-----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, C7MxoQCfShXMj9peG9Eg2Lx4ygOk+d7cU1I+4hvw5ZdlFirblyAWzdc8hJBGWcrw admKHGzMxYgcXWQ7Uzve5Q== 0000931763-99-003123.txt : 19991115 0000931763-99-003123.hdr.sgml : 19991115 ACCESSION NUMBER: 0000931763-99-003123 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABC BANCORP CENTRAL INDEX KEY: 0000351569 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 581456434 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-13901 FILM NUMBER: 99747481 BUSINESS ADDRESS: STREET 1: 310 FIRST ST NE CITY: MOULTRIE STATE: GA ZIP: 31768 BUSINESS PHONE: 9128901111 MAIL ADDRESS: STREET 1: PO BOX 1500 CITY: MOULTRIE STATE: GA ZIP: 31776 FORMER COMPANY: FORMER CONFORMED NAME: ABC HOLDING CO DATE OF NAME CHANGE: 19870119 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1999 ------------------ OR [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 0-16181 ------- ABC BANCORP ------------------------------------------------------------------------------ (Exact name of registrant as specified in its charter) GEORGIA 58-1456434 ------------------------------- ------------------- (State of incorporation) (IRS Employer ID No.) 310 FIRST STREET, SE MOULTRIE, GA 31768 ------------------------------------------ (Address of principal executive offices) (912) 890-1111 --------------------------- (Registrant's telephone number) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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_____ --- There were 7,269,945 shares of Common Stock outstanding as of September 30, 1999. 1 ABC BANCORP QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1999 TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Item Page - ----- ---- 1. Financial Statements Consolidated Balance Sheets 3 Consolidated Statements of Income & Comprehensive Income 4 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 3. Quantitative and Qualitative Disclosures about Market Risk 15 PART II - OTHER INFORMATION 4. Submission of Matters to a Vote of Securities Holders 16 6. Exhibits and Reports on Form 8-K 16 Signature 17 2 ABC BANCORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited)
- --------------------------------------------------------------------------------------------------------------------------- Sept 30 Dec 31 1999 1998 ---------------- ---------------- Assets - ------ Cash and due from banks $ 46,160 $ 56,475 Securities available for sale, at fair value 132,756 135,933 Securities held to maturity, at cost 15,606 18,613 Loans 524,220 477,194 Less allowance for loan losses 9,889 10,192 ---------------- ---------------- Loans, net 514,331 467,002 ---------------- ---------------- Premises and equipment, net 19,340 19,088 Other assets 23,157 27,835 ---------------- ---------------- $ 751,350 $ 724,946 ================ ================ Liabilities and Stockholders' Equity - ------------------------------------ Deposits Noninterest-bearing demand $ 86,106 $ 99,957 Interest-bearing demand 130,984 132,527 Savings 57,947 59,719 Time, $100,000 and over 89,575 93,381 Other time 243,581 247,741 ---------------- ---------------- Total deposits 608,193 633,325 Federal funds purchased & securities sold under repurchase agreements 11,763 883 Other borrowings 50,368 11,850 Other liabilities 6,203 7,054 ---------------- ---------------- Total liabilities 676,527 653,112 ---------------- ---------------- Stockholders' equity - -------------------- Common stock, par value $1; 15,000,000 shares authorized 7,582,298 and 7,524,718 shares issued 7,582 7,525 Surplus 30,371 29,677 Retained earnings 40,508 36,280 Accumulated other comprehensive income (963) 322 Unearned Comp-Grants (617) 0 ---------------- ---------------- 76,881 73,804 Less cost of shares acquired for the treasury, 312,353 and 305,153 shares (2,058) (1,970) ---------------- ---------------- Total stockholders' equity 74,823 71,834 ---------------- ---------------- $ 751,350 $ 724,946 ================ ================
See Notes to Consolidated Financial Statements. 3 ABC BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Dollars in Thousands) (Unaudited)
- ------------------------------------------------------------------------------------------------------------ 1999 1998 ------------ ------------ Interest income Interest and fees on loans $ 12,877 $ 13,247 Interest on taxable securities 1,853 1,412 Interest on nontaxable securities 272 300 Interest on deposits in other banks 155 301 Interest on Federal funds sold - 8 ------------ ------------ 15,157 15,268 ------------ ------------ Interest expense Interest on deposits 5,519 6,484 Interest on securities sold under repurchase agreements and other borrowings 631 267 ------------ ------------ 6,150 6,751 ------------ ------------ Net interest income 9,007 8,517 Provision for loan losses 554 819 ------------ ------------ Net interest income after provision for loans losses 8,453 7,698 ------------ ------------ Other income Service charges on deposit accounts 1,405 1,397 Other service charges, commissions and fees 440 547 Other (25) 24 Loss on sale of securities (44) - ------------ ------------ 1,776 1,968 ------------ ------------ Other expense Salaries and employee benefits 3,942 3,996 Equipment expense 539 641 Occupancy expense 475 500 Amortization of intangible assets 214 257 Data processing fees 168 333 Directors fees 165 190 FDIC premiums 61 61 Other operating expenses 1,458 1,396 ------------ ------------ 7,022 7,374 ------------ ------------ Income before income taxes 3,207 2,292 Applicable income taxes 1,065 790 ------------ ------------ Net income $ 2,142 $ 1,502 ------------ ------------ Other comprehensive income, net of tax: Unrealized holding gains (losses) arising during period, net of tax $ (280) $ 228 Reclassification adjustment for losses included in net income, net of tax 29 $ - ------------ ------------ Comprehensive income $ 1,891 $ 1,730 ============ ============ Income per common share-Basic $ 0.30 $ 0.21 ============ ============ Income per common share-Diluted $ 0.29 $ 0.21 ============ ============ Average shares outstanding 7,255,132 7,252,365 ============ ============
See Notes to Consolidated Financial Statements. 4 ABC BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Dollars in Thousands) (Unaudited)
- -------------------------------------------------------------------------------------------------------- 1999 1998 ------------- ------------- Interest income Interest and fees on loans $ 37,406 $ 38,647 Interest on taxable securities 5,593 4,677 Interest on nontaxable securities 815 903 Interest on deposits in other banks 468 604 Interest on Federal funds sold - 39 ------------- ------------- 44,282 44,870 ------------- ------------- Interest expense Interest on deposits 16,726 19,120 Interest on securities sold under repurchase agreements and other borrowings 1,123 828 ------------- ------------- 17,849 19,948 ------------- ------------- Net interest income 26,433 24,922 Provision for loan losses 1,563 4,139 ------------- ------------- Net interest income after provision for loans losses 24,870 20,783 ------------- ------------- Other income Service charges on deposit accounts 4,049 4,165 Other service charges, commissions and fees 1,683 1,603 Other 183 311 Loss on sale of securities (81) - ------------- ------------- 5,834 6,079 ------------- ------------- Other expense Salaries and employee benefits 11,625 11,745 Equipment expense 1,747 1,810 Occupancy expense 1,401 1,387 Amortization of intangible assets 640 682 Data processing fees 495 504 Directors fees 493 519 FDIC premiums 208 178 Other operating expenses 4,415 4,877 ------------- ------------- 21,024 21,702 ------------- ------------- Income before income taxes 9,680 5,160 Applicable income taxes 3,285 1,805 ------------- ------------- $ 6,395 $ 3,355 Net income ------------- ------------- Other comprehensive income, net of tax: Unrealized holding gains (losses) arising during period, net of tax $ (1,338) $ 203 Reclassification adjustment for losses included in net income, net of tax $ 53 $ - ------------- ------------- Comprehensive income $ 5,110 $ 3,558 ============= ============= Income per common share-Basic $ 0.88 $ 0.46 ============= ============= Income per common share-Diluted $ 0.88 $ 0.46 ============= ============= Average shares outstanding 7,247,416 7,252,365 ============= =============
See Notes to Consolidated Financial Statements. 5 ABC BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (Dollars in Thousands) (Unaudited)
- ---------------------------------------------------------------------------------------------------------------- 1999 1998 ------------- ------------ OPERATING ACTIVITIES Net Income $ 6,395 $ 3,355 ------------- ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 1,460 1,513 Provision for loan losses 1.563 4,139 Amortization of intangible assets 640 Net loss on securities available for sale 81 - Other prepaids, deferrals and accruals, net 3,902 5,100 ------------- ------------ Total adjustments 7,646 11,434 ------------- ------------ Net cash provided by operating activities 14,041 14,789 ------------- ------------ INVESTING ACTIVITIES Proceeds from maturities of investment securities 51,564 55,041 Purchase of investment securities (67,560) (49,955) Proceeds from sales of securities available for sale 20,240 - (Increase)decrease in Federal funds sold - (80) (Increase) decrease in loans (48,892) (9,067) Purchase of premises and equipment (1,712) (2,084) ------------- ------------ Net cash used in investing activities (46,360) (6,145) ------------- ------------ FINANCING ACTIVITIES Net increase (decrease) in deposits (25,132) 8,543 Net increase (decrease) in repurchase agreements 10,880 (217) Repay long-term borrowings (2,053) - Increase (decrease) in other borrowings 40,571 (1,429) Dividends paid (2,174) (2,175) Purchase treasury stock (88) (94) ------------- ------------ Net cash provided by (used in) financing activities 22,004 4,628 ------------- ------------ Net increase (decrease) in cash and due from banks $(10,315) $ 13,272 Cash and due from banks at beginning of period 56,475 36,261 ------------- ------------ Cash and due from banks at end of period $ 46,160 $ 49,533 ============= ============
See Notes to Consolidated Financial statements. 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting and reporting policies of ABC Bancorp and subsidiaries ("the Company") conform to generally accepted accounting principles and to general practices within the banking industry. The interim consolidated financial statements included herein are unaudited, but reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the consolidated financial position and results of operations for the interim periods presented. All adjustments reflected in the interim financial statements are of a normal, recurring nature. Such financial statements should be read in conjunction with the financial statements and notes thereto and the report of independent auditors included in the Company's Form 10-K Annual Report for the year ended December 31, 1998. The results of operations for the nine months ended September 30, 1999 are not necessarily indicative of the results to be expected for the full year. 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Liquidity and Capital Resources Liquidity management involves the matching of the cash flow requirements of customers, who may be either depositors desiring to withdraw funds or borrowers needing assurance that sufficient funds will be available to meet their credit needs, and the ability of ABC Bancorp and its subsidiaries (the "Company") to meet those needs. The Company strives to maintain an adequate liquidity position by managing the balances and maturities of interest-earning assets and interest-bearing liabilities so that the balance it has in available funding at any given time will adequately cover the projected short-term need for funds. Additionally, the subsidiary banks (the "Banks") maintain relationships with correspondent banks which could provide funds to them on short notice, if needed. The liquidity and capital resources of the Company is monitored on a periodic basis by state and Federal regulatory authorities. As determined under guidelines established by these regulatory authorities, the Banks' liquidity ratios at September 30, 1999 were considered satisfactory. At that date, the Banks' short term investments were adequate to cover any reasonably anticipated immediate need for funds. The Company is aware of no events or trends likely to result in a material change in liquidity. At September 30, 1999, the Company's and the Banks' capital asset ratios were considered adequate based on guidelines established by regulatory authorities. During the nine months ended September 30, 1999, total capital increased $2,989,000 to $74,823,000. This increase in capital resulted from the retention of net earnings of $4,221,000 (after deducting dividends to shareholders of $2,174,000), less $88,000 for the purchase of 7,200 shares acquired for the treasury, plus $134,000 accrual for award grants, and a decrease of approximately $1,278,000 in unrealized losses on securities available for sale, net of taxes. At September 30, 1999, ABC had no binding commitments for capital expenditures. The Company anticipates that approximately $750,000 will be required for capital expenditures during the remainder of 1999. Additional expenditures may be required for other mergers and acquisitions. No additional mergers or acquisitions requiring cash are being negotiated at present. 8 Year 2000 Status The Company is actively engaged in remediating potential Year 2000 technology problems. All items were inventoried and vendors contacted regarding Year 2000 readiness of their products. The inventory included computer equipment and software as well as other items which could contain embedded date chips. Renovation plans for non-compliant items were developed. The Y2K Business Resumption Contingency Plan was completed and forwarded to the appropriate regulatory bodies on September 25, 1999. Those agencies are in the process of reviewing the plan. The document was subjected to an independent, third party review by a member of our internal audit staff with satisfactory results. The Company's and subsidiaries' Boards of Directors have approved the plan. The Company estimates total Year 2000 project costs will approximate $500,000. Expenses associated with the Company's Year 2000 compliance efforts for fiscal year 1998 were approximately $300,000, and most of the remaining $200,000 has been recorded in the first three quarters of 1999. Year 2000 expenditures are not expected to have a material impact on the Company's earnings, financial position or cash flows. Additionally, the status of major customers and vendors is being reviewed to minimize the risks to the Company. The impact of Year 2000 noncompliance by major customers and vendors cannot be accurately projected at this time. The Company completed renovation and testing of all mission-critical technology items during the second quarter of 1999. 9 Results of Operations The Company's results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since interest rates are determined by market forces and economic conditions beyond the control of the Company, the ability to generate net interest income is dependent upon the Banks' ability to obtain an adequate spread between the rate earned on interest-earning assets and the rate paid on interest-bearing liabilities. Thus, the key performance measure for net interest income is the interest margin or net yield, which is taxable-equivalent net interest income divided by average earning assets. The primary component of consolidated earnings is net interest income, or the difference between interest income on interest-earning assets and interest paid on interest-bearing liabilities. The net interest margin is net interest income expressed as a percentage of average interest-earning assets. Interest- earning assets consist of loans, investment securities and Federal funds sold. Interest-bearing liabilities consist of deposits and borrowings such as Federal funds purchased, securities sold under repurchase agreements and Federal Home Loan Bank advances. A portion of interest income is earned on tax-exempt investments, such as state and municipal bonds. In an effort to state this tax- exempt income and its resultant yields on a basis comparable to all other taxable investments, an adjustment is made to analyze this income on a taxable- equivalent basis. 10 Comparison of Statements of Income The net interest margin was 5.44% and 5.33% during the nine months ended September 30, 1999 and 1998, respectively, an increase of 11 basis points. These variances are primarily attributable to fluctuations in the average rates charged and fees earned on loans. Net interest income on a taxable-equivalent basis was $26.9 million as compared to $25.5 million during the nine months ended September 30, 1999 and 1998, respectively, representing an increase of 5.5%. The provision for loan losses is a charge to earnings in the current period to replenish the allowance for loan losses and maintain it at the level management determines is adequate. The provision for loan losses charged to earnings amounted to $1,563,000 and $4,139,000 during the nine months ended September 30, 1999 and 1998, respectively. The decrease in the provision for loan losses of $2,576,000, or 62.24%, is attributable to an unusually large provision being recorded in the first quarter of 1998 in response to the deteriorating financial condition of several large borrowers. The allowance for loan losses represents a reserve for potential losses in the loan portfolio. The adequacy of the allowance for loan losses is evaluated quarterly based on a review of all significant loans, with a particular emphasis on non-accruing, past due and other loans that management believes require attention. Another factor used in determining the adequacy of the reserve is management's judgment about factors affecting loan quality and assumptions about the local and national economy. The allowance for loan losses was 1.89% and 2.14% of total loans outstanding at September 30, 1999 and December 31, 1998. As of September 30, 1999, nonperforming assets were $7,175,000 compared to $9,382,000 in nonperforming assets as of December 31, 1998. Management considers the allowance for loan losses as of September 30, 1999 adequate to cover potential losses in the loan portfolio. 11 Following is a comparison of noninterest income for the nine months ended September 30, 1999 and 1998 (dollars in thousands). Nine Months Ended ------------------ September 30, 1999 September 30, 1998 ------------------ ------------------ Service charges on deposits $4,049 $4,165 Other service charges, commissions & fees 1,683 1,603 Other income 102 311 Total noninterest income $5,834 $6,079 ====== ====== Total noninterest income for the nine months ended September 30, 1999 was $245,000 lower than during the same period in 1998. Following is an analysis of noninterest expense for the nine months ended September, 1999 and 1998 (dollars in thousands). Nine Months Ended ----------------- September 30, 1999 September 30, 1998 ------------------ ------------------ Salaries and employee benefits $11,625 $11,745 Occupancy and equipment expense 3,148 3,197 Deposit Insurance Premium 208 178 Data processing fees 495 504 Other expense 5,548 6,078 ------- ------- Total noninterest expense $21,024 $21,702 ======= ======= Total noninterest expense for the nine months ended September 30, 1999 was $678,000 lower than during the same period in 1998. Salaries and employee benefits for the nine months ended September 30, 1999, were $120,000 lower than during the same period in 1998. Deposit insurance premiums for the nine months ended September 30, 1999 was $30,000 higher than during the same period in 1998. 12 Data processing fees for the nine months ended September 30, 1999 were $9,000 lower than during the same period in 1998. Other operating expense for the nine months ended September 30, 1999 decreased $530,000 as compared to the same period in 1998. Following is a condensed summary of net income during the nine months ended September 30, 1999 and 1998 (dollars in thousands). Nine Months Ended ----------------- September 30, 1999 September 30, 1998 ------------------ ------------------ Net interest income $26,433 $24,922 Provision for loan losses 1,563 4,139 Other income 5,834 6,079 Other expense 21,024 21,702 Income before income taxes 9,680 5,160 Applicable income taxes 3,285 1,805 ------- ------- Net income $ 6,395 $ 3,355 ======= ======= Net income increased $3,040,000 or 90.61% to $6,395,000 for the nine months ended September 30, 1999 as compared to $3,355,000 for the nine months ended September 30, 1998. Net interest income of ABC and its subsidiaries increased $1,511,000, the provision for loan losses decreased by $2,576,000 and all other noninterest expense decreased by $678,000. 13 Comparison of Balance Sheets Total assets increased by $26.4 million, or 3.64%, to $751.4 million at September 30, 1999 from $724.95 million at December 31, 1998. Total earning assets increased by $36.4 million, or 5.6%, to $686.9 million at September 30, 1999 from $650.51 million at December 31, 1998. Total loans, net of the allowance for loan losses, increased by $47.3 million, or 10.13%, to $514.3 million at September 30, 1999 from $467 million at December 31, 1998. Total deposits decreased by $25.1 million, or 3.97%, to $608.2 million at September 30, 1999 from $633.33 million at December 31, 1998. Approximately 14.16% and 15.78% of deposits were noninterest-bearing as of September 30, 1999 and December 31, 1998, respectively. 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exposed only to U. S. Dollar interest rate changes and, accordingly, the Company manages exposure by considering the possible changes in the net interest margin. The Company does not have any trading instruments nor does it classify any portion of the investment portfolio as held for trading. The Company does not engage in any hedging activities or enter into any derivative instruments with a higher degree of risk than mortgage backed securities which are commonly pass through securities. Finally, the Company has no exposure to foreign currency exchange rate risk, commodity price risk, and other market risks. Interest rates play a major part in the net interest income of a financial institution. The sensitivity to rate changes is known as "interest rate risk." The repricing of interest earning assets and interest-bearing liabilities can influence the changes in net interest income. As part of the Company's asset/liability management program, the timing of repriced assets and liabilities is referred to as Gap management. It is the policy of the Company to maintain a Gap ratio in the one-year time horizon of .80 to 1.20. The Company uses simulation analysis to monitor changes in net interest income due to changes in market interest rates. The simulation of rising, declining and flat interest rate scenarios allows management to monitor and adjust interest rate sensitivity to minimize the impact of market interest rate swings. The analysis of the impact on net interest income over a twelve month period is subjected to a gradual 200 basis point increase or decrease in market rates on net interest income and is monitored on a quarterly basis. The most recent simulation model projects net interest income would decrease 3.03% if rates rise gradually over the next year. On the other hand, the model projects net interest income to increase .65% if rates decline over the next year. 15 Part II. Other Information Item 4. Submission of Matters to a Vote of Securities Holders There were no matters submitted to a vote of securities holders during the quarter ended September 30, 1999. Item 6. Exhibits and Reports on Form 8-K There were no exhibits and reports filed on Form 8-K during the quarter ended September 30, 1999. 16 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the Undersigned thereunto duly authorized: ABC BANCORP 11/5/99 /s/ W. EDWIN LANE, JR. - ---------------------- -------------------------------------- DATE W. EDWIN LANE, JR. EXECUTIVE VICE PRESIDENT & CHIEF FINANCIAL OFFICER (Duly authorized officer and principal financial/accounting officer) 17 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 46,160 0 0 0 132,756 15,606 15,731 524,220 9,889 751,350 608,193 57,715 6,203 4,416 0 0 7,582 67,241 751,350 37,406 6,408 468 44,282 16,726 17,849 26,433 1,563 (81) 21,024 9,680 9,680 0 0 6,395 .88 .88 5.44 6,636 0 0 6,636 10,192 2,639 773 9,889 9,889 0 9,889
-----END PRIVACY-ENHANCED MESSAGE-----