FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995 Commission file number 0-13759
ANCHOR FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
South Carolina 57-0778015
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification number)
2002 Oak St., Myrtle Beach, S. C. 29577
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (803) 448-1411
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 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 latest practicable date.
Class Outstanding at May 9, 1995
(Common stock, $6.00 par value) 1,270,210
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
Part I -Financial Information
Consolidated balance sheet - March 31, 1995
and December 31, 1994 1
Consolidated statement of income - three months
ended March 31, 1995 and 1994 2
Consolidated statement of cash flows -
three months ended March 31, 1995 and 1994 3
Notes to consolidated financial statements 4-6
Management's Discussion and Analysis of
Financial Condition and Results of Operation 7-9
Part II -Other Information
Item 1 - Legal Proceedings 10
Item 2 - Changes in Securities 10
Item 3 - Defaults Upon Senior Securities 10
Item 4 - Submission of Matters to a Vote
of Security-Holders 10
Item 5 - Other Information 10
Item 6 - Exhibits and Reports on Form 8-K 10
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited) *
<S> <C> <C>
ASSETS
Cash and due from banks $ 14,561,931 $ 18,838,551
Interest-bearing balances due from banks 99,000 99,000
Federal funds sold 2,500,000 1,000,000
Investment securities:
Held-to-maturity, at amortized cost (market value
of $31,097,519 in 1995 and $33,949,605 in 1994) 31,739,522 35,012,480
Available-for-sale, at fair value (amortized cost
of $44,456,747 in 1995 and $45,031,822 in 1994) 44,148,020 44,066,796
Total investment
securities 75,887,542 79,079,276
Loans 250,394,611 236,801,927
Less - unearned income (29,052) (30,651)
- allowance for loan losses (2,859,086) (2,795,941)
Net loans 247,506,473 233,975,335
Premises and equipment 12,621,536 11,666,522
Other assets 7,486,709 7,208,278
Total assets $ 360,663,191 $ 351,866,962
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand deposits $ 58,309,824 $ 52,730,429
NOW and Money Market accounts 145,307,204 155,753,241
Time deposits $100,000 and over 29,758,174 20,320,349
Other time and savings deposits 87,337,081 79,404,398
Total deposits 320,712,283 308,208,417
Federal funds purchased and securities
sold under agreements to repurchase 462,016 4,896,099
Other short-term borrowings 5,809,053 7,098,089
Subordinated notes 5,000,000 5,000,000
Other liabilities 2,827,773 1,889,739
Total liabilities 334,811,125 327,092,344
Stockholders' Equity:
Common stock, $6.00 par value; 4,000,000 shares
authorized; shares issued and outstanding -
1,270,210 in 1995 and 1994 7,621,260 7,621,260
Surplus 8,479,858 8,479,858
Retained earnings 10,932,639 10,317,527
Unrealized losses on investment securities
available-for-sale, net of tax (199,582) (636,918)
Unearned ESOP shares (982,109) (1,007,109)
Total stockholders' equity 25,852,066 24,774,618
Total liabilities and
stockholders' equity $ 360,663,191 $ 351,866,962
</TABLE>
* Obtained from audited financial statements.
The accompanying notes to consolidated financial statements
are an integral part of these financial statements.
1
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1995 1994
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 5,719,912 $ 4,281,749
Interest on investment securities:
Taxable 1,067,123 611,760
Non-taxable 47,300 47,827
Other interest income 63,203 30,837
Total interest income 6,897,538 4,972,173
INTEREST EXPENSE:
Interest on deposits 2,750,946 1,746,596
Interest on short-term borrowings 121,394 41,917
Interest on subordinated notes 108,759 108,759
Total interest expense 2,981,099 1,897,272
Net interest income 3,916,439 3,074,901
Provision for loan losses 134,500 50,000
Net interest income after provision
for loan losses 3,781,939 3,024,901
NONINTEREST INCOME:
Trust income 47,808 44,458
Service charges on deposit accounts 364,491 383,837
Commissions and fees 147,848 141,383
Gains on sales of mortgage loans 48,339 151,712
Gains on sales of investment securities 0 0
Other operating income 63,258 47,217
Total noninterest income 671,744 768,607
NONINTEREST EXPENSE:
Salaries and employee benefits 1,643,598 1,416,047
Net occupancy expense 239,367 211,883
Equipment expense 244,987 242,614
Other operating expense 1,020,513 989,844
Total noninterest expense 3,148,465 2,860,388
Income before income taxes 1,305,218 933,120
Provision for income taxes 461,468 297,069
Net income $ 843,750 $ 636,051
Net income per share $ 0.66 $ 0.50
Weighted average common shares outstanding 1,270,210 1,267,243
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these financial statements.
2
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1995 1994
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash flows from operating activities:
Net income $ 843,750 $ 636,051
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion and amortization of investment
securities 28,964 137,946
Depreciation of premises and equipment 238,125 233,180
Amortization of intangible assets 74,499 72,004
Provision for loan losses 134,500 50,000
Gains on sales of mortgage loans (48,339) (151,712)
Gains on sales of premises and equipment (20,530) (5,675)
Change in interest receivable (348,859) (365,851)
Change in prepaid expenses 100,194 (39,387)
Change in income taxes payable 522,248 275,646
Change in deferred taxes 63,118 (123,390)
Change in interest payable 268,760 33,040
Change in accrued expenses 11,286 215,743
Origination of mortgage loans held for sale (2,066,260) (7,183,225)
Proceeds from sales of mortgage loans held for
sale 2,136,001 6,893,370
Net cash provided by operating
activities 1,937,457 677,740
Cash flows from investing activities:
Purchase of investment securities held-to-maturity 0 0
Proceeds from maturities of investment securities
held-to-maturity 3,223,479 4,121,916
Purchase of investment securities available-for-sale (411,700) (2,503,945)
Proceeds from sales of investment securities
available-for-sale 282,200 0
Proceeds from maturities of investment securities
available-for-sale 725,090 1,504,988
Net change in loans (13,687,040) (12,954,367)
Capital expenditures (1,232,542) (627,661)
Other, net (140,674) (106,860)
Net cash used for investing activities (11,241,187) (10,565,929)
Cash flows from financing activities:
Net change in deposits 12,503,866 7,717,766
Net change in federal funds purchased (4,434,082) 586,688
Net change in short-term borrowings (1,289,036) (303,563)
Sale of common stock 0 221,600
Net change in ESOP borrowings (25,000) 25,565
Cash dividends paid (228,638) (190,530)
Net cash provided by financing
activities 6,527,110 8,057,526
Net change in cash and cash equivalents (2,776,620) (1,830,663)
Cash and cash equivalents at January 1 19,937,551 26,864,974
Cash and cash equivalents at March 31 $ 17,160,931 $ 25,034,311
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
3
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying consolidated financial statements are
unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair
statement of the financial position and operating results of
Anchor Financial Corporation and its subsidiaries for the
periods presented. A summary of the Corporation's significant
accounting policies is set forth in Note 1 to the
Consolidated Financial Statements in the Corporation's Annual
Report on Form 10-K for 1994.
The results of operations for the three month period ended
March 31, 1995 are not necessarily indicative of the results
to be expected for the full year.
For purposes of the Consolidated Statement of Cash Flows, the
Corporation has defined cash and cash equivalents as cash on
hand, amounts due from banks, and federal funds sold.
Generally, federal funds are purchased and sold for one-day
periods.
NOTE 2: RESERVE FOR LOAN LOSSES
Transactions to the reserve for loan losses for the three
months ended March 31, 1995 and 1994 are summarized as
follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Balance, beginning of year $2,795,941 $2,361,656
Provision charged to operations 134,500 50,000
Recoveries of charged off loans 32,795 22,338
Loans charged off (104,150) (15,290)
$2,859,086 $2,418,704
</TABLE>
NOTE 3: NONPERFORMING ASSETS
The following is a summary of nonperforming assets at March
31, 1995 and 1994. The income effect of interest foregone on
these assets is not material. The Corporation did not have
any loans with reduced interest rates because of troubled
debt restructuring, foreign loans, or loans for highly
leveraged transactions. Management is not aware of any
situation, other than those included in the summary below,
where known information about a borrower would require
disclosure as a potential problem loan.
4
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Nonaccrual loans $1,127,309 $423,751
Loans past due ninety days or more 158,049 188,361
Other real estate owned 0 100,689
Total nonperforming assets $1,285,358 $712,801
</TABLE>
NOTE 4: INCOME TAXES
The significant components of the Corporation's deferred tax
assets and (liabilities) recorded pursuant to Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes," and included in other assets in the consolidated
balance sheet, are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation over book ($494,193) ($531,446)
Other, net (159,865) (19,931)
Total deferred tax liabilities (654,058) (551,377)
Deferred tax assets:
Allowance for loan losses 667,893 447,518
Net unrealized loss SFAS 115 109,145 33,159
Deferred loan fees and costs 224,997 182,821
Deferred compensation 163,661 0
Other, net 97,103 125,317
Total deferred tax liabilities 1,262,799 788,815
Net deferred tax asset $ 608,741 $ 237,438
</TABLE>
5
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5: PER SHARE DATA
Earnings per share are computed by dividing net income for
each period by the weighted average number of shares
outstanding during each period. The effect of outstanding
stock options is not material to the weighted average number
of common shares outstanding or earnings per share and has not
been included in the calculation.
NOTE 6: OTHER MATTERS
At March 31, 1995, outstanding standby letters of credit
totalled $660,250.
At March 31, 1995 and 1994, the Corporation paid
interest of $2,712,339 and $1,864,232, respectively. The
Corporation received refunds of income taxes totalling
$123,898 during the first quarter of 1995 and paid income
taxes of $144,814 during the same period in 1994.
6
<PAGE>
Management's Discussion and Analysis
Net Income
Net income for the first quarter of 1995 was $843,750, an increase
of $207,699 or 32.7% from the $636,051 for the same period in 1994. Net
income per share for the first quarter increased 32.3% from $0.50 in
1994 to $0.66 in 1995.
The primary factor affecting this increase was an increase of
$841,538 in net interest income. These positive factors were partially
offset by a decrease of $96,863 in noninterest income and increases in
noninterest expense of $288,077, the provision for loan losses of
$84,500 and the provision for income taxes of $164,399.
Annualized return on average total assets for the first quarter of
1995 was 0.97% compared with 0.86% in 1994. Annualized return on
average stockholders' equity for the first quarter of 1995 was 12.74%
compared with 10.75% in 1994.
Net Interest Income
Net interest income, the major component of the Corporation's net
income, was $3,916,439 for the first quarter of 1995, an increase of
$841,538 or 27.4% from the $3,074,901 reported for the same period in
1994. This increase was primarily attributable to the increased volume
of earning assets during the period and an increase in the tax
equivalent net yield on earning assets from 4.63% in 1994 to 4.95% in
1995. The increased volume of earning assets was primarily the result
of quality loan demand and strong deposit growth.
Interest income increased $1,925,365 or 38.7% for the three months
ended March 31, 1995 compared with the same period in 1994. The
increase was due to an increase in the volume of earning assets and the
yield on earning assets which increased from 7.47% in 1994 to 8.70% in
1995. Average loans increased $31.9 million or 15.1% and average
investment securities increased $18.7 million or 32.1% for the first
quarter of 1995 compared with the same period in 1994. Average interest
earning assets represented 91.8% of average total assets during the
first quarter of 1995 compared with 90.0% in 1994. The composition of
average interest-earning assets changed slightly as the percentage of
average loans to average interest-earning assets decreased from 77.7% in
1994 to 75.3% in 1995.
Interest expense increased $1,083,827 or 57.1% for the three months
ended March 31, 1995 compared with the same period in 1994. The
increase in interest expense was due to an increase in the volume of
average interest-bearing liabilities and the rate paid on these funds
during the period. Average interest-bearing liabilities increased $40.1
million or 17.3% for the first quarter of 1995 compared with the same
period in 1994. The rate paid on average interest-bearing liabilities
increased from 3.32% for the three months ended March 31, 1994 to 4.45%
in 1995. Average interest-bearing liabilities represented 84.3% of
funding sources during the first quarter of 1995 compared with 85.4% in
1994.
7
<PAGE>
Provision for Loan Losses
A $134,500 provision for loan losses was made during the first
quarter of 1995 compared with a provision of $50,000 in 1994. The
provision for loan losses was higher during the first quarter of 1995
primarily due to loan growth and a slight increase in the level of net
charge-offs.
At March 31, 1995 and 1994 the ratio of annualized net charge-offs
to average loans was 0.12% and (0.01%), respectively. The ratio of
nonperforming assets to total loans and other real estate owned was
0.51% at March 31, 1995 compared with 0.33% at March 31, 1994.
The reserve for loan losses at March 31, 1995 represented 1.14% of
total loans outstanding compared with 1.18% at December 31, 1994. Based
on the current evaluation of the loan portfolio, management believes the
reserve at March 31 is adequate to cover potential losses in the
portfolio.
Noninterest Income
Noninterest income for the first quarter of 1995 decreased $96,863
or 12.6% from the same period in 1994. The primary reason for this
decrease was a decline in gains on sales of mortgage loans of $103,373
or 68.1% primarily due to lower refinancing activity during 1995. Also,
service charges on deposit accounts decreased $19,346 or 5.0%.
Noninterest Expense
Noninterest expense for the first quarter of 1995 increased $288,077
or 10.1% from the same period in 1994. This increase was primarily the
result of increased salaries and employee benefits caused by the
significant growth of the Corporation during the last year. Also, the
FDIC insurance assessment increased $17,925 or 11.4% from the first
three months of 1994 to $174,899.
Income Taxes
The provision for income taxes for the first quarter of 1995
increased $164,399 or 55.3% from the same period in 1994. The provision
for income taxes increased primarily due to significantly higher income
before taxes since tax rates remained approximately the same as 1994.
Financial Position
For the first quarter of 1995, average total assets increased 16.5%
while average deposits increased 16.8% from the first quarter of 1994.
Due to the seasonal nature of the Myrtle Beach and Hilton Head
Island market areas, deposit growth is strong during the summer months
and loan demand usually reaches its peak during the winter months.
Thus, the Corporation historically has a more favorable liquidity
position during the summer months. To meet loan demand and liquidity
needs during the winter months, the Corporation typically invests
sizable amounts of its deposit growth during the summer months in
temporary investments and short-term securities maturing in the winter
months. Additionally, the Corporation has access to other funding
sources including federal funds purchased from
8
<PAGE>
correspondent banks, a line of credit with the Federal Home Loan Bank, and
a seasonal borrowing privilege from the Federal Reserve Bank.
The Corporation continues to have a strong capital position by
industry standards with the ratio of average stockholders' equity to
average total assets for the first three months of 1995 being 7.6%
versus 8.0% for the same period in 1994. At March 31, 1995, the total
risk-based capital ratio was 13.1% compared with 13.5% at December 31,
1994. The leverage ratio at March 31, 1995 was 7.0% compared with 6.9%
at December 31, 1994.
9
<PAGE>
PART II -OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
There are no material legal proceedings.
ITEM 2.
CHANGES IN SECURITIES
None.
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On April 26, 1995, the Corporation held its 1995 Annual Meeting
of Shareholders. At the 1995 Annual Meeting, the following
individuals were elected as Directors with the votes indicated.
Director For Withheld Abstain
James E. Burroughs 815,022 38,435 0
Stephen L. Chryst 827,446 26,011 0
John D. Flowers 828,837 24,620 0
J. Bryan Floyd 829,032 24,425 0
Ruppert L. Piver 827,802 25,655 0
Albert A. Springs, III 828,837 24,620 0
C. Jason Ammons, Howell V. Bellamy, Jr., W. Cecil Brandon, Jr.,
C. Donald Cameron, Admah Lanier, Jr., Tommy E. Looper, W. Gairy
Nichols, III, Thomas J. Rogers, J. Roddy Swaim, Harry A. Thomas, and
Zeb M. Thomas, Sr. continued in their terms of office as directors
of the Corporation.
The following is a brief description of other matters voted upon
at the 1995 Annual Meeting and the number of votes cast for and
withheld, as well as, the number of abstentions.
Proposal to ratify the selection of Price Waterhouse LLP as
independent public accountants for the period ending December 31,
1995.
For - 836,205 Withheld - 603 Abstain - 16,649
ITEM 5.
OTHER INFORMATION
None.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter ended
March 31, 1995.
10
<PAGE>
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.
/s/ Stephen L. Chryst
Stephen L. Chryst, President and
Chief Executive Officer
/s/ Tommy E. Looper
Tommy E. Looper, Executive Vice
President and Chief Financial
Officer
Date : May 9, 1995
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 14,561,931
<INT-BEARING-DEPOSITS> 99,000
<FED-FUNDS-SOLD> 2,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 44,148,020
<INVESTMENTS-CARRYING> 31,739,522
<INVESTMENTS-MARKET> 31,097,519
<LOANS> 250,365,559
<ALLOWANCE> 2,859,086
<TOTAL-ASSETS> 360,663,191
<DEPOSITS> 320,712,283
<SHORT-TERM> 6,271,069
<LIABILITIES-OTHER> 2,827,773
<LONG-TERM> 5,000,000
<COMMON> 7,621,260
0
0
<OTHER-SE> 18,230,806
<TOTAL-LIABILITIES-AND-EQUITY> 360,663,191
<INTEREST-LOAN> 5,719,912
<INTEREST-INVEST> 1,114,423
<INTEREST-OTHER> 63,203
<INTEREST-TOTAL> 6,897,538
<INTEREST-DEPOSIT> 2,750,946
<INTEREST-EXPENSE> 2,981,099
<INTEREST-INCOME-NET> 3,916,439
<LOAN-LOSSES> 134,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 3,148,465
<INCOME-PRETAX> 1,305,218
<INCOME-PRE-EXTRAORDINARY> 843,750
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 843,750
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
<YIELD-ACTUAL> 4.95
<LOANS-NON> 1,127,309
<LOANS-PAST> 158,049
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,795,941
<CHARGE-OFFS> 104,150
<RECOVERIES> 32,795
<ALLOWANCE-CLOSE> 2,859,086
<ALLOWANCE-DOMESTIC> 2,359,086
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 500,000
</TABLE>
