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 September 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 November 12, 1996
(Common stock, $6.00 par value) 2,559,340
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
Part I - Financial Information
Consolidated Balance Sheet - September 30, 1996
and December 31, 1995 1
Consolidated Statement of Income - Three Months
and Nine months ended September 30, 1996 and 1995 2
Consolidated Statement of Cash Flows -
Nine months ended September 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>
September 30, December 31,
1996 1995
(Unaudited) <F1>
<S> <C> <C>
Assets
Cash and due from banks $ 23,171,294 $ 20,516,188
Interest-bearing balances due from banks 99,000 99,000
Investment securities:
Held-to-maturity, at amortized cost (fair
value of $20,461,662 in 1996 and $32,881,489
in 1995) 21,126,073 31,403,494
Available-for-sale, at fair value (amortized
cost of $83,263,053 in 1996 and $52,407,146
in 1995) 82,983,686 52,043,206
Total investment securities 104,109,759 83,446,700
Loans 322,215,245 285,129,012
Less - unearned income (23,983) (25,477)
- allowance for loan losses (3,609,181) (3,045,656)
Net loans 318,582,081 282,057,879
Premises and equipment 15,787,880 13,866,646
Other assets 9,281,935 7,520,004
Total assets $471,031,949 $407,506,417
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand deposits $ 73,253,657 $ 61,748,670
NOW and Money Market accounts 207,179,821 168,984,005
Time deposits $100,000 and over 25,437,246 35,505,253
Other time and savings deposits 92,705,400 87,637,828
Total deposits 398,576,124 353,875,756
Federal funds purchased and securities sold
under agreements to repurchase 7,493,970 1,748,127
Other short-term borrowings 7,468,640 954,451
Long-term debt 18,000,000 15,000,000
Subordinated notes 5,000,000 5,000,000
Other liabilities 3,533,776 2,386,065
Total liabilities 440,072,510 378,964,399
Stockholders' Equity:
Common stock, $6.00 par value; 7,000,000 shares
authorized; shares issued and outstanding -
2,555,171 in 1996 and 2,540,420 in 1995 15,331,026 15,245,910
Surplus 930,033 875,331
Retained earnings 15,625,033 12,964,631
Unrealized gains (losses) on investment securities
available-for-sale, net of tax (183,044) 292,755
Unearned ESOP shares (743,609) (836,609)
Total stockholders' equity 30,959,439 28,542,018
Total liabilities and
stockholders' equity $471,031,949 $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>
Nine months ended Three months ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $21,826,929 $18,550,502 $7,553,937 $6,509,009
Interest on investment
securities:
Taxable 4,309,942 3,261,802 1,607,569 1,120,463
Non-taxable 151,273 141,624 49,750 47,450
Other interest income 267,962 346,828 41,751 267,834
Total interest income 26,556,106 22,300,756 9,253,007 7,944,756
INTEREST EXPENSE:
Interest on deposits 10,637,068 9,135,728 3,614,580 3,288,696
Interest on short-term
borrowings 130,341 229,804 58,736 36,333
Interest on long-term debt 823,947 242,479 280,123 167,490
Interest on subordinated notes 329,284 330,208 110,578 111,703
Total interest expense 11,920,640 9,938,219 4,064,017 3,604,222
Net interest income 14,635,466 12,362,537 5,188,990 4,340,534
Provision for loan losses 590,000 455,500 200,000 206,000
Net interest income after
provision for loan losses 14,045,466 11,907,037 4,988,990 4,134,534
NONINTEREST INCOME:
Service charges on deposit
accounts 1,447,640 1,127,199 483,444 365,894
Commissions and fees 707,379 492,190 301,562 204,815
Trust income 183,891 160,631 57,446 57,254
Gains on sales of
mortgage loans 145,467 200,867 47,247 73,212
Gains (losses) on sales of
investment securities, net (14,523) 36,884 (3,860) 0
Other operating income 284,002 157,665 70,377 54,039
Total noninterest income 2,753,856 2,175,436 956,216 755,214
NONINTEREST EXPENSE:
Salaries and employee
benefits 6,155,825 5,316,075 2,122,853 1,888,043
Net occupancy expense 983,405 749,985 343,718 270,607
Equipment expense 955,282 761,889 316,170 276,494
Other operating expense 3,397,331 3,189,106 1,071,834 989,585
Total noninterest expense 11,491,843 10,017,055 3,854,575 3,424,729
Income before income taxes 5,307,479 4,065,418 2,090,631 1,465,019
Provision for income taxes 1,868,229 1,431,661 765,579 518,666
Net income $3,439,250 $2,633,757 $1,325,052 $ 946,353
Net income per share $ 1.31 $ 1.04 $ 0.50 $ 0.37
Weighted average common
shares outstanding 2,616,014 2,540,420 2,630,707 2,540,420
</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>
Nine months ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,439,250 $ 2,633,757
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion and amortization of investment securities (39,058) 58,716
Depreciation of premises and equipment 928,133 744,355
Amortization of intangible assets 297,748 241,926
Provision for loan losses 590,000 455,500
Gains on sales of investment securities 14,523 (36,884)
Gains on sales of mortgage loans (145,467) (200,867)
Gains on sales of premises and equipment 3,833 (21,730)
Change in interest receivable 151,921 (2,944)
Change in prepaid expenses 54,462 270,708
Change in income taxes payable 2,206 42,832
Change in deferred taxes (260,434) 237,587
Change in interest payable 127,685 226,531
Change in accrued expenses 265,370 83,838
Origination of mortgage loans held for sale (8,172,600) (9,677,155)
Proceeds from sales of mortgage loans held for sale 8,097,817 10,385,880
Net cash provided by operating activities 5,355,389 5,442,050
Cash flows from investing activities:
Purchase of investment securities held-to-maturity (2,053,654) (3,980,698)
Proceeds from maturities of investment
securities held-to-maturity 12,296,120 5,943,525
Purchase of investment securities available-
for-sale (52,074,966) (13,489,344)
Proceeds from sales of investment securities
available-for-sale 10,458,539 2,286,575
Proceeds from maturities of investment
securities available-for-sale 10,007,056 3,930,783
Net change in loans (36,893,953) (27,760,287)
Capital expenditures (2,894,742) (2,761,091)
Proceeds from sale of premises and equipment 41,542 62,159
Other, net (1,000,595) (541,876)
Net cash used for investing activities (62,114,653) (36,310,254)
Cash flows from financing activities:
Net change in deposits 44,700,369 41,914,051
Net change in federal funds purchased and
securities sold under agreements to repurchase 5,745,843 (4,130,158)
Net change in short-term borrowings 6,514,189 (4,807,664)
Proceeds from issuance of long-term debt 3,000,000 10,000,000
Proceeds from issuance of stock in
accordance with:
Dividend Reinvestment Plan 30,405 0
Stock Option Plan 74,412 0
Net change in unearned ESOP Shares 153,000 101,375
Cash dividends paid (803,848) (685,912)
Net cash provided by financing activities 59,414,370 42,391,692
Net change in cash and cash equivalents 2,655,106 11,523,488
Cash and cash equivalents at January 1 20,615,188 19,937,551
Cash and cash equivalents at September 30 $23,270,294 $31,461,039
</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 nine month periods
ended September 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 nine months
ended September 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 590,000 455,500
Recoveries of charged off loans 235,792 60,275
Loans charged off (262,267) (395,731)
$3,609,181 $2,915,985
</TABLE>
NOTE 3: NONPERFORMING ASSETS
The following is a summary of nonperforming assets at September
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 $ 166,683 $ 407,909
Loans past due ninety days or more 8,164 39,008
Other real estate owned 0 6,500
Total nonperforming assets $ 174,847 $ 453,417
</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 ($554,331) ($499,063)
Net unrealized gain SFAS 115 0 (79,966)
Other, net (220,486) (151,839)
Total deferred tax liabilities (774,817) (730,868)
Deferred tax assets:
Allowance for loan losses 911,717 687,819
Deferred loan fees and costs 238,467 244,466
Deferred compensation 197,983 167,487
Net unrealized loss SFAS 115 96,323 0
Other, net 163,925 105,972
Total deferred tax assets 1,608,415 1,205,744
Net deferred tax asset $833,598 $ 474,876
</TABLE>
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5: LONG-TERM DEBT
Long-term debt at September 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 September 30, 1996 is $5,000,000 in 1998, $3,000,000
in 1999, $5,000,000 in 2000, and $10,000,000 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>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 September 30, all of which are held by the
bank subsidiaries, are summarized in Note 3.
At September 30, 1996, impaired loans had a related specific
allowance for loan losses totaling $17,000. There were no
material commitments to lend additional funds to customers whose
loans were classified as impaired at September 30, 1996.
NOTE 8: OTHER MATTERS
At September 30, 1996, outstanding standby letters of credit totaled
$418,858.
For the nine months ended September 30, 1996 and 1995, the
Corporation paid interest of $11,792,955 and $9,711,687
respectively. The Corporation paid income taxes of $2,018,630
during the nine months ended September 30, 1996 and $1,151,242
during the same period in 1995.
<PAGE>
Management's Discussion and Analysis
Net Income
Net income for the third quarter of 1996 was $1,325,052 an increase of
$378,699 or 40.0% from the $946,353 for the same period in 1995. Net income
per share for the third quarter increased 35.2% from $0.37 in 1995 to $0.50
in 1996.
The primary factors affecting this increase were an increase of
$848,456 in net interest income and an increase in noninterest income of
$201,002. These positive factors were partially offset by increases in
noninterest expense of $429,846 and the provision for income taxes of $246,913.
The provision for loan losses decreased slightly during this period.
Net income for the nine months ended September 30, 1996 was $3,439,250,
an increase of $805,493 or 30.6% from the $2,633,757 for the same period in
1995. Net income per share for this period increased 26.8% from $1.04 in
1995 to $1.31 in 1996. Excluding securities transactions, net income
increased $839,243 or 32.2%.
The primary factors affecting this increase were an increase of
$2,272,929 in net interest income and an increase in noninterest income of
$578,420. These positive factors were partially offset by increases in
noninterest expense of $1,474,788, the provision for income taxes of
$436,568, and the provision for loan losses of $134,500.
Annualized return on average total assets for the third quarter of 1996
was 1.12% compared with 0.95% in 1995. For the nine months ended September
30, 1996, annualized return on average total assets was 1.02% compared with
0.94% in 1995. Annualized return on average stockholders' equity for the
third quarter of 1996 was 16.79% compared with 13.38% in 1995. For the nine
months ended September 30, 1996, annualized return on average stockholders'
equity was 15.10% compared with 12.83% for the same period in 1995.
Net Interest Income
Net interest income, the major component of the Corporation's net
income, was $5,188,990 for the third quarter of 1996, an increase of $848,456
or 19.6% from the $4,340,534 reported for the same period in 1995. This
increase was primarily attributed to the increased volume of earning assets
during the period and an increase in the tax equivalent net yield on earning
assets from 4.79% in 1995 to 4.82% in 1996. The increased volume of earning
assets was primarily the result of quality loan demand during the period.
Interest income increased $1,308,251 or 16.5% for the three months
ended September 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 8.74% in 1995 to 8.58% in 1996. Average
loans increased $56.0 million or 21.2% and average investment securities
increased $26.8 million or 33.5% for the third quarter of 1996 compared with
the same period in 1995. Average interest earning assets represented 91.6%
of average total assets during the third quarter of 1996 compared with 91.3%
in 1995. The composition of average interest-earning assets changed
slightly as the percentage of average loans to average interest-earning
assets increased from 73.0% in 1995 to 74.5% in 1996. A slight decrease in
the yield on loans caused by a lower prime lending rate was the primary reason
for the decline in the yield on earning assets during the period.
<PAGE>
Interest expense increased $459,795 or 12.8% for the three months
ended September 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 4.80% for the three months ended September 30,
1995 to 4.52% for the same period in 1996. Average interest-bearing
liabilities increased $60.1 million or 20.2% for the third quarter of 1996
compared with the same period in 1995. Average interest-bearing liabilities
represented 83.2% of funding sources during the third quarter of 1996
compared with 82.2% in 1995.
For the nine months ended September 30, 1996, net interest income
increased $2,272,929 or 18.4% 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 4.88% for the first nine months of 1995 to 4.75% for the same period in
1996. The decrease in net yield during the third quarter primarily reflects
the effect of a slight change in the mix of earning assets and funding
sources. The increased volume of earning assets was primarily the result of
quality loan demand during the period.
Interest income increased $4,255,350 or 19.1% for the nine months ended
September 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 8.79% in 1995 to 8.59% in 1996.
Average loans increased $53.8 million or 21.0% and average investment
securities increased $21.1 million or 27.5% for the nine months ended
September 30, 1996 compared with the same period in 1995. Average interest-
earning assets represented 91.5% of average total assets during the nine
months ended September 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 75.2% in
1995 to 74.8% in 1996.
Interest expense increased $1,982,421 or 20.0% for the nine months
ended September 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 decreased during the
period. Average interest-bearing liabilities increased $65.9 million or
23.3% for the nine months ended September 30, 1996 compared with the same
period in 1995. The rate paid on average interest-bearing liabilities
decreased slightly from 4.70% for the nine months ended September 30, 1995
to 4.57% in 1996. Average interest-bearing liabilities represented 84.3% of
funding sources during the nine months ended September 30, 1996 compared
with 83.2% in 1995.
Provision for Loan Losses
A $200,000 provision for loan losses was made during the third quarter
of 1996 compared with a provision of $206,000 in 1995. The provision for loan
losses declined during the third quarter of 1996 primarily due to the
significant decline in levels of net charge-offs and nonperforming loans.
The provision for loan losses for the nine months ended September 30, 1996
was $590,000 versus $455,500 for the same period in 1995. The increase in
the provision for loan losses for the nine months ended September 30, 1996
was primarily due to loan growth since credit quality measures remain
favorable.
At September 30, 1996 and 1995 the ratio of annualized net charge-offs
to average loans was 0.01% and 0.18%, respectively. The ratio of nonperforming
assets to total loans and other real estate owned was 0.05% at September 30,
1996 compared with 0.17% at September 30, 1995.
<PAGE>
The reserve for loan losses at September 30, 1996 and December 31, 1995
represented 1.12% and 1.07% respectively of total loans outstanding. Based
on the current evaluation of the loan portfolio, management believes the
reserve at September 30, 1996 is adequate to cover potential losses in the
portfolio.
Noninterest Income
Noninterest income for the third quarter of 1996 increased $201,002 or
26.6% from the same period in 1995. Noninterest income before investment
securities transactions for the third quarter of 1996 increased $204,862 or
27.1% from the same period in 1995. The primary factors attributing to this
increase were increases in service charges on deposit accounts of $117,550
or 32.1%, and commissions and fees of $96,747 or 47.2%.
The increase in service charges on deposit accounts was due to the
significant growth in deposits and an increase in certain prices. The
increase in commissions and fees resulted primarily from increased revenue
generated by credit card merchant services. During the third quarter of 1996
mortgage banking income (which includes profits from the origination and sale
of loans) decreased $25,965 or 35.5% from the same period in 1995. The
significant decrease in mortgage banking income was the result of lower
refinancing activity experienced during the third quarter of 1996.
Noninterest income for the nine months ended September 30, 1996
increased $578,420 or 26.6% from the same period in 1995. Noninterest income
before investment securities transactions for the nine months ended
September 30, 1996 increased $629,827 or 29.5% from the same period in 1995.
The primary factors attributing to this increase were increases in service
charges on deposit accounts of $320,441 or 28.4% and commissions and fees of
$215,189 or 43.7%.
The increase in service charges on deposit accounts was due to the
significant growth in deposits and an increase in certain prices. The
increase in commissions and fees resulted primarily from increased revenue
generated by credit card merchant services. Other operating income for the nine
months ended September 30, 1996 increased $126,337 or 80.1% from the same
period in 1995. The increase in other operating income was primarily due to
non-recurring life insurance proceeds received from deferred compensation plans
of previous directors of $100,657. During the first nine months of 1996
mortgage banking income decreased $55,400 or 27.6% from the same period in
1995. The decrease in mortgage banking income was the result of lower
refinancing activity experienced during the first nine months of 1996.
Noninterest Expense
Noninterest expense for the third quarter of 1996 increased $429,846
or 12.6 % 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 third quarter of 1996 increase
$234,810 or 12.4% 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 $73,111 or 27.0% and equipment expense
increased $39,676 or 14.4% for the third 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 September 30, 1996 increased $82,249 or 8.3% compared with the same
period in 1995.
<PAGE>
For the nine months ended September 30, 1996, noninterest expense
increased $1,474,788 or 14.7% 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 nine months ended September 30,
1996 increased $839,750 or 15.8% 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 $233,420 or 31.1% and equipment
expense increased $193,393 or 25.4% for the nine months ended September
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
nine months ended September 30, 1996 increased $208,225 or 6.5% compared
with the same period in 1995.
Income Taxes
The provision for income taxes for the third quarter of 1996 increased
$246,913 or 47.6% from the same period in 1995. For the nine months ended
September 30, 1996, the provision increased $436,568 or 30.5% 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 third quarter of 1996, average total assets increased 18.4%
while average deposits increased 17.1% from the third quarter of 1995. For the
nine months ended September 30, 1996, average total assets increased 21.4%
while average deposits increased 19.8 % 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 long-term advances totaled $18,000,000 at
September 30, 1996 versus $10,000,000 at September 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 nine months of 1996 being 6.7% versus 7.4% for the same
period in 1995. At September 30, 1996, the total risk-based capital ratio
was 11.6% compared with 12.2% at December 31, 1995. The leverage ratio at
September 30, 1996 was 6.4% compared with 6.8% at December 31, 1995.
<PAGE>
Other Events
On October 4, 1996, the Corporation merged its two banking
subsidiaries, The Anchor Bank and The Anchor Bank of North Carolina. The Anchor
Bank survived the merger and The Anchor Bank of North Carolina's five branch
offices are now part of The Anchor Bank branch system. By bringing the two
subsidiary banks together, the Corporation will achieve greater economies of
scale and improved efficiencies. The Anchor Bank of North Carolina customers
continue to be served by the same employees who assisted them in the past
and did not need to make any changes in their banking routine. Customers of
both institutions are now 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
September 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: November 12, 1996
<PAGE>
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<PERIOD-END> SEP-30-1996
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