NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
ASB Bancorp, Inc. (the Parent) was incorporated on May 12, 2011 by Asheville Savings
Bank, S.S.B. (the Bank) to be the Banks holding company upon completion of the Banks conversion from the mutual to stock form of organization. The conversion was completed on October 11, 2011 and the Parent contributed
$28.0 million in capital to the Bank on that date from the conversion proceeds.
The Bank is headquartered in Asheville, North Carolina and
provides mortgage, consumer and commercial banking services primarily in Buncombe, Henderson, McDowell, Transylvania, and Madison counties in North Carolina. The Bank is regulated by the Office of the North Carolina Commissioner of Banks
(NCCoB) and the Federal Deposit Insurance Corporation (FDIC). The Company is regulated by the Board of Governors of the Federal Reserve System (the FRB) and the NCCoB.
Principles of Consolidation
The consolidated financial statements include the accounts of the Parent and its wholly owned
subsidiary, the Bank (collectively, the Company). The Bank has two wholly owned subsidiaries, Appalachian Financial Services, Inc., which has on occasion managed the Banks real estate acquired through debt default but is currently
inactive, and Wenoca, Inc., which serves as the Banks trustee regarding deeds of trust. Both subsidiaries are organized as North Carolina corporations. For purposes of the consolidated financial statements, all significant intercompany
accounts and transactions have been eliminated. The accounting and reporting policies of the Company conform to accounting principals generally accepted in the United States of America (GAAP).
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Cash and Cash Equivalents
Cash equivalents include demand and time deposits
(with original maturities of 90 days or less) at other financial institutions and federal funds sold.
Investment Securities
The Company classifies investment securities into three categories. Debt securities that the Company has the positive intent and ability to hold to maturity are classified as held to maturity securities and reported at amortized
cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as trading securities and reported at fair value, with unrealized gains and losses included in earnings.
Debt securities not classified as either held to maturity securities or trading securities and equity securities not classified as trading securities are classified as available for sale securities and reported at fair value, with
unrealized gains and losses excluded from earnings and reported as a separate component of equity. The Company classified no securities as trading securities as of December 31, 2012 and December 31, 2011.
Realized gains and losses on sales of investment securities are recognized at the time of sale (trade date) based upon the specific
identification method.
Interest income includes amortization of purchase premiums and discounts. Realized gains and losses are derived from
the amortized cost of the security sold. Declines in the fair value of held to maturity and available for sale debt securities below their cost that are deemed to be other than temporary because of credit risk impairment are reflected in earnings as
realized losses. In estimating other-than-temporary impairment losses, management considers, among other issues, (i) the length of time and the extent to which the fair value has been less than cost, (ii) the financial condition and
near-term prospects of the issuer, (iii) the intent of the Company to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value, and (iv) whether it is more likely than not that
the Company will be required to sell the investment prior to a recovery.
77
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investments Held at Cost
The Bank, as a member of the Federal Home Loan Bank system
(the FHLB), is required to maintain an investment in capital stock of the FHLB in an amount equal to the greater of 1% of its outstanding home loans or 5% of advances from the FHLB. This investment is carried at cost. Due to the
redemption provisions of the FHLB, the Bank estimated that fair value equals cost and that this investment was not impaired at December 31, 2012 and December 31, 2011.
Loans
Loans that management has the intent and ability to hold for the foreseeable future are reported at their outstanding principal balances net of any unearned income, charge-offs,
unamortized fees and costs on originated loans. The net amount of nonrefundable loan origination fees and certain direct costs associated with the lending processes are deferred and amortized to interest income over the contractual lives of the
loans.
Loan Segments and Classes
The Banks portfolio segments and classes within those segments are subject to risks that could have an adverse impact on the credit quality of the
loan portfolio. Management identified the risks described below as significant risks that are generally similar among the loan segments and classes.
Commercial loan segment
The Banks commercial loans are centrally underwritten based
primarily on the customers ability to generate the required cash flow to service the debt in accordance with the contractual terms and conditions of the loan agreement. The Banks commercial lenders and underwriters work to understand the
borrowers businesses and management experiences. The majority of the Banks commercial loans are secured by collateral, so collateral values are important to the transaction. In commercial loan transactions where the principals or other
parties provide personal guarantees, the Banks commercial lenders and underwriters analyze the relative financial strength and liquidity of each guarantor. Risks that are common to the Banks commercial loan classes include general
economic conditions, demand for the borrowers products and services, the personal circumstances of the principals, and reductions in collateral values.
In addition to these common risks for the Banks commercial loans, the various commercial loan classes also have certain risks specific to them.
Commercial construction and land development
loans are highly dependent on the supply and demand for commercial real estate in the Banks
markets as well as the demand for the newly constructed residential homes and lots being developed by the Banks commercial loan customers. Prolonged deterioration in demand could result in significant decreases in the underlying collateral
values and make repayment of the outstanding loans more difficult for the Banks commercial borrowers.
Commercial mortgage and
commercial and industrial
loans are primarily dependent on the ability of the Banks commercial loan customers to achieve business results consistent with those projected at loan origination resulting in cash flow sufficient to service the
debt. To the extent that a borrowers actual business results significantly underperform the original projections, the ability of that borrower to service the Banks loan on a basis consistent with the contractual terms may be at risk.
While these loans and leases are generally secured by real property, personal property, or business assets such as inventory or accounts receivable, it is possible that the liquidation of the collateral will not fully satisfy the obligation.
78
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Other commercial real estate
loans consist primarily of loans secured by multifamily housing. The
primary risk associated with multifamily loans is the ability of the income producing property that collateralizes the loan to produce adequate cash flow to service the debt. High unemployment or generally weak economic conditions may result in the
borrower having to provide rental rate concessions to achieve adequate occupancy rates.
Non-commercial loan segment
The Bank underwrites its non-commercial loans using automated credit scoring and analysis tools. These credit scoring tools take into account factors such
as payment history, credit utilization, length of credit history, types of credit currently in use, and recent credit inquiries. To the extent that the loan is secured by collateral, the value of the collateral is also evaluated. Common risks to
each class of non-commercial loans include general economic conditions within the Banks markets, such as unemployment and potential declines in collateral values, and the personal circumstances of the borrowers.
In addition to these common risks for the Banks non-commercial loans, various non-commercial loan classes may also have certain risks specific to
them.
Residential mortgage and non-commercial construction and land development
loans are to individuals and are typically secured by
1-4 family residential property, undeveloped land, and partially developed land in anticipation of pending construction of a personal residence. Significant and rapid declines in real estate values can result in residential mortgage loan borrowers
having debt levels in excess of the current market value of the collateral. Recent declines in value have led to unprecedented levels of foreclosures and losses within the banking industry. Non-commercial construction and land development loans can
experience delays in completion and cost overruns that exceed the borrowers financial ability to complete the project. Such cost overruns can result in foreclosure of partially completed and unmarketable collateral.
Revolving mortgage
loans are often secured by second liens on residential real estate, thereby making such loans particularly susceptible to
declining collateral values. A substantial decline in collateral value could render the Banks second lien position to be effectively unsecured. Additional risks include lien perfection inaccuracies and disputes with first lien holders that may
further weaken collateral positions. Further, the open-end structure of these loans creates the risk that customers may draw on the lines in excess of the collateral value if there have been significant declines since origination.
Consumer
loans include loans secured by personal property such as automobiles, marketable securities, other titled recreational vehicles including
boats and motorcycles, as well as unsecured consumer debt. The value of underlying collateral within this class is especially volatile due to potential rapid depreciation in values since date of loan origination in excess of principal repayment.
Credit Quality Indicators
Loans
are monitored for credit quality on a recurring basis and the composition of the loans outstanding by credit quality indicator is provided below.
Loan credit quality indicators are developed through review of individual borrowers on an ongoing basis, although certain non-commercial loans, including residential mortgage, revolving mortgage and
consumer loans, are evaluated upon origination and are reevaluated upon a change in delinquency status. Most commercial loans are evaluated at least annually with more frequent evaluation of more severely criticized loans or leases. The indicators
represent the rating for loans as of the date presented based on the most recent assessment performed. These credit quality indicators are defined as follows:
79
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Pass
A pass rated asset is not adversely classified because it does not display any of the
characteristics for adverse classification.
Special mention
A special mention asset has potential weaknesses that deserve
managements close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not
warrant adverse classification.
Substandard
A substandard asset is inadequately protected by the current net worth and paying
capacity of the obligor or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct
possibility of loss if the deficiencies are not corrected.
Doubtful
An asset classified doubtful has all the weaknesses
inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions, and values.
Loss
Assets classified loss are considered uncollectible and of such little value that their continuing to be carried as an asset is not
warranted. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full write-off even though partial recovery may be effected in the future.
Loans Held for Sale
Loans held for sale are residential mortgages carried at the lower of cost or market value. The market values of
loans held for sale are based on what mortgage buyers are currently offering the Bank on a best efforts basis to buy the loans.
Allowance for Loan Losses
The allowance for loan losses is managements estimate of probable credit losses that are inherent in
the Banks loan portfolios at the balance sheet date. The allowance increases when the Bank provides for loan losses through charges to operating earnings and when the Bank recovers amounts from loans previously written down or charged off. The
allowance decreases when the Bank writes down or charges off loans amounts that are deemed uncollectible.
Management determines the allowance
for loan losses based on periodic evaluations that are inherently subjective and require substantial judgment because the evaluations require the use of material estimates that are susceptible to significant change. The Bank generally uses two
allowance methodologies that are primarily based on managements determination as to whether or not a loan is considered to be impaired.
Commercial loans, as well as non-commercial loans that are classified as substandard and secured by real estate, are evaluated for impairment on a
loan-by-loan basis and are considered impaired when it is probable, based on current information, that the borrower will be unable to pay contractual interest or principal as required by the loan agreement. Loans that experience insignificant
payment delays and payment shortfalls are not necessarily considered impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding
the loan and the borrower, including the length of the delay, the reasons for the delay, the borrowers prior payment history, and the amount of the shortfall relative to the principal and interest owed. Loans that are deemed to be troubled
debt restructurings are also included as impaired loans. Impaired loans are measured at their estimated fair value based on either the value of the loans expected future cash flows discounted at the loans effective interest rate or on
the collateral value, net of the estimated costs of disposal, if the loan is collateral dependent. For loans considered impaired, an individual allowance for loan losses is recorded when the loan principal balance exceeds the estimated fair value.
80
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
For loans not considered impaired, management determines the allowance for loan losses based on
estimated loss percentages that are determined by and applied to the various classes of loans that comprise the segments of the Banks loan portfolio. The estimated loss percentages by loan class are based on a number of factors that include by
class (i) average historical losses over the past three years, (ii) levels and trends in delinquencies, impairments, and net charge-offs, (iii) trends in the volume and direction of loan balances within that class, terms, and
concentrations, (iv) trends in interest rates, (v) effects of changes in the Banks risk tolerance, underwriting standards, lending policies, procedures, and practices, and (vi) national and local business and economic
conditions.
Methodology change
In the fourth quarter, the Bank modified its loan loss methodology for unimpaired commercial
construction and land development and its unimpaired commercial mortgage loans. This change resulted in further segmentation of these classes of loans and the related historical charge-off rates. The purpose was to allocate the substantial
historical charge-offs rates, created by two segments of these loan classes, against the significantly diminished credit exposure to the Bank within these same classes. Specifically, additional sub segments of loans on large tracts of unimproved
land or land development loans in excess of $1 million and purchased participations from a failed bank in out of market commercial mortgage loans were created. This change in methodology resulted in a nonrecurring reduction of approximately $1.6
million in the Banks reserves on loans not considered impaired.
Future material adjustments to the allowance for loan losses may be
necessary due to changing economic conditions or declining collateral values. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Banks allowance for loan losses and may require the Bank
to make adjustments to the allowance for loan losses based upon judgments that differ significantly from those of management.
Nonperforming Assets
Nonperforming assets can include loans that are past due 90 days or more and continue to accrue interest, loans
on which interest is not being accrued, and foreclosed real estate.
Loans Past Due 90 Days or More, Nonaccruing, Impaired, or Restructured
The Banks policies related to when loans are placed on nonaccruing status conform to guidelines prescribed by bank regulatory authorities. Generally, the Bank suspends the accrual of interest on loans (i) that are maintained on
a cash basis because of the deterioration of the financial condition of the borrower, (ii) for which payment in full of principal or interest is not expected, or (iii) on which principal or interest has been in default for a period of 90
days or more, unless the loan is both well secured and in the process of collection. While a loan is on nonaccruing status, the Bank recognizes interest income only to the extent cash payments are received in excess of collection of the principal
portion of the payment on the loan. Loans are returned to accruing status when all principal and interest amounts contractually due are brought current and concern no longer exists as to the future collectability of principal and interest, which is
generally confirmed when the loan demonstrates performance for six consecutive months or payment cycles.
81
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A troubled debt restructuring (TDR) occurs when a borrower is experiencing financial
difficulty and the Bank grants a concession to provide the borrower relief from one or more of the contractual loan conditions. Concessions that the Bank might consider include the allowance of interest-only payments on a temporary basis, the
reduction of interest rates, the extension of the loan term, the forgiveness of principal, or a combination of these. The Bank rarely reduces interest rates below market rates or forgives principal as concessions. The Bank might require additional
collateral or additional guarantors as conditions to modifying loans as TDRs.
The Bank might consider modifying both accruing or nonaccruing
loans as TDRs. When a modification includes a reduction of principal that resulted from a partial charge off of the loan, the Bank typically accounts for the TDR as a nonaccruing loan.
The Bank classifies TDRs as impaired loans and evaluates the need for an allowance for loan loss on a loan-by-loan basis consistent with its evaluation of impaired loans that have not been modified
as TDRs. An allowance is based on either the present value of expected future cash flows discounted at the loans effective interest rate, the loans observable market price or the estimated fair value of the underlying collateral less any
selling costs, if the loan is deemed to be collateral dependent.
The Banks policy for recognition of interest income on loans
considered to be impaired, including restructured loans, is the same as its interest income recognition policy for loans not considered to be impaired.
Loan Charge-offs
The Bank charges off loan balances, in whole or in part, when available, verifiable, and documentable information confirms that specific loans, or portions of specific
loans, are uncollectible or unrecoverable. For unsecured loans, losses are confirmed when it can be determined that the borrower, or any guarantor, is unwilling or unable to pay the amounts as agreed. When the borrower, or any guarantors, are
unwilling or unable to pay the amounts as agreed on a loan secured by collateral and any recovery is dependent upon the sale of the collateral, the loan is deemed to be collateral dependent. Repayments or recoveries for collateral dependent loans
are directly affected by the value of the collateral at liquidation. As such, loan repayment can be affected by factors that influence the amount recoverable, the timing of the recovery, or a combination of the two. Such factors include economic
conditions that affect the markets in which the loan or its collateral is sold, bankruptcy, repossession and foreclosure laws, and consumer banking regulations. Losses are also confirmed when the loan, or a portion of the loan, is classified as loss
resulting from loan reviews conducted by the Bank.
Charge-offs of loans in the commercial loan segment are recognized when the
uncollectibility of the loan balance and the inability to recover sufficient value from the sale of any collateral securing the loan is confirmed. The uncollectibility of the loan balance is evidenced by the inability of the commercial borrower to
generate cash flows sufficient to repay the loan as agreed causing the loan to become delinquent. For collateral dependent commercial loans, the Bank determines the fair value of the collateral based on appraisals, current market conditions, and
estimated costs to sell the collateral. For collateral dependent commercial loans where the loan balance, including any accrued interest, net deferred fees or costs, and unamortized premiums or discounts, exceeds the fair value of the collateral
securing the loan, the deficiency is identified as unrecoverable, is deemed to be a confirmed loss, and is charged off.
82
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Charge-offs of loans in the non-commercial loan segment are generally confirmed and recognized in a
manner similar to loans in the commercial loan segment. Secured non-commercial loans that are identified as uncollectible and are deemed to be collateral dependent are confirmed as loss to the extent the fair value of the collateral is insufficient
to recover the loan balance. Closed-end consumer loans that become 120 cumulative days past due and open-end consumer loans that become 180 cumulative days past due are charged off to the extent that the fair value of any collateral, less estimated
costs to sell the collateral, is insufficient to recover the loan balance. Closed-end and open-end loans secured by residential real estate that become 180 days past due are charged off to the extent that the fair value of the residential real
estate securing the loan, less estimated costs to sell the collateral, is insufficient to recover the loan balance. Loans determined to be fraudulent are charged off within 90 days of discovery. Loans to borrowers in bankruptcy are subject to
modification by the bankruptcy court and are charged off to the extent that the fair value of any collateral securing the loan, less estimated costs to sell the collateral, is insufficient to recover the loan balance, unless the Bank expects
repayment is likely to occur. Such loans are charged off within 60 days of the receipt of notification from a bankruptcy court or when the loans become 120 days past due, whichever is shorter.
Foreclosed Real Estate
Nonperforming assets also include foreclosed real estate, which consists of real estate and other assets acquired as
a result of customers loan defaults. Foreclosed real estate is stated at the lower of the related loan balance or the fair value of the property net of the estimated costs of disposal with a charge to the allowance for loan losses upon
foreclosure. Any write-downs subsequent to foreclosure are charged against operating earnings. To the extent recoverable, costs relating to the development and improvement of property are capitalized, whereas those costs relating to holding the
property are charged to expense.
Premises and Equipment
Premises and equipment are stated at cost less accumulated
depreciation. Major additions and improvements are capitalized, and repairs which do not improve or extend the life of the respective assets are expensed in the period incurred. Gains and losses on dispositions are reflected in current operations.
Depreciation of premises and equipment is provided over the estimated useful lives of the related assets on the straight-line method for
financial statement purposes and on a combination of straight-line and accelerated methods for income tax purposes. Estimated lives are 10 to 40 years for buildings, building components and improvements, 5 to 10 years for furniture, fixtures and
equipment and 3 years for computers.
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the Bank estimates the future cash flows expected to result from the use of the asset and its eventual disposition, and recognizes an impairment
loss if the expected future cash flows are less than the carrying amount of the asset.
Deferred Loan Fees
The Bank
defers loan origination fees, net of certain direct loan origination costs. Such costs and fees for loans held for investment are recognized as an adjustment to yield over the lives of the related loans utilizing a method of amortization that
approximates the level-yield method. When a loan is prepaid or sold, the related unamortized net origination fee is included in income. Net deferred fees for loans held for sale are deferred until the loan is sold and included as part of the gain or
loss on the sale.
Commitment fees to originate or purchase loans are deferred and, if the commitment is exercised, recognized over the life
of the loan as an adjustment of yield. If the commitment expires unexercised, commitment fees are recognized in income upon expiration of the commitment.
83
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income
Comprehensive income is defined as the change in equity of an
enterprise during a period from transactions and other events and circumstances from non-owner sources and, accordingly, includes both net income and amounts referred to as other comprehensive income. The items of other comprehensive income are
included in the Consolidated Statements of Comprehensive Income (Loss). The accumulated balance of other comprehensive income is included in the equity section of the Consolidated Balance Sheets. The Companys components of accumulated other
comprehensive income include unrealized gains and/or losses on investment securities classified as available for sale and certain changes in the Companys benefit obligations under its retirement plans. The Company adjusts the level of
accumulated comprehensive income related to its retirement plans on an annual basis, consistent with the receipt of its annual actuarial studies.
The components of the Companys accumulated other comprehensive loss, net of income taxes, are as follows:
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December 31,
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(in thousands)
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|
2012
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2011
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|
|
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|
Unrealized gain on securities
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$
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1,879
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|
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$
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2,700
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Benefit plan liability
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|
|
(4,946
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)
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|
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(4,029
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)
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Accumulated other comprehensive loss, net of tax
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$
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(3,067
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)
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|
$
|
(1,329
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)
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|
|
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|
Income Taxes
The establishment of provisions for federal and state income taxes is a complex area of
accounting, which involves the use of significant judgments and estimates in applying relevant tax statutes. The Company is subject to audit by federal and state tax authorities, the results of which may produce tax liabilities that differ from the
Companys tax estimates and provisions. The Company continually evaluates its exposure to possible tax assessments arising from audits and it records its estimate of possible exposure based on current facts and circumstances. The Parent and the
Bank have entered into a formal agreement that will allow them, if so elected, to file consolidated federal and state income tax returns, where permitted, and each to pay its respective share of income taxes due.
Deferred tax assets and liabilities are recognized for the tax effects of differing carrying values of assets and liabilities for tax and financial
statement purposes that will reverse in future periods. Deferred tax assets and liabilities are reflected at currently enacted income tax rates applicable to the period in which the deferred tax assets or liabilities are expected to be realized or
settled. As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes. When uncertainty exists concerning the recoverability of a deferred tax asset, the carrying value of the
asset may be reduced by a valuation allowance. The amount of any valuation allowance established is based upon an estimate of the deferred tax asset that is more likely than not to be recovered. Increases or decreases in the valuation allowance
result in increases or decreases to the provision for income taxes.
84
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
A significant portion of the recorded deferred tax assets relate to a loan loss allowance on which the
realization of income tax benefits is dependent on the Banks ability to generate future taxable income. Because of this dependency, the Banks management considered the need for a valuation allowance, but determined there was sufficient
positive evidence to support their conclusion not to record a valuation allowance. The positive evidence that led the Banks management to conclude that the income tax benefits of the Banks deferred tax assets would be realized included
(1) the Bank has a sustained history of generating taxable income and realizing the income tax benefits of its deferred tax assets and income tax credits, (2) the Banks management believes that, based on certain credit quality
indicators, the credit quality issues that resulted in the 2010 net loss and caused the net operating loss carry forward and deferred tax asset related to the loan loss allowance have significantly improved, (3) the Bank generated pretax income
in 2012 and 2011, (4) the Banks management is aware of one or more strategies that, if implemented, could generate future taxable income, and (5) the net operating loss carry forward does not expire in the near term and the Bank has
not experienced expiring loss carry forwards in its past. The Banks loss carry forward periods under applicable federal and North Carolina income tax laws are 20 years and 15 years, respectively, with remaining loss carry forward periods of 18
years and 13 years, respectively.
The Bank includes interest and penalties related to income tax liabilities in noninterest expense. The
Banks tax filings for the years ended December 31, 2008 through 2011 are currently open to audit under statutes of limitations by the Internal Revenue Service and the North Carolina Department of Revenue.
Pension Plan
The Bank has two noncontributory, defined benefit pension plans. The Bank recognizes the overfunded or underfunded
status of the plans as an asset or liability in its consolidated statement of financial position and recognizes changes in the funded status in the year in which the change occurs through comprehensive income. The funded status of a benefit plan is
measured as the difference between plan assets at fair value and the benefit obligation. For a pension plan, the benefit obligation is the projected benefit obligation. GAAP also requires an employer to measure the funded status of a plan as of the
date of its year-end statement of financial position. GAAP also requires additional disclosure in the notes to financial statements about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of
the gains or losses, prior service costs or credits, and transition asset or obligation.
Employee Stock Ownership Plan
(ESOP)
In connection with the mutual-to-stock conversion discussed in note 2 below, the Bank established an ESOP for the benefit of all of its eligible employees. Full-time employees of the Bank who have been credited with
at least 1,000 hours of service during a 12-month period and who have attained age 21 are eligible to participate in the ESOP. Shares allocated under the ESOP vest at the rate of 20% per year of service beginning with the completion of two
years of service and fully vesting with the completion of six years of service. The Bank anticipates it will make contributions to the ESOP in amounts necessary to amortize the ESOP loan payable to the Company over a period of 15 years.
Unallocated ESOP shares are not considered outstanding (including for the calculation of net income per common share as discussed below) and are shown as
a reduction of stockholders equity. Dividends on unallocated ESOP shares, if paid, will be considered to be compensation expense. The Company will recognize compensation cost equal to the fair value of the ESOP shares during the periods in
which they become committed to be released. The fair value of the annual share allocations are recorded on a monthly basis with fair value determined by calculating the average closing stock price for each day during the month. To the extent that
the fair value of the Companys ESOP shares differs from the cost of such shares, the differential will be recognized in stockholders equity. The Company will recognize a tax deduction equal to the cost of the shares released. Because the
ESOP is internally leveraged through a loan from the Company to the ESOP, the loan receivable by the Company from the ESOP is not reported as an asset nor is the debt of the ESOP shown as a liability in the consolidated financial statements.
85
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Equity Incentive Plan
The Company plans to issue restricted stock and stock options
under the 2012 Equity Incentive Plan to key officers and outside directors. In accordance with the requirements of ASC 718,
Compensation Stock Compensation,
the Company plans to follow a fair value based method of accounting for
employee stock compensation plans, whereby compensation cost is measured based on the fair value of the award as of the grant date and recognized over the vesting period.
Net Income Per Common Share
Where presented, basic net income per common share is the Companys net income available to common stockholders, which represents net income less
dividends paid or payable to preferred stock shareholders, if any, divided by the weighted average number of common shares outstanding during the period. In calculating the weighted average number of common shares outstanding, shares held by the
ESOP are not considered to be outstanding until they are committed to be released for allocation.
For diluted income per common share, net
income available to common shareholders is divided by the weighted average number of common shares issued and outstanding for each period plus amounts representing the dilutive effect of stock options and restricted stock, as well as any adjustment
to income that would result from the assumed issuance. The effects of restricted stock and stock options are excluded from the computation of diluted income per common share in periods in which the effect would be antidilutive. Potential common
shares that might be issued by the Company relate solely to outstanding stock options and restricted stock and are determined using the treasury stock method. At December 31, 2012, the Company had no stock options or restricted stock that would
cause a dilutive effect on net income per common share.
For the year ended December 31, 2011, weighted average shares outstanding used
in the calculation of basic and diluted net income per share were the weighted average of shares outstanding, which include ESOP shares held by the trustee, from October 12, 2011, the date on which the Companys common stock began trading
on the Nasdaq Global Market, to December 31, 2011.
Net income per common share has been computed based on the following:
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|
|
Year Ended December 31,
|
|
(dollars in thousands, except per share data)
|
|
2012
|
|
|
2011
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
862
|
|
|
$
|
1,187
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average common shares issued
|
|
|
5,584,551
|
|
|
|
5,584,551
|
|
Less: Weighted average unallocated ESOP shares
|
|
|
423,721
|
|
|
|
443,089
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares used to compute net income per common share basic
|
|
|
5,160,830
|
|
|
|
5,141,462
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares used to compute net income per common share diluted
|
|
|
5,160,830
|
|
|
|
5,141,462
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share Basic
|
|
$
|
0.17
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
Net income per common share Diluted
|
|
$
|
0.17
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
Reclassifications
Certain amounts in the prior years financial statements have been
reclassified to conform to the December 31, 2012 presentation. The reclassifications had no effect on net income or stockholders equity as previously reported.
86
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Accounting Pronouncements
Accounting Standards Update ASU 2011-11
In December, 2011, the FASB issued ASU 2011-11,
Disclosures about Offsetting Assets and Liabilities
, in an effort to improve comparability
between U.S. GAAP and IFRS financial statements with regard to the presentation of offsetting assets and liabilities on the statement of financial position arising from financial and derivative instruments, and repurchase agreements. The ASU
establishes additional disclosures presenting the gross amounts of recognized assets and liabilities, offsetting amounts, and the net balance reflected in the statement of financial position. Descriptive information regarding the nature and rights
of the offset must also be disclosed. The amendments are effective for annual reporting periods beginning on or after January 1, 2013. The adoption of the new guidance is not expected to have an impact on the Companys financial
statements.
Accounting Standards Update ASU 2012-02
In July, 2012, the FASB issued ASU 2012-02,
Testing Indefinite-Lived
Intangible Assets for Impairment,
which amends the guidance in ASC 350-30 on testing indefinite-lived intangible assets, other than goodwill, for impairment. The FASB amended the impairment testing requirements by allowing an entity to perform a
qualitative impairment assessment before calculating the fair value of the asset. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted. The
adoption of the new guidance is not expected to have an impact on the Companys financial statements.
Accounting Standards Update ASU
2012-03
In August, 2012, the FASB issued ASU 2012-03,
Technical Amendments and Corrections to SEC Sections,
which amends a number of SEC sections in the FASB Accounting Standards Codification as a result of (1) the issuance of
SAB 114, (2) the issuance of SEC Final Rule 33-9250, and (3) corrections related to ASU 2010-22. ASU 2012-03 is effective for all entities upon issuance. The adopting of the new guidance did not have a significant impact on the
Companys financial statements.
Accounting Standards Update ASU 2013-02
In February, 2013, the FASB issued ASU 2013-02,
Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income,
which adds new disclosure requirements for items reclassified out of accumulated other comprehensive income (AOCI). The ASU is intended to help entities improve
the transparency of changes in other comprehensive income (OCI) and items reclassified out of AOCI in their financial statements. It does not amend any existing requirements for reporting net income or OCI in the financial statements. Both public
and nonpublic entities that report items of OCI are affected by the ASU. ASU 2013-02 is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2012. Early adoption is permitted. The
amendments in the ASU should be applied prospectively. The adoption of the new guidance is not expected to have an impact on the Companys financial statements.
87
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. STOCK CONVERSION AND CHANGE IN CORPORATE FORM
The Company completed its initial public stock offering in connection with the Banks conversion from the mutual to the stock form
of organization on October 11, 2011. The Company sold a total of 5,584,551 shares of its common stock at an offering price of $10.00 per share. This included 446,764 shares purchased by the ESOP pursuant to a loan from the Company in the amount
of $4.5 million. Trading of the Companys common stock commenced on the Nasdaq Global Market on October 12, 2011 under the symbol ASBB. The conversion was accounted for as a change in corporate form and, as a result, the
historic basis of the Banks assets, liabilities and equity remained unchanged. Including the additional $4.5 million in ESOP share purchases, gross proceeds were $55.8 million. After payment of conversion expenses of approximately $1.9
million, the net proceeds of $53.9 million received in the offering, as reduced for the unearned ESOP shares of $4.5 million, was reflected in the stockholders equity accounts of the Company in its December 31, 2011 consolidated balance
sheet. On October 11, 2011, the Company contributed $28.0 million in capital to the Bank from the proceeds received in the offering.
On
October 11, 2011, liquidation accounts were established by the Company and the Bank for the benefit of eligible account holders and supplemental eligible account holders (collectively, eligible depositors) of the Bank as defined in
the Banks Amended and Restated Plan of Conversion (the Plan of Conversion). Each eligible depositor will have a pro rata interest in the liquidation accounts for each of his or her deposit accounts based upon the proportion that
the balance of each such account bears to the balance of all deposit accounts of the Bank as of the dates defined in the Plan of Conversion. The liquidation accounts will be maintained for the benefit of eligible depositors who continue to maintain
their deposit accounts in the Bank after the conversion. The liquidation accounts will be reduced annually to the extent that eligible depositors have reduced their qualifying deposits. In the unlikely event of a complete liquidation of the Bank or
the Company or both, and only in such event, eligible depositors who continue to maintain accounts will be entitled to receive a distribution from the liquidation accounts before any liquidation may be made with respect to common stock. Neither the
Company nor the Bank may declare or pay a cash dividend if the effect thereof would cause its equity to be reduced below either the amount required for the liquidation accounts or the regulatory capital requirements imposed by the Companys or
the Banks regulators.
88
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT SECURITIES
Securities Available for Sale
The maturities, amortized cost, unrealized gains, unrealized losses and fair values
of securities available for sale are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type and Maturity Group
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
(in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Government Sponsored Entity (GSE) and agency securities due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 1 year but within 5 years
|
|
$
|
10,609
|
|
|
$
|
232
|
|
|
$
|
(16
|
)
|
|
$
|
10,825
|
|
After 5 years but within 10 years
|
|
|
1,416
|
|
|
|
6
|
|
|
|
|
|
|
|
1,422
|
|
Asset-backed securities issued by the Small Business Administration (SBA)
|
|
|
69,088
|
|
|
|
1,387
|
|
|
|
(64
|
)
|
|
|
70,411
|
|
Residential mortgage-backed securities issued by GSEs (1)
|
|
|
105,598
|
|
|
|
1,386
|
|
|
|
(297
|
)
|
|
|
106,687
|
|
State and local government securities due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 5 years but within 10 years
|
|
|
7,613
|
|
|
|
388
|
|
|
|
(6
|
)
|
|
|
7,995
|
|
After 10 years
|
|
|
40,570
|
|
|
|
529
|
|
|
|
(442
|
)
|
|
|
40,657
|
|
Mutual funds
|
|
|
711
|
|
|
|
28
|
|
|
|
|
|
|
|
739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
235,605
|
|
|
$
|
3,956
|
|
|
$
|
(825
|
)
|
|
$
|
238,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE and agency securities due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 1 year but within 5 years
|
|
$
|
33,174
|
|
|
$
|
895
|
|
|
$
|
(4
|
)
|
|
$
|
34,065
|
|
After 5 years but within 10 years
|
|
|
6,131
|
|
|
|
165
|
|
|
|
|
|
|
|
6,296
|
|
After 10 years
|
|
|
2,000
|
|
|
|
6
|
|
|
|
|
|
|
|
2,006
|
|
Asset-backed securities issued by the SBA
|
|
|
30,736
|
|
|
|
760
|
|
|
|
(4
|
)
|
|
|
31,492
|
|
Residential mortgage-backed securities issued by GSEs (1)
|
|
|
155,275
|
|
|
|
2,207
|
|
|
|
(104
|
)
|
|
|
157,378
|
|
State and local government securities due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 5 years but within 10 years
|
|
|
2,831
|
|
|
|
175
|
|
|
|
|
|
|
|
3,006
|
|
After 10 years
|
|
|
8,528
|
|
|
|
389
|
|
|
|
(9
|
)
|
|
|
8,908
|
|
Mutual funds
|
|
|
689
|
|
|
|
23
|
|
|
|
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
239,364
|
|
|
$
|
4,620
|
|
|
$
|
(121
|
)
|
|
$
|
243,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Residential mortgage-backed securities were issued by United States government sponsored entities including the Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, or Government National Mortgage Association. The Company held no private label residential mortgage-backed securities at December 31, 2012 and December 31, 2011 or during the periods then ended.
|
89
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT SECURITIES (Continued)
Securities Held to Maturity
The maturities, amortized cost, unrealized gains,
unrealized losses and fair values of securities classified as held to maturity are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Type and Maturity Group
|
|
Amortized
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Fair
|
|
(in thousands)
|
|
Cost
|
|
|
Gains
|
|
|
Losses
|
|
|
Value
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE and agency securities due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 5 years but within 10 years
|
|
$
|
1,065
|
|
|
$
|
144
|
|
|
$
|
|
|
|
$
|
1,209
|
|
Residential mortgage-backed securities issued by GSEs (1)
|
|
|
1,166
|
|
|
|
83
|
|
|
|
|
|
|
|
1,249
|
|
State and local government securities due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 5 years but within 10 years
|
|
|
951
|
|
|
|
141
|
|
|
|
|
|
|
|
1,092
|
|
After 10 years
|
|
|
1,467
|
|
|
|
165
|
|
|
|
|
|
|
|
1,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,649
|
|
|
$
|
533
|
|
|
$
|
|
|
|
$
|
5,182
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE and agency securities due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 5 years but within 10 years
|
|
$
|
1,078
|
|
|
$
|
140
|
|
|
$
|
|
|
|
$
|
1,218
|
|
Residential mortgage-backed securities issued by GSEs (1)
|
|
|
1,726
|
|
|
|
121
|
|
|
|
|
|
|
|
1,847
|
|
State and local government securities due
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
After 10 years
|
|
|
2,414
|
|
|
|
274
|
|
|
|
|
|
|
|
2,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,218
|
|
|
$
|
535
|
|
|
$
|
|
|
|
$
|
5,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Residential mortgage-backed securities were issued by United States government sponsored entities including the Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, or Government National Mortgage Association. The Company held no private label residential mortgage-backed securities at December 31, 2012 and December 31, 2011 or during the periods then ended.
|
90
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT SECURITIES (Continued)
The following tables show investment gross unrealized losses and fair value, aggregated by investment
category and length of time that individual securities have been in a continuous unrealized loss position, at December 31, 2012 and December 31, 2011. The total number of securities with unrealized losses at December 31, 2012 and
December 31, 2011 were 54 and 11, respectively. The unrealized losses relate to debt securities that have incurred fair value reductions due to higher market interest rates since the securities were purchased. The unrealized losses are not
likely to reverse unless and until market interest rates decline to the levels that existed when the securities were purchased. Management has the ability and intent to hold securities with unrealized losses until a recovery of the market value
occurs. Management has determined that it is more likely than not that the Company will not be required to sell any of the securities with unrealized losses prior to a recovery of market value sufficient to negate the unrealized loss. Management has
analyzed the creditworthiness of the underlying issuers and determined that the Company will collect all contractual cash flows, therefore all impairment is considered to be temporary.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
(in thousands)
|
|
Fair
value
|
|
|
Unrealized
losses
|
|
|
Fair
value
|
|
|
Unrealized
losses
|
|
|
Fair
value
|
|
|
Unrealized
losses
|
|
|
|
|
|
|
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US GSE and agency
|
|
$
|
1,984
|
|
|
$
|
(16
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,984
|
|
|
$
|
(16
|
)
|
Asset-backed SBA
|
|
|
13,381
|
|
|
|
(63
|
)
|
|
|
390
|
|
|
|
(1
|
)
|
|
|
13,771
|
|
|
|
(64
|
)
|
Residential mortgage- backed GSE (1)
|
|
|
35,995
|
|
|
|
(297
|
)
|
|
|
|
|
|
|
|
|
|
|
35,995
|
|
|
|
(297
|
)
|
State and local government
|
|
|
24,018
|
|
|
|
(448
|
)
|
|
|
|
|
|
|
|
|
|
|
24,018
|
|
|
|
(448
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily impaired securities available for sale
|
|
|
75,378
|
|
|
|
(824
|
)
|
|
|
390
|
|
|
|
(1
|
)
|
|
|
75,768
|
|
|
|
(825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
75,378
|
|
|
$
|
(824
|
)
|
|
$
|
390
|
|
|
$
|
(1
|
)
|
|
$
|
75,768
|
|
|
$
|
(825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Residential mortgage-backed securities were issued by United States government sponsored entities including the Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, or Government National Mortgage Association. The Company held no private label residential mortgage-backed securities at December 31, 2012 and December 31, 2011 or during the periods then ended.
|
91
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT SECURITIES (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
Less Than 12 Months
|
|
|
12 Months or More
|
|
|
Total
|
|
(in thousands)
|
|
Fair
value
|
|
|
Unrealized
losses
|
|
|
Fair
value
|
|
|
Unrealized
losses
|
|
|
Fair
value
|
|
|
Unrealized
losses
|
|
|
|
|
|
|
|
|
Securities Available for Sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
US GSE and agency
|
|
$
|
3,996
|
|
|
$
|
(4
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
3,996
|
|
|
$
|
(4
|
)
|
Asset-backed SBA
|
|
|
2,254
|
|
|
|
(4
|
)
|
|
|
|
|
|
|
|
|
|
|
2,254
|
|
|
|
(4
|
)
|
Residential mortgage- backed GSE (1)
|
|
|
16,378
|
|
|
|
(104
|
)
|
|
|
|
|
|
|
|
|
|
|
16,378
|
|
|
|
(104
|
)
|
State and local government
|
|
|
581
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
581
|
|
|
|
(9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Temporarily impaired securities available for sale
|
|
|
23,209
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
23,209
|
|
|
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total temporarily impaired securities
|
|
$
|
23,209
|
|
|
$
|
(121
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
23,209
|
|
|
$
|
(121
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Residential mortgage-backed securities were issued by United States government sponsored entities including the Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation, or Government National Mortgage Association. The Company held no private label residential mortgage-backed securities at December 31, 2012 and December 31, 2011 or during the periods then ended.
|
The fair value of investment securities pledged as collateral follow:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Pledged to Federal Reserve Discount Window
|
|
$
|
3,301
|
|
|
$
|
10,835
|
|
Pledged to Federal funds purchased lines of credit
|
|
|
|
|
|
|
1,218
|
|
Pledged to repurchase agreements for commercial customers
|
|
|
922
|
|
|
|
758
|
|
Interest income from taxable and tax-exempt securities recognized in interest and dividend income follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Interest income from taxable securities
|
|
$
|
4,532
|
|
|
$
|
4,904
|
|
|
$
|
4,085
|
|
Interest income from tax-exempt securities
|
|
|
625
|
|
|
|
284
|
|
|
|
134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest income from securities
|
|
$
|
5,157
|
|
|
$
|
5,188
|
|
|
$
|
4,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
92
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. INVESTMENT SECURITIES (Continued)
Gross proceeds and gross realized gains from sales of securities recognized in net income follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Proceeds from sales of securities
|
|
$
|
160,301
|
|
|
$
|
46,444
|
|
|
$
|
18,908
|
|
Realized gains from sales of securities
|
|
|
3,190
|
|
|
|
1,398
|
|
|
|
798
|
|
4. LOANS RECEIVABLE
The composition of loans receivable by segment and class follow:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
5,161
|
|
|
$
|
22,375
|
|
Commercial mortgage
|
|
|
138,804
|
|
|
|
139,947
|
|
Commercial and industrial
|
|
|
11,093
|
|
|
|
17,540
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
155,058
|
|
|
|
179,862
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
3,729
|
|
|
|
3,907
|
|
Residential mortgage
|
|
|
163,571
|
|
|
|
175,866
|
|
Revolving mortgage
|
|
|
48,221
|
|
|
|
51,044
|
|
Consumer
|
|
|
17,552
|
|
|
|
22,588
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
233,073
|
|
|
|
253,405
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
|
388,131
|
|
|
|
433,267
|
|
Less: Deferred loan fees
|
|
|
(410
|
)
|
|
|
(384
|
)
|
|
|
|
|
|
|
|
|
|
Total loans receivable net of deferred loan fees
|
|
|
387,721
|
|
|
|
432,883
|
|
Less: Allowance for loan losses
|
|
|
(8,513
|
)
|
|
|
(10,627
|
)
|
|
|
|
|
|
|
|
|
|
Loans receivable, net
|
|
$
|
379,208
|
|
|
$
|
422,256
|
|
|
|
|
|
|
|
|
|
|
93
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LOANS RECEIVABLE (Continued)
Loans receivable by segment, class, and grade follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Pass
|
|
|
Special
Mention
|
|
|
Substandard
|
|
|
Doubtful
|
|
|
Loss*
|
|
|
Total
Loans
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
4,516
|
|
|
$
|
450
|
|
|
$
|
195
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
5,161
|
|
Commercial mortgage
|
|
|
117,046
|
|
|
|
21,231
|
|
|
|
527
|
|
|
|
|
|
|
|
|
|
|
|
138,804
|
|
Commercial and industrial
|
|
|
10,239
|
|
|
|
694
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
11,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
131,801
|
|
|
|
22,375
|
|
|
|
882
|
|
|
|
|
|
|
|
|
|
|
|
155,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
3,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,729
|
|
Residential mortgage
|
|
|
151,617
|
|
|
|
9,797
|
|
|
|
2,153
|
|
|
|
|
|
|
|
4
|
|
|
|
163,571
|
|
Revolving mortgage
|
|
|
45,140
|
|
|
|
2,294
|
|
|
|
787
|
|
|
|
|
|
|
|
|
|
|
|
48,221
|
|
Consumer
|
|
|
16,722
|
|
|
|
683
|
|
|
|
147
|
|
|
|
|
|
|
|
|
|
|
|
17,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
217,208
|
|
|
|
12,774
|
|
|
|
3,087
|
|
|
|
|
|
|
|
4
|
|
|
|
233,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
349,009
|
|
|
$
|
35,149
|
|
|
$
|
3,969
|
|
|
$
|
|
|
|
$
|
4
|
|
|
$
|
388,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
6,394
|
|
|
$
|
1,002
|
|
|
$
|
14,410
|
|
|
$
|
|
|
|
$
|
569
|
|
|
$
|
22,375
|
|
Commercial mortgage
|
|
|
118,735
|
|
|
|
19,858
|
|
|
|
1,354
|
|
|
|
|
|
|
|
|
|
|
|
139,947
|
|
Commercial and industrial
|
|
|
12,834
|
|
|
|
2,058
|
|
|
|
2,647
|
|
|
|
1
|
|
|
|
|
|
|
|
17,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
137,963
|
|
|
|
22,918
|
|
|
|
18,411
|
|
|
|
1
|
|
|
|
569
|
|
|
|
179,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
3,797
|
|
|
|
|
|
|
|
109
|
|
|
|
1
|
|
|
|
|
|
|
|
3,907
|
|
Residential mortgage
|
|
|
163,134
|
|
|
|
8,417
|
|
|
|
4,315
|
|
|
|
|
|
|
|
|
|
|
|
175,866
|
|
Revolving mortgage
|
|
|
48,057
|
|
|
|
2,003
|
|
|
|
984
|
|
|
|
|
|
|
|
|
|
|
|
51,044
|
|
Consumer
|
|
|
21,189
|
|
|
|
1,246
|
|
|
|
153
|
|
|
|
|
|
|
|
|
|
|
|
22,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
236,177
|
|
|
|
11,666
|
|
|
|
5,561
|
|
|
|
1
|
|
|
|
|
|
|
|
253,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
374,140
|
|
|
$
|
34,584
|
|
|
$
|
23,972
|
|
|
$
|
2
|
|
|
$
|
569
|
|
|
$
|
433,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Items included in the Loss column are fully reserved.
|
94
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LOANS RECEIVABLE (Continued)
Loans receivable by segment, class, and delinquency status follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Past Due
|
|
|
|
|
|
|
|
(in thousands)
|
|
31-89 Days
|
|
|
90 Days
or More
|
|
|
Total
|
|
|
Current
|
|
|
Total
Loans
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
16
|
|
|
$
|
40
|
|
|
$
|
56
|
|
|
$
|
5,105
|
|
|
$
|
5,161
|
|
Commercial mortgage
|
|
|
393
|
|
|
|
|
|
|
|
393
|
|
|
|
138,411
|
|
|
|
138,804
|
|
Commercial and industrial
|
|
|
135
|
|
|
|
114
|
|
|
|
249
|
|
|
|
10,844
|
|
|
|
11,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
544
|
|
|
|
154
|
|
|
|
698
|
|
|
|
154,360
|
|
|
|
155,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,729
|
|
|
|
3,729
|
|
Residential mortgage
|
|
|
875
|
|
|
|
808
|
|
|
|
1,683
|
|
|
|
161,888
|
|
|
|
163,571
|
|
Revolving mortgage
|
|
|
203
|
|
|
|
60
|
|
|
|
263
|
|
|
|
47,958
|
|
|
|
48,221
|
|
Consumer
|
|
|
492
|
|
|
|
28
|
|
|
|
520
|
|
|
|
17,032
|
|
|
|
17,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
1,570
|
|
|
|
896
|
|
|
|
2,466
|
|
|
|
230,607
|
|
|
|
233,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
2,114
|
|
|
$
|
1,050
|
|
|
$
|
3,164
|
|
|
$
|
384,967
|
|
|
$
|
388,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
363
|
|
|
$
|
6,251
|
|
|
$
|
6,614
|
|
|
$
|
15,761
|
|
|
$
|
22,375
|
|
Commercial mortgage
|
|
|
|
|
|
|
833
|
|
|
|
833
|
|
|
|
139,114
|
|
|
|
139,947
|
|
Commercial and industrial
|
|
|
2,177
|
|
|
|
506
|
|
|
|
2,683
|
|
|
|
14,857
|
|
|
|
17,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
2,540
|
|
|
|
7,590
|
|
|
|
10,130
|
|
|
|
169,732
|
|
|
|
179,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
|
|
|
|
110
|
|
|
|
110
|
|
|
|
3,797
|
|
|
|
3,907
|
|
Residential mortgage
|
|
|
1,426
|
|
|
|
1,922
|
|
|
|
3,348
|
|
|
|
172,518
|
|
|
|
175,866
|
|
Revolving mortgage
|
|
|
751
|
|
|
|
407
|
|
|
|
1,158
|
|
|
|
49,886
|
|
|
|
51,044
|
|
Consumer
|
|
|
939
|
|
|
|
27
|
|
|
|
966
|
|
|
|
21,622
|
|
|
|
22,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
3,116
|
|
|
|
2,466
|
|
|
|
5,582
|
|
|
|
247,823
|
|
|
|
253,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
5,656
|
|
|
$
|
10,056
|
|
|
$
|
15,712
|
|
|
$
|
417,555
|
|
|
$
|
433,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. LOANS RECEIVABLE (Continued)
The recorded investment in loans, by segment and class, that are not accruing interest or are 90 days or
more past due and still accruing interest follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
December 31, 2011
|
|
(in thousands)
|
|
Nonaccruing
|
|
|
Past Due
90 Days
or More
and Still
Accruing
|
|
|
Nonaccruing
|
|
|
Past Due
90 Days
or More
and Still
Accruing
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
40
|
|
|
$
|
|
|
|
$
|
14,695
|
|
|
$
|
|
|
Commercial mortgage
|
|
|
|
|
|
|
|
|
|
|
833
|
|
|
|
|
|
Commercial and industrial
|
|
|
114
|
|
|
|
|
|
|
|
2,595
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
154
|
|
|
|
|
|
|
|
18,123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
|
|
|
|
|
|
|
|
110
|
|
|
|
|
|
Residential mortgage
|
|
|
808
|
|
|
|
|
|
|
|
1,922
|
|
|
|
|
|
Revolving mortgage
|
|
|
155
|
|
|
|
|
|
|
|
440
|
|
|
|
|
|
Consumer
|
|
|
34
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
997
|
|
|
|
|
|
|
|
2,499
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
1,151
|
|
|
$
|
|
|
|
$
|
20,622
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Bank services loans for Habitat for Humanity of Western North Carolina as an in kind donation. The balances of these
loans were $13.3 million and $12.3 million at December 31, 2012 and December 31, 2011, respectively.
96
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ALLOWANCE FOR LOAN LOSSES
An analysis of the allowance for loan losses by segment follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Commercial
|
|
|
Non-
Commercial
|
|
|
Total
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
6,625
|
|
|
$
|
4,002
|
|
|
$
|
10,627
|
|
Provision for loan losses
|
|
|
1,661
|
|
|
|
39
|
|
|
|
1,700
|
|
Charge-offs
|
|
|
(3,447
|
)
|
|
|
(548
|
)
|
|
|
(3,995
|
)
|
Recoveries
|
|
|
21
|
|
|
|
160
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
4,860
|
|
|
$
|
3,653
|
|
|
$
|
8,513
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
7,658
|
|
|
$
|
5,018
|
|
|
$
|
12,676
|
|
Provision for loan losses
|
|
|
2,906
|
|
|
|
879
|
|
|
|
3,785
|
|
Charge-offs
|
|
|
(4,033
|
)
|
|
|
(2,101
|
)
|
|
|
(6,134
|
)
|
Recoveries
|
|
|
94
|
|
|
|
206
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
6,625
|
|
|
$
|
4,002
|
|
|
$
|
10,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
An analysis of the allowance for loan losses follows:
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
8,994
|
|
Provision for loan losses
|
|
|
22,419
|
|
Charge-offs
|
|
|
(18,864
|
)
|
Recoveries
|
|
|
127
|
|
|
|
|
|
|
Balance at end of period
|
|
$
|
12,676
|
|
|
|
|
|
|
97
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ALLOWANCE FOR LOAN LOSSES (Continued)
The ending balances of loans and the related allowance, by segment and class, follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for Loan Losses
|
|
|
Total Loans Receivable
|
|
(in thousands)
|
|
Loans
Individually
Evaluated
for
Impairment
|
|
|
Loans
Collectively
Evaluated
|
|
|
Total
|
|
|
Loans
Individually
Evaluated
for
Impairment
|
|
|
Loans
Collectively
Evaluated
|
|
|
Total
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
14
|
|
|
$
|
146
|
|
|
$
|
160
|
|
|
$
|
184
|
|
|
$
|
4,977
|
|
|
$
|
5,161
|
|
Commercial mortgage
|
|
|
633
|
|
|
|
3,477
|
|
|
|
4,110
|
|
|
|
3,673
|
|
|
|
135,131
|
|
|
|
138,804
|
|
Commercial and industrial
|
|
|
84
|
|
|
|
506
|
|
|
|
590
|
|
|
|
375
|
|
|
|
10,718
|
|
|
|
11,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
731
|
|
|
|
4,129
|
|
|
|
4,860
|
|
|
|
4,232
|
|
|
|
150,826
|
|
|
|
155,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
|
|
|
|
243
|
|
|
|
243
|
|
|
|
|
|
|
|
3,729
|
|
|
|
3,729
|
|
Residential mortgage
|
|
|
150
|
|
|
|
1,691
|
|
|
|
1,841
|
|
|
|
2,836
|
|
|
|
160,735
|
|
|
|
163,571
|
|
Revolving mortgage
|
|
|
114
|
|
|
|
1,009
|
|
|
|
1,123
|
|
|
|
208
|
|
|
|
48,013
|
|
|
|
48,221
|
|
Consumer
|
|
|
|
|
|
|
446
|
|
|
|
446
|
|
|
|
|
|
|
|
17,552
|
|
|
|
17,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
264
|
|
|
|
3,389
|
|
|
|
3,653
|
|
|
|
3,044
|
|
|
|
230,029
|
|
|
|
233,073
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
995
|
|
|
$
|
7,518
|
|
|
$
|
8,513
|
|
|
$
|
7,276
|
|
|
$
|
380,855
|
|
|
$
|
388,131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
709
|
|
|
$
|
690
|
|
|
$
|
1,399
|
|
|
$
|
17,305
|
|
|
$
|
5,070
|
|
|
$
|
22,375
|
|
Commercial mortgage
|
|
|
70
|
|
|
|
4,426
|
|
|
|
4,496
|
|
|
|
1,426
|
|
|
|
138,521
|
|
|
|
139,947
|
|
Commercial and industrial
|
|
|
1
|
|
|
|
729
|
|
|
|
730
|
|
|
|
507
|
|
|
|
17,033
|
|
|
|
17,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
780
|
|
|
|
5,845
|
|
|
|
6,625
|
|
|
|
19,238
|
|
|
|
160,624
|
|
|
|
179,862
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
1
|
|
|
|
188
|
|
|
|
189
|
|
|
|
116
|
|
|
|
3,791
|
|
|
|
3,907
|
|
Residential mortgage
|
|
|
231
|
|
|
|
1,894
|
|
|
|
2,125
|
|
|
|
4,378
|
|
|
|
171,488
|
|
|
|
175,866
|
|
Revolving mortgage
|
|
|
|
|
|
|
1,092
|
|
|
|
1,092
|
|
|
|
300
|
|
|
|
50,744
|
|
|
|
51,044
|
|
Consumer
|
|
|
|
|
|
|
596
|
|
|
|
596
|
|
|
|
|
|
|
|
22,588
|
|
|
|
22,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
232
|
|
|
|
3,770
|
|
|
|
4,002
|
|
|
|
4,794
|
|
|
|
248,611
|
|
|
|
253,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
1,012
|
|
|
$
|
9,615
|
|
|
$
|
10,627
|
|
|
$
|
24,032
|
|
|
$
|
409,235
|
|
|
$
|
433,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
98
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ALLOWANCE FOR LOAN LOSSES (Continued)
Impaired loans and the related allowance, by segment and class, follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recorded Investment
|
|
|
|
|
(in thousands)
|
|
Unpaid
Principal
Balance
|
|
|
With a
Recorded
Allowance
|
|
|
With No
Recorded
Allowance
|
|
|
Total
|
|
|
Related
Recorded
Allowance
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
225
|
|
|
$
|
144
|
|
|
$
|
40
|
|
|
$
|
184
|
|
|
$
|
14
|
|
Commercial mortgage
|
|
|
3,673
|
|
|
|
3,146
|
|
|
|
527
|
|
|
|
3,673
|
|
|
|
633
|
|
Commercial and industrial
|
|
|
748
|
|
|
|
249
|
|
|
|
126
|
|
|
|
375
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
4,646
|
|
|
|
3,539
|
|
|
|
693
|
|
|
|
4,232
|
|
|
|
731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
2,978
|
|
|
|
1,747
|
|
|
|
1,089
|
|
|
|
2,836
|
|
|
|
150
|
|
Revolving mortgage
|
|
|
211
|
|
|
|
208
|
|
|
|
|
|
|
|
208
|
|
|
|
114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
3,189
|
|
|
|
1,955
|
|
|
|
1,089
|
|
|
|
3,044
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
7,835
|
|
|
$
|
5,494
|
|
|
$
|
1,782
|
|
|
$
|
7,276
|
|
|
$
|
995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
19,183
|
|
|
$
|
12,868
|
|
|
$
|
4,437
|
|
|
$
|
17,305
|
|
|
$
|
709
|
|
Commercial mortgage
|
|
|
2,124
|
|
|
|
521
|
|
|
|
905
|
|
|
|
1,426
|
|
|
|
70
|
|
Commercial and industrial
|
|
|
1,509
|
|
|
|
147
|
|
|
|
360
|
|
|
|
507
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
22,816
|
|
|
|
13,536
|
|
|
|
5,702
|
|
|
|
19,238
|
|
|
|
780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
195
|
|
|
|
116
|
|
|
|
|
|
|
|
116
|
|
|
|
1
|
|
Residential mortgage
|
|
|
4,888
|
|
|
|
2,977
|
|
|
|
1,401
|
|
|
|
4,378
|
|
|
|
231
|
|
Revolving mortgage
|
|
|
300
|
|
|
|
|
|
|
|
300
|
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
5,383
|
|
|
|
3,093
|
|
|
|
1,701
|
|
|
|
4,794
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impaired loans
|
|
$
|
28,199
|
|
|
$
|
16,629
|
|
|
$
|
7,403
|
|
|
$
|
24,032
|
|
|
$
|
1,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ALLOWANCE FOR LOAN LOSSES (Continued)
The average recorded investment in impaired loans and interest income recognized on impaired loans
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
(in thousands)
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
Average
Recorded
Investment
|
|
|
Interest
Income
Recognized
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
$
|
12,496
|
|
|
$
|
3
|
|
|
$
|
16,668
|
|
|
$
|
303
|
|
|
$
|
17,171
|
|
|
$
|
195
|
|
Commercial mortgage
|
|
|
4,422
|
|
|
|
118
|
|
|
|
4,108
|
|
|
|
78
|
|
|
|
12,674
|
|
|
|
322
|
|
Commercial and industrial
|
|
|
363
|
|
|
|
1
|
|
|
|
1,114
|
|
|
|
11
|
|
|
|
1,477
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
17,281
|
|
|
|
122
|
|
|
|
21,890
|
|
|
|
392
|
|
|
|
31,322
|
|
|
|
584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
19
|
|
|
|
|
|
|
|
2,308
|
|
|
|
63
|
|
|
|
1,414
|
|
|
|
32
|
|
Residential mortgage
|
|
|
3,520
|
|
|
|
101
|
|
|
|
5,655
|
|
|
|
141
|
|
|
|
7,967
|
|
|
|
236
|
|
Revolving mortgage
|
|
|
305
|
|
|
|
8
|
|
|
|
154
|
|
|
|
|
|
|
|
33
|
|
|
|
16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
3,844
|
|
|
|
109
|
|
|
|
8,117
|
|
|
|
204
|
|
|
|
9,414
|
|
|
|
284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total loans receivable
|
|
$
|
21,125
|
|
|
$
|
231
|
|
|
$
|
30,007
|
|
|
$
|
596
|
|
|
$
|
40,736
|
|
|
$
|
868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ALLOWANCE FOR LOAN LOSSES (Continued)
The following table summarizes the Banks recorded investment in TDRs before and after their
modifications during the periods indicated. The Bank did not restructure any loans during the three months ended December 31, 2012. The payment terms on two loans were extended during the year ended December 31, 2012, and the Bank reduced
the interest rate below market levels on three loans during the year ended December 31, 2012. The Bank extended payment terms on no loans during the three months ended December 31, 2011 and on five loans during the year ended
December 31, 2011 and allowed the payments on one loan to be reduced based on the principal remaining after a partial charge-off during the year ended December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2012
|
|
|
Year Ended December 31, 2011
|
|
(dollars in thousands)
|
|
Number
of
Loans
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
|
Number
of
Loans
|
|
|
Pre-
Modification
Outstanding
Recorded
Investment
|
|
|
Post-
Modification
Outstanding
Recorded
Investment
|
|
|
|
|
|
|
|
|
Below market interest rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential mortgage
|
|
|
3
|
|
|
$
|
897
|
|
|
$
|
893
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
3
|
|
|
|
897
|
|
|
|
893
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3
|
|
|
$
|
897
|
|
|
$
|
893
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extended payment terms
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
|
1
|
|
|
$
|
234
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
Commercial mortgage
|
|
|
1
|
|
|
|
3,196
|
|
|
|
3,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
2
|
|
|
|
3,430
|
|
|
|
3,146
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-commercial construction and land development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
1,750
|
|
|
|
|
|
Residential mortgage
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
|
|
|
622
|
|
|
|
620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5
|
|
|
|
2,372
|
|
|
|
620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2
|
|
|
$
|
3,430
|
|
|
$
|
3,146
|
|
|
|
5
|
|
|
$
|
2,372
|
|
|
$
|
620
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
1
|
|
|
$
|
503
|
|
|
$
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
503
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
1
|
|
|
$
|
503
|
|
|
$
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
5
|
|
|
$
|
4,327
|
|
|
$
|
4,039
|
|
|
|
6
|
|
|
$
|
2,875
|
|
|
$
|
759
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents loans that were modified as TDRs within the years ended December 31, 2012 and 2011 that
stopped performing in accordance with their modified terms during the periods indicated. During the year ended December 31, 2012, one loan modified as a TDR stopped performing and its collateral was moved into foreclosed properties. No loans
stopped performing during the fourth quarter of 2012. During the year ended December 31, 2011, one loan modified as a TDR stopped performing and its collateral was moved into foreclosed properties. No loans stopped performing during the fourth
quarter of 2011.
101
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. ALLOWANCE FOR LOAN LOSSES (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31, 2012
|
|
|
Year Ended
December 31, 2011
|
|
(dollars in thousands)
|
|
Number
of
Loans
|
|
|
Recorded
Investment
|
|
|
Number
of
Loans
|
|
|
Recorded
Investment
|
|
|
|
|
|
|
Extended payment terms
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial construction and land development
|
|
|
1
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1
|
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness of principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and industrial
|
|
|
|
|
|
$
|
|
|
|
|
1
|
|
|
$
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total commercial
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
|
|
1
|
|
|
$
|
139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the determination of the allowance for loan losses, management considers TDRs on commercial loans, and the subsequent
nonperformance in accordance with their modified terms, by measuring impairment on a loan-by-loan basis based on either the present value of expected future cash flows discounted at the loans effective interest rate, the loans obtainable
market price, or the fair value of the collateral if the loan is collateral dependent.
The Banks loans that were considered to be
troubled debt restructurings follow:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Nonperforming restructured loans
|
|
$
|
114
|
|
|
$
|
13,097
|
|
Performing restructured loans
|
|
|
5,065
|
|
|
|
1,142
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
5,179
|
|
|
$
|
14,239
|
|
|
|
|
|
|
|
|
|
|
6. PREMISES AND EQUIPMENT
A summary of Bank premises and equipment, and related depreciation expense, follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Land
|
|
$
|
3,395
|
|
|
$
|
3,407
|
|
Office buildings and improvements
|
|
|
15,409
|
|
|
|
15,732
|
|
Furniture, fixtures, equipment and auto
|
|
|
7,684
|
|
|
|
8,386
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
26,488
|
|
|
|
27,525
|
|
Less accumulated depreciation
|
|
|
(13,182
|
)
|
|
|
(13,472
|
)
|
|
|
|
|
|
|
|
|
|
Premises and equipment, net
|
|
$
|
13,306
|
|
|
$
|
14,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Depreciation expense
|
|
$
|
1,192
|
|
|
$
|
1,225
|
|
|
$
|
1,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. DEPOSIT ACCOUNTS
The Banks deposit accounts are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Noninterest-bearing demand accounts
|
|
$
|
65,295
|
|
|
$
|
54,102
|
|
NOW accounts
|
|
|
141,276
|
|
|
|
132,812
|
|
Money market accounts
|
|
|
152,838
|
|
|
|
137,901
|
|
Savings accounts
|
|
|
29,686
|
|
|
|
24,880
|
|
Certificate accounts
|
|
|
189,204
|
|
|
|
258,541
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
578,299
|
|
|
$
|
608,236
|
|
|
|
|
|
|
|
|
|
|
The scheduled maturities of certificate of deposit accounts follow:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
2012
|
|
$
|
|
|
|
$
|
187,225
|
|
2013
|
|
|
98,815
|
|
|
|
46,616
|
|
2014
|
|
|
48,059
|
|
|
|
18,446
|
|
2015
|
|
|
33,016
|
|
|
|
3,194
|
|
2016
|
|
|
4,657
|
|
|
|
3,036
|
|
2017
|
|
|
4,657
|
|
|
|
24
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
189,204
|
|
|
$
|
258,541
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional certificate of deposit information (amounts included in the preceding tables)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate certificate of deposit accounts of $100,000 or more
|
|
$
|
58,338
|
|
|
$
|
89,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Brokered certificate of deposit accounts
|
|
$
|
16,376
|
|
|
$
|
15,359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposit interest expense follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
NOW accounts
|
|
$
|
526
|
|
|
$
|
934
|
|
|
$
|
1,780
|
|
Savings accounts
|
|
|
45
|
|
|
|
72
|
|
|
|
70
|
|
Money market accounts
|
|
|
473
|
|
|
|
721
|
|
|
|
1,046
|
|
Certificate accounts
|
|
|
3,059
|
|
|
|
4,495
|
|
|
|
6,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deposits
|
|
$
|
4,103
|
|
|
$
|
6,222
|
|
|
$
|
9,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. OVERNIGHT AND SHORT-TERM BORROWINGS
Overnight and short-term borrowings follow:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
$
|
411
|
|
|
$
|
758
|
|
|
|
|
|
|
|
|
|
|
Total overnight and short-term borrowings
|
|
$
|
411
|
|
|
$
|
758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available credit under federal funds borrowing agreements
|
|
$
|
49,636
|
|
|
$
|
55,335
|
|
|
|
|
|
|
|
|
|
|
The Bank has a federal funds borrowing agreement with the Federal Reserve Bank whereby any borrowings under the agreement
are secured by qualifying assets pledged by the Bank.
9. ADVANCES FROM THE FEDERAL HOME LOAN BANK
The Bank has established a line of credit borrowing arrangement with the FHLB of Atlanta. Available credit under this commitment was
$56.3 million at December 31, 2012 and $50.9 million at December 31, 2011. As security for advances, the Bank, under a blanket-floating lien, is required to maintain qualifying mortgages with unpaid principal balances, when discounted at
75% of the unpaid principal balances, equal to at least 100% of its outstanding advances. All stock in the FHLB of Atlanta is also pledged to secure these advances.
Maturities, conversion dates, and interest rates on outstanding FHLB of Atlanta advances follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Date
|
|
Date Convertible by
FHLB to Variable Rate
|
|
Interest
Rate
|
|
|
December 31,
|
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
March 13, 2017
|
|
March 13, 2013 (1)
|
|
|
4.09
|
%
|
|
$
|
10,000
|
|
|
$
|
10,000
|
|
March 13, 2017
|
|
March 13, 2013 (1)
|
|
|
4.20
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
March 20, 2017
|
|
March 20, 2013 (1)
|
|
|
3.99
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
June 29, 2017
|
|
March 29, 2012 (1)
|
|
|
4.46
|
%
|
|
|
|
|
|
|
10,000
|
|
September 11, 2017
|
|
March 12, 2013 (1)
|
|
|
3.45
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
September 17, 2018
|
|
September 17, 2013 (2)
|
|
|
3.65
|
%
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FHLB advances
|
|
|
|
|
|
|
|
$
|
50,000
|
|
|
$
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
FHLB has the option to convert the advance to a variable rate each quarter until maturity.
|
(2)
|
FHLB has the option to convert the advance to a variable rate only on the date indicated.
|
If the FHLB of Atlanta exercises its conversion option, the Bank can accept the new terms or repay the advance without any prepayment penalty. These advance agreements also contain prepayment penalty
provisions for early repayments if current advance rates are lower than the interest rates on the advances being repaid.
The Bank had
outstanding irrevocable letters of credit totaling $2.0 million and $1.5 million from the FHLB of Atlanta at December 31, 2012 and December 31, 2011, respectively, used to secure uninsured deposits placed with the Bank by state and local
governments and their political subdivisions, to the extent required by law.
104
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES
Components of the income tax provision follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
25
|
|
|
$
|
126
|
|
|
$
|
(2,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current expense (benefit)
|
|
|
25
|
|
|
|
126
|
|
|
|
(2,528
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
172
|
|
|
|
337
|
|
|
|
(2,424
|
)
|
State
|
|
|
105
|
|
|
|
125
|
|
|
|
(1,122
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred expense (benefit)
|
|
|
277
|
|
|
|
462
|
|
|
|
(3,546
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit)
|
|
$
|
302
|
|
|
$
|
588
|
|
|
$
|
(6,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increases (decreases) in deferred tax assets (liabilities) allocated to other comprehensive income related to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized (gains) losses on securities available for sale
|
|
$
|
547
|
|
|
$
|
(2,099
|
)
|
|
$
|
457
|
|
Qualified and non-qualified pension plan liability adjustments
|
|
|
575
|
|
|
|
525
|
|
|
|
392
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,122
|
|
|
$
|
(1,574
|
)
|
|
$
|
849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES (Continued)
The approximate tax effects of each type of temporary difference that gave rise to the Banks
deferred income tax assets and liabilities follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Deferred tax assets relating to:
|
|
|
|
|
|
|
|
|
Deferred loan fees
|
|
$
|
158
|
|
|
$
|
148
|
|
Deferred compensation
|
|
|
418
|
|
|
|
376
|
|
Non-accrual interest, book versus tax
|
|
|
9
|
|
|
|
11
|
|
Accrued vacation
|
|
|
219
|
|
|
|
203
|
|
Allowance for loan losses
|
|
|
3,282
|
|
|
|
4,097
|
|
Pension liabilities and prepayments
|
|
|
3,103
|
|
|
|
2,528
|
|
Net operating/net economic loss carry forward
|
|
|
1,150
|
|
|
|
1,212
|
|
Loss reserve on foreclosed real estate
|
|
|
1,201
|
|
|
|
806
|
|
Deferred gain on sale of foreclosed real estate
|
|
|
4
|
|
|
|
4
|
|
Other
|
|
|
152
|
|
|
|
296
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
9,696
|
|
|
|
9,681
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities relating to:
|
|
|
|
|
|
|
|
|
Original issue discount - loan fees
|
|
|
(531
|
)
|
|
|
(556
|
)
|
Property
|
|
|
(300
|
)
|
|
|
(387
|
)
|
Pension liabilities and prepayments
|
|
|
(1,287
|
)
|
|
|
(1,462
|
)
|
FHLB stock
|
|
|
(761
|
)
|
|
|
(761
|
)
|
Unrealized gain on securities available for sale
|
|
|
(1,253
|
)
|
|
|
(1,800
|
)
|
Other
|
|
|
(114
|
)
|
|
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(4,246
|
)
|
|
|
(5,076
|
)
|
|
|
|
|
|
|
|
|
|
Net recorded deferred tax assets
|
|
$
|
5,450
|
|
|
$
|
4,605
|
|
|
|
|
|
|
|
|
|
|
106
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. INCOME TAXES (Continued)
Income taxes computed by applying the federal statutory income tax rate of 34% to income before income
taxes differs from the actual income tax provision because of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Income tax provision at statutory rate
|
|
$
|
396
|
|
|
$
|
604
|
|
|
$
|
(5,281
|
)
|
Increase (decrease) in income taxes resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
State taxes, net of federal effect
|
|
|
69
|
|
|
|
82
|
|
|
|
(741
|
)
|
Other, net
|
|
|
(163
|
)
|
|
|
(98
|
)
|
|
|
(52
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
302
|
|
|
$
|
588
|
|
|
$
|
(6,074
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings include approximately $7.2 million representing pre-1988 tax bad debt reserve base year amounts for
which no deferred income tax liability has been provided since these reserves are not expected to reverse and may never reverse. Circumstances that would require an accrual of a portion or all of this unrecorded tax liability are a reduction in
qualifying loan levels relative to the end of 1987, failure to meet the definition of a bank, dividend payments in excess of accumulated tax earnings and profits, or other distributions, dissolution or liquidation of the Banks equity.
11. REGULATORY CAPITAL REQUIREMENTS
Capital Levels
The Company is a bank holding company regulated by the FRB and the NCCoB. The Bank is a
state-chartered savings bank regulated by the FDIC and the NCCoB. Federal regulations require the maintenance of a minimum leverage ratio of qualifying total capital to total assets of four percent and a minimum ratio of qualifying total capital to
risk-weighted assets of eight percent, of which at least four percent must be in the form of core capital. In addition, North Carolina regulations require North Carolina savings banks to maintain a ratio of qualifying total capital to total adjusted
assets of five percent.
Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct material effect on the Companys and the Banks financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classification also are
subject to qualitative judgments by the regulators about components, risk weightings and other factors.
As of December 31, 2012, the
most recent regulatory reporting period, the Bank was well capitalized under the current regulatory framework. To be categorized as well capitalized, the Bank must maintain minimum total risk-based capital, Tier I leverage ratio, and Tier I risk
adjusted capital as set forth in the table below.
107
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. REGULATORY CAPITAL REQUIREMENTS (Continued)
The following tables set forth actual and required regulatory capital amounts as of the periods
indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Regulatory Requirements
|
|
|
|
Actual
|
|
|
Minimum for Capital
Adequacy Purposes
|
|
|
Minimum to Be
Well Capitalized
|
|
(dollars in thousands)
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
Amount
|
|
|
Ratio
|
|
|
|
|
|
|
|
|
ASB Bancorp, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I leverage capital
|
|
$
|
112,508
|
|
|
|
14.69
|
%
|
|
$
|
30,632
|
|
|
|
4.00
|
%
|
|
$
|
38,290
|
|
|
|
5.00
|
%
|
Tier I risk-based capital
|
|
|
112,508
|
|
|
|
27.72
|
%
|
|
|
16,237
|
|
|
|
4.00
|
%
|
|
|
24,356
|
|
|
|
6.00
|
%
|
Total risk-based capital
|
|
|
117,638
|
|
|
|
28.98
|
%
|
|
|
32,475
|
|
|
|
8.00
|
%
|
|
|
40,594
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I leverage capital
|
|
$
|
114,757
|
|
|
|
14.30
|
%
|
|
$
|
32,098
|
|
|
|
4.00
|
%
|
|
$
|
40,122
|
|
|
|
5.00
|
%
|
Tier I risk-based capital
|
|
|
114,757
|
|
|
|
27.52
|
%
|
|
|
16,678
|
|
|
|
4.00
|
%
|
|
|
25,017
|
|
|
|
6.00
|
%
|
Total risk-based capital
|
|
|
120,050
|
|
|
|
28.79
|
%
|
|
|
33,356
|
|
|
|
8.00
|
%
|
|
|
41,694
|
|
|
|
10.00
|
%
|
|
|
|
|
|
|
|
Asheville Savings Bank, S.S.B.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I leverage capital
|
|
$
|
90,388
|
|
|
|
12.06
|
%
|
|
$
|
29,983
|
|
|
|
4.00
|
%
|
|
$
|
37,479
|
|
|
|
5.00
|
%
|
Tier I risk-based capital
|
|
|
90,388
|
|
|
|
22.35
|
%
|
|
|
16,174
|
|
|
|
4.00
|
%
|
|
|
24,262
|
|
|
|
6.00
|
%
|
Total risk-based capital
|
|
|
95,498
|
|
|
|
23.62
|
%
|
|
|
32,349
|
|
|
|
8.00
|
%
|
|
|
40,436
|
|
|
|
10.00
|
%
|
NC Savings Bank capital
|
|
|
98,914
|
|
|
|
13.48
|
%
|
|
|
36,680
|
|
|
|
5.00
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I leverage capital
|
|
$
|
88,897
|
|
|
|
11.09
|
%
|
|
$
|
32,063
|
|
|
|
4.00
|
%
|
|
$
|
40,079
|
|
|
|
5.00
|
%
|
Tier I risk-based capital
|
|
|
88,897
|
|
|
|
21.35
|
%
|
|
|
16,658
|
|
|
|
4.00
|
%
|
|
|
24,988
|
|
|
|
6.00
|
%
|
Total risk-based capital
|
|
|
94,193
|
|
|
|
22.62
|
%
|
|
|
33,317
|
|
|
|
8.00
|
%
|
|
|
41,646
|
|
|
|
10.00
|
%
|
NC Savings Bank capital
|
|
|
99,538
|
|
|
|
12.67
|
%
|
|
|
39,292
|
|
|
|
5.00
|
%
|
|
|
n/a
|
|
|
|
n/a
|
|
A reconciliation of GAAP equity and regulatory capital amounts follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASB Bancorp
December 31,
|
|
|
Asheville Savings Bank
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
Total GAAP equity
|
|
$
|
111,529
|
|
|
$
|
115,571
|
|
|
$
|
89,372
|
|
|
$
|
89,721
|
|
Accumulated other comprehensive income, net of tax
|
|
|
3,067
|
|
|
|
1,329
|
|
|
|
3,104
|
|
|
|
1,319
|
|
Disallowed deferred tax assets
|
|
|
(2,088
|
)
|
|
|
(2,143
|
)
|
|
|
(2,088
|
)
|
|
|
(2,143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tier I capital
|
|
|
112,508
|
|
|
|
114,757
|
|
|
|
90,388
|
|
|
|
88,897
|
|
Unrealized gains on available for sale equity securities
|
|
|
13
|
|
|
|
14
|
|
|
|
13
|
|
|
|
14
|
|
Allowable portion of allowance for loan losses
|
|
|
5,117
|
|
|
|
5,279
|
|
|
|
5,097
|
|
|
|
5,282
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total risk-based capital
|
|
$
|
117,638
|
|
|
$
|
120,050
|
|
|
|
95,498
|
|
|
|
94,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disallowed portion of allowance for loan losses
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
3,416
|
|
|
|
5,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NC Savings Bank capital
|
|
|
n/a
|
|
|
|
n/a
|
|
|
$
|
98,914
|
|
|
$
|
99,538
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. BENEFIT PLANS
Defined Benefit Plans
The Bank has a Qualified defined benefit pension plan covering substantially all of its
employees. The benefits are based on years of service and the employees compensation during employment. The Banks funding policy is based on actuarially determined amounts. Prior service costs are amortized using the straight line
method. Contributions are intended to provide for not only benefits attributed to service to date but also for those expected to be earned in the future. In addition, the Bank also has a Non-qualified plan covering certain officers whose benefit
under the Qualified plan would be reduced as a result of Internal Revenue Code limitations. The Non-qualified plan is an unfunded plan and any benefits payable shall be paid from the general assets of the Bank.
Effective April 1, 2013, the Board of Directors amended the Banks Qualified and Non-qualified pension plans (the Plans) to curtail
or eliminate benefits under the plans for services to be performed in future periods.
Effective January 1, 2010, the Board of Directors
amended the Banks Qualified and Non-qualified pension plans to reduce the projected benefit obligations under the plans for services to be performed in future periods.
Effective December 31, 2009, benefits under the Banks Plans were reduced with respect to existing employees and no new participants were allowed to enter the Plans after the effective date.
The following tables set forth the status of both the Qualified and the Non-qualified Plans using measurement dates of December 31, 2012
and 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified
|
|
|
Qualified
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
Change in Benefit Obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at beginning of year
|
|
$
|
1,196
|
|
|
$
|
1,152
|
|
|
$
|
18,772
|
|
|
$
|
17,042
|
|
Service cost
|
|
|
3
|
|
|
|
5
|
|
|
|
135
|
|
|
|
169
|
|
Interest cost
|
|
|
54
|
|
|
|
58
|
|
|
|
946
|
|
|
|
922
|
|
Actuarial loss
|
|
|
140
|
|
|
|
49
|
|
|
|
2,312
|
|
|
|
1,244
|
|
Benefits paid
|
|
|
(68
|
)
|
|
|
(68
|
)
|
|
|
(616
|
)
|
|
|
(605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation at end of year
|
|
$
|
1,325
|
|
|
$
|
1,196
|
|
|
$
|
21,549
|
|
|
$
|
18,772
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in Plan Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
|
$
|
|
|
|
$
|
|
|
|
$
|
17,197
|
|
|
$
|
17,279
|
|
Actual return on plan assets
|
|
|
|
|
|
|
|
|
|
|
1,431
|
|
|
|
523
|
|
Employer contribution
|
|
|
68
|
|
|
|
68
|
|
|
|
145
|
|
|
|
|
|
Benefits paid
|
|
|
(68
|
)
|
|
|
(68
|
)
|
|
|
(616
|
)
|
|
|
(605
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at end of year
|
|
$
|
|
|
|
$
|
|
|
|
$
|
18,157
|
|
|
$
|
17,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. BENEFIT PLANS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified
|
|
|
Qualified
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
Net Amount Recognized
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status
|
|
$
|
(1,576
|
)
|
|
$
|
(1,196
|
)
|
|
$
|
(3,393
|
)
|
|
$
|
(1,575
|
)
|
Unrecognized net actuarial loss
|
|
|
495
|
|
|
|
374
|
|
|
|
8,053
|
|
|
|
6,760
|
|
Unrecognized prior service credit
|
|
|
(34
|
)
|
|
|
(46
|
)
|
|
|
(465
|
)
|
|
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net amount recognized
|
|
$
|
(1,115
|
)
|
|
$
|
(868
|
)
|
|
$
|
4,195
|
|
|
$
|
4,654
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in Balance Sheets Pension obligation
|
|
$
|
(1,576
|
)
|
|
$
|
(1,196
|
)
|
|
$
|
(3,393
|
)
|
|
$
|
(1,575
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts Recognized in Accumulated Other Comprehensive Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
495
|
|
|
$
|
374
|
|
|
$
|
8,053
|
|
|
$
|
6,760
|
|
Prior service credit
|
|
|
(34
|
)
|
|
|
(46
|
)
|
|
|
(465
|
)
|
|
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
|
$
|
461
|
|
|
$
|
328
|
|
|
$
|
7,588
|
|
|
$
|
6,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to be Amortized from Accumulated Other Comprehensive Income Over Next Twelve Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
|
$
|
37
|
|
|
$
|
24
|
|
|
$
|
621
|
|
|
$
|
508
|
|
Prior service credit
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
(66
|
)
|
|
|
(66
|
)
|
Net periodic benefit cost related to defined benefit plans included the following components for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Non-Qualified Defined Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Benefit Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Interest cost
|
|
|
54
|
|
|
|
58
|
|
|
|
61
|
|
Amortization of prior service credit
|
|
|
(11
|
)
|
|
|
(11
|
)
|
|
|
(11
|
)
|
Amortization of net loss
|
|
|
18
|
|
|
|
22
|
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
64
|
|
|
$
|
74
|
|
|
$
|
86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Qualified Defined Benefit Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Net Periodic Benefit Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
135
|
|
|
$
|
169
|
|
|
$
|
156
|
|
Interest cost
|
|
|
946
|
|
|
|
922
|
|
|
|
906
|
|
Expected return on plan assets
|
|
|
(932
|
)
|
|
|
(933
|
)
|
|
|
(896
|
)
|
Amortization of prior service credit
|
|
|
(66
|
)
|
|
|
(66
|
)
|
|
|
(66
|
)
|
Amortization of net loss
|
|
|
519
|
|
|
|
396
|
|
|
|
269
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
|
$
|
602
|
|
|
$
|
488
|
|
|
$
|
369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. BENEFIT PLANS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified
|
|
|
Qualified
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
Additional Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated benefit obligation
|
|
$
|
1,322
|
|
|
$
|
1,194
|
|
|
$
|
21,470
|
|
|
$
|
18,725
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in minimum liability included in other comprehensive income
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumptions used in accounting for the defined benefit plans follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified
|
|
|
Qualified
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
Weighted Average Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Used to Determine Benefit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations at Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
3.98
|
%
|
|
|
4.91
|
%
|
|
|
4.34
|
%
|
|
|
5.11
|
%
|
Rate of compensation increase
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
|
|
3.50
|
%
|
|
|
|
|
|
Weighted Average Assumptions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Used to Determine Net Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit Cost for the Year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
|
4.91
|
%
|
|
|
5.20
|
%
|
|
|
5.11
|
%
|
|
|
5.50
|
%
|
Expected long-term return on plan assets
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
5.50
|
%
|
|
|
5.50
|
%
|
Rate of compensation increase
|
|
|
3.50
|
%
|
|
|
6.00
|
%
|
|
|
3.50
|
%
|
|
|
6.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Qualified
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
Asset Allocation
|
|
|
|
|
|
|
|
|
|
|
|
Actual Percentage of Plan Assets
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
0
|
%
|
|
|
0
|
%
|
Debt securities
|
|
|
100
|
%
|
|
|
100
|
%
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
Target Allocation
|
|
|
|
|
|
|
|
|
Equity securities
|
|
|
20
|
%
|
|
|
0
|
%
|
Debt securities
|
|
|
80
|
%
|
|
|
100
|
%
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
111
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. BENEFIT PLANS (Continued)
Investment Policy and Strategy Qualified Plan
The policy, as established by the Pension Committee, is to provide for preservation of capital by investing assets per the target allocations stated
above, which from time to time may be amended to include investments in equity securities. The assets will be reallocated quarterly to meet the above target allocations. The investment policy will be reviewed on a quarterly basis, under the
advisement of a certified investment advisor, to determine if the policy should be changed.
Determination of Expected Long-Term Rate of
Return
The expected long-term rate of return for the plans total assets is based on the expected return of each of the above
categories, weighted based on the median of the target allocation for each class. Equity securities are expected to return 7% to 9% over a full market cycle of 5-7 years, while cash and fixed income securities are expected to return 1% to 7%. Based
on historical experience, the Pension Committee expects that the Plans asset managers will provide a premium of approximately 0.40% per annum to their respective market benchmark indices.
Cash Flows
The expected contribution to
the Non-qualified Plan for the year ending December 31, 2013 is $70,492. The Bank does not expect to make a Qualified Plan contribution in 2013.
The following benefit payments reflecting expected future service are expected to be paid as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Non-
Qualified
|
|
|
Qualified
|
|
|
|
|
Fiscal Year Ending December 31,
|
|
|
|
|
|
|
|
|
2013
|
|
$
|
70
|
|
|
$
|
747
|
|
2014
|
|
|
70
|
|
|
|
840
|
|
2015
|
|
|
70
|
|
|
|
880
|
|
2016
|
|
|
70
|
|
|
|
914
|
|
2017
|
|
|
70
|
|
|
|
979
|
|
2018 2022
|
|
|
377
|
|
|
|
5,535
|
|
401(k) Plan
The Bank sponsors an employee savings plan under Section 401(k) of the Internal
Revenue Code, and the Plan covers substantially all employees. The Banks matching contribution is equal to 100% of the first 3% of each employees compensation for the plan year, plus 50% of the employees deferral contributions in
excess of 3% but not in excess of 5% of the employees compensation for the plan year.
Matching contributions to the Banks defined
contribution plan under Section 401(k) of the Internal Revenue Code were as follows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Contributions to defined contribution plan
|
|
$
|
209
|
|
|
$
|
190
|
|
|
$
|
178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. BENEFIT PLANS (Continued)
Deferred Compensation Plan
The Bank has adopted a non-qualified Directors and
Officers Deferral Plan (the D&O Plan) under which designated executive officers and directors can defer compensation and board/committee meeting fees into the D&O Plan which contains certain investment elections approved by the
Banks Compensation Committee and selected by the D&O Plans Participants, including the option to invest in the Companys common stock. All D&O Plan Participants are 100% vested in their account balances at all times.
Executive officers must first maximize their participation in the Banks qualified 401K Plan and can defer no less than five percent (5%) of compensation. No Participant may defer more than one hundred percent (100%) of fees and
compensation. The Bank may, at its discretion, make matching contributions to the D&O Plan but has heretofore not elected to do so. The D&O Plan has been amended to comply with Section 409A of the Internal Revenue Code. The Banks
assets under the D&O Plan equal its liabilities, which were $1,081,000 at December 31, 2012 and $972,000 at December 31, 2011.
Stock-Based Deferral Plan
The Bank adopted a non-qualified Stock-Based Deferral Plan to facilitate the investment of D&O Plan
funds in the Companys common stock as elected by D&O Plan participants.
Employee Stock Ownership Plan
In
conjunction with the initial public offering, the Company established an ESOP to provide eligible employees the opportunity to own Company stock. The Company provided a loan to the ESOP in the amount of $4,468,000, which was used to purchase 446,764
shares of the Companys common stock at a price of $10.00 per share in the Companys initial public offering. The loan bears a fixed interest rate of 3.25% and provides for annual payments of interest and principal over the 15 year term of
the loan.
At December 31, 2012, the remaining principal balance on the ESOP debt is payable as follows:
|
|
|
|
|
(in thousands)
|
|
Amount
|
|
|
|
Principal amounts due on December 31,
|
|
|
|
|
2013
|
|
$
|
262
|
|
2014
|
|
|
270
|
|
2015
|
|
|
279
|
|
2016
|
|
|
288
|
|
2017
|
|
|
298
|
|
Thereafter
|
|
|
2,757
|
|
|
|
|
|
|
Total
|
|
$
|
4,154
|
|
|
|
|
|
|
The Bank is committed to make contributions to the ESOP sufficient to support the debt service of the loan. The loan is
secured by the shares purchased, which are held in a suspense account until released for allocation to the participants, as principal and interest payments are made by the ESOP to the Company.
Shares released are allocated to each eligible participant based on the ratio of each participants compensation, as defined in the ESOP, to the
total compensation of all eligible plan participants. Forfeited shares shall be reallocated among other participants in the Plan. At the discretion of the Bank, cash dividends, when paid on allocated shares, will be distributed to participants
accounts or used to repay the principal and interest on the ESOP loan used to acquire Company stock on which dividends were paid. Cash dividends on unallocated shares will be used to repay the outstanding debt of the ESOP.
113
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. BENEFIT PLANS (Continued)
Shares held by the ESOP include the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(dollars in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Allocated ESOP shares
|
|
|
7,350
|
|
|
|
7,350
|
|
ESOP shares committed to be released
|
|
|
31,387
|
|
|
|
|
|
Unallocated ESOP shares
|
|
|
408,027
|
|
|
|
439,414
|
|
|
|
|
|
|
|
|
|
|
Total ESOP shares
|
|
|
446,764
|
|
|
|
446,764
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of unallocated ESOP shares
|
|
$
|
6,251
|
|
|
$
|
5,141
|
|
|
|
|
|
|
|
|
|
|
As ESOP shares are earned by the participants, the Company recognizes compensation expense equal to the fair value of the
earned ESOP shares during the periods in which they become committed to be released. Total expense recognized in connection with the ESOP was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
ESOP expense
|
|
$
|
439
|
|
|
$
|
86
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13. COMMITMENTS AND CONTINGENCIES
Loan Commitments
The Bank is party to financial instruments with off-balance sheet risk in the normal course of
business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess
of the amount recorded in the accompanying consolidated balance sheets. Such financial instruments are recorded when they are funded.
The
Banks exposure to credit loss in the event of nonperformance by the counterparty to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The
Bank uses the same credit policies in making such commitments as it does for instruments that are included in the balance sheet.
Commitments
to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customers creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on managements credit evaluation. Collateral held varies but may include accounts receivable, inventory, property and equipment, and
income-producing commercial real estate.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the
performance of a customer to a third party. Standby letters of credit generally have fixed expiration dates or other termination clauses and may require payment of a fee. The credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan facilities to customers. The Banks policy for obtaining collateral, and the nature of such collateral, is essentially the same as that involved in making commitments to extend credit.
114
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES (Continued)
The Banks commitments to extend or originate credit and under standby letters of credit follow:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Financial instruments whose contract amounts represent credit risk:
|
|
|
|
|
|
|
|
|
Commitments to extend or originate credit
|
|
$
|
144,733
|
|
|
$
|
117,446
|
|
Commitments under standby letters of credit
|
|
|
156
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
144,889
|
|
|
$
|
117,581
|
|
|
|
|
|
|
|
|
|
|
The Bank renegotiated the operating lease for the operations center location to include additional space. This lease
commenced May 1, 2007 with an original term of ten years. The lease has four five-year renewal options with predetermined rates per square foot rented. The Bank also renegotiated an operating lease for a parking lot for a three-year term, with
no renewal options. A new lease for land in Fletcher, North Carolina commenced on February 1, 2007 with an initial term of 20 years. The lease has renewal options of four consecutive renewal periods of five years each. The monthly payments are
subject to adjustment every 60 months based on the increase of the Consumer Price Index.
Future minimum lease payments under these leases are
as follows:
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
|
2013
|
|
$
|
362
|
|
2014
|
|
|
362
|
|
2015
|
|
|
362
|
|
2016
|
|
|
362
|
|
2017
|
|
|
161
|
|
Thereafter
|
|
|
550
|
|
|
|
|
|
|
Total
|
|
$
|
2,159
|
|
|
|
|
|
|
Total rental expense related to operating leases follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
|
|
|
Rental expense
|
|
$
|
361
|
|
|
$
|
355
|
|
|
$
|
364
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concentrations of Credit Risk
The Banks primary market area consists of Buncombe, Henderson,
McDowell, Transylvania and Madison counties of North Carolina. The majority of the Banks loans are residential mortgage loans and commercial real estate loans. The Banks policy generally will allow residential mortgage loans up to 80% of
the value of the real estate that is pledged as collateral or up to 95% with private mortgage insurance and commercial real estate loans up to 85% of the value of the real estate that serves as collateral to secure the loan.
115
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
13. COMMITMENTS AND CONTINGENCIES (Continued)
Interest Rate Risk
The Banks profitability depends to a large extent on its
net interest income, which is the difference between interest income from loans and investments and interest expense on deposits and borrowings. Like most financial institutions, the Banks interest income and interest expense are significantly
affected by changes in market interest rates and other economic factors beyond its control. The Banks interest-earning assets consist primarily of long-term, fixed-rate mortgage loans, adjustable rate mortgage loans and investments that
typically adjust more slowly to changes in interest rates than its interest-bearing liabilities, which are primarily term deposits. Accordingly, the Banks earnings are usually adversely affected during periods of rising interest rates and
positively impacted during periods of declining interest rates. However, based on the results of the Banks interest rate risk simulation model, which management believes accurately reflects the extraordinary stress currently existing in the
financial markets with respect to potential margin compression resulting from the Banks difficulty in reducing its cost of funds further in this competitive pricing environment, the Banks earnings may well be adversely affected if
interest rates decline further. Such a decline in rates could result from, among other things, the Federal Reserve Boards purchase of government securities and/or mortgage-backed securities in an effort to further stimulate the economy.
Accordingly, the Bank is currently the beneficiary of a stable rate environment and is carefully monitoring, through its Asset/Liability management process, the competitive landscape related to interest rates as well as various economic indicators
in order to optimally position the Bank in terms of changes in interest rates.
Litigation
The Bank is periodically
involved in legal actions in the normal course of business. The Bank is not a party to any pending legal proceedings that the Banks management believes would have a material adverse effect on the Banks financial condition, results of
operations, or cash flows.
Investment Commitments
During 2012, the Bank indicated its intent to enter into an agreement
to invest $2.0 million as a limited partner in a Small Business Investment Company. The Bank anticipates its first capital investment will be in 2013. This investment will be recognized using the cost method and will be included in other
assets on the balance sheet.
116
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FAIR VALUE MEASUREMENTS
FASB ASC Topic 820:
Fair Value Measurements and Disclosures
(FASB ASC Topic 820) requires disclosure of the fair
value of financial assets and financial liabilities, including those financial assets and financial liabilities that are not measured and reported at fair value on a recurring basis or non-recurring basis. The methodologies for estimating the fair
value of financial assets and financial liabilities that are measured at fair value on a recurring or non- recurring basis are discussed below. The estimated fair value amounts shown below have been determined by the Bank using available market
information and appropriate valuation methodologies. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the
amounts the Bank could realize in a current market exchange. The use of different market assumptions and/or valuation methodologies could have a material effect on the estimated fair value amounts.
Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no highly liquid market exists for a significant portion of the Companys
financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.
The fair value
estimates presented below are based on pertinent information available to management as of December 31, 2012 and December 31, 2011. Although management is not aware of any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued since the dates presented herein and, therefore, current estimates of fair value may differ significantly from the amounts presented.
The fair value measurement and disclosure guidance contained in FASB ASC Topic 820 defines fair value as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance also establishes a fair value
hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value.
Level 1
The fair values of Level 1
assets are determined by quoted prices in active markets for identical assets or liabilities. Level 1 assets and liabilities include debt and equity securities that are traded in an active exchange market, as well as certain U.S. Treasury debt
securities.
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or
other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently
than exchange-traded instruments whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes certain
U.S. Government and agency mortgage-backed debt securities, SBA asset-backed securities, securities issued by state and local governments, and corporate debt securities.
117
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FAIR VALUE MEASUREMENTS (Continued)
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments
whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation. This category
generally includes certain private equity investments, mortgage loans held for sale, loans receivable held for investment, accrued interest receivable and payable, time deposits, repurchase agreements, and FHLB advances.
The methodologies for estimating fair values of financial assets and financial liabilities were determined as discussed below. The estimated fair value
approximates carrying value for cash and cash equivalents, accrued interest, Federal Home Loan Bank Stock and demand deposits.
Investment Securities
Investment securities available for sale are recorded at fair value on a recurring basis. Fair value
measurement is primarily based upon quoted prices of like or similar securities, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the
present value of future cash flows, adjusted for the securitys credit rating, prepayment assumptions and other factors such as credit loss assumptions. The fair values of investments in mutual funds are determined by quoted prices and are
included as recurring Level 1 assets. The fair values of investments in securities issued by U.S. GSEs, asset-backed securities issued by the SBA, residential mortgage-backed securities issued by U.S. GSEs, and securities issued by state
and local governments are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the securitys credit rating, prepayment assumptions and other factors
such as credit loss assumptions and are included as recurring Level 2 assets.
Loans Held for Sale
Loans held for sale
are residential mortgages carried at the lower of cost or market value. The market values of loans held for sale are based on what mortgage buyers are currently offering on a best efforts basis to buy the loans. As such, mortgages held
for sale are classified as nonrecurring Level 2 assets.
Loans Receivable
For variable rate loans, carrying value is a
reasonable estimate of fair value. For fixed rate loans, fair values are estimated based on discounted future cash flows using the current interest rates at which loans with similar terms would be made to borrowers of similar credit quality.
Valuation adjustments are made for credit risk, which are represented by the allowance for loan losses, but do not include adjustments for illiquidity or other market risks.
The Bank does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable
that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures impairment in accordance with the
accounting guidance contained in FASB ASC Topic 310:
Receivables
(FASB ASC Topic 310). The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt,
enterprise value, liquidation value, or discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans.
Substantially all of the total impaired loans were evaluated based on the fair value of the collateral. In accordance with the fair value measurement and disclosure guidance contained in FASB ASC Topic 820, impaired loans where an allowance is
established based on the fair value of collateral require classification in the fair value hierarchy.
118
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FAIR VALUE MEASUREMENTS (Continued)
When the fair value of the collateral is based on an observable market price or a current appraised
value, the impaired loan is recorded as nonrecurring Level 2 assets. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market
price, the Bank records the impaired loan as nonrecurring Level 3 assets.
Accrued Interest Receivable and Payable
The
carrying amount is a reasonable estimate of fair value.
Deferred Compensation Assets
Assets include debt and equity
securities that are traded in an active exchange market. Fair values are obtained from quoted prices in active markets for identical assets.
Demand and Savings Deposits
By definition, the carrying values are equal to the fair values.
Time Deposits and Repurchase Agreements
Fair value of fixed maturity certificates of deposit is estimated using the FHLB Rate Curve
for similar remaining maturities. Fair value of repurchase agreements is estimated using the borrowing rate for overnight borrowings.
Federal Home Loan Bank Advances
The fair value of Federal Home Loan Bank advances is estimated using the rates currently offered for
advances of similar remaining maturities.
Deferred Compensation Liabilities
Fair values are measured based on the fair
values of the related deferred compensation assets.
Defined Benefit Plan Assets
The Nonqualified Defined Benefit Plan
had no plan assets because it was not funded. The assets of the Qualified Defined Benefit Plan, which are invested in interest-bearing depository accounts and money market and debt security mutual funds, are included at fair value in the Qualified
Plans separate financial statements. Fair value measurement is based upon quoted prices of like or similar securities. The fair values of the Plans investments in interest-bearing depository accounts and money market and debt security
mutual funds are determined by quoted prices and are included as recurring Level 1 assets.
Foreclosed Properties
Foreclosed properties are measured and recorded at the lower of cost or estimated fair value. The fair value of foreclosed properties is measured using the current appraised value of the property less the estimated expenses necessary to sell the
property. Foreclosed properties are classified as nonrecurring Level 3 assets.
119
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FAIR VALUE MEASUREMENTS (Continued)
The estimated fair values and carrying amounts of financial instruments follow:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
Total
Carrying
Amount
in
Balance
Sheet
|
|
(in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Estimated
Fair Value
|
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
47,390
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
47,390
|
|
|
$
|
47,390
|
|
Securities available for sale
|
|
|
739
|
|
|
|
237,997
|
|
|
|
|
|
|
|
238,736
|
|
|
|
238,736
|
|
Securities held to maturity
|
|
|
|
|
|
|
5,182
|
|
|
|
|
|
|
|
5,182
|
|
|
|
4,649
|
|
Investments in FHLB stock
|
|
|
|
|
|
|
|
|
|
|
3,429
|
|
|
|
3,429
|
|
|
|
3,429
|
|
Loans held for sale
|
|
|
|
|
|
|
9,905
|
|
|
|
|
|
|
|
9,905
|
|
|
|
9,759
|
|
Loans receivable, net
|
|
|
|
|
|
|
|
|
|
|
382,428
|
|
|
|
382,428
|
|
|
|
379,208
|
|
Accrued interest receivable
|
|
|
|
|
|
|
|
|
|
|
2,764
|
|
|
|
2,764
|
|
|
|
2,764
|
|
Deferred compensation assets
|
|
|
1,081
|
|
|
|
|
|
|
|
|
|
|
|
1,081
|
|
|
|
1,081
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
|
|
|
|
|
|
|
|
389,095
|
|
|
|
389,095
|
|
|
|
389,095
|
|
Time deposits
|
|
|
|
|
|
|
|
|
|
|
189,755
|
|
|
|
189,755
|
|
|
|
189,204
|
|
Repurchase agreements
|
|
|
|
|
|
|
|
|
|
|
409
|
|
|
|
409
|
|
|
|
411
|
|
Federal Home Loan Bank Advances
|
|
|
|
|
|
|
|
|
|
|
56,905
|
|
|
|
56,905
|
|
|
|
50,000
|
|
Deferred compensation liabilities
|
|
|
1,081
|
|
|
|
|
|
|
|
|
|
|
|
1,081
|
|
|
|
1,081
|
|
Accrued interest payable
|
|
|
|
|
|
|
|
|
|
|
127
|
|
|
|
127
|
|
|
|
127
|
|
|
|
|
|
|
|
Financial instruments whose contract amounts represent credit risk:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend or originate credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments under standby letters of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FAIR VALUE MEASUREMENTS (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement Using
|
|
|
Total
Carrying
Amount in
Balance
Sheet
|
|
(in thousands)
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Estimated
Fair Value
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
72,327
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
72,327
|
|
|
$
|
72,327
|
|
Securities available for sale
|
|
|
712
|
|
|
|
243,151
|
|
|
|
|
|
|
|
243,863
|
|
|
|
243,863
|
|
Securities held to maturity
|
|
|
|
|
|
|
5,753
|
|
|
|
|
|
|
|
5,753
|
|
|
|
5,218
|
|
Investments in FHLB stock
|
|
|
|
|
|
|
|
|
|
|
3,870
|
|
|
|
3,870
|
|
|
|
3,870
|
|
Loans held for sale
|
|
|
|
|
|
|
6,689
|
|
|
|
|
|
|
|
6,689
|
|
|
|
6,590
|
|
Loans receivable, net
|
|
|
|
|
|
|
|
|
|
|
428,876
|
|
|
|
428,876
|
|
|
|
422,256
|
|
Accrued interest receivable
|
|
|
|
|
|
|
|
|
|
|
2,539
|
|
|
|
2,539
|
|
|
|
2,539
|
|
Deferred compensation assets
|
|
|
972
|
|
|
|
|
|
|
|
|
|
|
|
972
|
|
|
|
972
|
|
|
|
|
|
|
|
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Demand deposits
|
|
|
|
|
|
|
|
|
|
|
349,695
|
|
|
|
349,695
|
|
|
|
349,695
|
|
Time deposits
|
|
|
|
|
|
|
|
|
|
|
260,466
|
|
|
|
260,466
|
|
|
|
258,541
|
|
Repurchase agreements
|
|
|
|
|
|
|
|
|
|
|
756
|
|
|
|
756
|
|
|
|
758
|
|
Federal Home Loan Bank Advances
|
|
|
|
|
|
|
|
|
|
|
68,641
|
|
|
|
68,641
|
|
|
|
60,000
|
|
Deferred compensation liabilities
|
|
|
972
|
|
|
|
|
|
|
|
|
|
|
|
972
|
|
|
|
972
|
|
Accrued interest payable
|
|
|
|
|
|
|
|
|
|
|
153
|
|
|
|
153
|
|
|
|
153
|
|
|
|
|
|
|
|
Financial instruments whose contract amounts represent credit risk:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments to extend or originate credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments under standby letters of credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
121
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FAIR VALUE MEASUREMENTS (Continued)
Assets and Liabilities Recorded at Fair Value on a Recurring Basis
Below is a table that presents information about certain assets and liabilities measured at fair value on a recurring basis. There were no transfers to or
from Levels 1 and 2 during the years ended December 31, 2012 and December 31, 2011.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair Value Measurement Using
|
|
|
Total
Carrying
Amount
in
Statement
of Financial
Position
|
|
|
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
Assets/
Liabilities
Measured at
Fair Value
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE and agency securities
|
|
$
|
|
|
|
$
|
12,247
|
|
|
$
|
|
|
|
$
|
12,247
|
|
|
$
|
12,247
|
|
Asset-backed SBA securities
|
|
|
|
|
|
|
70,411
|
|
|
|
|
|
|
|
70,411
|
|
|
|
70,411
|
|
Residential mortgage-backed securities issued by GSEs
|
|
|
|
|
|
|
106,687
|
|
|
|
|
|
|
|
106,687
|
|
|
|
106,687
|
|
State and local government securities
|
|
|
|
|
|
|
48,652
|
|
|
|
|
|
|
|
48,652
|
|
|
|
48,652
|
|
Mutual funds
|
|
|
739
|
|
|
|
|
|
|
|
|
|
|
|
739
|
|
|
|
739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
739
|
|
|
$
|
237,997
|
|
|
$
|
|
|
|
$
|
238,736
|
|
|
$
|
238,736
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,837
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
|
225
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt security mutual funds
|
|
|
12,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
18,157
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. GSE and agency securities
|
|
$
|
|
|
|
$
|
42,367
|
|
|
$
|
|
|
|
$
|
42,367
|
|
|
$
|
42,367
|
|
Asset-backed SBA securities
|
|
|
|
|
|
|
31,492
|
|
|
|
|
|
|
|
31,492
|
|
|
|
31,492
|
|
Residential mortgage-backed securities issued by GSEs
|
|
|
|
|
|
|
157,378
|
|
|
|
|
|
|
|
157,378
|
|
|
|
157,378
|
|
State and local government securities
|
|
|
|
|
|
|
11,914
|
|
|
|
|
|
|
|
11,914
|
|
|
|
11,914
|
|
Mutual funds
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
|
712
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
712
|
|
|
$
|
243,151
|
|
|
$
|
|
|
|
$
|
243,863
|
|
|
$
|
243,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefit plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
173
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Money market mutual funds
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt security mutual funds
|
|
|
16,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
17,197
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. FAIR VALUE MEASUREMENTS (Continued)
Assets and Liabilities Recorded at Fair Value on a Nonrecurring Basis
As may be required from time to time, certain assets may be recorded at fair value on a nonrecurring basis in accordance with U.S. GAAP. Assets measured
at fair value on a nonrecurring basis are included in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Fair Value Measurement Using
|
|
|
Total
Carrying
Amount
in
Statement
of Financial
Position
|
|
|
|
|
Description
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
|
Assets/
Liabilities
Measured at
Fair Value
|
|
|
|
|
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
|
|
|
$
|
|
|
|
$
|
4,686
|
|
|
$
|
4,686
|
|
|
$
|
4,686
|
|
Foreclosed properties
|
|
|
|
|
|
|
|
|
|
|
19,411
|
|
|
|
19,411
|
|
|
|
19,411
|
|
|
|
|
|
|
|
December 31, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impaired loans
|
|
$
|
|
|
|
$
|
|
|
|
$
|
21,858
|
|
|
$
|
21,858
|
|
|
$
|
21,858
|
|
Foreclosed properties
|
|
|
|
|
|
|
|
|
|
|
8,125
|
|
|
|
8,125
|
|
|
|
8,125
|
|
15. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
The following financial information pertains to ASB Bancorp, Inc. (parent company only), and should be read in conjunction with the
consolidated financial statements of the Company.
Condensed Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash on deposit with bank subsidiary
|
|
$
|
1,997
|
|
|
$
|
16,297
|
|
Interest-earning deposits with other financial institutions
|
|
|
8,345
|
|
|
|
2,998
|
|
|
|
|
|
|
|
|
|
|
Total cash and cash equivalents
|
|
|
10,342
|
|
|
|
19,295
|
|
Securities available for sale at fair value
|
|
|
7,576
|
|
|
|
2,080
|
|
ESOP loan receivable
|
|
|
4,154
|
|
|
|
4,407
|
|
Investment in bank subsidiary
|
|
|
89,372
|
|
|
|
89,721
|
|
Other assets
|
|
|
115
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
111,559
|
|
|
$
|
115,581
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Other liabilities
|
|
$
|
30
|
|
|
$
|
10
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
30
|
|
|
|
10
|
|
Total stockholders equity
|
|
|
111,529
|
|
|
|
115,571
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
111,559
|
|
|
$
|
115,581
|
|
|
|
|
|
|
|
|
|
|
123
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY (Continued)
Condensed Statements of Net Income
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Interest and dividend income
|
|
$
|
304
|
|
|
$
|
33
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
|
|
|
304
|
|
|
|
33
|
|
Noninterest income
|
|
|
|
|
|
|
|
|
Noninterest expenses
|
|
|
516
|
|
|
|
118
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes and equity in undistributed income of bank subsidiary
|
|
|
(212
|
)
|
|
|
(85
|
)
|
Income tax benefit
|
|
|
(72
|
)
|
|
|
(33
|
)
|
|
|
|
|
|
|
|
|
|
Net loss before equity in undistributed income of bank subsidiary
|
|
|
(140
|
)
|
|
|
(52
|
)
|
Equity in undistributed income of bank subsidiary
|
|
|
1,002
|
|
|
|
1,239
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
862
|
|
|
$
|
1,187
|
|
|
|
|
|
|
|
|
|
|
124
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY (Continued)
Condensed Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
(in thousands)
|
|
2012
|
|
|
2011
|
|
|
|
|
Operating Activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
862
|
|
|
$
|
1,187
|
|
Adjustments to reconcile net income to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Equity in undistributed income of bank subsidiary
|
|
|
(1,002
|
)
|
|
|
(1,239
|
)
|
Net amortization of premiums on securities
|
|
|
133
|
|
|
|
|
|
Increase in income tax receivable
|
|
|
(72
|
)
|
|
|
(33
|
)
|
Increase in interest receivable
|
|
|
(25
|
)
|
|
|
(6
|
)
|
Net change in other assets and liabilities
|
|
|
49
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(55
|
)
|
|
|
(113
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing Activities
|
|
|
|
|
|
|
|
|
Securities available for sale:
|
|
|
|
|
|
|
|
|
Purchases
|
|
|
(7,615
|
)
|
|
|
(2,098
|
)
|
Principal repayments on mortgage-backed backed and asset-backed securities
|
|
|
2,065
|
|
|
|
|
|
Investment in bank subsidiarys common stock
|
|
|
|
|
|
|
(28,000
|
)
|
ESOP loan
|
|
|
|
|
|
|
(4,468
|
)
|
ESOP principal payments received
|
|
|
253
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(5,297
|
)
|
|
|
(34,505
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing Activities
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock, net of issuance costs
|
|
|
|
|
|
|
53,913
|
|
Equity incentive plan shares purchased
|
|
|
(3,601
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(3,601
|
)
|
|
|
53,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
(8,953
|
)
|
|
|
19,295
|
|
|
|
|
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
Beginning of period
|
|
|
19,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period
|
|
$
|
10,342
|
|
|
$
|
19,295
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
|
|
|
Non-cash investing and financing transactions:
|
|
|
|
|
|
|
|
|
Change in unrealized gain on securities available for sale
|
|
$
|
79
|
|
|
$
|
(18
|
)
|
Change in deferred income taxes resulting from other comprehensive income
|
|
|
(32
|
)
|
|
|
7
|
|
125
ASB BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. UNAUDITED INTERIM FINANCIAL INFORMATION
The unaudited condensed statements of income (loss) for each of the quarters are summarized below for the periods indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
2012
|
|
|
September 30,
2012
|
|
|
June 30,
2012
|
|
|
March 31,
2012
|
|
|
|
|
|
|
Interest and dividend income
|
|
$
|
5,967
|
|
|
$
|
6,088
|
|
|
$
|
6,398
|
|
|
$
|
6,539
|
|
Interest expense
|
|
|
1,303
|
|
|
|
1,527
|
|
|
|
1,743
|
|
|
|
1,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income before provision for loan losses
|
|
|
4,664
|
|
|
|
4,561
|
|
|
|
4,655
|
|
|
|
4,620
|
|
Provision for (recovery of) loan losses
|
|
|
(733
|
)
|
|
|
542
|
|
|
|
1,293
|
|
|
|
598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
5,397
|
|
|
|
4,019
|
|
|
|
3,362
|
|
|
|
4,022
|
|
Noninterest income
|
|
|
3,083
|
|
|
|
2,416
|
|
|
|
1,999
|
|
|
|
1,958
|
|
Noninterest expenses
|
|
|
8,178
|
|
|
|
5,760
|
|
|
|
5,588
|
|
|
|
5,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax provision (benefit)
|
|
|
302
|
|
|
|
675
|
|
|
|
(227
|
)
|
|
|
414
|
|
Income tax provision (benefit)
|
|
|
67
|
|
|
|
218
|
|
|
|
(113
|
)
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
235
|
|
|
$
|
457
|
|
|
$
|
(114
|
)
|
|
$
|
284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share Basic
|
|
$
|
0.05
|
|
|
$
|
0.09
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share Diluted
|
|
$
|
0.05
|
|
|
$
|
0.09
|
|
|
$
|
(0.02
|
)
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
December 31,
2011
|
|
|
September 30,
2011
|
|
|
June 30,
2011
|
|
|
March 31,
2011
|
|
|
|
|
|
|
Interest and dividend income
|
|
$
|
6,784
|
|
|
$
|
7,112
|
|
|
$
|
7,540
|
|
|
$
|
7,415
|
|
Interest expense
|
|
|
2,013
|
|
|
|
2,120
|
|
|
|
2,205
|
|
|
|
2,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income before provision for loan losses
|
|
|
4,771
|
|
|
|
4,992
|
|
|
|
5,335
|
|
|
|
5,111
|
|
Provision for loan losses
|
|
|
1,974
|
|
|
|
730
|
|
|
|
424
|
|
|
|
657
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income after provision for loan losses
|
|
|
2,797
|
|
|
|
4,262
|
|
|
|
4,911
|
|
|
|
4,454
|
|
Noninterest income
|
|
|
1,912
|
|
|
|
1,973
|
|
|
|
1,890
|
|
|
|
1,647
|
|
Noninterest expenses
|
|
|
5,896
|
|
|
|
5,313
|
|
|
|
5,630
|
|
|
|
5,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income tax provision (benefit)
|
|
|
(1,187
|
)
|
|
|
922
|
|
|
|
1,171
|
|
|
|
869
|
|
Income tax provision (benefit)
|
|
|
(476
|
)
|
|
|
351
|
|
|
|
429
|
|
|
|
284
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(711
|
)
|
|
$
|
571
|
|
|
$
|
742
|
|
|
$
|
585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share Basic
|
|
$
|
(0.14
|
)
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share Diluted
|
|
$
|
(0.14
|
)
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
n/a
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|