Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. PROVIDENT COMMUNITY BANCSHARES, INC. (926164) 10-Q published on Nov 14, 2013 at 3:31 pm
Reporting Period: Sep 29, 2013
On July 18, 2013, the FASB issued guidance to eliminate the diversity in practice regarding presentation of unrecognized tax benefits in the statement of financial position. Under the clarified guidance, an unrecognized tax benefit, or a portion of an unrecognized tax benefit, will be presented in the financial statements as a reduction to a deferred tax asset unless certain criteria are met. The requirements should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The amendments will be effective for the Corporation for reporting periods beginning after December 15, 2013. The Corporation does not expect these amendments to have a material effect on its financial statements.
A loan is considered impaired when, in management’s judgment, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines when loans become impaired through its normal loan administration and review functions. Loans identified as nonaccrual are potentially impaired loans. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired, provided that management expects to collect all amounts due, including interest accrued at the contractual interest rate for the period of delay. Impairment is measured on a loan by loan basis for commercial and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Large groups of smaller balance homogeneous loans are collectively evaluated for loss and a general reserve is established accordingly.
During the three months ended September 30, 2013 and the previous year comparable period, a provision for loan losses was not required due to improvement in the credit quality of the portfolio and a decrease in the size of the portfolio, offset by an increase in specific reserves and charge-offs. The increase in specific reserves was primarily due to additional allocations of $2.0 million to cover TDR concessions. Nonperforming loans decreased $4.8 million from $15.8 million at September 30, 2012 to $11.0 million at September 30, 2013. Nonperforming assets decreased $15.3 million to $18.2 million at September 30, 2013, or 5.5% of total assets, as compared to $33.5 million or 9.4% of total assets at September 30, 2012. Specific reserves for nonperforming loans at September 30, 2013 were $2.1 million compared to $1.8 million for nonperforming loans at September 30, 2012.
NonInterest Expense
For the three months ended September 30, 2013, total noninterest expense decreased $50,000, or 1.7%. Compensation and employee benefits increased $265,000, or 25.8%, due primarily to staffing additions for the start up of a new residential mortgage loan department. Deposit insurance premiums expense decreased $24,000, or 11.1%, to $193,000 for the three months ended September 30, 2013 from $217,000 for the same period in 2012, due to a reduction in the deposit base. OREO and loan operations expense decreased $418,000 to $121,000 for the three months ended September 30, 2013 from $539,000 for the same period in 2012, due primarily to a decrease in write-downs and operating expenses for foreclosed loans. Other expense increased $106,000, or 47.5%, to $329,000 for the three months ended September 30, 2013 from $223,000 for the same period in 2012, due primarily to increases in loan expense due to loan appraisals required for impaired loans and deposit account charge-offs.
For the nine months ended September 30, 2013, total non-interest expense increased $985,000, or 12.6%, to $8.8 million from $7.8 million for the same period in 2012. Compensation and employee benefits increased $428,000, or 13.6%, due primarily to staffing additions for the start up of a new residential mortgage loan department. Deposit insurance premiums expense decreased $33,000, or 5.4%, to $578,000 for the nine months ended September 30, 2013 from $611,000 for the same period in 2012, due to a reduction in the deposit base. Professional services expense decreased $14,000, or 2.7%, to $505,000 for the nine months ended September 30, 2013 from $519,000 for the same period in 2012 due primarily to lower legal expense. OREO and loan operations expense increased $394,000 to $1.0 million for the nine months ended September 30, 2013 from $614,000 for the same period in 2012, due primarily to higher costs associated with loan foreclosures and write-downs required to adjust other real estate owned to fair market value. Items processing expense decreased $6,000, or 3.0%, to $196,000 for the nine months ended September 30, 2013 from $202,000 for the same period in 2012, due primarily to lower NOW account balances due to rate reductions. Other expense increased $200,000, or 33.1%, to $805,000 for the nine months ended September 30, 2013 from $605,000 for the same period in 2012, due primarily to a higher loan expense as a result of new appraisals for impaired loans and deposit account charge-offs.