<PAGE>
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, 1996
--------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-16181
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ABC BANCORP
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1456434
------------------------------- -------------------
(State of incorporation) (IRS Employer ID No.)
310 FIRST STREET, SE MOULTRIE, GA 31768
-----------------------------------------
(Address of principal executive offices)
(912)890-1111
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(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_____
---
There were 3,379,192 shares of Common Stock outstanding as of March 31, 1996.
1
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ABC BANCORP
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item Page
- ----- ----
1. Financial Statements
Consolidated Statements of Financial Condition 3
Consolidated Statements of Income 4
Consolidated Statements of Cash Flows 5 - 6
Notes to Consolidated Financial Statements 7
2. Management's Discussion and Analysis of Financial 8 - 12
Condition and Results of Operations
PART II - OTHER INFORMATION
3. Submission of Matters to a Vote of
Securities Holders 13
6. Exhibits and Reports on Form 8-K 13
Signatures 14
2
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ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
(Unaudited)
Assets Mar 31 Dec 31
------ 1996 1995
-------- --------
Cash and due from banks $16,855 $23,612
Securities available for sale, at fair value 46,618 39,991
Securities held to maturity, at cost 10,298 10,269
(fair value $10,479 and $10,462, respectively)
Federal funds sold 21,535 41,025
Loans 223,305 214,251
Less allowance for loan losses 4,428 4,272
-------- --------
Loans, net 218,877 209,979
-------- --------
Premises and equipment, net 7,222 6,942
Other assets 14,184 9,687
-------- --------
$335,589 $341,505
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $ 45,125 $ 58,430
Interest-bearing demand 74,410 71,833
Savings 24,075 22,318
Time, $100,000 and over 38,653 37,773
Other time 111,122 110,634
-------- --------
Total deposits 293,385 300,988
Securities sold under repurchase agreements
and other borrowing 529 3,487
Other liabilities 7,100 3,095
-------- --------
Total liabilities 301,014 307,570
-------- --------
Stockholders' equity
Common stock,par value $1; 10,000,000 shares
authorized, 3,597,074 shares issued 3,597 3,597
Capital surplus 16,826 16,826
Retained earnings 15,815 14,918
Unrealized gains (losses) on securities
available for sale, net of taxes (108) 149
-------- --------
36,130 35,490
Less cost of 217,882 shares acquired for the
treasury (1,555) (1,555)
-------- --------
Total stockholders' equity 34,575 33,935
-------- --------
$335,589 $341,505
======== ========
See Note to Consolidated Financial Statements.
-3-
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ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Dollars in Thousands)
(Unaudited)
1996 1995
------ ------
Interest income
Interest and fees on loans $5,872 $5,176
Interest on taxable securities 668 516
Interest on nontaxable securities 134 133
Interest on deposits in other banks 0 18
Interest on Federal funds sold 377 314
------ ------
7,051 6,157
------ ------
Interest expense
Interest on deposits 2,910 2,291
Interest on securities sold under repurchase
agreements and other borrowings 31 57
------ ------
2,941 2,348
------ ------
Net interest income 4,110 3,809
Provision for loan losses 180 180
------ ------
Net interest income after provision
for loan losses 3,930 3,629
------ ------
Other income
Service charges on deposit accounts 668 602
Other service charges, commisions and fees 233 229
Other 26 55
------ ------
927 886
------ ------
Other expense
Salaries and employee benefits 1,670 1,519
Equipment expense 270 278
Occupancy expense 207 231
Amortization of intangible assets 79 79
Data processing fees 346 337
Directors fees 49 47
FDIC premiums 3 145
Other operating expenses 393 364
------ ------
3,017 3,000
------ ------
Income before income taxes 1,840 1,515
Applicable income taxes 605 487
------ ------
Net income $1,235 $1,028
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Income per common share $0.37 $0.31
====== ======
Average shares outstanding 3,379,192 3,352,525
========= =========
See Note to Consolidated Financial Statements.
-4-
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ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Dollars in Thousands)
(Unaudited)
1996 1995
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $1,235 $1,028
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 227 199
Provision for loan losses 180 180
Amortization of intangible assets 79 67
Other prepaids, deferrals and accruals, net (547) (941)
------- -------
Total adjustments (61) (495)
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Net cash provided by (used in)
operating activities 1,174 533
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CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturities of securities held
for investment 6,145 3,928
Purchase of securities available for sale (12,561) (3,607)
Purchase of securities held for investment (500) --
(Increase)decrease in Federal funds sold 19,490 (1,663)
(Increase) decrease in loans (9,153) (3,510)
Purchase of premises and equipment (483) (217)
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Net cash provided by (used in)
investing activities 2,938 (5,069)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (8,613) (20)
Net increase (decrease) in repurchase
agreements (2,694) (1,198)
Increase (decrease) of long-term debt -- 2,000
Dividends paid (338) (239)
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Net cash provided by (used in) finan (11,645) 543
------- -------
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ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31 1996 AND 1995
(Dollars in Thousands)
(Unaudited)
1996 1995
-------- --------
Net increase (decrease) in cash and due from ($7,533) ($3,993)
Cash and due from banks at beginning of year 24,388 20,495
------- --------
Cash and due from banks at end of quarter $16,855 $16,502
======= =======
See Note to Consolidated Financial Statements.
-6-
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NOTES 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 generally accepted accounting principles 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 Form 10-K Annual Report
for the year ended December 31, 1995. The results of operations for the three
months ended March 31, 1996 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2. STOCKHOLDERS' EQUITY
As of July 17, 1995, a 4-for-3 stock split in the form of a Common Stock
dividend on the outstanding shares of the Company's Common Stock became
effective. Fractional shares were paid in cash. All per share information
reflects retroactively this stock split.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Liquidity management involves the matching of the cash flow
requirements of customers, who may be either depositors desiring to withdraw
funds or borrowers needing assurance that sufficient funds will be available to
meet their credit needs, and the ability of ABC Bancorp and its subsidiaries
(the "Company") to meet those needs. The Company strives to maintain an
adequate liquidity position by managing the balances and maturities of interest-
earning assets and interest-bearing liabilities so that the balance it has in
short-term investments (Federal funds sold) at any given time will adequately
cover any reasonably anticipated immediate need for funds. Additionally, the
subsidiary banks (the "Banks") maintain relationships with correspondent banks
which could provide funds to them on short notice, if needed.
The liquidity and capital resources of the Company is monitored on a
periodic basis by state and Federal regulatory authorities. As determined under
guidelines established by these regulatory authorities, the Banks' liquidity
ratios at March 31, 1996 were considered satisfactory. At that date, the Banks'
Federal funds sold were adequate to cover any reasonably anticipated immediate
need for funds. The Company is aware of no events or trends likely to result in
a material change in liquidity. At March 31, 1996, the Company's and the Banks'
capital asset ratios were considered adequate based on guidelines established by
regulatory authorities. Total capital increased during the first quarter of 1996
by $639,720, including a decrease of $257,000 attributable to unrealized losses
on available-for-sale securities, net of taxes. At March 31, 1996, total capital
of the Company amounted to $34,575,053.
At March 31, 1996, there were no binding outstanding commitments for
capital expenditures. However, the Company anticipates that expenditures of
approximately $1,500,000 will be required for the expansion or relocation of
properties which it plans to complete during 1996 in order to serve its
customers and meet the needs of the citizens in the communities served by the
Banks. In addition, the Company has entered into definitive merger agreements
for the acquisition of three bank holding companies. These acquisitions are
expected to be consummated during the second and third quarters of 1996. The
cash required to consummate these transactions is expected to be approximately
$6,000,000.
8
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RESULTS OF OPERATIONS
The Company's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and investment
losses, to generate noninterest income and to control noninterest expense.
Since interest rates are determined by market forces and economic conditions
beyond the control of the Company, the ability to generate net interest income
is dependent upon the Banks' ability to obtain an adequate spread between the
rate earned on interest-earning assets and the rate paid on interest-bearing
liabilities. Thus, the key performance measure for net interest income is the
interest margin or net yield, which is taxable-equivalent net interest income
divided by average earning assets.
The primary component of consolidated earnings is net interest income,
or the difference between interest income on interest-earning assets and
interest paid on interest-bearing liabilities. The net interest margin is net
interest income expressed as a percentage of average interest-earning assets.
Interest-earning assets consist of loans, investment securities and Federal
funds sold. Interest-bearing liabilities consist of deposits and borrowings
such as Federal funds purchased, securities sold under repurchase agreements and
Federal Home Loan Bank advances. A portion of interest income is earned on tax-
exempt investments, such as state and municipal bonds. In an effort to state
this tax-exempt income and its resultant yields on a basis comparable to all
other taxable investments, an adjustment is made to analyze this income on a
taxable-equivalent basis.
COMPARISON OF STATEMENTS OF INCOME: THREE MONTHS ENDED MARCH 31, 1996 AND 1995
The net interest margin was 5.35% and 5.68% during the three months
ended March 31, 1996 and 1995, respectively, a decrease of 5.8%. This decrease
in net interest margin was the result of an increase of 43 basis points in
average rate paid on interest-bearing liabilities. Net interest income on a
taxable-equivalent basis was $4,179,000 as compared to $3,877,000 during the
three months ended March 31, 1996 and 1995, respectively, representing an
increase of 7.9%.
The provision for loan losses is a charge to earnings in the current
period to replenish the allowance for loan losses and maintain it at the level
management determines is adequate. The provision for loan losses charged to
earnings amounted to $180,000 during the three months ended March 31, 1996 and
1995.
9
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RESULTS OF OPERATIONS (CONTINUED)
Following is a comparison of noninterest income for the three months
ended March 31, 1996 and 1995. (dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------ % Inc
Mar 1996 Mar 1995 (Dec)
-------- -------- --------
<S> <C> <C> <C>
Service charges on deposits $668 $602 10.96 %
Other service charges,
commissions & fees 233 229 1.74 %
Other income
26 55 (52.72)%
Total noninterest income ---- ---- -------
$927 $886 4.63 %
==== ==== =======
</TABLE>
The increase in service charges on deposits for the three months ended March 31,
1996 as compared to March 31, 1995 is attributable to an increase in average
deposits. The increase in other service charges and fees is attributable to an
increase in the volume of loans.
Following is an analysis of noninterest expense for the three months ended
March 31, 1996 and 1995. (dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended
------------------ % Inc
Mar 1996 Mar 1995 (Dec)
-------- -------- --------
<S> <C> <C> <C>
Salaries and employee benefits $1,670 $1,519 9.94 %
Occupancy and equipment expense 477 510 (6.47)%
Deposit insurance premium 3 145 (97.93)%
Data processing fees 346 337 2.67 %
Other expense 521 489 6.54 %
Total noninterest expense ------ ------ -------
$3,017 $3,000 0.57%
====== ====== =======
</TABLE>
Salaries and employee benefits for the three months ended March 31, 1996
were $151,000 higher than during the same period in 1995. Salaries increased
$55,000; bonuses increased $62,000; and employee benefits increased $34,000.
10
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
Following is a condensed summary of net income during the three months
ended March 31, 1996 and 1995. (dollars in thousands)
Three Months Ended
---------------------- Inc
Mar 1996 Mar 1995 (Dec)
--------- -------- --------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net interest income $4,110 $3,810 $300
Provision for loan losses 180 180 0
Other income 927 885 42
Other expense 3,017 3,000 17
------ ------ ----
Income before income
taxes 1,840 1,515 325
Applicable income taxes 605 487 118
------ ------ ----
Net income $1,235 $1,028 $207
====== ====== ====
</TABLE>
COMPARISON OF BALANCE SHEETS: MARCH 31, 1996 AND DECEMBER 31, 1995
Total assets decreased by $6.1 million or 1.81% to $335.6 million at March
31, 1996 from $341.8 million at December 31, 1995. Average total assets
increased by $7.6 million or 2.35% to $330.3 million for the quarter ended March
31, 1996 from $322.7 million for the quarter ended December 31, 1995.
Total earning assets increased by $13.0 million or 4.32% to $314.1 million
at March 31, 1996 from $301.1 million at December 31, 1995. Average earning
assets increased by $25.1 million or 8.73% to $312.7 million for the quarter
ended March 31, 1996 from $287.6 million for the quarter ended December 31,
1995.
Total loans, net of the allowance for loan losses, increased by $9.0
million or 4.27% to $218.9 million at March 31, 1996 from $210.0 million at
December 31, 1995. Average net loans increased by $4.4 million or 2.10% to
$212.8 million for the quarter ended March 31, 1996 from $208.5 million for the
quarter ended December 31, 1995.
Total deposits decreased by $8.6 million or 2.85% to $293.4 million at
March 31, 1996 from $302.0 million at December 31, 1995. Average deposits
increased by $10.6 million or 3.75% to $293.7 million for the quarter ended
March 31, 1996 from $283.1 million for the quarter ended December 31, 1995.
Approximately 17% of average deposits were noninterest-bearing during the three
months ended March 31, 1996 and December 31, 1995.
11
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RESULTS OF OPERATION (CONTINUED)
The allowance for loan losses represents a reserve for potential losses in
the loan portfolio. The adequacy of the allowance for loan losses is evaluated
quarterly based on a review of all significant loans, with a particular emphasis
on nonaccruing, past due and other loans that management believes require
attention. Another factor used in determining the adequacy of the reserve is
management's judgment about factors affecting loan quality and assumptions about
the local and national economy.
The allowance for loan losses was 1.98% and 2.03% of total loans outstanding
at March 31, 1996 and December 31, 1995, respectively. Loan charge-offs and
charge-off recoveries amounted to $33,000 net recoveries and $146,000 net
charge-offs during the three months ended March 31, 1996 and December 31, 1995,
respectively.
Management considers the quarter-end allowance for loan losses adequate to cover
potential losses in the loan portfolio.
12
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PART II. OTHER INFORMATION
ITEM 3. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
There were no matters submitted to a vote of securities
holders during the quarter ended March 31, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits - None.
B. There have been no reports filed on Form 8-K for the quarter
ended March 31, 1996.
13
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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:
ABC BANCORP
- ----------------------- ------------------------------------
DATE W. EDWIN LANE, JR.
EXECUTIVE VICE PRESIDENT &
CHIEF FINANCIAL OFFICER
(Duly authorized officer and
principal financial/accounting
officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 16,855 23,612
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 21,535 41,025
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 46,618 39,991
<INVESTMENTS-CARRYING> 10,298 10,269
<INVESTMENTS-MARKET> 10,462 10,479
<LOANS> 223,305 214,251
<ALLOWANCE> 4,428 4,272
<TOTAL-ASSETS> 335,589 341,505
<DEPOSITS> 293,385 300,988
<SHORT-TERM> 529 3,487
<LIABILITIES-OTHER> 7,100 3,095
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 3,597 3,597
<OTHER-SE> 30,978 30,338
<TOTAL-LIABILITIES-AND-EQUITY> 335,589 341,505
<INTEREST-LOAN> 5,872 5,176
<INTEREST-INVEST> 667 802
<INTEREST-OTHER> 377 314
<INTEREST-TOTAL> 7,051 6,157
<INTEREST-DEPOSIT> 2,910 2,291
<INTEREST-EXPENSE> 2,941 2,348
<INTEREST-INCOME-NET> 4,110 3,809
<LOAN-LOSSES> 180 180
<SECURITIES-GAINS> 3 4
<EXPENSE-OTHER> 3,017 3,000
<INCOME-PRETAX> 1,840 1,515
<INCOME-PRE-EXTRAORDINARY> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,235 1,028
<EPS-PRIMARY> .34 .31
<EPS-DILUTED> .34 .31
<YIELD-ACTUAL> 9.12 9.11
<LOANS-NON> 3,718 ,3944
<LOANS-PAST> 5,764 4,942
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 0 0
<ALLOWANCE-OPEN> 4,272 3,757
<CHARGE-OFFS> 153 81
<RECOVERIES> 129 112
<ALLOWANCE-CLOSE> 4,428 3,968
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 4,428 3,968
</TABLE>
