<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 1999
-------------
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: 33-95562
--------
BEACH FIRST NATIONAL BANCSHARES, INC.
-------------------------------------
(Exact name of small business issuer as specified in its charter)
South Carolina 58-1030117
------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
1550 N. Oak Street, Myrtle Beach, South Carolina 29577
------------------------------------------------------
(Address of principal executive offices)
(843) 626-2265
--------------
(Issuer's telephone number)
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 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 [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
On July 31, 1999, 735,868 shares of the issuer's common stock, par
value $1.00 per share, were issued and outstanding.
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BEACH FIRST NATIONAL BANCSHARES, INC.
MYRTLE BEACH, SOUTH CAROLINA
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998 1998
---- ---- ----
(unaudited) (unaudited) (audited)
<S> <C> <C> <C>
ASSETS
Cash and due from banks $ 1,075,619 $ 844,375 $ 970,349
Federal funds sold 1,500,000 2,080,000 2,250,000
Investment securities available for sale 8,904,424 10,866,728 11,524,689
Loans, net 26,037,884 15,266,662 20,832,341
Premises and equipment, net 1,465,587 1,552,852 1,530,005
Real estate acquired in settlement of loans 165,153 -- 288,074
Other assets 560,499 975,042 549,164
------------ ------------ ------------
Total assets $ 39,707,166 $ 31,585,659 $ 37,944,622
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits
Noninterest bearing deposits $ 5,522,841 $ 4,052,163 $ 5,199,610
Interest bearing deposits 27,600,591 20,576,209 25,935,432
------------ ------------ ------------
Total deposits 33,123,432 24,628,372 31,135,042
Other liabilities 166,392 308,920 335,924
------------ ------------ ------------
Total liabilities 33,289,824 24,937,292 31,470,966
------------ ------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, $1 par value; 10,000,000 shares
Authorized; 735,868 shares issued and outstanding 735,868 735,868 735,868
Paid-in capital 6,476,481 6,476,481 6,476,481
Retained deficit (728,632) (587,151) (740,819)
Accumulated other comprehensive income (loss) (66,375) 23,169 2,126
------------ ------------ ------------
Total shareholders' equity 6,417,342 6,648,367 6,473,656
------------ ------------ ------------
Total liabilities and shareholders' equity $ 39,707,166 $ 31,585,659 $ 37,944,622
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-2-
<PAGE> 3
BEACH FIRST NATIONAL BANCSHARES, INC.
MYRTLE BEACH, SOUTH CAROLINA
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
-------- --------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 1,077,015 $ 621,850 $ 575,756 $ 332,024
Investment securities 312,096 329,633 141,437 166,278
Federal funds sold 18,688 48,768 10,058 32,501
----------- ----------- ----------- -----------
Total interest income 1,407,799 1,000,251 727,251 530,803
INTEREST EXPENSE
Deposits and borrowings 661,109 496,898 332,186 267,640
----------- ----------- ----------- -----------
Net interest income 746,690 503,353 395,065 263,163
PROVISION FOR POSSIBLE LOAN
LOSSES 69,668 65,000 38,500 30,000
----------- ----------- ----------- -----------
Net interest income after provision
for possible loan losses 677,022 438,353 356,565 233,163
----------- ----------- ----------- -----------
NONINTEREST INCOME
Service fees on deposit accounts 65,443 65,145 37,681 37,270
Loss on sale of investment securities (23,170) (4,491) (10,313) (2,682)
Other income 16,559 14,728 8,405 7,633
----------- ----------- ----------- -----------
Total noninterest income 58,832 75,382 35,773 42,221
----------- ----------- ----------- -----------
NONINTEREST EXPENSES
Salaries and wages 303,502 258,007 155,778 130,659
Employee benefits 57,063 41,938 28,784 22,019
Supplies and printing 17,901 19,394 8,682 11,763
Advertising and public relations 22,870 16,652 11,670 7,321
Professional fees 58,367 60,608 28,391 40,621
Depreciation and amortization 102,010 97,067 51,781 48,546
Occupancy 20,785 22,615 10,832 12,008
Data processing fees 35,168 19,949 15,774 12,071
Other operating expenses 104,186 78,019 52,080 39,474
----------- ----------- ----------- -----------
Total noninterest expenses 721,852 614,249 363,772 324,482
----------- ----------- ----------- -----------
Income (loss) before income taxes 14,002 (100,514) 28,566 (49,098)
INCOME TAX EXPENSE (BENEFIT) 1,815 (21,000) 4,864 (9,800)
----------- ----------- ----------- -----------
Net income (loss) $ 12,187 $ (79,514) $ 23,702 $ (39,298)
=========== =========== =========== ===========
NET INCOME (LOSS) PER COMMON
SHARE $ .02 $ (.11) $ .03 $ (.05)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 735,868 735,868 735,868 735,868
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
<PAGE> 4
BEACH FIRST NATIONAL BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
other Total
Common stock Paid-in Retained comprehensive shareholders'
Shares Amount capital deficit income equity
------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 735,868 $ 735,868 $ 6,476,481 $ (507,636) $ 5,822 $ 6,710,535
Net loss -- -- -- (79,514) -- (79,514)
Other comprehensive loss, net of income taxes:
Unrealized gain on investment securities -- -- -- -- 12,856 12,856
Less reclassification adjustments for losses
included in net loss -- -- -- -- 4,491 4,491
-----------
Comprehensive loss -- -- -- -- -- (61,167)
------- ----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1998 735,868 $ 735,868 $ 6,476,481 $ (587,151) $ 23,169 $ 6,648,367
======= =========== =========== =========== =========== ===========
<CAPTION>
Accumulated
Other Total
Common stock Paid-in Retained Comprehensive Shareholders'
Shares Amount Capital deficit Loss equity
------ ------ ------- ------- ---- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 735,868 $ 735,868 $ 6,476,481 $ (740,819) $ 2,126 $ 6,473,656
Net income -- -- -- 12,187 -- 12,187
Other comprehensive loss, net of income taxes:
Unrealized loss on investment securities -- -- -- -- (91,671) (91,671)
Less reclassification adjustments for losses
Included in net income -- -- -- -- 23,170 23,170
-----------
Comprehensive loss -- -- -- -- -- (56,314)
------- ----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1999 735,868 $ 735,868 $ 6,476,481 $ (728,632) $ (66,375) $ 6,417,342
======= =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
-4-
<PAGE> 5
BEACH FIRST NATIONAL BANCSHARES, INC.
MYRTLE BEACH, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------
1999 1998
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ 12,187 $ (79,514)
Adjustments to reconcile net loss to net cash provided by
Operating activities:
Deferred income taxes 1,815 (21,000)
Provisions for loan losses 69,668 65,000
Depreciation and amortization 102,010 97,067
Loss on sale of investment securities 23,170 4,491
(Increase) decrease in other assets 22,237 (493,542)
Increase (decrease) in other liabilities (21,191) 153,132
----------- -----------
Net cash provided by (used in) operating activities 209,896 (274,366)
----------- -----------
INVESTING ACTIVITIES
Purchase of investment securities (1,363,470) (3,925,433)
Maturities or calls of securities 2,000,000 3,969,067
Sales of securities 1,858,454 --
Decrease (increase) in Federal funds sold 750,000 (870,000)
Increase in loans, net (5,275,211) (4,148,058)
Purchase of premises and equipment (28,799) (2,330)
Proceeds from sale of ORE 124,921 --
----------- -----------
Net cash used in investing activities (1,934,105) (4,976,754)
----------- -----------
FINANCING ACTIVITIES
Increase in deposits 1,988,390 4,556,451
Decrease in borrowed funds (158,912) --
----------- -----------
Net cash provided by financing activities 1,829,479 4,556,451
----------- -----------
Net increase (decrease) in cash and cash equivalents 105,270 (694,669)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD $ 970,349 $ 1,539,044
=========== ===========
CASH AND CASH EQUIVALENTS, END OF
PERIOD $ 1,075,619 $ 844,375
=========== ===========
CASH PAID FOR
Income taxes $ -- $ --
----------- -----------
Interest $ 650,474 $ 494,848
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
-5-
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements, and the
Company's operating performance each quarter is subject to various risks and
uncertainties that are discussed in detail in the Company's filings with the
Securities and Exchange Commission, including the "Risk Factors" section in the
Company's Registration Statement on Form S-1 (Registration Number 33-95562) as
filed with and declared effective by the Securities and Exchange Commission. The
Bank completed its second full year of operations in 1998 and has grown
substantially since opening in September 1996. Comparisons of the Bank's results
for the periods presented should be made with an understanding of the Bank's
short history.
RESULTS OF OPERATIONS
EARNINGS REVIEW
The Company's net profit was $12,187, or $0.02 per common share, for
the six months ended June 30, 1999 as compared to a loss of $79,514, or $0.11
per common share, for the six months ended June 30, 1998. The Company's net
profit was $23,702, or $.03, per common share, for the three months ended June
30, 1999 as compared to a loss of $39,298, or $.05, for the same period of 1998.
The improvement in net income reflects the Bank's continued strong growth
trends, as average earning assets increased to $34.6 million during the first
six months of 1999 from $26.2 million during the same period of 1998. The return
on average assets for the six month period ended June 30 was .06% in 1999
compared to (.55)% in 1998; the return on average equity was .39% in 1999 versus
(2.40)% in 1998.
During the first half of 1999, net interest income increased to
$746,690 from $503,353 in the same period of 1998. The growth in net interest
income resulted from an increase of $407,548 in interest income, partially
offset by an increase in interest expense of $164,211. For the three months
ended June 30, 1999, net interest income increased to $395,065 from $263,163
over the comparable period of 1998. The net interest spread was 3.11% in the
first six months of 1999 compared to 2.26% during the same period of 1998. The
net interest margin was 4.36% for the period ended June 30, 1999 compared to
3.87% for the same period of 1998.
The provision for loan losses was $69,668 for the six month period and
$38,500 for the three month period ended June 30, 1999, compared to $65,000 and
$30,000 for the six month and three month periods ended June 30, 1998. The
Company's allowance for loan losses as a percentage of its period end loans was
1.24% and 1.10% at June 30, 1999 and 1998, respectively. Net charge-offs totaled
$6,115 for the first half of 1999. In the same period of 1998, there were
$64,623 in net charge offs. The Company had $14,350 in non-performing loans at
June 30, 1999. There were no non-performing loans at June 30, 1998.
Noninterest income for the six month period ended June 30, 1999 was
$58,832, compared to $75,382 in the same period of 1998. This decline was due
primarily to an increase in the net loss realized on securities sold from $4,491
in 1998 to $23,170 in 1999. For the three month periods ended June 30, 1999 and
1998, noninterest income was $35,773 and $42,221 respectively.
Noninterest expense was $721,852 for the six month period ended June
30, 1999, which was an increase of $107,603 over the same period of 1998. For
the three months ended June 30, noninterest expense was $363,772 in 1999 and
$324,482 in 1998. These increases in noninterest expense reflect increases in
salaries, data processing fees and other expenses related to the growth of the
loans and deposits of the Bank.
NET INTEREST INCOME
The primary source of revenue for the Company is net interest income,
which is the difference between income on interest-bearing assets and interest
paid on deposits and borrowings used to support such assets. Net interest income
is determined by the rates earned on the Company's interest-earning assets and
the rates paid on its interest-bearing liabilities as well as the relative
amounts of interest-bearing assets and interest-bearing liabilities.
-6-
<PAGE> 7
Presented below are various components of assets and liabilities, interest
income and expense and yields/costs for the periods indicated.
AVERAGE BALANCES, INCOME AND EXPENSES, AND RATES
<TABLE>
<CAPTION>
For the six months ended For the six months ended
June 30, 1999 June 30, 1998
------------- -------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Federal funds sold $ 787,459 $ 18,688 4.79% $ 1,775,967 $ 48,768 5.54%
Investment securities 9,970,539 312,096 6.31% 10,584,066 329,633 6.28%
Net loans 23,816,870 1,077,015 9.12% 13,888,055 621,850 9.03%
-------------- ------------ ---------- -------------- ------------ ----------
Total earning assets $ 34,574,868 $ 1,407,799 8.21% $ 26,248,088 $ 1,000,251 7.68%
============== ============ ========== ============== ============ ==========
Interest-bearing deposits $ 26,034,775 $ 658,501 5.10% $ 18,374,861 $ 489,219 5.37%
Other borrowings 94,756 2,608 5.55% 103,631 7,679 14.94%
-------------- ------------ ---------- -------------- ------------ ----------
Total interest-bearing
Liabilities $ 26,129,531 $ 661,109 5.10% $ 18,478,492 $ 496,898 5.42%
============== ============ ========== ============== ============ ==========
Net interest spread 3.11% 2.26%
Net interest income/margin $ 746,690 4.36% $ 503,353 3.87%
============ ========== ============ ==========
</TABLE>
As reflected above, for the first half of 1999 the average yield on
earning assets amounted to 8.21%, while the average cost of interest-bearing
liabilities was 5.10%. For the same period of 1998, the average yield on earning
assets was 7.68% and the average cost of interest-bearing liabilities was 5.42%.
The increase in the yield on earning assets is attributable to a significant
increase in outstanding loans which earn higher rates than other components of
earning assets. This increase in average loans of $9.9 million was expected as
the Bank continues to build its customer base. The net interest margin is
computed by subtracting interest expense from interest income and dividing the
resulting figure by average interest-earning assets. The net interest margin for
the period ended June 30, 1999 was 4.36% and for 1998 was 3.87%. This increase
was the result of growth in average earning assets of $8.3 million, or 32%,
partially offset by a $7.7 million increase in interest-bearing liabilities. In
addition, the weighted average rates on earning assets increased by 53 basis
points while the rate on deposits declined 32 basis points. The increase in
outstanding balances was predicted since the Bank is expanding its core base of
loans and deposits.
The following table presents the changes in the Company's net interest
income as a result of changes in the volume and rate of its interest-earning
assets and interest-bearing liabilities. The change in net interest income is
primarily due to increases in the volume of both loans and deposits rather than
changes in average rates.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
<TABLE>
<CAPTION>
-------------------------------------------
Six months ended June 30, 1999 versus 1998
-------------------------------------------
Volume Rate Net change
------ ---- ----------
<S> <C> <C> <C>
Federal funds sold $ (23,459) $ (6,621) $ (30,080)
Investment securities (19,205) 1,668 (17,537)
Loans 448,988 6,177 455,165
--------- --------- ---------
Total earning assets 406,324 1,224 407,548
Interest-bearing deposits 193,743 (24,461) 169,282
Other borrowings (244) (4,827) (5,071)
--------- --------- ---------
Total interest-bearing
Liabilities 193,499 (29,288) 164,211
--------- --------- ---------
Net interest income $ 212,825 $ 30,512 $ 243,337
========= ========= =========
</TABLE>
-7-
<PAGE> 8
PROVISION FOR LOAN LOSSES
The provision for loan losses was $69,668 for the first six months of
1999 and $65,000 for the same period of 1998. The increase was the result of
management's assessment of the adequacy of the reserve for possible loan losses
given the size, mix and quality of the current loan portfolio. Management
anticipates loan growth will continue to be strong in 1999 and that it will
continue to increase the amount of the provision for loan losses as the
portfolio grows. See also "Allowance for Possible Loan Losses" below.
NONINTEREST INCOME
Noninterest income decreased to $58,832 in the first half of 1999 from
$75,382 in the same period of 1998 and from $42,221 for the three months ended
June 30, 1998 to $35,773 in the same period of 1999. While service fees on
deposit accounts remained constant, the net loss on the sale of investment
securities increased to $23,170 from $4,491 for the six month period and to
$10,313 for the three months ended June 30, 1999 from $2,682 for the same period
of 1998. These losses primarily relate to paydowns on mortgage backed securities
and result from movements in market interest rates since the securities were
acquired.
NONINTEREST EXPENSE
Total noninterest expense increased from $614,249 for the six months
ended June 30, 1998 to $721,852 for the same period of 1999, and from $324,482
for the three months ended June 30, 1998 to $363,772 in the same period of 1999.
The increase in noninterest expense reflects an increase in most expense
categories as a result of the growth of the Bank to $38.9 million in assets at
June 30, 1999 from $30.8 million at June 30, 1998. Salary and wages increased by
$45,495 during the six months and $25,119 during the three months ended June 30,
1999 compared to the same periods in 1998, and employee benefits increased by
$15,125 and $6,765 during these periods. These increases are partially the
result of an increase in the number of full-time equivalent employees to 18 at
the end of June 1999 from 16 at the end of June 1998. Additional staff was hired
to support the internal growth in loans and deposits. Management does not
anticipate any significant additions to staff during the next 12 months.
Professional fees were $58,357 during the six months ended and $28,391 during
the three months ended June 30, 1999, compared to $60,608 and $40,621 during the
comparable periods of 1998. These increases are attributable to increases in
legal fees, consulting fees and accounting fees associated with the growth of
the bank. For the six month period ended June 30, 1999, data processing
increased to $35,168 from $19,949 during the same period of 1998. For the three
months ended June 30, 1999, data processing expense was $15,774 compared to
$12,071 for the same period of 1998. These fees are directly related to
increases in the volume of loan and deposit accounts and associated transaction
activity.
Other operating expenses increased $26,167 during the six months ended
June 30, 1999 compared to the same period of 1998, and increased $12,606 during
the three month period ended June 30, 1999 compared to the same period of 1998.
These increases were due to growth in operating expenses associated with the
expansion of loans and deposits.
BALANCE SHEET REVIEW
INVESTMENT SECURITIES
At June 30, 1999 and June 30, 1998, the Company's investment securities
portfolio was a significant component of total earning assets. Investment
securities represented 24.2% of total earning assets at June 30, 1999 versus
38.2% at June 30, 1998. Total securities averaged $10.0 million in the first
half of 1999 and totaled $8.9 at June 30, 1999. In the same period of 1998,
total securities averaged $10.6 million and totaled $10.9 million at June 30,
1998. At June 30, 1999, the Company's total investment securities portfolio had
a book value of $9,004,131 and a market value of $8,904,424 for an unrealized
net loss of $99,705. The Company primarily invests in U.S. Government Agency
Mortgage backed securities.
-8-
<PAGE> 9
Contractual maturities and yields on the Company's investment
securities (all available for sale) at June 30, 1999 are as follows. Expected
maturities may differ from contractual maturities because issuers may have the
right to call or prepay obligations with or without call or prepayment
penalties.
INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
JUNE 30, 1999
<TABLE>
<CAPTION>
After one but After five but
Within one year Within five years Within ten years After ten years
--------------- ----------------- ---------------- ---------------
Amount Yield Amount Yield Amount Yield Amount Yield
------ ----- ------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ -- --% $ -- --% $ -- --% $ -- --%
U.S. Government Agencies -- --% -- --% -- --% -- --%
Mortgage-backed -- --% -- --% 341,052 7.33% 8,360,029 6.04%
Other -- --% -- --% -- --% 303,050 6.00%
----- --- ----- --- ---------- ---- ---------- ----
Total $ -- --% $ -- --% $ 341,052 7.33% $8,663,079 6.04%
===== ===== === ========== ==== ========== ====
</TABLE>
At June 30, 1999, short-term investments totaled $1,500,000 compared to
$2,080,000 as of June 30, 1998. These funds are one source of the Bank's
liquidity and are generally invested in an earning capacity on an overnight
basis.
LOANS
At June 30, 1999, net loans (gross loans less the allowance for loan
losses) totaled $26.0 million, an increase of $10.8 million from June 30, 1998.
Average gross loans increased from $13.9 million with a yield of 9.03% in 1998
to $23.8 million with a yield of 9.12% in 1999. The interest rates charged on
loans vary with the degree of risk and the maturity and amount of the loan.
Competitive pressures, money market rates, availability of funds and government
regulations also influence interest rates.
Since loans typically provide higher yields than other types of earning
assets, one of the Bank's goals is for loans to represent the largest category
of earning assets. Much progress was made in the effort as loans at June 30,
1999 were 71.8% of earning assets, versus 54.5% at June 30, 1998.
The following table shows the composition of the loan portfolio by
category at June 30, 1999 and 1998.
<TABLE>
<CAPTION>
COMPOSITION OF LOAN PORTFOLIO
JUNE 30, 1999 JUNE 30, 1998
Percent Percent
Amount of Total Amount Of Total
------ -------- ------ --------
<S> <C> <C> <C> <C>
Commercial $ 4,537,691 17.2% $ 2,562,784 16.6%
Real estate - construction 2,574,233 9.8% 1,362,162 8.8%
Real estate - mortgage 15,374,725 58.3% 9,614,262 62.3%
Consumer 3,878,003 14.7% 1,897,332 12.3%
------------ ----- ------------- -----
Loans, gross 26,364,652 100.0% 15,436,540 100.0%
===== =====
Allowance for possible loan losses (326,768) (169,878)
------------ -------------
Loans, net $ 26,037,884 $ 15,266,662
============ =============
</TABLE>
The principal component of the Company's loan portfolio at June 30,
1999 and 1998 was mortgage loans, which represented 58.3% and 62.3% of the
portfolio, respectively. In the context of this discussion, a "real estate
mortgage
-9-
<PAGE> 10
loan" is defined as any loan, other than loans for construction purposes,
secured by real estate, regardless of the purpose of the loan. The Company
follows the common practice of financial institutions in the Company's market
area of obtaining a security interest in real estate whenever possible, in
addition to any other available collateral. The collateral is taken to reinforce
the likelihood of the ultimate repayment of the loan and tends to increase the
magnitude of the real estate loan portfolio component. Generally, the Company
limits it loan-to-value ratio to 80%. Due to the short time the portfolio has
existed, the current mix may not be indicative of the ongoing portfolio mix.
Management will attempt to maintain a relatively diversified loan portfolio to
help reduce the risk inherent in concentrations of collateral.
The following table sets forth the maturity distribution, classified
according to sensitivity to changes in interest rates, for selected components
of the Company's loan portfolio as of June 30, 1999.
<TABLE>
<CAPTION>
LOAN MATURITY SCHEDULE AND SENSITIVITY TO CHANGES IN INTEREST RATES
JUNE 30, 1999
After one but After
One year Within five Five
or less Years Years Total
------- ----- ----- -----
<S> <C> <C> <C> <C>
Commercial $ 1,807,740 $ 2,627,855 $ 108,508 $ 4,544,103
Real estate 1,400,884 12,387,922 1,610,040 15,398,846
Construction 2,152,923 380,000 65,842 2,598,765
Consumer 1,558,436 1,879,234 448,237 3,885,907
----------- ----------- ----------- -----------
Total gross loans $ 6,919,983 $17,275,011 $ 2,232,627 $26,427,621
=========== =========== =========== ===========
Fixed Interest Rate $ 3,252,276 $15,631,107 $ 1,989,258 $20,872,641
Variable Interest Rate 3,667,707 1,643,904 243,369 5,554,980
----------- ----------- ----------- -----------
Total gross loans $ 6,919,983 $17,275,011 $ 2,232,627 $26,427,621
=========== =========== =========== ===========
</TABLE>
The information presented in the above table is based on the
contractual maturities of the individual loans, including loans which may be
subject to renewal at their contractual maturity. Renewal of such loans is
subject to review and credit approval, as well as modification of terms upon
their maturity. Actual repayments of loans may differ from maturities reflected
above because borrowers may have the right to prepay obligations with or without
prepayment penalties.
ALLOWANCE FOR POSSIBLE LOAN LOSSES
Management maintains an allowance for possible loan losses to cover
losses in the loan portfolio. The allowance for possible loan losses is
established through charges in the form of a provision for loan losses. Loan
losses and recoveries are charged or credited directly to the allowance. The
amount charged to the provision for loan losses by the Company is based on
management's judgment as to the amount required to maintain an allowance
adequate to provide for potential losses in the Company's loan portfolio. The
level of this allowance is dependent upon a number of factors, including the
total amount of past due loans, general economic conditions, regulatory reviews,
and management's assessment of potential losses. This evaluation is inherently
subjective as it requires estimates that are susceptible to significant change.
Ultimately, losses may vary from current estimates and future additions to the
allowance may be necessary. Thus, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan losses or that additional
increases in the loan loss allowance will not be required. Management evaluates
the adequacy of the allowance for loan losses quarterly and makes provisions for
loan losses based on this evaluation.
At June 30 1999, the allowance for possible loan losses was 326,768, or
1.24% of outstanding loans, compared to an allowance for possible loans losses
of $169,898, or 1.10% of outstanding loans, at June 30, 1998. In the first half
of 1999, the Bank had net charge-offs of $6,115. In the same period of 1998,
there were $64,623 in net charge offs. The Company had $14,350 in non-performing
loans at June 30, 1999. There were no non-performing loans at June 30, 1998.
-10-
<PAGE> 11
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
SIX MONTHS ENDING JUNE 30,
1999 1998
---- ----
<S> <C> <C>
Average loans outstanding $ 23,816,870 $ 13,888,055
Loans outstanding at period end 26,364,653 15,436,540
Total nonperforming loans 14,350 --
Beginning balance of allowance $ 263,215 $ 169,502
Loans charged off (6,115) (64,624)
Total recoveries 0 0
------------ ------------
Net loans charged off (6,115) (64,624)
Provision for loan losses 69,668 65,000
------------ ------------
Balance at period end $ 326,768 $ 169,879
============ ============
Net charge-offs to average loans 0.03% 0.05%
Allowance as a percent of total loans 1.24% 1.10%
Nonperforming loans as a
percentage of total loans .05% 0.00%
Allowance as a percent of
nonperforming loans 2,277.1% N/A
</TABLE>
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Average total deposits were $30.9 million and average interest-bearing
deposits were $26.0 million in the first half of 1999. Average total deposits
were $22.2 million and average interest-bearing deposits were $18.4 million in
the same period of 1998. The following table sets forth the deposits of the
Company by category as of June 30, 1999 and June 30, 1998.
<TABLE>
<CAPTION>
DEPOSITS
JUNE 30, 1999 JUNE 30, 1998
Percent of Percent of
Amount Deposits Amount Deposits
------ -------- ------ --------
<S> <C> <C> <C> <C>
Demand deposit accounts $ 5,522,841 16.8% $ 4,052,163 16.5%
NOW accounts 1,032,992 3.1% 788,834 3.2%
Money market accounts 3,693,229 11.1% 3,073,887 12.5%
Savings accounts 4,725,085 14.2% 4,342,720 17.6%
Time deposits less than $100,000 12,831,695 38.8% 7,860,806 31.9%
Time deposits of $100,000 or over 5,317,590 16.0% 4,509,962 18.3%
----------- ----- ----------- ------
Total deposits $33,123,432 100.0% $24,628,372 100.00%
=========== ===== =========== ======
</TABLE>
Internal growth, resulting primarily from special promotions and
increased customer convenience of the main office facility opened in June 1997,
generated the new deposits.
Core deposits, which exclude certificates of deposit of $100,000 or
more, provide a relatively stable funding source for the Company's loan
portfolio and other earning assets. The Company's core deposits were $27.8
million at June 30, 1999 compared to $20.1 million at June 30, 1998. A stable
base of deposits is expected to be the Company's primary source of funding to
meet both its short-term and long-term liquidity needs in the future. Core
deposits as a percentage of total deposits were approximately 84% at June 30
1999 and 82% at June 30, 1998. The Company's loan-
-11-
<PAGE> 12
to-deposit ratio was 79.6% at June 30, 1999 versus 62.7% at June 30, 1998. The
average loan-to-deposit ratio was 77.0% during the half of 1999 and 62.6% during
the same period of 1998.
CAPITAL
Under the capital guidelines of the Office of the Comptroller of the
Currency, the Bank is required to maintain a minimum total risk-based capital
ratio of 8%, with at least 4% being Tier 1 capital. To be considered
"well-capitalized", banks must meet regulatory standards of 10% for total
risk-based capital and 6% for Tier 1 capital. Tier 1 capital consists of common
shareholders' equity, qualifying perpetual preferred stock, and minority
interest in equity accounts of consolidated subsidiaries, less goodwill. In
addition, the Bank must maintain a minimum Tier 1 leverage ratio (Tier 1 capital
to total average assets) of at least 4%. The "well-capitalized" standard for the
Tier 1 leverage ratio is 5%. The following chart reflects the risk-based
regulatory capital ratios of the Bank at June 30, 1999.
ANALYSIS OF CAPITAL
JUNE 30, 1999
(Amounts in thousands)
<TABLE>
<CAPTION>
Required Actual Excess
-------- ------ ------
Amount % Amount % Amount %
------ --- ------ --- ------ ---
<S> <C> <C> <C> <C> <C> <C>
The Bank:
Tier 1 risk-based capital 1,158 4.00% 5,567 19.2% 4,409 15.2%
Total risk-based capital 2,316 8.00% 5,894 19.7% 3,578 11.7%
Tier 1 leverage 1,158 4.00% 5,567 14.8% 4,409 10.8%
</TABLE>
A condition of the original offering was that a minimum of 525,000
shares be sold. There were a total of 735,868 shares sold during the offering
period with gross proceeds after offering expenses of $7,212,349, and $6,300,000
of this amount was used to capitalize the Bank. The Company believes that this
amount is sufficient to fund the activities of the Bank in its initial stages of
operations, and that the Bank will generate sufficient income from operations to
fund its activities on an on-going basis. The remaining offering proceeds will
be used to provide working capital, including additional capital for investment
in the Bank, if needed.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Primary sources of liquidity for the Company are a stable base of
deposits, scheduled repayments on the Company's loans and interest on and
maturities of its investments. All securities of the Company have been
classified as available for sale. Occasionally, the Company might sell
investment securities in connection with the management of its interest
sensitivity gap or to manage cash availability. The Company may also utilize its
cash and due from banks, security repurchase agreements and federal funds sold
to meet liquidity requirements as needed. In addition, the Company has the
ability, on a short-term basis, to purchase federal funds from other financial
institutions. Presently, the Company has made arrangements with commercial banks
for short-term unsecured advances of up to $3,000,000. The Company believes that
its liquidity and ability to manage assets will be sufficient to meet its cash
requirements over the near term.
The Company monitors and manages the pricing and maturity of its assets
and liabilities in order to lessen the potential impact that interest rate
movements could have on its net interest margin. To minimize the effect of these
margin swings, the balance sheet should be structured so that repricing
opportunities exist for both assets and liabilities in roughly equivalent
amounts at approximately the same time intervals Imbalances in these pricing
opportunities at any point in time constitute interest rate risk.
-12-
<PAGE> 13
Interest rate sensitivity refers to the responsiveness of
interest-bearing assets and liabilities to changes in market interest rates. The
rate sensitive position, or gap, is the difference in the volume of rate
sensitive assets and liabilities at any given time interval. Management
generally attempts to maintain a balance between rate sensitive assets and
liabilities to minimize the company's interest rate risks. Interest rate
sensitivity can be managed by repricing assets or liabilities, selling
securities available-for-sale, replacing an asset or liability at maturity or by
adjusting the interest rate during the life of an asset or liability. Managing
the amount of assets and liabilities repricing in the same time interval helps
to hedge the risk and minimize the impact on net interest income of rising or
falling interest rates.
The interest rate sensitivity position at June 30, 1999 is presented
below. Since all rates and yields do not adjust at the same velocity, the gap is
only a general indicator of rate sensitivity.
INTEREST SENSITIVITY ANALYSIS
JUNE 30, 1999
<TABLE>
<CAPTION>
After three but After one but
Within three Within twelve within five After five
months months Years years Total
------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C>
ASSETS
Earning assets:
Federal funds sold $ 1,500,000 $ -- $ -- $ -- $ 1,500,000
Investment securities 3,210,814 -- 5,693,610 8,904,424
Loans 6,551,534 2,255,722 15,631,107 1,989,258 26,427,621
------------ ------------ ------------ ------------ ------------
Total earning assets $ 8,051,534 $ 5,466,536 $ 15,631,107 $ 7,682,868 $ 36,832,045
============ ============ ============ ============ ============
LIABILITIES
Interest-bearing liabilities
Money market and NOW $ 4,726,221 $ -- $ -- $ -- $ 4,726,221
Regular savings deposits 641,219 -- -- -- 641,219
Prime savings deposits 4,083,866 -- -- -- 4,083,866
Time deposits 3,643,232 2,477,142 12,028,911 -- 18,149,285
------------ ------------ ------------ ------------ ------------
Total interest-bearing
liabilities $ 13,094,538 $ 2,477,142 $ 12,028,911 $ -- $ 27,600,591
============ ============ ============ ============ ============
Period gap $ (5,043,004) $ 2,989,394 $ 3,602,196 $ 7,682,868 $ 7,868,426
Cumulative gap $ (5,043,004) $ (2,053,610) $ 1,548,586 $ 9,231,454 $ 7,868,426
Ratio of cumulative gap to
total earning assets (13.7)% (5.58)% 4.2% 25.1%
</TABLE>
The Company generally would benefit from increasing market rates of
interest when it has an asset sensitive gap and generally would benefit from
decreasing market rates of interest when it is liability sensitive. The Company
currently is liability sensitive in time frames less than one year and asset
sensitive after that. However, the Company's gap analysis is not a precise
indicator of its interest sensitivity position. The analysis presents only a
static view of the timing of maturities and repricing opportunities, without
taking into consideration that changes in interest rates do not affect all
assets and liabilities equally. Net interest income is also impacted by other
significant factors, including changes in the volume and mix of earning assets
and interest-bearing liabilities.
IMPACT OF INFLATION
Unlike most industrial companies, the assets and liabilities of
financial institutions such as the Company and the Bank are primarily monetary
in nature. Therefore, interest rates have a more significant impact on the
Company's performance than do the effects of changes in the general rate of
inflation and changes in prices. In addition, interest rates do not necessarily
move in the same magnitude as the prices of goods and services. As discussed
previously,
-13-
<PAGE> 14
management seeks to manage the relationships between interest sensitive assets
and liabilities in order to protect against wide rate fluctuations, including
those resulting from inflation.
INDUSTRY DEVELOPMENTS
Proposed legislation could have an effect on both the costs of doing
business and the competitive factors facing the financial services industry. Due
to continued changes in the regulatory environment, additional legislation
related to the banking industry is likely to continue. The Company cannot
predict whether any of these proposals will be adopted or, it adopted, how these
proposals will affect the Company.
YEAR 2000 ISSUES
Some computers, software, and other equipment include programming codes
in which calendar year data is abbreviated to only two digits. As a result of
this design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems are widely expected to increase in frequency and severity as the
year 2000 approaches and are commonly referred to as the "Year 2000 Problem."
ASSESSMENT
The Year 2000 Problem could affect computers, software, and other
equipment that the Company uses. These problems are widely expected to increase
in frequency and severity as the year 2000 approaches and are commonly referred
to as the "Year 2000 Problem." The Year 2000 Problem could affect computers,
software, and other equipment that the Company uses. In June 1996, the Federal
Financial Institutions Examination Council alerted the banking industry that
serious challenges could be encountered with Year 2000 issues. In addition, the
OCC has issued guidelines to require compliance with Year 2000 issues. In
accordance with these guidelines, we have developed and are executing a plan to
ensure that our computer and telecommunication systems do not have these Year
2000 problems. We rely on third party vendors to supply most of our computer and
telecommunication systems and other office equipment. Our technology and
processing vendors work with many other financial institutions, all of whom,
like us, are required by their bank regulators to be Year 2000 compliant.
Because our systems are substantially similar to those used in many other banks,
we believe that the scrutiny imposed by our regulatory and the banking industry
in general have significantly reduced the Year 2000 related risks we might
otherwise have faced. Nonetheless, there is a risk that the Year 2000 issues
could negatively affect our business.
INTERNAL INFRASTRUCTURE
The Company utilizes an outsourced data processing system by Fiserv for
most of its accounting functions. Fiserv is a well-established company and
provides computer systems and data processing for numerous financial
institutions. Fiserv has tested its systems with software and hardware similar
to the Company's. The Company has reviewed these test results and is relying on
them as a proxy for a test of its own systems with Fiserv. Banking regulators
have approved this type of testing as a valid means of testing. Based on this
review, the Company does not believe that its data processing system has any
material Year 2000 issues. Based on this review, the Company does not believe
that the data processing system has material Year 2000 issues. The Company
believes that it has also identified substantially all of the major computers,
software applications, and related equipment used in connection with its
internal operations that must be modified, upgraded, or replaced to minimize the
possibility of a material disruption of its business. The Company is in the
process of upgrading and testing the systems that it has determined are not
prepared for the Year 2000. Remediation of all systems was completed by June 30,
1999. The Company has spent approximately $42,000 to get all of its systems Year
2000 compliant. The Company does not believe that the cost related to these
efforts will be material to its business.
SYSTEMS OTHER THAN INFORMATION TECHNOLOGY SYSTEMS
In addition to computers and related systems, the operation of the
Company's office and facilities equipment, such as fax machines, photocopiers,
telephone switches, security systems, and other devices, may be affected by the
Year 2000 Problem. The company has completed its assessment of the potential
effect of, and the costing of remediating, the
-14-
<PAGE> 15
year 2000 Problem on this equipment. The Company estimates that its total cost
of completing any required modification, upgrades, or replacement of these
internal systems will not have a material effect on its business.
SUPPLIERS AND OTHER THIRD PARTIES
The Company has been gathering information from and has initiated
communications with its suppliers and other third parties to identify and, to
the extent possible, resolve issues involving the Year 2000 Problem. The Company
believes that the information systems and software it uses, and the network
connections it maintains, are programmed to comply with Year 2000 requirement.
Nevertheless, there is a risk that some of the hardware or software that the
Company uses will not be Year 2000 compliant, and the Company cannot predict
with any certainty the costs the Company will incur to respond to any Year 2000
issues. Factors which may affect the amount of these costs include the Company's
inability to control third party modification plans, the Company's ability to
identify and correct all relevant computer codes, the availability and cost of
engaging personnel trained in solving Year 2000 issues, and other similar
uncertainties.
CUSTOMERS
The Company believes that the largest Year 2000 Problem exposure to
most banks is the preparedness of the customers of the banks. Management is
addressing with its customers the possible consequences of not being prepared
for Year 2000. Should large borrowers not sufficiently address this issue, the
Company may experience an increase in loan defaults. The amount of potential
loss from this issues is not quantifiable. Management is attempting to reduce
this exposure by educating its customers. In addition, during the loan
underwriting process, management requires documentation from commercial
borrowers that they are taking all necessary measures to assure that their
information systems technology is in compliance with the Year 2000 requirements.
MOST LIKELY CONSEQUENCES OF YEAR 2000 PROBLEMS
The Company expects to identify and resolve all year 2000 Problems that
could materially adversely affect its business, financial condition, or
operating results. However, the Company believes that it is not possible to
determine with complete certainty that all Year 2000 Problems affecting it have
been identified or corrected. The number of devices that could be affected and
the interactions among these devices are simply too numerous. In addition, the
Company cannot accurately predict how may failures related to the Year 2000
Problem will occur with its suppliers, customers, or other third parties or the
severity, duration, or financial consequences of such failures. As a result, the
Company expects that it could possibly suffer the following consequences:
- A number of operations inconveniences and inefficiencies for
the Company, its service providers, or its customers that may
divert the Company's time and attention and financial and
human resources from its ordinary business activities;
- System malfunctions that may require significant efforts by
the Company or its service providers or customers to prevent
or alleviate material business disruptions.
Additionally, there may be a higher than usual demand for liquidity
immediately prior to the century change due deposit withdrawals by customers
concerned about Year 2000 issues. To address this possible demand, the Company
has secured an additional line of credit with the Federal Home Loan Bank. The
Company is also taking the appropriate measures to secure additional lines of
credit at the Federal Reserve Discount Window.
CONTINGENCY PLANS
The Company has developed contingency plans to be implemented as part
of its efforts to identify and correct Year 2000 Problems affecting its internal
systems. Depending on the systems effected, these plans include (a) accelerated
replacement of affected equipment or software; (b) short term use of backup
equipment and software; (c) increased work hours for the Company's personnel or
use of contract personnel to correct on an accelerated schedule any year 2000
Problems which arise; and (d) other similar approaches. If the Company is
required to implement any of these
-15-
<PAGE> 16
contingency plans, these plans could have a material adverse effect on its
business, financial condition, or operating results.
MARKET FOR THE COMPANY'S COMMON EQUITY
AND RELATED SHAREHOLDER MATTERS
The Company's articles of incorporation authorize it to issue up to
10,000,000 shares of Common Stock, of which 735,868, for a total of $7,358,680,
were sold in the initial public offering and are outstanding. As of July 21,
1999, the Company had 939 shareholders of record. There is no established
trading market in the Common Stock, and one is not expected to develop in the
near future.
All outstanding shares of Common Stock of the Company are entitled to
share equally in dividends from funds legally available therefor, when, as and
if declared by the Board of Directors. The Company does not plan to declare any
dividends in the immediate future.
-16-
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material legal proceedings to which the Company or any of
its subsidiaries is a party or of which any of their property is the subject.
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.
1. The Company's Bylaws provides that the Board of Directors shall be
divided into three classes with each class to be as nearly equal in
number as possible. The Bylaws also provide that the three classes of
directors are to have staggered terms, so that the terms of only
approximately one-third of the Board members will expire at each annual
meeting of shareholders. The current Class I directors are Raymond E.
Cleary, III, William Gary Horn, Joe N. Jarrett, Jr., Richard E. Lester,
and Don J. Smith. The current Class II directors are Michael Bert
Anderson, Orvis Bartlett Buie, Michael D. Harrington, Diane W. Sammons,
and Rick H. Seagroves. The current Class III directors are Vernie E.
Dove, Jack L. Green, Jr., Samuel Robert Spann, Jr., B. Larkin Spivey,
Jr., and James C. Yahnis. The Class I directors were up for reelection
at this year's annual meeting held April 22, 1999. Each of the existing
Class I directors was reelected at the annual meeting. For Mr. Cleary,
413,397 votes were cast in favor of his reelection as director and 100
votes were withheld while no votes abstained. For Mr. Horn, 413,097
votes were cast in favor of his reelection as director and 400 votes
were withheld while no votes abstained. For Mr. Jarrett, 413,497 votes
were cast in favor of his reelection as director and no votes were
withheld and no votes abstained. For Mr. Lester, 413,497 votes were
cast in favor of his reelection as director and no votes were withheld
and no votes abstained. For Mr. Smith, 413,197 votes were cast in favor
of his reelection as director and 300 votes were withheld while no
votes abstained. The terms of the Class II directors will expire at the
2000 Annual Shareholders Meeting, and the terms of the Class III
directors will expire at the 2001 Annual Shareholders Meeting.
ITEM 5. OTHER INFORMATION.
None.
-17-
<PAGE> 18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
1.1. Selling Agent Agreement, dated October 16, 1995, by and between Capital
Investment Group, Inc. and the Company (incorporated by reference to
Exhibit 1.1 to the Company's Registration Statement No. 33-95562 on
Form S-1).
3.1. Articles of Incorporation (incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement No. 33-95562 on Form S-1).
3.2. Bylaws (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement No. 33-95562 on Form S-1).
4.1. Provisions in the Company's Articles of Incorporation and Bylaws
defining the rights of holders of the Common Stock (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement No.
33-95562 on Form S-1).
4.2. Form of Certificate of Common Stock (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement No. 33-95562 on
Form S-1).
10.1. Contract of Sale, dated April 27, 1995, by and between Nadim Baroody,
Mary Baroody, Jean P. Saad, and Miray Saad, as sellers, and Orvis
Bartlett Buie, as purchaser (incorporated by reference to Exhibit 10.1
to the Company's Registration Statement No. 33-95562 on Form S-1).
10.2. Line of Credit Note, dated April 24, 1995, by Sea Group, Ltd. to The
Bankers Bank (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-95562 on Form S-1).
10.3. Employment Agreement, dated August 23, 1995, by and between the Company
and William Gary Horn (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement No. 33-95562 on Form S-1).*
10.4. Form of Amended and Restated Escrow Agreement, dated November __, 1995,
by and among The Bankers Bank, Capital Investment Group, Inc., and the
Company (incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement No. 33-95562 on Form S-1).
10.5. Amended and Restated Escrow Agreement, dated December 1, 1995, by and
among The Bankers Bank, Capital Investment Group, Inc., and the Company
(incorporated by reference to Exhibit 10.5 of the Company's Form 10-KSB
for the fiscal year ended December 31, 1995).
10.6. Amendment to Employment Agreement, dated January 9, 1996, by and
between the Company and William Gary Horn (incorporated by reference to
Exhibit 10.6 of the Company's Form 10-KSB for the fiscal year ended
December 31, 1995).*
10.7 Stock Option Plan dated as of April 30, 1997 (incorporated by reference
to Exhibit 10.7 of the Company's Form 10-KSB for the fiscal year ended
December 31, 1996).
13 Annual Report to Shareholders for the year ended December 31, 1997
(incorporated by reference to Exhibit 13 of the Company's Form 10-K for
the year ended December 31, 1997)
</TABLE>
-18-
<PAGE> 19
<TABLE>
<S> <C>
16 Letter of Francis & Company, dated November 6, 1997 to the Securities
and Exchange Commission (incorporated by reference to Exhibit 16 of the
Company's Current Report on Form 8-K filed on November 13, 1997)
21.1. Subsidiaries of the Company. (incorporated by reference to Exhibit 21.1
of the Company's Form 10-QSB for the quarter ended March 30, 1996).
27.1. Financial Data Schedule. (for SEC use only).
</TABLE>
- ----------------------
* Denotes executive compensation contract or arrangement.
(b) Reports on Form 8-K.
None.
-19-
<PAGE> 20
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BEACH FIRST NATIONAL BANCSHARES, INC.
Date: August 10, 1999 By: /s/ William Gary Horn
--------------- --------------------------------------
William Gary Horn
President
/s/ Ann W. Jones
--------------------------------------
Ann W. Jones
Chief Financial and Principal
Accounting Officer
-20-
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,070,601
<INT-BEARING-DEPOSITS> 5,018
<FED-FUNDS-SOLD> 1,500,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 8,904,424
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 26,364,652
<ALLOWANCE> 326,768
<TOTAL-ASSETS> 39,707,166
<DEPOSITS> 33,123,432
<SHORT-TERM> 0
<LIABILITIES-OTHER> 166,392
<LONG-TERM> 0
0
0
<COMMON> 735,868
<OTHER-SE> 5,681,474
<TOTAL-LIABILITIES-AND-EQUITY> 39,707,166
<INTEREST-LOAN> 1,077,015
<INTEREST-INVEST> 312,096
<INTEREST-OTHER> 18,688
<INTEREST-TOTAL> 1,407,799
<INTEREST-DEPOSIT> 658,501
<INTEREST-EXPENSE> 661,109
<INTEREST-INCOME-NET> 746,690
<LOAN-LOSSES> 69,668
<SECURITIES-GAINS> (23,170)
<EXPENSE-OTHER> 721,852
<INCOME-PRETAX> 14,002
<INCOME-PRE-EXTRAORDINARY> 14,002
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,187
<EPS-BASIC> .02
<EPS-DILUTED> .02
<YIELD-ACTUAL> 4.36
<LOANS-NON> 14
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 263,215
<CHARGE-OFFS> 6,115
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 326,768
<ALLOWANCE-DOMESTIC> 326,768
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
