Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X
PART II - OTHER INFORMATION
Item 1. | Legal Proceedings | 25 |
Item 2. | Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities | 25 |
Item 3. | Defaults upon Senior Securities | 25 |
Item 4. | Submission of Matters to a Vote of Security Holders | 25-26 |
Item 5. | Other Information | 26 |
Item 6. | Exhibits and Reports on Form 8-K | 26-27 |
Signatures | 28 | |
Certifications | 29-31 |
2 | ||
PEOPLES BANCORP OF NORTH CAROLINA, INC. | |||||||
June 30, |
|
| December 31, | ||||
Assets | 2004 |
|
| 2003 | |||
(Unaudited) | |||||||
Cash and due from banks | $ | 16,460,131 | 18,413,786 | ||||
Federal funds sold | 4,293,000 | 2,369,000 | |||||
Cash and cash equivalents | 20,753,131 | 20,782,786 | |||||
Investment securities available for sale | 91,828,182 | 79,460,452 | |||||
Other investments | 4,621,973 | 4,216,973 | |||||
Total securities | 96,450,155 | 83,677,425 | |||||
Mortgage loans held for sale | 2,929,920 | 587,495 | |||||
Loans | 546,596,277 | 552,126,189 | |||||
Less allowance for loan losses | (9,153,088 | ) | (9,722,267 | ) | |||
Net loans | 537,443,189 | 542,403,922 | |||||
Premises and equipment, net | 12,683,803 | 12,537,230 | |||||
Cash surrender value of life insurance | 5,937,319 | 5,045,449 | |||||
Accrued interest receivable and other assets | 9,873,509 | 8,998,137 | |||||
Total assets | $ | 686,071,026 | 674,032,444 | ||||
Liabilities and Shareholders' Equity | |||||||
Deposits: | |||||||
Non-interest bearing demand | $ | 75,433,797 | 72,420,923 | ||||
NOW, MMDA & savings | 180,408,549 | 158,677,445 | |||||
Time, $100,000 or more | 152,285,659 | 171,596,789 | |||||
Other time | 142,900,246 | 147,107,075 | |||||
Total deposits | 551,028,251 | 549,802,232 | |||||
Demand notes payable to U.S. Treasury | 1,215,526 | 443,384 | |||||
FHLB borrowings | 67,500,000 | 58,000,000 | |||||
Junior subordinated debentures | 14,433,000 | 14,433,000 | |||||
Accrued interest payable and other liabilities | 3,745,709 | 2,799,932 | |||||
Total liabilities | 637,922,486 | 625,478,548 | |||||
Shareholders' equity: | |||||||
Preferred stock, no par value; authorized | |||||||
5,000,000 shares; no shares issued | |||||||
and outstanding | - | - | |||||
Common stock, no par value; authorized | |||||||
20,000,000 shares; issued and | |||||||
outstanding 3,148,265 shares in 2004 | |||||||
and 3,135,202 shares in 2003 | 35,301,274 | 35,121,510 | |||||
Retained earnings | 14,480,780 | 12,844,524 | |||||
Accumulated other comprehensive income | (1,633,514 | ) | 587,862 | ||||
Total shareholders' equity | 48,148,540 | 48,553,896 | |||||
Total liabilites and shareholders' equity | $ | 686,071,026 | 674,032,444 | ||||
See accompanying notes to consolidated financial statements. |
3 | ||
PEOPLES BANCORP OF NORTH CAROLINA, INC. | |||||||||||||
Three months ended |
|
| Six months ended | ||||||||||
June 30, |
|
| June 30, | ||||||||||
2004 |
|
| 2003 |
|
| 2004 |
|
| 2003 | ||||
(Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | ||||||||||
Interest income: | |||||||||||||
Interest and fees on loans | $ | 7,907,704 | 7,823,938 | 15,966,972 | 15,607,361 | ||||||||
Interest on federal funds sold | 6,787 | 27,168 | 9,427 | 44,097 | |||||||||
Interest on investment securities: | |||||||||||||
U.S. Government agencies | 668,074 | 548,989 | 1,282,084 | 1,184,115 | |||||||||
States and political subdivisions | 163,149 | 141,690 | 312,854 | 291,351 | |||||||||
Other | 95,395 | 108,830 | 196,987 | 217,797 | |||||||||
Total interest income | 8,841,109 | 8,650,615 | 17,768,324 | 17,344,721 | |||||||||
Interest expense: | |||||||||||||
NOW, MMDA & savings deposits | 411,448 | 328,237 | 776,105 | 634,997 | |||||||||
Time deposits | 1,783,441 | 2,077,721 | 3,674,643 | 4,180,477 | |||||||||
FHLB borrowings | 643,017 | 641,982 | 1,288,824 | 1,301,923 | |||||||||
Junior subordinated debentures | 162,371 | 166,250 | 324,743 | 332,500 | |||||||||
Other | 1,487 | 1,446 | 3,159 | 3,682 | |||||||||
Total interest expense | 3,001,764 | 3,215,636 | 6,067,474 | 6,453,579 | |||||||||
Net interest income | 5,839,345 | 5,434,979 | 11,700,850 | 10,891,142 | |||||||||
Provision for loans losses | 868,000 | 2,276,900 | 1,727,000 | 3,069,900 | |||||||||
Net interest income after provision for loan losses | 4,971,345 | 3,158,079 | 9,973,850 | 7,821,242 | |||||||||
Other income: | |||||||||||||
Service charges | 881,111 | 818,928 | 1,684,355 | 1,591,079 | |||||||||
Other service charges and fees | 148,299 | 145,442 | 327,030 | 304,880 | |||||||||
Mortgage banking income | 90,159 | 213,751 | 170,005 | 404,108 | |||||||||
Insurance and banking commissions | 97,964 | 102,230 | 256,203 | 199,192 | |||||||||
Gain (loss) on sale of repossessed assets | (1,047 | ) | (533,402 | ) | (27,376 | ) | (550,966 | ) | |||||
Gain on sale of loans | - | - | - | 478,759 | |||||||||
Miscellaneous | 319,848 | 309,063 | 633,768 | 613,318 | |||||||||
Total other income | 1,536,334 | 1,056,012 | 3,043,985 | 3,040,370 | |||||||||
Other expense: | |||||||||||||
Salaries and employee benefits | 2,766,467 | 2,365,716 | 5,547,068 | 4,929,510 | |||||||||
Occupancy | 893,757 | 815,277 | 1,778,836 | 1,650,166 | |||||||||
Other | 1,213,193 | 993,998 | 2,267,053 | 2,042,248 | |||||||||
Total other expenses | 4,873,417 | 4,174,991 | 9,592,957 | 8,621,924 | |||||||||
Earnings before income taxes | 1,634,262 | 39,100 | 3,424,878 | 2,239,688 | |||||||||
Income taxes | 547,000 | (52,100 | ) | 1,159,700 | 730,400 | ||||||||
Net earnings | $ | 1,087,262 | 91,200 | 2,265,178 | 1,509,288 | ||||||||
Basic earnings per share | $ | 0.35 | 0.03 | 0.72 | 0.48 | ||||||||
Diluted earnings per share | $ | 0.34 | 0.03 | 0.71 | 0.48 | ||||||||
Cash dividends declared per share | $ | 0.10 | 0.10 | 0.20 | 0.20 | ||||||||
See accompanying notes to consolidated financial statements. |
4 | ||
PEOPLES BANCORP OF NORTH CAROLINA, INC. | |||||||||||||
Three months ended | Six months ended | ||||||||||||
|
| June 30, | June 30, | ||||||||||
2004 |
|
| 2003 |
|
| 2004 |
|
| 2003 | ||||
(Unaudited) | (Unaudited) |
| (Unaudited) |
| (Unaudited) | ||||||||
Net earnings | $ | 1,087,262 | 91,200 | 2,265,178 | 1,509,288 | ||||||||
Other comprehensive income (loss): | |||||||||||||
Unrealized holding gains on securities | |||||||||||||
available for sale | (3,634,998 | ) | 1,003,122 | (2,372,248 | ) | 1,098,316 | |||||||
Unrealized holding gains (losses) on derivative | |||||||||||||
financial instruments qualifying as cash flow | |||||||||||||
hedges | (1,081,000 | ) | 222,000 | (715,000 | ) | 104,000 | |||||||
Reclassification adjustment for gains on derivative | |||||||||||||
financial instruments qualifying as cash flow | |||||||||||||
hedges included in net earnings | (246,313 | ) | (83,807 | ) | (551,370 | ) | (83,807 | ) | |||||
Total other comprehensive income (loss), | |||||||||||||
before income taxes | (4,962,311 | ) | 1,141,315 | (3,638,618 | ) | 1,118,509 | |||||||
Income tax expense (benefit) related to other | |||||||||||||
comprehensive income: | |||||||||||||
Unrealized holding gains on securities | |||||||||||||
available for sale | (1,415,832 | ) | 390,716 | (923,991 | ) | 427,794 | |||||||
Unrealized holding gains (losses) on derivative | |||||||||||||
financial instruments qualifying as cash flow | |||||||||||||
hedges | (421,049 | ) | 86,469 | (278,492 | ) | 40,508 | |||||||
Reclassification adjustment for gains on derivative | |||||||||||||
financial instruments qualifying as cash flow | |||||||||||||
hedges included in net earnings | (95,939 | ) | (32,643 | ) | (214,759 | ) | (32,643 | ) | |||||
Total income tax expense (benefit) related to | |||||||||||||
other comprehensive income | (1,932,820 | ) | 444,542 | (1,417,242 | ) | 435,659 | |||||||
Total other comprehensive income (loss), | |||||||||||||
net of tax | (3,029,491 | ) | 696,773 | (2,221,376 | ) | 682,850 | |||||||
Total comprehensive income (loss) | $ | (1,942,229 | ) | 787,973 | 43,802 | 2,192,138 | |||||||
See accompanying notes to consolidate financial statements. |
5 | ||
PEOPLES BANCORP OF NORTH CAROLINA, INC. | |||||||
Six months ended June 30, 2004 and 2003 | |||||||
2004 |
|
| 2003 | ||||
(Unaudited) | (Unaudited) | ||||||
Cash flows from operating activities: | $ | 2,265,178 | 1,509,288 | ||||
Net earnings | |||||||
Adjustments to reconcile net earnings to | |||||||
net cash provided by opearting activities: | |||||||
Depreciation, amortization and accretion | 794,433 | 974,342 | |||||
Provision for loan losses | 1,727,000 | 3,069,900 | |||||
Recognition of gain on sale of derivative instruments | (551,370 | ) | (83,807 | ) | |||
Amortization of deferred gain on sale of premises | (10,448 | ) | (1,758 | ) | |||
Loss on sale of repossessed assets | 27,376 | 150,966 | |||||
Writedown of other real estate and repossessions | - | 400,000 | |||||
Change in: | |||||||
Cash surrender value of life insurance | (891,870 | ) | (119,872 | ) | |||
Other assets | (1,089,494 | ) | 606,242 | ||||
Other liabilities | 945,777 | (209,825 | ) | ||||
Mortgage loans held for sale | (2,342,425 | ) | (962,125 | ) | |||
Net cash provided by operating activities | 874,157 | 5,333,351 | |||||
Cash flows from investing activities: | |||||||
Purchases of investment securities available for sale | (23,563,918 | ) | (14,175,199 | ) | |||
Proceeds from calls and maturities of investment securities | |||||||
available for sale | 8,734,571 | 13,428,914 | |||||
Purchases of other investments | (1,582,500 | ) | (630,000 | ) | |||
Proceeds from sale of other investments | 1,177,500 | 953,600 | |||||
Net change in loans | 2,880,017 | (8,006,460 | ) | ||||
Purchases of premises and equipment | (778,317 | ) | (1,645,835 | ) | |||
Proceeds from sale of premises and equipment | - | 45,000 | |||||
Proceeds from sale of repossessed assets | 1,179,833 | 538,851 | |||||
Proceeds from sale of derivative financial instruments | - | 1,254,000 | |||||
Net cash used by investing activities | (11,952,814 | ) | (8,237,129 | ) | |||
Cash flows from financing activities: | |||||||
Net change in deposits | 1,226,019 | 23,564,844 | |||||
Net change in demand notes payable to U.S. Treasury | 772,142 | - | |||||
Proceeds from FHLB borrowings | 59,050,000 | 29,850,000 | |||||
Repayments of FHLB borrowings | (49,550,000 | ) | (34,921,429 | ) | |||
Proceeds from exercise of options | 179,764 | - | |||||
Cash dividends paid | (628,923 | ) | (626,709 | ) | |||
Net cash provided by financing activities | 11,049,002 | 17,866,706 | |||||
Net change in cash and cash equivalent | (29,655 | ) | 14,962,928 | ||||
Cash and cash equivalents at beginning of period | 20,782,786 | 15,577,665 | |||||
Cash and cash equivalents at end of period | $ | 20,753,131 | 30,540,593 | ||||
6 | ||
PEOPLES BANCORP OF NORTH CAROLINA, INC. | |||||||
Consolidated Statements of Cash Flows | |||||||
Six months ended June 30, 2004 and 2003 | |||||||
(Continued) | |||||||
2004 | 2003 | ||||||
(Unaudited) | (Unaudited) | ||||||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the year for: | |||||||
Interest | $ | 5,764,638 | 6,646,910 | ||||
Income taxes | $ | 692,966 | 1,140,897 | ||||
Noncash investing and financing activities: | |||||||
Change in unrealized gain (loss) on investment securities | |||||||
available for sale, net | $ | (1,448,257 | ) | 670,522 | |||
Change in unrealized gain (loss) on derivative financial | |||||||
instruments, net | $ | (773,119 | ) | 12,328 | |||
Transfer of loans to other real estate and repossessions | $ | 693,715 | 1,635,936 | ||||
Financed sale of other real estate | $ | 340,000 | - | ||||
Financed sale of premises and equipment | $ | - | 3,774,932 | ||||
See accompanying notes to consolidated financial statements. |
7 | ||
2004 | 2003 | ||||||
Balance, beginning of period | $ | 9,722,267 | 7,247,906 | ||||
Provision for loan losses | 1,727,000 | 3,069,900 | |||||
Less: | |||||||
Charge-offs | (2,418,702 | ) | (1,378,922 | ) | |||
Recoveries | 122,523 | 94,458 | |||||
Net charge-offs | (2,296,179 | ) | (1,284,464 | ) | |||
Balance, end of period | $ | 9,153,088 | 9,033,342 | ||||
8 | ||
|
|
| Net Earnings |
|
| Common Shares |
|
| Amount | |
Basic earnings per share | $ | 1,087,262 | 3,146,081 | $ | 0.35 | |||||
Effect of dilutive securities: | ||||||||||
Stock options | - | 43,250 | ||||||||
Diluted earnings per share | $ | 1,087,262 | 3,189,331 | $ | 0.34 | |||||
|
|
| Net Earnings |
|
| Common Shares |
|
| Amount | |
Basic earnings per share | $ | 2,265,178 | 3,143,359 | $ | 0.72 | |||||
Effect of dilutive securities: | ||||||||||
Stock options | - | 44,316 | ||||||||
Diluted earnings per share | $ | 2,265,178 | 3,187,675 | $ | 0.71 | |||||
|
|
| Net Earnings |
|
| Common Shares |
|
| Amount | |
Basic earnings per share | $ | 91,200 | 3,133,547 | $ | 0.03 | |||||
Effect of dilutive securities: | ||||||||||
Stock options | - | 25,394 | ||||||||
Diluted earnings per share | $ | 91,200 | 3,158,941 | $ | 0.03 | |||||
|
|
| Net Earnings |
|
| Common Shares |
|
| Amount | |
Basic earnings per share | $ | 1,509,288 | 3,133,547 | $ | 0.48 | |||||
Effect of dilutive securities: | ||||||||||
Stock options | - | 16,706 | ||||||||
Diluted earnings per share | $ | 1,509,288 | 3,150,253 | $ | 0.48 | |||||
9 | ||
10 | ||
Six months ended |
|
| ||||||||
|
|
|
|
| June 30, 2004 | |||||
Net Earnings | As reported | ��$ |
| 2,265,178 |
|
|
|
| ||
|
|
| Effect of grants, net of tax | $ |
| (101,994) |
|
|
|
|
|
|
| Proforma | $ |
| 2,163,184 |
|
|
|
|
Basic earnings per share |
|
| As reported | $ |
| 0.72 |
|
|
|
|
|
|
| Proforma | $ |
| 0.69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share | As reported | $ | 0.71 | |||||||
|
|
| Proforma | $ | 0.68 |
11 | ||
12 | ||
13 | ||
14 | ||
15 | ||
16 | ||
- the Bank’s 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 | General Reserve | ||||
By Risk Grade | Percentage | |||||
06/30/2004 | 12/31/2003 | 06/30/2004 | 12/31/2003 | |||
Risk 1 (Excellent Quality) | 12.69% | 11.36% | 0.15% | 0.15% | ||
Risk 2 (High Quality) | 22.94% | 24.03% | 0.50% | 0.50% | ||
Risk 3 (Good Quality) | 53.43% | 53.80% | 1.00% | 1.00% | ||
Risk 4 (Management Attention) | 5.56% | 5.11% | 2.50% | 2.50% | ||
Risk 5 (Watch) | 1.09% | 1.15% | 7.00% | 7.00% | ||
Risk 6 (Substandard) | 2.26% | 2.43% | 12.00% | 12.00% | ||
Risk 7 (Low Substandard) | 1.27% | 1.33% | 25.00% | 25.00% | ||
Risk 8 (Doubtful) | 0.00% | 0.00% | 50.00% | 50.00% | ||
Risk 9 (Loss) | 0.00% | 0.00% | 100.00% | 100.00% |
17 | ||
18 | ||
19 | ||
20 | ||
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS: | |||||||
June 30, 2004 | December 31, 2003 | ||||||
Contractual Cash Obligations | |||||||
Long-term borrowings | $ | 52,000,000 | 52,000,000 | ||||
Junior subordinated debentures | 14,433,000 | 14,433,000 | |||||
Operating lease obligations | 8,616,945 | 8,482,928 | |||||
Total | $ | 75,049,945 | 74,915,928 | ||||
Other Commitments | |||||||
Commitments to extend credit | $ | 110,836,818 | 104,729,455 | ||||
Standby letters of credit and financial guarantees written | 3,233,614 | 3,876,430 | |||||
Total | $ | 114,070,432 | 108,605,885 | ||||
21 | ||
22 | ||
23 | ||
24 | ||
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, 2004 | 573 | $ | 18.46 | - | - | ||||||||
May 1 - 31, 2004 | 257 | 18.94 | - | - | |||||||||
June 1 - 30, 2004 | - | - | - | - | |||||||||
Total | 830 | $ | 18.61 | - | - | ||||||||
Vote For | Withhold Authority | |
John W. Lineberger, Jr. | 2,926,187 | 37,199 |
Gary E. Matthews | 2,956,555 | 22,015 |
Dan Ray Timmerman, Sr. | 2,961,360 | 19,612 |
Benjamin I. Zachary | 2,918,592 | 40,996 |
Ratification of appointment of Independent Public Accountants – Porter Keadle Moore LLP
25 | ||
26 | ||
27 | ||
August 12, 2004 | /s/ Tony W. Wolfe | |
Date | Tony W. Wolfe | |
President and Chief Executive Officer | ||
(Principal Executive Officer) |
August 12, 2004 | /s/ A. Joseph Lampron | |
Date | A. Joseph Lampron | |
Executive Vice President and Chief Financial Officer | ||
(Principal Financial and Principal Accounting Officer) |
28 | ||