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 March 31, 2004
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.) |
24 SECOND AVE., SE MOULTRIE, GA 31768
(Address of principal executive offices)
(229) 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2) of the Exchange Act). Yes x No ¨
There were 9,765,180 shares of Common Stock outstanding as of March 31, 2004.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2004
TABLE OF CONTENTS
| Item |
Page | |||
| PART I - FINANCIAL INFORMATION |
||||
| 1. | Financial Statements |
|||
| 3 | ||||
| 4 | ||||
| 5 | ||||
| 6 | ||||
| 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
8 | ||
| 3. | 12 | |||
| 4. | 13 | |||
| PART II - OTHER INFORMATION | ||||
| 4. | 13 | |||
| 6. | 13 | |||
| 14 | ||||
| 15 | ||||
2
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
| March 31 2004 |
December 31 2003 |
|||||||
| Assets | ||||||||
| Cash and due from banks |
$ | 75,780 | $ | 80,480 | ||||
| Securities available for sale, at fair value |
195,129 | 196,289 | ||||||
| Loans |
840,724 | 840,539 | ||||||
| Less allowance for loan losses |
15,211 | 14,963 | ||||||
| Loans, net |
825,513 | 825,576 | ||||||
| Premises and equipment, net |
25,902 | 25,537 | ||||||
| Intangible assets |
3,089 | 3,286 | ||||||
| Goodwill |
19,231 | 19,231 | ||||||
| Other assets |
23,741 | 18,712 | ||||||
| $ | 1,168,385 | $ | 1,169,111 | |||||
| Liabilities and Stockholders’ Equity | ||||||||
| Deposits |
||||||||
| Noninterest-bearing demand |
131,763 | 141,715 | ||||||
| Interest-bearing demand |
283,372 | 291,715 | ||||||
| Savings |
70,718 | 65,918 | ||||||
| Time, $100,000 and over |
156,659 | 149,991 | ||||||
| Other time |
248,707 | 257,185 | ||||||
| Total deposits |
891,219 | 906,524 | ||||||
| Federal funds purchased & securities sold under agreements to repurchase |
5,051 | 8,211 | ||||||
| Other borrowings |
112,235 | 97,545 | ||||||
| Other liabilities |
8,436 | 7,651 | ||||||
| Subordinated deferrable interest debentures |
35,567 | 35,567 | ||||||
| Total liabilities |
1,052,508 | 1,055,498 | ||||||
| Stockholders’ equity | ||||||||
| Common stock, par value $1; 30,000,000 shares authorized; 10,850,522 and 10,849,922 shares issued respectively |
10,851 | 10,850 | ||||||
| Capital surplus |
46,452 | 46,446 | ||||||
| Retained earnings |
67,964 | 66,145 | ||||||
| Accumulated other comprehensive income |
1,236 | 522 | ||||||
| Unearned compensation |
(432 | ) | (491 | ) | ||||
| 126,071 | 123,472 | |||||||
| Less cost of 1,085,342 and 1,066,068 shares acquired for the treasury |
(10,194 | ) | (9,859 | ) | ||||
| Total stockholders’ equity |
115,877 | 113,613 | ||||||
| $ | 1,168,385 | $ | 1,169,111 | |||||
See Notes to Consolidated Financial Statements.
3
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Dollars in Thousands)
(Unaudited)
| 2004 |
2003 |
||||||
| Interest income | |||||||
| Interest and fees on loans |
$ | 13,763 | $ | 14,655 | |||
| Interest on taxable securities |
1,796 | 1,634 | |||||
| Interest on nontaxable securities |
42 | 40 | |||||
| Interest on deposits in other banks |
62 | 204 | |||||
| 15,663 | 16,533 | ||||||
| Interest expense | |||||||
| Interest on deposits |
2,746 | 4,107 | |||||
| Interest on federal funds purchased and securities sold under agreements to repurchase |
18 | 18 | |||||
| Interest on other borrowings |
1,938 | 2,011 | |||||
| 4,702 | 6,136 | ||||||
| Net interest income |
10,961 | 10,397 | |||||
| Provision for loan losses | 311 | 731 | |||||
| Net interest income after provision for loan losses |
10,650 | 9,666 | |||||
| Other income | |||||||
| Service charges on deposit accounts |
2,476 | 2,517 | |||||
| Other service charges, commissions and fees |
767 | 788 | |||||
| Other |
91 | 286 | |||||
| Gain on sale of securities |
— | 20 | |||||
| 3,334 | 3,611 | ||||||
| Other expense | |||||||
| Salaries and employee benefits |
5,223 | 5,144 | |||||
| Equipment and occupancy expense |
1,127 | 1,164 | |||||
| Amortization of intangible assets |
197 | 256 | |||||
| Other operating expenses |
2,692 | 2,626 | |||||
| 9,239 | 9,190 | ||||||
| Income before income taxes |
4,745 | 4,087 | |||||
| Applicable income taxes |
1,559 | 1,318 | |||||
| Net income |
$ | 3,186 | 2,769 | ||||
| Other comprehensive income, net of tax: | |||||||
| Unrealized holding gains(losses) arising during period, net of tax |
$ | 714 | $ | (421 | ) | ||
| Reclassification adjustment for gains included in net income, net of tax |
$ | — | $ | (13 | ) | ||
| Comprehensive income |
$ | 3,900 | $ | 2,335 | |||
| Income per common share-Basic |
$ | 0.33 | $ | 0.28 | |||
| Income per common share-Diluted |
$ | 0.32 | $ | 0.28 | |||
| Average shares outstanding |
9,777,267 | 9,770,275 | |||||
See Notes to Consolidated Financial Statements.
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
(Dollars in Thousands)
(Unaudited)
| 2004 |
2003 |
|||||||
| OPERATING ACTIVITIES | ||||||||
| Net Income |
$ | 3,186 | $ | 2,769 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation |
415 | 478 | ||||||
| Provision for loan losses |
311 | 731 | ||||||
| Amortization of intangible assets |
197 | 256 | ||||||
| Other prepaids, deferrals and accruals, net |
1,601 | 220 | ||||||
| Total adjustments |
2,524 | 1,685 | ||||||
| Net cash provided by operating activities |
5,710 | 4,454 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Proceeds from maturities of securities available for sale |
9,290 | 19,001 | ||||||
| Purchase of securities available for sale |
(13,192 | ) | (29,344 | ) | ||||
| Proceeds from sales of securities available for sale |
— | 2,360 | ||||||
| (Increase) decrease in loans |
(248 | ) | 1,529 | |||||
| Purchase of premises and equipment |
(780 | ) | (373 | ) | ||||
| Net cash used in investing activities |
(4,930 | ) | (6,827 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Net decrease in deposits |
(15,305 | ) | (4,476 | ) | ||||
| Net decrease in federal funds purchased and securities sold under agreements to repurchase |
(3,160 | ) | (1,684 | ) | ||||
| Increase (decrease) in other borrowings |
14,690 | (13,332 | ) | |||||
| Dividends paid |
(1,370 | ) | (1,180 | ) | ||||
| Purchase treasury stock |
(335 | ) | (158 | ) | ||||
| Net cash used in financing activities |
(5,480 | ) | (20,830 | ) | ||||
| Net decrease in cash and due from banks |
$ | (4,700 | ) | $ | (23,203 | ) | ||
| Cash and due from banks at beginning of period |
80,480 | 123,077 | ||||||
| Cash and due from banks at end of period |
$ | 75,780 | $ | 99,874 | ||||
See Notes to Consolidated Financial statements.
5
NOTE 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 accounting principles generally accepted in the United States of America 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 Annual Report on Form 10-K for the year ended December 31, 2003. The results of operations for the three months ended March 31, 2004 are not necessarily indicative of the results to be expected for the full year.
Stock Compensation Plans
At March 31, 2004, the Company has two stock-based employee compensation plans. The Company accounts for those plans under the recognition and measurement principles of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. No stock-based employee compensation cost is reflected in net income, as all options granted under those plans had an exercise price equal to the market value of the underlying stock on the date of grant. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.
| For The Three Months Ended March 31, |
||||||||
| 2004 |
2003 |
|||||||
| (Dollars in Thousands) | ||||||||
| Net income, as reported |
$ | 3,186 | $ | 2,769 | ||||
| Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects |
(20 | ) | (13 | ) | ||||
| Pro forma net income |
$ | 3,166 | $ | 2,756 | ||||
| Earnings per share: |
||||||||
| Basic - as reported |
$ | 0.33 | $ | 0.28 | ||||
| Basic - pro forma |
$ | 0.32 | < | |||||