SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OT 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________
TO _______________.
FDIC Certificate Number 26588-8
DARLINGTON COUNTY BANCSHARES, INC.
(Exact Name of Registrant as Specified in the Charter)
Incorporated in the State of South Carolina
I.R.S. Employer Identification Number 57-0805621
202 Cashua Street, Darlington, S.C. 29532
(Address of Principal Executive Offices)
(843) 395-1956
(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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock - $.01 Par Value
158,000 Shares Outstanding on November 1, 2000
<PAGE>
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
-------
<TABLE>
<CAPTION>
DARLINGTON COUNTY BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED) (AUDITED)
SEPTEMBER 30, DECEMBER 31,
2000 1999
---------------- ---------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 1,098 $ 1,409
Investment securities - held to maturity 721 1,023
Investment securities - available for sale 5,209 5,181
Other investments, at cost 50 50
Federal funds sold 3,920 1,960
Loans 17,006 16,491
Less allowance for loan losses (251) (209)
---------------- ---------------
Loans - net 16,755 16,282
Premises and equipment - net 870 914
Other assets 539 548
---------------- ---------------
Total assets $ 29,162 $ 27,367
================ ===============
LIABILITIES
Deposits
Demand deposits $ 6,236 $ 4,645
Savings and NOW accounts 8,755 9,850
Time deposits $100,000 and over 1,914 2,046
Other time deposits 8,605 7,393
---------------- ---------------
Total deposits 25,510 23,934
Other liabilities 153 129
---------------- ---------------
Total liabilities 25,663 24,063
---------------- ---------------
STOCKHOLDERS' EQUITY
Common stock - $.01 par value authorized, issued and outstanding 158,000
shares at September 30, 2000 and
December 31, 1999 2 2
Additional paid in capital 1,618 1,618
Retained earnings 1,958 1,787
Accumulated other comprehensive loss (79) (103)
---------------- ---------------
Total stockholders' equity 3,499 3,304
---------------- ---------------
Total liabilities and stockholders' equity $ 29,162 $ 27,367
================ ===============
</TABLE>
See notes to consolidated financial statements.
-2-
<PAGE>
<TABLE>
<CAPTION>
DARLINGTON COUNTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $ 401 $ 349 $ 1,185 $ 1,093
Investment securities
U. S. Government Agencies 83 80 246 236
Municipal securities 9 11 28 35
Other equity securities 1 - 2 3
Federal funds sold and securities purchased
under agreements to resell 34 27 106 119
------------- ------------- ------------- -------------
Total interest income 528 467 1,567 1,486
------------- ------------- ------------- -------------
INTEREST EXPENSE
Time deposits $100,000 and over 26 88 78 122
Other deposits 163 73 453 381
------------- ------------- ------------- -------------
Total interest expense 189 161 531 503
------------- ------------- ------------- -------------
NET INTEREST INCOME 339 306 1,036 983
PROVISION FOR LOAN LOSSES 16 - 61 -
------------- ------------- ------------- -------------
Net interest income after provision for loan losses 323 306 975 983
------------- ------------- ------------- -------------
NONINTEREST INCOME
Service charges on deposit accounts 64 75 173 192
Other service charges, commissions and fees 12 8 23 18
------------- ------------- ------------- -------------
Total noninterest income 76 83 196 210
------------- ------------- ------------- -------------
NONINTEREST EXPENSES
Salaries and employee benefits 129 119 378 358
Data processing 23 25 70 75
Occupancy 18 19 58 49
Furniture and equipment 18 17 50 53
Other 58 67 195 222
------------- ------------- ------------- -------------
Total noninterest expenses 246 247 751 757
------------- ------------- ------------- -------------
Income before income taxes 153 142 420 436
Provision for income taxes 51 42 123 147
------------- ------------- ------------- -------------
Net income $ 102 $ 100 $ 297 $ 289
============= ============= ============= =============
PER SHARE
Average shares outstanding 158,000 158,000 158,000 158,000
============= ============= =========== ============
Net income $ 0.65 $ 0.63 $ 1.88 $ 1.83
============= ============= ============= ============
Dividends paid $ - $ - $ 0.80 $ .65
============= ============= ============= ============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
DARLINGTON COUNTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollars in thousands)
(Unaudited)
Accumulated
Common stock other compre-
-----------------------
Number Additional hensive
of paid in Retained income
shares Amount capital earnings (loss) Total
----------- ---------- ------------ ---------------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1999 158,000 $ 790 $ 830 $ 1,477 $ 11 $ 3,108
Net income for period - - - 289 - 289
Comprehensive income, net of tax
Net change in unrealized gain on
securities available for sale - - - - (165) (165)
------------ -----------
Comprehensive income - 124
Cash dividend ($.65 per share) - - - (102) - (102)
Par value conversion - (788) 788 - - -
----------- ---------- ---------- ------------ ------------ -----------
BALANCE, September 30, 1999 158,000 $ 2 $ 1,618 $ 1,664 (154) $ 3,130
=========== ========== ========== ============ ============ ===========
BALANCE, JANUARY 1, 2000 158,000 $ 2 $ 1,618 $ 1,787 $ (103) $ 3,304
Net income for period - - - 297 - 297
Comprehensive income, net of tax
Net change in unrealized loss on
securities available for sale - - - - 24 24
------------ -----------
Comprehensive income 321
Cash dividend ($.80 per share) - - - (126) - (126)
----------- ---------- ---------- ------------ ------------ -----------
BALANCE, SEPTEMBER 30,
2000 $ 158,000 $ 2 $ 1,618 $ 1,958 $ (79) $ 3,499
=========== ========= ========= ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
DARLINGTON COUNTY BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
Nine months ended
September 30,
2000 1999
---------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 297 $ 289
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses 61 -
Depreciation 55 46
(Increase) decrease in other assets 9 (23)
Increase (decrease) in other liabilities (8) (175)
----------------- ---------------
Net cash provided by operating activities 414 137
---------------- ---------------
INVESTING ACTIVITIES
(Increase) decrease in federal funds sold (1,960) 5,560
Proceeds from maturities of investment securities
held to maturity 302 -
Proceeds from maturities of investment securities
available for sale - 1,264
Purchase of investment securities available for sale 28 (2,471)
Net increase in loan balances (534) (761)
Purchase of equipment (11) (16)
---------------- ---------------
Net cash provided by (used for) investing activities (2,175) 3,576
---------------- ---------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 1,576 (3,142)
Cash dividends paid (126) (102)
---------------- ---------------
Net cash provided by (used for) financing activities 1,450 (3,244)
---------------- ---------------
Increase (decrease) in cash and cash equivalents (311) 469
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,409 872
---------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,098 $ 1,341
================ ===============
CASH PAID FOR
Interest $ 510 $ 503
================ ===============
Income taxes $ 89 $ 186
================ ===============
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
DARLINGTON COUNTY BANCSHARES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B of the Securities and Exchange Commission. Accordingly, they do
not include all information and footnotes required by generally accepted
accounting principles for complete financial statements. However, in the opinion
of management, all adjustments (consisting of normal recurring adjustments)
considered necessary for a fair presentation have been included.
NOTE 2 - NET INCOME PER SHARE
-----------------------------
Net income per share is computed on the basis of the weighted average
number of common shares outstanding in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share". Darlington County
Bancshares, Inc. (the "Company") does not have any instruments which are
dilutive; therefore, only basic net income per share of common stock is
presented.
NOTE 3 - ORGANIZATION
---------------------
The Company was organized in July 1999 for the purpose of being a
holding company for Darlington County Bank (the "Bank"). On July 1, 1999,
pursuant to a Plan of Merger approved by the shareholders, all of the
outstanding shares of capital stock of the Bank were converted into shares of
common stock of the Company. A par value conversion of $788,000 was recorded in
July 1999 to reflect a change in the par value of common stock from $5.00 per
share to $.01 per share. The Company presently engages in no business other than
that of owning the Bank and has no employees. Reporting periods presented
earlier than July 1, 1999 include the operations of Darlington County Bank only.
ITEM 2.
-------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis should be read in conjunction
with the financial statements and related notes appearing in the Company's 1999
Annual Report to shareholders. Results of operations for the nine months ending
September 30, 2000 are not necessarily indicative of the results to be attained
for any other period. The following information may contain forward-looking
statements that involve risks and uncertainties. The Company's actual results
may differ materially from the results discussed in the forward-looking
statements.
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 2000
The Company's net income for the nine months ended September 30, 2000 was
$297,000 or $1.88 per share as compared to $289,000 or $1.83 per share for
the nine months ended September 30, 1999.
(Continued)
-6-
<PAGE>
ITEM 2: (CONTINUED)
-------------------
NET INTEREST INCOME
Net interest income is the difference between the interest earned on earning
assets and the interest paid for funds acquired to support those assets. Net
interest income, the principal source of the Bank's earnings, was $1,036,000
and $983,000 for the nine months ended September 30, 2000 and 1999,
respectively.
Changes that affect net interest income are changes in the average rate
earned on interest-earning assets, changes in the average rate paid on
interest-bearing liabilities, and changes in the volume of interest-earning
assets and interest-bearing liabilities.
Interest-earning assets for the third quarter of 2000 increased by $1,968,000
or 7.97% over the same period in 1999, while interest-bearing liabilities
increased by $1,322,000 or 5.47% comparing the third quarter of 2000 with the
third quarter of 1999.
<TABLE>
<CAPTION>
AVERAGE BALANCES, INCOME AND EXPENSES, AND RATES
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------------
2000 1999
-------------------------------------------------------------- -----------------------------------
AVERAGE INCOME/ ANNUALIZED AVERAGE INCOME/ ANNUALIZED
BALANCE EXPENSE YIELD/RATE BALANCE EXPENSE YIELD/RATE
------------ ------------- ------------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $ 2,264,781 $ 106,000 6.24% $ 3,268,205 $ 119,000 4.85%
Investment securities 6,001,589 276,000 6.13% 6,264,198 274,000 5.83%
Loans 16,718,848 1,185,000 9.45% 15,931,199 1,093,000 9.15%
------------ ----------- ------------ ------------- ----------- ----------
Total earning assets $ 24,985,218 1,567,000 8.36% $ 25,463,602 1,486,000 7.78%
============ =============
Total interest bearing
liabilities $ 23,994,194 531,000 2.95% $ 19,779,854 503,000 3.39%
============ ---------- ------------- ============= ----------- -----------
Net interest spread 5.41% 4.39%
Net interest income/margin $ 1,036,000 5.53% $ 983,000 5.15%
========== ============= =========== ===========
</TABLE>
As reflected above, for the nine months of 2000 the average yield on earning
assets amounts amounted to 8.36%, while the average cost of interest-bearing
liabilities was 2.95%. For the same period of 1999, the average yield on earning
assets was 7.78% and the average cost of interest-bearing liabilities was 3.39%.
The increase in the yield on earning assets is attributable to an increase in
the yield on investment securities and loans sold. The net interest margin is
computed by subtracting interest expense from interest income and dividing the
resulting figure by average interest-earning assets. The net interest margin for
the nine month period ended September 30, 2000 was 5.53% and for the comparable
period in 1999 was 5.15%. This increase was the result of an increase in the
rates on interest-earning assets, offset by an increase in the volume of
earning-bearing liabilities.
The following table represents changes in the Company's net interest income
which primarily result from changes in volume and rates of its interest-earning
assets and interest-bearing liabilities. The decrease in net interest income is
due to decreased volume of earning assets and interest bearing liabilities and a
decrease in rates on earning assets and interest bearing liabilities.
(Continued)
-7-
<PAGE>
ITEM 2: (CONTINUED)
-------------------
NET INTEREST INCOME, CONTINUED
<TABLE>
<CAPTION>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
FOR THE NINE MONTHS ENDED
9/30/00 VERSUS 9/30/99
-----------------------------------------------
VOLUME RATE NET CHANGE
------------ ------------ ---------------
<S> <C> <C> <C>
Federal fund sold $ (37,000) $ 24,000 $ (13,000)
Investment securities (12,000) 14,000 2,000
Loans 54,000 38,000 92,000
------------- ----------- ---------------
Total earning assets 5,000 76,000 81,000
Total interest on interest-bearing liabilities (107,000) 79,000 (28,000)
------------- ----------- ---------------
Net interest income $ (102,000) $ 155,000 $ 53,000
============= =========== ===============
</TABLE>
NONINTEREST INCOME
Noninterest income for the nine months ended September 30, 2000 and 1999 were
$195,000 and $210,000, respectively. Noninterest income is comprised of fees
and charges on deposits.
NONINTEREST EXPENSES
Noninterest expenses for the nine months ended September 30, 2000 and 1999
were $751,000 and $757,000, respectively. Noninterest expenses is comparable
due to the results of operations remaining relatively stable.
The allowance for loan losses was 1.48% of loans, net of unearned income, at
September 30, 2000 compared to 1.34% at September 30, 1999. The provision for
loan losses was $61,000 and $0 for the nine months ended September 30, 2000
and 1999, respectively. The 1999 provision was lower because of a recovery of
a previously charged off loan in 4th quarter 1998. Management reviews the
adequacy of the allowance on an ongoing basis and believes the allowance is
adequate.
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
RESULTS OF OPERATIONS - Three months ended September 30, 2000
The Company's net income for the third quarter of 2000 was $102,000 or $0.65
per share compared to $100,000 or $.63 per share for the third quarter of
1999.
NET INTEREST INCOME
Net interest income is the difference between the interest earned on earning
assets and the interest paid for funds acquired to support those assets. Net
interest income, the principal source of the Bank's earnings, was $339,000
and $306,000 for the quarters ended September 30, 2000 and 1999,
respectively.
NONINTEREST INCOME
Noninterest income remained flat for the three months ended September 30,
2000 and 1999. Amounts were $76,000 and $83,000, respectively.
-8-
<PAGE>
ITEM 2: (CONTINUED)
-------------------
NONINTEREST EXPENSES
Noninterest expenses for the three months ended September 30, 2000 and 1999
were $246,000 and $247,000, respectively. Noninterest expenses is comparable
due to the results of operations remaining relatively stable.
The allowance for loan losses was 1.48% of loans, net of unearned income, at
September 30, 2000 compared to 1.34% at September 30, 1999. The provision for
loan losses was $16,000 and $0 for the three months ended September 30, 2000
and 1999, respectively. The 1999 provision was lower because of a recovery of
a previously charged off loan in 4th quarter 1998. Management reviews the
adequacy of the allowance on an ongoing basis and believes the allowance is
adequate.
FINANCIAL CONDITION
The Company's primary source of funds for loans and investments is deposits.
Depostis were $25,510,000, an increase of $1,576,000. This increase was used
primarily to invest in federal funds sold, which increased by $1,960,000.
LIQUIDITY
Liquidity is the ability to meet current and future obligations through
liquidation or maturity of existing assets or the acquisition of liabilities.
The Company manages both assets and liabilities to achieve appropriate levels
of liquidity. Cash and short-term investments are the Company's primary
sources of asset liquidity. These funds provide a cushion against short-term
fluctuations in cash flow from both deposits and loans. The investment
portfolio is the Bank's principal source of secondary asset liquidity.
However, the availability of this source of funds is influenced by market
conditions. Individual and commercial deposits are the Bank's primary source
of funds for credit activities. Management believes that the Company's
liquidity sources are adequate to meet its operating needs.
LOANS
Commercial, financial and agricultural loans made up 32.6% of the total loan
portfolio as of September 30, 2000, totaling $5,547,000. Loans secured by
real estate for construction and land development totaled $800,000 or 4.7% of
the total loan portfolio while all other loans secured by real estate totaled
$6,766,000 or 39.8% of the total loan portfolio as of September 30, 2000.
Installment loans and other consumer loans to individuals totaling $3,893,000
comprised 22.9% of the total loan portfolio.
CAPITAL RESOURCES
Stockholders' Equity for the Company increased by $195,000 for the nine
months of 2000. This net change includes an increase to equity for net income
of $297,000 offset by an decrease in unrealized losses on investment
securities of $24,000 and cash dividends paid of $126,000. The Company's
equity to asset ratio was 12.00% on September 30, 2000, as compared to 12.07%
on December 31, 1999.
The Federal Deposit Insurance Corporation has issued guidelines for
risk-based capital requirements. As of September 30, 2000, the Bank's capital
ratios were as follows:
<TABLE>
<CAPTION>
CAPITAL RATIOS
(AMOUNTS IN THOUSANDS)
Well Adequately
Capitalized Capitalized
Actual Requirement Requirement
----------------------- -------------------- --------------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ---------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk weighted assets) $ 3,814 21.6% $ 1,762 10.0% $ 1,409 8.0%
Tier 1 capital (to risk weighted assets) 3,593 20.3 1,057 6.0 705 4.0
Tier 1 capital (to average assets) 3,593 13.1 1,369 5.0 1,096 4.0
</TABLE>
-9-
<PAGE>
ITEM 2: (CONTINUED)
-------------------
ASSET QUALITY
Nonperforming assets as a percentage of loans and foreclosed property totaled
6.10% and 6.20% as of September 30, 2000 and December 31, 1999, respectively.
Nonperforming assets were $1,021,000 as of September 30, 2000 and $1,024,000
at December 31, 1999. The nonperforming assets at September 30, 2000 and
December 31, 1999 include a farm loan totaling $926,000 of which $740,000 is
guaranteed by the US Government. Charge-offs during the nine months ended
September 30, 2000 and 1999 were $19,000 and $53,000, respectively.
EFFECTS OF REGULATORY ACTION
The management of the Company is not aware of any current recommendations by
regulatory authorities, which if they were to be implemented, would have a
material effect on liquidity, capital resources, or operations.
IMPACT OF INFLATION
Unlike most industrial companies, the assets and liabilities of financial
institutions such as the Bank are primarily monetary in nature. Therefore,
interest rates have a more significant impact on the Bank's performance than
do the effects of changes in the general rate of inflation and changes in
prices. In addition, interest rates do not necessarily move in the same
magnitude as the prices of goods and services. As discussed previously,
management seeks to manage the relationships between interest sensitive
assets and liabilities in order to protect against wide rate fluctuations,
including those resulting from inflation.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued SFAS 133, "Accounting for Derivative Instrument
and Hedging Activities". All derivatives are to be measured at fair value and
recognized in the balance sheet as assets and liabilities. SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging
Activities" was issued in June 2000 and amends the accounting and reporting
standards of SFAS 133 for certain derivative instruments and hedging
activities. The two statements are to be adopted concurrently and are
effective for fiscal years and quarters beginning after June 15, 2000. The
Company does not expect that the adoption of SFAS No. 133 and SFAS No. 138
will have a material impact on the presentation of the Company's financial
results or financial position.
Other accounting standards that have been issued or proposed by the Financial
Accounting Standards Board that do not require adoption until a future date
are not expected to have a material impact on the consolidated financial
statements upon adoption.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-------------------------
There are no material pending legal proceedings to which the Company or its
subsidiary party or of which any of their property is the subject.
ITEM 2. CHANGES IN SECURITIES
------------------------------
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
----------------------------------------
Not Applicable
-10-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
There were no matters submitted to security holders for a vote during the three
months ended September 30, 2000.
ITEM 5. OTHER INFORMATION
--------------------------
None
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
---------------------------------------
SIGNATURES
Under the requirements of the Securities Exchange Act of 1934, the Bank has duly
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
DARLINGTON COUNTY BANCSHARES, INC.
----------------------------------
Name of Bank
By: Date:
--------------------------------------- -----------------------
Albert L. James, III
Secretary and Treasurer
-11-