UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the quarterly period ended June 30, 2012
OR
o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to .
Commission file number 1-13661
S.Y. BANCORP, INC.
(Exact name of registrant as specified in its charter)
Kentucky |
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61-1137529 |
(State or other jurisdiction of |
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(I.R.S. Employer |
incorporation or organization) |
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Identification No.) |
1040 East Main Street, Louisville, Kentucky 40206
(Address of principal executive offices including zip code)
(502) 582-2571
(Registrants telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act:
Large accelerated filer o |
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Accelerated filer x |
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Non-accelerated filer o |
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Smaller reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.). Yes o No x
The number of shares of the registrants Common Stock, no par value, outstanding as of July 30, 2012, was 13,879,187.
S.Y. BANCORP, INC. AND SUBSIDIARY
PART I FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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The following consolidated financial statements of S.Y. Bancorp, Inc. and Subsidiary, Stock Yards Bank & Trust Company, are submitted herewith: |
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Consolidated Balance Sheets June 30, 2012 (Unaudited) and December 31, 2011 |
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Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011 (Unaudited) |
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Notes to Unaudited Consolidated Financial Statements |
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Managements Discussion and Analysis of Financial Condition and Results of Operations |
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S.Y. BANCORP, INC. AND SUBSIDIARY
June 30, 2012 and December 31, 2011
(In thousands, except share data)
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June 30, |
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December 31, |
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2012 |
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2011 |
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(Unaudited) |
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Assets |
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Cash and due from banks |
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$ |
34,789 |
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$ |
32,901 |
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Federal funds sold |
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35,533 |
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22,019 |
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Mortgage loans held for sale |
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6,608 |
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4,381 |
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Securities available for sale (amortized cost of $323,359 in 2012 and $343,059 in 2011) |
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333,143 |
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352,185 |
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Federal Home Loan Bank stock |
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5,180 |
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4,948 |
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Other securities |
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1,000 |
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1,001 |
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Loans |
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1,577,826 |
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1,544,845 |
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Less allowance for loan losses |
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31,773 |
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29,745 |
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Net loans |
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1,546,053 |
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1,515,100 |
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Premises and equipment, net |
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37,891 |
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36,611 |
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Bank owned life insurance |
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27,660 |
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27,143 |
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Accrued interest receivable |
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5,727 |
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5,964 |
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Other assets |
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50,044 |
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50,844 |
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Total assets |
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$ |
2,083,628 |
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$ |
2,053,097 |
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Liabilities and Stockholders Equity |
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Deposits: |
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Non-interest bearing |
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$ |
341,128 |
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$ |
313,587 |
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Interest bearing |
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1,323,161 |
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1,304,152 |
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Total deposits |
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1,664,289 |
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1,617,739 |
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Securities sold under agreements to repurchase |
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50,700 |
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66,026 |
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Federal funds purchased |
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36,736 |
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37,273 |
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Accrued interest payable |
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280 |
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232 |
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Other liabilities |
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43,995 |
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42,810 |
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Federal Home Loan Bank advances |
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60,426 |
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60,431 |
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Subordinated debentures |
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30,900 |
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40,900 |
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Total liabilities |
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1,887,326 |
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1,865,411 |
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Stockholders equity: |
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Preferred stock, no par value. Authorized 1,000,000 shares; no shares issued or outstanding |
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Common stock, no par value. Authorized 20,000,000 shares; issued and outstanding 13,878,261 and 13,819,319 shares in 2012 and 2011, respectively |
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7,149 |
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6,953 |
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Additional paid-in capital |
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16,452 |
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14,599 |
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Retained earnings |
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166,812 |
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160,672 |
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Accumulated other comprehensive income |
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5,889 |
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5,462 |
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Total stockholders equity |
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196,302 |
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187,686 |
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Total liabilities and stockholders equity |
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$ |
2,083,628 |
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$ |
2,053,097 |
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See accompanying notes to unaudited consolidated financial statements.
S.Y. BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Income
For the three and six months ended June 30, 2012 and 2011
(In thousands, except per share data)
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For three months ended |
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For six months ended |
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June 30, |
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June 30, |
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2012 |
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2011 |
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2012 |
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2011 |
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Interest income: |
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Loans |
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$ |
19,473 |
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$ |
19,875 |
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$ |
39,353 |
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$ |
39,475 |
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Federal funds sold |
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62 |
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49 |
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134 |
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95 |
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Mortgage loans held for sale |
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56 |
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34 |
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119 |
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97 |
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Securities taxable |
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1,453 |
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1,260 |
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2,930 |
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2,492 |
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Securities tax-exempt |
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319 |
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348 |
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639 |
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695 |
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Total interest income |
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21,363 |
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21,566 |
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43,175 |
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42,854 |
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Interest expense: |
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Deposits |
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1,881 |
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2,654 |
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3,927 |
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5,325 |
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Fed funds purchased |
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8 |
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10 |
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16 |
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23 |
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Securities sold under agreements to repurchase |
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43 |
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64 |
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92 |
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131 |
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Federal Home Loan Bank advances |
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364 |
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364 |
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727 |
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725 |
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Subordinated debentures |
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772 |
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863 |
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1,568 |
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1,724 |
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Total interest expense |
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3,068 |
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3,955 |
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6,330 |
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7,928 |
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Net interest income |
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18,295 |
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17,611 |
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36,845 |
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34,926 |
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Provision for loan losses |
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2,475 |
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2,600 |
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6,550 |
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5,400 |
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Net interest income after provision for loan losses |
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15,820 |
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15,011 |
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30,295 |
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29,526 |
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Non-interest income: |
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Investment management and trust services |
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3,670 |
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3,661 |
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7,160 |
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7,198 |
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Service charges on deposit accounts |
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2,125 |
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2,034 |
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4,180 |
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3,958 |
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Bankcard transaction revenue |
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1,017 |
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960 |
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1,982 |
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1,837 |
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Gains on sales of mortgage loans held for sale |
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866 |
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441 |
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1,605 |
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823 |
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Brokerage commissions and fees |
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652 |
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530 |
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1,193 |
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1,043 |
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Bank owned life insurance income |
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260 |
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255 |
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517 |
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504 |
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Other |
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700 |
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271 |
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1,898 |
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794 |
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Total non-interest income |
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9,290 |
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8,152 |
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18,535 |
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16,157 |
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Non-interest expenses: |
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Salaries and employee benefits |
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9,426 |
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8,648 |
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18,478 |
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17,048 |
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Net occupancy expense |
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1,464 |
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1,357 |
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2,833 |
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2,587 |
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Data processing expense |
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1,522 |
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1,346 |
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2,835 |
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2,483 |
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Furniture and equipment expense |
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326 |
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337 |
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618 |
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692 |
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FDIC insurance expense |
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346 |
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339 |
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697 |
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960 |
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Other |
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3,424 |
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2,698 |
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5,783 |
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5,782 |
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Total non-interest expenses |
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16,508 |
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14,725 |
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31,244 |
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29,552 |
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Income before income taxes |
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8,602 |
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8,438 |
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17,586 |
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16,131 |
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Income tax expense |
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2,499 |
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2,441 |
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4,981 |
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4,643 |
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Net income |
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6,103 |
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5,997 |
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12,605 |
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11,488 |
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Net income per share: |
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Basic |
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$ |
0.44 |
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$ |
0.43 |
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$ |
0.91 |
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$ |
0.83 |
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Diluted |
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$ |
0.44 |
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$ |
0.43 |
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$ |
0.91 |
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$ |
0.83 |
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Average common shares: |
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Basic |
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13,874 |
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13,789 |
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13,859 |
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13,768 |
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Diluted |
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13,941 |
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13,879 |
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13,916 |
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13,857 |
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See accompanying notes to unaudited consolidated financial statements.
S.Y. BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Comprehensive Income
For the three and six months ended June 30, 2012 and 2011
(In thousands)
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Three months ended |
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Six months ended |
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June 30, |
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June 30, |
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2012 |
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2011 |
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2012 |
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2011 |
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Net income |
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$ |
6,103 |
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$ |
5,997 |
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$ |
12,605 |
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$ |
11,488 |
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Other comprehensive income, net of tax: |
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Unrealized gains on securities available for sale: |
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Unrealized gains arising during the period (net of tax of $249, $775, $231 and $849, respectively) |
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462 |
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1,440 |
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427 |
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1,577 |
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Comprehensive income |
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$ |
6,565 |
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$ |
7,437 |
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$ |
13,032 |
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$ |
13,065 |
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See accompanying notes to unaudited consolidated financial statements.
S.Y. BANCORP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the six months ended June 30, 2012 and 2011
(In thousands)
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2012 |
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2011 |
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Operating activities: |
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Net income |
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$ |
12,605 |
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$ |
11,488 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Provision for loan losses |
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6,550 |
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5,400 |
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Depreciation, amortization and accretion, net |
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2,417 |
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1,917 |
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Deferred income tax benefit |
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(1,057 |
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(635 |
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Gain on sales of mortgage loans held for sale |
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(1,605 |
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(823 |
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Origination of mortgage loans held for sale |
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(95,702 |
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(42,953 |
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Proceeds from sale of mortgage loans held for sale |
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95,080 |
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51,724 |
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Bank owned life insurance income |
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(517 |
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(504 |
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(Increase) decrease in value of private investment fund |
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(637 |
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102 |
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Proceeds from liquidation of private investment fund |
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2,846 |
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Loss on the disposal of equipment |
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43 |
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382 |
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Loss on the sale of other real estate |
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208 |
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32 |
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Stock compensation expense |
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740 |
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564 |
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Excess tax benefits from share-based compensation arrangements |
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(30 |
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(77 |
) | ||
(Increase) decrease in accrued interest receivable and other assets |
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(1,273 |
) |
951 |
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Increase (decrease) in accrued interest payable and other liabilities |
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1,263 |
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(8,864 |
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Net cash provided by operating activities |
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20,931 |
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18,704 |
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Investing activities: |
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|
|
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Purchases of securities available for sale |
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(214,345 |
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(132,819 |
) | ||
Proceeds from sale of securities available for sale |
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Proceeds from maturities of securities available for sale |
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233,171 |
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121,840 |
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Proceeds from maturities of securities held to maturity |
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20 |
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Net increase in loans |
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(39,173 |
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(41,503 |
) | ||
Purchases of premises and equipment |
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(2,920 |
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(4,750 |
) | ||
Proceeds from disposal of premises and equipment |
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7 |
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Proceeds from sale of foreclosed assets |
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2,211 |
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5,293 |
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Net cash used in investing activities |
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(21,056 |
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(51,912 |
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Financing activities: |
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Net increase in deposits |
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46,550 |
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38,903 |
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Net (decrease) increase in securities sold under agreements to repurchase and federal funds purchased |
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(15,863 |
) |
2,273 |
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Net decrease in other short-term borrowings |
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(755 |
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Repayments of Federal Home Loan Bank advances |
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(5 |
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(5 |
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Repayments of subordinated debentures |
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(10,000 |
) |
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Issuance of common stock for options and dividend reinvestment plan |
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288 |
|
381 |
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Excess tax benefits from share-based compensation arrangements |
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30 |
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77 |
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Common stock repurchases |
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(202 |
) |
(167 |
) | ||
Cash dividends paid |
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(5,271 |
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(4,956 |
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Net cash provided by financing activities |
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15,527 |
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35,751 |
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Net increase in cash and cash equivalents |
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15,402 |
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2,543 |
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Cash and cash equivalents at beginning of period |
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54,920 |
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41,655 |
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Cash and cash equivalents at end of period |
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$ |
70,322 |
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$ |
44,198 |
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Supplemental cash flow information: |
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Income tax payments |
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$ |
5,200 |
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$ |
985 |
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Cash paid for interest |
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6,282 |
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8,053 |
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Supplemental non-cash activity: |
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|
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Transfers from loans to other real estate owned |
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$ |
1,670 |
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$ |
7,599 |
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See accompanying notes to unaudited consolidated financial statements.
S.Y. BANCORP, INC. AND SUBSIDIARY
Consolidated Statement of Changes in Stockholders Equity
For the six months ended June 30, 2012
(In thousands, except per share data)
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Accumulated |
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Common stock |
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other |
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Number of |
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Additional |
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Retained |
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comprehensive |
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shares |
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Amount |
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paid-in capital |
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earnings |
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income |
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Total |
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Balance December 31, 2011 |
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13,819 |
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$ |
6,953 |
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$ |
14,599 |
|
$ |
160,672 |
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$ |
5,462 |
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$ |
187,686 |
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|
|
|
|
|
|
|
|
|
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Net income |
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|
|
|
|
|
|
12,605 |
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|
|
12,605 |
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|
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|
|
|
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Other comprehensive income, net of tax |
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|
|
|
|
|
|
|
|
427 |
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427 |
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|
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Stock compensation expense |
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|
|
|
740 |
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|
740 |
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|
|
|
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|
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Stock issued for stock options exercised and dividend reinvestment plan |
|
15 |
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50 |
|
267 |
|
|
|
|
|
317 |
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|
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|
|
|
|
|
|
|
|
|
|
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Stock issued for non- vested restricted stock |
|
56 |
|
185 |
|
1,075 |
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(1,260 |
) |
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|
|
|
|
|
|
|
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Cash dividends, $0.38 per share |
|
|
|
|
|
|
|
(5,271 |
) |
|
|
(5,271 |
) | |||||
|
|
|
|
|
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|
|
|
|
|
|
|
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Shares repurchased or cancelled |
|
(12 |
) |
(39 |
) |
(229 |
) |
66 |
|
|
|
(202 |
) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance June 30, 2012 |
|
13,878 |
|
$ |
7,149 |
|
$ |
16,452 |
|
$ |
166,812 |
|
$ |
5,889 |
|
$ |
196,302 |
|
See accompanying notes to unaudited consolidated financial statements.
S.Y. BANCORP, INC. AND SUBSIDIARY
(1) Summary of Significant Accounting Policies
The accompanying consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all information and footnotes required by U.S. generally accepted accounting principles (US GAAP) for complete financial statements. The consolidated financial statements of S.Y. Bancorp, Inc. (Bancorp) and its subsidiary reflect all adjustments (consisting only of adjustments of a normal recurring nature) which are, in the opinion of management, necessary for a fair presentation of financial condition and results of operations for the interim periods.
The consolidated financial statements include the accounts of S.Y. Bancorp, Inc. and its wholly-owned subsidiary, Stock Yards Bank & Trust Company (Bank). S.Y. Bancorp Capital Trust II is a Delaware statutory trust that is a wholly-owned unconsolidated finance subsidiary of S.Y. Bancorp, Inc. Significant intercompany transactions and accounts have been eliminated in consolidation.
A description of other significant accounting policies is presented in the notes to the Consolidated Financial Statements for the year ended December 31, 2011 included in S.Y. Bancorp, Inc.s Annual Report on Form 10-K. Certain reclassifications have been made in the prior year financial statements to conform to current year classifications.
Interim results for the three and six month periods ended June 30, 2012 are not necessarily indicative of the results for the entire year.
Critical Accounting Policies
Management has identified the accounting policy related to the allowance and provision for loan losses as critical to the understanding of Bancorps results of operations and discussed this conclusion with the Audit Committee of the Board of Directors. Since the application of this policy requires significant management assumptions and estimates, it could result in materially different amounts to be reported if conditions or underlying circumstances were to change. Assumptions include many factors such as changes in borrowers financial condition which can change quickly or historical loss ratios related to certain loan portfolios which may or may not be indicative of future losses. To the extent that managements assumptions prove incorrect, the results from operations could be materially affected by a higher or lower provision for loan losses. The accounting policy related to the allowance for loan losses is applicable to the commercial banking segment of Bancorp.
Additionally, management has identified the accounting policy related to accounting for income taxes as critical to the understanding of Bancorps results of operations and discussed this conclusion with the Audit Committee of the Board of Directors. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entitys financial statements or tax returns. Judgment is required in assessing the future tax consequences of events that have been recognized in Bancorps financial statements or tax returns. Fluctuations in the actual outcome of these future tax consequences, including the effects of periodic IRS and state agency examinations, could materially impact Bancorps financial position and its results from operations.
(2) Securities
The amortized cost, unrealized gains and losses, and fair value of securities available for sale follow:
June 30, 2012 |
|
Amortized |
|
Unrealized |
|
|
| ||||||
Securities available for sale |
|
cost |
|
Gains |
|
Losses |
|
Fair value |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury and other U.S. government obligations |
|
$ |
45,000 |
|
$ |
|
|
$ |
|
|
$ |
45,000 |
|
Government sponsored enterprise obligations |
|
74,561 |
|
2,711 |
|
|
|
77,272 |
| ||||
Mortgage-backed securities |
|
135,178 |
|
4,115 |
|
17 |
|
139,276 |
| ||||
Obligations of states and political subdivisions |
|
67,620 |
|
2,957 |
|
16 |
|
70,561 |
| ||||
Trust preferred securities of financial institutions |
|
1,000 |
|
34 |
|
|
|
1,034 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total securities available for sale |
|
$ |
323,359 |
|
$ |
9,817 |
|
$ |
33 |
|
$ |
333,143 |
|
December 31, 2011 |
|
Amortized |
|
Unrealized |
|
|
| ||||||
Securities available for sale |
|
cost |
|
Gains |
|
Losses |
|
Fair value |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
| ||||
U.S. Treasury and other U.S. government obligations |
|
$ |
115,001 |
|
$ |
|
|
$ |
|
|
$ |
115,001 |
|
Government sponsored enterprise obligations |
|
43,349 |
|
2,837 |
|
|
|
46,186 |
| ||||
Mortgage-backed securities |
|
116,954 |
|
3,564 |
|
23 |
|
120,495 |
| ||||
Obligations of states and political subdivisions |
|
66,755 |
|
2,779 |
|
33 |
|
69,501 |
| ||||
Trust preferred securities of financial institutions |
|
1,000 |
|
2 |
|
|
|
1,002 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total securities available for sale |
|
$ |
343,059 |
|
$ |
9,182 |
|
$ |
56 |
|
$ |
352,185 |
|
The investment portfolio includes a significant level of obligations of states and political subdivisions. The issuers of these bonds are generally school districts or essential-service public works projects. The issuers are concentrated in Kentucky, with a small percentage in Indiana and Ohio. Each of these securities has a rating of A or better by a recognized bond rating agency.
In addition to the available for sale portfolio, investment securities held by Bancorp include certain securities which are not readily marketable, and are carried at cost. This category includes holdings of Federal Home Loan Bank of Cincinnati (FHLB) stock which are required for borrowing availability and are classified as restricted securities. Other securities consist of a Community Reinvestment Act (CRA) investment which matures in 2014, and is fully collateralized with a government agency security of similar duration.
A summary of the available for sale investment securities by maturity groupings as of June 30, 2012 is shown below. Actual maturities may differ from contractual maturities because some issuers have the right to call or prepay obligations. The investment portfolio includes agency mortgage-backed securities, which are guaranteed by agencies such as the FHLMC, FNMA, and GNMA. These securities differ from traditional debt securities primarily in that they may have uncertain principal payment dates and are priced based on estimated prepayment rates on the underlying collateral. Bancorp does not have exposure to subprime originated mortgage-backed or collateralized debt obligation instruments.
Securities available for sale |
|
Amortized cost |
|
Fair value |
| ||
(in thousands) |
|
|
|
|
| ||
|
|
|
|
|
| ||
Due within 1 year |
|
$ |
85,877 |
|
$ |
86,041 |
|
Due after 1 but within 5 years |
|
68,145 |
|
70,549 |
| ||
Due after 5 but within 10 years |
|
33,159 |
|
36,243 |
| ||
Due after 10 years |
|
1,000 |
|
1,034 |
| ||
Mortgage-backed securities |
|
135,178 |
|
139,276 |
| ||
Total securities available for sale |
|
$ |
323,359 |
|
$ |
333,143 |
|
Securities with unrealized losses at June 30, 2012 and December 31, 2011, not recognized in income are as follows:
|
|
Less than 12 months |
|
12 months or more |
|
Total |
| ||||||||||||
|
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
|
Fair |
|
Unrealized |
| ||||||
(in thousands) |
|
value |
|
losses |
|
value |
|
losses |
|
value |
|
losses |
| ||||||
June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Mortgage-backed securities |
|
$ |
5,234 |
|
$ |
17 |
|
$ |
|
|
$ |
|
|
$ |
5,234 |
|
$ |
17 |
|
Obligations of states and political subdivisions |
|
|
|
|
|
1,013 |
|
16 |
|
1,013 |
|
16 |
| ||||||
Total temporarily impaired securities |
|
$ |
5,234 |
|
$ |
17 |
|
$ |
1,013 |
|
$ |
16 |
|
$ |
6,247 |
|
$ |
33 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Mortgage-backed securities |
|
$ |
5,122 |
|
$ |
23 |
|
$ |
|
|
$ |
|
|
5,122 |
|
23 |
| ||
Obligations of states and political subdivisions |
|
2,644 |
|
17 |
|
1,021 |
|
16 |
|
3,665 |
|
33 |
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Total temporarily impaired securities |
|
$ |
7,766 |
|
$ |
40 |
|
$ |
1,021 |
|
$ |
16 |
|
$ |
8,787 |
|
$ |
56 |
|
Unrealized losses on Bancorps investment securities portfolio have not been recognized in income because the securities are of high credit quality, and the decline in fair values is largely due to changes in the prevailing interest rate environment since the purchase date. The fair value is expected to recover as the securities reach their maturity date and/or the interest rate environment returns to conditions similar to when the securities were purchased. These investments consist of two and five separate investment positions as of June 30, 2012 and December 31, 2011, respectively. Because management does not intend to sell the investments, and it is not likely that Bancorp will be required to sell the investments before
recovery of their amortized cost bases, which may be at maturity, Bancorp does not consider these securities to be other-than-temporarily impaired at June 30, 2012.
(3) Loans
The composition of loans by primary loan classification follows:
(in thousands) |
|
June 30, 2012 |
|
December 31, 2011 |
| ||
Commercial and industrial |
|
$ |
417,112 |
|
$ |
393,729 |
|
Construction and development |
|
139,328 |
|
147,637 |
| ||
Real estate mortgage |
|
985,647 |
|
966,665 |
| ||
Consumer |
|
35,739 |
|
36,814 |
| ||
|
|
|
|
|
| ||
Total loans |
|
$ |
1,577,826 |
|
$ |
1,544,845 |
|
The following table presents the balance in the recorded investment in loans and allowance for loan losses by portfolio segment and based on impairment method as of June 30, 2012 and December 31, 2011.
|
|
Type of loan |
|
|
|
|
| |||||||||||
June 30, 2012 |
|
Commercial |
|
Construction |
|
Real estate |
|
|
|
|
|
|
| |||||
(in thousands) |
|
and industrial |
|
and development |
|
mortgage |
|
Consumer |
|
|
|
Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance |
|
$ |
417,112 |
|
$ |
139,328 |
|
$ |
985,647 |
|
$ |
35,739 |
|
|
|
$ |
1,577,826 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance: loans with an allowance recorded |
|
$ |
11,516 |
|
$ |
13,237 |
|
$ |
10,695 |
|
$ |
|
|
|
|
$ |
35,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance: loans with no related allowance recorded |
|
$ |
405,596 |
|
$ |
126,091 |
|
$ |
974,952 |
|
$ |
35,739 |
|
|
|
$ |
1,542,378 |
|
|
|
Commercial |
|
Construction |
|
Real estate |
|
|
|
|
|
|
| ||||||
|
|
and industrial |
|
and development |
|
mortgage |
|
Consumer |
|
Unallocated |
|
Total |
| ||||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning balance December 31, 2011 |
|
$ |
7,364 |
|
$ |
3,546 |
|
$ |
11,182 |
|
$ |
540 |
|
$ |
7,113 |
|
$ |
29,745 |
|
Provision |
|
3,475 |
|
369 |
|
3,913 |
|
(327 |
) |
(880 |
) |
6,550 |
| ||||||
Charge-offs |
|
(3,500 |
) |
(123 |
) |
(1,121 |
) |
(368 |
) |
|
|
(5,112 |
) | ||||||
Recoveries |
|
5 |
|
|
|
134 |
|
451 |
|
|
|
590 |
| ||||||
Ending balance June 30, 2012 |
|
$ |
7,344 |
|
$ |
3,792 |
|
$ |
14,108 |
|
$ |
296 |
|
$ |
6,233 |
|
$ |
31,773 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance: allowance for loans with related allowance recorded |
|
$ |
1,758 |
|
$ |
3,597 |
|
$ |
527 |
|
$ |
|
|
|
|
$ |
5,882 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance: allowance for loans with no related allowance recorded |
|
$ |
5,586 |
|
$ |
195 |
|
$ |
13,581 |
|
$ |
296 |
|
$ |
6,233 |
|
$ |
25,891 |
|
|
|
Type of loan |
|
|
|
|
| |||||||||||
December 31, 2011 |
|
Commercial |
|
Construction |
|
Real estate |
|
|
|
|
|
|
| |||||
(in thousands) |
|
and industrial |
|
and development |
|
mortgage |
|
Consumer |
|
|
|
Total |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Loans |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance |
|
$ |
393,729 |
|
$ |
147,637 |
|
$ |
966,665 |
|
$ |
36,814 |
|
|
|
$ |
1,544,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance: loans with an allowance recorded |
|
$ |
5,459 |
|
$ |
2,416 |
|
$ |
14,170 |
|
$ |
94 |
|
|
|
$ |
22,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
Balance: loans with no related allowance recorded |
|
$ |
388,270 |
|
$ |
145,221 |
|
$ |
952,495 |
|
$ |
36,720 |
|
|
|
$ |
1,522,706 |
|
|
|
Commercial |
|
Construction |
|
Real estate |
|
|
|
|
|
|
| ||||||
|
|
and industrial |
|
and development |
|
mortgage |
|
Consumer |
|
Unallocated |
|
Total |
| ||||||
Allowance for loan losses |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Beginning balance December 31, 2010 |
|
$ |
2,796 |
|
$ |
2,280 |
|
$ |
12,272 |
|
$ |
623 |
|
$ |
7,572 |
|
$ |
25,543 |
|
Provision |
|
5,475 |
|
2,859 |
|
4,592 |
|
133 |
|
(459 |
) |
12,600 |
| ||||||
Charge-offs |
|
(1,015 |
) |
(1,593 |
) |
(5,840 |
) |
(673 |
) |
|
|
(9,121 |
) | ||||||
Recoveries |
|
108 |
|
|
|
158 |
|
457 |
|
|
|
723 |
| ||||||
Ending balance December 31, 2011 |
|
$ |
7,364 |
|
$ |
3,546 |
|
$ |
11,182 |
|
$ |
540 |
|
$ |
7,113 |
|
$ |
29,745 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance: allowance for loans with related allowance recorded |
|
$ |
954 |
|
$ |
10 |
|
$ |
1,597 |
|
$ |
|
|
|
|
$ |
2,561 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Balance: allowance for loans with no related allowance recorded |
|
$ |
6,410 |
|
$ |
3,536 |
|
$ |
9,585 |
|
$ |
540 |
|
$ |
7,113 |
|
$ |
27,184 |
|
Bancorp did not have any loans acquired with deteriorated credit quality at June 30, 2012 or December 31, 2011.
Management uses the following portfolio segments of loans when assessing and monitoring the risk and performance of the loan portfolio:
· Commercial and industrial
· Construction and development
· Real estate mortgage
· Consumer
The following table presents loans individually evaluated for impairment as of June 30, 2012 and December 31, 2011.
|
|
|
|
Unpaid |
|
|
|
Average |
| ||||
June 30, 2012 |
|
Recorded |
|
principal |
|
Related |
|
recorded |
| ||||
(in thousands) |
|
investment |
|
balance |
|
allowance |
|
investment |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loans with no related allowance recorded |
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
|
$ |
7,714 |
|
$ |
7,714 |
|
|
|
$ |
5,410 |
| |
Construction and development |
|
117 |
|
117 |
|
|
|
1,583 |
| ||||
Real estate mortgage |
|
5,384 |
|
5,384 |
|
|
|
6,178 |
| ||||
Consumer |
|
|
|
|
|
|
|
32 |
| ||||
Subtotal |
|
13,215 |
|
13,215 |
|
|
|
13,203 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loans with an allowance recorded |
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
|
3,802 |
|
3,802 |
|
1,758 |
|
4,325 |
| ||||
Construction and development |
|
13,120 |
|
13,120 |
|
3,597 |
|
5,009 |
| ||||
Real estate mortgage |
|
5,311 |
|
7,561 |
|
527 |
|
6,217 |
| ||||
Consumer |
|
|
|
|
|
|
|
|
| ||||
Subtotal |
|
22,233 |
|
24,483 |
|
5,882 |
|
15,551 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total |
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
|
$ |
11,516 |
|
$ |
11,516 |
|
$ |
1,758 |
|
$ |
9,735 |
|
Construction and development |
|
13,237 |
|
13,237 |
|
3,597 |
|
6,592 |
| ||||
Real estate mortgage |
|
10,695 |
|
12,945 |
|
527 |
|
12,395 |
| ||||
Consumer |
|
|
|
|
|
|
|
32 |
| ||||
Total |
|
$ |
35,448 |
|
$ |
37,698 |
|
$ |
5,882 |
|
$ |
28,754 |
|
|
|
|
|
Unpaid |
|
|
|
Average |
| ||||
December 31, 2011 |
|
Recorded |
|
principal |
|
Related |
|
recorded |
| ||||
(in thousands) |
|
investment |
|
balance |
|
allowance |
|
investment |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loans with no related allowance recorded |
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
|
$ |
694 |
|
$ |
920 |
|
|
|
$ |
951 |
| |
Construction and development |
|
2,316 |
|
2,316 |
|
|
|
1,979 |
| ||||
Real estate mortgage |
|
6,453 |
|
6,453 |
|
|
|
6,353 |
| ||||
Consumer |
|
94 |
|
94 |
|
|
|
83 |
| ||||
Subtotal |
|
9,557 |
|
9,783 |
|
|
|
9,366 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Loans with an allowance recorded |
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
|
4,765 |
|
6,415 |
|
954 |
|
2,447 |
| ||||
Construction and development |
|
100 |
|
100 |
|
10 |
|
20 |
| ||||
Real estate mortgage |
|
7,717 |
|
11,962 |
|
1,597 |
|
7,249 |
| ||||
Consumer |
|
|
|
|
|
|
|
10 |
| ||||
Subtotal |
|
12,582 |
|
18,477 |
|
2,561 |
|
9,726 |
| ||||
|
|
|
|
|
|
|
|
|
| ||||
Total |
|
|
|
|
|
|
|
|
| ||||
Commercial and industrial |
|
$ |
5,459 |
|
$ |
7,335 |
|
$ |
954 |
|
$ |
3,398 |
|
Construction and development |
|
2,416 |
|
2,416 |
|
10 |
|
1,999 |
| ||||
Real estate mortgage |
|
14,170 |
|
18,415 |
|
1,597 |
|
13,602 |
| ||||
Consumer |
|
94 |
|
94 |
|
|
|
93 |
| ||||
Total |
|
$ |
22,139 |
|
$ |
28,260 |
|
$ |
2,561 |
|
$ |
19,092 |
|
Differences between the recorded investment amounts and the unpaid principal balance amounts are due to partial charge-offs which have occurred over the life of the loans.
Impaired loans include non-accrual loans and loans accounted for as troubled debt restructuring (TDR), which continue to accrue interest. Non-performing loans include the balance of impaired loans plus any loans over 90 days past due and still accruing interest. Loans past due more than 90 days or more and still accruing interest amounted to $112,000 at June 30, 2012, and $1,160,000 at December 31, 2011.
The following table presents the recorded investment in non-accrual loans as of June 30, 2012 and December 31, 2011.
(in thousands) |
|
June 30, 2012 |
|
December 31, 2011 |
| ||
|
|
|
|
|
| ||
Commercial and industrial |
|
$ |
4,478 |
|
$ |
2,665 |
|
Construction and development |
|
13,237 |
|
2,416 |
| ||
Real estate mortgage |
|
10,192 |
|
13,562 |
| ||
Consumer |
|
|
|
94 |
| ||
|
|
|
|
|
| ||
Total |
|
$ |
27,907 |
|
$ |
18,737 |
|
On June 30, 2012 and 2011, Bancorp had $7.5 million and $250,000 of loans classified as TDR, respectively. The following table presents the recorded investment in loans modified and classified as TDR during the six months ended June 30, 2012.
|
|
|
|
Pre-modification |
|
Post-modification |
| ||
|
|
Number of |
|
outstanding recorded |
|
outstanding recorded |
| ||
(dollars in thousands) |
|
contracts |
|
investment |
|
investment |
| ||
|
|
|
|
|
|
|
| ||
Commercial & industrial |
|
3 |
|
$ |
5,788 |
|
$ |
5,788 |
|
Real estate mortgage |
|
2 |
|
503 |
|
503 |
| ||
Total |
|
5 |
|
$ |
6,291 |
|
$ |
6,291 |
|
Bancorp did not modify and classify any loans as TDR during the six months ended June 30, 2011.
The following table presents the recorded investment in loans accounted for as TDR that have defaulted as of June 30, 2012.
June 30, 2012 |
|
Number of |
|
|
| |
(dollars in thousands) |
|
Contracts |
|
Recorded investment |
| |
|
|
|
|
|
| |
Commercial & industrial |
|
3 |
|
$ |
1,583 |
|
Real estate mortgage |
|
1 |
|
361 |
| |
|
|
|
|
|
| |
Total |
|
4 |
|
$ |
1,944 |
|
The loans in the table above are all related to one borrower and have a related allowance allocation of $493,000, which management estimates to be the total loss exposure to this credit. Prior to 2012, Bancorp had not experienced loans accounted for as TDR that have subsequently defaulted. At June 30, 2012, loans accounted for as TDR included modifications from original terms due to bankruptcy proceedings and modifications of amortization periods due to customer financial difficulties. Some loans accounted for as TDR included temporary suspension of principal payments, resulting in payment of interest only. There has been no forgiveness of principal for loans accounted for as TDR. Loans accounted for as TDR, which have not defaulted, are individually evaluated for impairment and, at June 30, 2012, had a total allowance allocation of $300,000, compared to $1,167,000 at December 31, 2011.
The following table presents the aging of the recorded investment in past due loans as of June 30, 2012 and December 31, 2011.
|
|
|
|
|
|
Greater |
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
than |
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
90 days |
|
|
|
|
|
|
|
Recorded |
| |||||||
|
|
|
|
|
|
past due |
|
|
|
|
|
|
|
investment > |
| |||||||
June 30, 2012 |
|
30-59 days |
|
60-89 days |
|
(includes |
|
Total |
|
|
|
Total |
|
90 days and |
| |||||||
(in thousands) |
|
past due |
|
past due |
|
non-accrual) |
|
past due |
|
Current |
|
loans |
|
accruing |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial and industrial |
|
$ |
483 |
|
$ |
311 |
|
$ |
4,478 |
|
$ |
5,272 |
|
$ |
411,840 |
|
$ |
417,112 |
|
$ |
|
|
Construction and development |
|
413 |
|
86 |
|
13,237 |
|
13,736 |
|
125,592 |
|
139,328 |
|
|
| |||||||
Real estate mortgage |
|
6,025 |
|
2,626 |
|
10,284 |
|
18,935 |
|
966,712 |
|
985,647 |
|
92 |
| |||||||
Consumer |
|
41 |
|
4 |
|
20 |
|
65 |
|
35,674 |
|
35,739 |
|
20 |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total |
|
$ |
6,962 |
|
$ |
3,027 |
|
$ |
28,019 |
|
$ |
38,008 |
|
$ |
1,539,818 |
|
$ |
1,577,826 |
|
$ |
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Commercial and industrial |
|
$ |
989 |
|
$ |
162 |
|
$ |
2,665 |
|
$ |
3,816 |
|
$ |
389,913 |
|
$ |
393,729 |
|
$ |
|
|
Construction and development |
|
86 |
|
|
|
2,416 |
|
2,502 |
|
145,135 |
|
147,637 |
|
|
| |||||||
Real estate mortgage |
|
8,520 |
|
957 |
|
14,722 |
|
24,199 |
|
942,466 |
|
966,665 |
|
1,160 |
| |||||||
Consumer |
|
336 |
|
|
|
94 |
|
430 |
|
36,384 |
|
36,814 |
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total |
|
$ |
9,931 |
|
$ |
1,119 |
|
$ |
19,897 |
|
$ |
30,947 |
|
$ |
1,513,898 |
|
$ |
1,544,845 |
|
$ |
1,160 |
|
Bancorp categorizes loans into credit risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends. Pass-rated loans included all risk-rated loans other than those classified as special mention, substandard, and doubtful, which are defined below:
· Special Mention: Loans classified as special mention have a potential weakness that deserves managements close attention. These potential weaknesses may result in deterioration of repayment prospects for the loan or of the Banks credit position at some future date.
· Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize repayment of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
· Substandard non-performing: Loans classified as substandard-non-performing have all the characteristics of substandard loans and have been placed on non-accrual status or have been accounted for as troubled debt restructurings.
· Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.
As of June 30, 2012 and December 31, 2011, the risk categories of loans were as follows:
Credit risk profile by internally assigned grade
(in thousands)
|
|
Commercial |
|
Construction |
|
Real estate |
|
Consumer |
|
Total |
| |||||
June 30, 2012 |
|
|
|
|
|
|
|
|
|
|
| |||||
Grade |
|
|
|
|
|
|
|
|
|
|
| |||||
Pass |
|
$ |
391,331 |
|
$ |
119,576 |
|
$ |
933,244 |
|
$ |
35,710 |
|
$ |
1,479,861 |
|
Special mention |
|
6,880 |
|
6,515 |
|
24,223 |
|
9 |
|
37,627 |
| |||||
Substandard |
|
7,385 |
|
|
|
17,393 |
|
|
|
24,778 |
| |||||
Substandard non-performing |
|
11,516 |
|
13,237 |
|
10,787 |
|
20 |
|
35,560 |
| |||||
Doubtful |
|
|
|
|
|
|
|
|
|
|
| |||||
Total |
|
$ |
417,112 |
|
$ |
139,328 |
|
$ |
985,647 |
|
$ |
35,739 |
|
$ |
1,577,826 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
| |||||
|
|
|
|
|
|
|
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