x |
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM _________ TO
___________
|
NORTH
CAROLINA
|
56-2259050
|
(State
or other jurisdiction of Incorporation
|
(IRS
Employer Identification Number)
|
or
organization)
|
Large
accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
Page No.
|
|
Part
I. FINANCIAL INFORMATION
|
|
Item
1 - Financial Statements (Unaudited)
|
|
Consolidated
Balance Sheets
March
31, 2008 (unaudited) and December 31, 2007
|
3
|
Consolidated
Statements of Operations
Three
Months Ended March 31, 2008 and 2007 (unaudited)
|
4
|
Consolidated
Statements of Cash Flows
Three
Months Ended March 31, 2008 and 2007 (unaudited)
|
5
|
Notes
to Consolidated Financial Statements
|
6
-
9
|
Item
2 - Management’s Discussion and Analysis of Financial Condition and
Results of Operations
|
10
– 22
|
Item
3 - Quantitative and Qualitative Disclosures about Market
Risk
|
23
|
Item
4 - Controls and Procedures
|
23
|
Part
II. Other Information
|
|
Item
1 – Legal Proceedings
|
24
|
Item
1a – Risk Factors
|
24
|
Item
2 – Unregistered Sales of Equity Securities and Use of
Proceeds
|
24
|
Item
3 – Defaults Upon Senior Debt
|
24
|
Item
4 – Submission of Matters to a Vote of Security
Holders
|
24
|
Item
5 – Other Information
|
24
|
Item
6 - Exhibits
|
24
|
March 31, 2008
(Unaudited)
|
December 31,
2007*
|
||||||
ASSETS
|
|||||||
Cash
and due from banks
|
$
|
14,088,431
|
$
|
12,047,600
|
|||
Interest-earning
deposits with banks
|
387,323
|
211,804
|
|||||
Federal
funds sold
|
467,000
|
97,000
|
|||||
Investment
securities available for sale at fair value
|
94,854,874
|
90,758,467
|
|||||
Loans
|
710,544,547
|
675,916,228
|
|||||
Allowance
for loan losses
|
(8,425,000
|
)
|
(8,273,000
|
)
|
|||
NET
LOANS
|
702,119,547
|
667,643,228
|
|||||
Accrued
interest receivable
|
3,267,523
|
3,761,600
|
|||||
Federal
Home Loan Bank stock, at cost
|
7,039,000
|
6,790,700
|
|||||
Bank
premises and equipment, net
|
9,965,995
|
8,094,521
|
|||||
Investment
in life insurance
|
9,210,136
|
9,122,697
|
|||||
Goodwill
|
30,233,049
|
30,233,049
|
|||||
Other
assets
|
9,460,216
|
6,779,390
|
|||||
TOTAL
ASSETS
|
$
|
881,093,094
|
$
|
835,540,056
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
LIABILITIES
|
|||||||
Deposits
|
|||||||
Demand
|
$
|
65,890,041
|
$
|
69,367,630
|
|||
Savings
|
88,981,672
|
110,516,217
|
|||||
Money
market and NOW
|
106,109,148
|
80,316,251
|
|||||
Time
|
392,240,647
|
345,231,215
|
|||||
TOTAL
DEPOSITS
|
653,221,508
|
605,431,313
|
|||||
Short-term
borrowings
|
10,000,000
|
13,755,000
|
|||||
Long-term
borrowings
|
121,248,000
|
121,248,000
|
|||||
Accrued
expenses and other liabilities
|
3,285,602
|
3,446,931
|
|||||
TOTAL
LIABILITIES
|
787,755,110
|
743,881,244
|
|||||
STOCKHOLDERS’
EQUITY
|
|||||||
Preferred
stock, no par value, 5,000,000 shares authorized, none
outstanding;
|
-
|
-
|
|||||
Common
stock, $1 par value, 20,000,000 shares authorized; 9,496,555 shares
outstanding March 31, 2008; 9,404,579 shares outstanding December
31,
2007
|
9,496,555
|
9,404,579
|
|||||
Additional
paid-in capital
|
73,698,725
|
73,596,427
|
|||||
Retained
earnings
|
9,478,141
|
8,619,617
|
|||||
Accumulated
other comprehensive income (Note D)
|
664,563
|
38,189
|
|||||
TOTAL
STOCKHOLDERS’ EQUITY
|
93,337,984
|
91,658,812
|
|||||
COMMITMENTS
(Note B)
|
|||||||
TOTAL
LIABILITIES AND
STOCKHOLDERS’
EQUITY
|
$
|
881,093,094
|
$
|
835,540,056
|
2008
|
2007
|
||||||
INTEREST
INCOME
|
|||||||
Loans
|
$
|
12,471,592
|
$
|
11,575,394
|
|||
Investment
securities available for sale
|
1,206,442
|
1,060,455
|
|||||
Federal
funds sold and interest-earning deposits
|
43,634
|
121,396
|
|||||
TOTAL
INTEREST INCOME
|
13,721,668
|
12,757,245
|
|||||
INTEREST
EXPENSE
|
|||||||
Deposits
|
5,708,860
|
5,561,000
|
|||||
Short-term
borrowings
|
116,679
|
290,135
|
|||||
Long-term
borrowings
|
1,372,173
|
661,935
|
|||||
TOTAL
INTEREST EXPENSE
|
7,197,712
|
6,513,070
|
|||||
NET
INTEREST INCOME
|
6,523,956
|
6,244,175
|
|||||
PROVISION
FOR LOAN LOSSES
|
806,395
|
359,147
|
|||||
NET
INTEREST INCOME AFTER
|
|||||||
PROVISION
FOR LOAN LOSSES
|
5,717,561
|
5,885,028
|
|||||
NON-INTEREST
INCOME
|
|||||||
Mortgage
origination revenue and other loan fees
|
171,908
|
115,007
|
|||||
Fees
on deposit accounts
|
381,670
|
347,654
|
|||||
Earnings
on life insurance
|
98,732
|
83,470
|
|||||
Loss
on disposal of assets
|
(9,047
|
)
|
(941
|
)
|
|||
Other
|
165,286
|
83,690
|
|||||
TOTAL
NON-INTEREST INCOME
|
808,549
|
628,880
|
|||||
NON-INTEREST
EXPENSE
|
|||||||
Salaries
and employee benefits
|
2,804,130
|
2,404,298
|
|||||
Occupancy
and equipment
|
662,716
|
547,937
|
|||||
Data
processing
|
271,093
|
260,725
|
|||||
Other
|
1,283,239
|
1,007,438
|
|||||
TOTAL
NON-INTEREST EXPENSE
|
5,021,178
|
4,220,398
|
|||||
INCOME
BEFORE INCOME TAXES
|
1,504,932
|
2,293,510
|
|||||
INCOME
TAX EXPENSE
|
504,600
|
827,900
|
|||||
NET
INCOME
|
$
|
1,000,332
|
$
|
1,465,610
|
|||
NET
INCOME PER COMMON SHARE (Note C)
|
|||||||
Basic
|
$
|
.11
|
$
|
.16
|
|||
Diluted
|
$
|
.10
|
$
|
.15
|
|||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING (Note C)
|
|||||||
Basic
|
9,417,694
|
9,093,392
|
|||||
Diluted
|
9,678,841
|
9,611,833
|
2008
|
2007
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
income
|
$
|
1,000,332
|
$
|
1,465,610
|
|||
Adjustments
to reconcile net income to net cash provided (used) by operating
activities:
|
|||||||
Depreciation
|
177,511
|
178,961
|
|||||
Provision
for loan losses
|
806,395
|
359,147
|
|||||
Amortization
of core deposit premium
|
33,337
|
33,337
|
|||||
Loss
on disposal of assets
|
9,047
|
941
|
|||||
Net
amortization (accretion) of premiums/discounts on
securities
|
(30,657
|
)
|
(19,827
|
)
|
|||
Accretion
of loan discount
|
(109,955
|
)
|
(109,955
|
)
|
|||
Amortization
of deposit premium
|
46,387
|
101,569
|
|||||
Net
increase in cash value of life insurance
|
(87,439
|
)
|
(74,375
|
)
|
|||
Stock
based compensation
|
49,087
|
41,812
|
|||||
Change
in assets and liabilities:
|
|||||||
(Increase)
decrease in accrued interest receivable
|
494,077
|
(216,810
|
)
|
||||
Increase
in other assets
|
(1,058,641
|
)
|
(439,825
|
)
|
|||
Increase
in accrued interest payable
|
18,567
|
53,775
|
|||||
Decrease
in other liabilities
|
(321,704
|
)
|
(169,448
|
)
|
|||
TOTAL
ADJUSTMENTS
|
26,012
|
(260,698
|
)
|
||||
NET
CASH PROVIDED (USED) BY OPERATING ACTIVITIES
|
1,026,344
|
1,204,912
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Purchases
of investment securities available for sale
|
(7,293,615
|
)
|
(3,446,358
|
)
|
|||
Principal
repayments of investment securities available for sale
|
4,247,188
|
2,372,779
|
|||||
Purchase
of Federal Home Loan Bank stock
|
(248,300
|
)
|
(597,900
|
)
|
|||
Net
increase in loans
|
(37,221,230
|
)
|
(36,247,116
|
)
|
|||
Investment
in life insurance
|
-
|
(3,100,000
|
)
|
||||
Purchases
of bank premises and equipment
|
(2,058,031
|
)
|
(981,745
|
)
|
|||
NET
CASH USED BY INVESTING ACTIVITIES
|
(42,573,988
|
)
|
(42,000,340
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Net
increase (decrease) in deposits:
|
|||||||
Demand
|
(3,477,589
|
)
|
3,706,424
|
||||
Savings
|
(21,534,545
|
)
|
17,365,031
|
||||
Money
market and NOW
|
25,792,897
|
3,744,458
|
|||||
Time
deposits
|
46,963,044
|
23,210,123
|
|||||
Net
decrease in short-term borrowings
|
(3,755,000
|
)
|
(6,451,000
|
)
|
|||
Net
increase in long-term borrowings
|
-
|
10,000,000
|
|||||
Proceeds
from stock options exercised
|
127,787
|
106,492
|
|||||
Excess
tax benefits from stock options exercised
|
17,400
|
61,700
|
|||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
44,133,994
|
51,743,228
|
|||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
2,586,350
|
10,947,800
|
|||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
12,356,404
|
15,150,110
|
|||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
14,942,754
|
$
|
26,097,910
|
Undisbursed
lines of credit
|
$
|
175,349,000
|
||
Stand-by
letters of credit
|
6,372,000
|
|||
Undisbursed
commitment to purchase additional investment in Small Business Investment
Corporation
|
413,000
|
Three months ended
March
31,
|
|||||||
2008
|
2007
|
||||||
Weighted
average number of shares used in computing basic net income per share
|
9,417,694
|
9,093,392
|
|||||
Effect
of dilutive stock options
|
261,147
|
518,441
|
|||||
Weighted
average number of shares used in computing diluted net income per
share
|
9,678,841
|
9,611,833
|
·
|
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 flows models and similar
techniques.
|
Description
|
March 31,
2008
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
Significant
Other
Observable
Inputs
(Level 2)
|
Significant
Unobservable
Inputs
(Level 3)
|
|||||||||
Available
for sale securities
|
$
|
94,854,874
|
$
|
466,182
|
$
|
94,388,692
|
$
|
-
|
|||||
Impaired
loans
|
$
|
2,416,997
|
$
|
-
|
$
|
1,963,149
|
$
|
453,848
|
|||||
Other
assets
|
$
|
2,320,352
|
$
|
-
|
$
|
2,320,352
|
$
|
-
|
Item 2. |
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
2008
|
2007
|
||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
||||||||||||||||
Balance
|
Interest
|
Yield/Cost
|
Balance
|
Interest
|
Yield/Cost
|
||||||||||||||
(Dollars
in thousands)
|
|||||||||||||||||||
Interest-earnings
assets
|
|
||||||||||||||||||
Loan
portfolio
|
$
|
696,751
|
$
|
12,472
|
7.20
|
%
|
$
|
565,827
|
$
|
11,575
|
8.30
|
%
|
|||||||
Investment
securities
|
99,768
|
1,206
|
4.84
|
%
|
88,901
|
1,061
|
4.77
|
%
|
|||||||||||
Fed
funds and other interest-earning assets
|
5,479
|
44
|
3.23
|
%
|
9,449
|
121
|
5.19
|
%
|
|||||||||||
Total
interest-earning assets
|
801,998
|
13,722
|
6.88
|
%
|
664,177
|
12,757
|
7.79
|
%
|
|||||||||||
Noninterest-earning
assets
|
63,016
|
60,459
|
|||||||||||||||||
Total
Assets
|
$
|
865,014
|
$
|
724,636
|
|||||||||||||||
Interest-bearing
liabilities
|
|||||||||||||||||||
Interest-bearing
NOW
|
$
|
32,973
|
21
|
0.26
|
%
|
$
|
34,684
|
98
|
1.15
|
%
|
|||||||||
Money
market and savings
|
154,726
|
1,086
|
2.82
|
%
|
150,813
|
1,577
|
4.24
|
%
|
|||||||||||
Time
deposits
|
379,526
|
4,602
|
4.88
|
%
|
313,499
|
3,886
|
5.03
|
%
|
|||||||||||
Short-term
borrowings
|
13,067
|
117
|
3.58
|
%
|
21,818
|
290
|
5.32
|
%
|
|||||||||||
Long-term
borrowings
|
121,248
|
1,372
|
4.53
|
%
|
47,803
|
662
|
5.54
|
%
|
|||||||||||
Total
interest-bearing liabilities
|
701,540
|
7,198
|
4.13
|
%
|
568,617
|
6,513
|
4.65
|
%
|
|||||||||||
Noninterest-bearing
deposits
|
67,080
|
68,649
|
|||||||||||||||||
Other
liabilities
|
3,202
|
3,125
|
|||||||||||||||||
Total
Liabilities
|
771,822
|
640,391
|
|||||||||||||||||
Stockholders'
Equity
|
93,192
|
84,245
|
|||||||||||||||||
Total
Liabilities & Stockholders' Equity
|
$
|
865,014
|
$
|
724,636
|
|||||||||||||||
Net
interest income
|
$
|
6,524
|
$
|
6,244
|
|||||||||||||||
Interest
rate spread
|
2.75
|
%
|
3.14
|
%
|
|||||||||||||||
Net
interest-margin
|
3.27
|
%
|
3.81
|
%
|
|||||||||||||||
Percentage
of average interest-earning assets to average interest-bearing
liabilities
|
114.32
|
%
|
116.81
|
%
|
Three Months Ended March 31,
|
||||||||||
2008 vs. 2007
|
||||||||||
(in Thousands)
|
||||||||||
Increase (Decrease) Due to
|
||||||||||
Volume
|
Rate
|
Total
|
||||||||
Interest
Income
|
||||||||||
Loan
portfolio
|
$
|
2,571
|
$
|
(1,674
|
)
|
$
|
897
|
|||
Investment
Securities
|
130
|
15
|
145
|
|||||||
Fed
funds and other interest-earning assets
|
(41
|
)
|
(36
|
)
|
(77
|
)
|
||||
Total
interest-earning assets
|
2,660
|
(1,695
|
)
|
965
|
||||||
Interest
Expense
|
||||||||||
Interest-bearing
NOW
|
(2
|
)
|
(75
|
)
|
(77
|
)
|
||||
Money
market and savings
|
41
|
(532
|
)
|
(491
|
)
|
|||||
Time
deposits
|
829
|
(113
|
)
|
716
|
||||||
Short-term
borrowings
|
(96
|
)
|
(77
|
)
|
(173
|
)
|
||||
Long-term
debt
|
914
|
(204
|
)
|
710
|
||||||
Total
interest-bearing liabilities
|
1,686
|
(1,001
|
)
|
685
|
||||||
Net
interest income
|
$
|
974
|
$
|
(694
|
)
|
$
|
280
|
At March 31,
|
At December 31,
|
||||||||||||
2008
|
2007
|
2007
|
2006
|
||||||||||
(Dollars in thousands)
|
|||||||||||||
Nonaccrual
loans
|
$
|
257
|
$
|
604
|
$
|
2,726
|
$
|
135
|
|||||
Restructured
loans
|
-
|
-
|
-
|
-
|
|||||||||
Total
nonperforming loans
|
257
|
604
|
2,726
|
135
|
|||||||||
Real
estate owned
|
2,320
|
98
|
272
|
98
|
|||||||||
Repossessed
assets
|
10
|
14
|
-
|
-
|
|||||||||
Total
nonperforming assets
|
$
|
2,587
|
$
|
716
|
$
|
2,998
|
$
|
233
|
|||||
Accruing
loans past due 90 days or more
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Allowance
for loan losses
|
8,425
|
7,277
|
8,273
|
6,945
|
|||||||||
Nonperforming
loans to period end loans
|
0.04
|
%
|
0.10
|
%
|
0.40
|
%
|
0.02
|
%
|
|||||
Allowance
for loan losses to period end loans
|
1.19
|
%
|
1.24
|
%
|
1.22
|
%
|
1.26
|
%
|
|||||
Allowance
for loan losses to nonperforming loans
|
3,276.23
|
%
|
1,204.61
|
%
|
303.45
|
%
|
5,144.96
|
%
|
|||||
Nonperforming
assets to total assets
|
0.29
|
%
|
0.10
|
%
|
0.36
|
%
|
0.03
|
%
|
|||||
Nonperforming
assets and loans past due 90 days or more to total assets
|
0.29
|
%
|
0.10
|
%
|
0.36
|
%
|
0.03
|
%
|
|
At March 31,
|
At December 31,
|
|||||||||||
|
2008
|
2007
|
|||||||||||
|
|
% of Total
|
|
% of Total
|
|||||||||
|
Amount
|
Loans (1)
|
Amount
|
Loans (1)
|
|||||||||
|
(Dollars
in thousands)
|
||||||||||||
Residential
real estate loans
|
$
|
80
|
2.65
|
%
|
$
|
130
|
2.70
|
%
|
|||||
Home
equity loans and lines
|
307
|
6.74
|
%
|
334
|
6.69
|
%
|
|||||||
Commercial
mortgage loans
|
4,205
|
54.37
|
%
|
3,771
|
51.85
|
%
|
|||||||
Construction
loans
|
2,245
|
25.90
|
%
|
2,362
|
27.18
|
%
|
|||||||
Commercial
and industrial loans
|
1,449
|
9.45
|
%
|
1,536
|
10.77
|
%
|
|||||||
Loans
to individuals
|
139
|
0.89
|
%
|
140
|
0.81
|
%
|
|||||||
Total
allowance
|
$
|
8,425
|
100.00
|
%
|
$
|
8,273
|
100.00
|
%
|
For the Three-Month Period Ended March 31,
|
|||||||
2008
|
2007
|
||||||
(Dollars in thousands)
|
|||||||
Balance
at the beginning of the year
|
$
|
8,273
|
$
|
6,945
|
|||
Charge-offs:
|
|||||||
Commercial
and industrial loans
|
-
|
28
|
|||||
Commercial
real estate loans
|
91
|
-
|
|||||
Construction,
acquisition and development
|
564
|
-
|
|||||
Consumer
loans
|
-
|
-
|
|||||
Total
charge-offs
|
655
|
28
|
|||||
Recoveries
|
1
|
1
|
|||||
Net
charge-offs
|
654
|
27
|
|||||
Provision
for loan losses
|
806
|
359
|
|||||
Balance
at the end of the year
|
$
|
8,425
|
$
|
7,277
|
|||
Total
loans outstanding at period-end
|
$
|
710,545
|
$
|
586,149
|
|||
Average
loans outstanding for the period
|
$
|
696,751
|
$
|
565,827
|
|||
Allowance
for loan losses to total loans
outstanding
|
1.19
|
%
|
1.24
|
%
|
|||
Ratio
of net charge-offs to average loans outstanding
|
0.09
|
%
|
0.00
|
%
|
Part II. |
OTHER
INFORMATION
|
Item 1. |
Legal
Proceedings.
|
Item 1a. |
Risk
Factors.
|
Item 2. |
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
Item 3. |
Defaults
Upon Senior Debt.
|
Item 4. |
Submission
of Matters to a Vote of Security
Holders
|
Item 5. |
Other
Information.
|
Item 6. |
Exhibits
|
(a) |
Exhibits.
|
31.1 |
Certification
of Principal Executive Officer pursuant to Rule 13a –
14(a)
|
31.2 |
Certification
of Principal Financial Officer pursuant to Rule 13a –
14(a)
|
32.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted
pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2 |
Certification
of Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
CRESCENT FINANCIAL CORPORATION | ||
Date:
May 6, 2008
|
By:
|
/s/
Michael G. Carlton
|
Michael
G. Carlton
|
||
President
and Chief Executive Officer
|
||
Date:
May 6, 2008
|
By:
|
/s/
Bruce W. Elder
|
Bruce
W. Elder
|
||
Principal
Financial Officer
|