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, 1998 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 (843) 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 10, 1998
------------------------------------- --------------------------------
(Common stock, no par value) 6,487,148
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
INDEX
PAGE NO.
Part I - Financial Information
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheet - September 30, 1998
and December 31, 1997 1
Consolidated Statement of Income - Three months and
Nine months ended September 30, 1998 and 1997 2
Consolidated Statement of Changes in Stockholders' Equity
and Comprehensive Income - Nine months ended
September 30, 1998 and 1997 3
Consolidated Statement of Cash Flows -
Nine months ended September 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5-9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-17
Item 3 - Quantitative and Qualitative Disclosures about Market Risk 17
Part II - Other Information
Item 1 - Legal Proceedings 18
Item 2 - Changes in Securities 18
Item 3 - Defaults Upon Senior Securities 18
Item 4 - Submission of Matters to a Vote of Security-Holders 18
Item 5 - Other Information 19
Item 6 - Exhibits and Reports on Form 8-K 19
<PAGE>
Anchor Financial Corporation and Subsidiaries
Consolidated Balance Sheet
<TABLE>
<CAPTION>
September 30, December 31,
- - --------------------------------------------------------------------------------------------------------------------------------
1998 1997
- - --------------------------------------------------------------------------------------------------------------------------------
(Unaudited) *
ASSETS
<S> <C> <C>
Cash and due from banks $ 40,107,904 $ 42,468,726
Interest-bearing balances due from banks 2,717,662 2,484,148
Federal funds sold 8,960,000 6,820,000
Investment securities:
Held-to-maturity, at amortized cost (fair value of $20,982,470
in 1998 and $32,064,460 in 1997) 20,747,334 31,900,798
Available-for-sale, at fair value (amortized cost of $204,670,556
in 1998 and $162,708,263 in 1997) 207,386,045 163,715,485
- - --------------------------------------------------------------------------------------------------------------------------------
Total investment securities 228,133,379 195,616,283
- - --------------------------------------------------------------------------------------------------------------------------------
Loans 703,170,491 665,721,738
Less - unearned income (141,997) (118,632)
- allowance for loan losses (8,244,573) (7,321,491)
- - --------------------------------------------------------------------------------------------------------------------------------
Net loans 694,783,921 658,281,615
- - --------------------------------------------------------------------------------------------------------------------------------
Premises and equipment 21,471,467 22,541,857
Other assets 15,737,993 17,493,276
- - --------------------------------------------------------------------------------------------------------------------------------
Total assets $ 1,011,912,326 $ 945,705,905
================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand deposits $ 160,057,787 $ 143,634,657
NOW and money market accounts 358,130,041 340,748,137
Time deposits $100,000 and over 91,197,412 119,760,142
Other time and savings deposits 260,375,328 202,719,297
- - --------------------------------------------------------------------------------------------------------------------------------
Total deposits 869,760,568 806,862,233
Federal funds purchased and securities
sold under agreements to repurchase 16,547,664 15,008,480
Other short-term borrowings 2,080,478 7,168,079
Long-term debt 32,500,000 33,000,000
Subordinated notes 11,000,000 11,000,000
Other liabilities 8,358,566 6,467,057
- - --------------------------------------------------------------------------------------------------------------------------------
Total liabilities 940,247,276 879,505,849
- - --------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Common stock, no par value; 50,000,000 shares
authorized; shares issued and outstanding - 6,477,008
in 1998 and 6,430,694 in 1997 46,762,292 45,894,798
Retained earnings 23,550,057 19,918,423
Accumulated other comprehensive income, net of tax 1,772,701 913,460
Unearned ESOP shares (420,000) (526,625)
- - --------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 71,665,050 66,200,056
- - --------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 1,011,912,326 $ 945,705,905
================================================================================================================================
<FN>
* Obtained from audited financial statements.
</FN>
</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>
Three months ended September 30, Nine months ended September 30,
- - ------------------------------------------------------------------------------------------------------------------------------
1998 1997 1998 1997
- - ------------------------------------------------------------------------------------------------------------------------------
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans $ 16,279,215 $ 15,000,318 $ 48,679,090 $ 42,420,632
Interest on investment securities:
Taxable 3,456,010 2,849,563 9,417,670 8,260,653
Non-taxable 117,364 118,988 358,898 368,413
Other interest income 448,747 72,733 1,235,490 344,460
- - -------------------------------------------------------------------------------------------------------------------------------
Total interest income 20,301,336 18,041,602 59,691,148 51,394,158
- - -------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 8,364,544 7,238,402 24,608,170 20,354,181
Interest on short-term borrowings 172,045 197,887 539,214 724,359
Interest on long-term borrowings 553,014 432,523 1,709,237 1,240,205
Interest on subordinated notes 234,041 234,041 696,906 696,906
- - -------------------------------------------------------------------------------------------------------------------------------
Total interest expense 9,323,644 8,102,853 27,553,527 23,015,651
- - -------------------------------------------------------------------------------------------------------------------------------
Net interest income 10,977,692 9,938,749 32,137,621 28,378,507
Provision for loan losses 1,409,000 469,000 2,372,000 1,192,000
- - -------------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 9,568,692 9,469,749 29,765,621 27,186,507
- - -------------------------------------------------------------------------------------------------------------------------------
NONINTEREST INCOME:
Service charges on deposit accounts 920,771 994,287 2,777,126 2,682,989
Commissions and fees 640,712 527,163 1,541,166 1,320,652
Trust income 99,539 63,172 311,860 208,520
Gains on sales of mortgage loans 380,444 195,183 1,124,083 545,938
Gains on sales of securities 19,852 4,013 19,852 4,013
Other operating income 175,624 87,389 585,051 591,535
- - -------------------------------------------------------------------------------------------------------------------------------
Total noninterest income 2,236,942 1,871,207 6,359,138 5,353,647
- - -------------------------------------------------------------------------------------------------------------------------------
NONINTEREST EXPENSE:
Salaries and employee benefits 5,779,034 4,084,072 14,794,541 11,781,623
Net occupancy expense 608,528 575,575 1,732,787 1,592,151
Equipment expense 622,888 692,203 1,662,431 1,720,098
Other operating expense 4,236,719 2,078,819 8,901,935 6,572,940
- - -------------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 11,247,169 7,430,669 27,091,694 21,666,812
- - -------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 558,465 3,910,287 9,033,065 10,873,342
Provision for income taxes 683,777 1,386,791 3,705,065 3,860,470
- - -------------------------------------------------------------------------------------------------------------------------------
Net (loss) income $ (125,312) $ 2,523,496 $ 5,328,000 $ 7,012,872
===============================================================================================================================
Net (loss) income per share - basic $ (0.02) $ 0.40 $ 0.83 $ 1.11
===============================================================================================================================
Net (loss) income per share - diluted $ (0.02) $ 0.38 $ 0.79 $ 1.05
===============================================================================================================================
Weighted average common shares outstanding - basic 6,422,605 6,316,075 6,410,995 6,311,584
===============================================================================================================================
Weighted average common shares outstanding - diluted 6,422,605 6,694,799 6,734,681 6,661,653
===============================================================================================================================
</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 Changes in Stockholders' Equity
and Comprehensive Income
Nine Months ended September 30, 1998 and September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
Accumulated
other Unearned Total
Common Stock Retained comprehensive ESOP stockholders'
Shares Amount earnings income (loss) shares equity
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 6,379,811 $44,830,639 $12,222,045 $235,470 ($633,250) $56,654,904
Comprehensive Income
Net income 7,012,872 7,012,872
Other comprehensive income, net of tax
Unrealized gains on investment securities 303,537 303,537
-----------------
Total Comprehensive Income 7,316,409
-----------------
Common stock issued pursuant to:
Dividend Reinvestment Plan 5,451 134,233 (10,902) 123,331
Stock Option Plan 11,361 86,081 (3,999) 82,082
Fractional shares paid in stock split (21) (123) (782) (905)
Change in unearned ESOP shares 84,540 19,958 (27,000) 77,498
Cash dividends ($0.28 per share) (1,557,805) (1,557,805)
--------------------------------------------------------------------------------------
Balance at September 30, 1997 6,396,602 $45,135,370 $17,681,387 $539,007 ($660,250) $62,695,514
======================================================================================
Balance at December 31, 1997 6,430,694 $45,894,798 $19,918,423 $913,460 ($526,625) $66,200,056
Comprehensive Income
Net income 5,328,000 5,328,000
Other comprehensive income, net of tax
Unrealized gains on investment securities 859,241 859,241
-----------------
Total Comprehensive Income 6,187,241
-----------------
Common stock issued pursuant to:
Dividend Reinvestment Plan 7,483 295,067 295,067
Stock Option Plan 39,258 294,705 294,705
Fractional shares paid in acquistions (427) (15,718) (15,718)
Change in unearned ESOP shares 277,722 20,947 106,625 405,294
Cash dividends ($0.36 per share) (1,701,595) (1,701,595)
--------------------------------------------------------------------------------------
Balance at September 30, 1998 6,477,008 $46,762,292 $23,550,057 $1,772,701 ($420,000) $71,665,050
======================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
3
<PAGE>
Anchor Financial Corporation and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------------------------------------------------------
Nine Months ended September 30,
- - -------------------------------------------------------------------------------------------------------------------------------
1998 1997
- - -------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 5,328,000 $ 7,069,294
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion and amortization of investment securities (226,095) (51,231)
Depreciation of premises and equipment 1,557,111 1,541,053
Amortization of intangible assets 417,908 264,293
Provision for loan losses 2,372,000 1,192,000
Gains on sales of investment securities (19,852) (60,434)
Gains on sales of mortgage loans (1,085,684) (181,698)
Losses (gains) on sales of premises and equipment 8,814 (13,873)
Change in interest receivable 256,122 (20,909)
Change in interest payable (289,943) 82,311
Change in accrued expenses 2,181,452 1,380,703
Change in other assets 1,194,412 (634,810)
Origination of mortgage loans held for sale (25,984,360) (7,829,894)
Proceeds from sales of mortgage loans held for sale 25,969,911 9,102,292
Net change in unearned ESOP shares 405,294 77,499
- - -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 12,085,090 11,916,596
- - -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of investment securities held-to-maturity 0 (6,963,544)
Proceeds from maturities of investment securities held-to maturity 11,153,464 8,153,485
Purchase of investment securities available-for-sale (95,245,666) (43,884,870)
Proceeds from sales of investment securities available-for-sale 3,843,205 9,011,902
Proceeds from maturities of investment securities available-for-sale 47,731,901 19,393,512
Net change in loans (36,778,883) (96,764,787)
Capital expenditures (1,024,159) (2,530,963)
Proceeds from the sale of premises and equipment 528,624 15,200
- - -------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (69,791,514) (113,570,065)
- - -------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in deposits 62,898,335 109,147,449
Net change in federal funds purchased and securities
sold under agreements to repurchase 1,539,184 (8,957,994)
Net change in other short-term borrowings (3,898,434) 1,011,916
Proceeds from issuance of long-term debt 0 10,000,000
Repayment of long-term debt (1,689,167) 0
Proceeds from issuance of stock in accordance with:
Stock Option Plan 291,806 123,331
Dividend Reinvestment Plan 294,705 81,745
Cash dividends paid (1,701,595) (1,557,805)
Fractional shares paid (15,718) (567)
- - -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 57,719,116 109,848,075
- - -------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 12,692 8,194,606
Cash and cash equivalents at January 1 51,772,874 47,519,033
- - -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at September 30 $ 51,785,566 $ 55,713,639
===============================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these financial statements.
4
<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 1997. Amounts for all periods presented have been
restated to reflect the acquisitions of ComSouth Bankshares,
Inc. ("ComSouth") and M&M Financial Corporation ("M&M
Financial") under the pooling of interests method of accounting.
The results of operations for the three and nine month periods
ended September 30, 1998 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2: ACQUISITIONS
On August 31, 1998, The Corporation completed mergers with
ComSouth and M&M Financial. The acquisition of ComSouth was
accounted for as a pooling of interests and provided for a
tax-free exchange of 0.75 shares of Anchor common stock for each
outstanding share of ComSouth common stock. The acquisition of
M&M Financial was also accounted for as a pooling of interests
and provided for a tax-free exchange of 0.87 shares of Anchor
common stock for each outstanding share of M&M Financial common
stock.
As a result of the mergers, Anchor Financial became the parent
company of the Bank of Charleston, NA, the Bank of Columbia, NA,
and First National South. On October 16, 1998, the Bank of
Charleston, NA, and the Bank of Columbia, NA, were merged with
The Anchor Bank. On November 20, 1998, First National South will
be merged into The Anchor Bank.
Separate results of operations of M&M Financial and ComSouth for
the periods prior to the consolidation are presented in the
following table:
5
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
<TABLE>
<CAPTION>
M&M (3) ComSouth Anchor Combined
---------------------------------------------------------------------------------------------------------------
Three months ended September 30, 1998
(unaudited)
<S> <C> <C> <C> <C>
Net interest income (1) $1,130,776 $1,692,323 $8,154,593 $10,977,692
Net income (1) 16,356 (244,962) 103,294 (125,312)
Three months ended September 30, 1997
(unaudited)
Net interest income $1,093,317 $1,516,500 $7,328,932 $9,938,749
Net income 220,988 384,485 1,918,023 2,523,496
Nine months ended September 30, 1998
(unaudited)
Net interest income (2) $4,624,453 $6,477,635 $21,035,533 $32,137,621
Net income (2) 836,028 1,177,764 3,314,208 5,328,000
Nine months ended September 30, 1997
(unaudited)
Net interest income $4,170,568 $5,673,059 $18,534,880 $28,378,507
Net income 816,097 1,429,659 4,767,116 7,012,872
---------------------------------------------------------------------------------------------------------------
<FN>
(1) Net interest income and net income for the quarter ended
September 30, 1998 for M&M Financial and ComSouth include
two months of earnings due to the consummation of the
mergers on August 31, 1998.
</FN>
<FN>
(2) Net interest income and net income for the nine months
ended September 30, 1998 for M&M Financial and ComSouth
include eight months of earnings due to the consummation of
the mergers on August 31, 1998.
</FN>
<FN>
(3) For the nine months ended September 30, 1998 and 1997
eliminations were made for $212,392 and $56,422,
respectively for the gains M&M Financial realized on the
sale of Anchor common stock.
</FN>
</TABLE>
On September 24, 1998, Anchor Financial entered into a
definitive agreement to acquire Bailey Financial Corporation
("Bailey Financial"), parent company of M.S. Bailey & Son,
Bankers and The Saluda County Bank in Clinton, South Carolina.
The merger is expected to be accounted for as a pooling of
interests and provides for a tax-free exchange of 16.32 shares
of Anchor Financial common stock for each outstanding share of
Bailey Financial common stock. The acquisition is subject to
approval of shareholders of Bailey Financial and regulatory
approvals.
6
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The transaction is expected to be completed in the first quarter
of 1999. After consummation of the merger, The Saluda County
Bank will be merged into M.S. Bailey & Son, Bankers, which will
operate as a subsidiary of the Corporation.
NOTE 3: RESERVE FOR LOAN LOSSES
Activity in the reserve for loan losses for the nine months
ended September 30, 1998 and 1997 is summarized as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------------------
<S> <C> <C>
Balance, beginning of year $7,321,491 $6,630,958
Provision charged to operations 2,372,000 1,192,000
Recoveries of charged off loans 517,135 274,568
Loans charged off (1,966,053) (385,560)
-------------------------------------
Balance, end of period $8,244,573 $7,711,966
=====================================
</TABLE>
NOTE 4: NONPERFORMING ASSETS
The following is a summary of nonperforming assets at September
30, 1998 and December 31, 1997. 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>
9/30/98 12/31/97
-------------------------------------
<S> <C> <C>
Nonaccrual loans $817,270 $789,766
Loans past due ninety days or more 124,526 77,673
Other real estate owned 535,196 187,000
-------------------------------------
Total nonperforming assets $1,476,992 $1,054,439
=====================================
</TABLE>
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.
At September 30, 1998, impaired loans had a related specific
allowance for loan losses totaling $6,000. There were no material
commitments to lend additional funds to customers whose loans
were classified as impaired at September 30, 1998.
7
<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 are summarized as follows:
<TABLE>
<CAPTION>
9/30/98 12/31/97
-------------------------------------
Parent Company:
<S> <C> <C>
8.60% subordinated notes due in 2003 (a) $5,000,000 $5,000,000
7.89% subordinated notes due in 2006 (a) 6,000,000 6,000,000
-------------------------------------
Total $11,000,000 $11,000,000
-------------------------------------
Subsidiaries:
5.70% Federal Home Loan Bank advance due in 1998 $ 0 $5,000,000
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 5,000,000
6.19% Federal Home Loan Bank advance due in 2002 4,500,000 5,000,000
7.21% Federal Home Loan Bank advance due in 2005 5,000,000 5,000,000
5.51% Federal Home Loan Bank advance due in 2008 5,000,000 0
-------------------------------------
Total 32,500,000 33,000,000
-------------------------------------
Total long-term debt and subordinated notes $43,500,000 $44,000,000
=====================================
<FN>
(a) Debt qualifies for inclusion in the determination of total
capital under the Risk- Based Capital Guidelines.
</FN>
</TABLE>
The principal maturity of long-term debt and subordinated notes
for the next five years subsequent to September 30, 1998 is
$5,000,000 in 1998, $3,000,000 in 1999, $5,000,000 in 2000,
$9,500,000 in 2002, $5,000,000 in 2003, and $16,000,000 there
after.
NOTE 6: EARNINGS PER SHARE DATA
Earnings per share - basic is computed by dividing net income by
the weighted average number of shares outstanding. Earnings per
share - diluted is computed by dividing net income by the
weighted average number of common shares outstanding and dilutive
common share equivalents using the treasury
8
<PAGE>
ANCHOR FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
stock method. Dilutive 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 shares outstanding.
In accordance with SFAS No. 128, "Earnings Per Share," the
calculation of net income (loss) per share - basic and net income
(loss) per share - diluted, including the effect of nonrecurring
charges, for the three and nine months ended September 30 is
presented below:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------------- ----------------------------
1998 1997 1998 1997
----------------------------- ----------------------------
Net income per share - basic computation
<S> <C> <C> <C> <C>
Net (loss) income ($125,312) $2,523,496 $5,328,000 $7,012,872
Income available to common shareholders ($125,312) $2,523,496 $5,328,000 $7,012,872
============================= ============================
Average common shares outstanding 6,473,940 6,379,322 6,462,330 6,374,831
Unallocated ESOP Shares (51,335) (63,247) (51,335) (63,247)
----------------------------- ----------------------------
Average common shares outstanding - basic 6,422,605 6,316,075 6,410,995 6,311,584
============================= ============================
Net (loss) income per share - basic ($0.02) $0.40 $0.83 $1.11
============================= ============================
Net income per share - diluted computation
Income available to common shareholders ($125,312) $2,523,496 $5,328,000 $7,012,872
============================= ============================
Average common shares outstanding - basic 6,422,605 6,316,075 6,410,995 6,311,584
Incremental shares from assumed conversions:
Stock Options 0 378,724 323,686 350,069
----------------------------- ----------------------------
Average common shares outstanding - diluted 6,422,605 6,694,799 6,734,681 6,661,653
============================= ============================
Net (loss) income per share - diluted ($0.02) $0.38 $0.79 $1.05
============================= ============================
</TABLE>
NOTE 7: OTHER MATTERS
At September 30, 1998, outstanding standby letters of credit
totaled $7,820,418.
For the nine months ended September 30, 1998 and 1997, the
Corporation paid interest of $27,843,469 and $22,945,033
respectively. The Corporation paid $4,461,251 in income taxes
during the nine months ended September 30, 1998 and $3,760,615
during the same period in 1997.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis
Certain information included in this discussion contains
forward-looking statements with respect to the financial condition, results of
operations and business of the Corporation, based on management's belief and
information currently available to management. Such forward-looking statements
are subject to risks, uncertainties and assumptions. Actual results may vary
materially from those anticipated, estimated, projected, or expected. Among the
factors that may cause variations from such forward-looking statements are
fluctuations in the economy, especially in the Corporation's market areas;
changes in the interest rate environment; the Corporation's ability to realize
anticipated cost savings relating to pending acquisitions; the Corporation's
success in assimilating acquired operations in the Corporation's culture,
including its ability to instill the Corporation's credit culture into acquired
operations; the continued growth of the markets in which the Corporation
operates; and the enactment of legislation impacting the Corporation.
Net Income
Net income for the third quarter of 1998 totaled $2,797,224, or $0.41
per diluted share, before pretax charges of $3,914,259 ($2,922,536 after taxes)
associated with the acquisitions of ComSouth and M&M Financial. Excluding
these nonrecurring charges, net income and earnings per diluted share for the
quarter ended September 30, 1998, increased 10.9% and 9.0% respectively, from
the third quarter of 1997. Including the effect of the nonrecurring charges,
the Corporation incurred a net loss of $125,312, or $0.02 per diluted share, for
the quarter ended September 30, 1998, compared to net income of $2,523,495, or
$0.38 per diluted share earned in the same period of 1997.
The primary factors affecting the increase in net income, before
nonrecurring charges, for the third quarter of 1998 were an increase of
$1,038,943 in net interest income, and an increase in noninterest income of
$365,735. These positive factors were partially offset by increases in
noninterest expense of $702,241, the provision for income taxes of $288,706,
and the provision for loan losses of $140,000.
Net income for the nine months ended September 30, 1998 was $8,507,641
or $1.33 per diluted share, before pretax nonrecurring charges of $4,174,964.
Excluding these nonrecurring charges, net income and earnings per diluted
share for the first nine months of 1998 increased 21.3% and 19.4%, respectively,
from the same period in 1997. Including the effect of the nonrecurring
charges, net income totaled $5,328,000, or $0.83 per diluted share, for the
first nine months of 1998, compared to $7,012,872, or $1.05 per diluted share
earned in the same period of 1997.
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The primary factors affecting the increase in net income for the first
nine months of 1998 were increases of $3,759,114 in net interest income and
$1,005,491 in noninterest income. These positive factors were partially offset
by increases in noninterest expense of $2,049,918, the provision for income
taxes of $839,918, and provision for loan losses of $380,000.
For the quarter ended September 30, 1998, return on average assets and
return on average equity, excluding nonrecurring charges, were 1.09% and
15.52%, respectively, compared to prior year ratios of 1.13% and 16.17%. For the
nine months ended September 30, 1998, return on average assets and return on
average equity, excluding nonrecurring charges, were 1.14% and 16.09%,
respectively, compared to prior year ratios of 1.11% and 15.65%, respectively.
During the nine months ended September 30, 1998, the Corporation
incurred $1,410,179, before tax effect, in legal, accounting, and financial
advisory fees arising from the mergers with ComSouth and M&M Financial (See Note
2 to the unaudited interim consolidated financial statements). Restructuring
charges, which include, but are not limited to, employment agreements,
involuntary separation benefits, system conversions and other software and
equipment costs, and training totaled $2,764,785, before tax effect.
Net Interest Income
Net interest income, the major component of the Corporation's net
income, was $10,977,692 for the third quarter of 1998, an increase of $1,038,943
or 10.5% from the $9,938,749 reported for the same period in 1997. This increase
was attributed to the increased volume of earning assets during the period since
the tax equivalent net yield on earning assets decreased from 4.86% in 1997 to
4.62% in 1998. The increased volume of earning assets was primarily the result
of continued quality loan demand and strong deposit growth during the period.
The decrease in the net yield on earning assets was primarily due to a lower
yield on earning assets during the period.
Interest income was up $2,259,734 or 12.5% for the quarter ended
September 30, 1998 compared with the same period in 1997. The increase was due
to growth in the volume of earning assets since the yield on earning assets
decreased from 8.78% in 1997 to 8.50% in 1998. Average interest earning assets
for the third quarter of 1998 increased $133.6 million or 16.3% from the third
quarter of 1997. Average loans increased $69.4 million or 11.1% and average
investment securities increased $37.4 million or 19.7% for the third quarter of
1998 compared with the same period in 1997. Average interest earning assets
represented 93.3% of average total assets during the third quarter of 1998
compared with 92.6% in 1997. The yield on earning assets decreased because the
yield on loans decreased from 9.16% in 1997 to 9.04% in 1998. Also, the
composition of earning assets was less favorable during 1998. The composition of
average interest-earning assets changed slightly as the percentage of average
loans to average interest-earning assets decreased from 76.3% in 1997 to 72.9%
in 1998.
11
<PAGE>
Interest expense increased $1,220,791 or 15.1% for the quarter ended
September 30, 1998 compared with the same period in 1997. 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 slightly from 4.76% for the three months ended September
30, 1997 to 4.75% for the same period in 1998. Average interest-bearing
liabilities increased $102.3 million or 15.1% for the third quarter of 1998
compared with the same period in 1997. Average interest-bearing liabilities
represented 81.7% of funding sources during the third quarter of 1998 compared
with 82.5% in 1997.
For the nine months ended September 30, 1998, net interest income
increased $3,759,114 or 13.3% from the same period in 1997. The primary reason
for this increase was the increased volume of earning assets during the period
since the tax equivalent net yield on earning assets decreased from 4.88% for
the first nine months of 1997 to 4.63% for the same period in 1998. The
increased volume of earning assets was primarily the result of quality loan
demand during the period. The decrease in the net yield on earning assets was
primarily due to a lower yield on earning assets and a higher cost of funds
during the period.
Interest income increased $8,296,990 or 16.1% for the nine months ended
September 30, 1998 compared with the same period in 1997. Higher volume of
average interest-earning assets, offset by a decrease in the yield of earning
assets accounted for this increase. Average interest-earning assets for the
first nine months of 1998 increased $148.9 million or 19.0% compared with the
same period in 1997. Average loans increased $100.5 million or 17.0% and average
investment securities increased $25.7 million or 13.9% for the nine months ended
September 30, 1998 compared with the same period in 1997. Average
interest-earning assets represented 93.4% of average total assets during the
nine months ended September 30, 1998 versus 92.4% in 1997. The yield of earning
assets for the first nine months of the year decreased from 8.81% in 1997 to
8.59% in 1998. Average loan yield for the nine months ended September 30, 1998
declined 10 basis points, which, along with a less favorable composition of
earning assets accounted for most of the decrease in the yield of earning
assets. The composition of average interest-earning assets changed slightly as
the percentage of average loans to average interest-earning assets decreased
from 75.5% in 1997 to 74.2% in 1998.
Interest expense increased $4,537,876 or 19.7% for the nine months
ended September 30, 1998 compared with the same period in 1997. The increase in
interest expense was due to an increase in the volume of average
interest-bearing liabilities and a higher rate paid on these funds during the
period. Average interest-bearing liabilities increased $115.1 million or 17.7%
for the nine months ended September 30, 1998 compared with the same period in
1997. Growth in average prime money market deposits and average time deposits
accounted for most of this increase. The rate paid on average interest-bearing
liabilities increased from 4.72% for the nine months ended September 30, 1997 to
4.80% in 1998. Average interest-bearing liabilities represented 82.2% of funding
sources during the nine months ended September 30, 1998 compared with 83.2% in
1997.
12
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Provision for Loan Losses
A $609,000 provision for loan losses, excluding $800,000 of additional
provision for loan losses necessitated by third quarter charge-offs at the
acquired banks in a similar amount, was made during the third quarter of 1998
compared with a provision of $469,000 in 1997. Excluding the additional
provision for loan losses of $800,000, the provision for loan losses for the
nine months ended September 30, 1998 was $1,572,000 versus $1,192,000 for the
same period in 1997. The increase in the provision for loan losses for the third
quarter and the nine months ended September 30, 1998 was primarily due to loan
growth resulting from quality loan demand and expansion into new market areas
and a higher level of net charge-offs.
At September 30, 1998 and 1997 the ratio of annualized net charge-offs
to average loans was 0.28% and 0.02% respectively. The Corporation charged off
approximately $800,000 in the third quarter of 1998 as a result of factors
affecting the acquried banks' loans portfolios.
Nonperforming assets at September 30, 1998 totaled $1,476,992 compared
with $2,478,091 reported at the same time last year. The Corporation's
nonperforming assets have historically remained relatively low as the result of
conservative underwriting policies and favorable market conditions. The ratio of
nonperforming assets to total loans and other real estate owned was 0.21% at
September 30, 1998 compared with 0.39% at September 30, 1997.
The reserve for loan losses at September 30, 1998 and December 31, 1997
represented 1.17% and 1.21% respectively of total loans outstanding. Based on
the current evaluation of the loan portfolio, management believes the reserve at
September 30, 1998 is adequate to cover potential losses in the portfolio.
Noninterest Income
Noninterest income for the third quarter of 1998 was up $365,735 or
19.6% from the same period in 1997. The primary factors contributing to this
increase were increases in mortgage banking income of $185,261 or 94.9%,
commissions and fees of $113,549 or 21.5%, other operating income of $88,235 or
101.0%, and trust income of $36,367 or 57.6%. These positive factors were offset
by a decrease in service charges on deposit accounts of $73,516 or 7.4%,
Noninterest income for the nine months ended September 30, 1998
increased $1,005,491 or 18.8% from the same period in 1997. The primary factors
contributing to this increase were increases in mortgage banking income of
$578,145 or 105.9%, commissions and fees of $220,514 or 16.7%, trust income of
$103,340 or 50.0%, and service charges on deposit accounts of $94,137 or 3.5%.
These increases were offset by a slight decline in other operating income.
13
<PAGE>
The increase in mortgage banking income resulted from increased volume
of loan originations due to the favorable interest rate environment and the
Corporation's expansion of its mortgage origination program. The Corporation has
taken aggressive steps to expand its marketing tools in the residential real
estate market. Trust revenue continues to benefit from increased sales efforts
and favorable conditions in the Corporation's expanding markets. The growth in
commissions and fees resulted primarily from ATM terminal fees and investment
fee income. Service charges on deposit account revenues for the nine months
ended September 30, 1998 increased primarily due to growth in the number of
deposit accounts.
Noninterest Expense
Noninterest expense, excluding pretax nonrecurring charges of
$3,114,259, for the third quarter of 1998 increased $702,241 or 9.5% from
the same period in 1997. The primary factors contributing to this increase
were increases in salaries and employee benefits of $502,241 or 12.3%, other
operating expense of $236,362 or 11.4%, and net occupancy expense of $32,953 or
5.7%. These increases were offset by a decrease in equipment expense of $69,315
or 15.5%.
For the nine months ended September 30, 1998, noninterest expense,
exclusive of nonrecurring charges, increased $2,049,918 or 9.5% from the same
period in 1997. The primary factors contributing to this increase were increases
in salaries and employee benefits of $1,820,197 or 15.5%, net occupancy expense
of $140,636 or 8.8%, and a slight increase in other operating expense. These
increases were offset by a slight decrease in equipment expense.
New personnel and salary increases for existing staff accounted for
most of the growth in salaries and employee benefits. The additional staffing
cost increases were largely due to expansion of sales-related positions in
growing market areas.
Net occupancy expense increased largely due to higher building
depreciation and rent expense. The Corporation purchased a new operations center
in Conway, South Carolina during the third quarter of 1997. The lease on the
branch office opened on Meeting Street in Charleston, South Carolina accounted
for most of the growth in rent expense.
Income Taxes
The provision for income taxes, excluding the tax benefit of $991,723
associated with tax deductible nonrecurring charges, for the third quarter of
1998 increased $288,709 or 20.8% from the same period in 1997. For the nine
months ended September 30, 1998, excluding the tax benefit of $995,323
associated with nonrecurring charges, the provision increased $839,918 or 21.7%
from the same period in 1997. The provision for income taxes
14
<PAGE>
increased in 1998 primarily due to higher income before taxes since tax rates
remained approximately the same as 1997.
Financial Position
For the nine months ended September 30, 1998, average total assets
increased 17.8% while average loans increased 17.0% and average deposits
increased 18.1% from the same period in 1997.
Because the economy of the Corporation's primary market areas are
seasonal in nature, deposit growth is strong during the summer months and loan
demand usually reaches its peak during the winter months. This seasonality is
caused by the economic impact of a large number of tourists visiting coastal
South Carolina and North Carolina during the summer months. Thus, the
Corporation historically has a more favorable liquidity position during the
summer. 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, a line of credit
with the Federal Home Loan Bank ("FHLB"), as well as a seasonal borrowing
privilege from the Federal Reserve Bank to meet its liquidity needs during the
winter months.
The Corporation utilizes long-term advances from the FHLB as part of
its funding strategy. FHLB long-term advances totaled $32,500,000 at September
30, 1998 compared with $33,000,000 at December 31, 1997.
The Corporation continues to have a strong capital position by industry
standards with the ratio of average stockholders' equity to average total assets
at September 30, 1998 and December 31, 1997 being 7.1%. At September 30, 1998
and December 31, 1997, the total risk-based capital ratio was 12.0% and 11.9%,
respectively, and the leverage ratio was 6.8% and 6.9%, respectively.
Year 2000
The Corporation recognizes the need to ensure its operations will not
be adversely impacted by Year 2000 software failures. This issue affects
computer systems that have time-sensitive programs that may not properly
recognize the Year 2000. Potential software failures due to processing errors
arising from calculations using the Year 2000 date are a known risk. The
Corporation completed its Year 2000 assessment at December 31, 1997. The
Corporation is currently in the testing phase of Year 2000 compliance and
expects to complete the testing and implementation phases by December 31, 1998.
Internal Year 2000 issues have been addressed by the Corporation with
modifications to existing programs and conversions to new programs. The
Corporation communicated with software vendors and other service providers
with whom it
15
<PAGE>
conducts business to help it identify and resolve Year 2000 issues. The
Corporation anticipates that all mission critical systems will be Year 2000
compliant by December 31, 1998. In the event that a system is not Year 2000
compliant at that time, the Corporation will develop contingency plans. The
current year costs associated with Year 2000 testing total approximately
$12,550. The total cost associated with the required modifications and
conversions is not expected to exceed $250,000. These costs are not expected
to be material to the Corporation's financial position and are being expensed
as incurred.
Accounting and Regulatory Matters
On January 1, 1998, the Corporation adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income," ("SFAS No.
130"). SFAS No. 130 establishes standards for reporting the components of
comprehensive income and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
included in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income includes net income as well as
certain items that are reported directly within a separate component of
stockholders' equity and bypass net income. The adoption of SFAS No. 130 did not
have a material impact on the Corporation's financial condition or results of
operations. All of the Corporation's other comprehensive income relates to net
unrealized gains on investment securities available for sale.
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 131 "Disclosure about Segments
of an Enterprise and Related Information," ("SFAS No. 131"), which establishes
new standards for business segment reporting. Requirements of SFAS No. 131
include reporting of (a) financial and descriptive information about reportable
operating segments, (b) a measure of segment profit or loss, certain specific
revenue and expense items and segment assets with reconciliations to the
Corporation's financial statements, and (c) information regarding revenues
derived from the Corporation's products and services, information about major
customers and information related to geographic areas. The Corporation has
adopted SFAS No. 131 effective January 1, 1998. Provisions of SFAS No. 131 state
that segmented information need not be applied to interim financial statements;
therefore, the Corporation's statements do not reflect segmented reporting.
In February 1998, the FASB issued SFAS No. 132, "Employer's Disclosures
about Pensions and Other Post-retirement Benefits," ("SFAS No. 132"), an
amendment of SFAS Nos. 87, 88, and 106. SFAS No. 132 revises employer's
disclosures about pensions and other post-retirement benefit plans. It does not
change the measurement or recognition of those plans. The Corporation has
adopted SFAS No. 132 effective January 1, 1998.
On June 15, 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," ("SFAS No. 133"). SFAS No. 133
is effective for all fiscal quarters of all fiscal years beginning after June
15, 1999 (January 1, 2000 for the
16
<PAGE>
Corporation). SFAS No. 133 requires that all derivative instruments be
recorded on the balance sheet at their fair value. Changes in the fair value
of derivatives are recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as
part of a hedge transaction and, if it is, the type of hedge transaction.
Management of the Corporation anticipates that, due to its limited use of
derivative instruments, the adoption of SFAS No. 133 will not have a significant
effect on the Corporation's results of operations or its financial position.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes in market risk exposures that
affect the quantitative or qualitative disclosures presented as of the preceding
fiscal year end in the Corporation's Annual Report on Form 10-K.
17
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material legal proceedings.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On August 25, 1998, the Corporation held a Special Meeting
of Shareholders. The following is a brief description of matters
voted upon at the Special Meeting and the number of votes cast for and
withheld, as well as, the number of abstentions.
Proposal to ratify and approve the Agreement and Plan of Merger, dated
as of April 14, 1998 (the "ComSouth Agreement"), by and
between the Corporation and ComSouth Bankshares, Inc. ("ComSouth")
pursuant to which ComSouth will merge with and into the
Corporation and each share of ComSouth's common stock (except for
certain shares held by the Corporation) will be converted into .75
of a share of Anchor common stock, and such other terms and conditions
as are set forth in the ComSouth Agreement.
For - 2,872,888 Withheld - 1,883 Abstain - 11,354
Proposal to ratify and approve the Agreement and Plan of Merger, dated
as of May 15, 1998 (the "M&M Agreement"), by and between the
Corporation and M&M Financial Corporation ("M&M") pursuant to which
M&M will merge with and into the Corporation and each share of M&M's
common stock will be converted into .87 of a share of Anchor common
stock, and such other terms and conditions as are set forth in the M&M
Agreement.
For - 2,876,702 Withheld - 6,595 Abstain - 11,828
Proposal to amend the Corporation's Articles of Incorporation to
increase the authorized shares of common stock to 50,000,000.
For - 3,133,175 Withheld - 19,778 Abstain - 27,622
18
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ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 10.1 Restricted Stock Agreement with Stephen L. Chryst dated
October 22, 1998
10.2 Restricted Stock Agreement with Tommy E. Looper dated
October 22, 1998
10.3 Restricted Stock Loan Agreement with Stephen L. Chryst
dated October 22, 1998
10.4 Restricted Stock Loan Agreement with Tommy E. Looper dated
October 22, 1998
10.5 Employment Agreement with Chester A. Duke dated August 31,
1998
27 Financial Data Schedule (for SEC purposes only)
(b) A report on Form 8-K dated September 4, 1998 was filed with
the Securities and Exchange Commission on September 10,
1998. On September 4, 1998, Anchor Financial Corporation
("Anchor Financial") and Bailey Financial Corporation
("Bailey Financial"), parent company of M.S. Bailey & Son,
Bankers and The Saluda County Bank in Clinton, South
Carolina, announced the signing of a letter of intent to
merge. The proposed merger is expected to be accounted for
as a pooling of interests and provides for a tax-free
exchange of 16.32 shares of Anchor Financial common stock
for each outstanding share of Bailey Financial common stock.
Based on Anchor Financial's September 3rd closing stock
price of $36.00 and Bailey Financial's approximately 95,140
outstanding shares of common stock, the proposed transaction
would have a total value of $55.9 million. After
consummation of the proposed merger, The Saluda County Bank
will be merged into M.S. Bailey & Son, Bankers, which will
operate as a subsidiary of Anchor Financial.
19
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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 10, 1998
20
Anchor Financial Corporation
Restricted Stock Agreement
THIS RESTRICTED STOCK AGREEMENT (this "Agreement") is made and entered
into as of October 22, 1998 by and between Anchor Financial Corporation
("Anchor") and Stephen L. Chryst ("Executive").
RECITALS
A. In recognition of exceptional performance in the management of Anchor,
Anchor desires to grant to Executive shares of common stock of Anchor
(the "Common Stock"), subject to the terms and conditions set forth in
this Agreement. The date on which such grant will occur shall be October
22, 1998.
B. In order to induce Anchor to grant such shares of Common Stock, Executive
agrees to hold such shares subject to the restrictions and interests
created by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties agree as follows:
1. Grant of Stock Anchor hereby agrees to grant to Executive, subject to the
conditions and restrictions contained in this Agreement, 12,500 shares
(individually, a "Share" and collectively, the "Shares") of Common Stock.
2. Restrictions
(a) Transfer/Issuance Upon signing this Agreement, the Common Stock will be
promptly issued or transferred and a certificate or certificates for such Shares
shall be issued in the Executive's name. The Executive shall thereupon be a
Shareholder of all the Shares represented by the certificate or certificates. As
such, the Executive will have all the rights of a Shareholder with respect to
such Shares, including the right to vote them and to receive all dividends and
other distributions paid with respect to them, provided, however, that the
Shares shall be subject to the restrictions in Section 2(c).
(b) Restricted Period The term "Restricted Period" with respect to
Restricted Shares (after which restrictions shall lapse) means a period starting
on the date of grant of such Shares to the Executive and ending on August 17,
1999 for 20% of the Shares granted, August 17, 2000 for another 20% of the
Shares granted, August 17, 2001 for another 20% of the Shares granted, August
17, 2002 for another 20% of the shares granted, and August 17, 2003 for the
final 20% of the Shares granted.
(c) Restrictions on Shares The restrictions to which Restricted Shares
shall be subject are as follows:
(i) During the Restricted Period applicable to such Shares and except
as otherwise specifically provided in the Agreement, none of such Shares
shall be sold,
<PAGE>
exchanged, transferred, pledged, hypothecated, or otherwise
disposed during the Restricted Period.
(ii) If an Executive's employment is terminated for any reason (other
than for death, disability or Change in Control as addressed in Section 2(d))
at any time before the Restricted Period ends, Anchor shall so notify the
escrow agent appointed under Section 2(a) and the escrow agent shall return
the shares to Anchor.
(d) Lapse of Restrictions Upon Death, Disability or Change in Control
All restrictions lapse immediately upon the occurrence of any of the following:
death of the Executive; disability of the Executive (as defined in the
Executive's disability coverage provided through Anchor); or upon a Change in
Control (as defined in the Executive's Employment Agreement).
3. Miscellaneous
(a) Legends on Certificates Any and all certificates hereby issued
evidencing Shares of Common Stock shall have endorsed upon them a legend
substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS AS
DESCRIBED IN THE RESTRICTED STOCK AGREEMENT DATED OCTOBER 22, 1998 BY AND
BETWEEN ANCHOR FINANCIAL CORPORATION AND STEPHEN L. CHRYST, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF ANCHOR FINANCIAL
CORPORATION.
Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations.
(b) Further Assurances Each party hereto agrees to perform any further acts
and execute and deliver any documents which may be reasonably necessary to carry
out the intent of this Agreement.
(c) Notices Except as otherwise provided herein, all notices, requests,
demands and other communications under this Agreement shall be in writing, and
if given by telegram, telecopy, or telex, shall be deemed to have been validly
served, given or delivered when sent, if given by personal delivery, shall be
deemed to have been validly served, given or delivered upon actual delivery and,
if mailed, shall be deemed to have been validly served, given or delivered three
business days after deposit in the United States mails, as registered or
certified mail, with proper postage prepaid and addressed to the party or
parties to be notified, at the following address:
Anchor Financial Corporation
2002 Oak Street
Myrtle Beach, South Carolina 29578
(d) Amendments; No Waiver This Agreement may be amended only by a written
agreement executed by both of the parties hereto.
<PAGE>
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina.
(f) Disputes. In the event of any dispute among the parties arising out of
this Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party the reasonable expenses of the prevailing party including,
without limitation, reasonable attorneys' fees and expenses.
(g) Entire Agreement. This Agreement and the instruments and agreement
referenced herein constitute the entire agreement and understanding among the
parties pertaining to the subject matter hereof and supersede any and all prior
agreements, whether written or oral, relating hereto.
(h) Recapitalizations or Exchanges Affecting Anchor's Capital Stock. The
provisions of this Agreement shall apply to any and all shares of capital stock
or other securities of Anchor or any successor or assign of Anchor which may be
issued in respect of, in exchange for or in substitution of, the Shares by
reason of any stock dividend, stock split, reverse split, recapitalization,
reclassificiation, combination, merger, consolidation or otherwise, and such
shares or other securities shall be encompassed within the term "Shares" for
purposes of this Agreement.
(i) No Rights. Nothing in this Agreement shall affect in any manner
whatsover the rights of Anchor or any of its Subsidiaries to terminate
Executive's employment or other relationship for any reason with or without
cause, subject to the terms and conditions of any agreement to which Executive
may be a party.
(j) Disclosure. Anchor shall have no duty or obligation to affirmatively
disclose to Executive, and Executive shall have no right to be advised of, any
material information regarding Anchor or any of its Subsidiaries at any time
prior to, upon or in connection with Anchor's repurchase of the Shares under
this Agreement at or after the cessation or termination of Executive's
employment or other relationship with Anchor and/or any of its Subsidiaries.
(k) RIGHT IN OTHER CAPACITIES; EXECUTIVE'S REVIEW OF AGREEMENT.
(i) ALTHOUGH AFTER HIS RECEIPT OF THE SHARES, EXECUTIVE WILL BE OR
CONTINUE TO BE AN EXECUTIVE OF ANCHOR (OR A DIRECT OR INDIRECT SUBSIDIARY OR
OTHER AFFILIATE OF ANCHOR), EXECUTIVE REPRESENTS THAT EXECUTIVE IS ACQUIRING THE
SHARES AS AN EQUITY INVESTMENT AND WITHOUT ANY EXPECTATION THAT THE OWNERSHIP OF
THE SHARES WILL ENTITLE EXECUTIVE TO ANY RIGHTS AS AN EXECUTIVE, OFFICER OR
DIRECTOR OF ANCHOR (OR ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF
ANCHOR) THAT WOULD NOT EXIST IF EXECUTIVE WERE NOT A SHAREHOLDER. EXECUTIVE
FURTHER AGREES THAT NO CHANGE IN HIS OR HER EXPECTATIONS CONCERNING EMPLOYMENT
OR CONCERNING HIS OR HER PARTICIPATION AS AN OFFICER OR DIRECTOR, IF APPLICABLE,
WILL HAVE A REASONABLE BASIS UNLESS SET FORTH IN A WRITTEN AGREEMENT EXPRESSLY
GIVING EXECUTIVE ADDITIONAL RIGHTS AS TO SUCH MATTERS. ANCHOR HEREBY ADVISES
EXECUTIVE THAT ANCHOR IS ISSUING THE SHARES IN RELIANCE ON THE FOREGOING
REPRESENTATIONS
<PAGE>
OF EXECUTIVE AND IN THE EXPECTATON THAT EXECUTIVE WILL NOT HAVE
ANY RIGHT TO EMPLOYMENT BY ANCHOR (OR BY ANY DIRECT OR INDIRECT SUBSIDIARY OR
OTHER AFFILIATE OF ANCHOR) OR TO CONTINUE TO BE AN OFFICER OR DIRECTOR OF ANCHOR
(OR OF ANY SUCH SUBSIDIARY OR OTHER AFFILIATE) BY VIRTUE OF EXECUTIVES OWNERSHIP
OF THE SHARES AND THAT ANCHOR WOULD NOT ISSUE SHARES TO EXECUTIVE IF EXECUTIVE
HAD ANY CONTRARY EXPECTATIONS.
(ii) EXECUTIVE CONFIRMS THAT EXECUTIVE HAS CAREFULLY REVIEWED THIS
AGREEMENT AND UNDERSTANDS IT. EXECUTIVE FURTHER CONFIRMS THAT EXECUTIVE HAS BEEN
ADVISED TO CONSULT WITH LEGAL COUNSEL REPRESENTING EXECUTIVE CONCERNING THIS
AGREEMENT AND ANY OTHER AGREEMENTS BETWEEN OR AMONG EXECUTIVE, ANCHOR AND ANY OF
ITS PRESENT OR PROSPECTIVE SHAREHOLDERS, DIRECTORS, OFFICERS AND/OR EXECUTIVES.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ANCHOR:
ANCHOR FINANCIAL CORPORATION
By: /s/ Thomas J. Rogers
Name: Thomas J. Rogers
Title: Vice Chairman
EXECUTIVE
/s/ Stephen L. Chryst
STEPHEN L. CHRYST
Anchor Financial Corporation
Restricted Stock Agreement
THIS RESTRICTED STOCK AGREEMENT (this "Agreement") is made and entered
into as of October 22, 1998 by and between Anchor Financial Corporation
("Anchor") and Tommy E. Looper ("Executive").
RECITALS
A. In recognition of exceptional performance in the management of Anchor,
Anchor desires to grant to Executive shares of common stock of Anchor (the
"Common Stock"), subject to the terms and conditions set forth in this
Agreement. The date on which such grant will occur shall be October 22,
1998.
B. In order to induce Anchor to grant such shares of Common Stock, Executive
agrees to hold such shares subject to the restrictions and interests
created by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and conditions contained herein, the parties agree as follows:
1. Grant of Stock Anchor hereby agrees to grant to Executive, subject to the
conditions and restrictions contained in this Agreement, 2,500 shares
(individually, a "Share" and collectively, the "Shares") of Common Stock.
2. Restrictions
(a)Transfer/Issuance Upon signing this Agreement, the Common Stock will be
promptly issued or transferred and a certificate or certificates for such Shares
shall be issued in the Executive's name. The Executive shall thereupon be a
Shareholder of all the Shares represented by the certificate or certificates. As
such, the Executive will have all the rights of a Shareholder with respect to
such Shares, including the right to vote them and to receive all dividends and
other distributions paid with respect to them, provided, however, that the
Shares shall be subject to the restrictions in Section 2(c).
(b)Restricted Period The term "Restricted Period" with respect to
Restricted Shares (after which restrictions shall lapse) means a period starting
on the date of grant of such Shares to the Executive and ending on August 17,
1999 for 20% of the Shares granted, August 17, 2000 for another 20% of the
Shares granted, August 17, 2001 for another 20% of the Shares granted, August
17, 2002 for another 20% of the shares granted, and August 17, 2003 for the
final 20% of the Shares granted.
(c)Restrictions on Shares The restrictions to which Restricted Shares
shall be subject are as follows:
(i) During the Restricted Period applicable to such Shares and except
as otherwise specifically provided in the Agreement, none of such Shares shall
be sold,
<PAGE>
exchanged, transferred, pledged, hypothecated, or otherwise disposed
during the Restricted Period.
(ii) If an Executive's employment is terminated for any reason (other
than for death, disability or Change in Control as addressed in Section 2(d)) at
any time before the Restricted Period ends, Anchor shall so notify the escrow
agent appointed under Section 2(a) and the escrow agent shall return the shares
to Anchor.
(d) Lapse of Restrictions Upon Death, Disability or Change in Control All
restrictions lapse immediately upon the occurrence of any of the following:
death of the Executive; disability of the Executive (as defined in the
Executive's disability coverage provided through Anchor); or upon a Change in
Control (as defined in the Executive's Employment Agreement).
3. Miscellaneous
(a) Legends on Certificates Any and all certificates hereby issued
evidencing Shares of Common Stock shall have endorsed upon them a legend
substantially as follows:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS AS
DESCRIBED IN THE RESTRICTED STOCK AGREEMENT DATED OCTOBER 22, 1998 BY AND
BETWEEN ANCHOR FINANCIAL CORPORATION AND TOMMY E. LOOPER, A COPY OF WHICH
AGREEMENT IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF ANCHOR FINANCIAL
CORPORATION.
Such certificates shall also bear such legends and shall be subject to such
restrictions on transfer as may be necessary to comply with all applicable
federal and state securities laws and regulations.
(b) Further Assurances Each party hereto agrees to perform any further acts
and execute and deliver any documents which may be reasonably necessary to carry
out the intent of this Agreement.
(c) Notices Except as otherwise provided herein, all notices, requests,
demands and other communications under this Agreement shall be in writing, and
if given by telegram, telecopy, or telex, shall be deemed to have been validly
served, given or delivered when sent, if given by personal delivery, shall be
deemed to have been validly served, given or delivered upon actual delivery and,
if mailed, shall be deemed to have been validly served, given or delivered three
business days after deposit in the United States mails, as registered or
certified mail, with proper postage prepaid and addressed to the party or
parties to be notified, at the following address:
Anchor Financial Corporation
2002 Oak Street
Myrtle Beach, South Carolina 29578
(d) Amendments; No Waiver This Agreement may be amended only by a written
agreement executed by both of the parties hereto.
<PAGE>
(e) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of South Carolina.
(f) Disputes. In the event of any dispute among the parties arising out of
this Agreement, the prevailing party shall be entitled to recover from the
non-prevailing party the reasonable expenses of the prevailing party including,
without limitation, reasonable attorneys' fees and expenses.
(g) Entire Agreement. This Agreement and the instruments and agreement
referenced herein constitute the entire agreement and understanding among the
parties pertaining to the subject matter hereof and supersede any and all prior
agreements, whether written or oral, relating hereto.
(h) Recapitalizations or Exchanges Affecting Anchor's Capital Stock. The
provisions of this Agreement shall apply to any and all shares of capital stock
or other securities of Anchor or any successor or assign of Anchor which may be
issued in respect of, in exchange for or in substitution of, the Shares by
reason of any stock dividend, stock split, reverse split, recapitalization,
reclassificiation, combination, merger, consolidation or otherwise, and such
shares or other securities shall be encompassed within the term "Shares" for
purposes of this Agreement.
(i) No Rights. Nothing in this Agreement shall affect in any manner whatsover
the rights of Anchor or any of its Subsidiaries to terminate Executive's
employment or other relationship for any reason with or without cause, subject
to the terms and conditions of any agreement to which Executive may be a party.
(j) Disclosure. Anchor shall have no duty or obligation to affirmatively
disclose to Executive, and Executive shall have no right to be advised of, any
material information regarding Anchor or any of its Subsidiaries at any time
prior to, upon or in connection with Anchor's repurchase of the Shares under
this Agreement at or after the cessation or termination of Executive's
employment or other relationship with Anchor and/or any of its Subsidiaries.
(k) RIGHT IN OTHER CAPACITIES; EXECUTIVE'S REVIEW OF AGREEMENT.
(i) ALTHOUGH AFTER HIS RECEIPT OF THE SHARES, EXECUTIVE WILL BE OR
CONTINUE TO BE AN EXECUTIVE OF ANCHOR (OR A DIRECT OR INDIRECT SUBSIDIARY OR
OTHER AFFILIATE OF ANCHOR), EXECUTIVE REPRESENTS THAT EXECUTIVE IS ACQUIRING THE
SHARES AS AN EQUITY INVESTMENT AND WITHOUT ANY EXPECTATION THAT THE OWNERSHIP OF
THE SHARES WILL ENTITLE EXECUTIVE TO ANY RIGHTS AS AN EXECUTIVE, OFFICER OR
DIRECTOR OF ANCHOR (OR ANY DIRECT OR INDIRECT SUBSIDIARY OR OTHER AFFILIATE OF
ANCHOR) THAT WOULD NOT EXIST IF EXECUTIVE WERE NOT A SHAREHOLDER. EXECUTIVE
FURTHER AGREES THAT NO CHANGE IN HIS OR HER EXPECTATIONS CONCERNING EMPLOYMENT
OR CONCERNING HIS OR HER PARTICIPATION AS AN OFFICER OR DIRECTOR, IF APPLICABLE,
WILL HAVE A REASONABLE BASIS UNLESS SET FORTH IN A WRITTEN AGREEMENT EXPRESSLY
GIVING EXECUTIVE ADDITIONAL RIGHTS AS TO SUCH MATTERS. ANCHOR HEREBY ADVISES
EXECUTIVE THAT ANCHOR IS ISSUING THE SHARES IN RELIANCE ON THE FOREGOING
REPRESENTATIONS
<PAGE>
OF EXECUTIVE AND IN THE EXPECTATON THAT EXECUTIVE WILL NOT HAVE
ANY RIGHT TO EMPLOYMENT BY ANCHOR (OR BY ANY DIRECT OR INDIRECT SUBSIDIARY OR
OTHER AFFILIATE OF ANCHOR) OR TO CONTINUE TO BE AN OFFICER OR DIRECTOR OF ANCHOR
(OR OF ANY SUCH SUBSIDIARY OR OTHER AFFILIATE) BY VIRTUE OF EXECUTIVES OWNERSHIP
OF THE SHARES AND THAT ANCHOR WOULD NOT ISSUE SHARES TO EXECUTIVE IF EXECUTIVE
HAD ANY CONTRARY EXPECTATIONS.
(ii) EXECUTIVE CONFIRMS THAT EXECUTIVE HAS CAREFULLY REVIEWED THIS
AGREEMENT AND UNDERSTANDS IT. EXECUTIVE FURTHER CONFIRMS THAT EXECUTIVE HAS BEEN
ADVISED TO CONSULT WITH LEGAL COUNSEL REPRESENTING EXECUTIVE CONCERNING THIS
AGREEMENT AND ANY OTHER AGREEMENTS BETWEEN OR AMONG EXECUTIVE, ANCHOR AND ANY OF
ITS PRESENT OR PROSPECTIVE SHAREHOLDERS, DIRECTORS, OFFICERS AND/OR EXECUTIVES.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ANCHOR:
ANCHOR FINANCIAL CORPORATION
By: /s/ Thomas J. Rogers
Name: Thomas J. Rogers
Title: Vice Chairman
EXECUTIVE
/s/ Tommy E. Looper
TOMMY E. LOOPER
RESTRICTED STOCK
LOAN AGREEMENT
THIS RESTRICTED STOCK LOAN AGREEMENT ("Agreement") is made this 22 day of
October, 1998, by and between ANCHOR FINANCIAL CORPORATION, a South Carolina
corporation ("Anchor") and STEPHEN L. CHRYST of Myrtle Beach, South Carolina
("Executive").
In conjunction with the recently awarded restricted stock grant in the amount of
12,500 shares, Anchor hereby agrees to provide the Executive a loan sufficient
to pay the taxes associated with his Election to Include Value of Restricted
Property and Gross Income in Year of Transfer under Code Section 83(b). The
terms of the loan are as follows:
1. Stephen L. Chryst may borrow up to an amount equivalent to the
income taxes due as a result of his execution and filing of
the Election to Include Value of Restricted Property and Gross
Income in Year of Transfer under Code Section 83(b). The
maximum amount of the loan will be $225,000.
2. The loan will accrue interest at the prime rate as determined
on the date of the loan.
3. The Executive agrees to repay the loan in five equal
installments. The first installment will be due one year from
the date the loan is provided to the Executive; the second
installment will be due two years from the date of the loan;
the third installment will be due three years from the date of
the loan; the fourth installment will be due four years from
the date of the loan; and the fifth installment will be due
five years from the date of the loan.
4. Notwithstanding the above repayment schedule, on each loan
repayment due date that the Executive is still employed by
Anchor, the Executive's payment due will be forgiven (both
principal and interest).
5. On each date on which a loan repayment is forgiven pursuant to
paragraph 4 above, Anchor will pay a bonus sufficient to pay
any taxes associated with the forgiven debt.
6. If during the repayment period the Executive dies or becomes
disabled (as defined in the Executive's disability coverage
provided through Anchor), the remaining balance (both
principal and interest) will be immediately forgiven.
7. Upon Change in Control (as defined in the Executive's
employment agreement), the remaining balance (both principal
and interest) will be immediately forgiven.
<PAGE>
8. In the event the Executive voluntarily terminates employment
prior to full repayment, the remaining principal and interest
due and owing will be forgiven on the date the Restricted
Shares are returned to Anchor pursuant to paragraph 2c(ii) of
the Anchor Financial Corporation Restricted Stock Agreement
entered into between the Executive and Anchor on October 22,
1998.
Date of Loan:
---------------------------
Amount of Loan:
-------------------------
Interest Rate of Loan:
-----------------
IN WITNESS WHEREOF, the Executive and Anchor (by action of its duly authorized
representative) have executed this Agreement on the date first above written.
ANCHOR FINANCIAL CORPORATION
ATTEST: /s/ Rhonda P. Housand By: /s/ Thomas J. Rogers
Name: Thomas J. Rogers
Title: Vice Chairman
EXECUTIVE
ATTEST: /s/ Christie Truette /s/ Stephen L. Chryst
STEPHEN L. CHRYST
RESTRICTED STOCK
LOAN AGREEMENT
THIS RESTRICTED STOCK LOAN AGREEMENT ("Agreement") is made this 22 day of
October, 1998, by and between ANCHOR FINANCIAL CORPORATION, a South Carolina
corporation ("Anchor") and TOMMY E. LOOPER of Myrtle Beach, South Carolina
("Executive").
In conjunction with the recently awarded restricted stock grant in the amount of
2,500 shares, Anchor hereby agrees to provide the Executive a loan sufficient to
pay the taxes associated with his Election to Include Value of Restricted
Property and Gross Income in Year of Transfer under Code Section 83(b). The
terms of the loan are as follows:
1. Tommy E. Looper may borrow up to an amount equivalent to the
income taxes due as a result of his execution and filing of
the Election to Include Value of Restricted Property and Gross
Income in Year of Transfer under Code Section 83(b). The
maximum amount of the loan will be $45,000.
2. The loan will accrue interest at the prime rate as determined
on the date of the loan.
3. The Executive agrees to repay the loan in five equal
installments. The first installment will be due one year from
the date the loan is provided to the Executive; the second
installment will be due two years from the date of the loan;
the third installment will be due three years from the date of
the loan; the fourth installment will be due four years from
the date of the loan; and the fifth installment will be due
five years from the date of the loan.
4. Notwithstanding the above repayment schedule, on each loan
repayment due date that the Executive is still employed by
Anchor, the Executive's payment due will be forgiven (both
principal and interest).
5. On each date on which a loan repayment is forgiven pursuant to
paragraph 4 above, Anchor will pay a bonus sufficient to pay
any taxes associated with the forgiven debt.
6. If during the repayment period the Executive dies or becomes
disabled (as defined in the Executive's disability coverage
provided through Anchor), the remaining balance (both
principal and interest) will be immediately forgiven.
7. Upon Change in Control (as defined in the Executive's
employment agreement), the remaining balance (both principal
and interest) will be immediately forgiven.
<PAGE>
8. In the event the Executive terminates employment prior to full
repayment, the remaining principal and interest due and owing
will be forgiven on the date the Restricted Shares are
returned to Anchor pursuant to paragraph 2c(ii) of the Anchor
Financial Corporation Restricted Stock Agreement entered into
between the Executive and Anchor on October 22, 1998.
Date of Loan:
----------------------------
Amount of Loan:
-----------------------
Interest Rate of Loan:
------------------
IN WITNESS WHEREOF, the Executive and Anchor (by action of its duly authorized
representative) have executed this Agreement on the date first above written.
ANCHOR FINANCIAL CORPORATION
ATTEST: /s/ Rhonda P. Housand By: /s/ Thomas J. Rogers
Name: Thomas J. Rogers
Title: Vice Chairman
EXECUTIVE
ATTEST: /s/ Christie Truette /s/ Tommy E. Looper
TOMMY E. LOOPER
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") made this 31st day of August, 1998 by
and between THE ANCHOR BANK, a South Carolina banking corporation with principal
offices located at 2002 Oak Street, Myrtle Beach, South Carolina 29578 ("Bank")
and Chester A. Duke of Marion, South Carolina ("Employee").
RECITALS:
A. The Employee is, as of the date hereof, employed by the Bank as an
executive officer and the Bank desires to insure the Employee's
continued employment with the Bank.
B. The Bank and the Employee mutually desire that their employment
relationship be set forth under the terms of a written employment
agreement;
In consideration of the foregoing and of the promises and mutual agreements set
forth below, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows :
1. Employment. The Bank agrees to employ the Employee, and the Employee
agrees to serve the Bank, on the terms and conditions, set forth herein.
2. Term of Employment. The employment of the Employee by the Bank, as
provided under Section 1, shall commence on the date hereof and end on
August 31, 2001 (the "Initial Term") unless further extended or sooner
terminated as hereinafter provided. On August 31, 1999 and on August 31 of
each year thereafter, the term of the Employee's employment hereunder shall
be extended automatically one (1) additional year, unless prior to the date
of such automatic extension the Bank shall have delivered to the Employee or
the Employee shall have delivered to the Bank written notice that the term of
the Employee's employment hereunder shall not be extended.
3. Position and Duties. The Employee shall serve as Vice Chairman of the
Bank and shall be responsible for all duties, authorities and responsibilities
as set forth in the Bylaws of the Bank and shall assume such additional
responsibilities and authority as may from time to time be assigned to him by
the Chief Executive Officer of the Bank or other executive designated by the
Board of Directors of the Bank. The Employee shall perform his responsibilities
and duties in the best interests of the Bank and its stockholders.
4. Place of Performance. In connection with the Employee's employment
hereunder, the Employee shall be based initially at the Bank's office located
in Marion, South Carolina, subject to reasonable travel or relocation
necessary to the business of the Bank.
<PAGE>
5. Compensation and Benefits. In consideration of the Employee's
performance of his duties hereunder, the Bank shall provide the Employee
with the following compensation and benefits during the term of his employment
hereunder.
a. Base Salary. Commencing on the first day after the Effective
Date, and continuing for a period of three (3) years
thereafter, and for any extended term hereof, the
Employee shall serve on a full-time basis as Vice Chairman
of the Bank. During his full-time employment,
Employee shall receive a per annum salary of $185,000, payable
in equal installments in arrears on the last day of the month.
During the term of the Employee's employment under this
Agreement, the Bank's Board of Directors periodically will
review and may increase (but not decrease) the Employee's base
salary rate, all in accordance with the Bank's salary
administration policies and procedures in effect from time to
time; and each change in the Base Salary amount listed in this
Section shall become the new Base Salary amount. The Bank
shall have no obligation to increase the Employee's base
salary rate at any particular time or in any particular
amount, and any such increase shall be in the sole and
absolute discretion of the Chief Executive Officer of the Bank
or other executive designated by the Board of Directors of the
Bank.
b. Bonus and Incentive Compensation. The Bank shall pay to
the Employee with respect to each fiscal year during
the term of the Employee's employment hereunder, such
cash bonus as the Chief Executive Officer the Bank or other
executive designated by the Board of Directors of the Bank
shall determine in his sole discretion; provided,
however, in no event shall this paragraph b. be deemed to
require that any such bonus be paid with respect to any such
fiscal year. In addition, and without diminution of any other
compensation or benefit provided for in this Agreement, the
Employee may be given the opportunity to participate in
certain incentive compensation plans that may be adopted by
the Bank or in such plans that may be adopted or sponsored by
the Bank's parent corporation, Anchor Financial Corporation
("Anchor"), which participation opportunity may be offered to
the Employee in the full discretion of Anchor and the Bank.
c. Expenses. The Bank, as applicable, shall reimburse the
Employee for all proper and reasonable out-of-pocket expenses
incurred by the Employee in his performance of services
hereunder, including all such expenses of travel and living
expense while away from home on business of the Bank, provided
that such expenses are incurred and accounted for in
accordance with the regular policies and procedures
established by the Bank from time to time.
d. Vacations. The Employee shall be entitled to the number of
vacation days in each calendar year, and to compensation in
respect of earned but unused vacation days, determined in
accordance with the Bank's vacation plan as applicable to the
Employee, as well as to all paid holidays provided by the Bank
to its employees.
2
<PAGE>
e. Automobile. The Bank shall provide an automobile for
Employee's use.
f. Dues. The Bank shall pay Employee's regular monthly dues to
the Country Club of South Carolina.
6. Compensation and Benefits in the Event of Termination. In the event
of the termination of the Employee's employment by the Bank or by the Employee
during the term of this Agreement, compensation and benefits shall be paid as
set forth below.
a. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated:
(i) "Cause" shall mean (A) the breach by Employee of
any material provision of this Agreement, provided that Bank
gives the Employee written notice of such failure and such
failure is not cured within thirty (30) days thereafter; (B)
the willful and continued failure by the Employee to
substantially perform his duties under this Agreement (other
than the Employee's inability to perform, with or without
reasonable accommodation, resulting from his incapacity due to
physical or mental illness or impairment), after a demand for
substantial performance is delivered to him by the Bank, which
demand specifically identifies the manner in which the
Employee is alleged to have not substantially performed his
duties; (C) the willful engaging by the Employee in misconduct
(criminal, immoral or otherwise) which is materially injurious
to the Bank, its officers, directors, shareholders, employees,
or customers, monetarily or otherwise; (D) the Employee's
conviction of a felony; or (E) the commission in the course of
the Employee's employment of an act of fraud, embezzlement,
theft or proven dishonesty, or any other illegal act or
practice, which would constitute a felony, (whether or not
resulting in criminal prosecution or conviction), or any act
or practice which the Bank shall, in good faith, deem to have
resulted in the Employee becoming unbondable under the Bank's
"banker's blanket bond."
(ii) "Change in Control" shall mean either:
(A) the acquisition, directly or indirectly, by any
"person" (as such term is defined for purposes of Section
13(d) and 14(d) of the Securities Exchange Act of 1934
("Exchange Act")), other than by the Bank, Anchor or any
subsidiary controlled by Anchor or any person so defined who
on the date of this Agreement is a director of the Bank or
Anchor, or whose shares of stock therein are treated as
"beneficially owned" (as such term is defined for purposes of
Rule 13d-3 of the Exchange Act) by any such director, of the
beneficial ownership [as such term is defined for purposes of
Section 13(d) (1) of the Exchange Act] of shares in the Bank
or Anchor which, when added to any other shares the beneficial
ownership of which is held by such acquiror, shall have fifty
percent (50%) or more of the combined voting power of the Bank
or Anchor's then outstanding voting securities; or
3
<PAGE>
(B) the occurrence of any merger, consolidation or
reorganization to which the Bank or Anchor is a party and to
which the Bank or Anchor (or an entity controlled by the Bank
or Anchor) is not a surviving entity, or the sale of all or
substantially all of the assets of the Bank or Anchor.
The merger, combination, or consolidation of the Bank with
Anchor or any other wholly owned Subsidiary of Anchor shall
not be construed as a Change in Control.
(iii) "Date of Termination" shall mean: (A) if the Employee's
employment is terminated by reason of his death, his date of
death; (B) if the Employee's employment is terminated for
Disability, thirty (30) days after Notice of Termination is
given (provided that the Employee shall not have returned to
the performance of his duties as provided under sub-paragraph
(iv) of this paragraph a; or (C) if the Employee's employment
is terminated by action of either party for any other reason,
the date specified in the Notice of Termination; provided,
however, that if within thirty (30) days after any Notice of
Termination is given, the party receiving such Notice of
Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be
the date on which the dispute is finally resolved, either by
mutual written agreement of the parties, or by a final
judgment, order or decree of a court of competent jurisdiction
(the time for appeal therefrom having expired and no appeal
having been perfected).
(iv) "Disability" shall mean the Employee's failure to
satisfactorily perform the essential functions of his office
on a full-time basis for one hundred and eighty (180)
consecutive days, with or without accommodation, by reason of
the Employee's incapacity resulting from physical or mental
illness or impairment, except where within fifteen (15) days
after Notice of Termination is given following such absence,
the Employee shall have returned to the satisfactory, full
time performance of such duties. Any determination of
Disability hereunder shall be made by the Board of Directors
of the Bank in good faith and on the basis of the certificates
of at least three (3) qualified physicians chosen by it for
such purpose, one (1) of whom shall be the Employee's regular
attending physician.
(v) "Good Reason" shall mean either:
(A) Failure by the Bank to comply with any material
provision of this Agreement, provided that the
Employee gives the Bank (as applicable) written
notice of such failure and such failure is not cured
within thirty (30) days thereafter;
(B) Failure by the Bank to obtain the assumption of
its obligations under this Agreement by any
successor;
4
<PAGE>
(C) The failure by the Bank to comply with Section 5
of this Agreement; or
(D) Any purported termination of the Employee's
employment by action of the Bank which is not
effected pursuant to a Notice of Termination.
(vi) "Notice of Termination" shall mean a written notice which
shall include the specific termination provision under this
Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis
for termination of the Employee's employment. Any purported
termination of the Employee's employment hereunder by action
of either party shall be communicated by delivery of a Notice
of Termination to the other party.
(vii) "Retirement" shall mean termination of the Employee's
employment pursuant to the Bank's regular retirement policy
applicable to the position held by the Employee at the time of
such termination.
b. Termination For Cause, Disability, Death, Retirement or Other
Than for Good Reason. In the event the Employee's employment
hereunder is terminated (A) by action of the Bank for Cause
prior to or coincident with or following a Change in Control;
(B) by action of the Employee not for Good Reason, at any
time; or (C) by reason of the Employee's death, Disability or
Retirement, the following compensation and benefits shall be
paid and provided the Employee (or his beneficiary):
(1) The Employee's base salary provided under paragraph a. of
Section 5 through the last day of the month in which the Date
of Termination occurs, at the annual rate in effect at the
time Notice of Termination is given (or death occurs), to the
extent unpaid prior to such Date of Termination;
(2) Any bonus under paragraph b. of Section 5 which has been
awarded prior to the Date of Termination, to the extent unpaid
prior to such date;
(3) Any benefits to which the Employee (or his beneficiary)
may be entitled as a result of such termination, under the
terms and conditions of the pertinent plans or arrangements in
effect at the time of the Notice of Termination under
paragraph d. of Section 5; and
(4) Any amounts due the Employee with respect to paragraph c.
or paragraph e. of Section 5 as of the Date of Termination.
c. Termination for Good Reason or Other Than For Cause,
Disability, Death or Retirement. In the event the
Employee's employment hereunder is terminated other than
by reason of the Employee's death, Disability or
Retirement, and (A) by action
5
<PAGE>
of the Employee coincident with, following, or prior to a
Change in Control and for Good Reason, or (B) by
action of the Bank coincident with, following or prior
to a Change in Control and other than for Cause, the Bank
shall pay and provide the Employee the compensation and
benefits stipulated under subparagraph b. immediately
above; provided, however, in addition thereto and without
setoff, the following compensation shall be paid and
provided the Employee:
For the remaining Initial Term or one year term thereafter of
this Agreement, (i) the Bank shall continue to pay to the
Employee the Base Salary provided for in Section 5.a. above
(at the Employee's Base Salary rate provided for in that
Section immediately prior to the Date of Termination) and,
(ii) at its sole cost and expense, the Bank will continue to
provide the Employee with the insurance coverages he would
have had had he remained as an employee of the Bank or with
insurance coverages substantially equivalent thereto, or, at
the Bank's request (and so long as such coverage reasonably
can be obtained by the Employee himself), the Employee will
obtain substantially equivalent insurance coverages from
insurance companies chosen by him and the Bank promptly will
reimburse Employee for premium costs actually incurred by him
from time to time for the same. If termination pursuant to
this section c. shall occur during the last twelve months of
the term of this Agreement, the Employee shall be entitled to
receive the Base Salary pursuant to section 5a. and the
insurance benefits discussed immediately above for a period of
twelve months subsequent to such termination. The Base Salary
shall continue to be payable in equal installments in arrears
on the last day of the month; provided, however if the payment
under this section, either alone or together with other
payments which the Employee has the right to receive from the
Bank, would constitute a "parachute payment" (as defined in
Section 280G of the Internal Revenue Code of 1986, as amended
(the "Code"), such severance payment shall be reduced to the
largest amount as will result in no portion of the severance
payment under this Section 6 being subject to the excise tax
imposed by Section 4999 of the Code or the disallowance of a
deduction to the Bank under Section 280G(a) of the Code.
7. Confidentiality.
a. The Employee recognizes that his activities on behalf of the
Bank require considerable responsibility and trust. Relying on
the ethical responsibilities and undivided loyalty of the
Employee, the Bank has and will and Anchor and its
Subsidiaries will in the future entrust the Employee with
highly sensitive confidential, restricted and proprietary
information involving Confidential Information (as defined
below).
b. For the purposes of this Agreement, "Confidential Information"
means any data or information, that is material to the Bank,
Anchor or the Subsidiaries of Anchor, and
6
<PAGE>
not generally known by the public. To the extent consistent
with the foregoing definition, Confidential Information
includes (without limitation):
i. the sales records, circulation, profit and
performance reports, pricing manuals, training
manuals, selling and pricing procedures, financing
methods of the Bank, Anchor or the Subsidiaries of
Anchor, and all other business records of the Bank,
Anchor or the Subsidiaries of Anchor;
ii. the identities of the customers of the Bank, Anchor
or the Subsidiaries of Anchor, their specific
demands, and their current and anticipated
requirements for the products of the Bank, Anchor or
the Subsidiaries of Anchor.
iii. the business plans and internal financial statements
and projections of the Bank, Anchor or the
Subsidiaries of Anchor; and
iv. the specifics of any specialized products or services
of the Bank, Anchor or the Subsidiary of Anchor may
offer or provide to its customers.
c. The Employee recognizes the proprietary and sensitive
nature of the Bank, Anchor and its Subsidiaries' Confidential
Information. The Employee agrees to abide by all of the
Bank and Anchor's rules and procedures designed to
protect their Confidential Information and to preserve
and maintain all such information in strict confidence
during the Employee's engagement with the Bank and as long
thereafter as the Confidential Information remains, in the
sole opinion of the Bank, Anchor and its Subsidiaries,
proprietary and confidential to the Bank, Anchor and its
Subsidiaries. The Employee agrees not to use, disclose or
in any other way use or disseminate any Confidential
Information to any person not properly authorized by
the Bank, Anchor or the Subsidiaries of Anchor.
8. Return of Materials. Upon the request of the Bank, and in any event,
upon the termination of the Employee's employment, the Employee must return to
the Bank, Anchor or the Subsidiaries of Anchor and leave at the disposal
of the Bank, Anchor or the Subsidiaries of Anchor, all memoranda, notes,
records, and other documents pertaining to the business of the Bank, Anchor and
the Subsidiaries of Anchor, or the Employee's specific duties for such
entities (including all copies of such materials). The Employee must also
return to the Bank, Anchor and the Subsidiaries of Anchor, and leave at the
disposal of the Bank, Anchor and the Subsidiaries of Anchor, all materials
involving any Confidential Information of the respective entities.
9. Implementation.
a. The covenants contained herein shall be construed as covenants
independent of one another, and as obligations distinct from
any other contract between the Employee and the Bank. Any
claim the Employee
7
<PAGE>
may have against the Bank shall not constitute a defense
to enforcement by the Bank of this Agreement.
b. The covenants made by the Employee herein shall survive
termination of the Employee's employment, regardless of who
causes the termination and under what circumstances.
10. Restrictive Covenant. In consideration of the Bank's employment of
the Employee, the Employee agrees that in addition to any other limitation, for
a period of twelve (12) months after the termination of his employment
hereunder, the termination of this Agreement or the completion of Base Salary
payments pursuant to section 6.c. above, whichever is later, he will not, within
a twenty-five (25) mile radius of any operating office of Anchor or the Bank,
manage, operate or be employed by, participate in, or be connected in any manner
with the management, operation, or control of any banking business or savings
and loan business or financial services business. The Employee further agrees,
regardless of the circumstances of the termination of employment, that for a
period of twelve (12) months after the termination of his employment hereunder,
the termination of this Agreement or the completion of Base Salary payments
pursuant to section 6.c. above, he will not solicit the business or patronage,
directly or indirectly, from any customers of the Bank (or any other office of a
Subsidiary of Anchor if Employee should have been employed by and located at
such office) and the Employee will not seek to or assist others to persuade any
employee of the Bank engaged in similar work or related to the Bank's work to
discontinue employment with the Bank or seek employment or engage in any
business of the Bank. Furthermore, the Employee will not communicate to any
person, firm or corporation any information related to customer lists, prices,
secrets or other Confidential Information which he might from time to time
acquire with respect to the business of the Bank, Anchor, or its Subsidiaries,
or any of their affiliates. The Employee agrees to disclose the contents of this
Agreement to any subsequent employer for a period of twelve (12) months
following termination of his employment hereunder, the termination of this
Agreement or completion of Base Salary payments pursuant to 6.c. above,
whichever is later.
11. Remedies for Breach of Employment Contract. Irreparable harm shall be
presumed if the Employee breaches any covenant of this Agreement. The faithful
observance of all covenants in this Agreement is an essential condition to the
Employee's employment, and the Bank, Anchor and the Subsidiaries of Anchor are
depending upon absolute compliance. Damages would probably be very difficult to
ascertain if the Employee breached any covenant in this Agreement. This
Agreement is intended to protect the proprietary rights of the Bank, Anchor and
the Subsidiaries of Anchor in many important ways. In light of these facts, the
Employee agrees that any court of competent jurisdiction should immediately
enjoin any breach of this Agreement, upon the request of the Bank, Anchor and
the Subsidiaries of Anchor, and the Employee specifically releases the Bank,
Anchor, and the Subsidiaries of Anchor, from the requirement to post any bond in
connection with a temporary or interlocutory injunctive relief, to the extent
permitted by law.
12. Withholding. Any provision of this Agreement to the contrary
notwithstanding, all payments made by the Bank hereunder to the Employee or his
estate or beneficiaries shall be subject to the withholding of such amounts, if
any, relating to tax and other payroll deductions as
8
<PAGE>
the Bank may reasonably determine should be withheld pursuant to any applicable
law or regulation. In lieu of withholding such amounts, the Bank may accept
other provisions to the end that they have sufficient funds to pay all
taxes required by law to be withheld in respect of any or all such payments.
13. Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing and shall be sufficiently
given if and when mailed in the continental United States by registered or
certified mail, or personally delivered to the party entitled thereto, at the
address stated below or to such changed address as the addressee may have given
by a similar notice:
To the Bank: Stephen L. Chryst
President and Chief Executive Officer
Anchor Financial Corporation
2002 Oak Street
Myrtle Beach, South Carolina 29577
with copy to: Ann W. Langston
Gerrish & McCreary, P.C.
700 Colonial Road, Suite 200
Memphis, Tennessee 38117
To the Employee: Chester A. Duke
905 Evans Road
Marion, SC 29571
with copy to:
------------------------------------
------------------------------------
------------------------------------
------------------------------------
14. Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be enforceable by the Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Employee should die while any amount would still
be payable to him hereunder if he had continued to live, all such amounts,
except to the extent otherwise provided under this Agreement, shall be paid in
accordance with the terms of this Agreement to his devisee, legatee or other
designee, or if there be no such designee, to the Employee's estate.
15. Modification, Waiver or Discharge. No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by the executive and an authorized officer of
the Bank. No waiver by either party hereto at any time
9
<PAGE>
of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set forth in this Agreement; provided, however, that this Agreement shall no
supersede or in any way limit the right, duties or obligations that the
Employee or the Bank may have under any other written agreement between
such parties, under any employee pension benefit plan or employee welfare
benefit plan as defined under the Employee Retirement Income Security Act of
1974, as amended, and maintained by the Bank, or under any established
personnel practice or policy applicable to the Employee.
16. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
South Carolina. Any arbitration, proceeding or litigation pertaining to this
Agreement shall be located in Horry County, South Carolina or such other
location as determined by the Bank.
17. Validity. The invalidity or unenforceability of any provision of this
Agreement shall not effect the validity or enforceability of any other provision
of this Agreement, which latter shall remain in full force and effect.
18. Miscellaneous.
a. No Right of Set-Off, Etc. There shall be no right of set-off
or counterclaim, in respect of any claim, debt or obligation
against any payments to the Employee, his beneficiaries or
estates provided for in this Agreement.
b. No Adequate Remedy At Law. The Bank and the Employee recognize
that each party will have no adequate remedy at law for breach
by the other of any of the agreements contained herein and, in
the event of any such breach, the Bank and the Employee hereby
agree and consent that the other shall be entitled to decree
of specific performance, mandamus, or other appropriate remedy
to enforce performance of such agreements.
c. Non-Assignability. No right, benefit, or interest hereunder
shall be subject to anticipation, alienation, sale,
assignment, encumbrance, charge, pledge, hypothecation, or
setoff in respect of any claim, debt or obligation, or
to execution, attachment, levy or similar process, or
assignment by operation of law. Any attempt, voluntary or
involuntary, to effect any action specified in the
immediately preceding sentence shall, to the full extent
permitted by law, be null, void and of no effect. Any of the
foregoing to the contrary notwithstanding, this provision
shall not preclude the Employee from designating one or more
beneficiaries to receive any amount that may be payable after
his death, and shall not preclude the legal representative of
the Employee's estate from assigning any right hereunder to
the
10
<PAGE>
person or persons entitled thereto under his will or, in
the case of intestacy applicable to his estate.
19. Enforcement of Agreement; Attorneys' Fees. In the event litigation is
commenced by the Employee against the Bank in seeking to obtain or enforce any
right, benefit or payment under this Agreement or to enforce any obligation of
the Bank described herein, then, provided the Employee shall prevail in such
litigation, the Bank shall be obligated to pay all reasonable expenses
(including without limitation all reasonable attorneys' fees and court costs)
paid or incurred by the Employee in connection with such litigation.
20. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, the Employee and the Bank (by action of its duly
authorized officer) have executed this Agreement on the date first above
written.
THE ANCHOR BANK
ATTEST: /s/ Rhonda P. Housand By: /s/ Stephen L. Chryst
Name: Stephen L. Chryst
Title: President & Chief Executive Officer
EMPLOYEE
ATTEST: /s/ M.E. Freeman /s/ Chester A. Duke
Chester A. Duke
11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 9
<S> <C>
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1988
<PERIOD-TYPE> 9-MOS
<CASH> 40,107,904
<INT-BEARING-DEPOSITS> 2,717,662
<FED-FUNDS-SOLD> 8,960,000
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<TOTAL-ASSETS> 1,011,912,326
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<INTEREST-TOTAL> 59,691,148
<INTEREST-DEPOSIT> 24,608,170
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<INTEREST-INCOME-NET> 32,137,621
<LOAN-LOSSES> 2,372,000
<SECURITIES-GAINS> 19,852
<EXPENSE-OTHER> 27,091,694
<INCOME-PRETAX> 9,033,065
<INCOME-PRE-EXTRAORDINARY> 9,033,065
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,328,000
<EPS-PRIMARY> 0.79
<EPS-DILUTED> 0.79
<YIELD-ACTUAL> 4.63
<LOANS-NON> 817,270
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