Filed
by the Registrant
|
[X ] | ||||||
Filed by a Party other than the Registrant | [ ] |
|
[ ]
|
|
Preliminary
Proxy Statement
|
|
[ ]
|
|
Confidential,
for Use of the Commission
|
|
[X]
|
|
Definitive
Proxy Statement
|
|
|
|
Only
(as permitted by Rule 14a-6(e)(2))
|
|
[ ]
|
|
Definitive
Additional Materials
|
|
|
|
|
|
[ ]
|
|
Soliciting
Material Pursuant to
|
|
|
|
|
|
|
|
§240.14a-12
|
|
|
|
|
|
|
|
|
Payment
of Filing Fee (Check the appropriate box):
|
|||
|
[X]
|
|
No
fee required.
|
|
[ ]
|
|
Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
|
|
(1)
|
Title
of each class of securities to which transaction
applies:
|
|
|
(2)
|
Aggregate
number of securities to which transaction applies:
|
|
|
(3)
|
Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
|
|
|
(4)
|
Proposed
maximum aggregate value of transaction:
|
|
|
(5)
|
Total
fee paid:
|
|
|
|
|
|
|
[ ]
|
|
Fee
paid previously with preliminary materials:
|
|
[ ]
|
|
Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
|
|
(1)
|
Amount
Previously Paid:
|
|
|
(2)
|
Form,
Schedule or Registration Statement No.:
|
|
|
(3)
|
Filing
Party:
|
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|
(4)
|
Date
Filed:
|
Page
|
|||
Notice
of 2006 Annual Meeting of
Shareholders................................................................................................................
|
ii
|
||
Proxy
Statement.........................................................................................................................................................................
|
1
|
||
Solicitation,
Voting and Revocability of
Proxies………............................................................................…..……..
|
1
|
||
Security
Ownership of Certain Beneficial
Owners………….............................................................................……
|
2
|
||
Section
16(a) Beneficial Ownership Reporting
Compliance...............................................................................…..
|
5
|
||
Proposal
1 - Election of
Directors.................................................................................................................................
|
5
|
||
|
Report
of Governance Committee with Respect to
Compensation.........................................................................
|
20
|
|
|
Governance Committee Interlocks and Insider Participation................................................................................... |
20
|
|
|
Report
of Audit
Committee...........................................................................................................................................
|
20
|
|
|
Performance Graph......................................................................................................................................................... |
21
|
|
|
Proposal 2 - Ratification of Selection of Independent Auditor............................................................................... |
22
|
|
|
Date
for Receipt of Shareholder
Proposals................................................................................................................
|
23
|
|
|
Other Matters.................................................................................................................................................................. |
23
|
|
|
Miscellaneous................................................................................................................................................................. |
23
|
|
Appendix
A: Annual
Report.....................................................................................................................................................
|
|||
|
General
Description of the
Business...........................................................................................................................
|
A-1
|
|
|
Selected Financial Data................................................................................................................................................. |
A-2
|
|
|
Management's Discussion and Analysis of Financial Condition and Results of Operations........................... |
A-3
|
|
|
Quantitative and Qualitative Disclosures About Market Risk................................................................................ |
A-20
|
|
|
Market for the Company's Common Equity and Related Shareholder Matters.................................................... |
A-22
|
|
|
Directors and Officers of the Company....................................................................................................................... |
A-23
|
|
|
Report of Independent Registered Public Accounting Firm.................................................................................... |
A-24
|
|
|
Consolidated Balance Sheets - December 31, 2005 and 2004................................................................................... |
A-25
|
Consolidated Statements of Earnings - For the Years Ended December 31, 2005, 2004 | ||||
|
and 2003............................................................................................................................................................... |
A-26
|
||
Consolidated Statements of Changes in Shareholders' Equity - For the Years Ended | ||||
|
December 31, 2005, 2004 and 2003................................................................................................................... |
A-27
|
||
Consolidated Statements of Comprehensive Income - For the Years Ended | ||||
|
December 31, 2005, 2004 and 2003................................................................................................................... |
A-28
|
||
Consolidated Statements of Cash Flows - For the Years Ended December 31, 2005, | ||||
|
2004 and 2003...................................................................................................................................................... |
A-29
|
||
|
Notes to Consolidated Financial Statements.............................................................................................................. |
A-31
|
1.
|
To
elect four persons who will serve as directors of the Company for
a
three-year term expiring in 2009, or until their successors are
duly
elected and qualified;
|
2.
|
To
ratify the appointment of Porter Keadle Moore, LLP ("PKM")
as the independent auditor for the Company for the fiscal year
ending
December 31, 2006; and
|
3.
|
To
transact such other business as may properly come before the Meeting
or
any adjournments thereof. The board of directors of the Company
(the
"Board
of Directors")
is not aware of any other business to be considered at the
Meeting.
|
1
|
Unless
otherwise noted, all shares are owned directly of record by the named
individuals, by their spouses and minor children, or by other
entities
controlled
by the named individuals. Voting and investment power is not shared
unless
otherwise indicated.
|
2
|
Based
upon a total of 3,454,501 shares of Common Stock outstanding as of
the
Record Date.
|
3
|
Carolina
Glove Company, Inc. owns 65,215 shares of Common Stock. These shares
are
included in the calculation of Ms. Abernethy's total beneficial ownership
interest. Ms. Abernethy owns approximately 50% of the stock of Carolina
Glove Company, Inc. The business is operated by a family committee.
Ms.
Abernethy has no active day-to-day participation in the business
affairs
of Carolina Glove Company, Inc.
|
Amount
and
|
||||||
Nature
of
|
Percentage
|
|||||
Beneficial
|
of
|
|
||||
Name
and Address
|
Ownership1
|
Class2
|
||||
James
S. Abernethy
|
108,9073
|
3.06%
|
||||
Post
Office Box 327
|
||||||
Newton,
NC 28658
|
||||||
Robert
C. Abernethy
|
124,6244
|
3.50%
|
||||
Post
Office Box 366
|
||||||
Newton,
NC 28658
|
||||||
Joseph
F. Beaman, Jr.
|
23,4475
|
*
|
||||
Post
Office Box 467
|
||||||
Newton,
NC 28658
|
||||||
William
D. Cable
|
17,4636
|
*
|
||||
Post
Office Box 467
|
||||||
Newton,
NC 28658
|
||||||
Douglas
S. Howard
|
4,4347
|
*
|
||||
P.
O. Box 587
|
||||||
Denver,
NC 28037
|
||||||
A.
Joseph Lampron
|
11,6478
|
*
|
||||
Post
Office Box 467
|
||||||
Newton,
NC 28658
|
||||||
John
W. Lineberger, Jr.
|
563
|
*
|
||||
6154
Vesuvius Furnace Road
|
||||||
Iron
Station, NC 28080
|
||||||
Gary
E. Matthews
|
8,900
|
*
|
||||
210
First Avenue South
|
||||||
Conover,
NC 28613
|
||||||
Billy
L. Price, Jr., M.D.
|
598
|
*
|
||||
540
11th Ave. Place NW
|
||||||
Hickory,
NC 28601
|
||||||
Larry
E. Robinson
|
27,1259
|
*
|
||||
Post
Office Box 723
|
||||||
Newton,
NC 28658
|
Amount
and
|
||||||
Nature
of
|
Percentage
|
|||||
Beneficial
|
of
|
|||||
Name
and Address
|
Ownership1
|
Class2
|
||||
Lance
A. Sellers
|
20,97110
|
*
|
||||
Post
Office Box 467
|
||||||
Newton,
NC 28658
|
||||||
William
Gregory Terry
|
3,27611
|
*
|
||||
706
South College Ave
|
||||||
Newton,
NC 28658
|
||||||
Dan
Ray Timmerman, Sr.
|
35,30212
|
*
|
||||
Post
Office Box 1148
|
||||||
Conover,
NC 28613
|
||||||
Tony
W. Wolfe
|
43,57013
|
1.22%
|
||||
Post
Office Box 467
|
||||||
Newton,
NC 28658
|
||||||
Benjamin
I. Zachary
|
45,31114
|
1.27%
|
||||
Post
Office Box 277
|
||||||
Taylorsville,
NC 28681
|
||||||
All
current directors and nominees and
|
435,985
15,16
|
12.24%
|
||||
executive
officers as a group (17 people)
|
1
|
Unless
otherwise noted, all shares are owned directly of record by the named
individuals, by their spouses and minor children, or by other entities
controlled by the named individuals. Voting and investment power
is not
shared unless otherwise indicated.
|
2
|
Based
upon a total of 3,454,501 shares of Common Stock outstanding as of
the
Record Date and 107,421 stock options exercisable within 60 days
with
respect to the designated recipient(s).
|
3
|
Includes
38,811 shares of Common Stock owned by Alexander Railroad Company.
Mr. J.
Abernethy is Vice President, Secretary and Chairman of the Board
of
Directors of Alexander Railroad
Company.
|
4
|
Includes
2,961 shares of Common Stock owned by Mr. R. Abernethy's spouse,
for which
Mr. R. Abernethy disclaims beneficial
ownership.
|
5
|
Includes
20,945 shares of Common Stock in which Mr. Beaman has the right to
acquire
beneficial interest within 60 days by the exercise of stock options
granted under the Omnibus Stock Ownership and Long Term Incentive
Plan.
|
6
|
Includes
14,248 shares of Common Stock in which Mr. Cable has the right to
acquire
beneficial interest within 60 days by the exercise of stock options
granted under the Omnibus Stock Ownership and Long Term Incentive
Plan.
|
7
|
Includes
1,000 shares of Common Stock owned by Mr. Howard's mother over which
Mr. Howard holds a power of attorney. Includes 500 shares of Common
Stock
owned by Howard Ventures, Inc. Mr. Howard is Vice President of Howard
Ventures, Inc.
|
8
|
Includes
11,152 shares of Common Stock in which Mr. Lampron has the right
to
acquire beneficial interest within 60 days by the exercise of stock
options granted under the Omnibus Stock Ownership and Long Term Incentive
Plan.
|
9
|
Includes
4,143 shares of Common Stock owned by Mr. Robinson's spouse, for
which Mr.
Robinson disclaims beneficial
ownership.
|
11
|
Includes 1,000
shares of Common Stock owned by Drum Funeral Home, LLC. Mr. Terry
is
Executive Vice-President of Drum Funeral Home, LLC.
|
12
|
Includes 1,650
shares of Common Stock owned by Timmerman Manufacturing, Inc. Mr.
Timmerman is President and a Director of Timmerman Manufacturing,
Inc.
|
13
|
Includes
40,228 shares of Common Stock in which Mr. Wolfe has the right to
acquire
beneficial interest within 60 days by the exercise of stock options
granted under the Omnibus Stock Ownership and Long Term Incentive
Plan.
|
14
|
Includes
38,811 shares of Common Stock owned by Alexander Railroad Company.
Mr.
Zachary is President, Treasurer, General Manager and a Director of
Alexander Railroad Company.
|
15
|
The
38,811 shares owned by Alexander Railroad Company and attributed
to Mr. J.
Abernethy and Mr. Zachary are only included once in calculating this
total.
|
16
|
Includes
107,421 shares of Common Stock in which the executive officers, as
a
group, have the right to acquire beneficial interest within 60 days
by the
exercise of stock options granted under the Omnibus Stock Ownership
and
Long Term Incentive Plan.
|
|
|
Age
on
|
|
Principal
Occupation
|
|
Director
|
|
Name
|
|
December
31, 2005
|
|
During
Last Five Years
|
|
Since
|
|
Robert
C. Abernethy
|
55
|
President,
Secretary and Treasurer, Carolina
|
1976
|
||||
Glove
Company, Inc. (glove manufacturer);
|
|||||||
Secretary
and Assistant Treasurer, Midstate
|
|||||||
Contractors,
Inc (paving company)
|
|||||||
James
S. Abernethy
|
51
|
Vice
President, Carolina Glove Company,
|
1992
|
||||
Inc
(glove manufacturer); President and
|
|||||||
Assistant
Secretary, Midstate Contractors,
|
|||||||
Inc
(paving company); Vice President,
|
|||||||
Secretary
and Chairman of the Board of
|
|||||||
Directors,
Alexander Railroad Company
|
|||||||
Larry
E. Robinson
|
60
|
President
and Chief Executive Officer,
|
1993
|
||||
The
Blue Ridge Distributing Company, Inc
|
|||||||
(beer
and wine distributor)
|
|||||||
William
Gregory Terry
|
38
|
Executive
Vice President, Drum &
|
2004
|
||||
Willis-Reynolds
Funeral Homes and
|
|||||||
Crematory
|
Age
on
|
|
Principal
Occupation
|
|
Director
|
|
Term
|
|
||
Name
|
|
December
31, 2005
|
|
During
Last Five Years
|
|
Since
|
|
Expires
|
|
John
W. Lineberger, Jr.
|
55
|
President,
Lincoln Bonded Warehouse
|
|
2004
|
|
2007
|
|||
Company
(commercial warehousing
|
|||||||||
facility)
|
|||||||||
Gary
E. Matthews
|
50
|
President
and Director, Matthews
|
2001
|
|
2007
|
||||
Construction
Company, Inc.
|
|||||||||
Dan
Ray Timmerman, Sr.
|
58
|
President,
Timmerman Manufacturing,
|
|
1995
|
|
2007
|
|||
Inc.
(wrought iron furniture
|
|||||||||
manufacturer)
|
Age
on
|
|
Principal
Occupation
|
|
Director
|
|
Term
|
|
||
Name
|
|
December
31, 2005
|
|
During
Last Five Years
|
|
Since
|
|
Expires
|
|
Benjamin
I. Zachary
|
49
|
President,
Treasurer, and member of the
|
|
1995
|
|
2007
|
|
||
Board
of Directors, Alexander Railroad
|
|||||||||
Douglas
S. Howard
|
46
|
Vice
President, Howard Ventures, Inc.;
|
|
2004
|
|
2008
|
|||
Secretary/Treasurer,
Denver Equipment
|
|||||||||
of
Charlotte, Inc
|
|||||||||
Billy
L. Price, Jr., M D
|
49
|
Practicing
Internist and Partner in
|
2004
|
|
2008
|
||||
Catawba
Valley Internal Medicine, P.A.;
|
|||||||||
Clinical
Instructor, Wake Forest
|
|||||||||
University
School of Medicine
|
|
|
Age
on
|
|
|
|
Employed
By
|
|
|
|
|
|
December
31,
|
|
Positions
and Occupations
|
|
the
Company or
|
|
|
Name
|
|
2005
|
|
During
Last Five Years
|
|
the
Bank Since
|
|
Tony
W. Wolfe
|
59
|
President
and Chief Executive Officer
|
1990
|
|||||
of
the Company and the Bank
|
||||||||
Joseph
F. Beaman, Jr.
|
56
|
Executive
Vice President and Corporate
|
1977
|
|||||
Secretary
of the Company; Executive
|
||||||||
Vice
President, Chief Administrative
|
||||||||
Officer
and Secretary of the Bank
|
||||||||
William
D. Cable
|
37
|
Executive
Vice President and Assistant
|
1995
|
|||||
Corporate
Treasurer of the Company;
|
||||||||
Executive
Vice President and Chief
|
||||||||
Operations
Officer of the Bank; Prior to
|
||||||||
2002,
Bank Senior Vice President -
|
||||||||
Information
Services
|
||||||||
Lance
A. Sellers
|
43
|
Executive
Vice President and Assistant
|
1998
|
|||||
Corporate
Secretary of the Company;
|
||||||||
Executive
Vice President and Chief
|
||||||||
Credit
Officer of the Bank
|
||||||||
A.
Joseph Lampron
|
51
|
Executive
Vice President, Chief
|
2001
|
|||||
Financial
Officer and Corporate
|
||||||||
Treasurer
of the Company; Executive
|
||||||||
Vice
President and Chief Financial
|
||||||||
Officer
of the Bank. Prior to December
|
||||||||
2001,
Vice President/Senior Change
|
||||||||
Manager
at a large North Carolina bank
|
Annual
Compensation
|
Long
Term Compensation Awards
|
All
Other
|
||||||||
Compensation2,3,4,5,6
|
||||||||||
Securities
Underlying
|
|
|
||||||||
|
|
|
|
|
|
Restricted
|
Options/Stock
|
|
|
|
|
Name
and
|
|
|
|
Other
Annual
|
Stock
|
Appreciation
Rights
|
|
|
|
|
Principal
Position
|
Year
|
Salary
|
Bonus
|
Compensation1
|
Awards
|
("SARS")
(in shares)
|
|||
Tony
W. Wolfe
|
2005
|
$
224,560
|
$
50,593
|
$--
|
$--
|
$0/0
|
$
13,660
|
|||
President
and Chief Executive
|
2004
|
$
212,949
|
$0
|
$--
|
$--
|
$0/0
|
$
12,832
|
|||
Officer
of the Company and the
|
2003
|
$
206,828
|
$0
|
$--
|
$--
|
$0/0
|
$
13,814
|
|||
Bank
|
||||||||||
Joseph
F. Beaman, Jr.
|
2005
|
$
117,386
|
$
27,042
|
$--
|
$--
|
$0/0
|
$
6,937
|
|||
Executive
Vice President and
|
2004
|
$
139,222
|
$0
|
$--
|
$--
|
$0/0
|
$
8,098
|
|||
Corporate
Secretary of the
|
2003
|
$
152,214
|
$0
|
$--
|
$--
|
$0/0
|
$
7,963
|
|||
Company;
Executive Vice
|
||||||||||
President,
Chief Administrative
|
||||||||||
Officer
and Secretary of the Bank
|
||||||||||
Lance
A. Sellers
|
2005
|
$
160,676
|
$
32,636
|
$--
|
$--
|
$0/0
|
$
8,326
|
|||
Executive
Vice President and
|
2004
|
$
156,205
|
$0
|
$--
|
$--
|
$0/0
|
$
8,201
|
|||
Assistant
Corporate Secretary of the
|
2003
|
$
150,031
|
$0
|
$--
|
$--
|
$0/0
|
$
7,648
|
|||
Company;
Executive Vice President
|
||||||||||
and
Chief Credit Officer of the
|
||||||||||
Bank
|
||||||||||
A.
Joseph Lampron
|
2005
|
$
125,865
|
$
27,924
|
$--
|
$--
|
$0/0
|
$
6,946
|
|||
Executive
Vice President, Chief
|
2004
|
$
131,067
|
$0
|
$--
|
$--
|
$0/0
|
$
6,608
|
|||
Financial
Officer and Corporate
|
2003
|
$
111,593
|
$0
|
$--
|
$--
|
$0/0
|
$
6,089
|
|||
Treasurer
of the Company;
|
||||||||||
Executive
Vice President and Chief
|
||||||||||
Financial
Officer of the Bank
|
||||||||||
William
D. Cable
|
2005
|
$
130,602
|
$
27,924
|
$--
|
$--
|
$0/0
|
$
6,638
|
|||
Executive
Vice President and
|
2004
|
$
123,689
|
$0
|
$--
|
$--
|
$0/0
|
$
6,342
|
|||
Assistant
Corporate Treasurer of the
|
2003
|
$
118,135
|
$0
|
$--
|
$--
|
$0/0
|
$
6,046
|
|||
Company;
Executive Vice President
|
||||||||||
and
Chief Operations Officer of the
|
||||||||||
Bank
|
1
|
Perquisites
for the fiscal year did not exceed the lesser of $50,000, or 10%
of salary
and bonus as reported for the named employee.
|
2
|
For
Mr. Wolfe, includes for 2005 $10,000 under the 401(k) plan, $1,992
premium
paid for group term life insurance in excess of $50,000 and $1,668
paid
for the Split Dollar Benefit; 2004: $9,324 under the 401(k) plan,
a $1,899
premium paid for group term life insurance in excess of $50,000 and
$1,609
paid for the Split Dollar Death Benefit; 2003: $10,410 under the
401(k)
plan, a $1,827 premium paid for group term life insurance in excess
of
$50,000 and $1,577 paid for the Split Dollar
Benefit;
|
3
|
For
Mr. Beaman, includes for 2005 $5,711 under the 401(k) plan, $918
premium
paid for group term life insurance in excess of $50,000 and $308
paid for
the Split Dollar Death Benefit; 2004: $6,816 under the 401(k) plan,
a $991
premium paid for group term life insurance in excess of $50,000 and
$291
paid for the Split Dollar Death Benefit; 2003: $7,296 under the 401(k)
plan, a $667 premium paid for group term life insurance in excess
of
$50,000 and $282 paid for the Split Dollar Death Benefit.
|
4
|
For
Mr. Sellers, includes for 2005 $7,869 under the 401(k) plan, $319
premium
paid for group term life insurance in excess of $50,000 and $138
paid for
the Split Dollar Death Benefit; 2004: $7,643 under the 401(k) plan,
a $307
premium paid for group term life insurance in excess of $50,000 and
$251
paid for the Split Dollar Death Benefit; 2003: $7,355 under the 401(k)
plan, a $293 premium paid for group term life insurance in excess
of
$50,000 and $130 paid for the Split Dollar Death
Benefit.
|
5
|
For
Mr. Lampron, includes for 2005 $6,109 under the 401(k) plan, $541
premium
paid for group term life insurance in excess of $50,000 and $296
paid for
the Split Dollar Death Benefit; 2004: $5,819 under the 401(k) plan,
a $508
premium paid for group term life insurance in excess of $50,000 and
$281
paid for the Split Dollar Death Benefit; 2003: $5,561 under the 401(k)
plan, a $310 premium paid for group term life insurance in excess
of
$50,000 and $218 paid for the Split Dollar Death
Benefit.
|
6
|
For
Mr. Cable, includes for 2005 $6,343 under the 401(k) plan, $222 premium
paid for group term life insurance in excess of $50,000 and $73 paid
for
the Split Dollar Death Benefit; 2004: $6,043 under the 401(k) plan,
a $207
premium paid for group term life insurance in excess of $50,000 and
$92
paid for the Split Dollar Death Benefit; 2003: $5,780 under the 401(k)
plan, a $197 premium paid for group term life insurance in excess
of
$50,000 and $69 paid for the Split Dollar Death
Benefit.
|
Plan
Category
|
Number
of securities to
be
issued upon exercise
of
outstanding options, warrants and rights
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation
plans
(excluding
securities
reflected in
column
(a))
|
(a)
|
(b)
|
(c)
|
|
Equity
compensation
plans
approved by
security
holders
|
193,7431
|
$13.412
|
33,154
|
Equity
compensation
plans
not approved by
security
holders
|
0
|
$0
|
0
|
Total
|
193,743
|
$13.41
|
33,154
|
Aggregated
Option/SAR Exercises in Last Fiscal
Year
|
|
|||||
|
and
Fiscal Year-End Option/SAR Values
|
|||||
Shares
|
|
Number
of Securities
|
Value
of Unexercised
|
|||
|
Acquired
|
Value
|
Underlying
Unexercised
|
In-the-Money
|
||
|
on
|
Realized
|
Options/SARs
at
|
Options/SARs
at
|
||
Name
|
Exercise
#
|
($)
|
Fiscal
Year End1,2
|
Fiscal
Year End3
|
||
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||
Tony
W. Wolfe
|
0
|
$0
|
40,228/0
|
0/0
|
$370,177.46/$0
|
$0/$0
|
Joseph
F. Beaman, Jr
|
0
|
$0
|
20,945/0
|
0/0
|
$192,055.68/$0
|
$0/$0
|
Lance
A. Sellers
|
0
|
$0
|
20,848/0
|
0/0
|
$193,179.70/$0
|
$0/$0
|
|
Shares
|
|
Number
of Securities
|
Value
of Unexercised
|
||
|
Acquired
|
Value
|
Underlying
Unexercised
|
In-the-Money
|
||
|
on
|
Realized
|
Options/SARs
at
|
Options/SARs
at
|
||
Name
|
Exercise
#
|
($)
|
Fiscal
Year End1,2
|
Fiscal
Year End3
|
||
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||
|
|
|
|
|
|
|
A.
Joseph Lampron
|
0
|
$0
|
11,152/0
|
0/0
|
$105,488.73/$0
|
$0/$0
|
William
D. Cable
|
0
|
$0
|
14,248/0
|
0/0
|
$132,734.30/$0
|
$0/$0
|
1
|
Options
to purchase 16,627 shares of Common Stock (adjusted to reflect
the April
24, 2000 10% stock dividend and the 10% stock dividend on March
16, 2005)
were granted to Messrs. Wolfe, Beaman, Sellers and Cable as of
September
28, 1999. Pursuant to an amendment to the Stock Option Grant Agreements
dated September 25, 2000 these options vest 20% each year over
a five-year
period beginning on September 28, 2000, with the last 20% vesting
on
September 28, 2004. Options to purchase 24,953 shares of Common
Stock were
granted to the Messr. Wolfe, Beaman, Sellers and Cable as of September
25,
2000. One-third of these options vested on September 25, 2001,
one-third
vested on September 25, 2002 and one-third vested on September
25, 2003.
Options to purchase 24,984 shares of Common Stock were granted
to Messr.
Wolfe, Beaman, Sellers and Cable as of October 30, 2001. One-third
vested
on October 30, 2002, one-third vested on October 30, 2003, and
one-third
vested on October 30, 2004. Options to purchase 36,300 shares of
Common
Stock were granted to all the named persons (including Mr. Lampron)
as of
December 17, 2002. One-third vested on December 17, 2003, one-third
vested
on December 17, 2004, and one-third vested on December 17, 2005.
|
2
|
Options
to purchase 4,551 shares of Common Stock were granted to Mr. Lampron
as of
December 18, 2001. One-third vested on December 18, 2002, one-third
vested
on December 18, 2003 and one-third vested on December 18, 2004.
|
3
|
The
exercise price of the stock options granted to Messr. Wolfe, Beaman,
Sellers and Cable on September 28, 1999 is $14.88 (adjusted to
reflect the
April 24, 2000 10% stock dividend). The exercise price of the stock
options granted to them on September 25, 2000 is $11.53. The exercise
price of the stock options granted to them on October 30, 2001
is $14.49.
The exercise price of stock options granted to Mr. Lampron on December
18,
2001 is $13.36. The exercise price of stock options granted to
all named
persons on December 17, 2002 is $12.82. On December 31, 2005, the
closing
market price for the Common Stock as reported on the Nasdaq National
Market was $22.50.
|
Robert
C. Abernethy
|
John
W. Lineberger, Jr.
|
|||
Larry
E. Robinson
|
James
S. Abernethy
|
|||
William
G. Terry
|
Dan
Ray Timmerman, Sr.
|
|||
Benjamin
I. Zachary
|
Robert
C. Abernethy
|
Douglas
S. Howard
|
|||
Larry
E. Robinson
|
Dan
Ray Timmerman, Sr.
|
|||
Gary
E. Matthews
|
Dr.
Billy L. Price, Jr.
|
|||
Benjamin
I. Zachary
|
Period
Ending
|
||||||
Index
|
12/31/00
|
12/31/01
|
12/31/02
|
12/31/03
|
12/31/04
|
12/31/05
|
Peoples
Bancorp of North
|
100.00
|
109.10
|
113.32
|
114.67
|
156.57
|
163.45
|
Carolina,
Inc.
|
||||||
|
||||||
NASDAQ
- Total US*
|
100.00
|
79.18
|
54.44
|
82.09
|
89.59
|
91.54
|
SNL
Southeast Bank Index
|
100.00
|
124.58
|
137.62
|
172.81
|
204.94
|
209.78
|
SELECTED
FINANCIAL DATA
|
||||||||||||||||
Dollars
in Thousands Except Per Share Amounts
|
||||||||||||||||
2005
|
|
2004
|
|
2003
|
|
2002
|
2001
|
|||||||||
Summary
of Operations
|
||||||||||||||||
Interest
income
|
$
|
43,371
|
36,292
|
34,935
|
36,649
|
41,932
|
||||||||||
Interest
expense
|
15,429
|
12,335
|
12,749
|
15,777
|
23,027
|
|||||||||||
Net
interest income
|
27,942
|
23,957
|
22,186
|
20,872
|
18,905
|
|||||||||||
Provision
for loan losses
|
3,110
|
3,256
|
6,744
|
5,432
|
3,545
|
|||||||||||
Net
interest income after provision for loan losses
|
24,832
|
20,701
|
15,442
|
15,440
|
15,360
|
|||||||||||
Non-interest
income
|
6,696
|
6,020
|
5,845
|
6,466
|
8,229
|
|||||||||||
Non-interest
expense
|
21,816
|
20,057
|
18,228
|
16,758
|
16,752
|
|||||||||||
Income
before taxes
|
9,712
|
6,664
|
3,059
|
5,148
|
6,837
|
|||||||||||
Income
taxes
|
3,381
|
2,233
|
1,055
|
1,712
|
2,262
|
|||||||||||
Net
income
|
$
|
6,331
|
4,431
|
2,004
|
3,436
|
4,575
|
||||||||||
Selected
Year-End Balances
|
||||||||||||||||
Assets
|
$
|
730,280
|
686,348
|
674,032
|
645,638
|
619,505
|
||||||||||
Available
for sale securities
|
115,158
|
105,598
|
79,460
|
71,736
|
84,286
|
|||||||||||
Loans,
net
|
559,239
|
527,419
|
542,404
|
519,122
|
484,517
|
|||||||||||
Mortgage
loans held for sale
|
2,248
|
3,783
|
587
|
5,065
|
5,339
|
|||||||||||
Interest-earning
assets
|
692,402
|
652,678
|
639,501
|
608,619
|
586,496
|
|||||||||||
Deposits
|
582,854
|
556,522
|
549,802
|
515,739
|
490,223
|
|||||||||||
Interest-bearing
liabilities
|
576,681
|
553,135
|
550,357
|
527,525
|
516,422
|
|||||||||||
Shareholders'
equity
|
$
|
54,353
|
50,938
|
48,554
|
48,605
|
45,401
|
||||||||||
Shares
outstanding*
|
3,440,805
|
3,448,341
|
3,448,722
|
3,446,902
|
3,540,585
|
|||||||||||
Selected
Average Balances
|
||||||||||||||||
Assets
|
$
|
706,843
|
684,385
|
661,077
|
625,227
|
575,142
|
||||||||||
Available
for sale securities
|
108,690
|
93,770
|
72,072
|
77,414
|
84,549
|
|||||||||||
Loans
|
550,545
|
547,753
|
539,559
|
507,879
|
454,371
|
|||||||||||
Interest-earning
assets
|
668,181
|
650,095
|
625,764
|
592,947
|
545,945
|
|||||||||||
Deposits
|
570,997
|
558,142
|
533,703
|
499,224
|
481,289
|
|||||||||||
Interest-bearing
liabilities
|
563,210
|
553,880
|
540,676
|
516,747
|
472,435
|
|||||||||||
Shareholders'
equity
|
$
|
55,989
|
51,978
|
49,971
|
48,257
|
47,432
|
||||||||||
Shares
outstanding*
|
3,449,873
|
3,459,379
|
3,447,056
|
3,467,173
|
3,540,585
|
|||||||||||
Profitability
Ratios
|
||||||||||||||||
Return
on average total assets
|
0.90
|
%
|
0.65
|
%
|
0.30
|
%
|
0.55
|
%
|
0.80
|
%
|
||||||
Return
on average shareholders' equity
|
11.31
|
%
|
8.52
|
%
|
4.01
|
%
|
7.12
|
%
|
9.65
|
%
|
||||||
Dividend
payout ratio
|
22.34
|
%
|
28.37
|
%
|
62.56
|
%
|
36.58
|
%
|
28.14
|
%
|
||||||
Liquidity
and Capital Ratios (averages)
|
||||||||||||||||
Loan
to deposit
|
96.42
|
%
|
98.14
|
%
|
101.10
|
%
|
101.73
|
%
|
94.41
|
%
|
||||||
Shareholders'
equity to total assets
|
7.92
|
%
|
7.59
|
%
|
7.56
|
%
|
7.72
|
%
|
8.25
|
%
|
||||||
Per
share of common stock*
|
||||||||||||||||
Basic
net income
|
$
|
1.84
|
1.28
|
0.58
|
0.99
|
1.29
|
||||||||||
Diluted
net income
|
$
|
1.80
|
1.26
|
0.58
|
0.99
|
1.29
|
||||||||||
Cash
dividends
|
$
|
0.41
|
0.36
|
0.36
|
0.36
|
0.36
|
||||||||||
Book
value
|
$
|
15.80
|
14.77
|
14.08
|
14.10
|
12.83
|
||||||||||
*Shares
outstanding and per share computations have been retroactively
restated to
reflect a 10% stock dividend during first quarter
2005.
|
Table
1- Average Balance Table
|
||||||||||||||||||||||||||||
December
31, 2005
|
December
31, 2004
|
December
31, 2003
|
||||||||||||||||||||||||||
(Dollars
in Thousands)
|
Average
Balance
|
|
|
Interest
|
|
|
Yield
/ Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield
/ Rate
|
|
|
Average
Balance
|
|
|
Interest
|
|
|
Yield
/ Rate
|
|||
Interest-earning
assets:
|
||||||||||||||||||||||||||||
Loans
|
$
|
550,545
|
37,234
|
6.76
|
%
|
547,753
|
29,826
|
5.45
|
%
|
539,559
|
28,700
|
5.32
|
%
|
|||||||||||||||
Interest
rate swap agreements
|
-
|
(575
|
)
|
-0.14
|
%
|
-
|
1,056
|
2.21
|
%
|
-
|
1,522
|
3.22
|
%
|
|||||||||||||||
Loan
fees
|
-
|
1,951
|
0.29
|
%
|
-
|
1,409
|
0.26
|
%
|
-
|
1,390
|
0.26
|
%
|
||||||||||||||||
Total
loans
|
550,545
|
38,610
|
7.01
|
%
|
547,753
|
32,291
|
5.90
|
%
|
539,559
|
31,612
|
5.86
|
%
|
||||||||||||||||
Investments
- taxable
|
37,487
|
1,597
|
4.26
|
%
|
35,920
|
1,545
|
4.30
|
%
|
49,082
|
2,186
|
4.45
|
%
|
||||||||||||||||
Investments
- nontaxable*
|
71,203
|
3,389
|
4.76
|
%
|
57,850
|
2,741
|
4.74
|
%
|
22,990
|
1,228
|
5.34
|
%
|
||||||||||||||||
Federal
funds sold
|
2,272
|
73
|
3.21
|
%
|
3,363
|
35
|
1.05
|
%
|
5,981
|
58
|
0.98
|
%
|
||||||||||||||||
Other
|
6,674
|
238
|
3.57
|
%
|
5,209
|
141
|
2.70
|
%
|
8,152
|
174
|
2.14
|
%
|
||||||||||||||||
Total
interest-earning assets
|
668,181
|
43,907
|
6.57
|
%
|
650,095
|
36,753
|
5.65
|
%
|
625,764
|
35,258
|
5.63
|
%
|
||||||||||||||||
Cash
and due from banks
|
15,149
|
13,058
|
12,587
|
|||||||||||||||||||||||||
Other
assets
|
31,324
|
30,601
|
31,008
|
|||||||||||||||||||||||||
Allowance
for loan losses
|
(7,811
|
)
|
(9,369
|
)
|
(8,282
|
)
|
||||||||||||||||||||||
Total
assets
|
$
|
706,843
|
684,385
|
661,077
|
||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||||||
NOW
accounts
|
$
|
110,852
|
1,468
|
1.32
|
%
|
106,832
|
1,292
|
1.21
|
%
|
75,757
|
688
|
0.91
|
%
|
|||||||||||||||
Regular
savings accounts
|
21,205
|
65
|
0.31
|
%
|
21,845
|
72
|
0.33
|
%
|
21,131
|
75
|
0.35
|
%
|
||||||||||||||||
Money
market accounts
|
56,858
|
1,112
|
1.96
|
%
|
51,069
|
535
|
1.05
|
%
|
58,134
|
556
|
0.96
|
%
|
||||||||||||||||
Time
deposits
|
292,807
|
8,923
|
3.05
|
%
|
300,175
|
7,145
|
2.38
|
%
|
310,991
|
8,157
|
2.62
|
%
|
||||||||||||||||
FHLB
borrowings
|
65,934
|
2,889
|
4.38
|
%
|
58,656
|
2,603
|
4.44
|
%
|
59,305
|
2,597
|
4.38
|
%
|
||||||||||||||||
Demand
notes payable to U.S. Treasury
|
702
|
21
|
3.02
|
%
|
678
|
8
|
1.14
|
%
|
710
|
7
|
0.99
|
%
|
||||||||||||||||
Trust
preferred securities
|
14,433
|
938
|
6.50
|
%
|
14,433
|
677
|
4.69
|
%
|
14,433
|
668
|
4.62
|
%
|
||||||||||||||||
Other
|
419
|
13
|
3.00
|
%
|
192
|
3
|
1.46
|
%
|
215
|
1
|
0.47
|
%
|
||||||||||||||||
Total
interest-bearing liabilities
|
563,210
|
15,429
|
2.74
|
%
|
553,880
|
12,335
|
2.23
|
%
|
540,676
|
12,749
|
2.36
|
%
|
||||||||||||||||
Demand
deposits
|
89,275
|
78,221
|
67,690
|
|||||||||||||||||||||||||
Other
liabilities
|
1,275
|
2,137
|
2,800
|
|||||||||||||||||||||||||
Shareholders'
equity
|
55,989
|
51,978
|
49,971
|
|||||||||||||||||||||||||
Total
liabilities and shareholder's equity
|
$
|
709,749
|
686,216
|
661,137
|
||||||||||||||||||||||||
Net
interest spread
|
$
|
28,478
|
3.83
|
%
|
24,418
|
3.43
|
%
|
22,509
|
3.27
|
%
|
||||||||||||||||||
Net
yield on interest-earning assets
|
4.26
|
%
|
3.76
|
%
|
3.60
|
%
|
||||||||||||||||||||||
Taxable
equivalent adjustment
|
||||||||||||||||||||||||||||
Investment
securities
|
$
|
536
|
460
|
323
|
||||||||||||||||||||||||
Net
interest income
|
$
|
27,942
|
23,958
|
22,186
|
||||||||||||||||||||||||
*Includes
U.S. government agency securities that are non-taxable for state
income
tax purposes of $50.7 million in 2005, $40.4 million in 2004
and $9.4
million in 2003. An effective tax rate of 6.90% was used to calculate
the
tax equivalent yield on these
securities.
|
Table
2 - Rate/Volume Analysis-Tax Equivalent Basis
|
|||||||||||||||||||
December
31, 2005
|
December
31, 2004
|
||||||||||||||||||
(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
|
$
|
180
|
6,139
|
6,319
|
481
|
198
|
679
|
||||||||||||
Investments
- taxable
|
67
|
(15
|
)
|
52
|
(603
|
)
|
(38
|
)
|
(641
|
)
|
|||||||||
Investments
- nontaxable
|
634
|
14
|
648
|
1,756
|
(243
|
)
|
1,513
|
||||||||||||
Federal
funds sold
|
(23
|
)
|
61
|
38
|
(26
|
)
|
3
|
(23
|
)
|
||||||||||
Other
|
45
|
52
|
97
|
(73
|
)
|
40
|
(33
|
)
|
|||||||||||
Total
interest income
|
903
|
6,251
|
7,154
|
1,535
|
(40
|
)
|
1,495
|
||||||||||||
Interest
expense:
|
|||||||||||||||||||
NOW
accounts
|
51
|
125
|
176
|
329
|
275
|
604
|
|||||||||||||
Regular
savings accounts
|
(2
|
)
|
(5
|
)
|
(7
|
)
|
2
|
(5
|
)
|
(3
|
)
|
||||||||
Money
market accounts
|
87
|
490
|
577
|
(71
|
)
|
50
|
(21
|
)
|
|||||||||||
Time
deposits
|
(200
|
)
|
1,978
|
1,778
|
(271
|
)
|
(741
|
)
|
(1,012
|
)
|
|||||||||
FHLB
Borrowings
|
321
|
(35
|
)
|
286
|
(28
|
)
|
34
|
6
|
|||||||||||
Demand
notes payable to
|
|||||||||||||||||||
U.S.
Treasury
|
-
|
13
|
13
|
-
|
1
|
1
|
|||||||||||||
Trust
Preferred Securities
|
24
|
237
|
261
|
-
|
9
|
9
|
|||||||||||||
Other
|
5
|
5
|
10
|
-
|
2
|
2
|
|||||||||||||
Total
interest expense
|
286
|
2,808
|
3,094
|
(39
|
)
|
(375
|
)
|
(414
|
)
|
||||||||||
Net
interest income
|
$
|
617
|
3,443
|
4,060
|
1,574
|
335
|
1,909
|
Table
3 - Non-Interest Income
|
||||||||||
(Dollars
in Thousands)
|
2005
|
|
2004
|
|
2003
|
|||||
Service
charges
|
$
|
3,780
|
3,435
|
3,267
|
||||||
Other
service charges and fees
|
1,142
|
677
|
611
|
|||||||
Gain
(loss) on sale of securities
|
(730
|
)
|
(64
|
)
|
(53
|
)
|
||||
Mortgage
banking income
|
469
|
356
|
604
|
|||||||
Insurance
and brokerage commissions
|
387
|
430
|
421
|
|||||||
Loss
on foreclosed and repossessed assets
|
(38
|
)
|
(179
|
)
|
(747
|
)
|
||||
Gain
on sale of loans
|
-
|
-
|
479
|
|||||||
Miscellaneous
|
1,686
|
1,365
|
1,263
|
|||||||
Total
non-interest income
|
$
|
6,696
|
6,020
|
5,845
|
Table
4 - Non-Interest Expense
|
||||||||||
(Dollars
in Thousands)
|
2005
|
|
2004
|
|
2003
|
|||||
Salaries
and wages
|
$
|
8,648
|
8,240
|
7,733
|
||||||
Employee
benefits
|
3,702
|
3,237
|
2,367
|
|||||||
Total
personnel expense
|
12,350
|
11,477
|
10,100
|
|||||||
Occupancy
expense
|
3,949
|
3,672
|
3,390
|
|||||||
Office
supplies
|
314
|
314
|
270
|
|||||||
FDIC
deposit insurance
|
76
|
81
|
82
|
|||||||
Professional
services
|
389
|
290
|
333
|
|||||||
Postage
|
264
|
211
|
217
|
|||||||
Telephone
|
403
|
337
|
333
|
|||||||
Director
fees and expense
|
334
|
351
|
234
|
|||||||
Marketing
and public relations
|
656
|
620
|
541
|
|||||||
Consulting
fees
|
233
|
306
|
280
|
|||||||
Taxes
and licenses
|
218
|
200
|
443
|
|||||||
Other
operating expense
|
2,631
|
2,198
|
2,005
|
|||||||
Total
non-interest expense
|
$
|
21,817
|
20,057
|
18,228
|
Table
5 - Interest Sensitivity Analysis
|
|||||||||||||||||||
(Dollars
in Thousands)
|
Immediate
|
|
|
1-3
Months
|
|
|
4-12
Months
|
|
|
Total
Within One year
|
|
|
Over
One year & Non-sensitive
|
|
|
Total
|
|||
Interest-earning
assets:
|
|||||||||||||||||||
Loans
|
$
|
427,716
|
17,536
|
8,697
|
453,949
|
112,714
|
$
|
566,663
|
|||||||||||
Mortgage
loans available for sale
|
2,248
|
-
|
-
|
2,248
|
-
|
2,248
|
|||||||||||||
Investment
securities
|
-
|
1,753
|
-
|
1,753
|
113,405
|
115,158
|
|||||||||||||
Federal
funds sold
|
1,347
|
-
|
-
|
1,347
|
-
|
1,347
|
|||||||||||||
Interest-bearing
deposit accounts
|
1,480
|
-
|
-
|
1,480
|
-
|
1,480
|
|||||||||||||
Other
interest-earning assets
|
-
|
-
|
-
|
-
|
5,506
|
5,506
|
|||||||||||||
Total
interest-earning assets
|
432,791
|
19,289
|
8,697
|
460,777
|
231,625
|
$
|
692,402
|
||||||||||||
Interest-bearing
liabilities:
|
|||||||||||||||||||
NOW,
savings, and money market deposits
|
183,249
|
-
|
-
|
183,249
|
-
|
$
|
183,249
|
||||||||||||
Time
deposits
|
69,697
|
42,161
|
130,078
|
241,936
|
63,008
|
304,944
|
|||||||||||||
Other
short term borrowings
|
1,474
|
-
|
-
|
1,474
|
-
|
1,474
|
|||||||||||||
FHLB
borrowings
|
4,600
|
2,500
|
-
|
7,100
|
64,500
|
71,600
|
|||||||||||||
Securities
sold under agreement to repurchase
|
981
|
-
|
-
|
981
|
-
|
981
|
|||||||||||||
Trust
preferred securities
|
-
|
14,433
|
-
|
14,433
|
-
|
14,433
|
|||||||||||||
Total
interest-bearing liabilities
|
260,001
|
59,094
|
130,078
|
449,173
|
127,508
|
$
|
576,681
|
||||||||||||
Interest-sensitive
gap
|
$
|
172,790
|
(39,805
|
)
|
(121,381
|
)
|
11,604
|
104,117
|
$
|
115,721
|
|||||||||
Cumulative
interest-sensitive gap
|
$
|
172,790
|
132,985
|
11,604
|
11,604
|
115,721
|
|||||||||||||
Interest-earning
assets as a percentage of interest-bearing
liabilities
|
|
|
166.46
|
%
|
|
32.64
|
%
|
6.69 | % | 102.58 | % |
Table
6 - Summary of Investment Portfolio
|
||||||||||
(Dollars
in Thousands)
|
2005
|
|
2004
|
|
2003
|
|||||
Obligations
of United States government
|
||||||||||
agencies
and corporations
|
$
|
60,243
|
46,570
|
34,517
|
||||||
Obligations
of states and political subdivisions
|
21,609
|
20,649
|
14,950
|
|||||||
Mortgage
backed securities
|
31,004
|
36,543
|
24,920
|
|||||||
Trust
preferred securities
|
1,750
|
1,750
|
5,000
|
|||||||
Equity
securities
|
552
|
86
|
73
|
|||||||
Total
securities
|
$
|
115,158
|
105,598
|
79,460
|
Table
7 - Maturity Distribution and Weighted Average Yield on
Investments
|
|||||||||||||||||||||||||||||||
One
Year or Less
|
After
One Year Through 5 Years
|
|
After
5 Years Through 10 Years
|
|
After
10 Years
|
|
Totals
|
||||||||||||||||||||||||
(Dollars
in Thousands)
|
Amount
|
|
Yield
|
|
Amount
|
|
Yield
|
|
Amount
|
|
Yield
|
|
Amount
|
|
Yield
|
|
Amount
|
|
Yield
|
|
|||||||||||
Book
value:
|
|||||||||||||||||||||||||||||||
United
States Government agencies
|
$
|
-
|
-
|
36,433
|
4.27
|
%
|
24,318
|
4.80
|
%
|
-
|
-
|
$
|
60,751
|
4.48
|
%
|
||||||||||||||||
States
and political subdivisions
|
200
|
7.21
|
%
|
8,341
|
5.08
|
%
|
9,329
|
4.88
|
%
|
3,878
|
7.04
|
%
|
21,748
|
5.36
|
%
|
||||||||||||||||
Mortgage
backed securities
|
-
|
-
|
432
|
3.74
|
%
|
12,371
|
3.99
|
%
|
19,063
|
4.53
|
%
|
31,866
|
4.31
|
%
|
|||||||||||||||||
Trust
preferred securities
|
-
|
-
|
-
|
-
|
-
|
-
|
1,750
|
7.16
|
%
|
1,750
|
7.16
|
%
|
|||||||||||||||||||
Equity
securities
|
-
|
-
|
-
|
-
|
-
|
-
|
815
|
0.21
|
%
|
815
|
0.21
|
%
|
|||||||||||||||||||
Total
securities
|
$
|
200
|
7.21
|
%
|
45,206
|
4.42
|
%
|
46,018
|
4.60
|
%
|
25,506
|
4.95
|
%
|
$
|
116,930
|
4.61
|
%
|
Table
8 - Loan Portfolio
|
|||||||||||||||||||||||||||||||
2005
|
2004
|
2003
|
2002
|
2001
|
|||||||||||||||||||||||||||
(Dollars
in Thousands)
|
Amount
|
|
%
of Loans
|
|
Amount
|
|
%
of Loans
|
|
Amount
|
|
%
of Loans
|
|
Amount
|
|
%
of Loans
|
|
Amount
|
|
%
of Loans
|
||||||||||||
Breakdown
of loan receivables:
|
|||||||||||||||||||||||||||||||
Commercial
|
$
|
79,902
|
14.10
|
%
|
79,189
|
14.79
|
%
|
90,558
|
16.41
|
%
|
92,141
|
17.51
|
%
|
102,409
|
20.87
|
%
|
|||||||||||||||
Real
estate - mortgage
|
330,227
|
58.28
|
%
|
312,988
|
58.45
|
%
|
332,730
|
60.26
|
%
|
322,987
|
61.36
|
%
|
277,737
|
56.61
|
%
|
||||||||||||||||
Real
estate - construction
|
141,420
|
24.96
|
%
|
127,042
|
23.73
|
%
|
110,392
|
19.99
|
%
|
80,552
|
15.30
|
%
|
82,791
|
16.88
|
%
|
||||||||||||||||
Consumer
|
15,115
|
2.66
|
%
|
16,249
|
3.03
|
%
|
18,446
|
3.34
|
%
|
30,690
|
5.83
|
%
|
27,671
|
5.64
|
%
|
||||||||||||||||
Total
loans
|
$
|
566,664
|
100.00
|
%
|
535,468
|
100.00
|
%
|
552,126
|
100.00
|
%
|
526,370
|
100.00
|
%
|
490,608
|
100.00
|
%
|
|||||||||||||||
Less:
Allowance for loan losses
|
7,425
|
8,049
|
9,722
|
7,248
|
6,091
|
||||||||||||||||||||||||||
Net
loans
|
$
|
559,239
|
527,419
|
542,404
|
519,122
|
484,517
|
Table
9 - Maturity and Repricing Data for Loans
|
|||||||||||||
(Dollars
in Thousands)
|
Within
One
Year
or Less
|
After
One Year Through Five Years
|
After
Five
Years
|
Total
Loans
|
|||||||||
Commercial
|
$
|
70,761
|
8,572
|
569
|
$
|
79,902
|
|||||||
Real
estate - mortgage
|
245,454
|
51,624
|
33,149
|
330,227
|
|||||||||
Real
estate - construction
|
131,110
|
9,373
|
937
|
141,420
|
|||||||||
Consumer
|
6,624
|
7,215
|
1,275
|
15,114
|
|||||||||
Total
loans
|
$
|
453,949
|
76,784
|
35,930
|
$
|
566,663
|
|||||||
Total
fixed rate loans
|
$
|
11,316
|
63,882
|
35,930
|
$
|
111,128
|
|||||||
Total
floating rate loans
|
442,633
|
12,902
|
-
|
455,535
|
|||||||||
Total
loans
|
$
|
453,949
|
76,784
|
35,930
|
$
|
566,663
|
· |
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.
|
Table
10 - Loan Risk Grade Analysis
|
|||||||||||||
Percentage
of Loans
|
General
Reserve
|
|
|||||||||||
|
|
By
Risk Grade
|
|
Percentage
|
|||||||||
Risk
Grade
|
2005
|
|
2004
|
|
2005
|
|
2004
|
||||||
Risk
1 (Excellent Quality)
|
14.28
|
%
|
13.44
|
%
|
0.15
|
%
|
0.15
|
%
|
|||||
Risk
2 (High Quality)
|
18.16
|
%
|
23.03
|
%
|
0.50
|
%
|
0.50
|
%
|
|||||
Risk
3 (Good Quality)
|
56.40
|
%
|
53.89
|
%
|
1.00
|
%
|
1.00
|
%
|
|||||
Risk
4 (Management Attention)
|
8.38
|
%
|
5.67
|
%
|
2.50
|
%
|
2.50
|
%
|
|||||
Risk
5 (Watch)
|
0.88
|
%
|
0.95
|
%
|
7.00
|
%
|
7.00
|
%
|
|||||
Risk
6 (Substandard)
|
0.42
|
%
|
0.61
|
%
|
12.00
|
%
|
12.00
|
%
|
|||||
Risk
7 (Low Substandard)
|
0.86
|
%
|
1.46
|
%
|
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
|
%
|
Table
11 - Analysis of Allowance for Loan Losses
|
||||||||||||||||
(Dollars
in Thousands)
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
2001
|
|||
Reserve
for loan losses at beginning
|
$
|
8,049
|
9,722
|
7,248
|
6,091
|
4,713
|
||||||||||
Loans
charged off:
|
||||||||||||||||
Commercial
|
293
|
1,004
|
1,179
|
3,737
|
842
|
|||||||||||
Real
estate - mortgage
|
2,141
|
3,842
|
2,422
|
158
|
790
|
|||||||||||
Real
estate - construction
|
1,250
|
4
|
251
|
-
|
51
|
|||||||||||
Consumer
|
516
|
535
|
630
|
546
|
675
|
|||||||||||
Total
loans charged off
|
4,200
|
5,385
|
4,482
|
4,441
|
2,358
|
|||||||||||
Recoveries
of losses previously charged off:
|
||||||||||||||||
Commercial
|
144
|
162
|
36
|
40
|
84
|
|||||||||||
Real
estate - mortgage
|
162
|
144
|
18
|
-
|
-
|
|||||||||||
Real
estate - construction
|
-
|
-
|
1
|
4
|
6
|
|||||||||||
Consumer
|
160
|
150
|
157
|
122
|
101
|
|||||||||||
Total
recoveries
|
466
|
456
|
212
|
166
|
191
|
|||||||||||
Net
loans charged off
|
3,734
|
4,929
|
4,270
|
4,275
|
2,167
|
|||||||||||
Provision
for loan losses
|
3,110
|
3,256
|
6,744
|
5,432
|
3,545
|
|||||||||||
Reserve
for loan losses at end of year
|
$
|
7,425
|
8,049
|
9,722
|
7,248
|
6,091
|
||||||||||
Loans
charged off net of recoveries, as
|
||||||||||||||||
a
percent of average loans outstanding
|
0.68
|
%
|
0.90
|
%
|
0.79
|
%
|
0.84
|
%
|
0.48
|
%
|
Table
12 - Non-performing Assets
|
||||||||||||||||
(Dollars
in Thousands)
|
2005
|
|
2004
|
|
2003
|
|
2002
|
|
2001
|
|||||||
Non-accrual
loans
|
$
|
3,492
|
5,097
|
4,343
|
4,602
|
3,756
|
||||||||||
Loans
90 days or more past due and still accruing
|
946
|
245
|
271
|
239
|
655
|
|||||||||||
Total
non-performing loans
|
4,438
|
5,342
|
4,614
|
4,841
|
4,411
|
|||||||||||
All
other real estate owned
|
531
|
682
|
1,447
|
240
|
256
|
|||||||||||
All
other repossessed assets
|
-
|
-
|
206
|
1,538
|
4
|
|||||||||||
Total
non-performing assets
|
$
|
4,969
|
6,024
|
6,267
|
6,619
|
4,671
|
||||||||||
As
a percent of total loans at year end
|
||||||||||||||||
Non-accrual
loans
|
0.62
|
%
|
0.95
|
%
|
0.79
|
%
|
0.87
|
%
|
0.77
|
%
|
||||||
Loans
90 days or more past due and still accruing
|
0.17
|
%
|
0.05
|
%
|
0.05
|
%
|
0.05
|
%
|
0.13
|
%
|
||||||
Total
non-performing assets
|
0.88
|
%
|
1.12
|
%
|
1.14
|
%
|
1.26
|
%
|
0.95
|
%
|
Table
13 - Maturities of Time Deposits over $100,000
|
||||
(Dollars
in Thousands)
|
2005
|
|||
Three
months or less
|
$
|
33,040
|
||
Over
three months through six months
|
28,730
|
|||
Over
six months through twelve months
|
38,760
|
|||
Over
twelve months
|
51,881
|
|||
Total
|
$
|
152,411
|
Table
14 - Contractual Obligations and Other
Commitments
|
||||||||||||||||
(Dollars
in Thousands)
|
Within
One year
|
|
One
to Three Years
|
|
Three
to Five Years
|
|
Five
Years or More
|
|
Total
|
|||||||
Contractual
Cash Obligations
|
||||||||||||||||
Long-term
borrowings*
|
$
|
2,500
|
2,500
|
17,000
|
45,000
|
$
|
67,000
|
|||||||||
Junior
subordinated debentures
|
-
|
-
|
-
|
14,433
|
14,433
|
|||||||||||
Operating
lease obligations
|
985
|
1,935
|
1,447
|
4,232
|
8,599
|
|||||||||||
Total
|
$
|
3,485
|
4,435
|
18,447
|
63,665
|
$
|
90,032
|
|||||||||
Other
Commitments
|
||||||||||||||||
Commitments
to extend credit
|
$
|
46,450
|
23,217
|
9,472
|
54,270
|
$
|
133,409
|
|||||||||
Standby
letters of credit
|
||||||||||||||||
and
financial guarantees written
|
2,607
|
85
|
-
|
-
|
2,692
|
|||||||||||
Total
|
$
|
49,057
|
23,302
|
9,472
|
54,270
|
$
|
136,101
|
|||||||||
*Excludes
$4.6 million adjustable rate credit due to the FHLB, which matured
in
February 2006.
|
Table
15 - Equity Ratios
|
||||||||||
2005
|
|
|
2004
|
|
|
2003
|
||||
Return
on average assets
|
0.90
|
%
|
0.65
|
%
|
0.30
|
%
|
||||
Return
on average equity
|
11.31
|
%
|
8.52
|
%
|
4.01
|
%
|
||||
Dividend
payout ratio
|
22.34
|
%
|
28.37
|
%
|
62.56
|
%
|
||||
Average
equity to average assets
|
7.92
|
%
|
7.59
|
%
|
7.56
|
%
|
||||
Table
16 - Quarterly Financial Data
|
|||||||||||||||||||||||||
2005
|
2004
|
||||||||||||||||||||||||
(Dollars
in thousands, except
per
share amounts)
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
||||||||||
Total
interest income
|
$
|
9,581
|
10,349
|
11,352
|
12,089
|
8,936
|
8,847
|
9,135
|
9,374
|
||||||||||||||||
Total
interest expense
|
3,346
|
3,686
|
3,978
|
4,418
|
3,066
|
3,002
|
3,103
|
3,164
|
|||||||||||||||||
Net
interest income
|
6,235
|
6,663
|
7,374
|
7,671
|
5,870
|
5,845
|
6,032
|
6,210
|
|||||||||||||||||
Provision
for loan losses
|
690
|
723
|
930
|
767
|
859
|
868
|
931
|
598
|
|||||||||||||||||
Other
income
|
1,638
|
1,842
|
1,795
|
1,421
|
1,500
|
1,531
|
1,549
|
1,440
|
|||||||||||||||||
Other
expense
|
5,259
|
5,301
|
5,388
|
5,869
|
4,720
|
4,873
|
4,990
|
5,474
|
|||||||||||||||||
Income
before income taxes
|
1,924
|
2,481
|
2,851
|
2,456
|
1,791
|
1,635
|
1,660
|
1,578
|
|||||||||||||||||
Income
taxes
|
647
|
873
|
1,010
|
851
|
613
|
547
|
552
|
521
|
|||||||||||||||||
Net
earnings
|
$
|
1,277
|
1,608
|
1,841
|
1,605
|
1,178
|
1,088
|
1,108
|
1,057
|
||||||||||||||||
Basic
earnings per share
|
$
|
0.37
|
0.47
|
0.53
|
0.47
|
0.34
|
0.31
|
0.32
|
0.31
|
||||||||||||||||
Diluted
earnings per share
|
$
|
0.36
|
0.46
|
0.52
|
0.46
|
0.34
|
0.31
|
0.32
|
0.30
|
Table 17 - Market Risk Table | ||
(Dollars In Thousands) | Principal/Notional Amount Maturing in Year Ended December 31, |
Loans
Receivable
|
2006
|
|
|
2007
|
|
|
2008
|
|
|
2009
& 2010
|
|
|
Thereafter
|
|
|
Total
|
|
|
Fair
Value
|
|||
Fixed
rate
|
$
|
19,131
|
16,117
|
14,695
|
31,070
|
30,114
|
$
|
111,128
|
$
|
111,049
|
||||||||||||
Average
interest rate
|
7.93
|
%
|
7.28
|
%
|
6.80
|
%
|
6.83
|
%
|
6.92
|
%
|
||||||||||||
Variable
rate
|
$
|
169,488
|
66,448
|
38,876
|
74,198
|
106,526
|
$
|
455,535
|
$
|
455,498
|
||||||||||||
Average
interest rate
|
7.82
|
%
|
7.97
|
%
|
8.05
|
%
|
7.89
|
%
|
7.65
|
%
|
||||||||||||
$
|
566,663
|
$
|
566,547
|
|||||||||||||||||||
Investment
Securities
|
.
|
|||||||||||||||||||||
Interest
bearing cash
|
$
|
-
|
-
|
-
|
-
|
1,480
|
$
|
1,480
|
$
|
1,480
|
||||||||||||
Average
interest rate
|
-
|
-
|
-
|
-
|
3.64
|
%
|
||||||||||||||||
Federal
funds sold
|
$
|
1,347
|
-
|
-
|
-
|
-
|
$
|
1,347
|
$
|
1,347
|
||||||||||||
Average
interest rate
|
3.80
|
%
|
-
|
-
|
-
|
-
|
||||||||||||||||
Securities
available for sale
|
$
|
1,535
|
5,485
|
16,725
|
25,708
|
65,705
|
$
|
115,158
|
$
|
115,158
|
||||||||||||
Average
interest rate
|
4.41
|
%
|
4.57
|
%
|
4.29
|
%
|
4.18
|
%
|
3.88
|
%
|
||||||||||||
Nonmarketable
equity securities
|
$
|
-
|
-
|
-
|
-
|
3,735
|
$
|
3,735
|
$
|
5,506
|
||||||||||||
Average
interest rate
|
-
|
-
|
-
|
-
|
3.97
|
%
|
||||||||||||||||
Debt
Obligations
|
||||||||||||||||||||||
Deposits
|
$
|
230,683
|
101,307
|
46,232
|
37,888
|
166,744
|
$
|
582,854
|
$
|
583,312
|
||||||||||||
Average
interest rate
|
3.36
|
%
|
4.10
|
%
|
4.05
|
%
|
3.77
|
%
|
1.05
|
%
|
||||||||||||
Advances
from FHLB
|
$
|
47,100
|
7,500
|
-
|
17,000
|
-
|
$
|
71,600
|
$
|
71,843
|
||||||||||||
Average
interest rate
|
3.62
|
%
|
3.99
|
%
|
-
|
5.35
|
%
|
-
|
||||||||||||||
Demand
notes payable to U.S. Treasury
|
$
|
1,474
|
-
|
-
|
-
|
-
|
$
|
1,474
|
$
|
1,474
|
||||||||||||
Average
interest rate
|
3.79
|
%
|
-
|
-
|
-
|
-
|
||||||||||||||||
Securities
sold under agreement to repurchase
|
$
|
981
|
-
|
-
|
-
|
-
|
$
|
981
|
$
|
981
|
||||||||||||
Average
interest rate
|
3.14
|
%
|
-
|
-
|
-
|
-
|
||||||||||||||||
Junior
subordinated debentures
|
$
|
-
|
-
|
-
|
-
|
|
14,433
|
$
|
14,433
|
$
|
14,433
|
|||||||||||
Average
interest rate
|
-
|
-
|
-
|
-
|
7.11
|
%
|
||||||||||||||||
Derivative
Instruments (notional amount)
|
||||||||||||||||||||||
Interest
rate floor contracts
|
$
|
-
|
-
|
70,000
|
-
|
-
|
$
|
70,000
|
$
|
176
|
||||||||||||
Average
interest rate
|
-
|
-
|
6.63
|
%
|
-
|
-
|
Table
18 - Interest Rate Risk
|
|||||||
(Dollars
in thousands)
|
|||||||
Estimated
Resulting Theoretical Net Interest Income
|
|||||||
Hypothetical
rate change
(ramp
over 12 months)
|
Amount
|
|
|
%
Change
|
|||
+2%
|
$
|
33,409
|
7.68
|
%
|
|||
+1%
|
$
|
32,216
|
3.83
|
%
|
|||
0%
|
$
|
31,028
|
0.00
|
%
|
|||
-1%
|
$
|
29,952
|
-3.47
|
%
|
|||
-2%
|
$
|
29,052
|
-6.37
|
%
|
|||
Estimated
Resulting Theoretical
Market Value
of Equity
|
|||||||
Hypothetical
rate change
(immediate
shock)
|
Amount
|
%
Change
|
|||||
+2%
|
$
|
48,424
|
-8.63
|
%
|
|||
+1%
|
$
|
50,588
|
-4.54
|
%
|
|||
0%
|
$
|
52,995
|
0.00
|
%
|
|||
-1%
|
$
|
55,686
|
5.08
|
%
|
|||
-2%
|
$
|
58,725
|
10.81
|
%
|
|||
Table
19 - Market and Dividend Data
|
||||||||||
2005
|
Low
Bid
|
|
|
High
Bid
|
|
|
Cash
Dividend
Per
Share
|
|||
First
Quarter
|
$
|
17.75
|
22.27
|
0.10
|
||||||
Second
Quarter
|
$
|
17.25
|
22.00
|
0.10
|
||||||
Third
Quarter
|
$
|
18.16
|
22.27
|
0.10
|
||||||
Fourth
Quarter
|
$
|
19.47
|
24.00
|
0.11
|
||||||
2004
|
Low
Bid
|
|
|
High
Bid
|
|
|
Cash
Dividend
Per
Share
|
|||
First
Quarter
|
$
|
15.84
|
18.25
|
0.09
|
||||||
Second
Quarter
|
$
|
16.09
|
17.95
|
0.09
|
||||||
Third
Quarter
|
$
|
16.54
|
18.09
|
0.09
|
||||||
Fourth
Quarter
|
$
|
16.39
|
18.18
|
0.09
|
Certified
Public Accountants
|
PEOPLES
BANCORP OF NORTH CAROLINA, INC. AND
SUBSIDIARIES
|
|||||||
|
|
|
|
|
|
||
Consolidated
Balance Sheets
|
|||||||
|
|
|
|
|
|
||
December
31, 2005 and 2004
|
|||||||
Assets
|
2005
|
|
2004
|
|
|||
Cash
and due from banks, including reserve requirements
|
$
|
18,468,999
|
15,067,871
|
||||
of
$5,229,000 and $4,643,000
|
|||||||
Federal
funds sold
|
1,347,000
|
1,723,000
|
|||||
Cash
and cash equivalents
|
19,815,999
|
16,790,871
|
|||||
Investment
securities available for sale
|
115,158,184
|
105,598,106
|
|||||
Other
investments
|
5,810,749
|
5,396,959
|
|||||
Total
securities
|
120,968,933
|
110,995,065
|
|||||
Mortgage
loans held for sale
|
2,247,900
|
3,783,175
|
|||||
Loans
|
566,663,416
|
535,467,733
|
|||||
Less
allowance for loan losses
|
(7,424,782
|
)
|
(8,048,627
|
)
|
|||
Net
loans
|
559,238,634
|
527,419,106
|
|||||
Premises
and equipment, net
|
12,662,153
|
12,742,730
|
|||||
Cash
surrender value of life insurance
|
6,311,757
|
6,034,188
|
|||||
Accrued
interest receivable and other assets
|
9,034,239
|
8,582,937
|
|||||
Total
assets
|
$
|
730,279,615
|
686,348,072
|
||||
Liabilities
and Shareholders' Equity
|
|||||||
Deposits:
|
|||||||
Non-interest
bearing demand
|
$
|
94,660,721
|
78,024,194
|
||||
NOW,
MMDA & savings
|
183,248,699
|
193,917,507
|
|||||
Time,
$100,000 or more
|
152,410,976
|
154,300,926
|
|||||
Other
time
|
152,533,265
|
130,279,446
|
|||||
Total
deposits
|
582,853,661
|
556,522,073
|
|||||
Demand
notes payable to U.S. Treasury
|
1,473,693
|
1,184,392
|
|||||
Securities
sold under agreement to repurchase
|
981,050
|
-
|
|||||
FHLB
borrowings
|
71,600,000
|
59,000,000
|
|||||
Junior
subordinated debentures
|
14,433,000
|
14,433,000
|
|||||
Accrued
interest payable and other liabilities
|
4,585,217
|
4,270,755
|
|||||
Total
liabilities
|
675,926,621
|
635,410,220
|
|||||
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
3,440,805 shares in 2005
|
|||||||
and
3,135,074 shares in 2004
|
41,096,500
|
35,040,390
|
|||||
Retained
earnings
|
14,656,160
|
16,018,206
|
|||||
Accumulated
other comprehensive income (loss)
|
(1,399,666
|
)
|
(120,744
|
)
|
|||
Total
shareholders' equity
|
54,352,994
|
50,937,852
|
|||||
Total
liabilities and shareholders' equity
|
$
|
730,279,615
|
686,348,072
|
||||
See
accompanying notes to consolidated financial statements.
|
PEOPLES
BANCORP OF NORTH CAROLINA, INC. AND
SUBSIDIARIES
|
||||||||||
|
|
|
|
|
|
|
|
|||
Consolidated
Statements of Earnings
|
||||||||||
|
|
|
|
|
|
|
|
|||
For
the Years Ended December 31, 2005, 2004 and
2003
|
||||||||||
2005
|
|
2004
|
|
2003
|
||||||
Interest
income:
|
||||||||||
Interest
and fees on loans
|
$
|
38,609,667
|
32,290,835
|
31,612,448
|
||||||
Interest
on federal funds sold
|
72,578
|
35,236
|
58,384
|
|||||||
Interest
on investment securities:
|
||||||||||
U.S.
Government agencies
|
3,584,755
|
2,903,865
|
2,244,375
|
|||||||
States
and political subdivisions
|
735,892
|
660,227
|
577,339
|
|||||||
Other
|
367,875
|
402,080
|
441,958
|
|||||||
Total
interest income
|
43,370,767
|
36,292,243
|
34,934,504
|
|||||||
Interest
expense:
|
||||||||||
NOW,
MMDA & savings deposits
|
2,644,413
|
1,899,249
|
1,318,820
|
|||||||
Time
deposits
|
8,923,488
|
7,145,486
|
8,157,388
|
|||||||
FHLB
borrowings
|
2,888,785
|
2,602,866
|
2,597,043
|
|||||||
Junior
subordinated debentures
|
938,145
|
676,547
|
667,526
|
|||||||
Other
|
33,790
|
10,518
|
7,891
|
|||||||
Total
interest expense
|
15,428,621
|
12,334,666
|
12,748,668
|
|||||||
Net
interest income
|
27,942,146
|
23,957,577
|
22,185,836
|
|||||||
Provision
for loans losses
|
3,110,000
|
3,256,000
|
6,743,900
|
|||||||
Net
interest income after provision for loan losses
|
24,832,146
|
20,701,577
|
15,441,936
|
|||||||
Other
income:
|
||||||||||
Service
charges
|
3,779,933
|
3,434,544
|
3,266,949
|
|||||||
Other
service charges and fees
|
1,141,879
|
677,191
|
610,591
|
|||||||
Loss
on sale of securities
|
(729,727
|
)
|
(63,688
|
)
|
(52,855
|
)
|
||||
Mortgage
banking income
|
469,109
|
356,782
|
604,568
|
|||||||
Insurance
and brokerage commissions
|
386,662
|
429,788
|
420,762
|
|||||||
Loss
on sale of repossessed assets
|
(37,811
|
)
|
(179,886
|
)
|
(746,543
|
)
|
||||
Gain
on sale of loans
|
-
|
-
|
478,759
|
|||||||
Miscellaneous
|
1,686,334
|
1,365,397
|
1,262,883
|
|||||||
Total
other income
|
6,696,379
|
6,020,128
|
5,845,114
|
|||||||
Other
expense:
|
||||||||||
Salaries
and employee benefits
|
12,350,119
|
11,477,495
|
10,099,811
|
|||||||
Occupancy
|
3,948,694
|
3,672,051
|
3,389,857
|
|||||||
Other
|
5,517,832
|
4,907,923
|
4,738,253
|
|||||||
Total
other expenses
|
21,816,645
|
20,057,469
|
18,227,921
|
|||||||
Earnings
before income taxes
|
9,711,880
|
6,664,236
|
3,059,129
|
|||||||
Income
taxes
|
3,380,900
|
2,233,300
|
1,055,538
|
|||||||
Net
earnings
|
$
|
6,330,980
|
4,430,936
|
2,003,591
|
||||||
Basic
earnings per share
|
$
|
1.84
|
1.28
|
0.58
|
||||||
Diluted
earnings per share
|
$
|
1.80
|
1.26
|
0.58
|
||||||
Cash
dividends declared per share
|
$
|
0.41
|
0.36
|
0.36
|
||||||
See
accompanying notes to consolidated financial statements.
|
PEOPLES
BANCORP OF NORTH CAROLINA, INC.
|
||||||||||||||||
Consolidated
Statements of Changes in Shareholders' Equity
|
||||||||||||||||
For
the Years Ended December 31, 2005, 2004 and
2003
|
||||||||||||||||
|
|
|
|
|
|
Accumulated
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
|
|
|||
|
|
|
Shares
|
|
|
Amount
|
|
|
Earnings
|
|
|
Income
(Loss)
|
|
|
Total
|
|
Balance,
December 31, 2002
|
3,133,547
|
$
|
35,097,773
|
12,094,363
|
1,412,597
|
48,604,733
|
||||||||||
Cash
dividends declared
|
-
|
-
|
(1,253,430
|
)
|
-
|
(1,253,430
|
)
|
|||||||||
Exercise
of stock options
|
1,655
|
23,737
|
-
|
-
|
23,737
|
|||||||||||
Net
earnings
|
-
|
-
|
2,003,591
|
-
|
2,003,591
|
|||||||||||
Change
in accumulated other
|
||||||||||||||||
comprehensive
income (loss), net of tax
|
-
|
-
|
-
|
(824,735
|
)
|
(824,735
|
)
|
|||||||||
Balance,
December 31, 2003
|
3,135,202
|
35,121,510
|
12,844,524
|
587,862
|
48,553,896
|
|||||||||||
Cash
dividends declared
|
-
|
-
|
(1,257,254
|
)
|
-
|
(1,257,254
|
)
|
|||||||||
Repurchase
and retirement of common
|
||||||||||||||||
stock
|
(15,100
|
)
|
(290,826
|
)
|
-
|
-
|
(290,826
|
)
|
||||||||
Exercise
of stock options
|
14,972
|
209,706
|
-
|
-
|
209,706
|
|||||||||||
Net
earnings
|
-
|
-
|
4,430,936
|
-
|
4,430,936
|
|||||||||||
Change
in accumulated other
|
||||||||||||||||
comprehensive
income (loss), net of tax
|
-
|
-
|
-
|
(708,606
|
)
|
(708,606
|
)
|
|||||||||
Balance,
December 31, 2004
|
3,135,074
|
35,040,390
|
16,018,206
|
(120,744
|
)
|
50,937,852
|
||||||||||
10%
stock dividend
|
313,546
|
6,274,087
|
(6,274,087
|
)
|
-
|
-
|
||||||||||
Cash
paid in lieu of fractional shares
|
-
|
-
|
(4,700
|
)
|
-
|
(4,700
|
)
|
|||||||||
Cash
dividends declared
|
-
|
-
|
(1,414,239
|
)
|
-
|
(1,414,239
|
)
|
|||||||||
Repurchase
and retirement of common
|
||||||||||||||||
stock
|
(15,000
|
)
|
(314,750
|
)
|
-
|
-
|
(314,750
|
)
|
||||||||
Exercise
of stock options
|
7,185
|
96,773
|
-
|
-
|
96,773
|
|||||||||||
Net
earnings
|
-
|
-
|
6,330,980
|
-
|
6,330,980
|
|||||||||||
Change
in accumulated other
|
||||||||||||||||
comprehensive
income (loss), net of tax
|
-
|
-
|
-
|
(1,278,922
|
)
|
(1,278,922
|
)
|
|||||||||
Balance,
December 31, 2005
|
3,440,805
|
$
|
41,096,500
|
14,656,160
|
(1,399,666
|
)
|
54,352,994
|
|||||||||
See
accompanying notes to consolidated financial statements.
|
PEOPLES
BANCORP OF NORTH CAROLINA, INC. AND
SUBSIDIARIES
|
||||||||||
Consolidated
Statements of Comprehensive Income
|
||||||||||
For
the Years Ended December 31, 2005, 2004 and
2003
|
||||||||||
2005
|
|
|
2004
|
|
|
2003
|
||||
Net
earnings
|
$
|
6,330,980
|
4,430,936
|
2,003,591
|
||||||
Other
comprehensive income (loss):
|
||||||||||
Unrealized
holding gains (losses) on securities
|
||||||||||
available
for sale
|
(3,045,565
|
)
|
30,988
|
(419,147
|
)
|
|||||
Reclassification
adjustment for losses on
|
||||||||||
sales
of securities available for sale included
|
||||||||||
in
net earnings
|
729,727
|
63,688
|
52,855
|
|||||||
Unrealized
holding losses on derivative
|
||||||||||
financial
instruments qualifying as cash flow
|
||||||||||
hedges
|
(283,493
|
)
|
(702,000
|
)
|
(284,000
|
)
|
||||
Reclassification
adjustment for losses (gains) on
|
||||||||||
derivative
financial instruments qualifying as
|
||||||||||
cash
flow hedges included in net earnings
|
483,715
|
(553,375
|
)
|
(700,626
|
)
|
|||||
Total
other comprehensive income (loss),
|
||||||||||
before
income taxes
|
(2,115,616
|
)
|
(1,160,699
|
)
|
(1,350,918
|
)
|
||||
Income
tax expense (benefit) related to other
|
||||||||||
comprehensive
income:
|
||||||||||
Unrealized
holding gains (losses) on securities
|
||||||||||
available
for sale
|
(1,186,248
|
)
|
12,070
|
(163,258
|
)
|
|||||
Reclassification
adjustment for losses on
|
||||||||||
sales
of securities available for sale included
|
||||||||||
in
net earnings
|
284,229
|
24,806
|
20,587
|
|||||||
Unrealized
holding losses on derivative
|
||||||||||
financial
instruments qualifying as cash flow
|
||||||||||
hedges
|
(123,082
|
)
|
(273,429
|
)
|
(110,618
|
)
|
||||
Reclassification
adjustment for losses (gains) on
|
||||||||||
derivative
financial instruments qualifying as
|
||||||||||
cash
flow hedges included in net earnings
|
188,407
|
(215,540
|
)
|
(272,894
|
)
|
|||||
Total
income tax expense (benefit) related to
|
||||||||||
other
comprehensive income
|
(836,694
|
)
|
(452,093
|
)
|
(526,183
|
)
|
||||
Total
other comprehensive income (loss),
|
||||||||||
net
of tax
|
(1,278,922
|
)
|
(708,606
|
)
|
(824,735
|
)
|
||||
Total
comprehensive income
|
$
|
5,052,058
|
3,722,330
|
1,178,856
|
||||||
See
accompanying notes to consolidated financial statements.
|
PEOPLES
BANCORP OF NORTH CAROLINA, INC.
|
||||||||||
|
|
|
|
|
|
|
|
|||
Consolidated
Statements of Cash Flows
|
||||||||||
|
|
|
|
|
|
|
|
|||
For
the Years Ended December 31, 2005, 2004 and
2003
|
||||||||||
2005
|
|
2004
|
|
2003
|
||||||
Cash
flows from operating activities:
|
||||||||||
Net
earnings
|
$
|
6,330,980
|
4,430,936
|
2,003,591
|
||||||
Adjustments
to reconcile net earnings to
|
||||||||||
net
cash provided by operating activities:
|
||||||||||
Depreciation,
amortization and accretion
|
1,643,459
|
1,563,245
|
1,963,995
|
|||||||
Provision
for loan losses
|
3,110,000
|
3,256,000
|
6,743,900
|
|||||||
Deferred
income taxes
|
332,806
|
341,441
|
(1,526,062
|
)
|
||||||
Loss
on sale of investment securities
|
729,727
|
63,688
|
52,855
|
|||||||
Recognition
of gain (loss) on sale of
|
||||||||||
derivative
instruments
|
483,715
|
(553,375
|
)
|
(700,626
|
)
|
|||||
Gain
on sale of loans
|
-
|
-
|
(478,759
|
)
|
||||||
Amortization
of deferred gain on sale of premises
|
(21,984
|
)
|
(22,412
|
)
|
-
|
|||||
Loss
(gain) on sale of repossessed assets
|
(2,189
|
)
|
15,412
|
262,840
|
||||||
Writedown
of other real estate and repossessions
|
40,000
|
164,474
|
483,703
|
|||||||
Change
in:
|
||||||||||
Mortgage
loans held for sale
|
1,535,275
|
(3,195,680
|
)
|
4,477,140
|
||||||
Cash
surrender value of life insurance
|
(277,569
|
)
|
(988,739
|
)
|
(216,741
|
)
|
||||
Other
assets
|
462,686
|
(3,442,472
|
)
|
377,900
|
||||||
Other
liabilities
|
651,204
|
1,470,823
|
(4,582
|
)
|
||||||
Net
cash provided by operating activities
|
15,018,110
|
3,103,341
|
13,439,154
|
|||||||
Cash
flows from investing activities:
|
||||||||||
Purchases
of investment securities available for sale
|
(49,431,813
|
)
|
(48,667,610
|
)
|
(55,439,455
|
)
|
||||
Proceeds
from calls and maturities of investment securities
|
||||||||||
available
for sale
|
9,655,995
|
19,413,975
|
27,158,675
|
|||||||
Proceeds
from sales of investment securities available
|
||||||||||
for
sale
|
27,768,392
|
2,986,313
|
19,896,324
|
|||||||
Purchases
of other investments
|
(5,367,790
|
)
|
(4,822,500
|
)
|
(925,000
|
)
|
||||
Proceeds
from sale of other investments
|
4,239,000
|
3,642,514
|
953,600
|
|||||||
Net
change in loans
|
(35,062,738
|
)
|
12,578,820
|
(31,533,937
|
)
|
|||||
Proceeds
from sale of loans
|
-
|
-
|
4,207,206
|
|||||||
Purchases
of premises and equipment
|
(1,373,019
|
)
|
(1,502,346
|
)
|
(1,913,876
|
)
|
||||
Proceeds
from sale of premises and equipment
|
1,750
|
-
|
-
|
|||||||
Proceeds
from sale of repossessed assets
|
246,218
|
2,153,103
|
1,502,891
|
|||||||
Purchases
of derivative financial instruments
|
(364,000
|
)
|
-
|
-
|
||||||
Proceeds
from (payment on) settlement of
|
||||||||||
derivative
financial instruments
|
(870,000
|
)
|
-
|
1,254,000
|
||||||
Net
cash used by investing activities
|
(50,558,005
|
)
|
(14,217,731
|
)
|
(34,839,572
|
)
|
||||
Cash
flows from financing activities:
|
||||||||||
Net
change in deposits
|
26,331,588
|
6,719,841
|
34,063,277
|
|||||||
Net
change in demand notes payable to U.S. Treasury
|
289,301
|
741,008
|
(1,156,616
|
)
|
||||||
Net
change in securities sold under agreement to repurchase
|
981,050
|
-
|
-
|
|||||||
Proceeds
from FHLB borrowings
|
162,300,000
|
95,850,000
|
46,650,000
|
|||||||
Repayments
of FHLB borrowings
|
(149,700,000
|
)
|
(94,850,000
|
)
|
(51,721,429
|
)
|
||||
Proceeds
from exercise of stock options
|
96,773
|
209,706
|
23,737
|
|||||||
Common
stock repurchased
|
(314,750
|
)
|
(290,826
|
)
|
-
|
|||||
Cash
paid in lieu of fractional shares
|
(4,700
|
)
|
-
|
-
|
||||||
Cash
dividends paid
|
(1,414,239
|
)
|
(1,257,254
|
)
|
(1,253,430
|
)
|
||||
Net
cash provided by financing activities
|
38,565,023
|
7,122,475
|
26,605,539
|
|||||||
Net
change in cash and cash equivalent
|
3,025,128
|
(3,991,915
|
)
|
5,205,121
|
||||||
Cash
and cash equivalents at beginning of period
|
16,790,871
|
20,782,786
|
15,577,665
|
|||||||
Cash
and cash equivalents at end of period
|
$
|
19,815,999
|
16,790,871
|
20,782,786
|
PEOPLES
BANCORP OF NORTH CAROLINA, INC.
|
||||||||||
|
|
|
|
|
|
|
|
|||
Consolidated
Statements of Cash Flows, continued
|
||||||||||
|
|
|
|
|
|
|
|
|||
For
the Years ended December 31, 2005, 2004 and
2003
|
||||||||||
2005
|
|
|
2004
|
|
|
2003
|
||||
Supplemental
disclosures of cash flow information:
|
||||||||||
Cash
paid during the year for:
|
||||||||||
Interest
|
$
|
15,189,559
|
11,833,234
|
12,975,587
|
||||||
Income
taxes
|
$
|
2,245,000
|
2,483,394
|
2,093,000
|
||||||
Noncash
investing and financing activities:
|
||||||||||
Change
in unrealized gain (loss) on investment securities
|
||||||||||
available
for sale, net
|
$
|
(1,413,819
|
)
|
57,800
|
(223,621
|
)
|
||||
Change
in unrealized gain (loss) on derivative financial
|
||||||||||
instruments,
net
|
$
|
134,897
|
(766,406
|
)
|
(601,114
|
)
|
||||
Transfer
of loans to other real estate and repossessions
|
$
|
133,210
|
1,362,138
|
3,382,633
|
||||||
Financed
portion of sale of other real estate
|
$
|
-
|
2,212,142
|
1,258,500
|
||||||
Financed
portion of sale of premises and equipment
|
$
|
-
|
-
|
3,729,932
|
||||||
Reclassification
of a security from other investments
|
||||||||||
to
securities available for sale
|
$
|
715,000
|
-
|
-
|
||||||
See
accompanying notes to consolidated financial statements.
|
Buildings
and improvements
|
10
- 50 years
|
Furniture
and equipment
|
3
- 10 years
|
2005
|
2004
|
2003
|
|||||
Net
earnings
|
As
reported
|
$
|
6,330,980
|
4,430,936
|
2,003,591
|
||
Effect
of grants
|
(143,747)
|
(312,444)
|
-
|
||||
Effect
of forfeitures
|
5,253
|
14,092
|
-
|
||||
Proforma
|
$
|
6,192,486
|
4,132,584
|
2,003,591
|
|||
Basic
earnings per share
|
As
reported
|
$
|
1.84
|
1.28
|
0.58
|
||
Proforma
|
$
|
1.79
|
1.19
|
0.58
|
|||
Diluted
earnings per share
|
As
reported
|
$
|
1.80
|
|
1.26
|
|
0.58
|
Proforma
|
$
|
1.76
|
|
1.18
|
|
0.58
|
For
the year ended December 31, 2005:
|
Net
Earnings
|
Common
Shares
|
Per
Share Amount
|
||||
Basic
earnings per share
|
$
|
6,330,980
|
3,449,873
|
$
|
1.84
|
||
Effect
of dilutive securities:
|
|||||||
Stock
options
|
-
|
60,655
|
|||||
Diluted
earnings per share
|
$
|
6,330,980
|
3,510,528
|
$
|
1.80
|
||
For
the year ended December 31, 2004:
|
Net
Earnings
|
Common
Shares
|
Per
Share Amount
|
||||
Basic
earnings per share
|
$
|
4,430,936
|
|
3,459,379
|
|
$
|
1.28
|
Effect
of dilutive securities:
|
|||||||
Stock
options
|
-
|
|
47,604
|
||||
Diluted
earnings per share
|
$
|
4,430,936
|
|
3,506,983
|
$
|
1.26
|
For
the year ended December 31, 2003:
|
Net
Earnings
|
|
Common
Shares
|
|
|
Per
Share Amount
|
|
Basic
earnings per share
|
$
|
2,003,591
|
|
3,447,056
|
$
|
0.58
|
|
Effect
of dilutive securities:
|
|||||||
Stock
options
|
|
-
|
|
29,703
|
|||
Diluted
earnings per share
|
$
|
2,003,591
|
|
3,476,759
|
$
|
0.58
|
December
31, 2005
|
||||||||
|
|
Gross
|
|
Gross
|
|
|
||
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Estimated
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
Mortgage-backed
securities
|
$
|
31,865,547
|
-
|
861,583
|
31,003,964
|
|||
U.S.
government agencies
|
60,751,179
|
83,410
|
591,506
|
60,243,083
|
||||
State
and political subdivisions
|
21,748,079
|
268,720
|
407,307
|
21,609,492
|
||||
Trust
preferred securities
|
1,750,000
|
-
|
-
|
1,750,000
|
||||
Equity
securities
|
814,995
|
-
|
263,350
|
551,645
|
||||
Total
|
$
|
116,929,800
|
|
352,130
|
|
2,123,746
|
|
115,158,184
|
December
31, 2004
|
||||||||
|
|
|
|
Gross
|
|
Gross
|
||
|
|
Amortized
|
|
Unrealized
|
|
Unrealized
|
|
Estimated
Fair
|
|
|
Cost
|
|
Gains
|
|
Losses
|
|
Value
|
Mortgage-backed
securities
|
$
|
36,492,826
|
188,816
|
138,443
|
36,543,199
|
|||
U.S.
government agencies
|
46,498,958
|
170,574
|
99,195
|
46,570,337
|
||||
State
and political subdivisions
|
20,212,105
|
546,905
|
110,189
|
20,648,821
|
||||
Trust
preferred securities
|
1,750,000
|
-
|
-
|
1,750,000
|
||||
Equity
securities
|
99,995
|
-
|
14,246
|
85,749
|
||||
Total
|
$
|
105,053,884
|
|
906,295
|
|
362,073
|
|
105,598,106
|
December
31, 2005
|
||||||||||||
Less
than 12 Months
|
12
Months or More
|
Total
|
||||||||||
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
Fair
Value
|
|
Losses
|
|
Fair
Value
|
|
Losses
|
|
Fair
Value
|
|
Losses
|
Mortgage-backed
securities
|
$
|
19,267,931
|
436,110
|
11,725,154
|
425,473
|
30,993,085
|
861,583
|
|||||
U.S.
government agencies
|
27,541,468
|
313,598
|
11,221,262
|
277,908
|
38,762,730
|
591,506
|
||||||
State
and political subdivisions
|
5,986,444
|
106,833
|
6,546,483
|
300,474
|
12,532,927
|
407,307
|
||||||
Equity
securities
|
479,050
|
235,950
|
72,595
|
27,400
|
551,645
|
263,350
|
||||||
Total
|
$
|
53,274,893
|
|
1,092,491
|
|
29,565,494
|
|
1,031,255
|
|
82,840,387
|
|
2,123,746
|
December
31, 2004
|
||||||||||||
Less
than 12 Months
|
12
Months or More
|
Total
|
||||||||||
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
|
Unrealized
|
|
|
Fair
Value
|
|
Losses
|
|
Fair
Value
|
|
Losses
|
|
Fair
Value
|
|
Losses
|
Mortgage-backed
securities
|
$
|
9,706,756
|
|
100,854
|
|
2,625,755
|
|
37,589
|
|
12,332,511
|
|
138,443
|
U.S.
government agencies
|
14,910,156
|
|
85,488
|
|
2,986,293
|
|
13,707
|
|
17,896,449
|
|
99,195
|
|
State
and political subdivisions
|
7,118,463
|
|
110,189
|
|
-
|
|
-
|
|
7,118,463
|
|
110,189
|
|
Equity
securities
|
-
|
|
-
|
|
85,749
|
|
14,246
|
|
85,749
|
|
14,246
|
|
Total
|
$
|
31,735,375
|
|
296,531
|
|
5,697,797
|
|
65,542
|
|
37,433,172
|
|
362,073
|
Amortized
Cost
|
Estimated
Fair
Value
|
|||
Due
within one year
|
$
|
200,172
|
201,026
|
|
Due
from one to five years
|
44,773,905
|
44,213,108
|
||
Due
from five to ten years
|
33,646,742
|
33,398,366
|
||
Due
after ten years
|
5,628,439
|
5,790,075
|
||
Mortgage-backed
securities
|
31,865,547
|
31,003,964
|
||
Equity
securities
|
814,995
|
551,645
|
||
Total
|
$
|
116,929,800
|
|
115,158,184
|
2005
|
|
2004
|
||
Commercial
|
$
|
79,902,157
|
79,189,073
|
|
Real
estate - mortgage
|
330,226,315
|
312,988,293
|
||
Real
estate - construction
|
141,420,338
|
127,041,980
|
||
Consumer
|
15,114,606
|
16,248,387
|
||
Total
loans
|
566,663,416
|
|
535,467,733
|
|
Less
allowance for loan losses
|
7,424,782
|
|
8,048,627
|
|
Total
net loans
|
$
|
559,238,634
|
|
527,419,106
|
2005
|
2004
|
2003
|
||||
Balance
at beginning of year
|
$
|
8,048,627
|
9,722,267
|
7,247,906
|
||
Amounts
charged off
|
(4,199,650)
|
(5,385,199)
|
(4,481,548)
|
|||
Recoveries
on amounts previously charged off
|
465,805
|
455,559
|
212,009
|
|||
Provision
for loan losses
|
3,110,000
|
3,256,000
|
6,743,900
|
|||
|
||||||
Balance
at end of year
|
$
|
7,424,782
|
|
8,048,627
|
|
9,722,267
|
2005
|
|
2004
|
||
Land
|
$
|
2,187,254
|
2,170,514
|
|
Buildings
and improvements
|
10,405,684
|
10,138,526
|
||
Furniture
and equipment
|
12,743,224
|
11,679,698
|
||
Total
premises and equipment
|
25,336,162
|
|
23,988,738
|
|
Less
accumulated depreciation
|
12,674,009
|
|
11,246,008
|
|
Total
net premises and equipment
|
$
|
12,662,153
|
|
12,742,730
|
2006
|
$
|
241,930,881
|
|
2007
|
46,248,980
|
||
2008
|
6,666,780
|
||
2009
|
7,034,324
|
||
2010
and thereafter
|
3,063,276
|
||
Total
|
$
|
304,944,241
|
Maturity
Date
|
Call
Date
|
Rate
|
Rate
Type
|
Amount
|
|
February
5, 2006
|
N/A
|
4.440%
|
Daily
Rate
|
$
|
4,600,000
|
March
30, 2010
|
March
30, 2001 and every three
|
||||
months
thereafter
|
6.020%
|
Convertible
|
5,000,000
|
||
March
30, 2010
|
September
30, 2000 and every three
|
||||
months
thereafter
|
5.880%
|
Convertible
|
5,000,000
|
||
May
24, 2010
|
May
24, 2001 and every three
|
||||
months
thereafter
|
6.490%
|
Convertible
|
2,000,000
|
||
January
10, 2011
|
January
10, 2002 and every three
|
||||
months
thereafter
|
4.200%
|
Convertible
|
5,000,000
|
||
May
2, 2011
|
May
2, 2002 and every three
|
||||
months
thereafter
|
4.055%
|
Convertible
|
30,000,000
|
||
January
26, 2006
|
N/A
|
3.280%
|
Adjustable
|
2,500,000
|
|
January
25, 2007
|
N/A
|
4.220%
|
Adjustable
|
2,500,000
|
|
June
24, 2015
|
June
24, 2010
|
3.710%
|
Convertible
|
5,000,000
|
|
June
24, 2010
|
June
24, 2006
|
3.879%
|
Convertible
|
5,000,000
|
|
July
23, 2012
|
July
23, 2007
|
3.870%
|
Convertible
|
5,000,000
|
|
$
|
71,600,000
|
|
2005
|
|
2004
|
|
2003
|
|
Current
|
$
|
3,048,094
|
|
1,891,859
|
|
2,581,600
|
Deferred
|
332,806
|
|
341,441
|
|
(1,526,062)
|
|
Total
|
$
|
3,380,900
|
|
2,233,300
|
|
1,055,538
|
2005
|
|
2004
|
|
2003
|
||
Pre-tax
income at statutory rates (34%)
|
$
|
3,302,039
|
|
2,265,840
|
|
1,040,104
|
Differences:
|
||||||
Tax
exempt interest income
|
(263,555)
|
|
(243,346)
|
|
(216,431)
|
|
Nondeductible
interest and other expense
|
30,511
|
|
21,588
|
|
18,668
|
|
Cash
surrender value of life insurance
|
(73,973)
|
|
(65,871)
|
|
(73,692)
|
|
State
taxes, net of federal benefits
|
363,264
|
|
236,544
|
|
270,493
|
|
Other,
net
|
22,614
|
|
18,545
|
|
16,396
|
|
Total
|
$
|
3,380,900
|
|
2,233,300
|
|
1,055,538
|
2005
|
|
2004
|
||
Deferred
tax assets:
|
||||
Allowance
for loan losses
|
$
|
2,862,550
|
|
3,103,068
|
Amortizable
intangible assets
|
|
141,010
|
|
173,548
|
Accrued
retirement expense
|
533,155
|
|
454,446
|
|
Income
from non-accrual loans
|
9,639
|
|
23,309
|
|
Deferred
gain on sale of premises
|
220,876
|
|
228,932
|
|
Unrealized
loss on cash flow hedges
|
223,684
|
|
289,009
|
|
Unrealized
loss on available for sale securities
|
690,044
|
|
-
|
|
Other
|
33,578
|
|
28,965
|
|
Total
gross deferred tax assets
|
4,714,536
|
|
4,301,277
|
|
Deferred
tax liabilities:
|
||||
Unrealized
gains on available for sale securities
|
-
|
|
211,974
|
|
Deferred
loan fees
|
1,135,448
|
|
1,060,798
|
|
Premises
and equipment
|
545,570
|
|
477,285
|
|
Deferred
income from servicing rights
|
87,330
|
|
108,920
|
|
Total
gross deferred tax liabilities
|
1,768,348
|
|
1,858,977
|
|
Net
deferred tax asset
|
$
|
2,946,188
|
|
2,442,300
|
Beginning
balance
|
$
|
8,404,828
|
|
New
loans
|
2,229,878
|
||
Repayments
|
3,413,977
|
||
Ending
balance
|
$
|
7,220,729
|
Year
|
|||
2006
|
$
|
984,858
|
|
2007
|
983,386
|
||
2008
|
952,257
|
||
2009
|
793,700
|
||
2010
|
652,643
|
||
Thereafter
|
4,232,256
|
||
Total
minimum obligation
|
$
|
8,599,100
|
Contractual
Amount
|
|||||
2005
|
|
2004
|
|||
Financial
instruments whose contract amount represent credit risk:
|
|||||
Commitments
to extend credit
|
$
|
133,409,227
|
|
123,093,680
|
|
Standby
letters of credit and financial guarantees written
|
$
|
2,692,192
|
|
3,278,326
|
2005
|
|
2004
|
||
Accumulated
postretirement benefit obligation
|
$
|
244,304
|
215,985
|
|
Unrecognized
gain (loss)
|
(80,495)
|
(49,038)
|
||
Net
liability recognized
|
$
|
163,809
|
|
166,947
|
2005
|
2004
|
2003
|
|||||||||||||||||
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
|
Option
Price
|
|
|
|
|
|
Option
Price
|
Option
Price
|
||||||
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Shares
|
|
|
Per
Share
|
|
|
Shares
|
|
|
Per
Share
|
|
Outstanding,
beginning of period
|
202,401
|
$
|
13.39
|
216,726
|
13.26
|
218,545
|
13.25
|
||||||||||||
Granted
during the period
|
-
|
$
|
-
|
4,400
|
17.22
|
-
|
-
|
||||||||||||
Forfeited
during the period
|
(1,194
|
)
|
$
|
12.82
|
(2,260
|
)
|
13.19
|
-
|
-
|
||||||||||
Exercised
during the period
|
(7,464
|
)
|
$
|
12.97
|
(16,465
|
)
|
12.73
|
(1,819
|
)
|
13.04
|
|||||||||
Outstanding,
end of period
|
193,743
|
$
|
13.41
|
202,401
|
13.39
|
216,726
|
13.26
|
||||||||||||
Number
of shares exercisable
|
190,809
|
$
|
13.35
|
173,609
|
13.37
|
140,035
|
13.17
|
2005
|
2004
|
2003
|
|||||||||||||||||
|
|
Weighted
|
|
Weighted
|
Weighted
|
||||||||||||||
|
|
Average
|
Average
|
Average
|
|||||||||||||||
|
|
Price
of
|
Price
of
|
Price
of
|
|||||||||||||||
|
|
Book
Value
|
Book
Value
|
Book
Value
|
|||||||||||||||
|
Shares
|
Shares
|
Shares
|
Shares
|
Shares
|
Shares
|
|||||||||||||
Outstanding,
beginning of period
|
70,819
|
$
|
11.88
|
53,114
|
10.67
|
59,015
|
10.64
|
||||||||||||
Granted
during the period
|
-
|
$
|
-
|
23,606
|
14.25
|
-
|
-
|
||||||||||||
Forfeited
during the period
|
-
|
$
|
-
|
(1,180
|
)
|
10.41
|
(5,902
|
)
|
10.41
|
||||||||||
Exercised
during the period
|
(11,802
|
)
|
$
|
10.41
|
(4,721
|
)
|
10.41
|
-
|
-
|
||||||||||
Outstanding,
end of period
|
59,017
|
$
|
12.18
|
70,819
|
11.88
|
53,114
|
10.67
|
||||||||||||
Number
of shares exercisable
|
40,127
|
$
|
11.20
|
45,733
|
10.63
|
40,717
|
10.58
|
|
|
To
Be Well
|
|||||||||
|
Capitalized
Under
|
||||||||||
|
|
|
For
Capital
|
Prompt
Corrective
|
|||||||
|
Actual
|
|
Adequacy
Purposes
|
Action
Provisions
|
|||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||
(dollars
in thousands)
|
|||||||||||
As
of December 31, 2005:
|
|||||||||||
Total
Capital (to Risk-Weighted Assets)
|
|||||||||||
Consolidated
|
$
76,993
|
|
12.19%
|
|
50,514
|
|
8.00%
|
|
N/A
|
|
N/A
|
Bank
|
$
73,265
|
|
11.64%
|
|
50,360
|
|
8.00%
|
|
62,951
|
|
10.00%
|
Tier
1 Capital (to Risk-Weighted Assets)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
$
69,568
|
|
11.02%
|
|
25,257
|
|
4.00%
|
|
N/A
|
|
N/A
|
Bank
|
$
65,840
|
|
10.46%
|
|
25,180
|
|
4.00%
|
|
37,770
|
|
6.00%
|
Tier
1 Capital (to Average Assets)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
$
69,568
|
|
9.84%
|
|
28,273
|
|
4.00%
|
|
N/A
|
|
N/A
|
Bank
|
$
65,840
|
|
9.33%
|
|
28,217
|
|
4.00%
|
|
35,272
|
|
5.00%
|
As
of December 31, 2004:
|
|||||||||||
Total
Capital (to Risk-Weighted Assets)
|
|||||||||||
Consolidated
|
$
72,410
|
|
12.22%
|
|
47,407
|
|
8.00%
|
|
N/A
|
|
N/A
|
Bank
|
$
68,503
|
|
11.60%
|
|
47,240
|
|
8.00%
|
|
59,050
|
|
10.00%
|
Tier
1 Capital (to Risk-Weighted Assets)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
$
65,021
|
|
10.97%
|
|
23,704
|
|
4.00%
|
|
N/A
|
|
N/A
|
Bank
|
$
61,114
|
|
10.35%
|
|
23,620
|
|
4.00%
|
|
35,430
|
|
6.00%
|
Tier
1 Capital (to Average Assets)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
$
65,021
|
|
9.50%
|
|
27,374
|
|
4.00%
|
|
N/A
|
|
N/A
|
Bank
|
$
61,114
|
|
8.95%
|
|
27,328
|
|
4.00%
|
|
34,161
|
|
5.00%
|
2005
|
2004
|
2003
|
||||
Advertising
|
$
|
656,184
|
|
619,731
|
|
540,970
|
2005
|
2004
|
|||||||
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated
Fair
Value
|
|||||
(dollars
in thousands)
|
||||||||
Assets:
|
||||||||
Cash
and cash equivalents
|
$
|
19,816
|
|
19,816
|
|
16,791
|
|
16,791
|
Investment
securities available for sale
|
$
|
115,158
|
|
115,158
|
|
105,598
|
|
105,598
|
Other
investments
|
$
|
5,811
|
|
5,811
|
|
5,397
|
|
5,397
|
Mortgage
loans held for sale
|
$
|
2,248
|
|
2,248
|
|
3,783
|
|
3,783
|
Loans,
net
|
$
|
559,239
|
|
559,122
|
|
527,419
|
|
525,818
|
Cash
surrender value of life insurance
|
$
|
6,312
|
|
6,312
|
|
6,034
|
|
6,034
|
Mortgage
servicing rights
|
$
|
227
|
|
227
|
|
283
|
|
283
|
Derivative
instruments
|
$
|
176
|
|
176
|
|
-
|
|
-
|
Liabilities:
|
||||||||
Deposits
and demand notes payable
|
$
|
584,327
|
|
584,786
|
|
557,706
|
|
556,993
|
FHLB
advances
|
$
|
71,600
|
|
71,804
|
|
59,000
|
|
61,637
|
Junior
subordinated debentures
|
$
|
14,433
|
|
14,433
|
|
14,433
|
|
14,433
|
Derivative
instruments
|
$
|
-
|
|
-
|
|
742
|
|
742
|
Balance
Sheets
|
||||||||||
|
|
|
|
|
|
|
|
|||
December
31, 2005 and 2004
|
||||||||||
Assets
|
2005
|
|
2004
|
|||||||
Cash
|
$
|
519,089
|
517,652
|
|||||||
Interest-bearing
time deposit
|
2,000,000
|
2,000,000
|
||||||||
Investment
in subsidiaries
|
65,057,096
|
61,463,299
|
||||||||
Investment
securities available for sale
|
451,651
|
-
|
||||||||
Other
investments
|
349,994
|
1,050,749
|
||||||||
Other
assets
|
683,493
|
613,727
|
||||||||
Total
assets
|
$
|
69,061,323
|
65,645,427
|
|||||||
Liabilities
and Shareholders' Equity
|
||||||||||
Accrued
expenses
|
$
|
275,329
|
274,575
|
|||||||
Junior
subordinated debentures
|
14,433,000
|
14,433,000
|
||||||||
Shareholders'
equity
|
54,352,994
|
50,937,852
|
||||||||
Total
liabilities and shareholders' equity
|
$
|
69,061,323
|
65,645,427
|
|||||||
Statements
of Earnings
|
||||||||||
For
the Years Ended December 31, 2005, 2004 and
2003
|
||||||||||
Revenues:
|
2005
|
|
|
2004
|
|
|
2003
|
|||
Dividends
from subsidiaries
|
$
|
2,375,042
|
1,962,551
|
3,948,455
|
||||||
Interest
and dividend income
|
83,632
|
63,875
|
43,684
|
|||||||
Total
revenues
|
2,458,674
|
2,026,426
|
3,992,139
|
|||||||
Expenses:
|
||||||||||
Interest
|
938,145
|
676,547
|
667,526
|
|||||||
Other
operating expenses
|
289,691
|
280,002
|
211,788
|
|||||||
Total
expenses
|
1,227,836
|
956,549
|
879,314
|
|||||||
Earnings
before income tax benefit and equity in
|
||||||||||
undistributed
earnings of subsidiaries
|
1,230,838
|
1,069,877
|
3,112,825
|
|||||||
Income
tax benefit
|
379,500
|
296,700
|
277,200
|
|||||||
Earnings
before undistributed earnings in subsidiaries
|
1,610,338
|
1,366,577
|
3,390,025
|
|||||||
Equity
in undistributed earnings in subsidiaries
|
4,720,642
|
3,064,359
|
-
|
|||||||
Dividends
paid in excess in earnings
|
-
|
-
|
(1,386,434
|
)
|
||||||
Net
earnings
|
$
|
6,330,980
|
4,430,936
|
2,003,591
|
Statements
of Cash Flows
|
||||||||||
|
|
|
|
|||||||
For
the Years Ended December 31, 2005, 2004 and 2003
|
||||||||||
2005
|
2004
|
2003
|
||||||||
Cash
flows from operating activities:
|
||||||||||
Net
earnings
|
$
|
6,330,980
|
4,430,936
|
2,003,591
|
||||||
Adjustments
to reconcile net earnings to net
|
||||||||||
cash
provided by operating activities:
|
||||||||||
Amortization
|
17,742
|
17,742
|
17,742
|
|||||||
Book
value shares accrual
|
21,818
|
66,933
|
47,078
|
|||||||
Equity
in undistributed earnings of subsidiaries
|
(4,720,642
|
)
|
(3,064,359
|
)
|
1,386,434
|
|||||
Deferred
income tax benefit
|
(8,412
|
)
|
(25,806
|
)
|
(19,173
|
)
|
||||
Change
in:
|
||||||||||
Accrued
income
|
17,930
|
(9,033
|
)
|
-
|
||||||
Accrued
expense
|
(21,063
|
)
|
-
|
7,814
|
||||||
Net
cash provided by operating activities
|
1,638,353
|
1,416,413
|
3,443,486
|
|||||||
Cash
flows from investing activities:
|
||||||||||
Net
change in interest-bearing time deposit
|
-
|
-
|
(2,000,000
|
)
|
||||||
Purchases
of investment securities available for sale
|
-
|
(250,000
|
)
|
-
|
||||||
Net
cash used by investing activities
|
-
|
(250,000
|
)
|
(2,000,000
|
)
|
|||||
Cash
flows from financing activities:
|
||||||||||
Cash
dividends paid
|
(1,414,239
|
)
|
(1,257,254
|
)
|
(1,253,430
|
)
|
||||
Cash
paid in lieu of fractional shares
|
(4,700
|
)
|
-
|
-
|
||||||
Common
stock repurchased
|
(314,750
|
)
|
(290,826
|
)
|
-
|
|||||
Proceeds
from exercise of stock options
|
96,773
|
209,706
|
23,737
|
|||||||
Net
cash provided (used) by financing activities
|
(1,636,916
|
)
|
(1,338,374
|
)
|
(1,229,693
|
)
|
||||
Net
change in cash
|
1,437
|
(171,961
|
)
|
213,793
|
||||||
Cash
at beginning of year
|
517,652
|
689,613
|
475,820
|
|||||||
Cash
at end of year
|
$
|
519,089
|
517,652
|
689,613
|
Please
be sure to sign and date this Proxy in the box
below.
|
Date
|
|
|
Shareholder
sign above
|
Co-holder
(if any) sign above
|
THIS
PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
|
The above signed hereby acknowledges receipt of the Notice of
Meeting and
Proxy Statement each dated April 3, 2006, relating to the Meeting
and
hereby
|
revokes
any proxy or proxies heretofore given.
|
Each properly executed proxy will be voted in accordance with the specifications made above and in the discretion of the proxy committee of the Company |
on any other matter that come before the Meeting. Where no choice is specified, this proxy will be voted (i) FOR all listed nominees to serve as directors, (ii) |
FOR the ratification and approval of the appointment of Porter Keadle Moore, LLP as the Company's independent auditors for the fiscal year ending December |
31, 2006, and (iii) in accordance with the discretion of the proxy committee of the Company on such other matters as may properly come before the Meeting. |
PLEASE
ACT PROMPTLY
|
SIGN,
DATE & MAIL YOUR PROXY CARD
TODAY
|