K-Fed Bancorp 10-Q 2010
Part I — FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Financial Condition
(Dollars in thousands, except per share data)
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Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(Dollars in thousands, except per share data)
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Consolidated Statements of Stockholders’ Equity
(Dollars in thousands, except per share data)
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Consolidated Statements of Cash Flows
(Dollars in thousands)
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Notes to Consolidated Financial Statements
Note 1 – Nature of Business and Significant Accounting Policies
Nature of Business>: K-Fed Bancorp (or the “Company”) is a majority-owned subsidiary of K-Fed Mutual Holding Company (or the “Parent”). The Company and its Parent are holding companies that are federally chartered. The Company’s sole subsidiary, Kaiser Federal Bank (or the “Bank”), is a federally chartered savings association, which provides retail and commercial banking services to individuals and business customers from its nine branch locations throughout California. While the Bank originates many types of residential and commercial real estate loans, a large percentage of our residential real estate loans have been purchased from other financial institutions using our underwriting standards. However, we have not purchased any loans since June 2007.
The Company’s business activities generally are limited to passive investment activities and oversight of our investment in the Bank. Unless the context otherwise requires, all references to the Company include the Bank and the Company on a consolidated basis.
Basis of Presentation:> The financial statements of K-Fed Bancorp have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and predominant practices followed by the financial services industry, and are unaudited. In the opinion of the Company’s management, all adjustments consisting of normal recurring accruals necessary for (i) a fair presentation of the financial condition and results of operations for the interim periods included herein and (ii) to make such statements not misleading have been made.
The results of operations for the three and six months ended December 31, 2009 are not necessarily indicative of the results of operations that may be expected for any other interim period or for the fiscal year ending June 30, 2010. Certain information and note disclosures normally included in the Company’s annual financial statements have been condensed or omitted. Therefore, these consolidated financial statements and notes thereto should be read in conjunction with the consolidated financial statements and notes included in the 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission.
Principles of Consolidation: >The consolidated financial statements presented in this quarterly report include the accounts of K-Fed Bancorp and its wholly-owned subsidiary, Kaiser Federal Bank. All material intercompany balances and transactions have been eliminated in consolidation. K-Fed Mutual Holding Company is owned by the depositors of the Bank. These financial statements do not include the transactions and balances of K-Fed Mutual Holding Company.
Use of Estimates: >The preparation of consolidated 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 consolidated financial statements and the reported amounts of income and expenses during the reporting period. Changes in these estimates and assumptions are considered reasonably possible and may have a material impact on the consolidated financial statements and thus actual results could differ from the amounts reported and disclosed herein. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of financial instruments.
Subsequent Events: >Management has reviewed events occurring through February 9, 2010, the date the financial statements were issued and determined no subsequent events requiring accrual or disclosure occurred.
Reclassifications: >Some items in prior year financial statements were reclassified to conform to the current presentation.
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Adoption of New Accounting Standards:
Effective July 2009, The Financial Accounting Standards Board (“FASB”) codified accounting literature into a single source of authoritative accounting principles, except for certain authoritative rules and interpretive releases issued by the Securities and Exchange Commission. Since the codification did not alter existing GAAP, it did not have an impact on the financial statements of the Company.
In December 2007, the FASB issued new authoritative guidance under Accounting Standards Codification (“ASC”) Topic 805, “Business Combinations.” This guidance replaces the standard on business combinations and will significantly change the accounting for and reporting of business combinations in consolidated financial statements. This guidance requires an entity to measure the business acquired at fair value and to recognize goodwill attributable to any noncontrolling interests (previously referred to as minority interests) rather than just the portion attributable to the acquirer. The guidance will also result in fewer exceptions to the principle of measuring assets acquired and liabilities assumed in a business combination at fair value. In addition, the guidance will result in payments to third parties for consulting, legal, and similar services associated with an acquisition to be recognized as expenses when incurred rather than capitalized as part of the business combination. The new authoritative guidance under ASC Topic 805 was effective for fiscal years beginning on or after December 15, 2008. The adoption of this guidance did not have a material effect on the financial statements of the Company.
In June 2008, the FASB issued new authoritative guidance under ASC Topic 260, “Earnings Per Share.” The guidance addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (“EPS”) under the two-class method. This guidance provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of EPS pursuant to the two-class method. The new authoritative guidance under ASC Topic 260 was effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years. All prior-period EPS data presented were to be adjusted retrospectively (including interim financial statements, summaries of earnings, and selected financial data) to conform with the provisions of this guidance. The adoption of this guidance did not have a material impact upon the Company.
In August 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-05, “Measuring Liabilities at Fair Value,” and was issued to increase the consistency in the application of ASC Topic 820. This ASU applies to all entities that measure liabilities at fair value under ASC Topic 820 and amends sections of ASC 820-10. This ASU states that, in circumstances in which a quoted price in an active market for the identical liability is not available, fair value of the liability must be measured by either (a) a valuation technique that uses the quoted price of the identical liability when traded as an asset or quoted prices for similar liabilities or similar liabilities when traded as assets, or (b) another valuation technique that is consistent with the principles of ASC Topic 820, such as an income approach or a market approach. Further if a restriction on the transference of the liability exists, the ASU clarifies that an entity is not required to factor that in to the inputs of the fair value determination. Lastly, the ASU also clarifies that a quoted price in an active market for the identical liability, or an unadjusted quoted price in an active market for the identical liability, when traded as an asset, are level 1 measurements within the fair value hierarchy. The guidance in this ASU is effective for the first reporting period beginning after August 2009. The adoption of this guidance did not have a material impact upon the Company.
Newly Issued Accounting Standards:
In June 2009, the FASB issued new authoritative guidance under ASC Topic 860, “Transfers and Servicing,” to enhance reporting about transfers of financial assets, including securitizations, and where companies have continuing exposure to the risks related to transferred financial assets. ASC Topic 860 eliminates the concept of a “qualifying special-purpose entity” and changes the requirements for derecognizing financial assets. ASC Topic 860 also requires additional disclosures about all continuing involvements with transferred financial assets including information about gains and losses resulting from transfers during the period. The new authoritative guidance under ASC Topic 860 will be effective at the start of the fiscal year beginning after November 15, 2009. Early application is not permitted. The adoption of this guidance is not expected to have a material impact upon the Company.
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In June 2009, the FASB issued new authoritative guidance under Statement of Financial Accounting Standard (“SFAS”) No. 167, “Amendments to FASB Interpretation No. 46R.” In December 2009, the FASB issued Accounting Standards Update (“ASU”) No. 2009-17 which provides updates to ASC Topic 810, “Consolidations” This guidance changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting or similar rights should be consolidated. The determination of whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. The guidance requires additional disclosures about the reporting entity’s involvement with variable-interest entities and any significant changes in risk exposure due to that involvement as well as its affect on the entity’s financial statements. The new guidance under ASC Topic 810 will be effective at the start of the fiscal year beginning after November 15, 2009. Early application is not permitted. The adoption of this guidance is not expected to have a material impact upon the Company.
Note 2 – Earnings (Loss) Per Share
Basic earnings (loss) per common share is net income (loss) divided by the weighted average number of common shares outstanding during the period. Employee Stock Ownership Plan (“ESOP”) shares are considered outstanding for this calculation unless unearned. Unvested stock awards with non-forfeitable rights to dividends are considered outstanding for this calculation. Diluted earnings (loss) per common share includes the dilutive effect of additional potential common shares issuable under stock options.
For the three and six months ended December 31, 2009 outstanding stock options to purchase 484,400 shares were anti-dilutive and not considered in computing diluted earnings (loss) per common share. For the three and six months ended December 31, 2008 outstanding stock options to purchase 304,400 shares were anti-dilutive and not considered in computing diluted earnings per common share.
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Note 3 – Fair Value Measurements
FASB ASC 820-10 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>: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2>: Significant other 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.
Level 3>: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1 inputs) or matrix pricing, which is a mathematical technique widely used in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2 inputs).
The fair value of impaired loans with specific allocations of the allowance for loan losses is generally based on recent real estate appraisals. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments are typically significant and result in a Level 3 classification of the inputs for determining fair value.
Nonrecurring adjustments to certain real estate properties classified as real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. Fair values are generally based on third party appraisals of the property, resulting in a Level 3 classification. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized.
Assets and liabilities measured at fair value on a recurring basis are summarized in the following table:
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The Company may also be required, from time to time, to measure certain other assets at fair value on a non-recurring basis in accordance with GAAP. The following assets and liabilities were measured at fair value on a non-recurring basis:
Impaired loans, which are measured for impairment using the fair value of the collateral for collateral dependent loans, had a carrying amount of $18,186,000 at December 31, 2009 as compared to $5,056,000 at June 30, 2009. The fair value of collateral is calculated using a third party appraisal. The valuation allowance for these loans was $3,630,000 at December 31, 2009 as compared to $1,201,000 at June 30, 2009. An additional provision for loan losses of $2,642,000 was made for the six months ended December 31, 2009 relating to impaired loans.
Real estate owned is measured at the lower of carrying amount or fair value less costs to sell at transfer. If the fair value of the asset declines, a write-down is recorded through expense. During the three and six months ended December 31, 2009, the Company did not incur any charges to reduce real estate owned to fair value.
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Fair Value of Financial Instruments
The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily 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 Company could realize in a market exchange. The use of different assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The following methods and assumptions were used to estimate fair value of each class of financial instruments for which it is practicable to estimate fair value:
Estimated fair values for investments are obtained from quoted market prices where available. Where quoted market prices are not available, estimated fair values are based on quoted market prices of comparable instruments.
The estimated fair value for all loans is determined by discounting the estimated cash flows using the current rate at which similar loans would be made to borrowers with similar credit ratings and maturities.
Impaired loans that are previously reported are excluded from the fair value disclosure below.
The estimated fair value of deposit accounts (savings, non interest bearing demand and money market accounts) is the carrying amount. The fair value of fixed-maturity time certificates of deposit is estimated by discounting the estimated cash flows using the current rate at which similar certificates would be issued.
The fair values of the FHLB advances are estimated using discounted cash flow analyses, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.
Other On-Balance-Sheet Financial Instruments
Other on-balance-sheet financial instruments include cash and cash equivalents, accrued interest receivable, FHLB stock and accrued expenses and other liabilities. The carrying value of each of these financial instruments is a reasonable estimation of fair value. It was not practicable to determine the fair value of FHLB stock due to restrictions placed on its transferability.
Off-Balance-Sheet Financial Instruments
The fair values for the Company’s off-balance sheet loan commitments are estimated based on fees charged to others to enter into similar agreements taking into account the remaining terms of the agreements and credit standing of the Company’s customers. The estimated fair value of these commitments is not significant.
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The estimated fair values of the Company’s financial instruments are summarized as follows:
Note 4 – Investments
The amortized cost and fair value of available-for-sale securities and the related gross unrealized gains and losses recognized in accumulated other comprehensive income were as follows:
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The carrying amount, unrecognized gains and losses, and fair value of securities held-to-maturity were as follows:
There were no sales of securities during the six months ended December 31, 2009 and December 31, 2008.
Securities with unrealized losses at December 31, 2009 and June 30, 2009, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, are as follows:
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The Company evaluates securities for other-than-temporary impairment at least on a quarterly basis, and more frequently when economic or market concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, and the Company does not have the intent to sell these securities and it is not more than likely it will be required to sell the securities before their anticipated recovery. In analyzing an issuer’s financial condition, the Company may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition.
The unrealized losses relate principally to the general change in interest rates and liquidity, and not credit quality, that has occurred since the securities purchase dates, and such unrecognized losses or gains will continue to vary with general interest rate level fluctuations in the future. As management has the intent and ability to hold debt securities until recovery, which may be maturity, and it is not more than likely it will be required to sell the securities before their anticipated recovery, no declines are deemed to be other-than-temporary.
Note 5 – Loans
The composition of loans consists of the following:
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The following is the activity in the allowance for loan losses:
At December 31, 2009, non-accrual loans totaled $22.5 million, compared to $8.9 million at June 30, 2009. At December 31, 2009 and June 30, 2009, there were no loans past due more than 90 days and still accruing interest. Included in non-accrual loans are troubled debt restructures of $5,092,000 and $2,094,000 at December 31, 2009 and June 30, 2009, respectively.
A loan is impaired when it is probable, based on current information and events, the Bank will be unable to collect all contractual principal and interest payments due in accordance with the terms of the loan agreement. When it is determined that a loss is probable, a specific valuation allowance is established and included in the allowance for loan losses. The amount of impairment is determined by the difference between the recorded investment in the loan and estimated net realizable value of the underlying collateral on collateral dependent loans.
Individually impaired loans were as follows:
For the three and six months ended December 31, 2009, the Company’s average investment in impaired loans was $17.9 million and $14.9 million, respectively. For the three and six months ended December 31, 2008, the Company’s average investment in impaired loans was $5.6 million and $5.0 million, respectively.
Payments received on impaired loans are recorded as a reduction of principal or as interest income depending on management’s assessment of the ultimate collectability of the loan principal. Generally, interest income on an impaired loan is recorded on a cash basis when the outstanding principal is brought current. For the three and six months ended December 31, 2009, income recorded on impaired loans totaled $114,000 and $142,000, respectively. For the three and six months ended December 31, 2008, income recorded on impaired loans totaled $17,000 and $34,000, respectively. Interest income recorded on impaired loans for all periods presented was recorded on a cash basis.
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This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to the Company and the Bank that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often includes words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “should,” “could,” or “may” and similar expressions or the negative thereof. Certain factors that could cause actual results to differ materially from expected results include, changes in the interest rate environment, changes in general economic conditions, legislative and regulatory changes that adversely affect the business of K-Fed Bancorp and Kaiser Federal Bank, and changes in the securities markets. Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-Q to reflect future events or developments.
Legislative Proposal.> The U.S. Treasury Department recently released a legislative proposal that would implement sweeping changes to the current bank regulatory structure. The proposal would create a new federal banking regulator, the National Bank Supervisor, and merge our current primary federal regulator, the Office of Thrift Supervision (“OTS”), as well as the Office of the Comptroller of the Currency (the primary federal regulator for national banks) into this new federal bank regulator. The proposal would also eliminate federal savings associations and require all federal savings associations, such as Kaiser Federal Bank, to elect, within six months of the effective date of the legislation, to convert to a national bank, state bank or state savings association. A federal savings association that does not make the election would, by operation of law, be converted into a national bank within one year of the effective date of the legislation. The proposal would also require thrift holding companies such as K-Fed Bancorp to be regulated as bank holding companies subject to the regulation and supervision of the Federal Reserve Board. Unlike a bank holding company, a thrift holding company is not required to maintain any minimum level of regulatory capital.
Federal Deposit Insurance Corporation Coverage/Assessments. >The Emergency Economic Stabilization Act (“EESA”) of 2008 temporarily increased the limit on FDIC coverage for deposits to $250,000 from $100,000 through December 31, 2013. In addition, on October 14, 2008, the FDIC announced the creation of the Temporary Liquidity Guarantee Program (“TLGP”) as part of a larger government effort to strengthen confidence and encourage liquidity in the nation’s banking system. All eligible institutions were automatically enrolled in the program through December 5, 2008 at no cost. Organizations that did not wish to participate in the TLGP needed to opt out by December 5, 2008. After that time, participating entities were charged fees. One component of the TLGP provides full FDIC insurance coverage for non-interest bearing transaction deposit accounts, regardless of dollar amount.
This program, originally set to expire on December 31, 2009, was recently extended to June 30, 2010. An annualized 10 basis point assessment on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 will be assessed on a quarterly basis. The Company did not opt out and is participating in this component of the TLGP. As of December 31, 2009 the Company had no non-interest bearing transaction accounts in excess of $250,000. We opted into the extension which took effect on January 1, 2010. An annualized assessment rate between 15 and 25 basis points on balances in noninterest-bearing transaction accounts that exceed the existing deposit insurance limit of $250,000 will be assessed depending on the institution’s risk category.
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The FDIC currently imposes an assessment against institutions for deposit insurance based on the risk category of the institution. Federal law requires the designated reserve ratio for the deposit insurance fund be established by the FDIC at 1.15% to 1.50% of estimated insured deposits. Recent bank failures coupled with deteriorating economic conditions have significantly reduced the deposit insurance fund’s reserve ratio. On February 27, 2009, the FDIC issued a final rule that altered the way the FDIC calculates federal deposit insurance assessment rates beginning in the second quarter of 2009 and thereafter. Under the rule, the Federal Deposit Insurance Corporation first establishes an institution’s initial base assessment rate. This initial base assessment rate ranges, depending on the risk category of the institution, from 12 to 45 basis points. The Federal Deposit Insurance Corporation would then adjust the initial base assessment (higher or lower) to obtain the total base assessment rate. The adjustments to the initial base assessment rate are based upon an institution’s levels of unsecured debt, secured liabilities, and brokered deposits. The total base assessment rate ranges from 7 to 77.5 basis points of the institution’s deposits. Additionally, the Federal Deposit Insurance Corporation on May 22, 2009, issued a final rule that imposed a special 5 basis point assessment on each FDIC-insured depository institution's assets, minus its Tier 1 capital on June 30, 2009, which was collected on December 31, 2009. The special assessment was capped at 10 basis points of an institution's domestic deposits. On December 31, 2009, the Bank paid $407,000 related to this special assessment. Future special assessments could also be assessed.
The FDIC issued a final rule pursuant to which all insured depository institutions were required to prepay their estimated assessments for the fourth quarter of 2009, and for all of 2010, 2011 and 2012. Under the rule, this pre-payment was due on December 30, 2009. The assessment rate for the fourth quarter of 2009 and for 2010 was based on each institution’s total base assessment rate for the third quarter of 2009, modified to assume the assessment rate in effect on September 30, 2009 had been in effect for the entire third quarter, and the assessment rate for 2011 and 2012 was equal to the modified third quarter assessment rate plus an additional 3 basis points. In addition, each institution’s base assessment rate for each period was calculated using its third quarter assessment base, adjusted quarterly for an estimated 5% annual growth rate in the assessment base through the end of 2012. Based on our deposits and assessment rate at September 30, 2009, our prepayment amount was $3.5 million.
The financial services sector of the United States economy continues to experience a declining economic environment. Economic conditions remain weak both nationally and in our market area of California. We continue to experience a downward pressure on home prices and California remains one of the top in the nation for foreclosure activity. California, in particular has experienced significant declines in real estate values and elevated unemployment rates. Unemployment rates in California increased to 12.4% in December 2009 from 11.6% in June 2009.
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Comparison of Financial Condition at December 31, 2009 and June 30, 2009.
Assets.> Total assets decreased $17.6 million, or 2.0% to $877.5 million at December 31, 2009 from $895.1 million at June 30, 2009 due primarily to a decrease in total cash and cash equivalents. Total cash and cash equivalents decreased $24.4 million, or 33.1% to $49.3 million at December 31, 2009 from $73.7 million at June 30, 2009. The decrease was a result of the repayment of $60.0 million in FHLB advances that matured during the period. The repayment was funded with available liquidity and strong deposit growth.
Our investment securities portfolio decreased $2.1 million, or 21.1% to $7.7 million at December 31, 2009 from $9.8 million at June 30, 2009. The decrease was attributable to maturities and normal repayments of principal on our mortgage-backed securities and collateralized mortgage obligations.
Our loan portfolio increased by $11.1 million, or 1.5% to $758.0 million at December 31, 2009 from $746.9 million at June 30, 2009 due primarily to an increase in multi-family loans. Multi-family loans increased $51.3 million, or 26.1% to $247.9 million at December 31, 2009 from $196.6 million at June 30, 2009. One-to-four family real estate loans decreased $23.8 million, or 6.3% to $353.4 million at December 31, 2009 from $377.2 million at June 30, 2009. Commercial real estate loans decreased $6.2 million, or 5.2% to $114.9 million at December 31, 2009 from $121.1 million at June 30, 2009. Other loans which are comprised primarily of automobile loans decreased $4.0 million, or 7.2% to $52.2 million at December 31, 2009 from $56.2 million at June 30, 2009. Real estate loans comprised 93.2% of the total loan portfolio at December 31, 2009, compared with 92.5% at June 30, 2009. The decrease in one-to-four family real estate loans and increase in multi-family loans was due to our focus on originating multi-family loans as a means of diversifying the loan portfolio.
Other assets increased by $4.4 million to $8.5 million at December 31, 2009 from $4.2 million at June 30, 2009. The increase in other assets was primarily a result of the FDIC prepayment of $3.5 million that was paid on the last day of the quarter.
Deposits.> Total deposits increased $58.0 million or 10.2% to $624.2 million at December 31, 2009 from $566.2 million at June 30, 2009. The growth was comprised of increases of $33.6 million in certificates of deposit, $11.3 million in money market accounts, and $13.1 million in checking and savings accounts. The increase in certificate of deposit accounts was a result of promotions for these types of accounts as well as an increase in individual retirement account balances. Money market accounts have steadily increased throughout the year. The increase in checking and savings balances was primarily a result of a third pay period experienced by a significant number of our customers on the last day of December.
Borrowings.> Advances from the FHLB of San Francisco decreased $60.0 million, or 29.0% to $147.0 million at December 31, 2009 from $207.0 million at June 30, 2009. The decline was the result of scheduled maturities in August and September 2009 and was funded with available liquidity as well as increased deposits. In addition $15.0 million was paid down on the outstanding State of California time deposit at maturity.
Stockholders’ Equity. >Stockholders’ equity decreased $322,000, to $92.2 million at December 31, 2009 from $92.6 million at June 30, 2009 primarily as a result of the payment of dividends of $928,000 ($0.22 per share) and stock repurchases of $114,000. This decrease was partially offset by $204,000 in net income for the six months ended December 31, 2009 and the allocation of ESOP shares, stock awards, and stock options earned totaling $533,000.
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Average Balances, Net Interest Income, Yields Earned and Rates Paid
The following table sets forth certain information for the quarter ended December 31, 2009 and 2008, respectively.