U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2005
| ¨ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-23847
SHORE FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
| Virginia | 54-1873994 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |
| 25253 Lankford Highway Onley, Virginia |
23418 | |
| (Address of Principal Executive Offices) |
(Zip Code) | |
Issuer’s telephone number: (757) 787-1335
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 ¨ No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨
Number of shares of Common Stock outstanding as of May 13, 2005: 2,070,697
SHORE FINANCIAL CORPORATION AND SUBSIDIARIES
Index - Form 10-Q
PART I - FINANCIAL INFORMATION
| Item 1 - Consolidated Financial Statements (Unaudited) |
||
| Consolidated Statements of Financial Condition as of March 31, 2005 and December 31, 2004 |
3 | |
| Consolidated Statements of Income for the Three Months Ended March 31, 2005 and 2004 |
4 | |
| Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2005 and 2004 |
5 | |
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2005 and 2004 |
6 | |
| 8 | ||
| Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations |
12 | |
| 12 | ||
| 15 | ||
| 17 | ||
| 17 | ||
| 19 | ||
| Item 3 – Quantitative and Qualitative Disclosures about Market Risk |
21 | |
| Item 4 - Controls and Procedures |
22 | |
| PART II - OTHER INFORMATION | ||
| Item 1 - Legal Proceedings |
23 | |
| Item 2 - Changes in Securities |
23 | |
| Item 3 - Defaults Upon Senior Securities |
23 | |
| 23 | ||
| Item 5 - Other Information |
23 | |
| Item 6 - Exhibits and Reports on Form 8-K |
23 | |
| SIGNATURES | 24 | |
2
Consolidated Statements of Financial Condition
| March 31, 2005 |
December 31, 2004 | |||||
| (Unaudited) | ||||||
| ASSETS | ||||||
| Cash (including interest - earning deposits of approximately $1,944,100 and $3,149,300, respectively) |
$ | 7,325,600 | $ | 9,415,000 | ||
| Investment securities: |
||||||
| Held-to-maturity (fair value of $0 and $0, respectively) |
— | — | ||||
| Available-for-sale (amortized cost of $37,320,600 and $36,437,500, respectively) |
37,544,600 | 37,386,500 | ||||
| Other investments, at cost |
1,854,000 | 1,584,600 | ||||
| Loans receivable, net |
180,280,600 | 175,995,200 | ||||
| Premises and equipment, net |
7,845,600 | 8,024,900 | ||||
| Other assets |
5,396,900 | 5,282,300 | ||||
| $ | 240,247,300 | $ | 237,688,500 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||
| Deposits: |
||||||
| Interest-bearing |
$ | 166,340,800 | $ | 168,242,100 | ||
| Noninterest-bearing |
26,102,400 | 24,495,000 | ||||
| Total deposits |
192,443,200 | 192,737,100 | ||||
| Advances from Federal Home Loan Bank |
25,100,000 | 21,966,700 | ||||
| Other liabilities |
663,700 | 1,025,700 | ||||
| Total liabilities |
218,206,900 | 215,729,500 | ||||
| Stockholders’ equity |
||||||
| Preferred stock, par value $1 per share, 500,000 shares authorized; none issued and outstanding |
— | — | ||||
| Common stock, par value $.33 per share, 5,000,000 shares authorized; 2,070,697 and 2,063,284 shares issued and outstanding, respectively |
683,300 | 680,900 | ||||
| Additional capital |
8,232,400 | 8,199,000 | ||||
| Retained earnings |
13,001,600 | 12,494,400 | ||||
| Accumulated other comprehensive income |
123,100 | 584,700 | ||||
| Total stockholders’ equity |
22,040,400 | 21,959,000 | ||||
| $ | 240,247,300 | $ | 237,688,500 | |||
The accompanying notes are an integral part of these financial statements.
3
Consolidated Statements of Income (Unaudited)
| Three Months Ended March 31, | ||||||
| 2005 |
2004 | |||||
| Interest and dividend income |
||||||
| Loans |
$ | 2,632,200 | $ | 2,107,400 | ||
| Investments |
||||||
| Taxable interest |
313,700 | 308,100 | ||||
| Tax-exempt interest |
34,700 | 35,700 | ||||
| Dividends |
42,300 | 36,400 | ||||
| Total interest and dividend income |
3,022,900 | 2,487,600 | ||||
| Interest expense |
||||||
| Deposits |
820,900 | 693,700 | ||||
| FHLB/other advances |
128,900 | 56,600 | ||||
| Total interest expense |
949,800 | 750,300 | ||||
| Net interest income |
2,073,100 | 1,737,300 | ||||
| Provision for loan losses |
78,200 | 104,700 | ||||
| Net interest income after provision for loan losses |
1,994,900 | 1,632,600 | ||||
| Noninterest income |
||||||
| Deposit account fees |
288,000 | 294,400 | ||||
| Loan fees |
19,300 | 31,900 | ||||
| Mortgage banking fees |
31,800 | — | ||||
| Commissions on investment brokerage sales |
31,200 | 28,600 | ||||
| Gains on sales of securities |
90,400 | 94,000 | ||||
| Other |
61,500 | 70,200 | ||||
| Total noninterest income |
522,200 | 519,100 | ||||
| Noninterest expense |
||||||
| Compensation and employee benefits |
736,400 | 601,400 | ||||
| Occupancy and equipment |
420,100 | 322,400 | ||||
| Data processing |
186,200 | 153,600 | ||||
| Professional fees |
56,600 | 46,100 | ||||
| Advertising and promotion |
36,400 | 28,200 | ||||
| Other |
164,800 | 126,300 | ||||
| Total noninterest expense |
1,600,500 | 1,278,000 | ||||
| Income before income taxes |
916,600 | 873,700 | ||||
| Income taxes |
285,500 | 272,900 | ||||
| Net income |
$ | 631,100 | $ | 600,800 | ||
| Earnings Per Common Share: |
||||||
| Basic |
$ | 0.31 | $ | 0.29 | ||
| Diluted |
$ | 0.30 | $ | 0.29 | ||
The accompanying notes are an integral part of these financial statements.
4
Consolidated Statements of Stockholders’ Equity
| Number of Shares |
Common Stock |
Additional Capital |
Retained Earnings |
Accumulated Other Comprehensive Income (Loss) |
Total |
|||||||||||||||
| Balance, December 31, 2003 |
2,061,724 | $ | 680,400 | $ | 8,164,600 | $ | 10,595,300 | $ | 760,900 | $ | 20,201,200 | |||||||||
| Common stock cash dividend declared |
— | — | — | (103,000 | ) | — | (103,000 | ) | ||||||||||||
| Exercise of stock options |
600 | 200 | 4,400 | — | — | 4,600 | ||||||||||||||
| Repurchase of common stock |
— | — | — | — | — | — | ||||||||||||||
| Comprehensive income |
— | — | — | 600,800 | 240,600 | 841,400 | ||||||||||||||
| Balance, March 31, 2004 (Unaudited) |
2,062,324 | $ | 680,600 | $ | 8,169,000 | $ | 11,093,100 | $ | 1,001,500 | $ | 20,944,200 | |||||||||
| Balance, December 31, 2004 |
2,063,284 | $ | 680,900 | $ | 8,199,000 | $ | 12,494,400 | $ | 584,700 | $ | 21,959,000 | |||||||||
| Common stock cash dividend declared |
— | — | — | (123,900 | ) | — | (123,900 | ) | ||||||||||||
| Exercise of stock options |
7,413 | 2,400 | 33,400 | — | — | 35,800 | ||||||||||||||
| Tax benefit associated with the exercise of stock options |
— | — | — | — | — | — | ||||||||||||||
| Comprehensive income (loss) |
— | — | — | 631,100 | (461,600 | ) | 169,500 | |||||||||||||
| Balance, March 31, 2005 (Unaudited) |
2,070,697 | $ | 683,300 | $ | 8,232,400 | $ | 13,001,600 | $ | 123,100 | $ | 22,040,400 | |||||||||
The accompanying notes are an integral part of these financial statements.
5
Consolidated Statements of Cash Flows
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from operating activities |
||||||||
| Net income |
$ | 631,100 | $ | 600,800 | ||||
| Adjustments to reconcile to net cash provided by operating activities: |
||||||||
| Provision for loan losses |
78,200 | 104,700 | ||||||
| Depreciation and amortization |
180,800 | 123,800 | ||||||
| Amortization of premium and accretion of discount on securities, net |
17,300 | 20,700 | ||||||
| Gain on sale of investment securities |
(90,400 | ) | (94,000 | ) | ||||
| Increase in cash surrender value of life insurance |
(33,000 | ) | (33,600 | ) | ||||
| Changes in: |
||||||||
| Deferred loan fees |
38,700 | 17,100 | ||||||
| Other assets |
168,100 | (86,100 | ) | |||||
| Other liabilities |
(362,000 | ) | 354,600 | |||||
| Net cash flows from operating activities |
628,800 | 1,008,000 | ||||||
| Cash flows from investing activities |
||||||||
| Purchase of available-for-sale securities |
(1,055,200 | ) | (127,500 | ) | ||||
| Proceeds from maturities, sales and calls of available-for-sale securities |
245,200 | 1,313,600 | ||||||
| Purchase of other investments |
(1,455,900 | ) | (129,200 | ) | ||||
| Proceeds from maturities, sales and calls of other investments |
1,186,500 | 39,900 | ||||||
| Loan originations, net of repayments |
(4,402,300 | ) | (7,479,400 | ) | ||||
| Purchase of premises and equipment |
(80,700 | ) | (799,000 | ) | ||||
| Basis reduction due to cost savings agreement on building construction |
92,900 | — | ||||||
| Net cash flows from investing activities |
(5,469,500 | ) | (7,181,600 | ) | ||||
6
Consolidated Statements of Cash Flows
| Three Months Ended March 31, |
||||||||
| 2005 |
2004 |
|||||||
| Cash flows from financing activities |
||||||||
| Net increase in demand deposits |
$ | 1,296,100 | $ | 11,354,700 | ||||
| Net increase (decrease) in time deposits |
(1,590,000 | ) | ||||||