The following should be read in conjunction with the Management's Discussion and
Analysis in Item 7 of the Company's Annual Report on Form 10-K for the year
The Company is a
Our principal business consists of attracting retail and commercial deposits from the general public and businesses, including some brokered deposits, and investing those funds primarily in loans secured by consumer closed end first mortgages and consumer open end and junior liens on owner-occupied, one- to four-family residences, a variety of other consumer loans, loans secured by commercial real estate, commercial construction and development and commercial and industrial loans. Funds not invested in loans generally are invested in investment securities, including mortgage-backed and mortgage-related securities. We also obtain funds from FHLB advances and other borrowings.
Our results of operations depend primarily on the level of our net interest income, which is the difference between interest income on interest-earning assets, such as loans, mortgage-backed securities and investment securities, and interest expense on interest-bearing liabilities, primarily deposits and borrowings. The structure of our interest-earning assets versus the structure of interest-bearing liabilities, along with the shape of the yield curve, has a direct impact on our net interest income. Historically, our interest-earning assets have been longer term in nature (i.e., fixed-rate mortgage loans) and interest-bearing liabilities have been shorter term (i.e., certificates of deposit, regular savings accounts, etc.). This structure would impact net interest income favorably in a decreasing rate environment, assuming a normally shaped yield curve, as the rates on interest-bearing liabilities would decrease more rapidly than rates on interest-earning assets. Conversely, in an increasing rate environment, assuming a normally shaped yield curve, net interest income would be impacted unfavorably as rates on interest-earning assets would increase at a slower rate than rates on interest-bearing liabilities.
Second Quarter Highlights. At
Financial highlights for the second quarter ended
· Gross loan balances increased by
in the second quarter of 2014.
· Asset quality continues to improve as non-performing loans to total loans were
0.61% as of
non-performing assets to total assets were 0.94% as of
to 1.12% as of
· Classified loans decreased approximately 17% in the second quarter of 2014 and
· Deposits decreased
a decrease in certificates of deposit of
· Tangible common equity to total assets is 8.40% and tangible book value per
$16.54as of June 30, 2014compared to tangible common equity to total assets of 7.91% and tangible book value per share of $15.46as of December 31, 2013.
· Cash dividend on common stock increased by 33%.
· Net interest income for the second quarter of 2014 increased by
linked quarter basis and
· Net interest margin was 3.28% for the second quarter 2014 compared to 3.10% in
the second quarter 2013.
· Non-interest income in the second quarter of 2014 increased by
linked quarter basis and decreased by
quarter of 2013.
· Non-interest expense decreased in the second quarter of 2014 by
linked quarter basis and
$49,000when compared to the second quarter of 2013.
The Management's Discussion and Analysis in Item 7 of the Company's Annual Report on Form 10-K for the year ended
Critical Accounting Policies