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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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  March 31, 2003
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
incorporation or organization)		   (I.R.S. Employer Identification No.)
     
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 [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)    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
13,209,357 shares outstanding as of April 30, 2003

Exhibit Index begins on page 31

1

 

Index

           
      Begins
    on Page
   
Part I - Financial Information
       
Item 1. Financial Statements:
        
 
Consolidated Balance Sheets March 31, 2003 and December 31, 2002
     3  
 
Consolidated Statements of Income Three Months Ended March 31, 2003 and 2002
     4  
 
Consolidated Statements of Comprehensive Income Three Months Ended March 31, 2003 and 2002
     5  
 
Consolidated Statements of Changes in Shareholders’ Equity Three Months Ended March 31, 2003 and 2002
     6  
 
Consolidated Statements of Cash Flows Three Months Ended March 31, 2003 and 2002
     7  
 
Notes to Consolidated Financial Statements
     9  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     13  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     25  
Item 4. Controls and Procedures
     25  
Part II - Other Information
        
Item 6. Exhibits and Reports on Form 8-K
     26  
Signatures
     28  
Certifications Pursuant To Section 302(a) Of The Sarbanes-Oxley Act of 2002
     29  
Exhibit Index
     31  

2

 

Item 1. Financial Statements

Bank of Granite Corporation
Consolidated Balance Sheets
    (unaudited)

                   
      March 31,   December 31,
      2003   2002
Assets:
                
Cash and cash equivalents:
                
 
Cash and due from banks
   $ 30,076,310     $ 24,829,541  
 
Interest-bearing deposits
     3,349,041       2,655,071  
 
Federal funds sold
     9,200,000       5,900,000  
 
 
    
     
 
Total cash and cash equivalents
     42,625,351       33,384,612  
 
    
     
 
Investment securities:
                
 
Available for sale, at fair value
     52,934,583       52,264,131  
 
Held to maturity, at amortized cost
     70,051,387       72,660,165  
Loans
     544,050,422       533,185,315  
Allowance for loan losses
     (9,318,291 )     (8,834,611 )
 
 
    
     
 
Net loans
     534,732,131       524,350,704  
 
    
     
 
Mortgage loans held for sale
     33,470,925       32,188,784  
 
    
     
 
Premises and equipment, net
     7,987,211       8,170,150  
Accrued interest receivable
     5,052,251       4,791,422  
Investment in bank owned life insurance
     9,210,749       9,106,748  
Other assets
     6,234,091       5,097,958  
 
    
     
 
Total assets
   $ 762,298,679     $ 742,014,674  
 
    
     
 
Liabilities and shareholders’ equity:
                
Deposits:
                
 
Demand accounts
   $ 101,680,814     $ 100,281,675  
 
NOW accounts
     89,064,206       89,142,366  
 
Money market accounts
     96,418,933       84,874,514  
 
Savings accounts
     25,641,983       25,793,477  
 
Time deposits of $100,000 or more
     121,172,287       114,696,822  
 
Other time deposits
     132,117,823       132,460,461  
 
 
    
     
 
 
Total deposits
     566,096,046       547,249,315  
Overnight borrowings
     14,232,066       16,720,407  
Other borrowings
     45,968,768       45,677,313  
Accrued interest payable
     1,115,399       1,189,364  
Other liabilities
     7,005,440       3,735,433  
 
 
    
     
 
Total liabilities
     634,417,719       614,571,832  
 
    
     
 
Shareholders’ equity:
                
Common stock, $1 par value Authorized - 25,000,000 shares Issued - 14,420,986 shares in 2003 and 14,420,986 shares in 2002 Outstanding - 13,227,157 shares in 2003 and 13,333,674 shares in 2002
     14,420,986       14,420,986  
Capital surplus
     20,694,133       20,694,133  
Retained earnings
     112,353,304       109,982,826  
Accumulated other comprehensive income, net of deferred income taxes
     905,141       995,539  
Less: Cost of common stock in treasury; 1,193,829 shares in 2003 and 1,087,312 shares in 2002
     (20,492,604 )     (18,650,642 )
 
 
    
     
 
Total shareholders’ equity
     127,880,960       127,442,842  
 
    
     
 
Total liabilities and shareholders’ equity
   $ 762,298,679     $ 742,014,674  
 
 
    
     
 

See notes to consolidated financial statements.

3

 

Bank of Granite Corporation
Consolidated Statements of Income
    (unaudited)

                   
      Three Months
      Ended March 31,
      2003   2002
Interest income:
                
Interest and fees on loans
   $ 9,889,233     $ 9,406,269  
Federal funds sold
     4,938       —  
Interest-bearing deposits
     11,581       4,229  
Investments:
                
 
U.S. Treasury
     —       28,918  
 
U.S. Government agencies
     622,163       973,106  
 
States and political subdivisions
     742,699       859,802  
 
Other
     91,580       173,330  
 
    
     
 
Total interest income
     11,362,194       11,445,654  
 
    
     
 
Interest expense:
                
Time deposits of $100,000 or more
     736,638       946,302  
Other deposits
     1,422,150       1,624,872  
Overnight borrowings
     57,999       225,170  
Other borrowings
     169,687       101,240  
 
    
     
 
Total interest expense
     2,386,474       2,897,584  
 
    
     
 
Net interest income
     8,975,720       8,548,070  
Provision for loan losses
     1,135,852       791,035  
 
    
     
 
Net interest income after provision for loan losses
     7,839,868       7,757,035  
 
    
     
 
Other income:
                
Service charges on deposit accounts
     1,392,641       1,220,492  
Other service charges, fees and commissions
     1,695,837       1,105,533  
Securities losses
     (11,809 )     —  
Other
     256,536       324,096  
 
    
     
 
Total other income
     3,333,205       2,650,121  
 
    
     
 
Other expenses:
                
Salaries and wages
     2,872,777       2,465,474  
Employee benefits
     723,183       611,995  
Occupancy expense, net
     237,783       211,937  
Equipment expense
     258,269       362,078  
Other
     1,278,410       1,168,696  
 
    
     
 
Total other expenses
     5,370,422       4,820,180  
 
    
     
 
Income before income taxes
     5,802,651       5,586,976  
Income taxes
     1,965,468       1,804,637  
 
    
     
 
Net income
   $ 3,837,183     $ 3,782,339  
 
    
     
 
Per share amounts:
                
Net income - Basic
   $ 0.29     $ 0.28  
Net income - Diluted
     0.29       0.28  
Cash dividends
     0.11       0.10  
Book value
     9.67       9.18  

See notes to consolidated financial statements.

4

 

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

                   
      Three Months
      Ended March 31,
      2003   2002
Net income
   $ 3,837,183     $ 3,782,339  
 
    
     
 
Items of other comprehensive income:
                
Items of other comprehensive losses, before tax:
                
 
Unrealized gains (losses) on securities available for sale
     (162,156 )     (854,941 )
 
Less: Reclassification adjustments for securities gains (losses) included in net income
     (11,809 )     —  
 
    
     
 
Items of other comprehensive losses, before tax
     (150,347 )     (854,941 )
 
Less: Change in deferred income taxes related to change in unrealized gains or losses on securities available for sale
     (59,949 )     (340,909 )
 
    
     
 
Other comprehensive losses, net of tax
     (90,398 )     (514,032 )
 
    
     
 
Comprehensive income
   $ 3,746,785     $ 3,268,307  
 
    
     
 

See notes to consolidated financial statements.

5

 

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

                 
    Three Months
    Ended March 31,
    2003   2002
Common stock, $1 par value
                
At beginning of period
   $ 14,420,986     $ 11,537,515  
 
    
     
 
At end of period
     14,420,986       11,537,515  
 
    
     
 
Capital surplus
                
At beginning of period
     20,694,133       23,577,604  
 
    
     
 
At end of period
     20,694,133       23,577,604  
 
    
     
 
Retained earnings
                
At beginning of period
     109,982,826       100,492,853  
Net income
     3,837,183       3,782,339  
Cash dividends paid
     (1,466,705 )     (1,317,972 )
 
    
     
 
At end of period
     112,353,304       102,957,220  
 
    
     
 
Accumulated other comprehensive income, net of deferred income taxes
                
At beginning of period
     995,539       556,648  
Net change in unrealized gains or losses on securities available for sale, net of deferred income taxes
     (90,398 )     (514,032 )
 
    
     
 
At end of period
     905,141       42,616  
 
    
     
 
Cost of common stock in treasury
                
At beginning of period
     (18,650,642 )     (11,383,304 )
Cost of common stock repurchased
     (1,841,962 )     (1,574,834 )
 
    
     
 
At end of period
     (20,492,604 )     (12,958,138 )
 
    
     
 
Total shareholders’ equity
   $ 127,880,960     $ 125,156,817  
 
    
     
 
Shares issued
                
At beginning of period
     14,420,986       11,537,515  
 
    
     
 
At end of period
     14,420,986       11,537,515  
 
    
     
 
Common shares in treasury
                
At beginning of period
     (1,087,312 )     (550,430 )
Common shares repurchased
     (106,517 )     (75,674 )
 
    
     
 
At end of period
     (1,193,829 )     (626,104 )
 
    
     
 
Total shares outstanding
     13,227,157       10,911,411  
 
    
     
 

See notes to consolidated financial statements.

6

 

Bank of Granite Corporation
Consolidated Statements of Cash Flows (unaudited)

                     
        Three Months
        Ended March 31,
        2003   2002
Increase (decrease) in cash & cash equivalents:
                
Cash flows from operating activities:
                
 
Interest received
   $ 11,171,688     $ 11,227,052  
 
Fees and commissions received
     3,241,013       2,589,660  
 
Interest paid
     (2,460,439 )     (3,316,840 )
 
Cash paid to suppliers and employees
     (4,520,568 )     (5,699,681 )
 
Income taxes paid
     (541,000 )     (333,583 )
 
 
    
     
 
   
Net cash provided by operating activities
     6,890,694       4,466,608  
 
    
     
 
Cash flows from investing activities:
                
 
Proceeds from maturities and/or calls of securities available for sale
     6,085,000       3,845,000  
 
Proceeds from maturities and/or calls of securities held to maturity
     1,970,925       5,965,000  
 
Proceeds from sales of securities available for sale
     187,635       —  
 
Proceeds from sales of securities held to maturity
     605,000       —  
 
Purchase of securities available for sale
     (7,142,713 )     (206,755 )
 
Net increase in loans
     (11,517,279 )     (10,256,838 )
 
Net decrease (increase) in mortgage loans held for sale
     (1,337,976 )     6,158,702  
 
Unrealized losses on hedged mortgage loan commitments
     55,835       —  
 
Unrealized hedging losses on contracts to sell mortgage-backed securities
     92,810       —  
 
Investment in bank owned life insurance
     —       (194,000 )
 
Capital expenditures
     (226,279 )     (106,604 )
 
Proceeds from sale of fixed assets
     235,909       917  
 
Proceeds from sale of other real estate
     —       97,197  
 
 
    
     
 
   
Net cash provided by (used in) investing activities
     (10,991,133 )     5,302,619  
 
 
    
     
 
Cash flows from financing activities:
                
 
Net increase in demand, NOW, money market and savings deposits
     12,713,904       4,877,496  
 
Net increase (decrease) in time deposits
     6,132,827       (7,663,698 )
 
Net decrease in overnight borrowings
     (2,488,341 )     (1,154,812 )
 
Net increase (decrease) in other borrowings
     291,455       (6,001,474 )
 
Dividend paid
     (1,466,705 )     (1,317,972 )
 
Purchases of common stock for treasury
     (1,841,962<