Notes
to the Unaudited Consolidated Financial Statements
Note 1. Basis of Presentation/Nature of Operations
The accompanying unaudited Consolidated Financial Statements include the accounts of FedFirst Financial Corporation (“FedFirst Financial” or the “Company”), a stock holding company established in 2010, whose wholly owned subsidiary is First Federal Savings Bank (“First Federal” or the “Bank”), a federally chartered stock savings bank, which owns FedFirst Exchange Corporation (“FFEC”). FFEC has an 80% controlling interest in Exchange Underwriters, Inc. (“Exchange Underwriters”). Exchange Underwriters is a full-service, independent insurance agency that offers property and casualty, commercial liability, surety and other insurance products. All significant intercompany transactions have been eliminated.
First Federal operates as a community-oriented financial institution offering residential, multi-family and commercial mortgages, consumer loans and commercial business loans as well as a variety of deposit products for individuals and businesses from seven locations in southwestern Pennsylvania. First Federal conducts insurance brokerage activities through Exchange Underwriters. The Bank is subject to competition from other financial institutions and to the regulations of certain federal and state agencies and undergoes periodic examinations by those regulatory authorities.
The unaudited consolidated financial statements were prepared in accordance with instructions to Form 10-Q and, therefore, do not include information or notes necessary for a complete presentation of financial position, results of operations, changes in stockholders’ equity and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). However, all normal recurring adjustments that, in the opinion of management, are necessary to make the consolidated financial statements not misleading have been included. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the three and six months ended June 30, 2014 are not necessarily indicative of the results that may be expected for the full year or any other interim period.
The Company evaluated subsequent events through the date the consolidated financial statements were filed with the Securities and Exchange Commission and incorporated into the consolidated financial statements the effect of all material known events determined by Accounting Standards Codification (“ASC”) Topic 855,
Subsequent Events
, to be recognizable events.
In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and income and expenses during the reporting period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to determination of the allowance for losses on loans, the valuation of real estate acquired in connection with foreclosures or in satisfaction of loans, evaluation of securities for other-than-temporary impairment including related cash flow projections, goodwill impairment, and the valuation of deferred tax assets.
Note 2. Proposed Merger Announcement
On April 14, 2014, CB Financial Services, Inc. (“CB Financial”), a Carmichaels, Pennsylvania based holding company for Community Bank, and FedFirst Financial announced the signing of an Agreement and Plan of Merger (“Merger Agreement”) under which FedFirst Financial will merge with and into CB Financial in a cash and stock transaction valued at approximately $54.5 million. Under the terms of the Merger Agreement, stockholders of FedFirst Financial will be entitled to elect to receive $23.00 in cash or shares of CB Financial common stock based on a fixed exchange ratio of 1.1590 shares of CB Financial common stock for each share of FedFirst Financial common stock, subject to proration to ensure that at closing 65% of the outstanding shares of FedFirst Financial common stock are exchanged for shares of CB Financial common stock and the remaining 35% are exchanged for cash. CB Financial and FedFirst Financial expect to complete the transaction in the early fourth quarter of 2014. The transaction is subject to customary closing conditions, including the receipt of regulatory approvals and approval of the merger by shareholders of FedFirst Financial. The Merger Agreement contains certain provisions under which each party has agreed to pay the other a termination fee of $2.75 million if the Merger Agreement is terminated under certain circumstances.
Community Bank, a Pennsylvania-chartered commercial bank, operates eleven offices in Greene, Allegheny and Washington Counties in southwestern Pennsylvania. At December 31, 2013, CB Financial had total consolidated assets of approximately $546.5 million.
The Company incurred $1.4 million of merger-related expenses for the three and six months ended June 30, 2014. Expenses consisted of professional services related to investment banker and legal fees, occupancy expenses related to the planned consolidation of the First Federal Peters and Washington branches into nearby Community Bank branches, and audit and accounting fees. The Company expects to incur additional expenses prior to the completion of the transaction including, but not limited to, compensation expense related to stock options and awards as well as severance and change in control agreement payments, additional investment banker, legal and other professional fees and fees related to the early termination of data processing and various other contracts.
On April 21, 2014, a class action complaint, captioned Sutton v. FedFirst Financial Corp., et al., was filed under Case No. 24C14002331, in the Circuit Court in Baltimore City, Maryland, against the Company, each of FedFirst Financial’s directors, and CB Financial. The complaint alleges, among other things, that the FedFirst Financial directors breached their fiduciary duties to FedFirst Financial and its stockholders by agreeing to sell to CB Financial without first taking steps to ensure that FedFirst Financial stockholders would obtain adequate, fair and maximum consideration under the circumstances, by agreeing to terms with CB Financial that benefit themselves and/or CB Financial without regard for the FedFirst Financial stockholders and by agreeing to terms with CB Financial that discourages other bidders. The plaintiff also alleges that CB Financial aided and abetted the FedFirst Financial directors’ breaches of fiduciary duties. The complaint seeks, among other things, an order declaring the Merger Agreement unenforceable and rescinding and invalidating the Merger Agreement, an order enjoining the defendants from consummating the merger, as well as attorneys’ and experts’ fees and certain other damages. On June 20, 2014, the Company and the individual defendants filed a Motion to Dismiss the complaint. On July 29, 2014 the plaintiff filed an amended complaint adding an additional claim that the Form S-4 filed by CB Financial in connection with the merger contains material misstatements and omissions. The Company now has until August 13, 2014 to amend its Motion to Dismiss to address the additional claims. A hearing date has not been set. The Company believes the factual allegations in the complaint, as amended, are without merit and is defending vigorously against the allegations in the complaint.
Note 3. Recent Accounting Pronouncements
ASU 2013-11
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
.
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11,
Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists
, which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss (“NOL”) carryforward, a similar tax loss, or a tax credit carryforward exists. The ASU is intended to eliminate diversity in practice resulting from a lack of guidance on this topic in current GAAP. Under the ASU, an entity generally must present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, in the financial statements as a reduction to a deferred tax asset for an NOL carryforward, a similar tax loss, or a tax credit carryforward. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this ASU did not have a material impact on the Company’s financial condition and results of operation.
ASU 2014-04
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure
.
In January 2014, the FASB issued ASU 2014-04,
Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans Upon Foreclosure
, to reduce diversity in practice by clarifying when an in substance repossession of foreclosure occurs, that is, when a creditor should be considered to have received physical possession of a residential real estate property collateralizing a consumer mortgage loan such that the loan receivable should be derecognized and the real estate property recognized. The amendments in this ASU clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both the amount of foreclosed residential real estate property held by the creditor and the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. This ASU is effective for fiscal years, and interim periods within those years, beginning after December 15, 2014. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operation.
ASU 2014-06
Technical Corrections and Improvements Related to Glossary Terms.
In March 2014, the FASB issued ASU 2014-06,
Technical Corrections and Improvements Related to Glossary Terms
, to amend and clarify various master glossary terms that cover a wide range of topics in the Accounting Standards Codification. The amendments in this ASU were effective upon issuance and did not have a material impact on the Company’s financial condition and results of operations.
ASU 2014-08
Presentation of Financial Statements and Property, Plant, and Equipment.
In April 2014, the FASB issued ASU 2014-08,
Presentation of Financial Statements and Property, Plant, and Equipment,
to amend the definition of discontinued operation and requires entities to provide additional disclosures about disposal transactions that do not meet the discontinued operations criteria. The FASB issued the ASU to provide more decision-useful information to users and to elevate the threshold for a disposal transaction to qualify as a discontinued operation. This ASU is effective prospectively for all disposals (except disposals classified as held for sale before the adoption date) or components initially classified as held for sale in periods beginning on or after December 15, 2014, with early adoption permitted. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operations.
ASU 2014-09
Revenue from Contracts with Customers.
In May 2014, the FASB issued 2014-09
Revenue from Contracts with Customers
which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In applying the revenue model to contracts within its scope, an entity will identify the contract(s) with a customer (step 1), identify the performance obligations in the contract (step 2), determine the transaction price (step 3), allocate the transaction price to the performance obligations in the contract (step 4), and recognize revenue when (or as) the entity satisfies a performance obligation (step 5). The ASU applies to all contracts with customers except those that are within the scope of other topics in the FASB ASC. The ASU requires entities to disclose both quantitative and qualitative information that enables users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The ASU is effective for annual reporting periods, including interim reporting periods within those periods, beginning after December 15, 2016. Early application is not permitted. The Company has not yet determined the impact the adoption of this ASU will have on its financial condition and results of operations.
ASU 2014-11
Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures.
In June 2014, the FASB issued ASU 2014-11,
Transfers and Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures
, which changes the accounting for repurchase-to-maturity transactions and repurchase financing arrangements. The new guidance aligns the accounting for repurchase-to-maturity transactions and repurchase agreements executed as a repurchase financing with the accounting for other typical repurchase agreements. Going forward, these transactions would all be accounted for as secured borrowings. It also requires additional disclosures about repurchase agreements and other similar transactions. The amendments in this ASU and disclosure for certain transactions accounted for as a sale are effective for the first interim or annual period beginning after December 15, 2014. The disclosure for transactions accounted for as secured borrowings is required to be presented for annual periods beginning after December 15, 2014, and interim periods beginning after March 15, 2015. Earlier application is prohibited. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operations.
ASU 2014-12
Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.
In June 2014, the FASB issued ASU 2014-12,
Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
This ASU clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Therefore, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the performance target will be met. No new disclosures are required under the ASU. The ASU’s guidance is effective for reporting periods (including interim periods) beginning after December 15, 2015. Early adoption is permitted. In addition, all entities will have the option of applying the guidance either prospectively or retrospectively. The adoption of this ASU is not expected to have a material impact on the Company’s financial condition and results of operations.
Note 4. Securities
The following table sets forth the amortized cost and fair value of securities available-for-sale at the dates indicated (dollars in thousands).
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
7,954
|
|
|
$
|
217
|
|
|
$
|
66
|
|
|
$
|
8,105
|
|
|
Mortgage-backed - GSEs
|
|
|
6,763
|
|
|
|
524
|
|
|
|
-
|
|
|
|
7,287
|
|
|
REMICs
|
|
|
5,208
|
|
|
|
65
|
|
|
|
11
|
|
|
|
5,262
|
|
|
Corporate debt
|
|
|
3,996
|
|
|
|
-
|
|
|
|
280
|
|
|
|
3,716
|
|
|
Total securities available-for-sale
|
|
$
|
23,921
|
|
|
$
|
806
|
|
|
$
|
357
|
|
|
$
|
24,370
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
7,988
|
|
|
$
|
207
|
|
|
$
|
225
|
|
|
$
|
7,970
|
|
|
Mortgage-backed - GSEs
|
|
|
7,740
|
|
|
|
452
|
|
|
|
-
|
|
|
|
8,192
|
|
|
REMICs
|
|
|
6,946
|
|
|
|
98
|
|
|
|
25
|
|
|
|
7,019
|
|
|
Corporate debt
|
|
|
3,996
|
|
|
|
-
|
|
|
|
405
|
|
|
|
3,591
|
|
|
Total securities available-for-sale
|
|
$
|
26,670
|
|
|
$
|
757
|
|
|
$
|
655
|
|
|
$
|
26,772
|
|
The amortized cost and fair value of securities at June 30, 2014 by contractual maturity were as follows. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without penalties.
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
Due in one year or less
|
|
$
|
1
|
|
|
$
|
1
|
|
|
Due from one to five years
|
|
|
2,070
|
|
|
|
2,252
|
|
|
Due from five to ten years
|
|
|
5,917
|
|
|
|
6,022
|
|
|
Due after ten years
|
|
|
15,933
|
|
|
|
16,095
|
|
|
Total
|
|
$
|
23,921
|
|
|
$
|
24,370
|
|
The following table presents gross unrealized losses and fair value of securities aggregated by category and length of time that individual securities have been in a continuous loss position at the dates indicated (dollars in thousands).
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
2
|
|
|
$
|
3,855
|
|
|
$
|
66
|
|
|
|
2
|
|
|
$
|
3,855
|
|
|
$
|
66
|
|
|
REMICs
|
|
|
1
|
|
|
|
1,577
|
|
|
|
11
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
1,577
|
|
|
|
11
|
|
|
Corporate debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
3,716
|
|
|
|
280
|
|
|
|
3
|
|
|
|
3,716
|
|
|
|
280
|
|
|
Total securities temporarily impaired
|
|
|
1
|
|
|
$
|
1,577
|
|
|
$
|
11
|
|
|
|
5
|
|
|
$
|
7,571
|
|
|
$
|
346
|
|
|
|
6
|
|
|
$
|
9,148
|
|
|
$
|
357
|
|
|
|
|
Less than 12 months
|
|
|
12 months or more
|
|
|
Total
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Municipal bonds
|
|
|
2
|
|
|
$
|
4,147
|
|
|
$
|
142
|
|
|
|
1
|
|
|
$
|
1,058
|
|
|
$
|
83
|
|
|
|
3
|
|
|
$
|
5,205
|
|
|
$
|
225
|
|
|
REMICs
|
|
|
3
|
|
|
|
2,532
|
|
|
|
25
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
2,532
|
|
|
|
25
|
|
|
Corporate debt
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
3,591
|
|
|
|
405
|
|
|
|
3
|
|
|
|
3,591
|
|
|
|
405
|
|
|
Total securities temporarily impaired
|
|
|
5
|
|
|
$
|
6,679
|
|
|
$
|
167
|
|
|
|
4
|
|
|
$
|
4,649
|
|
|
$
|
488
|
|
|
|
9
|
|
|
$
|
11,328
|
|
|
$
|
655
|
|
The Company reviews its investment portfolio on a quarterly basis for indications of other-than-temporary impairment (“OTTI”). This review includes analyzing the length of time and the extent to which the fair value has been lower than the cost, the financial condition and near-term prospects of the issuer including any specific events that may influence the operations of the issuer, and the intent and ability to hold the investment for a period of time sufficient to allow for any anticipated recovery in the market.
Municipal Bonds
– At June 30, 2014, the Company had two municipal bonds with an unrealized loss of $66,000 in an unrealized loss position of 12 months or more. An evaluation was performed on each bond. For one bond, there were no events to indicate deterioration in credit with unchanged, investment grade credit ratings. The Company believes the unrealized loss on this bond is due to market conditions, specifically interest rates impacting the value of the bonds. For the second bond, the credit rating was initially downgraded in 2012 primarily due to budgetary challenges and more recently in July 2013 primarily due to accreditation concerns; however the credit rating remains investment grade and the strong income indicators of the economic base and sound financial policies and practices of the municipality, and the municipality’s ability to levy a property tax that is sufficient to be used for bond payment are expected to allow it to repay debt and meet its contractual obligations. Therefore, the Company believes the unrealized loss of this bond is due to changes in market conditions. The Company does not intend to sell the bonds and it is more likely than not that the Company will not be required to sell the bonds before recovery. The Company expects to recover the entire amortized cost basis and concluded that there was no OTTI on these bonds at June 30, 2014.
Corporate Debt
– At June 30, 2014, the Company had three securities that were in an unrealized loss position for 12 months or more at an amount of $280,000. These securities consist of two pools of trust preferred corporate debt obligations (“CDOs”) collateralized by the trust preferred securities of insurance companies in the United States. These securities were downgraded from their original rating issuance to below investment grade in 2009 after purchase. Credit rating downgrades and market uncertainties are factors contributing to the unrealized losses on these securities.
The following table provides additional information related to the Company’s CDOs at June 30, 2014 (dollars in thousands).
|
Pool
|
Class
|
Tranche
|
Amortized
Cost
|
Fair Value
|
Unrealized
Loss
|
S&P
Rating
|
Current
Number of
Insurance
Companies
|
Total
Collateral
|
Current
Deferrals and
Defaults
|
Performing
Collateral
|
Additional
Immediate
Deferrals /
Defaults Before
Causing an
Interest
Shortfall
(a)
|
Additional
Immediate
Deferrals /
Defaults
Before
Causing a
Break in Yield
(b)
|
|
I-PreTSL I
|
Mezzanine
|
B-3
|
|
$ 1,500
|
|
$ 1,329
|
|
$ (171)
|
|
CCC-
|
16
|
$ 188,300
|
$ 32,500
|
$ 155,800
|
$ 104,044
|
$ 46,500
|
|
I-PreTSL II
|
Mezzanine
|
B-3
|
|
2,496
|
|
2,387
|
|
(109)
|
|
BB+
|
21
|
255,500
|
24,500
|
231,000
|
193,901
|
102,000
|
|
|
|
|
|
$ 3,996
|
|
$ 3,716
|
|
$ (280)
|
|
|
|
|
|
|
|
|
|
(a)
|
A temporary interest shortfall is caused by an amount of deferrals/defaults high enough such that there is insufficient cash flow available to pay current interest on the given tranche or by breaching the principal coverage test of the tranche immediately senior to the given tranche. Amounts presented represent additional deferrals/defaults beyond those currently existing that must occur before the security would experience an interest shortfall.
|
|
(b)
|
A break in yield for a given tranche means that deferrals/defaults have reached such a level that the tranche would not receive all of its contractual cash flows (principal and interest) by maturity (so not just a temporary interest shortfall, but an actual loss in yield on the investment). In other words, the magnitude of the defaults/deferrals has depleted the entire credit enhancement (excess interest and over-collateralization) beneath the given tranche. Amounts presented represent additional deferrals/defaults beyond those currently existing that must occur before the security would experience a break in yield.
|
These securities are evaluated for OTTI by determining whether it is probable that an adverse change in estimated cash flows has occurred. Determining whether there has been an adverse change in estimated cash flows involves the calculation of the present value of remaining cash flows compared to previously projected cash flows. None of these securities are projecting a cash flow disruption, nor have any of these securities experienced a cash flow disruption. Additionally, reports are reviewed that provide information for the amount of deferral/defaults that would have to occur to prevent the tranche from collecting contractual cash flows (principal and interest). These securities have a strong credit profile based on the stress analysis which found I-PreTSL I and I-PreTSL II could withstand an immediate default of up to 30% and 44%, respectively, of the remaining performing collateral and still expect to receive all contractual cashflows. The Company also reviewed each of the issues’ collateral participants, including their financial condition, ratings provided by A. M. Best (for insurance companies), and adverse conditions specifically related to industry or geographic area. This information did not suggest additional deferrals or defaults in the future that would result in the securities not receiving all of their contractual cash flows. Based on the analysis performed and the fact that the Company does not expect to sell these securities, and because it is not more likely than not that the Company will be required to sell the securities before recovery of their amortized cost basis, the Company concluded that there was no OTTI on these securities at June 30, 2014.
In December 2013, the OCC adopted final regulations implementing section 619 of the Dodd-Frank Wall Street Reform and Protection Act, commonly known as the “Volcker Rule”, which restricts the ability of a banking entity to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund (referred to as a “covered fund”). A banking entity must divest its holding in covered funds by July 15, 2015. A covered fund is defined to include any issuer that would be an investment company under the Investment Company Act of 1940, but relies on the exemption for funds sold to fewer than 100 investors or the exemption for funds sold only to qualified purchasers. An issuer that could rely on a different exemption from the definition of investment company under the Investment Company Act would not be considered a covered fund, and therefore would not be subject to the Volcker Rule. In particular, the federal banking regulators have noted that some issuers of CDOs may qualify for exemption under Investment Company Act Rule 3a-7, which exempts non-managed fixed income funds from the definition of investment company. Therefore, if the issuer meets the requirements of Rule 3a-7, the CDOs will not be subject to the Volcker Rule. Based on our review, the CDOs held by the Bank as of June 30, 2014 satisfy all conditions for relying on the exemption under Investment Company Act Rule 3a-7, and therefore are not considered a covered fund that require divesture by July 15, 2015. The CDOs were in an unrealized loss position of $280,000 at June 30, 2014.
Other Securities
– This category may include mortgage-backed securities and REMICS. At June 30, 2014, the Company had one REMIC security that was issued and backed by a Government-Sponsored Enterprise (“GSE”) with an unrealized loss of $11,000. The security was in an unrealized loss position for less than 12 months. The Company believes the unrealized loss of the security is due to changes in market interest rates or changes in market conditions as there was no indication that the issuers were having financial difficulties. The Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before its recovery. The Company expects to recover the entire amortized cost basis of the security and concluded that there was no OTTI at June 30, 2014.
Note 5. Loans
The following table sets forth the composition of our loan portfolio at the dates indicated (dollars in thousands).
|
|
|
June 30, 2014
|
|
|
December 31, 2013
|
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Real estate-mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated
|
|
$
|
105,247
|
|
|
|
35.4
|
%
|
|
$
|
104,870
|
|
|
|
37.1
|
%
|
|
Purchased
|
|
|
6,076
|
|
|
|
2.0
|
|
|
|
6,888
|
|
|
|
2.4
|
|
|
Total one- to four-family residential
|
|
|
111,323
|
|
|
|
37.4
|
|
|
|
111,758
|
|
|
|
39.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated
|
|
|
7,310
|
|
|
|
2.5
|
|
|
|
7,083
|
|
|
|
2.5
|
|
|
Purchased
|
|
|
3,238
|
|
|
|
1.1
|
|
|
|
3,768
|
|
|
|
1.3
|
|
|
Total multi-family
|
|
|
10,548
|
|
|
|
3.6
|
|
|
|
10,851
|
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
69,700
|
|
|
|
23.4
|
|
|
|
61,889
|
|
|
|
21.9
|
|
|
Total real estate-mortgage
|
|
|
191,571
|
|
|
|
64.4
|
|
|
|
184,498
|
|
|
|
65.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate-construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
3,805
|
|
|
|
1.3
|
|
|
|
3,337
|
|
|
|
1.2
|
|
|
Commercial
|
|
|
18,016
|
|
|
|
6.1
|
|
|
|
15,979
|
|
|
|
5.7
|
|
|
Total real estate-construction
|
|
|
21,821
|
|
|
|
7.4
|
|
|
|
19,316
|
|
|
|
6.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan-to-value ratio of 80% or less
|
|
|
45,826
|
|
|
|
15.4
|
|
|
|
47,543
|
|
|
|
16.9
|
|
|
Loan-to-value ratio of greater than 80%
|
|
|
9,052
|
|
|
|
3.0
|
|
|
|
9,247
|
|
|
|
3.3
|
|
|
Total home equity
|
|
|
54,878
|
|
|
|
18.4
|
|
|
|
56,790
|
|
|
|
20.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
1,579
|
|
|
|
0.5
|
|
|
|
1,666
|
|
|
|
0.6
|
|
|
Total consumer
|
|
|
56,457
|
|
|
|
18.9
|
|
|
|
58,456
|
|
|
|
20.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial business
|
|
|
27,594
|
|
|
|
9.3
|
|
|
|
20,023
|
|
|
|
7.1
|
|
|
Total loans
|
|
$
|
297,443
|
|
|
|
100.0
|
%
|
|
$
|
282,293
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net premiums on loans purchased
|
|
|
81
|
|
|
|
|
|
|
|
93
|
|
|
|
|
|
|
Net deferred loan costs
|
|
|
322
|
|
|
|
|
|
|
|
351
|
|
|
|
|
|
|
Loans in process
|
|
|
(10,174
|
)
|
|
|
|
|
|
|
(10,617
|
)
|
|
|
|
|
|
Allowance for loan losses
|
|
|
(3,612
|
)
|
|
|
|
|
|
|
(3,308
|
)
|
|
|
|
|
|
Loans, net
|
|
$
|
284,060
|
|
|
|
|
|
|
$
|
268,812
|
|
|
|
|
|
Delinquencies.
The following table provides information about delinquencies in our loan portfolio at the dates indicated (dollars in thousands).
|
|
|
June 30, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate - mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated
|
|
$
|
-
|
|
|
$
|
260
|
|
|
$
|
1,348
|
|
|
$
|
1,012
|
|
|
$
|
427
|
|
|
$
|
627
|
|
|
Purchased
|
|
|
-
|
|
|
|
-
|
|
|
|
307
|
|
|
|
-
|
|
|
|
-
|
|
|
|
307
|
|
|
Total one- to four-family residential
|
|
|
-
|
|
|
|
260
|
|
|
|
1,655
|
|
|
|
1,012
|
|
|
|
427
|
|
|
|
934
|
|
|
Commercial
|
|
|
28
|
|
|
|
-
|
|
|
|
467
|
|
|
|
30
|
|
|
|
-
|
|
|
|
493
|
|
|
Total real estate - mortgage
|
|
|
28
|
|
|
|
260
|
|
|
|
2,122
|
|
|
|
1,042
|
|
|
|
427
|
|
|
|
1,427
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate - construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
715
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan-to-value ratio of 80% or less
|
|
|
17
|
|
|
|
-
|
|
|
|
66
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
Loan-to-value ratio of greater than 80%
|
|
|
291
|
|
|
|
-
|
|
|
|
47
|
|
|
|
144
|
|
|
|
158
|
|
|
|
30
|
|
|
Total home equity
|
|
|
308
|
|
|
|
-
|
|
|
|
113
|
|
|
|
145
|
|
|
|
158
|
|
|
|
30
|
|
|
Other
|
|
|
64
|
|
|
|
4
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
Total consumer
|
|
|
372
|
|
|
|
4
|
|
|
|
113
|
|
|
|
145
|
|
|
|
161
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total delinquencies
|
|
$
|
400
|
|
|
$
|
264
|
|
|
$
|
2,235
|
|
|
$
|
1,902
|
|
|
$
|
588
|
|
|
$
|
1,457
|
|
Nonperforming Assets.
The following table provides information with respect to our nonperforming assets at the dates indicated (dollars in thousands).
|
|
|
June 30, 2014
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
Amount
|
|
|
|
|
|
Amount
|
|
|
Nonaccrual loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate - mortgage:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family residential
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Originated
|
|
|
7
|
|
|
$
|
2,306
|
|
|
|
4
|
|
|
$
|
1,595
|
|
|
Purchased
|
|
|
4
|
|
|
|
307
|
|
|
|
4
|
|
|
|
307
|
|
|
Total one- to four-family residential
|
|
|
11
|
|
|
|
2,613
|
|
|
|
8
|
|
|
|
1,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
2
|
|
|
|
467
|
|
|
|
2
|
|
|
|
493
|
|
|
Total real estate - mortgage
|
|
|
13
|
|
|
|
3,080
|
|
|
|
10
|
|
|
|
2,395
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan-to-value ratio of 80% or less
|
|
|
2
|
|
|
|
66
|
|
|
|
-
|
|
|
|
-
|
|
|
Loan-to-value ratio of greater than 80%
|
|
|
2
|
|
|
|
47
|
|
|
|
1
|
|
|
|
30
|
|
|
Total home equity
|
|
|
4
|
|
|
|
113
|
|
|
|
1
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonaccrual loans
|
|
|
17
|
|
|
|
3,193
|
|
|
|
11
|
|
|
|
2,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accruing loans past due 90 days or more
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Total nonaccrual loans and accruing loans
past due 90 days or more
|
|
|
17
|
|
|
|
3,193
|
|
|
|
11
|
|
|
|
2,425
|
|
|
Real estate owned
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
126
|
|
|
Total nonperforming assets
|
|
|
17
|
|
|
$
|
3,193
|
|
|
|
12
|
|
|
$
|
2,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Troubled debt restructurings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In nonaccrual status
|
|
|
1
|
|
|
|
958
|
|
|
|
1
|
|
|
|
968
|
|
|
Performing under modified terms
|
|
|
8
|
|
|
|
2,301
|
|
|
|
8
|
|
|
|
2,358
|
|
|
Troubled debt restructurings
|
|
|
9
|
|
|
$
|
3,259
|
|
|
|
9
|
|
|
$
|
3,326
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans to total loans
|
|
|
|
|
|
|
1.07
|
%
|
|
|
|
|
|
|
0.86
|
%
|
|
Total nonperforming assets to total assets
|
|
|
|
|
|
|
0.96
|
|
|
|
|
|
|
|
0.80
|
|
|
Total nonperforming assets and troubled debt restructurings
performing under modified terms to total assets
|
|
|
|
|
|
|
1.66
|
|
|
|
|
|
|
|
1.54
|
|
Troubled Debt Restructurings.
A loan whose contractual terms have been restructured in a manner which grants a concession to a borrower experiencing financial difficulties is considered a troubled debt restructuring (“TDR”). TDRs typically are the result of our loss mitigation activities whereby concessions are granted to minimize loss and avoid foreclosure or repossession of collateral. The concessions granted for the TDRs in our portfolio primarily consist of, but are not limited to, capitalization of principal and interest due, reverting from payment of principal and interest to interest-only, or extending a maturity date through a signed forbearance agreement. Certain TDRs were placed in nonaccrual status at the time of restructure and may only be returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period which is generally six consecutive months. Loans that were current at the time of classification remained on an accrual basis and are monitored to ensure restructured contractual terms are met.
TDRs are typically evaluated for any possible impairment similar to other impaired loans based on the current fair value of the collateral, less selling costs, for collateral dependent loans. If we determine that the value of the modified loan is less than the recorded investment in the loan, impairment is recognized through a specific allowance for loan losses. In periods subsequent to modification, we continue to evaluate all TDRs for any additional impairment and will adjust any specific allowances accordingly.
There were no loans modified as a TDR during the three and six months ended June 30, 2014 and 2013.
During the three and six months ended June 30, 2014, no loans classified as a TDR were paid off. During the three and six months ended June 30, 2013, one commercial real estate loan TDR with a balance of $76,000 was paid off.
Impaired Loans.
The following tables summarize information in regards to impaired loans by loan portfolio class at the dates indicated (dollars in thousands).
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family originated residential
|
|
$
|
1,493
|
|
|
$
|
1,493
|
|
|
$
|
-
|
|
|
$
|
1,499
|
|
|
$
|
28
|
|
|
Commercial real estate
|
|
|
2,635
|
|
|
|
2,648
|
|
|
|
-
|
|
|
|
2,676
|
|
|
|
76
|
|
|
Home equity (loan-to-value ratio of 80% or less)
|
|
|
397
|
|
|
|
397
|
|
|
|
-
|
|
|
|
401
|
|
|
|
9
|
|
|
Total impaired loans
|
|
$
|
4,525
|
|
|
$
|
4,538
|
|
|
$
|
-
|
|
|
$
|
4,576
|
|
|
$
|
113
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans with no related allowance recorded
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family originated residential
|
|
$
|
1,505
|
|
|
$
|
1,505
|
|
|
$
|
-
|
|
|
$
|
1,515
|
|
|
$
|
65
|
|
|
Commercial real estate
|
|
|
2,705
|
|
|
|
2,705
|
|
|
|
-
|
|
|
|
2,742
|
|
|
|
149
|
|
|
Home equity (loan-to-value ratio of 80% or less)
|
|
|
405
|
|
|
|
405
|
|
|
|
-
|
|
|
|
409
|
|
|
|
10
|
|
|
Total impaired loans
|
|
$
|
4,615
|
|
|
$
|
4,615
|
|
|
$
|
-
|
|
|
$
|
4,666
|
|
|
$
|
224
|
|
Allowance for loan losses.
The allowance for loan losses is a valuation allowance for probable losses inherent in the loan portfolio. We evaluate the need to establish allowances against losses on loans on a quarterly basis. When additional allowances are necessary, a provision for loan losses is charged to earnings.
Our methodology for assessing the appropriateness of the allowance for loan losses consists of: (1) a valuation allowance on impaired loans; and (2) a valuation allowance on the remainder of the loan portfolio. Although we determine the amount of each element of the allowance separately, the entire allowance for loan losses is available for the entire portfolio.
Allowance on Impaired Loans.
We establish an allowance for loans that are individually evaluated and determined to be impaired. The amount of impairment is determined by the difference between the present value of the expected cash flows related to the loan, using current interest rates and its recorded value, or, as a practical measure in the case of collateralized loans, the difference between the fair value of the collateral and the recorded amount of the loans less estimated selling costs. At June 30, 2014, there were seven loan relationships that were individually evaluated for impairment, of which five were considered TDRs. TDR and impaired loan activity and any related specific allowances were previously discussed in the
“Troubled Debt Restructurings”
and
“Impaired Loans”
sections.
Allowance on the Remainder of the Loan Portfolio.
We establish an allowance for loans that are not determined to be impaired. Management determines historical loss experience for each group of loans with similar risk characteristics within the portfolio based on loss experience for loans in each group. Loan categories will represent groups of loans with similar risk characteristics and may include types of loans categorized by product, large credit exposures, concentrations, loan grade, or any other characteristic that causes a loan’s risk profile to be similar to another. We utilize previous years’ net charge-off experience by loan category as a basis in determining loss projections. In addition, there are two categories of loans considered to be higher risk concentrations that are evaluated separately when calculating the allowance for loan losses:
|
·
|
Loans purchased in the secondary market.
Prior to 2006, pools of multi-family and one- to four- family residential mortgage loans located in areas outside of our primary geographic lending area in southwestern Pennsylvania were acquired in the secondary market. Although these loans were underwritten to our lending standards, they are considered higher risk given our unfamiliarity with the geographic areas where the properties are located and ability to timely identify problem loans through servicer correspondence.
|
|
·
|
Home equity loans with a loan-to-value ratio greater than 80%.
These loans are considered higher risk given the pressure on property values and reduced credit alternatives available to leveraged borrowers.
|
We also consider qualitative or environmental factors that are likely to cause estimated credit losses associated with the Bank’s existing portfolio to differ from historical loss experience. Our historical loss experience and qualitative and environmental factors are reviewed on a quarterly basis to ensure they are reflective of current conditions in our loan portfolio and economy. At June 30, 2014, we utilized the three most recent years of loss history and periods where we did not experience any losses were excluded from determining the historical average loss for each loan class. Certain historical loss factors are annually adjusted when another complete year of loss history is available in order to incorporate recent loss experience in the allowance calculation.
The following table summarizes the activity in the allowance for loan losses for the three and six months ended June 30, 2014 (dollars in thousands).
|
|
|
Real estate - mortgage
|
|
|
Real estate-construction
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity (loan-
to-value ratio of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
80%
|
|
|
greater
|
|
|
Other
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
(originated)
|
|
|
(purchased)
|
|
|
(originated)
|
|
|
(purchased)
|
|
|
Commercial
|
|
|
Residential
|
|
|
Commercial
|
|
|
or less)
|
|
|
than 80%)
|
|
|
Consumer
|
|
|
business
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Balance
|
|
$
|
105,247
|
|
|
$
|
6,076
|
|
|
$
|
7,310
|
|
|
$
|
3,238
|
|
|
$
|
69,700
|
|
|
$
|
3,805
|
|
|
$
|
18,016
|
|
|
$
|
45,826
|
|
|
$
|
9,052
|
|
|
$
|
1,579
|
|
|
$
|
27,594
|
|
|
|
|
|
$
|
297,443
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2014
|
|
$
|
418
|
|
|
$
|
275
|
|
|
$
|
113
|
|
|
$
|
34
|
|
|
$
|
1,095
|
|
|
$
|
9
|
|
|
$
|
113
|
|
|
$
|
469
|
|
|
$
|
263
|
|
|
$
|
11
|
|
|
$
|
456
|
|
|
$
|
131
|
|
|
$
|
3,387
|
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Recoveries
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5
|
|
|
Provision
|
|
|
85
|
|
|
|
(18
|
)
|
|
|
-
|
|
|
|
(5
|
)
|
|
|
51
|
|
|
|
(3
|
)
|
|
|
37
|
|
|
|
(4
|
)
|
|
|
(2
|
)
|
|
|
(1
|
)
|
|
|
85
|
|
|
|
(5
|
)
|
|
|
220
|
|
|
June 30, 2014
|
|
$
|
506
|
|
|
$
|
257
|
|
|
$
|
113
|
|
|
$
|
29
|
|
|
$
|
1,146
|
|
|
$
|
6
|
|
|
$
|
150
|
|
|
$
|
465
|
|
|
$
|
263
|
|
|
$
|
10
|
|
|
$
|
541
|
|
|
$
|
126
|
|
|
$
|
3,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
$
|
432
|
|
|
$
|
286
|
|
|
$
|
114
|
|
|
$
|
34
|
|
|
$
|
1,025
|
|
|
$
|
6
|
|
|
$
|
103
|
|
|
$
|
475
|
|
|
$
|
268
|
|
|
$
|
11
|
|
|
$
|
432
|
|
|
$
|
122
|
|
|
$
|
3,308
|
|
|
Charge-offs
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Recoveries
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
Provision
|
|
|
68
|
|
|
|
(29
|
)
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
121
|
|
|
|
-
|
|
|
|
47
|
|
|
|
(10
|
)
|
|
|
(8
|
)
|
|
|
(1
|
)
|
|
|
109
|
|
|
|
4
|
|
|
|
295
|
|
|
June 30, 2014
|
|
$
|
506
|
|
|
$
|
257
|
|
|
$
|
113
|
|
|
$
|
29
|
|
|
$
|
1,146
|
|
|
$
|
6
|
|
|
$
|
150
|
|
|
$
|
465
|
|
|
$
|
263
|
|
|
$
|
10
|
|
|
$
|
541
|
|
|
$
|
126
|
|
|
$
|
3,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated
on historical loss
experience
|
|
$
|
113
|
|
|
$
|
126
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
62
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
29
|
|
|
$
|
86
|
|
|
$
|
5
|
|
|
$
|
26
|
|
|
$
|
-
|
|
|
$
|
447
|
|
|
Collectively evaluated
on qualitative
factors
|
|
|
393
|
|
|
|
131
|
|
|
|
113
|
|
|
|
29
|
|
|
|
1,084
|
|
|
|
6
|
|
|
|
150
|
|
|
|
436
|
|
|
|
177
|
|
|
|
5
|
|
|
|
515
|
|
|
|
-
|
|
|
|
3,039
|
|
|
Unallocated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
126
|
|
|
|
126
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance
for loan losses
|
|
$
|
506
|
|
|
$
|
257
|
|
|
$
|
113
|
|
|
$
|
29
|
|
|
$
|
1,146
|
|
|
$
|
6
|
|
|
$
|
150
|
|
|
$
|
465
|
|
|
$
|
263
|
|
|
$
|
10
|
|
|
$
|
541
|
|
|
$
|
126
|
|
|
$
|
3,612
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Allowance
|
|
|
14.0
|
%
|
|
|
7.1
|
%
|
|
|
3.1
|
%
|
|
|
0.8
|
%
|
|
|
31.7
|
%
|
|
|
0.1
|
%
|
|
|
4.2
|
%
|
|
|
12.9
|
%
|
|
|
7.3
|
%
|
|
|
0.3
|
%
|
|
|
15.0
|
%
|
|
|
3.5
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Loans
(1)
|
|
|
35.4
|
%
|
|
|
2.0
|
%
|
|
|
2.5
|
%
|
|
|
1.1
|
%
|
|
|
23.4
|
%
|
|
|
1.3
|
%
|
|
|
6.1
|
%
|
|
|
15.4
|
%
|
|
|
3.0
|
%
|
|
|
0.5
|
%
|
|
|
9.3
|
%
|
|
|
|
|
|
|
100.0
|
%
|
|
(1)
|
Represents percentage of loans in each category to total loans.
|
The following table summarizes the activity in the allowance for loan losses for the three and six months ended June 30, 2013 (dollars in thousands).
|
|
|
Real estate - mortgage
|
|
|
Real estate-construction
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity (loan-
to-value ratio of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
80%
|
|
|
greater
|
|
|
Other
|
|
|
Commercial
|
|
|
|
|
|
|
|
|
|
|
(originated)
|
|
|
(purchased)
|
|
|
(originated)
|
|
|
(purchased)
|
|
|
Commercial
|
|
|
Residential
|
|
|
Commercial
|
|
|
or less)
|
|
|
than 80%)
|
|
|
Consumer
|
|
|
business
|
|
|
Unallocated
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Balance
|
|
$
|
104,637
|
|
|
$
|
7,954
|
|
|
$
|
10,706
|
|
|
$
|
3,830
|
|
|
$
|
49,189
|
|
|
$
|
1,883
|
|
|
$
|
15,194
|
|
|
$
|
45,736
|
|
|
$
|
8,914
|
|
|
$
|
1,730
|
|
|
$
|
17,339
|
|
|
|
|
|
$
|
267,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for loan losses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2013
|
|
$
|
448
|
|
|
$
|
340
|
|
|
$
|
33
|
|
|
$
|
102
|
|
|
$
|
807
|
|
|
$
|
3
|
|
|
$
|
18
|
|
|
$
|
464
|
|
|
$
|
264
|
|
|
$
|
18
|
|
|
$
|
263
|
|
|
$
|
103
|
|
|
$
|
2,886
|
|
|
Charge-offs
|
|
|
(12
|
)
|
|
|
(4
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(35
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(51
|
)
|
|
Recoveries
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13
|
|
|
Provision
|
|
|
18
|
|
|
|
(36
|
)
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
37
|
|
|
|
-
|
|
|
|
5
|
|
|
|
11
|
|
|
|
54
|
|
|
|
-
|
|
|
|
22
|
|
|
|
64
|
|
|
|
165
|
|
|
June 30, 2013
|
|
$
|
457
|
|
|
$
|
300
|
|
|
$
|
32
|
|
|
$
|
93
|
|
|
$
|
853
|
|
|
$
|
3
|
|
|
$
|
23
|
|
|
$
|
475
|
|
|
$
|
284
|
|
|
$
|
18
|
|
|
$
|
285
|
|
|
$
|
167
|
|
|
$
|
2,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
$
|
466
|
|
|
$
|
372
|
|
|
$
|
33
|
|
|
$
|
102
|
|
|
$
|
802
|
|
|
$
|
3
|
|
|
$
|
8
|
|
|
$
|
434
|
|
|
$
|
246
|
|
|
$
|
19
|
|
|
$
|
245
|
|
|
$
|
156
|
|
|
$
|
2,886
|
|
|
Charge-offs
|
|
|
(12
|
)
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(35
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(80
|
)
|
|
Recoveries
|
|
|
6
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1
|
|
|
|
3
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
|
Provision
|
|
|
(3
|
)
|
|
|
(39
|
)
|
|
|
(1
|
)
|
|
|
(9
|
)
|
|
|
42
|
|
|
|
-
|
|
|
|
15
|
|
|
|
41
|
|
|
|
72
|
|
|
|
(4
|
)
|
|
|
40
|
|
|
|
11
|
|
|
|
165
|
|
|
June 30, 2013
|
|
$
|
457
|
|
|
$
|
300
|
|
|
$
|
32
|
|
|
$
|
93
|
|
|
$
|
853
|
|
|
$
|
3
|
|
|
$
|
23
|
|
|
$
|
475
|
|
|
$
|
284
|
|
|
$
|
18
|
|
|
$
|
285
|
|
|
$
|
167
|
|
|
$
|
2,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Collectively evaluated
on historical loss
experience
|
|
$
|
130
|
|
|
$
|
134
|
|
|
$
|
-
|
|
|
$
|
58
|
|
|
$
|
97
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
65
|
|
|
$
|
111
|
|
|
$
|
13
|
|
|
$
|
10
|
|
|
$
|
-
|
|
|
$
|
618
|
|
|
Collectively evaluated
on qualitative
factors
|
|
|
327
|
|
|
|
166
|
|
|
|
32
|
|
|
|
35
|
|
|
|
756
|
|
|
|
3
|
|
|
|
23
|
|
|
|
410
|
|
|
|
173
|
|
|
|
5
|
|
|
|
275
|
|
|
|
-
|
|
|
|
2,205
|
|
|
Unallocated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
167
|
|
|
|
167
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total allowance
for loan losses
|
|
$
|
457
|
|
|
$
|
300
|
|
|
$
|
32
|
|
|
$
|
93
|
|
|
$
|
853
|
|
|
$
|
3
|
|
|
$
|
23
|
|
|
$
|
475
|
|
|
$
|
284
|
|
|
$
|
18
|
|
|
$
|
285
|
|
|
$
|
167
|
|
|
$
|
2,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Allowance
|
|
|
15.3
|
%
|
|
|
10.0
|
%
|
|
|
1.1
|
%
|
|
|
3.1
|
%
|
|
|
28.5
|
%
|
|
|
0.1
|
%
|
|
|
0.8
|
%
|
|
|
15.9
|
%
|
|
|
9.5
|
%
|
|
|
0.6
|
%
|
|
|
9.5
|
%
|
|
|
5.6
|
%
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of Loans
(1)
|
|
|
39.2
|
%
|
|
|
3.0
|
%
|
|
|
4.0
|
%
|
|
|
1.4
|
%
|
|
|
18.4
|
%
|
|
|
0.7
|
%
|
|
|
5.7
|
%
|
|
|
17.2
|
%
|
|
|
3.3
|
%
|
|
|
0.6
|
%
|
|
|
6.5
|
%
|
|
|
|
|
|
|
100.0
|
%
|
|
(1)
|
Represents percentage of loans in each category to total loans.
|
Credit Quality Information.
Federal regulations require us to review and classify our assets on a regular basis. In addition, the Office of the Comptroller of the Currency (“OCC”) has the authority to identify problem assets and, if appropriate, require them to be classified. There are four classifications for problem assets: special mention, substandard, doubtful and loss. The following table presents the classes of the loan portfolio and shows our credit risk profile by internally assigned risk rating at the dates indicated (dollars in thousands).
|
|
|
Real estate - mortgage
|
|
|
Real estate-construction
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity (loan-
to-value ratio of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
80%
|
|
|
greater
|
|
|
Other
|
|
|
Commercial
|
|
|
Total
|
|
|
June 30, 2014
|
|
(originated)
|
|
|
(purchased)
|
|
|
(originated)
|
|
|
(purchased)
|
|
|
Commercial
|
|
|
Residential
|
|
|
Commercial
|
|
|
or less)
|
|
|
than 80%)
|
|
|
Consumer
|
|
|
business
|
|
|
loans
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
102,941
|
|
|
$
|
5,769
|
|
|
$
|
5,492
|
|
|
$
|
3,238
|
|
|
$
|
66,952
|
|
|
$
|
3,805
|
|
|
$
|
18,016
|
|
|
$
|
45,163
|
|
|
$
|
9,005
|
|
|
$
|
1,579
|
|
|
$
|
25,860
|
|
|
$
|
287,820
|
|
|
Special Mention
|
|
|
-
|
|
|
|
-
|
|
|
|
1,818
|
|
|
|
-
|
|
|
|
544
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,734
|
|
|
|
4,096
|
|
|
Substandard
|
|
|
2,306
|
|
|
|
307
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,204
|
|
|
|
-
|
|
|
|
-
|
|
|
|
663
|
|
|
|
47
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,527
|
|
|
Total
|
|
$
|
105,247
|
|
|
$
|
6,076
|
|
|
$
|
7,310
|
|
|
$
|
3,238
|
|
|
$
|
69,700
|
|
|
$
|
3,805
|
|
|
$
|
18,016
|
|
|
$
|
45,826
|
|
|
$
|
9,052
|
|
|
$
|
1,579
|
|
|
$
|
27,594
|
|
|
$
|
297,443
|
|
|
|
|
Real estate - mortgage
|
|
|
Real estate-construction
|
|
|
Consumer
|
|
|
|
|
|
|
|
|
|
|
One- to four-family
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Home equity (loan-
to-value ratio of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-family
|
|
|
|
|
|
|
|
|
|
|
|
80%
|
|
|
greater
|
|
|
Other
|
|
|
Commercial
|
|
|
Total
|
|
|
December 31, 2013
|
|
(originated)
|
|
|
(purchased)
|
|
|
(originated)
|
|
|
(purchased)
|
|
|
Commercial
|
|
|
Residential
|
|
|
Commercial
|
|
|
or less)
|
|
|
than 80%)
|
|
|
Consumer
|
|
|
business
|
|
|
loans
|
|
|
Grade:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
103,275
|
|
|
$
|
6,581
|
|
|
$
|
5,231
|
|
|
$
|
3,768
|
|
|
$
|
58,311
|
|
|
$
|
3,337
|
|
|
$
|
15,979
|
|
|
$
|
46,934
|
|
|
$
|
9,217
|
|
|
$
|
1,666
|
|
|
$
|
17,964
|
|
|
$
|
272,263
|
|
|
Special Mention
|
|
|
-
|
|
|
|
-
|
|
|
|
1,852
|
|
|
|
-
|
|
|
|
676
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,059
|
|
|
|
4,587
|
|
|
Substandard
|
|
|
1,595
|
|
|
|
307
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,902
|
|
|
|
-
|
|
|
|
-
|
|
|
|
609
|
|
|
|
30
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,443
|
|
|
Total
|
|
$
|
104,870
|
|
|
$
|
6,888
|
|
|
$
|
7,083
|
|
|
$
|
3,768
|
|
|
$
|
61,889
|
|
|
$
|
3,337
|
|
|
$
|
15,979
|
|
|
$
|
47,543
|
|
|
$
|
9,247
|
|
|
$
|
1,666
|
|
|
$
|
20,023
|
|
|
$
|
282,293
|
|
Note 6. Deposits
Deposits are summarized as follows (dollars in thousands).
|
|
|
June 30, 2014
|
|
|
December 31, 2013
|
|
|
|
|
Amount
|
|
|
Percent
|
|
|
Amount
|
|
|
Percent
|
|
|
Noninterest-bearing demand deposits
|
|
$
|
31,502
|
|
|
|
13.6
|
%
|
|
$
|
27,247
|
|
|
|
12.4
|
%
|
|
Interest-bearing demand deposits
|
|
|
34,787
|
|
|
|
15.0
|
|
|
|
30,733
|
|
|
|
14.0
|
|
|
Savings accounts
|
|
|
25,094
|
|
|
|
10.8
|
|
|
|
24,415
|
|
|
|
11.1
|
|
|
Money market accounts
|
|
|
57,189
|
|
|
|
24.7
|
|
|
|
48,746
|
|
|
|
22.2
|
|
|
Certificates of deposit
|
|
|
82,905
|
|
|
|
35.9
|
|
|
|
88,091
|
|
|
|
40.3
|
|
|
Total deposits
|
|
$
|
231,477
|
|
|
|
100.0
|
%
|
|
$
|
219,232
|
|
|
|
100.0
|
%
|
Note 7. Borrowings
We utilize borrowings as a supplemental source of funds for loans and securities. The primary sources of borrowings are FHLB advances and, to a limited extent, repurchase agreements. At June 30, 2014, we had $46.0 million of FHLB advances and at December 31, 2013, we had $45.9 million of borrowings of which $42.9 million were FHLB advances and $3.0 million were repurchase agreements. At June 30, 2014 and December 31, 2013, our FHLB advances were comprised of fixed rate advances.
The following table sets forth borrowings based on their stated maturities and weighted average rates at the dates indicated.
|
|
|
June 30, 2014
|
|
December 31, 2013
|
|
(Dollars in thousands)
|
|
Balance
|
|
|
|
|
Balance
|
|
|
|
|
Due in one year or less
|
|
$
|
34,000
|
|
|
|
0.43
|
%
|
|
$
|
33,860
|
|
|
|
1.81
|
%
|
|
Due in one to two years
|
|
|
12,000
|
|
|
|
3.82
|
|
|
|
12,000
|
|
|
|
3.82
|
|
|
Advances
|
|
$
|
46,000
|
|
|
|
|
|
|
$
|
45,860
|
|
|
|
|
|
|
Less: deferred premium on modification
|
|
|
(182
|
)
|
|
|
|
|
|
|
(269
|
)
|
|
|
|
|
|
Total advances
|
|
$
|
45,818
|
|
|
|
1.32
|
%
|
|
$
|
45,591
|
|
|
|
2.34
|
%
|
The following table sets forth information concerning our borrowings for the periods indicated.
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
Maximum amount outstanding at any month end during the period
|
|
$
|
45,818
|
|
|
$
|
46,338
|
|
|
Average amount outstanding during the period
|
|
|
40,963
|
|
|
|
37,784
|
|
|
Weighted average rate during the period
|
|
|
2.45
|
%
|
|
|
3.37
|
%
|
Note 8. (Loss) Earnings Per Share
Basic (loss) earnings per common share is calculated by dividing FedFirst Financial’s net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted (loss) earnings per common share is computed in a manner similar to basic earnings per common share except that the weighted-average number of common shares outstanding is increased to include the incremental common shares (as computed using the treasury stock method) that would have been outstanding if all potentially dilutive common stock equivalents were issued during the period. Common stock equivalents include restricted stock awards and stock options. Anti-dilutive shares are common stock equivalents with weighted-average exercise prices in excess of the weighted-average market value for the periods presented. Unallocated common shares held by the Employee Stock Ownership Plan (“ESOP”) are not included in the weighted-average number of common shares outstanding for purposes of calculating both basic and diluted earnings per common share until they are committed to be released.
The following table sets forth basic and diluted (loss) earnings per common share at the dates indicated.
|
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
(Dollars in thousands, except per share amounts)
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income of FedFirst Financial Corporation
|
|
$
|
(276
|
)
|
|
$
|
576
|
|
|
$
|
258
|
|
|
$
|
1,370
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,231,561
|
|
|
|
2,446,186
|
|
|
|
2,232,304
|
|
|
|
2,450,894
|
|
|
Effect of dilutive stock options and
restrictive stock awards
|
|
|
-
|
|
|
|
33,648
|
|
|
|
53,734
|
|
|
|
27,328
|
|
|
Diluted
|
|
|
2,231,561
|
|
|
|
2,479,834
|
|
|
|
2,286,038
|
|
|
|
2,478,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.12
|
)
|
|
$
|
0.24
|
|
|
$
|
0.12
|
|
|
$
|
0.56
|
|
|
Diluted
|
|
|
(0.12
|
)
|
|
|
0.23
|
|
|
|
0.11
|
|
|
|
0.55
|
|
The dilutive effect on average shares outstanding is the result of stock options outstanding and restricted stock. For the three months ended June 30, 2014, options to purchase 288,163 shares of common stock were considered dilutive. For the three months ended June 30, 2013, options to purchase 139,983 shares of common stock at a weighted average exercise price of $19.30 per share were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares. For the six months ended June 30, 2014 and 2013, options to purchase 52,556 and 139,983 shares of common stock, respectively, at a weighted average exercise price of $21.35 and $19.30 per share, respectively, were not included in the computation of diluted earnings per share because the options’ exercise price was greater than the average market price of the common shares.
Note 9. Fair Value Measurements and Fair Values of Financial Instruments
Management uses its best judgment in estimating the fair value of the Company’s financial instruments; however, there are inherent weaknesses in any estimation technique. Therefore, for substantially all financial instruments, the fair value estimates herein are not necessarily indicative of the amounts the Company could realize in a sale transaction on the dates indicated. The estimated fair value amounts were measured as of June 30, 2014 and December 31, 2013 and were not re-evaluated or updated for purposes of these financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to June 30, 2014 and December 31, 2013 may be different than the amounts reported at each period end.
The fair value hierarchy prioritizes the inputs to valuation methods used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements).
The three levels of the fair value hierarchy are as follows:
|
|
Level 1 –
|
Quoted prices for identical instruments in active markets.
|
|
|
Level 2 –
|
Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are active, and model derived valuations in which significant inputs or significant drivers are observable in active markets.
|
|
|
Level 3 –
|
Valuations derived from valuation techniques in which one or more significant inputs or significant drivers are unobservable.
|
The following is a discussion of assets and liabilities measured at fair value on a recurring basis and the valuation techniques used:
Securities available for sale
.
The majority of the Company’s securities are included in Level 2 of the fair value hierarchy. Fair values were primarily determined by a third party pricing service using both quoted prices for similar assets, when available, and model-based valuation techniques that derive fair value based on market-corroborated data, such as instruments with similar prepayment speeds and default interest rates. The standard inputs that are normally used include benchmark yields of like securities, reportable trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, and reference data including market research publications. In some cases, the fair value was determined from a broker who is able to quote a price based on observable inputs in a liquid market for similar securities.
In some instances, the fair value of certain securities cannot be determined using these techniques due to the lack of relevant market data. As such, these securities are valued using an alternative technique and classified within Level 3 of the fair value hierarchy. At June 30, 2014, Level 3 includes three corporate debt securities with a fair value of $3.7 million.
The corporate debt securities are pooled trust preferred CDOs collateralized by the trust preferred securities of insurance companies in the United States. The CDOs, which were rated A at purchase and are currently rated below investment grade, could not be priced using quoted market prices, observable market activity or comparable trades, and the financial market was considered not active. The trust preferred market has been severely impacted by the lack of liquidity in the credit markets and concern over the financial services industry. There has been little or no active trading in these securities; therefore it was more appropriate to determine fair value using a discounted cash flow analysis.
The Company utilized a third party pricing service that performed a two-step process to determine the fair value of the CDOs. First, an asset analysis was performed to evaluate the credit quality of the collateral and the deal structure using probability of default values for each underlying issuer and loss given default values by asset type. Probability of default is the likelihood that the issuer of the CDOs will go into default and stop paying and was estimated using an expected default frequency approach, which considers the market value and volatility of a firm’s assets and the threshold for default. Probability of default was combined with correlation assumptions, which is the tendency of companies to default once other companies have defaulted. CDOs are more likely to experience stress at the same time since they are concentrated in the same sector, therefore a 50% asset correlation was assumed for issuers in the same industry. Loss given default is the amount of cash lost to the investor at the time of default and is related to the recovery rate. Loss and recovery estimates determine how much cash remains when an issuer goes into default. Deferrals are a common feature of CDOs and were treated as defaults in the analysis. Loss given default has been historically high for CDOs and therefore a 0% recovery rate was assumed on currently defaulted and deferring assets, which resulted in a 100% loss given default.
Second, a liability analysis was performed in which the expected cash flows produced based off the expected credit events of the asset analysis were allocated across the tranches to determine the tranches that would get paid or incur a loss. These expected cash flows were discounted at a risk free interest rate plus a premium for illiquidity (3 month LIBOR plus 300 basis points) to produce a discounted cash flow valuation and determine an estimated fair value.
For financial assets measured at fair value on a recurring basis, the following tables set forth the fair value measurements by fair value hierarchy at the dates indicated.
|
(Dollars in thousands)
|
|
June 30, 2014
|
|
|
December 31, 2013
|
|
|
Significant other observable inputs (Level 2)
|
|
|
|
|
|
|
|
Securities available-for-sale
|
|
|
|
|
|
|
|
Municipal bonds
|
|
$
|
8,105
|
|
|
$
|
7,970
|
|
|
Mortgage-backed - GSEs
|
|
|
7,287
|
|
|
|
8,192
|
|
|
REMICs
|
|
|
5,262
|
|
|
|
7,019
|
|
|
Total significant other observerable inputs (Level 2)
|
|
|
20,654
|
|
|
|
23,181
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant unobservable inputs (Level 3)
|
|
|
|
|
|
|
|
|
|
Securities available-for-sale
|
|
|
|
|
|
|
|
|
|
Corporate debt
|
|
|
3,716
|
|
|
|
3,591
|
|
|
Total significant unobservable inputs (Level 3)
|
|
|
3,716
|
|
|
|
3,591
|
|
|
Total securities available-for-sale
|
|
$
|
24,370
|
|
|
$
|
26,772
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets measured at fair value on a recurring basis
|
|
$
|
24,370
|
|
|
$
|
26,772
|
|
|
(Dollars in thousands)
|
|
Significant
Unobservable Inputs
(Level 3)
|
|
|
December 31, 2012
|
|
$
|
1,882
|
|
|
Total unrealized gains included in other comprehensive income
|
|
|
1,708
|
|
|
Discount accretion
|
|
|
1
|
|
|
December 31, 2013
|
|
$
|
3,591
|
|
|
Total unrealized gains included in other comprehensive income
|
|
|
125
|
|
|
June 30, 2014
|
|
$
|
3,716
|
|
We may be required to measure certain assets at fair value on a nonrecurring basis. These adjustments to fair value usually result from application of lower-of-cost-or-market accounting or writedowns of individual assets.
The following is a discussion of assets and liabilities measured at fair value on a nonrecurring basis.
Impaired loans.
Certain impaired loans over $250,000 are individually reviewed to determine the amount of each loan that may be at risk of noncollection. When repayment is expected solely from the collateral, the impaired loans are reported at the fair value of the underlying collateral using property appraisals less any projected selling costs.
Real estate owned.
The fair value of real estate owned is estimated using property appraisals less any projected selling costs.
For financial assets measured at fair value on a nonrecurring basis, the following table sets forth the fair value measurements by fair value hierarchy at the dates indicated.
|
|
|
December 31, 2013
|
|
|
(Dollars in thousands)
|
|
Carrying Value
|
|
|
Fair Value
|
|
|
Level 3
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
586
|
|
|
$
|
586
|
|
|
Real estate owned
|
|
|
465
|
|
|
|
465
|
|
|
Total assets measured at fair value
on a nonrecurring basis
|
|
$
|
1,051
|
|
|
$
|
1,051
|
|
For Level 3 assets measured at fair value on a recurring basis as of June 30, 2014, the following table sets forth the significant unobservable inputs used in the fair value measurements.
|
(Dollars in thousands)
|
|
Fair Value
|
|
Valuation Technique
|
Significant
Unobservable Inputs
|
|
Significant Unobservable
Input Value
|
|
|
Recurring basis
|
|
|
|
|
|
|
|
|
|
Securities available-for-sale:
|
|
|
|
|
|
|
|
Corporate debt
|
|
$
|
3,716
|
|
Discounted cash flow
|
Average probability of default
|
|
0.72%
|
|
|
|
|
|
|
|
|
Correlation for issuers in the same industry
|
|
50%
|
|
|
|
|
|
|
|
|
Deferral/default recovery rate on currently defaulted/deferring assets and projected defaults
|
|
0%
|
|
|
|
|
|
|
|
|
Prepayment
|
|
0%
|
|
The following presents the fair value of financial instruments. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be sustained by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from the disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. In addition, the following information should not be interpreted as an estimate of the fair value of the Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful.
The following methods and assumptions were used to estimate the fair values of the Company’s financial instruments at June 30, 2014 and December 31, 2013.
Cash and Cash Equivalents
The carrying amounts approximate the asset’s fair values.
Securities Available-for Sale
See previous discussion on securities available-for-sale measured at fair value on a recurring basis for further details on the valuation techniques used to determine the fair value of securities available-for-sale.
Loans
The fair values for residential real estate loans are estimated using discounted cash flow analyses using mortgage commitment rates from either FNMA or FHLMC. The fair values of consumer and commercial business loans are estimated using discounted cash flow analyses, using interest rates reported in various government releases. The fair values of multi-family and commercial real estate loans are estimated using discounted cash flow analysis, using interest rates based on national commitment rates on similar loans. The carrying value is net of the allowance for loan losses. Due to the significant judgment involved in evaluating credit quality and the allowance for loan losses, loans are classified as Level 3.
Federal Home Loan Bank Stock
The carrying amount approximates the asset’s fair value.
Accrued Interest Receivable and Accrued Interest Payable
The fair value of these instruments approximates the carrying value.
Deposits
The fair values disclosed for demand deposits (e.g., savings accounts) are, by definition, equal to the amount payable on demand at the repricing date (i.e., their carrying amounts). Fair values of certificates of deposits are estimated using a discounted cash flow calculation that applies the FHLB of Pittsburgh advance yield curve to the maturity schedule of the Bank’s certificates of deposit.
Borrowings
The fair value of FHLB advances and repurchase agreements are estimated using a discounted cash flow calculation using the current FHLB advance yield curve. This is the method that the FHLB of Pittsburgh used to determine the cost of terminating the borrowing contract.
Commitments to Extend Credit
These financial instruments are generally not subject to sale and estimated fair values are not readily available. The carrying value, represented by the net deferred fee arising from the unrecognized commitment, and the fair value determined by discounting the remaining contractual fee over the term of the commitment using fees currently charged to enter into similar agreements with similar credit risk, are not considered material for disclosure purposes.
The following table sets forth the carrying amount and estimated fair value of financial instruments at the dates indicated (dollars in thousands).
|
|
|
Carrying
|
|
|
Estimated
|
|
|
Fair Value Measurements
|
|
|
June 30, 2014
|
|
Amount
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
4,714
|
|
|
$
|
4,714
|
|
|
$
|
4,714
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Securities available-for-sale
|
|
|
24,370
|
|
|
|
24,370
|
|
|
|
-
|
|
|
|
20,654
|
|
|
|
3,716
|
|
|
Loans, net
|
|
|
284,060
|
|
|
|
290,652
|
|
|
|
-
|
|
|
|
-
|
|
|
|
290,652
|
|
|
FHLB stock
|
|
|
2,632
|
|
|
|
2,632
|
|
|
|
-
|
|
|
|
2,632
|
|
|
|
-
|
|
|
Accrued interest receivable
|
|
|
1,006
|
|
|
|
1,006
|
|
|
|
-
|
|
|
|
1,006
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
231,477
|
|
|
|
231,833
|
|
|
|
-
|
|
|
|
231,833
|
|
|
|
-
|
|
|
Borrowings
|
|
|
45,818
|
|
|
|
46,276
|
|
|
|
-
|
|
|
|
46,276
|
|
|
|
-
|
|
|
Accrued interest payable
|
|
|
182
|
|
|
|
182
|
|
|
|
-
|
|
|
|
182
|
|
|
|
-
|
|
|
|
|
Carrying
|
|
|
Estimated
|
|
|
Fair Value Measurements
|
|
|
December 31, 2013
|
|
Amount
|
|
|
Fair Value
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,552
|
|
|
$
|
5,552
|
|
|
$
|
5,552
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Securities available-for-sale
|
|
|
26,772
|
|
|
|
26,772
|
|
|
|
-
|
|
|
|
23,181
|
|
|
|
3,591
|
|
|
Loans, net
|
|
|
268,812
|
|
|
|
271,038
|
|
|
|
-
|
|
|
|
-
|
|
|
|
271,038
|
|
|
FHLB stock
|
|
|
2,589
|
|
|
|
2,589
|
|
|
|
-
|
|
|
|
2,589
|
|
|
|
-
|
|
|
Accrued interest receivable
|
|
|
993
|
|
|
|
993
|
|
|
|
-
|
|
|
|
993
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
|
219,232
|
|
|
|
219,538
|
|
|
|
-
|
|
|
|
219,538
|
|
|
|
-
|
|
|
Borrowings
|
|
|
45,591
|
|
|
|
46,446
|
|
|
|
-
|
|
|
|
46,446
|
|
|
|
-
|
|
|
Accrued interest payable
|
|
|
251
|
|
|
|
251
|
|
|
|
-
|
|
|
|
251
|
|
|
|
-
|
|
Note 10. Other Comprehensive Income (Loss)
The following table sets forth the tax effects allocated to each component of the Company’s other comprehensive income (loss) at the dates indicated (dollars in thousands).
|
Three Months Ended June 30, 2014
|
|
Before Income
Tax Expense
(Benefit)
|
|
|
|
|
|
Net of Income
Tax Expense
(Benefit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on securities available-for-sale
|
|
$
|
204
|
|
|
$
|
80
|
|
|
$
|
124
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on securities available-for-sale
|
|
$
|
(191
|
)
|
|
$
|
(75
|
)
|
|
$
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on securities available-for-sale,
|
|
$
|
347
|
|
|
$
|
136
|
|
|
$
|
211
|
|
Note 11. Segment Reporting
The consolidated operating results of FedFirst Financial are presented as a single financial services segment. FedFirst Financial is the parent company of the Bank, which owns FFEC. FFEC has an 80% controlling interest in Exchange Underwriters, Inc. Exchange Underwriters, Inc. is managed separately from the banking and related financial services that the Company offers. Exchange Underwriters, Inc. is an independent insurance agency that offers property and casualty, life, health, commercial general liability, surety and other insurance products.
Following is a table of selected financial data for the Company's subsidiaries and consolidated results for the dates indicated (dollars in thousands).
|
|
|
First Federal Savings Bank
|
|
|
Exchange Underwriters, Inc.
|
|
|
FedFirst Financial Corporation
|
|
|
Net Eliminations
|
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
330,851
|
|
|
$
|
1,375
|
|
|
$
|
50,853
|
|
|
$
|
(52,124
|
)
|
|
$
|
330,955
|
|
|
Liabilities
|
|
|
284,265
|
|
|
|
667
|
|
|
|
107
|
|
|
|
(4,905
|
)
|
|
|
280,134
|
|
|
Stockholders' equity
|
|
|
46,586
|
|
|
|
708
|
|
|
|
50,746
|
|
|
|
(47,219
|
)
|
|
|
50,821
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
$
|
319,381
|
|
|
$
|
1,438
|
|
|
$
|
51,773
|
|
|
$
|
(53,565
|
)
|
|
$
|
319,027
|
|
|
Liabilities
|
|
|
273,457
|
|
|
|
578
|
|
|
|
27
|
|
|
|
(6,886
|
)
|
|
|
267,176
|
|
|
Stockholders' equity
|
|
|
45,924
|
|
|
|
860
|
|
|
|
51,746
|
|
|
|
(46,679
|
)
|
|
|
51,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
3,269
|
|
|
$
|
-
|
|
|
$
|
18
|
|
|
$
|
(18
|
)
|
|
$
|
3,269
|
|
|
Total interest expense
|
|
|
548
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18
|
)
|
|
|
530
|
|
|
Net interest income
|
|
|
2,721
|
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
|
|
|
2,739
|
|
|
Provision for loan losses
|
|
|
220
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
220
|
|
|
Net interest income after provision for loan losses
|
|
|
2,501
|
|
|
|
-
|
|
|
|
18
|
|
|
|
-
|
|
|
|
2,519
|
|
|
Noninterest income
|
|
|
228
|
|
|
|
918
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,146
|
|
|
Noninterest expense
|
|
|
3,311
|
|
|
|
670
|
|
|
|
116
|
|
|
|
-
|
|
|
|
4,097
|
|
|
Undistributed net income of subsidiary
|
|
|
145
|
|
|
|
-
|
|
|
|
(211
|
)
|
|
|
66
|
|
|
|
-
|
|
Income (loss) before income tax expense (benefit) and noncontrolling
interest in net income of consolidated subsidiary
|
|
|
(437
|
)
|
|
|
248
|
|
|
|
(309
|
)
|
|
|
66
|
|
|
|
(432
|
)
|
|
Income tax expense (benefit)
|
|
|
(255
|
)
|
|
|
103
|
|
|
|
(33
|
)
|
|
|
-
|
|
|
|
(185
|
)
|
Net income (loss) before noncontrolling interest in net
income of consolidated subsidiary
|
|
|
(182
|
)
|
|
|
145
|
|
|
|
(276
|
)
|
|
|
66
|
|
|
|
(247
|
)
|
Less: Noncontrolling interest in net income of
consolidated subsidiary
|
|
|
29
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
29
|
|
|
Net income (loss) of FedFirst Financial Corporation
|
|
$
|
(211
|
)
|
|
$
|
145
|
|
|
$
|
(276
|
)
|
|
$
|
66
|
|
|
$
|
(276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
6,489
|
|
|
$
|
-
|
|
|
$
|
37
|
|
|
$
|
(37
|
)
|
|
$
|
6,489
|
|
|
Total interest expense
|
|
|
1,157
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(37
|
)
|
|
|
1,120
|
|
|
Net interest income
|
|
|
5,332
|
|
|
|
-
|
|
|
|
37
|
|
|
|
-
|
|
|
|
5,369
|
|
|
Provision for loan losses
|
|
|
295
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
295
|
|
|
Net interest income after provision for loan losses
|
|
|
5,037
|
|
|
|
-
|
|
|
|
37
|
|
|
|
-
|
|
|
|
5,074
|
|
|
Noninterest income
|
|
|
437
|
|
|
|
1,708
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,145
|
|
|
Noninterest expense
|
|
|
5,256
|
|
|
|
1,303
|
|
|
|
217
|
|
|
|
-
|
|
|
|
6,776
|
|
|
Undistributed net income of subsidiary
|
|
|
234
|
|
|
|
-
|
|
|
|
377
|
|
|
|
(611
|
)
|
|
|
-
|
|
Income (loss) before income tax expense (benefit) and noncontrolling
interest in net income of consolidated subsidiary
|
|
|
452
|
|
|
|
405
|
|
|
|
197
|
|
|
|
(611
|
)
|
|
|
443
|
|
|
Income tax expense (benefit)
|
|
|
28
|
|
|
|
171
|
|
|
|
(61
|
)
|
|
|
-
|
|
|
|
138
|
|
Net income (loss) before noncontrolling interest in net
income of consolidated subsidiary
|
|
|
424
|
|
|
|
234
|
|
|
|
258
|
|
|
|
(611
|
)
|
|
|
305
|
|
Less: Noncontrolling interest in net income of
consolidated subsidiary
|
|
|
47
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
47
|
|
|
Net income (loss) of FedFirst Financial Corporation
|
|
$
|
377
|
|
|
$
|
234
|
|
|
$
|
258
|
|
|
$
|
(611
|
)
|
|
$
|
258
|
|
|
(Dollars in thousands)
|
|
First Federal Savings Bank
|
|
|
Exchange Underwriters, Inc.
|
|
|
FedFirst Financial Corporation
|
|
|
Net Eliminations
|
|
|
Consolidated
|
|
|
Three Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
3,282
|
|
|
$
|
-
|
|
|
$
|
21
|
|
|
$
|
(21
|
)
|
|
$
|
3,282
|
|
|
Total interest expense
|
|
|
702
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(21
|
)
|
|
|
681
|
|
|
Net interest income
|
|
|
2,580
|
|
|
|
-
|
|
|
|
21
|
|
|
|
-
|
|
|
|
2,601
|
|
|
Provision for loan losses
|
|
|
165
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
165
|
|
|
Net interest income after provision for loan losses
|
|
|
2,415
|
|
|
|
-
|
|
|
|
21
|
|
|
|
-
|
|
|
|
2,436
|
|
|
Noninterest income
|
|
|
348
|
|
|
|
736
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,084
|
|
|
Noninterest expense
|
|
|
1,866
|
|
|
|
646
|
|
|
|
80
|
|
|
|
-
|
|
|
|
2,592
|
|
|
Undistributed net income of subsidiary
|
|
|
51
|
|
|
|
-
|
|
|
|
615
|
|
|
|
(666
|
)
|
|
|
-
|
|
Income before income tax expense (benefit) and
noncontrolling interest in net income of consolidated subsidiary
|
|
|
948
|
|
|
|
90
|
|
|
|
556
|
|
|
|
(666
|
)
|
|
|
928
|
|
|
Income tax expense (benefit)
|
|
|
323
|
|
|
|
39
|
|
|
|
(20
|
)
|
|
|
-
|
|
|
|
342
|
|
Net income before noncontrolling interest in net
income of consolidated subsidiary
|
|
|
625
|
|
|
|
51
|
|
|
|
576
|
|
|
|
(666
|
)
|
|
|
586
|
|
Less: Noncontrolling interest in net income of
consolidated subsidiary
|
|
|
10
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10
|
|
|
Net income of FedFirst Financial Corporation
|
|
$
|
615
|
|
|
$
|
51
|
|
|
$
|
576
|
|
|
$
|
(666
|
)
|
|
$
|
576
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income
|
|
$
|
6,526
|
|
|
$
|
-
|
|
|
$
|
42
|
|
|
$
|
(42
|
)
|
|
$
|
6,526
|
|
|
Total interest expense
|
|
|
1,437
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(42
|
)
|
|
|
1,395
|
|
|
Net interest income
|
|
|
5,089
|
|
|
|
-
|
|
|
|
42
|
|
|
|
-
|
|
|
|
5,131
|
|
|
Provision for loan losses
|
|
|
165
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
165
|
|
|
Net interest income after provision for loan losses
|
|
|
4,924
|
|
|
|
-
|
|
|
|
42
|
|
|
|
-
|
|
|
|
4,966
|
|
|
Noninterest income
|
|
|
603
|
|
|
|
1,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,353
|
|
|
Noninterest expense
|
|
|
3,748
|
|
|
|
1,302
|
|
|
|
154
|
|
|
|
-
|
|
|
|
5,204
|
|
|
Undistributed net income of subsidiary
|
|
|
261
|
|
|
|
-
|
|
|
|
1,444
|
|
|
|
(1,705
|
)
|
|
|
-
|
|
Income before income tax expense (benefit) and
noncontrolling interest in net income of consolidated subsidiary
|
|
|
2,040
|
|
|
|
448
|
|
|
|
1,332
|
|
|
|
(1,705
|
)
|
|
|
2,115
|
|
|
Income tax expense (benefit)
|
|
|
544
|
|
|
|
187
|
|
|
|
(38
|
)
|
|
|
-
|
|
|
|
693
|
|
Net income before noncontrolling interest in net
income of consolidated subsidiary
|
|
|
1,496
|
|
|
|
261
|
|
|
|
1,370
|
|
|
|
(1,705
|
)
|
|
|
1,422
|
|
Less: Noncontrolling interest in net income of
consolidated subsidiary
|
|
|
52
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
52
|
|
|
Net income of FedFirst Financial Corporation
|
|
$
|
1,444
|
|
|
$
|
261
|
|
|
$
|
1,370
|
|
|
$
|
(1,705
|
)
|
|
$
|
1,370
|
|
Note 12. Stock Based Compensation
In 2006, the Company’s stockholders approved the 2006 Equity Incentive Plan (the “2006 Plan”). The purpose of the 2006 Plan is to promote the Company’s success and enhance its value by linking the personal interests of its employees, officers, directors and directors emeritus to those of the Company’s stockholders, and by providing participants with an incentive for outstanding performance. All of the Company’s salaried employees, officers and directors are eligible to participate in the 2006 Plan. The 2006 Plan authorizes the granting of options to purchase shares of the Company’s stock, which may be non-statutory stock options or incentive stock options, and restricted stock which is subject to restrictions on transferability and subject to forfeiture. The 2006 Plan reserved an aggregate number of 214,787 shares of which 153,419 may be issued in connection with the exercise of stock options and 61,367 may be issued as restricted stock.
In 2011, the Company’s stockholders approved the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan’s details related to purpose, eligibility, and granting of shares are the same as noted above for the 2006 Plan. The 2011 Plan reserved an aggregate number of 204,218 shares of which 145,870 may be issued in connection with the exercise of stock options and 58,348 may be issued as restricted stock.
The Company recognizes expense associated with the awards over the five-year vesting period in accordance with ASC 718
Compensation - Stock Compensation
and ASC 505-50
Equity-Based Payments to Non-Employees
. Compensation expense was $80,000 for the three months ended June 30, 2014 compared to $75,000 for the three months ended June 30, 2013. For the six months ended June 30, 2014, compensation expense was $160,000 compared to $122,000 for the six months ended June 30, 2013. As of June 30, 2014, there was $1.0 million of total unrecognized compensation cost related to nonvested stock-based compensation compared to $1.2 million at December 31, 2013. The compensation expense at June 30, 2014 is expected to be recognized ratably over the weighted average remaining service period of 3.5 years.
|
|
|
Stock Options
|
|
|
Stock-Based Compensation
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2013
|
|
|
294,081
|
|
|
$
|
16.44
|
|
|
|
7.08
|
|
|
Expired
|
|
|
(5,918
|
)
|
|
|
21.35
|
|
|
|
|
|
|
Outstanding at June 30, 2014
|
|
|
288,163
|
|
|
$
|
16.34
|
|
|
|
6.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at June 30, 2014
|
|
|
133,507
|
|
|
$
|
17.23
|
|
|
|
4.94
|
|
|
|
|
Stock Options
|
|
|
Restricted Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2013
|
|
|
175,390
|
|
|
$
|
3.37
|
|
|
|
46,715
|
|
|
$
|
16.80
|
|
|
Vested
|
|
|
(20,734
|
)
|
|
|
3.56
|
|
|
|
(7,198
|
)
|
|
|
15.65
|
|
|
Nonvested at June 30, 2014
|
|
|
154,656
|
|
|
$
|
3.34
|
|
|
|
39,517
|
|
|
$
|
17.01
|
|
Note 13. Related Parties
In 2002, the Company purchased an 80% controlling interest in Exchange Underwriters. The President of Exchange Underwriters is Richard B. Boyer, who owns the remaining 20% of Exchange Underwriters (“Shareholder”). Mr. Boyer is on the board of directors of the Company. The original stock purchase agreement between FFEC and the Shareholder includes an obligation for the Company to purchase the Shareholder’s 20% stake upon the earliest of (1) the termination of the Shareholder’s employment for any reason, (2) May 29, 2014 (the twelfth anniversary of the closing date of the stock purchase agreement), or (3) the transfer by the Shareholder of any of his shares. The Shareholder has a right of first refusal to purchase the FFEC’s interest in Exchange Underwriters prior to the FFEC selling or transferring such shares and has “tag-along” rights to participate in any sale to a buyer on the same terms and conditions as FFEC.
In connection with the execution of the Merger Agreement with CB Financial, FFEC entered into a new stock purchase agreement dated as of April 14, 2014 by and between FFEC and Richard B. Boyer, which provides for the purchase of Mr. Boyer’s interest in Exchange Underwriters for total consideration of $1.2 million immediately prior to the closing of the Company’s merger with CB Financial. FFEC also entered into an amendment to the original stock purchase agreement which extends from May 29, 2014 to June 1, 2017 the date on which FedFirst Financial is obligated to purchase Mr. Boyer’s interest in Exchange Underwriters in the event that the merger is not completed.