x
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
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 ¨
|
Accelerated
filer ¨
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
Page No.
|
|||
Part
I.
|
FINANCIAL
INFORMATION
|
||
Item
1 -
|
Financial
Statements (Unaudited)
|
||
Consolidated
Balance Sheets
|
|||
September
30, 2009 (unaudited) and December 31, 2008
|
3
|
||
Consolidated
Statements of Operations
|
|||
Three
and Nine Months Ended September 30, 2009 and 2008
(unaudited)
|
4
|
||
Consolidated
Statements of Comprehensive Income
|
|||
Three
and Nine Months Ended September 30, 2009 and 2008
(unaudited)
|
5
|
||
Consolidated
Statement of Stockholders’ Equity
|
|||
Nine
Months Ended September 30, 2009 (unaudited)
|
6
|
||
Consolidated
Statements of Cash Flows
|
|||
Nine
Months Ended September 30, 2009 and 2008 (unaudited)
|
7
|
||
Notes
to Consolidated Financial Statements
|
8 -
21
|
||
Item
2 -
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
22
– 39
|
|
Item
3 -
|
Quantitative
and Qualitative Disclosures about Market Risk
|
40
|
|
Item
4T -
|
Controls
and Procedures
|
40
|
|
Part
II.
|
Other
Information
|
||
Item
1 -
|
Legal
Proceedings
|
41
|
|
Item
1a -
|
Risk
Factors
|
41
|
|
Item
2 -
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
41
|
|
Item
3 -
|
Defaults
Upon Senior Debt
|
41
|
|
Item
4 -
|
Submission
of Matters to a Vote of Security Holders
|
41
|
|
Item
5 -
|
Other
Information
|
41
|
|
Item
6 -
|
Exhibits
|
41
|
September
30, 2009
|
December
31,
|
|||||||
(Unaudited)
|
2008*
|
|||||||
ASSETS
|
||||||||
Cash
and due from banks
|
$ | 7,841,334 | $ | 9,917,277 | ||||
Interest-earning
deposits with banks
|
4,436,146 | 266,512 | ||||||
Federal
funds sold
|
5,545,000 | 99,000 | ||||||
Investment
securities available for sale, at fair value
|
198,309,418 | 105,648,618 | ||||||
Loans
|
771,996,633 | 785,377,283 | ||||||
Allowance
for loan losses
|
(13,782,000 | ) | (12,585,000 | ) | ||||
NET
LOANS
|
758,214,633 | 772,792,283 | ||||||
Accrued
interest receivable
|
4,255,378 | 3,341,258 | ||||||
Federal
Home Loan Bank stock, at cost
|
11,776,500 | 7,264,000 | ||||||
Bank
premises and equipment, net
|
11,945,611 | 10,845,049 | ||||||
Investment
in life insurance
|
17,444,371 | 16,811,918 | ||||||
Goodwill
|
30,233,049 | 30,233,049 | ||||||
Other
assets
|
13,701,887 | 11,091,784 | ||||||
TOTAL
ASSETS
|
$ | 1,063,703,327 | $ | 968,310,748 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
LIABILITIES
|
||||||||
Deposits
|
||||||||
Demand
|
$ | 66,947,119 | $ | 63,945,717 | ||||
Savings
|
59,973,050 | 58,833,876 | ||||||
Money
market and NOW
|
148,560,074 | 130,542,569 | ||||||
Time
|
438,702,295 | 461,560,593 | ||||||
TOTAL
DEPOSITS
|
714,182,538 | 714,882,755 | ||||||
Short-term
borrowings
|
88,000,000 | 37,706,000 | ||||||
Long-term
borrowings
|
133,748,000 | 116,748,000 | ||||||
Accrued
expenses and other liabilities
|
4,258,075 | 3,882,385 | ||||||
TOTAL
LIABILITIES
|
940,188,613 | 873,219,140 | ||||||
COMMITMENTS
(Note B)
|
||||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Preferred
stock, no par value, 5,000,000 shares authorized, 24,900 shares issued and
outstanding on September 30, 2009
|
22,797,940 | - | ||||||
Common
stock, $1 par value, 20,000,000 shares authorized; 9,626,559 shares
outstanding September 30, 2009 and December 31, 2008
|
9,626,559 | 9,626,559 | ||||||
Common
stock warrants
|
2,367,368 | - | ||||||
Additional
paid-in capital
|
74,483,619 | 74,349,299 | ||||||
Retained
earnings
|
11,297,788 | 10,488,628 | ||||||
Accumulated
other comprehensive income
|
2,941,440 | 627,122 | ||||||
TOTAL
STOCKHOLDERS’ EQUITY
|
123,514,714 | 95,091,608 | ||||||
TOTAL
LIABILITIES AND
|
||||||||
STOCKHOLDERS’
EQUITY
|
$ | 1,063,703,327 | $ | 968,310,748 |
Three-month
Periods
|
Nine-month
Periods
|
|||||||||||||||
Ended
September 30,
|
Ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
INTEREST
INCOME
|
||||||||||||||||
Loans
|
$ | 11,986,538 | $ | 12,570,944 | $ | 36,089,299 | $ | 36,978,349 | ||||||||
Investment
securities available for sale
|
2,081,011 | 1,206,343 | 6,133,383 | 3,639,786 | ||||||||||||
Federal
funds sold and interest-earning deposits
|
1,014 | 16,763 | 8,349 | 74,971 | ||||||||||||
TOTAL
INTEREST INCOME
|
14,068,563 | 13,794,050 | 42,231,031 | 40,693,106 | ||||||||||||
INTEREST
EXPENSE
|
||||||||||||||||
Deposits
|
4,885,179 | 5,953,339 | 15,196,846 | 17,164,617 | ||||||||||||
Short-term
borrowings
|
507,004 | 125,860 | 1,476,614 | 333,463 | ||||||||||||
Long-term
borrowings
|
1,265,254 | 1,371,992 | 3,646,362 | 4,036,486 | ||||||||||||
TOTAL
INTEREST EXPENSE
|
6,657,437 | 7,451,191 | 20,319,822 | 21,534,566 | ||||||||||||
NET
INTEREST INCOME
|
7,411,126 | 6,342,859 | 21,911,209 | 19,158,540 | ||||||||||||
PROVISION
FOR LOAN LOSSES
|
1,957,526 | 1,281,471 | 4,786,505 | 2,547,178 | ||||||||||||
NET
INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
|
5,453,600 | 5,061,388 | 17,124,704 | 16,611,362 | ||||||||||||
NON-INTEREST
INCOME
|
||||||||||||||||
Mortgage
loan origination revenue
|
223,278 | 188,952 | 735,113 | 511,561 | ||||||||||||
Fees
on deposit accounts
|
423,775 | 414,177 | 1,207,485 | 1,177,331 | ||||||||||||
Earnings
on life insurance
|
225,022 | 188,823 | 660,150 | 431,294 | ||||||||||||
Gain
(loss) on disposal of assets
|
20 | (2,169 | ) | (480 | ) | (1,346 | ) | |||||||||
Gain
on sale of available for sale securities
|
109,777 | - | 109,777 | 15,535 | ||||||||||||
Loss
on impairment of nonmarketable equity security
|
- | - | (406,802 | ) | - | |||||||||||
Other
|
146,573 | 268,973 | 363,774 | 622,907 | ||||||||||||
TOTAL
NON-INTEREST INCOME
|
1,128,445 | 1,058,756 | 2,669,017 | 2,757,282 | ||||||||||||
NON-INTEREST
EXPENSE
|
||||||||||||||||
Salaries
and employee benefits
|
3,030,101 | 2,881,444 | 9,018,527 | 8,602,773 | ||||||||||||
Occupancy
and equipment
|
951,473 | 709,164 | 2,606,593 | 2,027,775 | ||||||||||||
Data
processing
|
358,236 | 269,567 | 1,109,895 | 801,559 | ||||||||||||
FDIC
insurance premiums
|
309,916 | 102,935 | 1,331,504 | 295,403 | ||||||||||||
Other
|
1,237,467 | 1,104,707 | 3,733,934 | 3,527,296 | ||||||||||||
TOTAL
NON-INTEREST EXPENSE
|
5,887,193 | 5,067,817 | 17,800,453 | 15,254,806 | ||||||||||||
INCOME
BEFORE INCOME TAXES
|
694,852 | 1,052,327 | 1,993,268 | 4,113,838 | ||||||||||||
INCOME
TAXES
|
58,100 | 306,300 | 171,800 | 1,336,800 | ||||||||||||
NET
INCOME
|
636,752 | 746,027 | 1,821,468 | 2,777,038 | ||||||||||||
Effective
dividend on preferred stock (Note G)
|
422,443 | - | 1,012,308 | - | ||||||||||||
Net
income available to common shareholders
|
$ | 214,309 | $ | 746,027 | $ | 809,160 | $ | 2,777,038 | ||||||||
NET
INCOME PER COMMON SHARE
|
||||||||||||||||
Basic
|
$ | .02 | $ | .08 | $ | .08 | $ | .29 | ||||||||
Diluted
|
$ | .02 | $ | .08 | $ | .08 | $ | .29 | ||||||||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING (Note C)
|
||||||||||||||||
Basic
|
9,569,290 | 9,548,589 | 9,569,290 | 9,478,117 | ||||||||||||
Diluted
|
9,606,186 | 9,628,147 | 9,585,422 | 9,642,969 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
income
|
$ | 636,752 | $ | 746,027 | $ | 1,821,468 | $ | 2,777,038 | ||||||||
Other
comprehensive income (loss):
|
||||||||||||||||
Securities
available for sale:
|
||||||||||||||||
Unrealized
holding gains (losses) on available for sale securities
|
3,429,112 | (1,221,550 | ) | 4,226,163 | (1,631,094 | ) | ||||||||||
Tax
effect
|
(1,323,950 | ) | 471,706 | (1,631,244 | ) | 629,602 | ||||||||||
Reclassification
of (gains) losses recognized in net income
|
(109,777 | ) | - | (109,777 | ) | (15,535 | ) | |||||||||
Tax
effect
|
42,319 | - | 42,319 | 5,989 | ||||||||||||
Net
of tax amount
|
2,037,704 | (749,844 | ) | 2,527,461 | (1,011,038 | ) | ||||||||||
Cash
flow hedging activities:
|
||||||||||||||||
Unrealized
holding loss on cash flow hedging activities
|
(194,916 | ) | - | (346,857 | ) | - | ||||||||||
Tax
effect
|
74,714 | - | 133,714 | - | ||||||||||||
Net
of tax amount
|
(120,202 | ) | - | (213,143 | ) | - | ||||||||||
Total
other comprehensive income (loss)
|
1,917,502 | (749,844 | ) | 2,314,318 | (1,011,038 | ) | ||||||||||
COMPREHENSIVE
INCOME (LOSS)
|
$ | 2,554,254 | $ | (3,817 | ) | $ | 4,135,786 | $ | 1,766,000 |
Accumulated
|
||||||||||||||||||||||||||||||||||||
Common
|
Additional
|
Other
|
Total
|
|||||||||||||||||||||||||||||||||
Preferred stock
|
Common stock
|
stock
|
paid-in
|
Retained
|
Comprehensive
|
stockholders’
|
||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
warrants
|
Capital
|
earnings
|
income
|
equity
|
||||||||||||||||||||||||||||
Balance
at December 31, 2008 -
|
$ | - | 9,626,559 | $ | 9,626,559 | $ | - | $ | 74,349,299 | $ | 10,488,628 | $ | 627,122 | $ | 95,091,608 | |||||||||||||||||||||
Net
income
|
- | - | - | - | - | - | 1,821,468 | - | 1,821,468 | |||||||||||||||||||||||||||
Other
comprehensive income
|
- | - | - | - | - | - | - | 2,314,318 | 2,314,318 | |||||||||||||||||||||||||||
Expense
recognized in connection with stock options and
restricted stock
|
- | - | - | - | - | 134,320 | - | - | 134,320 | |||||||||||||||||||||||||||
Preferred
stock transaction:
|
||||||||||||||||||||||||||||||||||||
Issuance
of preferred stock
|
24,900 | 24,900,000 | - | - | - | - | - | - | 24,900,000 | |||||||||||||||||||||||||||
Discount
on preferred stock
|
- | (2,367,368 | ) | - | - | 2,367,368 | - | - | - | - | ||||||||||||||||||||||||||
Accretion
of discount
|
- | 265,308 | - | - | - | - | (265,308 | ) | - | - | ||||||||||||||||||||||||||
Preferred
stock dividend
|
- | - | - | - | - | - | (747,000 | ) | - | (747,000 | ) | |||||||||||||||||||||||||
Balance
at September 30, 2009
|
24,900 | $ | 22,797,940 | 9,626,559 | $ | 9,626,559 | $ | 2,367,368 | $ | 74,483,619 | $ | 11,297,788 | $ | 2,941,440 | $ | 123,514,714 |
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income
|
$ | 1,821,468 | $ | 2,777,038 | ||||
Adjustments
to reconcile net income to net cash provided
|
||||||||
by
operating activities:
|
||||||||
Depreciation
|
690,888 | 585,491 | ||||||
Provision
for loan losses
|
4,786,505 | 2,547,178 | ||||||
Amortization
of core deposit premium
|
100,012 | 100,012 | ||||||
Deferred
income taxes
|
(615,901 | ) | (479,000 | ) | ||||
Loss
on impairment of nonmarketable equity security
|
406,802 | - | ||||||
Gain
on sale of available of sale securities
|
(109,777 | ) | (15,535 | ) | ||||
Loss
on disposal of other real estate owned
|
45,076 | 74,800 | ||||||
(Gain)
loss on disposal of assets
|
480 | 1,346 | ||||||
Net
amortization (accretion) of premiums/discounts on
securities
|
727,295 | (66,910 | ) | |||||
Accretion
of loan discount
|
(146,607 | ) | (329,865 | ) | ||||
Amortization
of deposit premium
|
82,298 | 139,162 | ||||||
Net
increase in cash value of life insurance
|
(632,455 | ) | (394,077 | ) | ||||
Stock
based compensation
|
134,320 | 160,457 | ||||||
Change
in assets and liabilities:
|
||||||||
(Increase)
decrease in accrued interest receivable
|
(914,120 | ) | 433,983 | |||||
(Increase)
in other assets
|
(532,263 | ) | (1,621,266 | ) | ||||
Decrease
(increase) in accrued interest payable
|
(237,213 | ) | 82,915 | |||||
Increase
(decrease) in other liabilities
|
399,763 | 314,062 | ||||||
TOTAL
ADJUSTMENTS
|
4,185,103 | 1,532,753 | ||||||
NET
CASH PROVIDED BY OPERATING ACTIVITIES
|
6,006,571 | 4,309,791 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchases
of investment securities available for sale
|
(130,544,840 | ) | (18,911,004 | ) | ||||
Principal
repayments of investment securities available for sale
|
30,635,630 | 10,548,208 | ||||||
Proceeds
from sale of securities available for sale
|
10,743,929 | 1,543,197 | ||||||
Purchase
of Federal Home Loan Bank stock
|
(4,512,500 | ) | (473,300 | ) | ||||
Proceeds
from disposal of foreclosed real estate
|
4,559,220 | 566,790 | ||||||
Net
(increase) decrease in loans
|
1,779,126 | (95,239,479 | ) | |||||
Investment
in life insurance
|
- | (7,000,000 | ) | |||||
Purchases
of bank premises and equipment
|
(1,791,930 | ) | (2,789,271 | ) | ||||
NET
CASH USED BY INVESTING ACTIVITIES
|
(89,131,365 | ) | (111,754,859 | ) | ||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Net
increase (decrease) in deposits:
|
||||||||
Demand
|
3,001,402 | 226,478 | ||||||
Savings
|
1,139,174 | (46,302,557 | ) | |||||
Money
market and NOW
|
18,017,505 | 40,114,210 | ||||||
Time
deposits
|
(22,940,596 | ) | 112,034,601 | |||||
Net
increase in short-term borrowings
|
50,294,000 | 6,245,000 | ||||||
Net
increase in long-term borrowings
|
17,000,000 | 4,500,000 | ||||||
Proceeds
from stock options exercised
|
- | 615,500 | ||||||
Proceeds
from issuance of preferred stock
|
24,900,000 | - | ||||||
Dividends
paid on preferred stock
|
(747,000 | ) | - | |||||
Excess
tax benefits from stock options exercised
|
- | 91,700 | ||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
90,664,485 | 117,524,932 | ||||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
7,539,691 | 10,079,864 | ||||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
10,282,789 | 12,356,404 | ||||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 17,822,480 | $ | 22,436,268 |
Undisbursed
lines of credit
|
$ | 146,890,000 | ||
Stand-by
letters of credit
|
4,049,000 | |||
Undisbursed
commitment to purchase additional investment in Small Business Investment
Corporation
|
363,000 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Weighted
average number of shares used in computing basic net income per
share
|
9,569,290 | 9,548,589 | 9,569,290 | 9,478,117 | ||||||||||||
Effect
of dilutive stock options
|
36,896 | 79,558 | 16,132 | 164,852 | ||||||||||||
Weighted
average number of shares used in computing diluted net income
per share
|
9,606,186 | 9,628,147 | 9,585,422 | 9,642,969 |
September 30, 2009
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
unrealized
|
unrealized
|
Fair
|
|||||||||||||
cost
|
gains
|
losses
|
value
|
|||||||||||||
Securities
available for sale:
|
||||||||||||||||
U.S.
government securities and obligations of U.S. government
agencies
|
$ | 16,676,072 | $ | 480,010 | $ | 1,708 | $ | 17,154,374 | ||||||||
Mortgage-backed
|
56,378,994 | 1,947,002 | - | 58,325,996 | ||||||||||||
Collateralized
mortgage obligations
|
76,248,556 | 1,732,676 | 64,380 | 77,916,852 | ||||||||||||
Municipals
|
43,281,539 | 1,405,841 | 137,630 | 44,549,750 | ||||||||||||
Other
equity securities
|
590,678 | - | 228,232 | 362,446 | ||||||||||||
$ | 193,175,839 | $ | 5,565,529 | $ | 431,950 | $ | 198,309,418 |
December 31, 2008
|
||||||||||||||||
Gross
|
Gross
|
|||||||||||||||
Amortized
|
unrealized
|
unrealized
|
Fair
|
|||||||||||||
cost
|
gains
|
losses
|
value
|
|||||||||||||
Securities
available for sale:
|
||||||||||||||||
U.S.
government securities and obligations of U.S. government
agencies
|
$ | 10,664,833 | $ | 169,315 | $ | 2,313 | $ | 10,831,835 | ||||||||
Mortgage-backed
|
67,308,567 | 1,707,655 | 39,863 | 68,976,359 | ||||||||||||
Municipals
|
26,089,420 | 177,788 | 917,537 | 25,349,671 | ||||||||||||
Other
equity securities
|
565,255 | 4,989 | 79,491 | 490,753 | ||||||||||||
$ | 104,628,075 | $ | 2,059,747 | $ | 1,039,204 | $ | 105,648,618 |
September 30, 2009
|
||||||||||||||||||||||||
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
value
|
losses
|
value
|
losses
|
value
|
losses
|
|||||||||||||||||||
Securities
available for sale:
|
||||||||||||||||||||||||
U.S.
government securities and obligations of U.S. government
agencies
|
$ | 3,406,139 | $ | 1,708 | $ | - | $ | - | $ | 3,406,139 | $ | 1,708 | ||||||||||||
Mortgage-backed
|
- | - | - | - | - | - | ||||||||||||||||||
Collateralized
mortgage Obligations
|
8,630,276 | 64,380 | - | - | 8,630,276 | 64,380 | ||||||||||||||||||
Municipals
|
887,021 | 7,205 | 2,949,443 | 130,425 | 3,836,464 | 137,630 | ||||||||||||||||||
Marketable
equity
|
269,247 | 42,033 | 93,199 | 186,199 | 362,446 | 228,232 | ||||||||||||||||||
Total
temporarily impaired securities
|
$ | 13,192,683 | $ | 115,326 | $ | 3,042,642 | $ | 316,624 | $ | 16,235,325 | $ | 431,950 |
December 31, 2008
|
||||||||||||||||||||||||
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||||||||
value
|
losses
|
value
|
losses
|
value
|
losses
|
|||||||||||||||||||
Securities
available for sale:
|
||||||||||||||||||||||||
U.S.
government securities and obligations of U.S. government
agencies
|
$ | 972,624 | $ | 2,313 | $ | - | $ | - | $ | 972,624 | $ | 2,313 | ||||||||||||
Mortgage-backed
|
1,768,974 | 22,558 | 1,097,179 | 17,305 | 2,866,153 | 39,863 | ||||||||||||||||||
Collateralized
mortgage Obligations
|
- | - | - | - | - | - | ||||||||||||||||||
Municipals
|
13,246,896 | 755,550 | 986,586 | 161,987 | 14,233,482 | 917,537 | ||||||||||||||||||
Marketable
equity
|
- | - | 206,366 | 79,491 | 206,366 | 79,491 | ||||||||||||||||||
Total
temporarily impaired securities
|
$ | 15,988,494 | $ | 780,421 | $ | 2,290,131 | $ | 258,783 | $ | 18,278,625 | $ | 1,039,204 |
Amortized
|
Fair
|
|||||||
cost
|
value
|
|||||||
Due
within one year
|
$ | 28,771,262 | $ | 29,660,188 | ||||
Due
after one year through five years
|
99,953,380 | 102,541,461 | ||||||
Due
after five years through ten years
|
41,731,300 | 42,850,135 | ||||||
Due
after ten years
|
22,129,219 | 22,895,188 | ||||||
Other
equity securities
|
590,678 | 632,446 | ||||||
$ | 193,175,839 | $ | 198,309,418 |
September 30, 2009
|
|||||||||
Estimated
Fair
|
|||||||||
Balance
Sheet
|
Notional
|
Value
of
|
|||||||
Location
|
Asset(Liability)
|
Amount
|
|||||||
Trust
preferred securities:
|
|||||||||
Interest
rate swap
|
Other
liabilities
|
$ | 4,000,000 | $ | (75,254 | ) | |||
Interest
rate swap
|
Other
liabilities
|
4,000,000 | (103,362 | ) | |||||
Subordinated
term loan agreements:
|
|||||||||
Interest
rate swap
|
Other
liabilities
|
3,750,000 | (70,922 | ) | |||||
Interest
rate swap
|
Other
liabilities
|
3,750,000 | (97,319 | ) | |||||
$ | 15,500,000 | $ | (346,857 | ) |
September 30, 2009
|
||||
Accumulated
OCI resulting from interest rate swaps as of January 1, net of
tax
|
$ | - | ||
Other
comprehensive loss recognized during nine month period ended September 30,
net of tax
|
(213,143 | ) | ||
Accumulated
OCI resulting from interest rate swaps as of September 30, net of
tax
|
$ | (213,143 | ) |
Fair Value Measurements at
|
||||||||||||||||||||
September 30, 2009, Using
|
||||||||||||||||||||
Total Carrying
|
||||||||||||||||||||
Amount in The
|
Quoted Prices
|
Significant
|
||||||||||||||||||
Consolidated
|
Assets/(Liabilities)
|
in Active
|
Other
|
Significant
|
||||||||||||||||
Balance
|
Measured at
|
Markets for
|
Observable
|
Unobservable
|
||||||||||||||||
Sheet
|
Fair Value
|
Identical Assets
|
Inputs
|
Inputs
|
||||||||||||||||
Description
|
9/30/2009
|
9/30/2009
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||||
Securities
available for sale:
|
||||||||||||||||||||
U.S.
Government obligations and agency
|
$ | 17,154,374 | $ | 17,154,374 | $ | - | $ | 17,154,374 | $ | - | ||||||||||
Mortgage-backed
|
58,325,996 | 58,325,996 | - | 58,325,996 | - | |||||||||||||||
Collateralized mortgage obligations
|
77,916,852 | 77,916,852 | - | 77,916,852 | - | |||||||||||||||
Municipals
|
44,549,750 | 44,549,750 | - | 44,549,750 | - | |||||||||||||||
Marketable
equity
|
362,446 | 362,446 | 362,446 | - | - | |||||||||||||||
Foreclosed
real estate
|
5,295,562 | 5,295,562 | - | - | 5,295,562 | |||||||||||||||
Impaired
loans
|
16,687,266 | 16,687,266 | - | 15,632,995 | 1,054,271 | |||||||||||||||
Derivative
liabilities
|
(346,857 | ) | (346,857 | ) | - | (346,857 | ) | - |
Fair Value Measurements at
|
||||||||||||||||||||
December 31, 2008, Using
|
||||||||||||||||||||
Total Carrying
|
||||||||||||||||||||
Amount in The
|
Quoted Prices
|
Significant
|
||||||||||||||||||
Consolidated
|
Assets/(Liabilities)
|
in Active
|
Other
|
Significant
|
||||||||||||||||
Balance
|
Measured at
|
Markets for
|
Observable
|
Unobservable
|
||||||||||||||||
Sheet
|
Fair Value
|
Identical Assets
|
Inputs
|
Inputs
|
||||||||||||||||
Description
|
12/31/2008
|
12/31/2008
|
(Level 1)
|
(Level 2)
|
(Level 3)
|
|||||||||||||||
Securities
available for sale
|
$ | 105,648,618 | $ | 105,648,618 | $ | 490,753 | $ | 105,157,865 | $ | - | ||||||||||
Foreclosed
real estate
|
1,716,207 | 1,716,207 | - | - | 1,716,207 | |||||||||||||||
Impaired
loans
|
7,556,644 | 7,556,644 | - | 6,787,739 | 768,905 |
September 30, 2009
|
December 31, 2008
|
|||||||||||||||
Carrying
|
Estimated
|
Carrying
|
Estimated
|
|||||||||||||
amount
|
fair value
|
amount
|
fair value
|
|||||||||||||
Financial
assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 17,822,480 | $ | 17,822,480 | $ | 10,282,789 | $ | 10,282,789 | ||||||||
Investment
securities
|
198,309,418 | 198,309,418 | 105,648,618 | 105,648,618 | ||||||||||||
FHLB
stock
|
11,776,500 | 11,776,500 | 7,264,000 | 7,264,000 | ||||||||||||
Loans,
net
|
758,214,633 | 735,692,000 | 772,792,283 | 784,667,000 | ||||||||||||
Investment
in life insurance
|
17,444,371 | 17,444,371 | 16,811,918 | 16,811,918 | ||||||||||||
Accrued
interest receivable
|
4,255,378 | 4,255,378 | 3,341,258 | 3,341,258 | ||||||||||||
Financial
liabilities:
|
||||||||||||||||
Deposits
|
714,182,538 | 724,466,000 | 714,882,755 | 718,590,000 | ||||||||||||
Short-term
borrowings
|
88,000,000 | 88,574,000 | 37,706,000 | 39,925,000 | ||||||||||||
Long-term
borrowings
|
133,748,000 | 131,617,000 | 116,748,000 | 121,748,000 | ||||||||||||
Interest
rate swaps
|
346,857 | 346,857 | - | - | ||||||||||||
Accrued
interest payable
|
1,721,131 | 1,721,131 | 1,958,344 | 1,958,344 |
Risk-free
interest rate
|
2.49 | % | ||
Expected
life of warrants
|
10
years
|
|||
Expected
dividend yield
|
0.00 | % | ||
Expected
volatility
|
37.27 | % |
Breakdown
of Commercial Real Estate
|
||||
Total Aggregate
|
||||
Exposure
|
||||
Loan Type
|
(in thousands)
|
|||
Non
owner occupied investment property
|
$ | 170,239 | ||
Owner
occupied commercial property
|
165,214 | |||
Multi-family
investment property
|
20,741 | |||
Agriculture/Farmland
|
848 | |||
Other
|
145 | |||
Subtotal
|
357,187 | |||
Deferred
unearned interest
|
(593 | ) | ||
Total
commercial real estate loans
|
$ | 356,594 | ||
Breakdown
of Construction, Acquisition & Development
|
||||
Total Aggregate
|
||||
Exposure
|
||||
Loan Type
|
(in thousands)
|
|||
Land
acquisition and development
|
$ | 133,173 | ||
1
to 4 family residential construction
|
25,083 | |||
Commercial
construction
|
20,986 | |||
Subtotal
|
179,242 | |||
Deferred
unearned interest
|
(161 | ) | ||
Total
construction, acquistition & development
|
$ | 179,081 |
For
the Three Months Ended September 30,
|
||||||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Balance
|
Interest
|
Yield/Cost
|
Balance
|
Interest
|
Yield/Cost
|
|||||||||||||||||||
Interest-earnings
assets
|
||||||||||||||||||||||||
Loan
portfolio
|
$ | 772,419 | $ | 11,987 | 6.16 | % | $ | 765,539 | $ | 12,571 | 6.53 | % | ||||||||||||
Investment
securities
|
207,599 | 2,081 | 4.01 | % | 102,764 | 1,206 | 4.69 | % | ||||||||||||||||
Fed
funds and other interest-earning assets
|
2,987 | 1 | 0.13 | % | 3,420 | 17 | 1.98 | % | ||||||||||||||||
Total
interest-earning assets
|
983,005 | 14,069 | 5.68 | % | 871,723 | 13,794 | 6.30 | % | ||||||||||||||||
Noninterest-earning
assets
|
76,990 | 69,594 | ||||||||||||||||||||||
Total
Assets
|
$ | 1,059,995 | $ | 941,317 | ||||||||||||||||||||
Interest-bearing
liabilities
|
||||||||||||||||||||||||
Interest-bearing
NOW
|
$ | 65,362 | 316 | 1.92 | % | $ | 34,506 | 10 | 0.12 | % | ||||||||||||||
Money
market and savings
|
134,105 | 456 | 1.35 | % | 158,346 | 1,067 | 2.68 | % | ||||||||||||||||
Time
deposits
|
443,337 | 4,113 | 3.68 | % | 437,762 | 4,876 | 4.43 | % | ||||||||||||||||
Short-term
borrowings
|
107,389 | 507 | 1.87 | % | 14,803 | 126 | 3.39 | % | ||||||||||||||||
Long-term
debt
|
120,487 | 1,265 | 4.11 | % | 133,112 | 1,372 | 4.03 | % | ||||||||||||||||
Total
interest-bearing liabilities
|
870,680 | 6,657 | 3.03 | % | 778,529 | 7,451 | 3.81 | % | ||||||||||||||||
Non-interest
bearing deposits
|
63,551 | 64,469 | ||||||||||||||||||||||
Other
liabilities
|
3,268 | 3,495 | ||||||||||||||||||||||
Total
Liabilities
|
937,499 | 846,493 | ||||||||||||||||||||||
Stockholders'
Equity
|
122,496 | 94,824 | ||||||||||||||||||||||
Total
Liabilities & Stockholders' Equity
|
$ | 1,059,995 | $ | 941,317 | ||||||||||||||||||||
Net
interest income
|
$ | 7,412 | $ | 6,343 | ||||||||||||||||||||
Interest
rate spread
|
2.64 | % | 2.49 | % | ||||||||||||||||||||
Net
interest-margin
|
2.99 | % | 2.89 | % | ||||||||||||||||||||
Percentage
of average interest-earning assets to average interest-bearing
liabilities
|
112.90 | % | 111.97 | % |
For
the Nine Months Ended September 30,
|
||||||||||||||||||||||||
2009
|
2008
|
|||||||||||||||||||||||
Average
|
Average
|
Average
|
Average
|
|||||||||||||||||||||
Balance
|
Interest
|
Yield/Cost
|
Balance
|
Interest
|
Yield/Cost
|
|||||||||||||||||||
Interest-earnings
assets
|
||||||||||||||||||||||||
Loan
portfolio
|
$ | 781,311 | $ | 36,089 | 6.18 | % | $ | 728,901 | $ | 36,978 | 6.78 | % | ||||||||||||
Investment
securities
|
202,570 | 6,134 | 4.04 | % | 101,916 | 3,640 | 4.76 | % | ||||||||||||||||
Fed
funds and other interest-earning assets
|
5,326 | 8 | 0.20 | % | 3,920 | 75 | 2.56 | % | ||||||||||||||||
Total
earning assets
|
989,207 | 42,231 | 5.71 | % | 834,737 | 40,693 | 6.51 | % | ||||||||||||||||
Noninterest-earning
assets
|
72,136 | 66,405 | ||||||||||||||||||||||
Total
Assets
|
$ | 1,061,343 | $ | 901,142 | ||||||||||||||||||||
Interest-bearing
liabilities
|
||||||||||||||||||||||||
Interest-bearing
NOW
|
$ | 54,085 | 594 | 1.47 | % | $ | 34,727 | 41 | 0.16 | % | ||||||||||||||
Money
market and savings
|
135,555 | 1,427 | 1.41 | % | 158,888 | 3,140 | 2.64 | % | ||||||||||||||||
Time
deposits
|
453,306 | 13,176 | 3.89 | % | 403,903 | 13,984 | 4.63 | % | ||||||||||||||||
Short-term
borrowings
|
110,631 | 1,477 | 1.78 | % | 14,274 | 333 | 3.12 | % | ||||||||||||||||
Long-term
debt
|
121,356 | 3,646 | 3.96 | % | 126,436 | 4,037 | 4.21 | % | ||||||||||||||||
Total
interest-bearing liabilities
|
874,933 | 20,320 | 3.11 | % | 738,228 | 21,535 | 3.90 | % | ||||||||||||||||
Non
interest-bearing deposits
|
62,069 | 65,562 | ||||||||||||||||||||||
Other
liabilities
|
3,092 | 3,138 | ||||||||||||||||||||||
Total
Liabilities
|
940,094 | 806,928 | ||||||||||||||||||||||
Stockholders'
Equity
|
121,249 | 94,214 | ||||||||||||||||||||||
Total
Liabilities & Stockholders' Equity
|
$ | 1,061,343 | $ | 901,142 | ||||||||||||||||||||
Net
interest income
|
$ | 21,911 | $ | 19,158 | ||||||||||||||||||||
Interest
rate spread
|
2.60 | % | 2.61 | % | ||||||||||||||||||||
Net
margin
|
2.96 | % | 3.07 | % | ||||||||||||||||||||
Percentage
of average interest-earning assets to average interest bearing
liabilities
|
113.06 | % | 113.07 | % |
Three
Months Ended September 30,
|
||||||||||||
2009
vs. 2008
|
||||||||||||
(in
Thousands)
|
||||||||||||
Increase
(Decrease) Due to
|
||||||||||||
Volume
|
Rate
|
Total
|
||||||||||
Interest Income
|
||||||||||||
Loan
portfolio
|
127 | (711 | ) | (584 | ) | |||||||
Investment
Securities
|
1,146 | (271 | ) | 875 | ||||||||
Fed
funds and other interest-earning assets
|
(1 | ) | (15 | ) | (16 | ) | ||||||
Total
interest-earning assets
|
1,272 | (997 | ) | 275 | ||||||||
Interest Expense
|
||||||||||||
Interest-bearing
NOW
|
79 | 227 | 306 | |||||||||
Money
market and savings
|
(122 | ) | (489 | ) | (611 | ) | ||||||
Time
deposits
|
64 | (827 | ) | (763 | ) | |||||||
Short-term
borrowings
|
614 | (233 | ) | 381 | ||||||||
Long-term
debt
|
(130 | ) | 23 | (107 | ) | |||||||
Total
interest-bearing liabilities
|
505 | (1,299 | ) | (794 | ) | |||||||
Net
interest income
|
767 | 302 | 1,069 |
Nine
Months Ended September 30,
|
||||||||||||
2009
vs. 2008
|
||||||||||||
(in
Thousands)
|
||||||||||||
Increase
(Decrease) Due to
|
||||||||||||
Volume
|
Rate
|
Total
|
||||||||||
Interest Income
|
||||||||||||
Loan
portfolio
|
2,522 | (3,411 | ) | (889 | ) | |||||||
Investment
Securities
|
3,316 | (822 | ) | 2,494 | ||||||||
Fed
funds and other interest-earning assets
|
15 | (82 | ) | (67 | ) | |||||||
Total
interest-earning assets
|
5,853 | (4,315 | ) | 1,538 | ||||||||
Interest Expense
|
||||||||||||
Interest-bearing
NOW
|
118 | 435 | 553 | |||||||||
Money
market and savings
|
(355 | ) | (1,358 | ) | (1,713 | ) | ||||||
Time
deposits
|
1,566 | (2,374 | ) | (808 | ) | |||||||
Short-term
borrowings
|
1,766 | (622 | ) | 1,144 | ||||||||
Long-term
debt
|
(165 | ) | (226 | ) | (391 | ) | ||||||
Total
interest-bearing liabilities
|
2,930 | (4,145 | ) | (1,215 | ) | |||||||
Net
interest income
|
2,923 | (170 | ) | 2,753 |
At September 30,
|
At December 31,
|
|||||||||||||||
2009
|
2008
|
2008
|
2007
|
|||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
Nonaccrual
loans
|
$ | 16,540 | $ | 2,771 | $ | 13,094 | $ | 2,726 | ||||||||
Accruing
loans past due 90 days or more
|
- | - | - | - | ||||||||||||
Total
nonperforming loans
|
16,540 | 2,771 | 13,094 | 2,726 | ||||||||||||
Real
estate owned
|
5,296 | 1,870 | 1,716 | 272 | ||||||||||||
Repossessed
assets
|
2 | - | - | - | ||||||||||||
Total
nonperforming assets
|
$ | 21,838 | $ | 4,641 | $ | 14,810 | $ | 2,998 | ||||||||
Restructured
loans not in categories listed above
|
$ | 9,525 | $ | - | $ | - | $ | - | ||||||||
Allowance
for loan losses
|
13,782 | 9,988 | 12,585 | 8,273 | ||||||||||||
Nonperforming
loans to period end loans
|
2.14 | % | 0.36 | % | 1.53 | % | 0.40 | % | ||||||||
Allowance
for loan losses to period end loans
|
1.79 | % | 1.30 | % | 1.60 | % | 1.22 | % | ||||||||
Allowance
for loan losses to nonperforming loans
|
83 | % | 360 | % | 96 | % | 303 | % | ||||||||
Nonperforming
assets to total assets
|
2.05 | % | 0.49 | % | 1.67 | % | 0.36 | % | ||||||||
Nonperforming
assets and loans past due 90 days or more to total
assets
|
2.05 | % | 0.49 | % | 1.67 | % | 0.36 | % |
At
September 30,
|
At
December 31,
|
|||||||||||||||
2009
|
2008
|
|||||||||||||||
%
of Total
|
%
of Total
|
|||||||||||||||
Amount
|
Loans
(1)
|
Amount
|
Loans
(1)
|
|||||||||||||
(Dollars
in thousands)
|
||||||||||||||||
Residential
real estate loans
|
$ | 1,133 | 12.36 | % | $ | 103 | 11.43 | % | ||||||||
Home
equity loans and lines
|
1,247 | 8.09 | % | 469 | 8.11 | % | ||||||||||
Commercial
mortgage loans
|
3,557 | 46.21 | % | 6,003 | 38.89 | % | ||||||||||
Construction
loans
|
5,166 | 23.19 | % | 3,694 | 30.87 | % | ||||||||||
Commercial
and industrial loans
|
2,441 | 9.52 | % | 1,953 | 10.30 | % | ||||||||||
Loans
to individuals
|
238 | 0.63 | % | 363 | 0.40 | % | ||||||||||
Total
allowance
|
$ | 13,782 | 100.00 | % | $ | 12,585 | 100.00 | % |
(1)
|
Represents
total of all outstanding loans in each category as a percent of total
loans outstanding. Percentages for December 31, 2008 have been changed to
reflect the reclassification previously
discussed.
|
For the Nine-Month Period Ended September
30,
|
||||||||
2009
|
2008
|
|||||||
(Dollars
in thousands)
|
||||||||
Balance
at the beginning of the year
|
$ | 12,585 | $ | 8,273 | ||||
Charge-offs:
|
||||||||
Commercial
and industrial loans
|
1,205 | 167 | ||||||
Commercial
real estate loans
|
- | 91 | ||||||
Construction,
acquisition and development
|
1,736 | 569 | ||||||
Residential
mortgage loans
|
721 | - | ||||||
Home
equity lines and loans
|
195 | - | ||||||
Consumer
loans
|
76 | 17 | ||||||
Total
charge-offs
|
3,933 | 844 | ||||||
Recoveries
|
||||||||
Commercial
and industrial loans
|
65 | 9 | ||||||
Commercial
real estate
|
- | 3 | ||||||
Construction,
acquisition and development
|
269 | - | ||||||
Residential
mortgage loans
|
9 | - | ||||||
Consumer
loans
|
- | - | ||||||
Total
recoveries
|
343 | 12 | ||||||
Net
charge-offs
|
3,590 | 832 | ||||||
Provision
for loan losses
|
4,787 | 2,547 | ||||||
Balance
at the end of the period
|
$ | 13,782 | $ | 9,988 | ||||
Total
loans outstanding at period-end
|
$ | 771,997 | $ | 769,090 | ||||
Average
loans outstanding for the period
|
$ | 781,311 | $ | 728,901 | ||||
Allowance
for loan losses to total loans outstanding
|
1.79 | % | 1.30 | % | ||||
Annualized
ratio of net charge-offs to average loans outstanding
|
0.61 | % | 0.15 | % |
Part
II.
|
OTHER
INFORMATION
|
Item
1.
|
Legal
Proceedings.
|
|
None
that are material.
|
Item
1a.
|
Risk
Factors.
|
|
Not
Applicable.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
|
None.
|
Item
3.
|
Defaults
Upon Senior Debt.
|
|
None.
|
Item
4.
|
Submission
of Matters to a Vote of Security
Holders
|
|
None.
|
Item
5.
|
Other
Information.
|
|
None.
|
Item
6.
|
Exhibits
|
(a)
|
Exhibits.
|
10.25
|
Amended
And Restated Director’s Compensation
Plan
|
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: November
10, 2009
|
By:
|
/s/ Michael G.
Carlton
|
Michael
G. Carlton
|
||
President
and Chief Executive Officer
|
||
Date: November
10, 2009
|
By:
|
/s/ Bruce W. Elder
|
Bruce
W. Elder
|
||
Principal
Financial Officer
|