-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KsNjW6X2CEn54BtGFFc19XnEBMHZ3Q8Q0/KC/nQ1w04lHFnM/MQ86/Zsk3+SYWnB fBzqYCm383fsjtGRaOq9Hw== 0001157523-04-004927.txt : 20040517 0001157523-04-004927.hdr.sgml : 20040517 20040517161406 ACCESSION NUMBER: 0001157523-04-004927 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOUR OAKS FINCORP INC CENTRAL INDEX KEY: 0001040799 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 562028446 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22787 FILM NUMBER: 04812604 BUSINESS ADDRESS: STREET 1: 6144 US 301 SOUTH STREET 2: P O BOX 309 CITY: FOUR OAKS STATE: NC ZIP: 27524 BUSINESS PHONE: 9199632177 10-Q 1 a4641453.txt FOUR OAKS FINCORP 10-Q DOCUMENTS U. S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [ X ] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2004 [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period ended --------------------- Commission File Number 0-22787 ----------- FOUR OAKS FINCORP, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) NORTH CAROLINA 56-2028446 - ------------------------------- ---------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 6114 U.S. 301 SOUTH, FOUR OAKS, NC 27524 - -------------------------------------------------------------------------------- (Address of principal executive office, including zip code) (919) 963-2177 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.) Yes No X --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Common Stock, 2,719,811 par value $1.00 per share (Number of shares outstanding (Title of Class) as of May 11, 2004) - 1 - Page No. -------- Part I. FINANCIAL INFORMATION Item 1 - Financial Statements (Unaudited) Consolidated Balance Sheets March 31, 2004 and December 31, 2003.......................... 3 Consolidated Statements of Income Three Months Ended March 31, 2004 and 2003.................... 4 Consolidated Statements of Comprehensive Income Three Months Ended March 31, 2004 and 2003.................... 5 Consolidated Statement of Shareholders' Equity Three Months Ended March 31, 2004............................. 6 Consolidated Statements of Cash Flows Three Months Ended March 31, 2004 and 2003.................... 7 Notes to Consolidated Financial Statements.................... 8 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.......................................... 10 Item 3 - Quantitative and Qualitative Disclosure About Market Risk...... 12 Item 4 - Controls and Procedures ....................................... 13 Part II. Other Information Item 6 - Exhibits and Reports on Form 8-K............................... 13 - 2 - Part I. Financial Information Item 1 - Financial Statements
FOUR OAKS FINCORP, INC. CONSOLIDATED BALANCE SHEETS =================================================================================================================== March 31, 2004 December 31, (Unaudited) 2003* ------------------ ----------------- ASSETS (In thousands) Cash and due from banks $ 11,384 $ 10,548 Interest-earning deposits 5,332 5,277 Investment securities available for sale 44,505 38,203 Loans 289,980 272,623 Allowance for loan losses (3,865) (3,430) ------------------ ----------------- Net loans 286,115 269,193 Accrued interest receivable 1,741 1,893 Bank premises and equipment, net 10,413 10,582 FHLB stock 2,150 1,923 Other assets 4,813 4,102 ------------------ ----------------- Total assets $ 366,453 $ 341,721 ================== ================= LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing demand $ 52,999 $ 50,829 Money market and NOW accounts 51,632 43,927 Savings 13,455 13,038 Time deposits, $100,000 and over 89,311 85,100 Other time deposits 77,927 80,024 ------------------ ----------------- Total deposits 285,324 272,918 Borrowings 43,161 33,160 Accrued interest payable 1,299 1,284 Other liabilities 2,173 1,479 ------------------ ----------------- Total liabilities 331,957 308,841 ------------------ ----------------- Shareholders' equity: Common stock; $1.00 par value, 5,000,000 shares authorized; 2,713,424 and 2,676,263 shares issued and outstanding at March 31, 2004 and December 31, 2003, respectively 2,713 2,676 Additional paid-in capital 8,677 8,029 Retained earnings 22,395 21,867 Accumulated other comprehensive income 711 308 ------------------ ----------------- Total shareholders' equity 34,496 32,880 ------------------ ----------------- Total liabilities and shareholders' equity $ 366,453 $ 341,721 ================== ================= * Derived from audited consolidated financial statements. The accompanying notes are an integral part of the consolidated financial statements.
- 3 -
FOUR OAKS FINCORP, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, ---------------------------- 2004 2003 ------------ ------------ (In thousands, except per share data) Interest income: Loans, including fees $ 4,640 $ 4,031 Investment securities: Taxable 300 427 Tax-exempt 51 55 Dividends 22 25 Interest-earning deposits 5 21 ------------ ------------ Total interest income 5,018 4,559 ------------ ------------ Interest expense: Deposits 942 1,274 Borrowings 396 381 ------------ ------------ Total interest expense 1,338 1,655 ------------ ------------ Net interest income 3,680 2,904 Provision for loan losses 568 343 ------------ ------------ Net interest income after provision for loan losses 3,112 2,561 ------------ ------------ Non-interest income: Service charges on deposit accounts 496 443 Other service charges, commissions and fees 307 308 Gain on sale of investment securities available for sale 56 165 Increase in cash surrender value of life insurance 49 - ------------ ------------ Total non-interest income 908 916 ------------ ------------ Non-interest expense: Salaries 1,323 1,165 Employee benefits 293 273 Occupancy expenses 135 110 Equipment expenses 276 283 Professional and consulting fees 152 171 Other taxes and licenses 62 60 Merchant fees 65 68 Other operating expenses 484 416 ------------ ------------ Total non-interest expense 2,790 2,546 ------------ ------------ Income before income taxes 1,230 931 Income taxes 431 303 Net income $ 799 $ 628 ============ ============ Net income per common share: Basic and diluted $ .30 $ .23 ============ ============ The accompanying notes are an integral part of the consolidated financial statements.
- 4 -
Four Oaks Fincorp, Inc. Consolidated Statements of Comprehensive Income (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, ---------------------------- 2004 2003 ------------ ------------ (Amounts in thousands) Net income $ 799 $ 628 ------------ ------------ Other comprehensive income: Securities available for sale: Unrealized holding gains on available for sale securities 371 280 Tax effect (147) (114) Reclassification of gains recognized in net income (56) (165) Tax effect 22 66 ------------ ------------ Net of tax amount 190 67 ------------ ------------ Cash flow hedging activities: Unrealized holding gains on cash flow hedging activities 353 - Tax effect (140) - ------------ ------------ Net of tax amount 213 - ------------ ------------ Total other comprehensive income 403 67 ------------ ------------ Comprehensive income $ 1,202 $ 695 ============ ============ The accompanying notes are an integral part of the consolidated financial statements.
- 5 -
Four Oaks Fincorp, Inc. Consolidated Statement of Shareholders' Equity (unaudited) - ------------------------------------------------------------------------------------------------------------------- Accumulated Common stock Additional other Total ---------------------- paid-in Retained comprehensive shareholders' Shares Amount capital earnings income equity --------- ----------- ----------- ------------ ------------- ------------- (Amounts in thousands, except share and per share data) Balance, December 31, 2003 2,676,263 $ 2,676 $ 8,029 $ 21,867 $ 308 $ 32,880 Comprehensive income: Net income - - - 799 - 799 Other comprehensive income - - - - 403 403 Common stock issued pursuant to: Exercise of stock options 37,161 37 609 - - 646 Current income tax benefit - - 39 - - 39 Cash dividends of $.10 per share - - - (271) - (271) --------- ----------- ----------- ------------ ------------ ------------ Balance, March 31, 2004 2,713,424 $ 2,713 $ 8,677 $ 22,395 $ 711 $ 34,496 ========= =========== =========== ============ ============ ============ The accompanying notes are an integral part of the consolidated financial statements.
- 6 -
FOUR OAKS FINCORP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - ------------------------------------------------------------------------------------------------------------------- Three Months Ended March 31, ---------------------------- 2004 2003 ------------ ------------ (In thousands) Operating activities: Net income $ 799 $ 628 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 568 343 Provision for depreciation and amortization 251 219 Net amortization of bond premiums and discounts 51 160 Gain on sale of securities (56) (165) Gain on sale of foreclosed assets - (4) Increase in cash surrender value of life insurance (49) - Changes in assets and liabilities: Increase in other assets (295) (391) Decrease in interest receivable 152 152 Increase (decrease) in other liabilities 643 (526) Increase (decrease) in interest payable 15 (252) ------------ ------------ Net cash provided by operating activities 2,079 164 ------------ ------------ Investing activities: Proceeds from sales and calls of securities available for sale 11,147 21,393 Proceeds from maturities of securities available for sale 2,826 - Purchase of securities available for sale (19,955) (14,049) Net increase in loans (17,773) (7,550) Purchase of bank premises and equipment (78) (341) Purchase of Federal Home Loan Bank stock (227) - Proceeds from sales of foreclosed assets - 248 ------------ ------------ Net cash used in investment activities (24,060) (299) ------------ ------------ Financing activities: Net proceeds from borrowings 10,001 995 Net increase in deposit accounts 12,496 4,841 Proceeds from issuance of common stock 646 419 Purchase and retirement of common stock - (270) Cash dividends (271) (237) ------------ ------------ Net cash provided by financing activities 22,872 5,748 ------------ ------------ Increase in cash and cash equivalents 891 5,613 Cash and cash equivalents at beginning of period 15,825 19,054 ------------ ------------ Cash and cash equivalents at end of period $ 16,716 $ 24,667 ============ ============ The accompanying notes are an integral part of the consolidated financial statements.
- 7 - FOUR OAKS FINCORP, INC. Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- NOTE 1 - BASIS OF PRESENTATION In management's opinion, the financial information contained in the accompanying consolidated financial statements, which is unaudited, reflects all adjustments (consisting solely of normal recurring adjustments) necessary for a fair presentation of the financial information as of and for the three month periods ended March 31, 2004 and 2003, in conformity with accounting principles generally accepted in the United States of America. The consolidated financial statements include the accounts of Four Oaks Fincorp, Inc. (the "Company") and its wholly-owned subsidiaries, Four Oaks Bank & Trust Company (the "Bank"), and Four Oaks Mortgage Services, LLC, a mortgage origination subsidiary. All significant intercompany transactions and balances have been eliminated in consolidation. Operating results for the three month period ended March 31, 2004 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2004. The organization and business of the Company, accounting policies followed by the Company and other information are contained in the notes to the consolidated financial statements filed as part of the Company's annual report on Form 10-KSB for the year ended December 31, 2003. This quarterly report should be read in conjunction with such annual report. NOTE 2 - NET INCOME PER SHARE Basic and diluted net income per common share is computed based on the weighted average number of shares outstanding during each period after retroactively adjusting for a 5-for-4 stock split paid on November 10, 2003. Diluted net income per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the net income of the Company. Basic and diluted net income per common share have been computed based upon net income as presented in the accompanying consolidated statements of income divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below: Three Months Ended March 31, ---------------------------- 2004 2003 ------------ ------------ Weighted average number of common shares used in computing basic net income per share 2,693,293 2,682,703 Effect of dilutive stock options 13,584 6,961 ------------ ------------ Weighted average number of common shares and dilutive potential common shares used in computing diluted net income per share 2,706,877 2,689,664 ============ ============ - 8 - FOUR OAKS FINCORP, INC. Notes to Consolidated Financial Statements - -------------------------------------------------------------------------------- NOTE 3 - STOCK COMPENSATION PLANS SFAS No. 123, Accounting for Stock-Based Compensation, encourages all entities to adopt a fair value based method of accounting for employee stock compensation plans, whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. However, it also allows an entity to continue to measure compensation cost for those plans using the intrinsic value based method of accounting prescribed by Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, whereby compensation cost is the excess, if any, of the quoted market price of the stock at the grant date (or other measurement date) over the amount an employee must pay to acquire the stock. Stock options issued under the Company's stock option plans have no intrinsic value at the grant date as they are granted with an exercise price equal to the fair market value on that date and, under Opinion No. 25, no compensation cost is recognized for them. The Company has elected to continue with the accounting methodology in Opinion No. 25 and, as a result, has provided the following pro forma disclosures of net income and earnings per share and other disclosures as if the fair value based method of accounting had been applied. Three Months Ended March 31, ----------------------- 2004 2003 --------- -------- (Amounts in thousands, except per share data) Net income: As reported $ 799 $ 628 Deduct:Total stock-based employee compensation expense determined under fair value method for all awards, net of related tax effects (15) (14) --------- -------- Pro forma $ 784 $ 614 ========= ======== Basic earnings per share: As reported $ .30 $ .23 Pro forma .29 .23 Diluted earnings per share: As reported $ .30 $ .23 Pro forma .29 .23 NOTE 4 - COMMITMENTS At March 31, 2004, loan commitments were as follows (in thousands): Commitment to extend credit $ 52,940 Undisbursed lines of credit 20,026 Letters of credit 1,238 - 9 - ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion provides information about the major components of the financial condition and results of operations of the Company and its subsidiaries and should be read in conjunction with our Consolidated Financial Statements and Notes thereto. Comparison of Financial Condition at March 31, 2004 and December 31, 2003 During the three months ended March 31, 2004, the Company's total assets grew from $341.7 million at December 31, 2003 to $366.5 million, an increase of $24.8 million or 7.25%. This increase in our assets resulted primarily from the increase in our net loans of $16.9 million from $269.2 million at December 31, 2003 to $286.1 million at March 31, 2004. The growth in our loan portfolio resulted primarily from increases in our loans secured by real estate, which increased $17.9 million. In addition, our liquid assets, consisting of cash and cash equivalents and investment securities available for sale, experienced a net increase of $6.6 million. This growth in our assets was funded by increases in both deposits from our customers and borrowings, which increased by $12.4 million and $10.0 million, respectively. Deposits continue to be our primary funding source. During the three months ended March 31, 2004, we had an increase in deposits from our customers of $12.4 million, from $272.9 million at December 31, 2003 to $285.3 million. This increase occurred primarily within our demand deposit accounts, which increased by $10.3 million during the quarter. Also during the current year quarter, our borrowings, which consist almost entirely of advances from the Federal Home Loan Bank, increased $10.0 million to $43.2 million. Total shareholders' equity increased $1.6 million from $32.9 million at December 31, 2003 to $34.5 million at March 31, 2004. This increase in shareholders' equity resulted principally from income from operations during the period of $799,000, net proceeds from the exercise of stock options and employee stock purchases in the amount of $685,000, and increases in other comprehensive income in the amount of $403,000. Offsetting these increases were dividends paid to our shareholders of $271,000. At March 31, 2004, both the Company and the Bank were considered to be well capitalized, as such term is defined in applicable federal regulations. Results of Operations for the Three Months Ended March 31, 2004 and 2003 Net Income. Net income for the three months ended March 31, 2004 was $799,000, or $.30 basic per share, as compared with net income of $628,000 or $.23 basic per share for the three months ended March 31, 2003, an increase of $171,000 or $.07 per share. This increase resulted primarily from an increase in the Company's net interest income for the three months ended March 31, 2004 of $776,000 which was partially offset by increases of $225,000 and $244,000 in the provision for loan losses and our non-interest expenses, respectively. Net Interest Income. Like most financial institutions, the primary component of earnings for the Bank is net interest income. Net interest income is the difference between interest income, principally from loan and investment securities portfolios, and interest expense, principally on customer deposits and borrowings. Changes in net interest income result from changes in volume, spread and margin. For this purpose, volume refers to the average dollar level of interest-earning assets and interest-bearing liabilities, spread refers to the difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities and margin refers to net interest income divided by average interest-earning assets. Margin is influenced by the level and relative mix of interest-earning assets and interest-bearing liabilities, as well as by levels of non-interest-bearing liabilities and capital. - 10 - Net interest income for the three months ended March 31, 2004 was $3.7 million, an increase of $776,000 compared to the first quarter of 2003, which resulted primarily from the increase in the level of our average interest-earning assets relative to the increase in the level of our average interest-bearing liabilities during the quarter. Our average interest-earning assets increased $36.8 million for the three months ended March 31, 2004 compared to the same period in 2003, while during the same period, our average interest-bearing liabilities increased $22.4 million, thereby resulting in an increase in level of our net interest-earning assets during the current year period of $14.4 million. In addition, subsequent to the first quarter of 2003, the Bank entered into an interest rate swap agreement that was used to hedge prime-based loans. This interest rate swap increased interest income by $111,000 for the three months ended March 31, 2004. Also, during the first quarter of 2004, the Bank utilized interest rate swaps to hedge its exposure to changes in the interest rates related to a $10.0 million notional amount of brokered deposits. This interest rate swap decreased interest expense by $44,000 for the quarter. All of the aforementioned factors combined to increase our net interest margin by 50 basis points from 4.06% in the 2003 quarter to 4.56% in the current year quarter. Provision for Loan Losses. The provision for loan losses was $568,000 and $343,000 for the three months ended March 31, 2004 and 2003, respectively, an increase of $225,000. This increase in the provision resulted largely from an increase of $240,000 during the period as a result of an unsecured overdraft related to a discontinued product. There was $133,000 of net loan charge-offs during the three months ended March 31, 2004 compared to $243,000 of net charge-offs in the first quarter of 2003. Non-performing loans aggregated $972,000 at March 31, 2004, decreasing from the $1.1 million at December 31, 2003, while the allowance for loan losses, expressed as a percentage of gross loans, was 1.33% and 1.25% at March 31, 2004 and December 31, 2003, respectively. This increase in the allowance relative to our gross loans resulted principally from the unsecured overdraft discussed above. Management believes that the allowance is adequate to absorb probable losses inherent in the loan portfolio. Non-Interest Income. Non-interest income decreased $8,000 for the three months ended March 31, 2004 to $908,000 as compared to $916,000 for the same period in 2003. There were no significant changes in any of the categories of income that comprise our total non-interest income. Non-Interest Expense. Non-interest expense increased $244,000 to $2.8 million for the three months ended March 31, 2004 compared to $2.5 million for the three months ended March 31, 2004. This increase was primarily due to an increase in salaries and employee benefits of $178,000, which resulted from normal salary adjustments, the addition of new personnel, and rising insurance costs. The remaining non-interest expenses increased by $66,000 due to the Company's overall asset growth. Provision for Income Taxes. The Company's provision for income taxes, as a percentage of income before income taxes, was 35.0% and 32.5% for the three months ended March 31, 2004 and 2003, respectively. - 11 - Liquidity and Capital Resources Our liquidity position is primarily dependent upon the Bank's need to respond to loan demand, the short-term demand for funds caused by withdrawals from deposit accounts (other than time deposits) and the liquidity of its assets. The Bank's primary liquidity sources include cash and amounts due from other banks, federal funds sold, and U.S. Government Agency and other short-term investment securities. In addition, the Bank has the ability to borrow funds from the Federal Reserve Bank and the Federal Home Loan Bank of Atlanta and to purchase federal funds from other financial institutions. Our management believes that our liquidity sources are adequate to meet our operating needs and the operating needs of the Bank for the next eighteen months. Total shareholders' equity was $34.5 million or 9.4% of total assets at March 31, 2004 and $32.9 million or 9.6% of total assets at December 31, 2003. Forward Looking Information Information set forth in this Quarterly Report on Form 10-Q, under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains various "forward looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements represent our judgment concerning the future and are subject to risks and uncertainties that could cause our actual operating results and financial position to differ materially. Such forward looking statements can be identified by the use of forward looking terminology, such as "may," "will," "expect," "anticipate," "estimate," or "continue" or the negative thereof, or other variations thereof, or comparable terminology. We caution that any such forward looking statements are further qualified by important factors that could cause our actual operating results to differ materially from those in the forward looking statements, including, without limitation, the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates on the level and composition of deposits, the effects of competition from other financial institutions, the failure of assumptions underlying the establishment of the allowance for loan losses, the low trading volume of our common stock, other considerations described in connection with specific forward looking statements and other cautionary elements specified in our periodic filings with the Securities and Exchange Commission, including without limitation, our Annual Report on Form 10-KSB, Quarterly Reports on Form 10-Q, and current Reports on Form 8-K. Item 3 - Quantitative and Qualitative Disclosure About Market Risk - ------------------------------------------------------------------ Not applicable. - 12 - Item 4 - Controls and Procedures - -------------------------------- As required by paragraph (b) of Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), an evaluation was carried out under the supervision and with the participation of the Company's management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that as of the end of the period covered by this report, the Company's disclosure controls and procedures are effective, in that they provide reasonable assurances that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods required by the Commission's rules and forms. There have been no changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits. Exhibit Description - ------- ----------- 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-4(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification by the 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 by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K. On February 2, 2004, the Company filed a Form 8-K with the SEC reporting fourth quarter and annual results for fiscal year ended December 31, 2003. - 13 - SIGNATURES Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FOUR OAKS FINCORP, INC. Date: May 17, 2004 By: /s/ Ayden R. Lee, Jr. --------------------------------- Ayden R. Lee, Jr. President and Chief Executive Officer Date: May 17, 2004 By: /s/ Nancy S. Wise --------------------------------- Nancy S. Wise Senior Vice President and Chief Financial Officer - 14 - Exhibit Index ------------- Exhibit No. Description - ----------- ----------- 31.1 Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification by the 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 by the Chief Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 EX-31.1 2 a4641453ex311.txt FOUR OAKS FINCORP, INC. EXHIBIT 31.1 Exhibit 31.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER Pursuant to Rule 13a-14(a) or Rule 15d-14(a) As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Ayden R. Lee, Jr., certify that: (1) I have reviewed this quarterly report on Form 10-Q of Four Oaks Fincorp, Inc.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) {Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986}; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 17, 2004 /s/ Ayden R. Lee, Jr. -------------------------- Ayden R. Lee, Jr. Chief Executive Officer EX-31.2 3 a4641453ex312.txt FOUR OAKS FINCORP, INC. EXHIBIT 31.2 Exhibit 31.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER Pursuant to Rule 13a-14(a) or Rule 15d-14(a) As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Nancy S. Wise, certify that: (1) I have reviewed this quarterly report on Form 10-Q of Four Oaks Fincorp, Inc.; (2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; (3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; (4) The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) {Paragraph omitted pursuant to SEC Release Nos. 33-8238 and 34-47986}; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and (5) The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 17, 2004 /s/ Nancy S. Wise -------------------------- Nancy S. Wise Chief Financial Officer EX-32.1 4 a4641453ex321.txt FOUR OAKS FINCORP, INC. EXHIBIT 32.1 Exhibit 32.1 Certification by the Chief Executive Officer Pursuant to 18. U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned hereby certifies that, to his or her knowledge, (i) the Form 10-Q filed by Four Oaks Fincorp, Inc. (the "Issuer") for the quarter ended March 31, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein. FOUR OAKS FINCORP, INC. Date: May 17, 2004 By: /s/ Ayden R. Lee, Jr. ------------------------------------- Ayden R. Lee, Jr. President and Chief Executive Officer This Certification is being furnished solely to accompany this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed "filed" by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. EX-32.2 5 a4641453ex322.txt FOUR OAKS FINCORP, INC. EXHIBIT 32.2 Exhibit 32.2 Certification by the Chief Financial Officer Pursuant to 18. U.S.C. Section 1350 As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned hereby certifies that, to his or her knowledge, (i) the Form 10-Q filed by Four Oaks Fincorp, Inc. (the "Issuer") for the quarter ended March 31, 2004, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and (ii) the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer on the dates and for the periods presented therein. FOUR OAKS FINCORP, INC. Date: May 17, 2004 By: /s/ Nancy S. Wise ------------------------- Nancy S. Wise Senior Vice President and Chief Financial Officer This Certification is being furnished solely to accompany this Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed "filed" by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and shall not be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Report, irrespective of any general incorporation language contained in such filing. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----