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, 1997 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 8, 1997
- ------------------------------- -----------------------------
(Common stock, $6.00 par value) 2,560,673
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
Part I - Financial Information
Consolidated Balance Sheet - June 30, 1997
and December 31, 1996 1
Consolidated Statement of Income - Three Months
and Six months ended June 30, 1997 and 1996 2
Consolidated Statement of Cash Flows -
Six months ended June 30, 1997 and 1996 3
Notes to Consolidated Financial Statements 4-7
Management's Discussion and Analysis of
Financial Condition and Results of Operation 8-11
Part II - Other Information
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote
of Security-Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------------------------
(Unaudited) <F1>
<S> <C> <C>
ASSETS
Cash and due from banks $ 27,202,308 $ 25,346,998
Interest-bearing balances due from banks 105,556 316,654
Investment securities:
Held-to-maturity, at amortized cost (fair value of $12,980,782
in 1997 and $18,225,853 in 1996) 12,983,341 18,187,108
Available-for-sale, at fair value (amortized cost of $98,178,516
in 1997 and $81,272,830 in 1996) 98,984,006 82,044,037
---------------------------------------------
Total investment securities 111,967,347 100,231,145
---------------------------------------------
Loans 383,046,799 345,429,534
Less - unearned income (22,166) (24,367)
- allowance for loan losses (4,189,363) (3,801,201)
---------------------------------------------
Net loans 378,835,270 341,603,966
---------------------------------------------
Premises and equipment 16,207,682 16,121,015
Other assets 10,488,934 9,884,514
---------------------------------------------
Total assets $ 544,807,097 $ 493,504,292
=============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand deposits $ 90,884,833 $ 79,958,880
NOW and money market accounts 241,404,602 199,879,530
Time deposits $100,000 and over 47,934,864 45,099,776
Other time and savings deposits 86,435,231 95,273,664
---------------------------------------------
Total deposits 466,659,530 420,211,850
Federal funds purchased and securities
sold under agreements to repurchase 7,924,911 6,337,197
Other short-term borrowings 2,127,543 1,847,779
Long-term debt 18,000,000 18,000,000
Subordinated notes 11,000,000 11,000,000
Other liabilities 3,929,861 3,132,061
---------------------------------------------
Total liabilities 509,641,845 460,528,887
---------------------------------------------
Stockholders' Equity:
Common stock, $6.00 par value; 7,000,000 shares
authorized; shares issued and outstanding - 2,559,340
in 1997 and 1996 15,356,040 15,356,040
Surplus 1,124,708 1,070,326
Retained earnings 18,830,734 16,684,988
Unrealized gains on investment securities
available-for-sale, net of tax 510,645 497,301
Unearned ESOP shares (656,875) (633,250)
---------------------------------------------
Total stockholders' equity 35,165,252 32,975,405
---------------------------------------------
Total liabilities and stockholders' equity $ 544,807,097 $ 493,504,292
=============================================
<F1> Obtained from audited financial statements.
</TABLE>
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>
Six months ended Three months ended
June 30, June 30,
-------------------------------------- ------------------------------------
1997 1996 1997 1996
-------------------------------------- ------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 17,182,068 $ 14,272,992 $ 8,916,763 $ 7,306,291
Interest on investment securities:
Taxable 3,164,637 2,702,373 1,621,307 1,485,184
Non-taxable 129,780 101,523 64,390 50,133
Other interest income 96,646 226,211 58,045 56,962
-------------------------------------- ------------------------------------
Total interest income 20,573,131 17,303,099 10,660,505 8,898,570
-------------------------------------- ------------------------------------
INTEREST EXPENSE:
Interest on deposits 8,171,795 7,022,488 4,247,782 3,584,669
Interest on short-term borrowings 113,647 71,605 54,971 46,551
Interest on long-term borrowings 552,620 543,824 277,836 277,077
Interest on subordinated notes 462,865 218,706 232,541 109,353
-------------------------------------- ------------------------------------
Total interest expense 9,300,927 7,856,623 4,813,130 4,017,650
-------------------------------------- ------------------------------------
Net interest income 11,272,204 9,446,476 5,847,375 4,880,920
Provision for loan losses 440,000 390,000 240,000 230,000
-------------------------------------- ------------------------------------
Net interest income after provision
for loan losses 10,832,204 9,056,476 5,607,375 4,650,920
-------------------------------------- ------------------------------------
NONINTEREST INCOME:
Service charges on deposit accounts 967,811 964,196 487,377 516,829
Commissions and fees 602,717 405,817 336,129 233,529
Trust income 145,348 126,445 91,487 69,132
Gains on sales of mortgage loans 119,072 98,220 42,372 38,133
Gains (losses) on sales of investment securities, net 0 (10,663) 0 (10,663)
Other operating income 268,035 213,625 96,884 170,050
-------------------------------------- ------------------------------------
Total noninterest income 2,102,983 1,797,640 1,054,249 1,017,010
-------------------------------------- ------------------------------------
NONINTEREST EXPENSE:
Salaries and employee benefits 4,675,955 4,032,972 2,374,104 2,057,113
Net occupancy expense 652,524 639,687 330,990 324,270
Equipment expense 649,088 639,112 327,012 350,534
Other operating expense 2,544,915 2,325,497 1,310,381 1,174,668
-------------------------------------- ------------------------------------
Total noninterest expense 8,522,482 7,637,268 4,342,487 3,906,585
-------------------------------------- ------------------------------------
Income before income taxes 4,412,705 3,216,848 2,319,137 1,761,345
Provision for income taxes 1,563,589 1,102,650 804,680 579,039
-------------------------------------- ------------------------------------
Net income $ 2,849,116 $ 2,114,198 $ 1,514,457 $ 1,182,306
====================================== ====================================
Net income per share $ 1.06 $ 0.81 $ 0.56 $ 0.45
Weighted average common shares outstanding 2,683,629 2,607,391 2,684,868 2,609,180
</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>
Six months ended June 30,
----------------------------------------
1997 1996
----------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,849,116 $ $2,114,198
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion and amortization of investment securities (27,382) (15,399)
Depreciation of premises and equipment 621,706 635,667
Amortization of intangible assets 205,437 198,580
Provision for loan losses 440,000 390,000
Losses on sales of investment securities 0 10,663
Gains on sales of mortgage loans (119,072) (98,220)
Losses (gains) on sales of premises and equipment (13,873) 3,833
Change in interest receivable (833,289) (1,412,845)
Change in prepaid expenses 94,081 65,675
Change in income taxes payable 163,352 16,380
Change in deferred taxes (35,164) (502,004)
Change in interest payable 285,362 (11,192)
Change in accrued expenses 45,032 54,122
Origination of mortgage loans held for sale (5,216,644) (6,189,750)
Proceeds from sales of mortgage loans held for sale 5,712,000 6,210,420
Net change in unearned ESOP shares 44,000 80,500
----------------------------------------
Net cash provided by operating activities 4,214,662 1,550,628
----------------------------------------
Cash flows from investing activities:
Purchase of investment securities held-to-maturity 0 (2,053,593)
Proceeds from maturities of investment securities held-to maturity 5,197,828 11,420,442
Purchase of investment securities available-for-sale (26,976,320) (43,386,672)
Proceeds from sales of investment securities available-for-sale 984,600 5,513,594
Proceeds from maturities of investment securities available-for-sale 9,119,355 4,900,000
Net change in loans (38,047,588) (35,700,880)
Capital expenditures (709,700) (1,154,590)
Proceeds from sale of premises and equipment 15,200 41,542
Other, net 247,630 (909,462)
----------------------------------------
Net cash used for investing activities (50,168,995) (61,329,619)
----------------------------------------
Cash flows from financing activities:
Net change in deposits 46,447,681 49,064,372
Net change in federal funds purchased and securities sold under agreements to repurchase 1,587,714 7,720,146
Net change in other short-term borrowings 279,764 1,246,710
Proceeds from issuance of long-term debt 0 3,000,000
Proceeds from issuance of stock in accordance with Stock Option Plan 0 62,010
Cash dividends paid (716,614) (535,708)
----------------------------------------
Net cash provided by financing activities 47,598,545 60,557,530
----------------------------------------
Net change in cash and cash equivalents 1,644,212 778,539
Cash and cash equivalents at January 1 25,663,652 20,615,188
----------------------------------------
Cash and cash equivalents at June 30 $ 27,307,864 $ 21,393,727
========================================
</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 1996.
The results of operations for the three and six month periods
ended June 30, 1997 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, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
Balance, beginning of year $3,801,201 $3,045,656
Provision charged to operations 440,000 390,000
Recoveries of charged off loans 85,996 221,014
Loans charged off (137,834) (214,296)
------------- ------------
$4,189,363 $3,442,374
============= ============
</TABLE>
NOTE 3: NONPERFORMING ASSETS
The following is a summary of nonperforming assets at June 30,
1997 and 1996. 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>
1997 1996
------------ ------------
<S> <C> <C>
Nonaccrual loans $ 362,011 $ 156,862
Loans past due ninety days or more 0 65,044
Other real estate owned 16,559 0
------------ ------------
Total nonperforming assets $ 378,570 $ 221,906
============ ============
</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>
1997 1996
------------ -----------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation over book ($585,095) ($531,597)
Net unrealized gain SFAS 115 (295,897) 0
Other, net (308,931) (192,467)
------------ -----------
Total deferred tax liabilities (1,189,923) (724,064)
------------ -----------
Deferred tax assets:
Allowance for loan losses 1,114,817 863,242
Deferred loan fees and costs 172,893 218,092
Deferred compensation 207,221 196,084
Net unrealized loss SFAS 115 0 161,174
Other, net 214,318 175,117
------------ -----------
Total deferred tax assets 1,709,249 1,613,709
------------ -----------
Net deferred tax asset $ 519,326 $ 889,645
------------ -----------
</TABLE>
5
<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>
1997 1996
------------- -------------
<S> <C> <C>
Parent Company:
8.60% subordinated notes due in 2003 <F2> $ 5,000,000 $5,000,000
7.89% subordinated notes due in 2006 <F2> 6,000,000 0
------------- -------------
11,000,000 5,000,000
Subsidiaries:
5.71% Federal Home Loan Bank advance due
in 1998 5,000,000 5,000,000
5.48% Federal Home Loan Bank advance due
in 1999 3,000,000 3,000,000
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 $29,000,000 $23,000,000
============= =============
<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, 1997 is $5,000,000 in 1998, $3,000,000 in
1999, $5,000,000 in 2000, and $16,000,000 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.
6
<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
subsidiary, are summarized in Note 3.
At June 30, 1997, impaired loans had a related specific allowance
for loan losses totaling $36,000. There were no material
commitments to lend additional funds to customers whose loans
were classified as impaired at June 30, 1997.
NOTE 8: OTHER MATTERS
At June 30, 1997, outstanding standby letters of credit totaled
$1,712,181.
For the six months ended June 30, 1997 and 1996, the Corporation
paid interest of $9,015,565 and $7,867,814 respectively. The
Corporation paid income taxes of $1,426,027 during the six months
ended June 30, 1997 and $1,279,971 during the same period in
1996.
7
<PAGE>
Management's Discussion and Analysis
Net Income
Net income for the second quarter of 1997 was $1,514,457 an increase of
$332,151 or 28.1% from the $1,182,306 for the same period in 1996. Net income
per share for the second quarter increased 24.6% from $0.45 in 1996 to $0.56 in
1997.
The primary factors affecting this increase were an increase of $966,455
in net interest income and an increase in noninterest income of $37,239. These
positive factors were partially offset by increases in noninterest expense of
$435,902, the provision for income taxes of $225,641, and the provision for loan
losses of $10,000.
Net income for the six months ended June 30, 1997 was $2,849,116, an
increase of $734,918 or 34.8% from the $2,114,198 for the same period in 1996.
Net income per share for this period increased 30.9% from $0.81 in 1996 to $1.06
in 1997.
The primary factors affecting this increase were an increase of $1,825,728
in net interest income and an increase in noninterest income of $305,343. These
positive factors were partially offset by increases in noninterest expense of
$885,214, the provision for income taxes of $460,939, and the provision for loan
losses of $50,000.
Annualized return on average total assets for the second quarter of 1997
was 1.15% compared with 1.04% in 1996. For the six months ended June 30, 1997,
annualized return on average total assets was 1.11% compared with 0.96% in 1996.
Annualized return on average stockholders' equity for the second quarter of 1997
was 17.49% compared with 15.69% in 1996. For the six months ended June 30, 1997,
annualized return on average stockholders' equity was 16.80% compared with
14.20% for the same period in 1996.
Net Interest Income
Net interest income, the major component of the Corporation's net income,
was $5,847,375 for the second quarter of 1997, an increase of $966,455 or 19.8%
from the $4,880,920 reported for the same period in 1996. This increase was
attributed to the increased volume of earning assets during the period and an
increase in the tax equivalent net yield on earning assets from 4.70% in 1996 to
4.86% in 1997. The increased volume of earning assets was primarily the result
of quality loan demand and strong deposit growth during the period.
Interest income increased $1,761,935 or 19.8% for the three months ended
June 30, 1997 compared with the same period in 1996. The increase was due to an
increase in the volume of earning assets and the yield on earning assets which
increased from 8.74% in 1996 to 8.83% in 1997. Average loans increased $60.5
million or 19.3% and average investment securities increased $5.8 million or
5.6% for the second quarter of 1997 compared with the same period in 1996.
Average interest earning assets represented 91.6% of average total assets during
the second quarter of 1997 compared with 91.4% in 1996. The composition of
average interest-earning assets changed slightly as the percentage of average
loans to average interest-earning assets increased from 74.6% in 1996 to 76.9%
in 1997.
8
<PAGE>
Interest expense increased $795,480 or 19.8% for the three months ended
June 30, 1997 compared with the same period in 1996. The increase in interest
expense was due to an increase in the volume of average interest-bearing
liabilities and the rate paid on average interest-bearing liabilities which
increased from 4.56% for the three months ended June 30, 1996 to 4.74% for the
same period in 1997. Average interest-bearing liabilities increased $52.3
million or 14.8% for the second quarter of 1997 compared with the same period in
1996. Average interest-bearing liabilities represented 83.8% of funding sources
during the second quarter of 1997 compared with 84.5% in 1996.
For the six months ended June 30, 1997, net interest income increased
$1,825,728 or 19.3% from the same period in 1996. The primary reasons for this
increase were the increased volume of earning assets during the period and tax
equivalent net yield on earning assets which increased from 4.71% for the first
six months of 1996 to 4.83% for the same period in 1997. The increased volume of
earning assets was primarily the result of quality loan demand during the
period.
Interest income increased $3,270,032 or 18.9% for the six months ended
June 30, 1997 compared with the same period in 1996. The increase was due to an
increase in the volume of average interest-earning assets and the yield of
earning assets which increased from 8.60% in 1996 to 8.79% in 1997. Average
loans increased $59.8 million or 19.7% and average investment securities
increased $12.8 million or 13.8% for the six months ended June 30, 1997 compared
with the same period in 1996. Average interest-earning assets represented 91.6%
of average total assets during the six months ended June 30, 1997 versus 91.4%
in 1996. The composition of average interest-earning assets changed slightly as
the percentage of average loans to average interest-earning assets increased
from 74.9% in 1996 to 76.9% in 1997.
Interest expense increased $1,444,304 or 18.4% for the six months ended
June 30, 1997 compared with the same period in 1996. 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 $54.7 million or 15.9% for the six months
ended June 30, 1997 compared with the same period in 1996. The rate paid on
average interest-bearing liabilities increased from 4.59% for the six months
ended June 30, 1996 to 4.70% in 1997. Average interest-bearing liabilities
represented 84.3% of funding sources during the six months ended June 30, 1997
compared with 84.9% in 1996.
Provision for Loan Losses
A $240,000 provision for loan losses was made during the second quarter of
1997 compared with a provision of $230,000 in 1996. The provision for loan
losses increased during the second quarter of 1997 primarily due to loan growth
and a slight increase in the level of net charge-offs and nonperforming loans.
The provision for loan losses for the six months ended June 30, 1997 was
$440,000 versus $390,000 for the same period in 1996. The increase in the
provision for loan losses for the six months ended June 30, 1997 was primarily
due to loan growth and a slight increase in the level of net charge-offs and
nonperforming loans.
At June 30, 1997 and 1996 the ratio of annualized net charge-offs
(recoveries) to average loans was 0.03% and (0.004%), respectively. The ratio of
nonperforming assets to total loans and other real estate owned was 0.10% at
June 30, 1997 compared with 0.07% at June 30, 1996.
9
<PAGE>
The reserve for loan losses at June 30, 1997 and December 31, 1996
represented 1.09% and 1.10% respectively of total loans outstanding. Based on
the current evaluation of the loan portfolio, management believes the reserve at
June 30, 1997 is adequate to cover potential losses in the portfolio.
Noninterest Income
Noninterest income for the second quarter of 1997 increased $37,239 or
3.7% from the same period in 1996. The primary factors attributing to this
increase were increases in commissions and fees of $102,600 or 43.9%, trust
income of $22,355 or 32.3%, and mortgage banking income of $4,239 or 11.1%.
These positive changes were offset by a decrease in other operating income of
$73,166 or 43.0%, and a slight decrease in service charges on deposit accounts.
The increase in commissions and fees resulted primarily from increased
revenue generated by credit card merchant services and ATM terminal fees. The
decrease in other operating income was due to non-recurring life insurance
proceeds received from deferred compensation plans of previous directors of
$100,957 during the second quarter of 1996.
Noninterest income for the six months ended June 30, 1997 increased
$305,343 or 17.0% from the same period in 1996. The primary factors attributing
to this increase were increases in commissions and fees of $196,900 or 48.5%,
other operating income of $54,410 or 25.5%, mortgage banking income of 20,852 or
21.2%, trust income of $18,903 or 15.0%, and a slight increase in service
charges on deposit accounts.
The increase in commissions and fees resulted primarily from increased
revenue generated by credit card merchant services and ATM terminal fees. The
increase in other operating income was generated by normal banking and bank
related activities. Mortgage banking income (which includes normal servicing
fees and profits from the origination and sale of loans) increased as a result
of the Corporation concentrating more resources on growing its mortgage loan
portfolio.
Noninterest Expense
Noninterest expense for the second quarter of 1997 increased $435,902 or
11.2% from the same period in 1996. The primary factors attributing to this
increase were increases in salaries and employee benefits, other operating
expense, and a slight increase in net occupancy expense caused by the
Corporation's continued strong growth. These increases were offset by a slight
decrease in equipment expense.
Salaries and employee benefits for the second quarter of 1997 increased
$316,991 or 15.4% from the same period in 1996. This increase was primarily due
to investments in new personnel to further develop the infrastructure of the
Corporation. Other operating expense increased $135,713 or 11.6% from the same
period in 1996.
For the six months ended June 30, 1997, noninterest expense increased
$885,214 or 11.6% from the same period in 1996. The primary factor attributing
to this increase was an increase in salaries and employee benefits.
10
<PAGE>
Salaries and employee benefits for the six months ended June 30, 1997
increased $642,983 or 15.9% from the same period in 1996 due to investments in
new personnel to further develop the infrastructure of the Corporation. Net
occupancy expense and equipment expense experienced slight increases from the
first six months of 1996. Other operating expense for the six months ended June
30, 1997 increased $219,418 or 9.4% compared with the same period in 1996. The
increase in other operating expense was primarily due to an increase in
marketing related expenses.
Income Taxes
The provision for income taxes for the second quarter of 1997 increased
$225,641 or 39.0% from the same period in 1996. For the six months ended June
30, 1997, the provision increased $460,939 or 41.8% from the same period in
1996. The provision for income taxes increased in 1997 primarily due to higher
income before taxes since tax rates remained approximately the same as 1996.
Financial Position
For the second quarter of 1997, average total assets increased 15.5% while
average loans increased 19.3% and average deposits increased 14.6% from the
second quarter of 1996. For the six months ended June 30, 1997, average total
assets increased 16.4% while average loans increased 19.7% and average deposits
increased 15.3% from the same period in 1996.
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 June 30, 1997
and 1996.
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 1997 being 6.6% versus 6.8% for the same period in
1996. At June 30, 1997, the total risk-based capital ratio was 12.6% compared
with 12.2% at December 31, 1996. The leverage ratio at June 30, 1997 was 6.5%
compared with 6.8% at December 31, 1996.
Other Events
On June 23, 1997, the Meeting Street Branch of The Anchor Bank, located at
134 Meeting Street, Charleston, South Carolina, opened for business. Initially,
the Meeting Street Branch will function as a loan production facility and will
occasionally open deposit accounts and receive deposits to existing accounts.
The Meeting Street Branch is The Anchor Bank's nineteenth branch along the
Carolina coast.
11
<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, 1997.
12
<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 8, 1997
13
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 6-MOS
<CASH> 27,202,308
<INT-BEARING-DEPOSITS> 105,556
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 98,984,006
<INVESTMENTS-CARRYING> 12,983,341
<INVESTMENTS-MARKET> 12,980,782
<LOANS> 383,024,633
<ALLOWANCE> 4,189,363
<TOTAL-ASSETS> 544,807,097
<DEPOSITS> 466,659,530
<SHORT-TERM> 10,052,454
<LIABILITIES-OTHER> 3,929,861
<LONG-TERM> 29,000,000
<COMMON> 15,356,040
0
0
<OTHER-SE> 19,955,442
<TOTAL-LIABILITIES-AND-EQUITY> 544,807,097
<INTEREST-LOAN> 17,182,068
<INTEREST-INVEST> 3,294,417
<INTEREST-OTHER> 96,646
<INTEREST-TOTAL> 20,573,131
<INTEREST-DEPOSIT> 8,171,795
<INTEREST-EXPENSE> 9,300,927
<INTEREST-INCOME-NET> 11,272,204
<LOAN-LOSSES> 440,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 8,522,482
<INCOME-PRETAX> 4,412,705
<INCOME-PRE-EXTRAORDINARY> 4,412,705
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,849,116
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
<YIELD-ACTUAL> 4.83
<LOANS-NON> 362,011
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,801,201
<CHARGE-OFFS> 137,834
<RECOVERIES> 85,996
<ALLOWANCE-CLOSE> 4,189,363
<ALLOWANCE-DOMESTIC> 3,689,363
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 500,000
</TABLE>
