<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- --------------------------
Commission file number 0-26612
----------------------------------------------------
HAYWOOD BANCSHARES, INC.
---------------------------- ------------------------
(Exact name of registrant as specified in its charter)
North Carolina 56-1918006
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
505 North Main Street, Waynesville, North Carolina 28786
--------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(704) 456-9092
--------------------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
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 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
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
As of May 1, 1996, shares of common stock outstanding were 1,202,556.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Financial Condition
<TABLE>
<CAPTION>
March 31, December 31,
Assets 1996 1995
------ ------------- ------------
(Unaudited)
<S> <C> <C>
Cash on hand and in banks E$1,243,331 1,467,946
Interest-bearing balances in other banks 423,980 816,890
Federal funds sold 379,728 440,248
Investment securities (market value of $17,667,901
and $17,113,475, respectively) 17,700,000 17,100,000
Mortgage-backed securities (market value of $1,366,062
and $1,488,416, respectively) 1,368,510 1,419,707
Loans receivable (net of allowance for loan losses
of $708,547 and $703,547, respectively) 106,328,452 104,018,911
Real estate acquired in settlement of loans 1,834,567 1,834,567
Federal Home Loan Bank stock, at cost 1,512,200 1,512,200
Premises and equipment 1,785,630 1,827,077
Other assets 878,524 799,417
Goodwill 819,405 832,530
------------ ------------
$134,274,327 132,069,493
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Deposit accounts:
Noninterest-bearing $ 122,622 122,427
Interest-bearing, including $12,173,532 and $10,754,929,
respectively, of time deposits for $100,000 or more 109,444,749 108,640,828
------------ ------------
109,567,371 108,763,255
Note payable 1,000,000 -
Accrued expenses and other liabilities 2,060,144 1,889,969
----------- ------------
Total liabilities 112,627,515 110,663,224
----------- ------------
ESOP stock subject to put option 2,470,355 2,470,355
Stockholders' equity:
Serial preferred stock, $1.00 par value,
5,000,000 shares authorized; no shares
issued or outstanding - -
Common stock, $1.00 par value, 10,000,000
shares authorized; 1,289,072 and 1,287,372
shares issued and outstanding, respectively 1,289,072 1,287,372
Additional paid-in capital 4,837,894 4,798,452
Retained income, substantially restricted 16,024,491 15,825,090
ESOP stock subject to put option, 175,000
common shares at $17 per share (2,975,000) (2,975,000)
------------ ------------
Total stockholders' equity 19,176,457 18,935,914
------------ ------------
$134,274,327 132,069,493
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three months ended March 31
(Unaudited)
----------------------------------
<S> <C> <C>
1996 1995
--------------- ---------------
Interest income:
Loans $2,165,209 $2,048,740
Investment securities-U.S. Government agencies 239,942 288,175
Mortgage-backed securities 29,700 34,957
Interest-bearing balances in other banks 6,545 7,287
Federal funds sold 8,249 5,211
Other 27,259 27,014
---------- ----------
Total interest income 2,476,904 $2,411,384
---------- ----------
Interest expense:
Deposits, including $133,332 in 1996 and
$119,100 in 1995, on time deposits for
$100,000 or more 1,264,386 1,129,279
Other borrowed money - 3,215
----------- ----------
Total interest expense 1,264,386 1,132,494
---------- ----------
Net interest income 1,212,518 1,278,890
Provision for loan losses 5,000 5,000
---------- ----------
Net interest income after provision
for loan losses 1,207,518 1,273,890
---------- ----------
Other income:
Insurance income, net 37,394 33,791
Service charges on deposits 21,234 13,579
Rental income 11,491 15,025
Real estate operations, net 107,802 57,927
Other income 9,923 10,067
---------- ----------
Total other income, net 187,844 130,389
---------- -----------
General and administrative expenses:
Salaries and employee benefits 462,621 413,284
Occupancy and equipment 98,787 106,628
Federal and other insurance premiums 71,615 68,699
Amortization of goodwill 13,125 13,125
Other expenses 156,222 189,639
---------- ----------
Total general and administrative expenses 802,370 791,375
---------- ----------
Income before income taxes 592,992 612,904
Income taxes 222,000 231,000
---------- ----------
Net income $ 370,992 381,904
========== ==========
Per share amounts-Net income $.29 .30
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Three Months ended March 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Additional ESOP Stock Total
Common Paid-in Retained Subject to Stockholders'
Stock Capital Income Put Option Equity
----------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $1,287,372 4,798,452 15,825,090 (2,975,000) 18,935,914
Stock options exercised 1,700 7,863 - - 9,563
Net income - - 370,992 - 370,992
Cash dividends declared on
common stock, $.13 per share - - (167,579) - (167,579)
Principal repayment of
ESOP debt - 15,600 - - 15,600
Release and allocation of ESOP
shares - 15,979 (4,012) - 11,967
----------- --------- ---------- ---------- -----------
Balance at March 31, 1996 $ 1,289,072 4,837,894 16,024,491 (2,975,000) 19,176,457
=========== ========= ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three months ended March 31
(Unaudited)
---------------------------
<S> <C> <C>
1996 1995
------------ ------------
Cash flows from operating activities:
Net income $370,992 381,904
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 5,000 5,000
Accretion of discount on loans (10,500) (10,500)
Depreciation 47,412 48,443
Amortization of goodwill 13,125 13,125
Decrease in allowance for uncollected interest (10,492) (7,385)
Increase in other assets (79,107) (107,052)
Increase in accrued expenses and other liabilities 187,521 264,827
Increase in deferred loan fees 22,233 6,829
------------ ------------
Net cash provided by operating activities 546,184 595,191
------------ ------------
Cash flows from investing activities:
Purchases of investment securities (2,400,000) (300,000)
Proceeds from maturities of investment securities 1,800,000 900,000
Principal collected on mortgage-backed securities 51,197 65,255
Loan principal repayments (originations), net (2,315,782) (772,512)
Purchases of premises and equipment (5,965) (3,020)
------------ ------------
Net cash used in investing activities (2,870,550) (110,277)
------------ ------------
Cash flows from financing activities:
Net increase (decrease) in certificates of deposit 238,614 1,993,018
Net increase (decrease) in other deposits 565,502 (2,035,008)
Proceeds from issuance of long-term debt 1,000,000 -
Cash dividends paid (167,358) (153,687)
Proceeds from issuance of common stock upon
exercise of stock options 9,563 9,281
------------ ------------
Net cash used in financing activities 1,646,321 (186,396)
------------ ------------
Net increase (decrease) in cash and cash equivalents (678,045) 298,518
Cash and cash equivalents at beginning of period 2,725,084 1,707,898
------------ ------------
Cash and cash equivalents at end of period $2,047,039 2,006,416
============ ============
</TABLE>
(Continued)
5
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
Three Months ended March 31
(Unaudited)
-----------------------------
1996 1995
------------- ------------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,288,816 1,132,494
Income taxes 44,000 45,798
=========== ============
Supplemental schedule of noncash investing
and financing activities:
Dividends payable $167,579 153,885
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1996
(Unaudited)
(1) Presentation of Financial Statements
------------------------------------
The unaudited consolidated financial statements within Item 1 include, in
the opinion of management of Haywood Bancshares, Inc., all adjustments
(consisting only of normal recurring adjustments) necessary for fair
presentation of such consolidated financial statements for the periods
indicated.
(2) Summary of Significant Accounting Policies
------------------------------------------
For a description of the significant accounting and reporting
policies, see note (1) in the notes to the December 31, 1995
consolidated financial statements of the 1995 annual report.
(3) Cash and Cash Equivalents
-------------------------
Cash and cash equivalents include cash on hand and in banks, interest-
bearing balances in other banks, and federal funds sold.
Generally, cash and cash equivalents are considered to have
maturities of three months or less.
(4) Allowance for Loan Losses
-------------------------
The following is a reconciliation of the allowance for loan losses for
the three months ended March 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- -------
<S> <C> <C>
Balance at beginning of period $703,547 683,547
Provision for loan losses 5,000 5,000
-------- --------
Balance at end of period $708,547 688,547
======== ========
</TABLE>
(5) Stock Options
-------------
During the three month period ended March 31, 1996, 1,700 incentive
stock options were exercised at an option price of $5.63 per share.
(6) Formation of Bank Holding Company
---------------------------------
Effective on February 28, 1995, Haywood Bancshares, Inc. (the Holding
Company) was incorporated, solely for the purpose of becoming the
holding company for Haywood Savings Bank, Inc., SSB. The Holding
Company's Registration Statement on Form S-4 became effective with the
Securities and Exchange Commission on April 7, 1995. The stockholders of
Haywood Savings Bank, Inc., SSB approved the Agreement and the Plan of
Reorganization on May 2, 1995 and the reorganization was completed on
June 30, 1995.
The comparative three months ended March 31, 1995 financial statements
presented represent the financial statements for the wholly-owned
subsidiary, Haywood Savings Bank, Inc., SSB.
7
<PAGE>
HAYWOOD BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(7) Subsequent Event
----------------
In April and May 1996, Haywood Bancshares, Inc. repurchased 86,516
shares of common stock at $18 per share in connection with the
stock repurchase program announced on August 8, 1995 which
permits repurchases of up to 10% of the 1,287,372 outstanding
shares. Haywood Bancshares, Inc. will retire all repurchased
shares.
(8) Other Accounting Changes
------------------------
Effective January 1, 1996 the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," which requires that long-lived assets and
certain identifiable intangibles to be held and used by an entity
be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may
not be recoverable. The adoption of the Standard had no impact
on the Corporation's financial statements.
The Financial Accounting Standards Board (FASB) has issued SFAS No.
122, "Accounting for Mortgage Servicing Rights," which requires
that a mortgage banking enterprise recognize as separate assets
the rights to service mortgage loans for others, however, those
servicing rights are acquired. The Corporation adopted SFAS No.
122 effective January 1, 1996. As the Corporation does not
generally originate loans held for sale, the adoption of SFAS No.
122 has had no affect on the financial statements.
The FASB has also issued Standard No. 123, "Accounting for Stock-Based
Compensation," which requires that the fair value of employee
stock-based compensation plans be recorded as a component of
compensation expense in the statement of income as of the date of
grant of awards related to such plans or that the impact of such
fair value on net income and earnings per share be disclosed on a
pro forma basis in a footnote to financial statements for awards
granted after December 15, 1994, if the accounting for such
awards continues to be in accordance with Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees"
(APB 25). The Corporation will continue such accounting under
the provisions of APB 25. This Standard is required for fiscal
years beginning after December 15, 1995.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Comparison of Financial Condition and Operating Results as of and for
---------------------------------------------------------------------
the Three Months ended March 31, 1996 and 1995
----------------------------------------------
Net income for the first quarter of 1996 declined to $370,992, or $0.29 per
share, from $381,904 or $0.30 per share, during the first quarter of 1995.
Average shares outstanding were 1,287,939 and 1,281,272 during the first
quarters of 1996 and 1995, respectively. The decline in net income was
attributable to a decrease in net interest income and an increase in general
and administrative expenses which offset an increase in other income and a
decrease in income taxes.
Total interest income in 1996 was $2,476,904, a $65,520 increase from the
same period in 1995. The primary reason for the change was an increase in
the average yield on interest earning assets (see table below) along with an
increase in the balance of average interest earning assets of approximately
$2.8 million, or 2.2%. Interest expense in 1996 increased from 1995 by
$131,892, or 11.6%, due to an increase in the average rate on interest
bearing liabilities (see table below) and offset partially by an approximate
$1.6 million, or 1.5%, decrease in the average balance of interest bearing
liabilities. The overall net effect of these changes was a $66,372 decrease
in net interest income before provision for loan losses and a decrease in the
interest rate spread between interest earning assets and interest bearing
liabilities from 3.62% in 1995 to 3.10% in 1996.
Other income increased $57,455, or 44.1%, in 1996 compared to the same period
in 1995 primarily as a result of an increase in net real estate operations,
which relates to net rental income from a significant piece of real estate
owned.
General and administrative expenses increased $10,995, or 1.4%, in 1996
compared to 1995. Increases were experienced in salaries and employee
benefits (due mainly to annual salary increases) and federal and other
insurance premium expense. Offsetting these increases were decreases in
occupancy and equipment expense and miscellaneous other expenses.
As a result of these and other factors, income before income taxes decreased
$19,912, or 3.2%, in 1996 versus 1995. Income tax expense of $222,000 during
the period resulted in an effective income tax rate of 37.4% compared to
37.7% in 1995.
Haywood Savings' loan portfolio increased by approximately $2.3 million
during the three months ended March 31, 1996. Loan originations for the
period were approximately $8 million. For the same period in 1995, loan
originations were approximately $6.5 million and the loan portfolio increased
by approximately $779,000.
Comparative yields, costs and spreads for the respective periods are as
follows:
<TABLE>
<CAPTION>
Three Months Twelve Months
ended At ended
March 31, March 31, December 31,
1996 1995 1996 1995
----- ------------ --------- --------------
<S> <C> <C> <C> <C>
Average yield on interest earning assets 7.74% 7.70 7.57 7.86%
Average rate on interest bearing liabilities 4.64 4.08 4.93 4.54
---- ---- ---- ----
Asset/liability spread 3.10% 3.62 2.64 3.32%
==== ==== ==== ====
</TABLE>
9
<PAGE>
Asset Quality
-------------
Haywood Bancshares' allowance for loan losses as a percentage of outstanding
loans remained stable at .66% at March 31, 1996 compared to .67% at December
31, 1995. At March 31, 1996, nonaccrual loans were 1,456,000 compared to
$1,285,000 at December 31, 1995. There were no charge-offs during the three
month periods ended March 31, 1996 and 1995. Management recorded provisions
for loan losses of $5,000 for the three month periods ended March 31, 1996
and 1995. Management remains conscious of the judgmental nature of the
allowance for loan losses and the need for periodically evaluating the risk
inherent in the loan portfolio.
Liquidity
---------
Haywood Bancshares' asset-liability management policy is to maintain and
enhance the net interest income and provide adequate liquidity to meet
continuing loan demand, withdrawal requirements, and pay for normal operating
expenses. Liquidity is primarily provided by the ability to attract
deposits, maturities in the investment portfolio, loan repayments, and
current earnings.
At March 31, 1996, Haywood Bancshares had approximately $19.7 million in
cash, interest bearing balances in other banks, federal funds sold, and
investment securities. Management believes that the level of liquidity at
March 31, 1996, is adequate and in compliance with regulatory requirements.
Capital Resources
-----------------
Haywood Savings must comply with regulatory capital requirements established
by the FDIC. At March 31, 1996 Haywood Savings' leverage capital ratio (Tier
I Capital less certain intangible assets to total assets) was 13.67%. The
FDIC has not advised Haywood Savings of any specific leverage ratio
applicable to it. Also, Haywood Savings exceeds the minimum FDIC
requirements for total risk-based capital (8%). The Holding Company must
comply with FRB capital requirements which are substantially the same.
Regulatory Matters and Contingencies
------------------------------------
Various proposals are being considered by the United States Congress
concerning a possible merger of the Bank Insurance Fund (BIF) and the Savings
Association Insurance Fund (SAIF). Central to that discussion is the
recapitalization of the SAIF prior to such a merger, and most of the
proposals mandate a special one-time assessment of SAIF-insured deposits. As
of March 31, 1995, the proposed measurement date, the Bank had total SAIF
deposits of approximately $110 million. While a final assessment rate is yet
to be determined, proposals have ranged up to $0.85 per $100 of SAIF-insured
deposits. Due to the uncertainty as to which, if any, of the various
proposals will be adopted and the ultimate amount of the assessment to be
levied, the impact of the proposals and the assessment is impossible to
predict with certainty at this time.
Management is not presently aware of any current recommendations to the
Corporation or to Haywood Savings by regulatory authorities which, if they
were to be implemented, would have a material effect on the Corporation's
liquidity, capital resources, or operations.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Not applicable.
(b) Reports on Form 8-K. During the quarter ended March 31, 1996, no
current reports on Form 8-K were filed with the Commission by
the Corporation.
11
<PAGE>
SIGNATURES
----------
Under 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.
HAYWOOD BANCSHARES, INC.
(Registrant)
Date: May 10, 1996 By: /s/ Larry R. Ammons
------------ ------------------------
Larry R. Ammons
(President and Principal
Executive Officer)
(Duly Authorized
Representative)
Date: May 10, 1996 By: /s/ Jack T. Nichols
------------ ------------------------
Jack T. Nichols
(Principal Financial Officer
and Principal Accounting
Officer)
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,243,331
<INT-BEARING-DEPOSITS> 423,980
<FED-FUNDS-SOLD> 379,728
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 19,068,510
<INVESTMENTS-MARKET> 19,033,963
<LOANS> 107,036,909
<ALLOWANCE> 708,547
<TOTAL-ASSETS> 134,274,327
<DEPOSITS> 109,567,371
<SHORT-TERM> 1,000,000
<LIABILITIES-OTHER> 4,530,499
<LONG-TERM> 0
0
0
<COMMON> 1,289,072
<OTHER-SE> 17,887,385
<TOTAL-LIABILITIES-AND-EQUITY> 19,176,457
<INTEREST-LOAN> 2,165,209
<INTEREST-INVEST> 269,642
<INTEREST-OTHER> 42,053
<INTEREST-TOTAL> 2,476,904
<INTEREST-DEPOSIT> 1,264,386
<INTEREST-EXPENSE> 1,264,386
<INTEREST-INCOME-NET> 1,212,518
<LOAN-LOSSES> 5,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 802,370
<INCOME-PRETAX> 592,992
<INCOME-PRE-EXTRAORDINARY> 370,992
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 370,992
<EPS-PRIMARY> .29
<EPS-DILUTED> .29
<YIELD-ACTUAL> 3.35
<LOANS-NON> 1,456,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 703,547
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 708,547
<ALLOWANCE-DOMESTIC> 708,547
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
