SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE) FORM 10-QSB/A
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
--- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period ended June 30, 2000
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition Period from _________to_________
Commission File Number 000-26905
RHBT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 58-2482426
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
315 East Main Street
Rock Hill, SC 29731
(Address of principal executive
offices, including zip code)
(803) 324-2500
(Registrant's telephone number, including area code)
------------------------------------------------
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 the number of shares outstanding of each of the issuer's classes of
common stock as of the date of this filing.
1,720,938 shares of common stock, $.01 par value
PAGE 1 OF 20
EXHIBIT INDEX ON PAGE 2
<PAGE>
RHBT FINANCIAL CORPORATION
Index
PART I. FINANCIAL INFORMATION Page No.
-----------------------------
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -- June 30, 2000
and December 31, 1999...............................................3
Condensed Consolidated Statements of Income -- Six months ended June
30, 2000 and 1999 and Three months ended
June 30, 2000 and 1999..............................................4
Condensed Consolidated Statements of Shareholders' Equity and
Comprehensive Income -- Six months ended June 30, 2000..............5
Condensed Consolidated Statements of Cash Flows -- Six months
ended June 30, 2000 and 1999........................................6
Notes to Condensed Consolidated Financial Statements.................7-9
Review by Independent Certified Public Accountants............................10
Report on Review by Independent Certified Public Accountants..................11
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations......................12-17
PART II. OTHER INFORMATION
--------------------------
Item 4. Submission of Matters to a Vote of Security Holders...................18
Item 6. Exhibits and Reports on Form 8-K......................................18
(a) Exhibits.........................................................18
(b) Reports on Form 8-K..............................................18
<PAGE>
RHBT FINANCIAL CORPORATION
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 2000 Dec. 31, 1999
-------------- -------------
(Unaudited)
<S> <C> <C>
Assets
Cash and cash equivalents:
Cash and due from banks $ 2,888,398 $ 3,680,173
Federal funds sold and securities
purchased under agreements to resell 27,850,000 16,425,000
---------------- --------------
30,738,398 20,105,173
---------------- --------------
Securities available-for-sale 7,138,754 7,832,559
Loans receivable 142,464,356 118,709,167
Less allowance for loan losses (1,493,804) (1,226,442)
---------------- --------------
Loans, net 140,970,552 117,482,725
Accrued interest receivable 1,237,236 825,111
Premises and equipment, net 1,656,209 1,672,998
Other assets 1,288,175 1,529,614
---------------- --------------
Total assets $ 183,029,324 $ 149,448,180
================ ==============
Liabilities
Deposits:
Noninterest-bearing $ 13,531,851 $ 6,555,078
Interest-bearing 37,164,858 34,659,500
Savings 5,717,344 4,426,598
Time deposits $100,000 and over 42,471,429 29,434,939
Other time deposits 53,092,267 32,749,958
---------------- --------------
151,977,749 107,826,073
Securities sold under agreement to repurchase 5,210,000 9,105,000
Federal funds purchased - 5,000,000
Advances from the Federal Home Loan Bank 7,000,000 10,000,000
Accrued interest payable 690,355 483,114
Other liabilities 192,864 120,539
---------------- --------------
Total liabilities 165,070,968 132,534,726
---------------- --------------
Shareholders' Equity
Common stock, $ .01 par value; 10,000,000 shares authorized,
1,720,938 shares issued and outstanding 17,208 17,208
Capital surplus 15,383,930 15,383,930
Retained earnings 2,616,362 1,564,652
Accumulated other comprehensive income (loss) (59,144) (52,336)
---------------- --------------
Total shareholders' equity 17,958,356 16,913,454
---------------- --------------
Total liabilities and shareholders' equity $ 183,029,324 $ 149,448,180
================ ==============
</TABLE>
See notes to condensed financial statements
3
<PAGE>
RHBT FINANCIAL CORPORATION
Condensed Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30, Three Months Ended June 30,
-------------------------- ---------------------------
2000 1999 2000 1999
----- ----- ----- ----
<S> <C> <C> <C> <C>
Interest income
Loans, including fees $ 6,472,795 $ 3,689,614 $ 3,404,169 $ 1,980,967
Investment securities, taxable 214,384 215,353 103,340 111,117
Federal funds sold and securities
purchased under agreements to resell 601,988 552,169 291,864 295,329
------------ ----------- ------------ -------------
Total 7,289,167 4,457,136 3,799,373 2,387,413
------------ ----------- ------------ -------------
Interest expense
Deposit accounts 424,035 1,922,391 1,793,924 987,546
Securities sold under agreements to
repurchase 172,058 270,781 84,688 145,302
Advances from the Federal Home
Loan Bank 207,842 - 112,521 -
------------ ----------- ------------ -------------
Total 3,803,935 2,193,172 1,991,133 1,132,848
------------ ----------- ------------ -------------
Net interest income 3,485,232 2,263,964 1,808,240 1,254,565
Provision for loan losses 289,000 187,000 125,000 106,000
------------ ----------- ------------ -------------
Net interest income after provision
for loan losses 3,196,232 2,076,964 1,683,240 1,148,565
------------ ----------- ------------ -------------
Other income
Service charges on deposit accounts 154,574 93,030 78,715 51,635
Other charges, commissions and fees 92,866 56,131 45,442 29,388
Income from fiduciary activities 174,616 82,604 95,170 52,465
------------ ----------- ------------ -------------
Total 422,056 231,765 219,327 133,488
------------ ----------- ------------ -------------
Other expense
Salaries and employee benefits 794,423 563,810 430,988 302,583
Occupancy expense 307,858 194,782 154,709 99,990
Advertising and marketing expense 30,142 46,972 13,116 19,141
Other operating expenses 816,559 519,373 431,607 276,920
------------ ----------- ------------ -------------
Total 1,948,982 1,324,937 1,030,420 698,634
------------ ----------- ------------ -------------
Income before income taxes 1,669,306 983,792 872,147 583,419
Income tax expense 617,596 364,058 322,398 216,058
------------ ----------- ------------ -------------
Net income $ 1,051,710 $ 619,734 $ 549,749 $ 367,361
============ =========== ============ =============
Basic net income per share $ 0.61 $ 0.36 $ 0.32 $ 0.21
Diluted net income per share 0.61 0.36 0.32 0.21
See notes to condensed financial statements.
</TABLE>
4
<PAGE>
RHBT FINANCIAL CORPORATION
Condensed Consolidated Statement of Shareholders'
Equity and Comprehensive Income for the
six months ended June 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Accumulated
Common Stock Other
------------- Capital Retained Comprehensive
Shares Amount Surplus Earnings Income Total
------- ------- -------- --------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 1,720,938 $ 17,208 $15,383,930 $ 1,564,652 $ (52,336) $16,913,454
Net income
for the period 1,051,710 1,051,710
Other comprehensive
income, net of
tax $3,998 (6,808) (6,808)
-------
Comprehensive income 1,044,902
--------- -------- ------------ ----------- ----------- ------------
Balance, 1,720,938 $ 17,208 $15,383,930 $ 2,616,362 $ (59,144) $17,958,356
========= ======== ============ =========== =========== ============
June 30, 2000
</TABLE>
See notes to condensed financial statements.
5
<PAGE>
RHBT FINANCIAL CORPORATION
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-------------------------
2000 1999
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,051,710 $ 619,734
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 123,745 79,326
Provision for loan losses 289,000 187,000
Accretion and premium amortization (4,247) 19,150
Amortization of net loan fees and costs 27,096 25,708
Amortization of organizational costs 9,517 9,517
(Increase) decrease in interest receivable (412,125) (154,576)
Increase (decrease) in interest payable 207,241 77,696
(Increase) decrease in other assets 235,920 (37,098)
(Increase) decrease in other liabilities 72,325 (111,901)
------------- -------------
Net cash provided by operating activities 1,600,182 714,556
------------- -------------
Cash flows from investing activities:
Purchases of securities available-for-sale (1,962,754) (6,083,643)
Maturities of securities available-for-sale 2,650,000 4,545,000
Net increase in loans made to customers (23,803,923) (22,200,688)
Purchases of premises and equipment (106,956) (170,449)
(Purchase) sale of Federal Home Loan Bank Stock - (163,800)
------------- -------------
Net cash used by investing activities (23,223,633) (24,073,580)
------------- --------------
Cash flows from financing activities:
Net increase in demand deposits, interest-bearing transaction
accounts and savings accounts 10,772,877 13,025,692
Net increase in certificates of deposit and other time deposits 33,378,799 12,346,771
Net increase (decrease) in securities sold under agreements
to repurchase (8,895,000) 205,000
Repayments of advances from the Federal Home Loan Bank (3,000,000) -
------------- -------------
Net cash provided by financing activities 32,256,676 25,577,463
------------- -------------
Net increase in cash and cash equivalents 10,633,225 2,218,439
Cash and cash equivalents, beginning 20,105,173 27,996,891
------------- -------------
Cash and cash equivalents, ending $ 30,738,398 $ 30,215,330
============= =============
Cash paid during the period for:
Income taxes $ 618,126 $ 116,033
Interest $ 3,596,694 $ 1,049,338
</TABLE>
See notes to condensed financial statements
6
<PAGE>
RHBT FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - Basis of Presentation
------------------------------
The accompanying consolidated financial statements have been prepared in
accordance with the requirements for interim financial statements and,
accordingly, they are condensed and omit disclosures, which would substantially
duplicate those contained in the most recent annual report to shareholders. The
financial statements as of June 30, 2000 and for the interim periods ended June
30, 2000 and 1999 are unaudited and, in the opinion of management, include all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation. The financial information as of December 31, 1999 has been
derived from the audited financial statements as of that date. For further
information, refer to the financial statements and the notes included in RHBT
Financial Corporation's 1999 Annual Report.
Note 2 - Merger with Ridgeway Bancshares, Inc.
----------------------------------------------
On June 28, 2000, RHBT Financial Corporation (the Company) announced that it
signed a letter of intent to acquire Ridgeway Bancshares, Inc. and its
subsidiary, the Bank of Ridgeway. The Bank of Ridgeway is South Carolina's
oldest banking organization with approximately 67.5 million in total assets. The
Bank of Ridgeway will continue to operate as a separate bank, wholly owned by
the Company. Under the agreement, the Company will exchange 26.355 shares of its
common stock for each outstanding share of Ridgeway Bancshares, Inc. common
stock. Following the proposed merger, the Company will have 2,775,138 total
shares outstanding of its common stock. The merger will be accounted for under
the pooling of interests method of accounting. The merger is expected to be
completed by the end of 2000.
Note 3 - Comprehensive Income
-----------------------------
Comprehensive income includes net income and other comprehensive income, which
is defined as non-owner related transactions in equity. The following table sets
forth the amounts of other comprehensive income included in equity along with
the related tax effect for the three and six month periods ended June 30, 2000
and 1999.
<TABLE>
<CAPTION>
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
-------- ---------- ---------
<S> <C> <C> <C>
For the Six Months Ended June 30, 2000:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period $ (10,806) $ 3,998 $ (6,808)
Plus: reclassification adjustment for
gains (losses) realized in net income - - -
-------- ------- ---------
Net unrealized gains (losses) on securities (10,806) 3,998 (6,808)
-------- ------ ---------
Other comprehensive income $ (10,806) $ 3,998 $ (6,808)
========== ======== =========
</TABLE>
7
<PAGE>
RHBT FINANCIAL COPRORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 3 - Comprehensive Income -- continued
------------------------------------------
<TABLE>
<CAPTION>
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
---------- --------- ----------
<S> <C> <C> <C>
For the Six Months Ended June 30, 1999:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period $ (84,673) $ 31,329 $ (53,344)
Plus: reclassification adjustment for
gains (losses) realized in net income - - -
----------- --------- -----------
Net unrealized gains (losses) on securities 84,673) 31,329 (53,344)
----------- --------- -----------
Other comprehensive income $ (84,673) $ 31,329 $ (53,344)
========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
---------- --------- -----------
<S> <C> <C> <C>
For the Three Months Ended June 30, 2000:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period $ 6,151 $ (2,276) $ 3,875
Plus: reclassification adjustment for
gains (losses) realized in net income - - -
---------- --------- -----------
Net unrealized gains (losses) on securities 6,151 (2,276) 3,875
---------- --------- -----------
Other comprehensive income $ 6,151 $ (2,276) 3,875
========== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
Pre-tax (Expense) Net-of-tax
Amount Benefit Amount
---------- --------- -----------
<S> <C> <C> <C>
For the Three Months Ended June 30, 1999:
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during the period $ (47,679) $ 17,641 $ (30,038)
Plus: reclassification adjustment for
gains (losses) realized in net income - - -
---------- --------- -----------
Net unrealized gains (losses) on securities (47,679) 17,641 (30,038)
---------- --------- -----------
Other comprehensive income $ (47,679) $ 17,641 $ (30,038)
========== ========= ===========
</TABLE>
Accumulated other comprehensive income consists solely of the unrealized gain on
securities available for sale, net of the deferred tax effects.
8
<PAGE>
RHBT FINANCIAL CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 4 - Earnings Per Share
---------------------------
Net income per share - basic is computed by dividing net income by the weighted
average number of common shares outstanding. Net income per share - diluted is
computed by dividing net income by the weighted average number of common shares
outstanding and dilutive common share equivalents using the treasury stock
method. Dilutive common share equivalents include common shares issuable upon
exercise of outstanding stock options.
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------------ -----------------------
2000 1999 2000 1999
---------- --------- -------- --------
Net income per share - basic computation:
<S> <C> <C> <C> <C>
Net income available to common shareholders $1,051,710 $619,734 $549,749 $367,361
---------- -------- -------- --------
Average common shares outstanding - basic 1,720,938 1,720,313 1,720,938 1,720,313
---------- -------- -------- --------
Net income per share - basic $ 0.61 $ 0.36 $ 0.32 $ 0.21
---------- -------- -------- --------
Net income per share - diluted computation:
Net income available to common shareholders $1,051,710 $619,734 $549,749 $367,361
========== ======== ======== ========
Average common shares outstanding - basic 1,720,938 1,720,313 1,720,938 1,720,313
========== ======== ======== ========
Incremental shares from assumed conversions:
Stock options 15,650 11,302 15,120 25,371
---------- -------- -------- --------
Average common shares outstanding - diluted 1,736,588 1,736,615 1,736,058 1,745,684
---------- -------- -------- --------
Net income per share - diluted $ 0.61 $ 0.36 $ 0.32 $ 0.21
========== ======== ======== ========
</TABLE>
9
<PAGE>
RHBT FINANCIAL CORPORATION
Review by Independent Certified Public Accountants
--------------------------------------------------
Tourville, Simpson and Caskey, L.L.P., the Company's independent certified
public accountants, have made a limited review of the financial data as of June
30, 2000, and for the three and six month periods ended June 30, 2000 and 1999
presented in this document, in accordance with standards established by the
American Institute of Certified Public Accountants.
Their report furnished pursuant to Article 10 of Regulation S-X is included
herein.
10
<PAGE>
RHBT FINANCIAL CORPORATION
Report on Review by Independent Certified Public Accountants
------------------------------------------------------------
The Board of Directors
RHBT Financial Corporation
Rock Hill, South Carolina
We have reviewed the accompanying condensed consolidated balance sheet of RHBT
Financial Corporation and subsidiary (the Company) as of June 30, 2000, the
related condensed consolidated statements of income for the three and six month
periods ended June 30, 2000 and 1999, the related condensed consolidated
statement of changes in shareholders' equity and comprehensive income for the
six month period ended June 30, 2000, and the related condensed consolidated
statements of cash flows for the six month periods ended June 30, 2000 and 1999.
These financial statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1999, and the
related consolidated statements of income, changes in shareholders' equity and
comprehensive income, and cash flows for the year then ended (not presented
herein); and, in our report dated January 21, 2000, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of December 31, 1999, is fairly stated, in all material respects, in relation
to the consolidated balance sheet from which it has been derived.
TOURVILLE, SIMPSON AND CASKEY, L.L.P.
Columbia, South Carolina
August 2, 2000
11
<PAGE>
RHBT FINANCIAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
-------------------------------------------------------------------
The following is a discussion of the Company's financial condition as of June
30, 2000 compared to December 31, 1999, and the results of operations for the
three and six months ended June 30, 2000 compared to the three and six months
ended June 30, 1999. These comments should be read in conjunction with the
Company's condensed financial statements and accompanying footnotes appearing in
this report. This report contains "forward-looking statements" relating to,
without limitation, future economic performance, plans and objectives of
management for future operations, and projections of revenues and other
financial items that are based on the beliefs of the Company's management, as
well as assumptions made by and information currently available to the Company's
management. The words "expect," "estimate," "anticipate," and "believe," as well
as similar expressions, are intended to identify forward-looking statements. The
Company's actual results may differ materially from the results discussed in the
forward-looking statements, and the Company's operating performance each quarter
is subject to various risks and uncertainties that are discussed in detail in
the Company's filings with the Securities and Exchange Commission.
Results of Operations
---------------------
Net Interest Income
-------------------
For the six months ended June 30, 2000, net interest income increased
$1,221,268, or 53.94%, to $3,485,232 as compared to $2,263,964 for the same
period in 1999. The net interest margin realized on earning assets increased
from 3.97% for the six months ended June 30, 1999 to 4.30% for the same period
in 2000. The interest rate spread also increased by 23 basis points from 3.03%
at June 30, 1999 to 3.26% at June 30, 2000.
Net interest income increased from $1,254,565 for the quarter ending June 30,
1999 to $1,808,240 for the quarter ending June 30, 2000. This represents an
increase of $553,675, or 44.13%. The net interest margin realized on earning
assets increased from 4.16% for the quarter ended June 30, 1999 to 4.37% for the
quarter ended June 30, 2000. The interest rate spread also increased by 53 basis
points from 3.05% at June 30, 1999 to 3.58% at June 30, 2000.
Provision and Allowance for Loan Losses
---------------------------------------
The provision for loan losses is the charge to operating earnings that
management believes is necessary to maintain the allowance for possible loan
losses at an adequate level. For the six months ended June 30, 2000, the
provision charged to expense was $289,000. This increase of $102,000 from the
comparable period in 1999 is a result of management's efforts to increase the
allowance for loan losses to match the growth in the loan portfolio. For the
quarter ended June 30, 2000 and 1999, the provision charged to expense was
$125,000 and $106,000, respectively. There are risks inherent in making all
loans, including risks with respect to the period of time over which loans may
be repaid, risks resulting from changes in economic and industry conditions,
risks inherent in dealing with individual borrowers, and, in the case of a
collateralized loan, risks resulting from uncertainties about the future value
of the collateral. The Company maintains an allowance for loan losses based on,
among other things, historical experience, an evaluation of economic conditions,
and regular reviews of delinquencies and loan portfolio quality. Management's
judgment about the adequacy of the allowance is based upon a number of
assumptions about future events, which it believes to be reasonable, but which
may not prove to be accurate. Thus, there is a risk that charge-offs in future
periods could exceed the allowance for loan losses or that substantial
additional increases in the allowance for loan losses could be required.
Additions to the allowance for loan losses would result in a decrease of the
Company's net income and, possibly, its capital.
12
<PAGE>
RHBT FINANCIAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition -- continued
--------------------------------------------------------------------------------
Noninterest Income
------------------
Noninterest income during the six months ended June 30, 2000 was $422,056, an
increase of $190,291 from $231,765 during the comparable period in 1999. The
increase is primarily a result of an increase in income from fiduciary
activities from $82,604 for the six months ended June 30, 1999 to $174,616 for
the six months ended June 30, 2000. In addition, service charges on deposit
accounts resulted in income of $154,574 during the six months ended June 30,
2000, compared to $93,030 during the comparable period in 1999. This was due to
an overall increase in deposit accounts over the two periods.
For the quarter ended June 30, 2000, noninterest income increased $85,839, or
64.30%, from $133,488 for the same period in 1999. This increase is primarily
due to income from fiduciary activities, which increased $42,705, or 81.40%,
from the quarter ended June 30, 1999. Service charges on deposit accounts also
increased from $51,635 for the quarter ended June 30, 1999 to $78,715 for the
quarter ended June 30, 2000. This was due to an overall increase in deposit
accounts over the two periods.
Noninterest Expense
-------------------
Total noninterest expense for the six months ended June 30, 2000 was $1,948,982
or 47.10% higher than the $1,324,937 amount for the six months ended June 30,
1999. The largest increase was in other operating expenses, which increased from
$519,373 at June 30, 1999 to $816,559 for the six months ended June 30, 2000.
Other operating expenses increased in most all areas as a result of the growth
of the Company, including the opening of the Fort Mill/Tega Cay office, which
opened on September 21, 1999. One such increase was in data processing charges,
which increased from $90,401 for the six months ended June 30, 199 to $151,898
for the six months ended June 30, 2000. Salaries and employee benefits also
increased $230,613, or 40.90%, to $794,423 for the six months ended June 30,
2000. This increase is attributable to normal pay increases and additional
personnel hired to staff the Fort Mill/Tega Cay office.
For the quarter ended June 30, 2000, noninterest expense increased $331,786, or
47.49%, over the same period in 1999. The largest increase between the quarters
ended June 30, 2000 and June 30, 1999 was in other operating expense, which
increased $154,687, or 55.86%. Salaries and employee benefits also increased
from $302,583 for the quarter ended June 30, 1999 to $430,988 for the quarter
ended June 30, 2000. Salaries and employee benefits increased for the quarter
ended June 30, 2000 as compared to June 30, 1999 for the same reasons discussed
above.
Income Taxes
------------
The income tax provision for the six months ended June 30, 2000 was $617,596 as
compared to $364,058 for the same period in 1999. The effective tax rate was 37%
at June 30, 2000 and June 30, 1999. The effective tax rate was 37% for the
quarters ended June 30, 2000 and June 30, 1999.
Net Income
----------
The combination of the above factors resulted in net income for the six months
ended June 30, 2000 of $1,051,710 as compared to $619,734 for the same period in
1999. This represents an increase of $431,976 over the same period in 1999. For
the quarter ended June 30, 2000, net income was $549,749 or $182,388 higher than
$367,361 for the quarter ended June 30, 1999. This increase reflects the
Company's continued growth, as average-earning assets increased from
$113,989,000 for the six months ended June 30, 1999 to $162,211,000, for the six
months ended June 30, 2000.
13
<PAGE>
RHBT FINANCIAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition -- continued
--------------------------------------------------------------------------------
Assets and Liabilities
----------------------
During the first six months of 2000, total assets increased $33,581,144, or
22.47%, when compared to December 31, 1999. The primary source of growth in
assets was loans, which increased $23,755,189 during the first six months of
2000. Federal funds sold and repurchase agreements increased $11,425,000 from
December 31, 1999 to $27,850,000 at June 30, 2000. Total deposits also increased
$44,151,676, or 40.95%, from the December 31, 1999 amount of $107,826,073.
Within the deposit area, certificates of deposit increased $33,378,799, or
53.68%, during the first six months of 2000. Federal funds purchased of
$5,000,000 that were obtained for Year 2000 concerns at December 31, 1999, were
repaid by June 30, 2000. Advances from the Federal Home Loan Bank decreased from
$10,000,000 at December 31, 1999 to $7,000,000 at June 30, 2000.
Investment Securities
---------------------
Investment securities decreased slightly from $7,832,559 at December 31, 1999 to
$7,138,754 at June 30, 2000. The decrease can be attributed to the maturing of
five securities during the first six months of the year. The funds from the
securities were invested in higher yielding loans. All of the Company's
investment securities were designated as available-for-sale at June 30, 2000.
Loans
-----
The Company continued its trend of growth during the first six months of 2000,
especially in the loan area. Net loans increased $23,487,827, or 19.99%, during
the period. As shown below, the main component of growth in the loan portfolio
was commercial and industrial loans, which increased 50.74%, or $25,149,951,
from December 31, 1999. Commercial and industrial loans include discounted
accounts receivable loans that totaled $11,957,437 at June 30, 2000. This
represents an increase of $1,864,543 or 18.47%, when compared to December
31,1999. Also, real estate - construction loans increased $1,257,929, or 23.21%
during the first six months of 2000. Balances within the major loans receivable
categories as of June 30, 2000 and December 31, 1999 are as follows:
June 30, December 31,
2000 1999
--------------- ---------------
Real estate - construction $ 6,677,593 $ 5,419,664
Real estate - mortgage 56,285,086 57,996,758
Commercial and industrial 74,719,104 49,569,153
Consumer and other 4,782,573 5,723,592
---------------- ---------------
$ 142,464,356 $ 118,709,167
================ ===============
14
<PAGE>
RHBT FINANCIAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition -- continued
--------------------------------------------------------------------------------
Risk Elements in the Loan Portfolio
-----------------------------------
The following is a summary of risk elements in the loan portfolio:
<TABLE>
<CAPTION>
June 30,
-------------------------------
2000 1999
------------- -------------
<S> <C> <C>
Loans: Nonaccrual loans $ 1,864,690 $ 4,805
Accruing loans more than 90 days past due $ - $ -
Loans identified by the internal review mechanism:
Criticized $ 41,945 $ 3,349
Classified $ 1,864,690 $ -
Activity in the Allowance for Loan Losses is as follows:
June 30,
-------------------------------
2000 1999
------------- -------------
Balance, January 1, $ 1,226,442 $ 812,174
Provision for loan losses for the period 289,000 187,000
Net loans (charged off) recovered for the period (21,638) (5,492)
------------- -------------
Balance, end of period $ 1,493,804 $ 993,682
============= =============
Gross loans outstanding, end of period $ 142,464,356 $ 92,146,984
Allowance for loan losses to loans outstanding 1.05% 1.07%
</TABLE>
15
<PAGE>
RHBT FINANCIAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition -- continued
--------------------------------------------------------------------------------
Deposits
--------
At June 30, 2000, total deposits increased by $44,151,676, or 40.9%, from
December 31, 1999. The largest increase was in certificates of deposit, which
increased $33,378,799 or 53.7%, from December 31, 1999 to June 30, 2000. At June
30, 2000, certificates of deposit included brokered deposits totaling
$24,813,984. Brokered deposits increased $12,719,845 or 105.2% from December 31,
1999. Expressed in percentages, noninterest-bearing deposits increased 106.4%
and interest-bearing deposits increased 36.7%.
Balances within the major deposit categories as of June 30, 2000 and December
31, 1999 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
--------------- --------------
<S> <C> <C>
Noninterest-bearing demand deposits $ 13,531,851 $ 6,555,078
Interest-bearing demand deposits 37,164,858 34,659,500
Savings deposits 5,717,344 4,426,598
Time deposits $100,000 and over 42,471,429 29,434,939
Other time deposits 53,092,267 32,749,958
--------------- --------------
$ 151,977,749 $ 107,826,073
=============== ==============
</TABLE>
Advances from the Federal Home Loan Bank
----------------------------------------
At June 30, 2000, Advances from the Federal Home Loan Bank totaled $7,000,000.
This amount consists of one advance with a fixed interest rate of 6.29% and
maturity date of September 30, 2009. The option to call this advance can be
exercised in 2000.
Liquidity
---------
Liquidity needs are met by the Company through scheduled maturities of loans and
investments on the asset side and through pricing policies on the liability side
for interest-bearing deposit accounts. The level of liquidity is measured by the
loan-to-total borrowed funds ratio, which was at 86.8% at June 30, 2000 and
89.9% at December 31, 1999.
Securities available-for-sale, which totaled $7,138,754 at June 30, 2000, serve
as a ready source of liquidity. The Company also has lines of credit available
with correspondent banks to purchase federal funds for periods from one to seven
days. At June 30, 2000, unused lines of credit totaled $22,600,000.
Capital Resources
-----------------
Total shareholders' equity increased from $16,913,454 at December 31, 1999 to
$17,958,356 at June 30, 2000. The increase is due to net income for the period
of $1,051,710, partially offset by a negative change of $6,808 in the fair value
of securities available-for-sale.
Bank holding companies, such as the Company, and their banking subsidiaries are
required by banking regulators to meet certain minimum levels of capital
adequacy, which are expressed in the form of certain ratios. Capital is
separated into Tier 1 capital (essentially common shareholders' equity less
intangible assets) and Tier 2 capital (essentially the allowance for loan losses
limited to 1.25% of risk-weighted assets). The first two ratios, which are based
on the degree of credit risk in the Company's assets, provide the weighting of
assets based on assigned risk factors and include off-balance sheet items such
as loan commitments and stand-by letters of credit. The ratio of Tier 1 capital
to risk-weighted assets must be at least 4.0% and the ratio of total capital
(Tier 1 capital plus Tier 2 capital) to risk-weighted assets must be at least
8.0%. The capital leverage ratio supplements the risk-based capital guidelines.
16
<PAGE>
RHBT FINANCIAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition -- continued
--------------------------------------------------------------------------------
Capital Resources -- continued
------------------------------
Banks and bank holding companies are required to maintain a minimum ratio of
Tier 1 capital to adjusted quarterly average total assets of 3.0%.
The following table summarizes the Company's risk-based capital at June 30,
2000:
Shareholders' equity $ 18,017,500
Less: intangibles 17,447
-------------------
Tier 1 capital 18,000,053
Plus: allowance for loan losses (1) 1,493,804
-----------------
Total capital $ 19,493,857
==============
Risk-weighted assets $ 142,491,991
=============
Risk based capital ratios
Tier 1 capital (to risk-weighted assets) 12.63%
Total capital (to risk-weighted assets) 13.68%
Tier 1 capital (to total average assets) 10.47%
(1) limited to 1.25% of risk-weighted assets
Regulatory Matters
------------------
From time to time, various bills are introduced in the United States Congress
with respect to the regulation of financial institutions. Certain of these
proposals, if adopted, could significantly change the regulation of banks and
the financial services industry. The Company cannot predict whether any of these
proposals will be adopted or, if adopted, how these proposals would affect the
Company.
17
<PAGE>
RHBT FINANCIAL CORPORATION
Part II - Other Information
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
On April 27, 2000, the Bank held its Annual Meeting of Shareholders for the
purpose of electing two Class II directors to serve for three-year terms.
The two nominees for director received the number of affirmative votes of
shareholders required for such nominee's election in accordance with the Bylaws
of the Company. Of the 1,720,938 outstanding shareholders of the Company
shareholders voted for the election of each director as follows: Jean M.
Gaillard received 1,553,632 yes votes for her election, 1,309 abstentions and no
votes against, withheld or broker nonvotes; Jerry H. Padgett received 1,554,723
votes for his election, 1,309 abstentions and no votes against, withheld or
broker nonvotes.
Item 6. Exhibits And Reports on Form 8-K
----------------------------------------
(a) Exhibits
10.1 Right of First Refusal Agreement dated May 16, 1998 with
Bailey Financial Corporation and the Bank. (Incorporated by
reference to the Bank's Registration Statement of Form 10-SB
filed July 30, 1998).
10.2 Share Exchange Agreement dated April 6, 1998 with Bailey
Financial Corporation and the Bank. (Incorporated by reference
to the Bank's Registration Statement on Form 10-SB filed July
30, 1998).
27.1 Financial Data Schedule for the period ended June 30, 2000.
Reports on Form 8-K
-------------------
(b) Reports on Form 8-K -- The following reports were filed on Form 8-K
during the quarter ended June 30, 2000.
99.1 Press Release dated June 28, 2000 to announce that the Company
signed a letter of intent to acquire Ridgeway Bancshares, Inc.
(Incorporated by reference to Exhibit 99.1 of the Company's
Form 8-K filed with the SEC on June 30, 2000).
Items 1, 2, 3, and 5 are not applicable.
18
<PAGE>
RHBT FINANCIAL CORPORATION
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
By: /s/ J.A. FERGUSON, JR.
-----------------------------------
J.A. Ferguson, Jr.
President & Chief Executive Officer
Date: August 8, 2000 By: /s/ PATRICIA M. STONE
-----------------------------------
Patricia M. Stone
Chief Financial Officer
19
