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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 September 30, 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
13,654,762 shares outstanding as of October 31, 2003

Exhibit Index begins on page 35

1

 

Index

           
      Begins
      on Page
     
Part I  -  Financial Information
        
Item 1. Financial Statements:
        
 
Consolidated Balance Sheets
September 30, 2003 and December 31, 2002
     3  
 
Consolidated Statements of Income
Three Months Ended September 30, 2003 and 2002
And Nine Months Ended September 30, 2003 and 2002
     4  
 
Consolidated Statements of Comprehensive Income
Three Months Ended September 30, 2003 and 2002
And Nine Months Ended September 30, 2003 and 2002
     5  
 
Consolidated Statements of Changes in Shareholders’ Equity
Nine Months Ended September 30, 2003 and 2002
     6  
 
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2003 and 2002
     7  
 
Notes to Consolidated Financial Statements
     9  
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     15  
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     31  
Item 4. Controls and Procedures
     31  
Part II  -  Other Information
        
Item 6. Exhibits and Reports on Form 8-K
     32  
Signatures
     34  
Exhibit Index
     35  

2

 

Item 1. Financial Statements

Bank of Granite Corporation
Consolidated Balance Sheets
    (unaudited)

                   
      September 30,   December 31,
      2003   2002
Assets:
                
Cash and cash equivalents:
                
 
Cash and due from banks
   $ 29,310,984     $ 24,829,541  
 
Interest-bearing deposits
     5,942,594       2,655,071  
 
Federal funds sold
     5,400,000       5,900,000  
 
 
    
     
 
Total cash and cash equivalents
     40,653,578       33,384,612  
 
    
     
 
Investment securities:
                
 
Available for sale, at fair value
     96,975,689       52,264,131  
 
Held to maturity, at amortized cost
     62,040,819       72,660,165  
Loans
     694,464,512       532,921,937  
Allowance for loan losses
     (11,237,904 )     (8,834,611 )
 
 
    
     
 
Net loans
     683,226,608       524,087,326  
 
    
     
 
Mortgage loans held for sale
     37,866,479       32,452,162  
 
    
     
 
Premises and equipment, net
     11,475,626       8,170,150  
Accrued interest receivable
     5,974,491       4,791,422  
Investment in bank owned life insurance
     13,185,813       9,106,748  
Intangible assets
     10,829,694       —  
Other assets
     9,415,457       5,097,958  
 
 
    
     
 
Total assets
   $ 971,644,254     $ 742,014,674  
 
 
    
     
 
Liabilities and shareholders’ equity:
                
Deposits:
                
 
Demand accounts
   $ 131,227,538     $ 100,281,675  
 
NOW accounts
     97,357,942       89,142,366  
 
Money market accounts
     135,805,911       84,874,514  
 
Savings accounts
     27,024,974       25,793,477  
 
Time deposits of $100,000 or more
     161,407,344       114,696,822  
 
Other time deposits
     175,510,444       132,460,461  
 
 
    
     
 
 
Total deposits
     728,334,153       547,249,315  
Overnight borrowings
     18,056,913       16,720,407  
Other borrowings
     77,519,654       45,677,313  
Accrued interest payable
     1,303,375       1,189,364  
Other liabilities
     4,668,115       3,735,433  
 
 
    
     
 
Total liabilities
     829,882,210       614,571,832  
 
    
     
 
Shareholders’ equity:
                
Common stock, $1 par value
                
 
Authorized - 25,000,000 shares
                
 
Issued - 14,980,885 shares in 2003 and 14,420,986 shares in 2002
                
 
Outstanding - 13,673,401 shares in 2003 and 13,333,674 shares in 2002
     14,980,885       14,420,986  
Capital surplus
     31,261,752       20,694,133  
Retained earnings
     117,402,595       109,982,826  
Accumulated other comprehensive income, net of deferred income taxes
     730,015       995,539  
Less: Cost of common stock in treasury; 1,307,484 shares in 2003 and 1,087,312 shares in 2002
     (22,613,203 )     (18,650,642 )
 
 
    
     
 
Total shareholders’ equity
     141,762,044       127,442,842  
 
    
     
 
Total liabilities and shareholders’ equity
   $ 971,644,254     $ 742,014,674  
 
 
    
     
 

See notes to consolidated financial statements.

3

 

Bank of Granite Corporation
Consolidated Statements of Income
    (unaudited)

                                   
      Three Months   Nine Months
      Ended September 30,   Ended September 30,
      2003   2002   2003   2002
Interest income:
                                
Interest and fees from loans
   $ 10,206,814     $ 8,840,894     $ 28,078,919     $ 25,980,329  
Interest and fees from mortgage banking
     1,839,981       808,888       4,547,208       2,482,025  
Federal funds sold
     40,409       —       84,190       —  
Interest-bearing deposits
     19,092       7,986       61,740       19,855  
Investments:
                                
 
U.S. Treasury
     25,779       19,781       25,779       77,513  
 
U.S. Government agencies
     699,702       730,081       1,864,889       2,558,397  
 
States and political subdivisions
     685,510       778,117       2,110,913       2,452,703  
 
Other
     165,622       116,719       346,695       431,087  
 
    
     
     
     
 
Total interest income
     13,682,909       11,302,466       37,120,333       34,001,909  
 
    
     
     
     
 
Interest expense:
                                
Time deposits of $100,000 or more
     994,498       879,293       2,510,463       2,731,593  
Other deposits
     1,592,807       1,547,782       4,565,057       4,726,563  
Overnight borrowings
     52,641       150,634       159,772       544,092  
Other borrowings
     533,342       90,209       998,946       266,613  
 
    
     
     
     
 
Total interest expense
     3,173,288       2,667,918       8,234,238       8,268,861  
 
    
     
     
     
 
Net interest income
     10,509,621       8,634,548       28,886,095       25,733,048  
Provision for loan losses
     1,139,250       896,782       3,423,631       2,695,066  
 
    
     
     
     
 
Net interest income after provision for loan losses
     9,370,371       7,737,766       25,462,464       23,037,982  
 
    
     
     
     
 
Other income:
                                
Service charges on deposit accounts
     1,402,915       1,411,872       4,173,977       3,948,605  
Other service charges, fees and commissions
     251,066       266,829       696,339       820,172  
Mortgage banking income
     2,408,487       963,729       5,823,648       2,524,568  
Securities gains
     297       —       12,665       3,170  
Other
     220,923       282,834       727,519       746,806  
 
    
     
     
     
 
Total other income
     4,283,688       2,925,264       11,434,148       8,043,321  
 
    
     
     
     
 
Other expenses:
                                
Salaries and wages
     3,991,940       2,540,057       10,351,168       7,469,836  
Employee benefits
     586,163       604,374       1,848,937       1,871,252  
Occupancy expense, net
     344,625       228,604       843,084       672,190  
Equipment expense
     377,465       325,054       976,686       1,070,889  
Other
     1,870,113       1,319,704       4,657,078       3,844,117  
 
    
     
     
     
 
Total other expenses
     7,170,306       5,017,793       18,676,953       14,928,284  
 
    
     
     
     
 
Income before income taxes
     6,483,753       5,645,237       18,219,659       16,153,019  
Income taxes
     2,252,662       1,962,653       6,232,228       5,236,561  
 
    
     
     
     
 
Net income
   $ 4,231,091     $ 3,682,584     $ 11,987,431     $ 10,916,458  
 
    
     
     
     
 
Per share amounts:
                                
Net income  -  Basic
   $ 0.31     $ 0.27     $ 0.90     $ 0.80  
Net income  -  Diluted
     0.31       0.27       0.89       0.80  
Cash dividends
     0.12       0.11       0.34       0.30  
Book value
                     10.37       9.47  

See notes to consolidated financial statements.

4

 

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

                                   
      Three Months   Nine Months
      Ended September 30,   Ended September 30,
      2003   2002   2003   2002
Net income
   $ 4,231,091     $ 3,682,584     $ 11,987,431     $ 10,916,458  
 
    
     
     
     
 
Items of other comprehensive income:
                                
Items of other comprehensive income (losses), before tax:
                                
 
Unrealized gains (losses) on securities available for sale
     (868,997 )     1,139,280       (403,990 )     1,481,870  
 
Less: Reclassification adjustments for securities gains included in net income
     297       —       12,665       3,170  
 
Unrealized gains (losses) on mortgages held for sale
     (405,023 )     —       (25,010 )     —  
 
    
     
     
     
 
Items of other comprehensive income (losses), before tax
     (1,274,317 )     1,139,280       (441,665 )     1,478,700  
 
Less: Change in deferred income taxes related to change in unrealized gains or losses on securities available for sale
     (346,630 )     454,280       (166,137 )     589,620  
 
Less: Change in deferred income taxes related to change in unrealized gains or losses on mortgages held for sale
     (162,008 )     —       (10,004 )     —  
 
    
     
     
     
 
Other comprehensive income (losses), net of tax
     (765,679 )     685,000       (265,524 )     889,080  
 
    
     
     
     
 
Comprehensive income
   $ 3,465,412     $ 4,367,584     $ 11,721,907     $ 11,805,538  
 
    
     
     
     
 

See notes to consolidated financial statements.

5

 

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

                   
      Nine Months
      Ended September 30,
      2003   2002
Common stock, $1 par value
                
At beginning of period
   $ 14,420,986     $ 11,537,515  
Par value of shares issued in purchase accounting merger
     543,217       —  
Par value of shares issued under stock option plans
     16,682       —  
Transferred from capital surplus for shares issued due to stock splits
     —       2,883,471  
 
    
     
 
At end of period
     14,980,885       14,420,986  
 
    
     
 
Capital surplus
                
At beginning of period
     20,694,133       23,577,604  
Surplus of shares issued in purchase accounting merger
     10,417,467       —  
Surplus of shares issued under stock option plans
     150,152       —  
Transferred to common stock for shares issued due to stock splits
     —       (2,883,471 )
 
    
     
 
At end of period
     31,261,752       20,694,133  
 
    
     
 
Retained earnings
                
At beginning of period
     109,982,826       100,492,853  
Net income
     11,987,431       10,916,458  
Cash dividends paid
     (4,567,662 )     (4,114,507 )
Cash paid for fractional shares
     —       (17,528 )
 
    
     
 
At end of period
     117,402,595       107,277,276