UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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FORM 10-Q
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[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended: September 30, 2011
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OR
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from __________ to __________
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PEOPLES BANCORP OF NORTH CAROLINA, INC.
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(Exact name of registrant as specified in its charter)
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North Carolina
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(State or other jurisdiction of incorporation or organization)
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000-27205
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56-2132396
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(Commission File No.)
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(IRS Employer Identification No.)
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518 West C Street, Newton, North Carolina
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28658
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(Address of principal executive offices)
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(Zip Code)
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(828) 464-5620
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(Registrant’s telephone number, including area code)
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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.
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Yes
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X |
No
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Yes
|
X |
No
|
Large Accelerate Filer
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Accelerated Filer
|
Non-Accelerated Filer
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Smaller Reporting Company
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X
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Yes
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No
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X |
INDEX
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PART I.
|
FINANCIAL INFORMATION
|
PAGE(S)
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|
Item 1.
|
Financial Statements
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||
Consolidated Balance Sheets at September 30, 2011 (Unaudited) and
|
|||
December 31, 2010
|
3
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||
Consolidated Statements of Earnings for the three and nine months ended
|
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September 30, 2011 and 2010 (Unaudited)
|
4
|
||
Consolidated Statements of Comprehensive Income for the three and nine
|
|||
months ended September 30, 2011 and 2010 (Unaudited)
|
5
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||
Consolidated Statements of Cash Flows for the nine months ended
|
|||
September 30, 2011 and 2010 (Unaudited)
|
6-7
|
||
Notes to Consolidated Financial Statements (Unaudited)
|
8-20
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||
Item 2.
|
Management's Discussion and Analysis of Financial Condition
|
||
and Results of Operations
|
21-35
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||
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
36
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|
Item 4T.
|
Controls and Procedures
|
37
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|
PART II.
|
OTHER INFORMATION
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||
Item 1.
|
Legal Proceedings
|
38
|
|
Item 1A.
|
Risk Factors
|
38
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
38
|
|
Item 3.
|
Defaults upon Senior Securities
|
38
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|
Item 5.
|
Other Information
|
38
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|
Item 6.
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Exhibits
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38-41
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|
Signatures
|
42
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||
Certifications
|
43-45
|
PART I.
|
FINANCIAL INFORMATION
|
|
Item 1.
|
Financial Statements
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
|||||
Consolidated Balance Sheets
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|||||
(Dollars in thousands)
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|||||
September 30,
|
December 31,
|
||||
Assets
|
2011
|
2010
|
|||
(Unaudited)
|
(Audited)
|
||||
Cash and due from banks, including reserve requirements
|
$ | 44,077 | 22,521 | ||
Interest bearing deposits
|
796 | 1,456 | |||
Cash and cash equivalents
|
44,873 | 23,977 | |||
Certificates of deposit
|
- | 735 | |||
Investment securities available for sale
|
325,730 | 272,449 | |||
Other investments
|
5,779 | 5,761 | |||
Total investment securities
|
331,509 | 278,210 | |||
Mortgage loans held for sale
|
2,148 | 3,814 | |||
Loans
|
677,665 | 726,160 | |||
Less allowance for loan losses
|
(16,348 | ) | (15,493 | ) | |
Net loans
|
661,317 | 710,667 | |||
Premises and equipment, net
|
17,074 | 17,334 | |||
Cash surrender value of life insurance
|
12,721 | 7,539 | |||
Other real estate
|
5,985 | 6,673 | |||
Accrued interest receivable and other assets
|
13,992 | 18,703 | |||
Total assets
|
$ | 1,089,619 | 1,067,652 | ||
Liabilities and Shareholders' Equity
|
|||||
Deposits:
|
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Non-interest bearing demand
|
$ | 136,154 | 114,792 | ||
NOW, MMDA & savings
|
354,048 | 332,511 | |||
Time, $100,000 or more
|
215,573 | 241,366 | |||
Other time
|
135,266 | 150,043 | |||
Total deposits
|
841,041 | 838,712 | |||
Demand notes payable to U.S. Treasury
|
1,096 | 1,600 | |||
Securities sold under agreement to repurchase
|
47,701 | 34,094 | |||
FHLB borrowings
|
70,000 | 70,000 | |||
Junior subordinated debentures
|
20,619 | 20,619 | |||
Accrued interest payable and other liabilities
|
6,212 | 5,769 | |||
Total liabilities
|
986,669 | 970,794 | |||
Commitments
|
|||||
Shareholders' equity:
|
|||||
Series A preferred stock, $1,000 stated value; authorized
|
|||||
5,000,000 shares; issued and outstanding
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25,054 shares in 2011 and 2010
|
24,722 | 24,617 | |||
Common stock, no par value; authorized
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20,000,000 shares; issued and outstanding
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5,542,703 shares in 2011 and 5,541,413 shares in 2010
|
48,289 | 48,281 | |||
Retained earnings
|
25,577 | 23,573 | |||
Accumulated other comprehensive income
|
4,362 | 387 | |||
Total shareholders' equity
|
102,950 | 96,858 | |||
Total liabilities and shareholders' equity
|
$ | 1,089,619 | 1,067,652 | ||
See accompanying notes to consolidated financial statements.
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
|||||||||
Consolidated Statements of Earnings
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|||||||||
(Dollars in thousands, except per share amounts)
|
|||||||||
Three months ended
|
Nine months ended
|
||||||||
September 30,
|
September 30,
|
||||||||
2011
|
2010
|
2011
|
2010
|
||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||
Interest income:
|
|||||||||
Interest and fees on loans
|
$ | 8,921 | 9,983 | 27,695 | 30,236 | ||||
Interest on investment securities:
|
|||||||||
U.S. Government sponsored enterprises
|
1,504 | 1,365 | 3,998 | 3,966 | |||||
States and political subdivisions
|
792 | 586 | 2,387 | 1,448 | |||||
Other
|
74 | 61 | 190 | 154 | |||||
Total interest income
|
11,291 | 11,995 | 34,270 | 35,804 | |||||
Interest expense:
|
|||||||||
NOW, MMDA & savings deposits
|
517 | 866 | 1,836 | 2,643 | |||||
Time deposits
|
1,221 | 1,637 | 3,901 | 5,259 | |||||
FHLB borrowings
|
761 | 803 | 2,258 | 2,505 | |||||
Junior subordinated debentures
|
100 | 112 | 300 | 310 | |||||
Other
|
74 | 98 | 231 | 306 | |||||
Total interest expense
|
2,673 | 3,516 | 8,526 | 11,023 | |||||
Net interest income
|
8,618 | 8,479 | 25,744 | 24,781 | |||||
Provision for loan losses
|
3,378 | 4,656 | 9,696 | 10,217 | |||||
Net interest income after provision for loan losses
|
5,240 | 3,823 | 16,048 | 14,564 | |||||
Non-interest income:
|
|||||||||
Service charges
|
1,273 | 1,435 | 3,845 | 4,195 | |||||
Other service charges and fees
|
493 | 523 | 1,603 | 1,684 | |||||
Other than temporary impairment losses
|
- | (100 | ) | - | (100 | ) | |||
Gain on sale of securities
|
1,239 | 1,623 | 2,495 | 1,791 | |||||
Mortgage banking income
|
127 | 125 | 531 | 372 | |||||
Insurance and brokerage commissions
|
121 | 84 | 350 | 275 | |||||
Miscellaneous
|
469 | 167 | 1,207 | 1,380 | |||||
Total non-interest income
|
3,722 | 3,857 | 10,031 | 9,597 | |||||
Non-interest expense:
|
|||||||||
Salaries and employee benefits
|
3,489 | 3,511 | 10,829 | 10,464 | |||||
Occupancy
|
1,334 | 1,334 | 4,030 | 3,986 | |||||
Other
|
2,341 | 2,337 | 7,083 | 6,978 | |||||
Total non-interest expense
|
7,164 | 7,182 | 21,942 | 21,428 | |||||
Earnings before income taxes
|
1,798 | 498 | 4,137 | 2,733 | |||||
Income tax expense (benefit)
|
406 | (42 | ) | 755 | 454 | ||||
Net earnings
|
1,392 | 540 | 3,382 | 2,279 | |||||
Dividends and accretion on preferred stock
|
348 | 348 | 1,045 | 1,045 | |||||
Net earnings available to common shareholders
|
$ | 1,044 | 192 | 2,337 | 1,234 | ||||
Basic net earnings per common share
|
$ | 0.19 | 0.03 | 0.42 | 0.22 | ||||
Diluted net earnings per common share
|
$ | 0.19 | 0.03 | 0.42 | 0.22 | ||||
Cash dividends declared per common share
|
$ | 0.02 | 0.02 | 0.04 | 0.06 | ||||
See accompanying notes to consolidated financial statements.
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
|||||||||
Consolidated Statements of Comprehensive Income
|
|||||||||
(Dollars in thousands)
|
|||||||||
Three months ended
|
Nine months ended
|
||||||||
September 30,
|
September 30,
|
||||||||
2011
|
2010
|
2011
|
2010
|
||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||
Net earnings
|
$ | 1,392 | 540 | 3,382 | 2,279 | ||||
Other comprehensive income:
|
|||||||||
Unrealized holding gains on securities
|
|||||||||
available for sale
|
3,612 | 3,251 | 9,653 | 5,914 | |||||
Reclassification adjustment for other than temporary
|
|||||||||
impairment losses included in net earnings
|
- | 100 | - | 100 | |||||
Reclassification adjustment for gains on
|
|||||||||
securities available for sale
|
|||||||||
included in net earnings
|
(1,239 | ) | (1,623 | ) | (2,495 | ) | (1,791 | ) | |
Unrealized holding losses on derivative
|
|||||||||
financial instruments qualifying as cash flow
|
|||||||||
hedges
|
- | (329 | ) | (648 | ) | (729 | ) | ||
Total other comprehensive income,
|
|||||||||
before income taxes
|
2,373 | 1,399 | 6,510 | 3,494 | |||||
Income tax expense related to other
|
|||||||||
comprehensive income:
|
|||||||||
Unrealized holding gains on securities
|
|||||||||
available for sale
|
1,407 | 1,266 | 3,760 | 2,304 | |||||
Reclassification adjustment for gains net of
|
|||||||||
write downs of securities available for sale
|
|||||||||
included in net earnings
|
(483 | ) | (593 | ) | (972 | ) | (659 | ) | |
Unrealized holding losses on derivative
|
|||||||||
financial instruments qualifying as cash flow
|
|||||||||
hedges
|
- | (128 | ) | (253 | ) | (284 | ) | ||
Total income tax expense related to
|
|||||||||
other comprehensive income
|
924 | 545 | 2,535 | 1,361 | |||||
Total other comprehensive income,
|
|||||||||
net of tax
|
1,449 | 854 | 3,975 | 2,133 | |||||
Total comprehensive income
|
$ | 2,841 | 1,394 | 7,357 | 4,412 | ||||
See accompanying notes to consolidated financial statements.
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
|||||
Consolidated Statements of Cash Flows
|
|||||
Nine months ended September 30, 2011 and 2010
|
|||||
(Dollars in thousands)
|
|||||
2011
|
2010
|
||||
(Unaudited)
|
(Unaudited)
|
||||
Cash flows from operating activities:
|
|||||
Net earnings
|
$ | 3,382 | 2,279 | ||
Adjustments to reconcile net earnings to
|
|||||
net cash provided by operating activities:
|
|||||
Depreciation, amortization and accretion
|
3,915 | 3,519 | |||
Provision for loan losses
|
9,696 | 10,217 | |||
Gain on sale of investment securities
|
(2,495 | ) | (1,791 | ) | |
Write-down of investment securities
|
- | 100 | |||
Loss/(Gain) on sale of other real estate and repossessions
|
181 | (198 | ) | ||
Write-down of other real estate and repossessions
|
845 | 895 | |||
Restricted stock expense
|
5 | 7 | |||
Change in:
|
|||||
Mortgage loans held for sale
|
1,666 | 726 | |||
Cash surrender value of life insurance
|
(182 | ) | (193 | ) | |
Other assets
|
1,546 | (643 | ) | ||
Other liabilities
|
438 | (357 | ) | ||
Net cash provided by operating activities
|
18,997 | 14,561 | |||
Cash flows from investing activities:
|
|||||
Net change in certificates of deposit
|
735 | 2,610 | |||
Purchases of investment securities available for sale
|
(158,631 | ) | (133,646 | ) | |
Proceeds from calls, maturities and paydowns of investment securities
|
|||||
available for sale
|
39,813 | 77,070 | |||
Proceeds from sale of investment securities available for sale
|
72,292 | 28,077 | |||
Purchases of other investments
|
(215 | ) | - | ||
Proceeds from sale of other investments
|
197 | 393 | |||
Net change in loans
|
36,659 | 22,338 | |||
Purchases of premises and equipment
|
(775 | ) | (1,148 | ) | |
Purchase of bank owned life insurance | (5,000) | - | |||
Proceeds from sale of other real estate and repossessions
|
2,656 | 4,681 | |||
Net cash (used) provided by investing activities
|
(12,269 | ) | 375 | ||
Cash flows from financing activities:
|
|||||
Net change in deposits
|
2,329 | 32,962 | |||
Net change in demand notes payable to U.S. Treasury
|
(504 | ) | (284 | ) | |
Net change in securities sold under agreement to repurchase
|
13,607 | 4,634 | |||
Proceeds from FHLB borrowings
|
5,000 | - | |||
Repayments of FHLB borrowings
|
(5,000 | ) | (7,000 | ) | |
Restricted stock payout
|
9 | - | |||
Cash dividends paid on Series A preferred stock
|
(940 | ) | (940 | ) | |
Cash dividends paid on common stock
|
(333 | ) | (337 | ) | |
Net cash provided by financing activities
|
14,168 | 29,035 | |||
Net change in cash and cash equivalent
|
20,896 | 43,971 | |||
Cash and cash equivalents at beginning of period
|
23,977 | 31,340 | |||
Cash and cash equivalents at end of period
|
$ | 44,873 | 75,311 |
PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
|||||
Consolidated Statements of Cash Flows, continued
|
|||||
Nine months ended September 30, 2011 and 2010
|
|||||
(Dollars in thousands)
|
|||||
2011
|
2010
|
||||
(Unaudited)
|
(Unaudited)
|
||||
Supplemental disclosures of cash flow information:
|
|||||
Cash paid during the year for:
|
|||||
Interest
|
$ | 8,613 | 11,146 | ||
Income taxes
|
$ | 132 | 1,700 | ||
Noncash investing and financing activities:
|
|||||
Change in unrealized gain on investment securities
|
|||||
available for sale, net
|
$ | (4,370 | ) | (2,578 | ) |
Change in unrealized gain on derivative financial
|
|||||
instruments, net
|
$ | 395 | 445 | ||
Transfer of loans to other real estate and repossessions
|
$ | 7,041 | 6,189 | ||
Financed portion of sale of other real estate
|
$ | 4,047 | 1,703 | ||
Accretion of Series A preferred stock
|
$ | 106 | 106 | ||
See accompanying notes to consolidated financial statements.
|
(Dollars in thousands)
|
||||||||
September 30, 2011
|
||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated Fair
Value
|
|||||
Mortgage-backed securities
|
$ | 198,755 | 2,422 | 350 | 200,827 | |||
U.S. Government
|
||||||||
sponsored enterprises
|
24,715 | 886 | - | 25,601 | ||||
State and political subdivisions
|
92,971 | 4,219 | 35 | 97,155 | ||||
Trust preferred securities
|
1,250 | - | - | 1,250 | ||||
Equity securities
|
893 | 186 | 182 | 897 | ||||
Total
|
$ | 318,584 | 7,713 | 567 | 325,730 | |||
(Dollars in thousands)
|
||||||||
December 31, 2010
|
||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated Fair
Value
|
|||||
Mortgage-backed securities
|
$ | 137,811 | 2,119 | 569 | 139,361 | |||
U.S. Government
|
||||||||
sponsored enterprises
|
42,933 | 393 | 686 | 42,640 | ||||
State and political subdivisions
|
89,486 | 793 | 2,450 | 87,829 | ||||
Trust preferred securities
|
1,250 | - | - | 1,250 | ||||
Equity securities
|
982 | 387 | - | 1,369 | ||||
Total
|
$ | 272,462 | 3,692 | 3,705 | 272,449 |
(Dollars in thousands)
|
||||||||||||
September 30, 2011
|
||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
|||||||
Mortgage-backed securities
|
$ | 49,699 | 325 | 1,060 | 25 | 50,759 | 350 | |||||
State and political subdivisions
|
4,736 | 34 | 1,027 | 1 | 5,763 | 35 | ||||||
Equity securities
|
- | - | 226 | 182 | 226 | 182 | ||||||
Total
|
$ | 54,435 | 359 | 2,313 | 208 | 56,748 | 567 |
(Dollars in thousands)
|
||||||||||||
December 31, 2010
|
||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
Fair Value
|
Unrealized Losses
|
|||||||
Mortgage-backed securities
|
$ | 59,471 | 569 | - | - | 59,471 | 569 | |||||
U.S. Government
|
||||||||||||
sponsored enterprises
|
24,123 | 686 | - | - | 24,123 | 686 | ||||||
State and political subdivisions
|
56,374 | 2,450 | - | - | 56,374 | 2,450 | ||||||
Total
|
$ | 139,968 | 3,705 | - | - | 139,968 | 3,705 |
(Dollars in thousands)
|
||||
Amortized
Cost
|
Estimated Fair
Value
|
|||
Due within one year
|
$ | 4,651 | 4,722 | |
Due from one to five years
|
29,678 | 30,716 | ||
Due from five to ten years
|
71,327 | 74,437 | ||
Due after ten years
|
13,280 | 14,131 | ||
Mortgage-backed securities
|
198,755 | 200,827 | ||
Equity securities
|
893 | 897 | ||
Total
|
$ | 318,584 | 325,730 |
(Dollars in thousands)
|
||||
September 30, 2011
|
December 31, 2010
|
|||
Real estate loans
|
||||
Construction and land development
|
$ | 103,901 | 124,048 | |
Single-family residential
|
271,019 | 287,307 | ||
Commercial
|
211,352 | 213,487 | ||
Multifamily and farmland
|
4,923 | 6,456 | ||
Total real estate loans
|
591,195 | 631,298 | ||
Commercial loans (not secured by real estate)
|
53,082 | 60,994 | ||
Consumer loans (not secured by real estate)
|
10,634 | 11,500 | ||
All other loans (not secured by real estate)
|
22,754 | 22,368 | ||
Total loans
|
677,665 | 726,160 | ||
Less allowance for loan losses
|
16,348 | 15,493 | ||
Total net loans
|
$ | 661,317 | 710,667 |
September 30, 2011
|
||||||||||||
(Dollars in thousands)
|
||||||||||||
Loans 30-89
Days Past
Due
|
Loans 90 or
More Days
Past Due
|
Total Past
Due
Loans
|
Total
Current
Loans
|
Total Loans
|
Accruing
Loans 90 or
More Days
Past Due
|
|||||||
Real estate loans
|
||||||||||||
Construction and land development
|
$ | 1,138 | 3,636 | 4,774 | 99,127 | 103,901 | - | |||||
Single-family residential
|
8,170 | 4,490 | 12,660 | 258,359 | 271,019 | 1,411 | ||||||
Commercial
|
1,367 | 1,962 | 3,329 | 208,023 | 211,352 | - | ||||||
Multifamily and farmland
|
215 | - | 215 | 4,708 | 4,923 | - | ||||||
Total real estate loans
|
10,890 | 10,088 | 20,978 | 570,217 | 591,195 | 1,411 | ||||||
Commercial loans (not secured by real estate)
|
306 | 35 | 341 | 52,741 | 53,082 | - | ||||||
Consumer loans (not secured by real estate)
|
123 | 6 | 129 | 10,505 | 10,634 | - | ||||||
All other loans (not secured by real estate)
|
- | - | - | 22,754 | 22,754 | - | ||||||
Total loans
|
$ | 11,319 | 10,129 | 21,448 | 656,217 | 677,665 | 1,411 |
December 31, 2010
|
||||||||||||
(Dollars in thousands)
|
||||||||||||
Loans 30-89
Days Past
Due
|
Loans 90 or
More Days
Past Due
|
Total Past
Due
Loans
|
Total
Current
Loans
|
Total Loans
|
Accruing
Loans 90 or
More Days
Past Due
|
|||||||
Real estate loans
|
||||||||||||
Construction and land development
|
$ | 2,306 | 8,870 | 11,176 | 112,872 | 124,048 | 197 | |||||
Single-family residential
|
19,377 | 5,936 | 25,313 | 261,994 | 287,307 | - | ||||||
Commercial
|
382 | 1,482 | 1,864 | 211,623 | 213,487 | - | ||||||
Multifamily and farmland
|
- | - | - | 6,456 | 6,456 | - | ||||||
Total real estate loans
|
22,065 | 16,288 | 38,353 | 592,945 | 631,298 | 197 | ||||||
Commercial loans (not secured by real estate)
|
1,098 | 720 | 1,818 | 59,176 | 60,994 | 13 | ||||||
Farm loans (not secured by real estate)
|
- | - | - | - | - | - | ||||||
Consumer loans (not secured by real estate)
|
98 | 13 | 111 | 11,389 | 11,500 | - | ||||||
All other loans (not secured by real estate)
|
- | - | - | 22,368 | 22,368 | - | ||||||
Total loans
|
$ | 23,261 | 17,021 | 40,282 | 685,878 | 726,160 | 210 |
(Dollars in thousands)
|
||||
September 30, 2011
|
December 31, 2010
|
|||
Real estate loans
|
||||
Construction and land development
|
$ | 17,088 | 22,916 | |
Single-family residential
|
5,665 | 10,837 | ||
Commercial
|
4,174 | 5,351 | ||
Multifamily and farmland
|
- | - | ||
Total real estate loans
|
26,927 | 39,104 | ||
Commercial loans (not secured by real estate)
|
437 | 816 | ||
Consumer loans (not secured by real estate)
|
127 | 142 | ||
All other loans (not secured by real estate)
|
- | - | ||
Total
|
$ | 27,491 | 40,062 |
September 30, 2011
|
||||||||||||
(Dollars in thousands)
|
||||||||||||
Unpaid
Contractual Principal
Balance
|
Recorded Investment
With No Allowance
|
Recorded Investment
With
Allowance
|
Recorded Investment
in Impaired
Loans
|
Related Allowance
|
Average Outstanding Impaired
Loans
|
|||||||
Real estate loans
|
||||||||||||
Construction and land development
|
$ | 27,114 | 17,088 | - | 17,088 | - | 19,753 | |||||
Single-family residential
|
6,792 | 5,148 | 517 | 5,665 | 1,316 | 7,846 | ||||||
Commercial
|
5,237 | 3,196 | 978 | 4,174 | 1 | 4,482 | ||||||
Multifamily and farmland
|
- | - | - | - | - | - | ||||||
Total impaired real estate loans
|
39,143 | 25,432 | 1,495 | 26,927 | 1,317 | 32,081 | ||||||
Commercial loans (not secured by real estate)
|
494 | 437 | - | 437 | - | 631 | ||||||
Consumer loans (not secured by real estate)
|
143 | 127 | - | 127 | - | 138 | ||||||
All other loans (not secured by real estate)
|
- | - | - | - | - | - | ||||||
Total impaired loans
|
$ | 39,780 | 25,996 | 1,495 | 27,491 | 1,317 | 32,850 |
December 31, 2010
|
||||||||||||
(Dollars in thousands)
|
||||||||||||
Unpaid
Contractual Principal
Balance
|
Recorded Investment
With No Allowance
|
Recorded Investment
With
Allowance
|
Recorded Investment
in Impaired
Loans
|
Related Allowance
|
Average Outstanding Impaired
Loans
|
|||||||
Real estate loans
|
||||||||||||
Construction and land development
|
31,346 | 20,787 | 2,130 | 22,916 | 1,055 | 18,767 | ||||||
Single-family residential
|
12,376 | 9,847 | 990 | 10,837 | 168 | 12,573 | ||||||
Commercial
|
6,018 | 4,991 | 359 | 5,351 | 148 | 4,769 | ||||||
Multifamily and Farmland
|
- | - | - | - | - | 27 | ||||||
Total impaired real estate loans
|
49,740 | 35,625 | 3,479 | 39,104 | 1,371 | 36,136 | ||||||
Commercial loans (not secured by real estate)
|
1,243 | 811 | 5 | 816 | 5 | 1,479 | ||||||
Farm loans (non RE)
|
- | |||||||||||
Consumer loans (not secured by real estate)
|
152 | 142 | - | 142 | - | 79 | ||||||
All other loans (not secured by real estate)
|
- | - | - | - | - | |||||||
Total impaired loans
|
$ | 51,135 | 36,578 | 3,484 | 40,062 | 1,376 | 37,694 |
(Dollars in thousands)
|
|||||||||||||||||
Real Estate Loans
|
|||||||||||||||||
Construction and land development
|
Single-
family residential
|
Commercial
|
Multifamily
and
farmland
|
Commercial
|
Consumer
|
Unallocated
|
Total
|
||||||||||
Allowance for loan losses:
|
|||||||||||||||||
Beginning balance
|
$ | 5,774 | 6,097 | 1,409 | 17 | 1,174 | 430 | 592 | 15,493 | ||||||||
Charge-offs
|
(5,028 | ) | (2,579 | ) | (1,180 | ) | - | (313 | ) | (434 | ) | - | (9,534 | ) | |||
Recoveries
|
235 | 198 | 23 | - | 114 | 122 | - | 693 | |||||||||
Provision
|
5,134 | 2,400 | 1,404 | (4 | ) | 23 | 173 | 566 | 9,696 | ||||||||
Ending balance
|
$ | 6,115 | 6,116 | 1,656 | 13 | 998 | 292 | 1,158 | 16,348 | ||||||||
Ending balance: Individually
|
|||||||||||||||||
evaluated for impairment
|
$ | - | 1,316 | 1 | - | - | - | - | 1,317 | ||||||||
Ending balance: Collectively
|
|||||||||||||||||
evaluated for impairment
|
6,115 | 4,800 | 1,655 | 13 | 998 | 292 | 1,158 | 15,031 | |||||||||
Ending balance
|
$ | 6,115 | 6,116 | 1,656 | 13 | 998 | 292 | 1,158 | 16,348 |
·
|
Risk Grade 1 – Excellent Quality: Loans are well above average quality and a minimal amount of credit risk exists. CD or cash secured loans or properly margined actively traded stock or bond secured loans would fall in this grade.
|
·
|
Risk Grade 2 – High Quality: Loans are of good quality with risk levels well within the Company’s range of acceptability. The organization or individual is established with a history of successful performance though somewhat susceptible to economic changes.
|
·
|
Risk Grade 3 – Good Quality: Loans of average quality with risk levels within the Company’s range of acceptability but higher than normal. This may be a new organization or an existing organization in a transitional phase (e.g. expansion, acquisition, market change).
|
·
|
Risk Grade 4 – Management Attention: These loans have very high risk and servicing needs but still are acceptable. Evidence of marginal performance or deteriorating trends are evident. These are not problem credits presently, but may be in the future if the borrower is unable to change its present course.
|
·
|
Risk Grade 5 – Watch: These loans are currently performing satisfactorily, but there are potential weaknesses that may, if not corrected, weaken the asset or inadequately protect the Company’s position at some future date. This frequently results from deviating from prudent lending practices, for instance over-advancing on collateral.
|
·
|
Risk Grade 6 – Substandard: A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged (if there is any). There is a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. There is a distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
|
·
|
Risk Grade 7 – Low Substandard: These loans have the general characteristics of a Grade 6 Substandard loan, with heightened potential concerns. The exact amount of loss is not yet known because neither the liquidation value of the collateral nor the borrower’s predicted repayment ability is known with confidence.
|
·
|
Risk Grade 8 – Doubtful: Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable. Doubtful is a temporary grade where a loss is expected but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is charged off.
|
·
|
Risk Grade 9 – Loss: Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be realized in the future. Loss is a temporary grade until the appropriate authority is obtained to charge the loan off.
|
September 30, 2011
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Real Estate Loans
|
||||||||||||||||
Construction
and land development
|
Single-
family residential
|
Commercial
|
Multifamily
and
farmland
|
Commercial
|
Consumer
|
All other
|
Total
|
|||||||||
1- Excellent Quality
|
$ | 199 | 21,428 | - | - | 738 | 1,075 | - | 23,440 | |||||||
2- High Quality
|
$ | 5,088 | 65,657 | 21,969 | 134 | 10,410 | 4,201 | 3,298 | 110,757 | |||||||
3- Good Quality
|
$ | 27,736 | 108,619 | 137,239 | 3,482 | 33,647 | 4,711 | 19,449 | 334,883 | |||||||
4- Management Attention
|
$ | 45,272 | 52,572 | 40,570 | 365 | 6,847 | 501 | 7 | 146,134 | |||||||
5- Watch
|
$ | 6,037 | 9,833 | 1,898 | 727 | 499 | 9 | - | 19,003 | |||||||
6- Substandard
|
$ | 19,569 | 12,910 | 9,676 | 215 | 941 | 137 | - | 43,448 | |||||||
7- Low Substandard
|
$ | - | - | - | - | - | - | - | - | |||||||
8- Doubtful
|
$ | - | - | - | - | - | - | - | - | |||||||
9- Loss
|
$ | - | - | - | - | - | - | - | - | |||||||
Total
|
$ | 103,901 | 271,019 | 211,352 | 4,923 | 53,082 | 10,634 | 22,754 | 677,665 |
December 31, 2010
|
||||||||||||||||
(Dollars in thousands)
|
||||||||||||||||
Real Estate Loans
|
||||||||||||||||
Construction
and land development
|
Single-
family residential
|
Commercial
|
Multifamily
and
farmland
|
Commercial
|
Consumer
|
All other
|
Total
|
|||||||||
1- Excellent Quality
|
$ | 19 | 27,698 | 102 | - | 630 | 1,006 | - | 29,455 | |||||||
2- High Quality
|
$ | 5,789 | 70,990 | 21,591 | 2,856 | 9,673 | 4,491 | 5,145 | 120,535 | |||||||
3- Good Quality
|
$ | 33,991 | 109,800 | 129,530 | 2,256 | 39,248 | 5,360 | 17,223 | 337,408 | |||||||
4- Management Attention
|
$ | 46,283 | 55,001 | 43,731 | 1,121 | 8,143 | 454 | 154,733 | ||||||||
5- Watch
|
$ | 8,076 | 7,959 | 5,569 | - | 1,590 | 38 | 23,232 | ||||||||
6- Substandard
|
$ | 29,502 | 15,022 | 12,605 | 223 | 1,678 | 145 | 59,175 | ||||||||
7- Low Substandard
|
$ | - | 756 | 359 | - | - | - | 1,115 | ||||||||
8- Doubtful
|
$ | 388 | 81 | - | - | 17 | - | 486 | ||||||||
9- Loss
|
$ | - | - | - | - | 15 | 6 | - | 21 | |||||||
Total
|
$ | 124,048 | 287,307 | 213,487 | 6,456 | 60,994 | 11,500 | 22,368 | 726,160 |
(Dollars in thousands)
|
||||||
Number of Contracts
|
Pre-Modification Outstanding
Recorded
Investment
|
Post-Modification Outstanding
Recorded
Investment
|
||||
Real estate loans
|
||||||
Construction and land development
|
31 | $ | 24,708 | 17,311 | ||
Single-family residential
|
240 | 26,285 | 24,955 | |||
Commercial
|
18 | 8,695 | 4,783 | |||
Multifamily and farmland
|
1 | 322 | 215 | |||
Total real estate TDR loans
|
290 | 60,010 | 47,264 | |||
Commercial loans (not secured by real estate)
|
22 | 1,776 | 1,157 | |||
Consumer loans (not secured by real estate)
|
8 | 142 | 127 | |||
All other loans (not secured by real estate)
|
- | - | - | |||
Total TDR loans
|
320 | $ | 61,928 | 48,548 |
For the three months ended September 30, 2011
|
|||||||
Net Earnings Available to
Common Shareholders
(Dollars in thousands)
|
Common Shares
|
Per Share Amount
|
|||||
Basic earnings per common share
|
$ | 1,044 | 5,542,703 | $ | 0.19 | ||
Effect of dilutive securities:
|
|||||||
Stock options
|
- | 1,922 | |||||
Diluted earnings per common share
|
$ | 1,044 | 5,544,625 | $ | 0.19 |
For the nine months ended September 30, 2011
|
|||||||
Net Earnings Available to
Common
Shareholders
(Dollars in thousands)
|
Common Shares
|
Per Share Amount
|
|||||
Basic earnings per common share
|
$ | 2,337 | 5,542,126 | $ | 0.42 | ||
Effect of dilutive securities:
|
|||||||
Stock options
|
- | 1,739 | |||||
Diluted earnings per common share
|
$ | 2,337 | 5,543,865 | $ | 0.42 |
For the three months ended September 30, 2010
|
|||||||
Net Earnings Available to
Common
Shareholders
(Dollars in
thousands)
|
Common Shares
|
Per Share Amount
|
|||||
Basic earnings per common share
|
$ | 192 | 5,539,056 | $ | 0.03 | ||
Effect of dilutive securities:
|
|||||||
Stock options
|
- | 2,768 | |||||
Diluted earnings per common share
|
$ | 192 | 5,541,824 | $ | 0.03 |
For the nine months ended September 30, 2010
|
|||||||
Net Earnings Available to
Common
Shareholders
(Dollars in
thousands)
|
Common Shares
|
Per Share Amount
|
|||||
Basic earnings per common share
|
$ | 1,234 | 5,539,056 | $ | 0.22 | ||
Effect of dilutive securities:
|
|||||||
Stock options
|
- | 4,480 | |||||
Diluted earnings per common share
|
$ | 1,234 | 5,543,536 | $ | 0.22 |
(Dollars in thousands)
|
||||||||
Fair Value
Measurements
September 30, 2011
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
|||||
Mortgage-backed securities
|
$ | 200,827 | - | 200,827 | - | |||
U.S. government
|
||||||||
sponsored enterprises
|
$ | 25,601 | - | 25,601 | - | |||
State and political subdivisions
|
$ | 97,155 | - | 97,155 | - | |||
Trust preferred securities
|
$ | 1,250 | - | - | 1,250 | |||
Equity securities
|
$ | 897 | 897 | - | - | |||
Mortgage loans held for sale
|
$ | 2,148 | - | 2,148 | - |
(Dollars in thousands)
|
||||||||
Fair Value
Measurements
December 31, 2010
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
|||||
Mortgage-backed securities
|
$ | 139,361 | - | 139,361 | - | |||
U.S. government
|
||||||||
sponsored enterprises
|
$ | 42,640 | - | 42,640 | - | |||
State and political subdivisions
|
$ | 87,829 | - | 87,829 | - | |||
Trust preferred securities
|
$ | 1,250 | - | - | 1,250 | |||
Equity securities
|
$ | 1,369 | 1,369 | - | - | |||
Mortgage loans held for sale
|
$ | 3,814 | - | 3,814 | - | |||
Market value of derivatives (in other assets)
|
$ | 648 | - | 648 | - |
(Dollars in thousands)
|
||
Investment Securities Available for Sale
|
||
Level 3 Valuation
|
||
Balance, beginning of period
|
$ | 1,250 |
Change in book value
|
- | |
Change in gain/(loss) realized and unrealized
|
- | |
Purchases/(sales)
|
- | |
Transfers in and/or out of Level 3
|
- | |
Balance, end of period
|
$ | 1,250 |
Change in unrealized gain/(loss) for assets still held in Level 3
|
$ | - |
(Dollars in thousands)
|
||||||||||
Fair Value
Measurements
September 30, 2011
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
Total Gains/(Losses) for
the Nine Months Ended
September 30, 2011
|
||||||
Impaired loans
|
$ | 27,491 | - | 19,040 | 8,451 | (9,696) | ||||
Other real estate
|
$ | 5,985 | - | 5,985 | - | (1,026) | ||||
(Dollars in thousands)
|
||||||||||
Fair Value
Measurements
December 31, 2010
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
Total Gains/(Losses) for
the Year Ended December
31, 2010
|
||||||
Impaired loans
|
$ | 40,062 | - | 26,798 | 13,264 | (10,591) | ||||
Other Real Estate
|
$ | 6,673 | - | 6,673 | - | (340) |
(Dollars in thousands)
|
||||||||
September 30, 2011
|
December 31, 2010
|
|||||||
Carrying Amount
|
Estimated
Fair Value
|
Carrying
Amount
|
Estimated
Fair Value
|
|||||
Assets:
|
||||||||
Cash and cash equivalents
|
$ | 44,873 | 44,873 | 23,977 | 23,977 | |||
Certificates of deposit
|
- | - | 735 | 735 | ||||
Investment securities available for sale
|
325,730 | 325,730 | 272,449 | 272,449 | ||||
Other investments
|
5,779 | 5,779 | 5,761 | 5,761 | ||||
Mortgage loans held for sale
|
2,148 | 2,148 | 3,814 | 3,814 | ||||
Loans, net
|
661,317 | 657,056 | 710,667 | 710,880 | ||||
Cash surrender value of life insurance
|
12,721 | 12,721 | 7,539 | 7,539 | ||||
Derivative instruments
|
- | - | 648 | 648 | ||||
Liabilities:
|
||||||||
Deposits and demand notes payable
|
$ | 841,041 | 843,207 | 840,312 | 839,379 | |||
Securities sold under agreements
|
||||||||
to repurchase
|
47,701 | 47,701 | 34,094 | 34,094 | ||||
FHLB borrowings
|
70,000 | 79,579 | 70,000 | 79,950 | ||||
Junior subordinated debentures
|
20,619 | 20,619 | 20,619 | 20,619 |
(Dollars in thousands)
|
|||||||||
Asset Derivatives
|
|||||||||
As of September 30, 2011
|
As of December 31, 2010
|
||||||||
Balance Sheet
Location
|
Fair Value
|
Balance Sheet
Location
|
Fair Value
|
||||||
Interest rate derivative contracts
|
Other assets
|
$ | - |
Other assets
|
$ | 648 |
(Dollars in thousands) | ||||||||||||||
Location of Gain | Amount of Gain | |||||||||||||
Amount of Gain | (Loss) Reclassified | (Loss) Reclassified | ||||||||||||
(Loss) Recognized in | from Accumulated | from Accumulated | ||||||||||||
OCI on Derivatives | OCI into Earnings | OCI into Earnings | ||||||||||||
Nine months ended | Nine months ended | |||||||||||||
September 30, | September 30, | |||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||
Interest rate derivative contracts | $ | (20) | $ | 407 | Interest income | $ | 628 | $ | 1,136 |
(Dollars in thousands)
|
|||||||||
Asset Derivatives
|
|||||||||
As of September 30, 2011
|
As of December 31, 2010
|
||||||||
Balance Sheet
Location
|
Fair Value
|
Balance Sheet
Location
|
Fair Value
|
||||||
Interest rate derivative contracts
|
Other assets
|
$ | - |
Other assets
|
$ | 648 |
(Dollars in thousands)
|
||||||||||||||
Location of Gain
|
Amount of Gain
|
|||||||||||||
Amount of Gain
|
(Loss) Reclassified
|
(Loss) Reclassified
|
||||||||||||
(Loss) Recognized in
|
from Accumulated
|
from Accumulated
|
||||||||||||
OCI on Derivatives
|
OCI into Earnings
|
OCI into Earnings
|
||||||||||||
Nine months ended
|
Nine months ended
|
|||||||||||||
September 30,
|
September 30,
|
|||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||
Interest rate derivative contracts
|
$
|
(20)
|
$
|
407
|
Interest income
|
$
|
628
|
$
|
1,136
|
(Dollars in thousands)
|
||||||||
Fair Value
Measurements
September 30, 2011
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
|||||
Mortgage-backed securities
|
$ | 200,827 | - | 200,827 | - | |||
U.S. government
|
||||||||
sponsored enterprises
|
$ | 25,601 | - | 25,601 | - | |||
State and political subdivisions
|
$ | 97,155 | - | 97,155 | - | |||
Trust preferred securities
|
$ | 1,250 | - | - | 1,250 | |||
Equity securities
|
$ | 897 | 897 | - | - | |||
Mortgage loans held for sale
|
$ | 2,148 | - | 2,148 | - |
(Dollars in thousands)
|
||||||||
Fair Value
Measurements
December 31, 2010
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
|||||
Mortgage-backed securities
|
$ | 139,361 | - | 139,361 | - | |||
U.S. government
|
||||||||
sponsored enterprises
|
$ | 42,640 | - | 42,640 | - | |||
State and political subdivisions
|
$ | 87,829 | - | 87,829 | - | |||
Trust preferred securities
|
$ | 1,250 | - | - | 1,250 | |||
Equity securities
|
$ | 1,369 | 1,369 | - | - | |||
Mortgage loans held for sale
|
$ | 3,814 | - | 3,814 | - | |||
Market value of derivatives (in other assets)
|
$ | 648 | - | 648 | - |
(Dollars in thousands)
|
||
Investment Securities Available for Sale
|
||
Level 3 Valuation
|
||
Balance, beginning of period
|
$ | 1,250 |
Change in book value
|
- | |
Change in gain/(loss) realized and unrealized
|
- | |
Purchases/(sales)
|
- | |
Transfers in and/or out of Level 3
|
- | |
Balance, end of period
|
$ | 1,250 |
Change in unrealized gain/(loss) for assets still held in Level 3
|
$ | - |
(Dollars in thousands)
|
||||||||||
Fair Value
Measurements
September 30, 2011
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
Total Gains/(Losses) for the
Nine Months Ended
September 30, 2011
|
||||||
Impaired loans
|
$ | 27,491 | - | 19,040 | 8,451 | (9,696) | ||||
Other real estate
|
$ | 5,985 | - | 5,985 | - | (1,026) |
(Dollars in thousands)
|
||||||||||
Fair Value
Measurements
December 31, 2010
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
Total Gains/(Losses) for the
Year Ended December 31,
2010
|
||||||
Impaired loans
|
$ | 40,062 | - | 26,798 | 13,264 | (10,591) | ||||
Other Real Estate
|
$ | 6,673 | - | 6,673 | - | (340) |
Three months ended
|
Three months ended
|
|||||||||||
September 30, 2011
|
September 30, 2010
|
|||||||||||
(Dollars in thousands)
|
Average
Balance
|
Interest
|
Yield /
Rate
|
Average
Balance
|
Interest
|
Yield /
Rate
|
||||||
Interest-earning assets:
|
||||||||||||
Interest and fees on loans
|
$ | 687,086 | 8,921 | 5.15% | 752,475 | 9,983 | 5.26% | |||||
Investments - taxable
|
179,270 | 1,321 | 2.92% | 115,638 | 980 | 3.36% | ||||||
Investments - nontaxable*
|
134,529 | 1,452 | 4.28% | 119,181 | 1,349 | 4.49% | ||||||
Other
|
15,176 | 20 | 0.53% | 16,976 | 25 | 0.59% | ||||||
Total interest-earning assets
|
1,016,061 | 11,714 | 4.57% | 1,004,270 | 12,337 | 4.87% | ||||||
Cash and due from banks
|
24,003 | 43,627 | ||||||||||
Other assets
|
50,967 | 50,533 | ||||||||||
Allowance for loan losses
|
(16,192 | ) | (17,712 | ) | ||||||||
Total assets
|
$ | 1,074,839 | 1,080,718 | |||||||||
Interest-bearing liabilities:
|
||||||||||||
NOW, MMDA & savings deposits
|
$ | 347,308 | 517 | 0.59% | 317,628 | 866 | 1.08% | |||||
Time deposits
|
347,187 | 1,221 | 1.40% | 401,710 | 1,637 | 1.62% | ||||||
FHLB borrowings
|
70,000 | 761 | 4.31% | 70,000 | 803 | 4.55% | ||||||
Demand notes payable to U.S. Treasury
|
764 | - | 0.00% | 903 | - | 0.00% | ||||||
Trust preferred securities
|
20,619 | 100 | 1.92% | 20,619 | 112 | 2.16% | ||||||
Other
|
47,145 | 74 | 0.63% | 41,719 | 98 | 0.93% | ||||||
Total interest-bearing liabilities
|
833,023 | 2,673 | 1.27% | 852,579 | 3,516 | 1.64% | ||||||
Demand deposits
|
135,835 | 121,648 | ||||||||||
Other liabilities
|
4,327 | 3,527 | ||||||||||
Shareholders' equity
|
101,937 | 102,744 | ||||||||||
Total liabilities and shareholder's equity
|
$ | 1,075,122 | 1,080,498 | |||||||||
Net interest spread
|
9,041 | 3.30% | 8,821 | 3.23% | ||||||||
Net yield on interest-earning assets
|
3.53% | 3.48% | ||||||||||
Taxable equivalent adjustment
|
||||||||||||
Investment securities
|
423 | 342 | ||||||||||
Net interest income
|
8,618 | 8,479 | ||||||||||
*Includes U.S. government agency securities that are non-taxable for state income tax purposes of $134.5 million in 2011 and $119.2 million in 2010. An effective tax rate of 6.90% was used to calculate the tax equivalent yield on these securities.
|
Nine months ended
|
Nine months ended
|
|||||||||||
September 30, 2011
|
September 30, 2010
|
|||||||||||
(Dollars in thousands)
|
Average
Balance
|
Interest
|
Yield /
Rate
|
Average
Balance
|
Interest
|
Yield /
Rate
|
||||||
Interest-earning assets:
|
||||||||||||
Interest and fees on loans
|
$ | 704,263 | 27,695 | 5.26% | 762,692 | 30,236 | 5.30% | |||||
Investments - taxable
|
153,063 | 3,317 | 2.90% | 108,323 | 2,701 | 3.33% | ||||||
Investments - nontaxable*
|
136,525 | 4,487 | 4.39% | 103,725 | 3,690 | 4.76% | ||||||
Federal funds sold
|
- | - | 0.00% | 119 | - | 0.00% | ||||||
Other
|
19,278 | 63 | 0.44% | 17,520 | 68 | 0.52% | ||||||
Total interest-earning assets
|
1,013,129 | 35,562 | 4.69% | 992,379 | 36,695 | 4.94% | ||||||
Cash and due from banks
|
23,700 | 48,652 | ||||||||||
Other assets
|
49,628 | 49,922 | ||||||||||
Allowance for loan losses
|
(15,655 | ) | (16,906 | ) | ||||||||
Total assets
|
$ | 1,070,802 | 1,074,047 | |||||||||
Interest-bearing liabilities:
|
||||||||||||
NOW, MMDA & savings deposits
|
$ | 341,277 | 1,836 | 0.72% | 306,060 | 2,643 | 1.15% | |||||
Time deposits
|
363,046 | 3,901 | 1.44% | 408,592 | 5,259 | 1.72% | ||||||
FHLB borrowings
|
70,037 | 2,258 | 4.31% | 72,659 | 2,505 | 4.61% | ||||||
Demand notes payable to U.S. Treasury
|
891 | - | 0.00% | 804 | - | 0.00% | ||||||
Trust preferred securities
|
20,619 | 300 | 1.95% | 20,619 | 310 | 2.01% | ||||||
Other
|
41,487 | 231 | 0.75% | 39,604 | 306 | 1.03% | ||||||
Total interest-bearing liabilities
|
837,357 | 8,526 | 1.36% | 848,338 | 11,023 | 1.74% | ||||||
Demand deposits
|
130,209 | 120,838 | ||||||||||
Other liabilities
|
4,036 | 3,751 | ||||||||||
Shareholders' equity
|
100,587 | 102,137 | ||||||||||
Total liabilities and shareholder's equity
|
$ | 1,072,189 | 1,075,064 | |||||||||
Net interest spread
|
27,036 | 3.33% | 25,672 | 3.20% | ||||||||
Net yield on interest-earning assets
|
3.57% | 3.46% | ||||||||||
Taxable equivalent adjustment
|
||||||||||||
Investment securities
|
1,292 | 891 | ||||||||||
Net interest income
|
25,744 | 24,781 | ||||||||||
*Includes U.S. government agency securities that are non-taxable for state income tax purposes of $136.5 million in 2011 and $103.7 million in 2010. An effective tax rate of 6.90% was used to calculate the tax equivalent yield on these securities.
|
Three Months Ended September 30, 2011
Compared to 2010
|
Nine Months Ended September 30, 2011
Compared to 2010
|
|||||||||||||
(Dollars in thousands)
|
Changes in
Average Volume
|
Changes in
Average Rates
|
Total Increase (Decrease)
|
Changes in
Average Volume
|
Changes in
Average Rates
|
Total Increase (Decrease)
|
||||||||
Interest income:
|
||||||||||||||
Loans: Net of unearned income
|
$ | (858 | ) | (204 | ) | (1,063 | ) | (2,332 | ) | (209 | ) | (2,541 | ) | |
Investments - taxable
|
505 | (164 | ) | 341 | 1,042 | (426 | ) | 616 | ||||||
Investments - nontaxable
|
171 | (68 | ) | 103 | 1,123 | (326 | ) | 797 | ||||||
Other
|
(3 | ) | (2 | ) | (6 | ) | 6 | (11 | ) | (5 | ) | |||
Total interest income
|
(186 | ) | (438 | ) | (624 | ) | (161 | ) | (972 | ) | (1,133 | ) | ||
Interest expense:
|
||||||||||||||
NOW, MMDA & savings deposits
|
57 | (406 | ) | (349 | ) | 241 | (1,048 | ) | (807 | ) | ||||
Time deposits
|
(207 | ) | (209 | ) | (416 | ) | (538 | ) | (820 | ) | (1,358 | ) | ||
FHLB / FRB Borrowings
|
- | (42 | ) | (42 | ) | (88 | ) | (159 | ) | (248 | ) | |||
Trust Preferred Securities
|
- | (12 | ) | (12 | ) | - | (10 | ) | (10 | ) | ||||
Other
|
11 | (35 | ) | (24 | ) | 13 | (88 | ) | (75 | ) | ||||
Total interest expense
|
(139 | ) | (704 | ) | (843 | ) | (373 | ) | (2,125 | ) | (2,497 | ) | ||
Net interest income
|
$ | (47 | ) | 265 | 219 | 212 | 1,152 | 1,364 |
(Dollars in thousands)
|
|||||||
Number of Loans
|
Balance Outstanding
|
Non-accrual Balance
|
|||||
Land acquisition and development - commercial purposes
|
74 | $ | 22,043 | $ | 2,614 | ||
Land acquisition and development - residential purposes
|
340 | 70,944 | 14,474 | ||||
1 to 4 family residential construction
|
29 | 8,713 | - | ||||
Commercial construction
|
7 | 2,201 | - | ||||
Total acquisition, development and construction
|
450 | $ | 103,901 | $ | 17,088 |
·
|
our loan loss experience;
|
·
|
the amount of past due and non-performing loans;
|
·
|
specific known risks;
|
·
|
the status and amount of other past due and non-performing assets;
|
·
|
underlying estimated values of collateral securing loans;
|
·
|
current and anticipated economic conditions; and
|
·
|
other factors which management believes affect the allowance for potential credit losses.
|
LOAN RISK GRADE ANALYSIS:
|
||
Percentage of Loans
|
||
By Risk Grade
|
||
Risk Grade
|
09/30/2011
|
12/31/2010
|
Risk Grade 1 (Excellent Quality)
|
3.24%
|
3.36%
|
Risk Grade 2 (High Quality)
|
16.30%
|
16.60%
|
Risk Grade 3 (Good Quality)
|
49.29%
|
47.00%
|
Risk Grade 4 (Management Attention)
|
21.42%
|
21.36%
|
Risk Grade 5 (Watch)
|
2.80%
|
2.84%
|
Risk Grade 6 (Substandard)
|
6.37%
|
8.12%
|
Risk Grade 7 (Low Substandard)
|
0.00%
|
0.37%
|
Risk Grade 8 (Doubtful)
|
0.00%
|
0.07%
|
Risk Grade 9 (Loss)
|
0.00%
|
0.00%
|
(Dollars in thousands)
|
||||
September 30, 2011
|
December 31, 2010
|
|||
Contractual Cash Obligations:
|
||||
Long-term borrowings
|
$ | 70,000 | 70,000 | |
Junior subordinated debentures
|
20,619 | 20,619 | ||
Operating lease obligations
|
2,758 | 3,220 | ||
Total
|
$ | 93,377 | 93,839 | |
Other Commitments:
|
||||
Commitments to extend credit
|
$ | 131,808 | 137,015 | |
Standby letters of credit and financial guarantees written
|
3,071 | 3,590 | ||
Total
|
$ | 134,880 | 140,605 |
PART II.
|
OTHER INFORMATION
|
Item 1.
|
Legal Proceedings
|
In the opinion of management, the Company is not involved in any material pending legal proceedings other than routine proceedings
|
|
occurring in the ordinary course of business.
|
|
Item 1A.
|
Risk Factors
|
Not required for smaller reporting companies.
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
ISSUER PURCHASES OF EQUITY SECURITIES
|
|||||||||
Period
|
Total
Number of
Shares
Purchased
|
Average
Price Paid
per Share
|
Total
Number of
Shares
Purchased as
Part of
Publicly
Announced
Plans or
Programs
|
Maximum
Number of
Shares that
May Yet Be Purchased
Under the Plans
or Programs
|
|||||
July 1 - 31, 2011
|
- | $ | - | - | - | ||||
August 1 - 31, 2011
|
3,435 | 5.03 | - | - | |||||
September 1 - 30, 2011
|
- | - | - | - | |||||
Total
|
3,435 | (1) | $ | 5.03 | - | ||||
(1) The Company purchased 3,435 shares on the open market in the three months ended September 30, 2011 for its deferred compensation plan. All purchases were funded by participant contributions to the plan. The Purchase Agreement with the UST under the CPP program permits the Company to purchase its common stock on the open market pursuant to benefit plans.
|
Item 3.
|
Defaults Upon Senior Securities
|
Not applicable
|
|
Item 5.
|
Other Information
|
Not applicable
|
|
Item 6.
|
Exhibits
|
Exhibit (3)(1)
|
Articles of Amendment dated December 19, 2008, regarding the Series A
|
|
Preferred Stock, incorporated by reference to Exhibit (3)(1) to the Form 8-K filed
|
||
with the Securities and Exchange Commission on December 29, 2008
|
||
Exhibit (3)(2)
|
Articles of Amendment dated February 26, 2010, incorporated by reference to
|
|
Exhibit (3)(2) to the Form 10-K filed with the Securities and Exchange
|
||
Commission on March 25, 2010
|
||
Exhibit (3)(i)
|
Articles of Incorporation of the Registrant incorporated by reference to Exhibit
|
|
(3)(i) to the Form 8-A filed with the Securities and Exchange Commission on
|
||
September 2, 1999
|
Exhibit (3)(ii)
|
Amended and Restated Bylaws of the Registrant incorporated by reference to
|
|
Exhibit (3)(ii) to the Form 10-K filed with the Securities and Exchange
|
||
Commission on March 25, 2010
|
||
Exhibit (4)
|
Specimen Stock Certificate, incorporated by reference to Exhibit (4) to the Form
|
|
8-A filed with the Securities and Exchange Commission on September 2, 1999
|
||
Exhibit (4)(1)
|
Form of Certificate for the Series A Preferred Stock, incorporated by reference to
|
|
Exhibit (4)(1) to the Form 8-K filed with the Securities and Exchange
|
||
Commission on December 29, 2008
|
||
Exhibit (4)(2)
|
Warrant dated December 23, 2008, for the purchase of shares of Common Stock,
|
|
incorporated by reference to Exhibit (4)(2) to the Form 8-K filed with the
|
||
Securities and Exchange Commission on December 29, 2008
|
||
Exhibit (10)(1)
|
Letter Agreement dated December 23, 2008 between the Registrant and the
|
|
United States Department of the Treasury, incorporated by reference to Exhibit
|
||
(10)(1) to the Form 8-K filed with the Securities and Exchange Commission on
|
||
December 29, 2008
|
||
Exhibit (10)(a)(i)
|
Employment Letter Agreement dated December 23, 2008 between the Registrant
|
|
and Tony W. Wolfe, incorporated by reference to Exhibit (10)(a)(i) to the Form
|
||
8-K filed with the Securities and Exchange Commission on December 29, 2008
|
||
Exhibit (10)(a)(ii)
|
Amendment to Employment Agreement between Peoples Bank and Tony W.
|
|
Wolfe dated December 18, 2008, incorporated by reference to Exhibit (10)(a)(ii)
|
||
to the Form 8-K filed with the Securities and Exchange Commission on
|
||
December 29, 2008
|
||
Exhibit (10)(a)(iii)
|
Amended and Restated Executive Salary Continuation Agreement between
|
|
Peoples Bank and Tony W. Wolfe dated December 18, 2008, incorporated by
|
||
reference to Exhibit (10)(a)(iii) to the Form 8-K filed with the Securities and
|
||
Exchange Commission on December 29, 2008
|
||
Exhibit (10)(b)(i)
|
Employment Letter Agreement dated December 23, 2008 between the Registrant
|
|
and Joseph F. Beaman, Jr., incorporated by reference to Exhibit (10)(b)(i) to the
|
||
Form 8-K filed with the Securities and Exchange Commission on December 29,
|
||
2008
|
||
Exhibit (10)(b)(ii)
|
Amendment to Employment Agreement between Peoples Bank and Joseph F.
|
|
Beaman, Jr. dated December 18, 2008, incorporated by reference to Exhibit
|
||
(10)(b)(ii) to the Form 8-K filed with the Securities and Exchange Commission
|
||
on December 29, 2008
|
||
Exhibit (10)(b)(iii)
|
Amended and Restated Executive Salary Continuation Agreement between
|
|
Peoples Bank and Joseph F. Beaman, Jr. dated December 18, 2008, incorporated
|
||
by reference to Exhibit (10)(b)(iii) to the Form 8-K filed with the Securities and
|
||
Exchange Commission on December 29, 2008
|
||
Exhibit (10)(c)(i)
|
Employment Letter Agreement dated December 23, 2008 between the Registrant
|
|
and William D. Cable, Sr., incorporated by reference to Exhibit (10)(c)(i) to the
|
||
Form 8-K filed with the Securities and Exchange Commission on December 29,
|
||
2008
|
||
Exhibit (10)(c)(ii)
|
Amendment to Employment Agreement between Peoples Bank and William D.
|
|
Cable, Sr. dated December 18, 2008, incorporated by reference to Exhibit
|
||
(10)(c)(ii) to the Form 8-K filed with the Securities and Exchange Commission
|
||
on December 29, 2008
|
Exhibit (10)(c)(iii)
|
Amended and Restated Executive Salary Continuation Agreement between
|
|
Peoples Bank and William D. Cable, Sr. dated December 18, 2008, incorporated
|
||
by reference to Exhibit (10)(c)(iii) to the Form 8-K filed with the Securities and
|
||
Exchange Commission on December 29, 2008
|
||
Exhibit (10)(d)(i)
|
Employment Letter Agreement dated December 23, 2008 between the Registrant
|
|
and Lance A. Sellers, incorporated by reference to Exhibit (10)(d)(i) to the Form
|
||
8-K filed with the Securities and Exchange Commission on December 29, 2008
|
||
Exhibit (10)(d)(ii)
|
Amendment to Employment Agreement between Peoples Bank and Lance A.
|
|
Sellers dated December 18, 2008, incorporated by reference to Exhibit (10)(d)(ii)
|
||
to the Form 8-K filed with the Securities and Exchange Commission on
|
||
December 29, 2008
|
||
Exhibit (10)(d)(iii)
|
Amended and Restated Executive Salary Continuation Agreement between
|
|
Peoples Bank and Lance A. Sellers dated December 18, 2008, incorporated by
|
||
reference to Exhibit (10)(d)(iii) to the Form 8-K filed with the Securities and
|
||
Exchange Commission on December 29, 2008
|
||
Exhibit (10)(e)
|
Peoples Bancorp of North Carolina, Inc. Omnibus Stock Ownership and Long
|
|
Term Incentive Plan incorporated by reference to Exhibit (10)(f) to the Form 10-
|
||
K filed with the Securities and Exchange Commission on March 30, 2000
|
||
Exhibit (10)(e)(i)
|
Amendment No. 1 to the Peoples Bancorp of North Carolina, Inc. Omnibus Stock
|
|
Ownership and Long Term Incentive Plan incorporated by reference to Exhibit
|
||
(10)(e)(i) to the Form 10-K filed with the Securities and Exchange Commission
|
||
on March 15, 2007
|
||
Exhibit (10)(f)(i)
|
Employment Letter Agreement dated December 23, 2008 between the Registrant
|
|
and A. Joseph Lampron, incorporated by reference to Exhibit (10)(f)(i) to the
|
||
Form 8-K filed with the Securities and Exchange Commission on December 29,
|
||
2008
|
||
Exhibit (10)(f)(ii)
|
Amendment to Employment Agreement between Peoples Bank and A. Joseph
|
|
Lampron dated March 18, 2010, incorporated by reference to Exhibit (10)(f)(ii)
|
||
to the Form 10-K filed with the Securities and Exchange Commission on March
|
||
25, 2010
|
||
Exhibit (10)(f)(iii)
|
Amended and Restated Executive Salary Continuation Agreement between
|
|
Peoples Bank and A. Joseph Lampron dated December 18, 2008, incorporated by
|
||
reference to Exhibit (10)(f)(iii) to the Form 8-K filed with the Securities and
|
||
Exchange Commission on December 29, 2008
|
||
Exhibit (10)(g)
|
Peoples Bank Directors' and Officers' Deferral Plan, incorporated by reference to
|
|
Exhibit (10)(h) to the Form 10-K filed with the Securities and Exchange
|
||
Commission on March 28, 2002
|
||
Exhibit (10)(h)
|
Rabbi Trust for the Peoples Bank Directors' and Officers' Deferral Plan,
|
|
incorporated by reference to Exhibit (10)(i) to the Form 10-K filed with the
|
||
Securities and Exchange Commission on March 28, 2002
|
||
Exhibit (10)(i)
|
Description of Service Recognition Program maintained by Peoples Bank,
|
|
incorporated by reference to Exhibit (10)(i) to the Form 10-K filed with the
|
||
Securities and Exchange Commission on March 27, 2003
|
||
Exhibit (10)(j)
|
Capital Securities Purchase Agreement dated as of June 26, 2006, by and among
|
|
the Registrant, PEBK Capital Trust II and Bear, Sterns Securities Corp.,
|
||
incorporated by reference to Exhibit (10)(j) to the Form 10-Q filed with the
|
||
Securities and Exchange Commission on November 13, 2006
|
Exhibit (10)(k)
|
Amended and Restated Trust Agreement of PEBK Capital Trust II, dated as of
|
|
June 28, 2006 incorporated by reference to Exhibit (10)(k) to the Form 10-Q filed
|
||
with the Securities and Exchange Commission on November 13, 2006
|
||
Exhibit (10)(l)
|
Guarantee Agreement of the Registrant dated as of June 28, 2006, incorporated
|
|
by reference to Exhibit (10)(l) to the Form 10-Q filed with the Securities and
|
||
Exchange Commission on November 13, 2006
|
||
Exhibit (10)(m)
|
Indenture, dated as of June 28, 2006, by and between the Registrant and LaSalle
|
|
Bank National Association, as Trustee, relating to Junior Subordinated Debt
|
||
Securities Due September 15, 2036, incorporated by reference to Exhibit (10)(m)
|
||
to the Form 10-Q filed with the Securities and Exchange Commission on
|
||
November 13, 2006
|
||
Exhibit (10)(n)
|
Form of Amended and Restated Director Supplemental Retirement Agreement
|
|
between Peoples Bank and Directors Robert C. Abernethy, James S. Abernethy,
|
||
Douglas S. Howard, John W. Lineberger, Jr., Gary E. Matthews, Dr. Billy L.
|
||
Price, Jr., Larry E. Robinson, W. Gregory Terry, Dan Ray Timmerman, Sr. and
|
||
Benjamin I. Zachary, incorporated by reference to Exhibit (10)(n) to the Form 8-
|
||
K filed with the Securities and Exchange Commission on December 29, 2008
|
||
Exhibit (10)(o)
|
2009 Omnibus Stock Ownership and Long Term Incentive Plan incorporated by
|
|
reference to Exhibit (10)(o) to the Form 10-K filed with the Securities and
|
||
Exchange Commission on March 20, 2009
|
||
Exhibit (14)
|
Code of Business Conduct and Ethics of Peoples Bancorp of North Carolina,
|
|
Inc., incorporated by reference to Exhibit (14) to the Form 10-K filed with the
|
||
Securities and Exchange Commission on March 25, 2005
|
||
Exhibit (31)(a)
|
Certification of principal executive officer pursuant to section 302 of the
|
|
Sarbanes-Oxley Act of 2002
|
||
Exhibit (31)(b)
|
Certification of principal financial officer pursuant to section 302 of the
|
|
Sarbanes-Oxley Act of 2002
|
||
Exhibit (32)
|
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
|
|
906 of the Sarbanes-Oxley Act of 2002
|
||
Exhibit (101)
|
The following materials from the Company's 10-Q Report for the quarterly
|
|
period ended September 30, 2011, formatted in XBRL: (i) the Condensed
|
||
Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of
|
||
Income, (iii) the Condensed Consolidated Statements of Changes in
|
||
Shareholders' Equity, (iv) the Condensed Consolidated Statements of Cash
|
||
Flows, and (v) the Notes to the Condensed Consolidated Financial Statements,
|
||
tagged as blocks of text.* | ||
*Furnished, not filed.
|
Peoples Bancorp of North Carolina, Inc.
|
||
November 9, 2011
|
/s/ Tony W. Wolfe
|
|
Date
|
Tony W. Wolfe
|
|
President and Chief Executive Officer
|
||
(Principal Executive Officer)
|
||
November 9, 2011
|
/s/ A. Joseph Lampron, Jr.
|
|
Date
|
A. Joseph Lampron, Jr.
|
|
Executive Vice President and Chief Financial Officer
|
||
(Principal Financial and Principal Accounting Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Peoples Bancorp of North Carolina Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 9, 2011
|
/s/ Tony W. Wolfe
|
|
Date
|
Tony W. Wolfe
|
|
President and Chief Executive Officer
|
||
(Principal Executive Officer)
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Peoples Bancorp of North Carolina Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation ; and
|
d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
|
a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 9, 2011
|
/s/ A. Joseph Lampron, Jr.
|
|
Date
|
A. Joseph Lampron, Jr.
|
|
Executive Vice President and Chief Financial Officer
|
||
(Principal Financial and Principal Accounting Officer)
|
November 9, 2011
|
/s/ Tony W. Wolfe
|
|
Date
|
Tony W. Wolfe
|
|
Chief Executive Officer
|
||
November 9, 2011
|
/s/ A. Joseph Lampron, Jr.
|
|
Date
|
A. Joseph Lampron, Jr.
|
|
Chief Financial Officer
|
Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Shareholders' equity | ||
Preferred stock, stated value (in dollars per share) | $ 1,000 | $ 1,000 |
Preferred stock, authorized (in shares) | 5,000,000 | 5,000,000 |
Preferred stock, issued (in shares) | 25,054 | 25,054 |
Preferred stock, outstanding (in shares) | 25,054 | 25,054 |
Common stock, no par value (in dollars per share) | $ 0 | $ 0 |
Common stock, authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, issued (in shares) | 5,542,703 | 5,541,413 |
Common stock, outstanding (in shares) | 5,542,703 | 5,541,413 |
Document And Entity Information (USD $) | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | Oct. 31, 2011 | Jun. 30, 2010 | |
Entity Registrant Name | PEOPLES BANCORP OF NORTH CAROLINA INC | ||
Entity Central Index Key | 0001093672 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Smaller Reporting Company | ||
Entity Public Float | $ 21,022,031 | ||
Entity Common Stock, Shares Outstanding | 5,542,703 | ||
Document Fiscal Year Focus | 2011 | ||
Document Fiscal Period Focus | Q3 | ||
Document Type | 10-Q | ||
Amendment Flag | false | ||
Document Period End Date | Sep. 30, 2011 |
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Fair Value | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value | (6) Fair Value The Company is required to disclose fair value information about financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. The assumptions used in the estimation of the fair value of the Company's financial instruments are detailed below. Where quoted prices are not available, fair values are based on estimates using discounted cash flows and other valuation techniques. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The following disclosures should not be considered a surrogate of the liquidation value of the Company, but rather a good faith estimate of the increase or decrease in value of financial instruments held by the Company since purchase, origination, or issuance. Cash and Cash Equivalents For cash, due from banks and interest bearing deposits, the carrying amount is a reasonable estimate of fair value. Certificates of Deposit The carrying amount of certificates of deposit is a reasonable estimate of fair value. Investment Securities Available for Sale Fair values for investment securities are based on quoted market prices. Other Investments For other investments, the carrying value is a reasonable estimate of fair value. Mortgage Loans Held for Sale Mortgage loans held for sale are carried at lower of aggregate cost or market value. The cost of mortgage loans held for sale approximates the market value. Loans The fair value of fixed rate loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings. For variable rate loans, the carrying amount is a reasonable estimate of fair value. Cash Surrender Value of Life Insurance For cash surrender value of life insurance, the carrying value is a reasonable estimate of fair value. Derivative Instruments For derivative instruments, fair value is estimated as the amount that the Company would receive or pay to terminate the contracts at the reporting date, taking into account the current unrealized gains or losses on open contracts. Deposits and Demand Notes Payable to U.S. Treasury The fair value of demand deposits, interest-bearing demand deposits, savings, and demand notes payable to the U.S. Treasury is the amount payable on demand at the reporting date. The fair value of certificates of deposit is estimated by discounting the future cash flows using the rates currently offered for deposits of similar remaining maturities. Securities Sold Under Agreements to Repurchase For securities sold under agreements to repurchase, the carrying value is a reasonable estimate of fair value. Federal Home Loan Bank (“FHLB”) Borrowings The fair value of FHLB borrowings is estimated based upon discounted future cash flows using a discount rate comparable to the current market rate for such borrowings. Junior Subordinated Debentures Because the Company's junior subordinated debentures were issued at a floating rate, the carrying amount is a reasonable estimate of fair value. Commitments to Extend Credit and Standby Letters of Credit Commitments to extend credit and standby letters of credit are generally short-term and at variable interest rates. Therefore, both the carrying value and estimated fair value associated with these instruments are immaterial. Limitations 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 Company's entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Company's financial instruments, fair value estimates are based on many judgments. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include the deferred income taxes and premises and equipment. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. GAAP establishes a framework for measuring fair value and expands disclosures about fair value measurements. There is a three-level fair value hierarchy for fair value measurements. Level 1 inputs are quoted prices in active markets for identical assets or liabilities that a company has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The following tables present the balance of securities available for sale, mortgage loans held for sale and derivatives, which are measured at fair value on a recurring basis by level within the fair value hierarchy as of September 30, 2011 and December 31, 2010.
The following is an analysis of fair value measurements of investment securities available for sale using Level 3, significant unobservable inputs, for the nine months ended September 30, 2011:
The Company's September 30, 2011 and December 31, 2010 fair value measurement for impaired loans and other real estate on a non-recurring basis is presented below:
The carrying amount and estimated fair value of the Company's financial instruments at September 30, 2011 and December 31, 2010 are as follows:
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Investment Securities | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Investment Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Securities | (2) Investment Securities Investment securities available for sale at September 30, 2011 and December 31, 2010 are as follows:
The current fair value and associated unrealized losses on investments in securities with unrealized losses at September 30, 2011 and December 31, 2010 are summarized in the tables below, with the length of time the individual securities have been in a continuous loss position.
At September 30, 2011, unrealized losses in the investment securities portfolio relating to debt securities totaled $385,000. The unrealized losses on these debt securities arose due to changing interest rates and are considered to be temporary. From the September 30, 2011 tables above, 6 out of 168 securities issued by state and political subdivisions contained unrealized losses and 25 out of 112 securities issued by U.S. government sponsored enterprises, including mortgage-backed securities, contained unrealized losses. These unrealized losses are considered temporary because of acceptable investment grades on each security and the repayment sources of principal and interest are government backed. The unrealized loss on one equity security was $182,000 as of September 30, 2011. This unrealized loss is considered temporary based upon the entity's strong capital position and growth potential. The amortized cost and estimated fair value of investment securities available for sale at September 30, 2011, by contractual maturity, are shown below. Expected maturities of mortgage-backed securities will differ from contractual maturities because borrowers have the right to call or prepay obligations with or without call or prepayment penalties.
Proceeds from sales of securities available for sale during nine months ended September 30, 2011 were $72.3 million and resulted in gross gains of $2.5 million and gross losses of $9,000. Proceeds from sales of securities available for sale during the nine months ended September 30, 2010 were $28.1 million and resulted in a gross gain of $1.8 million. Securities with a fair value of approximately $88.1million and $75.5 million at September 30, 2011 and December 31, 2010, respectively, were pledged to secure public deposits and for other purposes as required by law. |
Derivative Instruments and Hedging Activities | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities | (7) Derivative Instruments and Hedging Activities Accounting Policy for Derivative Instruments and Hedging Activities The disclosure requirements for derivatives and hedging activities have the intent to provide users of financial statements with an enhanced understanding of: (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for and (c) how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. The disclosure requirements include qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about the fair value of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative instruments. The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative, whether the Company has elected to designate a derivative in a hedging relationship and apply hedge accounting and whether the hedging relationship has satisfied the criteria necessary to apply hedge accounting. Derivatives designated and qualifying as a hedge of the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives designated and qualifying as a hedge of the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. Hedge accounting generally provides for the matching of the timing of gain or loss recognition on the hedging instrument with the recognition of the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk in a fair value hedge or the earnings effect of the hedged forecasted transactions in a cash flow hedge. The Company may enter into derivative contracts that are intended to economically hedge certain of its risks, even though hedge accounting does not apply or the Company elects not to apply hedge accounting. Risk Management Objective of Using Derivatives The Company has an overall interest rate risk management strategy that incorporates the use of derivative instruments to minimize significant unplanned fluctuations in earnings that are caused by interest rate volatility. By using derivative instruments, the Company is exposed to credit and market risk. If the counterparty fails to perform, credit risk is equal to the extent of the fair value gain in the derivative. The Company minimizes the credit risk in derivative instruments by entering into transactions with high-quality counterparties that are reviewed periodically by the Company. The Company did not have any interest rate derivatives outstanding as of September 30, 2011. Fair Values of Derivative Instruments on the Balance Sheet The table below presents the fair value of the Company's derivative financial instruments as well as their classification on the balance sheet as of September 30, 2011 and December 31, 2010.
Cash Flow Hedges of Interest Rate Risk The Company's objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps and floors as part of its interest rate risk management strategy. For hedges of the Company's variable-rate loan assets, interest rate swaps designated as cash flow hedges involve the receipt of fixed-rate amounts from a counterparty in exchange for the Company making variable-rate payments over the life of the agreements without exchange of the underlying notional amount. For hedges of the Company's variable-rate loan assets, the interest rate floors designated as a cash flow hedge involves the receipt of variable-rate amounts from a counterparty if interest rates fall below the strike rate on the contract in exchange for an up front premium. The Company had an interest rate swap contract that expired in June 2011. The Company did not have any interest rate derivatives outstanding as of September 30, 2011. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in Accumulated Other Comprehensive Income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. Such derivatives were used to hedge the variable cash inflows associated with existing pools of prime-based loan assets during 2011 and 2010. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. The Company's derivatives did not have any hedge ineffectiveness recognized in earnings during the nine months ended September 30, 2011 and 2010. Effect of Derivative Instruments on the Income Statement The table below presents the effect of the Company's derivative financial instruments on the statement of earnings for the nine months ended September 30, 2011 and 2010.
Subsequent Events The Company has reviewed and evaluated subsequent events and transactions for material subsequent events through the date the financial statements are issued. Management has concluded that there were no material subsequent events. |
Loans | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans | (3) Loans Major classifications of loans at September 30, 2011 and December 31, 2010 are summarized as follows:
The Company grants loans and extensions of credit primarily within the Catawba Valley region of North Carolina, which encompasses Catawba, Alexander, Iredell and Lincoln counties and also in Mecklenburg, Union and Wake counties of North Carolina. Although the Bank has a diversified loan portfolio, a substantial portion of the loan portfolio is collateralized by improved and unimproved real estate, the value of which is dependent upon the real estate market. Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on non-accrual status when, in management's opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on non-accrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The following tables present an age analysis of past due loans, by loan type, as of September 30, 2011 and December 31, 2010:
The following table presents the Company's non-accrual loans as of September 30, 2011 and December 31, 2010:
At each reporting period, the Company determines which loans are impaired. Accordingly, the Company's impaired loans are reported at their estimated fair value on a non-recurring basis. An allowance for each impaired loan, which is generally collateral-dependent, is calculated based on the fair value of its collateral. The fair value of the collateral is based on appraisals performed by third-party valuation specialists. Factors including the assumptions and techniques utilized by the appraiser are considered by management. If the recorded investment in the impaired loan exceeds the measure of fair value of the collateral, a valuation allowance is recorded as a component of the allowance for loan losses. No interest income is recognized on impaired loans subsequent to their classification as impaired. The following tables present the Company's impaired loans as of September 30, 2011 and December 31, 2010:
Changes in the allowance for loan losses for the nine months ended September 30, 2011 were as follows:
The Company utilizes an internal risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 9. A description of the general characteristics of the nine risk grades is as follows:
The following tables present the credit risk profile of each loan type based on internally assigned risk grade as of September 30, 2011 and December 31, 2010.
At September 30, 2011, troubled debt restructured (“TDR”) loans amounted to $48.5 million, including $16.0 million in performing TDR loans. The terms of these loans have been renegotiated to provide a reduction in principal or interest as a result of the deteriorating financial position of the borrower. At December 31, 2010, TDR loans amounted to $56.7 million, including $10.0 million in performing TDR loans. The following table presents an analysis of TDR loans by loan type as of September 30, 2011.
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Net Earnings Per Common Share | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Earnings Per Common Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Earnings Per Common Share | (4) Net Earnings Per Common Share Net earnings per common share is based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per common share. The average market price during the year is used to compute equivalent shares. The reconciliation of the amounts used in the computation of both “basic earnings per common share” and “diluted earnings per common share” for the three and nine months ended September 30, 2011 and 2010 is as follows:
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