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: June 30, 2012
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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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Yes
|
X |
No
|
Yes
|
X |
No
|
Large Accelerate Filer
|
Accelerated Filer
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Non-Accelerated Filer
|
Smaller Reporting Company
|
X
|
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2 of the Exchange Act).
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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
|
|||
Consolidated Balance Sheets at June 30, 2012 (Unaudited) and December
|
||||
31, 2011 (Audited)
|
3
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|||
Consolidated Statements of Earnings for the three and six months ended
|
||||
June 30, 2012 and 2011 (Unaudited)
|
4
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|||
Consolidated Statements of Comprehensive Income for the three and six
|
||||
months ended June 30, 2012 and 2011 (Unaudited)
|
5
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|||
Consolidated Statements of Cash Flows for the six months ended June 30,
|
||||
2012 and 2011 (Unaudited)
|
6-7
|
|||
Notes to Consolidated Financial Statements (Unaudited)
|
8-22
|
|||
Item 2.
|
Management's Discussion and Analysis of Financial Condition
|
|||
and Results of Operations
|
23-37
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Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
38
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Item 4T.
|
Controls and Procedures
|
39
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PART II.
|
OTHER INFORMATION
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|||
Item 1.
|
Legal Proceedings
|
40
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||
Item 1A.
|
Risk Factors
|
40
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||
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
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40
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||
Item 3.
|
Defaults upon Senior Securities
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40
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Item 5.
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Other Information
|
40
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Item 6.
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Exhibits
|
40-43
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Signatures
|
44
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|||
Certifications
|
45-47
|
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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|||||
June 30,
|
December 31,
|
||||
Assets
|
2012
|
2011
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|||
(Unaudited)
|
(Audited)
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||||
Cash and due from banks, including reserve requirements
|
$ | 25,350 | 22,532 | ||
of $9,265 in 2012 and $8,492 in 2011
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|||||
Interest bearing deposits
|
44,127 | 6,704 | |||
Cash and cash equivalents
|
69,477 | 29,236 | |||
Investment securities available for sale
|
280,735 | 321,388 | |||
Other investments
|
5,734 | 5,712 | |||
Total securities
|
286,469 | 327,100 | |||
Mortgage loans held for sale
|
3,753 | 5,146 | |||
Loans
|
642,815 | 670,497 | |||
Less allowance for loan losses
|
(16,640 | ) | (16,604 | ) | |
Net loans
|
626,175 | 653,893 | |||
Premises and equipment, net
|
16,342 | 16,896 | |||
Cash surrender value of life insurance
|
13,040 | 12,835 | |||
Other real estate
|
6,505 | 7,576 | |||
Accrued interest receivable and other assets
|
13,328 | 14,381 | |||
Total assets
|
$ | 1,035,089 | 1,067,063 | ||
Liabilities and Shareholders' Equity
|
|||||
Deposits:
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|||||
Non-interest bearing demand
|
$ | 147,825 | 136,878 | ||
NOW, MMDA & savings
|
353,076 | 366,133 | |||
Time, $100,000 or more
|
156,974 | 193,045 | |||
Other time
|
122,671 | 131,055 | |||
Total deposits
|
780,546 | 827,111 | |||
Securities sold under agreements to repurchase
|
50,510 | 39,600 | |||
FHLB borrowings
|
70,000 | 70,000 | |||
Junior subordinated debentures
|
20,619 | 20,619 | |||
Accrued interest payable and other liabilities
|
18,574 | 6,706 | |||
Total liabilities
|
940,249 | 964,036 | |||
Commitments
|
|||||
Shareholders' equity:
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|||||
Series A preferred stock, $1,000 stated value; authorized
|
|||||
5,000,000 shares; issued and outstanding
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|||||
12,524 shares in 2012 and 25,054 shares in 2011
|
12,298 | 24,758 | |||
Common stock, no par value; authorized 20,000,000 shares;
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|||||
issued and outstanding 5,544,160 shares in 2012 and 2011
|
48,298 | 48,298 | |||
Retained earnings
|
29,617 | 26,895 | |||
Accumulated other comprehensive income
|
4,627 | 3,076 | |||
Total shareholders' equity
|
94,840 | 103,027 | |||
Total liabilities and shareholders' equity
|
$ | 1,035,089 | 1,067,063 | ||
See accompanying Notes to Consolidated Financial Statements.
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PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
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|||||||||
Consolidated Statements of Earnings
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|||||||||
Three and six months ended June 30, 2012 and 2011
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|||||||||
(Dollars in thousands, except per share amounts)
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|||||||||
Three months ended
|
Six months ended
|
||||||||
June 30,
|
June 30,
|
||||||||
2012
|
2011
|
2012
|
2011
|
||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||
Interest income:
|
|||||||||
Interest and fees on loans
|
$ | 8,227 | 9,159 | 16,652 | 18,774 | ||||
Interest on due from banks | 16 | 8 | 19 | 14 | |||||
Interest on investment securities:
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|||||||||
U.S. Government sponsored enterprises,
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|||||||||
including mortgage-backed securities
|
737 | 1,413 | 1,807 | 2,494 | |||||
States and political subdivisions
|
787 | 790 | 1,587 | 1,595 | |||||
Other
|
68 | 52 | 132 | 102 | |||||
Total interest income
|
9,835 | 11,422 | 20,197 | 22,979 | |||||
Interest expense:
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|||||||||
NOW, MMDA & savings deposits
|
295 | 601 | 639 | 1,319 | |||||
Time deposits
|
864 | 1,277 | 1,896 | 2,681 | |||||
FHLB borrowings
|
684 | 753 | 1,374 | 1,497 | |||||
Junior subordinated debentures
|
110 | 101 | 222 | 200 | |||||
Other
|
34 | 77 | 73 | 156 | |||||
Total interest expense
|
1,987 | 2,809 | 4,204 | 5,853 | |||||
Net interest income
|
7,848 | 8,613 | 15,993 | 17,126 | |||||
Provision for loan losses
|
1,603 | 3,368 | 3,652 | 6,318 | |||||
Net interest income after provision for loan losses
|
6,245 | 5,245 | 12,341 | 10,808 | |||||
Non-interest income:
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|||||||||
Service charges
|
1,192 | 1,316 | 2,379 | 2,572 | |||||
Other service charges and fees
|
516 | 528 | 1,115 | 1,109 | |||||
Gain on sale of securities
|
664 | 181 | 1,191 | 1,256 | |||||
Mortgage banking income
|
271 | 218 | 497 | 405 | |||||
Insurance and brokerage commissions
|
119 | 121 | 254 | 229 | |||||
Loss on sale and write-down of
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|||||||||
other real estate
|
(195 | ) | (361 | ) | (384 | ) | (708 | ) | |
Miscellaneous
|
1,026 | 733 | 1,920 | 1,446 | |||||
Total non-interest income
|
3,593 | 2,736 | 6,972 | 6,309 | |||||
Non-interest expense:
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|||||||||
Salaries and employee benefits
|
3,931 | 3,673 | 7,772 | 7,340 | |||||
Occupancy
|
1,300 | 1,331 | 2,600 | 2,696 | |||||
Other
|
2,612 | 2,404 | 4,742 | 4,742 | |||||
Total non-interest expense
|
7,843 | 7,408 | 15,114 | 14,778 | |||||
Earnings before income taxes
|
1,995 | 573 | 4,199 | 2,339 | |||||
Income tax expense (benefit)
|
486 | (56 | ) | 1,031 | 349 | ||||
Net earnings
|
1,509 | 629 | 3,168 | 1,990 | |||||
Dividends and accretion on preferred stock
|
348 | 348 | 697 | 697 | |||||
Net earnings available to common shareholders
|
$ | 1,161 | 281 | 2,471 | 1,293 | ||||
Basic net earnings per common share
|
$ | 0.21 | 0.05 | 0.45 | 0.23 | ||||
Diluted net earnings per common share
|
$ | 0.21 | 0.05 | 0.45 | 0.23 | ||||
Cash dividends declared per common share
|
$ | 0.02 | 0.02 | 0.09 | 0.04 | ||||
See accompanying Notes to Consolidated Financial Statements.
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
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|||||||||
Consolidated Statements of Comprehensive Income
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|||||||||
Three and Six Months Ended June 30, 2012 and 2011
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|||||||||
(Dollars in thousands)
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|||||||||
Three months ended
|
Six months ended
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||||||||
June 30,
|
June 30,
|
||||||||
2012
|
2011
|
2012
|
2011
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||||||
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||
Net earnings
|
$ | 1,509 | 629 | 3,168 | 1,990 | ||||
Other comprehensive income:
|
|||||||||
Unrealized holding gains on securities
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available for sale
|
2,513 | 5,568 | 3,730 | 6,041 | |||||
Reclassification adjustment for gains on
|
|||||||||
securities available for sale
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|||||||||
included in net earnings
|
(664 | ) | (181 | ) | (1,191 | ) | (1,256 | ) | |
Unrealized holding losses on derivative
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|||||||||
financial instruments qualifying as cash flow
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|||||||||
hedges
|
- | (264 | ) | - | (648 | ) | |||
Total other comprehensive income,
|
|||||||||
before income taxes
|
1,849 | 5,123 | 2,539 | 4,137 | |||||
Income tax expense related to other
|
|||||||||
comprehensive income:
|
|||||||||
Unrealized holding gains on securities
|
|||||||||
available for sale
|
979 | 2,168 | 1,452 | 2,353 | |||||
Reclassification adjustment for gains
|
|||||||||
on securities available for sale
|
|||||||||
included in net earnings
|
(259 | ) | (70 | ) | (464 | ) | (489 | ) | |
Unrealized holding losses on derivative
|
|||||||||
financial instruments qualifying as cash flow
|
|||||||||
hedges
|
- | (103 | ) | - | (253 | ) | |||
Total income tax expense related to
|
|||||||||
other comprehensive income
|
720 | 1,995 | 988 | 1,611 | |||||
Total other comprehensive income,
|
|||||||||
net of tax
|
1,129 | 3,128 | 1,551 | 2,526 | |||||
Total comprehensive income
|
$ | 2,638 | 3,757 | 4,719 | 4,516 | ||||
See accompanying Notes to Consolidated Financial Statements.
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
|||||
Consolidated Statements of Cash Flows
|
|||||
Six Months Ended June 30, 2012 and 2011
|
|||||
(Dollars in thousands)
|
|||||
2012
|
2011
|
||||
(Unaudited)
|
(Unaudited)
|
||||
Cash flows from operating activities:
|
|||||
Net earnings
|
$ | 3,168 | 1,990 | ||
Adjustments to reconcile net earnings to
|
|||||
net cash provided by operating activities:
|
|||||
Depreciation, amortization and accretion
|
4,406 | 2,853 | |||
Provision for loan losses
|
3,652 | 6,318 | |||
Gain on sale of investment securities
|
(1,191 | ) | (1,256 | ) | |
Loss on sale of other real estate
|
40 | 143 | |||
Write-down of other real estate
|
344 | 565 | |||
Restricted stock expense
|
17 | 7 | |||
Change in:
|
|||||
Mortgage loans held for sale
|
1,393 | 1,847 | |||
Cash surrender value of life insurance
|
(205 | ) | (121 | ) | |
Other assets
|
(267 | ) | 394 | ||
Other liabilities
|
11,867 | (135 | ) | ||
Net cash provided by operating activities
|
23,224 | 12,605 | |||
Cash flows from investing activities:
|
|||||
Purchases of investment securities available for sale
|
(25,473 | ) | (80,971 | ) | |
Proceeds from calls, maturities and paydowns of investment securities
|
|||||
available for sale
|
31,641 | 24,749 | |||
Proceeds from sales of investment securities available for sale
|
34,788 | 35,269 | |||
Purchases of other investments
|
(493 | ) | (232 | ) | |
Proceeds from sale of other investments
|
471 | 153 | |||
Net change in loans
|
21,662 | 24,691 | |||
Purchases of premises and equipment
|
(426 | ) | (1,214 | ) | |
Proceeds from sale of other real estate
|
3,406 | 1,679 | |||
Net cash provided by investing activities
|
65,576 | 4,124 | |||
Cash flows from financing activities:
|
|||||
Net change in deposits
|
(46,565 | ) | (8,302 | ) | |
Net change in demand notes payable to U.S. Treasury
|
- | (348 | ) | ||
Net change in securities sold under agreement to repurchase
|
10,910 | 10,418 | |||
Proceeds from FHLB borrowings
|
25,400 | 5,000 | |||
Repayments of FHLB borrowings
|
(25,400 | ) | (5,000 | ) | |
Preferred Stock Repurchase
|
(11,695 | ) | - | ||
Restricted stock payout
|
- | 9 | |||
Cash dividends paid on Series A preferred stock
|
(710 | ) | (626 | ) | |
Cash dividends paid on common stock
|
(499 | ) | (222 | ) | |
Net cash (used) provided by financing activities
|
(48,559 | ) | 929 | ||
Net change in cash and cash equivalent
|
40,241 | 17,658 | |||
Cash and cash equivalents at beginning of period
|
29,236 | 23,977 | |||
Cash and cash equivalents at end of period
|
$ | 69,477 | 41,635 |
PEOPLES BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
|||||
Consolidated Statements of Cash Flows, continued
|
|||||
Six Months Ended June 30, 2012 and 2011
|
|||||
(Dollars in thousands)
|
|||||
2012
|
2011
|
||||
(Unaudited)
|
(Unaudited)
|
||||
Supplemental disclosures of cash flow information:
|
|||||
Cash paid during the year for:
|
|||||
Interest
|
$ | 4,737 | 5,924 | ||
Income taxes
|
$ | 985 | 112 | ||
Noncash investing and financing activities:
|
|||||
Change in unrealized gain on investment securities
|
|||||
available for sale, net
|
$ | 1,551 | (2,921 | ) | |
Change in unrealized gain on derivative financial
|
|||||
instruments, net
|
$ | - | 395 | ||
Transfer of loans to other real estate and repossessions
|
$ | 2,707 | 6,051 | ||
Financed portion of sale of other real estate
|
$ | 303 | 3,222 | ||
Accretion of Series A preferred stock
|
$ | 70 | 70 | ||
Discount on preferred stock | $ | 835 | - | ||
See accompanying Notes to Consolidated Financial Statements.
|
(1)
|
Summary of Significant Accounting Policies
|
(2)
|
Investment Securities
|
(Dollars in thousands)
|
||||||||
June 30, 2012
|
||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated Fair
Value
|
|||||
Mortgage-backed securities
|
$ | 164,423 | 1,981 | 383 | 166,021 | |||
U.S. Government
|
||||||||
sponsored enterprises
|
2,853 | 77 | - | 2,930 | ||||
State and political subdivisions
|
102,342 | 5,368 | 35 | 107,675 | ||||
Corporate bonds
|
1,539 | 6 | - | 1,545 | ||||
Trust preferred securities
|
1,250 | - | - | 1,250 | ||||
Equity securities
|
748 | 566 | - | 1,314 | ||||
Total
|
$ | 273,155 | 7,998 | 418 | 280,735 | |||
(Dollars in thousands)
|
||||||||
December 31, 2011
|
||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated Fair
Value
|
|||||
Mortgage-backed securities
|
$ | 213,378 | 1,371 | 1,056 | 213,693 | |||
U.S. Government
|
||||||||
sponsored enterprises
|
7,429 | 265 | - | 7,694 | ||||
State and political subdivisions
|
92,996 | 4,157 | 56 | 97,097 | ||||
Corporate bonds
|
546 | - | 3 | 543 | ||||
Trust preferred securities
|
1,250 | - | - | 1,250 | ||||
Equity securities
|
748 | 363 | - | 1,111 | ||||
Total
|
$ | 316,347 | 6,156 | 1,115 | 321,388 |
(Dollars in thousands)
|
||||||||||||
June 30, 2012
|
||||||||||||
Less than 12 Months
|
12 Months or More
|
Total
|
||||||||||
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
Fair Value
|
Unrealized
Losses
|
|||||||
Mortgage-backed securities
|
$ | 50,288 | 331 | 2,979 | 52 | 53,267 | 383 | |||||
State and political subdivisions
|
4,149 | 35 | - | - | 4,149 | 35 | ||||||
Total
|
$ | 54,437 | 366 | 2,979 | 52 | 57,416 | 418 |
(Dollars in thousands)
|
||||||||||||
December 31, 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
|
$ | 95,122 | 991 | 4,125 | 65 | 99,247 | 1,056 | |||||
State and political subdivisions
|
4,444 | 56 | - | - | 4,444 | 56 | ||||||
Corporate bonds
|
542 | 3 | - | - | 542 | 3 | ||||||
Total
|
$ | 100,108 | 1,050 | 4,125 | 65 | 104,233 | 1,115 |
(Dollars in thousands)
|
||||
Amortized
Cost
|
Estimated Fair
Value
|
|||
Due within one year
|
$ | 2,604 | 2,648 | |
Due from one to five years
|
13,130 | 13,489 | ||
Due from five to ten years
|
80,180 | 84,321 | ||
Due after ten years
|
12,070 | 12,942 | ||
Mortgage-backed securities
|
164,423 | 166,021 | ||
Equity securities
|
748 | 1,314 | ||
Total
|
$ | 273,155 | 280,735 |
(3)
|
Loans
|
(Dollars in thousands)
|
||||
June 30, 2012
|
December 31, 2011
|
|||
Real estate loans
|
||||
Construction and land development
|
$ | 86,498 | 93,812 | |
Single-family residential
|
255,339 | 267,051 | ||
Commercial
|
207,245 | 214,415 | ||
Multifamily and farmland
|
5,285 | 4,793 | ||
Total real estate loans
|
554,367 | 580,071 | ||
Commercial loans (not secured by real estate)
|
59,416 | 60,646 | ||
Consumer loans (not secured by real estate)
|
10,205 | 10,490 | ||
All other loans (not secured by real estate)
|
18,827 | 19,290 | ||
Total loans
|
642,815 | 670,497 | ||
Less allowance for loan losses
|
16,640 | 16,604 | ||
Total net loans
|
$ | 626,175 | 653,893 |
June 30, 2012
|
||||||||||||
(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
|
$ | 6,538 | 3,012 | 9,550 | 76,948 | 86,498 | - | |||||
Single-family residential
|
6,711 | 4,175 | 10,886 | 244,453 | 255,339 | 1,797 | ||||||
Commercial
|
2,161 | 1,543 | 3,704 | 203,541 | 207,245 | - | ||||||
Multifamily and farmland
|
- | - | - | 5,285 | 5,285 | - | ||||||
Total real estate loans
|
15,410 | 8,730 | 24,140 | 530,227 | 554,367 | 1,797 | ||||||
Commercial loans (not secured by real estate)
|
743 | 17 | 760 | 58,656 | 59,416 | - | ||||||
Consumer loans (not secured by real estate)
|
102 | 4 | 106 | 10,099 | 10,205 | - | ||||||
All other loans (not secured by real estate)
|
- | - | - | 18,827 | 18,827 | - | ||||||
Total loans
|
$ | 16,255 | 8,751 | 25,006 | 617,809 | 642,815 | 1,797 |
December 31, 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
|
$ | 10,033 | 3,338 | 13,371 | 80,441 | 93,812 | - | |||||
Single-family residential
|
16,536 | 6,189 | 22,725 | 244,326 | 267,051 | 2,709 | ||||||
Commercial
|
1,002 | 958 | 1,960 | 212,455 | 214,415 | - | ||||||
Multifamily and farmland
|
13 | - | 13 | 4,780 | 4,793 | - | ||||||
Total real estate loans
|
27,584 | 10,485 | 38,069 | 542,002 | 580,071 | 2,709 | ||||||
Commercial loans (not secured by real estate)
|
576 | 9 | 585 | 60,061 | 60,646 | - | ||||||
Consumer loans (not secured by real estate)
|
116 | 36 | 152 | 10,338 | 10,490 | - | ||||||
All other loans (not secured by real estate)
|
- | - | - | 19,290 | 19,290 | - | ||||||
Total loans
|
$ | 28,276 | 10,530 | 38,806 | 631,691 | 670,497 | 2,709 |
(Dollars in thousands)
|
||||
June 30, 2012
|
December 31, 2011
|
|||
Real estate loans
|
||||
Construction and land development
|
$ | 12,624 | 13,257 | |
Single-family residential
|
4,626 | 5,522 | ||
Commercial
|
3,234 | 2,451 | ||
Multifamily and farmland
|
- | - | ||
Total real estate loans
|
20,484 | 21,230 | ||
Commercial loans (not secured by real estate)
|
575 | 403 | ||
Consumer loans (not secured by real estate)
|
15 | 152 | ||
Total
|
$ | 21,074 | 21,785 |
June 30, 2012
|
||||||||||||
(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
|
$ | 28,750 | 12,377 | 7,960 | 20,337 | 2,470 | 14,990 | |||||
Single-family residential
|
29,103 | 5,475 | 22,927 | 28,402 | 1,533 | 28,841 | ||||||
Commercial
|
6,250 | 5,018 | 663 | 5,681 | 299 | 4,872 | ||||||
Multifamily and farmland
|
201 | 201 | - | 201 | - | 202 | ||||||
Total impaired real estate loans
|
64,304 | 23,071 | 31,550 | 54,621 | 4,302 | 48,905 | ||||||
Commercial loans (not secured by real estate)
|
1,408 | 1,408 | - | 1,408 | 15 | 1,222 | ||||||
Consumer loans (not secured by real estate)
|
22 | - | 17 | 17 | - | 42 | ||||||
Total impaired loans
|
$ | 65,734 | 24,479 | 31,567 | 56,046 | 4,317 | 50,169 |
December 31, 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
|
$ | 28,721 | 14,484 | 6,098 | 20,582 | 3,264 | 17,848 | |||||
Single-family residential
|
26,382 | 969 | 24,719 | 25,688 | 1,427 | 25,102 | ||||||
Commercial
|
7,717 | 3,845 | 3,139 | 6,984 | 77 | 4,518 | ||||||
Multifamily and farmland
|
209 | - | 209 | 209 | 1 | 214 | ||||||
Total impaired real estate loans
|
63,029 | 19,298 | 34,165 | 53,463 | 4,769 | 47,682 | ||||||
Commercial loans (not secured by real estate)
|
1,111 | - | 1,083 | 1,083 | 26 | 1,485 | ||||||
Consumer loans (not secured by real estate)
|
157 | - | 152 | 152 | 2 | 140 | ||||||
Total impaired loans
|
$ | 64,297 | 19,298 | 35,400 | 54,698 | 4,797 | 49,307 |
Six months ended June 30, 2012
|
|||||||||||||||||
(Dollars in thousands)
|
|||||||||||||||||
Real Estate Loans
|
|||||||||||||||||
Construction and Land Development
|
Single-
Family Residential
|
Commercial
|
Multifamily
and
Farmland
|
Commercial
|
Consumer
and All
Other
|
Unallocated
|
Total
|
||||||||||
Allowance for loan losses:
|
|||||||||||||||||
Beginning balance
|
$ | 7,182 | 5,357 | 1,731 | 13 | 1,029 | 255 | 1,037 | 16,604 | ||||||||
Charge-offs
|
(2,381 | ) | (861 | ) | (523 | ) | - | (343 | ) | (268 | ) | - | (4,376 | ) | |||
Recoveries
|
218 | 69 | 374 | - | 11 | 88 | - | 760 | |||||||||
Provision
|
2,626 | 561 | (66 | ) | - | (68 | ) | 116 | 483 | 3,652 | |||||||
Ending balance
|
$ | 7,645 | 5,126 | 1,516 | 13 | 629 | 191 | 1,520 | 16,640 | ||||||||
Ending balance: individually
|
|||||||||||||||||
evaluated for impairment
|
$ | 1,101 | 1,364 | - | - | - | - | - | 2,465 | ||||||||
Ending balance: collectively
|
|||||||||||||||||
evaluated for impairment
|
6,544 | 3,762 | 1,516 | 13 | 629 | 191 | 1,520 | 14,175 | |||||||||
Ending balance
|
$ | 7,645 | 5,126 | 1,516 | 13 | 629 | 191 | 1,520 | 16,640 | ||||||||
Loans:
|
|||||||||||||||||
Ending balance
|
$ | 86,498 | 255,339 | 207,245 | 5,285 | 59,416 | 29,032 | - | 642,815 | ||||||||
Ending balance: individually
|
|||||||||||||||||
evaluated for impairment
|
$ | 19,789 | 23,452 | 4,961 | - | 362 | - | - | 48,564 | ||||||||
Ending balance: collectively
|
|||||||||||||||||
evaluated for impairment
|
$ | 66,709 | 231,887 | 202,284 | 5,285 | 59,054 | 29,032 | - | 594,251 |
Year ended December 31, 2011
|
|||||||||||||||||
(Dollars in thousands)
|
|||||||||||||||||
Real Estate Loans
|
|||||||||||||||||
Construction and Land Development
|
Single-
Family Residential
|
Commercial
|
Multifamily and
Farmland
|
Commercial
|
Consumer
and All
Other
|
Unallocated
|
Total
|
||||||||||
Allowance for loan losses:
|
|||||||||||||||||
Beginning balance
|
$ | 5,774 | 6,097 | 1,409 | 17 | 1,174 | 430 | 592 | 15,493 | ||||||||
Charge-offs
|
(7,164 | ) | (2,925 | ) | (1,271 | ) | - | (314 | ) | (586 | ) | - | (12,260 | ) | |||
Recoveries
|
241 | 201 | 24 | - | 121 | 152 | - | 739 | |||||||||
Provision
|
8,331 | 1,984 | 1,569 | (4 | ) | 48 | 259 | 445 | 12,632 | ||||||||
Ending balance
|
$ | 7,182 | 5,357 | 1,731 | 13 | 1,029 | 255 | 1,037 | 16,604 | ||||||||
Ending balance: individually
|
|||||||||||||||||
evaluated for impairment
|
$ | 1,250 | 1,289 | - | - | - | - | - | 2,539 | ||||||||
Ending balance: collectively
|
|||||||||||||||||
evaluated for impairment
|
5,932 | 4,068 | 1,731 | 13 | 1,029 | 255 | 1,037 | 14,065 | |||||||||
Ending balance
|
$ | 7,182 | 5,357 | 1,731 | 13 | 1,029 | 255 | 1,037 | 16,604 | ||||||||
Loans:
|
|||||||||||||||||
Ending balance
|
$ | 93,812 | 267,051 | 214,415 | 4,793 | 60,646 | 29,780 | - | 670,497 | ||||||||
Ending balance: individually
|
|||||||||||||||||
evaluated for impairment
|
$ | 20,280 | 20,661 | 3,845 | - | - | - | - | 44,786 | ||||||||
Ending balance: collectively
|
|||||||||||||||||
evaluated for impairment
|
$ | 73,532 | 246,390 | 210,570 | 4,793 | 60,646 | 29,780 | - | 625,711 |
·
|
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 as 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 as 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.
|
June 30, 2012
|
||||||||||||||||
(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
|
$ | 193 | 22,425 | - | - | 902 | 1,320 | - | 24,840 | |||||||
2- High Quality
|
5,506 | 61,133 | 24,729 | 41 | 8,293 | 4,170 | 2,611 | 106,483 | ||||||||
3- Good Quality
|
26,624 | 94,484 | 123,709 | 3,637 | 36,186 | 4,065 | 16,210 | 304,915 | ||||||||
4- Management Attention
|
26,320 | 46,754 | 47,325 | 686 | 12,503 | 374 | 6 | 133,968 | ||||||||
5- Watch
|
11,861 | 11,701 | 5,263 | 720 | 325 | 115 | - | 29,985 | ||||||||
6- Substandard
|
15,994 | 18,842 | 6,219 | 201 | 1,182 | 161 | - | 42,599 | ||||||||
7- Low Substandard
|
- | - | - | - | - | - | - | - | ||||||||
8- Doubtful
|
- | - | - | - | - | - | - | - | ||||||||
9- Loss
|
- | - | - | - | 25 | - | - | 25 | ||||||||
Total
|
$ | 86,498 | 255,339 | 207,245 | 5,285 | 59,416 | 10,205 | 18,827 | 642,815 |
December 31, 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
|
$ | 197 | 25,474 | - | - | 715 | 1,344 | - | 27,730 | |||||||
2- High Quality
|
5,183 | 64,817 | 25,506 | 50 | 8,801 | 4,070 | 2,774 | 111,201 | ||||||||
3- Good Quality
|
27,675 | 100,388 | 136,137 | 3,448 | 36,585 | 4,259 | 16,509 | 325,001 | ||||||||
4- Management Attention
|
28,138 | 50,253 | 40,312 | 358 | 12,882 | 429 | 7 | 132,379 | ||||||||
5- Watch
|
15,923 | 11,767 | 2,795 | 728 | 622 | 89 | - | 31,924 | ||||||||
6- Substandard
|
16,696 | 14,352 | 9,665 | 209 | 1,041 | 154 | - | 42,117 | ||||||||
7- Low Substandard
|
- | - | - | - | - | - | - | - | ||||||||
8- Doubtful
|
- | - | - | - | - | - | - | - | ||||||||
9- Loss
|
- | - | - | - | - | 145 | - | 145 | ||||||||
Total
|
$ | 93,812 | 267,051 | 214,415 | 4,793 | 60,646 | 10,490 | 19,290 | 670,497 |
June 30, 2012
|
||||||
(Dollars in thousands)
|
||||||
Number of Contracts
|
Pre-Modification Outstanding
Recorded
Investment
|
Post-Modification Outstanding
Recorded
Investment
|
||||
Real estate loans
|
||||||
Construction and land development
|
22 | $ | 17,661 | 10,990 | ||
Single-family residential
|
100 | 10,557 | 9,726 | |||
Commercial
|
7 | 3,829 | 1,648 | |||
Total real estate TDR loans
|
129 | 32,047 | 22,364 | |||
Commercial loans (not secured by real estate)
|
9 | 503 | 379 | |||
Consumer loans (not secured by real estate)
|
3 | 7 | 5 | |||
Total TDR loans
|
141 | $ | 32,557 | 22,748 |
December 31, 2011
|
||||||
(Dollars in thousands)
|
||||||
Number of
Contracts
|
Pre-Modification Outstanding
Recorded
Investment
|
Post-Modification Outstanding
Recorded
Investment
|
||||
Real estate loans
|
||||||
Construction and land development
|
29 | $ | 19,762 | 12,840 | ||
Single-family residential
|
241 | 25,541 | 24,846 | |||
Commercial
|
15 | 7,200 | 5,013 | |||
Multifamily and Farmland
|
1 | 322 | 209 | |||
Total real estate TDR loans
|
286 | 52,825 | 42,908 | |||
Commercial loans (not secured by real estate)
|
21 | 1,711 | 1,083 | |||
Consumer loans (not secured by real estate)
|
8 | 124 | 142 | |||
Total TDR loans
|
315 | $ | 54,660 | 44,133 |
(4)
|
Net Earnings Per Common Share
|
For the three months ended June 30, 2012
|
|||||||
Net Earnings Available to Common Shareholders (Dollars in thousands)
|
Common Shares
|
Per Share Amount
|
|||||
Basic earnings per common share
|
$ | 1,161 | 5,544,160 | $ | 0.21 | ||
Effect of dilutive securities:
|
|||||||
Stock options
|
- | 3,928 | |||||
Diluted earnings per common share
|
$ | 1,161 | 5,548,088 | $ | 0.21 | ||
For the six months ended June 30, 2012
|
|||||||
Net Earnings Available to Common Shareholders (Dollars in thousands)
|
Common Shares
|
Per Share Amount
|
|||||
Basic earnings per common share
|
$ | 2,471 | 5,544,160 | $ | 0.45 | ||
Effect of dilutive securities:
|
|||||||
Stock options
|
- | 1,964 | |||||
Diluted earnings per common share
|
$ | 2,471 | 5,546,124 | $ | 0.45 | ||
For the three months ended June 30, 2011
|
|||||||
Net Earnings Available to Common Shareholders (Dollars in thousands)
|
Common Shares
|
Per Share Amount
|
|||||
Basic earnings per common share
|
$ | 281 | 5,542,703 | $ | 0.05 | ||
Effect of dilutive securities:
|
|||||||
Stock options
|
- | 1,739 | |||||
Diluted earnings per common share
|
$ | 281 | 5,544,442 | $ | 0.05 | ||
For the six months ended June 30, 2011
|
|||||||
Net Earnings Available to Common Shareholders (Dollars in thousands)
|
Common Shares
|
Per Share Amount
|
|||||
Basic earnings per common share
|
$ | 1,293 | 5,542,126 | $ | 0.23 | ||
Effect of dilutive securities:
|
|||||||
Stock options
|
- | 1,646 | |||||
Diluted earnings per common share
|
$ | 1,293 | 5,543,772 | $ | 0.23 |
(5)
|
Stock-Based Compensation
|
(6)
|
Fair Value
|
·
|
Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.
|
·
|
Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
|
·
|
Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
|
(Dollars in thousands)
|
||||||||
June 30, 2012
|
||||||||
Fair Value Measurements
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
|||||
Mortgage-backed securities
|
$ | 166,021 | - | 166,021 | - | |||
U.S. Government
|
||||||||
sponsored enterprises
|
$ | 2,930 | - | 2,930 | - | |||
State and political subdivisions
|
$ | 107,675 | - | 107,675 | - | |||
Corporate bonds
|
$ | 1,545 | - | 1,545 | - | |||
Trust preferred securities
|
$ | 1,250 | - | - | 1,250 | |||
Equity securities
|
$ | 1,314 | 1,314 | - | - | |||
Mortgage loans held for sale
|
$ | 3,753 | - | - | 3,753 |
(Dollars in thousands)
|
||||||||
December 31, 2011
|
||||||||
Fair Value Measurements
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
|||||
Mortgage-backed securities
|
$ | 213,693 | - | 208,349 | 5,344 | |||
U.S. Government
|
||||||||
sponsored enterprises
|
$ | 7,694 | - | 7,694 | - | |||
State and political subdivisions
|
$ | 97,097 | - | 97,097 | - | |||
Corporate bonds
|
$ | 543 | - | 543 | - | |||
Trust preferred securities
|
$ | 1,250 | - | - | 1,250 | |||
Equity securities
|
$ | 1,111 | 1,111 | - | - | |||
Mortgage loans held for sale
|
$ | 5,146 | - | - | 5,146 |
(Dollars in thousands)
|
|||
Investment Securities Available for Sale
|
|||
Level 3 Valuation
|
|||
Balance, beginning of period
|
$ | 6,594 | |
Change in book value
|
- | ||
Change in gain/(loss) realized and unrealized
|
- | ||
Purchases/(sales)
|
- | ||
Transfers in and/or (out) of Level 3
|
(5,344 | ) | |
Balance, end of period
|
$ | 1,250 | |
Change in unrealized gain/(loss) for assets still held in Level 3
|
$ | - |
(Dollars in thousands)
|
|||||||||||
Fair Value Measurements June
30, 2012
|
Level 1 Valuation
|
Level 2 Valuation
|
Level 3 Valuation
|
Total Gains/(Losses) for
the Six Months Ended
June 30, 2012
|
|||||||
Impaired loans
|
$ | 51,729 | - | 345 | 51,384 | (4,217 | ) | ||||
Other real estate
|
$ | 6,505 | - | - | 6,505 | (384 | ) |
(Dollars in thousands)
|
|||||||||||
Fair Value Measurements December 31, 2011
|
Level 1 Valuation
|
Level 2 Valuation
|
Level 3 Valuation
|
Total Gains/(Losses) for
the Year Ended
December 31, 2011
|
|||||||
Impaired loans
|
$ | 49,901 | - | 431 | 49,470 | (11,864 | ) | ||||
Other real estate
|
$ | 7,576 | - | - | 7,576 | (1,322 | ) |
(Dollars in thousands)
|
||||||||||
Fair Value Measurements at June 30, 2012
|
||||||||||
Carrying
Amount
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||
Assets:
|
||||||||||
Cash and cash equivalents
|
$ | 69,477 | 69,477 | - | - | 69,477 | ||||
Investment securities available for sale
|
280,735 | 1,314 | 278,171 | 1,250 | 280,735 | |||||
Other investments
|
5,734 | - | - | 5,734 | 5,734 | |||||
Mortgage loans held for sale
|
3,753 | - | - | 3,753 | 3,753 | |||||
Loans, net
|
626,175 | - | 345 | 619,259 | 619,604 | |||||
Cash surrender value of life insurance
|
13,040 | - | 13,040 | - | 13,040 | |||||
Liabilities:
|
||||||||||
Deposits
|
$ | 780,546 | - | 779,500 | - | 779,500 | ||||
Securities sold under agreements
|
||||||||||
to repurchase
|
50,510 | - | 50,510 | - | 50,510 | |||||
FHLB borrowings
|
70,000 | - | 75,508 | - | 75,508 | |||||
Junior subordinated debentures
|
20,619 | - | 20,619 | - | 20,619 |
(Dollars in thousands)
|
||||
December 31, 2011
|
||||
Carrying
Amount
|
Estimated
Fair Value
|
|||
Assets:
|
||||
Cash and cash equivalents
|
$ | 29,236 | 29,236 | |
Investment securities available for sale
|
321,388 | 321,388 | ||
Other investments
|
5,712 | 5,712 | ||
Mortgage loans held for sale
|
5,146 | 5,146 | ||
Loans, net
|
653,893 | 648,640 | ||
Cash surrender value of life insurance
|
12,835 | 12,835 | ||
Liabilities:
|
||||
Deposits and demand notes payable
|
$ | 827,111 | 826,810 | |
Securities sold under agreements
|
||||
to repurchase
|
39,600 | 39,600 | ||
FHLB borrowings
|
70,000 | 75,046 | ||
Junior subordinated debentures
|
20,619 | 20,619 |
(7)
|
Derivative Instruments and Hedging Activities
|
(Dollars in thousands)
|
|||||||||
Amount of Gain
(Loss) Recognized in
Accumulated OCI on
Derivatives
|
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
|
Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
|
|||||||
Six months ended
June 30,
|
Six months ended
June 30,
|
||||||||
2012
|
2011
|
2012
|
2011
|
||||||
Interest rate derivative contracts
|
$ -
|
$ (20)
|
Interest income
|
$ -
|
$ 628
|
(8)
|
TARP Repurchase
|
(Dollars in thousands)
|
|||||||||
Amount of Gain
(Loss) Recognized in
Accumulated OCI on
Derivatives
|
Location of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
|
Amount of Gain
(Loss) Reclassified
from Accumulated
OCI into Income
|
|||||||
Six months ended
June 30,
|
Six months ended
June 30,
|
||||||||
2012
|
2011
|
2012
|
2011
|
||||||
Interest rate derivative contracts
|
$ -
|
$ (20)
|
Interest income
|
$ -
|
$ 628
|
(Dollars in thousands)
|
||||||||
June 30, 2012
|
||||||||
Fair Value Measurements
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
|||||
Mortgage-backed securities
|
$ | 166,021 | - | 166,021 | - | |||
U.S. Government
|
||||||||
sponsored enterprises
|
$ | 2,930 | - | 2,930 | - | |||
State and political subdivisions
|
$ | 107,675 | - | 107,675 | - | |||
Corporate bonds
|
$ | 1,545 | - | 1,545 | - | |||
Trust preferred securities
|
$ | 1,250 | - | - | 1,250 | |||
Equity securities
|
$ | 1,314 | 1,314 | - | - | |||
Mortgage loans held for sale
|
$ | 3,753 | - | - | 3,573 |
(Dollars in thousands)
|
||||||||
December 31, 2011
|
||||||||
Fair Value Measurements
|
Level 1
Valuation
|
Level 2
Valuation
|
Level 3
Valuation
|
|||||
Mortgage-backed securities
|
$ | 213,693 | - | 208,349 | 5,344 | |||
U.S. Government
|
||||||||
sponsored enterprises
|
$ | 7,694 | - | 7,694 | - | |||
State and political subdivisions
|
$ | 97,097 | - | 97,097 | - | |||
Corporate bonds
|
$ | 543 | - | 543 | - | |||
Trust preferred securities
|
$ | 1,250 | - | - | 1,250 | |||
Equity securities
|
$ | 1,111 | 1,111 | - | - | |||
Mortgage loans held for sale
|
$ | 5,146 | - | - | 5,146 |
(Dollars in thousands)
|
|||
Investment Securities Available for Sale
|
|||
Level 3 Valuation
|
|||
Balance, beginning of period
|
$ | 6,594 | |
Change in book value
|
- | ||
Change in gain/(loss) realized and unrealized
|
- | ||
Purchases/(sales)
|
- | ||
Transfers in and/or (out) of Level 3
|
(5,344 | ) | |
Balance, end of period
|
$ | 1,250 | |
Change in unrealized gain/(loss) for assets still held in Level 3
|
$ | - |
(Dollars in thousands)
|
|||||||||||
Fair Value
Measurements June
30, 2012
|
Level 1 Valuation
|
Level 2 Valuation
|
Level 3 Valuation
|
Total Gains/(Losses) for
the Six Months Ended
June 30, 2012
|
|||||||
Impaired loans
|
$ | 51,729 | - | 345 | 51,384 | (4,217 | ) | ||||
Other real estate
|
$ | 6,505 | - | - | 6,505 | (384 | ) | ||||
(Dollars in thousands)
|
|||||||||||
Fair Value
Measurements
December 31, 2011
|
Level 1 Valuation
|
Level 2 Valuation
|
Level 3 Valuation
|
Total Gains/(Losses) for
the Year Ended
December 31, 2011
|
|||||||
Impaired loans
|
$ | 49,901 | - | 431 | 49,470 | (11,864 | ) | ||||
Other real estate
|
$ | 7,576 | - | - | 7,576 | (1,322 | ) |
Three months ended
|
Three months ended
|
|||||||||||||
June 30, 2012
|
June 30, 2011
|
|||||||||||||
(Dollars in thousands)
|
Average
Balance
|
Interest
|
Yield /
Rate
|
Average
Balance
|
Interest
|
Yield /
Rate
|
||||||||
Interest-earning assets:
|
||||||||||||||
Interest and fees on loans
|
$ | 654,343 | 8,227 | 5.06% | 704,366 | 9,159 | 5.22% | |||||||
Investments - taxable
|
193,722 | 773 | 1.61% | 152,996 | 1,146 | 3.11% | ||||||||
Investments - nontaxable*
|
96,948 | 1,202 | 4.99% | 140,496 | 1,541 | 4.40% | ||||||||
Other
|
27,950 | 16 | 0.46% | 14,356 | 8 | 0.42% | ||||||||
Total interest-earning assets
|
972,963 | 10,218 | 4.22% | 1,012,214 | 11,854 | 4.70% | ||||||||
Cash and due from banks
|
25,189 | 23,978 | ||||||||||||
Other assets
|
55,434 | 48,447 | ||||||||||||
Allowance for loan losses
|
(17,026 | ) | (15,651 | ) | ||||||||||
Total assets
|
$ | 1,036,560 | 1,068,988 | |||||||||||
Interest-bearing liabilities:
|
||||||||||||||
NOW, MMDA & savings deposits
|
$ | 348,243 | 295 | 0.34% | 342,739 | 601 | 0.70% | |||||||
Time deposits
|
287,473 | 864 | 1.21% | 358,956 | 1,277 | 1.43% | ||||||||
FHLB / FRB borrowings
|
70,000 | 684 | 3.93% | 70,000 | 753 | 4.31% | ||||||||
Trust preferred securities
|
20,619 | 110 | 2.14% | 20,619 | 101 | 1.96% | ||||||||
Other
|
47,131 | 34 | 0.29% | 42,040 | 77 | 0.74% | ||||||||
Total interest-bearing liabilities
|
773,466 | 1,987 | 1.03% | 834,354 | 2,809 | 1.35% | ||||||||
Demand deposits
|
152,743 | 131,741 | ||||||||||||
Other liabilities
|
4,321 | 4,071 | ||||||||||||
Shareholders' equity
|
106,671 | 98,803 | ||||||||||||
Total liabilities and shareholder's equity
|
$ | 1,037,202 | 1,068,969 | |||||||||||
Net interest spread
|
$ | 8,231 | 3.19% | 9,045 | 3.35% | |||||||||
Net yield on interest-earning assets
|
3.40% | 3.58% | ||||||||||||
Taxable equivalent adjustment
|
||||||||||||||
Investment securities
|
$ | 383 | 432 | |||||||||||
Net interest income
|
$ | 7,848 | 8,613 | |||||||||||
*Includes U.S. Government agency securities that are non-taxable for state income tax purposes of $3.0 million in 2012 and $52.3 million in 2011. An effective tax rate of 6.90% was used to calculate the tax equivalent yield on these securities.
|
Six months ended
|
Six months ended
|
||||||||||||
June 30, 2012
|
June 30, 2011
|
||||||||||||
(Dollars in thousands)
|
Average
Balance
|
Interest
|
Yield /
Rate
|
Average
Balance
|
Interest
|
Yield /
Rate
|
|||||||
Interest-earning assets:
|
|||||||||||||
Interest and fees on loans
|
$ | 662,962 | 16,652 | 5.05% | 712,994 | 18,773 | 5.31% | ||||||
Investments - taxable
|
206,273 | 1,854 | 1.82% | 147,003 | 2,026 | 2.88% | |||||||
Investments - nontaxable*
|
99,091 | 2,451 | 4.97% | 137,539 | 3,035 | 4.45% | |||||||
Other
|
17,079 | 19 | 0.54% | 14,102 | 14 | 0.40% | |||||||
Total interest-earning assets
|
985,405 | 20,976 | 4.28% | 1,011,638 | 23,848 | 4.75% | |||||||
Cash and due from banks
|
24,010 | 23,546 | |||||||||||
Other assets
|
55,655 | 48,947 | |||||||||||
Allowance for loan losses
|
(17,085 | ) | (15,381 | ) | |||||||||
Total assets
|
$ | 1,047,985 | 1,068,750 | ||||||||||
Interest-bearing liabilities:
|
|||||||||||||
NOW, MMDA & savings deposits
|
$ | 349,731 | 639 | 0.37% | 338,227 | 1,319 | 0.79% | ||||||
Time deposits
|
303,115 | 1,896 | 1.26% | 371,107 | 2,681 | 1.46% | |||||||
FHLB / FRB borrowings
|
70,703 | 1,374 | 3.91% | 70,055 | 1,497 | 4.31% | |||||||
Trust preferred securities
|
20,619 | 222 | 2.17% | 20,619 | 200 | 1.96% | |||||||
Other
|
45,713 | 73 | 0.32% | 39,567 | 156 | 0.80% | |||||||
Total interest-bearing liabilities
|
789,881 | 4,204 | 1.07% | 839,575 | 5,853 | 1.41% | |||||||
Demand deposits
|
148,513 | 127,350 | |||||||||||
Other liabilities
|
4,303 | 3,888 | |||||||||||
Shareholders' equity
|
106,691 | 98,415 | |||||||||||
Total liabilities and shareholder's equity
|
$ | 1,049,388 | 1,069,228 | ||||||||||
Net interest spread
|
$ | 16,772 | 3.21% | 17,995 | 3.34% | ||||||||
Net yield on interest-earning assets
|
3.42% | 3.59% | |||||||||||
Taxable equivalent adjustment
|
|||||||||||||
Investment securities
|
$ | 779 | 869 | ||||||||||
Net interest income
|
$ | 15,993 | 17,126 | ||||||||||
*Includes U.S. Government agency securities that are non-taxable for state income tax purposes of $4.6 million in 2012 and $48.8 million in 2011. An effective tax rate of 6.90% was used to calculate the tax equivalent yield on these securities.
|
Three months ended June 30, 2012
|
Six months ended June 30, 2012
|
||||||||||||
compared to three months ended June 30, 2011
|
compared to six months ended June 30, 2011
|
||||||||||||
(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
|
$ | (639 | ) | (293 | ) | (932 | ) | (1,286 | ) | (835 | ) | (2,121 | ) |
Investments - taxable
|
251 | (624 | ) | (373 | ) | 715 | (887 | ) | (172 | ) | |||
Investments - nontaxable
|
(509 | ) | 170 | (339 | ) | (899 | ) | 315 | (584 | ) | |||
Other
|
5 | 3 | 8 | (10 | ) | 15 | 5 | ||||||
Total interest income
|
(892 | ) | (744 | ) | (1,636 | ) | (1,480 | ) | (1,392 | ) | (2,872 | ) | |
Interest expense:
|
|||||||||||||
NOW, MMDA & savings deposits
|
7 | (313 | ) | (306 | ) | 33 | (713 | ) | (680 | ) | |||
Time deposits
|
(235 | ) | (178 | ) | (413 | ) | (458 | ) | (327 | ) | (785 | ) | |
FHLB / FRB Borrowings
|
0 | (69 | ) | (69 | ) | 13 | (136 | ) | (123 | ) | |||
Trust Preferred Securities
|
- | 9 | 9 | - | 22 | 22 | |||||||
Other
|
6 | (49 | ) | (43 | ) | 17 | (100 | ) | (83 | ) | |||
Total interest expense
|
(222 | ) | (600 | ) | (822 | ) | (395 | ) | (1,254 | ) | (1,649 | ) | |
Net interest income
|
$ | (670 | ) | (144 | ) | (814 | ) | (1,085 | ) | (138 | ) | (1,223 | ) |
(Dollars in thousands)
|
||||||||
Number of
Loans
|
Balance Outstanding
|
Non-accrual Balance
|
||||||
Land acquisition and development - commercial purposes
|
70 | $ | 18,491 | $ | 2,482 | |||
Land acquisition and development - residential purposes
|
328 | 57,089 | 10,142 | |||||
1 to 4 family residential construction
|
28 | 6,621 | - | |||||
Commercial construction
|
9 | 4,297 | - | |||||
Total construction and land development
|
435 | $ | 86,498 | $ | 12,624 |
·
|
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
|
06/30/2012
|
12/31/2011
|
|
Risk Grade 1 (Excellent Quality)
|
3.00%
|
3.12%
|
|
Risk Grade 2 (High Quality)
|
16.57%
|
16.58%
|
|
Risk Grade 3 (Good Quality)
|
48.12%
|
49.30%
|
|
Risk Grade 4 (Management Attention)
|
20.75%
|
19.65%
|
|
Risk Grade 5 (Watch)
|
4.29%
|
4.76%
|
|
Risk Grade 6 (Substandard)
|
6.91%
|
6.21%
|
|
Risk Grade 7 (Low Substandard)
|
0.00%
|
0.00%
|
|
Risk Grade 8 (Doubtful)
|
0.00%
|
0.00%
|
|
Risk Grade 9 (Loss)
|
0.00%
|
0.00%
|
(Dollars in thousands)
|
||||
June 30, 2012
|
December 31, 2011
|
|||
Contractual Cash Obligations
|
||||
Long-term borrowings
|
$ | 70,000 | 70,000 | |
Junior subordinated debentures
|
20,619 | 20,619 | ||
Operating lease obligations
|
4,433 | 4,326 | ||
Total
|
$ | 95,052 | 94,945 | |
Other Commitments
|
||||
Commitments to extend credit
|
$ | 142,155 | 131,565 | |
Standby letters of credit and financial guarantees written
|
2,917 | 3,288 | ||
Total
|
$ | 145,072 | 134,853 |
PART II.
|
OTHER INFORMATION
|
|
|
Item 1.
|
Legal Proceedings
|
On June 7, 2012, a Complaint was filed against the Company and the Bank in the General Court of Justice, Superior Court Division, Lincoln County, North Carolina. The Complaint (i) alleged that the Bank failed to operate its overdraft program and process customer transactions in accordance with its customer account agreement and violated the North Carolina Unfair and Deceptive Trade Practices Act in its assessment and collection of overdraft fees and (ii) sought the refund of overdraft fees, treble damages, attorneys’ fees and injunctive relief. On August 6, 2012, the Company and the Bank filed an Answer denying the allegations alleged in the Complaint and asserting certain other additional defenses. On August 9, 2012, the plaintiffs filed a Notice of Voluntary Dismissal Without Prejudice pursuant to which plaintiffs voluntarily dismissed its claims against the Company and the Bank.
|
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
|
|||||
April 1 - 30, 2012
|
- | $ | - | - | - | ||||
May 1 - 31, 2012
|
2,100 | (1) | 8.16 | - | - | ||||
June 1 - 30, 2012
|
12,530 | (2) | 933.36 | - | - | ||||
Total
|
14,630 | $ | 828.82 | - | |||||
(1) The Company purchased 2,100 shares on the open market in the six months ended June 30, 2012 for its deferred compensation plan. All purchases were funded by participant contributions to the plan. The Purchase Agreement with UST permits the Company to purchase its common stock on the open market pursuant to benefit plans.
|
|||||||||
(2) On June 28, 2012, the Company purchased 12,530 shares of the Company's 25,054 outstanding shares of preferred stock from the UST, which was issued to the UST in connection with the Company's participation in the CPP under the TARP in 2008. |
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, Jr., 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, Jr. 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, Jr. 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
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||
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
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||
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 (10)(p) | Underwriting Agreement with Merrill Lynch, Pierce, Fenner & Smith | |
Incorporated and Sandler O'Neill & Partners, L.P., as representatives of the | ||
several underwriters listed on Schedule A thereto and the UST incorporated by | ||
reference to Exhibit 1.1 to the Form 8-K filed with the Securities and Exchange | ||
Commission on June 29, 2012 | ||
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
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|
Sarbanes-Oxley Act of 2002
|
||
Exhibit (32)
|
Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
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|
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 June 30, 2012, 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.*
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||
*Furnished, not filed.
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Peoples Bancorp of North Carolina, Inc.
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||
August 10, 2012
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/s/ Tony W. Wolfe
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|
Date
|
Tony W. Wolfe
|
|
President and Chief Executive Officer
|
||
(Principal Executive Officer)
|
||
August 10, 2012
|
/s/ A. Joseph Lampron, Jr.
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|
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.
|
August 10, 2012
|
/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.
|
August 10, 2012
|
/s/ A. Joseph Lampron, Jr.
|
|
Date
|
A. Joseph Lampron, Jr.
|
|
Executive Vice President and Chief Financial Officer
|
||
(Principal Financial and Principal Accounting Officer)
|
August 10, 2012
|
/s/ Tony W. Wolfe
|
|
Date
|
Tony W. Wolfe
|
|
Chief Executive Officer
|
||
August 10, 2012
|
/s/ A. Joseph Lampron, Jr.
|
|
Date
|
A. Joseph Lampron, Jr.
|
|
Chief Financial Officer
|
Loans
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2012
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Loans [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans |
Major classifications of loans at June 30, 2012 and December 31, 2011 are summarized as follows:
The Bank 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 June 30, 2012 and December 31, 2011:
The following table presents the Company's non-accrual loans as of June 30, 2012 and December 31, 2011:
At each reporting period, the Bank determines which loans are impaired. Accordingly, the Bank'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 REAS, a subsidiary of the Bank. REAS is staffed by certified appraisers that also perform appraisals for other companies. 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. Impaired loans under $250,000 are not individually evaluated for impairment, with the exception of the Bank's troubled debt restructured ("TDR") loans in the residential mortgage loan portfolio, which are individually evaluated for impairment. Accruing impaired loans were $35.0 million, $20.3 million and $30.6 million at June 30, 2012, June 30, 2011 and December 31, 2011, respectively. Interest income recognized on accruing impaired loans was $1.1 million, $595,000 and $1.7 million for the six months ended June 30, 2012, the six months ended June 30, 2011 and the year ended December 31, 2011, respectively. No interest income is recognized on non-accrual impaired loans subsequent to their classification as impaired. The following tables present the Company's impaired loans as of June 30, 2012 and December 31, 2011:
Changes in the allowance for loan losses for the six months ended June 30, 2012 and the year ended December 31, 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. These risk grades are evaluated on an ongoing basis. 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 grades as of June 30, 2012 and December 31, 2011.
At June 30, 2012, TDR loans were $22.7 million, including $1.7 million in performing TDR loans. Effective March 31, 2012, performing TDR balances reflect current year TDR loans only, in accordance with GAAP. Previously reported TDR amounts reflect cumulative TDR loans from prior periods in addition to current year TDR loans. At December 31, 2011, TDR loans were $44.1 million, including $15.1 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. The following table presents an analysis of TDR loans by loan type as of June 30, 2012 and December 31, 2011.
|