UNITED STATES |
TEXAS (State or other jurisdiction of incorporation or organization) | 75-16516431 (I.R.S. Employer Identification No.) |
100 W. ARKANSAS 903-572-9881 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. As of August 12, 2002, there were 2,996,428 shares of the registrant’s Common Stock, par value $1.00 per share, outstanding. GUARANTY BANCSHARES, INC. |
PART I - FINANCIAL INFORMATION | Page |
PART II - OTHER INFORMATION |
Item 1. | Legal Proceedings | 24 | |||
Item 2. | Changes in Securities and Use of Proceeds | 24 | |||
Item 3. | Defaults upon Senior Securities | 24 | |||
Item 4. | Submission of Matters to a Vote of Security Holders | 24 | |||
Item 5. | Other Information | 24 | |||
Item 6. | Exhibits and Reports on Form 8-K | 24 | |||
Signatures | 25 |
2 PART I – FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSGUARANTY BANCSHARES, INC. AND SUBSIDIARIES |
June 30, 2002 | December 31, 2001 | |||||||
---|---|---|---|---|---|---|---|---|
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 10,305 | $ | 15,410 | ||||
Federal funds sold | 12,775 | 4,395 | ||||||
Securities available-for-sale | 94,707 | 81,715 | ||||||
Loans, net of allowance for loan losses of $3,576 and $3,346 | 344,387 | 327,909 | ||||||
Premises and equipment, net | 13,386 | 13,616 | ||||||
Other real estate | 1,896 | 562 | ||||||
Accrued interest receivable | 3,053 | 3,167 | ||||||
Goodwill | 2,338 | 2,338 | ||||||
Other assets | 8,699 | 11,397 | ||||||
Total assets | $ | 491,546 | $ | 460,509 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities | ||||||||
Deposits: | ||||||||
Noninterest-bearing | $ | 67,755 | $ | 63,726 | ||||
Interest-bearing | 335,012 | 319,553 | ||||||
Total deposits | 402,767 | 383,279 | ||||||
FHLB advances | 42,930 | 33,092 | ||||||
Long-term debt | 7,000 | 7,000 | ||||||
Other liabilities | 5,103 | 5,311 | ||||||
Total liabilities | 457,800 | 428,682 | ||||||
Shareholders’ equity: | ||||||||
Preferred stock, $5.00 par value, 15,000,000 shares authorized, | ||||||||
no shares issued | — | — | ||||||
Common stock, $1.00 par value, 50,000,000 shares authorized, | ||||||||
3,252,016 issued at June 31, 2002 and | ||||||||
3,250,016 at December 31, 2001 | 3,252 | 3,250 | ||||||
Additional capital | 12,676 | 12,659 | ||||||
Retained earnings | 19,348 | 17,723 | ||||||
Treasury stock, 255,588 and 245,588 shares at cost | (2,783 | ) | (2,653 | ) | ||||
Accumulated other comprehensive income | 1,253 | 848 | ||||||
Total shareholders’ equity | 33,746 | 31,827 | ||||||
Total liabilities and shareholders’ equity | $ | 491,546 | $ | 460,509 | ||||
See accompanying Notes to Consolidated Financial Statements. 3 GUARANTY BANCSHARES, INC. AND SUBSIDIARIES |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | 2002 | 2001 | |||||||||||
Interest income: | ||||||||||||||
Loans | $ | 5,935 | $ | 6,129 | $ | 11,878 | $ | 12,339 | ||||||
Securities | 1,203 | 1,130 | 2,291 | 2,267 | ||||||||||
Federal funds sold and other temporary investments | 56 | 234 | 105 | 503 | ||||||||||
Total interest income | 7,194 | 7,493 | 14,274 | 15,109 | ||||||||||
Interest expense: | ||||||||||||||
Deposits | 2,514 | 3,983 | 5,134 | 8,120 | ||||||||||
FHLB advances and other borrowed funds | 585 | 290 | 1,105 | 653 | ||||||||||
Total interest expense | 3,099 | 4,273 | 6,239 | 8,773 | ||||||||||
Net interest income | 4,095 | 3,220 | 8,035 | 6,336 | ||||||||||
Provision for loan losses | 450 | 185 | 700 | 340 | ||||||||||
Net interest income after provision for loan losses | 3,645 | 3,035 | 7,335 | 5,996 | ||||||||||
Noninterest income: | ||||||||||||||
Service charges | 761 | 687 | 1,405 | 1,305 | ||||||||||
Other operating income | 434 | 354 | 787 | 728 | ||||||||||
Realized gain on available-for-sale securities | 280 | 51 | 317 | 317 | ||||||||||
Total noninterest income | 1,475 | 1,092 | 2,509 | 2,350 | ||||||||||
Noninterest expense: | ||||||||||||||
Employee compensation and benefits | 2,107 | 1,790 | 4,214 | 3,710 | ||||||||||
Occupancy expenses | 486 | 460 | 960 | 924 | ||||||||||
Other operating expenses | 981 | 957 | 1,890 | 1,838 | ||||||||||
Total noninterest expenses | 3,574 | 3,207 | 7,064 | 6,472 | ||||||||||
Earnings before income taxes | 1,546 | 920 | 2,780 | 1,874 | ||||||||||
Provision for income taxes | 453 | 197 | 705 | 413 | ||||||||||
Net earnings | $ | 1,093 | $ | 723 | $ | 2,075 | $ | 1,461 | ||||||
Basic earnings per common share | $ | 0.36 | $ | 0.24 | $ | 0.69 | $ | 0.48 | ||||||
Diluted earnings per common share | $ | 0.36 | $ | 0.24 | $ | 0.69 | $ | 0.48 | ||||||
See accompanying Notes to Consolidated Financial Statements. 4 GUARANTY BANCHSHARES, INC. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | 2002 | 2001 | |||||||||||
Balance at beginning of period | $ | 32,568 | $ | 30,457 | $ | 31,827 | $ | 29,425 | ||||||
Net income | 1,093 | 723 | 2,075 | 1,461 | ||||||||||
Cash dividends declared on common stock | (450 | ) | (391 | ) | (450 | ) | (391 | ) | ||||||
Purchases of treasury stock | — | (246 | ) | (130 | ) | (411 | ) | |||||||
Proceeds from stock option exercises | 19 | — | 19 | — | ||||||||||
Change in accumulated other comprehensive income, net of tax | 516 | (41 | ) | 405 | 418 | |||||||||
Balance at end of period | $ | 33,746 | $ | 30,502 | $ | 33,746 | $ | 30,502 | ||||||
See accompanying Notes to Consolidated Financial Statements. 5 GUARANTY BANCSHARES, INC. AND SUBSIDIARIES |
Six Months Ended June 30, | ||||||||
---|---|---|---|---|---|---|---|---|
2002 | 2001 | |||||||
Net cash from operating activities | $ | 4,823 | $ | 2,428 | ||||
Cash flows from investing activities: | ||||||||
Securities available for sale: | ||||||||
Purchases | (47,239 | ) | (22,229 | ) | ||||
Sales | 19,629 | 18,368 | ||||||
Maturities, calls, and principal repayments | 15,284 | 14,135 | ||||||
Net increase in loans | (19,194 | ) | (13,685 | ) | ||||
Purchases of premises and equipment | (269 | ) | (537 | ) | ||||
Proceeds from sale of other real estate | 1,476 | 376 | ||||||
Net change in federal funds sold | (8,380 | ) | (14,475 | ) | ||||
Net cash from investing activities | (38,693 | ) | (18,047 | ) | ||||
Cash flows from financing activities: | ||||||||
Net change in deposits | 19,488 | 22,634 | ||||||
Net change in short-term FHLB advances | 9,838 | (7,000 | ) | |||||
Repayment of long-term FHLB advances | — | (154 | ) | |||||
Stock options exercised | 19 | — | ||||||
Purchase of treasury stock | (130 | ) | (411 | ) | ||||
Dividends paid | (450 | ) | (391 | ) | ||||
Net cash from financing activities | 28,765 | 14,678 | ||||||
Net change in cash and cash equivalents | (5,105 | ) | (941 | ) | ||||
Cash and cash equivalents at beginning of period | 15,410 | 10,212 | ||||||
Cash and cash equivalents at end of period | $ | 10,305 | $ | 9,271 | ||||
Supplemental disclosures: | ||||||||
Cash paid for income taxes | $ | 1,180 | $ | 58 | ||||
Cash paid for interest | 6,412 | 8,448 | ||||||
Significant non-cash transactions: | ||||||||
Transfers from loans to real estate owned | $ | 2,672 | $ | 574 |
See accompanying Notes to Consolidated Financial Statements. 6 GUARANTY BANCSHARES, INC. |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | 2002 | 2001 | |||||||||||
Net earnings | $ | 1,093 | $ | 723 | $ | 2,075 | $ | 1,461 | ||||||
Other comprehensive income: | ||||||||||||||
Unrealized gain (loss) on available for sale securities | ||||||||||||||
arising during the period | 1,062 | (11 | ) | 930 | 951 | |||||||||
Reclassification adjustment for amounts realized on | ||||||||||||||
securities sales included in net earnings | (280 | ) | (51 | ) | (317 | ) | (317 | ) | ||||||
Net unrealized gain (loss) | 782 | (62 | ) | 613 | 634 | |||||||||
Tax effect | (266 | ) | 21 | (208 | ) | (216 | ) | |||||||
Total other comprehensive income (loss) | 516 | (41 | ) | 405 | 418 | |||||||||
Comprehensive income | $ | 1,609 | $ | 682 | $ | 2,480 | $ | 1,879 | ||||||
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | 2002 | 2001 | |||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Reported net income | $ | 1,093 | $ | 723 | $ | 2,075 | $ | 1,461 | ||||||
Add back amortization of goodwill | — | 37 | — | 75 | ||||||||||
Adjusted net income | $ | 1,093 | $ | 760 | $ | 2,075 | $ | 1,536 | ||||||
Reported earnings per share | $ | 0.36 | $ | 0.24 | $ | 0.69 | $ | 0.48 | ||||||
Goodwill amortization | — | 0.01 | — | 0.03 | ||||||||||
Adjusted earnings per share | $ | 0.36 | $ | 0.25 | $ | 0.69 | $ | 0.51 | ||||||
Intangible Assets and Other Long-Lived Assets: Intangible assets with definite useful lives are amortized on a straight-line basis over their estimated useful life. Intangible assets, premises and equipment and other long-lived assets are tested for impairment whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value. The following accounting standard was issued during the six months ended June 30, 2002: Statement of Financial Accounting Standards (SFAS) No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS 145 clarifies and simplifies existing accounting pronouncements related to gains and losses from debt extinguishments and certain lease modifications and eliminates certain transitional accounting standards that are no longer necessary. This statement also makes minor technical corrections to various other existing pronouncements. Certain provisions of this statement will become effective for the Company on January 1, 2003, while other provisions became effective for transactions occurring and financial statements issued after May 15, 2002. Adoption of the provisions of this statement that were effective after May 15, 2002 did not have a significant impact on the Company’s financial statements. Furthermore, adoption of the remaining provisions of this statement on January 1, 2003 is not expected to have a significant impact on the Company’s financial statements. 9 NOTE 3. EARNINGS PER SHAREEarnings per share is computed in accordance with Statement of Financial Accounting Standards No. 128, which requires dual presentation of basic and diluted earnings per share (“EPS”) for entities with complex capital structures. Basic EPS is based on net earnings divided by the weighted-average number of shares outstanding during the period. Diluted EPS includes the dilutive effect of stock options granted using the treasury stock method. The weighted-average number of common shares outstanding for basic and diluted earnings per share computations was as follows: |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | 2002 | 2001 | |||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Weighted average common shares used in basic EPS | 2,995,307 | 3,017,755 | 2,999,566 | 3,028,424 | ||||||||||
Dilutive effect of stock options | 22,920 | 8,832 | 18,534 | 8,322 | ||||||||||
Weighted average common shares used in | ||||||||||||||
diluted EPS | 3,018,227 | 3,026,587 | 3,018,100 | 3,036,746 | ||||||||||
NOTE 4. STOCK OPTIONSIn 2000, the Company granted nonqualified stock options to certain executive officers of the Company and Guaranty Bank under the Company’s 1998 Stock Incentive Plan. The grants consisted of eight-year options to purchase 89,500 shares at an exercise price of $9.30 per share, which was the market price of the Company’s stock on the date the options were granted. In February 2002, the Company granted eight-year options to purchase 20,000 shares at an exercise price of $12.50 per share, which was the market price of the Company’s stock on the date the options were granted. The options fully vest and become exercisable in five equal installments commencing on the first anniversary of the date of grant and annually thereafter. At June 30, 2002, 2,000 shares of the options have been exercised and 893,500 options remain available for future grant under the 1998 Stock Incentive Plan. The weighted-average fair value per share of options granted during 2002 was $4.09. The fair value of options granted was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: Dividend yield of 2.24%; expected volatility of 28.7%; risk-free interest rate of 5.0%, and an expected life of 8.00 years. NOTE 5. COMMITMENT AND CONTINGENCIESIn the normal course of business, the Company enters into various transactions, which, in accordance with generally accepted accounting principles in the United States of America, are not included in the consolidated balance sheets. These transactions are referred to as “off-balance sheet commitments.” The Company enters into these transactions to meet the financing needs of its customers. These transactions include commitments to extend credit and letters of credit, which involve elements of credit risk in excess of the amounts recognized in the consolidated balance sheets. The Company minimizes its exposure to loss under these commitments by subjecting them to credit approval and monitoring procedures. 10 The Company enters into contractual commitments to extend credit, normally with fixed expiration dates or termination clauses, at specified rates and for specific purposes. Customers use credit commitments to ensure that funds will be available for working capital purposes, for capital expenditures and to ensure access to funds at specified terms and conditions. Substantially all of the Company’s commitments to extend credit are contingent upon customers maintaining specific credit standards at the time of loan funding. Management assesses the credit risk associated with certain commitments to extend credit in determining the level of the allowance for credit losses. Letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The Company’s policies generally require that letters of credit arrangements contain security and debt covenants similar to those contained in loan agreements. Outstanding commitments and letters of credit are approximately as follows (dollars in thousands): |
Contract or Notional Amount | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
June 30, 2002 | December 31, 2001 | |||||||||||||
(Unaudited) | ||||||||||||||
Commitments to extend credit | $ | 28,108 | $ | 21,394 | ||||||||||
Letters of credit | 1,103 | 1,042 |
Three Months Ended June 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | |||||||||||||||||||
Average Outstanding Balance | Interest Earned/ Paid | Average Yield/ Rate | Average Outstanding Balance | Interest Earned/ Paid | Average Yield/ Rate | |||||||||||||||
(Dollars in thousands) (Unaudited) | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||
Loans | $ | 337,799 | $ | 5,935 | 7.05 | % | $ | 291,814 | $ | 6,129 | 8.42 | % | ||||||||
Securities | 90,320 | 1,203 | 5.34 | % | 70,112 | 1,130 | 6.46 | % | ||||||||||||
Federal funds sold | 13,213 | 56 | 1.70 | % | 21,135 | 234 | 4.44 | % | ||||||||||||
Interest-bearing deposits in | ||||||||||||||||||||
other financial institutions | 30 | — | 1.70 | % | 106 | — | 3.90 | % | ||||||||||||
Total interest-earning assets | 441,362 | 7,194 | 6.54 | % | 383,167 | 7,493 | 7.84 | % | ||||||||||||
Less allowance for loan losses | (3,373 | ) | (2,778 | ) | ||||||||||||||||
Total interest-earning | ||||||||||||||||||||
assets, net of allowance | 437,989 | 380,389 | ||||||||||||||||||
Non-earning assets: | ||||||||||||||||||||
Cash and due from banks | 14,428 | 11,803 | ||||||||||||||||||
Premises and equipment | 13,445 | 13,561 | ||||||||||||||||||
Interest receivable and | ||||||||||||||||||||
other assets | 16,997 | 18,023 | ||||||||||||||||||
Other real estate owned | 1,837 | 511 | ||||||||||||||||||
Total assets | $ | 484,696 | $ | 424,287 | ||||||||||||||||
Liabilities and shareholders’ equity | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
NOW, savings, and money | ||||||||||||||||||||
market accounts | $ | 107,001 | $ | 395 | 1.48 | % | $ | 105,759 | $ | 719 | 2.73 | % | ||||||||
Time deposits | 230,407 | 2,119 | 3.69 | % | 216,020 | 3,264 | 6.06 | % | ||||||||||||
Total interest-bearing | ||||||||||||||||||||
deposits | 337,408 | 2,514 | 2.99 | % | 321,779 | 3,983 | 4.96 | % | ||||||||||||
FHLB advances and federal funds purchased | 39,627 | 395 | 4.00 | % | 6,418 | 97 | 6.06 | % | ||||||||||||
Long-term debt | 7,000 | 190 | 10.89 | % | 7,000 | 193 | 11.06 | % | ||||||||||||
Total interest-bearing | ||||||||||||||||||||
liabilities | 384,035 | $ | 3,099 | 3.24 | % | 335,197 | $ | 4,273 | 5.11 | % | ||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||
Demand deposits | 62,592 | 54,295 | ||||||||||||||||||
Accrued interest, taxes and | ||||||||||||||||||||
other liabilities | 4,592 | 4,283 | ||||||||||||||||||
Total liabilities | 451,219 | 393,775 | ||||||||||||||||||
Shareholders’ equity | 33,477 | 30,512 | ||||||||||||||||||
Total liabilities and | ||||||||||||||||||||
shareholders’ equity | $ | 484,696 | $ | 424,287 | ||||||||||||||||
Net interest income | $ | 4,095 | $ | 3,220 | ||||||||||||||||
Net interest spread | 3.30 | % | 2.73 | % | ||||||||||||||||
Net interest margin | 3.72 | % | 3.37 | % | ||||||||||||||||
15 |
Six Months Ended June 30, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | |||||||||||||||||||
Average Outstanding Balance | Interest Earned/ Paid | Average Yield/ Rate | Average Outstanding Balance | Interest Earned/ Paid | Average Yield/ Rate | |||||||||||||||
(Dollars in thousands) (Unaudited) | ||||||||||||||||||||
Assets | ||||||||||||||||||||
Interest-earning assets: | ||||||||||||||||||||
Loans | $ | 334,330 | $ | 11,878 | 7.16 | % | $ | 290,607 | $ | 12,339 | 8.56 | % | ||||||||
Securities | 84,918 | 2,291 | 5.44 | % | 68,531 | 2,267 | 6.67 | % | ||||||||||||
Federal funds sold | 12,968 | 105 | 1.63 | % | 20,539 | 503 | 4.94 | % | ||||||||||||
Interest-bearing deposits in | ||||||||||||||||||||
other financial institutions | 35 | — | 1.70 | % | 66 | — | 3.90 | % | ||||||||||||
Total interest-earning assets | 432,251 | 14,274 | 6.66 | % | 379,743 | 15,109 | 8.02 | % | ||||||||||||
Less allowance for loan losses | (3,364 | ) | (2,716 | ) | ||||||||||||||||
Total interest-earning | ||||||||||||||||||||
assets, net of allowance | 428,887 | 377,027 | ||||||||||||||||||
Non-earning assets: | ||||||||||||||||||||
Cash and due from banks | 13,894 | 11,840 | ||||||||||||||||||
Premises and equipment | 13,507 | 13,560 | ||||||||||||||||||
Interest receivable and | ||||||||||||||||||||
other assets | 17,011 | 17,875 | ||||||||||||||||||
Other real estate owned | 1,306 | 424 | ||||||||||||||||||
Total assets | $ | 474,605 | $ | 420,726 | ||||||||||||||||
Liabilities and shareholders’ equity | ||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||
NOW, savings, and money | ||||||||||||||||||||
market accounts | $ | 107,170 | $ | 797 | 1.50 | % | $ | 104,654 | $ | 1,615 | 3.11 | % | ||||||||
Time deposits | 224,594 | 4,337 | 3.89 | % | 212,853 | 6,505 | 6.16 | % | ||||||||||||
Total interest-bearing | ||||||||||||||||||||
deposits | 331,764 | 5,134 | 3.12 | % | 317,507 | 8,120 | 5.16 | % | ||||||||||||
FHLB advances and federal funds purchased | 36,335 | 731 | 4.06 | % | 8,697 | 270 | 6.26 | % | ||||||||||||
Long-term debt | 7,000 | 374 | 10.77 | % | 7,000 | 383 | 11.03 | % | ||||||||||||
Total interest-bearing | ||||||||||||||||||||
liabilities | 375,099 | $ | 6,239 | 3.35 | % | 333,204 | $ | 8,773 | 5.31 | % | ||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||
Demand deposits | 61,679 | 53,141 | ||||||||||||||||||
Accrued interest, taxes and | ||||||||||||||||||||
other liabilities | 4,769 | 4,009 | ||||||||||||||||||
Total liabilities | 441,547 | 390,354 | ||||||||||||||||||
Shareholders’ equity | 33,058 | 30,372 | ||||||||||||||||||
Total liabilities and | ||||||||||||||||||||
shareholders’ equity | $ | 474,605 | $ | 420,726 | ||||||||||||||||
Net interest income | $ | 8,035 | $ | 6,336 | ||||||||||||||||
Net interest spread | 3.31 | % | 2.71 | % | ||||||||||||||||
Net interest margin | 3.75 | % | 3.36 | % | ||||||||||||||||
16 The following tables present the dollar amount of changes in interest income and interest expense for the major components of interest-earning assets and interest-bearing liabilities and distinguishes between the increase (decrease) related to outstanding balances and the volatility of interest rates. For purposes of these tables, changes attributable to both rate and volume that can be segregated have been allocated (dollars in thousands): |
Three Months Ended June 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2002 vs. 2001 | |||||||||||
Increase (Decrease) Due to | |||||||||||
Volume | Rate | Total | |||||||||
(Unaudited) | |||||||||||
Interest-earning assets: | |||||||||||
Loans | $ | 3,872 | $ | (4,066 | ) | $ | (194 | ) | |||
Securities | 1,306 | (1,233 | ) | 73 | |||||||
Federal funds sold | (352 | ) | 174 | (178 | ) | ||||||
Interest-bearing deposits in other | |||||||||||
financial institutions | (3 | ) | 3 | — | |||||||
Total change in interest income | 4,823 | (5,122 | ) | (299 | ) | ||||||
Interest-bearing liabilities: | |||||||||||
NOW, savings, and money market | |||||||||||
accounts | 3,391 | (3,715 | ) | (324 | ) | ||||||
Time deposits | 872 | (2,017 | ) | (1,145 | ) | ||||||
FHLB advances | 2,012 | (1,714 | ) | 298 | |||||||
Long-term debt | — | (3 | ) | (3 | ) | ||||||
Total change in interest expense | 6,275 | (7,449 | ) | (1,174 | ) | ||||||
Total change in net interest income | $ | (1,452 | ) | $ | 2,327 | $ | 875 | ||||
17 |
Six Months Ended June 30, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
2002 vs. 2001 | |||||||||||
Increase (Decrease) Due to | |||||||||||
Volume | Rate | Total | |||||||||
(Unaudited) | |||||||||||
Interest-earning assets: | |||||||||||
Loans | $ | 3,743 | $ | (4,204 | ) | $ | (461 | ) | |||
Securities | 1,093 | (1,069 | ) | 24 | |||||||
Federal funds sold | (374 | ) | (24 | ) | (398 | ) | |||||
Interest-bearing deposits in other | |||||||||||
financial institutions | (1 | ) | 1 | — | |||||||
Total change in interest income | 4,461 | (5,296 | ) | (835 | ) | ||||||
Interest-bearing liabilities: | |||||||||||
NOW, savings, and money market | |||||||||||
accounts | 78 | (896 | ) | (818 | ) | ||||||
Time deposits | 723 | (2,891 | ) | (2,168 | ) | ||||||
FHLB advances | 1,730 | (1,269 | ) | 461 | |||||||
Long-term debt | — | (9 | ) | (9 | ) | ||||||
Total change in interest expense | 2,531 | (5,065 | ) | (2,534 | ) | ||||||
Total change in net interest income | $ | 1,930 | $ | (231 | ) | $ | 1,699 | ||||
Provision for Loan LossesProvisions for loan losses are charged to income to bring the total allowance for loan losses to a level deemed appropriate by management of the Company based on such factors as the industry diversification of the Company’s commercial loan portfolio, the effect of changes in the local real estate market on collateral values, the results of recent regulatory examinations, the effects on the loan portfolio of current economic indicators and their probable impact on borrowers, the amount of charge-offs for the period, the amount of nonperforming loans and related collateral security, the evaluation of the Company’s loan portfolio by Independent Bank Services, L.C. and the annual examination of the Company’s financial statements by its independent auditors. The provision for loan losses for the six months ended June 30, 2002, was $700,000 compared with $340,000 for the six months ended June 30, 2001, an increase of $360,000, or 105.9%. The provision for loan losses for the three months ended June 30, 2002 was $450,000 compared to $185,000 for the three months ended June 30, 2001, an increase of $265,000, or 143.2%. The increase for the six month period was due to the increase in average loans of $43.7 million, or 15.0% over the period. Management believes increasing the allowance for loan losses is prudent as total loans, particularly higher-risk commercial, construction, and consumer loans, increase. The increase is also due to the unstable economic conditions and interest rate environment. Noninterest IncomeThe following table presents, for the periods indicated, the major categories of noninterest income (dollars in thousands): 18 |
Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | 2002 | 2001 | |||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Service charges on deposit accounts | $ | 761 | $ | 687 | $ | 1,405 | $ | 1,305 | ||||||
Fee income | 199 | 157 | 372 | 336 | ||||||||||
Fiduciary income | 38 | 30 | 77 | 63 | ||||||||||
Other noninterest income | 197 | 167 | 338 | 329 | ||||||||||
Realized gain on securities | 280 | 51 | 317 | 317 | ||||||||||
Total noninterest income | $ | 1,475 | $ | 1,092 | $ | 2,509 | $ | 2,350 | ||||||
The Company’s primary sources of recurring noninterest income are service charges on deposit accounts and fee income. Noninterest income for the three and six-months period ended June 30, 2002 increased $383,000, or 35.1% and $159,000 or 6.8%, respectively, over the same periods ended June 30, 2001. The increase in noninterest income for the three and six-month periods ended June 30, 2002 was primarily due to increases in service charges on deposit accounts created by an increase in the number of deposit accounts and increases in fee income due to increases in check cashing fee income and debit card fee income. The Company had net gains on sales of securities of $317,000 for the six month period ended June 30, 2002 and the six month period ended June 30, 2001. Noninterest ExpensesThe following table presents, for the periods indicated, the major categories of noninterest expenses (dollars in thousands): |
Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2002 | 2001 | 2002 | 2001 | |||||||||||
(Unaudited) | (Unaudited) | |||||||||||||
Employee compensation and benefits | $ | 2,107 | $ | 1,790 | $ | 4,214 | $ | 3,710 | ||||||
Non-staff expenses: | ||||||||||||||
Net bank premises expense | 486 | 460 | 960 | 924 | ||||||||||
Office and computer supplies | 65 | 63 | 133 | 145 | ||||||||||
Legal and professional fees | 50 | 121 | 196 | 191 | ||||||||||
Advertising | 94 | 69 | 165 | 141 | ||||||||||
Postage | 48 | 53 | 94 | 96 | ||||||||||
FDIC insurance | 16 | 21 | 33 | 38 | ||||||||||
Other | 708 | 630 | 1,269 | 1,227 | ||||||||||
Total non-staff expenses | 1,467 | 1,417 | 2,850 | 2,762 | ||||||||||
Total noninterest expenses | $ | 3,574 | $ | 3,207 | $ | 7,064 | $ | 6,472 | ||||||
Employee compensation and benefits expense increased $317,000, or 17.7%, and $504,000, or 13.6%, for the three and six months ended June 30, 2002 compared to the same periods in 2001. The increase for both the three and six month periods ended June 30, 2002 was due primarily to normal salary increases and additional staff placement in the Mt. Pleasant, Texarkana, and Paris locations to handle customer growth. The number of full-time equivalent employees was 209 at June 30, 2002, compared with 195 at June 30, 2001, an increase of 7.2%. 19 Non-staff expenses increased $50,000, or 3.5%, and $88,000, or 3.2%, for the three and six months ended June 30, 2002, compared with the same periods in 2001. Net bank premises expense increased $26,000, or 5.7% and $36,000, or 3.9% over the comparable periods due to higher building maintenance expense and increased property tax expense. Advertising also increased during the same periods by $25,000, or 36.2% and $24,000, or 17.0% due to additional advertising in some of the Company’s markets. Other non-staff expenses increased $78,000, or 12.4% and $42,000, or 3.4%, over the comparable three and six month periods. These increases were partially the result of increase in software support fees, ATM and debit card expenses, and audit fees. Income TaxesIncome tax expense increased $292,000 to $705,000 for the six months ended June 30, 2002 from $413,000 for the same period in 2001. Income tax expense was $453,000 for the three months ended June 30, 2002 compared with $197,000 for the three months ended June 30, 2001, an increase of $256,000. The increase for the three and six month period is primarily attributable to the increase in income before income taxes and also the result of fewer tax deductions available from the Company’s leveraged leasing activities. The income stated on the consolidated statement of earnings differs from the taxable income due to tax-exempt income, the amount of non-deductible interest expense and the amount of other non-deductible expense. FINANCIAL CONDITIONLoan PortfolioGross loans were $348.0 million at June 30, 2002, an increase of $16.7 million, or 5.0%, from $331.3 million at December 31, 2001. Loan growth occurred primarily in 1– 4 family residential loans and in the construction and land development loans due to good loan demand in the various markets that the Company serves. The following table summarizes the loan portfolio of the Company by type of loan as of June 30, 2002 and December 31, 2001 (dollars in thousands): |
June 30, 2002 | December 31, 2001 | |||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Amount | Percent | Amount | Percent | |||||||||||
(Unaudited) | ||||||||||||||
Commercial and industrial | $ | 64,096 | 18.42 | % | $ | 66,641 | 20.12 | % | ||||||
Agriculture | 8,610 | 2.47 | 8,589 | 2.59 | ||||||||||
Real estate: | ||||||||||||||
Construction and land development | 12,229 | 3.51 | 9,492 | 2.87 | ||||||||||
1-4 family residential | 137,488 | 39.51 | 126,114 | 38.07 | ||||||||||
Farmland | 9,687 | 2.78 | 9,794 | 2.96 | ||||||||||
Non-residential and non-farmland | 73,399 | 21.09 | 68,165 | 20.58 | ||||||||||
Multi-family residential | 9,205 | 2.65 | 9,333 | 2.81 | ||||||||||
Consumer | 33,249 | 9.57 | 33,127 | 10.00 | ||||||||||
Total gross loans | $ | 347,963 | 100.00 | % | $ | 331,255 | 100.00 | % | ||||||
20 Allowance for Loan LossesIn originating loans, the Company recognizes that it will experience credit losses and the risk of loss will vary with, among other things, general economic conditions, the type of loan being made, the creditworthiness of the borrower over the term of the loan and, in the case of a collateralized loan, the quality of the collateral for such loan. The Company maintains an allowance for loan losses in an amount that it believes is adequate for estimated losses in its loan portfolio. Management determines the adequacy of the allowance through its evaluation of the loan portfolio. In addition to unallocated allowances, specific allowances are provided for individual loans when ultimate collection is considered questionable by management after reviewing the current status of loans which are contractually past due and considering the net realizable value of the collateral for the loan. Loans are charged-off against the allowance for loan losses when appropriate. Although management believes it uses the best information available to make determinations with respect to the allowance for loan losses, future adjustments may be necessary if economic conditions differ from the assumptions used in making the initial determinations. Loan charge-offs, net of recoveries, during the six month period ended June 30, 2002 increased $346,000 or 279.0% over the same period ended June 30, 2001. This increase is due primarily to additional charge-offs recognized during the period caused by the Company’s aggressive position on identifying problem assets. At June 30, 2002 and June 30, 2001, the allowance for loan losses totaled $3.6 million or 1.03% of gross loans and $2.8 million or 0.93% of gross loans respectively. The allowance for loan losses as a percentage of nonperforming loans was 77.69% at June 30, 2002. Set forth below is an analysis of the allowance for loan losses for the periods indicated (dollars in thousands): |
Six months ended June 30, 2002 | Six months ended June 30, 2001 | |||||||
---|---|---|---|---|---|---|---|---|
(Unaudited) | ||||||||
Average loans outstanding | $ | 334,330 | $ | 290,607 | ||||
Gross loans outstanding at end of period | $ | 347,963 | $ | 300,322 | ||||
Allowance for loan losses at beginning of period | $ | 3,346 | $ | 2,578 | ||||
Provision for loan losses | 700 | 340 | ||||||
Charge-offs: | ||||||||
Commercial and industrial | (46 | ) | (117 | ) | ||||
Real estate | (358 | ) | (44 | ) | ||||
Consumer | (178 | ) | (141 | ) | ||||
Recoveries: | ||||||||
Commercial and industrial | 20 | 24 | ||||||
Real estate | 53 | 118 | ||||||
Consumer | 39 | 36 | ||||||
Net loan recoveries (charge-offs) | (470 | ) | (124 | ) | ||||
Allowance for loan losses at end of period | $ | 3,576 | $ | 2,794 | ||||
Ratio of allowance to end of period loans | 1.03 | % | 0.93 | % | ||||
Ratio of net charge-offs to average loans | 0.14 | % | 0.04 | % | ||||
Ratio of allowance to end of period nonperforming loans | 77.69 | % | 57.89 | % |
21 NONPERFORMING ASSETSNonperforming assets were $6.5 million at June 30, 2002 compared with $6.2 million at December 31, 2001. Nonaccrual loans increased $198,000 from $3.7 million at December 31, 2001 to $3.9 million at June 30, 2002. This increase is due primarily to certain commercial lines being added to non-accrual status. These lines are currently in a liquidation mode. They have collateral values, which exceed the total debt, and no loss is anticipated. Accruing loans 90 or more days past due decreased $1.2 million, from $1.9 million at December 31, 2001 to $668,000 at June 30, 2002. This decrease is due primarily to collection efforts of previously past due credits. Other real estate increased $1.3 million during the same period. This increase is primarily the result of loans that were foreclosed on during the period totaling $2.7 million, net of sales of properties with a carrying value of $1.4 million. Management anticipates minimal losses on the total of these new nonperforming assets. The ratio of nonperforming assets to total loans and other real estate was 1.86% and 1.87% at June 30, 2002, and December 31, 2001, respectively. The following table presents information regarding nonperforming assets as of the dates indicated (dollars in thousands): |
June 30, 2002 | December 31, 2001 | |||||||
---|---|---|---|---|---|---|---|---|
(Unaudited) | ||||||||
Nonaccrual loans | $ | 3,935 | $ | 3,737 | ||||
Accruing loans 90 or more days past due | 668 | 1,912 | ||||||
Total nonperforming loans | 4,603 | 5,649 | ||||||
Other real estate | 1,896 | 562 | ||||||
Total nonperforming assets | $ | 6,499 | $ | 6,211 | ||||
None |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES |
None |
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
The Annual Meeting of shareholders was held on April 16, 2002. The following matters were submitted for approval to the shareholders: |
1. | The election of two Class III directors, Tyson T. Abston and Bill Priefert; four Class II directors, Jonice Crane, C.A. Hinton, Sr., Arthur B. Scharlach, Jr., and Gene Watson with 2,402,922 votes for and 91 votes abstaining. |
2. | To ratify the appointment of McGladrey & Pullen, LLP as independent auditors. 2,402,672 votes for, 91 votes against and 250 votes abstaining. |
ITEM 5. OTHER INFORMATION |
None |
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K |
(a) The following documents are filed as part of this Quarterly Report on Form 10Q: |
(1) Exhibits –The following exhibits are filed as a part of this Quarterly Report on Form 10Q: |
11 Statement regarding computation of earnings per share |
99 Certification of Chief Executive Officer and Chief Financial Officer |
(b) Reports on Form 8-K |
No reports on Form 8-K were filed by Guaranty Bancshares, Inc., during the three months ended June 30, 2002. |
24 SIGNATURESPursuant 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. |
Date: August 12, 2002 | GUARANTY BANCSHARES, INC. (Registrant) By: /s/Arthur B. Scharlach, Jr. —————————————— Arthur B. Scharlach, Jr. President (Principal Executive Officer) |
Date: August 12, 2002 | By: /s/Clifton A. Payne —————————————— Clifton A. Payne Senior Vice President and Chief Financial Officer (Principal Financial Officer) |
25 INDEX TO EXHIBITS |
Exhibit Number | Description | Page Number |
11 | Statement regarding computation of earnings per share | Reference is hereby made to Note 3 of Notes to Consolidated Financial Statements on page 10 hereof. |
99 | Certification of Chief Executive Officer and Chief Financial Officer | Page 27 |
26 |