HENRY COUNTY BANCSHARES INC - 10-Q Quarterly Report

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2004

¨	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: 0-49789

Henry County Bancshares, Inc.

(Exact name of small business issuer as specified in its charter)

Georgia

58-1485511

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

4806 N. Henry Blvd., Stockbridge, Georgia 30281

(Address of principal executive offices)

(770) 474-7293

(Issuer’s telephone number)

N/A

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

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ¨

State the number of shares outstanding of each of the issuer’s classes of common equity, as of May 4, 2004: 7,160,992; $2.50 par value

HENRY COUNTY BANCSHARES, INC AND SUBSIDIARIES

INDEX


		Page
PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Balance Sheets- March 31, 2004 and December 31, 2003	3

	Consolidated Statements of Income and Comprehensive Income - Three Months Ended March 31, 2004 and 2003	4

	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2004 and 2003	5

	Notes to Consolidated Financial Statements	6-7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	8-14

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14

Item 4.	Controls and Procedures	15

PART II. OTHER INFORMATION

Item 4 -	Submission of Matters to a Vote of Security Holders	16

Item 6 -	Exhibits and Reports on Form 8-K	16

	Signatures	17

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

HENRY COUNTY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2004 AND DECEMBER 31, 2003

(Unaudited)


	2004			2003
Assets
Cash and due from banks	$	18,035,310		$	25,198,796
Interest bearing deposits in banks		566,454			571,884
Federal funds sold		11,000,000			—
Securities available-for-sale, at fair value		47,449,641			56,499,855
Securities held-to-maturity, at cost, (fair value 2004 $580,000; 2003 $598,000)		557,280			572,369
Restricted equity securities, at cost		1,467,473			983,473
Loans held for sale		473,500			1,673,368
Loans		442,312,804			418,637,070
Less allowance for loan losses		4,324,968			4,178,472

Loans, net		437,987,836			414,458,598

Premises and equipment		9,354,696			9,099,287
Other assets		6,004,698			6,079,703

Total assets	$	532,896,888		$	515,137,333

Liabilities and Stockholders’ Equity
Deposits
Noninterest-bearing	$	84,798,974		$	81,309,482
Interest-bearing		362,080,604			345,723,652

Total deposits		446,879,578			427,033,134
Other borrowings		30,151,685			34,835,265
Other liabilities		2,958,167			1,884,542

Total liabilities		479,989,430			463,752,941

Commitments and contingencies

Stockholders’ equity
Common stock, par value $2.50; 10,000,000 shares authorized; 7,237,066 shares issued		18,092,664			18,092,664
Capital surplus		739,560			739,560
Retained earnings		35,087,034			33,661,983
Accumulated other comprehensive income		381,616			283,601
Treasury stock, 76,074 shares		(1,393,416	)		(1,393,416	)

Total stockholders’ equity		52,907,458			51,384,392

Total liabilities and stockholders’ equity	$	532,896,888		$	515,137,333

See Notes to Consolidated Financial Statements.

HENRY COUNTY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)


	Three Months Ended March 31,
	2004		2003
Interest income
Loans	$	6,326,271	$	5,731,713
Taxable securities		353,369		416,235
Nontaxable securities		95,725		123,463
Deposits in banks		2,769		6,877
Federal funds sold		10,977		46,950

Total interest income		6,789,111		6,325,238

Interest expense
Deposits		2,101,061		2,195,760
Other borrowings		274,048		201,128

Total interest expense		2,375,109		2,396,888

Net interest income		4,414,002		3,928,350
Provision for loan losses		150,000		150,000

Net interest income after provision for loan losses		4,264,002		3,778,350

Other operating income
Service charges on deposit accounts		570,052		593,429
Other service charges and fees		185,780		210,893
Mortgage banking income		299,389		629,263

Total other income		1,055,221		1,433,585

Other expenses
Salaries and employee benefits		1,293,155		1,487,072
Occupancy and equipment expenses		346,993		366,592
Other operating expenses		527,592		538,804

Total other expenses		2,167,740		2,392,468

Income before income taxes		3,151,483		2,819,467

Income tax expense		1,081,944		1,011,697

Net income		2,069,539		1,807,770

Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale, net of tax		98,015		(55,255	)

Comprehensive income	$	2,167,554	$	1,752,515

Earnings per share (weighted average shares outstanding - 7,160,992 and 7,160,992)	$	0.29	$	0.25

Cash dividends per share	$	0.09	$	0.08

See Notes to Consolidated Financial Statements.

HENRY COUNTY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2004 AND 2003

(Unaudited)


	2004			2003
OPERATING ACTIVITIES
Net income	$	2,069,539		$	1,807,770
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		124,490			131,215
Net decrease in loans held for sale		1,199,868			3,092,134
Provision for loan losses		150,000			150,000
(Increase) decrease in interest receivable		96,732			(62,936	)
Decrease in interest payable		(14,518	)		(70,430	)
Net other operating activities		1,015,923			839,900

Net cash provided by operating activities		4,642,034			5,887,653

INVESTING ACTIVITIES
Purchases of securities available-for-sale		(6,491,597	)		(10,910,836	)
Proceeds from maturities of securities available-for-sale		15,690,319			17,354,297
Proceeds from maturities of securities held-to-maturity		15,089			32,438
Purchases of restricted equity securities		(484,000	)		—
Net (increase) decrease in federal funds sold		(11,000,000	)		17,900,000
Net decrease in interest-bearing deposits in banks		5,430			144,730
Net increase in loans		(23,679,238	)		(19,371,053	)
Purchase of premises and equipment		(379,899	)		(43,652	)

Net cash provided by (used in) investing activities		(26,323,896	)		5,105,924

FINANCING ACTIVITIES
Net (increase) decrease in deposits		19,846,444			(13,138,087	)
Net repayments of other borrowings		(4,683,580	)		(5,107,148	)
Dividends paid		(644,488	)		(572,879	)

Net cash provided by (used in) financing activities		14,518,376			(18,818,114	)

Net decrease in cash and due from banks		(7,163,486	)		(7,824,537	)

Cash and due from banks, beginning of period		25,198,796			35,459,970

Cash and due from banks, end of period	$	18,035,310		$	27,635,433

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	2,389,627		$	2,467,318

Income taxes	$	—		$	120,607

See Notes to Consolidated Financial Statements.

HENRY COUNTY BANCSHARES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PRESENTATION

The consolidated financial information for Henry County Bancshares, Inc. (the “Company”) included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim period.

The results of operations for the three month period ended March 31, 2004 are not necessarily indicative of the results to be expected for the full year.

NOTE 2. SUPPLEMENTAL SEGMENT INFORMATION

The Company has two reportable segments: commercial banking and mortgage loan origination. The commercial banking segment provides traditional banking services offered through the Bank. The mortgage loan origination segment provides mortgage loan origination services offered through First Metro.

The accounting policies of the segments are the same as those described in the footnotes to the December 31, 2003 consolidated financial statements as filed in our annual report on Form 10-K. The Company evaluates performance based on profit and loss from operations before income taxes not including nonrecurring gains and losses.

The Company accounts for intersegment revenues and expenses as if the revenue/expense transactions were to third parties, that is, at current market prices.

The Company’s reportable segments are strategic business units that offer different products and services. They are managed separately because each segment has different types and levels of credit and interest rate risk.


	INDUSTRY SEGMENTS
For the Three Months Ended March 31, 2004	Commercial Banking		Mortgage			All Other		Eliminations			Total
Interest income	$	6,801,828	$	3,955		$	—	$	(16,672	)	$	6,789,111
Interest expense		2,379,064		12,717			—		(16,672	)		2,375,109
Net interest income (expense)		4,422,764		(8,762	)		—		—			4,414,002
Intersegment net interest income (expense)		16,672		(16,672	)		—		—			—

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents