Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
1 the little bank
2016 Annual Report
ANNUAL REPORT
2016
Proudly Serving Eastern NC For Over 18 Years
1 the little bank
2016 Annual Report
the little bank TABLE OF CONTENTS
Page No.
Letter To Our Shareholders………………………………………………………...…... 2
Who We Are……………………………………………………………………………. 3
Financial Statements
Financial Highlights…….……………………………………………………………. 4
Balance Sheets…….………………………………………………………………… .. 5
Statements of Operations…..………………………………….……………………… 6
Notes to Summary Financial Statements.………………….…………………………. 7-8
the little bank Executive Officers, Board of Directors, Branch & Stock Information……..9-10
Financial Information A complete 2016 Audited Financial Statement may be
obtained by contacting the little bank. Please request by
contacting Doyle M. Thigpen by mail at the little bank,
1011-A Red Banks Road, Greenville, NC 27858, or via
our website at www.thelittlebank.com — please
remember to give your return address information.
Annual Shareholders Meeting The annual meeting of shareholders of the little bank
will be held on May 18, 2017 at 10:00 a.m. at the Spirit
AeroSystems Composite Center of Excellence, 3800
Hwy 58 North, Kinston, NC.
Greenville, NC Branch
It’s our personal service that makes all the difference.
2 the little bank
2016 Annual Report
Dear little bank shareholders,
The little bank (the "Bank") board of directors and management are pleased to report 2016 results and a fifth consecutive year of
record “core” earnings. Outstanding loan quality, solid net interest margins, increased non-interest income and controlled expenses
were the drivers of our results.
The Bank continues to be in excellent financial condition. Capital and liquidity ratios are strong and our loan quality indicators are
excellent. As a result, the Bank was able to continue its policy of paying semi-annual cash dividends on its common stock. The Bank
paid out $552,000 in cash dividends to shareholders in 2016; the equivalent of $0.17 per share. The Bank also paid shareholders
another 5% stock dividend in 2016. Shareholders received an increase of 10.6% in total cash dividends, compared to 2015. In
addition, the Bank maintained its common stock repurchase program throughout 2016, purchasing 20,155 shares of common stock at
an average price of $12.46. Management and the board of directors will continue the common stock repurchase plan as it deems
beneficial to the Company and the shareholders.
Net income for the year decreased 1.2% to $3,085,000 or $0.92 per basic share. Return on average assets and average equity were
well above peer averages at .85% and 8.46%, respectively, for the year. Net income was impacted by merger related expenses of
$256,000 during the fourth quarter of 2016. Adjusted for merger expenses, “core” earnings for the year were up 5.52% to
$3,294,000. For the purposes of this letter, “core” earnings are defined as net income adjusted for non-recurring merger expenses.
Deposits increased 1.0% to $300.6 million over December 31, 2015 levels. Net interest income was up 2.6% to $11,958,000 while
noninterest income was up 12.2% to $1,753,000. Total noninterest expenses (adjusted for merger expenses) were up 4.0% for the
year. The Bank’s efficiency ratio, adjusted for merger related expense, of 65.3% continues to be among the best in our peer group.
While the beginning of 2017 has produced optimism for the banking industry and the economy in general, a combination of low
interest rates, mixed global economic trends, mixed economic data in our own country, and changing consumer buying patterns
continue to create a challenging environment for businesses to navigate. We are cautiously optimistic about the economy in general;
however, we will continue to maintain a disciplined approach to growth and overall risk management.
In the past we have talked about our industry’s need for consolidation. We have also talked about the fact that our Bank was poised
to take advantage of consolidation opportunities when they are available. In November we announced the acquisition of Oxford, NC
based Union Bank. The combined bank, which will be headquartered in Greenville, NC and operate under the Union Bank brand
name, will have approximately $670 million in total assets, $485 million in total loans, and $548 million in total deposits based on
reported amounts as of December 31, 2016. The combined bank will operate a 15 branch network, including locations in Cary,
Creedmoor, Goldsboro, Greenville, Henderson, Jacksonville, Kinston, LaGrange, Louisburg, New Bern, Oxford, Raleigh, Roxboro,
Wilmington and Youngsville. Although we refer you to the enclosed joint proxy statement / offering circular for details associated
with this proposed merger, the boards of directors and management of both banks are excited about the opportunity created by this
potential business combination.
Our final message is the same as last year in that we continue to believe that the industry is positioned for consolidation. We also
believe this consolidation will create a variety of opportunities which include attracting new customers, strengthening our sales force
and other strategic opportunities, including whole bank or branch acquisitions. The Bank is well positioned to take advantage of
these situations as they present themselves. We continue to be excited about the long-term prospects for community banking and the
markets we serve. The board of directors, management, and all of our associates would like to thank you for your continued support.
Sincerely,
Robert Lee Burrows, Jr. Vincent R. Jones
Chairman President & Chief Executive Officer
3 the little bank
2016 Annual Report
“At the little bank, it’s all about getting to know YOU.”
Founded in November of 1998, the little bank’s guiding principal is that old fashion personal service is as
valuable today as it was 100 years ago. At the little bank, we do want to know who you are. We pride
ourselves at being big enough to handle your needs and small enough to know what your needs are.
Local decision-making has been critical to our success, as has our ability to offer a full array of banking
products, providing everything from complicated commercial lending transactions to basic mortgage
financing for primary and secondary homes. Through technology, we are able to offer the convenience
of online and mobile banking services to our business and consumer customers, and save them time and
money through the use of our remote deposit services.
We are proud of the personalized service we provide to all of our customers.
“The little bank has always been there for me and my business. It’s great to have a relationship with
someone who cares.”
Stephen Howell
Owner, Howell Funeral Home & Crematory, Inc.
“At the little bank, you are treated like their #1 customer.”
Stephen P. Clary
Owner, Spunky McDoogle’s and 37th Street Pizzeria
“The little bank has been instrumental in my business growing over the last year. Wesley Barnes and
his team made my switch to the little bank from another banking institution very seamless. I greatly
appreciate the little bank and look forward to a wonderful relationship with them.”
Brian Corbett
Owner, Flagship Property Management, LLC
Convenience Technology Local Decisions
4 the little bank
2016 Annual Report
the little bank FINANCIAL HIGHLIGHTS Years Ended December 31, 2016, 2015 and 2014 (Dollars in thousands, except per share data)
2016 2015 2014
Earnings Summary:
Net Income $ 3,085 $ 3,122 $ 2,925
Per Common Share:
Net income basic $ .92 $ .92 $ .86
Net income diluted $ .91 $ .92 $ .85
Book value per common share $ 10.91 $ 10.30 $ 9.60
Selected Year-End Balances:
Loans, net of unearned income $246,522 $242,516 $246,147
Other interest earning assets 91,814 98,579 69,323
Total Assets 362,009 362,127 339,048
Deposits 300,574 297,621 277,381
Stockholders’ equity 36,597 34,655 32,533
Selected Performance Ratios:
Return on average assets .85% .89% .88%
Return on average equity 8.46% 9.20% 9.29%
Efficiency Ratio 67.20% 65.15% 63.89%
Asset Quality Ratios:
Allowance for loan losses to period-end loans 1.40% 1.44% 1.50%
Net loan charge-offs to average loans 0.02% 0.04% 0.13%
Capital Ratios:
Total risk-based capital 15.51% 14.76% 13.97%
Tier 1 risk-based capital 14.26% 13.51% 12.71%
Common equity Tier 1 to risk-based capital 14.26% 13.51% N/A
Tier 1 leverage ratio 10.21% 9.48% 9.58%
Equity to assets 10.11% 9.57% 9.60%
Number of Common Shares:
Basic 3,357,815 3,381,538 3,418,317
Diluted 3,375,281 3,394,955 3,431,360
Friendly Local Personal Service
5 the little bank
2016 Annual Report
the little bank BALANCE SHEETS December 31, 2016 and 2015 (Dollars in thousands)
ASSETS 2016 2015
Cash and due from banks $ 9,085 $ 7,842
Interest-earning deposits with banks 8,345 15,661
Federal funds sold 1,645 1,177
Investment securities available for sale 81,824 81,741
Loans 246,522 242,516
Allowance for loan losses (3,444) (3,496)
NET LOANS 243,078 239,020
Accrued interest receivable 934 950
Federal Home Loan Bank stock 1,346 1,623
Bank premises and equipment, net 4,464 4,831
Bank-owned life insurance 9,016 7,730
Other real estate owned 50 -
Other assets 2,222 1,552
TOTAL ASSETS $ 362,009 $ 362,127
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Demand $ 135,203 $ 123,092
Savings 6,625 5,327
Money market and NOW 53,396 54,770
Time 105,350 114,432
TOTAL DEPOSITS 300,574 297,621
Federal Home Loan Bank advances 24,000 29,000
Accrued interest payable 98 103
Accrued expenses and other liabilities 739 748
TOTAL LIABILITIES 325,411 327,472
Stockholders’ Equity:
Common stock, no par value, 24,000,000 shares authorized 31,507 29,590
Retained earnings 5,544 5,068
Accumulated other comprehensive income (loss) (453) (3)
TOTAL STOCKHOLDERS’ EQUITY 36,598 34,655
TOTAL LIABILITIES AND
STOCKHOLDERS’ EQUITY $ 362,009 $ 362,127
6 the little bank
2016 Annual Report
the little bank STATEMENTS OF OPERATIONS Years Ended December 31, 2016, 2015 and 2014 (Dollars in thousands, except per share data)
2016 2015 2014 INTEREST INCOME
Loans $ 11,521 $ 11,571 $ 11,445
Investment securities 1,599 1,325 1,212
Federal funds sold 9 4 4
Interest-bearing deposits with banks 112 59 34
TOTAL INTEREST INCOME 13,241 12,959 12,695
INTEREST EXPENSE
Money market, NOW and savings deposits 242 237 230
Time deposits 789 823 920
Advances from the Federal Home Loan Bank 252 244 202
TOTAL INTEREST EXPENSE 1,283 1,304 1,352
NET INTEREST INCOME 11,958 11,655 11,343
PROVISION (RECOVERY) FOR LOAN LOSSES - (100) 150
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 11,958 11,755 11,193
NONINTEREST INCOME
Service charges and fees on deposit accounts 518 485 463
Fees from presold mortgages 344 323 276
Other 891 755 669
TOTAL NONINTEREST INCOME 1,753 1,563 1,408
NONINTEREST EXPENSE
Salaries and employee benefits 5,338 5,193 5,028
Occupancy 901 908 809
Data processing 1,029 914 819
Marketing 152 175 171
Other 1,794 1,421 1,319
TOTAL NONINTEREST EXPENSE 9,214 8,611 8,146
INCOME BEFORE INCOME TAXES 4,497 4,707 4,455
INCOME TAXES 1,412 1,585 1,530
NET INCOME $ 3,085 $ 3,122 $ 2,925
NET INCOME PER COMMON SHARE
Basic $ .92 $ .92 $ .86
Diluted $ .91 $ .92 $ .85
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 3,357,815 3,381,538 3,418,317
Diluted 3,375,281 3,394,955 3,431,360
7 the little bank
2016 Annual Report
NOTES TO SUMMARY FINANCIAL STATEMENTS Organization and Nature of Operations
the little bank (the “Bank”) was incorporated as a North Carolina char tered savings bank on September 16, 1998 and
began operations on November 9, 1998. The Bank is headquartered in Kinston, North Carolina and has as its principal market
area, Lenoir, Wayne, Onslow, Craven, Pitt and New Hanover Counties. The Bank operates under the laws of North Carolina and
the rules and regulations of the Federal Deposit Insurance Corporation and the North Carolina Banking Commission. The Bank
undergoes periodic examinations by those regulatory authorities.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly
susceptible to significant change relate to the determination of the allowance for losses on loans and other real estate owned.
Investment Securities
Available-for-sale securities are reported at fair value and consist of bonds and notes not classified as trading securities nor as
held-to-maturity securities. Unrealized holding gains and losses on available-for-sale securities are reported as a net amount in
other comprehensive income, net of income taxes. Gains and losses on the sale of available-for-sale securities are recorded on
the trade date and determined using the specific-identification method. Declines in the fair value of individual held-to-maturity
and available-for-sale securities below their cost that are other than temporary would result in write-downs of the individual
securities to their fair value. Such write-downs would be included in earnings as realized losses. Premiums and discounts are
recognized in interest income using the interest method over the period to maturity.
Loans
Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at their
outstanding principal balance adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on
originated loans and unamortized premiums or discounts on purchased loans. Loan origination fees and certain direct origination
costs are capitalized and recognized as an adjustment to the yield over the lives of the related loans. The recognition of interest
income is discontinued when, in management's opinion, the collection of all or a portion of interest becomes doubtful or the loan
becomes ninety days delinquent. Loans are returned to accrual status when the factors indicating doubtful collectability cease to
exist and the loan has performed in accordance with its terms for a demonstrated period of time. The past due status of loans is
based on the contractual payment terms.
A loan is considered impaired when, based on current information or events, it is probable that a borrower will be unable to pay
all amounts due according to the contractual terms of the loan agreement. For loans determined to be impaired, the allowance is
based on discounted cash flows using the loan’s initial effective interest rate or the fair value of the collateral for certain
collateral dependent loans. When the ultimate collectability of the impaired loan’s principal is doubtful, all cash receipts are
applied to principal. Once the recorded principal balance has been reduced to zero, future cash receipts are first recorded as
recoveries of any amounts previously charged-off and are then applied to interest income, to the extent that any interest has been
foregone.
Loans, including impaired loans, are generally classified as nonaccrual if they are past due as to maturity or payment of
principal or interest for a period of more than 90 days, unless such loans are well secured and in the process of collection. Loans
that are current or past due less than 90 days may also be classified as nonaccrual if repayment in full of principal and/or interest
is in doubt (as determined by the contractual terms of the note). Loans may be returned to accrual status when all principal and
interest amounts contractually due (including arrearages) are reasonably assured of repayment within an acceptable period of
time, and there is a sustained period of repayment performance (generally a minimum of six months) by the borrower, in
accordance with the contractual terms.
While a loan (including an impaired loan) is classified as nonaccrual and the future collectability of the recorded loan balance is
doubtful, collections of interest and principal are generally applied as a reduction to the principal outstanding. When the future
collectability of the recorded loan balance is not in doubt, interest income may be recognized on a cash basis. In the case where a
nonaccrual loan had been partially charged-off, recognition of interest on a cash basis is limited to that which would have been
recognized on the recorded loan balance at the contractual interest rate. Receipts in excess of that amount are recorded as
recoveries to the allowance for loan losses until prior charge-offs have been fully recovered.
8 the little bank
2016 Annual Report
NOTES TO SUMMARY FINANCIAL STATEMENTS (continued) Allowance for Loan Losses The provision for loan losses is based upon management’s estimate of the amount needed to maintain the allowance for loan
losses at an adequate level. In making the evaluation of the adequacy of the allowance for loan losses, management gives
consideration to current and anticipated economic conditions, statutory examinations of the loan portfolio by regulatory
agencies, delinquency information and management’s internal review of the loan portfolio. Loans are considered impaired when
it is probable that all amounts due under the contractual terms of the loan will not be collected. The measurement of impaired
loans is generally based on the present value of expected future cash flows discounted at the historical effective interest rate, or
upon the fair value of the collateral if the loss is collateral dependent. If the recorded investment in the loan exceeds the measure
of fair value, a valuation allowance is established as a component of the allowance for loan losses. While management uses the
best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ
substantially from the assumptions previously used in making the evaluations. In addition, regulatory examiners may require the
Bank to recognize changes to the allowance for loan losses based on their judgments about information available to them at the
time of their examination. Historical loss calculations are based on a twelve quarter rolling average loss ratio calculation with
the most recent year’s loss history included in the model. The impact is to more quickly recognize and apply the most relevant
loss history for the loan portfolio.
Real Estate Owned
Real estate acquired through, or in lieu of, loan foreclosure is initially recorded at fair value, less estimated selling costs, at the
date of foreclosure establishing a new cost basis. After foreclosure, valuations of the property are periodically performed by
management and the real estate is carried at fair value minus the estimated cost to sell the property. Revenues and expenses
from operations and changes in the valuation allowance are charged to operations.
Earnings Per Common Share
Basic and diluted earnings per common share have been computed by dividing net income available to common stockholders for
each period by the weighted average number of shares of common stock outstanding during each period. Diluted earnings per
common share reflect additional common shares that would have been outstanding if dilutive potential common shares had been
issued, as well as any adjustment to income that would result from the assumed issuance. Potential common shares that may be
issued by the Bank relate solely to outstanding stock options. Diluted earnings per common share is computed by dividing net
income available to common stockholders by the weighted average number of common stock equivalents and other potentially
dilutive securities using the treasury stock method.
Regulatory Matters The Bank is subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary actions by regulators
that, if undertaken, could have a direct material effect on the Bank’s financial statements. As of December 31, 2016, the most
recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective
action. There are no conditions or events since that notification that management believes have changed the Bank’s category.
9 the little bank
2016 Annual Report
Kinston Branch
1101 W. Vernon Ave., Kinston, NC
252-939-3900
Greenville Branch
1011 Red Banks Road, Greenville, NC
252-215-3030
Goldsboro Branch
2406 E. Ash Street, Goldsboro, NC
919-583-8989
New Bern Branch
531 McCarthy Blvd., New Bern, NC
252-633-3585
La Grange Branch
101 S. Caswell Street, La Grange, NC
252-566-5600
Wilmington Branch
1427 Military Cutoff Rd., Suite 210
Wilmington, NC
910-509-7477
Jacksonville Branch
118 Western Blvd., Jacksonville, NC
910-353-8600
10 the little bank
2016 Annual Report
Executive Officers
Vincent R. Jones Doyle M. Thigpen President Executive Vice President
Chief Executive Officer Chief Financial Officer & Secretary
Anne R. Corey Susan W. Barrett Executive Vice President Executive Vice President
Chief Credit Officer Chief Operations Officer
Board of Directors
Robert Lee Burrows, Jr. C. Dwight Howard David Weil Chairman of the Board, President, Carolina Greenhouses, Carolina President,
the little bank Soil Company, Howard Development, Inc., Weil Enterprises, Real Estate
CEO of Banks Street Partners, LLC East Coast Modular, Inc., How Corp, Development & Management
LLC, and Eastern Warehouses, LLC
Vincent R. Jones Cameron McRae James T. Hill, Jr. President and President, Tands Inc., Bojangles Franchisee President
Chief Executive Officer, President, McRae & Associates, Inc., Tull Hill Farms, Inc.
the little bank Management Company for the Franchise
Dr. Raymond C. Ball, Jr. Marty Beam J.E. Blizzard Coastal Carolina Orthodontics President & Owner, President and Owner,
W.A. Moore & Co. Contract Flooring Design
Lawrence Davenport David Womack President, Chairman,
J.P. Davenport & Son, Inc. Womack Electric Supply Co., Inc.
Stock Transfer Agent
Broadridge Corporate Issuer Solutions, Inc.
51 Mercedes Way
Edgewood, NY 11717
Market for Common Stock
The little bank’s common stock is
traded on the OTCQX under
the symbol “LTLB.”
the little bank Leadership
Independent Auditors
Dixon Hughes Goodman LLP
1003 Red Banks Road
Greenville, NC 27858
PO Box 279, Kinston, NC 28501 www.thelittlebank.com
Member FDIC