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, 2005

¨	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, 2005: 7,151,684; $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, 2005 and December 31, 2004	3

	Consolidated Statements of Income and Comprehensive Income - Three Months Ended March 31, 2005 and 2004	4

	Consolidated Statements of Cash Flows - Three Months Ended March 31, 2005 and 2004	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	16

PART II.	OTHER INFORMATION

	Item 5 - Submission of Matters to a Vote of Security Holders	17

	Item 6 - Exhibits and Reports on Form 8-K	17

	Signatures	18

PART I - FINANCIAL INFORMATION

FINANCIAL STATEMENTS

HENRY COUNTY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

MARCH 31, 2005 AND DECEMBER 31, 2004

(Unaudited)


	2005			2004
Assets

Cash and due from banks	$	29,250,929		$	17,105,749
Interest bearing deposits in banks		567,670			330,137
Federal funds sold		700,000			—
Securities available-for-sale, at fair value		49,217,429			51,449,146
Securities held-to-maturity, at cost, (fair value 2005 $429,000; 2004 $444,000)		424,033			432,725
Restricted equity securities, at cost		2,057,451			2,359,473
Loans held for sale		1,860,705			577,755

Loans		503,711,369			486,722,703
Less allowance for loan losses		4,653,696			4,488,958

Loans, net		499,057,673			482,233,745

Premises and equipment		9,016,434			9,097,573
Other assets		7,536,897			6,942,020

Total assets	$	599,689,221		$	570,528,323

Liabilities and Stockholders’ Equity

Deposits
Noninterest-bearing	$	91,988,144		$	88,154,876
Interest-bearing		426,554,949			382,158,615

Total deposits		518,543,093			470,313,491
Other borrowings		19,962,348			42,057,905
Other liabilities		3,583,392			1,890,491

Total liabilities		542,088,833			514,261,887

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		40,656,703			39,109,140
Accumulated other comprehensive income		(322,925	)		(109,314	)
Treasury stock, 85,382 shares		(1,565,614	)		(1,565,614	)

Total stockholders’ equity		57,600,388			56,266,436

Total liabilities and stockholders’ equity	$	599,689,221		$	570,528,323

See Notes to Consolidated Financial Statements.

HENRY COUNTY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

THREE MONTHS ENDED MARCH 31, 2005 AND 2004

(Unaudited)


	Three Months Ended March 31,
	2005			2004
Interest income
Loans	$	7,740,580		$	6,326,271
Taxable securities		331,884			353,369
Nontaxable securities		59,766			95,725
Deposits in banks		1,717			2,769
Federal funds sold		18,049			10,977

Total interest income		8,151,996			6,789,111

Interest expense
Deposits		2,631,592			2,101,061
Other borrowings		319,812			274,048

Total interest expense		2,951,404			2,375,109

Net interest income		5,200,592			4,414,002
Provision for loan losses		161,250			150,000

Net interest income after provision for loan losses		5,039,342			4,264,002

Other operating income
Service charges on deposit accounts		507,781			570,052
Other service charges and fees		275,933			185,780
Mortgage banking income		206,482			299,389

Total other income		990,196			1,055,221

Other expenses
Salaries and employee benefits		1,506,915			1,293,155
Occupancy and equipment expenses		396,662			346,993
Other operating expenses		631,320			527,592

Total other expenses		2,534,897			2,167,740

Income before income taxes		3,494,641			3,151,483

Income tax expense		1,303,426			1,081,944

Net income		2,191,215			2,069,539

Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale, net of tax		(213,611	)		98,015

Comprehensive income	$	1,977,604		$	2,167,554

Earnings per share (weighted average shares outstanding - 7,151,684 and 7,160,992)	$	0.31		$	0.29

Cash dividends per share	$	0.09		$	0.09

See Notes to Consolidated Financial Statements.

HENRY COUNTY BANCSHARES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

THREE MONTHS ENDED MARCH 31, 2005 AND 2004

(Unaudited)


	2005			2004
OPERATING ACTIVITIES
Net income	$	2,191,215		$	2,069,539
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		138,759			124,490
Net (increase) decrease in loans held for sale		(1,282,950	)		1,199,868
Provision for loan losses		161,250			150,000
(Increase) decrease in interest receivable		(1,684	)		96,732
Increase (decrease) in interest payable		114,051			(14,518	)
Net other operating activities		1,095,699			1,015,923

Net cash provided by operating activities		2,416,340			4,642,034

INVESTING ACTIVITIES
Purchases of securities available-for-sale		—			(6,491,597	)
Proceeds from maturities of securities available-for-sale		1,908,064			15,690,319
Proceeds from maturities of securities held-to-maturity		8,692			15,089
Redemptions (purchases) of restricted equity securities		302,022			(484,000	)
Increase in federal funds sold		(700,000	)		(11,000,000	)
Net (increase) decrease in interest-bearing deposits in banks		(237,533	)		5,430
Net increase in loans		(16,985,178	)		(23,679,238	)
Purchase of premises and equipment		(57,620	)		(379,899	)

Net cash used in investing activities		(15,761,553	)		(26,323,896	)

FINANCING ACTIVITIES
Net increase in deposits		48,229,602			19,846,444
Net repayments of other borrowings		(22,095,557	)		(4,683,580	)
Dividends paid		(643,652	)		(644,488	)

Net cash provided by financing activities		25,490,393			14,518,376

Net decrease in cash and due from banks		12,145,180			(7,163,486	)

Cash and due from banks, beginning of period		17,105,749			25,198,796

Cash and due from banks, end of period	$	29,250,929		$	18,035,310

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	2,837,353		$	2,389,627

Income taxes	$	—		$	—

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, 2005 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 First State 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, 2004 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, 2005	Commercial Banking		Mortgage			All Other		Eliminations			Total
Interest income	$	8,167,279	$	3,678		$	—	$	(18,961	)	$	8,151,996
Interest expense		2,955,082		15,283			—		(18,961	)		2,591,404
Net interest income (expense)		5,212,197		(11,605	)		—		—			5,200,592
Intersegment net interest income (expense)		11,605		(11,605	)		—		—			—
Other revenue from external sources		780,564		206,482

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