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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 29549

FORM 10-Q

(mark one)

     
[x]   Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
    For the quarterly period ended June 30, 2002
    OR
[  ]   Transition report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
    For the transition period from                 to                

Commission file number 0-15956

Bank of Granite Corporation

(Exact name of registrant as specified in its charter)
     
Delaware   56-1550545
 
(State or other jurisdiction of   (I.R.S. Employer Identification No.)
incorporation or organization)    
     
Post Office Box 128, Granite Falls, N.C.   28630
 
(Address of principal executive offices)   (Zip Code)

(828) 496-2000

(Registrant’s telephone number, including area code)

(Former name, former address and former
fiscal year, if changed since last report)

     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 [_]

APPLICABLE ONLY TO CORPORATE ISSUERS:

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common stock, $1 par value
13,496,981 shares outstanding as of July 31, 2002

Exhibit Index begins on page 25

1

 

Index

               
          Begins
          on Page
         
Part I — Financial Information
        
 
        
Item 1. Financial Statements:
        
 
        
 
Consolidated Balance Sheets
        
     
June 30, 2002 and December 31, 2001
     3  
 
        
 
Consolidated Statements of Income
        
     
Three Months Ended June 30, 2002 and 2001
        
     
And Six Months Ended June 30, 2002 and 2001
     4  
 
        
 
Consolidated Statements of Comprehensive Income
        
     
Three Months Ended June 30, 2002 and 2001
        
     
And Six Months Ended June 30, 2002 and 2001
     5  
 
        
 
Consolidated Statements of Changes in Shareholders’ Equity
        
     
Six Months Ended June 30, 2002 and 2001
     6  
 
        
 
Consolidated Statements of Cash Flows
        
     
Six Months Ended June 30, 2002 and 2001
     7  
 
        
 
Notes to Consolidated Financial Statements
     9  
 
        
Item 2. Management’s Discussion and Analysis of
        
   
Financial Condition and Results of Operations
     11  
 
        
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     21  
 
        
Part II — Other Information
        
 
        
Item 4. Submission of Matters to a Vote of Security Holders
     21  
 
        
Item 6. Exhibits and Reports on Form 8-K
     23  
 
        
Signatures
     24  
 
        
Exhibit Index
     25  

2

 

Item 1. Financial Statements

Bank of Granite Corporation
Consolidated Balance Sheets

                   
      June 30,   December 31,
      2002   2001
      (unaudited)    
Assets:
                
Cash and cash equivalents:
                
 
Cash and due from banks
   $ 32,257,544     $ 26,272,410  
 
Interest-bearing deposits
     —       785,603  
 
  
Total cash and cash equivalents
     32,257,544       27,058,013  
 
  
 
                
Investment securities:
                
 
Available for sale, at fair value
     59,041,844       72,664,934  
 
Held to maturity, at amortized cost
     73,813,431       86,520,225  
 
                
Loans
     517,850,773       510,410,948  
Allowance for loan losses
     (7,680,704 )     (6,426,477 )
 
  
Net loans
     510,170,069       503,984,471  
 
  
 
                
Premises and equipment, net
     8,104,324       8,417,070  
Accrued interest receivable
     4,830,947       5,185,018  
Investment in bank owned life insurance
     8,797,047       8,202,255  
Other assets
     4,280,006       3,357,921  
 
  
Total assets
   $ 701,295,212     $ 715,389,907  
 
  
Liabilities and shareholders’ equity:
                
Deposits:
                
 
Demand accounts
   $ 97,225,563     $ 93,335,500  
 
NOW accounts
     83,479,681       84,230,541  
 
Money market accounts
     44,330,391       40,205,618  
 
Savings accounts
     26,948,318       24,115,461  
 
Time deposits of $100,000 or more
     122,267,941       124,212,611  
 
Other time deposits
     147,788,379       156,682,988  
 
  
 
Total deposits
     522,040,273       522,782,719  
Overnight borrowings
     37,714,169       40,576,330  
Other borrowings
     12,705,129       23,257,111  
Accrued interest payable
     1,326,954       1,846,493  
Other liabilities
     1,390,918       2,145,938  
 
  
Total liabilities
     575,177,443       590,608,591  
 
  
 
                
Shareholders’ equity:
                
Common stock, $1 par value
                
 
Authorized - 25,000,000 shares
                
 
Issued - 14,420,986 shares in 2002 and 11,537,515 shares in 2001
                
 
Outstanding - 13,539,181 shares in 2002 and 10,987,085 shares in 2001
     14,420,986       11,537,515  
Capital surplus
     20,694,133       23,577,604  
Retained earnings
     105,081,857       100,492,853  
Accumulated other comprehensive income, net of deferred income taxes
     760,728       556,648  
Less: Cost of common shares in treasury;
                
 
Held - 881,805 shares in 2002 and 550,430 shares in 2001
     (14,839,935 )     (11,383,304 )
 
  
Total shareholders’ equity
     126,117,769       124,781,316  
 
  
Total liabilities and shareholders’ equity
   $ 701,295,212     $ 715,389,907  
 
  

See notes to consolidated financial statements.

3

 

Bank of Granite Corporation
Consolidated Statements of Income
(unaudited)

                                   
      Three Months   Six Months
      Ended June 30,   Ended June 30,
      2002   2001   2002   2001
Interest income:
                                
Interest and fees on loans
   $ 9,406,303     $ 11,034,390     $ 18,812,572     $ 22,593,727  
Federal funds sold
     —       325,813       —       523,665  
Interest-bearing deposits
     7,640       7,392       11,869       15,557  
Investments:
                                
 
U.S. Treasury
     28,814       44,314       57,732       159,017  
 
U.S. Government agencies
     855,210       1,123,283       1,828,316       2,330,814  
 
States and political subdivisions
     814,784       802,110       1,674,586       1,630,226  
 
Other
     141,038       162,307       314,368       342,962  
 
  
Total interest income
     11,253,789       13,499,609       22,699,443       27,595,968  
 
  
Interest expense:
                                
Time deposits of $100,000 or more
     905,998       2,018,254       1,852,300       4,149,954  
Other deposits
     1,553,909       3,104,417       3,178,781       6,282,396  
Overnight borrowings
     168,288       118,269       393,458       220,279  
Other borrowings
     75,164       192,211       176,404       324,744  
 
  
Total interest expense
     2,703,359       5,433,151       5,600,943       10,977,373  
 
  
Net interest income
     8,550,430       8,066,458       17,098,500       16,618,595  
Provision for loan losses
     1,007,249       2,010,680       1,798,284       2,710,578  
 
  
Net interest income after provision for loan losses
     7,543,181       6,055,778       15,300,216       13,908,017  
 
  
Other income:
                                
Service charges on deposit accounts
     1,316,241       1,335,919       2,536,733       2,597,216  
Other service charges, fees and commissions
     1,008,649       904,781       2,114,182       1,807,345  
Securities gains
     3,170       9,214       3,170       137,549  
Other
     139,876       80,031       463,972       234,692  
 
  
Total other income
     2,467,936       2,329,945       5,118,057       4,776,802  
 
  
Other expenses:
                                
Salaries and wages
     2,464,305       2,402,606       4,929,779       4,683,509  
Employee benefits
     654,883       315,187       1,266,878       826,810  
Occupancy expense, net
     231,649       211,278       443,586       426,606  
Equipment expense
     383,757       387,661       745,835       767,023  
Other
     1,355,717       1,245,886       2,524,413       2,359,286  
 
  
Total other expenses
     5,090,311       4,562,618       9,910,491       9,063,234  
 
  
Income before income taxes
     4,920,806       3,823,105       10,507,782       9,621,585  
Income taxes
     1,469,271       1,192,598       3,273,908       3,142,972  
 
  
Net income
   $ 3,451,535     $ 2,630,507     $ 7,233,874     $ 6,478,613  
 
  
Per share amounts:
                                
Net income — Basic
   $ 0.25     $ 0.19     $ 0.53     $ 0.46  
Net income — Diluted
     0.25       0.19       0.53       0.46  
Cash dividends
     0.10       0.09       0.19       0.18  
Book value
                     9.32       8.85  

See noes to consolidated financial statements.

4

 

Bank of Granite Corporation
Consolidated Statements of
Comprehensive Income
(unaudited)

                                   
      Three Months   Six Months
      Ended June 30,   Ended June 30,
      2002   2001   2002   2001
 
Net income
   $ 3,451,535     $ 2,630,507     $ 7,233,874     $ 6,478,613  
 
  
 
                                
Items of other comprehensive income:
                                
Items of other comprehensive income, before tax:
                                
 
Unrealized gains on securities available for sale
     1,197,531       92,277       342,590       772,564  
 
Less: Reclassification adjustments for gains included in net income
     3,170       9,214       3,170       137,549  
 
  
Items of other comprehensive income, before tax
     1,194,361       83,063       339,420       635,015  
 
Less: Change in deferred income taxes related to change in unrealized gains or losses on securities available for sale
     476,249       33,122       135,340       253,209  
 
  
Other comprehensive income, net of tax
     718,112       49,941       204,080       381,806  
 
  
Comprehensive income
   $ 4,169,647     $ 2,680,448     $ 7,437,954     $ 6,860,419  
 
  

See notes to consolidated financial statements.

5

 

Bank of Granite Corporation
Consolidated Statements of Changes in
Shareholders’ Equity (unaudited)

                 
    Six Months
    Ended June 30,
    2002   2001
Common stock, $1 par value
                
At beginning of period
   $ 11,537,515     $ 11,517,084  
Shares issued under incentive stock option plans
     —       20,431  
Transferred from capital surplus for shares issued due to stock splits
     2,883,471       —  
 
  
At end of period
     14,420,986       11,537,515  
 
  
 
                
Capital surplus
                
At beginning of period
     23,577,604       23,260,188  
Shares issued under incentive stock option plans
     —       317,416  
Transferred to common stock for shares issued due to stock splits
     (2,883,471 )     —  
 
  
At end of period
     20,694,133       23,577,604  
 
  
 
                
Retained earnings
                
At beginning of period
     100,492,853       91,794,837  
Net income
     7,233,874       6,478,613  
Cash dividends paid
     (2,627,342 )     (2,449,560 )
Cash paid for fractional shares
     (17,528 )     —  
 
  
At end of period
     105,081,857       95,823,890  
 
  
 
                
Accumulated other comprehensive income, net of deferred income taxes