SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT T0 SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
or the quarterly period ended June 30, 1996
Commission File Number - 33-60742
GUARANTY STATE BANCORP
----------------------
(Exact name of small business issuer as specified in its charter)
North Carolina 56-1816641
- - ------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
302 West Main Street
Durham, North Carolina 27701
-----------------------------
(Address of principal executive offices)
Telephone: (919) 688-9361
---------------------------
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such 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.
Common Stock 878,275
- - ----------------------- ----------------------------
Class Outstanding at June 30, 1996
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
The Statements of Financial Condition, Results of Operations and Cash
Flows have been included as Attachments to this report.
(1) Balance Sheets page 3
(2) Statements of Income page 4
(3) Consolidated Statement of Cash Flow page 5
(4) Statement of Changes in
Capital Accounts page 6
(5) Loan Loss Reserve Analysis page 7
(6) Net Yield Analysis page 8
(7) Notes to Consolidated
Financial Statements page 9
Item 2. Management Discussion and Analysis page 10
and Results of Operations
-2-
<PAGE>
GUARANTY STATE BANCORP
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Guaranty State Bancorp and Subsidiary
- - -------------------------------------------------------------------------------
06-30 06-30 12-31
1996 1995 1995
Unaudited Unaudited Audited
ASSETS
<S> <C> <C> <C>
Cash and due from banks $3,453,820 $3,042,288 $2,575,816
Federal funds sold 1,692,000 4,635,000 655,000
Investment securities available for sale 21,173,497 18,045,215 18,665,226
Loans held for sale 940,100 142,318 210,700
Loans: 65,773,500 54,492,352 59,179,216
Less allowance for possible loan losses 1,195,472 1,059,775 1,102,709
----------- ----------- -----------
Net loans 65,518,128 53,574,895 58,287,207
Federal Home Loan Bank of Atlanta stock 305,500 0 226,700
Premises and equipment 1,768,309 1,739,852 1,682,180
Interest receivable 716,645 540,230 644,057
Other assets 448,515 759,160 321,800
----------- ----------- -----------
Total assets $95,076,414 $82,336,640 $83,057,986
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $11,064,546 $9,852,248 $10,026,166
Interest-bearing demand 4,449,727 4,897,543 4,150,956
Savings 24,038,759 18,251,144 18,753,457
Large denomination certificates of deposit 12,911,293 14,024,008 13,665,346
Other time 27,970,600 25,388,741 26,027,458
----------- ----------- -----------
Total deposits 80,434,925 72,413,684 72,623,383
Federal Home Loan Bank of Atlanta
short-term borrowings 3,800,000 0 0
Interest payable 544,184 540,285 603,556
Other liabilities 164,927 136,435 156,296
----------- ----------- -----------
Total liabilities 84,944,036 73,090,404 73,383,235
Shareholders' Equity:
Common stock: $1.00 par value, 2,500,000 shares authorized;
878,275, 871,262 and 580,858 shares issued
and outstanding on 6/30/96, 12/31/95
and 6/30/95, respectively 878,275 580,858 871,262
Surplus 4,708,139 4,661,964 4,661,964
Undivided profits 4,397,288 3,876,258 3,990,771
Net unrealized gain (loss) investment securities, 148,676 127,156 150,754
----------- ----------- -----------
Total shareholders' equity 10,132,378 9,246,236 9,674,751
----------- ----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $95,076,414 $82,336,640 $83,057,986
=========== =========== ===========
</TABLE>
-3-
<PAGE>
GUARANTY STATE BANCORP
Guaranty State Bancorp and Subsidiary
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans and fees on loans $1,517,908 $1,298,502 $2,981,267 $2,475,473
Federal funds sold 27,829 49,038 44,866 103,313
Investment securities, taxable 268,291 224,349 492,073 429,476
Investment securities, non-taxable 44,871 43,411 91,626 96,828
---------- ---------- ---------- ----------
Total interest income 1,858,899 1,615,300 3,609,832 3,105,090
---------- ---------- ---------- ----------
Interest Expense:
Large denomination certificates of deposit 184,137 157,927 365,961 311,467
Other deposits 643,903 561,824 1,232,591 1,036,106
Other interest expense 53,260 0 95,296 0
---------- ---------- ---------- ----------
Total interest expense 881,300 719,751 1,693,848 1,347,573
---------- ---------- ---------- ----------
Net interest income 977,599 895,549 1,915,984 1,757,517
Provision for loan losses 36,228 42,756 70,380 85,512
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 941,371 852,793 1,845,604 1,672,005
Other income:
Service charges on deposit accounts 56,811 54,761 111,687 113,134
Other service charges, commissions and fee 44,471 43,230 86,598 65,817
Other operating income 12,700 7,800 21,708 15,600
---------- ---------- ---------- ----------
Total other income 113,982 105,791 219,993 194,551
Other expense:
Salaries 312,911 299,831 616,889 597,598
Employee benefits 58,686 61,301 116,046 104,817
Occupancy expense 67,420 64,957 138,235 124,956
Equipment and fixture expense 24,618 30,516 50,874 57,559
FDIC assessment 0 37,776 2,000 75,552
Other operating expense 186,416 136,894 331,630 280,832
---------- ---------- ---------- ----------
Total other expense 650,051 631,275 1,255,674 1,241,314
---------- ---------- ---------- ----------
Income before income taxes 405,302 327,309 809,923 625,242
Income taxes 131,187 101,857 263,682 191,625
---------- ---------- ---------- ----------
Net income 274,115 225,452 546,241 433,617
========== ========== ========== ==========
*Net income per share $0.31 $0.26 $0.62 $0.50
========== ========== ========== ==========
**Cash divdends per share $0.08 $0.07 $0.16 $0.13
========== ========== ========== ==========
**Book value per share $11.54 $10.61 $11.54 $10.61
========== ========== ========== ==========
* Earnings per share are based on weighted average number of shares outstanding
for the applicable period. 1995 earnings are adjusted for the October, 1995
stock dividend.
**1995's cash dividends and book value per share are adjusted for the October,
1995 50% stock dividend.
</TABLE>
-4-
<PAGE>
GUARANTY STATE BANCORP
CONSOLIDATED STATEMENTS OF CASH FLOWS
Guaranty State Bancorp and Subsidiary
SIX MONTHS ENDED
JUNE 30 JUNE 30
1996 1995
----------- ----------
Cash flows from operating activities:
Net income $546,241 $433,617
Adjustments to reconcile net income
to net cash provided by operations:
Depreciation and amortization 64,642 71,059
Amortization of premiums on investment
securities net of accretion discount 21,421 38,461
Changes in assets and liabilities:
Interest receivable (72,588) 58,289
Other assets (126,715) (296,258)
Interest payable (59,372) 153,811
Other liabilities 8,631 26,950
----------- ----------
Net cash (used in) provided by operating
activities 452,640 571,441
----------- ----------
Cash flows from investing activities:
Proceeds from maturity of investment
securities 4,854,075 3,489,680
Purchase of investment securities (7,566,879) (2,828,116)
Net decrease (increase) in loans (7,230,921) (5,444,038)
Capital expenditures (118,917) (30,999)
----------- ----------
Net cash (used)/provided by investing
activities (10,062,642) (4,813,473)
----------- ----------
Cash flows from financing activities:
Net increase (decrease) in deposits 7,811,542 5,943,190
Proceeds from exercise of stock options 53,188 19,672
Dividends paid (139,724) (116,172)
Proceeds from borrowed funds 3,800,000 0
Repayment of borrowed funds 0 0
Net cash (used)/provided by financing
activities 11,525,006 5,846,690
----------- ----------
Net increase (decrease) in cash and
and cash equivalents 1,915,004 1,604,658
Cash and cash equivalents at beginning
of period 3,230,816 6,072,630
----------- ----------
Cash and cash equivalents at end of period 5,145,820 7,677,288
=========== ==========
-5-
<PAGE>
GUARANTY STATE BANCORP
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY CAPITAL
Guaranty State Bancorp and Subsidiary
- - --------------------------------------------------------------------------------
Six months ended June 30
1996
<TABLE>
<CAPTION>
Unrealized
Common Stock Gain/(losses) Total
---------------- Undivided Securities Stockholders
Shares Amount Surplus Profits Available for Sale Equity
------- ------- ---------- ---------- ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1996 871,262 $871,262 $4,661,964 $3,990,771 $150,754 $9,674,751
Exercise of stock options 7,013 7,013 46,175 0 0 53,188
Net income 0 0 546,241 0 546,241
Cash dividends 0 0 (139,724) 0 (139,724)
Change in unrealized gain (loss) on
investment securities held for sale
net of income taxes 0 0 0 (2,078) (2,078)
-------- -------- ---------- ---------- -------- -----------
BALANCE JUNE 30, 1996 $878,275 $878,275 $4,708,139 $4,397,288 $148,676 $10,132,378
======== ======== ========== ========== ======== ===========
</TABLE>
-6-
<PAGE>
RESERVE FOR LOAN LOSSES
The following is an analysis of the reserve for loan losses as of the periods
indicated for Guaranty State Bank:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30 ENDED JUNE 30
1996 1995 1996 1995
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Balance, beginning $1,162,066 $908,217 $1,102,709 $947,022
Provision charged again 36,228 34,141 70,380 85,512
Recoveries 4,996 3,329 32,994 45,639
Losses charged off (7,818) (16,887) (10,611) (18,938)
---------- -------- ---------- --------
Balance, ending $1,195,472 $928,800 $1,195,472 $1,059,235
========== ======== ========== ==========
</TABLE>
-7-
<PAGE>
MONTHLY MARGIN
TABLE 1
Net Interest Income and Average Balances
<TABLE>
<CAPTION>
6 MONTH
JUNE ANNUALIZED 1996 1995
Interest Interest
Average Income/ Yield/ Average Income/ Yield/
Balance (Expense) (Cost) Balance (Expense) (Cost)
----------- ---------- ------ ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Interest earning assets:
Taxable investment securities (1) $15,573,851 $1,012,273 6.50% $13,832,261 $899,926 6.51%
Nontaxable investment securities (1) 3,750,183 298,550 7.96% 3,907,670 315,503 8.07%
Federal Home Loan Bank Stock 296,603 19,553 6.59% 143,820 0 0.00%
Federal Funds sold and securities
purchased with agreements to resell 1,752,828 90,223 5.15% 3,557,631 206,624 5.81%
Loans (2) 63,999,290 5,993,863 9.37% 51,833,316 4,992,530 9.63%
----------- ---------- ----------- ---------
Total interest earning assets 85,372,755 7,414,462 73,274,698 6,414,482
----------- ---------- ----------- ---------
Average yield on interest earning assets 8.68% 8.75%
Noninterest earning assets:
Cash and due from banks 2,142,118 2,240,049
Premises and equipment 1,703,393 1,760,349
Allowance for loan losses (1,155,350) (991,245)
Interest receivable and other 1,435,903 1,035,976
Total noninterest earning assets 4,126,064 4,045,129
----------- -----------
Total assets $89,498,819 $77,319,827
=========== ===========
Interest bearing liabilities:
Demand deposits 3,937,920 80,405 2.04% $ 4,744,383 94,664 2.00%
Savings deposits 21,695,618 830,339 3.83% 17,946,443 845,552 4.71%
Time deposits 39,753,068 2,303,928 5.80% 36,196,468 1,978,917 5.47%
FHLB Borrowings 3,378,198 188,498 5.58%
----------- ---------- ----------- ---------
Total interest bearing liabilities 68,764,804 3,403,170 58,887,294 2,919,133
----------- ---------- ----------- ---------
Average cost on interest bearing
liabilities 4.95% 4.96%
Noninterest bearing liabilities:
Demand deposits 10,087,870 9,003,263
Interest payable and other 754,260 541,737
----------- -----------
Total noninterest bearing liabilities 10,842,130 9,545,000
----------- -----------
Total liabilities 79,606,934 68,432,294
----------- -----------
Stockholders' equity 9,891,885 8,887,533
----------- -----------
Total liabilities and stockholders'
equity $89,498,819 $77,319,827
=========== ===========
Net interest income $4,011,292 $3,495,349
========== ==========
Net yield on interest earning assets (margin) 4.70% 4.77%
Interest rate spread (earning asset yield minus
interest-bearing liability rate) 3.74% 3.80%
</TABLE>
(1) Tax exempt income on investments and the related yield are shown on a fully
taxable equivalent basis computed using the Federal statutory tax rate of 34%
and the state tax rate of 7%.
(2) For purposes of calculating loan yield, average loan balances include
nonaccrual loans and are net of allowance for loan losses.
-8-
<PAGE>
GUARANTY STATE BANCORP AND SUBSIDIARY
Notes to Consolidated Financial Statement
1. These financial statements have been prepared in accordance with
instructions to Form 10-QSB and therefore, do not include information of
footnotes necessary for a fair presentation of financial position, results
of operations and statement of cash flows in conformity with generally
accepted accounting principles. However, all adjustments which are in the
opinion of management necessary for a fair presentation have been included.
All adjustments are of a normal recurring nature.
The accounting and reporting policies of Guaranty State Bancorp ("GSB" or
the "Company") follow generally accepted accounting principles and general
practices within the financial services industry. The consolidated
financial statements of GSB, a bank holding company incorporated under the
laws of the State of North Carolina, include the accounts of Guaranty State
Bank ("the Bank"), its wholly owned subsidiary. All significant
intercompany transactions have been eliminated.
Statement of Financial Accounting Standards No. 119 (SFAS No. 119),
"Disclosure about Derivative Financial Instruments and Fair Value of
Financial Instruments", has been issued and is effective for fiscal years
beginning after December 15, 1995. As SFAS No. 119 relates only to
disclosure issues, no impact on the financial position of the Company is
expected upon adoption.
-9-
<PAGE>
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS AND
RESULTS OF OPERATIONS
Guaranty State Bank's tradition of record earnings and asset growth
continued in the second quarter of 1996. Compared to second quarter 1995,
earnings grew by 21.6% and assets at the end of the period increased by 15.4%.
Net income for the current quarter was $274,115 compared to $225,452 for
the second quarter in the prior year. For the six months ended June 30, 1996,
net income was $546,241, a 26.0% increase over the first six months of 1995.
Earnings per share for the first half of 1996 were $.62 compared to $.50 in
1995.
Asset growth continued at a brisk pace throughout 1996. At June 30, 1996,
total assets were $95.0 million, compared to $82.3 million a year ago. Loans
outstanding grew by 20.7% to total $65.8 million. Deposits increased by 11.1%
to total $80.4 million. Guaranty's reserve for possible loan losses remained
strong at 1.79% of loans outstanding, although the expense for loan loss
provision decreased by 17.7% in 1996 over the same period in 1995. Other
assets include treasurer's checks in a suspense file for loans pending closing
at attorney's offices. This amount varies greatly from quarter to quarter,
depending on the number of loans in process at the end of each quarter.
Guaranty's return on average assets is among the strongest in its group of
peer banks. Annualized at June 30, 1996, the return on average assets was 1.22%
compared to 1.12% at June 30, 1995. Return on average equity was 11.04%
annualized, compared to 9.76% for 1995. Noninterest income increased by 13.1%
for the first half of the year, resulting from increased volume of mortgage
loans sold to correspondents and increased rental income. Reduction in
premiums paid to the Federal Deposit Insurance Corporation contributed to
noninterest expense increasing by only 1.6% over the prior year.
These results are very satisfactory. In Guaranty's strong local economy
management looks forward to a promising second half of the year. The Bank
continues to experience quality loan growth and recent deposit advertising
campaigns have generated excellent response.
On July 1, 1996, Guaranty State Bancorp paid shareholders of record as of
June 14, 1996, a quarterly dividend of $.08 per share, a 20.0% increase over
that paid through the same period last year.
Management efforts remain focused on building shareholder value through
growth in quality assets and deposits.
-10-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings involving the Company.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
The following items were submitted to a vote of security holders
through solicitation of proxies for the regular annual meeting of
shareholders which was held on April 23, 1996.
1. Election of Directors for a three-year term ending 1999.
Votes Votes
For Against
------- -------
a. Robert F. Baker 732,240 0
b. B. W. Harris, III 731,940 300
c. Philip H. Pearce 628,522 103,718
2. Ratification of Coopers and Lybrand, independent public
accountants, to audit the Corporation's books for fiscal 1996.
Votes For Votes Against Abstain
--------- ------------- -------
625,274 0 106,966
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial Data Schedule
All other items are omitted due to the absence of the conditions
under which they are required or because the information is included
in Part I.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Guaranty State Bancorp
Date: August 6, 1996 By: /s/ Charles J. Stewart
------------------------------
Charles J. Stewart
President and CEO
Date: August 6, 1996 By: /s/ Jean R. Turner
------------------------------
Jean R. Turner
Senior Vice President
-12-
<PAGE>
EXHIBITS
ITEM 6(a)
Quarterly Report on Form 10-QSB
For the quarter ended June 30, 1996
Exhibit Number: Exhibit Description
- - --------------- --------------------------------------------------------
27 Financial Data Schedule
-13-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF GUARANTY STATE BANCORP FOR THE SIX MONTHS ENDED JUNE 30,
1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 5,145,820
<SECURITIES> 21,478,998
<RECEIVABLES> 65,518,128
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,165,160
<PP&E> 1,768,309
<DEPRECIATION> 0
<TOTAL-ASSETS> 95,076,414
<CURRENT-LIABILITIES> 84,944,036
<BONDS> 0
0
0
<COMMON> 10,132,378
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 95,076,414
<SALES> 0
<TOTAL-REVENUES> 3,830,568
<CGS> 0
<TOTAL-COSTS> 1,598,552
<OTHER-EXPENSES> 1,254,931
<LOSS-PROVISION> 70,380
<INTEREST-EXPENSE> 95,296
<INCOME-PRETAX> 809,923
<INCOME-TAX> 263,682
<INCOME-CONTINUING> 546,241
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 546,241
<EPS-PRIMARY> 0.62
<EPS-DILUTED> 0.62
</TABLE>
