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, 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 October 31, 1997
(Common stock, $6.00 par value) 3,846,440
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
Part I - Financial Information
Consolidated Balance Sheet - September 30, 1997
and December 31, 1996 1
Consolidated Statement of Income - Three months
and Nine months ended September 30, 1997 and 1996 2
Consolidated Statement of Cash Flows -
Nine months ended September 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>
September 30, December 31,
1997 1996
-----------------------------------------------
<S> <C> <C>
(Unaudited) <F1>
ASSETS
Cash and due from banks $ 22,683,677 $ 25,346,998
Interest-bearing balances due from banks 239,533 316,654
Federal funds sold 8,700,000 0
Investment securities:
Held-to-maturity, at amortized cost (fair value of $11,974,179
in 1997 and $18,225,853 in 1996) 11,956,901 18,187,108
Available-for-sale, at fair value (amortized cost of $100,380,738
in 1997 and $81,272,830 in 1996) 101,622,832 82,044,037
-----------------------------------------------
Total investment securities 113,579,733 100,231,145
-----------------------------------------------
Loans 401,182,379 345,429,534
Less - unearned income (44,932) (24,367)
- allowance for loan losses (4,524,853) (3,801,201)
-----------------------------------------------
Net loans 396,612,594 341,603,966
-----------------------------------------------
Premises and equipment 16,689,991 16,121,015
Other assets 9,436,600 9,884,514
-----------------------------------------------
Total assets $ 567,942,128 $ 493,504,292
===============================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand deposits $ 91,063,708 $ 79,958,880
NOW and money market accounts 244,954,189 199,879,530
Time deposits $100,000 and over 55,078,931 45,099,776
Other time and savings deposits 96,654,578 95,273,664
-----------------------------------------------
Total deposits 487,751,406 420,211,850
Federal funds purchased and securities
sold under agreements to repurchase 2,988,561 6,337,197
Other short-term borrowings 2,107,132 1,847,779
Long-term debt 23,000,000 18,000,000
Subordinated notes 11,000,000 11,000,000
Other liabilities 4,569,872 3,132,061
-----------------------------------------------
Total liabilities 531,416,971 460,528,887
-----------------------------------------------
Stockholders' Equity:
Common stock, $6.00 par value; 7,000,000 shares
authorized; shares issued and outstanding - 3,846,440
in 1997 and 3,839,010 in 1996 23,078,640 23,034,060
Surplus 1,267,724 1,070,326
Retained earnings 12,046,930 9,006,968
Unrealized gains on investment securities
available-for-sale, net of tax 792,113 497,301
Unearned ESOP shares (660,250) (633,250)
-----------------------------------------------
Total stockholders' equity 36,525,157 32,975,405
-----------------------------------------------
Total liabilities and stockholders' equity $ 567,942,128 $ 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>
Nine months ended Three months ended
September 30, September 30,
------------------------------------ -----------------------------
1997 1996 1997 1996
------------------------------------ -----------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 26,481,092 $ 21,826,929 $ 9,299,024 $ 7,553,937
Interest on investment securities:
Taxable 4,836,315 4,309,942 1,671,678 1,607,569
Non-taxable 198,037 151,273 68,257 49,750
Other interest income 120,413 267,962 23,767 41,751
------------------------------------ -----------------------------
Total interest income 31,635,857 26,556,106 11,062,726 9,253,007
------------------------------------ -----------------------------
INTEREST EXPENSE:
Interest on deposits 12,528,037 10,637,068 4,356,242 3,614,580
Interest on short-term borrowings 202,619 130,341 88,972 58,736
Interest on long-term borrowings 838,226 823,947 285,606 280,123
Interest on subordinated notes 696,906 329,284 234,041 110,578
------------------------------------ -----------------------------
Total interest expense 14,265,788 11,920,640 4,964,861 4,064,017
------------------------------------ -----------------------------
Net interest income 17,370,069 14,635,466 6,097,865 5,188,990
Provision for loan losses 680,000 590,000 240,000 200,000
------------------------------------ -----------------------------
Net interest income after provision
for loan losses 16,690,069 14,045,466 5,857,865 4,988,990
------------------------------------ -----------------------------
NONINTEREST INCOME:
Service charges on deposit accounts 1,448,436 1,447,640 480,625 483,444
Commissions and fees 979,296 707,379 376,579 301,562
Trust income 208,520 183,891 63,172 57,446
Gains on sales of mortgage loans 181,698 145,467 62,626 47,247
Gains (losses) on sales of investment securities, net 4,013 (14,523) 4,013 (3,860)
Other operating income 388,693 284,002 120,658 70,377
------------------------------------ -----------------------------
Total noninterest income 3,210,656 2,753,856 1,107,673 956,216
------------------------------------ -----------------------------
NONINTEREST EXPENSE:
Salaries and employee benefits 7,134,459 6,155,825 2,458,504 2,122,853
Net occupancy expense 1,001,624 983,405 349,100 343,718
Equipment expense 988,616 955,282 339,528 316,170
Other operating expense 3,829,744 3,397,331 1,284,829 1,071,834
------------------------------------ -----------------------------
Total noninterest expense 12,954,443 11,491,843 4,431,961 3,854,575
------------------------------------ -----------------------------
Income before income taxes 6,946,282 5,307,479 2,533,577 2,090,631
Provision for income taxes 2,470,508 1,868,229 906,919 765,579
------------------------------------ -----------------------------
Net income $ 4,475,774 $ 3,439,250 $ 1,626,658 $ 1,325,052
==================================== =============================
Net income per share $ 1.11 $ 0.88 $ 0.40 $ 0.34
Weighted average common shares outstanding 4,035,762 3,924,021 4,053,954 3,946,061
</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>
Nine months ended September 30,
1997 1996
-------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,475,774 $ 3,439,250
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion and amortization of investment securities (45,153) (39,058)
Depreciation of premises and equipment 941,033 928,133
Amortization of intangible assets 264,293 297,748
Provision for loan losses 680,000 590,000
Losses (gains) on sales of investment securities (4,013) 14,523
Gains on sales of mortgage loans (181,698) (145,467)
Losses (gains) on sales of premises and equipment (13,873) 3,833
Change in interest receivable 209,818 151,921
Change in prepaid expenses 73,346 54,462
Change in income taxes payable 275,164 2,206
Change in deferred taxes 30,193 (260,434)
Change in interest payable 36,383 127,685
Change in accrued expenses 229,151 265,370
Origination of mortgage loans held for sale (7,829,894) (8,172,600)
Proceeds from sales of mortgage loans held for sale 9,102,292 8,097,817
Net change in unearned ESOP shares 77,499 153,000
---------------------------------------
Net cash provided by operating activities 8,320,315 5,508,389
---------------------------------------
Cash flows from investing activities:
Purchase of investment securities held-to-maturity 0 (2,053,654)
Proceeds from maturities of investment securities held-to-maturity 6,225,721 12,296,120
Purchase of investment securities available-for-sale (33,121,520) (52,074,966)
Proceeds from sales of investment securities available-for-sale 3,984,612 10,458,539
Proceeds from maturities of investment securities available-for-sale 10,082,651 10,007,056
Net change in loans (56,779,328) (36,893,953)
Capital expenditures (1,511,335) (2,894,742)
Proceeds from sale of premises and equipment 15,200 41,542
Other, net 591,300 (1,000,595)
---------------------------------------
Net cash used for investing activities (70,512,699) (62,114,653)
---------------------------------------
Cash flows from financing activities:
Net change in deposits 67,539,557 44,700,369
Net change in federal funds purchased and securities sold under agreements to (3,348,636) 5,745,843
repurchase
Net change in other short-term borrowings 259,353 6,514,189
Proceeds from issuance of long-term debt 5,000,000 3,000,000
Proceeds from issuance of stock in accordance with:
Dividend Reinvesment Plan 123,331 30,405
Stock Option Plan 19,329 74,412
Payment for fractional shares issued in stock split (567) 0
Cash dividends paid (1,440,425) (803,848)
---------------------------------------
Net cash provided by financing activities 68,151,942 59,261,370
---------------------------------------
Net change in cash and cash equivalents 5,959,558 2,655,106
Cash and cash equivalents at January 1 25,663,652 20,615,188
---------------------------------------
Cash and cash equivalents at September 30 $ 31,623,210 $ 23,270,294
=======================================
</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 (the "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 nine month periods
ended September 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.
On August 11, 1997, the Board of Directors of the Corporation
declared a three-for-two stock split in the form of a 50% common
stock dividend paid on September 26, 1997, to shareholders of
record of the Corporation on August 29, 1997. All financial
statement information presented in this report has been restated
to reflect the three-for-two stock split.
NOTE 2: RESERVE FOR LOAN LOSSES
Activity in the reserve for loan losses for the nine months
ended September 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 680,000 590,000
Recoveries of charged off loans 209,495 235,792
Loans charged off (165,843) (262,267)
$4,524,853 $3,609,181
</TABLE>
4
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3: NONPERFORMING ASSETS
The following is a summary of nonperforming assets at September
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.
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Nonaccrual loans $ 401,212 $ 166,683
Loans past due ninety days or more 31,060 8,164
Other real estate owned 106,675 0
Total nonperforming assets $ 538,947 $ 174,847
</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 ($587,918) ($554,331)
Net unrealized gain SFAS 115 (452,485) 0
Other, net (339,735) (220,486)
Total deferred tax liabilities (1,380,138) (774,817)
Deferred tax assets:
Allowance for loan losses 1,229,232 911,717
Deferred loan fees and costs 160,544 238,467
Deferred compensation 209,049 197,983
Net unrealized loss SFAS 115 0 96,323
Other, net 235,281 163,925
Total deferred tax assets 1,834,106 1,608,415
Net deferred tax asset $ 453,968 $ 833,598
</TABLE>
5
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 5: LONG-TERM DEBT AND SUBORDINATED NOTES
Long-term debt and subordinated notes at September 30 are
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
Total 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
5.66% Federal Home Loan Bank advance due
in 2002 5,000,000 0
7.21% Federal Home Loan Bank advance due
in 2006 5,000,000 5,000,000
Total 23,000,000 18,000,000
Total long-term debt and subordinated notes $34,000,000 $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 and subordinated notes
for the next five years subsequent to September 30, 1997 is
$5,000,000 in 1998, $3,000,000 in 1999, $5,000,000 in 2000,
$5,000,000 in 2002, 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>
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 subsidiary, are summarized in Note 3.
At September 30, 1997, impaired loans had a related specific
allowance for loan losses totaling $40,000. There were no
material commitments to lend additional funds to customers whose
loans were classified as impaired at September 30, 1997.
NOTE 8: OTHER MATTERS
At September 30, 1997, outstanding standby letters of credit
totaled $1,353,191.
For the nine months ended September 30, 1997 and 1996, the
Corporation paid interest of $14,229,405 and $11,792,955
respectively. The Corporation paid income taxes of $2,360,098
during the nine months ended September 30, 1997 and $2,018,630
during the same period in 1996.
7
<PAGE>
Management's Discussion and Analysis
Net Income
Net income for the third quarter of 1997 was $1,626,658, an increase of
$301,606 or 22.8% from the $1,325,052 for the same period in 1996. Net income
per share for the third quarter increased 19.5% from $0.34 in 1996 to $0.40 in
1997.
The primary factors affecting this increase were an increase of $908,875
in net interest income and an increase in noninterest income of $151,457. These
positive factors were partially offset by increases in noninterest expense of
$577,386, the provision for income taxes of $141,340, and the provision for loan
losses of $40,000.
Net income for the nine months ended September 30, 1997 was $4,475,774, an
increase of $1,036,524 or 30.1% from the $3,439,250 for the same period in 1996.
Net income per share for this period increased 26.5% from $0.88 in 1996 to $1.11
in 1997.
The primary factors affecting this increase were an increase of $2,734,603
in net interest income and an increase in noninterest income of $456,800. These
positive factors were partially offset by increases in noninterest expense of
$1,462,600, the provision for income taxes of $602,279, and the provision for
loan losses of $90,000.
Annualized return on average total assets for the third quarter of 1997
was 1.18% compared with 1.12% in 1996. For the nine months ended September 30,
1997, annualized return on average total assets was 1.14% compared with 1.02% in
1996. Annualized return on average stockholders' equity for the third quarter of
1997 was 17.87% compared with 16.79% in 1996. For the nine months ended
September 30, 1997, annualized return on average stockholders' equity was 17.17%
compared with 15.10% for the same period in 1996.
Net Interest Income
Net interest income, the major component of the Corporation's net income,
was $6,097,865 for the third quarter of 1997, an increase of $908,875 or 17.5%
from the $5,188,990 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 4.82% in 1996 to
4.83% 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 $1,809,719 or 19.6% for the three months ended
September 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 8.58% in 1996 to 8.73% in 1997. Average loans increased
$71.9 million or 22.4% and average investment securities increased $4.1 million
or 3.9% for the third quarter of 1997 compared with the same period in 1996.
Average interest earning assets represented 92.1% of average total assets during
the third quarter of 1997 compared with 91.6% in 1996. The composition of
average interest-earning assets changed slightly as the percentage of average
loans to average interest-earning assets increased from 74.5% in 1996 to 77.7%
in 1997.
8
<PAGE>
Interest expense increased $900,844 or 22.2% for the three months ended
September 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 4.52% for the three months ended September 30,
1996 to 4.74% for the same period in 1997. Average interest-bearing liabilities
increased $57.6 million or 16.1% for the third quarter of 1997 compared with the
same period in 1996. Average interest-bearing liabilities represented 82.4% of
funding sources during the third quarter of 1997 compared with 83.2% in 1996.
For the nine months ended September 30, 1997, net interest income
increased $2,734,603 or 18.7% 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 4.75% for
the first nine 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 $5,079,751 or 19.1% for the nine months ended
September 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 8.59% in 1996 to 8.77% in 1997. Average
loans increased $63.9 million or 20.7% and average investment securities
increased $9.9 million or 10.1% for the nine months ended September 30, 1997
compared with the same period in 1996. Average interest-earning assets
represented 91.8% of average total assets during the nine months ended September
30, 1997 versus 91.5% in 1996. The composition of average interest-earning
assets changed slightly as the percentage of average loans to average
interest-earning assets increased from 74.8% in 1996 to 77.8% in 1997.
Interest expense increased $2,345,148 or 19.7% for the nine months ended
September 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 $55.7 million or 16.0% for the
nine months ended September 30, 1997 compared with the same period in 1996. The
rate paid on average interest-bearing liabilities increased from 4.57% for the
nine months ended September 30, 1996 to 4.72% in 1997. Average interest-bearing
liabilities represented 83.6% of funding sources during the nine months ended
September 30, 1997 compared with 84.3% in 1996.
Provision for Loan Losses
A $240,000 provision for loan losses was made during the third quarter of
1997 compared with a provision of $200,000 in 1996. The provision for loan
losses increased during the third quarter of 1997 primarily due to loan growth
since the Corporation had net loan recoveries for the quarter ended September
30, 1997. The provision for loan losses for the nine months ended September 30,
1997 was $680,000 versus $590,000 for the same period in 1996. The increase in
the provision for loan losses for the nine months ended September 30, 1997 was
primarily due to loan growth since the Corporation had net loan recoveries
during this period. Nonperforming assets at September 30, 1997 increased
compared with the balance at the same time last year, however, the balance is
nominal relative to the size of the Corporation and its portfolio.
At September 30, 1997 and 1996 the ratio of annualized net charge-offs
(recoveries) to average loans was (0.02)% and 0.01% respectively. The ratio of
nonperforming assets to total loans and other real estate owned was 0.13% at
September 30, 1997 compared with 0.05% at September 30, 1996.
9
<PAGE>
The reserve for loan losses at September 30, 1997 and December 31, 1996
represented 1.13% and 1.10% respectively of total loans outstanding. Based on
the current evaluation of the loan portfolio, management believes the reserve at
September 30, 1997 is adequate to cover potential losses in the portfolio.
Noninterest Income
Noninterest income for the third quarter of 1997 increased $151,457 or
15.8% from the same period in 1996. The primary factors attributing to this
increase were increases in commissions and fees of $75,017 or 24.9%, other
operating income of $50,281 or 71.4%, mortgage banking income of $15,379 or
32.6%, and a 10.0% increase in trust income. These positive changes were offset
by 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
increase in other operating income was primarily due to non-recurring recoveries
of previously charged-off assets.
Noninterest income for the nine months ended September 30, 1997 increased
$456,800 or 16.6% from the same period in 1996. The primary factors attributing
to this increase were increases in commissions and fees of $271,917 or 38.4%,
other operating income of $104,691 or 36.9%, mortgage banking income of $36,231
or 24.9%, trust income of $24,629 or 13.4%, 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
operation.
Noninterest Expense
Noninterest expense for the third quarter of 1997 increased $577,386 or
15.0% 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 and equipment expense due to the
Corporation's continued strong growth.
Salaries and employee benefits for the third quarter of 1997 increased
$335,651 or 15.8% from the same period in 1996. 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. Other operating expense increased $212,995 or 19.9% from the same
period in 1996. The increase in other operating expense was primarily due to an
increase in legal fees. The increased legal fees primarily resulted from closing
costs that the Corporation incurred in association with an equity line
promotion.
For the nine months ended September 30, 1997, noninterest expense
increased $1,462,600 or 12.7% from the same period in 1996. The primary factors
attributing to this increase were increases in salaries and employee benefits
and other operating expenses.
10
<PAGE>
Salaries and employee benefits for the nine months ended September 30,
1997 increased $978,634 or 15.9% from the same period in 1996. 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 and equipment expense experienced
slight increases from the first nine months of 1996. Other operating expense for
the nine months ended September 30, 1997 increased $432,413 or 12.7% compared
with the same period in 1996. The increase in other operating expense was
primarily due to increases in marketing related expenses and legal fees. The
increased legal fees primarily resulted from closing costs that the Corporation
incurred in association with an equity line promotion.
Income Taxes
The provision for income taxes for the third quarter of 1997 increased
$141,340 or 18.5% from the same period in 1996. For the nine months ended
September 30, 1997, the provision increased $602,279 or 32.2% 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 third quarter of 1997, average total assets increased 16.8% while
average loans increased 22.4% and average deposits increased 15.6% from the
third quarter of 1996. For the nine months ended September 30, 1997, average
total assets increased 16.6% while average loans increased 20.7% and average
deposits increased 15.4% 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 $23,000,000 at September 30,
1997 compared with $18,000,000 at September 30, 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 nine months of 1997 being 6.6% versus 6.7% for the same period in
1996. At September 30, 1997, the total risk-based capital ratio was 12.4%
compared with 12.2% at December 31, 1996. The leverage ratio at September 30,
1997 was 6.5% compared with 6.8% at December 31, 1996.
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) A report on Form 8-K dated August 11, 1997 was filed with the
Securities and Exchange Commission on August 15, 1997. On
August 11, 1997, the Board of Directors of Anchor Financial
Corporation (the "Corporation") approved a three-for-two stock
split in the form of a 50% common stock dividend payable on
September 26, 1997, to shareholders of record of the
Corporation on August 29, 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: October 31, 1997
13
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 22,683,677
<INT-BEARING-DEPOSITS> 239,533
<FED-FUNDS-SOLD> 8,700,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 101,622,832
<INVESTMENTS-CARRYING> 11,956,901
<INVESTMENTS-MARKET> 11,974,179
<LOANS> 401,137,447
<ALLOWANCE> 4,524,853
<TOTAL-ASSETS> 567,942,128
<DEPOSITS> 487,751,406
<SHORT-TERM> 5,095,693
<LIABILITIES-OTHER> 4,569,872
<LONG-TERM> 34,000,000
0
0
<COMMON> 23,078,640
<OTHER-SE> 13,314,654
<TOTAL-LIABILITIES-AND-EQUITY> 567,942,128
<INTEREST-LOAN> 26,481,092
<INTEREST-INVEST> 5,034,352
<INTEREST-OTHER> 120,413
<INTEREST-TOTAL> 31,635,857
<INTEREST-DEPOSIT> 12,528,037
<INTEREST-EXPENSE> 14,265,788
<INTEREST-INCOME-NET> 17,370,069
<LOAN-LOSSES> 680,000
<SECURITIES-GAINS> 4,013
<EXPENSE-OTHER> 12,954,443
<INCOME-PRETAX> 6,946,282
<INCOME-PRE-EXTRAORDINARY> 6,946,282
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,475,774
<EPS-PRIMARY> 1.11
<EPS-DILUTED> 1.11
<YIELD-ACTUAL> 4.83
<LOANS-NON> 401,212
<LOANS-PAST> 31,060
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 3,801,201
<CHARGE-OFFS> 165,843
<RECOVERIES> 209,495
<ALLOWANCE-CLOSE> 4,524,853
<ALLOWANCE-DOMESTIC> 4,024,853
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 500,000
</TABLE>
