<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
------------------ --------------------
Commission file number: 0-11448
LSB BANCSHARES, INC.
(Exact Name of Registrant as Specified in Its Charter)
NORTH CAROLINA 56-1348147
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One LSB Plaza
Lexington, North Carolina 27292
(Address of Principal Executive Offices) (Zip Code)
(910) 248-6500
(Registrant's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
--------- ---------
As of March 31, 1997, 5,403,539 shares of the registrant's common
stock, par value $5.00 per share, were outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LSB Bancshares, Inc.
Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Cash and Due from Banks $ 16,517 $ 20,611
--------- ---------
Federal Funds Sold 34,900 26,720
--------- ---------
Investment Securities:
Held to Maturity, Market Value $61,840 at March 31,1997 and 61,276 66,991
$67,981 at December 31, 1996 --------- ---------
Available for Sale, at Market Value 23,293 23,626
--------- ---------
Loans:
Commercial 102,626 97,431
Installment 54,883 53,525
Mortgage 125,745 121,088
--------- ---------
Total Loans 283,254 272,044
Less, Reserve for Loan Losses (3,086) (3,075)
--------- ---------
Net Loans 280,168 268,969
--------- ---------
Premises and Equipment 8,811 8,840
--------- ---------
Other Assets 6,587 5,843
--------- ---------
TOTAL ASSETS $ 431,552 $ 421,600
========= =========
LIABILITIES
Deposits:
Demand $ 40,834 $ 43,987
Savings, NOW and Money Market Accounts 168,538 166,077
Certificates of Deposit of less than $100,000 103,018 101,018
Certificates of Deposit of $100,000 or more 49,634 43,738
--------- ---------
Total Deposits 362,024 354,820
Securities Sold Under Agreements to Repurchase 3,663 3,285
Borrowings from the Federal Home Loan Bank 10,333 9,167
Other Liabilities 2,891 2,642
--------- ---------
Total Liabilities 378,911 369,914
--------- ---------
SHAREHOLDERS' EQUITY
Capital Stock: Common, authorized 10,000,000
shares, Par Value $5, issued 5,403,539 shares
in 1997 and 5,382,760 shares in 1996 27,018 27,018
Paid-In Capital 11,331 11,331
Retained Earnings 14,428 13,336
Net Unrealized Gains (Losses) on Securities Available
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ---------
<S> <C> <C>
for Sale, Net of taxes (136) 1
--------- ---------
Total Shareholders' Equity 52,641 51,686
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 431,552 $ 421,600
========= =========
</TABLE>
3
<PAGE> 4
LSB Bancshares, Inc.
Consolidated Statements of Income
(In Thousands Except Share Data and Note)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
---------- -----------
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 6,403 $ 5,345
Interest on Investment Securities:
Taxable 813 1,162
Tax Exempt 437 486
Federal Home Loan Bank 28
Federal Funds Sold 463 148
---------- -----------
Total Interest Income 8,144 7,141
---------- -----------
INTEREST EXPENSE
Deposits 3,168 2,835
Securities Sold Under Agreements to Repurchase 25 16
Borrowings from the Federal Home Loan Bank 153
---------- -----------
Total Interest Expense 3,346 2,851
---------- -----------
NET INTEREST INCOME 4,798 4,290
Provision for Loan Losses 93 73
---------- -----------
Net Interest Income After Provision
for Loan Losses 4,705 4,217
---------- -----------
NONINTEREST INCOME
Service Charges on Deposit Accounts 505 493
Gains (Losses) on Sales of Mortgages 44 (7)
Other Operating Income 624 469
---------- -----------
Total Noninterest Income 1,173 955
---------- -----------
NONINTEREST EXPENSE
Personnel Expense 2,003 1,942
Occupancy Expense 207 192
Equipment Depreciation and Maintenance 193 167
Other Operating Expense 1,026 935
Restructuring Charges 0 517
---------- -----------
Total Noninterest Expense 3,429 3,753
---------- -----------
Income Before Income Taxes 2,449 1,419
Income Taxes 763 345
---------- -----------
NET INCOME $ 1,686 $ 1,074
========== ===========
NET INCOME PER SHARE $ 0.31 $ 0.20
Weighted Average Shares Outstanding 5,403,539 5,382,760
</TABLE>
Note: On January 9, 1996, Lexington State Bank approved a plan to restructure
the operations of the Bank, which management believes will enhance the quality
of service to customers and reduce future operating costs. Restructuring charges
to implement the plan totaled $522,000, consisting of $490,000 for retirement
benefits, $27,000 for severance costs and $5,000 for professional fees.
4
<PAGE> 5
LSB Bancshares, Inc.
Consolidated Statements of Cash Flows
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
-------- --------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net income $ 1,686 $ 1,074
Adjustments to reconcile net income to net cash:
Depreciation and amortization 199 161
Securities premium amortization and
discount accretion, net (6) 10
(Increase) decrease in loans held for sale 633 28
Deferred income taxes (246) 131
Income taxes payable 947 240
(Increase) decrease in income earned
but not received (219) (255)
Increase (decrease) in interest accrued
but not paid 48 (22)
Provision for loan losses 93 73
Gain on sale of investment securities 0 0
Gain on sale of premise and equipment (5) 0
-------- --------
Net cash provided by operating activities 3,130 1,440
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchases of securities held to maturity 0 0
Proceeds from maturities of securities held to maturity 5,720 6,209
Proceeds from sales of securities held to maturity 0 0
Purchases of securities available for sale (2,391) (4,067)
Proceeds from maturities of securities available for sale 2,500 0
Proceeds from sales of securities available for sale 0 0
Net (increase) decrease in loans made to customers (11,925) (5,515)
Purchases of premises and equipment (181) (309)
Proceeds from sale of premises and equipment 16 0
Net (increase) decrease in Federal Funds sold (8,180) 6,450
(Increase) decrease in other assets (190) (74)
-------- --------
Net cash used by investing activities (14,631) 2,694
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits,
NOW, money market and savings accounts (692) (5,576)
Net increase (decrease) in time deposits 7,896 502
Net increase (decrease) in securities
sold under agreements to repurchase (395) (68)
Proceeds from issuance of long-term debt 2,000
Payments on long-term debt (833)
Dividends paid (594) (550)
Net increase (decrease) in other liabilities 25 328
Common stock Issued 0 69
-------- --------
Net cash provided by financing activities 7,407 (5,295)
-------- --------
Increase (decrease) in cash (4,094) (1,161)
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C> <C>
Cash at the beginning of the period 20,611 17,581
-------- --------
Cash at end of period $ 16,517 $ 16,420
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the years for:
Interest $ 3,302 $ 2,872
Income Taxes 63 0
SUPPLEMENTAL DISCLOSURES
Transfer of loans to other real estate owned $ 0 $ 91
Unrealized losses on securities available for sale:
Increase (decrease) in securities available for sale $ 225 $ 405
Increase (decrease) in deferred taxes 87 138
Increase (decrease) in shareholders' equity 137 267
</TABLE>
6
<PAGE> 7
LSB BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Note 1. Basis of Presentation
The accompanying unaudited Consolidated Financial Statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month period ended March 31,
1997 are not necessarily indicative of the results that may be expected
for the year ending December 31, 1997.
The accompanying unaudited Consolidated Financial Statements include
the accounts of LSB Bancshares, Inc. ("Bancshares") and its
wholly-owned subsidiary Lexington State Bank (the "Bank") and the
Bank's wholly-owned subsidiaries Peoples Finance Company of Lexington,
Inc. and LSB Financial Services, Inc.
For further information, refer to the Consolidated Financial Statements
and footnotes thereto included in Bancshares' Annual Report on Form
10-K for the year ended December 31, 1996.
Note 2. Investment Securities
Investment securities totaling $66,442,000 and $48,173,000 as of March
31, 1997 and 1996, were pledged to secure public deposits as required
by law.
Note 3. Loans
A summary of consolidated loans follows:
<TABLE>
<CAPTION>
(In Thousands)
March 31,
1997 1996
-------- --------
<S> <C> <C>
Commercial $102,626 $ 77,655
Installment 51,804 46,541
Mortgage 125,745 105,377
Credit Cards 3,079 2,514
-------- --------
Total $283,254 $232,087
</TABLE>
Bancshares' policy under Statement of Financial Accounting Standards
("SFAS") 114 for impaired loan accounting subjects all loans to
impairment recognition except for large groups of smaller-balance
homogeneous loans such as credit card, residential mortgage and
consumer loans. Bancshares generally considers most loans 90 days or
more past due and all nonaccrual loans to be impaired. Interest income
on impaired loans is recognized consistent with Bancshares' income
recognition policies. For all impaired loans other than
7
<PAGE> 8
nonaccrual loans, interest income is recorded on an accrual basis.
Interest income on nonaccrual loans is recognized on a cash basis.
At March 31, 1997, the total investment in loans that are considered
impaired under SFAS 14 was $2,139,000 of which $351,000 were nonaccrual
loans. A related valuation allowance of $325,000 was determined for the
total amount of impaired loans. The average recorded investment in
impaired loans for the quarter ended March 31, 1997 was approximately
$2,136,000.
Note 4. Reserve for Loan Losses
The following table sets forth certain information regarding the
consolidated reserve for loan losses:
<TABLE>
<CAPTION>
(In Thousands )
Three Months Ended
March 31,
1997 1996
------- -------
<S> <C> <C>
Balances at beginning of periods $ 3,075 $ 2,730
Provision for loan losses 93 73
Recoveries of amounts previously
charged off 27 18
Loan losses (109) (86)
------- -------
Balances at end of periods $ 3,086 $ 2,735
</TABLE>
Note 5. Restructuring Charges
In January 1996, the Board of Directors of Bancshares approved a
strategic plan to improve operating efficiencies. The major element of
the plan was the reduction in staff through an offer of early
retirement to all employees 55 years of age or older with ten years or
more of service. Of the employees offered this opportunity, 68% opted
for early retirement, which was effective March 31, 1996. The costs
associated with increases in the actuarially determined pension and
post retirement medical expenses totaled $490,000, severance costs
associated with the early retirement package totaled $27,000 and
professional fees for administration of the early retirement totaled
$5,000.
Note 6. Stock Split
In January 1996, the Board of Directors of Bancshares declared a
five-for-four stock split payable February 15, 1996. All previously
reported per share amounts have been restated to reflect this stock
split.
Note 7. Other Accounting Changes
As of January 1996, Bancshares adopted SFAS 122, "Accounting for
Mortgage Servicing Rights." SFAS 122 requires that an entity recognize
as separate assets rights to service mortgage loans for others however
those rights are acquired. This statement amends certain provisions of
SFAS 65 to eliminate the distinction between rights to service mortgage
loans for others that are acquired through loan origination activities
and rights to service mortgage loans for others that are acquired
through purchase transactions. All of Bancshares' mortgage servicing
rights were acquired through loan origination activities.
8
<PAGE> 9
Under SFAS 122, servicing rights are to be calculated based on the
present value of the fair market value of the servicing fees at the
time the loan is sold, with consideration given to any prepayment
assumptions. The value of the servicing rights are then amortized over
the life of the loan. SFAS 122 also requires that all capitalized
servicing rights be evaluated periodically for impairment based on the
excess of the carrying amount of such rights over their fair value. For
purposes of measuring impairment, capitalized mortgage servicing rights
are stratified on the basis of one or more of the predominant risk
characteristics of the underlying loans.
Disclosure requirements of SFAS 123, "Accounting for Stock-Based
Compensation," are applicable for financial statements for fiscal years
beginning after December 15, 1995. SFAS 123 establishes a fair value
based method of accounting for stock options and other equity
instruments used in employee compensation plans. SFAS 123 also requires
significantly expanded disclosures, including disclosure of the pro
forma amount of net income and earnings per share as if the fair value
based method were used to account for stock-based compensation, if the
intrinsic value method of APB-25 is retained. Bancshares intends to
retain APB-25 in its pro forma disclosure.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
Net Interest Income
The primary source of earnings for Bancshares is net interest income,
which represents the dollar amount by which interest generated by
earning assets exceeds the cost of funds. Earning assets consist
primarily of loans and investment securities and cost of funds is the
interest paid on interest-bearing deposits and borrowed funds.
Total interest income of $8,144,000 for the first quarter of 1997 was
up $1,003,000 or 14.0% compared to $7,141,000 for the first quarter of
1996. Total interest expense for the same period increased $495,000 or
17.4%. These results produced net interest income of $4,798,000 for the
first quarter of 1997, for a gain of $508,000 or 11.8% compared to
$4,290,000 for the first quarter of 1996. Strong loan demand, resulting
in part from the stable interest rate environment during this period,
contributed to the gain in net interest income. The total loan
portfolio at March 31, 1997 was up $11,210,000 compared to December 31,
1996 and $51,167,000 or 22.0% compared to March 31, 1996. The prime
interest rate made its first change in March of this year since
dropping to 8.25% in February of 1996. The prime interest rate, which
is used as an interest rate indicator by banks, increased 25 basis
points on March 27, 1997 to 8.50%. Interest rates paid on
interest-bearing liabilities increased slightly just prior to the prime
interest rate adjustment, but had little affect on the Bank's cost of
funds. Deposit growth, while remaining relatively strong, has lagged
that experienced in the loan portfolio. Total deposits at March 31,
1997 were up $7,204,000 or 2.0% compared to December 31, 1996 and
$43,809,000 or 13.8% compared to March 31, 1996.
9
<PAGE> 10
Noninterest Income and Expense
Noninterest income for the first quarter of 1997 was up $218,000 or
22.8% compared to the first quarter of 1996. Fee income related to
service charges on deposit accounts for the first quarter of 1997
increased $12,000 or 2.4% compared to the first quarter of 1996. Other
operating income for the first quarter of 1997 was up $155,000 or 33.0%
compared to the first quarter of 1996. This increase is attributable to
fee income generated from deposit and loan services provided by the
Bank.
Noninterest expense for the first quarter of 1997 decreased $324,000 or
8.6% compared to the first quarter of 1996. A contributing factor to
the decrease in noninterest expense is the restructuring charge of
$517,000 incurred in the first quarter of 1996. The restructuring plan
implemented by the Bank in 1996 included an offer for early retirement
to all employees 55 years of age with ten years or more of service. Of
this group, 68% opted for early retirement, which was effective March
31, 1996. This reduction in the Bank's staff contributed to the smaller
than normal increase in personnel expenses in the first quarter of
1997. Personnel expense for the first quarter of 1997, comprised of
salaries and fringe benefits, increased $61,000 or 3.1% compared to the
first quarter of 1996. Occupancy expense for the first quarter of 1997
increased $15,000 or 7.8% compared to the first quarter of 1996, while
the equipment depreciation and maintenance expense for the same period
increased $26,000 or 15.6%. Other operating expense for the first
quarter of 1997 increased $91,000 or 9.7% compared to the first quarter
of 1996. All increases in noninterest expense were within the Bank's
budgeted projections.
Asset Quality and Provision for Loan Losses
The reserve for loan losses was $3,086,000 or 1.09% of loans
outstanding at March 31, 1997 compared to $3,075,000 or 1.13% of loans
outstanding at December 31, 1996 and $2,735,000 or 1.18% at March 31,
1996. Nonperforming loans totaled $1,799,000 or .64% of loans
outstanding at March 31, 1997 compared to $3,124,000 or 1.35% of loans
outstanding at March 31, 1996. Nonperforming loans include nonaccrual
loans, restructured loans, other real estate acquired through
foreclosed properties and accruing loans ninety days or more past due.
At March 31, 1997 the Bank had $256,000 in restructured loans, $351,000
in nonaccrual loans and $902,000 in other real estate. Accruing loans
past due 90 days or more were $290,000 at March 31, 1997 compared to
$370,000 at March 31, 1996. The accrual of interest generally
discontinues on any loan that becomes 90 days past due as to principal
or interest unless collection of both principal and interest is assured
by way of collateralization, guarantees or other security and the loan
is considered to be in the process of collection. At March 31, 1997,
the reserve for loan losses was 1.72 times the nonperforming loans,
compared to 1.56 times at December 31, 1996 and .88 times nonperforming
loans at March 31, 1996.
In the opinion of management, all loans where serious doubts exist as
to the ability of borrowers to comply with the present repayment terms
have been included in the schedule presented.
Responsibility for market risk management resides with the
Asset/Liability Management Committee ("ALCO"). The ALCO Committee
monitors market conditions, interest rate trends and the economic
environment in its decision making process. Based upon its view of
existing and expected market conditions, balance sheet strategies will
be adopted to optimize net interest income while minimizing the risk
associated with unanticipated changes in interest rates.
The provision for loan and lease losses for the first quarter of 1997
was $93,000 compared to $73,000 in 1996. Net charge-offs amounted to
$82,000, or .03% of average loans outstanding, on an annualized basis,
during the first three months of 1997 compared to $68,000, or .03% of
average loans outstanding, on an annualized basis, for the comparable
period of 1996. The increase in the provision reflects higher net
charge-offs incurred during the recent quarter and continued growth in
the loan portfolio.
Loans classified for regulatory purposes as loss, doubtful, substandard
or special mention that have not been disclosed as nonperforming do not
represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results,
liquidity, or capital resources, or represent material credits about
which management is aware of any information which causes management to
have serious doubts as to the ability of such borrowers to comply with
the loan repayment terms.
ASSET QUALITY ANALYSIS
<TABLE>
<CAPTION>
<S> <C> <C>
3/31/97 3/31/96
RESERVE FOR LOAN LOSSES
Beginning balance $3,075 $2,730
Provision for loan losses 93 73
Net charge-offs (82) (66)
Ending balance 3,086 2,735
RISK ASSETS
Nonaccrual loans $ 351 $1,389
Foreclosed real estate 902 1,076
Restructured loans 256 287
Loans 90 days or more past due and
still accruing 290 370
ASSET QUALITY RATIOS
Nonaccrual loans as a percentage of
total loans .12% .60%
Nonperforming assets as a percentage of:
Total assets .42 .54
Loans plus foreclosed property .63 1.34
Net charge-offs as a percentage of
average loans .03 .03
Reserve for loan losses as a percentage
of loans 1.09 1.18
Ratio of reserve for loan losses to:
Net charge-offs 9.41X 10.06X
Nonaccrual loans 8.79 1.97
</TABLE>
10
<PAGE> 11
Income Taxes
Accrued taxes applicable to income for the three-month period ended
March 31, 1997 was up $418,000 compared to the three-month period ended
March 31, 1996. Pretax income for the first three months of 1997 was
$2,449,000, an increase of $1,030,000 or 72.6% compared to $1,419,000
for the first three months of 1996. The increase in accrued taxes for
the first three months of 1997 is attributable to the higher operating
income.
Capital Resources and Shareholders' Equity
Regulatory guidelines require minimum levels of capital, based on a
risk weighting of each asset category and off-balance sheet
contingencies. At March 31, 1997, based on these measures, the Bank's
ratio for Tier 1 capital was 20.34% compared to the regulatory minimum
risk-based capital ratio requirement of 4%. The Bank's Tier 2 capital
ratio at this date was 21.53% compared to the regulatory requirement of
8%. Tier 1 or core capital, as defined by federal bank regulators,
equals common shareholders' equity capital less goodwill and other
disallowed intangible assets. Tier 2 capital is the allowable portion,
as defined by the federal regulators, of the allowance for loan losses
and 100% of Tier 1 capital. Federal banking guidelines for risk-based
capital limit the amount of the allowance for loan losses allowable in
Tier 2 or total capital to 1.25% of risk-weighted assets.
Interest Rate Sensitivity and Liquidity
Asset/liability management is the process used to monitor exposure to
interest rate risk, balance sheet trends and pricing policies. It also
addresses proper liquidity positioning and sound capital. The goals of
asset/liability management are to ensure profitability and performance,
minimize risk, adhere to proper liquidity and maintain sound capital.
Profitability and performance are affected by balance sheet composition
and interest rate movements. Management responsibility for both
liquidity and interest sensitivity reside with a designated
Asset/Liability Management Committee ("ALCO"). Market conditions,
interest rate trends and the economic environment are all evaluated by
the ALCO as a part of its asset/liability management decision-making
process. Based upon its view of existing and expected market
conditions, the ALCO adopts balance sheet strategies intended to
optimize net interest income to the extent possible while minimizing
the risk associated with unanticipated changes in interest rates. Core
deposits have historically been the primary funding sources for asset
growth. Correspondent relationships have also been maintained with
several large banks in order to have access to federal funds purchases
when needed. The Bank also has available lines of credit maintained
with the Federal Home Loan Bank (the "FHLB") which can be used for
funding and/or liquidity needs.
To minimize risk of interest rate movements, the asset/liability
management process seeks to match maturities and repricing
opportunities of interest-sensitive assets and liabilities. On March
31, 1997 the gap between interest-sensitive assets and
interest-sensitive liabilities was a negative $104,629,000 or .66.
Under current economic conditions, management believes that is an
acceptable level.
Asset/liability management also addresses liquidity positioning.
Liquidity management is required in order to fund current and future
extensions of credit, meet deposit withdrawals, maintain reserve
requirements and otherwise sustain operations. As such, it
11
<PAGE> 12
is related to interest rate sensitivity management, in that each is
affected by maturing assets and liabilities. While interest sensitivity
management is concerned with repricing intervals of assets and
liabilities, liquidity management is concerned with the maturities of
those respective balances. An appropriate liquidity position is further
accomplished through deposit growth and access to sources of funds
other than deposits, such as the federal funds market. Historically,
Bancshares has been a seller of excess investable funds in the federal
funds market and uses these funds as a part of its liquidity
management. Details of cash flows for the three months ended March 31,
1996 and 1995 are provided in the Consolidated Statements of Cash
Flows.
12
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Bancshares held its Annual Meeting of Shareholders on April 16, 1997.
Proxies were solicited in connection with the Annual Meeting in
accordance with Regulation 14 under the Securities Exchange Act of
1934, as amended, pursuant to a Proxy Statement dated March 14, 1997,
in the form as filed by the Company with the Securities and Exchange
Commission on March 14, 1997.
At the Annual Meeting, the shareholders of Bancshares (i) elected four
members to Bancshares' Board of Directors, (ii) ratified the
appointment of Turlington and Company, L.L.P. to conduct the
independent audit for the year 1997 and (iii) voted against a
shareholder proposal relating to minimum share ownership requirements
for members of the Board of Directors of Bancshares, each as more fully
described in the Proxy Statement. Of the 5,403,539 shares of
Bancshares' common stock entitled to vote at the Annual Meeting, the
number of shares cast for, against and withheld, and the number of
abstentions and broker nonvotes, as to each proposal are set forth
below:
1. Election of Directors.
<TABLE>
<CAPTION>
For (Proxy) Withheld
----------- --------
<S> <C> <C>
Margaret Lee W. Crowell 3,632,738 52,136
Robert F. Lowe 3,642,092 42,782
Robert E. Timberlake 3,643,961 40,913
Julius S. Young, Jr 3,643,825 41,049
</TABLE>
2. Ratification of appointment of Turlington and Company, L.L.P.,
to conduct the independent audit for the year 1997.
<TABLE>
<CAPTION>
For Against Abstaining
--- ------- ----------
<S> <C> <C> <C>
3,643,372 22,265 19,237
</TABLE>
3. Shareholder proposal by W. Robert Koontz relating to minimum
share ownership requirements for directors.
<TABLE>
<CAPTION>
For Against Abstaining
--- ------- ----------
<S> <C> <C> <C>
623,993 2,410,566 1,353
</TABLE>
ITEM 5. OTHER INFORMATION.
On January 21, 1997, Bancshares announced that it had entered into a
letter of intent with Old North State Bank pursuant to which Lexington
State Bank (the "Bank") and Old North State Bank, headquartered in
Winston-Salem, North Carolina, would merge and the Bank would be the
surviving corporation. On March 14, 1997, Bancshares, the Bank and Old
North State Bank entered into an Agreement and Plan of Reorganization
and Merger
13
<PAGE> 14
(the "Agreement"). Under the terms of the Agreement, Old North State
Bank shareholders will receive shares of Bancshares common stock in
exchange for their shares of Old North State Bank common stock. The
value of the transaction would be $30 million based on the recent
trading price of Bancshares common stock of $20.00 per share at the
time of the announcement of the merger. The merger is anticipated to
result in earnings per share dilution to Bancshares in the year in
which the transaction closes due to one-time merger-related expenses,
but become accretive in the following years. In connection with the
signing of the letter of intent, Old North State granted Bancshares an
option to purchase 265,675 shares of Old North State Bank common stock
at an exercise price of $8.00 per share, exercisable only under certain
conditions. Bancshares operates 14 banking offices in Davidson County,
while Old North State Bank operates seven banking offices in Forsyth
and Stokes Counties, which are contiguous to Davidson County. The
merger is subject to regulatory and shareholder approvals and is
expected to be completed in July 1997.
The foregoing statements regarding the merger of the Bank and Old North
State Bank, including the projected earnings per share dilution in
1997, the accretive effect of the merger in subsequent years and the
expected timing of the consummation of the transaction, are "forward
looking statements" as defined in the Private Securities Litigation
Reform Act of 1995. As forward-looking statements, they are necessarily
based upon various uncertain factors, including, but not limited to,
the completion of the parties' due diligence reviews and negotiations,
projections of costs to be incurred in connection with the merger and
the parties' financial performance in the future. Because of such
uncertainties, the actual timing and results of the merger may differ
significantly from the forward-looking statements contained herein.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
EXHIBIT NO. DESCRIPTION
----------- -----------
2 Agreement and Plan of Reorganization and Merger By and Among
LSB Bancshares, Inc., Lexington State Bank and Old North State
Bank (incorporated by reference to Exhibit 2 to the
registrant's Current Report on Form 8-K filed on March 26,
1997).
3.1 Articles of Incorporation of LSB Bancshares, Inc.
(incorporated by reference to Exhibit 4.2 to the registrant's
Registration Statement on Form S-8 filed on November 17, 1992
(file no. 33-54610)).
3.2 Bylaws of LSB Bancshares, Inc. (incorporated by reference to
the registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
27 Financial Data Schedule.
14
<PAGE> 15
(b) Reports on Form 8-K.
The registrant filed a Current Report on Form 8-K (date of earliest
event reported: March 14, 1997) on March 26, 1997.
15
<PAGE> 16
SIGNATURES
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.
Date: July 2, 1997 LSB BANCSHARES, INC.
(Registrant)
/s/ Monty J. Oliver
-----------------------------------
Monty J. Oliver
Chief Financial Officer
Principal Accounting Officer
16
<PAGE> 17
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
----------- -----------
2 Agreement and Plan of Reorganization and Merger By and Among
LSB Bancshares, Inc., Lexington State Bank and Old North State
Bank (incorporated by reference to Exhibit 2 to the
registrant's Current Report on Form 8-K filed on March 26,
1997).
3.1 Articles of Incorporation of LSB Bancshares, Inc.
(incorporated by reference to Exhibit 4.2 to the registrant's
Registration Statement on Form S-8 filed on November 17, 1992
(file no. 33-54610)).
3.2 Bylaws of LSB Bancshares, Inc. (incorporated by reference to
the registrant's Annual Report on Form 10-K for the year ended
December 31, 1995).
27 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
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