b111210010q.htm


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010
or

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the transition period from _____ to _____

 
Commission file Number:   000-32891

        1ST CONSTITUTION BANCORP       
(Exact Name of Registrant as Specified in Its Charter)

New Jersey
 
22-3665653
(State of Other Jurisdiction
of Incorporation or Organization)
 
(I.R.S. Employer Identification No.)

2650 Route 130, P.O. Box 634, Cranbury, NJ
 
08512
(Address of Principal Executive Offices)
 
(Zip Code)

                       
   (609) 655-4500  
 
(Issuer’s Telephone Number, Including Area Code)
 
 
 
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  o
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o      No  o
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
(Do not check if a smaller reporting company)
o
Smaller reporting company
x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o    No  x
 
As of November 12, 2010, there were 4,572,593 shares of the registrant’s common stock, no par value, outstanding.
 


 
 

 
 
1ST CONSTITUTION BANCORP
 
 FORM 10-Q
 
INDEX

       
Page
 PART I FINANCIAL INFORMATION  
         
  Financial Statements
1
         
     
     
   
1
         
     
     
   
2
         
     
     
   
3
         
     
     
   
4
         
   
5
         
   
   
19
         
 
39
         
 
39
         
PART II. OTHER INFORMATION  
         
 
39
         
 
40
         
SIGNATURES
41
 

PART I. FINANCIAL INFORMATION

Item 1.                    Financial Statements.
1st Constitution Bancorp and Subsidiaries
Consolidated Balance Sheets
(unaudited)
 
   
September 30, 2010
   
December 31, 2009
 
ASSETS
           
CASH AND DUE FROM BANKS
  $ 13,970,407     $ 25,842,901  
                 
FEDERAL FUNDS SOLD / SHORT-TERM INVESTMENTS
    11,394       11,384  
                 
Total cash and cash equivalents
    13,981,801       25,854,285  
                 
INVESTMENT SECURITIES:
               
Available for sale, at fair value
    110,151,679       204,118,850  
Held to maturity (fair value of $86,815,455 and $24,215,530 at
        September 30, 2010 and December 31, 2009, respectively)
    85,835,513       23,608,980  
                 
Total investment securities
    195,987,192       227,727,830  
                 
LOANS HELD FOR SALE
    17,681,284       21,514,785  
                 
LOANS
    442,118,479       379,945,735  
Less- Allowance for loan losses
    (5,726,132 )     (4,505,387 )
                 
Net loans
    436,392,347       375,440,348  
PREMISES AND EQUIPMENT, net
    6,158,328       4,899,091  
ACCRUED INTEREST RECEIVABLE
    2,338,878       2,274,087  
BANK-OWNED LIFE INSURANCE
    11,373,540       10,319,055  
OTHER REAL ESTATE OWNED
    1,730,331       1,362,621  
OTHER ASSETS
    6,872,014       8,604,378  
                 
Total assets
  $ 692,515,715     $ 677,996,480  
                 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
LIABILITIES:
               
Deposits
               
Non-interest bearing
  $ 91,605,239     $ 82,473,328  
Interest bearing
    446,247,990       489,682,026  
                 
Total deposits
    537,853,229       572,155,354  
                 
BORROWINGS
    70,100,000       22,500,000  
REDEEMABLE SUBORDINATED DEBENTURES
    18,557,000       18,557,000  
ACCRUED INTEREST PAYABLE
    1,265,447       1,757,151  
ACCRUED EXPENSES AND OTHER LIABILITIES
    3,827,241       5,625,922  
                 
Total liabilities
    631,602,917       620,595,427  
                 
COMMITMENTS AND CONTINGENCIES
               
                 
SHAREHOLDERS’ EQUITY:
               
                 
Preferred Stock, no par value; 5,000,000 shares authorized, of which 12,000
shares of Series B, $1,000 liquidation preference, 5% cumulative
increasing to 9% cumulative on February 15, 2014, were issued and
outstanding
          11,554,213            11,473,262  
                 
Common stock, no par value; 30,000,000 shares authorized; 4,583,185 and
4,526,827 shares issued and 4,572,593 and 4,515,924 shares
outstanding at September 30, 2010 and December 31, 2009, respectively
        36,969,610          36,774,621  
Retained earnings
    12,152,796       10,307,331  
                 
Treasury Stock, at cost, 10,592 shares and 10,903 shares at September 30, 2010
and December 31, 2009, respectively
    (71,396 )     (73,492 )
Accumulated other comprehensive income (loss)
    307,575       (1,080,669 )
                 
Total shareholders’ equity
    60,912,798       57,401,053  
                 
Total liabilities and shareholders’ equity
  $ 692,515,715     $ 677,996,480  
See accompanying notes to consolidated financial statements.
 
 
1st Constitution Bancorp and Subsidiaries
Consolidated Statements of Income
(unaudited)

   
Three months ended September 30,
   
Nine months ended September 30,
 
             
INTEREST INCOME
 
2010
   
2009
   
2010
   
2009
 
Loans, including fees
  $ 6,349,180     $ 6,094,031     $ 17,414,422     $ 18,395,282  
Securities
                               
Taxable
    1,229,394       1,211,220       3,843,035       3,630,530  
Tax-exempt
    106,841       120,790       321,012       373,308  
Federal funds sold and short-term investments
    4,659       41,134       37,278       73,799  
Total interest income
    7,690,074       7,467,175       21,615,747       22,472,919  
                                 
INTEREST EXPENSE
                               
Deposits
    1,567,786       2,511,377       5,129,799       7,539,760  
Borrowings
    309,476       335,789       853,898       1,060,986  
Redeemable subordinated debentures
    269,565       270,480       801,255       803,455  
Total interest expense
    2,146,827       3,117,646       6,784,952       9,404,201  
Net interest income
    5,543,247       4,349,529       14,830,795       13,068,718  
Provision for loan losses
    875,000       505,000       1,725,000       1,293,000  
Net interest income after provision for loan losses
    4,668,247       3,844,529       13,105,795       11,775,718  
                                 
NON-INTEREST INCOME
                               
Service charges on deposit accounts
    185,242       225,772       550,270       680,526  
Gain on sales of loans
    416,754       339,887       1,129,875       953,073  
Income on bank-owned life insurance
    102,791       98,886       304,486       292,213  
Other income
    291,910       311,548       967,932       840,134  
Total non-interest income
    996,697       976,093       2,952,563       2,765,946  
                                 
NON-INTEREST EXPENSE
                               
Salaries and employee benefits
    2,532,427       2,338,830       7,326,361       6,860,225  
Occupancy expense
    499,745       464,799       1,398,510       1,360,471  
Data processing expenses
    284,554       281,177       815,752       817,057  
FDIC insurance expenses
    94,034       183,386       589,285       987,169  
Other operating expenses
    961,537       824,810       2,655,425       2,880,259  
Total non-interest expense
    4,372,297       4,093,002       12,785,333       12,905,181  
       Income before income taxes
    1,292,647       727,620       3,273,025       1,636,483  
                                 
INCOME TAXES
    411,048       106,386       896,609       3,949  
Net income
    881,599       621,234       2,376,416       1,632,534  
Dividends and accretion on preferred stock
    176,984       176,983       530,952       542,618  
Net income available to common shareholders
    704,615     $ 444,251       1,845,464     $ 1,089,916  
                                 
NET INCOME PER COMMON SHARE
                               
Basic
  $ 0.15     $ 0.10     $ 0.41     $ 0.24  
Diluted
  $ 0.15     $ 0.10     $ 0.40     $ 0.24  

See accompanying notes to consolidated financial statements.
 
 
1st Constitution Bancorp and Subsidiaries
Consolidated Statements of Changes in Shareholders’ Equity
For the Nine Months Ended September 30, 2010 and 2009
(unaudited)
 
   
 
 
Preferred
Stock
   
 
 
Common
Stock
   
 
 
Retained
Earnings
   
 
 
Treasury
Stock
   
Accumulated
Other
Comprehensive
(Loss) Income
   
 
Total
Shareholders’
Equity
 
                                                 
BALANCE, January 1, 2009
  $ 11,387,828     $ 35,180,433     $ 9,653,923     $ (53,331 )   $ (549,201 )   $ 55,619,652  
                                                 
Share-based compensation
            64,517                               64,517  
                                                 
Treasury stock purchased (11,295 shares)
                            (70,478 )             (70,478 )
                                                 
Exercise of stock options and issuance
     of vested shares under benefit program (83,857 shares)
            295,320               58,305               353,625  
                                                 
Dividends on preferred stock
                    (461,667 )                     (461,667 )
                                                 
Preferred stock issuance costs
    (22,500 )                                     (22,500 )
                                                 
Accretion of discount on preferred stock
    80,951               (80,951 )                     --  
                                                 
Comprehensive Income:
    Net Income for the nine months
   ended September 30, 2009
                    1,632,534                       1,632,534  
                                                 
    Minimum pension liability, net of tax
                                    51,436       51,436  
                                                 
    Unrealized gain on securities available for sale,
net of tax
                                    643,735       643,735  
                                                 
       Unrealized gain on interest rate swap contract,
            net of tax
                                    92,106       92,106  
                                                 
Comprehensive Income
                                            2,419,811  
                                                 
Balance, September 30, 2009
  $ 11,446,279     $ 35,540,270     $ 10,743,839     $ (65,504 )   $ (238,076 )   $ 57,902,960  
                                                 
Balance, January 1, 2010
  $ 11,473,262     $ 36,774,621     $ 10,307,331     $ (73,492 )   $ (1,080,669 )   $ 57,401,053  
                                                 
Exercise of stock options and issuance of vested shares
       under employee benefit program (56,669 shares)
            148,660               2,096               150,756  
                                                 
Share-based compensation
            46,329                               46,329  
                                                 
Dividends on preferred stock
                    (450,000 )                     (450,000 )
                                                 
Accretion of discount on preferred stock
    80,951               (80,951 )                     0  
                                                 
Comprehensive Income:
    Net Income for the nine months
   ended September 30, 2010
                    2,376,416                       2,376,416  
                                                 
   Minimum pension liability, net of tax
                                    205,532       205,532  
                                                 
    Unrealized gain on securities available for
sale, net of tax
                                    971,120       971,120  
                                                 
   Unrealized gain on interest rate swap contract,
net of tax
                                    211,592       211,592  
                                                 
Comprehensive Income
                                            3,764,660  
                                                 
Balance, September 30, 2010
  $ 11,554,213     $ 36,969,610     $ 12,152,796     $ (71,396 )   $ 307,575     $ 60,912,798  
 
See accompanying notes to consolidated financial statements.
 
 
1st Constitution Bancorp and Subsidiaries
Consolidated Statements of Cash Flows
(unaudited)

     
Nine Months Ended September 30,
 
     
2010
     
2009
 
OPERATING ACTIVITIES: 
               
     Net income 
  $
2,376,416
    $
1,632,534
 
           Adjustments to reconcile net income 
               
                to net cash provided by (used in) operating activities- 
               
           Provision for loan losses 
   
1,725,000
     
1,293,000
 
           Depreciation and amortization 
   
454,760
     
480,488
 
           Net amortization of premiums and discounts on securities 
   
733,173
     
24,780
 
           Gains on sales of other real estate owned
   
(62,584)
     
(27,776)
 
           Gains on sales of loans held for sale
   
(1,129,875)
     
(953,073)
 
           Originations of loans held for sale 
   
(99,507,515)
     
(121,999,780)
 
           Proceeds from sales of loans held for sale 
   
104,470,891
     
111,868,218
 
           Income on Bank – owned life insurance 
   
(304,486)
     
(292,213)
 
           Share-based compensation expense
   
171,329
     
176,517
 
          (Increase) decrease in accrued interest receivable
   
(64,791)
     
69,063
 
          (Increase) decrease in other assets 
   
922,877
     
(2,145,550)
 
          (Decrease) in accrued interest payable 
   
(491,704)
     
(122,195)
 
          (Decrease) increase in accrued expenses and other liabilities 
   
(1,201,221)
     
1,757,356
 
                 
Net cash provided by (used in) operating activities 
   
8,092,270
     
(8,238,631)
 
INVESTING ACTIVITIES:
               
     Purchases of securities - 
               
           Available for sale 
   
(35,226,910)
     
(78,656,269)
 
           Held to maturity 
   
(85,955,664)
     
(1,619,834)
 
     Proceeds from maturities and prepayments of securities - 
               
           Available for sale 
   
129,995,205
     
40,082,916
 
           Held to maturity 
   
23,666,230
     
1,950,349
 
     Net increase in loans 
   
(64,624,145)
     
(1,069,417)
 
     Purchase of bank-owned life insurance
   
(750,000)
     
0
 
     Capital expenditures 
   
(1,686,463)
     
(247,369)
 
     Additional investment in other real estate owned
   
(107,395)
     
(400,991)
 
     Proceeds from sales of other real estate owned
   
1,725,757
     
3,842,947
 
                 
Net cash used in investing activities 
   
(32,963,385)
     
(36,117,668)
 
                 
FINANCING ACTIVITIES: 
               
     Exercise of stock options and issuance of vested shares
   
150,756
     
353,625
 
     Purchase of Treasury Stock
   
0
     
(70,478)
 
     Dividend paid on preferred stock
   
(450,000)
     
(386,667)
 
     Preferred stock issuance costs paid
   
0
     
(22,500)
 
    Net increase (decrease) in demand, savings and time deposits 
   
(34,302,125)
     
141,487,850
 
     Net increase (decrease) in short-term borrowings
   
47,600,000
     
(24,000,000)
 
 
Net cash provided by financing activities 
   
12,998,631
     
117,361,830
 
 
Increase (decrease)  in cash and cash equivalents 
   
(11,872,484)
     
73,005,531
 
 
CASH AND CASH EQUIVALENTS 
               
     AT BEGINNING OF PERIOD
   
25,854,285
     
14,333,119
 
 
CASH AND CASH EQUIVALENTS 
               
     AT END OF PERIOD
  $
13,981,801
    $
87,338,650
 
 
SUPPLEMENTAL DISCLOSURES 
               
     OF CASH FLOW INFORMATION: 
               
           Cash paid during the period for - 
               
Interest 
  $
7,276,656
    $
9,526,396
 
Income taxes 
   
1,660,000
     
329,160
 
Non-cash investing activities
               
Real estate acquired in full satisfaction of loans in foreclosure
  $
1,947,146
    $
1,828,687
 

See accompanying notes to consolidated financial statements.
 
 
1st Constitution Bancorp and Subsidiaries
Notes To Consolidated Financial Statements
September 30, 2010 (Unaudited)
 
(1)  Summary of Significant Accounting Policies
 
The accompanying unaudited Consolidated Financial Statements include 1st Constitution Bancorp (the “Company”), its wholly-owned subsidiary, 1st Constitution Bank (the “Bank”), and the Bank’s wholly-owned subsidiaries, 1st Constitution Investment Company of Delaware, Inc., 1st Constitution Investment Company of New Jersey, Inc., FCB Assets Holdings, Inc. and 1st Constitution Title Agency, LLC.  1st Constitution Capital Trust II, a subsidiary of the Company, is not included in the Company’s consolidated financial statements, as it is a variable interest entity and the Company is not the primary beneficiary.  All significant intercompany accounts and transactions have been eliminated in consolidation and certain prior period amounts have been reclassified to conform to current year presentation.  The accounting and reporting policies of the Company and its subsidiaries conform to accounting principles generally accepted in the United States of America and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Article 8 of Regulation S-X.  Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations.  These Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Form 10-K for the year ended December 31, 2009, filed with the SEC on March 26, 2010.
 
Subsequent to the filing of Form 10-Q for the nine months ended September 30, 2009, an error was noted in the consolidated statement of income whereby a reclassification of $257,104 of mortgage commissions was not made that would have decreased both noninterest income and noninterest expense.  This reclassification entry had no effect on net income, net income per share, total equity or total assets.  The reclassification has been reported correctly in this document and was reported correctly in the consolidated financial statements for the year ended December 31, 2009.
 
In the opinion of the Company, all adjustments (consisting only of normal recurring accruals) which are necessary for a fair presentation of the operating results for the interim periods have been included. The results of operations for periods of less than a year are not necessarily indicative of results for the full year.
 
The Company has evaluated events and transactions occurring subsequent to the balance sheet date of September 30, 2010 for items that should potentially be recognized or disclosed in these financial statements.  The evaluation was conducted through the date these financial statements were issued.
 
(2)  Net Income Per Common Share
 
Basic net income per common share is calculated by dividing net income less dividends and discount accretion on preferred stock by the weighted average number of common shares outstanding during each period.
 
Diluted net income per common share is calculated by dividing net income less dividends and discount accretion on preferred stock by the weighted average number of common shares outstanding, as adjusted for the assumed exercise of potential common stock options and unvested restricted stock awards (as defined below), using the treasury stock method. All share information has been adjusted for the effect of a 5% stock dividend declared December 17, 2009 and paid on February 3, 2010 to shareholders of record on January 19, 2010.
 
The following tables illustrate the reconciliation of the numerators and denominators of the basic and diluted earnings per common share (EPS) calculations.  Dilutive securities in the tables below exclude common stock options and warrants with exercise prices that exceed the average market price of the Company’s common stock during the periods presented.  Inclusion of these common stock options and warrants would be anti-dilutive to the diluted earnings per common share calculation.
 
 
   
Three Months Ended September 30, 2010
 
   
 
 
Income
   
Weighted-
average
Shares
   
 
Per Share
Amount
 
Basic Earnings Per Common Share
                 
Net income
  $ 881,599              
Preferred stock dividends and accretion
    (176,984 )            
Income available to common shareholders
    704,615       4,569,401     $ 0.15  
                         
Effect of dilutive securities
                       
Stock options and unvested stock awards
            26,723          
                         
Diluted Earnings Per Common Share
                       
Income available to common shareholders
      plus assumed conversion
  $ 704,615       4,596,124     $ 0.15  
 
 
   
Three Months Ended September 30, 2009
 
   
 
 
Income
   
Weighted-
average
Shares
   
 
Per Share
Amount
 
Basic Earnings Per Common Share
                 
Net income
  $ 621,234              
Preferred stock dividends and accretion
    (176,983 )            
Income available to common shareholders
    444,251       4,480,994     $ 0.10  
                         
Effect of dilutive securities
                       
Stock options and unvested stock awards
            22,130          
                         
Diluted Earnings Per Common Share
                       
Net income available to common shareholders
      plus assumed conversion
  $ 444,251       4,503,124     $ 0.10  

 
   
Nine Months Ended September 30, 2010
 
   
 
 
Income
   
Weighted-
average
Shares
   
 
Per Share
Amount
 
Basic Earnings Per Common Share
                 
Net income
  $ 2,376,416              
Preferred stock dividends and accretion
    (530,952 )            
Income available to common shareholders
    1,845,464       4,541,164     $ 0.41  
                         
Effect of dilutive securities
                       
Stock options and unvested stock awards
            29,862          
                         
Diluted Earnings Per Common Share
                       
Income available to common shareholders
      plus assumed conversion
  $ 1,845,464       4,571,026     $ 0.40  
   

 
   
Nine Months Ended September 30, 2009
 
   
 
 
Income
   
Weighted-
average
Shares
   
 
Per Share
Amount
 
Basic Earnings Per Common Share
                 
Net income
  $ 1,632,534              
Preferred stock dividends and accretion
    (542,618 )            
Income available to common shareholders
    1,089,916       4,459,308     $ 0.24  
                         
Effect of dilutive securities
                       
Stock options and unvested stock awards
            12,117          
                         
Diluted Earnings Per Common Share
                       
Net income available to common shareholders
      plus assumed conversion
  $ 1,089,916       4,471,425     $ 0.24  
 
 
(3)           Investment Securities
 
Amortized cost, gross unrealized gains and losses, and the estimated fair value by security type are as follows:

         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
September 30, 2010 
 
Cost
   
Gains
   
Losses
   
Value
 
                         
Available for sale-
                       
U. S. Treasury securities and
                       
obligations of U.S. Government
                       
   sponsored corporations (“GSE”) and
        agencies
  $ 51,478,181     $ 142,145       0     $ 51,620,326  
   Residential collateralized
        mortgage obligations – GSE
    27,087,179       793,704       (15,993 )     27,864,890  
Residential mortgage
     backed securities – GSE
    18,974,750       1,392,481       0       20,367,231  
Obligations of State and
                               
Political subdivisions
    3,262,254       61,330       (34,427 )     3,289,157  
    Trust preferred debt securities – single issuer
    2,459,732       0       (612,259 )     1,847,473  
    Corporate Debt Securities
    1,508,344       1,756       (1,598 )     1,508,502  
    Restricted stock
    3,629,100       0       0       3,629,100  
    Mutual fund
    25,000       0       0       25,000  
                                 
    $ 108,424,540     $ 2,391,416     $ (664,277 )   $ 110,151,679  


 
             September 30, 2010
 
 
 
 
 
 
Amortized
Cost
   
Other-Than-
Temporary
Impairment
Recognized In
Accumulated
Other
Comprehensive
Income
   
 
 
 
 
 
Carrying
Value
   
 
 
 
 
Gross
Unrealized
Gains
   
 
 
 
 
Gross
Unrealized
Losses
   
 
 
 
 
 
Fair
Value
 
Held to maturity-
                                   
    U. S. Treasury securities and
                                   
         obligations of U.S. Government
                                   
         sponsored corporations (“GSE”) and
              agencies
  $ 60,157,804     $ -     $ 60,157,804     $ 248,072     $ (3,120 )   $ 60,402,756  
    Residential collateralized
        mortgage obligations – GSE
    2,957,348       -       2,957,348       111,490       0       3,068,838  
    Residential mortgage backed
        securities - GSE
    6,624,796       -       6,624,796       229,913       (2,526 )     6,852,183  
Obligations of State and
                                               
      Political subdivisions
    8,066,837       -       8,066,837       384,675       (452 )     8,451,060  
Trust preferred debt securities - pooled
    637,812       (500,944 )     136,868       0       (44,723 )     92,145  
Corporate debt securities
    7,891,860       -       7,891,860       81,107       (24,494 )     7,948,473  
                                                 
    $ 86,336,457     $ (500,944 )   $ 85,835,513     $ 1,055,257     $ (75,315 )   $ 86,815,455  


         
Gross
   
Gross
       
   
Amortized
   
Unrealized
   
Unrealized
   
Fair
 
December 31, 2009
 
Cost
   
Gains
   
Losses
   
Value
 
                         
Available for sale-
                       
U. S. Treasury securities and
                       
obligations of U.S. Government
                       
sponsored corporations (“GSE”)
      and agencies
  $ 138,351,028     $ 291,906     $ (673,252 )   $ 137,969,682  
       Residential collateralized mortgage
            obligations – GSE
    34,749,123       172,698       (252,023 )     34,669,798  
Residential mortgage backed
     securities – GSE
    24,182,584       1,449,071       0       25,631,655  
Obligations of State and
                               
Political subdivisions
    2,633,210       45,644       (91,212 )     2,587,642  
        Trust preferred debt securities
          – single issuer
    2,457,262       0       (687,089 )     1,770,173  
        Restricted Stock
    1,464,900       0       0       1,464,900  
        Mutual Fund
    25,000       0       0       25,000  
                                 
    $ 203,863,107     $ 1,959,319     $ (1,703,576 )   $ 204,118,850  

 
December 31, 2009
 
 
 
 
 
 
Amortized
Cost
   
Other-Than-
Temporary
Impairment
Recognized In
Accumulated
Other
Comprehensive
Loss
   
 
 
 
 
 
Carrying
Value
   
 
 
 
 
Gross
Unrealized
Gains
   
 
 
 
 
Gross
Unrealized
Losses
   
 
 
 
 
 
Fair
Value
 
Held to maturity-
                                   
    Residential collateralized
        mortgage obligations – GSE
  $ 4,881,475     $ -     $ 4,881,475     $ 150,055     $ 0     $ 5,031,530  
    Residential mortgage backed
          securities - GSE
    6,111,131       -       6,111,131       97,782       (29,521 )     6,179,392  
Obligations of State and
                                               
      Political subdivisions
    8,600,596       -       8,600,596       270,947       0       8,871,543  
Trust preferred debt securities - pooled
    633,998       (500,944 )     133,054       0       0       133,054  
Corporate debt securities
    3,882,724       -       3,882,724       117,287       0       4,000,011  
                                                 
    $ 24,109,924     $ (500,944 )   $ 23,608,980     $ 636,071     $ (29,521 )   $ 24,215,530  

 
Restricted stock at September 30, 2010 and December 31, 2009 consists of $3,614,100 and $1,449,900, respectively, of Federal Home Loan Bank of New York stock and $15,000 of Atlantic Central Bankers Bank stock.
 
The amortized cost and estimated fair value of investment securities at September 30, 2010, by contractual maturity, are shown below.  Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.  Restricted stock is included in “Available for sale - Due in one year or less.”
   
Amortized
Cost
   
Fair
Value
 
Available for sale-
     
     Due in one year or less
  $ 43,293,923     $ 43,395,065  
     Due after one year through five years
    12,220,865       12,309,179  
     Due after five years through ten years
    7,567,192       7,976,701  
     Due after ten years
    45,342,560       46,470,734  
Total
  $ 108,424,540     $ 110,151,679  
                 
Held to maturity-
               
     Due in one year or less
  $ 1,752,162     $ 1,758,030  
     Due after one year through five years
    47,823,280       48,132,857  
     Due after five years through ten years
    28,409,840       28,800,416  
     Due after ten years
    8,351,175       8,124,152  
Total
  $ 86,336,457     $ 86,815,455  

Gross unrealized losses on securities and the estimated fair value of the related securities aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2010 and December 31, 2009 are as follows:

September 30, 2010
       
Less than 12 months
   
12 months or longer
   
Total
 
   
Number
of
Securities
   
 
Fair Value
   
Unrealized
Losses
   
 
Fair Value
   
Unrealized
Losses
   
 
Fair Value
   
Unrealized
Losses
 
U.S. Treasury securities and obligations
      of U.S. Government sponsored
          corporations and agencies
    2     $ 1,996,880     $ (3,120 )   $ -     $ -     $ 1,996,880     $ (3,120 )
                                                         
Residential collateralized mortgage
     obligations - GSE
    1                       418,777       (15,993 )     418,777       (15,993 )
                                                         
Residential mortgage backed securities – GSE
    1       1,033,889       (2,526 )                     1,033,889       (2,526 )
                                                         
Obligations of State and Political
    Subdivisions
    3       583,105       (1,008 )     980,311       (33,871 )     1,563,416       (34,879 )
                                                         
Trust preferred debt securities – single issuer
    4       0       0       1,847,473       (612,259 )     1,847,473       (612,259 )
                                                         
Trust preferred debt securities – pooled
    1       0       0       92,145       (545,667 )     92,145       (545,667 )
                                                         
Corporate Debt Securities
    7       5,303,538       (26,092 )     0       0       5,303,538       (26,092 )
                                                         
  Total temporarily impaired securities
    19     $ 8,917,412     $ (32,746 )   $ 3,338,706     $ (1,207,790 )   $ 12,256,118     $ (1,240,536 )
                                                         

December 31, 2009
       
Less than 12 months
   
12 months or longer
   
Total
 
   
Number of
Securities
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
   
Fair Value
   
Unrealized
Losses
 
U.S. Government sponsored
     corporations and agencies
    33     $ 73,177,106     $ (673,252 )   $ -     $ -     $ 73,177,106     $ (673,252 )
                                                         
Residential collateralized mortgage
      Obligations – GSE
    5       9,399,574       (158,696 )     428,264       (93,327 )     9,827,838       (252,023 )
                                                         
Residential mortgage backed securities - GSE
    1       2,885,660       (29,521 )     -       -       2,885,660       (29,521 )
                                                         
Obligations of State and Political
     Subdivisions
    1       924,549       (91,212 )     -       -       924,549       (91,212 )
                                                         
Trust preferred debt securities – single issuer
    4       -       -       1,770,172       (687,089 )     1,770,172       (687,089 )
                                                         
Trust preferred debt securities – pooled
    1       -       -       133,054       (500,944 )     133,054       (500,944 )
                                                         
  Total temporarily impaired securities
    45     $ 86,386,889     $ (952,681 )   $ 2,331,490     $ (1,281,360 )   $ 88,718,379     $ (2,234,041 )
                                                         

 
U.S. Treasury securities and obligations of U.S. Government sponsored corporations and agencies:  The unrealized losses on investments in these securities were caused by interest rate increases.  The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost of the investment.  Because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than temporarily impaired.

               Residential collateralized mortgage obligations and residential mortgaged-backed securities: The unrealized losses on investments in residential collateralized residential mortgage obligations and mortgage-backed securities were caused by interest rate increases. The contractual cash flows of these securities are guaranteed by the issuers, which are either government or government sponsored agencies. It is expected that the securities would not be settled at a price less than the amortized cost of the investment. Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Obligations of State and Political Subdivisions:  The unrealized losses on investments in these securities were caused by interest rate increases.  It is expected that the securities would not be settled at a price less than the amortized cost of the investment.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Corporate debt securities:   The unrealized losses on investments in corporate debt securities were caused by interest rate increases.  None of the corporate issuers have defaulted on interest payments.  Because the decline in fair value is attributable to changes in interest rates and not credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Trust preferred debt securities – single issuer:  The investments in these securities with unrealized losses are comprised of four corporate trust preferred securities that mature in 2027, all of which were single-issuer securities.   The contractual terms of the trust preferred securities do not allow the issuer to settle the securities at a price less than the face value of the trust preferred securities, which is greater than the amortized cost of the trust preferred securities.  None of the corporate issuers have defaulted on interest payments.  Because the decline in fair value is attributable to widening of interest rate spreads and the lack of an active trading market for these securities and to a lesser degree market concerns on the issuers’ credit quality, and because the Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell these investments before a market price recovery or maturity, these investments are not considered other-than-temporarily impaired.

Trust preferred debt security – pooled:  This trust preferred debt security was issued by a two issuer pool (Preferred Term Securities XXV, Ltd. co-issued by Keefe, Bruyette and Woods, Inc. and First Tennessee (“PreTSL XXV”)), consisting primarily of financial institution holding companies.  During 2009, the Company recognized an