x |
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
|
NORTH
CAROLINA
|
56-2259050
|
(State
or other jurisdiction of Incorporation
|
(IRS
Employer Identification Number)
|
or
organization)
|
Page
No.
|
||
Part
I.
|
FINANCIAL
INFORMATION
|
|
Item
1 -
|
Financial
Statements (Unaudited)
|
|
Consolidated
Balance Sheets March 31, 2007 (unaudited) and December 31,
2006
|
3
|
|
Consolidated
Statements of Operations Three Month Periods Ended March 31,
2007 and 2006
(unaudited)
|
4
|
|
Consolidated
Statements of Cash Flows Three Months Ended March 31, 2007 and
2006
(unaudited)
|
5
|
|
Notes
to Consolidated Financial Statements
|
6
-
7
|
|
Item
2 -
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
8
-
21
|
Item
3 -
|
Quantitative
and Qualitative Disclosures about Market Risk
|
22
|
Item
4 -
|
Controls
and Procedures
|
22
|
Part
II.
|
Other
Information
|
|
Item
1 - Legal Proceedings
|
23
|
|
Item
1a - Risk Factors
|
23
|
|
Item
2 - Unregistered Sales of Equity Securities and Use of
Proceeds
|
23
|
|
Item
3 - Defaults Upon Senior Debt
|
23
|
|
Item
4 - Submission of Matters to a Vote of Security
Holders
|
23
|
|
Item
5 - Other Information
|
23
|
|
Item
6 - Exhibits
|
23
|
|
March
31, 2007
|
|
December
31,
|
|
||||
|
|
(Unaudited)
|
|
2006*
|
|||
|
|||||||
ASSETS
|
|||||||
Cash
and due from banks
|
$
|
12,730,827
|
$
|
14,295,053
|
|||
Interest-earning
deposits with banks
|
209,083
|
763,057
|
|||||
Federal
funds sold
|
13,158,000
|
92,000
|
|||||
Investment
securities available for sale at fair value
|
86,360,519
|
84,722,892
|
|||||
Loans
|
586,148,571
|
549,818,548
|
|||||
Allowance
for loan losses
|
(7,277,100
|
)
|
(6,945,000
|
)
|
|||
NET
LOANS
|
578,871,471
|
542,873,548
|
|||||
Accrued
interest receivable
|
3,262,650
|
3,045,840
|
|||||
Federal
Home Loan Bank stock
|
4,180,700
|
3,582,800
|
|||||
Bank
premises and equipment
|
6,709,507
|
5,907,664
|
|||||
Investment
in life insurance
|
8,857,869
|
5,683,493
|
|||||
Goodwill
|
30,225,549
|
30,225,549
|
|||||
Other
assets
|
6,911,308
|
6,717,324
|
|||||
TOTAL
ASSETS
|
$
|
751,477,483
|
$
|
697,909,220
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
LIABILITIES
|
|||||||
Deposits
|
|||||||
Demand
|
$
|
74,126,816
|
$
|
70,420,392
|
|||
Savings
|
95,744,462
|
78,379,431
|
|||||
Money
market and NOW
|
101,087,586
|
97,343,128
|
|||||
Time
|
319,050,421
|
295,738,729
|
|||||
TOTAL
DEPOSITS
|
590,009,285
|
541,881,680
|
|||||
Short-term
borrowings
|
18,000,000
|
24,451,000
|
|||||
Long-term
borrowings
|
55,248,000
|
45,248,000
|
|||||
Accrued
expenses and other liabilities
|
3,178,890
|
3,294,562
|
|||||
TOTAL
LIABILITIES
|
666,436,175
|
614,875,242
|
|||||
STOCKHOLDERS’
EQUITY
|
|||||||
Preferred
stock, no par value, 5,000,000 shares authorized, none
outstanding;
|
-
|
-
|
|||||
Common
stock, $1 par value, 20,000,000 shares authorized; 8,301,868
shares
outstanding March 31, 2007; 8,265,136 shares outstanding
December 31,
2006
|
8,301,868
|
8,265,136
|
|||||
Additional
paid-in capital
|
62,832,473
|
62,659,201
|
|||||
Retained
earnings
|
14,076,198
|
12,610,588
|
|||||
Accumulated
other comprehensive loss (Note D)
|
(169,231
|
)
|
(500,947
|
)
|
|||
TOTAL
STOCKHOLDER'S EQUITY
|
85,041,308
|
83,033,978
|
|||||
COMMITMENTS
(Note B)
|
|||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
751,477,483
|
$
|
697,909,220
|
2007
|
|
2006
|
|||||
INTEREST
INCOME
|
|||||||
Loans
|
$
|
11,575,394
|
$
|
6,433,325
|
|||
Investment
securities available for sale
|
1,060,455
|
663,212
|
|||||
Federal
funds sold and interest-earning deposits
|
121,396
|
4,628
|
|||||
TOTAL
INTEREST INCOME
|
12,757,245
|
7,101,165
|
|||||
INTEREST
EXPENSE
|
|||||||
Deposits
|
5,561,000
|
2,391,255
|
|||||
Short-term
borrowings
|
290,135
|
232,480
|
|||||
Long-term
debt
|
661,935
|
403,031
|
|||||
TOTAL
INTEREST EXPENSE
|
6,513,070
|
3,026,766
|
|||||
NET
INTEREST INCOME
|
6,244,175
|
4,074,399
|
|||||
PROVISION
FOR LOAN LOSSES
|
359,147
|
270,300
|
|||||
NET
INTEREST INCOME AFTER
|
|||||||
PROVISION
FOR LOAN LOSSES
|
5,885,028
|
3,804,099
|
|||||
NON-INTEREST
INCOME
|
|||||||
Mortgage
origination revenue and other loan fees
|
115,007
|
168,820
|
|||||
Fees
on deposit accounts
|
347,654
|
317,667
|
|||||
Earnings
on life insurance
|
83,470
|
56,345
|
|||||
Loss
on disposal of assets
|
(941
|
)
|
(127
|
)
|
|||
Other
|
83,690
|
52,970
|
|||||
TOTAL
NON-INTEREST INCOME
|
628,880
|
595,675
|
|||||
NON-INTEREST
EXPENSE
|
|||||||
Salaries
and employee benefits
|
2,404,298
|
1,569,109
|
|||||
Occupancy
and equipment
|
547,937
|
469,317
|
|||||
Data
processing
|
260,725
|
182,792
|
|||||
Other
|
1,007,438
|
649,608
|
|||||
|
|||||||
TOTAL
NON-INTEREST EXPENSE
|
4,220,398
|
2,870,826
|
|||||
INCOME
BEFORE INCOME TAXES
|
2,293,510
|
1,528,948
|
|||||
INCOME
TAX EXPENSE
|
827,900
|
546,500
|
|||||
NET
INCOME
|
$
|
1,465,610
|
$
|
982,448
|
|||
NET
INCOME PER COMMON SHARE (Note C)
|
|||||||
Basic
|
$
|
.16
|
$
|
.15
|
|||
Diluted
|
$
|
.15
|
$
|
.15
|
|||
WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING (Note C)
|
|||||||
Basic
|
9,093,392
|
6,364,850
|
|||||
Diluted
|
9,611,833
|
6,611,900
|
2007
|
2006
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
income
|
$
|
1,465,610
|
$
|
982,448
|
|||
Adjustments
to reconcile net income to net cash provided by
operating activities:
|
|||||||
Depreciation
|
178,961
|
164,297
|
|||||
Provision
for loan losses
|
359,147
|
270,300
|
|||||
Deferred
income taxes
|
-
|
86,168
|
|||||
Loss
on disposal of assets
|
941
|
127
|
|||||
Net
amortization (accretion) of premiums/discounts on
securities
|
(19,827
|
)
|
11,398
|
||||
Increase
in cash value of life insurance
|
(74,375
|
)
|
(49,502
|
)
|
|||
Stock
based compensation
|
41,812
|
36,366
|
|||||
Change
in assets and liabilities:
|
|||||||
(Increase)
in accrued interest receivable
|
(216,810
|
)
|
(145,037
|
)
|
|||
(Increase)
in other assets
|
(406,488
|
)
|
(682,514
|
)
|
|||
Increase
in accrued interest payable
|
53,775
|
64,718
|
|||||
(Decrease)
in other liabilities
|
(169,448
|
)
|
(95,631
|
)
|
|||
TOTAL
ADJUSTMENTS
|
(252,312
|
)
|
(339,310
|
)
|
|||
NET
CASH PROVIDED BY OPERATING ACTIVITIES
|
1,213,298
|
643,138
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Purchases
of securities available for sale
|
(3,446,358
|
)
|
(5,307,255
|
)
|
|||
Principal
repayments of securities available for sale
|
2,372,779
|
1,340,650
|
|||||
Purchase
of Federal Home Loan Bank stock
|
(597,900
|
)
|
(578,300
|
)
|
|||
Net
increase in loans
|
(36,357,071
|
)
|
(27,484,358
|
)
|
|||
Investment
in bank owned life insurance
|
(3,100,000
|
)
|
-
|
||||
Purchases
of bank premises and equipment
|
(981,745
|
)
|
(328,402
|
)
|
|||
NET
CASH USED BY INVESTING ACTIVITIES
|
(42,110,295
|
)
|
(32,357,665
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Net
increase in deposits:
|
|||||||
Noninterest-bearing
demand
|
3,706,424
|
3,049,495
|
|||||
Savings
|
17,365,031
|
2,745,488
|
|||||
Money
market and NOW
|
3,744,458
|
1,776,071
|
|||||
Time
deposits
|
23,311,692
|
19,912,091
|
|||||
Net
increase (decrease) in short-term borrowings
|
(6,451,000
|
)
|
(4,188,965
|
)
|
|||
Net
increase (decrease) in long-term debt
|
10,000,000
|
10,000,000
|
|||||
Proceeds
from stock options exercised
|
106,492
|
79,045
|
|||||
Excess
tax benefits from stock options exercised
|
61,700
|
18,200
|
|||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
|
51,844,797
|
33,391,425
|
|||||
NET
INCREASE IN CASH AND CASH EQUIVALENTS
|
10,947,800
|
1,676,898
|
|||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
15,150,110
|
9,471,507
|
|||||
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
$
|
26,097,910
|
$
|
11,148,405
|
Undisbursed
lines of credit
|
$
|
175,890,000
|
||
Stand-by
letters of credit
|
5,673,000
|
|||
Undisbursed
commitment to purchase additional
|
||||
investment
in Small Business Investment Corporation
|
563,000
|
Three
months ended March 31,
|
|||||||
2007
|
2006
|
||||||
Weighted
average number of shares used in computing
|
|||||||
basic
net income per share
|
9,093,392
|
6,364,850
|
|||||
Effect
of dilutive stock options
|
518,441
|
247,050
|
|||||
Weighted
average number of shares used in computing
|
|||||||
diluted
net income per share
|
9,611,833
|
6,611,900
|
Average
Balances, Interest and Average Yields/Cost
|
|||||||||||||||||||
(Dollars
in Thousands)
|
|||||||||||||||||||
For
the Three Months Ended March 31,
|
|||||||||||||||||||
2007
|
|
2006
|
|
||||||||||||||||
|
|
Average
|
|
|
|
Average
|
|
Average
|
|
|
|
Average
|
|
||||||
|
|
Balance
|
|
Interest
|
|
Yield/Cost
|
|
Balance
|
|
Interest
|
|
Yield/Cost
|
|
||||||
|
|
(Dollars
in thousands)
|
|||||||||||||||||
Interest-earnings
assets
|
|||||||||||||||||||
Loan
portfolio
|
$
|
565,827
|
$
|
11,575
|
8.30
|
%
|
$
|
343,818
|
$
|
6,433
|
7.59
|
%
|
|||||||
Investment
securities
|
88,901
|
1,061
|
4.77
|
%
|
59,718
|
663
|
4.44
|
%
|
|||||||||||
Fed
funds and other interest-earning assets
|
9,449
|
121
|
5.19
|
%
|
411
|
5
|
4.93
|
%
|
|||||||||||
Total
interest-earning assets
|
664,177
|
12,757
|
7.79
|
%
|
403,947
|
7,101
|
7.13
|
%
|
|||||||||||
Noninterest-bearing
assets
|
60,459
|
24,568
|
|||||||||||||||||
Total
Assets
|
$
|
724,636
|
$
|
428,515
|
|||||||||||||||
Interest-bearing
liabilities
|
|||||||||||||||||||
Interest-bearing
NOW
|
$
|
34,684
|
98
|
1.15
|
%
|
$
|
38,758
|
147
|
1.54
|
%
|
|||||||||
Money
market and savings
|
150,813
|
1,577
|
4.24
|
%
|
56,580
|
426
|
3.05
|
%
|
|||||||||||
Time
deposits
|
313,499
|
3,886
|
5.03
|
%
|
192,286
|
1,818
|
3.83
|
%
|
|||||||||||
Short-term
borrowings
|
21,818
|
290
|
5.32
|
%
|
20,147
|
233
|
4.69
|
%
|
|||||||||||
Long-term
debt
|
47,803
|
662
|
5.54
|
%
|
31,137
|
403
|
5.13
|
%
|
|||||||||||
Total
interest-bearing liabilities
|
568,617
|
6,513
|
4.65
|
%
|
338,908
|
3,027
|
3.62
|
%
|
|||||||||||
Non-interest
bearing deposits
|
68,649
|
45,515
|
|||||||||||||||||
Other
liabilities
|
3,125
|
1,622
|
|||||||||||||||||
Total
Liabilities
|
640,391
|
386,045
|
|||||||||||||||||
Stockholders'
Equity
|
84,245
|
42,470
|
|||||||||||||||||
Total
Liabilities & Stockholders' Equity
|
$
|
724,636
|
$
|
428,515
|
|||||||||||||||
Net
interest income
|
$
|
6,244
|
$
|
4,074
|
|||||||||||||||
Interest
rate spread
|
3.14
|
%
|
3.51
|
%
|
|||||||||||||||
Net
interest-margin
|
3.81
|
%
|
4.09
|
%
|
|||||||||||||||
|
|||||||||||||||||||
Percentage
of average interest-earning assets
|
|||||||||||||||||||
to
average interest-bearing liabilities
|
116.81
|
%
|
119.19
|
%
|
Rate/Volume
Analysis
|
||||||||||
Three
Months Ended March 31,
|
|
|||||||||
|
|
2007
vs. 2006
|
|
|||||||
|
|
(in
Thousands)
|
|
|||||||
|
|
Increase
(Decrease) Due to
|
|
|||||||
|
|
Volume
|
|
Rate
|
|
Total
|
||||
Interest
Income
|
||||||||||
Loan
portfolio
|
4,348
|
794
|
5,142
|
|||||||
Investment
Securities
|
334
|
64
|
398
|
|||||||
Fed
funds and other interest-earning assets
|
113
|
3
|
116
|
|||||||
Total
interest-earning assets
|
4,795
|
861
|
5,656
|
|||||||
Interest
Expense
|
||||||||||
Interest-bearing
NOW
|
(14
|
)
|
(36
|
)
|
(50
|
)
|
||||
Money
market and savings
|
847
|
303
|
1,150
|
|||||||
Time
deposits
|
1,325
|
744
|
2,069
|
|||||||
Short-term
borrowings
|
20
|
37
|
57
|
|||||||
Long-term
debt
|
217
|
43
|
260
|
|||||||
Total
interest-bearing liabilities
|
2,395
|
1,091
|
3,486
|
|||||||
Net
interest income
|
2,400
|
(230
|
)
|
2,170
|
At
March 31,
|
At
December 31
|
||||||||||||
2007
|
|
2006
|
|
2006
|
|
2005
|
|||||||
(Dollars
in thousands)
|
|||||||||||||
Nonaccrual
loans
|
$
|
604
|
$
|
19
|
$
|
135
|
$
|
26
|
|||||
Restructured
loans
|
-
|
-
|
-
|
-
|
|||||||||
Total
nonperforming loans
|
604
|
19
|
135
|
26
|
|||||||||
Real
estate owned
|
98
|
22
|
98
|
22
|
|||||||||
Repossessed
assets
|
14
|
-
|
-
|
-
|
|||||||||
Total
nonperforming assets
|
$
|
716
|
$
|
41
|
$
|
233
|
$
|
48
|
|||||
Accruing
loans past due
|
|||||||||||||
90
days or more
|
$
|
-
|
$
|
-
|
$
|
-
|
$
|
-
|
|||||
Allowance
for loan losses
|
7,277
|
4,621
|
6,945
|
4,351
|
|||||||||
Nonperforming
loans to
|
|||||||||||||
period
end loans
|
0.10
|
%
|
0.01
|
%
|
0.02
|
%
|
0.01
|
%
|
|||||
Allowance
for loan losses
|
|||||||||||||
to
period end loans
|
1.24
|
%
|
1.30
|
%
|
1.26
|
%
|
1.33
|
%
|
|||||
Allowance
for loan losses
|
|||||||||||||
to
nonperforming loans
|
1,204.61
|
%
|
24,078.05
|
%
|
5,144.96
|
%
|
16,960.60
|
%
|
|||||
Nonperforming
assets
|
|||||||||||||
to
total assets
|
0.10
|
%
|
0.01
|
%
|
0.03
|
%
|
0.01
|
%
|
|||||
Nonperforming
assets and loans
|
|||||||||||||
total
assets
|
0.10
|
%
|
0.01
|
%
|
0.03
|
%
|
0.01
|
%
|
Allocation
of Allowance for Loan Losses
|
|||||||||||||
At
March 31,
|
|
At
December 31,
|
|
||||||||||
|
|
2007
|
|
2006
|
|
||||||||
|
|
|
|
%
of Total
|
|
|
|
%
of Total
|
|
||||
|
|
Amount
|
|
Loans
(1)
|
|
Amount
|
|
Loans
(1)
|
|
||||
|
|
(Dollars
in thousands)
|
|||||||||||
Residential
real estate loans
|
$
|
121
|
3.48
|
%
|
$
|
121
|
3.67
|
%
|
|||||
Home
equity loans and lines
|
289
|
7.07
|
%
|
269
|
7.76
|
%
|
|||||||
Commercial
mortgage loans
|
4,028
|
55.25
|
%
|
3,920
|
55.36
|
%
|
|||||||
Construction
loans
|
1,591
|
21.50
|
%
|
1,379
|
19.99
|
%
|
|||||||
Commercial
and industrial loans
|
1,080
|
11.71
|
%
|
1,161
|
12.32
|
%
|
|||||||
Loans
to individuals
|
168
|
0.99
|
%
|
95
|
0.90
|
%
|
|||||||
Total
allowance
|
$
|
7,277
|
100.00
|
%
|
$
|
6,945
|
100.00
|
%
|
Changes
in Allowance for Loan Losses
|
|||||||
For
the Three-Month Period Ended March 31,
|
|||||||
2007
|
|
2006
|
|||||
(Dollars
in thousands)
|
|||||||
Balance
at the beginning of the year
|
$
|
6,945
|
$
|
4,351
|
|||
Charge-offs:
|
|||||||
Commercial
and industrial loans
|
28
|
-
|
|||||
Total
charge-offs
|
28
|
-
|
|||||
Recoveries
|
1
|
-
|
|||||
Net
charge-offs (recoveries)
|
27
|
-
|
|||||
Provision
for loan losses
|
359
|
270
|
|||||
Balance
at the end of the year
|
$
|
7,277
|
$
|
4,621
|
|||
Total
loans outstanding at period-end
|
$
|
586,149
|
$
|
355,806
|
|||
Average
loans outstanding for the period
|
$
|
565,827
|
$
|
343,818
|
|||
Allowance
for loan losses to
|
|||||||
total
loans outstanding
|
1.24
|
%
|
1.30
|
%
|
|||
Ratio
of net charge-offs to average loans outstanding
|
0.00
|
%
|
0.00
|
%
|
31.1 |
Certification
of Principal Executive Officer pursuant to Rule 13a -
14(a)
|
31.2 |
Certification
of Principal Financial Officer pursuant to Rule 13a -
14(a)
|
32.1 |
Certification
of Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted
pursuant
to Section 906 of the Sarbanes-Oxley Act of
2002
|
32.2 |
Certification
of Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
CRESCENT
FINANCIAL CORPORATION
|
||
|
|
|
Date: May 8, 2007 | By: | /s/ Michael G. Carlton |
Michael
G. Carlton
President
and Chief Executive Officer
|
||
Date: May 8, 2007 | By: | /s/ Bruce W. Elder |
Bruce
W. Elder
Principal
Financial Officer
|