Middlefield Banc Corp. 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20552
FORM
10 - Q
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þ |
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QUARTERLY REPORT UNDER SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 |
For the quarterly period ended September 30, 2006
Commission File Number 33-23094
Middlefield Banc Corp.
(Exact name of registrant as specified in its charter)
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Ohio
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34 - 1585111 |
(State or other jurisdiction of incorporation
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(IRS Employer Identification No.) |
or organization) |
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15985 East High Street, Middlefield, Ohio 44062-9263
(Address of principal executive offices)
(440) 632-1666
(Registrants telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during
the past 12 months (or 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 þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o Accelerated filer o Non-accelerated filer þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
YES o NO þ
State the number of shares outstanding of each of the issuers classes of common equity as of the
latest practicle date:
Class: Common Stock, without par value
Outstanding at November 10, 2006: 1,353,376
MIDDLEFIELD BANC CORP.
INDEX
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Page |
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Number |
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PART I FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Item 1A. Risk Factors |
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EX-31 |
EX-31.1 |
EX-32 |
EX-99.2 |
MIDDLEFIELD BANC CORP.
CONSOLIDATED BALANCE SHEET
(Unaudited)
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September 30, |
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December 31 |
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2006 |
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2005 |
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ASSETS |
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Cash and due from banks |
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$ |
5,217,424 |
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$ |
5,294,641 |
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Federal funds sold |
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5,440,000 |
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Cash and cash equivalents |
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10,657,424 |
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5,294,641 |
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Interest-bearing deposits in other institutions |
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538,369 |
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526,523 |
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Investment securities available for sale |
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55,025,592 |
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57,887,130 |
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Investment securities held to maturity (estimated
market value of $225,604 and $232,967) |
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215,836 |
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221,453 |
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Loans |
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244,851,623 |
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234,054,797 |
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Less allowance for loan losses |
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3,049,076 |
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2,841,098 |
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Net loans |
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241,802,547 |
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231,213,699 |
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Premises and equipment |
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6,570,303 |
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6,624,776 |
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Bank-owned life insurance |
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6,810,585 |
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5,632,982 |
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Accrued interest and other assets |
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4,053,955 |
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3,812,987 |
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TOTAL ASSETS |
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$ |
325,674,611 |
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$ |
311,214,191 |
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LIABILITIES |
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Deposits: |
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Noninterest-bearing demand |
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$ |
40,490,319 |
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39,782,375 |
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Interest-bearing demand |
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12,612,933 |
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9,362,399 |
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Money market |
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14,908,162 |
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13,078,829 |
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Savings |
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57,241,678 |
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66,495,057 |
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Time |
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139,452,806 |
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120,730,980 |
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Total deposits |
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264,705,898 |
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249,449,640 |
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Short-term borrowings |
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1,309,558 |
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6,710,914 |
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Other borrowings |
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28,690,292 |
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26,578,211 |
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Accrued interest and other liabilities |
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1,401,631 |
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1,186,061 |
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TOTAL LIABILITIES |
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296,107,379 |
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283,924,826 |
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STOCKHOLDERS EQUITY |
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Common stock, no par value; 10,000,000 shares authorized,
1,448,546 and 1,434,987 shares issued |
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16,503,343 |
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15,976,335 |
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Retained earnings |
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16,738,454 |
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14,959,891 |
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Accumulated other comprehensive loss |
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(466,258 |
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(677,088 |
) |
Treasury stock, at cost; 95,080 shares in 2006 and 89,333 shares in 2005 |
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(3,208,307 |
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(2,969,773 |
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TOTAL STOCKHOLDERS EQUITY |
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29,567,232 |
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27,289,365 |
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TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
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$ |
325,674,611 |
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$ |
311,214,191 |
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See accompanying unaudited notes to the consolidated financial statements.
MIDDLEFIELD BANC CORP
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2006 |
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2005 |
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2006 |
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2005 |
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INTEREST INCOME |
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Interest and fees on loans |
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$ |
4,393,937 |
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$ |
3,846,492 |
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$ |
12,598,616 |
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$ |
11,065,258 |
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Interest-bearing deposits in
other institutions |
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4,546 |
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6,521 |
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11,939 |
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10,461 |
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Federal funds sold |
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29,391 |
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7,401 |
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38,328 |
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31,057 |
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Investment securities: |
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Taxable interest |
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275,448 |
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321,517 |
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871,259 |
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1,041,027 |
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Tax-exempt interest |
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251,777 |
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226,283 |
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745,368 |
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621,423 |
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Dividends on FHLB stock |
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20,979 |
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19,178 |
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61,517 |
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48,761 |
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Total interest income |
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4,976,078 |
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4,427,392 |
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14,327,027 |
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12,817,987 |
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INTEREST EXPENSE |
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Deposits |
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1,867,011 |
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1,377,349 |
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5,085,705 |
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4,041,713 |
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Short term borrowings |
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22,563 |
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25,911 |
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145,213 |
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60,140 |
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Other borrowings |
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327,907 |
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260,162 |
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898,771 |
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738,223 |
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Total interest expense |
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2,217,481 |
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1,663,422 |
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6,129,689 |
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4,840,076 |
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NET INTEREST INCOME |
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2,758,597 |
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2,763,970 |
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8,197,338 |
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7,977,911 |
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Provision for loan losses |
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90,000 |
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75,000 |
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240,000 |
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195,000 |
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES |
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2,668,597 |
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2,688,970 |
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7,957,338 |
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7,782,911 |
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NONINTEREST INCOME |
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Service charges on deposit accounts |
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462,295 |
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425,966 |
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1,310,979 |
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1,167,988 |
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Investment securities losses, net |
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(5,868 |
) |
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Earnings on bank-owned life insurance |
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64,431 |
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52,705 |
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177,603 |
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155,684 |
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Other income |
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116,876 |
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80,604 |
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305,869 |
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243,222 |
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Total noninterest income |
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643,602 |
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559,275 |
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1,788,583 |
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1,566,894 |
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NONINTEREST EXPENSE |
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Salaries and employee benefits |
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1,010,312 |
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933,808 |
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2,840,361 |
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2,758,504 |
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Occupancy expense |
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117,190 |
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115,631 |
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385,037 |
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374,994 |
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Equipment expense |
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108,380 |
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112,019 |
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301,066 |
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327,133 |
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Data processing costs |
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147,484 |
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145,777 |
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484,270 |
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443,775 |
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Ohio state franchise tax |
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90,000 |
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90,000 |
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270,000 |
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270,000 |
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Other expense |
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569,039 |
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484,769 |
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1,695,434 |
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1,567,114 |
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Total noninterest expense |
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2,042,405 |
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1,882,004 |
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5,976,168 |
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5,741,520 |
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Income before income taxes |
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1,269,794 |
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1,366,241 |
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3,769,753 |
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3,608,285 |
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Income taxes |
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339,000 |
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390,000 |
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1,033,587 |
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1,001,000 |
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NET INCOME |
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$ |
930,794 |
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$ |
976,241 |
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$ |
2,736,166 |
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$ |
2,607,285 |
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EARNINGS PER SHARE |
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Basic |
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$ |
0.69 |
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$ |
0.73 |
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$ |
2.03 |
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$ |
1.95 |
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Diluted |
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0.68 |
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|
0.72 |
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2.00 |
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1.92 |
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DIVIDENDS DECLARED PER SHARE |
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$ |
0.240 |
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$ |
0.229 |
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$ |
0.710 |
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$ |
0.648 |
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See accompanying unaudited notes to the consolidated financial statements.
MIDDLEFIELD BANC CORP.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
(Unaudited)
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Accumulated |
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Other |
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Total |
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Common |
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Retained |
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Comprehensive |
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Treasury |
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Stockholders |
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Comprehensive |
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Stock |
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Earnings |
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Income (Loss) |
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Stock |
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Equity |
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Income |
|
Balance, December 31, 2005 |
|
$ |
15,976,335 |
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|
$ |
14,959,891 |
|
|
$ |
(677,088 |
) |
|
$ |
(2,969,773 |
) |
|
$ |
27,289,365 |
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Net income |
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|
|
2,736,166 |
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|
|
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|
|
|
2,736,166 |
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|
$ |
2,736,166 |
|
Other comprehensive income: |
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Unrealized gain on available for
sale
securities net of taxes of $108,607
net of reclassification adjustment |
|
|
|
|
|
|
|
|
|
|
210,830 |
|
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|
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|
210,830 |
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|
210,830 |
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Comprehensive income |
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$ |
2,946,996 |
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Common stock issued |
|
|
294,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
294,518 |
|
|
|
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Purchase of treasury stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(238,534 |
) |
|
|
(238,534 |
) |
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Dividend reinvestment plan |
|
|
232,490 |
|
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|
|
232,490 |
|
|
|
|
|
Cash dividends ($0.71 per share) |
|
|
|
|
|
|
(957,603 |
) |
|
|
|
|
|
|
|
|
|
|
(957,603 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, September 30, 2006 |
|
$ |
16,503,343 |
|
|
$ |
16,738,454 |
|
|
$ |
(466,258 |
) |
|
$ |
(3,208,307 |
) |
|
$ |
29,567,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying unaudited notes to the consolidated financial statements.
MIDDLEFIELD BANC CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
Net income |
|
$ |
2,736,166 |
|
|
$ |
2,607,285 |
|
Adjustments to reconcile net income to
net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Provision for loan losses |
|
|
240,000 |
|
|
|
195,000 |
|
Investment securities losses, net |
|
|
5,868 |
|
|
|
|
|
Depreciation and amortization |
|
|
326,531 |
|
|
|
334,769 |
|
Amortization of premium and
discount on investment securities |
|
|
178,373 |
|
|
|
213,550 |
|
Amortization of deferred loan costs (fees) |
|
|
(55,586 |
) |
|
|
(100,379 |
) |
Earnings on bank-owned life insurance |
|
|
(177,603 |
) |
|
|
(155,684 |
) |
Increase in accrued interest receivable |
|
|
(280,934 |
) |
|
|
(338,076 |
) |
Increase in accrued interest payable |
|
|
179,333 |
|
|
|
82,135 |
|
Deferred Taxes, net |
|
|
(199,366 |
) |
|
|
(157,108 |
) |
Other, net |
|
|
217,560 |
|
|
|
(305,729 |
) |
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
3,170,342 |
|
|
|
2,375,763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Net change in interest-bearing deposits in
other institutions |
|
|
(11,846 |
) |
|
|
90,183 |
|
Investment securities available for sale: |
|
|
|
|
|
|
|
|
Proceeds from repayments and maturities |
|
|
3,951,106 |
|
|
|
6,925,090 |
|
Proceeds from sale of securities |
|
|
664,838 |
|
|
|
|
|
Purchases |
|
|
(1,619,234 |
) |
|
|
(10,313,758 |
) |
Investment securities held to maturity: |
|
|
|
|
|
|
|
|
Proceeds from repayments and maturities |
|
|
5,643 |
|
|
|
|
|
Increase in loans, net |
|
|
(10,773,262 |
) |
|
|
(10,177,986 |
) |
Purchase of Federal Home Loan Bank stock |
|
|
(50,600 |
) |
|
|
(46,200 |
) |
Purchase of bank-owned life insurance |
|
|
(1,000,000 |
) |
|
|
|
|
Purchase of premises and equipment |
|
|
(272,058 |
) |
|
|
(307,498 |
) |
|
|
|
|
|
|
|
Net cash used for investing activities |
|
|
(9,105,413 |
) |
|
|
(13,830,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Net increase in deposits |
|
|
15,256,258 |
|
|
|
8,281,236 |
|
Increase (decrease) in short-term borrowings, net |
|
|
(5,401,356 |
) |
|
|
324,979 |
|
Repayment of other borrowings |
|
|
(3,887,919 |
) |
|
|
(9,440,888 |
) |
Proceeds from other borrowings |
|
|
6,000,000 |
|
|
|
13,000,000 |
|
Purchase of Treasury Stock |
|
|
(238,534 |
) |
|
|
|
|
Common stock issued |
|
|
294,518 |
|
|
|
212,848 |
|
Proceeds from dividend reinvestment plan |
|
|
232,490 |
|
|
|
206,385 |
|
Cash dividends |
|
|
(957,603 |
) |
|
|
(857,713 |
) |
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
11,297,854 |
|
|
|
11,726,847 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents |
|
|
5,362,783 |
|
|
|
272,441 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD |
|
|
5,294,641 |
|
|
|
5,311,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS
AT END OF PERIOD |
|
$ |
10,657,424 |
|
|
$ |
5,584,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATION |
|
|
|
|
|
|
|
|
Cash paid during the year for: |
|
|
|
|
|
|
|
|
Interest on deposits and borrowings |
|
$ |
5,941,806 |
|
|
$ |
4,922,211 |
|
Income taxes |
|
|
1,025,000 |
|
|
|
1,075,000 |
|
See accompanying notes to unaudited consolidated financial statements.
MIDDLEFIELD BANC CORP.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 BASIS OF PRESENTATION
The consolidated financial statements of Middlefield Banc Corp. (Middlefield) includes its wholly
owned subsidiary, The Middlefield Banking Company (the Bank). All significant inter-company
items have been eliminated.
The accompanying financial statements have been prepared in accordance with U.S. generally accepted
accounting principles and the instructions for Form 10-Q and Article 10 of Regulation S-X. In
Managements opinion, the financial statements include all adjustments, consisting of normal
recurring adjustments, that Middlefield considers necessary to fairly state Middlefields financial
position and the results of operations and cash flows. The balance sheet at December 31, 2005, has
been derived from the audited financial statements at that date but does not include all of the
necessary informational disclosures and footnotes as required by U. S. generally accepted
accounting principles. The accompanying financial statements should be read in conjunction with
the financial statements and notes thereto included with Middlefields Form 10-K (File No.
33-23094). The results of Middlefields operations for any interim period are not necessarily
indicative of the results of Middlefields operations for any other interim period or for a full
fiscal year.
NOTE 2 STOCK-BASED COMPENSATION
The Company maintains a stock option plan for key officers, employees, and non-employee directors.
Had compensation expense for the stock option plans been recognized in accordance with the fair
value accounting provisions of FAS No. 123, Accounting for Stock-Based Compensation, net income
applicable to common stock, basic, and diluted net income per common share would have been as
follows:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Nine Months |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2005 |
|
|
2005 |
|
Net income, as reported: |
|
$ |
976,241 |
|
|
$ |
2,607,285 |
|
|
|
|
|
|
|
|
|
|
Less proforma expense related to
stock options |
|
|
10,891 |
|
|
|
35,099 |
|
|
|
|
|
|
|
|
Proforma net income |
|
$ |
965,350 |
|
|
$ |
2,572,186 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per common share: |
|
|
|
|
|
|
|
|
As reported |
|
$ |
0.73 |
|
|
$ |
1.95 |
|
Pro forma |
|
|
0.72 |
|
|
|
1.92 |
|
|
|
|
|
|
|
|
|
|
Diluted net income per common share: |
|
|
|
|
|
|
|
|
As reported |
|
$ |
0.72 |
|
|
$ |
1.92 |
|
Pro forma |
|
|
0.71 |
|
|
|
1.90 |
|
For purposes of computing pro forma results, the Company estimated the fair values of stock options
using the Black-Scholes option-pricing model. The model requires the use of subjective assumptions
that can materially affect fair value estimates. Therefore, the pro forma results are estimates of
results of operations as if compensation expense had been recognized for the stock option plans.
As of September 30, 2006, there was no recognized compensation cost related to vested
share-based compensation awards granted.
NOTE 3 EARNINGS PER SHARE
Middlefield provides dual presentation of Basic and Diluted earnings per share. Basic earnings per
share utilizes net income as reported as the numerator and the actual average shares outstanding as
the denominator. Diluted earnings per share includes any dilutive effects of options, warrants,
and convertible securities.
There are no convertible securities that would affect the numerator in calculating basic and
diluted earnings per share; therefore, net income as presented on the Consolidated Statement of
Income (Unaudited) will be used as the numerator. The following tables set forth the composition of
the weighted-average common shares (denominator) used in the basic and diluted earnings per share
computation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three |
|
|
For the Nine |
|
|
|
Months Ended |
|
|
Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Weighted average common shares
outstanding |
|
|
1,446,024 |
|
|
|
1,432,303 |
|
|
|
1,441,717 |
|
|
|
1,426,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average treasury stock shares |
|
|
(94,323 |
) |
|
|
(89,333 |
) |
|
|
(92,043 |
) |
|
|
(89,333 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares and
common stock equivalents used to
calculate basic earnings per share |
|
|
1,351,702 |
|
|
|
1,342,970 |
|
|
|
1,349,674 |
|
|
|
1,337,287 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional common stock equivalents
(stock options) used to calculate
diluted earnings per share |
|
|
22,334 |
|
|
|
20,642 |
|
|
|
22,045 |
|
|
|
19,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares and
common stock equivalents used
to calculate diluted earnings per share |
|
|
1,374,036 |
|
|
|
1,363,612 |
|
|
|
1,371,719 |
|
|
|
1,356,755 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 4 COMPREHENSIVE INCOME
The components of comprehensive income consist exclusively of unrealized gains and losses on
available for sale securities. For the nine months ended September 30, 2006, this activity is
shown under the heading Comprehensive Income as presented in the Consolidated Statement of Changes
in Stockholders Equity (Unaudited).
The following shows the components and activity of comprehensive income during the periods
ended September 30, 2006 and 2005 (net of the income tax effect):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
2006 |
|
|
2005 |
|
Unrealized holding gains(losses) arising during
the period on securities held |
|
$ |
773,007 |
|
|
$ |
(331,849 |
) |
|
$ |
214,703 |
|
|
$ |
(305,033 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification adjustment for losses
included in net income, net of tax |
|
|
|
|
|
|
|
|
|
|
(3,873 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in unrealized gains(losses) during the
period |
|
|
773,007 |
|
|
|
(331,849 |
) |
|
|
210,830 |
|
|
|
(305,033 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding (losses) gains,
beginning of period |
|
|
(1,239,265 |
) |
|
|
(1,867 |
) |
|
|
(677,088 |
) |
|
|
(28,683 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding losses, end of period |
|
$ |
(466,258 |
) |
|
$ |
(333,716 |
) |
|
$ |
(466,258 |
) |
|
$ |
(333,716 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
$ |
930,794 |
|
|
$ |
976,241 |
|
|
$ |
2,736,166 |
|
|
$ |
2,607,285 |
|
Other comprehensive income, net of tax: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized holding gains (losses) arising during
the period |
|
|
773,007 |
|
|
|
(331,849 |
) |
|
|
210,830 |
|
|
|
(305,033 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
$ |
1,703,801 |
|
|
$ |
644,392 |
|
|
$ |
2,946,996 |
|
|
$ |
2,302,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recent Accounting Pronouncements
In February 2006, the Financial Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (FAS) No. 155, Accounting for Certain Hybrid Instruments, as an
amendment of FASB Statements No. 133 and 140. FAS No. 155 allows financial instruments that have
embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the
derivative from its host) if the holder elects to account for the whole instrument on a fair value
basis. This statement is effective for all financial instruments acquired or issued after the
beginning of an entitys first fiscal year that begins after September 15, 2006. The adoption of
this standard is not expected to have a material effect on the Companys results of operations or
financial position.
In March 2006, the FASB issued FAS No. 156, Accounting for Servicing of Financial Assets. This
Statement, which is an amendment to FAS No. 140, will simplify the accounting for servicing assets
and liabilities, such as those common with mortgage securitization activities. Specifically, FAS
No. 156 addresses the recognition and measurement of separately recognized servicing assets and
liabilities and provides an approach to simplify efforts to obtain hedge-like (offset) accounting.
FAS No. 156 also clarifies when an obligation to service financial assets should be separately
recognized as a servicing asset or a servicing liability, requires that a separately recognized
servicing asset or servicing liability be initially measured at fair value, if practicable, and
permits an entity with a separately recognized servicing asset or servicing liability to choose
either of the amortization or fair value methods for subsequent measurement. The provisions of FAS
No. 156 are effective as of the beginning of the first fiscal year that begins after September 15,
2006. The adoption of this standard is not expected to have a material effect on the Companys
results of operations or financial position. Or The Company is currently evaluating the impact the
adoption of the standard will have on the Companys results of operations.
In September 2006, the FASB issued FAS No. 157, Fair Value Measurements, which provides enhanced
guidance for using fair value to measure assets and liabilities. The standard applies whenever
other standards require or permit assets or liabilities to be measured at fair value. The Standard
does not expand the use of fair value in any new circumstances. FAS No. 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years. Early adoption is permitted. The adoption of this standard is not
expected to have a material effect on the Companys results of operations or financial position.
In September 2006, the FASB issued FAS No. 158, Employers Accounting for Defined Benefit Pension
and Other Post Retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R).
FAS No. 158 requires that a company recognize the overfunded or underfunded status of its defined
benefit post retirement plans (other than multiemployer plans) as an asset or liability in its
statement of financial position and that it recognize changes in the funded status in the year
in which the changes occur through
other comprehensive income. FAS No. 158 also requires the
measurement of defined benefit plan assets and obligations as of the fiscal year end, in
addition to footnote disclosures. FAS No. 158 is effective for fiscal years ending after
December 15, 2006. The Company is currently evaluating the impact the adoption of the standard
will have on the Companys financial position.
In June 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in
Income Taxes. FIN 48 is an interpretation of FAS No. 109, Accounting for Income Taxes, and it seeks
to reduce the diversity in practice associated with certain aspects of measurement and recognition
in accounting for income taxes. In addition, FIN No. 48 requires expanded disclosure with respect
to the uncertainty in income taxes and is effective for fiscal years beginning after December 15,
2006. The Company is currently evaluating the impact the adoption of the standard will have on the
Companys results of operations.
In September 2006, the SEC issued Staff Accounting Bulletin No. 108 (SAB 108), Considering the
Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial
Statements, providing guidance on quantifying financial statement misstatement and implementation
when first applying this guidance. Under SAB No. 108, companies should evaluate a misstatement
based on its impact on the current year income statement, as well as the cumulative effect of
correcting such misstatements
that existed in prior years existing in the current years ending balance sheet. SAB 108 is
effective for fiscal years ending after November 15, 2006. The Company is currently evaluating the
impact the adoption of the standard will have on the Companys results of operations.
In September 2006, the FASB reached consensus on the guidance provided by Emerging Issues Task
Force Issue 06-4 (EITF 06-4), Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split-Dollar Life Insurance Arrangements. The guidance is applicable to
endorsement split-dollar life insurance arrangements, whereby the employer owns and controls the
insurance policy, that are associated with a postretirement benefit. EITF 06-4 requires that for a
split-dollar life insurance arrangement within the scope of the Issue, an employer should recognize
a liability for future benefits in accordance with FAS No. 106 (if, in substance, a postretirement
benefit plan exists) or Accounting Principles Board Opinion No. 12 (if the arrangement is, in
substance, an individual deferred compensation contract) based on the substantive agreement with
the employee. EITF 06-4 is effective for fiscal years beginning after December 15, 2007. The
Company is currently evaluating the impact the adoption of the standard will have on the Companys
results of operations or financial condition.
In September 2006, the FASB reached consensus on the guidance provided by Emerging Issues Task
Force Issue 06-5(EITF 06-5), Accounting for Purchases of Life InsuranceDetermining the Amount
That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for
Purchases of Life Insurance. EITF 06-5 states that a policyholder should consider any additional
amounts included in the contractual terms of the insurance policy other than the cash surrender
value in determining the amount that could be realized under the insurance contract. EITF 06-5
also states that a policyholder should determine the amount that could be realized under the life
insurance contract assuming the surrender of an individual-life by individual-life policy (or
certificate by certificate in a group policy). EITF 06-5 is effective for fiscal years beginning
after December 15, 2006. The Company is currently evaluating the impact the adoption of the
standard will have on the Companys results of operations or financial condition.
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provides further detail to the financial condition and
results of operations of the Company. The MD&A should be read in conjunction with the notes and
financial statements presented in this report.
CHANGES IN FINANCIAL CONDITION
General. The Companys total assets increased $14.5 million or 4.7% from December 31, 2005 to
September 30, 2006 to a balance of $325.7 million. Loans receivable and cash and cash equivalents
increased $10.7 million, $5.4 million respectively. The increase in total assets reflects a
corresponding increase in total liabilities of $12.2 million or 4.3% and an increase in
stockholders equity of $2.3 million or 8.4%. The increase in total liabilities was primarily the
result of growth in deposits of $15.3 million along with an increase in borrowings from the Federal
Home Loan Bank of Cincinnati. The net increase in stockholders equity was the result of increases
in common stock and retained earnings of $527,000 and $1.8 million, respectively, as well as an
increase treasury stock of $239,000.
Cash on hand and due from banks. Cash on hand, due from banks and federal funds sold represent cash
equivalents. Cash equivalents increased a combined $5.4 million to $10.7 million at September 30,
2006 from $5.3 million at December 31, 2005. Deposits from customers into savings and checking
accounts, loan and security repayments and proceeds from borrowed funds typically increase these
accounts. Decreases result from customer withdrawals, new loan originations, security purchases and
repayments of borrowed funds. The decrease for the first nine months can principally be attributed
to increases in deposits.
Securities. The Companys securities portfolio declined $2.8 million or 4.9% to $55.2 million at September 30, 2006 from $58.1 million at
December 31, 2005. During the first three quarters of the
year ended September 30, 2006 the Company recorded purchases of available for sale securities of
$1.7 million, consisting of purchases of municipal bonds. Offsetting the purchases of securities
were repayments and maturities of securities of $4.0 million during the nine months ended September
30, 2006. In addition, the securities portfolio increased approximately $318,000 due to increases
in the market value. These fair value adjustments represent temporary fluctuations resulting from
changes in market rates in relation to average yields in the available for sale portfolio. If
securities are held to their respective maturity dates, no fair value gain or loss is realized.
Loans receivable. The loans receivable category consists primarily of single family mortgage loans
used to purchase or refinance personal residences located within the Companys market area and
commercial real estate loans used to finance properties that are used in the borrowers businesses
or to finance investor-owned rental properties, and to a lesser extent commercial and consumer
loans. Loans receivable increased $10.8 million or 4.6% to $244.9 million at September 30, 2006
from $234.1 million at December 31, 2005. Included in this increase were increases in mortgage
loans of $7.6 million or 5.8% and commercial loans of $2.4 million or 3.3%, as well as a decrease
in consumer loans of $122,000 during the nine months ended September 30, 2006. The Corporations
lending philosophy is to focus on the commercial loans and to attempt to grow the portfolio. To
attract and build the commercial loan portfolio, the Corporation has taken a proactive approach in
contacting
new and current clients to ensure that the Corporation is servicing its clients needs. These
lending relationships generally offer more attractive returns than residential loans and also offer
opportunities for attracting larger balance deposit relationships. However, the shift in loan
portfolio mix from residential real estate to commercial oriented loans may increase credit risk.
Non-performing loans. Non-performing loans included non-accrual loans, renegotiated loans, loans 90
days or more past due, other real estate own, and repossessed assets. A loan is classified, as
non-accrual when, in the opinion of management, there are serious doubts about collectibility of
interest and principal. At the time the accrual of interest is discontinued, future income is
recognized only when cash is received. Renegotiated loans are those loans which terms have been
renegotiated to provide a reduction or deferral of principal or interest as a result of the
deterioration of the borrower. Non-performing loans amounted to $1.7 million or 0.69% and $1.5
million or 0.63% of total loans at September 30, 2006 and December 31, 2005, respectively.
Deposits. The Company considers various sources when evaluating funding needs, including but not
limited to deposits, which are a significant source of funds totaling $264.7 million or 90% of the
Companys total funding sources at September 30, 2006. Total deposits increased $15.3 million or
6.1% to $264.7 million at September 30, 2006 from $249.5 million at December 31, 2005. The increase
in deposits is primarily related to the growth of certificates of deposits that totaled $139.5
million at September 30, 2006 an increase of $18.7 million or 15.5% for the year. Saving deposits
declined $9.3 million, or 13.9% while non interest-bearing demand, interest-bearing demand and
money market accounts increased $708,000, $3.3 million and $1.8 million respectively during the
nine months ended September 30, 2006.
Borrowed funds. The Company utilizes short and long-term borrowings as another source of funding
used for asset growth and liquidity needs. These borrowings primarily include FHLB advances and
repurchase agreements. Short-term borrowings declined $5.4 million or 80.1% to $1.3 million at
September 30, 2006 from $6.7 million at December 31, 2005 while FHLB advances increased $2.1
million or 8.0%. The increase in FHLB advances was a result of the funding needs to support the
growth of the loan portfolio during the first three quarters of the year.
Stockholders equity. Stockholders equity increased $2.3 million or 8.4% to $29.6 million at
September 30, 2006 from $27.3 million at December 31, 2005. The increase in stockholders equity
was the result of increases in common stock and retained earnings of $527,000 and $1.8 million,
respectively, as well as, a reduction in accumulated other comprehensive loss and treasury stock of
$211,000 and $239,000 respectively. The change in the accumulated other comprehensive loss was
the result of an increase in the mark to market of the Companys securities available for sale
portfolio. The increase in treasury stock was the result of the purchase of 5,747 shares of the
banks common stock at an average price of $41.51 since December 31, 2005.
RESULTS OF OPERATIONS
General. The Company recorded net income of $931,000 and $2,736,000 for the three and nine months
ended September 30, 2006, respectively, as compared to net income of $976,000 and $2,607,000,
respectively, for the same periods in the prior year. The $45,000, or 4.7% decline in net income
for the quarter ended September 30, 2006, as compared to the same period in the prior year was
primarily attributable to an decline in net interest income after provision for loan losses of
$20,000 and an increase in non-interest expense of $160,000, partially offset by an increase in
non-interest income of $84,000 and an decrease in provision for income taxes of $51,000. The
$129,000, or 5.0% increase in net income for the first three quarters ended September 30, 2006, as
compared to the same period in the prior year was primarily attributable to an increase in net
interest income after provision for loan losses of $174,000 and an increase in non-interest income
of $222,000, partially offset by an increase in non-interest expense of $235,000.
Net interest income. Net interest income, the primary source of revenue for the Company, is
determined by the Companys interest rate spread, which is defined as the difference between income
on earning assets and the cost of funds supporting those assets, and the relative
amounts of
interest earning assets and interest bearing liabilities. Management periodically adjusts the mix
of assets and liabilities, as well as the rates earned or paid on those assets and liabilities in
order to manage and improve net interest income. The level of interest rates and changes in the
amount and composition of interest earning assets and liabilities affect the Companys net interest
income. Historically from an interest rate risk perspective, it has been managements perception
that differing interest rate environments can cause sensitivity to the Companys net interest
income, these being extended low long-term interest rates or rapidly rising short-term interest
rates. Net interest income remained the same at $2.8 million for the three months ended September
30, 2006, compared to the same period in the prior year. Interest income was recorded to be
$549,000 higher than the first three months of 2006 yet this was offset by an increase in interest
expense of $554,000. Net interest income after provision increased $174,000, or 2.2%, for the nine
months ended September 30, 2006 compared to the same period in the prior year. This increase in net
interest income can be attributed to an increase in interest income of $1.5 million, partially
offset by an increase in interest expense of $1.3 million. The increase in net interest income for
the first nine months was not sufficient to prevent a slight reduction in the banks net interest
margin. The decline in the net interest margin was the result in an increase in the cost of
interest-bearing liabilities of 74 basis points to 3.52% for the quarter ended September 30, 2006
compared to 2.78% for the same period in the prior year and an increase of 58 basis points to 3.33%
for the nine months ended September 30, 2005 compared to 2.75% for the same period in the prior
year. The increase in the cost of funds was only partially offset by an increase in the yield on
interest earning assets of 38 basis points
to 6.67% for the quarter ended September 30, 2006 compared to 6.29% for the same period in the
prior year and for the nine months ended September 30, 2006 and an increase of 38 basis points to
6.59% for the nine months ended September 30, 2005 compared to 6.21% for the same period in the
prior year
Interest income. Interest income increased $549,000, or 12.4%, for the three months ended September
30, 2006, compared to the same period in the prior year. This increase can be attributed to an
increases in interest earned on loans receivable of $547,000 partially offset by a decline in
interest income on securities of $21,000. Interest income increased $1.5 million, or 11.8%, for
the nine months ended September 30, 2006, compared to the same period in the prior year. This
increase can be attributed to an increases in interest earned on loans receivable of $1.5 million
partially offset by a decline in interest income on securities of $46,000.
Interest earned on loans receivable increased $547,000, or 14.2%, for the three months ended
September 30, 2006, compared to the same period in the prior year. This increase was attributable
to an increase in the average balance of loans outstanding of $18.5 million, or 8.3%, to $242.8
million for the three months ended September 30, 2006 compared to $224.3 million for the same
period in the prior year. Loan interest income was enhanced by an increase in the yield on the
loans to 7.2% for the three months ended September 30, 2006 from 6.8% for the same period in the
prior year.
For the nine months ended September 30, 2006, interest earned on loans receivable increased $1.5
million, or 13.9%, compared to the same period in the prior year. This increase was attributable to
an increase in the average balance of loans outstanding of $17.5 million, or 7.9%, to $238.3
million for the nine months ended September 30, 2006 compared to $220.8 million for the same period
in the prior year. Loan interest income was enhanced by an increase in the yield on the loans to
7.1% for the nine months ended September 30, 2006 from 6.7% for the same period in the prior year.
Interest earned on securities declined $21,000 for the three months ended September 30, 2006,
compared to the same period in the prior year. This decrease was primarily the result of a
reduction in the average balance of the securities portfolio of $4.2 million, or 7.0%, to $55.9
million at September 30, 2006 from $60.1 million for the same period in the prior year. The
decline in interest income on securities was partially offset by the increase in the tax equivalent
yield on securities to 4.66% for the three months ended September 30, 2006 from 4.38% for the same
period in the prior year.
For the nine months ended September 30, 2006, interest earned on securities declined $46,000,
compared to the same period in the prior year. This decline was primarily the result of a reduction
in the average balance of the securities portfolio of $2.2 million to $57.1 million at September
30, 2006 from $59.3 million for the same period in the prior year. The decline in interest income
on securities was partially offset by the increase in the tax equivalent yield on securities to
4.70% for the nine months ended September 30, 2006 from 4.47% for the same period in the prior
year.
Interest expense. Interest expense increased $554,000, or 33.3%, for the three months ended
September 30, 2006, compared to the same period in the prior year. This increase in interest
expense can be attributed to increases in interest incurred on deposits and other borrowing
$490,000, and $68,000, respectively. For the nine months ended September 30, 2006 interest expense
increased $1.3 million or 26.6% compared to the same period in the prior year. This increase in
interest expense can be attributed to increases in interest incurred on deposits, short-term
borrowing and other borrowing $1.0 million, $85,000 and $161,000, respectively.
Interest incurred on deposits, the largest component of the Companys interest-bearing liabilities,
increased $490,000, or 35.7%, for the three months ended September 30, 2006, compared to the same
period in the prior year. This increase was primarily attributable to an increase in the cost of
interest-bearing deposits to 3.37% from 2.61% for the quarters ended September 30, 2006 and 2005,
respectively. Additionally the average balance of interest-bearing deposits increased by $10.6
million, or 5.1%, to $220.1 million for the three months ended September 30,
2006, compared to
$209.5 million for the same period in the prior year. The Company diligently monitors the interest
rates on its products as well as the rates being offered by its competition and utilizing rate
surveys to keep its total interest expense costs down. For the nine months ended September 30,
2006 interest incurred on deposits, increased $1.0 million, or 25.8%, compared to the same period
in the prior year. This increase was primarily attributable to an increase in the cost of
interest-bearing deposits to 3.16% for the nine months ended September 30, 2006 compared to 2.58%
for the same period in the prior year. In addition the increase in the cost of interest-bearing
deposits was also attributed to an increase in the average balance of interest-bearing deposits of
$5.6 million, or 2.7%, to $215.4 million for the nine months ended September 30, 2005, compared to
$209.8 million for the same period in the prior year.
Interest incurred on borrowed funds, increased $63,000, or 22.0%, for the three months ended
September 30, 2006, compared the same period in the prior year. This increase was primarily
attributable to the increase in the cost of these funds to 4.7% from 4.1% for the quarters ended
September 30, 2006 and 2005, respectively. Adding to the cost of these funds was a rise in the
average balance of borrowed funds of $1.8 million, or 6.5%, to $29.7 million for the three months
ended September 30, 2004, compared to $27.9 million for the same period in the prior year. This
increase is reflected in the quarterly rate volume report presented below which depicts that the
increase to the costs associated with
the interest-bearing liabilities.
For the nine months ended September 30, 2006, interest incurred on borrowed funds increased
$245,000, or 30.7%, compared to the same period in the prior year. This increase was attributable
to the rise in the average balance of borrowed funds of $5.2 million, or 20.10%, to $30.9 million
for the nine months ended September 30, 2006, compared to $25.7 million for the nine months ended
September 30, 2005. Adding to the expense of these funds was a rise in the cost to 4.5% for the
nine months ended September 30, 2006, compared to 4.2% for the same period in the prior year.
Provision for loan losses. The provision for loan losses is the result of normal operations for the
quarter and year to date. In determining the appropriate level of allowance for loan losses,
management considers historical loss experience, the financial condition of borrowers, economic
conditions (particularly as they relate to markets where the Company originates loans), the status
of non-performing assets, the estimated underlying value of the collateral and other factors
related to the collectibility of the loan portfolio. The Companys total allowance for losses on
loans at September 30, 2006 and December 31, 2005 amounted to $3.1 million or 1.25% and $2.8
million or 1.21%, respectively, of the Companys total loan portfolio. The Companys allowance for
losses on loans as a percentage of non-performing loans was 179.6% and 156.6% at September 30, 2006
and December 31, 2005, respectively.
Non-interest income. Non-interest income increased $84,000 or 15.1% to $644,000 for the three
months ended September 30, 2006, compared to $559,000 for the same period in the prior year. This
increase can be attributed primarily to increases in fees and service charges, earnings on
bank-owned life insurance (BOLI) and other income of $36,000, $12,000 and $36,000, respectively.
For the nine months ended September 30, 2006, non-interest income increased $222,000 or 14.2% to
$1.8 million, compared to $1.6 million for the same period in the prior year. This increase is
attributed to increases in fees and service charges, earnings on bank-owned life insurance (BOLI)
and other income of $143,000, $22,000 and $63,000, respectively. Partially offsetting the increase
in non-interest income was a $6,000 loss on the sale of investments during the first quarter.
Service charges on deposit accounts increased $36,000 or 8.5% to $462,000 for the three months
ended September 30, 2006, compared to $426,000 for the same period in the prior year. Revenue from
overdraft fees represented the majority of this quarterly growth. Other income and earnings on
BOLI increased $36,000 and $12,000 respectively for the same period in the prior year. For the
nine months ended September 30, 2006, service charges on deposit accounts increased $143,000 or
12.2% compared to the same period in the prior year. Ninety six percent of this increase for the
first nine months came from charges on over-drafted accounts.
Non-interest expense. Non-interest expense increased $160,000 or 8.5% to $2.0 million for the three
months ended September 30, 2006, from $1.9 million for the same period in the prior year. This
increase was the result of increases salary and employee benefits and other expenses of $77,000 and
$84,000 respectively. The increase to compensation and employee benefits is primarily related to
increases in health care costs and retirement plans as well as normal salary increases between the
periods.
For the nine months ended September 30, 2006 non-interest expense increased $235,000 or 4.1% for
the same period in the prior year. This increase was the result of increases in other expense,
employee benefits and data processing costs of $128,000, $82,000 and $40,000, respectively. The
change in other cost was in part due to the expense of updating and improving the Banks website.
The change in data processing cost was due to the added expense of new accounts for the period.
Provision for income taxes. The Company recognized $1.0 million in income tax expense, which
reflected an effective tax rate of 27.4% for the nine months, ended September 30, 2006, as compared
to $1.0 million with an effective tax rate of 27.7% for the respective 2005 period.
CRITICAL ACCOUNTING ESTIMATES
The Companys critical accounting estimates involving the more significant judgments and
assumptions used in the preparation of the consolidated financial statements as of September 30,
2006, have remained unchanged from December 31, 2005.
Average Balance Sheet and Yield/Rate Analysis. The following table sets forth, for the periods
indicated, information concerning the total dollar amounts of interest income from interest-earning
assets and the resultant average yields, the total dollar amounts of interest expense on
interest-bearing liabilities and the resultant average costs, net interest income, interest rate
spread and the net interest margin earned on average interest-earning assets. For purposes of this
table, average balances are calculated using monthly averages and the average loan balances include
non-accrual loans and exclude the allowance for loan losses, and interest income includes accretion
of net deferred loan fees. Interest and yields on tax-exempt securities (tax-exempt for federal
income tax purposes) are shown on a fully tax equivalent basis utilizing a federal tax rate of 34%.
Yields and rates have been calculated on an annualized basis utilizing monthly interest amounts.
|
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|
|
|
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|
|
|
|
|
|
For the Three Months Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Balance |
|
|
Interest |
|
|
Yield/Cost |
|
|
Balance |
|
|
Interest |
|
|
Yield/Cost |
|
|
|
(Dollars in thousands) |
|
|
(Dollars in thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
|
$ |
242,809 |
|
|
$ |
4,394 |
|
|
|
7.18 |
% |
|
$ |
224,274 |
|
|
$ |
3,846 |
|
|
|
6.80 |
% |
Investments securities |
|
|
55,946 |
|
|
|
527 |
|
|
|
4.66 |
% |
|
|
60,128 |
|
|
|
548 |
|
|
|
4.38 |
% |
Interest-bearing deposits with other banks |
|
|
4,759 |
|
|
|
55 |
|
|
|
4.59 |
% |
|
|
2,267 |
|
|
|
33 |
|
|
|
5.78 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
303,514 |
|
|
|
4,976 |
|
|
|
6.67 |
% |
|
|
286,669 |
|
|
|
4,427 |
|
|
|
6.29 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets |
|
|
16,055 |
|
|
|
|
|
|
|
|
|
|
|
16,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
319,569 |
|
|
|
|
|
|
|
|
|
|
$ |
303,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand deposits |
|
$ |
11,610 |
|
|
|
36 |
|
|
|
1.23 |
% |
|
$ |
9,548 |
|
|
|
20 |
|
|
|
0.83 |
% |
Money market deposits |
|
|
13,994 |
|
|
|
102 |
|
|
|
2.89 |
% |
|
|
14,680 |
|
|
|
70 |
|
|
|
1.89 |
% |
Savings deposits |
|
|
56,487 |
|
|
|
220 |
|
|
|
1.55 |
% |
|
|
67,815 |
|
|
|
246 |
|
|
|
1.44 |
% |
Certificates of deposit |
|
|
138,004 |
|
|
|
1,509 |
|
|
|
4.34 |
% |
|
|
117,442 |
|
|
|
1,040 |
|
|
|
3.51 |
% |
Borrowings |
|
|
29,659 |
|
|
|
350 |
|
|
|
4.68 |
% |
|
|
27,862 |
|
|
|
287 |
|
|
|
4.09 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
249,754 |
|
|
|
2,217 |
|
|
|
3.52 |
% |
|
|
237,347 |
|
|
|
1,663 |
|
|
|
2.78 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
41,063 |
|
|
|
|
|
|
|
|
|
|
|
39,839 |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
28,752 |
|
|
|
|
|
|
|
|
|
|
|
26,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
319,569 |
|
|
|
|
|
|
|
|
|
|
$ |
303,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
2,759 |
|
|
|
|
|
|
|
|
|
|
$ |
2,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (1) |
|
|
|
|
|
|
|
|
|
|
3.15 |
% |
|
|
|
|
|
|
|
|
|
|
3.51 |
% |
Net yield on interest-earning assets (2) |
|
|
|
|
|
|
|
|
|
|
3.78 |
% |
|
|
|
|
|
|
|
|
|
|
3.99 |
% |
Ratio of average interest-earning assets to
average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
121.53 |
% |
|
|
|
|
|
|
|
|
|
|
120.78 |
% |
|
|
|
(1) |
|
Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing liabilities. |
|
(2) |
|
Net yield on interest-earning assets represents net interest income as a percentage of average
interest-earning assets. |
|
(3) |
|
Average yields are computed using annualized interest income and expense for the periods. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Balance |
|
|
Interest |
|
|
Yield/Cost |
|
|
Balance |
|
|
Interest |
|
|
Yield/Cost |
|
|
|
(Dollars in thousands) |
|
|
(Dollars in thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
|
$ |
238,285 |
|
|
$ |
12,598 |
|
|
|
7.07 |
% |
|
$ |
220,824 |
|
|
$ |
11,065 |
|
|
|
6.70 |
% |
Investments securities |
|
|
57,086 |
|
|
|
1,617 |
|
|
|
4.69 |
% |
|
|
59,293 |
|
|
|
1,663 |
|
|
|
4.47 |
% |
Interest-bearing deposits with other banks |
|
|
3,207 |
|
|
|
112 |
|
|
|
4.67 |
% |
|
|
2,955 |
|
|
|
90 |
|
|
|
4.07 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
|
|
|
|
|
|
|
|
(3) |
|
|
|
Average |
|
|
|
|
|
|
Average |
|
|
Average |
|
|
|
|
|
|
Average |
|
|
|
Balance |
|
|
Interest |
|
|
Yield/Cost |
|
|
Balance |
|
|
Interest |
|
|
Yield/Cost |
|
|
|
(Dollars in thousands) |
|
|
(Dollars in thousands) |
|
Total interest-earning assets |
|
|
298,578 |
|
|
|
14,327 |
|
|
|
6.59 |
% |
|
|
283,072 |
|
|
|
12,818 |
|
|
|
6.21 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-earning assets |
|
|
16,028 |
|
|
|
|
|
|
|
|
|
|
|
16,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
314,606 |
|
|
|
|
|
|
|
|
|
|
|
299,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand deposits |
|
|
10,982 |
|
|
|
100 |
|
|
|
1.22 |
% |
|
|
9,370 |
|
|
|
54 |
|
|
|
0.77 |
% |
Money market deposits |
|
|
13,261 |
|
|
|
257 |
|
|
|
2.59 |
% |
|
|
15,508 |
|
|
|
217 |
|
|
|
1.87 |
% |
Savings deposits |
|
|
59,147 |
|
|
|
696 |
|
|
|
1.57 |
% |
|
|
71,170 |
|
|
|
779 |
|
|
|
1.46 |
% |
Certificates of deposit |
|
|
131,997 |
|
|
|
4,032 |
|
|
|
4.08 |
% |
|
|
113,745 |
|
|
|
2,991 |
|
|
|
3.52 |
% |
Borrowings |
|
|
30,873 |
|
|
|
1,044 |
|
|
|
4.52 |
% |
|
|
25,708 |
|
|
|
799 |
|
|
|
4.16 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
246,260 |
|
|
|
6,129 |
|
|
|
3.33 |
% |
|
|
235,501 |
|
|
|
4,840 |
|
|
|
2.75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other liabilities |
|
|
40,154 |
|
|
|
|
|
|
|
|
|
|
|
39,261 |
|
|
|
|
|
|
|
|
|
Stockholders equity |
|
|
28,192 |
|
|
|
|
|
|
|
|
|
|
|
25,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
314,606 |
|
|
|
|
|
|
|
|
|
|
$ |
299,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
|
|
|
|
$ |
8,198 |
|
|
|
|
|
|
|
|
|
|
$ |
7,978 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate spread (1) |
|
|
|
|
|
|
|
|
|
|
3.26 |
% |
|
|
|
|
|
|
|
|
|
|
3.46 |
% |
Net yield on interest-earning assets (2) |
|
|
|
|
|
|
|
|
|
|
3.84 |
% |
|
|
|
|
|
|
|
|
|
|
3.92 |
% |
Ratio of average interest-earning assets to
average interest-bearing liabilities |
|
|
|
|
|
|
|
|
|
|
121.25 |
% |
|
|
|
|
|
|
|
|
|
|
120.20 |
% |
|
|
|
(1) |
|
Interest rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing liabilities. |
|
(2) |
|
Net yield on interest-earning assets represents net interest income as a percentage of average
interest-earning assets. |
|
(3) |
|
Average yields are computed using annualized interest income and expense for the periods. |
Analysis of Changes in Net Interest Income. The following tables analyzes the changes in
interest income and interest expense, between the three and nine month periods ended September 30,
2006 and 2005, in terms of: (1) changes in volume of interest-earning assets and interest-bearing
liabilities and (2) changes in yields and rates. The table reflects the extent to which changes in
the Companys interest income and interest expense are attributable to changes in rate (change in
rate multiplied by prior period volume), changes in volume (changes in volume multiplied by prior
period rate) and changes attributable to the combined impact of volume/rate (change in rate
multiplied by change in volume). The changes attributable to the combined impact of volume/rate are
allocated on a consistent basis between the volume and rate variances. Changes in interest income
on securities reflects the changes in interest income on a fully tax equivalent basis.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months ended, |
|
|
|
September 30, |
|
|
|
2006 versus 2005 |
|
|
|
Increase (decrease) due to |
|
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
|
$ |
70 |
|
|
$ |
478 |
|
|
$ |
548 |
|
Investments securities |
|
($ |
12 |
) |
|
($ |
9 |
) |
|
($ |
21 |
) |
Interest-bearing deposits with other banks |
|
($ |
30 |
) |
|
$ |
52 |
|
|
$ |
22 |
|
|
|
|
Total interest-earning assets |
|
|
28 |
|
|
|
521 |
|
|
|
549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand deposits |
|
$ |
8 |
|
|
$ |
8 |
|
|
$ |
16 |
|
Money market deposits |
|
($ |
7 |
) |
|
$ |
39 |
|
|
$ |
32 |
|
Savings deposits |
|
($ |
12 |
) |
|
($ |
14 |
) |
|
($ |
26 |
) |
Certificates of deposit |
|
$ |
170 |
|
|
$ |
299 |
|
|
$ |
469 |
|
Borrowings |
|
$ |
11 |
|
|
$ |
52 |
|
|
$ |
63 |
|
|
|
|
Total interest-bearing liabilities |
|
|
170 |
|
|
|
384 |
|
|
|
554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
($ |
141 |
) |
|
$ |
136 |
|
|
($ |
5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months ended, |
|
|
|
September 30, |
|
|
|
2006 versus 2005 |
|
|
|
Increase (decrease) due to |
|
|
|
Volume |
|
|
Rate |
|
|
Total |
|
|
|
|
|
|
|
(Dollars in thousands) |
|
|
|
|
|
Interest-earning assets: |
|
|
|
|
|
|
|
|
|
|
|
|
Loans receivable |
|
$ |
64 |
|
|
$ |
1,469 |
|
|
$ |
1,533 |
|
Investments securities |
|
($ |
5 |
) |
|
|
(41 |
) |
|
|
(46 |
) |
Interest-bearing deposits with other banks |
|
$ |
2 |
|
|
|
20 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
Total interest-earning assets |
|
|
61 |
|
|
|
1,448 |
|
|
|
1,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing demand deposits |
|
$ |
7 |
|
|
|
39 |
|
|
|
46 |
|
Money market deposits |
|
($ |
16 |
) |
|
|
56 |
|
|
|
40 |
|
Savings deposits |
|
($ |
13 |
) |
|
|
(70 |
) |
|
|
(83 |
) |
Certificates of deposit |
|
$ |
104 |
|
|
|
937 |
|
|
|
1,041 |
|
Borrowings |
|
$ |
19 |
|
|
|
226 |
|
|
|
245 |
|
|
|
|
|
|
|
|
|
|
|
Total interest-bearing liabilities |
|
|
100 |
|
|
|
1,189 |
|
|
|
1,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
($ |
39 |
) |
|
$ |
259 |
|
|
$ |
220 |
|
|
|
|
|
|
|
|
|
|
|
LIQUIDITY
Managements objective in managing liquidity is maintaining the ability to continue meeting the
cash flow needs of its customers, such as borrowings or deposit withdrawals, as well as its own
financial commitments. The principal sources of liquidity are net income, loan payments,
maturing and principal reductions on securities and sales of securities available for sale, federal
funds sold and cash and deposits with banks. Along with its liquid assets, the Company has
additional sources of liquidity available to ensure that adequate funds are available as needed.
These include, but are not limited to, the purchase of federal funds, and the ability to borrow
funds under line of credit agreements with correspondent banks and a borrowing agreement with the
Federal Home Loan Bank of Cincinnati, Ohio and the adjustment of interest rates to obtain
depositors. Management feels that it has the capital adequacy, profitability and reputation to meet
the current and projected needs of its customers.
For the nine months ended September 30, 2006, the adjustments to reconcile net income to net cash
from operating activities consisted mainly of depreciation and amortization of premises and
equipment, the provision for loan losses, net amortization of securities and net changes in other
assets and liabilities. Cash and cash equivalents increased as a result of the purchasing of
government agency securities. For a more detailed illustration of sources and uses of cash, refer
to the condensed consolidated statements of cash flows.
INFLATION
Substantially all of the Companys assets and liabilities relate to banking activities and are
monetary in nature. The consolidated financial statements and related financial data are presented
in accordance with U.S. GAAP. GAAP currently requires the Company to measure the financial position
and results of operations in terms of historical dollars, with the exception of securities
available for sale, impaired loans and other real estate loans that are measured at fair value.
Changes in the value of money due to rising inflation can cause purchasing power loss.
Managements opinion is that movements in interest rates affect the financial condition and results
of operations to a greater degree than changes in the rate of inflation. It should be noted that
interest rates and inflation do affect each other, but do not always move in correlation with each
other. The Companys ability to match the interest sensitivity of its financial assets to the
interest sensitivity of its liabilities in its asset/liability management may tend to minimize the
effect of changes in interest rates on the Companys performance.
REGULATORY MATTERS
The Company is subject to the regulatory requirements of The Federal Reserve System as a one-bank
holding company. The affiliate bank is subject to regulations of the Federal Deposit Insurance
Corporation (FDIC) and the State of Ohio, Division of Financial Institutions.
REGULATORY CAPITAL REQUIREMENTS
The Company is subject to regulatory capital requirements administered by federal banking agencies.
Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures
of assets, liabilities and certain off-balance sheet items calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to qualitative judgments by
regulators about components, risk weightings and other factors and the regulators can lower
classifications in certain cases. Failure to meet various capital requirements can initiate
regulatory action that could have a direct material effect on the Banks operations.
The prompt corrective action regulations provide five classifications, including well
capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and
critically undercapitalized, although these terms are not used to represent overall financial
condition. If adequately capitalized, regulatory approval is required to accept brokered deposits.
If undercapitalized, capital distributions are limited, as is asset growth and expansion and plans
for capital restoration are required.
The minimum requirements are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
Tier 1 |
|
Tier 1 |
|
|
Capital to |
|
Capital to |
|
Capital to |
|
|
Risk-Weighted |
|
Risk-Weighted |
|
Average |
|
|
Assets |
|
Assets |
|
Assets |
Well capitalized |
|
|
10.00 |
% |
|
|
6.00 |
% |
|
|
5.00 |
% |
Adequately capitalized |
|
|
8.00 |
% |
|
|
4.00 |
% |
|
|
4.00 |
% |
Undercapitalized |
|
|
6.00 |
% |
|
|
3.00 |
% |
|
|
3.00 |
% |
The following table illustrates the Companys risk-weighted capital ratios at September 30,
2006:
( in thousands)
|
|
|
|
|
|
|
September 30 |
Risk-Weighted Capital Ratios |
|
2006 |
Tier 1 Capital |
|
$ |
30,004 |
|
Total risk-based capital |
|
$ |
32,788 |
|
Risk-weighted assets |
|
$ |
223,466 |
|
Average total assets |
|
$ |
318,625 |
|
|
|
|
|
|
Tier 1 capital to average assets |
|
|
9.42 |
% |
Tier 1 risk-based capital ratio |
|
|
13.43 |
% |
Total risk-based capital ratio |
|
|
14.67 |
% |
Item 3 Quantitative and Qualitative Disclosures about Market Risk
ASSET AND LIABILITY MANAGEMENT
The primary objective of the Companys asset and liability management function is to
maximize the Companys net interest income while simultaneously maintaining an acceptable level of
interest rate risk given the Companys operating environment, capital and liquidity requirements,
performance objectives and overall business focus. The principal determinant of the exposure of the
Companys earnings to interest rate risk is the timing difference between the repricing and
maturity of interest-earning assets and the repricing or maturity of its interest-bearing
liabilities. The Companys asset and liability management policies are designed to decrease
interest rate sensitivity primarily by shortening the maturities of interest-earning assets while
at the same time extending the maturities of interest-
bearing liabilities. The Board of Directors
of the Company continues to believe in strong asset/liability management in order to insulate the
Company from material and prolonged increases in interest rates. As a result of this policy, the
Company emphasizes a larger, more diversified portfolio of residential mortgage loans in the form
of mortgage-backed securities. Mortgage-backed securities generally increase the quality of the
Companys assets by virtue of the insurance or guarantees that back them, are more liquid than
individual mortgage loans and may be used to collateralize borrowings or other obligations of the
Company.
The Companys Board of Directors has established an Asset and Liability Management Committee
consisting of four outside directors, the President and Chief Executive Officer, Executive/Vice
President/ Chief Operating Officer, Senior Vice President/Chief Financial Officer and Senior Vice
President/Commercial Lending. This committee, which meets quarterly, generally monitors various
asset and liability management policies and strategies, which were implemented by the Company over
the past few years. These strategies have included: (i) an emphasis on the investment in
adjustable-rate and shorter duration mortgage-backed securities; (ii) an emphasis on the
origination of single-family residential adjustable-rate mortgages (ARMs), residential construction
loans and commercial real estate loans, which generally have adjustable or floating interest rates
and/or shorter maturities than traditional single-family residential loans, and consumer loans,
which generally have shorter terms and higher interest rates than mortgage loans; (iii) increase
the duration of the liability base of the Company by extending the maturities of savings deposits,
borrowed funds and repurchase agreements.
The Company has established the following guidelines for assessing interest rate risk:
Net interest income simulation. Given a 200 basis point parallel and gradual increase or decrease
in market interest rates, net interest income may not change by more than 10% for a one-year
period.
Portfolio equity simulation. Portfolio equity is the net present value of the Companys existing
assets and liabilities. Given a 200 basis point immediate and permanent increase or decrease in
market interest rates, portfolio equity may not correspondingly decrease or increase by more than
20% of stockholders equity.
The following table presents the simulated impact of a 200 basis point upward and a 200 basis point
downward shift of market interest rates on net interest income and the change in portfolio equity.
This analysis was done assuming that the interest-earning asset and interest-bearing liability
levels at September 30, 2006 remained constant. The impact of the market rate movements was
developed by simulating the effects of rates changing gradually over a one-year period from the
September 30, 2006 levels for net interest income. The impact of market rate
movements was developed by simulating the effects of an immediate and permanent change in rates at
September 30, 2006 for portfolio equity:
|
|
|
|
|
|
|
|
|
|
|
Increase |
|
Decrease |
|
|
200 |
|
200 |
|
|
BP |
|
BP |
Net interest income increase (decrease) |
|
|
8.2 |
% |
|
|
(9.1 |
)% |
Portfolio equity increase (decrease) |
|
|
(3.1 |
)% |
|
|
1.5 |
% |
ITEM 4.
Controls and Procedures Disclosure
The Corporation maintains disclosure controls and procedures that are designed to ensure that
information required to be disclosed in the Corporations reports that it files or submits under
the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commissions rules and forms, and that
such information is accumulated and communicated to the Companys management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
As of the end of the period covered by this quarterly report, an evaluation was carried out
under the supervision and with the participation of management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14(e) and 15d-14(e) under the Securities
Exchange Act of 1934). Based on their evaluation, our Chief Executive Officer and Chief
Financial Officer have concluded that the Companys disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Corporation in reports that
it files or submits under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules and forms.
Subsequent to the date of their evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that
there were no significant changes in internal control or in other
factors that could significantly affect its internal controls, including any corrective actions
with regard to significant deficiencies and material weaknesses.
A material weakness is a significant deficiency (as defined in Public Company Accounting
Oversight Board Auditing Standard No. 2), or a combination of significant deficiencies, that
results in there being more than a remote likelihood that a material misstatement of the annual
or interim financial statements will not be prevented or detected on a timely basis by
management or employees in the normal course of performing their assigned functions.
Changes in Internal Control over Financial Reporting
There have not been any changes in the Corporations internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the
Corporations most recent fiscal quarter that have materially affected, or are reasonably likely
to materially affect, the Corporations internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On May 9, 2006, the Corporation announced the adoption of a stock repurchase program that
authorizes the repurchase of up to 4.9% or approximately 67,328 shares of its outstanding common
stock in the open market or in privately negotiated transactions. This program expires in May 2007.
The following table summarizes the treasury stock purchased by the issuer during the third quarter
of 2006:
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Total Number of |
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Maximum Number of |
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Shares Purchased as |
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Shares that May Yet |
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Total Number of |
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Average Price Paid |
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Part of Publicly |
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Be Purchased Under |
Date |
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Shares Purchased |
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Per Share |
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Announced Program |
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the Program |
September, 2006 |
|
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783 |
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$ |
41.75 |
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783 |
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64,350 |
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Item 3. Defaults by the Company on its senior securities
None
Item 4. Submission of matters to a vote of security holders
None
Item 5. Other information
None
Item 6. Exhibits
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(a) |
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The following exhibits are included in this Report or incorporated herein by
reference: |
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3.1 |
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Second Amended and Restated Articles of Incorporation of Middlefield Banc Corp. * |
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3.2 |
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Regulations of Middlefield Banc Corp. * |
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4 |
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Specimen Stock Certificate * |
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10.1 |
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1999 Stock Option Plan of Middlefield Banc Corp. * |
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10.2 |
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Severance Agreement of President and Chief Executive Officer * |
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10.3 |
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Severance Agreement of Executive Vice President * |
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10.4 |
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Severance Agreement of Vice President * |
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10.5 |
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Federal Home Loan Bank of Cincinnati Agreement for Advances and
Security Agreement dated September 14, 2000 |
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10.7 |
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Director Retirement Agreement with Richard T. Coyne * |
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10.8 |
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Director Retirement Agreement with Francis H. Frank * |
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10.9 |
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Director Retirement Agreement with Thomas C. Halstead * |
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10.10 |
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Director Retirement Agreement with George F. Hasman * |
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10.11 |
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Director Retirement Agreement with Donald D. Hunter * |
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10.12 |
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Director Retirement Agreement with Martin S. Paul * |
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10.13 |
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Director Retirement Agreement with Donald E. Villers * |
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10.14 |
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DBO Agreement with Donald L. Stacy ** |
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10.15 |
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DBO Agreement with Jay P. Giles ** |
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10.16 |
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DBO Agreement with Alfred S. Thompson, Jr. ** |
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10.17 |
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DBO Agreement with Nancy C. Snow ** |
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10.18 |
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DBO Agreement with Teresa M. Hetrick ** |
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10.19 |
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DBO Agreement with Jack L. Lester ** |
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10.20 |
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DBO Agreement with James R. Heslop, II ** |
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10.21 |
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DBO Agreement with Thomas G. Caldwell ** |
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31.1 |
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Certification Pursuant to Section 302 of the Securities Exchange Act
of 1934 Thomas G. Caldwell |
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31.2 |
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Certification Pursuant to Section 302 of the Securities Exchange Act
of 1934 Donald L. Stacy |
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32 |
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Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
to Section 906 of the Sarbanes-Oxley Act 0f 2002. |
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99.1 |
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Form of Indemnification Agreement with directors of Middlefield Banc
Corp. and executive officers of Middlefield Banc Corp. and The Middlefield Banking
Company *** |
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99.2 |
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Independent Accountants Report |
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* |
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Incorporated by reference to the identically numbered exhibit to the December 31, 2001 Form
10-K (File No. 033-23094) filed with the SEC on March 28, 2002. |
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** |
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Incorporated by reference to the identically numbered exhibit to the December 31, 2003 Form
10-K (File No. 000-32561) filed with the SEC on March 30, 2004. |
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*** |
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Incorporated by reference to the identically numbered exhibit to Amendment No. 1 of the
registration statement on Form 10 (File No. 033-23094) filed on June 14, 2001 . |
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has
duly caused this report to be signed on its behalf by the undersigned and hereunto duly authorized.
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MIDDLEFIELD BANC CORP.
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Date: November 9, 2006 |
By: |
/s/Thomas G. Caldwell
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Thomas G. Caldwell |
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President and Chief Executive Officer |
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Date: November 9, 2006 |
By: |
/s/Donald L. Stacy
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Donald L. Stacy |
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Principal Financial and Accounting Officer |
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