UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended September 30, 2006.
Or
[ ] 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: 0-50275
BCB Bancorp, Inc.
-----------------
(Exact name of registrant as specified in its charter)
New Jersey 26-0065262
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(State or other jurisdiction of (IRS Employer I.D. No.)
incorporation or organization)
104-110 Avenue C Bayonne, New Jersey 07002
------------------------------------ -----
(Address of principal executive offices) (Zip Code)
(201) 823-0700
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(Registrant's telephone number, including area code)
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(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.
[X] Yes [ ] No
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 larger accelerated filer" in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [X]
Indicate by check mark whether the registrant is a shell company (as defined in
rule 12b-2 of the Exchange Act).
[ ] Yes [X] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by the court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. As of November 10, 2006, BCB
Bancorp, Inc., had 5,005,754 shares of common stock, no par value, issued and
outstanding.
BCB BANCORP INC., AND SUBSIDIARIES
INDEX
PART I. CONSOLIDATED FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements
Consolidated Statements of Financial Condition as of
September 30, 2006 and December 31, 2005 (unaudited).................1
Consolidated Statements of Income for the three and nine months
ended September 30, 2006 and September 30, 2005 (unaudited)..........2
Consolidated Statement of Changes in Stockholders' Equity for the
nine months ended September 30, 2006 (unaudited).....................3
Consolidated Statements of Cash Flows for the nine months
ended September 30, 2006 and September 30, 2005 (unaudited)..........4
Notes to Unaudited Consolidated Financial Statements.................5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................9
Item 3. Quantitative and Qualitative Disclosures about Market Risk..17
Item 4. Controls and Procedures.....................................19
PART II. OTHER INFORMATION...................................................20
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Financial Condition at
September 30, 2006 and December 31, 2005
(Unaudited)
(in thousands except for share and per share data )
At At
30-Sep-06 31-Dec-05
--------- ---------
ASSETS
------
Cash and amounts due from depository institutions ........... $ 2,608 $ 2,987
Interest-earning deposits ................................... 7,680 22,160
--------- ---------
Total cash and cash equivalents .......................... 10,288 25,147
Securities held to maturity ................................. 168,738 140,002
Loans held for sale ......................................... 1,716 780
Loans receivable, net ....................................... 314,441 284,451
Premises and equipment ...................................... 5,355 5,518
Federal Home Loan Bank of New York stock .................... 3,724 2,778
Interest receivable, net .................................... 3,427 3,104
Subscriptions Receivable .................................... -- 2,353
Deferred income taxes ....................................... 1,212 997
Other assets ................................................ 857 1,112
--------- ---------
Total assets ............................................ $ 509,758 $ 466,242
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
LIABILITIES
Deposits .................................................... $ 382,818 $ 362,851
Long-term Debt .............................................. 74,124 54,124
Other Liabilities ........................................... 2,219 1,420
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Total Liabilities ....................................... 459,161 418,395
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STOCKHOLDERS' EQUITY
--------------------
Common stock, stated value $0.06
10,000,000 shares authorized; 5,060,480 and 5,050,552 shares,
respectively, issued ........................................ 324 323
Additional paid-in capital .................................. 45,617 45,518
Treasury stock, at cost, 54,820 and 51,316 shares,
respectively ................................................ (851) (795)
Retained earnings ........................................... 5,507 2,801
--------- ---------
Total stockholders' equity .............................. 50,597 47,847
--------- ---------
Total liabilities and stockholders' equity ............. $ 509,758 $ 466,242
========= =========
See accompanying notes to consolidated financial statements.
1
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the three and nine months ended
September 30, 2006 and 2005
(Unaudited)
(in thousands except for per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- -----------------
2006 2005 2006 2005
----------------- -----------------
Interest income:
Loans ............................................. $ 5,844 $ 4,859 $16,903 $13,741
Securities ........................................ 2,083 1,570 5,774 4,475
Other interest-earning assets ..................... 93 13 373 27
------- ------- ------- -------
Total interest income .......................... 8,020 6,442 23,050 18,243
------- ------- ------- -------
Interest expense:
Deposits:
Demand ......................................... 109 81 277 249
Savings and club ............................... 591 984 2,066 3,059
Certificates of deposit ........................ 2,156 1,008 5,428 2,511
------- ------- ------- -------
2,856 2,073 7,771 5,819
Borrowed money ................................. 737 386 1,781 696
------- ------- ------- -------
Total interest expense ....................... 3,593 2,459 9,552 6,515
------- ------- ------- -------
Net interest income ................................. 4,427 3,983 13,498 11,728
Provision for loan losses ........................... 50 200 625 760
------- ------- ------- -------
Net interest income after provision for loan losses . 4,377 3,783 12,873 10,968
------- ------- ------- -------
Non-interest income:
Fees and service charges ......................... 149 146 437 403
Gain on sales of loans originated for sale ....... 151 52 489 157
Gain on sale of securities ....................... -- -- -- 28
Other ............................................ 8 7 21 19
------- ------- ------- -------
Total non-interest income ..................... 308 205 947 607
------- ------- ------- -------
Non-interest expense:
Salaries and employee benefits ................... 1,306 1,125 3,858 3,240
Occupancy expense of premises .................... 238 187 676 511
Equipment ........................................ 408 436 1,299 1,170
Advertising ...................................... 86 34 241 111
Other ............................................ 358 313 1,087 934
------- ------- ------- -------
Total non-interest expense .................... 2,396 2,095 7,161 5,966
------- ------- ------- -------
Income before income tax provision .................. 2,289 1,893 6,659 5,609
Income tax provision ................................ 824 702 2,450 2,064
------- ------- ------- -------
Net Income .......................................... $ 1,465 $ 1,191 $ 4,209 $ 3,545
======= ======= ======= =======
Net Income per common share-basic and diluted
basic .................................... $ 0.29 $ 0.32 $ 0.84 $ 0.95
======= ======= ======= =======
diluted .................................. $ 0.28 $ 0.31 $ 0.81 $ 0.91
======= ======= ======= =======
Weighted average number of common shares outstanding-
basic .................................... 5,006 3,716 5,004 3,731
======= ======= ======= =======
diluted .................................. 5,181 3,901 5,176 3,910
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
2
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the nine months ended September 30, 2006
(Unaudited)
(in thousands, except per share data)
Additional Treasury Retained
Common Stock Paid-In Capital Stock Earnings Total
------------ --------------- ----- -------- -----
Balance, December 31, 2005 ............ $ 323 $ 45,518 $ (795) $ 2,801 $ 47,847
Stock-based compensation ............... -- 25 -- -- 25
Exercise of Stock Options .............. 1 83 -- -- 84
Issuance of stock (stock offering costs) -- (9) -- -- (9)
Treasury Stock Purchases ............... -- -- (56) -- (56)
Cash Dividends ($0.30 per share) Paid .. -- -- -- (1,503) (1,503)
Net income for the nine months ended
September 30, 2006 ................ -- -- -- 4,209 4,209
------------ ------------ ------------ ------------ ------------
Balance, September 30, 2006 ............ $ 324 $ 45,617 $ (851) $ 5,507 $ 50,597
------------ ------------ ------------ ------------ ------------
See accompanying notes to consolidated financial statements.
3
BCB BANCORP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the nine months ended
September 30, 2006 and 2005
(Unaudited)
(in thousands)
Nine Months Ended
September 30,
------------------------
2006 2005
------------------------
Cash flows from operating activities :
Net Income ............................................... $ 4,209 $ 3,545
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation ....................................... 255 264
Amortization and accretion, net .................... (480) (384)
Provision for loan losses .......................... 625 760
Stock-based compensation ........................... 25 --
Deferred income tax ................................ (215) (251)
Loans originated for sale .......................... (28,055) (10,372)
Proceeds from sale of loans originated for sale .... 27,608 10,074
(Gain) on sale of loans originated for sale ........ (489) (157)
(Gain) on sale of securities held to maturity ...... -- (28)
(Increase) in interest receivable .................. (323) (444)
Decrease in subscriptions receivable ............... 2,353 --
(Increase) decrease in other assets ................ 255 (297)
Increase in accrued interest payable ............... 280 276
Increase in other liabilities ...................... 519 122
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Net cash provided by operating activities ... 6,567 3,108
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Cash flows from investing activities:
Purchase of FHLB stock ................................ (946) (2,176)
Proceeds from calls of securities held to maturity .... -- (55,815)
Proceeds from maturation of securities held to maturity 5,000 18,755
Proceeds from sales of securities held to maturity .... -- 7,373
Purchases of securities held to maturity .............. (37,500) --
Proceeds from repayments on securities held to maturity 3,775 5,201
Net (increase) in loans receivable .................... (30,146) (39,634)
Additions to premises and equipment ................... (92) (151)
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Net cash (used in) investing activities ........ (59,909) (66,447)
---------- ----------
Cash flows from financing activities:
Net increase in deposits .............................. 19,967 14,634
Net change in short-term debt ......................... -- 400
Proceeds of long-term debt ............................ 70,000 50,000
Repayment of long-term debt ........................... (50,000) --
Purchases of treasury stock ........................... (56) (422)
Stock options exercised ............................... 84 14
Cash Dividend paid .................................... (1,503) --
Stock issuance (costs) ................................ (9) --
---------- ----------
Net cash provided by financing activities ...... 38,483 64,626
---------- ----------
Net (decrease) increase in cash and cash equivalents ........ (14,859) 1,287
Cash and cash equivalents-begininng ......................... 25,147 4,534
---------- ----------
Cash and cash equivalents-ending ............................ $ 10,288 $ 5,821
========== ==========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Income taxes ....................................... $ 2,487 $ 2,138
Interest ........................................... $ 7,491 $ 6,239
See accompanying notes to consolidated financial statements.
4
BCB Bancorp Inc., and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements include the
accounts of BCB Bancorp, Inc. (the "Company") and the Company's wholly owned
subsidiaries, Bayonne Community Bank (the "Bank"), BCB Holding Company
Investment Company, and BCB Equipment Leasing Company. The Company's business is
conducted principally through the Bank. All significant intercompany accounts
and transactions have been eliminated in consolidation.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and, therefore, do not
necessarily include all information that would be included in audited financial
statements. The information furnished reflects all adjustments that are, in the
opinion of management, necessary for a fair presentation of consolidated
financial condition and results of operations. All such adjustments are of a
normal recurring nature. The results of operations for the three and nine months
ended September 30, 2006 are not necessarily indicative of the results to be
expected for the fiscal year ended December 31, 2006 or any other future interim
period.
These statements should be read in conjunction with the Company's audited
consolidated financial statements and related notes for the year ended December
31, 2005, which are included in the Company's Annual Report on Form 10-K as
filed with the Securities and Exchange Commission.
Note 2 - Earnings Per Share
Basic net income per common share is computed by dividing net income by the
weighted average number of shares of common stock outstanding. The diluted net
income per common share is computed by adjusting the weighted average number of
shares of common stock outstanding to include the effects of outstanding stock
options, if dilutive, using the treasury stock method.
Note 3 - Stock Compensation Plans
The Company has two stock-related compensation plans, the 2002 Stock
Option Plan and the 2003 Stock Option Plan, which are described in Note 11 to
the Company's Consolidated Financial Statements included in its Annual Report on
Form 10-K for the year ended December 31, 2005. Through December 31, 2005, the
Company accounted for its stock option plans using the intrinsic value method
set forth in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," ("APB No. 25") and related interpretations. Under APB No.
25, generally, when the exercise price of the Company's stock options equaled
the market price of the underlying stock on the date of the grant, no
compensation expense was recognized. As described in Note 11 to the Company's
Consolidated Financial Statements included in its Annual Report on Form 10-K for
the year ended December 31, 2005, the Company's Board of Directors approved, on
December 14, 2005, the acceleration of vesting for all 218,195 outstanding
unvested options so that all such options would become fully vested effective
December 20, 2005. Absent the acceleration of vesting, these options would have
become vested from time to time through 2008. As required, the Company has
estimated the number of options that will be exercised in the future which would
not have been exercisable under their original vesting terms and recorded an
expense therefore. This estimate will be updated on a quarterly basis and is not
expected to be significant.
The Company adopted SFAS No. 123R, using the modified-prospective
transition method, beginning on January 1, 2006, and therefore, began to expense
the fair value of all outstanding options over their remaining vesting periods
to the extent the options were not fully vested as of the adoption date and
instituted a procedure to expense the fair value of all options granted
subsequent to December 31, 2005 over their requisite service periods. Since all
outstanding options were fully vested by December 31, 2005, no expenses were
recorded for stock-based compensation during the three and nine months ended
September 30, 2006, except for $5,000 and $25,000, respectively, related to a
revision of the termination rate estimate to 12% annually as it relates to the
previously discussed option vesting acceleration.
5
SFAS No. 123R also requires that the benefits of realized tax deductions
in excess of previously recognized tax benefits on compensation expense are to
be reported as a financing cash flow (none recognized during the nine months
ended September 30, 2006) rather than an operating cash flow, as previously
required. In accordance with Staff Accounting Bulletin ("SAB") No. 107, the
Company classifies share-based compensation within salaries and employee
benefits and directors compensation expenses to correspond with the same line
item as the cash compensation paid to such individuals.
Options granted generally vest over a four-year service period (20%
immediately upon grant and an additional 20% at each of the four succeeding
grant anniversary dates). Compensation expense recognized for all option grants
is net of estimated forfeitures and is recognized over the awards' respective
requisite service periods. The fair values relating to all options granted were
estimated using a Black-Scholes option pricing model. Expected volatilities are
based on historical volatility of our stock and other factors, such as implied
market volatility. As permitted by SAB No. 107, we used the mid-point of the
original vesting period and original option life to estimate the options'
expected term, which represents the period of time that the options granted are
expected to be outstanding. The risk-free rate for periods within the
contractual life of the option is based on the U.S. Treasury yield curve in
effect at the time of grant. We will recognize compensation expense for the fair
values of these awards, which have graded vesting, on a straight-line basis over
the requisite service period of these awards. We did not grant any options
during the nine months ended September 30, 2006 and 2005.
During the nine months ended September 30, 2006, the Company recorded
$25,000 of share-based compensation expense, all of which related to the
aforementioned revision of the estimated termination rate. The Company does not
expect to record any additional significant share-based compensation expense in
fiscal 2006. This estimate may be impacted by potential changes to the structure
of the Company's share-based compensation plans which could impact the number of
stock options granted in fiscal 2006, changes in valuation assumptions, and
changes in the market price of the Company's common stock, among other things
and, as a result, the actual share-based compensation expense in fiscal 2006 may
differ from the Company's current estimate.
The following table illustrates the impact of share-based
compensation on reported amounts:
Three and nine months ended
September 30, 2006
(in thousands, except per share data)
Impact of Share-Based
As Reported Compensation
Quarter YTD Quarter YTD
Income before income taxes $2,289 $6,659 $ (5) $ (25)
Net Income $1,465 4,209 $ (5) (25)
Earnings per share:
Basic $ 0.29 0.84 $ 0.00 (0.01)
Diluted $ 0.28 0.81 $ 0.00 0.00
6
A summary of the Company's stock option activity and related information for its
option plans for the nine months ended September 30, 2006, was as follows:
Wtd. Avg. Rem. Aggregate
Wtd. Avg. Contractual Intrinsic
Options Exercise Price Term Value
Outstanding at 12/31/2005 428,454 $ 9.79
Granted 0 0.00
Exercised (9,958) 8.19
Forfeited or Cancelled 0 0.00
---------
Outstanding at 9/30/2006 418,496 $ 9.83 7.2 years $2,180,000
Exercisable at 9/30/2006 418,496 $ 9.83 7.2 years $2,180,000
The total intrinsic value of the options exercised during the three and
nine months ended September 30, 2006, was $ -0- and $71,000, respectively. There
were no stock options granted during the nine months ended September 30, 2006
and 2005. The Company had no non-vested options outstanding as of September 30,
2006, and during the nine months then ended.
For purposes of pro forma disclosures, the estimated fair value of the
stock are amortized to expense over their assumed vesting periods. The following
table illustrates the effect on net income and earnings per share if the Company
had applied the fair value recognition provisions of SFAS No. 123, to all
stock-related compensation prior to January 1, 2006.
Three and nine months ended September 30, 2005
(in thousands, except per share data)
Net income, as reported $ 1,191 $ 3,545
Add: Stock related compensation expense included in
reported net income, net of income taxes 0 0
Deduct: Stock related compensation expense determined
under the fair value method, net of income taxes (110) (352)
--------- ---------
Pro forma net income $ 1,081 $ 3,193
--------- ---------
Earnings per share:
Basic, as reported $ 0.32 $ 0.95
Basic, pro forma $ 0.29 $ 0.86
Diluted, as reported $ 0.31 $ 0.91
Diluted, pro forma $ 0.28 $ 0.82
7
Note 4 - New Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 157, Fair Value
Measurements, which defines fair value, establishes a framework for measuring
fair value under U.S. GAAP, and expands disclosures about fair value
measurements. SFAS No. 157 applies to other accounting pronouncements that
require or permit fair value measurements. The new guidance is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and for interim periods within those fiscal years. We are currently evaluating
the potential impact, if any, of the adoption of FASB Statement No. 157 on our
consolidated financial position, results of operations and cash flows.
On September 29, 2006, the FASB issued SFAS No. 158, Employers' Accounting for
Defined Benefit Pension and Other Postretirement Plans, which amends SFAS Nos.
87 and 106 to require recognition of the overfunded or underfunded status of
pension and other postretirement benefit plans on the balance sheet. Under SFAS
158, gains and losses, prior service costs and credits, and any remaining
transition amounts under SFAS Nos. 87 and 106 that have not yet been recognized
through net periodic benefit cost will be recognized in accumulated other
comprehensive income, net of tax effects, until they are amortized as a
component of net periodic cost. The measurement date -- the date at which the
benefit obligation and plan assets are measured -- is required to be the
company's fiscal year end. SFAS 158 is effective for publicly-held companies for
fiscal years ending after December 15, 2006, except for the measurement date
provisions, which are effective for fiscal years ending after December 15, 2008.
The Company is currently analyzing the effects of SFAS 158 but does not expect
its implementation will have a significant impact on the Company's consolidated
financial condition or results of operations.
In September 2006, the FASB issued FASB Staff Position AUG AIR-1, Accounting for
Planned Major Maintenance Activities, which is effective for fiscal years
beginning after December 15, 2006. This position statement eliminates the
accrue-in-advance method of accounting for planned major maintenance activities.
We do not expect this pronouncement to have a significant impact on the
determination or reporting of our financial results.
On September 13, 2006, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulleting ("SAB") No. 108. SAB No. 108 provides interpretive
guidance on how the effects of the carryover or reversal of prior year
misstatements should be considered in quantifying a potential current year
misstatement. Prior to SAB No. 108, companies might evaluate the materiality of
financial-statement misstatements using either the income statement or balance
sheet approach, with the income statement approach focusing on new misstatements
added in the current year, and the balance sheet approach focusing on the
cumulative amount of misstatement present in a company's balance sheet.
Misstatements that would be material under one approach could be viewed as
immaterial under another approach, and not be corrected. SAB No. 108 now
requires that companies view financial statement misstatements as material if
they are material according to either the income statement or balance sheet
approach. The Company has analyzed SAB 108 and determined that upon adoption it
will have no impact on the Company's consolidated financial condition or results
of operations.
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48, Accounting for Uncertainty in Income Taxes--an
interpretation of FASB Statement No. 109 (FIN 48), which clarifies the
accounting for uncertainty in tax positions. This Interpretation requires that
companies recognize in their financial statements the impact of a tax position,
if that position is more likely than not of being sustained on audit, based on
the technical merits of the position. The provisions of FIN 48 are effective for
fiscal years beginning after December 15, 2006, with the cumulative effect of
the change in accounting principle recorded as an adjustment to opening retained
earnings. We are currently evaluating the impact of adopting FIN 48 on our
consolidated financial statements.
8
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Financial Condition
Total assets increased by $43.6 million or 9.4% to $509.8 million at September
30, 2006 from $466.2 million at December 31, 2005. We continued to grow assets
primarily through the origination of real estate loans and the purchase of
Government Sponsored Enterprise, (GSE), investment securities, funded primarily
through cash flow provided by retail deposit growth, repayments and prepayments
of loans, as well as the mortgage backed securities and the utilization of
Federal Home Loan Bank advances. During 2006 asset growth has moderated and
growth is expected to occur at a more measured pace than in the past and in a
manner consistent with our capital levels.
Total cash and cash equivalents decreased by $14.8 million or 59.0% to $10.3
million at September 30, 2006 from $25.1 million at December 31, 2005. This
decrease was primarily attributable to the deployment of the proceeds of the
common stock offering that the Company conducted during the fourth quarter of
2005. Securities held-to-maturity increased by $28.7 million or 20.5% to $168.7
million at September 30, 2006 from $140.0 million at December 31, 2005. The
increase was primarily attributable to the purchase of $37.5 million of callable
agency securities during the nine months ended September 30, 2006, partially
offset by the maturity of $5.0 million in agency securities and $3.8 million of
repayments and prepayments from the mortgage backed securities portfolio.
Loans receivable increased by $29.9 million or 10.5% to $314.4 million at
September 30, 2006 from $284.5 million at December 31, 2005. The increase
resulted primarily from a $25.1 million or 10.1% increase in real estate
mortgages comprising residential, commercial, construction and participation
loans with other financial institutions, net of amortization, and a $6.1 million
or 24.8% increase in consumer loans, net of amortization, partially offset by a
$144,000 or 1.0% decrease in commercial loans comprising business loans and
commercial lines of credit, net of amortization and a $595,000 or 19.3% net
increase in the allowance for loan losses to $3.7 million at September 30, 2006
from $3.1 million at December 31, 2005. At September 30, 2006, the allowance for
loan losses was $3.7 million or 772.5% of non-performing loans and 1.15% of
gross loans.
Deposits increased by $19.9 million or 5.5% to $382.8 million at September 30,
2006 from $362.9 million at December 31, 2005. The increase resulted primarily
from an increase during the nine months ended September 30, 2006 of $58.9
million in time deposit accounts and an increase of $7.9 million in transaction
accounts, partially offset by a $46.9 million decrease in savings and club
accounts. The Bank has experienced some deposit flow from lower cost savings and
club balances to higher cost time deposits. Time deposit rates have continued to
rise commensurate with increases in short
9
term rates by the Federal Reserve during the nine months ended September 30,
2006, and the resultant increase in deposit rates by our competitors.
Borrowings increased by $20.0 million or 37.0% to $74.1 million at September 30,
2006 from $54.1 million at December 31, 2005. The increase in borrowings
reflects the use of long-term Federal Home Loan Bank advances to augment
deposits as the Bank's funding source for originating loans and investing in
Government Sponsored Enterprise (GSE) investment securities. During the nine
months ended September 2006, the Bank either acquired or refinanced $70.0
million in long-term, convertible advances from the Federal Home Loan Bank with
fixed rates of interest. Such borrowings were at an average interest rate of
4.29% with a final maturity of ten years, callable during periods between six
months and two years.
Stockholders' equity increased by $2.8 million or 5.9% to $50.6 million at
September 30, 2006 from $47.8 million at December 31, 2005. The increase was
primarily attributable to net income for the nine months ended September 30,
2006 of $4.2 million and $84,000 received from the proceeds of certain
individuals exercising stock options, partially offset by the payment of a $1.5
million special cash dividend equal to $0.30/share to shareholders of record on
September 1, 2006, and $56,000 utilized to repurchase 3,504 shares of common
stock under the Company's stock repurchase plan. At September 30, 2006 the
Bank's Tier 1, Tier 1 Risk-Based and Total Risk Based Capital Ratios were
10.49%, 15.75% and 16.86% respectively.
Results of Operations
Three Months
Net income increased by $274,000 or 23.0% to $1.5 million for the three months
ended September 30, 2006 from $1.2 million for the three months ended September
30, 2005. The increase in net income was due to increases in net interest income
and non-interest income and a decrease in the provision for loan losses
partially offset by increases in non-interest expense and income taxes. Net
interest income increased by $444,000 or 11.1% to $4.4 million for the three
months ended September 30, 2006 from $4.0 million for the three months ended
September 30, 2005. This increase resulted primarily from an increase in average
interest earning assets of $78.6 million or 19.2% to $488.9 million for the
three months ended September 30, 2006 from $410.3 million for the three months
ended September 30, 2005, funded primarily through an increase in average
interest bearing liabilities of $47.6 million or 13.1% to $412.3 million for the
three months ended September 30, 2006 from $364.7 million for the three months
ended September 30, 2005 and an increase in average stockholders' equity of
$22.5 million or 79.2% to $50.9 million for the three months ended September 30,
2006 from $28.4 million for the three months ended September 30, 2005, partially
offset by a decrease in the net interest margin to 3.62% for the three months
ended September 30, 2006 from 3.88% for the three months ended September 30,
2005.
10
Interest income on loans receivable increased by $985,000 or 20.3% to $5.8
million for the three months ended September 30, 2006 from $4.9 million for the
three months ended September 30, 2005. The increase was primarily attributable
to an increase in average loans receivable of $38.0 million or 13.5% to $320.4
million for the three months ended September 30, 2006 from $282.4 million for
the three months ended September 30, 2005, and an increase in the average yield
on loans receivable to 7.30% for the three months ended September 30, 2006 from
6.88% for the three months ended September 30, 2005. The increase in average
loans reflects management's philosophy to deploy funds in higher yielding
instruments, specifically commercial real estate loans, in an effort to achieve
higher returns. The increase in average yield reflects the increase in loan
yields tied to the prime lending rate which has been increasing consistent with
the Federal Reserve's more restrictive interest rate policy over the last
twenty-four months.
Interest income on securities held-to-maturity increased by $513,000 or 32.7% to
$2.1 million for the three months ended September 30, 2006 from $1.6 million for
the three months ended September 30, 2005. This increase was primarily due to an
increase in the average balance of securities held-to-maturity of $33.2 million
or 26.6% to $158.0 million for the three months ended September 30, 2006 from
$124.8 million for the three months ended September 30, 2005, and an increase in
the average yield on securities held-to-maturity to 5.27% for the three months
ended September 30, 2006 from 5.03% for the three months ended September 30,
2005. The increase in average balance reflects management's philosophy to deploy
funds in investments, absent an opportunity to originate higher yielding loans,
in an effort to achieve higher returns.
Interest income on other interest-earning assets increased by $80,000 to $93,000
for the three months ended September 30, 2006 from $13,000 for the three months
ended September 30, 2005. This increase was primarily due to a $7.4 million
increase in the average balance of other interest-earning assets to $10.5
million for the three months ended September 30, 2006 from $3.1 million for the
three months ended September 30, 2005 and an increase in the average yield on
other interest-earning assets to 3.54% for the three months ended September 30,
2006 from 1.68% for the three months ended September 30, 2005. The increase in
the average yield reflects the higher short-term interest rate environment for
overnight deposits in 2006 as compared to 2005.
Total interest expense increased by $1.1 million or 44.0% to $3.6 million for
the three months ended September 30, 2006 from $2.5 million for the three months
ended September 30, 2005. The increase resulted primarily from an increase in
average interest bearing liabilities of $47.6 million or 13.1% to $412.3 million
for the three months ended September 30, 2006 from $364.7 million for the three
months ended September 30, 2005, and an increase in the average cost of interest
bearing liabilities to 3.49% for the three months ended September 30, 2006 from
2.70% for the three months ended September 30, 2005.
The provision for loan losses totaled $50,000 and $200,000 for the three-month
periods ended September 30, 2006 and 2005, respectively. The provision for loan
losses is established based upon management's review of the Bank's loans and
consideration of a
11
variety of factors including, but not limited to, (1) the risk characteristics
of the loan portfolio, (2) current economic conditions, (3) actual losses
previously experienced, (4) significant level of loan growth and (5) the
existing level of reserves for loan losses that are probable and estimable.
During the three months ended September 30, 2006 the Bank recorded no
charge-offs. During the three months ended September 30, 2005, the Bank charged
off $13,000 of loans deemed uncollectible. During the three months ended
September 30, 2006 the Bank recorded $38,000 in recoveries, while recording no
recoveries during the three months ended September 30, 2005. The Bank had
non-performing loans totaling $477,000 or 0.15% of gross loans at September 30,
2006, $1.5 million or 0.47% of gross loans at June 30, 2006, and $1.2 million or
0.40% of gross loans at September 30, 2005. The allowance for loan losses was
$3.7 million or 1.15% of gross loans at September 30, 2006, $3.6 million or
1.13% of gross loans at June 30, 2006 and $3.2 million or 1.10% of gross loans
at September 30, 2005. The amount of the allowance is based on estimates and the
ultimate losses may vary from such estimates. Management assesses the allowance
for loan losses on a quarterly basis and makes provisions for loan losses as
necessary in order to maintain the adequacy of the allowance. While management
uses available information to recognize losses on loans, future loan loss
provisions may be necessary based on changes in the aforementioned criteria. In
addition various regulatory agencies, as an integral part of their examination
process, periodically review the allowance for loan losses and may require the
Bank to recognize additional provisions based on their judgment of information
available to them at the time of their examination. Management believes that the
allowance for loan losses was adequate at September 30, 2006, June 30, 2006, and
September 30, 2005. Recently, the Bank has become aware of two loan facilities
with a total exposure of $2.4 million which we are party to, via participation
agreements with another financial institution, who has informed us of the
possibility of performance related issues that may require additional attention
going forward. The aforementioned notwithstanding, both of these lending
relationships were performing as of September 30, 2006.
Total non-interest income increased by $103,000 or 50.2% to $308,000 for the
three months ended September 30, 2006 from $205,000 for the three months ended
September 30, 2005. The increase in non-interest income resulted primarily from
a $99,000 increase in gain on sales of loans originated for sale to $151,000 for
the three months ended September 30, 2006 from $52,000 for the three months
ended September 30, 2005. The increase in gain on sales of loans originated for
sale is the result of the increased volume of loans sold, which increased to
$9.2 million during the quarter ended September 30, 2006, from $3.4 million
during the quarter ended September 30, 2005.
Total non-interest expense increased by $301,000 or 14.4% to $2.4 million for
the three months ended September 30, 2006 from $2.1 million for the three months
ended September 30, 2005. Salaries and employee benefits expense increased by
$181,000 or 16.1% to $1.3 million for the three months ended September 30, 2006
from $1.1 million for the three months ended September 30, 2005. This increase
was primarily attributable to annual salary increases in conjunction with annual
reviews and an increase in health care benefits expense. Occupancy expense
increased by $51,000 to $238,000 for the three months ended September 30, 2006
from $187,000 for the three months ended September 30, 2005
12
primarily as a result of the Bank securing a lease for the opening of a branch
office in Hoboken, New Jersey. It is anticipated that this office will commence
operations during the first quarter of 2007. Advertising expense increased by
$52,000 to $86,000 for the three months ended September 30, 2006 from $34,000
for the three months ended September 30, 2005. The increase in advertising
expense relates to advertisements for deposit and loan promotions in an effort
to attract additional business during the three months ended September 30, 2006.
Other non-interest expense increased by $45,000 to $358,000 for the three months
ended September 30, 2006 from $313,000 for the three months ended September 30,
2005. The increase in other non-interest expense is primarily attributable to
increases in expenses commensurate with a growing franchise. Other non-interest
expense is comprised of directors' fees, stationary, forms and printing,
professional fees, legal fees, check printing, correspondent bank fees,
telephone and communication, shareholder relations and other fees and expenses.
The aforementioned increases were partially offset by a decrease in equipment
expense of $28,000 to $408,000 for the three months ended September 30, 2006
from $436,000 for the three months ended September 30, 2005.
Income tax expense increased $122,000 to $824,000 for the three months ended
September 30, 2006 from $702,000 for the three months ended September 30, 2005
reflecting increased pre-tax income earned during the three month time period
ended September 30, 2006. The consolidated effective income tax rate for the
three months ended September 30, 2006 was 36.0% as compared to 37.1% for the
three months ended September 30, 2005.
Nine Months of Operations
Net income increased by $664,000 or 18.7% to $4.2 million for the nine months
ended September 30, 2006 from $3.5 million for the nine months ended September
30, 2005. The increase in net income was due to increases in net interest income
and non-interest income and a decrease in the provision for loan losses
partially offset by increases in non-interest expense and income taxes. Net
interest income increased by $1.8 million or 15.4% to $13.5 million for the nine
months ended September 30, 2006 from $11.7 million for the nine months ended
September 30, 2005. This increase resulted primarily from an increase in average
interest earning assets of $85.1 million or 21.8% to $476.1 million for the nine
months ended September 30, 2006 from $391.0 million for the nine months ended
September 30, 2005 funded primarily through an increase in average interest
bearing liabilities of $57.0 million or 16.5% to $403.0 million for the nine
months ended September 30, 2006 from $346.0 million for the nine months ended
September 30, 2005 and an increase in average stockholders' equity of $20.9
million or 72.6% to $49.7 million for the nine months ended September 30, 2006
from $28.8 million for the nine months ended September 30, 2005, partially
offset by a decrease in the net interest margin to 3.78% for the nine months
ended September 30, 2006 from 4.00% for the nine months ended September 30,
2005.
Interest income on loans receivable increased by $3.2 million or 23.4% to $16.9
million for the nine months ended September 30, 2006 from $13.7 million for the
nine months
13
ended September 30, 2005. The increase was primarily attributable to an increase
in average loans receivable of $43.7 million or 16.2% to $313.0 million for the
nine months ended September 30, 2006 from $269.3 million for the nine months
ended September 30, 2005, and an increase in the average yield on loans
receivable to 7.20% for the nine months ended September 30, 2006 from 6.80% for
the nine months ended September 30, 2005. The increase in average loans reflects
management's philosophy to deploy funds in higher yielding instruments,
specifically commercial real estate loans, in an effort to achieve higher
returns. The increase in the average yield reflects the increase in the prime
lending rate concurrent with Fed policy and the Bank's efforts to close and
reprice loan offerings at those higher rates.
Interest income on securities held-to-maturity increased by $1.3 million or
28.9% to $5.8 million for the nine months ended September 30, 2006 from $4.5
million for the nine months ended September 30, 2005. The increase was primarily
due to an increase in the average balance of securities held-to-maturity of
$30.8 million or 26.1% to $148.7 million for the nine months ended September 30,
2006 from $117.9 million for the nine months ended September 30, 2005 and an
increase in the average yield on securities held-to-maturity to 5.18% for the
nine months ended September 30, 2006 from 5.06% for the nine months ended
September 30, 2005. The increase in average balance reflects management's
philosophy to deploy funds in investments absent the opportunity to invest in
higher yielding loans in an effort to achieve higher returns.
Interest income on other interest-earning assets increased by $346,000 to
$373,000 for the nine months ended September 30, 2006 from $27,000 for the nine
months ended September 30, 2005. This increase was primarily due to an increase
of $10.7 million in the average balance of other interest-earning assets to
$14.5 million for the nine months ended September 30, 2006 from $3.8 million for
the nine months ended September 30, 2005 and an increase in the average yield on
other interest-earning assets to 3.44% for the nine months ended September 30,
2006 from 0.94% for the nine months ended September 30, 2005. The increase in
the average yield reflects the higher short-term interest rate environment for
overnight deposits in 2006 as compared to 2005. The increase in the average
balance primarily reflects the undeployed portion of net proceeds from our
offering of common stock.
Total interest expense increased by $3.03 million or 46.5% to $9.55 million for
the nine months ended September 30, 2006 from $6.52 million for the nine months
ended September 30, 2005. The increase resulted primarily from an increase in
average interest bearing liabilities of $57.0 million or 16.5% to $403.0 million
for the nine months ended September 30, 2006 from $346.0 million for the nine
months ended September 30, 2005, and an increase in the average cost of interest
bearing liabilities to 3.16% for the nine months ended September 30, 2006 from
2.51% for the nine months ended September 30, 2005.
The provision for loan losses totaled $625,000 and $760,000 for the nine-month
periods ended September 30, 2006 and 2005, respectively. The provision for loan
losses is established based upon management's review of the Bank's loans and
consideration of a
14
variety of factors including, but not limited to, (1) the risk characteristics
of the loan portfolio, (2) current economic conditions, (3) actual losses
previously experienced, (4) significant level of loan growth and (5) the
existing level of reserves for loan losses that are probable and estimable.
During the nine months ended September 30, 2006, the Bank recorded $68,000 in
loan charge-offs and $38,000 in recoveries of previously charged off loans.
During the nine months ended September 30, 2005, the Bank recorded $99,000 in
loan charge-offs and $11,000 in recoveries of previously charged off loans. The
Bank had non-performing loans totaling $477,000 or 0.15% of gross loans at
September 30, 2006, $1.0 million or 0.36% of gross loans at December 31, 2005
and $1.2 million or 0.40% of gross loans at September 30, 2005. The allowance
for loan losses was $3.7 million or 1.15% of gross loans at September 30, 2006,
$3.1 million or 1.07% of gross loans at December 31, 2005 and $3.2 million or
1.10% of gross loans at September 30, 2005. The amount of the allowance is based
on estimates and the ultimate losses may vary from such estimates. Management
assesses the allowance for loan losses on a quarterly basis and makes provisions
for loan losses as necessary in order to maintain the adequacy of the allowance.
While management uses available information to recognize losses on loans, future
loan loss provisions may be necessary based on changes in the aforementioned
criteria. In addition various regulatory agencies, as an integral part of their
examination process, periodically review the allowance for loan losses and may
require the Bank to recognize additional provisions based on their judgment of
information available to them at the time of their examination. Management
believes that the allowance for loan losses was adequate at September 30, 2006,
December 31, 2005 and September 30, 2005. Recently, the Bank has become aware of
two loan facilities with a total exposure of $2.4 million which we are party to,
via participation agreements with another financial institution, who has
informed us of the possibility of performance related issues that may require
additional attention going forward. The aforementioned notwithstanding, both of
these lending relationships were performing as of September 30, 2006.
Total non-interest income increased by $340,000 or 56.0% to $947,000 for the
nine months ended September 30, 2006 from $607,000 for the nine months ended
September 30, 2005. The increase in non-interest income resulted primarily from
a $332,000 increase in gain on sales of loans originated for sale to $489,000
for the nine months ended September 30, 2006 from $157,000 for the nine months
ended September 30, 2005. The increase in gain on sales of loans originated for
sale is the result of the increased volume of loans sold, which increased to
$27.6 million during the nine months ended September 30, 2006, from $10.1
million during the nine months ended September 30, 2005.
Total non-interest expense increased by $1.2 million or 20.0% to $7.2 million
for the nine months ended September 30, 2006 from $6.0 million for the nine
months ended September 30, 2005. Salaries and employee benefits expense
increased by $618,000 or 19.1% to $3.9 million for the nine months ended
September 30, 2006 from $3.2 million for the nine months ended September 30,
2005. This increase was primarily attributable to annual salary increases in
conjunction with annual reviews and an increase in health care benefits expense
as well as an increase in the number of full time equivalent
15
employees to 82 for the nine months ended September 30, 2006 from 75 for the
nine months ended September 30, 2005. Equipment expense increased by $129,000 to
$1.3 million for the nine months ended September 30, 2006 from $1.2 million for
the nine months ended September 30, 2005. Occupancy expense increased by
$165,000 to $676,000 for the nine months ended September 30, 2006 from $511,000
for the nine months ended September 30, 2005 primarily as a result of the Bank
securing a lease for the opening of a branch office in Hoboken, New Jersey. It
is anticipated that this office will commence operations during the first
quarter of 2007. Advertising expense increased by $130,000 to $241,000 for the
nine months ended September 30, 2006 from $111,000 for the nine months ended
September 30, 2005. The increase in advertising expense relates to
advertisements for deposit and loan promotions in an effort to attract
additional business during the nine months ended September 30, 2006. Other
non-interest expense increased by $153,000 to $1.1 million for the nine months
ended September 30, 2006 from $934,000 for the nine months ended September 30,
2005. The increase in other non-interest expense is primarily attributable to
increases in expenses commensurate with a growing franchise. Other non-interest
expense is comprised of directors' fees, stationary, forms and printing,
professional fees, legal fees, check printing, correspondent bank fees,
telephone and communication, shareholder relations and other fees and expenses.
Income tax expense increased $386,000 or 18.7% to $2.5 million for the nine
months ended September 30, 2006 from $2.1 million for the nine months ended
September 30, 2005 reflecting increased pre-tax income earned during the nine
month time period ended September 30, 2006. The consolidated effective income
tax rate for the nine months ended September 30, 2006 and September 30, 2005 was
36.8%.
16
Item 3. Quantitative and Qualitative Analysis of Market Risk
Management of Market Risk
General. The majority of our assets and liabilities are monetary in nature.
Consequently, one of the most significant forms of market risk is interest rate
risk. Our assets, consisting primarily of mortgage loans, have longer maturities
than our liabilities, consisting primarily of deposits. As a result, a principal
part of our business strategy is to manage interest rate risk and reduce the
exposure of our net interest income to changes in market interest rates.
Accordingly, our Board of Directors has established an Asset/Liability Committee
which is responsible for evaluating the interest rate risk inherent in our
assets and liabilities, for determining the level of risk that is appropriate
given our business strategy, operating environment, capital, liquidity and
performance objectives, and for managing this risk consistent with the
guidelines approved by the Board of Directors. Senior Management monitors the
level of interest rate risk on a regular basis and the Asset/Liability
Committee, which consists of senior management and outside directors operating
under a policy adopted by the Board of Directors, meets as needed to review our
asset/liability policies and interest rate risk position.
The following table presents the Company's net portfolio value ("NPV"). These
calculations were based upon assumptions believed to be fundamentally sound,
although they may vary from assumptions utilized by other financial
institutions. The information set forth below is based on data that included all
financial instruments as of June 30, 2006, the latest data for which this
information is available. Assumptions have been made by the Company relating to
interest rates, loan prepayment rates, core deposit duration, and the market
values of certain assets and liabilities under the various interest rate
scenarios. Actual maturity dates were used for fixed rate loans and certificate
accounts. Investment securities were scheduled at either the maturity date or
the next scheduled call date based upon management's judgment of whether the
particular security would be called in the current interest rate environment and
under assumed interest rate scenarios. Variable rate loans were scheduled as of
their next scheduled interest rate repricing date. Additional assumptions were
made in preparation of the NPV table includes prepayment rates on loans and
mortgage-backed securities, core deposits without stated maturity dates were
scheduled with an assumed term of 48 months, and money market and noninterest
bearing accounts were scheduled with an assumed term of 24 months. The NPV at
"PAR" represents the difference between the Company's estimated value of assets
and estimated value of liabilities assuming no change in interest rates. The NPV
for a decrease of 300 basis points has been excluded since it would not be
meaningful, in the interest rate environment as of June 30, 2006. The following
sets forth the Company's NPV as of June 30, 2006.
NPV as a % of Assets
Change in Net Portfolio $ Change from % Change from --------------------
Calculation Value PAR PAR NPV Ratio Change
----------- ----- --- --- --------- ------
+300bp $ 26,349 $ (35,058) -57.09% 6.17% -682 bps
+200bp 38,343 (23,064) -37.56 8.69 -430 bps
+100bp 49,799 (11,608) -18.90 10.91 -208 bps
PAR 61,407 ------ ------ 12.99 ----- bps
-100bp 72,303 10,896 17.74 14.74 175 bps
-200bp 73,626 12,219 19.90 14.77 178 bps
bp - basis points
17
The table above indicates that at June 30, 2006, in the event of a 100 basis
point decrease in interest rates, we would experience a 17.74% increase in NPV.
In the event of a 100 basis point increase in interest rates, we would
experience an 18.90% decrease in NPV.
Certain shortcomings are inherent in the methodology used in the above interest
rate risk measurement. Modeling changes in NPV require making certain
assumptions that may or may not reflect the manner in which actual yields and
costs respond to changes in market interest rates. In this regard, the NPV table
presented assumes that the composition of our interest rate sensitive assets and
liabilities existing at the beginning of a period remains constant over the
period being measured and assumes that a particular change in interest rates is
reflected uniformly across the yield curve regardless of the duration or
repricing of specific assets and liabilities. Accordingly, although the NPV
table provides an indication of our interest rate risk exposure at a particular
point in time, such measurements are not intended to and do not provide a
precise forecast of the effect of changes in market interest rates on our net
interest income, and will differ from actual results.
18
ITEM 4.
Controls and Procedures
Under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer, the Company
has evaluated the effectiveness of the design and operation of its disclosure
controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the
Exchange Act) as of the end of the period covered by this quarterly report.
Based upon that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that, as of the end of the period covered by this quarterly
report, the Company's disclosure controls and procedures are effective to ensure
that information required to be disclosed in the reports that the Company 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 Commission's rules and forms. There has been no change in the Company's
internal control over financial reporting during the most recent fiscal quarter
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
There have been no changes in the Company's risk factors since the filing of the
Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Securities sold within the past three years without registering the securities
under the Securities Act of 1933
On June 17, 2004 the Company sold $4.1 million in debentures in connection with
its participation in a pooled trust preferred offering. The proceeds of the
offering were used to fund asset growth and qualify as regulatory capital.
Other than as stated below, the Company has not sold any securities during the
past three years. In connection with the Plan of Acquisition completed on May 1,
2003 the Bank reorganized into the holding company form of ownership and each
share of Bank common stock became a share of Company common stock. No new
capital was received in the reorganization.
The Company conducted a secondary public stock offering during the fourth
quarter of 2005. The Company sold 1,265,000 shares of its common stock for an
aggregate offering price of $19.3 million. The Company offered 1,100,000 shares
of its common stock, (with an over-allotment option of 165,000 shares) to the
public at a price of $15.25. The stock offering was underwritten by Janney
Montgomery Scott LLC on a firm commitment basis. The Company's registration
statement on Form S-1 (Commission File No. 333-128214) was declared effective by
the Securities and Exchange Commission on December 13, 2005. The Company also
filed a rule 462 registration statement on Form S-1 (Commission File No.
333-130307) which was effective upon filing December 14, 2005. The sale of 1.1
million shares was completed on December 19, 2005, and the over-allotment was
exercised in full on January 5, 2006.
Last year, the Company announced a stock repurchase plan which provides for the
purchase of up to 187,096 shares, adjusted for the 25% stock dividend paid on
October 27, 2005. The Company did not repurchase any shares of stock during the
three months ended September 30, 2006.
20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibit 31.1 and 31.2 Officers' Certification filed pursuant to section 302 of
the Sarbanes-Oxley Act of 2002.
Exhibit 32.1 Officers' Certification filed pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
21