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 June 30, 1996 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 August 5, 1996
(Common stock, $6.00 par value) 2,553,716
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
Part I - Financial Information
Consolidated Balance Sheet - June 30, 1996
and December 31, 1995 1
Consolidated Statement of Income - Three Months
and Six Months ended June 30, 1996 and 1995 2
Consolidated Statement of Cash Flows -
Six Months ended June 30, 1996 and 1995 3
Notes to Consolidated Financial Statements 4-7
Management's Discussion and Analysis of
Financial Condition and Results of Operation 8-12
Part II - Other Information
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 13
Item 3 - Defaults Upon Senior Securities 13
Item 4 - Submission of Matters to a Vote
of Security-Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited) <F1>
<S> <C> <C>
Assets
Cash and due from banks $20,794,727 $20,516,188
Interest-bearing balances due from banks 99,000 99,000
Federal funds sold 500,000 0
Investment securities:
Held-to-maturity, at amortized cost (fair
value of $21,861,909 in 1996 and $31,521,870
in 1995) 22,018,995 31,403,494
Available-for-sale, at fair value (amortized
cost of $84,589,657 in 1996 and $51,594,192
in 1995) 83,875,721 52,043,206
Total investment securities 105,894,716 83,446,700
Loans 320,912,459 285,129,012
Less - unearned income (23,776) (25,477)
- allowance for loan losses (3,442,374) (3,045,656)
Net loans 317,446,309 282,057,879
Premises and equipment 14,340,194 13,866,646
Other assets 10,970,177 7,520,004
Total assets $470,045,123 $407,506,417
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand deposits $ 75,398,990 $ 61,748,670
NOW and Money Market accounts 208,971,407 168,984,005
Time deposits $100,000 and over 26,806,498 35,505,253
Other time and savings deposits 91,763,232 87,637,828
Total deposits 402,940,127 353,875,756
Federal funds purchased and securities sold
under agreements to repurchase 9,468,273 1,748,127
Other short-term borrowings 2,201,161 954,451
Long-term debt 18,000,000 15,000,000
Subordinated notes 5,000,000 5,000,000
Other liabilities 2,930,923 2,386,065
Total liabilities 440,540,484 378,964,399
Stockholders' Equity:
Common stock, $6.00 par value; 7,000,000 shares
authorized; shares issued and outstanding -
2,551,595 in 1996 and 2,540,985 in 1995 15,309,570 15,245,910
Surplus 873,682 875,331
Retained earnings 14,568,120 12,964,631
Unrealized gains (losses) on investment securities
available-for-sale, net of tax (465,624) 292,755
Unearned ESOP shares (781,109) (836,609)
Total stockholders' equity 29,504,639 28,542,018
Total liabilities and
stockholders' equity $470,045,123 $407,506,417
<F1> Obtained from audited financial statements.
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $14,272,992 $12,041,493 $7,306,291 $6,321,581
Interest on investment
securities:
Taxable 2,702,373 2,141,339 1,485,184 1,074,216
Non-taxable 101,523 94,174 50,133 46,874
Other interest income 226,211 78,994 56,962 15,791
Total interest income 17,303,099 14,356,000 8,898,570 7,458,462
INTEREST EXPENSE:
Interest on deposits 7,022,488 5,847,032 3,584,669 3,096,086
Interest on short-term
borrowings 71,605 193,471 46,551 72,077
Interest on long-term debt 543,824 74,989 277,077 74,989
Interest on subordinated notes 218,706 218,505 109,353 109,746
Total interest expense 7,856,623 6,333,997 4,017,650 3,352,898
Net interest income 9,446,476 8,022,003 4,880,920 4,105,564
Provision for loan losses 390,000 249,500 230,000 115,000
Net interest income after
provision for loan losses 9,056,476 7,772,503 4,650,920 3,990,564
NONINTEREST INCOME:
Service charges on deposit
accounts 964,196 761,305 516,829 396,814
Commissions and fees 405,817 287,375 233,529 139,527
Trust income 126,445 103,377 69,132 55,569
Gains on sales of
mortgage loans 98,220 127,655 38,133 79,316
Gains (losses) on sales of
investment securities, net (10,663) 36,884 (10,663) 36,884
Other operating income 213,625 103,626 170,050 40,368
Total noninterest income 1,797,640 1,420,222 1,017,010 748,478
NONINTEREST EXPENSE:
Salaries and employee
benefits 4,032,972 3,428,032 2,057,113 1,784,434
Net occupancy expense 639,687 479,378 324,270 240,011
Equipment expense 639,112 485,395 350,534 240,408
Other operating expense 2,325,497 2,199,521 1,174,668 1,179,008
Total noninterest expense 7,637,268 6,592,326 3,906,585 3,443,861
Income before income taxes 3,216,848 2,600,399 1,761,345 1,295,181
Provision for income taxes 1,102,650 912,995 579,039 451,527
Net income $2,114,198 $1,687,404 $1,182,306 $ 843,654
Net income per share $ 0.81 $ 0.67 $ 0.45 $ 0.33
Weighted average common
shares outstanding 2,607,391 2,528,201 2,609,180 2,529,224
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $2,114,198 $1,687,404
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion and amortization of investment securities (15,399) 35,304
Depreciation of premises and equipment 635,667 484,166
Amortization of intangible assets 198,580 151,214
Provision for loan losses 390,000 249,500
Gains on sales of investment securities 10,663 (36,884)
Gains on sales of mortgage loans (98,220) (127,655)
Gains on sales of premises and equipment 3,833 (20,530)
Change in interest receivable (1,412,845) (115,374)
Change in prepaid expenses 65,675 283,646
Change in income taxes payable 16,380 192,580
Change in deferred taxes (502,004) 242,513
Change in interest payable (11,192) 234,165
Change in accrued expenses 54,122 (92,479)
Origination of mortgage loans held for sale (6,189,750) (5,483,705)
Proceeds from sales of mortgage loans held for sale 6,210,420 5,626,443
Net cash provided by operating activities 1,470,128 3,310,308
Cash flows from investing activities:
Purchase of investment securities held-to-maturity (2,053,593) 0
Proceeds from maturities of investment
securities held-to-maturity 11,420,442 5,293,525
Purchase of investment securities available-
for-sale (43,386,672) (910,200)
Proceeds from sales of investment securities
available-for-sale 5,513,594 2,286,575
Proceeds from maturities of investment
securities available-for-sale 4,900,000 761,498
Net change in loans (35,700,880) (27,809,175)
Capital expenditures (1,154,590) (1,768,237)
Proceeds from sale of premises and equipment 41,542 59,934
Other, net (909,462) (613,007)
Net cash used for investing activities (61,329,619) (22,699,087)
Cash flows from financing activities:
Net change in deposits 49,064,372 30,676,758
Net change in federal funds purchased and
securities sold under agreements to repurchase 7,720,146 (4,161,168)
Net change in short-term borrowings 1,246,710 (4,823,162)
Proceeds from issuance of long-term debt 3,000,000 10,000,000
Proceeds from issuance of stock in
accordance with:
Stock Option Plan 62,010 0
Net change in unearned ESOP Shares 80,500 63,875
Cash dividends paid (535,708) (457,276)
Net cash provided by financing activities 60,638,030 31,299,027
Net change in cash and cash equivalents 778,539 11,910,248
Cash and cash equivalents at January 1 20,615,188 19,937,551
Cash and cash equivalents at June 30 $21,393,727 $31,847,799
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these financial statements.
<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 1995.
The results of operations for the three and six month periods
ended June 30, 1996 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
Activity in the reserve for loan losses for the six months
ended June 30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Balance, beginning of year $3,045,656 $2,795,941
Provision charged to operations 390,000 249,500
Recoveries of charged off loans 221,014 49,144
Loans charged off (214,296) (205,423)
$3,442,374 $2,889,162
</TABLE>
NOTE 3: NONPERFORMING ASSETS
The following is a summary of nonperforming assets at June 30,
1996 and 1995. 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.
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Nonaccrual loans $ 156,862 $ 746,218
Loans past due ninety days or more 65,044 672,880
Other real estate owned 0 50,000
Total nonperforming assets $ 221,906 $1,469,098
</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>
1996 1995
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation over book ($531,597) ($489,691)
Net unrealized gain SFAS 115 0 (93,433)
Other, net (192,467) (131,830)
Total deferred tax liabilities (724,064) (714,954)
Deferred tax assets:
Allowance for loan losses 863,242 678,378
Deferred loan fees and costs 218,092 225,574
Deferred compensation 196,084 165,617
Net unrealized loss SFAS 115 161,174 0
Other, net 175,117 115,335
Total deferred tax assets 1,613,709 1,184,904
Net deferred tax asset $889,645 $469,950
</TABLE>
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5: LONG-TERM DEBT
Long-term debt at June 30 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Parent Company:
8.60% subordinated notes due in 2003 <F2> $ 5,000,000 $ 5,000,000
Subsidiaries:
5.71% Federal Home Loan Bank advance due
in 1998 5,000,000 0
5.48% Federal Home Loan Bank advance due
in 1999 3,000,000 0
6.08% Federal Home Loan Bank advance due
in 2000 5,000,000 5,000,000
7.21% Federal Home Loan Bank advance due
in 2005 5,000,000 5,000,000
Total long-term debt $23,000,000 $15,000,000
<F2> Debt qualifies for inclusion in the determination of total
capital under the Risk-Based Capital Guidelines.
</TABLE>
The principal maturity of long-term debt for the next five years
subsequent to June 30, 1996 is $5,000,000 in 1998, $5,000,000 in
1999, $5,000,000 in 2000, and $8,000,000 there after.
NOTE 6: PER SHARE DATA
Net income per share is computed by dividing net income by the weighted
average number of shares outstanding and dilutive common share
equivalents using the treasury stock method. Common share
equivalents include common shares issuable upon exercise of
outstanding stock options. Unallocated common shares held by the
Employee Stock Ownership Plan are excluded from the weighted average
number of common shares outstanding.
<PAGE>
NOTE 7: IMPAIRED LOANS
Adoption of SFAS Nos. 114 and 118 as of January 1, 1995 resulted in
the identification of certain loans which were considered impaired
under the provisions of SFAS No. 114. Impaired loans are loans for
which it is probable that all amounts, including principal and
interest, will not be collected in accordance with the contractual
terms of the loan agreement. Impaired (including cash basis) loans
at June 30, all of which are held by the bank subsidiaries, are
summarized in Note 3.
At June 30, 1996, impaired loans had a related specific allowance
for loan losses totaling $21,000. There were no material
commitments to lend additional funds to customers whose loans were
classified as impaired at June 30, 1996.
NOTE 8: OTHER MATTERS
At June 30, 1996, outstanding standby letters of credit totaled
$623,858.
For the six months ended June 30, 1996 and 1995, the Corporation paid
interest of $7,867,814 and $6,099,832 respectively. The Corporation
paid income taxes of $1,279,971 during the six months ended
June 30, 1996 and $879,078 during the same period in 1995.
<PAGE>
Management's Discussion and Analysis
Net Income
Net income for the second quarter of 1996 was $1,182,306, an increase
of $338,652 or 40.1% from the $843,654 for the same period in 1995. Net
income per share for the second quarter increased 35.9% from $0.33 in 1995
to $0.45 in 1996. Excluding securities transactions, net income increased
$386,199 or 47.9%.
The primary factors affecting this increase were an increase of
$775,356 in net interest income and an increase in noninterest income of
$268,532. These positive factors were partially offset by increases in
noninterest expense of $462,724, the provision of loan losses of $115,000,
and the provision for income taxes of $127,512.
Net income for the six months ended June 30, 1996 was $2,114,198, an
increase of $426,794 or 25.3% from the $1,687,404 for the same period in
1995. Net income per share for this period increased 21.5% from $0.67 in
1995 to $0.81 in 1996. Excluding securities transactions, net income
increased $474,341 or 28.7%.
The primary factors affecting this increase were an increase of
$1,424,473 in net interest income and an increase in noninterest income of
$377,418. These positive factors were partially offset by increases in
noninterest expense of $1,044,942, the provision for loan losses of
$140,500, and the provision for income taxes of $189,655.
Annualized return on average total assets for the second quarter of
1996 was 1.04% compared with 0.92% in 1995. For the six months ended June
30, 1996, annualized return on average total assets was 0.96% compared with
0.94% in 1995. Annualized return on average stockholders' equity for the
second quarter of 1996 was 15.69% compared with 12.35% in 1995. For the six
months ended June 30, 1996, annualized return on average stockholders'
equity was 14.20% compared with 12.54% for the same period in 1995.
Net Interest Income
Net interest income, the major component of the Corporation's net
income, was $4,880,920 for the second quarter of 1996, an increase of
$775,356 or 18.9% from the $4,105,564 reported for the same period in 1995.
This increase was primarily attributed to the increased volume of earning
assets during the period, since the tax equivalent net yield on earning assets
decreased from 4.92% in 1995 to 4.70% in 1996. The decrease in net yield
during the second quarter primarily reflects the effect of a slight change
in the mix of earning assets. The increased volume of earning assets was
primarily the result of quality loan demand during the period.
Interest income increased $1,440,108 or 19.3% for the three months
ended June 30, 1996 compared with the same period in 1995. The increase was
due to an increase in the volume of earning assets since the yield on
earning assets decreased from 8.92% in 1995 to 8.55% in 1996. Average
loans increased $53.2 million or 20.5% and average investment securities
increased $29.2 million or 40.0% for the second quarter of 1996 compared
with the same period in 1995. Average interest earning assets represented
91.4% of average total assets during the second quarter of 1996 compared
with 91.0% in 1995. The composition of average interest-earning assets
changed slightly as the percentage of average loans to average interest-
earning assets decreased from 77.3% in 1995 to 74.6% in 1996. This change
in the mix of earning assets and a slight decline in the yield on loans were
the primary reasons for the decline in the yield on earning assets during
the period.
<PAGE>
Interest expense increased $664,752 or 19.8% for the three months ended
June 30, 1996 compared with the same period in 1995. The increase in
interest expense was due to an increase in the volume of average interest-
bearing liabilities since the rate paid on average interest-bearing
liabilities decreased from 4.82% for the three months ended June 30, 1995 to
4.56% for the same period in 1996. Average interest-bearing liabilities
increased $75.7 million or 27.2% for the second quarter of 1996 compared
with the same period in 1995. Average interest-bearing liabilities
represented 84.5% of funding sources during the second quarter of 1996
compared with 83.0% in 1995.
For the six months ended June 30, 1996, net interest income increased
$1,424,473 or 17.8% from the same period in 1995. The primary reason for
this increase was the increased volume of earning assets during the period
because the tax equivalent net yield on earning assets decreased from 4.94%
for the first six months of 1995 to 4.71% for the same period in 1996. The
decrease in net yield during the second quarter primarily reflects the
effect of a slight change in the mix of earning assets. The increased
volume of earning assets was primarily the result of quality loan demand
during the period.
Interest income increased $2,947,099 or 20.5% for the six months ended
June 30, 1996 compared with the same period in 1995. The increase was due
to an increase in the volume of average interest-earning assets since the
yield of earning assets decreased from 8.81% in 1995 to 8.60% in 1996.
Average loans increased $52.6 million or 20.9% and average investment
securities increased $18.2 million or 24.3% for the six months ended June
30, 1996 compared with the same period in 1995. Average interest-earning
assets represented 91.4% of average total assets during the six months ended
June 30, 1996 versus 91.3% in 1995. The composition of average interest-
earning assets changed slightly as the percentage of average loans to
average interest-earning assets decreased from 76.4% in 1995 to 74.9% in
1996.
Interest expense increased $1,522,626 or 24.0% for the six months ended
June 30, 1996 compared with the same period in 1995. The increase in
interest expense was due to an increase in the volume of average interest-
bearing liabilities, since the rate paid on these funds during the period
decreased slightly. Average interest-bearing liabilities increased $68.8
million or 25.0% for the six months ended June 30, 1996 compared with the
same period in 1995. The rate paid on average interest-bearing liabilities
decreased slightly from 4.64% for the six months ended June 30, 1995 to
4.59% in 1996. Average interest-bearing liabilities represented 84.9% of
funding sources during the six months ended June 30, 1996 compared with
83.6% in 1995.
Provision for Loan Losses
A $230,000 provision for loan losses was made during the second quarter
of 1996 compared with a provision of $115,000 in 1995. The provision for
loan losses was higher during the second quarter of 1996 primarily due to
loan growth since the levels of net charge-offs and nonperforming loans
decreased. The provision for loan losses for the six months ended June 30,
1996 was $390,000 versus $249,500 for the same period in 1995. The increase
in the provision for loan losses for the six months ended June 30, 1996 was
primarily due to loan growth since credit quality measures remain favorable.
At June 30, 1996 and 1995 the ratio of annualized net charge-offs
(recoveries) to average loans was (0.004%) and 0.13%, respectively. The
ratio of nonperforming assets to total loans and other real estate owned was
0.07% at June 30, 1996 compared with 0.55% at June 30, 1995.
<PAGE>
The reserve for loan losses at June 30, 1996 and December 31, 1995
represented 1.07% of total loans outstanding. Based on the current
evaluation of the loan portfolio, management believes the reserve at June 30,
1996 is adequate to cover potential losses in the portfolio.
Noninterest Income
Noninterest income for the second quarter of 1996 increased $268,532 or
35.9% from the same period in 1995. Noninterest income before investment
securities transactions for the second quarter of 1996 increased $316,079 or
44.4% from the same period in 1995. The primary factors attributing to this
increase were increases in commissions and fees of $139,527 or 67.4% and
service charges on deposit accounts of $120,015 or 30.2%.
The increase in commissions and fees resulted from increased revenue
generated by trust and credit card merchant services. The increase in
service charges on deposit accounts was due to the significant growth in
deposits and an increase in certain prices. Other operating income for the
second quarter of 1996 increased $129,682 or 321.3% from the same period in
1995. The increase in other operating income was due to non-recurring life
insurance proceeds received from deferred compensation plans of previous
directors of $100,657. During the second quarter of 1996 mortgage banking
income (which includes profits from the origination and sale of loans)
decreased $41,183 or 51.9% from the same period in 1995. The significant
decrease in mortgage banking income was the result of lower refinancing
activity due to the rising interest rate environment experienced during the
second quarter of 1996.
Noninterest income for the six months ended June 30, 1996 increased
$377,418 or 26.6% from the same period in 1995. Noninterest income before
investment securities transactions for the six months ended June 30, 1996
increased $424,965 or 30.7% from the same period in 1995. The primary
factors attributing to this increase were increases in commissions and fees
of $118,442 or 41.2% and service charges on deposit accounts of $202,891 or
26.7%.
The increase in commissions and fees resulted from increased revenue
generated by trust and credit card merchant services. The increase in
service charges on deposit accounts was due to the significant growth in
deposits and an increase in certain prices. Other operating income for the
six months ended June 30, 1996 increased $109,999 or 106.2% from the same
period in 1995. The increase in other operating income was due to
non-recurring life insurance proceeds received from deferred compensation plans
of previous directors of $100,657. During the first six months of 1996
mortgage banking income decreased $29,435 or 23.1% from the same period in
1995. The decrease in mortgage banking income was the result of lower
refinancing activity due to the rising interest rate environment experienced
during the first six months of 1996.
Noninterest Expense
Noninterest expense for the second quarter of 1996 increased $462,724
or 13.4 % from the same period in 1995. This increase was the result of
increases in salaries and employee benefits, net occupancy expense, and
equipment expense caused by the Corporation's continued strong growth.
Salaries and employee benefits for the second quarter of 1996 increased
$272,679 or 15.3% from the same period in 1995. This increase was primarily
due to the increased number of employees from expansion into new markets and
investments in new personnel to further develop the infrastructure of the
Corporation.
<PAGE>
Net occupancy expense increased $84,259 or 35.1% and equipment expense
increased $240,408 or 45.8% for the second quarter of 1996 compared with the
same period in 1995. These increases were primarily due to the addition of
banking locations in Mt. Pleasant, South Carolina and Wilmington, North
Carolina. Other operating expense for the three months ended June 30, 1996
decreased slightly compared with the same period in 1995.
For the six months ended June 30, 1996, noninterest expense increased
$1,044,942 or 15.9% from the same period in 1995. This increase was the
result of increases in each of the categories of noninterest expense again
caused by the significant growth of the Corporation.
Salaries and employee benefits for the six months ended June 30, 1996
increased $604,940 or 17.6% from the same period in 1995. This increase was
primarily due to the increased number of employees from expansion into new
markets and investments in new personnel to further develop the
infrastructure of the Corporation.
Net occupancy expense increased $160,309 or 33.4% and equipment expense
increased $153,717 or 31.7% for the six months ended June 30, 1996 compared
with the same period in 1995. These increases were primarily due to the
addition of banking locations in Mt. Pleasant, South Carolina and
Wilmington, North Carolina. Other operating expense for the three months
ended June 30, 1996 increased slightly compared with the same period in
1995.
Income Taxes
The provision for income taxes for the second quarter of 1996 increased
$127,512 or 28.2% from the same period in 1995. For the six months ended
June 30, 1996, the provision increased $189,655 or 20.8% from the same
period in 1995. The provision for income taxes increased in 1996 primarily
due to higher income before taxes since tax rates remained approximately the
same as 1995.
Financial Position
For the second quarter of 1996, average total assets increased 24.4%
while average deposits increased 22.8% from the second quarter of 1995. For
the six months ended June 30, 1996, average total assets increased 23.1%
while average deposits increased 21.4 % from the same period in 1995.
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
correspondent banks and a line of credit with the Federal Home Loan Bank
("FHLB").
The Corporation utilizes long-term advances from the FHLB as part of
its funding strategy. FHLB advances totaled $18,000,000 at June 30, 1996
versus $10,000,000 at June 30, 1995.
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 six months of 1996 being 6.8% versus 7.6% for the same
period in 1995. At June 30, 1996, the total risk-based capital ratio was
11.2% compared with 12.2% at December 31, 1995. The leverage ratio at June
30, 1996 was 6.3% compared with 6.8% at December 31, 1995.
<PAGE>
Other Events
The Anchor Bank and The Anchor Bank of North Carolina expect to merge
into one entity late in the third quarter of 1996. By bringing the two
subsidiary banks together, the Corporation will achieve greater economies of
scale and improved efficiencies. The Anchor Bank will survive the merger
and The Anchor Bank of North Carolina's five branch offices will become part
of The Anchor Bank branch system. The Anchor Bank of North Carolina
customers will continue to be served by the same employees who have assisted
them in the past and will not need to make any changes in their banking
routine. After the merger is completed, customers of both institutions will
be able to do their banking at any of The Anchor Bank's eighteen branches
along the coast of North Carolina and South Carolina.
<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
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27 Financial Data Schedule (for SEC purposes only)
(b) No reports on Form 8-K have been filed during the quarter ended
June 30, 1996
<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
/s/ John J. Moran
John J. Moran, Senior Vice President
and Comptroller
Date : August 5, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 20,794,727
<INT-BEARING-DEPOSITS> 99,000
<FED-FUNDS-SOLD> 500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 83,875,721
<INVESTMENTS-CARRYING> 22,018,995
<INVESTMENTS-MARKET> 21,861,909
<LOANS> 320,888,683
<ALLOWANCE> 3,442,374
<TOTAL-ASSETS> 470,045,123
<DEPOSITS> 402,940,127
<SHORT-TERM> 11,669,434
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<LONG-TERM> 23,000,000
<COMMON> 15,309,570
0
0
<OTHER-SE> 14,195,069
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<INTEREST-DEPOSIT> 7,022,488
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<LOAN-LOSSES> 390,000
<SECURITIES-GAINS> (10,663)
<EXPENSE-OTHER> 7,637,268
<INCOME-PRETAX> 3,216,848
<INCOME-PRE-EXTRAORDINARY> 3,216,848
<EXTRAORDINARY> 0
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<NET-INCOME> 2,114,198
<EPS-PRIMARY> 0.81
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<YIELD-ACTUAL> 4.71
<LOANS-NON> 156,862
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