[
]
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Preliminary
Proxy Statement
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[ ]
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Confidential,
for Use of the Commission
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[X]
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Definitive
Proxy Statement
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Only
(as permitted by Rule 14a-6(e)(2))
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[ ]
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Definitive
Additional Materials
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[ ]
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Soliciting
Material Pursuant to
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§240.14a-12
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___________________________________ |
____________________________________ |
Payment
of Filing Fee (Check the appropriate box):
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[X]
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No
fee required.
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[ ]
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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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):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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[ ]
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Fee
paid previously with preliminary materials:
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[ ]
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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.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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PEOPLES BANCORP | ||
OF NORTH CAROLINA, INC. | ||
Table of Contents |
Page
|
|
NOTICE
OF 2009 ANNUAL MEETING OF SHAREHOLDERS
.....................................................................................................................................................................................................
|
ii
|
PROXY
STATEMENT
..........................................................................................................................................................................................................................................................................
|
1
|
Security
Ownership Of Certain Beneficial Owners and Management
.......................................................................................................................................................................................
|
4
|
Section
16(a) Beneficial Ownership Reporting Compliance
.........................................................................................................................................................................................................
|
7
|
Proposal
1 - Election of Directors
...................................................................................................................................................................................................................................................
|
7
|
Our
Board of Directors and Its Committees
..............................................................................................................................................................................................................................
|
8
|
Executive Committee
..................................................................................................................................................................................................................................................................
|
9 |
Governance Committee .............................................................................................................................................................................................................................................................. | 9 |
Audit Committee ........................................................................................................................................................................................................................................................................ | 9 |
Report of Audit Committee
..........................................................................................................................................................................................................................................................
|
10
|
Implications of Participation in the Troubled Asset Purchase Relief Capital Purchase Program on Executive Compensation Arrangements .................................................. | 12 |
Effect of the American Recovery and Reinvestment Act of 2009 .......................................................................................................................................................................................... |
13
|
Compensation Committee Interlocks and Insider Participation .............................................................................................................................................................................................. |
13
|
Compensation Committee Certification ...................................................................................................................................................................................................................................... | 14 |
Executive Compensation and
Benefits
...........................................................................................................................................................................................................................................
|
15
|
Director Compensation
.................................................................................................................................................................................................................................................................
|
15
|
Executive Officers
.........................................................................................................................................................................................................................................................................
|
16
|
Management Compensation
........................................................................................................................................................................................................................................................
|
17
|
Employment Agreements
...........................................................................................................................................................................................................................................................
|
20
|
Equity Compensation Plan
Information
...................................................................................................................................................................................................................................
|
21
|
Omnibus Stock Ownership and Long
Term Incentive Plan
..................................................................................................................................................................................................
|
21
|
Incentive Compensation Plans
....................................................................................................................................................................................................................................................
|
22
|
Deferred Compensation Plan
.......................................................................................................................................................................................................................................................
|
25
|
Supplemental Retirement Plan
.....................................................................................................................................................................................................................................................
|
26
|
Discretionary Bonuses and Service
Awards
............................................................................................................................................................................................................................
|
26
|
Profit Sharing Plan and 401(k)
Plan
.............................................................................................................................................................................................................................................
|
26
|
Indebtedness of and Transactions
with Management and Directors
..........................................................................................................................................................................
|
27
|
Performance Graph
.....................................................................................................................................................................................................................................................................
|
28
|
Proposal 2 - Approval of the
Company's 2009 Omnibus Stock Option and Long Term Incentive
Plan
....................................................................................................................
|
29
|
Federal Income Tax Consequences ................................................................................................................................................................................................................................ | 32 |
Proposal 3 - Advisory
(Non-Binding) Proposal to Approve the Compensation of the
Company's Named Executive Officers
...............................................................................
|
33
|
Proposal 4 - Ratification of Selection of Independent Auditor .................................................................................................................................................................................................. | 33 |
Audit Fees
...................................................................................................................................................................................................................................................................................
|
34
|
Audit Related Fees
........................................................................................................................................................................................................................................................................
|
34
|
Tax Fees
..........................................................................................................................................................................................................................................................................................
|
34
|
All Other Fees
.............................................................................................................................................................................................................................................................................
|
34
|
Date for Receipt of Shareholder
Proposals
....................................................................................................................................................................................................................................
|
34
|
Other Matters
.....................................................................................................................................................................................................................................................................................
|
35
|
Miscellaneous
....................................................................................................................................................................................................................................................................................
|
35
|
Appendix
A – Annual Report to Shareholders
|
|
Appendix
B – Peoples Bancorp of North Carolina, Inc. 2009 Omnibus Stock Option and
Long Term Incentive Plan
|
PEOPLES BANCORP OF NORTH CAROLINA, INC. | ||
Post Office Box 467 | ||
518 West C Street | ||
Newton, North Carolina 28658-0467 | ||
(828) 464-5620 | ||
NOTICE OF 2009 ANNUAL MEETING OF SHAREHOLDERS | ||
To Be Held on May 7, 2009 |
Place: | Catawba Country Club | ||
1154 Country Club Road | |||
Newton, North Carolina | |||
Date: | May 7, 2009 | ||
Time: | 11:00 a.m., Eastern Time |
·
|
To
elect four persons who will serve as members of the Board of Directors
until the 2011 Annual Meeting of Shareholders or until their successors
are duly elected and qualified;
|
● | To approve a new Peoples Bancorp of North Carolina 2009 Omnimbus Stock Ownership and Long Term Incentive Plan; |
·
|
To
participate in an advisory (non-binding) vote to approve the compensation
of the Company's executive officers, as disclosed in the Proxy
Statement;
|
·
|
To
ratify the appointment of Porter Keadle Moore, LLP (“PKM”) as the
Company’s independent registered public accounting firm for the fiscal
year ending December 31, 2009; and
|
·
|
To
consider and act on any other matters that may properly come before the
Annual Meeting or any adjournment.
|
When is the Annual Meeting? | May 7, 2009 at 11 a.m., Eastern Time |
Where will the Annual Meeting be held? | At the Catawba Country Club, 1154 Country Club Road, Newton, North Carolina |
What items will be voted on at the | ||
Annual Meeting? | 1. | ELECTION OF DIRECTORS. To elect four directors to serve until the 2011 Annual Meeting of Shareholders; |
2. | APPROVAL OF THE 2009 OMNIBUS PLAN. To approve the new Peoples Bancorp of North Carolina, Inc. 2009 Omnibus Stock | |
Ownership and Long Term Incentive Plan (the "2009 Omnibus Plan"); | ||
3. | PARTICIPATION IN ADVISORY VOTE. To participate in an advisory (non-binding) vote to approve the compensation of the | |
Company's executive officers, as disclosed in the Proxy Statement. | ||
4. | RATIFICATION OF REGISTERED PUBLIC ACCOUNTING FIRM. To ratify the appointment of PKM as the Company's | |
independent registered public accounting firm for fiscal year 2009; and |
5. | OTHER BUSINESS. To consider any other business as may properly come before the Annual Meeting or any adjournment. |
Who can
vote?
|
Only
holders of record of our common stock at the close of business on March
10, 2009 (the “Record Date”) will be entitled to notice of and to vote at
the Annual Meeting and any adjournment of the Annual
Meeting. On the Record Date, there were 5,539,056 shares of our
common stock outstanding and entitled to vote and 707 shareholders of
record.
|
How do I vote by
proxy?
|
You
may vote your shares by marking, signing and dating the enclosed proxy
card and returning it in the enclosed postage-paid envelope. If
you return your signed proxy card before the Annual Meeting, the proxies
will vote your shares as you direct. The Board of Directors has appointed
proxies to represent shareholders who cannot attend the Annual Meeting in
person.
|
How
do I change or revoke my proxy?
|
You
can change or revoke your proxy at any time before it is voted at the
Annual Meeting in any of three ways: (1) by delivering a written notice of
revocation to the Secretary of the Company; (2) by delivering another
properly signed proxy card to the Secretary of the Company with a more
recent date than your first proxy card; or (3) by attending the Annual
Meeting and voting in person. You should deliver your written
notice or superseding proxy to the Secretary of the Company at our
principal executive offices listed
above.
|
How many votes can I
cast?
|
You
are entitled to one vote for each share held as of the Record Date on each
nominee for election and each other matter presented for a vote at the
Annual Meeting. You may not vote your shares cumulatively in the
election of directors.
|
How many votes are required to
approve
the
proposals?
|
If
a quorum is present at the Annual Meeting, each director nominee will be
elected by a plurality of the votes cast in person or by
proxy. If you withhold your vote on a nominee, your shares will
not be counted as having voted for that
nominee.
|
|
The
proposal to approve the Company’s 2009 Omnibus Plan and the advisory
vote on the compensation of the Company's executive officers will be
approved by the affirmative vote of the holders of a majority of the
shares present, or represented by proxy, at the Annual
Meeting.
|
|
The
proposal to ratify the appointment of the Company’s independent registered
public accounting firm for 2009 will be approved if the votes cast in
favor exceed the votes cast in
opposition.
|
|
Any
other matters properly coming before the Annual Meeting for a vote will
require the affirmative vote of the holders of a majority of the shares
represented in person or by proxy at the Annual Meeting and entitled to
vote on that matter.
|
|
Abstentions
and broker non-votes are not treated as votes cast on any proposal,
therefore, neither will have an effect on the vote for the election of any
director, approval of the 2009 Omnibus Plan, or the ratification of
our independent registered public accounting
firm.
|
What constitutes a "quorum" for
the Annual
Meeting?
|
A
majority of the outstanding shares of our common stock entitled to vote at
the Annual Meeting, present in person or represented by proxy, constitutes
a quorum (a quorum is necessary to conduct business at the Annual
Meeting). Your shares will be considered part of the quorum if
you have voted by proxy. Abstentions, broker non-votes and
votes withheld from any director nominee count as shares present at the
Annual Meeting for purposes of determining a
quorum.
|
Who
pays for the solicitation of proxies?
|
We
will pay the cost of preparing, printing and mailing materials in
connection with this solicitation of proxies. In addition to
solicitation by mail, our officers, directors and regular employees, as
well as those of the Bank, may make
|
|
solicitations
personally, by telephone or otherwise without additional compensation for
doing so. We reserve the right to engage a proxy solicitation firm
to assist in the solicitation of proxies for the Annual Meeting. We
will, upon request, reimburse brokerage firms, banks and others for their
reasonable out-of-pocket expenses in forwarding proxy materials
to beneficial owners of stock or otherwise in connection with this
solicitation of proxies.
|
When are proposals for the
2010
Annual Meeting
due?
|
To
be considered either for inclusion in the proxy materials solicited by the
Board of Directors for the 2010 Annual Meeting, proposals must be received
by the Secretary of the Company at our principal executive offices at 518
West C Street, Newton, North Carolina 28658 (or at P.O. Box 467, Newton,
North Carolina 28658-0467) no later than December 4, 2009. To
be included in the proxy materials, a proposal must comply with our
Bylaws, Rule 14a-8 and all other applicable provisions of Regulation 14A
under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
|
Name
and Address of
Beneficial
Owner
|
Amount
and Nature of
Beneficial
Ownership1
|
Percent
of Class2
|
Christine
S. Abernethy
P.O.
Box 820
Newton,
NC 28658
|
651,095
3
|
11.75%
|
Tontine
Partners, LP
55
Railroad Avenue, 3rd
Floor
Greenwich,
CT 06830-6378
|
410,245
|
7.41%
|
|
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 5,539,056 shares of common stock outstanding as of the
Record Date.
|
|
3
|
Carolina
Glove Company, Inc. owns 107,604 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
|
171,414
3
|
3.03%
|
Post
Office Box 327
|
||
Newton,
NC 28658
|
||
Robert
C. Abernethy
|
163,757
4
|
2.89%
|
Post
Office Box 366
|
||
Newton,
NC 28658
|
||
Joseph
F. Beaman, Jr.
|
33,372
5
|
*
|
Post
Office Box 467
|
||
Newton,
NC 28658
|
||
William
D. Cable, Sr.
|
31,005
6
|
*
|
Post
Office Box 467
|
||
Newton,
NC 28658
|
||
Douglas
S. Howard
|
10,699
7
|
*
|
Post
Office Box 587
|
||
Denver,
NC 28037
|
||
A.
Joseph Lampron
|
20,529
8
|
*
|
Post
Office Box 467
|
||
Newton,
NC 28658
|
||
John
W. Lineberger, Jr.
|
1,252
|
*
|
Post
Office Box 481
|
||
Lincolnton,
NC 28092
|
||
Gary
E. Matthews
|
13,519
|
*
|
210
First Avenue South
|
||
Conover,
NC 28613
|
||
Billy
L. Price, Jr., M.D.
|
2,627
|
*
|
540
11th
Ave. Place NW
|
||
Hickory,
NC 28601
|
||
Larry
E. Robinson
|
47,371
9
|
*
|
Post
Office Box 723
|
||
Newton,
NC 28658
|
||
Lance
A. Sellers
|
27,446
10
|
*
|
Post
Office Box 467
|
||
Newton,
NC 28658
|
||
William
Gregory Terry
|
9,776
11
|
*
|
Post
Office Box 395
|
||
Conover,
NC 28613
|
||
Dan
Ray Timmerman, Sr.
|
59,484
12
|
1.05%
|
Post
Office Box 1148
|
||
Conover,
NC 28613
|
||
Tony
W. Wolfe
|
41,297
13
|
*
|
Post
Office Box 467
|
||
Newton,
NC 28658
|
||
Benjamin I. Zachary | 77,152 14 | 1.36% |
Post Office Box 277 | ||
Taylorsville, NC 28681 |
Amount and Nature | Percentage | |
of Beneficial | of | |
Name and Address | Ownership1 | Class2 |
All current
directors and nominees and
|
710,319 15,16 | 12.54% |
executive officers as a group (15 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 5,539,056 shares of common stock outstanding as of the
Record Date and 126,175 stock options exercisable within 60 days with
respect to the designated
recipient(s).
|
3
|
Includes
64,038 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
5,310 shares of common stock owned by Mr. R. Abernethy’s spouse, for which
Mr. R. Abernethy disclaims beneficial
ownership.
|
5
|
Includes
26,764 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
20,444 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
1,650 shares of common stock owned by Mr. Howard’s mother over which Mr.
Howard holds a power of attorney. Includes 825 shares of common
stock owned by Howard Ventures, Inc. Mr. Howard is Vice
President of Howard Ventures, Inc.
|
8
|
Includes
18,400 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
6,835 shares of common stock owned by Mr. Robinson’s spouse, for which Mr.
Robinson disclaims beneficial
ownership.
|
10
|
Includes
21,455 shares of common stock in which Mr. Sellers 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.
|
11
|
Includes
1,650 shares of common stock owned by Drum Funeral Home,
LLC. Mr. Terry is Executive Vice President of Drum Funeral
Home, LLC.
|
12
|
Includes
2,722 shares of common stock owned by Timmerman Manufacturing,
Inc. Mr. Timmerman is President and a Director of Timmerman
Manufacturing, Inc.
|
13
|
Includes
39,112 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
64,038 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
64,038 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
126,175 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.
|
Name
|
Age
on
December 31, 2008
|
Principal
Occupation
During Last Five
Years
|
Director
Since
|
Term
Expires
|
Robert
C. Abernethy
|
58
|
President,
Secretary and Treasurer, Carolina Glove Company, Inc. (glove
manufacturer); Secretary and Assistant Treasurer, Midstate Contractors,
Inc. (paving company)
|
1976
|
2009
|
James
S. Abernethy
|
54
|
Vice
President, Carolina Glove Company, 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
|
1992
|
2009
|
Larry
E. Robinson
|
63
|
President
and Chief Executive Officer,
The
Blue Ridge Distributing Company, Inc. (beer and wine distributor); Partner
and Vice President, United Beverages of North Carolina, LLC (beer
distributor)
|
1993
|
2009
|
William
Gregory Terry
|
41
|
Executive
Vice President, Drum & Willis-Reynolds Funeral Homes and
Crematory
|
2004
|
2009
|
THE
BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE FOR
ELECTION AS DIRECTORS.
|
Name
|
Age
on
December 31, 2008
|
Principal
Occupation
During Last Five
Years
|
Director
Since
|
Term
Expires
|
John
W. Lineberger, Jr.
|
58
|
President,
Lincoln Bonded Warehouse Company (commercial warehousing
facility)
|
2004
|
2010
|
Gary
E. Matthews
|
53
|
President
and Director, Matthews Construction Company, Inc.
|
2001
|
2010
|
Dan
Ray Timmerman, Sr.
|
61
|
President/CEO,
Timmerman Manufacturing, Inc. (wrought iron furniture, railings and gates
manufacturer)
|
1995
|
2010
|
Benjamin
I. Zachary
|
52
|
President,
Treasurer, General Manager and Director of Alexander Railroad
Company
|
1995
|
2010
|
Douglas
S. Howard
|
49
|
Vice
President, Howard Ventures, Inc.; Secretary/Treasurer, Denver Equipment of
Charlotte, Inc.
|
2004
|
2011
|
Billy
L. Price, Jr., M.D.
|
52
|
Managing
Partner and Practitioner of Internal Medicine, Catawba Valley Internal
Medicine, PA
|
2004
|
2011
|
Robert
C. Abernethy
|
Douglas
S. Howard
|
||
Benjamin
I. Zachary
|
Dan
R. Timmerman, Sr.
|
||
Gary
E. Matthews
|
Dr.
Billy L. Price, Jr.
|
·
|
Compensation
of the comparable executives at comparable group
firms;
|
·
|
Financial
performance of the Company (especially on a “net operating” basis, which
excludes the effect of one-time gains and expenses) over the most recent
fiscal year and the prior three
years;
|
● | Composition of earnings; |
·
|
Asset
quality relative to the banking
industry;
|
·
|
Responsiveness
to the economic environment;
|
·
|
The
Company’s achievement compared to its corporate, financial, strategic and
operational objectives and business plans;
and
|
·
|
Cumulative
shareholder return.
|
(i)
|
Base
Salary. The salaries of our NEOs are designed to provide
a reasonable level of compensation that is affordable to the Company and
fair to the executive. Salaries are reviewed annually, and
adjustments, if any, are made based on the review of competitive salaries
in our peer group, as well as an evaluation of the individual officer’s
responsibilities, job scope, and individual performance. For
example, we assess each officer’s success in achieving budgeted earnings
and return ratios, business conduct and integrity, and leadership and team
building skills.
|
(ii)
|
Annual Cash Incentive
Awards. We believe that annual cash incentive awards
encourage our NEOs to achieve short–term targets that are critical to
achievement of our strategic plan. The following officers are
eligible to receive annual cash incentive awards under our Management
Incentive Plan, which provides for cash awards to the following NEOs upon
achievement of certain financial
objectives:
|
·
|
Tony
W. Wolfe, President and Chief Executive
Officer
|
·
|
A.
Joseph Lampron, Executive Vice President and Chief Financial
Officer
|
·
|
Lance
A. Sellers, Executive Vice President and Chief Credit
Officer
|
·
|
William
D. Cable, Sr., Executive Vice President and Chief Operating
Officer
|
·
|
Joseph
F. Beaman, Jr., Executive Vice President, Chief Administrative Officer and
Corporate Secretary
|
(iii)
|
Discretionary Bonus and
Service Awards. From time to time the Compensation
Committee may recommend to the Board that additional bonuses be paid based
on accomplishments that significantly exceed expectations during the
fiscal year. These bonuses are totally discretionary as to who
will receive a bonus and the amount of any such bonus. No
discretionary bonuses were awarded to NEOs in 2008. The Bank gives service
awards to each employee and director for every five years of service with
the Bank to promote longevity of service for both directors and employees.
Service awards are made in the form of shares of the Company’s common
stock. The number of shares awarded increases with the number of years of
service to the Bank.
|
(iv)
|
Long-Term Equity Incentive
Awards. The Company maintains the 1999 Omnibus Stock
Ownership and Long Term Incentive Plan (“Omnibus Plan”), under which it is
permitted to grant incentive stock options, restricted stock grants, stock
appreciation rights and performance units. The purpose of
the
|
|
Omnibus
Plan is to promote the interests of the Company by attracting and
retaining employees of outstanding ability and to provide executives of
the Company greater incentive to make material contributions to the
success of the Company by providing them with stock-based compensation
which will increase in value based upon the market performance of the
common stock and/or the corporate achievement of financial and other
performance objectives. No rights under the Omnibus Plan were
granted to any NEO in 2008. The Compensation Committee is
reviewing the use of long-term equity incentives, with the intent to
associate the vesting of awards to the achievement of selected financial
performance goals.
|
Under the terms of the Omnibus Plan, option exercise prices are always based upon the closing trading price of the Company's common stock on the date of grant by the Board of Directors. | |
(v)
|
Retirement
Benefits. The Company maintains supplemental executive
retirement agreements (SERPs) for the benefit of Messrs. Wolfe, Lampron,
Sellers, Cable and Beaman. The Committee’s goal is to provide
competitive retirement benefits given the restrictions on executives
within tax-qualified plans. The Committee worked with Matthews
Young in analyzing the possible benefits of using SERPs to address the
issues of internal and external equity in terms of retirement benefits
offered to all employees at the Company as a percentage of final average
pay and executives in our peer group. The Committee approved
supplemental retirement benefits targeting 40% of the final average pay
for all NEOs. The Committee selected a target of 40% to match
such benefits offered to other employees fully participating in qualified
retirement plans offered by the Company. For more information
on the SERPs, see page 26 of this Proxy
Statement.
|
(vi)
|
Severance
Benefits. The Company has employment agreements with our
NEOs which provide, among other things, for severance benefits upon
certain types of employment terminations. We believe employment
agreements serve a number of functions, including (i) retention of our
executive team; (ii) mitigation of any uncertainty about future employment
and continuity of management in the event of a change in control; and
(iii) protection of the Company and customers through non-compete and
non-solicitation covenants. Additional information regarding
the employment agreements, including a description of key terms and a
quantification of benefits that would have been received by our NEOs had
they incurred a termination of employment on December 31, 2008, may be
found on page 20 of this Proxy
Statement.
|
·
|
A
“clawback” of any bonus or incentive compensation paid based on financial
statements or other criteria that prove to be materially
inaccurate;
|
●
|
A
limitation on the value of the payments and benefits to which the
executive would otherwise be entitled upon an involuntary termination of
employment of 2.99 times the executive's average annual taxable
compensation for the five years prior to the involuntary termination;
and
|
·
|
A
waiver of incentive compensation pursuant to arrangements that are
determined by the Compensation Committee to encourage our NEOs to take
unnecessary and excessive risks that threaten the value of the
Company.
|
·
|
The
parameters of acceptable and excessive risk taking in light of a number of
considerations, including the understanding that some risk taking is an
inherent part of the operations of a financial
institution;
|
·
|
The
other controls that the Company and the Bank have established (other than
reviews of the Company’s compensation practices) that limit undesirable
risk taking; and
|
·
|
The
general business goals and concerns of the Company, ranging from growth
and profitability to the need to attract, retain and incentivize top tier
talent.
|
Robert
C. Abernethy
|
John
W. Lineberger, Jr.
|
||
Larry
E. Robinson
|
James
S. Abernethy
|
||
William
G. Terry
|
Dan
Ray Timmerman, Sr.
|
Name
|
Fees
Earned
or
Paid
in
Cash
($)
|
Stock
Awards
($)
1
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan Compensation
($)
|
Change
in
Pension
Value
and
Nonqualified
Deferred
Compensation
Earnings2
|
All
Other Compensation
($)
|
Total
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
|
|||||||
James
S. Abernethy
|
25,150
|
10,271
|
0
|
0
|
1,720
|
0
|
37,141
|
Robert
C. Abernethy
|
34,450
|
10,271
|
0
|
0
|
2,834
|
0
|
47,555
|
Douglas
S. Howard
|
27,100
|
18,671
|
0
|
0
|
1,486
|
0
|
47,257
|
John
W. Lineberger, Jr.
|
23,500
|
18,671
|
0
|
0
|
4,303
|
0
|
46,474
|
Gary
E. Matthews
|
25,250
|
10,271
|
0
|
0
|
1,527
|
0
|
37,048
|
Billy
L. Price, Jr., M.D.
|
24,750
|
18,671
|
0
|
0
|
2,074
|
0
|
45,495
|
Larry
E. Robinson3
|
24,750
|
11,546
|
0
|
0
|
5,755
|
0
|
42,051
|
William
Gregory Terry
|
24,250
|
18,671
|
0
|
0
|
535
|
0
|
43,456
|
Dan
Ray Timmerman, Sr.
|
30,300
|
10,271
|
0
|
0
|
5,044
|
0
|
45,615
|
Benjamin
I. Zachary
|
24,750
|
10,271
|
0
|
0
|
1,555
|
0
|
36,576
|
Name
|
Age
on
December
31,
2008
|
Positions
and Occupations
During Last Five
Years
|
Employed
by the
Company
or the
Bank
Since
|
Tony
W. Wolfe
|
62
|
President
and Chief Executive Officer of the Company and the Bank
|
1990
|
Joseph
F. Beaman, Jr.
|
59
|
Executive
Vice President and Corporate Secretary of the Company; Executive Vice
President, Chief Administrative Officer and Secretary of the
Bank
|
1977
|
William
D. Cable, Sr.
|
40
|
Executive
Vice President and Assistant Corporate Treasurer of the Company; Executive
Vice President and Chief Operating Officer of the Bank.
|
1995
|
Lance
A. Sellers
|
46
|
Executive
Vice President and Assistant Corporate Secretary of the Company; Executive
Vice President and Chief Credit Officer of the Bank.
|
1998
|
A.
Joseph Lampron
|
54
|
Executive
Vice President, Chief Financial Officer and Corporate Treasurer of the
Company; Executive Vice President and Chief Financial Officer of the
Bank.
|
2001
|
Summary Compensation
Table
|
|||||||||||
Change in | |||||||||||
Pension Value | |||||||||||
and Nonqualified | |||||||||||
Non-Equity | Deferred | ||||||||||
Name
and Principal
|
Stock | Option | Incentive Plan | Compensation | All Other | ||||||
Position
|
Year | Salary | Bonus | Awards | Awards |
Compensation
|
Earnings | Compensation(1) | Total | ||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g) |
(h)
|
(i)
|
(j)
|
||
Tony
W. Wolfe
|
2008
|
$290,000
|
$0
|
$0
|
$0
|
$0
|
$141,785
|
$38,574
|
(2) |
$470,359
|
|
President
and Chief
|
2007
|
$243,269
|
$0
|
$0
|
$0
|
$111,526
|
$123,811
|
$23,374
|
$501,980
|
||
Executive
Officer
|
2006
|
$227,255
|
$0
|
$0
|
$0
|
$97,043
|
$108,610
|
$21,072
|
$453,980
|
||
A.
Joseph Lampron, Jr.
|
2008
|
$152,934
|
$0
|
$0
|
$0
|
$0
|
$15,349
|
$12,328
|
(3) |
$180,606
|
|
Executive
Vice President,
|
2007
|
$136,253
|
$0
|
$0
|
$0
|
$49,271
|
$13,454
|
$11,343
|
$210,321
|
||
Chief
Financial Officer
|
2006
|
$128,069
|
$0
|
$325
|
(7) |
$0
|
$52,908
|
$11,684
|
$12,007
|
$204,993
|
|
Joseph
F. Beaman, Jr.
|
2008
|
$125,373
|
$0
|
$0
|
$0
|
$0
|
$19,453
|
$12,617
|
(4) |
$162,443
|
|
Executive
Vice President,
|
2007
|
$119,269
|
$0
|
$5,000
|
(8) |
$0
|
$43,257
|
$17,037
|
$12,024
|
$196,587
|
|
Chief
Administrative Officer
|
2006
|
$114,899
|
$0
|
$0
|
$0
|
$50,792
|
$14,789
|
$12,520
|
$193,000
|
||
and
Corporate Secretary
|
|||||||||||
Lance
A. Sellers
|
2008
|
$194,371
|
$0
|
$650
|
(9) |
$0
|
$0
|
$12,033
|
$20,208
|
(5)
|
$227,262
|
Executive
Vice President,
|
2007
|
$173,198
|
$0
|
$0
|
$0
|
$66,762
|
$10,555
|
$14,693
|
$265,208
|
||
Chief
Credit Officer
|
2006
|
$163,836
|
$0
|
$0
|
$0
|
$61,432
|
$9,208
|
$13,542
|
$248,018
|
||
William
D. Cable, Sr.
|
2008
|
$156,835
|
$0
|
$0
|
$0
|
$0
|
$3,767
|
$13,590
|
(6) |
$174,192
|
|
Executive
Vice President,
|
2007
|
$139,751
|
$0
|
$0
|
$0
|
$52,008
|
$3,303
|
$11,701
|
$206,763
|
||
Chief
Operating Officer
|
2006
|
$132,231
|
$0
|
$0
|
$0
|
$52,908
|
$2,878
|
$10,609
|
$198,626
|
|
1 Perquisites
for the fiscal year did not exceed $10,000 for any NEO other than Mr.
Wolfe.
|
|
2 For Mr. Wolfe,
includes for 2008: $11,074 under the 401(k) plan, $4,213 premium paid for
group term life insurance in excess of $50,000 and $1,860 paid for the
Split Dollar Death Benefit, and perquisites consisting of country club
dues of $3,650, car allowance of $535, spouse attendance at conference of
$500, disability insurance premium of $15,662 and cell phone allowance of
$1,080; for 2007: $11,212 under the 401(k) plan, $3,469 premium paid for
group term life insurance in excess of $50,000 and $1,812 paid for the
Split Dollar Death Benefit, and perquisites consisting of country club
dues of $3,540, car allowance of $1,450, spouse attendance at conference
of $811, disability insurance premium of $15,662 and cell phone allowance
of $1,080; and for 2006: $10,764 under the 401(k) plan, $3,247 premium
paid for group term life insurance in excess of $50,000 and $1,719 paid
for the Split Dollar Death Benefit.
|
|
3 For Mr.
Lampron, includes for 2008: $7,909 under the 401(k) plan, $707 premium for
the group term life insurance in excess of $50,000 and $342 paid for the
Split Dollar Death Benefit; for 2007: $7,347 under the 401(k) plan, $618
premium for the group term life insurance in excess of $50,000 and $329
paid for the Split Dollar Death Benefit; and for 2006: $7,738 under the
401(k) plan, $574 premium for the group term life insurance in excess of
$50,000 and $311 paid for the Split Dollar Death
Benefit.
|
|
4 For Mr.
Beaman, includes for 2008: $6,498 under the 401(k) plan, $1,042 premium
for the group term life insurance in excess of $50,000 and $347 paid for
the Split Dollar Death Benefit; for 2007: $6,084 under the 401(k) plan,
$980 premium for the group term life insurance in excess of $50,000 and
$339 paid for the Split Dollar Death Benefit; and for 2006: $7,236 under
the 401(k) plan, $939 premium for the group term life insurance in excess
of $50,000 and $325 paid for the Split Dollar Death
Benefit.
|
|
5 For Mr.
Sellers, includes for 2008: $10,052 under the 401(k) plan, $612 premium
for the group term life insurance in excess of $50,000 and $326 paid for
the Split Dollar Death Benefit; for 2007: $8,643 under the 401(k)
plan, $536 premium for the group term life insurance in excess of $50,000
and $308 paid for the Split Dollar Death Benefit; and for 2006: $8,216
under the 401(k) plan, $336 premium for the group term life insurance in
excess of $50,000 and $151 paid for the Split Dollar Death
Benefit.
|
|
6 For Mr. Cable,
includes for 2008: $8,111 under the 401(k) plan, $317 premium paid for
group term life insurance in excess of $50,000 and $112 paid for the Split
Dollar Death Benefit; for 2007: $7,327 under the 401(k) plan, $251
premium paid for group term life insurance in excess of $50,000 and $104
paid for the Split Dollar Death Benefit; and for 2006: $6,627 under the
401(k) plan and a $233 premium paid for group term life insurance in
excess of $50,000 and $76 paid for the Split Dollar Death
Benefit.
|
|
7 Mr. Lampron
completed five years of service with the Bank in 2007. He
received a service award of eight shares of the Company’s common stock and
cash for a total value on the grant date of
$325.
|
|
8 Mr. Beaman
completed 30 years of service with the Bank in 2007. He
received a service award of 241 shares of the Company’s common stock and
cash for a total value on the grant date of
$5,000.
|
|
9 Mr.
Sellers completed 10 years of service with the Bank in 2008. He
received a service award of 44 shares of the Company’s common stock and
cash for a total value on the grant date of
$650.
|
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
|
191,6951,2
|
$8.273
|
630,4784
|
Equity
compensation
plans
not approved by
security
holders
|
0
|
$0
|
0
|
Total
|
191,6951,2
|
$8.273
|
630,4784
|
|
1
|
Includes
191,695 stock options issued under the 1999 Omnibus Plan, which are fully
vested as of December 31, 2008. Of the outstanding stock
options, options to purchase a total of 15,483 shares of the common stock
were granted on September 28, 1999; 19,391 options were granted on
September 25, 2000; 63,544 options were granted on October 30, 2001; 7,510
options were granted on December 18, 2001; 72,966 options were granted on
December 17,2002; 3,630 options were granted on May 6, 2004; and 2,421
options were granted on December 16,
2004.
|
|
2
|
Includes
3,000 shares of restricted stock granted on September 20, 2007, 1,750
shares granted on March 20, 2008 and 2,000 granted on November 30, 2008
under the 1999 Omnibus Plan. These restricted
stock grants cliff vest three years after
issuance.
|
|
3
|
The
exercise prices for the grants of stock options under the 1999 Omnibus
Plan on September 28, 1999; September 25, 2000; October 30, 2001; December
18, 2001; December 17, 2002; May 6, 2004 and December 16, 2004 are: $9.02
(as adjusted due to a 10% stock dividend granted on April 24, 2000);
$6.99; $8.78; $8.10; $7.77; $10.31; and $10.57,
respectively. All prices and shares have been adjusted for the
10% stock dividends paid March 16, 2005 and June 16, 2006 and the
three-for-two stock split paid June 15, 2007. The exercise
price for the grants of restricted stock is $9.18, the closing price for
the Company's stock on December 31,
2008.
|
|
4
|
The
number of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a)) reflects
390,000 additional shares approved May 3, 2008, which have been restated
to 585,000 additional shares to reflect the three-for-two stock split paid
June 15, 2007.
|
Name | Grant Date |
Estimated
Future Payouts Under Non-Equity Incentive Plan
Awards
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
All
Other
Stock
Awards:
Number
of Shares
of Stock
or Units
(#)
|
All
Other
Option
Awards:
Number
of
Securities
Under-
lying
Options
(#)
|
Exercise
or Base
Price of
Option
Awards
($/Sh)
|
Grant
Date
Fair Value
of Stock and
Option
Awards
|
||||
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
||||||
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
(l)
|
Tony
W. Wolfe
|
01/01/08 | $106,026 | $125,905 | $132,532 | |||||||
A.
Joseph Lampron
|
01/01/08 | $44,239 | $52,533 | $55,298 | |||||||
Joseph
F. Beaman, Jr.
|
01/01/08 | $37,586 | $44,633 | $46,982 | |||||||
Lance
A. Sellers
|
01/01/08 | $56,789 | $67,436 | $70,986 | |||||||
William
D. Cable, Sr.
|
01/01/08 | $44,239 | $52,533 | $55,298 |
Option
Awards
|
Stock
Awards
|
||||||||
Name
|
Number
of
Securities
Underlying Unexercised
Options
(#)
Exercisable1
|
Number
of Securities Underlying Unexercised Options
(#)
Unexercisable
|
Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised
Unearned Options
(#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Number
of
Shares
or Units
of
Stock That
Have
Not
Vested
(#)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)
|
Equity
Incentive
Plan Awards:
Number
of Unearned
Shares,
Units
or
Other Rights That Have Not Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of Unearned Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
Tony
W. Wolfe
|
12,989
|
$9.02
|
09/28/2009
|
||||||
17,048
|
$8.78
|
10/30/2011
|
|||||||
9,075
|
$7.77
|
12/17/2012
|
|||||||
A.
Joseph Lampron
|
7,510
|
$8.10
|
12/18/2011
|
||||||
10,890
|
$7.77
|
12/17/2012
|
|||||||
Joseph
F. Beaman, Jr.
|
10,463
|
$6.99
|
10/25/2010
|
||||||
9,041
|
$8.78
|
10/30/2011
|
|||||||
7,260
|
$7.77
|
12/17/2012
|
|||||||
Lance
A. Sellers
|
8,750
|
$8.78
|
10/30/2011
|
||||||
12,705
|
$7.77
|
12/17/2012
|
|||||||
William
D. Cable, Sr.
|
3,167
|
$6.99
|
10/25/2010
|
||||||
6,387
|
$8.78
|
10/30/2011
|
|||||||
10,890
|
$7.77
|
12/17/2012
|
Option
Awards
|
Stock
Awards
|
|||
Name
|
Number
of Shares
Acquired
on
Exercise
(#)
|
Value
Realized on
Exercise
($)
|
Number
of Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
Tony
W. Wolfe
|
0
|
$0
|
||
A.
Joseph Lampron
|
0
|
$0
|
||
Joseph
F. Beaman, Jr.
|
0
|
$0
|
|
|
Lance
A. Sellers1
|
2,379
|
$32,449
|
44 | $650 |
William
D. Cable, Sr.
|
1,289
|
$17,430
|
1
|
Mr.
Sellers completed 10 years of service with the Bank in 2008. He
received a service award of 44 shares of the Company’s common stock and
cash for a total value on the grant date of
$650.
|
Name
|
Executive
Contributions
in
Last FY ($)
|
Registrant
Contributions
in
Last FY ($)
|
Aggregate
Earnings
in
Last
FY ($)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance
at Last
FYE
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
Tony
W. Wolfe
|
$17,963
|
$0
|
|||
A.
Joseph Lampron
|
$4,746
|
$0
|
|||
Joseph
F. Beaman, Jr.
|
$1,300
|
$0
|
|||
Lance
A. Sellers
|
$0
|
$0
|
|||
William
D. Cable, Sr.
|
$12,978
|
$0
|
Name
|
Plan
Name
|
Number
of
Years
Credited
Service
(#)
|
Present
Value of
Accumulated
Benefit
($)
|
Payments
During
Last
Fiscal Year
($)
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
Tony
W. Wolfe
|
SERP
|
5
|
$686,020
|
0
|
A.
Joseph Lampron
|
SERP
|
5
|
$81,598
|
0
|
Joseph
F. Beaman, Jr.
|
SERP
|
5
|
$95,973
|
0
|
Lance
A. Sellers
|
SERP
|
5
|
$71,184
|
0
|
William
D. Cable, Sr.
|
SERP
|
5
|
$24,455
|
0
|
By
Order of the Board of Directors,
|
|||
|
/s/
Tony W. Wolfe
|
||
|
Tony
W. Wolfe
|
||
President
and Chief Executive Officer
|
SELECTED
FINANCIAL DATA
|
|||||||||||
Dollars
in Thousands Except Per Share Amounts
|
|||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||
Summary
of Operations
|
|||||||||||
Interest
income
|
$ | 56,323 | 61,732 | 55,393 | 41,913 | 35,095 | |||||
Interest
expense
|
23,527 | 27,585 | 23,110 | 15,429 | 12,335 | ||||||
Net
interest income
|
32,796 | 34,147 | 32,283 | 26,484 | 22,760 | ||||||
Provision
for loan losses
|
4,794 | 2,038 | 2,513 | 3,110 | 3,256 | ||||||
Net
interest income after provision for loan losses
|
28,002 | 32,109 | 29,770 | 23,374 | 19,504 | ||||||
Non-interest
income
|
10,495 | 8,816 | 7,554 | 6,668 | 6,000 | ||||||
Non-interest
expense
|
28,893 | 25,993 | 22,983 | 20,330 | 18,840 | ||||||
Income
before taxes
|
9,604 | 14,932 | 14,341 | 9,712 | 6,664 | ||||||
Income
taxes
|
3,213 | 5,340 | 5,170 | 3,381 | 2,233 | ||||||
Net
income
|
$ | 6,391 | 9,592 | 9,171 | 6,331 | 4,431 | |||||
Selected
Year-End Balances
|
|||||||||||
Assets
|
$ | 968,762 | 907,262 | 818,948 | 730,280 | 686,348 | |||||
Available
for sale securities
|
124,916 | 120,968 | 117,581 | 115,158 | 105,598 | ||||||
Loans,
net
|
770,163 | 713,174 | 643,078 | 559,239 | 527,419 | ||||||
Mortgage
loans held for sale
|
- | - | - | 2,248 | 3,783 | ||||||
Interest-earning
assets
|
921,101 | 853,878 | 780,082 | 692,835 | 653,111 | ||||||
Deposits
|
721,062 | 693,639 | 633,820 | 582,854 | 556,522 | ||||||
Interest-bearing
liabilities
|
758,334 | 718,870 | 650,364 | 576,681 | 553,135 | ||||||
Shareholders'
equity
|
$ | 101,128 | 70,102 | 62,835 | 54,353 | 50,938 | |||||
Shares
outstanding*
|
5,539,056 | 5,624,234 | 5,745,951 | 5,677,328 | 5,689,763 | ||||||
Selected
Average Balances
|
|||||||||||
Assets
|
$ | 929,799 | 846,836 | 772,585 | 706,843 | 684,385 | |||||
Available
for sale securities
|
115,853 | 120,296 | 118,137 | 108,690 | 93,770 | ||||||
Loans
|
747,203 | 665,379 | 604,427 | 550,545 | 547,753 | ||||||
Interest-earning
assets
|
876,425 | 801,094 | 732,244 | 668,614 | 650,528 | ||||||
Deposits
|
720,918 | 659,174 | 605,407 | 570,997 | 558,142 | ||||||
Interest-bearing
liabilities
|
740,478 | 665,727 | 613,686 | 563,210 | 553,880 | ||||||
Shareholders'
equity
|
$ | 76,241 | 70,586 | 62,465 | 55,989 | 51,978 | |||||
Shares
outstanding*
|
5,588,314 | 5,700,860 | 5,701,829 | 5,692,290 | 5,707,975 | ||||||
Profitability
Ratios
|
|||||||||||
Return
on average total assets
|
0.69% | 1.13% | 1.19% | 0.90% | 0.65% | ||||||
Return
on average shareholders' equity
|
8.38% | 13.59% | 14.68% | 11.31% | 8.52% | ||||||
Dividend
payout ratio
|
41.93% | 24.30% | 20.78% | 22.34% | 28.37% | ||||||
Liquidity
and Capital Ratios (averages)
|
|||||||||||
Loan
to deposit
|
103.65% | 100.94% | 99.84% | 96.42% | 98.14% | ||||||
Shareholders'
equity to total assets
|
8.20% | 8.34% | 8.09% | 7.92% | 7.59% | ||||||
Per
share of common stock*
|
|||||||||||
Basic
net income
|
$ | 1.14 | 1.68 | 1.61 | 1.11 | 0.77 | |||||
Diluted
net income
|
$ | 1.13 | 1.65 | 1.58 | 1.09 | 0.77 | |||||
Cash
dividends
|
$ | 0.48 | 0.41 | 0.33 | 0.25 | 0.22 | |||||
Book
value
|
$ | 13.73 | 12.46 | 10.94 | 9.57 | 8.95 | |||||
*Shares
outstanding and per share computations have been retroactively restated to
reflect a 10% stock dividend during first quarter 2005, a 10% stock
dividend during second quarter 2006 and a 3-for-2 stock split during
second quarter
2007.
|
Fair
Value Measurements December 31, 2008
|
Level
1
Valuation
|
Level
2
Valuation
|
Level
3
Valuation
|
|||||
Investment
securities available for sale
|
$ | 124,916,349 | 935,032 | 122,731,317 | 1,250,000 | |||
Market
value of derivatives (in other assets)
|
$ | 4,980,701 | - | 4,980,701 | - |
Investment
Securities Available for Sale
|
|||
Level
3 Valuation
|
|||
Balance,
beginning of period
|
$ | 250,000 | |
Change
in book value
|
- | ||
Change
in gain/(loss) realized and unrealized
|
- | ||
Purchases/(sales)
|
1,000,000 | ||
Transfers
in and/or out of Level 3
|
- | ||
Balance,
end of period
|
$ | 1,250,000 | |
Change
in unrealized gain/(loss) for assets still held in Level 3
|
$ | 0 |
Fair
Value Measurements December 31, 2008
|
Level
1
Valuation
|
Level
2
Valuation
|
Level
3
Valuation
|
Total
Gains/(Losses) for
the
Year Ended
December
31, 2008
|
||||||
Impaired
loans
|
$ | 7,073,045 | - | 5,902,848 | 1,170,197 | (345,000) | ||||
Other
real estate
|
$ | 1,866,971 | - | 1,866,971 | - | (165,630) |
Table
1- Average Balance Table
|
||||||||||||||||||||||
December
31, 2008
|
December
31, 2007
|
December
31, 2006
|
||||||||||||||||||||
(Dollars
in thousands)
|
Average
Balance
|
Interest
|
Yield
/
Rate
|
Average
Balance
|
Interest
|
Yield
/
Rate
|
Average
Balance
|
Interest
|
Yield
/
Rate
|
|||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||||
Loans
|
$ | 747,203 | 46,808 | 6.26 | % | 665,379 | 55,109 | 8.28 | % | 604,427 | 49,665 | 8.22 | % | |||||||||
Interest
rate derivative contracts
|
- | 3,403 | 0.45 | % | - | (406 | ) | -0.06 | % | - | (698 | ) | -0.12 | % | ||||||||
Loan
fees
|
- | 393 | 0.05 | % | - | 698 | 0.10 | % | - | 701 | 0.12 | % | ||||||||||
Total
loans
|
747,203 | 50,604 | 6.77 | % | 665,379 | 55,401 | 8.33 | % | 604,427 | 49,668 | 8.22 | % | ||||||||||
Investments
- taxable
|
26,591 | 1,253 | 4.71 | % | 20,305 | 868 | 4.27 | % | 29,784 | 1,306 | 4.38 | % | ||||||||||
Investments
- nontaxable*
|
89,262 | 4,924 | 5.52 | % | 99,991 | 5,470 | 5.47 | % | 88,353 | 4,642 | 5.25 | % | ||||||||||
Federal
funds sold
|
3,050 | 55 | 1.80 | % | 7,378 | 383 | 5.19 | % | 1,766 | 85 | 4.81 | % | ||||||||||
Other
|
10,319 | 293 | 2.84 | % | 8,041 | 444 | 5.52 | % | 7,914 | 424 | 5.36 | % | ||||||||||
Total
interest-earning assets
|
876,425 | 57,129 | 6.52 | % | 801,094 | 62,566 | 7.81 | % | 732,244 | 56,125 | 7.66 | % | ||||||||||
Cash
and due from banks
|
21,331 | 20,081 | 17,022 | |||||||||||||||||||
Other
assets
|
41,626 | 34,287 | 31,218 | |||||||||||||||||||
Allowance
for loan losses
|
(9,583 | ) | (8,626 | ) | (7,899 | ) | ||||||||||||||||
Total
assets
|
$ | 929,799 | 846,836 | 772,585 | ||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||
NOW
accounts
|
$ | 92,612 | 1,269 | 1.37 | % | 79,550 | 1,127 | 1.42 | % | 87,329 | 1,214 | 1.39 | % | |||||||||
Regular
savings accounts
|
17,423 | 50 | 0.29 | % | 18,685 | 54 | 0.29 | % | 19,768 | 57 | 0.29 | % | ||||||||||
Money
market accounts
|
93,564 | 1,930 | 2.06 | % | 87,916 | 2,918 | 3.32 | % | 66,035 | 1,789 | 2.71 | % | ||||||||||
Time
deposits
|
406,127 | 15,008 | 3.70 | % | 361,859 | 17,430 | 4.82 | % | 335,092 | 14,189 | 4.23 | % | ||||||||||
FHLB
/ FRB borrowings
|
79,417 | 3,616 | 4.55 | % | 80,058 | 3,759 | 4.70 | % | 74,082 | 3,588 | 4.84 | % | ||||||||||
Demand
notes payable to U.S. Treasury
|
859 | 14 | 1.63 | % | 814 | 39 | 4.79 | % | 722 | 34 | 4.71 | % | ||||||||||
Trust
preferred securities
|
20,619 | 1,016 | 4.93 | % | 20,619 | 1,476 | 7.16 | % | 24,878 | 1,963 | 7.89 | % | ||||||||||
Other
|
29,857 | 624 | 2.09 | % | 16,226 | 782 | 4.82 | % | 5,780 | 276 | 4.78 | % | ||||||||||
Total
interest-bearing liabilities
|
740,478 | 23,527 | 3.18 | % | 665,727 | 27,585 | 4.14 | % | 613,686 | 23,110 | 3.77 | % | ||||||||||
Demand
deposits
|
111,192 | 111,164 | 97,183 | |||||||||||||||||||
Other
liabilities
|
4,021 | 3,022 | 3,044 | |||||||||||||||||||
Shareholders'
equity
|
76,241 | 70,586 | 62,465 | |||||||||||||||||||
Total
liabilities and shareholder's equity
|
$ | 931,932 | 850,499 | 776,378 | ||||||||||||||||||
Net
interest spread
|
$ | 33,602 | 3.36 | % | 34,981 | 3.67 | % | 33,015 | 3.89 | % | ||||||||||||
Net
yield on interest-earning assets
|
3.83 | % | 4.37 | % | 4.51 | % | ||||||||||||||||
Taxable
equivalent adjustment
|
||||||||||||||||||||||
Investment
securities
|
$ | 806 | 834 | 731 | ||||||||||||||||||
Net
interest income
|
$ | 32,796 | 34,147 | 32,284 | ||||||||||||||||||
*Includes
U.S. government sponsored enterprises that are non-taxable for state
income tax purposes of $63.6 million in 2008, $74.9 million in 2007 and
$65.9 million in 2006. An effective tax rate of 6.90% was used to
calculate the tax equivalent yield on these securities.
|
Table
2 - Rate/Volume Variance Analysis-Tax Equivalent Basis
|
|||||||||||||
December
31, 2008
|
December
31, 2007
|
||||||||||||
(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
|
$ | 6,177 | (10,974 | ) | (4,797 | ) | 5,042 | 691 | 5,733 | ||||
Investments
- taxable
|
282 | 102 | 384 | (411 | ) | (27 | ) | (438 | ) | ||||
Investments
- nontaxable
|
(589 | ) | 43 | (546 | ) | 624 | 204 | 828 | |||||
Federal
funds sold
|
(151 | ) | (177 | ) | (328 | ) | 281 | 17 | 298 | ||||
Other
|
95 | (246 | ) | (151 | ) | 7 | 13 | 20 | |||||
Total
interest income
|
5,814 | (11,252 | ) | (5,438 | ) | 5,543 | 898 | 6,441 | |||||
Interest
expense:
|
|||||||||||||
NOW
accounts
|
182 | (40 | ) | 142 | (109 | ) | 22 | (87 | ) | ||||
Regular
savings accounts
|
(4 | ) | 0 | (4 | ) | (3 | ) | 0 | (3 | ) | |||
Money
market accounts
|
152 | (1,140 | ) | (988 | ) | 660 | 469 | 1,129 | |||||
Time
deposits
|
1,884 | (4,306 | ) | (2,422 | ) | 1,211 | 2,030 | 3,241 | |||||
FHLB
/ FRB Borrowings
|
(30 | ) | (113 | ) | (143 | ) | 285 | (114 | ) | 171 | |||
Demand
notes payable to
|
|||||||||||||
U.S.
Treasury
|
1 | (27 | ) | (26 | ) | 4 | 1 | 5 | |||||
Trust
Preferred Securities
|
0 | (459 | ) | (459 | ) | (320 | ) | (167 | ) | (487 | ) | ||
Other
|
471 | (629 | ) | (158 | ) | 501 | 5 | 506 | |||||
Total
interest expense
|
2,656 | (6,714 | ) | (4,058 | ) | 2,229 | 2,246 | 4,475 | |||||
Net
interest income
|
$ | 3,158 | (4,538 | ) | (1,380 | ) | 3,314 | (1,348 | ) | 1,966 |
Table
3 - Non-Interest Income
|
|||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
||||
Service
charges
|
$ | 5,203 | 4,279 | 3,930 | |||
Other
service charges and fees
|
2,399 | 1,938 | 1,540 | ||||
Gain
(loss) on sale of securities
|
(167 | ) | (562 | ) | (592 | ) | |
Mortgage
banking income
|
660 | 560 | 289 | ||||
Insurance
and brokerage commissions
|
426 | 521 | 389 | ||||
Loss
on foreclosed and repossessed assets
|
(287 | ) | (118 | ) | (108 | ) | |
Miscellaneous
|
2,261 | 2,198 | 2,106 | ||||
Total
non-interest income
|
$ | 10,495 | 8,816 | 7,554 |
Table
4 - Non-Interest Expense
|
||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
|||
Salaries
and wages
|
$ | 11,591 | 10,276 | 9,368 | ||
Employee
benefits
|
3,603 | 3,612 | 2,417 | |||
Total
personnel expense
|
15,194 | 13,888 | 11,785 | |||
Occupancy
expense
|
5,029 | 4,751 | 4,180 | |||
Office
supplies
|
564 | 554 | 436 | |||
FDIC
deposit insurance
|
547 | 140 | 75 | |||
Professional
services
|
422 | 400 | 239 | |||
Postage
|
360 | 320 | 307 | |||
Telephone
|
476 | 405 | 338 | |||
Director
fees and expense
|
450 | 499 | 423 | |||
Advertising
|
1,076 | 988 | 772 | |||
Consulting
fees
|
385 | 460 | 575 | |||
Taxes
and licenses
|
193 | 272 | 293 | |||
Other
operating expense
|
4,197 | 3,316 | 3,560 | |||
Total
non-interest expense
|
$ | 28,893 | 25,993 | 22,983 |
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
|
$ | 520,141 | 6,239 | 16,599 | 542,979 | 238,209 | 781,188 | ||||||
Investment
securities
|
- | 4,354 | 3,596 | 7,950 | 116,966 | 124,916 | |||||||
Federal
funds sold
|
6,733 | - | - | 6,733 | - | 6,733 | |||||||
Interest-bearing
deposit accounts
|
1,453 | - | - | 1,453 | - | 1,453 | |||||||
Other
interest-earning assets
|
- | - | - | - | 6,811 | 6,811 | |||||||
Total
interest-earning assets
|
528,327 | 10,593 | 20,195 | 559,115 | 361,986 | 921,101 | |||||||
Interest-bearing
liabilities:
|
|||||||||||||
NOW,
savings, and money market deposits
|
210,058 | - | - | 210,058 | - | 210,058 | |||||||
Time
deposits
|
47,003 | 145,974 | 175,522 | 368,499 | 38,057 | 406,556 | |||||||
Other
short term borrowings
|
1,600 | - | - | 1,600 | - | 1,600 | |||||||
FRB
borrowings
|
- | 5,000 | - | 5,000 | - | 5,000 | |||||||
FHLB
borrowings
|
- | 5,000 | - | 5,000 | 72,000 | 77,000 | |||||||
Securities
sold under
|
|||||||||||||
agreement
to repurchase
|
37,501 | - | - | 37,501 | - | 37,501 | |||||||
Trust
preferred securities
|
- | 20,619 | - | 20,619 | - | 20,619 | |||||||
Total
interest-bearing liabilities
|
296,162 | 176,593 | 175,522 | 648,277 | 110,057 | 758,334 | |||||||
Interest-sensitive
gap
|
$ | 232,165 | (166,000 | ) | (155,327 | ) | (89,162 | ) | 251,929 | 162,767 | |||
Cumulative
interest-sensitive gap
|
$ | 232,165 | 66,165 | (89,162 | ) | (89,162 | ) | 162,767 | |||||
Interest-earning
assets as a percentage of
|
|||||||||||||
interest-bearing liabilities | 178.39% | 6.00% | 11.51% | 86.25% | 328.91% |
Table
6 - Derivative Instruments
|
|||||||||||
(Dollars
in thousands)
|
|||||||||||
Type
of Derivative
|
Notional
Amount
|
Contract
Rate
|
Premium
|
Year-to-date
Income
(Net
of Premium Amortization)
|
|||||||
Interest
rate floor contact*
|
$ | - | - | $ | - | $ | 151 | ||||
Interest
rate floor contact*
|
- | - | - | 456 | |||||||
Interest
rate floor contact expiring 01/24/09
|
45,000 | 7.500% | 562 | 871 | |||||||
Interest
rate floor contact expiring 06/02/09
|
35,000 | 8.000% | 399 | 914 | |||||||
Interest
rate floor contact expiring 12/01/09
|
35,000 | 7.250% | 634 | 523 | |||||||
Interest
rate swap contact expiring 06/01/11
|
50,000 | 6.245% | - | 488 | |||||||
$ | 165,000 | $ | 1,595 | $ | 3,403 | ||||||
*
Interest rate floor contracts expired during 2008
|
Table
7 - Fair Values of Derivative Instruments
|
|||||||||||
Asset
Derivatives
|
Liability
Derivatives
|
||||||||||
(Dollars
in thousands)
|
As
of December 31,
2008
|
As
of December 31,
2007
|
As
of December 31,
2008
|
As
of December 31,
2007
|
|||||||
Balance
Sheet
Location
|
Fair
Value
|
Balance
Sheet
Location
|
Fair
Value
|
Balance
Sheet
Location
|
Fair
Value
|
Balance
Sheet
Location
|
Fair
Value
|
||||
Interest
rate derivative
|
|||||||||||
contracts
|
Other
assets
|
$ 4,981
|
Other
assets
|
$
1,907
|
N/A
|
$ -
|
N/A
|
$ -
|
Table
8 - Summary of Investment Portfolio
|
||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
|||
Obligations
of United States government
|
||||||
sponsored
enterprises
|
$ | 58,487 | 76,992 | 72,744 | ||
Obligations
of states and political subdivisions
|
26,973 | 25,905 | 24,366 | |||
Mortgage-backed
securities
|
37,271 | 16,271 | 19,220 | |||
Trust
preferred securities
|
1,250 | 250 | 750 | |||
Equity
securities
|
935 | 1,550 | 501 | |||
Total
securities
|
$ | 124,916 | 120,968 | 117,581 |
Table
9 - Maturity Distribution and Weighted Average Yield on
Investments
|
||||||||||||||||
After
One Year
|
After
5 Years
|
|||||||||||||||
One
Year or Less
|
Through
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
|
$ | 3,500 | 4.60% | 33,885 | 4.88% | 11,817 | 5.08% | 6,021 | 5.52% | 55,223 | 4.98% | |||||
sponsored
enterprises
|
||||||||||||||||
States
and political subdivisions
|
2,405 | 5.21% | 10,282 | 4.77% | 7,202 | 6.09% | 6,759 | 6.57% | 26,648 | 5.62% | ||||||
Mortgage
backed securities
|
- | - | 521 | 4.54% | 11,256 | 4.68% | 24,780 | 5.35% | 36,557 | 5.13% | ||||||
Trust
preferred securities
|
- | - | - | - | 1,000 | 3.35% | 250 | 8.13% | 1,250 | 4.31% | ||||||
Equity
securities
|
- | - | - | - | - | - | 1,382 | 1.49% | 1,382 | 1.49% | ||||||
Total
securities
|
$ | 5,905 | 4.85% | 44,688 | 4.85% | 31,275 | 5.11% | 39,192 | 5.47% | 121,060 | 5.12% |
Table
10 - Loan Portfolio
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
(Dollars
in thousands)
|
Amount
|
%
of Loans
|
Amount
|
%
of Loans
|
Amount
|
%
of Loans
|
Amount
|
%
of Loans
|
Amount
|
%
of Loans
|
||||||||||
Breakdown
of loan receivables:
|
||||||||||||||||||||
Commercial
|
$ | 76,945 | 9.85% | 82,190 | 11.38% | 85,064 | 13.06% | 79,902 | 14.10% | 79,189 | 14.79% | |||||||||
Real
estate - mortgage
|
474,732 | 60.77% | 417,709 | 57.83% | 364,595 | 55.97% | 330,227 | 58.28% | 312,988 | 58.45% | ||||||||||
Real
estate - construction
|
216,188 | 27.67% | 209,644 | 29.03% | 187,960 | 28.86% | 141,420 | 24.96% | 127,042 | 23.73% | ||||||||||
Consumer
|
13,323 | 1.71% | 12,734 | 1.76% | 13,762 | 2.11% | 15,115 | 2.66% | 16,249 | 3.03% | ||||||||||
Total
loans
|
$ | 781,188 | 100.00% | 722,277 | 100.00% | 651,381 | 100.00% | 566,664 | 100.00% | 535,468 | 100.00% | |||||||||
Less:
Allowance for loan losses
|
11,025 | 9,103 | 8,303 | 7,425 | 8,049 | |||||||||||||||
Net
loans
|
$ | 770,163 | 713,174 | 643,078 | 559,239 | 527,419 |
Table
11 - 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
|
$ | 62,205 | 13,187 | 1,553 | 76,945 | |||
Real
estate - mortgage
|
272,873 | 149,612 | 52,247 | 474,732 | ||||
Real
estate - construction
|
201,041 | 9,805 | 5,342 | 216,188 | ||||
Consumer
|
6,860 | 6,258 | 205 | 13,323 | ||||
Total
loans
|
$ | 542,979 | 178,862 | 59,347 | 781,188 | |||
Total
fixed rate loans
|
$ | 22,816 | 125,666 | 59,347 | 207,829 | |||
Total
floating rate loans
|
520,163 | 53,196 | - | 573,359 | ||||
Total
loans
|
$ | 542,979 | 178,862 | 59,347 | 781,188 |
·
|
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
12 - Loan Risk Grade Analysis
|
||
Percentage
of Loans
|
||
By
Risk Grade*
|
||
Risk
Grade
|
2008
|
2007
|
Risk
1 (Excellent Quality)
|
4.08%
|
11.06%
|
Risk
2 (High Quality)
|
17.95%
|
14.06%
|
Risk
3 (Good Quality)
|
63.08%
|
62.53%
|
Risk
4 (Management Attention)
|
10.42%
|
9.51%
|
Risk
5 (Watch)
|
2.14%
|
1.57%
|
Risk
6 (Substandard)
|
0.80%
|
0.13%
|
Risk
7 (Low Substandard)
|
0.00%
|
0.03%
|
Risk
8 (Doubtful)
|
0.00%
|
0.00%
|
Risk
9 (Loss)
|
0.00%
|
0.00%
|
*
Excludes non-accrual loans
|
Table
13 - Analysis of Allowance for Loan Losses
|
||||||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||
Reserve
for loan losses at beginning
|
$ | 9,103 | 8,303 | 7,425 | 8,049 | 9,722 | ||||
Loans
charged off:
|
||||||||||
Commercial
|
249 | 414 | 505 | 293 | 1,004 | |||||
Real
estate - mortgage
|
1,506 | 471 | 568 | 2,141 | 3,842 | |||||
Real
estate - construction
|
644 | 252 | 250 | 1,250 | 4 | |||||
Consumer
|
748 | 489 | 636 | 516 | 535 | |||||
Total
loans charged off
|
3,147 | 1,626 | 1,959 | 4,200 | 5,385 | |||||
Recoveries
of losses previously charged off:
|
||||||||||
Commercial
|
87 | 86 | 64 | 144 | 162 | |||||
Real
estate - mortgage
|
8 | 21 | 108 | 162 | 144 | |||||
Real
estate - construction
|
30 | 102 | 2 | - | - | |||||
Consumer
|
150 | 179 | 150 | 160 | 150 | |||||
Total
recoveries
|
275 | 388 | 324 | 466 | 456 | |||||
Net
loans charged off
|
2,872 | 1,238 | 1,635 | 3,734 | 4,929 | |||||
Provision
for loan losses
|
4,794 | 2,038 | 2,513 | 3,110 | 3,256 | |||||
Reserve
for loan losses at end of year
|
$ | 11,025 | 9,103 | 8,303 | 7,425 | 8,049 | ||||
Loans
charged off net of recoveries, as
|
||||||||||
a
percent of average loans outstanding
|
0.38% | 0.19% | 0.27% | 0.68% | 0.90% |
Table
14 - Non-performing Assets
|
||||||||||
(Dollars
in thousands)
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||
Non-accrual
loans
|
$ | 11,815 | 7,987 | 7,560 | 3,492 | 5,097 | ||||
Loans
90 days or more past due and still accruing
|
514 | - | 78 | 946 | 245 | |||||
Total
non-performing loans
|
12,329 | 7,987 | 7,638 | 4,438 | 5,342 | |||||
All
other real estate owned
|
1,867 | 483 | 344 | 531 | 682 | |||||
All
other repossessed assets
|
- | - | - | - | - | |||||
Total
non-performing assets
|
$ | 14,196 | 8,470 | 7,982 | 4,969 | 6,024 | ||||
As
a percent of total loans at year end
|
||||||||||
Non-accrual
loans
|
1.51% | 1.11% | 1.16% | 0.62% | 0.95% | |||||
Loans
90 days or more past due and still accruing
|
0.07% | 0.00% | 0.01% | 0.17% | 0.05% | |||||
Total
non-performing assets
|
1.82% | 1.17% | 1.23% | 0.88% | 1.12% |
Table
15 - Maturities of Time Deposits over $100,000
|
||
(Dollars
in thousands)
|
2008
|
|
Three
months or less
|
$ | 106,166 |
Over
three months through six months
|
58,526 | |
Over
six months through twelve months
|
40,819 | |
Over
twelve months
|
14,864 | |
Total
|
$ | 220,375 |
Table
16 - 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
|
$ | - | 12,000 | - | 65,000 | 77,000 | ||||
Junior
subordinated debentures
|
- | - | - | 20,619 | 20,619 | |||||
Operating
lease obligations
|
769 | 1,191 | 701 | 1,893 | 4,554 | |||||
Total
|
$ | 769 | 13,191 | 701 | 87,512 | 102,173 | ||||
Other
Commitments
|
||||||||||
Commitments
to extend credit
|
$ | 54,767 | 14,566 | 2,336 | 87,270 | 158,939 | ||||
Standby
letters of credit
|
||||||||||
and
financial guarantees written
|
4,294 | 22 | - | - | 4,316 | |||||
Total
|
$ | 59,061 | 14,588 | 2,336 | 87,270 | 163,255 |
Table
17 - Equity Ratios
|
||||||
2008
|
2007
|
2006
|
||||
Return
on average assets
|
0.69% | 1.13% | 1.19% | |||
Return
on average equity
|
8.38% | 13.59% | 14.68% | |||
Dividend
payout ratio
|
41.93% | 24.30% | 20.78% | |||
Average
equity to average assets
|
8.20% | 8.34% | 8.09% |
Table
18 - Quarterly Financial Data
|
||||||||||||||||||
2008
|
2007
|
|||||||||||||||||
Dollars in thousands, except | ||||||||||||||||||
per
share amounts)
|
First
|
Second
|
Third
|
Fourth
|
First
|
Second
|
Third
|
Fourth
|
||||||||||
Total
interest income
|
$ | 14,553 | 14,072 | 14,122 | 13,576 | $ | 15,200 | 15,446 | 15,625 | 15,461 | ||||||||
Total
interest expense
|
6,680 | 5,700 | 5,627 | 5,520 | 6,607 | 6,735 | 7,038 | 7,205 | ||||||||||
Net
interest income
|
7,873 | 8,372 | 8,495 | 8,056 | 8,593 | 8,711 | 8,587 | 8,256 | ||||||||||
Provision
for loan losses
|
391 | 681 | 1,035 | 2,687 | 323 | 634 | 296 | 785 | ||||||||||
Other
income
|
2,607 | 2,802 | 2,506 | 2,580 | 2,122 | 2,139 | 2,007 | 2,548 | ||||||||||
Other
expense
|
6,930 | 7,113 | 7,278 | 7,572 | 6,021 | 6,180 | 6,214 | 7,578 | ||||||||||
Income
before income taxes
|
3,159 | 3,380 | 2,688 | 377 | 4,371 | 4,036 | 4,084 | 2,441 | ||||||||||
Income
taxes
|
1,103 | 1,188 | 942 | (20 | ) | 1,584 | 1,446 | 1,471 | 839 | |||||||||
Net
earnings
|
$ | 2,056 | 2,192 | 1,746 | 397 | $ | 2,787 | 2,590 | 2,613 | 1,602 | ||||||||
Basic
earnings per share
|
$ | 0.37 | 0.39 | 0.31 | 0.07 | $ | 0.49 | 0.45 | 0.46 | 0.28 | ||||||||
Diluted
earnings per share
|
$ | 0.36 | 0.39 | 0.31 | 0.07 | $ | 0.48 | 0.44 | 0.45 | 0.28 |
Table
19 - Market Risk Table
|
|||||||||||||||||||
(Dollars
In thousands)
|
Principal/Notional
Amount Maturing in Year Ended December 31,
|
||||||||||||||||||
Loans
Receivable
|
2009
|
2010
|
2011
|
2012
&
2013
|
Thereafter
|
Total
|
Fair
Value
|
||||||||||||
Fixed
rate
|
$ | 33,980 | 32,285 | 20,804 | 80,068 | 40,692 | 207,829 | 210,922 | |||||||||||
Average
interest rate
|
7.25 | % | 7.00 | % | 6.97 | % | 6.86 | % | 7.34 | % | |||||||||
Variable
rate
|
$ | 241,262 | 84,819 | 31,616 | 50,428 | 165,234 | 573,359 | 573,359 | |||||||||||
Average
interest rate
|
4.09 | % | 3.98 | % | 4.39 | % | 4.33 | % | 5.99 | % | |||||||||
781,188 | 784,281 | ||||||||||||||||||
Investment
Securities
|
. | ||||||||||||||||||
Interest
bearing cash
|
$ | - | - | - | - | 1,453 | 1,453 | 1,453 | |||||||||||
Average
interest rate
|
- | - | - | - | 0.03 | % | |||||||||||||
Federal
funds sold
|
$ | 6,733 | - | - | - | - | 6,733 | 6,733 | |||||||||||
Average
interest rate
|
0.10 | % | - | - | - | - | |||||||||||||
Securities
available for sale
|
$ | 22,806 | 21,907 | 34,228 | 14,346 | 31,629 | 124,916 | 126,539 | |||||||||||
Average
interest rate
|
4.95 | % | 4.80 | % | 4.38 | % | 4.77 | % | 4.66 | % | |||||||||
Nonmarketable
equity securities
|
$ | - | - | - | - | 6,303 | 6,303 | 6,303 | |||||||||||
Average
interest rate
|
- | - | - | - | 3.52 | % | |||||||||||||
Debt
Obligations
|
|||||||||||||||||||
Deposits
|
$ | 368,469 | 23,198 | 12,805 | 2,249 | 314,341 | 721,062 | 716,678 | |||||||||||
Average
interest rate
|
3.17 | % | 3.02 | % | 2.50 | % | 3.09 | % | 4.08 | % | |||||||||
Advances
from FHLB
|
$ | - | 7,000 | 5,000 | 15,000 | 50,000 | 77,000 | 83,038 | |||||||||||
Average
interest rate
|
- | 6.05 | % | 4.21 | % | 4.19 | % | 4.27 | % | ||||||||||
Federal
Reserve Borrowings
|
$ | 5,000 | - | - | - | - | 5,000 | 4,999 | |||||||||||
Average
interest rate
|
0.28 | % | - | - | - | - | |||||||||||||
Demand
notes payable to U.S. Treasury
|
$ | 1,600 | - | - | - | - | 1,600 | 1,600 | |||||||||||
Average
interest rate
|
0.12 | % | - | - | - | - | |||||||||||||
Securities
sold under agreement to repurchase
|
$ | 37,501 | 37,501 | 37,501 | |||||||||||||||
Average
interest rate
|
1.34 | % | |||||||||||||||||
Junior
subordinated debentures
|
$ | - | - | - | - | 20,619 | 20,619 | 20,619 | |||||||||||
Average
interest rate
|
- | - | - | - | 3.63 | % | |||||||||||||
Derivative
Instruments (notional amount)
|
|||||||||||||||||||
Interest
rate floor contracts
|
$ | 115,000 | - | - | - | - | 115,000 | 2,254 | |||||||||||
Average
interest rate
|
7.58 | % | - | - | - | - | |||||||||||||
Interest
rate swap contracts
|
$ | - | - | 50,000 | - | - | 50,000 | 2,727 | |||||||||||
Average
interest rate
|
- | - | 6.25 | % | - | - |
Table
20 - Interest Rate Risk
|
|||||||
(Dollars
in thousands)
|
|||||||
Estimated
Resulting Theoretical Net
Interest
Income
|
|||||||
Hypothetical
rate change (ramp over 12 months)
|
Amount
|
%
Change
|
|||||
+2% | $ | 32,175 | 3.95% | ||||
+1% | $ | 31,476 | 1.70% | ||||
0% | $ | 30,951 | 0.00% | ||||
-1% | $ | 30,455 | -1.60% | ||||
-2% | $ | 29,832 | -3.62% | ||||
Estimated
Resulting Theoretical
Market
Value of Equity
|
|||||||
Hypothetical
rate change (immediate shock)
|
Amount
|
%
Change
|
|||||
+2% | $ | 92,797 | -10.94% | ||||
+1% | $ | 98,019 | -5.92% | ||||
0% | $ | 104,192 | 0.00% | ||||
-1% | $ | 106,142 | 1.87% | ||||
-2% | $ | 108,667 | 4.30% |
Table
21 - Market and Dividend Data
|
||||||||
Cash
Dividend
|
||||||||
2008
|
Low
Bid
|
High
Bid
|
Per
Share
|
|||||
First
Quarter
|
$ | 12.20 | 15.50 | 0.12 | ||||
Second
Quarter
|
$ | 9.56 | 14.19 | 0.12 | ||||
Third
Quarter
|
$ | 7.36 | 13.14 | 0.12 | ||||
Fourth
Quarter
|
$ | 8.51 | 12.00 | 0.12 | ||||
Cash
Dividend
|
||||||||
2007
|
Low
Bid
|
High
Bid
|
Per
Share
|
|||||
First
Quarter
|
$ | 17.37 | 19.26 | 0.08 | ||||
Second
Quarter
|
$ | 17.89 | 21.15 | 0.09 | ||||
Third
Quarter
|
$ | 17.13 | 20.03 | 0.12 | ||||
Fourth
Quarter
|
$ | 14.75 | 18.00 | 0.12 |
PEOPLES
BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
|
Consolidated
Financial Statements
|
|
December
31, 2008, 2007 and 2006
|
|
INDEX
|
|
PAGE(S)
|
|
Report
of Independent Registered Public Accounting Firm on the Consolidated
Financial Statements
|
A-31
|
Financial
Statements
|
|
Consolidated
Balance Sheets at December 31, 2008 and December 31, 2007
|
A-32
|
Consolidated
Statements of Earnings for the years ended December 31, 2008, 2007 and
2006
|
A-33
|
Consolidated
Statements of Changes in Shareholders' Equity for the years ended December
31, 2008, 2007 and 2006
|
A-34
|
Consolidated
Statements of Comprehensive Income for the years ended December 31, 2008,
2007 and 2006
|
A-35
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2008, 2007 and
2006
|
A-36
- A-37
|
Notes
to Consolidated Financial Statements
|
A-38
-
A-61
|
PEOPLES
BANCORP OF NORTH CAROLINA, INC. AND SUBSIDIARIES
|
||||||||
Consolidated
Balance Sheets
|
||||||||
December
31, 2008 and 2007
|
||||||||
Assets
|
2008
|
2007
|
||||||
Cash
and due from banks, including reserve requirements
|
$ | 19,743,047 | 26,108,437 | |||||
of
$7,257,000 and $7,439,000
|
||||||||
Interest
bearing deposits
|
1,452,825 | 1,539,190 | ||||||
Federal
funds sold
|
6,733,000 | 2,152,000 | ||||||
Cash
and cash equivalents
|
27,928,872 | 29,799,627 | ||||||
Investment
securities available for sale
|
124,916,349 | 120,968,358 | ||||||
Other
investments
|
6,302,809 | 6,433,947 | ||||||
Total
securities
|
131,219,158 | 127,402,305 | ||||||
Loans
|
781,188,082 | 722,276,948 | ||||||
Less
allowance for loan losses
|
(11,025,516 | ) | (9,103,058 | ) | ||||
Net
loans
|
770,162,566 | 713,173,890 | ||||||
Premises
and equipment, net
|
18,296,895 | 18,234,393 | ||||||
Cash
surrender value of life insurance
|
7,019,478 | 6,776,379 | ||||||
Accrued
interest receivable and other assets
|
14,135,328 | 11,875,202 | ||||||
Total
assets
|
$ | 968,762,297 | 907,261,796 | |||||
Liabilities and Shareholders'
Equity
|
||||||||
Deposits:
|
||||||||
Non-interest
bearing demand
|
$ | 104,448,128 | 112,071,090 | |||||
NOW,
MMDA & savings
|
210,057,612 | 196,959,895 | ||||||
Time,
$100,000 or more
|
220,374,302 | 203,499,504 | ||||||
Other
time
|
186,182,341 | 181,108,214 | ||||||
Total
deposits
|
721,062,383 | 693,638,703 | ||||||
Demand
notes payable to U.S. Treasury
|
1,600,000 | 1,600,000 | ||||||
Securities
sold under agreement to repurchase
|
37,500,738 | 27,583,263 | ||||||
Short-term
Federal Reserve Bank borrowings
|
5,000,000 | - | ||||||
FHLB
borrowings
|
77,000,000 | 87,500,000 | ||||||
Junior
subordinated debentures
|
20,619,000 | 20,619,000 | ||||||
Accrued
interest payable and other liabilities
|
4,851,750 | 6,219,248 | ||||||
Total
liabilities
|
867,633,871 | 837,160,214 | ||||||
Shareholders'
equity:
|
||||||||
Series
A preferred stock, $1,000 stated value; authorized
|
||||||||
5,000,000
shares; issued and outstanding
|
||||||||
25,054
shares in 2008 and no shares
|
||||||||
outstanding
in 2007
|
24,350,219 | - | ||||||
Common
stock, no par value; authorized
|
||||||||
20,000,000
shares; issued and
|
||||||||
outstanding
5,539,056 shares in 2008
|
||||||||
and
5,624,234 shares in 2007
|
48,268,525 | 48,651,895 | ||||||
Retained
earnings
|
22,985,694 | 19,741,876 | ||||||
Accumulated
other comprehensive income
|
5,523,988 | 1,707,811 | ||||||
Total
shareholders' equity
|
101,128,426 | 70,101,582 | ||||||
Total
liabilities and shareholders' equity
|
$ | 968,762,297 | 907,261,796 | |||||
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, 2008, 2007 and 2006
|
||||||||||||
2008
|
2007
|
2006
|
||||||||||
Interest
income:
|
||||||||||||
Interest
and fees on loans
|
$ | 50,603,885 | 55,400,514 | 49,667,700 | ||||||||
Interest
on federal funds sold
|
54,765 | 383,492 | 85,307 | |||||||||
Interest
on investment securities:
|
||||||||||||
U.S.
Government sponsored enterprises
|
4,392,356 | 4,571,571 | 4,321,346 | |||||||||
States
and political subdivisions
|
904,432 | 887,584 | 798,185 | |||||||||
Other
|
367,423 | 488,465 | 521,077 | |||||||||
Total
interest income
|
56,322,861 | 61,731,626 | 55,393,615 | |||||||||
Interest
expense:
|
||||||||||||
NOW,
MMDA & savings deposits
|
3,248,844 | 4,098,892 | 3,060,201 | |||||||||
Time
deposits
|
15,008,193 | 17,430,012 | 14,188,623 | |||||||||
FHLB
borrowings
|
3,616,018 | 3,758,996 | 3,588,169 | |||||||||
Junior
subordinated debentures
|
1,016,361 | 1,475,701 | 1,962,692 | |||||||||
Other
|
637,201 | 821,331 | 310,188 | |||||||||
Total
interest expense
|
23,526,617 | 27,584,932 | 23,109,873 | |||||||||
Net
interest income
|
32,796,244 | 34,146,694 | 32,283,742 | |||||||||
Provision
for loan losses
|
4,794,000 | 2,038,000 | 2,513,282 | |||||||||
Net
interest income after provision for loan losses
|
28,002,244 | 32,108,694 | 29,770,460 | |||||||||
Other
income:
|
||||||||||||
Service
charges
|
5,202,972 | 4,278,238 | 3,929,956 | |||||||||
Other
service charges and fees
|
2,399,051 | 1,938,137 | 1,539,367 | |||||||||
Loss
on sale and write-down of securities
|
(167,048 | ) | (561,832 | ) | (591,856 | ) | ||||||
Mortgage
banking income
|
660,288 | 560,291 | 289,293 | |||||||||
Insurance
and brokerage commissions
|
425,653 | 521,095 | 388,559 | |||||||||
Loss
on sale and write-down of
|
||||||||||||
other
real estate and repossessed assets
|
(287,431 | ) | (117,880 | ) | (107,712 | ) | ||||||
Miscellaneous
|
2,261,104 | 2,197,645 | 2,106,188 | |||||||||
Total
other income
|
10,494,589 | 8,815,694 | 7,553,795 | |||||||||
Other
expense:
|
||||||||||||
Salaries
and employee benefits
|
15,194,393 | 13,887,841 | 11,785,094 | |||||||||
Occupancy
|
5,029,096 | 4,750,634 | 4,180,058 | |||||||||
Other
|
8,669,465 | 7,354,401 | 7,017,986 | |||||||||
Total
other expenses
|
28,892,954 | 25,992,876 | 22,983,138 | |||||||||
Earnings
before income taxes
|
9,603,879 | 14,931,512 | 14,341,117 | |||||||||
Income
taxes
|
3,213,316 | 5,339,541 | 5,170,300 | |||||||||
Net
earnings
|
$ | 6,390,563 | 9,591,971 | 9,170,817 | ||||||||
Basic
earnings per common share
|
$ | 1.14 | 1.68 | 1.61 | ||||||||
Diluted
earnings per common share
|
$ | 1.13 | 1.65 | 1.58 | ||||||||
Cash
dividends declared per common share
|
$ | 0.48 | 0.41 | 0.33 | ||||||||
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, 2008, 2007 and 2006
|
||||||||||||||||||||||
Accumulated
|
||||||||||||||||||||||
Other
|
||||||||||||||||||||||
Stock Shares
|
Stock Amount
|
Retained
|
Comprehensive
|
|||||||||||||||||||
Preferred
|
Common
|
Preferred
|
Common
|
Earnings
|
Income (Loss)
|
Total
|
||||||||||||||||
Balance,
December 31, 2005
|
- | 3,440,805 | $ | - | 41,096,500 | 14,656,160 | (1,399,666 | ) | 54,352,994 | |||||||||||||
10%
stock dividend
|
- | 343,850 | - | 9,430,532 | (9,430,532 | ) | - | - | ||||||||||||||
Cash
paid in lieu of
|
||||||||||||||||||||||
fractional
shares
|
- | - | - | - | (6,426 | ) | - | (6,426 | ) | |||||||||||||
Cash
dividends declared
|
- | - | - | - | (1,905,556 | ) | - | (1,905,556 | ) | |||||||||||||
Repurchase
and retirement of
|
||||||||||||||||||||||
common
stock
|
- | (19,250 | ) | - | (425,000 | ) | - | - | (425,000 | ) | ||||||||||||
Exercise
of stock options
|
- | 65,229 | - | 771,325 | - | - | 771,325 | |||||||||||||||
Stock
option tax benefit
|
- | - | - | 243,100 | - | - | 243,100 | |||||||||||||||
Stock
option compensation
|
||||||||||||||||||||||
expense
|
- | - | - | 5,690 | - | - | 5,690 | |||||||||||||||
Net
earnings
|
- | - | - | - | 9,170,817 | - | 9,170,817 | |||||||||||||||
Change
in accumulated other
|
||||||||||||||||||||||
comprehensive
income
|
||||||||||||||||||||||
(loss),
net of tax
|
- | - | - | - | - | 628,429 | 628,429 | |||||||||||||||
Balance,
December 31, 2006
|
- | 3,830,634 | - | 51,122,147 | 12,484,463 | (771,237 | ) | 62,835,373 | ||||||||||||||
3
for 2 stock split
|
- | 1,915,147 | - | - | - | - | - | |||||||||||||||
Cash
paid in lieu of
|
||||||||||||||||||||||
fractional
shares
|
- | - | - | - | (3,355 | ) | - | (3,355 | ) | |||||||||||||
Cash
dividends declared
|
- | - | - | - | (2,331,203 | ) | - | (2,331,203 | ) | |||||||||||||
Repurchase
and retirement of
|
||||||||||||||||||||||
common
stock
|
- | (150,497 | ) | - | (2,810,907 | ) | - | - | (2,810,907 | ) | ||||||||||||
Exercise
of stock options
|
- | 28,950 | - | 239,182 | - | - | 239,182 | |||||||||||||||
Stock
option tax benefit
|
- | - | - | 91,815 | - | - | 91,815 | |||||||||||||||
Stock
option compensation
|
||||||||||||||||||||||
expense
|
- | - | - | 9,658 | - | - | 9,658 | |||||||||||||||
Net
earnings
|
- | - | - | - | 9,591,971 | - | 9,591,971 | |||||||||||||||
Change
in accumulated other
|
||||||||||||||||||||||
comprehensive
income
|
||||||||||||||||||||||
(loss),
net of tax
|
- | - | - | - | - | 2,479,048 | 2,479,048 | |||||||||||||||
Balance,
December 31, 2007
|
- | 5,624,234 | - | 48,651,895 | 19,741,876 | 1,707,811 | 70,101,582 | |||||||||||||||
Cumulative
effect of
|
||||||||||||||||||||||
adoption
of EITF 06-4
|
- | - | - | - | (466,917 | ) | - | (466,917 | ) | |||||||||||||
Issuance
of Series A
|
||||||||||||||||||||||
preferred
stock
|
25,054 | - | 24,350,219 | 703,781 | - | - | 25,054,000 | |||||||||||||||
Cash
dividends declared on
|
||||||||||||||||||||||
common
stock
|
- | - | - | - | (2,679,828 | ) | - | (2,679,828 | ) | |||||||||||||
Repurchase
and retirement of
|
||||||||||||||||||||||
common
stock
|
- | (90,500 | ) | - | (1,126,275 | ) | - | - | (1,126,275 | ) | ||||||||||||
Exercise
of stock options
|
- | 5,322 | - | 43,948 | - | - | 43,948 | |||||||||||||||
Stock
option compensation
|
||||||||||||||||||||||
expense
|
- | - | - | (4,824 | ) | - | - | (4,824 | ) | |||||||||||||
Net
earnings
|
- | - | - | - | 6,390,563 | - | 6,390,563 | |||||||||||||||
Change
in accumulated other
|
||||||||||||||||||||||
comprehensive
income
|
||||||||||||||||||||||
(loss),
net of tax
|
- | - | - | - | - | 3,816,177 | 3,816,177 | |||||||||||||||
Balance,
December 31, 2008
|
25,054 | 5,539,056 | $ | 24,350,219 | 48,268,525 | 22,985,694 | 5,523,988 | 101,128,426 | ||||||||||||||
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, 2008, 2007 and 2006
|
|||||||||
2008
|
2007
|
2006
|
|||||||
Net
earnings
|
$ | 6,390,563 | 9,591,971 | 9,170,817 | |||||
Other
comprehensive income:
|
|||||||||
Unrealized
holding gains on securities
|
|||||||||
available
for sale
|
2,144,591 | 1,964,861 | 197,569 | ||||||
Reclassification
adjustment for losses on sales and
|
|||||||||
write-downs
of securities available for sale included
|
|||||||||
in
net earnings
|
167,048 | 561,832 | 591,856 | ||||||
Unrealized
holding gains (losses) on derivative
|
|||||||||
financial
instruments qualifying as cash flow
|
|||||||||
hedges
|
3,743,982 | 1,244,910 | (345,049 | ) | |||||
Reclassification
adjustment for losses on
|
|||||||||
derivative
financial instruments qualifying as
|
|||||||||
cash
flow hedges included in net earnings
|
- | - | 386,285 | ||||||
Total
other comprehensive income,
|
|||||||||
before
income taxes
|
6,055,621 | 3,771,603 | 830,661 | ||||||
Income
tax expense related to other
|
|||||||||
comprehensive
income:
|
|||||||||
Unrealized
holding gains on securities
|
|||||||||
available
for sale
|
835,318 | 765,313 | 76,953 | ||||||
Reclassification
adjustment for losses on sales and
|
|||||||||
write-downs
of securities available for sale included
|
|||||||||
in
net earnings
|
65,065 | 218,834 | 230,528 | ||||||
Unrealized
holding gains (losses) on derivative
|
|||||||||
financial
instruments qualifying as cash flow
|
|||||||||
hedges
|
1,339,061 | 308,408 | (255,707 | ) | |||||
Reclassification
adjustment for losses on
|
|||||||||
derivative
financial instruments qualifying as
|
|||||||||
cash
flow hedges included in net earnings
|
- | - | 150,458 | ||||||
Total
income tax expense related to
|
|||||||||
other
comprehensive income
|
2,239,444 | 1,292,555 | 202,232 | ||||||
Total
other comprehensive income,
|
|||||||||
net
of tax
|
3,816,177 | 2,479,048 | 628,429 | ||||||
Total
comprehensive income
|
$ | 10,206,740 | 12,071,019 | 9,799,246 | |||||
See
accompanying notes to consolidated financial statements.
|
PEOPLES
BANCORP OF NORTH CAROLINA, INC.
|
|||||||||
Consolidated
Statements of Cash Flows
|
|||||||||
For
the Years Ended December 31, 2008, 2007 and 2006
|
|||||||||
2008
|
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
|||||||||
Net
earnings
|
$ | 6,390,563 | 9,591,971 | 9,170,817 | |||||
Adjustments
to reconcile net earnings to
|
|||||||||
net
cash provided by operating activities:
|
|||||||||
Depreciation,
amortization and accretion
|
1,678,913 | 1,553,251 | 1,616,558 | ||||||
Provision
for loan losses
|
4,794,000 | 2,038,000 | 2,513,282 | ||||||
Deferred
income taxes
|
(485,137 | ) | (479,806 | ) | (615,626 | ) | |||
Loss
on sale and write-down of investment securities
|
167,048 | 561,832 | 591,856 | ||||||
Recognition
of gain on sale of
|
|||||||||
derivative
instruments
|
- | - | 386,285 | ||||||
Loss
(gain) on sale of premises and equipment
|
1,404 | (10,337 | ) | (20,896 | ) | ||||
Loss
(gain) on sale of repossessed assets
|
46,801 | 83,294 | (2,288 | ) | |||||
Write-down
of other real estate and repossessions
|
240,630 | 34,586 | 110,000 | ||||||
Amortization
of deferred issuance costs on
|
|||||||||
junior
subordinated debentures
|
- | - | 461,298 | ||||||
Stock
option compensation expense
|
12,434 | 9,658 | 5,690 | ||||||
Change
in:
|
|||||||||
Mortgage
loans held for sale
|
- | - | 2,247,900 | ||||||
Cash
surrender value of life insurance
|
(243,099 | ) | (243,973 | ) | (220,649 | ) | |||
Other
assets
|
(19,918 | ) | (1,013,866 | ) | (1,206,937 | ) | |||
Other
liabilities
|
(1,851,672 | ) | 2,403,990 | (230,144 | ) | ||||
Net
cash provided by operating activities
|
10,731,967 | 14,528,600 | 14,807,146 | ||||||
Cash
flows from investing activities:
|
|||||||||
Purchases
of investment securities available for sale
|
(41,658,966 | ) | (15,858,155 | ) | (30,579,262 | ) | |||
Proceeds
from calls and maturities of investment securities
|
|||||||||
available
for sale
|
16,488,469 | 7,470,991 | 8,562,058 | ||||||
Proceeds
from sales of investment securities available
|
|||||||||
for
sale
|
23,448,161 | 8,362,525 | 19,871,979 | ||||||
Purchases
of other investments
|
(4,179,862 | ) | (8,356,900 | ) | (12,748,200 | ) | |||
Proceeds
from sale of other investments
|
4,311,000 | 8,424,000 | 11,263,500 | ||||||
Net
change in loans
|
(65,188,183 | ) | (72,815,928 | ) | (86,825,349 | ) | |||
Purchases
of premises and equipment
|
(1,857,429 | ) | (7,672,018 | ) | (1,624,299 | ) | |||
Proceeds
from sale of premises and equipment
|
33,545 | 55,630 | - | ||||||
Proceeds
from sale of repossessed assets
|
2,867,543 | 425,158 | 825,115 | ||||||
Purchases
of derivative financial instruments
|
- | (634,000 | ) | (961,500 | ) | ||||
Net
cash used by investing activities
|
(65,735,722 | ) | (80,598,697 | ) | (92,215,958 | ) | |||
Cash
flows from financing activities:
|
|||||||||
Net
change in deposits
|
27,423,680 | 59,818,414 | 50,966,628 | ||||||
Net
change in demand notes payable to U.S. Treasury
|
- | - | 126,307 | ||||||
Net
change in securities sold under agreement to repurchase
|
9,917,475 | 21,165,460 | 5,436,753 | ||||||
Proceeds
from FHLB borrowings
|
97,100,000 | 275,300,000 | 700,800,000 | ||||||
Repayments
of FHLB borrowings
|
(107,600,000 | ) | (277,100,000 | ) | (683,100,000 | ) | |||
Proceeds
from FRB borrowings
|
5,000,000 | - | - | ||||||
Proceeds
from issuance of junior subordinated debentures
|
- | - | 20,619,000 | ||||||
Repayments
of junior subordinated debentures
|
- | - | (14,433,000 | ) | |||||
Proceeds
from issuance of Series A preferred stock
|
25,054,000 | - | - | ||||||
Proceeds
from exercise of stock options
|
43,948 | 330,997 | 1,014,425 | ||||||
Common
stock repurchased
|
(1,126,275 | ) | (2,810,907 | ) | (425,000 | ) | |||
Cash
paid in lieu of fractional shares
|
- | (3,355 | ) | (6,426 | ) | ||||
Cash
dividends paid
|
(2,679,828 | ) | (2,331,203 | ) | (1,905,556 | ) | |||
Net
cash provided by financing activities
|
53,133,000 | 74,369,406 | 79,093,131 | ||||||
Net
change in cash and cash equivalent
|
(1,870,755 | ) | 8,299,309 | 1,684,319 | |||||
Cash
and cash equivalents at beginning of period
|
29,799,627 | 21,500,318 | 19,815,999 | ||||||
Cash
and cash equivalents at end of period
|
$ | 27,928,872 | 29,799,627 | 21,500,318 |
PEOPLES
BANCORP OF NORTH CAROLINA, INC.
|
|||||||||
Consolidated
Statements of Cash Flows, continued
|
|||||||||
For
the Years ended December 31, 2008, 2007 and 2006
|
|||||||||
2008
|
2007
|
2006
|
|||||||
Supplemental
disclosures of cash flow information:
|
|||||||||
Cash
paid during the year for:
|
|||||||||
Interest
|
$ | 23,799,196 | 27,420,245 | 23,171,572 | |||||
Income
taxes
|
$ | 4,165,800 | 5,689,500 | 6,398,100 | |||||
Noncash
investing and financing activities:
|
|||||||||
Change
in unrealized gain on investment securities
|
|||||||||
available
for sale, net
|
$ | 1,411,256 | 1,542,546 | 481,944 | |||||
Change
in unrealized gain on derivative financial
|
|||||||||
instruments,
net
|
$ | 2,404,921 | 936,502 | 146,485 | |||||
Transfer
of loans to other real estate and repossessions
|
$ | 4,538,987 | 681,735 | 746,004 | |||||
Financed
portion of sale of other real estate
|
$ | 1,133,480 | - | 273,000 | |||||
Reclassification
of an investment from other assets
|
|||||||||
to
securities available for sale
|
$ | - | 499,995 | - | |||||
Reclassification
of a security from other investments
|
|||||||||
to
securities available for sale
|
$ | - | 600,000 | - | |||||
Transfer
of retained earnings to common stock for
|
|||||||||
issuance
of stock dividend
|
$ | - | - | 9,430,532 | |||||
Deferred
gain rolled into cost basis of
|
|||||||||
acquired
building
|
$ | - | 539,815 | - | |||||
Cumulative
effect of adoption of EITF 06-4
|
$ | 466,917 | - | - | |||||
See
accompanying notes to consolidated financial statements.
|
(1)
|
Summary of Significant Accounting
Policies
|
·
|
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.
|
Buildings
and improvements
|
10
- 50 years
|
|
Furniture
and equipment
|
3 -
10 years
|
Stock
Option Activity
|
|||||||||||
For
the years ended December 31, 2008, 2007 and 2006
|
|||||||||||
Shares
|
Weighted
Average
Option
Price
Per Share
|
Weighted
Average
Remaining
Contractual
Term (in
years)
|
Aggregate
Intrinsic
Value
|
||||||||
Outstanding,
December 31, 2005
|
319,692 | $ | 8.13 | ||||||||
Granted
during the period
|
- | $ | - | ||||||||
Forfeited
during the period
|
(164 | ) | $ | 7.38 | |||||||
Exercised
during the period
|
(97,854 | ) | $ | 7.87 | |||||||
Outstanding,
December 31, 2006
|
221,674 | $ | 8.24 | ||||||||
Granted
during the period
|
- | $ | - | ||||||||
Forfeited
during the period
|
- | $ | - | ||||||||
Exercised
during the period
|
(28,949 | ) | $ | 8.26 | |||||||
Outstanding,
December 31, 2007
|
192,725 | $ | 8.24 | ||||||||
Granted
during the period
|
- | $ | - | ||||||||
Forfeited
during the period
|
(2,458 | ) | $ | 8.02 | |||||||
Exercised
during the period
|
(5,322 | ) | $ | 8.26 | |||||||
Outstanding,
December 31, 2008
|
184,945 | $ | 8.24 |
3.08
|
$
174,002
|
||||||
Exercisable,
December 31, 2008
|
184,945 | $ | 8.24 |
3.08
|
$
174,002
|
For the year ended December 31, 2008: | Net Earnings |
Common
Shares
|
Per
Share
Amount
|
||||||
Basic
earnings per common share
|
$ | 6,390,563 | 5,588,314 | $ | 1.14 | ||||
Effect
of dilutive securities:
|
|||||||||
Stock
options
|
- | 58,980 | |||||||
Diluted
earnings per common share
|
$ | 6,390,563 | 5,647,294 | $ | 1.13 | ||||
For the year ended December 31, 2007: | Net Earnings |
Common
Shares
|
Per
Share
Amount
|
||||||
Basic
earnings per common share
|
$ | 9,591,971 | 5,700,860 | $ | 1.68 | ||||
Effect
of dilutive securities:
|
|||||||||
Stock
options
|
- | 109,455 | |||||||
Diluted
earnings per common share
|
$ | 9,591,971 | 5,810,315 | $ | 1.65 | ||||
For the year ended December 31, 2006: | Net Earnings |
Common
Shares
|
Per
Share
Amount
|
||||||
Basic
earnings per common share
|
$ | 9,170,817 | 5,701,829 | $ | 1.61 | ||||
Effect
of dilutive securities:
|
|||||||||
Stock
options
|
- | 100,495 | |||||||
Diluted
earnings per common share
|
$ | 9,170,817 | 5,802,324 | $ | 1.58 |
(2)
|
Investment Securities
|
December
31, 2008
|
|||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||||
Mortgage-backed
securities
|
$ | 36,556,684 | 854,237 | 139,840 | 37,271,081 | ||||||||||
U.S.
government sponsored enterprises
|
55,222,788 | 3,266,198 | 2,324 | 58,486,662 | |||||||||||
State
and political subdivisions
|
26,648,553 | 459,546 | 134,525 | 26,973,574 | |||||||||||
Trust
preferred securities
|
1,250,000 | - | - | 1,250,000 | |||||||||||
Equity
securities
|
1,382,184 | - | 447,152 | 935,032 | |||||||||||
Total
|
$ | 121,060,209 | 4,579,981 | 723,841 | 124,916,349 | ||||||||||
December
31, 2007
|
|||||||||||||||
Amortized
Cost
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Estimated
Fair Value
|
||||||||||||
Mortgage-backed
securities
|
$ | 16,469,053 | 6,423 | 204,509 | 16,270,967 | ||||||||||
U.S.
government sponsored enterprises
|
75,155,693 | 1,839,143 | 3,035 | 76,991,801 | |||||||||||
State
and political subdivisions
|
25,856,311 | 250,483 | 201,406 | 25,905,388 | |||||||||||
Trust
preferred securities
|
250,000 | - | - | 250,000 | |||||||||||
Equity
securities
|
1,692,799 | 246,000 | 388,597 | 1,550,202 | |||||||||||
Total
|
$ | 119,423,856 | 2,342,049 | 797,547 | 120,968,358 |
December
31, 2008
|
|||||||||||||||||
Less
than 12 Months
|
12
Months or More
|
Total
|
|||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||||
Mortgage-backed
securities
|
$ | 10,017,250 | 139,840 | - | - | 10,017,250 | 139,840 | ||||||||||
U.S.
government sponsored enterprises
|
- | - | 614,289 | 2,324 | 614,289 | 2,324 | |||||||||||
State
and political subdivisions
|
2,748,094 | 75,172 | 2,373,145 | 59,353 | 5,121,239 | 134,525 | |||||||||||
Equity
securities
|
528,000 | 72,000 | 407,032 | 375,152 | 935,032 | 447,152 | |||||||||||
Total
|
$ | 13,293,344 | 287,012 | 3,394,466 | 436,829 | 16,687,810 | 723,841 | ||||||||||
December
31, 2007
|
|||||||||||||||||
Less
than 12 Months
|
12
Months or More
|
Total
|
|||||||||||||||
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
Fair
Value
|
Unrealized
Losses
|
||||||||||||
Mortgage-backed
securities
|
$ | 24,591 | 104 | 14,320,043 | 204,405 | 14,344,634 | 204,509 | ||||||||||
U.S.
government sponsored enterprises
|
- | - | 689,775 | 3,035 | 689,775 | 3,035 | |||||||||||
State
and political subdivisions
|
2,059,746 | 33,781 | 11,188,720 | 167,625 | 13,248,466 | 201,406 | |||||||||||
Equity
securities
|
425,620 | 88,134 | 278,581 | 300,463 | 704,201 | 388,597 | |||||||||||
Total
|
$ | 2,509,957 | 122,019 | 26,477,119 | 675,528 | 28,987,076 | 797,547 |
Amortized
Cost
|
Estimated
Fair Value
|
||||||
Due
within one year
|
$ | 5,904,880 | 6,015,036 | ||||
Due
from one to five years
|
44,167,067 | 46,804,084 | |||||
Due
from five to ten years
|
20,019,656 | 20,602,860 | |||||
Due
after ten years
|
13,029,738 | 13,288,256 | |||||
Mortgage-backed
securities
|
36,556,684 | 37,271,081 | |||||
Equity
securities
|
1,382,184 | 935,032 | |||||
Total
|
$ | 121,060,209 | 124,916,349 |
Fair
Value
Measurements
December
31, 2008
|
Level
1 Valuation
|
Level
2 Valuation
|
Level
3
Valuation
|
|||||
Investment
securities available for sale
|
$ | 124,916,349 | 935,032 | 122,731,317 | 1,250,000 | |||
Market
value of derivatives (in other assets)
|
$ | 4,980,701 | - | 4,980,701 | - |
Investment
Securities Available for Sale
|
||
Level
3 Valuation
|
||
Balance,
beginning of period
|
$ | 250,000 |
Change
in book value
|
- | |
Change
in gain/(loss) realized and unrealized
|
- | |
Purchases/(sales)
|
1,000,000 | |
Transfers
in and/or out of Level 3
|
- | |
Balance,
end of period
|
$ | 1,250,000 |
Change
in unrealized gain/(loss) for assets still held in Level 3
|
$ | 0 |
(3)
|
Loans
|
2008
|
2007
|
|||
Commercial
|
$ | 76,945,143 | 82,190,391 | |
Real
estate - mortgage
|
474,732,433 | 417,708,750 | ||
Real
estate - construction
|
216,187,811 | 209,643,836 | ||
Consumer
|
13,322,695 | 12,733,971 | ||
Total
loans
|
781,188,082 | 722,276,948 | ||
Less
allowance for loan losses
|
11,025,516 | 9,103,058 | ||
Total
net loans
|
$ | 770,162,566 | 713,173,890 |
Fair
Value Measurements December 31, 2008
|
Level
1
Valuation
|
Level
2
Valuation
|
Level
3
Valuation
|
Total
Gains/(Losses) for
the
Year Ended
December
31, 2008
|
||||||
Impaired
loans
|
$ | 7,073,045 | - | 5,902,848 | 1,170,197 | (345,000) | ||||
Other
real estate
|
$ | 1,866,971 | - | 1,866,971 | - | (165,630) |
2008
|
2007
|
2006
|
|||||||
Balance
at beginning of year
|
$ | 9,103,058 | 8,303,432 | 7,424,782 | |||||
Amounts
charged off
|
(3,146,939 | ) | (1,626,458 | ) | (1,958,551 | ) | |||
Recoveries
on amounts previously charged off
|
275,397 | 388,084 | 323,919 | ||||||
Provision
for loan losses
|
4,794,000 | 2,038,000 | 2,513,282 | ||||||
Balance
at end of year
|
$ | 11,025,516 | 9,103,058 | 8,303,432 |
(4)
|
Premises and Equipment
|
2008
|
2007
|
|||
Land
|
$ | 3,572,799 | 3,572,241 | |
Buildings
and improvements
|
14,709,218 | 14,700,078 | ||
Furniture
and equipment
|
17,156,190 | 15,496,630 | ||
Total
premises and equipment
|
35,438,207 | 33,768,949 | ||
Less
accumulated depreciation
|
17,141,312 | 15,534,556 | ||
Total
net premises and equipment
|
$ | 18,296,895 | 18,234,393 |
(5)
|
Time Deposits
|
2009
|
$ | 368,499,249 |
2010
|
23,010,748 | |
2011
|
12,797,281 | |
2012
|
1,156,885 | |
2013
and thereafter
|
1,092,480 | |
Total
|
$ | 406,556,643 |
(6)
|
Federal Home Loan Bank and Federal Reserve Bank
Borrowings
|
Maturity Date
|
Call Date
|
Rate
|
Rate Type
|
Amount
|
||||
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 | |||||
June
24, 2015
|
June
24, 2010
|
3.710% |
Convertible
|
5,000,000 | ||||
March
25, 2019
|
March
25, 2009
|
4.360% |
Convertible
|
5,000,000 | ||||
March
31, 2016
|
March
31, 2009 and every three
|
|||||||
months
thereafter
|
4.620% |
Convertible
|
5,000,000 | |||||
October
5, 2016
|
October
5, 2009
|
4.450% |
Convertible
|
5,000,000 | ||||
December
12, 2011
|
December
12, 2007 and every
|
4.210% |
Convertible
|
5,000,000 | ||||
three
months thereafter
|
||||||||
January
30, 2017
|
October
30, 2008 and every
|
4.500% |
Convertible
|
5,000,000 | ||||
three
months thereafter
|
||||||||
June
8, 2017
|
December
8, 2008 and every
|
4.713% |
Convertible
|
15,000,000 | ||||
three
months thereafter
|
||||||||
June
9, 2014
|
February
11, 2008 and every
|
4.685% |
Convertible
|
15,000,000 | ||||
month
thereafter
|
||||||||
July
11, 2017
|
January
11, 2008 and every
|
4.440% |
Convertible
|
5,000,000 | ||||
three
months thereafter
|
||||||||
July
24, 2017
|
April
24, 2008 and every
|
4.420% |
Convertible
|
5,000,000 | ||||
month
thereafter
|
||||||||
$ | 77,000,000 |
(7)
|
Junior Subordinated Debentures
|
(8)
|
Income Taxes
|
2008
|
2007
|
2006
|
|||||||
Current
|
$ | 3,698,453 | 5,819,347 | 5,785,926 | |||||
Deferred
|
(485,137 | ) | (479,806 | ) | (615,626 | ) | |||
Total
|
$ | 3,213,316 | 5,339,541 | 5,170,300 |
2008
|
2007
|
2006
|
|||||||
Pre-tax
income at statutory rates (34%)
|
$ | 3,265,319 | 5,076,714 | 4,875,980 | |||||
Differences:
|
|||||||||
Tax
exempt interest income
|
(313,083 | ) | (307,169 | ) | (280,826 | ) | |||
Nondeductible
interest and other expense
|
59,310 | 55,871 | 45,872 | ||||||
Cash
surrender value of life insurance
|
(82,654 | ) | (82,951 | ) | (75,021 | ) | |||
State
taxes, net of federal benefits
|
257,213 | 559,905 | 576,444 | ||||||
Other,
net
|
27,211 | 37,170 | 27,851 | ||||||
Total
|
$ | 3,213,316 | 5,339,541 | 5,170,300 |
2008
|
2007
|
|||
Deferred
tax assets:
|
||||
Allowance
for loan losses
|
$ | 4,280,854 | 3,531,076 | |
Amortizable
intangible assets
|
43,703 | 76,398 | ||
Accrued
retirement expense
|
1,184,373 | 819,246 | ||
Income
from non-accrual loans
|
36,973 | 50,219 | ||
Unrealized
loss on cash flow hedges
|
- | 20,525 | ||
Premises
and equipment
|
- | 9,757 | ||
Total
gross deferred tax assets
|
5,545,903 | 4,507,221 | ||
Deferred
tax liabilities:
|
||||
Deferred
loan fees
|
1,654,311 | 1,346,322 | ||
Premises
and equipment
|
194,463 | - | ||
Unrealized
gain on available for sale securities
|
1,501,966 | 601,583 | ||
Unrealized
gain on cash flow hedges
|
1,318,536 | - | ||
Other
|
84,100 | 12,482 | ||
Total
gross deferred tax liabilities
|
4,753,376 | 1,960,387 | ||
Net
deferred tax asset
|
$ | 792,527 | 2,546,834 |
Beginning
balance
|
$ | 5,615,899 |
New
loans
|
3,734,377 | |
Repayments
|
3,692,009 | |
Ending
balance
|
$ | 5,658,267 |
(10)
|
Commitments and Contingencies
|
Year ending December 31,
|
||
2009
|
$ | 769,569 |
2010
|
626,965 | |
2011
|
563,901 | |
2012
|
444,834 | |
2013
|
255,909 | |
Thereafter
|
1,893,313 | |
Total
minimum obligation
|
$ | 4,554,491 |
Contractual
Amount
|
||||
2008
|
2007
|
|||
Financial
instruments whose contract amount represent credit risk:
|
||||
Commitments
to extend credit
|
$ | 158,939,113 | 190,653,583 | |
Standby
letters of credit and financial guarantees written
|
$ | 4,316,012 | 3,894,259 |
(11)
|
Derivative Financial Instruments and Hedging
Transactions
|
Type
of Derivative
|
Notional
Amount
|
Contract
Rate
|
Premium
|
Year-to-date
Income (Net of Premium Amortization)
|
|||||||||
Interest
rate floor contact*
|
$ | - | - | $ | - | $ | 151,180 | ||||||
Interest
rate floor contact*
|
- | - | - | 455,766 | |||||||||
Interest
rate floor contact expiring 01/24/09
|
45,000,000 | 7.500% | 562,000 | 870,517 | |||||||||
Interest
rate floor contact expiring 06/02/09
|
35,000,000 | 8.000% | 399,000 | 914,017 | |||||||||
Interest
rate floor contact expiring 12/01/09
|
35,000,000 | 7.250% | 634,000 | 523,191 | |||||||||
Interest
rate swap contact expiring 06/01/11
|
50,000,000 | 6.245% | - | 488,451 | |||||||||
$ | 165,000,000 | $ | 1,595,000 | $ | 3,403,122 | ||||||||
*
Interest rate floor contracts expired during 2008
|
Asset
Derivatives
|
Liability
Derivatives
|
||||||||||
As
of December 31, 2008
|
As
of December 31, 2007
|
As
of December
31,
2008
|
As
of December
31,
2007
|
||||||||
Balance
Sheet
Location
|
Fair
Value
|
Balance
Sheet
Location
|
Fair
Value
|
Balance
Sheet
Location
|
Fair
Value
|
Balance
Sheet
Location
|
Fair
Value
|
||||
Interest
rate
|
|||||||||||
derivative
|
|||||||||||
contracts
|
Other assets
|
$ 4,981,000
|
Other assets
|
$ 1,907,000
|
N/A
|
$ -
|
N/A
|
$ -
|
(12)
|
Employee and Director Benefit
Programs
|
2008
|
||||
Benefit
obligation at beginning of period
|
$ | 1,528,488 | ||
Service
cost
|
180,162 | |||
Interest
cost
|
99,569 | |||
Benefits
paid
|
(28,931 | ) | ||
Benefit
obligation at end of period
|
$ | 1,779,288 |
2008
|
||||
Benefit
obligation
|
$ | 1,779,288 | ||
Fair
value of plan assets
|
- | |||
2008
|
||||
Funded
status
|
$ | (1,779,288 | ) | |
Unrecognized
prior service cost/benefit
|
- | |||
Unrecognized
net actuarial loss
|
- | |||
Net
amount recognized
|
$ | (1,779,288 | ) | |
Unfunded
accrued liability
|
$ | (1,779,288 | ) | |
Intangible
assets
|
- | |||
Net
amount recognized
|
$ | (1,779,288 | ) |
2008
|
||||
Service
cost
|
$ | 180,162 | ||
Interest
cost
|
99,569 | |||
Net
periodic cost
|
$ | 279,731 |
Weighted
average discount rate assumption used to
|
||
determine
benefit obligation
|
6.68%
|
Year
ending December 31,
|
|||
2009
|
$ | 58,713 | |
2010
|
$ | 62,690 | |
2011
|
$ | 86,858 | |
2012
|
$ | 199,328 | |
2013
|
$ | 204,735 | |
Thereafter
|
$ | 9,459,971 |
2008
|
2007
|
2006
|
||||||||||||
Shares
|
Weighted
Average
Price
of
Book
Value Shares
|
Shares
|
Weighted
Average
Price
of
Book
Value
Shares
|
Shares
|
Weighted
Average
Price
of
Book
Value
Shares
|
|||||||||
Outstanding,
beginning of period
|
97,377 | $ | 7.38 | 97,377 | $ | 7.38 | 97,377 | $ | 7.38 | |||||
Exercised
during the period
|
- | $ | - | - | $ | - | - | $ | - | |||||
Outstanding,
end of period
|
97,377 | $ | 7.38 | 97,377 | $ | 7.38 | 97,377 | $ | 7.38 | |||||
Number
of shares exercisable
|
89,580 | $ | 7.27 | 81,791 | $ | 7.89 | 73,998 | $ | 6.98 |
(13)
|
Regulatory Matters
|
Actual
|
For
Capital
Adequacy
Purposes
|
To
Be Well
Capitalized
Under
Prompt
Corrective
Action
Provisions
|
|||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
||||||||
(dollars
in thousands)
|
|||||||||||||
As
of December 31, 2008:
|
|||||||||||||
Total
Capital (to Risk-Weighted Assets)
|
|||||||||||||
Consolidated
|
$ | 125,871 | 14.90% | 67,589 | 8.00% | N/A | N/A | ||||||
Bank
|
$ | 93,530 | 11.10% | 67,411 | 8.00% | 84,264 | 10.00% | ||||||
Tier
1 Capital (to Risk-Weighted Assets)
|
|||||||||||||
Consolidated
|
$ | 115,332 | 13.65% | 33,794 | 4.00% | N/A | N/A | ||||||
Bank
|
$ | 82,991 | 9.85% | 33,705 | 4.00% | 50,558 | 6.00% | ||||||
Tier
1 Capital (to Average Assets)
|
|||||||||||||
Consolidated
|
$ | 115,332 | 12.40% | 37,192 | 4.00% | N/A | N/A | ||||||
Bank
|
$ | 82,991 | 8.94% | 37,137 | 4.00% | 46,421 | 5.00% | ||||||
As
of December 31, 2007:
|
|||||||||||||
Total
Capital (to Risk-Weighted Assets)
|
|||||||||||||
Consolidated
|
$ | 97,410 | 12.16% | 64,071 | 8.00% | N/A | N/A | ||||||
Bank
|
$ | 87,393 | 10.93% | 63,940 | 8.00% | 79,926 | 10.00% | ||||||
Tier
1 Capital (to Risk-Weighted Assets)
|
|||||||||||||
Consolidated
|
$ | 88,307 | 11.03% | 32,035 | 4.00% | N/A | N/A | ||||||
Bank
|
$ | 78,290 | 9.80% | 31,970 | 4.00% | 47,955 | 6.00% | ||||||
Tier
1 Capital (to Average Assets)
|
|||||||||||||
Consolidated
|
$ | 88,307 | 10.43% | 33,873 | 4.00% | N/A | N/A | ||||||
Bank
|
$ | 78,290 | 9.26% | 33,827 | 4.00% | 42,284 | 5.00% |
(14)
|
Shareholders’ Equity
|
(15)
|
Other Operating Expense
|
2008
|
2007
|
2006
|
||||
Advertising
|
$ | 1,076,461 | 988,116 | 772,917 |
(16)
|
Fair Value of Financial Instruments
|
2008
|
2007
|
|||||||
Carrying
Amount
|
Estimated
Fair
Value
|
Carrying
Amount
|
Estimated
Fair
Value
|
|||||
(dollars
in thousands)
|
||||||||
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 27,929 | 27,929 | 29,800 | 29,800 | |||
Investment
securities available for sale
|
$ | 124,916 | 126,539 | 120,968 | 120,968 | |||
Other
investments
|
$ | 6,303 | 6,303 | 6,434 | 6,434 | |||
Loans,
net
|
$ | 770,163 | 773,256 | 713,174 | 713,689 | |||
Cash
surrender value of life insurance
|
$ | 7,019 | 7,019 | 6,776 | 6,776 | |||
Derivative
instruments
|
$ | 4,981 | 4,981 | 1,907 | 1,907 | |||
Liabilities:
|
||||||||
Deposits
and demand notes payable
|
$ | 722,662 | 718,278 | 695,239 | 695,659 | |||
Securities
sold under agreements
|
||||||||
to
repurchase
|
$ | 37,501 | 37,501 | 27,583 | 27,583 | |||
Short-term
FRB borrowings
|
$ | 5,000 | 4,999 | - | - | |||
FHLB
borrowings
|
$ | 77,000 | 83,038 | 87,500 | 90,223 | |||
Junior
subordinated debentures
|
$ | 20,619 | 20,619 | 20,619 | 20,619 |
Balance
Sheets
|
||||
December
31, 2008 and 2007
|
||||
Assets
|
2008
|
2007
|
||
Cash
|
$ | 25,599,529 | 725,416 | |
Interest-bearing
time deposit
|
5,000,000 | 8,000,000 | ||
Investment
in subsidiaries
|
89,406,831 | 80,703,540 | ||
Investment
securities available for sale
|
1,811,123 | 1,374,581 | ||
Other
assets
|
415,483 | 251,724 | ||
Total
assets
|
$ | 122,232,966 | 91,055,261 | |
Liabilities and Shareholders'
Equity
|
||||
Accrued
expenses
|
$ | 485,540 | 334,679 | |
Junior
subordinated debentures
|
20,619,000 | 20,619,000 | ||
Shareholders'
equity
|
101,128,426 | 70,101,582 | ||
Total
liabilities and shareholders' equity
|
$ | 122,232,966 | 91,055,261 |
Statements
of Earnings
|
||||||||
For
the Years Ended December 31, 2008, 2007 and 2006
|
||||||||
Revenues:
|
2008
|
2007
|
2006
|
|||||
Dividends
from subsidiaries
|
$ | 1,929,455 | 4,811,203 | 3,855,556 | ||||
Interest
and dividend income
|
442,693 | 463,866 | 672,922 | |||||
Loss
on sale of securities
|
(327,013 | ) | (235,950 | ) | - | |||
Total
revenues
|
2,045,135 | 5,039,119 | 4,528,478 | |||||
Expenses:
|
||||||||
Interest
|
1,016,361 | 1,475,701 | 1,962,692 | |||||
Other
operating expenses
|
243,849 | 266,146 | 786,014 | |||||
Total
expenses
|
1,260,210 | 1,741,847 | 2,748,706 | |||||
Earnings
before income tax benefit and equity in
|
||||||||
undistributed
earnings of subsidiaries
|
784,925 | 3,297,272 | 1,779,772 | |||||
Income
tax benefit
|
389,200 | 514,800 | 705,800 | |||||
Earnings
before undistributed earnings in subsidiaries
|
1,174,125 | 3,812,072 | 2,485,572 | |||||
Equity
in undistributed earnings in subsidiaries
|
5,216,438 | 5,779,899 | 6,685,245 | |||||
Net
earnings
|
$ | 6,390,563 | 9,591,971 | 9,170,817 |
Statements
of Cash Flows
|
|||||||||
For
the Years Ended December 31, 2008, 2007 and 2006
|
|||||||||
2008
|
2007
|
2006
|
|||||||
Cash
flows from operating activities:
|
|||||||||
Net
earnings
|
$ | 6,390,563 | 9,591,971 | 9,170,817 | |||||
Adjustments
to reconcile net earnings to net
|
|||||||||
cash
provided by operating activities:
|
|||||||||
Amortization
|
- | - | 461,298 | ||||||
Book
value shares accrual
|
136,130 | 158,678 | 128,444 | ||||||
Equity
in undistributed earnings of subsidiaries
|
(5,216,438 | ) | (5,779,899 | ) | (6,685,245 | ) | |||
Deferred
income tax benefit
|
(52,855 | ) | (61,551 | ) | (49,520 | ) | |||
Loss
on sale of investment securities
|
327,013 | 235,950 | - | ||||||
Change
in:
|
|||||||||
Other
assets
|
(3,167 | ) | - | - | |||||
Accrued
income
|
(16,876 | ) | 1,603 | (1,421 | ) | ||||
Accrued
expense
|
14,731 | (253,748 | ) | 25,975 | |||||
Net
cash provided by operating activities
|
1,579,101 | 3,893,004 | 3,050,348 | ||||||
Cash
flows from investing activities:
|
|||||||||
Proceeds
from sales of investment securities available for sale
|
3,167 | - | (6,000,000 | ) | |||||
Purchases
of investment securities available for sale
|
(1,000,000 | ) | - | - | |||||
Net
change in interest-bearing time deposit
|
3,000,000 | - | (6,000,000 | ) | |||||
Purchases
of other investments
|
- | - | (600,000 | ) | |||||
Purchase
of equity in PEBK Capital Trust II
|
- | - | (619,000 | ) | |||||
Proceeds
from liquidation of PEBK Capital Trust I
|
- | - | 433,000 | ||||||
Net
cash used by investing activities
|
2,003,167 | - | (6,786,000 | ) | |||||
Cash
flows from financing activities:
|
|||||||||
Proceeds
from issuance of trust preferred securities
|
- | - | 20,619,000 | ||||||
Repayments
of trust preferred securities
|
- | - | (14,433,000 | ) | |||||
Proceeds
from issuance of preferred stock
|
25,054,000 | - | - | ||||||
Cash
dividends paid
|
(2,679,828 | ) | (2,331,203 | ) | (1,905,556 | ) | |||
Cash
paid in lieu of fractional shares
|
- | (3,355 | ) | (6,426 | ) | ||||
Common
stock repurchased
|
(1,126,275 | ) | (2,810,907 | ) | (425,000 | ) | |||
Proceeds
from exercise of stock options
|
43,948 | 330,997 | 1,014,425 | ||||||
Net
cash provided (used) by financing activities
|
21,291,845 | (4,814,468 | ) | 4,863,443 | |||||
Net
change in cash
|
24,874,113 | (921,464 | ) | 1,127,791 | |||||
Cash
at beginning of year
|
725,416 | 1,646,880 | 519,089 | ||||||
Cash
at end of year
|
$ | 25,599,529 | 725,416 | 1,646,880 |
Bank.
|
Peoples
Bank, Newton, North Carolina.
|
|
(i)
|
a
merger or consolidation in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the
state in which the Company is
incorporated;
|
(ii)
|
the
sale, transfer, or other disposition of all or substantially all of the
assets of the Company (including without limitation the capital stock of
the Company’s Subsidiaries);
|
(iii)
|
approval
by the Company’s shareholders of any plan or proposal for the complete
liquidation or dissolution of the
Company;
|
(iv)
|
any
reverse merger in which the Company is the surviving entity but in which
securities possessing more than fifty (50%) percent of the total combined
voting
|
|
power
of the Company’s outstanding securities are transferred to a person or
entity or persons or entities different from those that held such
securities immediately prior to such merger;
or
|
(v)
|
acquisition
by any person or entity or related group of persons or entities (other
than the Company or a Company-sponsored employee benefit plan) of
beneficiary ownership (within the meaning of Rule 13d-3 of the Exchange
Act) of securities possessing more than fifty (50%) percent of the total
combined voting power of the Company’s outstanding securities (whether or
not in a transaction also constituting a Change in
Control).
|
|
(i)
|
Unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result
in death or can be expected to last for a continuous period of not less
than 12 months, or
|
|
(ii)
|
By
reason of any medically determinable physical or mental impairment (which
can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months) receiving income replacement
benefits for a period of 3 or more months under an accident and health
plan covering employees of the Company and/or the Bank,
or
|
|
(iii)
|
Determined
to be disabled by the Social Security
Administration.
|
|
(i)
|
Such
individual must be a full time employee of the Company or a
Subsidiary. For this purpose, an individual shall be considered
to be an “employee” only if there exists between the Company or a
Subsidiary and the individual the legal and bona fide relationship of
employer and employee. In determining whether such relationship
exists, the regulations of the United States Treasury
Department
|
|
|
relating
to the determination of such relationship for the purpose of collection of
income tax at the source on wages shall be
applied.
|
|
(ii)
|
If
the Registration shall not have occurred, such individual must have such
knowledge and experience in financial and business matters that he or she
is capable of evaluating the merits and risks of the investment involved
in the receipt and/or exercise of a
Right.
|
|
(iii)
|
Such
individual, being otherwise an Eligible Employee under the foregoing
items, shall have been selected by the Committee as a person to whom a
Right or Rights shall be granted under the
Plan.
|
|
(i)
|
When
there is a public market for the Common Stock, the Fair Market Value shall
be determined by (A) the closing price for a share on the market trading
day on the date of the determination (and if a closing price was not
reported on that date, then the arithmetic mean of the closing bid and
asked prices at the close of the market on that date, and if these prices
were not reported on that date, then the closing price on the last trading
date on which a closing price was reported) on the stock exchange or
national market system that is the primary market for the Shares; and (B)
if the shares are not traded on such stock exchange or national market
system, the arithmetic mean of the closing bid and asked prices for a
share on the Nasdaq Stock Market for the day prior to the date of the
determination (and if these prices were not reported on that date, then on
the last date on which these prices were reported), in each case as
reported in The Wall Street Journal or such other source that the
Committee considers reliable in its exclusive
discretion.
|
|
(ii)
|
If
the Committee, in its exclusive discretion, determines that the foregoing
methods do not apply or produce a reasonable valuation, then Fair Market
Value shall be determined by an independent appraisal that satisfies the
requirements of Code Section 401(a)(28)(C) as of a date within twelve (12)
months before the date of the transaction for which the appraisal is used,
e.g., the date of grant of an Award (the “Appraisal”). If the
Committee, in its exclusive discretion, determines that the Appraisal does
not reflect information available after the date of the Appraisal that may
materially affect the value of the shares, then Fair Market Value shall be
determined by a new Appraisal.
|
|
(iii)
|
The
Committee shall maintain a written record of its method of determining
Fair Market Value.
|
|
(i)
|
The
employment relationship is treated as continuing intact while the Grantee
is on military leave, sick leave, or other bona fide leave of absence, if
the period of leave does not exceed six (6) months or, if longer, as long
as the employee’s right to reemployment with the Company, Bank, a Parent
or a Related Entity is provided by statute or contract. A leave
of absence is bona fide only if there is a reasonable expectation that the
employee will return to perform services for the Company, Bank, Parent, or
Related Entity. If the period of leave exceeds six (6) months
and the Grantee’s right to reemployment is not provided by statute or
contract, the employment relationship is deemed to terminate on the first
day immediately following the six (6) month
period;
|
(ii)
|
A
director or contractor has a separation from service upon the expiration
of the contract, and if there is more than one contract, all contracts,
under which the director or contractor performs services as long as the
expiration is a good faith and complete termination of the contractual
relationship; and
|
|
(iii)
|
If
a Grantee performs services in more than one capacity, the Grantee must
separate from service in all capacities as an employee, director, and
contractor. Notwithstanding the foregoing, if a Grantee
provides services both as an employee and a director, the services
provided as a director are not taken into account in determining whether
the Grantee has a separation from service as an employee under a
nonqualified deferred compensation plan in which the Grantee participates
as an employee and that is not aggregated under Section 409A with any plan
in which the Grantee participates as a director. In addition,
if a Grantee provides services both as an employee and a director, the
services provided as an employee are not taken into account in determining
whether the Grantee has a separation from service as a director under a
nonqualified deferred compensation plan in which the Grantee participates
as a director and that is not aggregated under Section 409A with any plan
in which the Grantee participates as an
employee.
|
|
(i)
|
On
the specified effective date of a Corporate Transaction or Change in
Control, each Award that is at the time outstanding automatically shall
become fully vested and exercisable and be released from any restrictions
on transfer (other than transfer restrictions applicable to ISOs) and
repurchase or forfeiture rights, immediately prior to the specified
effective
|
|
|
date
of such Corporate Transaction or Change in Control, for all the Shares at
the time represented by such Award (except to the extent that such
acceleration of exercisability would result in an “excess parachute
payment” within the meaning of Section 280G of the
Code). Notwithstanding the foregoing provisions, the Committee
may, in its exclusive discretion, provide as part of a Section 424
Corporate Transaction that any one or more of the foregoing provisions
shall not apply.
|
(ii)
|
On
the specified effective date of a Related Entity Disposition, for each
Grantee who on such specified effective date is engaged primarily in
service to the Related Entity that is the subject of the Related Entity
Disposition, each Award that is at the time outstanding automatically
shall become fully vested and exercisable and be released from any
restrictions on transfer (other than transfer restrictions applicable to
ISOs) and repurchase and forfeiture rights, immediately prior to the
specified effective date of such Related Entity Disposition, for all the
Shares at the time represented by such Award. Notwithstanding
the foregoing provisions, the Committee may, in its exclusive discretion,
provide as part of a Section 424 Corporate Transaction that any one or
more of the foregoing provisions shall not
apply.
|
(iii)
|
The
Committee may provide in any Award, Award Agreement, or as part of a
Section 424 Corporate Transaction, that if the requirements of Treas. Reg.
§1.424-1 (without regard to the requirement described in Treas. Reg.
§1.424-1(a)(2) that an eligible corporation be the employer of the
optionee) would be met if the stock right were an ISO, the substitution of
a new stock right pursuant to a Section 424 Corporate Transaction for an
outstanding stock right or the assumption of an outstanding stock right
pursuant to a Section 424 Corporate Transaction shall not be treated as
the grant of a new stock right or a change in the form of
payment. The requirement of Treas. Reg. §1.424-1(a)(5)(iii) is
deemed satisfied if the ratio of the exercise price to the Fair Market
Value of the Shares immediately after the substitution or assumption is
not greater than the ratio of the exercise price to the Fair Market Value
of the Shares immediately before the substitution or
assumption. In the case of a transaction described in Code
Section 355 in which the stock of the distributing corporation and the
stock distributed in the transaction are both readily tradable on an
established securities market immediately after the transaction, the
requirements of Treas. Reg. §1.424-1(a)(5) may be satisfied
by:
|
(1)
|
using
the last sale before or the first sale after the specified date as of
which such valuation is being made, the closing price on the last trading
day before or the trading day of a specified date, the
arithmetic
|
|
mean
of the high and low prices on the last trading day before or the trading
day of such specified date, or any other reasonable method using actual
transactions in such stock as reported by such market on a specified date,
for the stock of the distributing corporation and the stock distributed in
the transaction, provided the specified date is designated before such
specified date, and such specified date is not more than sixty (60) days
after the transaction;
|
(2)
|
using
the arithmetic mean of such market price on trading days during a
specified period designated before the beginning of such specified period,
when such specified period is not longer than thirty (30) days and ends no
later than sixty (60) days after the transaction;
or
|
(3)
|
using
an average of such prices during such prespecified period weighted based
on the volume of trading of such stock on each trading day during such
prespecified period.
|
|
(g) Notwithstanding anything in the Plan to the contrary, no
SAR shall contain any feature for the deferral of compensation other than
the right to receive compensation equal to the difference between the Base
Value on the date of grant and the Fair Market Value of the Share on the
date of Exercise.
|
Please
be sure to date and sign this proxy card in the box below.
|
Date
|
|