Table of Contents
Arkansas | 6022 | 71-0682831 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Number) | (IRS Employer Identification Number) |
John S. Selig, Esq. | Chet A. Fenimore, Esq. | |||
Mitchell, Williams, Selig, Gates & | Jenkens & Gilchrist, P.C. | |||
Woodyard, P.L.L.C. | and | 401 Congress Avenue, Suite 2500 | ||
425 West Capitol Avenue, Suite 1800 | Austin, Texas 78701 | |||
Little Rock, Arkansas 72201 | Telephone: (512) 499-3800 | |||
Telephone: (501) 688-8804 | Facsimile: (512) 499-3810 | |||
Facsimile: (501) 918-7804 |
Table of Contents
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. |
Per Share | Total | |||||||
Public offering price | $ | $ | ||||||
Underwriting discount | $ | $ | ||||||
Proceeds to us, before expenses | $ | $ |
Piper Jaffray | Sandler O’Neill + Partners, L.P. |
Table of Contents
1 | ||||||||
9 | ||||||||
17 | ||||||||
17 | ||||||||
18 | ||||||||
19 | ||||||||
20 | ||||||||
21 | ||||||||
23 | ||||||||
66 | ||||||||
78 | ||||||||
90 | ||||||||
92 | ||||||||
104 | ||||||||
107 | ||||||||
110 | ||||||||
111 | ||||||||
112 | ||||||||
112 | ||||||||
113 | ||||||||
F-1 | ||||||||
Consent of BKD, LLP | ||||||||
Consent of Ernst & Young, LLP | ||||||||
Consent of Hacker, Johnson & Smith, P.A. | ||||||||
Cosent of BKD, LLP | ||||||||
Consent of BKD, LLP |
Table of Contents
• | increased our total assets from $322.0 million to $2.0 billion; | |
• | increased our loans receivable from $235.7 million to $1.2 billion; | |
• | increased our total deposits from $237.3 million to $1.5 billion; and | |
• | expanded our branch network from eight to 48. | |
1
Table of Contents
Bank Subsidiary | Location | Effective Date of Acquisition | ||
First State Bank | Conway, Arkansas | October 26, 1998 | ||
Community Bank | Cabot, Arkansas | December 1, 2003 | ||
Twin City Bank | North Little Rock, Arkansas | January 1, 2005(1) | ||
Marine Bank | Marathon, Florida | June 1, 2005(2) | ||
Bank of Mountain View | Mountain View, Arkansas | September 1, 2005 |
(1) | Prior to the date of the acquisition, we owned approximately 32% of the shares of TCBancorp, the parent company of Twin City Bank. | |
(2) | In 1995, Mr. Allison, our Chairman and Chief Executive Officer, was a founding board member of Marine Bancorp, the parent company of Marine Bank. He owned approximately 13.9% of Marine Bancorp’s shares at the time of our acquisition. |
• | Organic growth — We believe that our current branch network provides us with the capacity to grow significantly within our existing market areas. Twenty-four of our 48 branches (including the branches of the banks we have acquired) have been opened since the beginning of 2001. As these newer branches continue to mature, we expect to see additional organic loan and deposit growth and increased profitability. Furthermore, we plan to broaden the product lines within each of our bank subsidiaries by cross-selling products such as insurance and trust services. | |
• | De novo branching — We intend to continue to opende novo branches in our current markets and in other attractive market areas if opportunities arise. In 2006, we have opened branches in Searcy and Beebe, Arkansas, and Port Charlotte, Florida. We plan to open an additional five to seven branches in 2006, including two or three in Arkansas, one or two in the Florida Keys, and two along the southwestern coast of Florida. | |
• | Strategic acquisitions — We will continue to consider strategic acquisitions, with a primary focus on Arkansas and southwestern Florida. When considering a potential acquisition, we assess a combination of factors, but concentrate on the strength of existing executive officers, the growth potential of the bank and the market, the profitability of the bank, and the valuation of the bank. We believe that potential sellers consider us an acquirer of choice, largely due to our community banking philosophy. With each acquisition we seek to maintain continuity of executive officers and the board of directors, consolidate back office operations, add product lines, and implement our credit policy. |
2
Table of Contents
• | operate largely autonomous community banks managed by experienced bankers and a local board of directors, who are empowered to make customer-related decisions quickly; | |
• | provide exceptional service and develop strong customer relationships; | |
• | pursue the business relationships of our boards of directors, executive officers, shareholders, and customers to actively promote our community banks; and | |
• | maintain our commitment to the communities we serve by supporting their civic and nonprofit organizations. |
• | Emphasis on credit quality — Credit quality is our first priority in the management of our bank subsidiaries. We employ a set of credit standards across our bank subsidiaries that are designed to ensure the proper management of credit risk. Our management team plays an active role in monitoring compliance with these credit standards at each of our bank subsidiaries. We have a centralized loan review process and regularly monitor each of our bank subsidiaries’ loan portfolios, which we believe enables us to take prompt action on potential problem loans. Non-performing assets as a percentage of total assets decreased from 1.18% as of December 31, 2004, to 0.45% as of March 31, 2006. | |
• | Continue to improve profitability — We intend to improve our profitability as we leverage the available capacity of our newer branches and employees. We believe our investments in our branch network and centralized technology infrastructure are sufficient to support a larger organization, and therefore believe increases in our expenses should be lower than the corresponding increases in our revenues. We also plan to increase our fee-based revenue by offering all our products and services, including insurance and trust services, through each of our bank subsidiaries. | |
• | Attract and motivate experienced bankers — We believe a major factor in our success has been our ability to attract and retain bankers that have experience in and knowledge of their local communities. For example, in January 2006, we hired eight experienced bankers in the Searcy, Arkansas, market (located approximately 50 miles northeast of Little Rock), where we subsequently opened a new branch. Hiring and retaining experienced relationship bankers has been integral to our ability to grow quickly when entering new markets. We will continue to recruit experienced relationship bankers as our banking franchise expands. | |
• | Leveraging our infrastructure — The support services we provide to our bank subsidiaries are generally centralized in Conway, Arkansas. These services include finance and accounting, internal audit, compliance, loan review, human resources, training, and data processing. We believe the centralization of our support services enhances efficiencies, maintains consistency in policies and procedures, and enables our employees to focus on developing and strengthening customer relationships. |
3
Table of Contents
Arkansas |
Florida |
4
Table of Contents
5
Table of Contents
Common stock offered | shares(1) | |
Common stock to be outstanding after this offering | shares(2) | |
Use of proceeds | We estimate the net proceeds of this offering will be $ , based on the midpoint of the price range on the cover page of this prospectus. We will use the net proceeds of this offering for general corporate purposes, which may include, among other things, our working capital needs and providing investments in our bank subsidiaries. We may also use a portion of the net proceeds to finance bank acquisitions, though we have no present plans in that regard. See “Use of Proceeds.” | |
Risk factors | See “Risk Factors” beginning on page and other information included in this prospectus for a discussion of factors you should consider carefully before deciding to invest in our common stock. | |
Dividend policy | We have paid quarterly cash dividends on our common stock beginning with the second quarter of 2003. We anticipate continuing to pay cash dividends on the common stock in the foreseeable future, subject to the prior payment of dividends on our outstanding shares of preferred stock and interest on our subordinated debentures. However, any future determination relating to dividends will be made at the discretion of our board of directors and will depend on a number of factors, including our future earnings, capital requirements, financial condition, future prospects, regulatory restrictions and other factors that our board of directors may deem relevant. See “Price Range of Our Common Stock and Dividends.” | |
Proposed Nasdaq National Market symbol | We have applied to have our common stock listed on The Nasdaq National Market under the symbol “HOMB.” |
(1) | The number of shares offered assumes that the underwriters do not exercise their over-allotment option. If the underwriters do exercise their over-allotment option, we will issue and sell up to an additional shares. |
(2) | The number of shares outstanding after this offering is based on the number of shares outstanding as of March 31, 2006, and excludes the following: (i) 1,048,964 shares of common stock issuable upon the exercise of stock options outstanding as of March 31, 2006, of which options for 561,944 shares of common stock were exercisable on that date (assuming conversion of preferred stock issued on option exercises); (ii) 151,036 shares of common stock as of March 31, 2006, reserved for issuance pursuant to future grants under our 2006 Stock Option and Performance Incentive Plan; (iii) 2,159,921 shares of common stock issuable upon conversion of the shares of our Class A preferred stock and Class B preferred stock that were outstanding as of March 31, 2006 (which conversions we intend to effect as soon as practicable after this offering is completed); and (iv) up to shares of common stock that may be issued upon the exercise of the underwriters’ over-allotment option. |
6
Table of Contents
As of or for the Three | |||||||||||||||||||||||||||||
Months Ended March 31, | As of or for the Years Ended December 31, | ||||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||||||
(Dollars and shares in thousands, except per share data) | |||||||||||||||||||||||||||||
Income statement data: | |||||||||||||||||||||||||||||
Total interest income | $ | 27,734 | $ | 16,361 | $ | 85,458 | $ | 36,681 | $ | 21,538 | $ | 20,361 | $ | 18,216 | |||||||||||||||
Total interest expense | 12,928 | 6,355 | 36,002 | 11,580 | 8,240 | 7,490 | 8,872 | ||||||||||||||||||||||
Net interest income | 14,806 | 10,006 | 49,456 | 25,101 | 13,298 | 12,871 | 9,344 | ||||||||||||||||||||||
Provision for loan losses | 484 | 1,051 | 3,827 | 2,290 | 807 | 2,220 | 1,708 | ||||||||||||||||||||||
Net interest income after provision for loan losses | 14,322 | 8,955 | 45,629 | 22,811 | 12,491 | 10,651 | 7,636 | ||||||||||||||||||||||
Non-interest income | 4,401 | 3,813 | 15,222 | 13,681 | 6,739 | 5,354 | 2,895 | ||||||||||||||||||||||
Gain on sale of equity investment | — | — | 465 | 4,410 | — | — | — | ||||||||||||||||||||||
Non-interest expense | 13,619 | 9,636 | 44,935 | 26,131 | 13,070 | 10,052 | 8,364 | ||||||||||||||||||||||
Income before income taxes and minority interest | 5,104 | 3,132 | 16,381 | 14,771 | 6,160 | 5,953 | 2,167 | ||||||||||||||||||||||
Provision for income taxes | 1,588 | 943 | 4,935 | 5,030 | 2,343 | 2,076 | 811 | ||||||||||||||||||||||
Minority interest | — | — | — | 582 | 48 | — | — | ||||||||||||||||||||||
Net income | $ | 3,516 | $ | 2,189 | $ | 11,446 | $ | 9,159 | $ | 3,769 | $ | 3,877 | $ | 1,356 | |||||||||||||||
Per share data: | |||||||||||||||||||||||||||||
Basic earnings | $ | 0.28 | $ | 0.18 | $ | 0.92 | $ | 1.08 | $ | 0.66 | $ | 0.78 | $ | 0.30 | |||||||||||||||
Diluted earnings | 0.24 | 0.16 | 0.82 | 0.94 | 0.63 | 0.77 | 0.29 | ||||||||||||||||||||||
Diluted cash earnings(1) | 0.26 | 0.18 | 0.89 | 0.98 | 0.64 | 0.77 | 0.29 | ||||||||||||||||||||||
Book value per common share | 11.68 | 10.88 | 11.45 | 10.75 | 9.79 | 8.36 | 7.28 | ||||||||||||||||||||||
Book value per share with preferred converted to common(2) | 11.83 | 11.10 | 11.63 | 11.07 | 10.29 | 8.36 | 7.28 | ||||||||||||||||||||||
Tangible book value per common share(3)(7) | 7.70 | 8.57 | 7.43 | 7.89 | 6.63 | 8.36 | 7.28 | ||||||||||||||||||||||
Tangible book value per share with preferred converted to common(2)(3)(7) | 8.45 | 9.07 | 8.21 | 8.70 | 7.68 | 8.36 | 7.28 | ||||||||||||||||||||||
Dividends — common | 0.02 | 0.01 | 0.07 | 0.04 | 0.01 | — | — | ||||||||||||||||||||||
Average common shares outstanding | 12,123 | 11,745 | 11,862 | 7,986 | 5,721 | 4,956 | 4,557 | ||||||||||||||||||||||
Average diluted shares outstanding | 14,392 | 13,548 | 13,889 | 9,783 | 5,964 | 5,019 | 4,605 | ||||||||||||||||||||||
Annualized Performance ratios: | |||||||||||||||||||||||||||||
Return on average assets | 0.74 | % | 0.63 | % | 0.69 | % | 1.17 | % | 0.85 | % | 1.14 | % | 0.52 | % | |||||||||||||||
Return on average equity | 8.51 | 5.89 | 7.27 | 8.61 | 8.88 | 9.87 | 4.27 | ||||||||||||||||||||||
Return on average tangible equity(3)(8) | 12.76 | 7.72 | 10.16 | 11.54 | 9.44 | 9.87 | 4.27 | ||||||||||||||||||||||
Net interest margin(4) | 3.53 | 3.22 | 3.37 | 3.75 | 3.47 | 4.12 | 3.92 | ||||||||||||||||||||||
Efficiency ratio(5) | 66.68 | 65.86 | 64.94 | 57.65 | 64.61 | 55.08 | 68.18 |
7
Table of Contents
As of or for the Three | |||||||||||||||||||||||||||||
Months Ended March 31, | As of or for the Years Ended December 31, | ||||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||||||
(Dollars and shares in thousands, except per share data) | |||||||||||||||||||||||||||||
Asset quality: | |||||||||||||||||||||||||||||
Nonperforming assets as a percentage of total assets | 0.45 | % | 0.56 | % | 0.47 | % | 1.18 | % | 1.24 | % | 0.58 | % | 0.48 | % | |||||||||||||||
Nonperforming loans as a percentage of total loans | 0.66 | 0.84 | 0.69 | 1.73 | 1.73 | 0.64 | 0.57 | ||||||||||||||||||||||
Allowance for loan losses to nonperforming loans | 296.72 | 239.36 | 291.62 | 182.40 | 170.10 | 314.73 | 286.66 | ||||||||||||||||||||||
Allowance for loan losses to total loans | 1.96 | 2.73 | 2.01 | 3.16 | 2.94 | 2.00 | 1.63 | ||||||||||||||||||||||
Net charge-offs as a percentage of average total loans | 0.07 | 0.08 | 0.38 | 0.13 | 0.16 | 0.14 | 0.14 | ||||||||||||||||||||||
Balance sheet data (period end): | |||||||||||||||||||||||||||||
Total assets | $ | 1,970,910 | $ | 1,422,652 | $ | 1,911,491 | $ | 805,186 | $ | 803,103 | $ | 368,983 | $ | 322,036 | |||||||||||||||
Investment securities | 525,257 | 491,500 | 530,302 | 190,466 | 161,951 | 44,317 | 55,285 | ||||||||||||||||||||||
Loans receivable | 1,246,146 | 806,633 | 1,204,589 | 516,655 | 500,055 | 284,764 | 235,699 | ||||||||||||||||||||||
Allowance for loan losses | 24,435 | 21,982 | 24,175 | 16,345 | 14,717 | 5,706 | 3,847 | ||||||||||||||||||||||
Intangible assets | 48,302 | 27,165 | 48,727 | 22,816 | 25,252 | — | — | ||||||||||||||||||||||
Non-interest-bearing deposits | 225,340 | 144,317 | 209,974 | 86,186 | 76,508 | 31,027 | 29,202 | ||||||||||||||||||||||
Total deposits | 1,507,443 | 1,046,097 | 1,427,108 | 552,878 | 572,218 | 279,228 | 237,343 | ||||||||||||||||||||||
Subordinated debentures (trust preferred securities) | 44,731 | 24,202 | 44,755 | 24,219 | 24,238 | — | — | ||||||||||||||||||||||
Shareholders’ equity | 169,040 | 148,555 | 165,857 | 106,610 | 99,472 | 46,753 | 35,997 | ||||||||||||||||||||||
Capital ratios: | |||||||||||||||||||||||||||||
Equity to assets | 8.58 | % | 10.44 | % | 8.68 | % | 13.24 | % | 12.39 | % | 12.67 | % | 11.17 | % | |||||||||||||||
Tangible equity to tangible assets(3)(9) | 6.28 | 8.70 | 6.29 | 10.71 | 9.54 | 12.67 | 11.17 | ||||||||||||||||||||||
Tier 1 leverage ratio(6) | 9.31 | 10.99 | 9.22 | 13.47 | 13.06 | 13.42 | 11.98 | ||||||||||||||||||||||
Tier 1 risk-based capital ratio | 12.13 | 15.62 | 12.25 | 17.39 | 16.35 | 14.17 | 13.34 | ||||||||||||||||||||||
Total risk-based capital ratio | 13.38 | 16.88 | 13.51 | 17.39 | 16.35 | 15.42 | 14.77 | ||||||||||||||||||||||
Dividend payout — common | 6.91 | 5.57 | 7.30 | 3.71 | 2.46 | — | — |
(1) | Diluted cash earnings per share reflect diluted earnings per share plus per share intangible amortization expense, net of the corresponding tax effect. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Table 20,” on page 56, for the non-GAAP tabular reconciliation. |
(2) | Shares of Class A preferred stock and Class B preferred stock outstanding on the indicated dates are assumed to have been converted to shares of common stock. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Table 21,” on page 57. |
(3) | Tangible calculations eliminate the effect of goodwill and acquisition-related intangible assets and the corresponding amortization expense on a tax-effected basis. |
(4) | Fully taxable equivalent (tax-exempt interest earnings are adjusted as if interest earnings are taxable). |
(5) | The efficiency ratio is calculated by dividing non-interest expense less amortization of core deposit intangibles by the sum of net interest income on a tax equivalent basis and non-interest income. |
(6) | Leverage ratio is Tier 1 capital to quarterly average total assets less intangible assets and gross unrealized gains/losses on available-for-sale investment securities. |
(7) | See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Table 21,” on page 57, for the non-GAAP tabular reconciliation. |
(8) | See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Table 22,” on page 57, for the non-GAAP tabular reconciliation. |
(9) | See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Table 23,” on page 58, for the non-GAAP tabular reconciliation. |
8
Table of Contents
9
Table of Contents
• | credit risk associated with the acquired bank’s loans and investments; | |
• | difficulty of integrating operations and personnel; and | |
• | potential disruption of our ongoing business. |
• | the inability to obtain all required regulatory approvals; | |
• | significant costs and anticipated operating losses associated with establishing ade novobranch or a new bank; | |
• | the inability to secure the services of qualified senior management; | |
• | the local market may not accept the services of a new bank owned and managed by a bank holding company headquartered outside of the market area of the new bank; |
10
Table of Contents
• | the inability to obtain attractive locations within a new market at a reasonable cost; and | |
• | the additional strain on management resources and internal systems and controls. |
11
Table of Contents
12
Table of Contents
• | We may not have sufficient earnings since our primary source of income, the payment of dividends to us by our bank subsidiaries, is subject to federal and state laws that limit the ability of these banks to pay dividends. | |
• | Federal Reserve Board policy requires bank holding companies to pay cash dividends on common stock only out of net income available over the past year and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. | |
• | Before dividends may be paid on our common stock in any year, dividends of $0.25 per share must first be paid on our Class A preferred stock and $0.57 per share on our Class B preferred stock. | |
• | Before dividends may be paid on our common stock in any year, payments must be made on our subordinated debentures. | |
• | Our board of directors may determine that, even though funds are available for dividend payments, retaining the funds for internal uses, such as expansion of our operations, is a better strategy. |
The holders of our subordinated debentures have rights that are senior to those of our shareholders. |
Our profitability is vulnerable to interest rate fluctuations and monetary policy. |
13
Table of Contents
We are subject to extensive regulation that could limit or restrict our activities and impose financial requirements or limitations on the conduct of our business, which limitations or restrictions could adversely affect our profitability. |
We have broad discretion in the use of the net proceeds from this offering, and our use of those proceeds may not yield a favorable return on your investment. |
14
Table of Contents
There has been no prior active trading market for our common stock. We cannot assure you that an active public trading market will develop after the offering and, even if it does, our stock price may trade below the public offering price. |
Investors in this offering will experience immediate and substantial dilution. |
The ability of our insiders or the holders of our Class A and Class B preferred stock to sell substantial amounts of common stock after this offering may depress the market price of our common stock or cause it to decline. |
There are three potentially significant sources of shares of our common stock that may come on the market after this offering: |
• | Our directors and executive officers will beneficially own approximately % of our common stock immediately after this offering. Although they are subject to “lock-up” agreements with our underwriters, which generally prevent them from selling their shares within 180 days after the offering, the underwriters may release them from those obligations. In any event, after thelock-up agreements expire, approximately 5.9 million additional shares of our common stock could become tradable by our directors and executive officers. | |
• | We intend to require that all of the outstanding shares of our Class A preferred stock be converted to common stock as soon as practicable after June 6, 2006, the first date on which we can require conversion of those shares. We also intend, as soon as practicable after this offering, to require that our Class B preferred stock be converted to common stock. Conversion of our Class A preferred stock and Class B preferred stock will result in as many as 2,240,641 shares of our common stock being issued, | |
15
Table of Contents
including shares issuable upon exercise of preferred stock options. Most of the holders of the newly issued shares of common stock will be eligible immediately to sell their shares. | ||
• | We intend to register all common stock that we may issue upon exercise of outstanding options under our 2006 Stock Option and Performance Incentive Plan. Once we register these shares, they can be sold in the public market upon issuance, subject to restrictions under the securities laws and, if applicable, thelock-up agreements described above. As of March 31, 2006, stock options to purchase 968,244 shares of our common stock had been granted under this plan, of which 481,224 are presently exercisable. | |
16
Table of Contents
• | the effects of future economic conditions, including inflation or a decrease in residential housing values; | |
• | governmental monetary and fiscal policies, as well as legislative and regulatory changes; | |
• | the risks of changes in interest rates or the level and composition of deposits, loan demand and the values of loan collateral, securities and interest sensitive assets and liabilities; | |
• | the effects of terrorism and efforts to combat it; | |
• | credit risks; | |
• | the effects of competition from other commercial banks, thrifts, mortgage banking firms, consumer finance companies, credit unions, securities brokerage firms, insurance companies, money market and other mutual funds and other financial institutions operating in our market area and elsewhere, including institutions operating regionally, nationally and internationally, together with competitors offering banking products and services by mail, telephone and the Internet; | |
• | the effect of any mergers, acquisitions or other transactions to which we or our subsidiaries may from time to time be a party, including our ability to successfully integrate any businesses that we acquire; and | |
• | the failure of assumptions underlying the establishment of our allowance for loan losses. |
17
Table of Contents
18
Table of Contents
March 31, 2006 | |||||||||
Actual | As adjusted(1) | ||||||||
(Dollars in thousands, except | |||||||||
per share data) | |||||||||
Long-term indebtedness:(2) | |||||||||
Subordinated debentures, due 2030 | $ | 3,493 | $ | 3,493 | |||||
Subordinated debentures, due 2033 | 20,619 | 20,619 | |||||||
Subordinated debentures, due 2033, floating rate | 5,155 | 5,155 | |||||||
Subordinated debentures, due 2035 | 15,464 | 15,464 | |||||||
Total long-term indebtedness | 44,731 | 44,731 | |||||||
Shareholders’ equity: | |||||||||
Class A preferred stock, $0.01 par value; 2,500,000 shares authorized; 2,090,812 shares issued and outstanding, actual and as adjusted | 21 | 21 | |||||||
Class B preferred stock, $0.01 par value; 3,000,000 shares authorized; 169,760 shares issued and outstanding, actual and as adjusted | 2 | 2 | |||||||
Common stock, $0.01 par value; 25,000,000 shares authorized; 12,129,355 shares issues and outstanding; shares issued and outstanding as adjusted | 121 | ||||||||
Capital surplus | 146,638 | ||||||||
Retained earnings | 30,449 | 30,449 | |||||||
Accumulated other comprehensive loss | (8,191 | ) | (8,191 | ) | |||||
Total shareholders’ equity | 169,040 | ||||||||
Total capitalization(3) | $ | 213,771 | |||||||
Book value per share with preferred converted to common | $ | 11.63 | |||||||
Capital ratios: | |||||||||
Equity to assets | 8.58 | % | |||||||
Tangible equity to tangible assets(4) | 6.28 | ||||||||
Tier 1 leverage ratio(5) | 9.31 | ||||||||
Tier 1 risk-based capital ratio | 12.13 | ||||||||
Total risk-based capital ratio | 13.38 |
(1) | As adjusted to give effect to the assumed issuance of shares of common stock. |
(2) | Excludes FHLB advances, which were approximately $123.2 million as of March 31, 2006. |
(3) | Consists of long-term debt and total shareholders’ equity. |
(4) | Tangible calculations eliminate the effect of goodwill and acquisition-related intangible assets and the corresponding amortization expense on a tax-effected basis. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Table 23,” on page , for the non-GAAP tabular reconciliation. |
(5) | Leverage ratio is Tier 1 capital to quarterly average total assets less intangible assets and gross unrealized gains/losses on available-for-sale investment securities. |
19
Table of Contents
Assumed initial public offering price | $ | ||||||||
Net tangible book value prior to offering | $ | 8.45 | |||||||
Increase in net tangible book value attributable to new investors | |||||||||
Pro forma net tangible book value after offering | |||||||||
Dilution to new investors | $ |
Shares Purchased | Total Consideration | |||||||||||||||||||
Average Price | ||||||||||||||||||||
Number | Percent | Amount(1) | Percent(1) | Per Share(1) | ||||||||||||||||
(Dollars in thousands, except per share amounts) | ||||||||||||||||||||
Shares previously issued | % | $ | % | $ | ||||||||||||||||
Shares issued in this offering | ||||||||||||||||||||
Total | % | $ | % | $ |
(1) | Before deducting estimated underwriting discounts and commissions of $ and estimated offering expenses of approximately $ . In addition, this table does not reflect the exercise of any outstanding stock options. As of March 31, 2006, there were options outstanding under our stock option plan to purchase a total of 968,244 shares of common stock with a weighted average exercise price of $11.22 per share; options outstanding to purchase a total of 11,703 shares of Class A preferred stock with a weighted average exercise price of $6.84 per share (which can convert into 9,239 shares of common stock with a weighted average price of $8.66 per share); and options outstanding to purchase a total of 23,827 shares of Class B preferred stock with a weighted average exercise price of $19.09 per share (which can convert into 71,481 shares of common stock with a weighted average price of $6.36 per share). |
20
Table of Contents
Mountain | ||||||||||||||||||||||
Home | Marine | View | Pro forma | |||||||||||||||||||
BancShares | Bancorp | Bancshares | 2005 with | |||||||||||||||||||
As | Jan. 1- | Jan. 1- | Marine and | |||||||||||||||||||
Reported | May 31, | Aug. 31, | Mountain | |||||||||||||||||||
2005 | 2005 | 2005 | Adjustments | View | ||||||||||||||||||
(Dollars and shares in thousands, except per share data) | ||||||||||||||||||||||
Interest income | ||||||||||||||||||||||
Loans receivable | $ | 65,244 | $ | 5,637 | $ | 3,421 | $ | — | $ | 74,302 | ||||||||||||
Investment securities | 19,829 | 325 | 3,206 | (792 | )(1) | 22,568 | ||||||||||||||||
Deposits — other banks | 101 | 5 | — | — | 106 | |||||||||||||||||
Federal funds sold | 284 | — | 117 | — | 401 | |||||||||||||||||
Total interest income | 85,458 | 5,967 | 6,744 | (792 | ) | 97,377 | ||||||||||||||||
Interest expense | ||||||||||||||||||||||
Interest on deposits | 26,883 | 1,532 | 2,410 | — | 30,825 | |||||||||||||||||
Federal funds purchased | 399 | — | — | — | 399 | |||||||||||||||||
FHLB and other borrowings | 4,046 | 413 | — | — | 4,459 | |||||||||||||||||
Securities sold under agreements to repurchase | 2,657 | — | — | — | 2,657 | |||||||||||||||||
Subordinated debentures | 2,017 | 155 | — | 681 | (2) | 2,853 | ||||||||||||||||
Total interest expense | 36,002 | 2,100 | 2,410 | 681 | 41,193 | |||||||||||||||||
�� | ||||||||||||||||||||||
Net interest income | 49,456 | 3,867 | 4,334 | (1,473 | ) | 56,184 | ||||||||||||||||
Provision for loan losses | 3,827 | 258 | 360 | — | 4,445 | |||||||||||||||||
Net interest income after provision for loan losses | 45,629 | 3,609 | 3,974 | (1,473 | ) | 51,739 | ||||||||||||||||
21
Table of Contents
Mountain | |||||||||||||||||||||
Home | Marine | View | Pro forma | ||||||||||||||||||
BancShares | Bancorp | Bancshares | 2005 with | ||||||||||||||||||
As | Jan. 1- | Jan. 1- | Marine and | ||||||||||||||||||
Reported | May 31, | Aug. 31, | Mountain | ||||||||||||||||||
2005 | 2005 | 2005 | Adjustments | View | |||||||||||||||||
(Dollars and shares in thousands, except per share data) | |||||||||||||||||||||
Non-interest income | |||||||||||||||||||||
Service charges on deposits | 8,319 | 275 | 228 | — | 8,822 | ||||||||||||||||
Other service charges and fees | 2,099 | 171 | 64 | — | 2,334 | ||||||||||||||||
Mortgage banking income | 1,651 | 206 | — | — | 1,857 | ||||||||||||||||
Other income | 3,618 | 15 | 305 | — | 3,938 | ||||||||||||||||
Total non-interest income | 15,687 | 667 | 597 | — | 16,951 | ||||||||||||||||
Non-interest expense | |||||||||||||||||||||
Salaries and employee benefits | 23,901 | 1,690 | 1,052 | — | 26,643 | ||||||||||||||||
Occupancy and equipment | 6,869 | 450 | 351 | — | 7,670 | ||||||||||||||||
Data processing expense | 1,991 | 298 | 33 | — | 2,322 | ||||||||||||||||
Advertising | 2,067 | 58 | 30 | — | 2,155 | ||||||||||||||||
Amortization of intangibles | 1,466 | — | — | 330 | (3) | 1,796 | |||||||||||||||
Other operating expense | 8,641 | 667 | 385 | — | 9,693 | ||||||||||||||||
Total non-interest expense | 44,935 | 3,163 | 1,851 | 330 | 50,279 | ||||||||||||||||
Income before taxes | 16,381 | 1,113 | 2,720 | (1,803 | ) | 18,411 | |||||||||||||||
Income taxes — pro forma adjustment | 4,935 | 442 | — | (707 | )(4) | 4,670 | |||||||||||||||
Income taxes — Mountain View adjustment | — | — | — | 450 | (5) | 450 | |||||||||||||||
Net income | $ | 11,446 | $ | 671 | $ | 2,720 | $ | (1,546 | ) | $ | 13,291 | ||||||||||
Basic earnings per share | $ | 0.92 | $ | — | $ | — | $ | — | $ | 1.05 | |||||||||||
Diluted earnings per share | 0.82 | — | — | — | 0.93 | ||||||||||||||||
Preferred stock dividends | $ | 574 | $ | 41 | $ | — | $ | — | $ | 615 | |||||||||||
Basic — weighted average shares outstanding | 11,862 | — | 224 | — | 12,086 | ||||||||||||||||
Diluted — weighted average shares outstanding | 13,889 | 203 | 224 | — | 14,316 |
(1) | This adjustment reflects the reduction in interest income that would result from the sale of $34.2 million of securities to fund our purchase of Marine Bancorp and Mountain View Bancshares for the five and eight months, respectively, prior to their acquisition by us. An average rate of 3.87% was used based on the yield of the securities sold. |
(2) | This adjustment reflects additional interest expense on subordinated debentures for the eight months prior to the acquisition of Mountain View Bancshares. An average rate of 6.81% was used based on the additional $15.0 million of subordinated debenture issued during 2005. |
(3) | This adjustment reflects the amortization expense for Marine Bancorp and Mountain View Bancshares core deposit intangible assets for the five and eight months, respectively, prior to their acquisitions by us. |
(4) | This adjustment reflects the estimated tax effect of the pro forma adjustments using a marginal 39.23% tax rate. |
(5) | This adjustment reflects the estimated tax effect of the conversion of Mountain View Bancshares from an S corporation to a C corporation tax filer using an estimated effective tax rate of 16.56%. The estimated effective tax rate is low due to the relatively high level of investments in municipal securities owned by Bank of Mountain View. |
22
Table of Contents
As of or for the Three | ||||||||||||||||||||
Months Ended March 31, | As of or for the Years Ended December 31, | |||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | ||||||||||||||||
(Dollars in thousands, except per share data) | ||||||||||||||||||||
Total assets | $ | 1,970,910 | $ | 1,422,652 | $ | 1,911,491 | $ | 805,186 | $ | 803,103 | ||||||||||
Loans receivable | 1,246,146 | 806,633 | 1,204,589 | 516,655 | 500,055 | |||||||||||||||
Total deposits | 1,507,443 | 1,046,097 | 1,427,108 | 552,878 | 572,218 | |||||||||||||||
Net income | 3,516 | 2,189 | 11,446 | 9,159 | 3,769 | |||||||||||||||
Basic earnings per share | $ | 0.28 | $ | 0.18 | $ | 0.92 | $ | 1.08 | $ | 0.66 | ||||||||||
Diluted earnings per share | 0.24 | 0.16 | 0.82 | 0.94 | 0.63 | |||||||||||||||
Diluted cash earnings per share(1) | 0.26 | 0.18 | 0.89 | 0.98 | 0.64 | |||||||||||||||
Net interest margin(2) | 3.53 | % | 3.22 | % | 3.37 | % | 3.75 | % | 3.47 | % | ||||||||||
Efficiency ratio | 66.68 | 65.86 | 64.94 | 57.65 | 64.61 | |||||||||||||||
Return on average assets(2) | 0.74 | 0.63 | 0.69 | 1.17 | 0.85 | |||||||||||||||
Return on average equity(2) | 8.51 | 5.89 | 7.27 | 8.61 | 8.88 |
(1) | See Table 20 “Diluted Cash Earnings Per Share” for a reconciliation to GAAP for diluted cash earnings per share. |
(2) | Annualized for March 31. |
23
Table of Contents
24
Table of Contents
25
Table of Contents
26
Table of Contents
27
Table of Contents
28
Table of Contents
Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | ||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||
Interest income | $ | 27,734 | $ | 16,361 | $ | 85,458 | $ | 36,681 | $ | 21,538 | ||||||||||
Fully taxable equivalent adjustment | 583 | 343 | 1,790 | 874 | 95 | |||||||||||||||
Interest income — fully taxable equivalent | 28,317 | 16,704 | 87,248 | 37,555 | 21,633 | |||||||||||||||
Interest expense | 12,928 | 6,355 | 36,002 | 11,580 | 8,240 | |||||||||||||||
Net interest income — fully taxable equivalent | $ | 15,389 | $ | 10,349 | $ | 51,246 | $ | 25,975 | $ | 13,393 | ||||||||||
Yield on earning assets — fully taxable equivalent | 6.50 | % | 5.20 | % | 5.74 | % | 5.42 | % | 5.61 | % | ||||||||||
Cost of interest-bearing liabilities | 3.39 | 2.31 | 2.75 | 2.00 | 2.36 | |||||||||||||||
Net interest spread — fully taxable equivalent | 3.11 | 2.89 | 2.99 | 3.42 | 3.25 | |||||||||||||||
Net interest margin — fully taxable equivalent | 3.53 | 3.22 | 3.37 | 3.75 | 3.47 |
December 31, | ||||||||||||
March 31, | ||||||||||||
2006 vs. 2005 | 2005 vs. 2004 | 2004 vs. 2003 | ||||||||||
(In thousands) | ||||||||||||
Increase in interest income due to change in earning assets | $ | 7,951 | $ | 46,333 | $ | 16,267 | ||||||
Increase (decrease) in interest income due to change in earning asset yields | 3,662 | 3,360 | (344 | ) | ||||||||
Increase in interest expense due to change in interest-bearing liabilities | 3,032 | 17,339 | 4,166 | |||||||||
Increase (decrease) in interest expense due to change in interest rates paid on interest-bearing liabilities | 3,541 | 7,083 | (826 | ) | ||||||||
Increase in net interest income | $ | 5,040 | $ | 25,271 | $ | 12,583 | ||||||
29
Table of Contents
Three Months Ended March 31, | ||||||||||||||||||||||||||
2006 | 2005 | |||||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | |||||||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||
Earning assets | ||||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 3,706 | $ | 41 | 4.49 | % | $ | 2,204 | $ | 8 | 1.47 | % | ||||||||||||||
Federal funds sold | 14,477 | 159 | 4.45 | 1,036 | 6 | 2.35 | ||||||||||||||||||||
Investment securities — taxable | 430,121 | 4,725 | 4.46 | 458,658 | 4,241 | 3.75 | ||||||||||||||||||||
Investment securities — non-taxable | 92,627 | 1,510 | 6.61 | 53,922 | 823 | 6.19 | ||||||||||||||||||||
Loans receivable | 1,224,871 | 21,882 | 7.25 | 787,251 | 11,626 | 5.99 | ||||||||||||||||||||
Total interest-earning assets | 1,765,802 | 28,317 | 6.50 | 1,303,071 | 16,704 | 5.20 | ||||||||||||||||||||
Non-earning assets | 169,399 | 116,190 | ||||||||||||||||||||||||
Total assets | $ | 1,935,201 | $ | 1,419,261 | ||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | $ | 520,287 | $ | 2,739 | 2.14 | $ | 370,843 | $ | 1,263 | 1.38 | ||||||||||||||||
Time deposits | 715,790 | 6,790 | 3.85 | 541,163 | 3,432 | 2.57 | ||||||||||||||||||||
Total interest-bearing deposits | 1,236,077 | 9,529 | 3.13 | 912,006 | 4,695 | 2.09 | ||||||||||||||||||||
Federal funds purchased | 26,469 | 304 | 4.66 | 19,637 | 122 | 2.52 | ||||||||||||||||||||
Securities sold under agreement to repurchase | 99,344 | 870 | 3.55 | 68,911 | 458 | 2.70 | ||||||||||||||||||||
FHLB and other borrowed funds | 137,796 | 1,476 | 4.34 | 90,124 | 681 | 3.06 | ||||||||||||||||||||
Subordinated debentures | 44,746 | 749 | 6.79 | 24,216 | 399 | 6.68 | ||||||||||||||||||||
Total interest-bearing liabilities | 1,544,432 | 12,928 | 3.39 | 1,114,894 | 6,355 | 2.31 | ||||||||||||||||||||
Non-interest bearing liabilities | ||||||||||||||||||||||||||
Non-interest-bearing deposits | 213,135 | 143,485 | ||||||||||||||||||||||||
Other liabilities | 10,067 | 10,194 | ||||||||||||||||||||||||
Total liabilities | 1,767,634 | 1,268,573 | ||||||||||||||||||||||||
Shareholders’ equity | 167,567 | 150,688 | ||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,935,201 | $ | 1,419,261 | ||||||||||||||||||||||
Net interest spread | 3.11 | % | 2.89 | % | ||||||||||||||||||||||
Net interest income and margin | $ | 15,389 | 3.53 | $ | 10,349 | 3.22 | ||||||||||||||||||||
30
Table of Contents
Years Ended December 31, | ||||||||||||||||||||||||||||||||||||||
2005 | 2004 | 2003 | ||||||||||||||||||||||||||||||||||||
Average | Income/ | Yield/ | Average | Income/ | Yield/ | Average | Income/ | Yield/ | ||||||||||||||||||||||||||||||
Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | ||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||||
Earning assets | ||||||||||||||||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 3,159 | $ | 101 | 3.20 | % | $ | 2,788 | $ | 38 | 1.36 | % | $ | 699 | $ | 8 | 1.14 | % | ||||||||||||||||||||
Federal funds sold | 8,048 | 284 | 3.53 | 16,902 | 158 | 0.93 | 13,562 | 159 | 1.17 | |||||||||||||||||||||||||||||
Investment securities — taxable | 442,168 | 17,103 | 3.87 | 144,446 | 5,764 | 3.99 | 48,350 | 1,584 | 3.28 | |||||||||||||||||||||||||||||
Investment securities — non-taxable | 66,960 | 4,301 | 6.42 | 34,945 | 2,331 | 6.67 | 4,277 | 276 | 6.45 | |||||||||||||||||||||||||||||
Loans receivable | 1,000,906 | 65,459 | 6.54 | 493,969 | 29,264 | 5.92 | 318,975 | 19,606 | 6.15 | |||||||||||||||||||||||||||||
Total interest-earning assets | 1,521,241 | 87,248 | 5.74 | 693,050 | 37,555 | 5.42 | 385,863 | 21,633 | 5.61 | |||||||||||||||||||||||||||||
Non-earning assets | 137,601 | 89,355 | 55,302 | |||||||||||||||||||||||||||||||||||
Total assets | $ | 1,658,842 | $ | 782,405 | $ | 441,165 | ||||||||||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||||||||
Interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | $ | 447,433 | $ | 8,267 | 1.85 | % | $ | 192,426 | $ | 1,435 | 0.75 | % | $ | 89,250 | $ | 781 | 0.88 | % | ||||||||||||||||||||
Time deposits | 624,692 | 18,616 | 2.98 | 281,391 | 6,171 | 2.19 | 187,734 | 4,919 | 2.62 | |||||||||||||||||||||||||||||
Total interest-bearing deposits | 1,072,125 | 26,883 | 2.51 | 473,817 | 7,606 | 1.61 | 276,984 | 5,700 | 2.06 | |||||||||||||||||||||||||||||
Federal funds purchased | 13,996 | 399 | 2.85 | 10,773 | 159 | 1.48 | 1,307 | 29 | 2.22 | |||||||||||||||||||||||||||||
Securities sold under agreement to repurchase | 85,876 | 2,657 | 3.09 | 23,068 | 407 | 1.76 | 22,859 | 256 | 1.12 | |||||||||||||||||||||||||||||
FHLB and other borrowed funds | 109,323 | 4,046 | 3.70 | 46,837 | 1,840 | 3.93 | 32,596 | 1,220 | 3.74 | |||||||||||||||||||||||||||||
Subordinated debentures | 29,408 | 2,017 | 6.86 | 24,219 | 1,568 | 6.47 | 16,075 | 1,035 | 6.43 | |||||||||||||||||||||||||||||
Total interest-bearing liabilities | 1,310,728 | 36,002 | 2.75 | 578,714 | 11,580 | 2.00 | 349,821 | 8,240 | 2.36 | |||||||||||||||||||||||||||||
Non-interest-bearing liabilities | ||||||||||||||||||||||||||||||||||||||
Non-interest-bearing deposits | 177,511 | 79,907 | 37,038 | |||||||||||||||||||||||||||||||||||
Other liabilities | 13,125 | 17,368 | 11,875 | |||||||||||||||||||||||||||||||||||
Total liabilities | 1,501,364 | 675,989 | 398,734 | |||||||||||||||||||||||||||||||||||
Shareholders’ equity | 157,478 | 106,416 | 42,431 | |||||||||||||||||||||||||||||||||||
Total liabilities and shareholders’ equity | $ | 1,658,842 | $ | 782,405 | $ | 441,165 | ||||||||||||||||||||||||||||||||
Net interest spread | 2.99 | % | 3.42 | % | 3.25 | % | ||||||||||||||||||||||||||||||||
Net interest income and margin | $ | 51,246 | 3.37 | $ | 25,975 | 3.75 | $ | 13,393 | 3.47 | |||||||||||||||||||||||||||||
31
Table of Contents
Three Months Ended March 31, | |||||||||||||
2006 over 2005 | |||||||||||||
Volume | Yield/Rate | Total | |||||||||||
(In thousands) | |||||||||||||
Increase (decrease) in: | |||||||||||||
Interest income: | |||||||||||||
Interest-bearing balances due from banks | $ | 8 | $ | 25 | $ | 33 | |||||||
Federal funds sold | 144 | 9 | 153 | ||||||||||
Investment securities — taxable | (276 | ) | 760 | 484 | |||||||||
Investment securities — non-taxable | 628 | 59 | 687 | ||||||||||
Loans receivable | 7,447 | 2,809 | 10,256 | ||||||||||
Total interest income | 7,951 | 3,662 | 11,613 | ||||||||||
Interest expense: | |||||||||||||
Interest-bearing transaction and savings deposits | 627 | 849 | 1,476 | ||||||||||
Time deposits | 1,324 | 2,034 | 3,358 | ||||||||||
Federal funds purchased | 52 | 130 | 182 | ||||||||||
Securities sold under agreement to repurchase | 240 | 172 | 412 | ||||||||||
FHLB and other borrowed funds | 445 | 350 | 795 | ||||||||||
Subordinated debentures | 344 | 6 | 350 | ||||||||||
Total interest expense | 3,032 | 3,541 | 6,573 | ||||||||||
Increase (decrease) in net interest income | $ | 4,919 | $ | 121 | $ | 5,040 | |||||||
Years Ended December 31, | |||||||||||||||||||||||||
2005 over 2004 | 2004 over 2003 | ||||||||||||||||||||||||
Yield/ | Yield/ | ||||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Increase (decrease) in: | |||||||||||||||||||||||||
Interest income: | |||||||||||||||||||||||||
Interest-bearing balances due from banks | $ | 6 | $ | 57 | $ | 63 | $ | 28 | $ | 2 | $ | 30 | |||||||||||||
Federal funds sold | (120 | ) | 246 | 126 | 35 | (36 | ) | (1 | ) | ||||||||||||||||
Investment securities — taxable | 11,521 | (182 | ) | 11,339 | 3,767 | 413 | 4,180 | ||||||||||||||||||
Investment securities — non-taxable | 2,059 | (89 | ) | 1,970 | 2,046 | 9 | 2,055 | ||||||||||||||||||
Loans receivable | 32,867 | 3,328 | 36,195 | 10,391 | (732 | ) | 9,659 | ||||||||||||||||||
Total interest income | 46,333 | 3,360 | 49,693 | 16,267 | (344 | ) | 15,923 | ||||||||||||||||||
32
Table of Contents
Years Ended December 31, | |||||||||||||||||||||||||
2005 over 2004 | 2004 over 2003 | ||||||||||||||||||||||||
Yield/ | Yield/ | ||||||||||||||||||||||||
Volume | Rate | Total | Volume | Rate | Total | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Interest expense: | |||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | 3,231 | 3,601 | 6,832 | 785 | (131 | ) | 654 | ||||||||||||||||||
Time deposits | 9,616 | 2,829 | 12,445 | 2,153 | (901 | ) | 1,252 | ||||||||||||||||||
Federal funds purchased | 59 | 181 | 240 | 143 | (13 | ) | 130 | ||||||||||||||||||
Securities sold under agreement to repurchase | 1,762 | 488 | 2,250 | 2 | 149 | 151 | |||||||||||||||||||
FHLB and other borrowed funds | 2,319 | (113 | ) | 2,206 | 556 | 64 | 620 | ||||||||||||||||||
Subordinated debentures | 352 | 97 | 449 | 527 | 6 | 533 | |||||||||||||||||||
Total interest expense | 17,339 | 7,083 | 24,422 | 4,166 | (826 | ) | 3,340 | ||||||||||||||||||
Increase (decrease) in net interest income | $ | 28,994 | $ | (3,723 | ) | $ | 25,271 | $ | 12,101 | $ | 482 | $ | 12,583 | ||||||||||||
33
Table of Contents
2006 | 2005 | ||||||||||||||||
Three Months | |||||||||||||||||
Ended March | 2006 Change | ||||||||||||||||
31, | from 2005 | ||||||||||||||||
) | |||||||||||||||||
(Dollars in thousands | |||||||||||||||||
Service charges on deposit accounts | $ | 2,052 | $ | 1,692 | $ | 360 | 21.3 | % | |||||||||
Other service charges and fees | 611 | 438 | 173 | 39.5 | |||||||||||||
Trust fees | 152 | 118 | 34 | 28.8 | |||||||||||||
Data processing fees | 193 | 106 | 87 | 82.1 | |||||||||||||
Mortgage banking income | 411 | 292 | 119 | 40.8 | |||||||||||||
Insurance commissions | 284 | 241 | 43 | 17.8 | |||||||||||||
Income from title services | 237 | 144 | 93 | 64.6 | |||||||||||||
Increase in cash value of life insurance | 51 | 64 | (13 | ) | (20.3 | ) | |||||||||||
Equity in loss of unconsolidated affiliates | (116 | ) | — | (116 | ) | 100.0 | |||||||||||
Gain on securities and loans, net | 34 | 187 | (153 | ) | (81.8 | ) | |||||||||||
Other income | 492 | 531 | (39 | ) | (7.3 | ) | |||||||||||
Total non-interest income | $ | 4,401 | $ | 3,813 | $ | 588 | 15.4 | % | |||||||||
34
Table of Contents
Years Ended December 31, | 2005 | 2004 | |||||||||||||||||||||||||||
Change from | Change from | ||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
Service charges on deposit accounts | $ | 8,319 | $ | 5,914 | $ | 2,254 | $ | 2,405 | 40.7 | % | $ | 3,660 | 162.4 | % | |||||||||||||||
Other service charges and fees | 2,099 | 959 | 474 | 1,140 | 118.9 | 485 | 102.3 | ||||||||||||||||||||||
Trust fees | 458 | 158 | 14 | 300 | 189.9 | 144 | 1,028.6 | ||||||||||||||||||||||
Data processing fees | 668 | 1,564 | 1,378 | (896 | ) | (57.3 | ) | 186 | 13.5 | ||||||||||||||||||||
Mortgage banking income | 1,651 | 1,188 | 1,220 | 463 | 39.0 | (32 | ) | (2.6 | ) | ||||||||||||||||||||
Insurance commissions | 674 | 631 | 22 | 43 | 6.8 | 609 | 2,768.2 | ||||||||||||||||||||||
Income from title services | 823 | 1,110 | 81 | (287 | ) | (25.9 | ) | 1,029 | 1,270.4 | ||||||||||||||||||||
Increase in cash value of life insurance | 256 | 244 | 13 | 12 | 4.9 | 231 | 1,776.9 | ||||||||||||||||||||||
Equity in income (loss) of unconsolidated affiliates | (592 | ) | 1,560 | 937 | (2,152 | ) | (137.9 | ) | 623 | 66.5 | |||||||||||||||||||
Gain on sale of equity investment | 465 | 4,410 | — | (3,945 | ) | (89.5 | ) | 4,410 | — | ||||||||||||||||||||
(Loss) gain on securities and loans, net | (10 | ) | (223 | ) | 135 | 213 | (95.5 | ) | (358 | ) | (265.2 | ) | |||||||||||||||||
Other income | 876 | 576 | 211 | 300 | 52.1 | 365 | 173.0 | ||||||||||||||||||||||
Total non-interest income | $ | 15,687 | $ | 18,091 | $ | 6,739 | $ | (2,404 | ) | (13.3 | )% | $ | 11,352 | 168.5 | % | ||||||||||||||
• | The $533,000 aggregate increase in service charges on deposit accounts and other service charges and fees was primarily a result of our acquisitions of Marine Bancorp and Mountain View Bancshares in the second and third quarters of 2005, respectively, combined with organic growth of our other bank subsidiaries’ service charges. | |
• | The $87,000 increase in data processing fees was related to the data processing fees associated with White River Bancshares, which began banking operations in May 2005. | |
• | The $119,000 increase in mortgage banking revenue was primarily the result of the acquisition of Marine Bancorp in the second quarter of 2005. | |
• | The $170,000 aggregate increase in trust fees, insurance commissions and title fees was primarily a result of our organic growth in those product lines. | |
• | The equity in loss of unconsolidated affiliate of $116,000 is related to the 20% interest in White River Bancshares that we purchased during 2005. Because the investment in White River Bancshares is accounted for on the equity method, we recorded our share of White River Bancshares’ operating loss. | |
• | The $153,000 decrease in the gain on securities and loans between March 31, 2005 and March 31, 2006 is primarily related to gains resulting from the sale of SBA loan products originated by us. The gain from the sale of SBA loans was $34,000 for thethree-month period ended March 31, 2006, compared to $230,000 for the same period in 2005. | |
• | The $3.8 million aggregate increase in service charges on deposit accounts, other service charges and fees, and trust fees was primarily a result of our acquisitions during 2005, combined with organic growth of our bank subsidiaries’ earnings. |
35
Table of Contents
• | The $896,000 decrease in data processing fees was primarily associated with the acquisition of TCBancorp. Prior to acquiring complete ownership of TCBancorp, we performed its data processing functions and received fees for this service. We continue to receive data processing fees from White River Bancshares and certain other non-affiliated banks. | |
• | The rising interest rate environment during 2005 resulted in decreased mortgage production volumes for the mortgage industry as compared to 2004. While we experienced an increase of $463,000 in this revenue source, the increase primarily resulted from the additional $757,000 mortgage banking revenues associated with the acquisitions of TCBancorp and Marine Bancorp during 2005. | |
• | The $287,000 decrease in title fees is primarily associated with lower demand for title fees as a result of the decrease in mortgage production volume associated with the rising interest rate environment in 2005. | |
• | The $2.2 million decrease in equity in income of unconsolidated affiliates is the result of acquiring 100% ownership in TCBancorp effective as of January 1, 2005, combined with the $592,000 loss associated with the 20% interest in White River Bancshares that we purchased during 2005. Because the investment in White River Bancshares is accounted for on the equity method, we recorded our share of White River Bancshares’ operating loss. White River Bancshares is currently operating at a loss as a result of their status as astart-up entity. | |
• | The $3.9 million decrease in gain on sale of equity investment for 2005 is primarily associated with a $4.4 million pre-tax gain recorded in the third quarter of 2004 from the sale of our equity ownership in Russellville Bancshares. During the third quarter of 2005, we recognized a $465,000 gain on sale of an equity investment. This gain was deferred as a result of our financing the purchase price for this transaction. The gain became recognizable during 2005 as a result of the financing being paid off. | |
• | The difference in the loss on securities and loans between 2004 and 2005 is primarily associated with specific transactions for each year. During 2004, a loss of $313,000 was recorded for write-downs for other-than-temporary losses in our investment portfolio, offset by $64,000 of gains from the sale of investment securities and a $26,000 gain resulting from the sale of our SBA loan product. In 2005, we made a strategic decision to sell lower-yielding investment securities, resulting in a loss of approximately $539,000. This loss was largely offset by approximately $529,000 in gains resulting from the sale of our SBA loan product. | |
• | The $300,000 increase in other income is primarily associated with a $324,000 gain from proceeds associated with fire damage at one of our branch banking locations during 2005. |
36
Table of Contents
2006 | 2005 | |||||||||||||||||
2006 | ||||||||||||||||||
Three Months | Change from | |||||||||||||||||
Ended March 31, | 2005 | |||||||||||||||||
) | ||||||||||||||||||
(Dollars in thousands | ||||||||||||||||||
Salaries and employee benefits | $ | 7,348 | $ | 5,260 | $ | 2,088 | 39.7 | % | ||||||||||
Occupancy and equipment | 2,005 | 1,492 | 513 | 34.4 | ||||||||||||||
Data processing expense | 567 | 433 | 134 | 31.0 | ||||||||||||||
Other operating expenses | ||||||||||||||||||
Advertising | 558 | 466 | 92 | 19.7 | ||||||||||||||
Amortization of intangibles | 425 | 309 | 116 | 37.5 | ||||||||||||||
ATM expense | 118 | 100 | 18 | 18.0 | ||||||||||||||
Directors’ fees | 204 | 86 | 118 | 137.2 | ||||||||||||||
Due from bank service charges | 70 | 74 | (4 | ) | (5.4 | ) | ||||||||||||
FDIC and state assessment | 125 | 122 | 3 | 2.5 | ||||||||||||||
Insurance | 223 | 136 | 87 | 64.0 | ||||||||||||||
Legal and accounting | 282 | 176 | 106 | 60.2 | ||||||||||||||
Other professional fees | 134 | 106 | 28 | 26.4 | ||||||||||||||
Operating supplies | 229 | 150 | 79 | 52.7 | ||||||||||||||
Postage | 163 | 121 | 42 | 34.7 | ||||||||||||||
Telephone | 220 | 123 | 97 | 78.9 | ||||||||||||||
Other expense | 948 | 482 | 466 | 96.7 | ||||||||||||||
Total non-interest expense | $ | 13,619 | $ | 9,636 | $ | 3,983 | 41.3 | % | ||||||||||
37
Table of Contents
Years Ended December 31, | 2005 | 2004 | |||||||||||||||||||||||||||
Change from | Change from | ||||||||||||||||||||||||||||
2005 | 2004 | 2003 | 2004 | 2003 | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||
Salaries and employee benefits | $ | 23,901 | $ | 14,123 | $ | 7,139 | $ | 9,778 | 69.2 | % | $ | 6,984 | 97.8 | % | |||||||||||||||
Occupancy and equipment | 6,869 | 3,750 | 1,659 | 3,119 | 83.2 | 2,091 | 126.0 | ||||||||||||||||||||||
Data processing expense | 1,991 | 1,170 | 893 | 821 | 70.2 | 277 | 31.0 | ||||||||||||||||||||||
Other operating expenses | |||||||||||||||||||||||||||||
Advertising | 2,067 | 900 | 774 | 1,167 | 129.7 | 126 | 16.3 | ||||||||||||||||||||||
Amortization of intangibles | 1,466 | 728 | 63 | 738 | 101.4 | 665 | 1,055.6 | ||||||||||||||||||||||
ATM expense | 427 | 372 | 237 | 55 | 14.8 | 135 | 57.0 | ||||||||||||||||||||||
Directors’ fees | 505 | 210 | 73 | 295 | 140.5 | 137 | 187.7 | ||||||||||||||||||||||
Due from bank service charges | 284 | 197 | 108 | 87 | 44.2 | 89 | 82.4 | ||||||||||||||||||||||
FDIC and state assessment | 503 | 301 | 155 | 202 | 67.1 | 146 | 94.2 | ||||||||||||||||||||||
Insurance | 504 | 344 | 193 | 160 | 46.5 | 151 | 78.2 | ||||||||||||||||||||||
Legal and accounting | 941 | 452 | 204 | 489 | 108.2 | 248 | 121.6 | ||||||||||||||||||||||
Other professional fees | 534 | 493 | 315 | 41 | 8.3 | 178 | 56.5 | ||||||||||||||||||||||
Operating supplies | 745 | 530 | 336 | 215 | 40.6 | 194 | 57.7 | ||||||||||||||||||||||
Postage | 580 | 404 | 183 | 176 | 43.6 | 221 | 120.8 | ||||||||||||||||||||||
Telephone | 669 | 377 | 153 | 292 | 77.5 | 224 | 146.4 | ||||||||||||||||||||||
Other expense | 2,949 | 1,780 | 585 | 1,169 | 65.7 | 1,195 | 204.3 | ||||||||||||||||||||||
Total non-interest expense | $ | 44,935 | $ | 26,131 | $ | 13,070 | $ | 18,804 | 72.0 | % | $ | 13,061 | 99.9 | % | |||||||||||||||
38
Table of Contents
Loan Portfolio |
39
Table of Contents
As of December 31, | ||||||||||||||||||||||||||
As of March 31, | ||||||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
Real estate: | ||||||||||||||||||||||||||
Commercial real estate loans: | ||||||||||||||||||||||||||
Non-farm/non-residential | $ | 422,618 | $ | 411,839 | $ | 181,995 | $ | 173,743 | $ | 91,352 | $ | 69,876 | ||||||||||||||
Construction/land development | 331,532 | 291,515 | 116,935 | 74,138 | 37,969 | 22,834 | ||||||||||||||||||||
Agricultural | 13,197 | 13,112 | 12,912 | 5,065 | 5,024 | 3,651 | ||||||||||||||||||||
Residential real estate loans: | ||||||||||||||||||||||||||
Residential 1-4 family | 220,273 | 221,831 | 86,497 | 79,246 | 58,899 | 49,548 | ||||||||||||||||||||
Multifamily residential | 36,425 | 34,939 | 17,708 | 16,654 | 6,255 | 5,778 | ||||||||||||||||||||
Total real estate | 1,024,045 | 973,236 | 416,047 | 348,846 | 199,499 | 151,687 | ||||||||||||||||||||
Consumer | 39,599 | 39,447 | 24,624 | 31,546 | 22,632 | 25,733 | ||||||||||||||||||||
Commercial and industrial | 166,025 | 175,396 | 69,345 | 102,350 | 46,555 | 47,733 | ||||||||||||||||||||
Agricultural | 8,287 | 8,466 | 6,275 | 14,409 | 16,078 | 10,546 | ||||||||||||||||||||
Other | 8,190 | 8,044 | 364 | 2,904 | — | — | ||||||||||||||||||||
Total loans receivable | 1,246,146 | 1,204,589 | 516,655 | 500,055 | 284,764 | 235,699 | ||||||||||||||||||||
Less: Allowance for loan losses | 24,435 | 24,175 | 16,345 | 14,717 | 5,706 | 3,847 | ||||||||||||||||||||
Total loans receivable, net | $ | 1,221,711 | $ | 1,180,414 | $ | 500,310 | $ | 485,338 | $ | 279,058 | $ | 231,852 | ||||||||||||||
40
Table of Contents
41
Table of Contents
Over One | |||||||||||||||||||
Year | |||||||||||||||||||
One Year | Through | Over Five | |||||||||||||||||
or Less | Five Years | Years | Total | ||||||||||||||||
(In thousands) | |||||||||||||||||||
Real estate: | |||||||||||||||||||
Commercial real estate loans: | |||||||||||||||||||
Non-farm/non-residential | $ | 94,259 | $ | 234,048 | $ | 83,532 | $ | 411,839 | |||||||||||
Construction/land development | 182,747 | 93,716 | 15,052 | 291,515 | |||||||||||||||
Agricultural | 7,126 | 4,093 | 1,893 | 13,112 | |||||||||||||||
Residential real estate loans: | |||||||||||||||||||
Residential 1-4 family | 72,868 | 70,955 | 78,008 | 221,831 | |||||||||||||||
Multifamily residential | 10,607 | 20,419 | 3,913 | 34,939 | |||||||||||||||
Total real estate | 367,607 | 423,231 | 182,398 | 973,236 | |||||||||||||||
Consumer | 16,603 | 22,107 | 737 | 39,447 | |||||||||||||||
Commercial and industrial | 90,885 | 69,640 | 14,871 | 175,396 | |||||||||||||||
Agricultural | 6,409 | 2,057 | — | 8,466 | |||||||||||||||
Other | 698 | 4,412 | 2,934 | 8,044 | |||||||||||||||
Total loans receivable | $ | 482,202 | $ | 521,447 | $ | 200,940 | $ | 1,204,589 | |||||||||||
With fixed interest rates | $ | 294,071 | $ | 398,663 | $ | 49,477 | $ | 742,211 | |||||||||||
With floating interest rates | 188,131 | 122,784 | 151,463 | 462,378 | |||||||||||||||
Total | $ | 482,202 | $ | 521,447 | $ | 200,940 | $ | 1,204,589 | |||||||||||
Non-Performing Assets |
42
Table of Contents
As of March 31, | As of December 31, | ||||||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||
Non-accrual loans | $ | 7,824 | $ | 10,100 | $ | 7,864 | $ | 8,959 | $ | 8,600 | $ | 1,671 | $ | 1,175 | |||||||||||||||||
Loans past due 90 days or more (principal or interest payments) | 411 | — | 426 | 2 | 52 | 142 | 167 | ||||||||||||||||||||||||
Total non-performing loans | 8,235 | 10,100 | 8,290 | 8,961 | 8,652 | 1,813 | 1,342 | ||||||||||||||||||||||||
Other non-performing assets | |||||||||||||||||||||||||||||||
Foreclosed assets held for sale | 663 | 502 | 758 | 458 | 1,274 | 169 | 90 | ||||||||||||||||||||||||
Other non-performing assets | 4 | 46 | 11 | 53 | 62 | 151 | 107 | ||||||||||||||||||||||||
Total other non-performing assets | 667 | 548 | 769 | 511 | 1,336 | 320 | 197 | ||||||||||||||||||||||||
Total non-performing assets | $ | 8,902 | $ | 10,648 | $ | 9,059 | $ | 9,472 | $ | 9,988 | $ | 2,133 | $ | 1,539 | |||||||||||||||||
Allowance for loan losses to non- performing loans | 296.72 | % | 239.36 | % | 291.62 | % | 182.40 | % | 170.10 | % | 314.73 | % | 286.66 | % | |||||||||||||||||
Non-performing loans to total loans | 0.66 | 0.84 | 0.69 | 1.73 | 1.73 | 0.64 | 0.57 | ||||||||||||||||||||||||
Non-performing assets to total assets | 0.45 | 0.56 | 0.47 | 1.18 | 1.24 | 0.58 | 0.48 |
43
Table of Contents
Allowance for Loan Losses |
44
Table of Contents
As of March 31, | As of December 31, | ||||||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | 2002 | 2001 | |||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||
Balance, beginning of year | $ | 24,175 | $ | 16,345 | $ | 16,345 | $ | 14,717 | $ | 5,706 | $ | 3,847 | $ | 2,414 | |||||||||||||||||
Loans charged off | |||||||||||||||||||||||||||||||
Real estate: | |||||||||||||||||||||||||||||||
Commercial real estate loans: | |||||||||||||||||||||||||||||||
Non-farm/non-residential | 106 | 50 | 2,448 | — | — | — | — | ||||||||||||||||||||||||
Construction/land development | 2 | 14 | 405 | 5 | 23 | 32 | — | ||||||||||||||||||||||||
Agricultural | 8 | — | 15 | — | 17 | — | — | ||||||||||||||||||||||||
Residential real estate loans: | |||||||||||||||||||||||||||||||
Residential 1-4 family | 54 | 110 | 515 | 404 | 138 | 19 | — | ||||||||||||||||||||||||
Multifamily residential | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Total real estate | 170 | 174 | 3,383 | 409 | 178 | 51 | — | ||||||||||||||||||||||||
Consumer | 70 | — | — | — | — | — | — | ||||||||||||||||||||||||
Commercial and industrial | 237 | 9 | 758 | 499 | 114 | 173 | 75 | ||||||||||||||||||||||||
Agricultural | — | — | 30 | 786 | 80 | — | — | ||||||||||||||||||||||||
Other | 9 | 78 | 440 | 487 | 304 | 277 | 239 | ||||||||||||||||||||||||
Total loans charged off | 486 | 261 | 4,611 | 2,181 | 676 | 501 | 314 | ||||||||||||||||||||||||
Recoveries of loans previously charged off | |||||||||||||||||||||||||||||||
Real estate: | |||||||||||||||||||||||||||||||
Commercial real estate loans: | |||||||||||||||||||||||||||||||
Non-farm/non-residential | 8 | 32 | 294 | 1,057 | 1 | — | — | ||||||||||||||||||||||||
Construction/land development | — | — | 15 | 13 | 19 | 17 | — | ||||||||||||||||||||||||
Agricultural | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Residential real estate loans: | |||||||||||||||||||||||||||||||
Residential 1-4 family | 97 | 20 | 115 | 47 | 31 | — | 8 | ||||||||||||||||||||||||
Multifamily residential | — | — | — | — | — | 31 | 3 | ||||||||||||||||||||||||
Total real estate | 105 | 52 | 424 | 1,117 | 51 | 48 | 11 | ||||||||||||||||||||||||
Consumer | 10 | — | — | — | — | — | — | ||||||||||||||||||||||||
Commercial and industrial | 21 | 15 | 102 | 254 | 10 | 10 | — | ||||||||||||||||||||||||
Agricultural | — | — | — | 17 | 45 | — | — | ||||||||||||||||||||||||
Other | 126 | 38 | 324 | 131 | 44 | 82 | 28 | ||||||||||||||||||||||||
Total recoveries | 262 | 105 | 850 | 1,519 | 150 | 140 | 39 | ||||||||||||||||||||||||
Net loans charged off | 224 | 156 | 3,761 | 662 | 526 | 361 | 275 | ||||||||||||||||||||||||
Allowance for loan losses of acquired institutions | — | 4,742 | 7,764 | — | 8,730 | — | — | ||||||||||||||||||||||||
Provision for loan losses | 484 | 1,051 | 3,827 | 2,290 | 807 | 2,220 | 1,708 | ||||||||||||||||||||||||
Balance, end of period or year | $ | 24,435 | $ | 21,982 | $ | 24,175 | $ | 16,345 | $ | 14,717 | $ | 5,706 | $ | 3,847 | |||||||||||||||||
Net charge-offs to average loans | 0.07 | % | 0.08 | % | 0.38 | % | 0.13 | % | 0.16 | % | 0.14 | % | 0.14 | % | |||||||||||||||||
Allowance for loan losses to period-end loans | 1.96 | 2.73 | 2.01 | 3.16 | 2.94 | 2.00 | 1.63 | ||||||||||||||||||||||||
Allowance for loan losses to net charge-offs | 2,690 | 3,474 | 642 | 2,469 | 2,798 | 1,581 | 1,399 |
45
Table of Contents
As of December 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||
As of March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||
2006 | 2005 | 2004 | 2003 | 2002 | 2001 | ||||||||||||||||||||||||||||||||||||||||||||||
Allowance | % of | Allowance | % of | Allowance | % of | Allowance | % of | Allowance | % of | Allowance | % of | ||||||||||||||||||||||||||||||||||||||||
Amount | Loans(1) | Amount | Loans(1) | Amount | Loans(1) | Amount | Loans(1) | Amount | Loans(1) | Amount | Loans(1) | ||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Real estate: | |||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial real estate loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||
Non-farm/non-residential | $ | 7,468 | 33.8 | % | $ | 7,202 | 34.1 | % | $ | 6,212 | 35.3 | % | $ | 5,505 | 34.8 | % | $ | 1,786 | 32.1 | % | $ | 1,119 | 29.6 | % | |||||||||||||||||||||||||||
Construction/land development | 6,230 | 26.6 | 5,544 | 24.2 | 1,690 | 22.6 | 1,407 | 14.8 | 862 | 13.3 | 449 | 9.7 | |||||||||||||||||||||||||||||||||||||||
Agricultural | 583 | 1.1 | 407 | 1.1 | 493 | 2.5 | 491 | 1.0 | 123 | 1.8 | 77 | 1.5 | |||||||||||||||||||||||||||||||||||||||
Residential real estate loans: | |||||||||||||||||||||||||||||||||||||||||||||||||||
Residential 1-4 family | 3,270 | 17.7 | 3,317 | 18.4 | 2,185 | 16.7 | 2,710 | 15.8 | 1,005 | 20.7 | 673 | 21.0 | |||||||||||||||||||||||||||||||||||||||
Multifamily residential | 375 | 2.9 | 423 | 2.9 | 156 | 3.4 | 85 | 3.3 | 107 | 2.2 | 78 | 2.5 | |||||||||||||||||||||||||||||||||||||||
Total real estate | 17,926 | 82.1 | 16,893 | 80.7 | 10,736 | 80.5 | 10,198 | 69.7 | 3,883 | 70.1 | 2,396 | 64.3 | |||||||||||||||||||||||||||||||||||||||
Consumer | 770 | 3.2 | 682 | 3.3 | 526 | 4.8 | 724 | 6.3 | 440 | 7.9 | 410 | 10.9 | |||||||||||||||||||||||||||||||||||||||
Commercial and industrial | 3,977 | 13.3 | 4,059 | 14.6 | 2,025 | 13.4 | 2,241 | 20.5 | 908 | 16.4 | 766 | 20.3 | |||||||||||||||||||||||||||||||||||||||
Agricultural | 391 | 0.7 | 505 | 0.7 | 316 | 1.2 | 572 | 2.9 | 475 | 5.6 | 275 | 4.5 | |||||||||||||||||||||||||||||||||||||||
Other | 19 | 0.7 | — | 0.7 | — | 0.1 | — | 0.6 | — | 0.0 | — | 0.0 | |||||||||||||||||||||||||||||||||||||||
Unallocated | 1,352 | 2,036 | 2,742 | 982 | — | — | |||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 24,435 | 100.0 | % | $ | 24,175 | 100.0 | % | $ | 16,345 | 100.0 | % | $ | 14,717 | 100.0 | % | $ | 5,706 | 100.0 | % | $ | 3,847 | 100.0 | % | |||||||||||||||||||||||||||
(1) | Percentage of loans in each category to loans receivable. |
Investments and Securities |
46
Table of Contents
47
Table of Contents
As of March 31, 2006 | As of December 31, 2005 | ||||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | ||||||||||||||||||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | Amortized | Unrealized | Unrealized | Estimated | ||||||||||||||||||||||||||
Cost | Gains | (Losses) | Fair Value | Cost | Gains | (Losses) | Fair Value | ||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||
Held-to-Maturity | |||||||||||||||||||||||||||||||||
State and political subdivisions | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Total | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||
Available-for-Sale | |||||||||||||||||||||||||||||||||
U.S. Government-sponsored enterprises | $ | 165,262 | $ | 12 | $ | (4,960 | ) | $ | 160,314 | $ | 162,165 | $ | 27 | $ | (4,723 | ) | $ | 157,469 | |||||||||||||||
Mortgage-backed securities | 254,014 | 8 | (8,579 | ) | 245,443 | 264,666 | 16 | (8,209 | ) | 256,473 | |||||||||||||||||||||||
State and political subdivisions | 104,526 | 1,219 | (759 | ) | 104,986 | 102,928 | 1,279 | (746 | ) | 103,461 | |||||||||||||||||||||||
Other securities | 14,979 | — | (465 | ) | 14,514 | 13,571 | — | (672 | ) | 12,899 | |||||||||||||||||||||||
Total | $ | 538,781 | $ | 1,239 | $ | (14,763 | ) | $ | 525,257 | $ | 543,330 | $ | 1,322 | $ | (14,350 | ) | $ | 530,302 | |||||||||||||||
As of December 31, | |||||||||||||||||||||||||||||||||
2004 | 2003 | ||||||||||||||||||||||||||||||||
Gross | Gross | Gross | Gross | ||||||||||||||||||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | Amortized | Unrealized | Unrealized | Estimated | ||||||||||||||||||||||||||
Cost | Gains | (Losses) | Fair Value | Cost | Gains | (Losses) | Fair Value | ||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||
Held-to-Maturity | |||||||||||||||||||||||||||||||||
State and political subdivisions | $ | 100 | $ | — | $ | — | $ | 100 | $ | 100 | $ | 3 | $ | — | $ | 103 | |||||||||||||||||
Total | $ | 100 | $ | — | $ | — | $ | 100 | $ | 100 | $ | 3 | $ | — | $ | 103 | |||||||||||||||||
Available-for-Sale | |||||||||||||||||||||||||||||||||
U.S. Government-sponsored enterprises | $ | 15,646 | $ | 18 | $ | (86 | ) | $ | 15,578 | $ | 22,019 | $ | 31 | $ | (104 | ) | $ | 21,946 | |||||||||||||||
Mortgage-backed securities | 127,316 | 249 | (898 | ) | 126,667 | 103,677 | 282 | (203 | ) | 103,756 | |||||||||||||||||||||||
State and political subdivisions | 39,564 | 717 | (147 | ) | 40,134 | 30,684 | 49 | (15 | ) | 30,718 | |||||||||||||||||||||||
Other securities | 8,010 | 15 | (38 | ) | 7,987 | 5,362 | 126 | (57 | ) | 5,431 | |||||||||||||||||||||||
Total | $ | 190,536 | $ | 999 | $ | (1,169 | ) | $ | 190,366 | $ | 161,742 | $ | 488 | $ | (379 | ) | $ | 161,851 | |||||||||||||||
48
Table of Contents
As of December 31, 2005 | |||||||||||||||||||||||||
1 Year | 5 Years | Total | |||||||||||||||||||||||
1 Year | Through | Through | Over | Amortized | Total Fair | ||||||||||||||||||||
or Less | 5 Years | 10 Years | 10 Years | Cost | Value | ||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||
Available-for-Sale | |||||||||||||||||||||||||
U.S. Government-sponsored enterprises | $ | 104,496 | $ | 36,648 | $ | 8,594 | $ | 12,427 | $ | 162,165 | $ | 157,469 | |||||||||||||
Mortgage-backed securities | 47,740 | 122,717 | 45,164 | 49,045 | 264,666 | 256,473 | |||||||||||||||||||
State and political subdivisions | 27,224 | 58,836 | 13,575 | 3,293 | 102,928 | 103,461 | |||||||||||||||||||
Other securities | 276 | 11,153 | 2,142 | — | 13,571 | 12,899 | |||||||||||||||||||
Total | $ | 179,736 | $ | 229,354 | $ | 69,475 | $ | 64,765 | $ | 543,330 | $ | 530,302 | |||||||||||||
Percentage of total | 33.1 | % | 42.2 | % | 12.8 | % | 11.9 | % | 100.0 | % | |||||||||||||||
Weighted average yield | 4.51 | % | 4.54 | % | 5.05 | % | 4.75 | % | 4.62 | % | |||||||||||||||
Deposits |
49
Table of Contents
Three Months Ended March 31, | Years Ended December 31, | |||||||||||||||||||||||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | ||||||||||||||||||||||||||||||||||||||
Average | Average | Average | Average | Average | Average | Average | Average | Average | Average | |||||||||||||||||||||||||||||||||
Amount | Rate Paid | Amount | Rate Paid | Amount | Rate Paid | Amount | Rate Paid | Amount | Rate Paid | |||||||||||||||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||||||||||||||||||
Non-interest-bearing transaction accounts | $ | 213,135 | — | % | $ | 143,485 | — | % | $ | 177,511 | — | % | $ | 79,907 | — | % | $ | 37,038 | — | % | ||||||||||||||||||||||
Interest-bearing transaction accounts | 435,517 | 2.22 | 334,843 | 1.48 | 389,291 | 1.94 | 164,538 | 0.81 | 76,647 | 0.95 | ||||||||||||||||||||||||||||||||
Savings deposits | 84,770 | 1.68 | 36,000 | 0.47 | 58,142 | 1.24 | 27,888 | 0.37 | 12,603 | 0.44 | ||||||||||||||||||||||||||||||||
Time deposits: | ||||||||||||||||||||||||||||||||||||||||||
$100,000 or more | 355,514 | 4.82 | 319,686 | 2.61 | 357,464 | 3.16 | 135,902 | 2.11 | 98,425 | 2.55 | ||||||||||||||||||||||||||||||||
Other time deposits | 360,276 | 2.89 | 221,477 | 2.51 | 267,228 | 2.74 | 145,489 | 2.27 | 89,309 | 2.70 | ||||||||||||||||||||||||||||||||
Total | $ | 1,449,212 | 2.67 | % | $ | 1,055,491 | 1.80 | % | $ | 1,249,636 | 2.15 | % | $ | 553,724 | 1.37 | % | $ | 314,022 | 1.82 | % | ||||||||||||||||||||||
As of December 31, | ||||||||||||||||||
2005 | 2004 | |||||||||||||||||
Balance | Percent | Balance | Percent | |||||||||||||||
(Dollars in thousands) | ||||||||||||||||||
Maturing | ||||||||||||||||||
Three months or less | $ | 164,233 | 40.8 | % | $ | 44,143 | 33.9 | % | ||||||||||
Over three months to six months | 76,664 | 19.0 | 35,544 | 27.3 | ||||||||||||||
Over six months to 12 months | 87,792 | 21.8 | 27,252 | 21.0 | ||||||||||||||
Over 12 months through two years | 37,949 | 9.4 | 20,644 | 15.9 | ||||||||||||||
Over two years | 36,392 | 9.0 | 2,408 | 1.9 | ||||||||||||||
Total | $ | 403,030 | 100.0 | % | $ | 129,991 | 100.0 | % | ||||||||||
FHLB and Other Borrowings |
50
Table of Contents
Subordinated Debentures |
As of December 31, | |||||||||||||
As of March 31, | |||||||||||||
2006 | 2005 | 2004 | |||||||||||
(In thousands) | |||||||||||||
Subordinated debentures, due 2030, fixed at 10.60%, callable beginning in 2010 with a prepayment penalty declining from 5.30% to 0.53% depending on the year of prepayment, callable in 2020 without penalty | $ | 3,493 | $ | 3,516 | $ | 3,600 | |||||||
Subordinated debentures, due 2033, fixed at 6.40% during the first five years and at a floating rate of 3.15% above the three-month LIBOR rate, reset quarterly, thereafter, callable in 2008 without penalty | 20,619 | 20,619 | 20,619 | ||||||||||
Subordinated debentures, due 2033, floating rate of 3.15% above the three-month LIBOR rate, reset quarterly, callable in 2008 without penalty | 5,155 | 5,155 | — | ||||||||||
Subordinated debentures, due 2035, fixed rate of 6.81% during the first ten years and at a floating rate of 1.38% above the three-month LIBOR rate, reset quarterly, thereafter, callable in 2010 without penalty | 15,464 | 15,465 | — | ||||||||||
Total | $ | 44,731 | $ | 44,755 | $ | 24,219 | |||||||
51
Table of Contents
Shareholders’ Equity |
52
Table of Contents
As of December 31, | |||||||||||||||
As of March 31, | |||||||||||||||
2006 | 2005 | 2004 | |||||||||||||
(Dollars in thousands) | |||||||||||||||
Tier 1 capital | |||||||||||||||
Shareholders’ equity | $ | 169,040 | $ | 165,857 | $ | 106,610 | |||||||||
Qualifying trust preferred securities | 43,000 | 43,000 | 23,000 | ||||||||||||
Goodwill and core deposit intangibles, net | (44,254 | ) | (44,516 | ) | (22,816 | ) | |||||||||
Qualifying minority interest | — | — | 9,238 | ||||||||||||
Unrealized loss on available-for-sale securities | 8,191 | 7,903 | 858 | ||||||||||||
Other | — | — | (11,751 | ) | |||||||||||
Total Tier 1 capital | 175,977 | 172,244 | 105,139 | ||||||||||||
Tier 2 capital | |||||||||||||||
Qualifying allowance for loan losses | 18,219 | 17,658 | 7,664 | ||||||||||||
Other | — | — | (7,664 | ) | |||||||||||
Total Tier 2 capital | 18,219 | 17,658 | — | ||||||||||||
Total risk-based capital | $ | 194,196 | $ | 189,902 | $ | 105,139 | |||||||||
Average total assets for leverage ratio | $ | 1,890,946 | $ | 1,868,143 | $ | 779,768 | |||||||||
Risk weighted assets | $ | 1,451,266 | $ | 1,406,131 | $ | 604,413 | |||||||||
Ratios at end of year | |||||||||||||||
Leverage ratio | 9.31 | % | 9.22 | % | 13.47 | % | |||||||||
Tier 1 risk-based capital | 12.13 | 12.25 | 17.39 | ||||||||||||
Total risk-based capital | 13.38 | 13.51 | 17.39 | ||||||||||||
Minimum guidelines | |||||||||||||||
Leverage ratio | 4.00 | % | 4.00 | % | 4.00 | % | |||||||||
Tier 1 risk-based capital | 4.00 | 4.00 | 4.00 | ||||||||||||
Total risk-based capital | 8.00 | 8.00 | 8.00 |
53
Table of Contents
To Be Well | ||||||||||||||||||||||||||
Capitalized Under | ||||||||||||||||||||||||||
For Capital | Prompt Corrective | |||||||||||||||||||||||||
Actual | Adequacy Purposes | Action Provision | ||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
As of March 31, 2006 | ||||||||||||||||||||||||||
Leverage ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 175,977 | 9.31 | % | $ | 75,608 | 4.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 39,415 | 8.57 | 18,397 | 4.00 | 22,996 | 5.00 | ||||||||||||||||||||
Community Bank | 22,136 | 7.28 | 12,163 | 4.00 | 15,203 | 5.00 | ||||||||||||||||||||
Twin City Bank | 48,047 | 7.65 | 25,123 | 4.00 | 31,403 | 5.00 | ||||||||||||||||||||
Marine Bank | 19,910 | 6.76 | 11,781 | 4.00 | 14,726 | 5.00 | ||||||||||||||||||||
Bank of Mountain View | 14,748 | 8.05 | 7,328 | 4.00 | 9,160 | 5.00 | ||||||||||||||||||||
Tier 1 capital ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 175,977 | 12.13 | % | $ | 58,030 | 4.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 39,415 | 9.87 | 15,974 | 4.00 | 23,960 | 6.00 | ||||||||||||||||||||
Community Bank | 22,136 | 9.73 | 9,100 | 4.00 | 13,650 | 6.00 | ||||||||||||||||||||
Twin City Bank | 48,047 | 10.15 | 18,935 | 4.00 | 28,402 | 6.00 | ||||||||||||||||||||
Marine Bank | 19,910 | 8.83 | 9,029 | 4.00 | 13,544 | 6.00 | ||||||||||||||||||||
Bank of Mountain View | 14,748 | 14.12 | 4,178 | 4.00 | 6,267 | 6.00 | ||||||||||||||||||||
Total risk-based capital ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 194,196 | 13.38 | % | $ | 116,111 | 8.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 44,390 | 11.12 | 31,935 | 8.00 | 39,919 | 10.00 | ||||||||||||||||||||
Community Bank | 25,024 | 11.00 | 18,199 | 8.00 | 22,749 | 10.00 | ||||||||||||||||||||
Twin City Bank | 53,933 | 11.39 | 37,881 | 8.00 | 47,351 | 10.00 | ||||||||||||||||||||
Marine Bank | 22,742 | 10.08 | 18,049 | 8.00 | 22,562 | 10.00 | ||||||||||||||||||||
Bank of Mountain View | 15,360 | 14.70 | 8,359 | 8.00 | 10,449 | 10.00 |
54
Table of Contents
To Be Well | ||||||||||||||||||||||||||
For Capital | Capitalized Under | |||||||||||||||||||||||||
Adequacy | Prompt Corrective | |||||||||||||||||||||||||
Actual | Purposes | Action Provision | ||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||
(Dollars in thousands) | ||||||||||||||||||||||||||
As of December 31, 2005 | ||||||||||||||||||||||||||
Leverage ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 172,244 | 9.22 | % | $ | 74,726 | 4.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 38,572 | 8.44 | 18,281 | 4.00 | 22,851 | 5.00 | ||||||||||||||||||||
Community Bank | 23,129 | 7.59 | 12,189 | 4.00 | 15,236 | 5.00 | ||||||||||||||||||||
Twin City Bank | 51,679 | 8.07 | 25,615 | 4.00 | 32,019 | 5.00 | ||||||||||||||||||||
Marine Bank | 20,050 | 7.28 | 11,016 | 4.00 | 13,771 | 5.00 | ||||||||||||||||||||
Bank of Mountain View | 29,468 | 16.35 | 7,209 | 4.00 | 9,012 | 5.00 | ||||||||||||||||||||
Tier 1 capital ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 172,244 | 12.25 | % | $ | 56,243 | 4.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 38,572 | 10.01 | 15,413 | 4.00 | 23,120 | 6.00 | ||||||||||||||||||||
Community Bank | 23,129 | 10.25 | 9,026 | 4.00 | 13,539 | 6.00 | ||||||||||||||||||||
Twin City Bank | 51,679 | 11.53 | 17,929 | 4.00 | 26,893 | 6.00 | ||||||||||||||||||||
Marine Bank | 20,050 | 9.08 | 8,833 | 4.00 | 13,249 | 6.00 | ||||||||||||||||||||
Bank of Mountain View | 29,468 | 29.75 | 3,962 | 4.00 | 5,943 | 6.00 | ||||||||||||||||||||
Total risk-based capital ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 189,902 | 13.51 | % | $ | 112,451 | 8.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 43,362 | 11.26 | 30,808 | 8.00 | 38,510 | 10.00 | ||||||||||||||||||||
Community Bank | 26,010 | 11.53 | 18,047 | 8.00 | 22,559 | 10.00 | ||||||||||||||||||||
Twin City Bank | 57,248 | 12.77 | 35,864 | 8.00 | 44,830 | 10.00 | ||||||||||||||||||||
Marine Bank | 22,815 | 10.33 | 17,669 | 8.00 | 22,086 | 10.00 | ||||||||||||||||||||
Bank of Mountain View | 30,094 | 30.38 | 7,925 | 8.00 | 9,906 | 10.00 | ||||||||||||||||||||
As of December 31, 2004 | ||||||||||||||||||||||||||
Leverage ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 105,139 | 13.47 | % | $ | 31,222 | 4.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 60,701 | 13.43 | 18,079 | 4.00 | 22,599 | 5.00 | ||||||||||||||||||||
Community Bank | 22,513 | 7.44 | 12,104 | 4.00 | 15,130 | 5.00 | ||||||||||||||||||||
Tier 1 capital ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 105,139 | 17.39 | % | $ | 24,184 | 4.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 60,701 | 15.53 | 15,635 | 4.00 | 23,452 | 6.00 | ||||||||||||||||||||
Community Bank | 22,513 | 11.97 | 7,523 | 4.00 | 11,285 | 6.00 | ||||||||||||||||||||
Total risk-based capital ratios: | ||||||||||||||||||||||||||
Home BancShares | $ | 105,139 | 17.39 | % | $ | 48,368 | 8.00 | % | $ | N/A | N/A | % | ||||||||||||||
First State Bank | 65,604 | 16.78 | 31,277 | 8.00 | 39,097 | 10.00 | ||||||||||||||||||||
Community Bank | 24,955 | 13.27 | 15,044 | 8.00 | 18,806 | 10.00 |
Off-Balance Sheet Arrangements and Contractual Obligations |
55
Table of Contents
Payments Due by Period | ||||||||||||||||||||
One- | Three- | Greater | ||||||||||||||||||
Less than | Three | Five | than Five | |||||||||||||||||
One Year | Years | Years | Years | Total | ||||||||||||||||
(In thousands) | ||||||||||||||||||||
Operating lease obligations | $ | 980 | $ | 1,892 | $ | 1,816 | $ | 5,384 | $ | 10,072 | ||||||||||
FHLB advances | 44,356 | 37,859 | 12,777 | 7,926 | 102,918 | |||||||||||||||
Other borrowed funds | 136 | — | 14,000 | — | 14,136 | |||||||||||||||
Subordinated debentures | — | — | 25,774 | 18,981 | 44,755 | |||||||||||||||
Loan commitments | 151,422 | 78,322 | 5,610 | 31,121 | 266,475 | |||||||||||||||
Letters of credit | 12,627 | 3,748 | 113 | 4,493 | 20,981 |
Non-GAAP Financial Measurements |
Three Months Ended | ||||||||||||||||||||
March 31, | Years Ended December 31, | |||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | ||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||
GAAP net income | $ | 3,516 | $ | 2,189 | $ | 11,446 | $ | 9,159 | $ | 3,769 | ||||||||||
Intangible amortization after-tax | 258 | 181 | 891 | 442 | 38 | |||||||||||||||
Cash earnings | $ | 3,774 | $ | 2,370 | $ | 12,337 | $ | 9,061 | $ | 3,807 | ||||||||||
GAAP diluted earnings per share | $ | 0.24 | $ | 0.16 | $ | 0.82 | $ | 0.94 | $ | 0.63 | ||||||||||
Intangible amortization after-tax | 0.02 | 0.02 | 0.07 | 0.04 | 0.01 | |||||||||||||||
Diluted cash earnings per share | $ | 0.26 | $ | 0.18 | $ | 0.89 | $ | 0.98 | $ | 0.64 | ||||||||||
56
Table of Contents
Three Months Ended | |||||||||||||||||||||
March 31, | Years Ended December 31, | ||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||
(Dollars in thousands, except per share data) | |||||||||||||||||||||
Book value per common share: (A-B-C)/D | $ | 11.68 | $ | 10.88 | $ | 11.45 | $ | 10.75 | $ | 9.79 | |||||||||||
Book value per common share with preferred converted to common: A/(D+E+F) | 11.83 | 11.10 | 11.63 | 11.07 | 10.29 | ||||||||||||||||
Tangible book value per common share: (A-B-C-G-H)/D | 7.70 | 8.57 | 7.43 | 7.89 | 6.63 | ||||||||||||||||
Tangible book value per share with preferred converted to common: (A-G-H)/(D+E+F) | 8.45 | 9.07 | 8.21 | 8.70 | 7.68 | ||||||||||||||||
(A) Total shareholders’ equity | $ | 169,040 | $ | 148,555 | $ | 165,857 | $ | 106,610 | $ | 99,472 | |||||||||||
(B) Total preferred A shareholders’ equity | 20,908 | 20,771 | 20,760 | 20,770 | 21,300 | ||||||||||||||||
(C) Total preferred B shareholders’ equity | 6,451 | — | 6,422 | — | — | ||||||||||||||||
(D) Common shares outstanding | 12,129 | 11,745 | 12,114 | 7,987 | 7,987 | ||||||||||||||||
(E) Preferred A shares converted to common | 1,651 | 1,640 | 1,639 | 1,640 | 1,681 | ||||||||||||||||
(F) Preferred B shares converted to common | 509 | — | 507 | — | — | ||||||||||||||||
(G) Goodwill | 37,527 | 19,687 | 37,527 | 18,555 | 20,002 | ||||||||||||||||
(H) Core deposit and other intangibles | 10,775 | 7,478 | 11,200 | 4,261 | 5,250 |
Three Months Ended | |||||||||||||||||||||
March 31, | Years Ended December 31, | ||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Annualized return on average shareholders’ equity: A/C | 8.51 | % | 5.89 | % | 7.27 | % | 8.61 | % | 8.88 | % | |||||||||||
Annualized return on average tangible equity: B/(C-D) | 12.76 | 7.72 | 10.16 | 11.54 | 9.44 | ||||||||||||||||
(A) Net income | $ | 3,516 | $ | 2,189 | $ | 11,446 | $ | 9,159 | $ | 3,769 | |||||||||||
(B) Cash earnings | 3,774 | 2,370 | 12,337 | 9,601 | 3,807 | ||||||||||||||||
(C) Average shareholders’ equity | 167,567 | 150,688 | 157,478 | 106,416 | 42,431 | ||||||||||||||||
(D) Average goodwill, core deposits and other intangible assets | 48,559 | 26,223 | 36,035 | 23,247 | 2,104 |
57
Table of Contents
Three Months Ended | |||||||||||||||||||||
March 31, | Years Ended December 31, | ||||||||||||||||||||
2006 | 2005 | 2005 | 2004 | 2003 | |||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||
Equity to assets: B/A | 8.58 | % | 10.44 | % | 8.68 | % | 13.24 | % | 12.39 | % | |||||||||||
Tangible equity to tangible assets: (B-C-D)/(A-C-D) | 6.28 | 8.70 | 6.29 | 10.71 | 9.54 | ||||||||||||||||
(A) Total assets | $ | 1,970,910 | $ | 1,422,652 | $ | 1,911,491 | $ | 805,186 | $ | 803,103 | |||||||||||
(B) Total shareholders’ equity | 169,040 | 148,555 | 165,857 | 106,610 | 99,472 | ||||||||||||||||
(C) Goodwill | 37,527 | 19,687 | 37,527 | 18,555 | 20,002 | ||||||||||||||||
(D) Core deposit and other intangibles | 10,775 | 7,478 | 11,200 | 4,261 | 5,250 |
2005 Quarter | ||||||||||||||||||||||
First | Second | Third | Fourth | Total | ||||||||||||||||||
(In thousands, except per share data) | ||||||||||||||||||||||
Income statement data: | ||||||||||||||||||||||
Total interest income | $ | 16,361 | $ | 18,824 | $ | 23,605 | $ | 26,668 | $ | 85,458 | ||||||||||||
Total interest expense | 6,355 | 7,628 | 10,139 | 11,880 | 36,002 | |||||||||||||||||
Net interest income | 10,006 | 11,196 | 13,466 | 14,788 | 49,456 | |||||||||||||||||
Provision for loan losses | 1,051 | 863 | 934 | 979 | 3,827 | |||||||||||||||||
Net interest income after provision for loan losses | 8,955 | 10,333 | 12,532 | 13,809 | 45,629 | |||||||||||||||||
Non-interest income | 3,813 | 3,342 | 4,031 | 4,036 | 15,222 | |||||||||||||||||
Gain on sale of equity investment | — | — | 465 | — | 465 | |||||||||||||||||
Non-interest expense | 9,636 | 10,374 | 12,186 | 12,739 | 44,935 | |||||||||||||||||
Income before income taxes | 3,132 | 3,301 | 4,842 | 5,106 | 16,381 | |||||||||||||||||
Provision for income taxes | 943 | 929 | 1,512 | 1,551 | 4,935 | |||||||||||||||||
Net income | $ | 2,189 | $ | 2,372 | $ | 3,330 | $ | 3,555 | $ | 11,446 | ||||||||||||
Per share data: | ||||||||||||||||||||||
Basic earnings | $ | 0.18 | $ | 0.19 | $ | 0.27 | $ | 0.28 | $ | 0.92 | ||||||||||||
Diluted earnings | 0.16 | 0.17 | 0.24 | 0.25 | 0.82 | |||||||||||||||||
Diluted cash earnings | 0.18 | 0.18 | 0.26 | 0.27 | 0.89 |
58
Table of Contents
2004 Quarter | |||||||||||||||||||||
First | Second | Third | Fourth | Total | |||||||||||||||||
(In thousands, except per share data) | |||||||||||||||||||||
Income statement data: | |||||||||||||||||||||
Total interest income | $ | 8,831 | $ | 9,110 | $ | 9,198 | $ | 9,542 | $ | 36,681 | |||||||||||
Total interest expense | 2,816 | 2,783 | 2,918 | 3,063 | 11,580 | ||||||||||||||||
Net interest income | 6,015 | 6,327 | 6,280 | 6,479 | 25,101 | ||||||||||||||||
Provision for loan losses | 441 | 380 | 588 | 881 | 2,290 | ||||||||||||||||
Net interest income after provision for loan losses | 5,574 | 5,947 | 5,692 | 5,598 | 22,811 | ||||||||||||||||
Non-interest income | 3,604 | 3,475 | 3,492 | 3,110 | 13,681 | ||||||||||||||||
Gain on sale of equity investment | — | — | 4,410 | — | 4,410 | ||||||||||||||||
Non-interest expense | 6,485 | 6,611 | 6,310 | 6,725 | 26,131 | ||||||||||||||||
Income before income taxes and minority interest | 2,693 | 2,811 | 7,284 | 1,983 | 14,771 | ||||||||||||||||
Provision for income taxes | 855 | 979 | 2,147 | 1,049 | 5,030 | ||||||||||||||||
Minority interest | 235 | 48 | 172 | 127 | 582 | ||||||||||||||||
Net income | $ | 1,603 | $ | 1,784 | $ | 4,965 | $ | 807 | $ | 9,159 | |||||||||||
Per share data: | |||||||||||||||||||||
Basic earnings | $ | 0.19 | $ | 0.20 | $ | 0.61 | $ | 0.08 | $ | 1.08 | |||||||||||
Diluted earnings | 0.17 | 0.18 | 0.51 | 0.08 | 0.94 | ||||||||||||||||
Diluted cash earnings | 0.18 | 0.19 | 0.52 | 0.09 | 0.98 |
Liquidity and Market Risk Management |
59
Table of Contents
60
Table of Contents
Percentage | ||||||||
Adjusted Net | Change | |||||||
Interest Rate Scenario | Interest Income | from Base | ||||||
(In millions) | ||||||||
Up 200 basis points | $ | 61.2 | (1.7 | )% | ||||
Up 100 basis points | 61.8 | (0.6 | ) | |||||
BASE | 62.2 | — | ||||||
Down 100 basis points | 61.7 | (0.8 | ) | |||||
Down 200 basis points | 59.6 | (4.2 | ) |
61
Table of Contents
Interest Rate Sensitivity Period | |||||||||||||||||||||||||||||||||||
0-30 | 31-90 | 91-180 | 181-365 | 1-2 | 2-5 | Over 5 | |||||||||||||||||||||||||||||
March 31, 2006 | Days | Days | Days | Days | Years | Years | Years | Total | |||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||
Earning assets | |||||||||||||||||||||||||||||||||||
Interest-bearing deposits due from banks | $ | 5,323 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,323 | |||||||||||||||||||
Federal funds sold | 19,558 | — | — | — | — | — | — | 19,558 | |||||||||||||||||||||||||||
Investment securities | 8,803 | 22,375 | 36,630 | 64,999 | 80,571 | 165,910 | 145,969 | 525,257 | |||||||||||||||||||||||||||
Loans receivable | 554,168 | 75,997 | 108,932 | 141,993 | 162,560 | 178,853 | 23,643 | 1,246,146 | |||||||||||||||||||||||||||
Total earning assets | 587,852 | 98,372 | 145,562 | 206,992 | 243,131 | 344,763 | 169,612 | 1,796,284 | |||||||||||||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | 244,765 | — | — | — | 25,001 | 97,861 | 171,233 | 538,860 | |||||||||||||||||||||||||||
Time deposits | 69,833 | 131,915 | 155,758 | 247,064 | 89,817 | 48,455 | 401 | 743,243 | |||||||||||||||||||||||||||
Federal funds purchased | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||
Securities sold under repurchase agreements | 75,803 | — | — | — | 3,247 | 9,741 | 9,754 | 98,545 | |||||||||||||||||||||||||||
FHLB and other borrowed funds | 20,363 | 7,300 | 17,797 | 22,424 | 37,026 | 18,377 | 16,018 | 139,305 | |||||||||||||||||||||||||||
Subordinated debentures | — | 5,155 | — | — | 20,619 | 18,957 | — | 44,731 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 410,764 | 144,370 | 173,555 | 269,488 | 175,710 | 193,391 | 197,406 | 1,564,684 | |||||||||||||||||||||||||||
Interest rate sensitivity gap | $ | 177,088 | $ | (45,998 | ) | $ | (27,993 | ) | $ | (62,496 | ) | $ | 67,421 | $ | 151,372 | $ | (27,794 | ) | $ | 231,600 | |||||||||||||||
Cumulative interest rate sensitivity gap | $ | 177,088 | $ | 131,090 | $ | 103,097 | $ | 40,601 | $ | 108,022 | $ | 259,394 | $ | 231,600 | |||||||||||||||||||||
Cumulative rate sensitive assets to rate sensitive liabilities | 143.1 | % | 123.6 | % | 114.1 | % | 104.1 | % | 109.2 | % | 119.0 | % | 114.8 | % | |||||||||||||||||||||
Cumulative gap as a % of total earning assets | 9.9 | % | 7.3 | % | 5.7 | % | 2.3 | % | 6.0 | % | 14.4 | % | 12.9 | % |
62
Table of Contents
Interest Rate Sensitivity Period | |||||||||||||||||||||||||||||||||||
0-30 | 31-90 | 91-180 | 181-365 | 1-2 | 2-5 | Over 5 | |||||||||||||||||||||||||||||
December 31, 2005 | Days | Days | Days | Days | Years | Years | Years | Total | |||||||||||||||||||||||||||
(Dollars in thousands) | |||||||||||||||||||||||||||||||||||
Earning assets | |||||||||||||||||||||||||||||||||||
Interest-bearing deposits due from banks | $ | 5,431 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,431 | |||||||||||||||||||
Federal funds sold | 7,055 | — | — | — | — | — | — | 7,055 | |||||||||||||||||||||||||||
Investment securities | 21,675 | 15,332 | 47,070 | 39,756 | 100,325 | 186,163 | 119,981 | 530,302 | |||||||||||||||||||||||||||
Loans receivable | 476,075 | 61,427 | 102,019 | 172,774 | 154,489 | 210,648 | 27,157 | 1,204,589 | |||||||||||||||||||||||||||
Total earning assets | 510,236 | 76,759 | 149,089 | 212,530 | 254,814 | 396,811 | 147,138 | 1,747,377 | |||||||||||||||||||||||||||
Interest-bearing liabilities | |||||||||||||||||||||||||||||||||||
Interest-bearing transaction and savings deposits | 207,043 | — | — | — | 24,129 | 98,915 | 182,097 | 512,184 | |||||||||||||||||||||||||||
Time deposits | 82,210 | 150,177 | 129,609 | 185,018 | 92,821 | 64,103 | 1,012 | 704,950 | |||||||||||||||||||||||||||
Federal funds purchased | 44,495 | — | — | — | — | — | — | 44,495 | |||||||||||||||||||||||||||
Securities sold under repurchase agreements | 76,942 | — | — | — | 3,823 | 11,469 | 11,484 | 103,718 | |||||||||||||||||||||||||||
FHLB and other borrowed funds | 18,322 | 15,084 | 10,234 | 14,320 | 28,563 | 21,961 | 8,570 | 117,054 | |||||||||||||||||||||||||||
Subordinated debentures | — | 5,155 | — | — | — | 20,619 | 18,981 | 44,755 | |||||||||||||||||||||||||||
Total interest-bearing liabilities | 429,012 | 170,416 | 139,843 | 199,338 | 149,336 | 217,067 | 222,144 | 1,527,156 | |||||||||||||||||||||||||||
Interest rate sensitivity gap | $ | 81,224 | $ | (93,657 | ) | $ | 9,246 | $ | 13,192 | $ | 105,478 | $ | 179,744 | $ | (75,006 | ) | $ | 220,221 | |||||||||||||||||
Cumulative interest rate sensitivity gap | $ | 81,224 | $ | (12,433 | ) | $ | (3,187 | ) | $ | 10,005 | $ | 115,483 | $ | 295,227 | $ | 220,221 | |||||||||||||||||||
Cumulative rate sensitive assets to rate sensitive liabilities | 118.9 | % | 97.9 | % | 99.6 | % | 101.1 | % | 110.6 | % | 122.6 | % | 114.4 | % | |||||||||||||||||||||
Cumulative gap as a % of total earning assets | 4.6 | % | (0.7 | )% | (0.2 | )% | 0.6 | % | 6.6 | % | 16.9 | % | 12.6 | % |
63
Table of Contents
64
Table of Contents
65
Table of Contents
• | increased our total assets from $322.0 million to $2.0 billion; | |
• | increased our loans receivable from $235.7 million to $1.2 billion; | |
• | increased our total deposits from $237.3 million to $1.5 billion; and | |
• | expanded our branch network from eight to 48. | |
66
Table of Contents
67
Table of Contents
• | Organic growth — We believe that our current branch network provides us with the capacity to grow significantly within our existing market areas. Twenty-four of our 48 branches (including branches of banks we have acquired) have been opened since the beginning of 2001. As these newer branches continue to mature, we expect to see additional organic loan and deposit growth and increased profitability. Furthermore, we plan to broaden the product lines within each of our bank subsidiaries by cross-selling products such as insurance and trust services. | |
• | De novo branching — We intend to continue to opende novo branches in our current markets and in other attractive market areas if opportunities arise. In 2006, we have opened branches in Searcy and Beebe, Arkansas, and Port Charlotte, Florida. We plan to open an additional five to seven branches in 2006, including two or three in Arkansas, one or two in the Florida Keys, and two along the southwestern coast of Florida. | |
• | Strategic acquisitions — We will continue to consider strategic acquisitions, with a primary focus on Arkansas and southwestern Florida. When considering a potential acquisition, we assess a combination of factors, but concentrate on the strength of existing management, the growth potential of the bank and the market, the profitability of the bank, and the valuation of the bank. We believe that potential sellers consider us an acquirer of choice, largely due to our community banking philosophy. With each acquisition we seek to maintain continuity of management and the board of directors, consolidate back office operations, add product lines, and implement our credit policy. |
• | operate largely autonomous community banks managed by experienced bankers and a local board of directors, who are empowered to make customer-related decisions quickly; | |
• | provide exceptional service and develop strong customer relationships; | |
• | pursue the business relationships of our boards of directors, management, shareholders, and customers to actively promote our community banks; and | |
• | maintain our commitment to the communities we serve by supporting their civic and nonprofit organizations. |
• | Emphasis on credit quality — Credit quality is our first priority in the management of our bank subsidiaries. We employ a set of credit standards across our bank subsidiaries that are designed to ensure the proper management of credit risk. Our management team plays an active role in monitoring compliance with these credit standards at each of our bank subsidiaries. We have a centralized loan review process and regularly monitor each of our bank subsidiaries’ loan portfolios, which we believe |
68
Table of Contents
enables us to take prompt action on potential problem loans. Non-performing assets as a percentage of total assets decreased from 1.18% as of December 31, 2004, to 0.45% as of March 31, 2006. | ||
• | Continue to improve profitability — We intend to improve our profitability as we leverage the available capacity of our newer branches and employees. We believe our investments in our branch network and centralized technology infrastructure are sufficient to support a larger organization, and therefore believe increases in our expenses should be lower than the corresponding increases in our revenues. We also plan to increase our fee-based revenue by offering all our products and services, including insurance and trust services, through each of our bank subsidiaries. | |
• | Attract and motivate experienced bankers — We believe a major factor in our success has been our ability to attract and retain bankers who have experience in and knowledge of their local communities. For example, in January 2006, we hired eight experienced bankers in the Searcy, Arkansas, market (located approximately 50 miles northeast of Little Rock), where we subsequently opened a new branch. Hiring and retaining experienced relationship bankers has been integral to our ability to grow quickly when entering new markets. We will continue to recruit experienced relationship bankers as our banking franchise expands. | |
• | Leveraging our infrastructure — The support services we provide to our bank subsidiaries are generally centralized in Conway, Arkansas. These services include finance and accounting, internal audit, compliance, loan review, human resources, training, and data processing. We believe the centralization of our support services enhances efficiencies, maintains consistency in policies and procedures, and enables our employees to focus on developing and strengthening customer relationships. |
Projected | Projected | |||||||||||||||||||
Home | Deposit | Population | Growth in Per | |||||||||||||||||
BancShares | Total Deposits | Market Share | Growth | Capita Income | ||||||||||||||||
Selected Markets | Deposits | in Market | Rank | 2005-2010 | 2005-2010 | |||||||||||||||
(Dollars in millions) | ||||||||||||||||||||
North Little Rock, AR | $ | 299 | $ | 1,084 | 1 | 4.0 | % | 27.6 | % | |||||||||||
Conway, AR | 282 | 1,041 | 1 | 11.6 | 26.4 | |||||||||||||||
Key West-Marathon, FL MSA | 214 | 2,258 | 4 | 2.2 | 21.7 | |||||||||||||||
Mountain View, AR | 158 | 187 | 1 | 0.2 | 32.7 | |||||||||||||||
Little Rock, AR | 152 | 5,356 | 9 | 4.7 | 29.0 | |||||||||||||||
Cabot, AR | 145 | 318 | 1 | 16.9 | 22.9 | |||||||||||||||
Total for Home BancShares | 1,445 | 11,030 | N/A | 6.6 | (1) | 26.4 | (1) | |||||||||||||
United States Average | N/A | N/A | N/A | 6.3 | 22.8 |
(1) | Weighted average based on total deposits by city as of June 30, 2005. |
69
Table of Contents
Arkansas |
70
Table of Contents
Florida |
71
Table of Contents
Amount | Percentage of portfolio | ||||||||
(Dollars in thousands) | |||||||||
Real estate: | |||||||||
Commercial real estate loans: | |||||||||
Non-farm/non-residential | $ | 422,618 | 33.8 | % | |||||
Construction/land development | 331,532 | 26.6 | |||||||
Agricultural | 13,197 | 1.1 | |||||||
Residential real estate loans: | |||||||||
Residential 1-4 family | 220,273 | 17.7 | |||||||
Multifamily residential | 36,425 | 2.9 | |||||||
Total real estate | 1,024,045 | 82.1 | |||||||
Consumer | 39,599 | 3.2 | |||||||
Commercial and industrial | 166,025 | 13.3 | |||||||
Agricultural | 8,287 | 0.7 | |||||||
Other | 8,190 | 0.7 | |||||||
Total loans receivable | $ | 1,246,146 | 100.0 | % | |||||
72
Table of Contents
• | $27.3 million consisting of loans to a developer of apartments; | |
• | $21.5 million consisting of loans to a healthcare provider; | |
• | $19.8 million consisting of loans to a healthcare provider; and | |
• | $19.2 million consisting of loans to a real estate developer and investor. | |
• | Individual Authorities. The board of directors of each bank establishes the authorization levels for individual loan officers on a case-by-case basis. Generally, the more experienced a loan officer, the higher the authorization level. The approval authority for individual loan officers range from $20,000 to $500,000 for secured loans and from $1,000 to $50,000 for unsecured loans. | |
• | Officer Loan Committees. Most of our bank subsidiaries also give their Officer Loan Committees loan approval authority. In those banks, credits in excess of individual loan limits are submitted to the appropriate bank’s Officer Loan Committee. The Officer Loan Committees consist of members of the senior management team of that bank and are chaired by that bank’s chief lending officer. The Officer Loan Committees have approval authority up to $750,000 at First State Bank, $750,000 at Community |
73
Table of Contents
Bank, and $1.0 million at Twin City Bank. At Marine Bank, certain officers are allowed to combine limits on secured loans up to $1.0 million for certain grades of credits. | ||
• | Directors Loan Committee. Each of our bank subsidiaries has a Directors Loan Committee consisting of outside directors, senior lenders of the bank, and our Chief Operating Officer. Generally, each bank requires a majority of outside directors be present to establish a quorum. Generally, this committee is chaired either by the chief lending officer or the chief executive officer of the bank. Each bank’s board of directors establishes the approval authority for this committee, which may be up to that bank’s legal lending limit. |
74
Table of Contents
Owned or | Date | Square | |||||||||||||||
Office Address | City | Leased | Constructed | Feet | |||||||||||||
First State Bank | |||||||||||||||||
620 Chestnut | Conway, AR | Owned | 1999 | 9,000 | |||||||||||||
2500 Dave Ward Drive | Conway, AR | Owned | 2002 | 2,640 | |||||||||||||
1815 East Oak Street | Conway, AR | Owned | 2001 | 2,640 | |||||||||||||
2690 Donaghey | Conway, AR | Leased | 2001 | 2,600 | |||||||||||||
1445 Hogan Lane | Conway, AR | Leased | 2004 | 3,200 | |||||||||||||
945 Salem Road | Conway, AR | Owned | 1999 | 4,200 | |||||||||||||
1208 Oak | Conway, AR | Owned | 1999 | 2,500 | |||||||||||||
582 Highway 365 South | Mayflower, AR | Leased | 2000 | 800 | |||||||||||||
1044 Main Street | Vilonia, AR | Owned | 1999 | 2,640 | |||||||||||||
#8 Business Park Drive | Greenbrier, AR | Owned | 2002 | 2,640 | |||||||||||||
1300 West Beebe-Capps Expwy | Searcy, AR | Owned | 2006 | 5,000 | |||||||||||||
Community Bank | |||||||||||||||||
218 West Main | Cabot, AR | Owned | 1977 | 1,200 | |||||||||||||
2171 West Main | Cabot, AR | Owned | 1999 | 20,500 | |||||||||||||
3111 Bill Foster Memorial Hwy | Cabot, AR | Leased | (2) | 2004 | 3,500 | ||||||||||||
One City Plaza | Cabot, AR | Owned | 1978 | 22,150 | |||||||||||||
1204 S. Pine Street | Cabot, AR | Owned | 1990 | 3,300 | |||||||||||||
707 Dewitt Henry Drive | Beebe, AR | Owned | 1998 | 2,924 | |||||||||||||
10 Crestview Plaza | Jacksonville, AR | Leased | 1997 | 2,600 | |||||||||||||
1900 John Hardin Drive | Jacksonville, AR | Owned | 2000 | 3,807 | |||||||||||||
1816 West Main | Jacksonville, AR | Owned | 2005 | 5,000 | |||||||||||||
902 North Street | Ward, AR | Owned | 1973 | 2,400 | |||||||||||||
30 Hwy 64 West | Beebe, AR | Owned | 2006 | 3,425 | |||||||||||||
Twin City Bank | |||||||||||||||||
2716 Lakewood Village Place | North Little Rock, AR | Leased | 2000 | 3,579 | |||||||||||||
650 Main | North Little Rock, AR | Leased | 2000 | 1,344 | |||||||||||||
4308 Broadway | North Little Rock, AR | Owned | 2001 | 2,060 | |||||||||||||
3811 MacArthur Drive | North Little Rock, AR | Leased | 2000 | 1,300 | |||||||||||||
4515 Camp Robinson Road | North Little Rock, AR | Owned | 2004 | 3,700 | |||||||||||||
9501 Maumelle Boulevard | Maumelle, AR | Owned | 2005 | 4,000 | |||||||||||||
7213 Hwy. 107 | Sherwood, AR | Owned | 2002 | 3,700 | |||||||||||||
301 East Kiehl | Sherwood, AR | Owned | 1998 | 2,898 | |||||||||||||
2922 South University | Little Rock, AR | Leased | 2003 | 3,511 | |||||||||||||
10315 Interstate 30 | Little Rock, AR | Owned | 2003 | 3,700 | |||||||||||||
718 Broadway | Little Rock, AR | Owned | 2005 | 2,500 | |||||||||||||
520 Bowman | Little Rock, AR | Leased | 2003 | 4,664 | |||||||||||||
5100 Kavanaugh Avenue | Little Rock, AR | Leased | 2003 | 893 | |||||||||||||
2610 Cantrell Road | Little Rock, AR | Leased | 2003 | 5,000 |
75
Table of Contents
Owned or | Date | Square | |||||||||||||||
Office Address | City | Leased | Constructed | Feet | |||||||||||||
13910 Cantrell Road | Little Rock, AR | Owned | 2003 | 3,700 | |||||||||||||
9712 Rodney Parham | Little Rock, AR | Owned | 2003 | 3,700 | |||||||||||||
Bank of Mountain View | |||||||||||||||||
121 East Main Street | Mountain View, AR | Owned | 1968 | 1,354 | |||||||||||||
Oak and Main Street | Mountain View, AR | Owned | 1992 | 1,958 | |||||||||||||
Marine Bank | |||||||||||||||||
11290 Overseas Highway | Marathon, FL | Owned | 1995 | 7,414 | |||||||||||||
25000 Overseas Highway | Summerland Key, FL | Leased | 1998 | 296 | |||||||||||||
82787 Overseas Highway | Islamorada, FL | Owned | 1988 | 705 | |||||||||||||
101 Wilder Road | Marathon, FL | Owned | 1998 | 3,456 | |||||||||||||
4594 Overseas Highway | Marathon, FL | Owned | 2000 | 1,450 | |||||||||||||
2514 N. Roosevelt Blvd. | Key West, FL | Leased | (2) | 2001 | 3,756 | ||||||||||||
789 Duck Key Lane | Marathon, FL | Leased | 2001 | 850 | |||||||||||||
22627 Bayshore Road | Port Charlotte, FL | Leased | 2006 | 3,384 | |||||||||||||
615 Elkham Circle | Marco Island, FL | Leased | Pending | 5,000 | (1) | ||||||||||||
100290 Overseas Highway | Key Largo, FL | Leased | Pending | 4,500 | (1) | ||||||||||||
1229 Simonton Street | Key West, FL | Leased | Pending | 3,440 | (1) |
(1) | Sizes of pending offices are estimated. |
(2) | Office is located on land that we lease. |
Owned or | Date | Square | ||||||||||||||
Office Address | City | Leased | Constructed | Feet | ||||||||||||
719 Harkrider Street | Conway, AR | Owned | 1984 | 33,000 | ||||||||||||
203 Dakota Drive, Suites A and C | Cabot, AR | Leased | 2000 | 2,000 | ||||||||||||
1515 N. Center, Suite 9 | Lonoke, AR | Leased | 2000 | 600 | ||||||||||||
#3 Crestview Plaza | Jacksonville, AR | Leased | 2000 | 1,600 | ||||||||||||
715 Chestnut | Conway, AR | Leased | 1999 | 2,100 | ||||||||||||
81011 Overseas Highway | Islamorada, FL | Leased | 2002 | 2,500 | ||||||||||||
1638 Overseas Highway | Marathon, FL | Owned | 2003 | 1,960 |
76
Table of Contents
77
Table of Contents
Positions Held | ||||||||
Name | Age | Positions Held | with Bank Subsidiaries | |||||
John W. Allison | 59 | Chairman of the Board and Chief Executive Officer | Chairman of the Board, First State Bank; Director, Community Bank, Twin City Bank, Bank of Mountain View, and Marine Bank | |||||
Ron W. Strother | 57 | President, Chief Operating Officer, and Director | Director, First State Bank, Community Bank, Twin City Bank, and Bank of Mountain View | |||||
Randy E. Mayor | 41 | Chief Financial Officer and Treasurer | Director, First State Bank | |||||
C. Randall Sims | 51 | Director and Secretary | President, Chief Executive Officer, and Director, First State Bank; Director, Community Bank | |||||
Richard H. Ashley | 50 | Vice Chairman of the Board | Chairman of the Board, Twin City Bank and Community Bank | |||||
Dale A. Bruns | 62 | Director | Director, First State Bank and Twin City Bank | |||||
Richard A. Buckheim | 62 | Director | Chairman of the Board, Marine Bank | |||||
Jack E. Engelkes | 56 | Director | Director, First State Bank | |||||
Frank D. Hickingbotham | 69 | Director | ||||||
Herren C. Hickingbotham | 47 | Director | Director, Twin City Bank | |||||
James G. Hinkle | 57 | Director | Chairman of the Board, Bank of Mountain View | |||||
Alex R. Lieblong | 55 | Director | ||||||
Robert Hunter Padgett | 47 | — | President, Chief Executive Officer, and Director, Marine Bank | |||||
William G. Thompson | 58 | Director | Director, Community Bank | |||||
Robert F. Birch, Jr. | 55 | — | President, Chief Executive Officer, and Director, Twin City Bank | |||||
Tracy M. French | 44 | — | President, Chief Executive Officer, and Director, Community Bank | |||||
James Ronnie Sims | 59 | — | President, Chief Executive Officer, and Director, Bank of Mountain View |
78
Table of Contents
79
Table of Contents
80
Table of Contents
81
Table of Contents
• | appoint, approve compensation and oversee the work of the independent auditor; | |
• | resolve disagreements between management and the auditors regarding financial reporting; | |
• | pre-approve all auditing and appropriate non-auditing services performed by the independent auditor; | |
• | retain independent counsel and accountants to assist the committee; | |
• | seek information it requires from employees or external parties; and | |
• | meet with our officers, independent auditors or outside counsel as necessary. |
• | development and control over the implementation of liquidity risk and market risk management policies; | |
• | review of interest rate movements, forecasts, and the development of Home BancShares strategy under specific market conditions; and | |
• | continued monitoring of the overall asset/liability structure of our bank subsidiaries to minimize interest rate sensitivity and liquidity risk. |
82
Table of Contents
Long Term | ||||||||||||||||||||
Annual Compensation | Compensation | |||||||||||||||||||
Securities | ||||||||||||||||||||
Other Annual | Underlying | All Other | ||||||||||||||||||
Name and Principal Positions | Salary | Bonus | Compensation | Options/SARS | Compensation | |||||||||||||||
John W. Allison Chairman and Chief Executive Officer | $ | — | $ | — | $ | 23,820 | 135,000 | $ | — | |||||||||||
Ron W. Strother President and Chief Operating Officer | 250,000 | 50,000 | — | — | 11,500 | (1) | ||||||||||||||
C. Randall Sims President of First State Bank | 190,000 | 80,750 | — | 36,000 | 9,761 | (1) | ||||||||||||||
Tracy M. French President of Community Bank | 197,836 | 71,500 | — | 30,000 | 6,597 | (2) | ||||||||||||||
Robert F. Birch, Jr. President of Twin City Bank | 190,000 | 66,500 | — | 30,000 | 5,700 | (1) |
(1) | Includes our annual contribution to the 401(k) plan. |
(2) | Includes our annual contribution to the 401(k) plan ($5,717) and life insurance premiums ($881). |
83
Table of Contents
Number | ||||||||||||||||||||||||
of Total | % of Total | |||||||||||||||||||||||
Options/ | Options/ | Potential Realizable Value at | ||||||||||||||||||||||
SARS | SARS | Assumed Annual Rates of | ||||||||||||||||||||||
Granted | Granted | Exercise | Stock Price Appreciation for | |||||||||||||||||||||
to | to | Price | Option Term | |||||||||||||||||||||
Employee | Employee | per | Expiration | |||||||||||||||||||||
Name | in 2005 | in 2005 | Share | Date | 5% | 10% | ||||||||||||||||||
John W. Allison (Options) | 75,000 | 18.03 | % | $ | 12.67 | 7/27/2015 | $ | 597,607 | $ | 1,514,454 | ||||||||||||||
John W. Allison (SARS) | 60,000 | 14.42 | 12.67 | 1/1/2010 | 210,029 | 464,110 | ||||||||||||||||||
Ron W. Strother | — | — | — | — | — | — | ||||||||||||||||||
C. Randall Sims (SARS) | 36,000 | 8.65 | 12.67 | 1/1/2010 | 126,018 | 278,466 | ||||||||||||||||||
Tracy M. French (SARS) | 30,000 | 7.21 | 12.67 | 1/1/2010 | 105,015 | 232,055 | ||||||||||||||||||
Robert F. Birch, Jr. (SARS) | 30,000 | 7.21 | 12.67 | 1/1/2010 | 105,015 | 232,055 |
Number of Securities | ||||||||||||||||||||||||
Underlying Unexercised | Value of Unexercised | |||||||||||||||||||||||
Shares | Options/SARS as of | in-the-Money Options/SARS | ||||||||||||||||||||||
Acquired | December 31, 2005 | as of December 31, 2005 | ||||||||||||||||||||||
on | Value | |||||||||||||||||||||||
Name | Exercise | Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
John W. Allison | — | — | 96,828 | (1) | 63,000 | $ | 75,426 | $ | 3,504 | |||||||||||||||
Ron W. Strother | 24,000 | $ | 12.67 | — | 96,000 | — | — | |||||||||||||||||
C. Randall Sims | — | — | 61,365 | 36,000 | 327,689 | — | ||||||||||||||||||
Tracy M. French | — | — | — | 30,000 | — | — | ||||||||||||||||||
Robert F. Birch, Jr. | — | — | 50,910 | 30,000 | 120,148 | — |
(1) | Includes 948 shares of Class B preferred stock convertible into 2,844 shares of common stock. |
Supplemental Executive Retirement Plan |
84
Table of Contents
401(k) Plan |
Health and Insurance Benefits |
Pension Plans |
2006 Stock Option and Performance Incentive Plan |
85
Table of Contents
86
Table of Contents
• | restricted shares of common stock, which are shares of our common stock subject to restrictions; | |
• | stock units, which are common stock units subject to restrictions; | |
• | unrestricted shares of common stock, which are shares of our common stock issued at no cost or for a purchase price determined by the Compensation Committee and which are free from any restrictions under the Plan; | |
• | tax offset payments, which are common stock or cash used to pay income taxes incurred as a result of participation in the Plan; | |
• | stock appreciation rights, tandem or non-tandem, which are a right to receive a number of shares or, in the discretion of the committee, an amount in cash or a combination of shares and cash, based on the increase in the fair market value of the shares underlying the right during a stated period specified by the Compensation Committee; and | |
• | performance and annual incentive awards, ultimately payable in our common stock or cash, as determined by the Compensation Committee. The Compensation Committee may grant multi-year and annual incentive awards subject to achievement of specified goals tied to business criteria (described below). The Compensation Committee may modify, amend or adjust the terms of each award and performance goal. |
• | shareholder return; | |
• | return on assets; | |
• | growth in assets; | |
• | return on equity; | |
• | gross margin; | |
• | earnings per share; | |
• | net income; | |
• | operating income; and | |
• | free cash flow. |
87
Table of Contents
Consideration Received | ||||||||
Percentage | (Shares of | |||||||
Ownership of | Home BancShares | |||||||
Name | TCBancorp | Common Stock) | ||||||
John W. Allison | 2.46 | % | 136,420 | |||||
Richard H. Ashley | 13.49 | 747,892 | ||||||
Dale A. Bruns | 0.17 | 9,697 | ||||||
Frank D. Hickingbotham | 1.59 | 88,157 | ||||||
Herren C. Hickingbotham | 3.98 | 220,391 | ||||||
Alex R. Lieblong | 0.67 | 37,026 |
Consideration Received | ||||||||||||
Shares of | ||||||||||||
Home BancShares | ||||||||||||
Percentage Ownership | Class B | |||||||||||
Name | of Marine Bancorp | Cash | Preferred Stock | |||||||||
John W. Allison | 13.87 | % | $ | 780,421 | 36,262 | |||||||
Alex R. Lieblong | 1.89 | 106,305 | 4,940 |
88
Table of Contents
89
Table of Contents
Amount and Nature | Percent of Shares | Percent of Shares | |||||||||||
of Beneficial | Beneficially Owned | Beneficially Owned | |||||||||||
Name of Beneficial Owner | Ownership | Before Offering(1) | After Offering(1) | ||||||||||
5% or greater holders: | |||||||||||||
Robert H. Adcock(2)(3) | 861,363 | 7.1 | % | % | |||||||||
Directors and executive officers: | |||||||||||||
John W. Allison(3)(4) | 2,602,422 | 21.1 | % | % | |||||||||
Richard H. Ashley(3)(5) | 1,020,339 | 8.4 | |||||||||||
Robert F. Birch, Jr.(3)(6) | 99,129 | * | * | ||||||||||
Dale A. Bruns(3)(7) | 102,675 | * | * | ||||||||||
Richard A. Buckheim | — | — | — | ||||||||||
Jack E. Engelkes(3)(8) | 52,842 | * | * | ||||||||||
Tracy M. French | — | — | — | ||||||||||
Frank D. Hickingbotham(3)(9) | 617,937 | 5.1 | |||||||||||
Herren C. Hickingbotham(3) | 222,813 | 1.8 | |||||||||||
James G. Hinkle(10) | 167,763 | 1.4 | |||||||||||
Alex R. Lieblong(3)(11) | 560,046 | 4.6 | |||||||||||
C. Randall Sims(3)(12) | 134,562 | 1.1 | |||||||||||
Ron W. Strother(3) | 48,000 | * | * | ||||||||||
William G. Thompson | — | — | — | ||||||||||
All directors and executive officers as a group (16 persons)(3) | 5,865,604 | 46.3 | % | % |
* | Less than 1%. |
(1) | The percentage of our common stock beneficially owned “before offering” was calculated based on 12,129,355 shares of our common stock outstanding as of March 31, 2006. The percentage of our common stock beneficially owned “after offering” was calculated based on 12,129,355 shares of our common stock outstanding as of March 31, 2006, and assumes the issuance of shares of common stock in connection with this offering but no exercise of the underwriters’ over-allotment option. In each case, the percentage assumes that the person or group shown in each row has exercised all options, and converted to common stock all shares of our preferred stock, that are exercisable or convertible by that person or group within 60 days of March 31, 2006. The table does not reflect any shares that may be acquired by the named person in this offering. |
90
Table of Contents
(2) | All of the shares beneficially owned by Mr. Adcock are held through blind trusts established for his benefit. The trustee of those trusts is Matt Barnhardt; his address is 1225 Front Street, Conway, Arkansas 72032. | |
(3) | Includes shares that may be issued upon the exercise of options, as follows: Mr. Adcock, 11,160 shares; Mr. Allison, 93,984 shares; Mr. Ashley, 1,212 shares; Mr. Birch, 50,910 shares; Mr. Engelkes, 1,500 shares; Mr. Frank D. Hickingbotham, 1,212 shares; Mr. Herren C. Hickingbotham, 2,424 shares; Mr. Lieblong, 6,750 shares; Mr. Sims, 61,365 shares; Mr. Strother, 24,000 shares; and all directors and executive officers as a group, 304,722 shares. | |
(4) | Includes 360,000 shares owned by Mr. Allison’s spouse, either individually or as custodian for their children. | |
(5) | Includes 354,390 shares owned by Conservative Development Company, a corporation of which Mr. Ashley is president. | |
(6) | Includes 9,210 shares owned by Mr. Birch’s 401(k) plan. | |
(7) | Includes 90,471 shares that are owned jointly by Mr. Bruns and his spouse. | |
(8) | Includes 36,000 shares owned by Mr. Engelkes’ spouse, and 9,000 shares for which Mr. Engelkes is custodian for his children. | |
(9) | Includes 616,725 shares owned by FDH Enterprises, Inc., a corporation controlled by Mr. Frank D. Hickingbotham. |
(10) | All shares are owned by the James G. Hinkle Revocable Trust. |
(11) | Includes 158,550 shares that are owned jointly by Mr. Lieblong and his spouse, and 342,900 shares that are owned by Key Colony Fund L.P., a hedge fund of which Mr. Lieblong is the managing partner. |
(12) | Includes 48,999 shares that are owned jointly by Mr. Sims and his spouse, or with his spouse and his children, and 24,198 shares owned by Mr. Sims’ 401(k) plan. |
91
Table of Contents
• | acquiring direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the bank’s voting shares; | |
• | acquiring all or substantially all of the assets of any bank; or | |
• | merging or consolidating with any other bank holding company. |
92
Table of Contents
• | the bank holding company has registered securities under Section 12 of the Securities Act of 1934; or | |
• | no other person owns a greater percentage of that class of voting securities immediately after the transaction. |
• | banking or managing or controlling banks; and | |
• | any activity that the Federal Reserve Board determines to be so closely related to banking as to be a proper incident to the business of banking. |
• | factoring accounts receivable; | |
• | making, acquiring, brokering or servicing loans and usual related activities; | |
• | leasing personal or real property; | |
• | operating a non-bank depository institution, such as a savings association; | |
• | trust company functions; | |
• | financial and investment advisory activities; | |
• | conducting discount securities brokerage activities; | |
• | underwriting and dealing in government obligations and money market instruments; | |
• | providing specified management consulting and counseling activities; | |
• | performing selected data processing services and support services; | |
• | acting as agent or broker in selling credit life insurance and other types of insurance in connection with credit transactions; and | |
• | performing selected insurance underwriting activities. |
93
Table of Contents
• | states that the bank holding company elects to become a financial holding company; | |
• | provides the name and head office address of the bank holding company and each depository institution controlled by the bank holding company; | |
• | certifies that each depository institution controlled by the bank holding company is “well-capitalized” as of the date the bank holding company submits its declaration; | |
• | provides the capital ratios for all relevant capital measures as of the close of the previous quarter for each depository institution controlled by the bank holding company; and | |
• | certifies that each depository institution controlled by the bank holding company is “well managed” as of the date the bank holding company submits its declaration. |
• | financial in nature; | |
• | incidental to such financial activity; or | |
• | complementary to a financial activity provided it “does not pose a substantial risk to the safety and soundness of depository institutions or the financial system generally.” |
94
Table of Contents
95
Table of Contents
96
Table of Contents
• | raise the deposit insurance limit on certain retirement accounts to $250,000 and index that limit for inflation; | |
• | require the FDIC and National Credit Union Administration boards, starting in 2010 and every succeeding five years, to consider raising the standard maximum deposit insurance; and | |
• | eliminate the current fixed 1.25 percent Designated Reserve Ratio and provide the FDIC with the discretion to set the DRR within a range of 1.15 to 1.50 percent for any given year. |
• | Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; | |
• | Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; | |
• | Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; | |
• | Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; | |
• | Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; | |
• | Servicemembers Civil Relief Act, which amended the Soldiers’ and Sailors’ Civil Relief Act of 1940, governing the repayment terms of, and property rights underlying, secured obligations of persons in military service; and | |
• | the rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws. |
97
Table of Contents
• | the Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and | |
• | the Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve Board to implement that act, which govern automatic deposits to and withdrawals from deposit accounts and customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services. |
• | common shareholders’ equity (includes common stock and any related surplus, undivided profits, disclosed capital reserves that represent a segregation of undivided profits, and foreign currency translation adjustments; less net unrealized losses on marketable equity securities); | |
• | certain noncumulative perpetual preferred stock and related surplus; and | |
• | minority interests in the equity capital accounts of consolidated subsidiaries, and excludes goodwill and various intangible assets. |
• | allowance for loan losses, up to a maximum of 1.25% of risk-weighted assets; | |
• | certain perpetual preferred stock and related surplus; | |
• | hybrid capital instruments; | |
• | perpetual debt; |
98
Table of Contents
• | mandatory convertible debt securities; | |
• | term subordinated debt; | |
• | intermediate-term preferred stock; and | |
• | certain unrealized holding gains on equity securities. |
99
Table of Contents
100
Table of Contents
• | allowing check truncation without making it mandatory; | |
• | demanding that every financial institution communicate to accountholders in writing a description of its substitute check processing program and their rights under the law; | |
• | legalizing substitutions for and replacements of paper checks without agreement from consumers; | |
• | retaining in place the previously mandated electronic collection and return of checks between financial institutions only when individual agreements are in place; | |
• | requiring that when accountholders request verification, financial institutions produce the original check (or a copy that accurately represents the original) and demonstrate that the account debit was accurate and valid; and | |
• | requiring recrediting of funds to an individual’s account on the next business day after a consumer proves that the financial institution has erred. |
101
Table of Contents
• | a bank’s loans or extensions of credit to affiliates; | |
• | a bank’s investment in affiliates; | |
• | assets a bank may purchase from affiliates, except for real and personal property exempted by the Federal Reserve Board; | |
• | loans or extensions of credit to third parties collateralized by the securities or obligations of affiliates; and | |
• | a bank’s guarantee, acceptance or letter of credit issued on behalf of an affiliate. |
102
Table of Contents
• | requirements for financial institutions to develop policies and procedures to identify potential identity theft and, upon the request of a consumer, place a fraud alert in the consumer’s credit file stating that the consumer may be the victim of identity theft or other fraud; | |
• | consumer notice requirements for lenders that use consumer report information in connection with risk-based credit pricing programs; | |
• | for entities that furnish information to consumer reporting agencies (which would include our subsidiary banks), requirements to implement procedures and policies regarding the accuracy and integrity of the furnished information and regarding the correction of previously furnished information that is later determined to be inaccurate; and | |
• | a requirement for mortgage lenders to disclose credit scores to consumers. |
103
Table of Contents
104
Table of Contents
105
Table of Contents
106
Table of Contents
107
Table of Contents
• | beginning on the effective date of this offering, only the shares of common stock sold in this offering and the shares of common stock not subject tolock-up agreements and eligible for resale under Rule 144(k) will be immediately available for sale in the public market; and | |
• | beginning 180 days after the date of this prospectus, the expiration date for thelock-up agreements, approximately shares of common stock held by affiliates will be eligible for sale pursuant to Rule 144, including the volume restrictions described below, and Rule 701. |
• | offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of, any shares of common stock of Home Bancshares, or any securities convertible into, exchangeable for or that represent the right to receive shares of common stock of Home Bancshares, whether now owned or hereafter acquired, owned directly (including holding as a custodian) or with respect to which such shareholder has beneficial ownership within the rules and regulations of the SEC, or file or cause to be filed any registration statement under the Securities Act with respect to the foregoing; or | |
• | engage in any hedging or other transaction that is designed to or that reasonably could be expected to lead to or result in a sale or disposition of any shares of common stock of Home Bancshares, such prohibited hedging or other transactions to include any short sale or grant of any right (including without limitation any put or call option) with respect to any shares of common stock of Home Bancshares or with respect to any security that includes, relates to, or derives any significant part of its value from such shares. |
108
Table of Contents
• | one percent of the total number of our then outstanding shares of common stock (approximately shares immediately after this offering), as shown by our most recent published report or statement at that time; or | |
• | the average weekly trading volume of our common stock on The Nasdaq National Market during the four calendar weeks preceding the date on which notice of the sale on Form 144 is filed with the Securities and Exchange Commission. |
109
Table of Contents
Underwriters | Number of Shares | ||||
Stephens Inc. | |||||
Piper Jaffray & Co. | |||||
Sandler O’Neill & Partners, L.P. | |||||
Total | |||||
Without | With | |||||||
Over- | Over- | |||||||
Allotment | Allotment | |||||||
Per share | ||||||||
Total |
110
Table of Contents
• | prevailing market and general economic conditions; | |
• | the market capitalizations, trading histories and stages of development of other publicly traded companies that the underwriters believe to be comparable to us; | |
• | our results of operations in recent periods; | |
• | our current financial position; | |
• | estimates of our business potential and prospects; | |
• | an assessment of our management; | |
• | the present state of our development; and | |
• | the availability for sale in the market of a significant number of shares of our common stock. |
• | the underwriters may over-allot or otherwise create a short position in the common stock for their own account by selling more shares of common stock than have been sold to them; | |
• | the underwriters may elect to cover any such short position by purchasing shares of common stock in the open market or by exercising the over-allotment option; | |
• | the underwriters may stabilize or maintain the price of the common stock by bidding; and | |
• | the underwriters may impose penalty bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in the offering are reclaimed if shares of common stock previously distributed in the offering are repurchased in connection with stabilization transactions or otherwise. |
111
Table of Contents
112
Table of Contents
113
Table of Contents
Audited Financial Statements of Home BancShares, Inc. and Subsidiaries | |||||
F-3 | |||||
F-4 | |||||
F-5 | |||||
F-6 | |||||
F-7 | |||||
F-10 | |||||
F-12 | |||||
Reviewed Financial Statements of Home BancShares, Inc. and Subsidiaries | |||||
F-46 | |||||
F-47 | |||||
F-48 | |||||
F-49 | |||||
F-51 | |||||
F-52 | |||||
Audited Financial Statements of TCBancorp, Inc. and Subsidiary | |||||
F-67 | |||||
F-68 | |||||
F-69 | |||||
F-70 | |||||
F-71 | |||||
F-72 | |||||
Audited Financial Statements of Marine Bancorp, Inc. and Subsidiary | |||||
F-90 | |||||
F-91 | |||||
F-92 | |||||
F-93 | |||||
F-94 | |||||
F-95 | |||||
Audited Financial Statements of Mountain View Bancshares, Inc. | |||||
F-113 |
F-1
Table of Contents
F-114 | ||||
F-115 | ||||
F-116 | ||||
F-117 | ||||
F-118 |
F-2
Table of Contents
/s/BKD, llp |
F-3
Table of Contents
/s/ERNST & YOUNG LLP |
F-4
Table of Contents
December 31 | |||||||||
2005 | 2004 | ||||||||
(In thousands, except | |||||||||
share data) | |||||||||
Assets | |||||||||
Cash and due from banks | $ | 39,248 | $ | 19,444 | |||||
Interest-bearing deposits with other banks | 5,431 | 369 | |||||||
Cash and cash equivalents | 44,679 | 19,813 | |||||||
Federal funds sold | 7,055 | 2,220 | |||||||
Investment securities — available for sale | 530,302 | 190,366 | |||||||
Investment securities — held to maturity | — | 100 | |||||||
Loans receivable | 1,204,589 | 516,655 | |||||||
Allowance for loan losses | (24,175 | ) | (16,345 | ) | |||||
Loans receivable, net | 1,180,414 | 500,310 | |||||||
Bank premises and equipment, net | 51,762 | 26,066 | |||||||
Foreclosed assets held for sale | 758 | 458 | |||||||
Cash value of life insurance | 6,850 | 6,380 | |||||||
Investments in unconsolidated affiliates | 9,813 | 20,122 | |||||||
Accrued interest receivable | 11,158 | 4,215 | |||||||
Deferred tax asset, net | 8,821 | 3,687 | |||||||
Goodwill | 37,527 | 18,555 | |||||||
Core deposit and other intangibles | 11,200 | 4,261 | |||||||
Other assets | 11,152 | 8,633 | |||||||
Total assets | $ | 1,911,491 | $ | 805,186 | |||||
Liabilities and Stockholders’ Equity | |||||||||
Deposits: | |||||||||
Demand and non-interest-bearing | $ | 209,974 | $ | 86,186 | |||||
Savings and interest-bearing transaction accounts | 512,184 | 196,304 | |||||||
Time deposits | 704,950 | 270,388 | |||||||
Total deposits | 1,427,108 | 552,878 | |||||||
Federal funds purchased | 44,495 | 7,950 | |||||||
Securities sold under agreements to repurchase | 103,718 | 21,259 | |||||||
FHLB and other borrowed funds | 117,054 | 74,869 | |||||||
Accrued interest payable and other liabilities | 8,504 | 8,163 | |||||||
Subordinated debentures | 44,755 | 24,219 | |||||||
Total liabilities | 1,745,634 | 689,338 | |||||||
Minority interest | — | 9,238 | |||||||
Stockholders’ equity: | |||||||||
Preferred stock A, par value $0.01 in 2005 and 2004; 2,500,000 shares authorized in 2005 and 2004; 2,076,195 and 2,134,068 shares issued in 2005 and 2004, respectively; and 2,076,195 and 2,077,118 shares outstanding in 2005 and 2004, respectively | 21 | 21 | |||||||
Preferred stock B, par value $0.01 in 2005; 3,000,000 shares authorized in 2005; 169,079 shares issued and outstanding in 2005 | 2 | — | |||||||
Common stock, par value $0.01 in 2005 and $0.10 in 2004; shares authorized 25,000,000 in 2005 and 5,000,000 in 2004: shares issued and outstanding 12,113,865 in 2005 and 7,987,485 (split adjusted) in 2004 | 121 | 266 | |||||||
Capital surplus | 146,285 | 90,455 | |||||||
Retained earnings | 27,331 | 17,295 | |||||||
Accumulated other comprehensive loss | (7,903 | ) | (858 | ) | |||||
Treasury stock at cost | — | (569 | ) | ||||||
Total stockholders’ equity | 165,857 | 106,610 | |||||||
Total liabilities and stockholders’ equity | $ | 1,911,491 | $ | 805,186 | |||||
F-5
Table of Contents
Year Ended December 31 | ||||||||||||||
2005 | 2004 | 2003 | ||||||||||||
(In thousands, except per share | ||||||||||||||
data) | ||||||||||||||
Interest income: | ||||||||||||||
Loans | $ | 65,244 | $ | 29,264 | $ | 19,605 | ||||||||
Investment securities: | ||||||||||||||
Taxable | 17,103 | 5,764 | 1,584 | |||||||||||
Tax-exempt | 2,726 | 1,457 | 182 | |||||||||||
Deposits — other banks | 101 | 38 | 8 | |||||||||||
Federal funds sold | 284 | 158 | 159 | |||||||||||
Total interest income | 85,458 | 36,681 | 21,538 | |||||||||||
Interest expense: | ||||||||||||||
Interest on deposits | 26,883 | 7,606 | 5,700 | |||||||||||
Federal funds purchased | 399 | 159 | 29 | |||||||||||
FHLB and other borrowed funds | 4,046 | 1,840 | 1,220 | |||||||||||
Securities sold under agreements to repurchase | 2,657 | 407 | 256 | |||||||||||
Subordinated debentures | 2,017 | 1,568 | 1,035 | |||||||||||
Total interest expense | 36,002 | 11,580 | 8,240 | |||||||||||
Net interest income | 49,456 | 25,101 | 13,298 | |||||||||||
Provision for loan losses | 3,827 | 2,290 | 807 | |||||||||||
Net interest income after provision for loan losses | 45,629 | 22,811 | 12,491 | |||||||||||
Non-interest income: | ||||||||||||||
Service charges on deposit accounts | 8,319 | 5,914 | 2,254 | |||||||||||
Other services charges and fees | 2,099 | 959 | 474 | |||||||||||
Trust fees | 458 | 158 | 14 | |||||||||||
Data processing fees | 668 | 1,564 | 1,378 | |||||||||||
Mortgage banking income | 1,651 | 1,188 | 1,220 | |||||||||||
Insurance commissions | 674 | 631 | 22 | |||||||||||
Income from title services | 823 | 1,110 | 81 | |||||||||||
Increase in cash value of life insurance | 256 | 244 | 13 | |||||||||||
Equity in (loss) income of unconsolidated affiliates | (592 | ) | 1,560 | 937 | ||||||||||
Gain on sale of equity investment | 465 | 4,410 | — | |||||||||||
Gain on sale of SBA loans | 529 | 26 | 96 | |||||||||||
(Loss) gain on sale of securities, net | (539 | ) | (249 | ) | 39 | |||||||||
Other income | 876 | 576 | 211 | |||||||||||
Total non-interest income | 15,687 | 18,091 | 6,739 | |||||||||||
Non-interest expense: | ||||||||||||||
Salaries and employee benefits | 23,901 | 14,123 | 7,139 | |||||||||||
Occupancy and equipment | 6,869 | 3,750 | 1,659 | |||||||||||
Data processing expense | 1,991 | 1,170 | 893 | |||||||||||
Other operating expenses | 12,174 | 7,088 | 3,379 | |||||||||||
Total non-interest expense | 44,935 | 26,131 | 13,070 | |||||||||||
Income before income taxes and minority interest | 16,381 | 14,771 | 6,160 | |||||||||||
Income tax expense | 4,935 | 5,030 | 2,343 | |||||||||||
Minority interest in earnings of subsidiaries, net | — | 582 | 48 | |||||||||||
Net income available to all shareholders | 11,446 | 9,159 | 3,769 | |||||||||||
Less: Preferred stock dividends | (574 | ) | (529 | ) | — | |||||||||
Income available to common shareholders | $ | 10,872 | $ | 8,630 | $ | 3,769 | ||||||||
Basic earnings per share | $ | 0.92 | $ | 1.08 | $ | 0.66 | ||||||||
Diluted earnings per share | $ | 0.82 | $ | 0.94 | $ | 0.63 | ||||||||
F-6
Table of Contents
Accumulated | |||||||||||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||||||||||
Comprehensive | |||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Capital | Retained | Income | Treasury | |||||||||||||||||||||||||||||
Stock A | Stock B | Stock | Surplus | Earnings | (Loss) | Stock | Total | ||||||||||||||||||||||||||||
(In thousands, except share data (1)) | |||||||||||||||||||||||||||||||||||
Balances at January 1, 2003 | $ | — | $ | — | $ | 1,864 | $ | 39,189 | $ | 5,329 | $ | 371 | $ | — | $ | 46,753 | |||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 3,769 | — | — | 3,769 | |||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Unrealized loss on investment securities available for sale, net of $51 tax effect | — | — | — | — | — | (99 | ) | — | (99 | ) | |||||||||||||||||||||||||
Reclassification adjustment for gains included in income, net of $32 tax effect | — | — | — | — | — | (61 | ) | — | (61 | ) | |||||||||||||||||||||||||
Unconsolidated affiliates unrealized loss on investment securities available for sale, net of taxes recorded by unconsolidated affiliate | — | — | — | — | — | (442 | ) | — | (442 | ) | |||||||||||||||||||||||||
Comprehensive income | 3,167 | ||||||||||||||||||||||||||||||||||
Sale of stock offerings, net of issuance costs of $37 — 2,374,143 shares | — | — | 79 | 27,619 | — | — | — | 27,698 | |||||||||||||||||||||||||||
Issuance of stock — employee stock bonus plan — 17,646 shares | — | — | 1 | 205 | — | — | — | 206 | |||||||||||||||||||||||||||
Issuance of 2,123,453 shares pursuant to acquisition of CFG, Inc. | 21 | — | — | 21,705 | — | — | — | 21,726 | |||||||||||||||||||||||||||
Issuance of 8,197 shares of convertible preferred stock at $0.17 per share | — | — | — | 1 | — | — | — | 1 | |||||||||||||||||||||||||||
Purchase of 2,013 shares of convertible preferred stock at $10.00 per share | — | — | — | �� | — | — | (20 | ) | (20 | ) | |||||||||||||||||||||||||
Reclassification for change in par value from $1.00 to $0.10 per share | — | — | (1,678 | ) | 1,678 | — | — | — | — | ||||||||||||||||||||||||||
Issuance of 4,500 shares of common stock from exercise of stock options | — | — | — | 34 | — | — | — | 34 | |||||||||||||||||||||||||||
Cash dividends, $0.01 per share | — | — | — | — | (93 | ) | — | — | (93 | ) | |||||||||||||||||||||||||
Balances at December 31, 2003 | 21 | — | 266 | 90,431 | 9,005 | (231 | ) | (20 | ) | 99,472 | |||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 9,159 | — | — | 9,159 |
F-7
Table of Contents
Accumulated | |||||||||||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||||||||||
Comprehensive | |||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Capital | Retained | Income | Treasury | |||||||||||||||||||||||||||||
Stock A | Stock B | Stock | Surplus | Earnings | (Loss) | Stock | Total | ||||||||||||||||||||||||||||
(In thousands, except share data (1)) | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Unrealized loss on investment securities available for sale, net of $109 tax effect | — | — | — | — | — | (153 | ) | — | (153 | ) | |||||||||||||||||||||||||
Reclassification adjustment for gains included in income, net of $27 tax effect | — | — | — | — | — | (40 | ) | — | (40 | ) | |||||||||||||||||||||||||
Unconsolidated affiliates unrealized loss on investment securities available for sale, net of taxes recorded by unconsolidated affiliate | — | — | — | — | — | (434 | ) | — | (434 | ) | |||||||||||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||||||||||
Issuance of 2,418 shares of convertible preferred stock at $10 per share | — | — | — | 24 | — | — | — | 24 | |||||||||||||||||||||||||||
Purchase of 54,937 shares of convertible preferred stock at $10 per share | — | — | — | — | — | — | (549 | ) | (549 | ) | |||||||||||||||||||||||||
Cash dividends — Preferred Stock, $0.250 per share | — | — | (529 | ) | — | — | (529 | ) | |||||||||||||||||||||||||||
Cash dividends — Common Stock, $0.043 per share | — | — | — | — | (340 | ) | — | ) | — | ) | (340 | ) | |||||||||||||||||||||||
Balances at December 31, 2004 | |||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | — | — | — | — | 11,446 | — | — | 11,446 | |||||||||||||||||||||||||||
Net income | |||||||||||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Unrealized loss on investment securities available for sale, net of $5,363 tax effect | — | — | — | — | — | (7,566 | ) | — | (7,566 | ) | |||||||||||||||||||||||||
Reclassification adjustment for gains included in income, net of $382 tax effect | — | — | — | — | — | 539 | — | 539 | |||||||||||||||||||||||||||
Unconsolidated affiliates unrealized loss on investment securities available for sale, net of taxes recorded by unconsolidated affiliate | — | — | — | — | — | (18 | ) | — | (18 | ) | |||||||||||||||||||||||||
Comprehensive income | — | — | 78 | (78 | ) | — | — | — | — | ||||||||||||||||||||||||||
Three for one stock split |
F-8
Table of Contents
Accumulated | |||||||||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||||||||
Comprehensive | |||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Capital | Retained | Income | Treasury | |||||||||||||||||||||||||||
Stock A | Stock B | Stock | Surplus | Earnings | (Loss) | Stock | Total | ||||||||||||||||||||||||||
(In thousands, except share data (1)) | |||||||||||||||||||||||||||||||||
Reclassification for change in par value from $0.10 to $0.01 per share | — | — | (352 | ) | 352 | — | — | — | — | ||||||||||||||||||||||||
Net issuance of 40,041 shares of common stock from exercise of stock options | — | — | 1 | 456 | — | — | — | 457 | |||||||||||||||||||||||||
Issuance of 15,366 shares of preferred stock A from exercise of stock options | — | — | — | 2 | — | — | — | 2 | |||||||||||||||||||||||||
Issuance of 7,040 shares of preferred stock B from exercise of stock options | — | — | — | 130 | — | — | — | 130 | |||||||||||||||||||||||||
Purchase of 16,289 shares of preferred stock A | — | — | — | (163 | ) | — | — | — | (163 | ) | |||||||||||||||||||||||
Issuance of 3,750,813 common shares pursuant to acquisition of TCBC | — | — | 125 | 45,186 | — | — | — | 45,311 | |||||||||||||||||||||||||
Issuance of 162,039 Preferred B shares pursuant to acquisition of MBI | — | 2 | — | 6,267 | — | — | — | 6,269 | |||||||||||||||||||||||||
Issuance of 335,526 common shares pursuant to acquisition of MVBI | — | — | 3 | 4,247 | — | — | — | 4,250 | |||||||||||||||||||||||||
Retirement of treasury stock | — | — | — | (569 | ) | — | — | 569 | — | ||||||||||||||||||||||||
Cash dividends — Preferred Stock A, $0.25 per share | — | — | — | — | (520 | ) | — | — | (520 | ) | |||||||||||||||||||||||
Cash dividends — Preferred Stock B, $0.33 per share | — | — | — | — | (54 | ) | — | — | (54 | ) | |||||||||||||||||||||||
Cash dividends — Common Stock, $0.07 per share | — | — | — | — | (836 | ) | — | — | (836 | ) | |||||||||||||||||||||||
Balances at December 31, 2005 | $ | 21 | $ | 2 | $ | 121 | $ | 146,285 | $ | 27,331 | $ | (7,903 | ) | $ | — | $ | 165,857 | ||||||||||||||||
(1) | All share and per share amounts have been restated to reflect the effect of the 2005 three for one stock split. |
F-9
Table of Contents
Year Ended December 31 | ||||||||||||||
2005 | 2004 | 2003 | ||||||||||||
(In thousands) | ||||||||||||||
Operating Activities | ||||||||||||||
Net income | $ | 11,446 | $ | 9,159 | $ | 3,769 | ||||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||
Depreciation | 3,624 | 2,323 | 964 | |||||||||||
Amortization/ Accretion | 2,582 | 1,715 | 91 | |||||||||||
Gain on sale of assets | (605 | ) | (86 | ) | (98 | ) | ||||||||
Gain on sale of equity investment | (465 | ) | (4,410 | ) | — | |||||||||
Minority interest | — | 582 | 48 | |||||||||||
Stock bonus compensation | — | — | 206 | |||||||||||
Provision for loan losses | 3,827 | 2,290 | 807 | |||||||||||
Deferred income tax (benefit) expense | (128 | ) | (1,562 | ) | 250 | |||||||||
Equity in loss (income) of unconsolidated affiliates | 592 | (1,560 | ) | (937 | ) | |||||||||
Increase in cash value of life insurance | (254 | ) | (244 | ) | (13 | ) | ||||||||
Originations of mortgage loans held for sale | (89,638 | ) | (50,431 | ) | (106,947 | ) | ||||||||
Proceeds from sales of mortgage loans held for sale | 88,939 | 50,473 | 107,305 | |||||||||||
Changes in assets and liabilities: | ||||||||||||||
Accrued interest receivable | (741 | ) | 222 | 241 | ||||||||||
Other assets | 4,788 | 3,562 | (5,044 | ) | ||||||||||
Accrued interest payable and other liabilities | (3,549 | ) | (18,973 | ) | 18,501 | |||||||||
Net cash provided by (used in) operating activities | 20,418 | (6,940 | ) | 19,143 | ||||||||||
Investing Activities | ||||||||||||||
Net increase (decrease) in federal funds sold | 3,556 | 39,660 | (40,055 | ) | ||||||||||
Net increase in loans | (152,155 | ) | (28,720 | ) | (16,557 | ) | ||||||||
Purchases of investment securities available for sale | (157,440 | ) | (84,299 | ) | (121,709 | ) | ||||||||
Proceeds from maturities of investment securities available for sale | 201,472 | 51,209 | 95,442 | |||||||||||
Proceeds from sales of investment securities available for sale | 58,945 | 2,936 | 12,957 | |||||||||||
Proceeds from maturities of investment securities held to maturity | 100 | — | 185 | |||||||||||
Proceeds from sale of loans | 6,042 | 4,238 | 1,435 | |||||||||||
Proceeds from foreclosed assets held for sale | 1,077 | 2,436 | — | |||||||||||
Proceeds from sale of fixed assets | — | 694 | 107 | |||||||||||
Proceeds from sale of investment in RBI | — | 13,546 | — | |||||||||||
Purchases of premises and equipment, net | (5,973 | ) | (7,846 | ) | (2,287 | ) | ||||||||
Paid on sale of branch, net of cash paid | — | (9,333 | ) | (1,646 | ) | |||||||||
Purchase of bank owned life insurance | — | (4,800 | ) | — | ||||||||||
Acquisition of financial institutions, net funds disbursed | (31,349 | ) | — | — | ||||||||||
Investments in unconsolidated affiliates | (9,091 | ) | (180 | ) | (8,592 | ) | ||||||||
Net cash used in investing activities | (84,816 | ) | (20,459 | ) | (80,720 | ) | ||||||||
F-10
Table of Contents
Year Ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
(In thousands) | ||||||||||||
Financing Activities | ||||||||||||
Net increase (decrease) in deposits | 15,332 | (2,257 | ) | 12,551 | ||||||||
Net increase (decrease) in securities sold under agreements to repurchase | 36,705 | (2,187 | ) | 11,240 | ||||||||
Net increase (decrease) in federal funds purchased | 36,545 | (1,285 | ) | 2,155 | ||||||||
Net increase (decrease) in FHLB and other borrowed funds | (27,333 | ) | 36,346 | (4,745 | ) | |||||||
Net borrowing of line of credit | 14,000 | — | — | |||||||||
Net proceeds from common stock issuance | — | — | 27,700 | |||||||||
Net proceeds from preferred stock issuance | — | 24 | — | |||||||||
Proceeds from issuance of subordinated debentures | 15,000 | — | 20,090 | |||||||||
Proceeds from exercise of stock options | 588 | — | 34 | |||||||||
Repurchase of stock | (163 | ) | (549 | ) | (20 | ) | ||||||
Dividends paid | (1,410 | ) | (869 | ) | (93 | ) | ||||||
Net cash provided by financing activities | 89,264 | 29,223 | 68,912 | |||||||||
Net change in cash and due from banks | 24,866 | 1,824 | 7,335 | |||||||||
Cash and cash equivalents — beginning of year | 19,813 | 17,989 | 10,654 | |||||||||
Cash and cash equivalents — end of year | $ | 44,679 | $ | 19,813 | $ | 17,989 | ||||||
F-11
Table of Contents
1. | Summary of Significant Accounting Policies |
Nature of Operations |
Operating Segments |
Use of Estimates |
Principles of Consolidation |
Reclassifications |
Cash and Due from Banks |
Investment Securities |
F-12
Table of Contents
Loans Receivable and Allowance for Loan Losses |
F-13
Table of Contents
Foreclosed Assets Held for Sale |
Bank Premises and Equipment |
Bank premises | 15-40 years | |||
Furniture, fixtures, and equipment | 3-15 years |
Investments in Unconsolidated Affiliates |
F-14
Table of Contents
2005 | 2004 | 2003 | ||||||||||
(In thousands) | ||||||||||||
Assets | $ | 229,072 | $ | 654,112 | $ | 882,263 | ||||||
Liabilities | 176,511 | 591,761 | 780,751 | |||||||||
Equity | 52,561 | 62,351 | 101,512 | |||||||||
Net (loss) income | (2,658 | ) | 2,158 | 4,932 |
Intangible Assets |
Securities Sold Under Agreements to Repurchase |
Derivative Financial Instruments |
F-15
Table of Contents
Income Taxes |
Earnings per Share |
2005 | 2004 | 2003 | ||||||||||
(In thousands) | ||||||||||||
Net income available to all shareholders | $ | 11,446 | $ | 9,159 | $ | 3,769 | ||||||
Less: Preferred stock dividends | (574 | ) | (529 | ) | — | |||||||
Income available to common shareholders | $ | 10,872 | $ | 8,630 | $ | 3,769 | ||||||
Average shares outstanding | 11,862 | 7,986 | 5,721 | |||||||||
Effect of common stock options | 78 | 114 | 99 | |||||||||
Effect of preferred stock options | 22 | 27 | — | |||||||||
Effect of preferred stock conversions | 1,927 | 1,656 | 144 | |||||||||
Diluted shares outstanding | 13,889 | 9,783 | 5,964 | |||||||||
Basic earnings per share | $ | 0.92 | $ | 1.08 | $ | 0.66 | ||||||
Diluted earnings per share | $ | 0.82 | $ | 0.94 | $ | 0.63 |
Pension Plan |
F-16
Table of Contents
Stock Option Plan |
2005 | 2004 | 2003 | ||||||||||
(In thousands except | ||||||||||||
per share data) | ||||||||||||
Basic pro forma | ||||||||||||
Net income available to common shareholders — as reported | $ | 10,872 | $ | 8,630 | $ | 3,769 | ||||||
Less: Total stock-based employee compensation cost determined under the fair value based method, net of income taxes | (114 | ) | (43 | ) | (45 | ) | ||||||
Net income available to common shareholders — pro forma | $ | 10,758 | $ | 8,587 | $ | 3,724 | ||||||
Basic earnings per share — as reported | $ | 0.92 | $ | 1.08 | $ | 0.66 | ||||||
Basic earnings per share — pro forma | 0.91 | 1.08 | 0.65 | |||||||||
Diluted pro forma | ||||||||||||
Net income — as reported | $ | 11,446 | $ | 9,159 | $ | 3,769 | ||||||
Less: Total stock-based employee compensation cost determined under the fair value based method, net of income taxes | (114 | ) | (43 | ) | (45 | ) | ||||||
Net income — pro forma | $ | 11,332 | $ | 9,116 | $ | 3,724 | ||||||
Diluted earnings per share — as reported | $ | 0.82 | $ | 0.94 | $ | 0.63 | ||||||
Diluted earnings per share — pro forma | 0.82 | 0.93 | 0.62 |
Fair Values of Financial Instruments |
F-17
Table of Contents
2. | Acquisitions |
F-18
Table of Contents
TCBancorp | |||||||||||||
Marine | |||||||||||||
Bancorp | |||||||||||||
Inc. | |||||||||||||
Mountain | |||||||||||||
View | |||||||||||||
Bancshares, Inc. | |||||||||||||
) | |||||||||||||
(In thousands | |||||||||||||
Cash and cash equivalents | $ | 9,039 | $ | 6,378 | $ | 3,204 | |||||||
Federal funds sold | 3,660 | 551 | 4,180 | ||||||||||
Investments | 327,189 | 23,432 | 106,707 | ||||||||||
Loans | 261,927 | 215,209 | 68,791 | ||||||||||
Other assets | 31,609 | 11,980 | 19,644 | ||||||||||
Total assets acquired | 633,424 | 257,550 | 202,526 | ||||||||||
Deposits | 500,144 | 200,747 | 158,007 | ||||||||||
Securities sold under agreements to repurchase | 45,754 | — | — | ||||||||||
FHLB and other borrowed funds | 20,884 | 34,564 | — | ||||||||||
Subordinated debentures | — | 5,155 | — | ||||||||||
Accrued interest payable and other liabilities | 1,928 | 1,521 | 441 | ||||||||||
Total liabilities assumed | 568,710 | 241,987 | 158,448 | ||||||||||
Net assets acquired | 64,714 | 15,563 | 44,078 | ||||||||||
2005 | 2004 | |||||||
(In thousands, except | ||||||||
per share data) | ||||||||
Net interest income | $ | 56,184 | $ | 50,347 | ||||
Non-interest income | 16,951 | 22,029 | ||||||
Total revenue | $ | 73,135 | $ | 72,376 | ||||
Net income | $ | 13,291 | $ | 13,768 | ||||
Basic earnings per share | $ | 1.05 | $ | 1.09 | ||||
Diluted earnings per share | $ | 0.93 | $ | 0.96 | ||||
F-19
Table of Contents
3. | Investment Securities |
December 31, 2005 | ||||||||||||||||
Available for Sale | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | (Losses) | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. Government-sponsored enterprises | $ | 162,165 | $ | 27 | $ | (4,723 | ) | $ | 157,469 | |||||||
Mortgage-backed securities | 264,666 | 16 | (8,209 | ) | 256,473 | |||||||||||
State and political subdivisions | 102,928 | 1,279 | (746 | ) | 103,461 | |||||||||||
Other Securities | 13,571 | — | (672 | ) | 12,899 | |||||||||||
Total | $ | 543,330 | $ | 1,322 | $ | (14,350 | ) | $ | 530,302 | |||||||
December 31, 2004 | ||||||||||||||||
Available for Sale | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | (Losses) | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. Government-sponsored enterprises | $ | 15,646 | $ | 18 | $ | (86 | ) | $ | 15,578 | |||||||
Mortgage-backed securities | 127,316 | 249 | (898 | ) | 126,667 | |||||||||||
State and political subdivisions | 39,564 | 717 | (147 | ) | 40,134 | |||||||||||
Other Securities | 8,010 | 15 | (38 | ) | 7,987 | |||||||||||
Total | $ | 190,536 | $ | 999 | $ | (1,169 | ) | $ | 190,366 | |||||||
Available-for-Sale | ||||||||
Amortized | Estimated | |||||||
Cost | Fair Value | |||||||
(In thousands) | ||||||||
Due in one year or less | $ | 179,736 | $ | 175,239 | ||||
Due after one year through five years | 229,354 | 224,570 | ||||||
Due after five years through ten years | 69,475 | 67,765 | ||||||
Due after ten years | 64,765 | 62,728 | ||||||
Total | $ | 543,330 | $ | 530,302 | ||||
F-20
Table of Contents
F-21
Table of Contents
December 31, 2005 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. Government-sponsored enterprises | $ | 29,083 | $ | 497 | $ | 118,209 | $ | 4,226 | $ | 147,292 | $ | 4,723 | ||||||||||||
State and political subdivisions | 13,231 | 159 | 25,172 | 587 | 38,403 | 746 | ||||||||||||||||||
Mortgage-backed securities | 59,722 | 1,216 | 191,328 | 6,993 | 251,050 | 8,209 | ||||||||||||||||||
Other securities | 1,860 | 172 | 5,945 | 500 | 7,805 | 672 | ||||||||||||||||||
$ | 103,896 | $ | 2,044 | $ | 340,654 | $ | 12,306 | $ | 444,550 | $ | 14,350 | |||||||||||||
December 31, 2004 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Unrealized | Fair | Unrealized | Unrealized | |||||||||||||||||||||
Fair Value | Losses | Value | Losses | Fair Value | Losses | |||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||
U.S. Government-sponsored enterprises | $ | 11,757 | $ | 86 | $ | — | $ | — | $ | 11,757 | $ | 86 | ||||||||||||
State and political subdivisions | 13,305 | 129 | 2,998 | 18 | 16,303 | 147 | ||||||||||||||||||
Mortgage-backed securities | 80,824 | 785 | 4,647 | 113 | 85,471 | 898 | ||||||||||||||||||
Other securities | 5,133 | 38 | 789 | — | 5,922 | 38 | ||||||||||||||||||
$ | 111,019 | $ | 1,038 | $ | 8,434 | $ | 131 | $ | 119,453 | $ | 1,169 | |||||||||||||
F-22
Table of Contents
4. | Loans Receivable and Allowance for Loan Losses |
December 31 | ||||||||||
2005 | 2004 | |||||||||
(In thousands) | ||||||||||
Real estate: | ||||||||||
Commercial real estate loans | ||||||||||
Non-farm/non-residential | $ | 411,839 | $ | 181,995 | ||||||
Construction/land development | 291,515 | 116,935 | ||||||||
Agricultural | 13,112 | 12,912 | ||||||||
Residential real estate loans | ||||||||||
Residential 1-4 family | 221,831 | 86,497 | ||||||||
Multifamily residential | 34,939 | 17,708 | ||||||||
Total real estate | 973,236 | 416,047 | ||||||||
Consumer | 39,447 | 24,624 | ||||||||
Commercial and industrial | 175,396 | 69,345 | ||||||||
Agricultural | 8,466 | 6,275 | ||||||||
Other | 8,044 | 364 | ||||||||
Total loans receivable before allowance for loan losses | 1,204,589 | 516,655 | ||||||||
Allowance for loan losses | 24,175 | 16,345 | ||||||||
Total loans receivable, net | $ | 1,180,414 | $ | 500,310 | ||||||
Year Ended December 31 | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands) | |||||||||||||
Balance, beginning of year | $ | 16,345 | $ | 14,717 | $ | 5,706 | |||||||
Loans charged off | (4,611 | ) | (2,181 | ) | (676 | ) | |||||||
Recoveries on loans previously charged off | 850 | 1,519 | 150 | ||||||||||
Net charge-offs | (3,761 | ) | (662 | ) | (526 | ) | |||||||
Provision charged to operating expense | 3,827 | 2,290 | 807 | ||||||||||
Allowance for loan losses of acquired institutions | 7,764 | — | 8,730 | ||||||||||
Balance, end of year | $ | 24,175 | $ | 16,345 | $ | 14,717 | |||||||
F-23
Table of Contents
5. | Goodwill and Core Deposit Intangibles |
December 31 | |||||||||
2005 | 2004 | ||||||||
(In thousands) | |||||||||
Goodwill | |||||||||
Balance, beginning of year | $ | 18,555 | $ | 20,002 | |||||
Acquisitions of financial institutions | 18,972 | (413 | ) | ||||||
Branch sale | — | (1,034 | ) | ||||||
Balance, end of year | $ | 37,527 | $ | 18,555 | |||||
Core Deposit Intangibles | |||||||||
Balance, beginning of year | $ | 4,261 | $ | 5,250 | |||||
Acquisitions of financial institutions | 8,405 | — | |||||||
Amortization expense | (1,466 | ) | (728 | ) | |||||
Branch sale | — | (261 | ) | ||||||
Balance, end of year | $ | 11,200 | $ | 4,261 | |||||
F-24
Table of Contents
December 31 | |||||||||
2005 | 2004 | ||||||||
(In thousands) | |||||||||
Gross carrying amount | $ | 13,457 | $ | 5,052 | |||||
Accumulated amortization | 2,257 | 791 | |||||||
Net carrying amount | $ | 11,200 | $ | 4,261 | |||||
6. | Deposits |
One month or less | $ | 82,210 | ||
Over 1 month to 3 months | 150,177 | |||
Over 3 months to 6 months | 129,609 | |||
Over 6 months to 12 months | 185,018 | |||
Over 12 months to 2 years | 92,821 | |||
Over 2 years to 3 years | 36,829 | |||
Over 3 years to 5 years | 27,274 | |||
Over 5 years | 1,012 | |||
Total time certificates of deposit | $ | 704,950 | ||
7. | FHLB and Other Borrowed Funds |
F-25
Table of Contents
2005 | 2004 | ||||||||
(In thousands) | |||||||||
Line of Credit, due 2009, at a floating rate of 0.75% below Prime, secured by bank stock | $ | 14,000 | $ | — | |||||
FHLB advances, due 2005 to 2020, 1.58% to 5.96% secured by residential real estate loans | 99,118 | 43,869 | |||||||
Total long-term borrowings | $ | 113,118 | $ | 43,869 | |||||
2006 | $ | 40,556 | ||
2007 | 28,939 | |||
2008 | 8,920 | |||
2009 | 14,512 | |||
2010 | 12,265 | |||
Thereafter | 7,926 | |||
$ | 113,118 | |||
8. | Subordinated Debentures |
2005 | 2004 | ||||||||
(In thousands) | |||||||||
Subordinated debentures, due 2033, fixed at 6.40%, during the first five years and at a floating rate of 3.15% above the three-month LIBOR rate, reset quarterly, thereafter, callable in 2008 without penalty | $ | 20,619 | $ | 20,619 | |||||
Subordinated debentures, due 2030, fixed at 10.60%, callable in 2010 with a penalty ranging from 5.30% to 0.53% depending on the year of prepayment, callable in 2020 without penalty | 3,516 | 3,600 | |||||||
Subordinated debentures, due 2033, floating rate of 3.15% above the three-month LIBOR rate, reset quarterly, callable in 2008 without penalty | 5,155 | — | |||||||
Subordinated debentures, due 2035, fixed rate of 6.81% during the first ten years and at a floating rate of 1.38% above the three-month LIBOR rate, reset quarterly, thereafter, callable in 2010 without penalty | 15,465 | — | |||||||
Total subordinated debt | $ | 44,755 | $ | 24,219 | |||||
F-26
Table of Contents
9. | Income Taxes |
Year Ended December 31 | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands) | |||||||||||||
Current: | |||||||||||||
Federal | $ | 4,224 | $ | 5,622 | $ | 1,716 | |||||||
State | 839 | 970 | 377 | ||||||||||
Total current | 5,063 | 6,592 | 2,093 | ||||||||||
Deferred: | |||||||||||||
Federal | (107 | ) | (1,304 | ) | 250 | ||||||||
State | (21 | ) | (258 | ) | — | ||||||||
Total deferred | (128 | ) | (1,562 | ) | 250 | ||||||||
Provision for income taxes | $ | 4,935 | $ | 5,030 | $ | 2,343 | |||||||
Year Ended December 31 | ||||||||||||
2005 | 2004 | 2003 | ||||||||||
Statutory federal income tax rate | 35.00 | % | 35.00 | % | 34.00 | % | ||||||
Effect of nontaxable interest income | (5.93 | ) | (3.53 | ) | (0.92 | ) | ||||||
Cash surrender value of life insurance | (0.54 | ) | (0.58 | ) | (0.08 | ) | ||||||
State taxes | 2.17 | 3.63 | 3.29 | |||||||||
Change in effective rate for deferred tax assets | — | (0.33 | ) | — | ||||||||
Other | (0.57 | ) | (0.13 | ) | 1.75 | |||||||
Effective income tax rate | 30.13 | % | 34.06 | % | 38.04 | % | ||||||
F-27
Table of Contents
December 31 | |||||||||
2005 | 2004 | ||||||||
(In thousands) | |||||||||
Deferred tax assets: | |||||||||
Allowance for loan losses | $ | 9,229 | $ | 5,792 | |||||
Deferred compensation | 249 | 139 | |||||||
Defined benefit pension plan | 109 | 350 | |||||||
Non-accrual interest income | 466 | 163 | |||||||
Investment in unconsolidated subsidiary | 336 | 89 | |||||||
Unrealized loss on securities | 5,105 | 99 | |||||||
Gain on sale of branch | — | 405 | |||||||
Other | 349 | 243 | |||||||
Gross deferred tax assets | 15,843 | 7,280 | |||||||
Deferred tax liabilities: | |||||||||
Accelerated depreciation on premises and equipment | 2,237 | 1,442 | |||||||
Core deposit intangibles | 4,211 | 1,671 | |||||||
Market value of cash flow hedge | 25 | — | |||||||
FHLB dividends | 393 | 281 | |||||||
Other | 156 | 199 | |||||||
Gross deferred tax liabilities | 7,022 | 3,593 | |||||||
Net deferred tax assets included in other assets | $ | 8,821 | $ | 3,687 | |||||
10. | Common Stock and Stock Compensation Plans |
F-28
Table of Contents
2005 | 2004 | 2003 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Shares | Exercisable | Shares | Exercisable | Shares | Exercisable | |||||||||||||||||||
(000) | Price | (000) | Price | (000) | Price | |||||||||||||||||||
Outstanding, beginning of year | 453 | $ | 9.46 | 324 | $ | 8.11 | 315 | $ | 7.99 | |||||||||||||||
Granted | 75 | 12.67 | 135 | 12.67 | 24 | 11.15 | ||||||||||||||||||
Options of acquired institution | 168 | 10.80 | — | n/a | — | n/a | ||||||||||||||||||
Forfeited | (23 | ) | 8.78 | (6 | ) | 9.72 | (12 | ) | 9.60 | |||||||||||||||
Exercised | (43 | ) | 11.48 | — | n/a | (3 | ) | 7.61 | ||||||||||||||||
Outstanding, end of year | 630 | 10.07 | 453 | 9.46 | 324 | 8.11 | ||||||||||||||||||
Exercisable, end of year | 497 | $ | 9.50 | 243 | $ | 7.81 | 231 | $ | 7.53 | |||||||||||||||
2005 | 2004 | 2003 | ||||||||||
Expected dividend yield | 0.63 | % | 0.00 | % | 0.00 | % | ||||||
Expected stock price volatility | 10.00 | % | 0.01 | % | 0.01 | % | ||||||
Risk-free interest rate | 4.39 | % | 3.73 | % | 3.05 | % | ||||||
Expected life of options | 13.0 years | 6.5 years | 6.5 years |
Options Outstanding | Options Exercisable | |||||||||||||||||||||
Weighted- | ||||||||||||||||||||||
Options | Average | Weighted- | Options | Weighted- | ||||||||||||||||||
Outstanding | Remaining | Average | Exercisable | Average | ||||||||||||||||||
Shares | Contractual Life | Exercise | Shares | Exercise | ||||||||||||||||||
Exercise Prices | (000s) | (in years) | Price | (000s) | Price | |||||||||||||||||
$ | 7.33 to $ 8.33 | 230 | 6.5 | $ | 7.46 | 229 | $ | 7.46 | ||||||||||||||
$ | 9.33 to $10.31 | 128 | 8.1 | 10.13 | 113 | 10.17 | ||||||||||||||||
$ | 11.67 to $11.34 | 87 | 10.9 | 11.40 | 77 | 11.36 | ||||||||||||||||
$ | 12.67 to $12.67 | 185 | 12.4 | 12.67 | 78 | 12.67 | ||||||||||||||||
630 | 497 | |||||||||||||||||||||
F-29
Table of Contents
11. | Preferred Stock A and Preferred Stock A Options |
F-30
Table of Contents
2005 | 2004 | 2003 | ||||||||||||||||||||||
Weighted | Weighted | Weighted | ||||||||||||||||||||||
Average | Average | Average | ||||||||||||||||||||||
Shares | Exercisable | Shares | Exercisable | Shares | Exercisable | |||||||||||||||||||
(000) | Price | (000) | Price | (000) | Price | |||||||||||||||||||
Outstanding, beginning of year | 41 | $ | 2.04 | 49 | $ | 1.73 | — | $ | — | |||||||||||||||
Acquired during acquisition | — | — | — | — | 49 | 1.73 | ||||||||||||||||||
Exercised | (15 | ) | 0.17 | (8 | ) | 0.17 | — | — | ||||||||||||||||
Outstanding, end of year | 26 | 3.14 | 41 | 2.04 | 49 | 1.73 | ||||||||||||||||||
Exercisable, end of year | 26 | $ | 3.14 | 41 | $ | 2.04 | 49 | $ | 1.73 | |||||||||||||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||
Number | Remaining | Average | Number | Average | ||||||||||||||||
Range of | Outstanding | Contractual | Exercise | Exercisable | Exercise | |||||||||||||||
Exercise Prices | (000) | Life | Price | (000) | Price | |||||||||||||||
$0.17 | 15 | 4 Years | $ | 0.17 | 15 | $ | 0.17 | |||||||||||||
$6.84 | 11 | 3 Years | $ | 6.84 | 11 | $ | 6.84 |
12. | Preferred Stock B and Preferred Stock B Options |
F-31
Table of Contents
Weighted | ||||||||
Average | ||||||||
Shares | Exercisable | |||||||
(000) | Price | |||||||
Outstanding, beginning of year | — | $ | n/a | |||||
Acquired during acquisition | 32 | 18.92 | ||||||
Exercised | (7 | ) | 18.41 | |||||
Outstanding, end of year | 25 | 19.06 | ||||||
Exercisable, end of year | 25 | $ | 19.06 | |||||
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted | ||||||||||||||||||||
Average | Weighted | Weighted | ||||||||||||||||||
Number | Remaining | Average | Number | Average | ||||||||||||||||
Range of | Outstanding | Contractual | Exercise | Exercisable | Exercise | |||||||||||||||
Exercise Prices | (000) | Life | Price | (000) | Price | |||||||||||||||
$18.41 | 9 | 5 Years | $ | 18.41 | 9 | $ | 18.41 | |||||||||||||
$19.09 | 10 | 8 Years | $ | 19.09 | 10 | $ | 19.09 | |||||||||||||
$20.05 | 6 | 9 Years | $ | 20.05 | 6 | $ | 20.05 |
F-32
Table of Contents
13. | Non-Interest Expense |
2005 | 2004 | 2003 | |||||||||||
(In thousands) | |||||||||||||
Salaries and employee benefits | $ | 23,901 | $ | 14,123 | $ | 7,139 | |||||||
Occupancy and equipment | 6,869 | 3,750 | 1,659 | ||||||||||
Data processing expense | 1,991 | 1,170 | 893 | ||||||||||
Other operating expenses: | |||||||||||||
Advertising | 2,067 | 900 | 774 | ||||||||||
Amortization of intangibles | 1,466 | 728 | 63 | ||||||||||
ATM expense | 427 | 372 | 237 | ||||||||||
Directors’ fees | 505 | 210 | 73 | ||||||||||
Due from bank service charges | 284 | 197 | 108 | ||||||||||
FDIC and state assessment | 503 | 301 | 155 | ||||||||||
Insurance | 504 | 344 | 193 | ||||||||||
Legal and accounting | 941 | 452 | 204 | ||||||||||
Other professional fees | 534 | 493 | 315 | ||||||||||
Operating supplies | 745 | 530 | 336 | ||||||||||
Postage | 580 | 404 | 183 | ||||||||||
Telephone | 669 | 377 | 153 | ||||||||||
Other expense | 2,949 | 1,780 | 585 | ||||||||||
Total other operating expenses | 12,174 | 7,088 | 3,379 | ||||||||||
Total non-interest expense | $ | 44,935 | $ | 26,131 | $ | 13,070 | |||||||
14. | Employee Benefit Plans |
401(k) Plan |
Stock Appreciation Rights |
F-33
Table of Contents
Pension Plan |
December 31 | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands) | |||||||||||||
Benefit obligation | $ | 3,494 | $ | 1,840 | $ | 1,896 | |||||||
Fair value of plan assets | 2,693 | 1,025 | 1,165 | ||||||||||
Funded status | $ | (801 | ) | $ | (815 | ) | $ | (731 | ) | ||||
Accrued benefit cost | $ | (552 | ) | $ | (949 | ) | $ | (990 | ) | ||||
Unrecognized net (gain) or loss | (146 | ) | (212 | ) | (251 | ) | |||||||
Unrecognized prior service cost | 117 | — | — | ||||||||||
Unrecognized net obligation | 70 | — | — | ||||||||||
Weighted-average assumptions: | |||||||||||||
Discount rate | 6.8 | % | 6.5 | % | 6.5 | % | |||||||
Actual return on plan assets | 9.8 | 6.7 | -2.2 | ||||||||||
Expected return on plan assets | 6.8 | 6.5 | 6.5 | ||||||||||
Rate of compensation increase | 4.0 | — | — | ||||||||||
Benefit cost | $ | 196 | $ | 41 | $ | 98 | |||||||
Interest cost | 268 | 117 | 128 | ||||||||||
Employer contributions | 767 | 166 | 165 | ||||||||||
Employee contributions | — | — | — | ||||||||||
Benefits paid | 1,095 | 296 | 287 |
2006 | $ | 170 | ||
2007 | 172 | |||
2008 | 176 | |||
2009 | 174 | |||
2010 | 146 | |||
2010-2015 | 2,564 |
F-34
Table of Contents
15. | Related Party Transactions |
16. | Leases |
F-35
Table of Contents
2006 | $ | 980 | ||
2007 | 976 | |||
2008 | 916 | |||
2009 | 909 | |||
2010 | 907 | |||
Thereafter | 5,384 | |||
$ | 10,072 | |||
17. | Concentration of Credit Risks |
18. | Significant Estimates and Concentrations |
19. | Commitments and Contingencies |
F-36
Table of Contents
20. | Financial Instruments |
December 31, 2005 | ||||||||||
Carrying | ||||||||||
Amount | Fair Value | |||||||||
(In thousands) | ||||||||||
Financial assets: | ||||||||||
Cash and due from banks and bank deposits | $ | 44,679 | $ | 44,679 | ||||||
Federal funds sold | 7,055 | 7,055 | ||||||||
Investment securities — available for sale | 530,302 | 530,302 | ||||||||
Net loans receivable | 1,180,414 | 1,173,873 | ||||||||
Accrued interest receivable | 11,158 | 11,158 | ||||||||
Financial liabilities: | ||||||||||
Deposits: | ||||||||||
Demand and non-interest-bearing | $ | 209,974 | $ | 209,974 | ||||||
Savings and interest-bearing transaction accounts | 512,184 | 512,184 | ||||||||
Time deposits | 704,950 | 706,982 | ||||||||
Federal funds purchased | 44,495 | 44,495 | ||||||||
Securities sold under agreements to repurchase | 103,718 | 103,718 | ||||||||
FHLB and other borrowings | 117,054 | 115,612 | ||||||||
Accrued interest payable and other liabilities | 8,504 | 8,504 | ||||||||
Subordinated debentures | 44,755 | 46,433 |
December 31, 2004 | |||||||||
Carrying | |||||||||
Amount | Fair Value | ||||||||
(In thousands) | |||||||||
Financial assets: | |||||||||
Cash and due from banks and bank deposits | $ | 19,813 | $ | 19,813 | |||||
Federal funds sold | 2,220 | 2,220 | |||||||
Investment securities — available for sale | 190,366 | 190,366 |
F-37
Table of Contents
December 31, 2004 | ||||||||||
Carrying | ||||||||||
Amount | Fair Value | |||||||||
(In thousands) | ||||||||||
Investment securities — held to maturity | 100 | 100 | ||||||||
Net loans receivable | 500,310 | 496,570 | ||||||||
Accrued interest receivable | 4,215 | 4,215 | ||||||||
Financial liabilities: | ||||||||||
Deposits: | ||||||||||
Demand and non-interest-bearing | 86,186 | 86,186 | ||||||||
Savings and interest-bearing transaction accounts | 196,304 | 196,304 | ||||||||
Time deposits | 270,388 | �� | 271,184 | |||||||
Federal funds purchased | 7,950 | 7,950 | ||||||||
Securities sold under agreements to repurchase | 21,259 | 21,259 | ||||||||
FHLB and other borrowings | 74,869 | 74,923 | ||||||||
Accrued interest payable and other liabilities | 8,163 | 8,163 | ||||||||
Subordinated debentures | 24,219 | 24,868 |
21. | Regulatory Matters |
F-38
Table of Contents
To Be Well | ||||||||||||||||||||||||||
Capitalized Under | ||||||||||||||||||||||||||
For Capital | Prompt Corrective | |||||||||||||||||||||||||
Actual | Adequacy Purposes | Action Provision | ||||||||||||||||||||||||
Amount | Ratio-% | Amount | Ratio-% | Amount | Ratio-% | |||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||
As of December 31, 2005 | ||||||||||||||||||||||||||
Leverage Ratio | ||||||||||||||||||||||||||
Home BancShares, Inc. | $ | 172,244 | 9.22 | $ | 74,726 | 4.00 | $ | N/A | ||||||||||||||||||
First State Bank | 38,572 | 8.44 | 18,281 | 4.00 | 22,851 | 5.00 | ||||||||||||||||||||
Community Bank | 23,129 | 7.59 | 12,189 | 4.00 | 15,236 | 5.00 | ||||||||||||||||||||
Twin City Bank | 51,679 | 8.07 | 25,615 | 4.00 | 32,019 | 5.00 | ||||||||||||||||||||
Marine Bank | 20,050 | 7.28 | 11,016 | 4.00 | 13,771 | 5.00 | ||||||||||||||||||||
Bank of Mountain View | 29,468 | 16.35 | 7,209 | 4.00 | 9,012 | 5.00 | ||||||||||||||||||||
Tier 1 Capital Ratio | ||||||||||||||||||||||||||
Home BancShares, Inc. | 172,244 | 12.25 | 56,243 | 4.00 | N/A | |||||||||||||||||||||
First State Bank | 38,572 | 10.01 | 15,413 | 4.00 | 23,120 | 6.00 | ||||||||||||||||||||
Community Bank | 23,129 | 10.25 | 9,026 | 4.00 | 13,539 | 6.00 | ||||||||||||||||||||
Twin City Bank | 51,679 | 11.53 | 17,929 | 4.00 | 26,893 | 6.00 | ||||||||||||||||||||
Marine Bank | 20,050 | 9.08 | 8,833 | 4.00 | 13,249 | 6.00 | ||||||||||||||||||||
Bank of Mountain View | 29,468 | 29.75 | 3,962 | 4.00 | 5,943 | 6.00 | ||||||||||||||||||||
Total Risk-Based Capital Ratio | ||||||||||||||||||||||||||
Home BancShares, Inc. | 189,902 | 13.51 | 112,451 | 8.00 | N/A | |||||||||||||||||||||
First State Bank | 43,362 | 11.26 | 30,808 | 8.00 | 38,510 | 10.00 | ||||||||||||||||||||
Community Bank | 26,010 | 11.53 | 18,047 | 8.00 | 22,559 | 10.00 | ||||||||||||||||||||
Twin City Bank | 57,248 | 12.77 | 35,864 | 8.00 | 44,830 | 10.00 | ||||||||||||||||||||
Marine Bank | 22,815 | 10.33 | 17,669 | 8.00 | 22,086 | 10.00 | ||||||||||||||||||||
Bank of Mountain View | 30,094 | 30.38 | 7,925 | 8.00 | 9,906 | 10.00 | ||||||||||||||||||||
As of December 31, 2004 | ||||||||||||||||||||||||||
Leverage Ratio | ||||||||||||||||||||||||||
Home BancShares, Inc. | $ | 105,139 | 13.47 | $ | 31,222 | 4.00 | $ | N/A | ||||||||||||||||||
First State Bank | 60,701 | 13.43 | 18,079 | 4.00 | 22,599 | 5.00 | ||||||||||||||||||||
Community Bank | 22,513 | 7.44 | 12,104 | 4.00 | 15,130 | 5.00 |
F-39
Table of Contents
To Be Well | |||||||||||||||||||||||||
Capitalized Under | |||||||||||||||||||||||||
For Capital | Prompt Corrective | ||||||||||||||||||||||||
Actual | Adequacy Purposes | Action Provision | |||||||||||||||||||||||
Amount | Ratio-% | Amount | Ratio-% | Amount | Ratio-% | ||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||
Tier 1 Capital Ratio | |||||||||||||||||||||||||
Home BancShares, Inc. | 105,139 | 17.39 | 24,184 | 4.00 | N/A | ||||||||||||||||||||
First State Bank | 60,701 | 15.53 | 15,635 | 4.00 | 23,452 | 6.00 | |||||||||||||||||||
Community Bank | 22,513 | 11.97 | 7,523 | 4.00 | 11,285 | 6.00 | |||||||||||||||||||
Total Risk-Based Capital Ratio | |||||||||||||||||||||||||
Home BancShares, Inc. | 105,139 | 17.39 | 48,368 | 8.00 | N/A | ||||||||||||||||||||
First State Bank | 65,604 | 16.78 | 31,277 | 8.00 | 39,097 | 10.00 | |||||||||||||||||||
Community Bank | 24,955 | 13.27 | 15,044 | 8.00 | 18,806 | 10.00 |
22. | Additional Cash Flow Information |
2005 | 2004 | 2003 | ||||||||||
(In thousands) | ||||||||||||
Interest paid | $ | 34,282 | $ | 11,584 | $ | 8,563 | ||||||
Income taxes paid | 6,000 | 3,015 | 4,990 |
23. | Recent Accounting Pronouncements |
F-40
Table of Contents
F-41
Table of Contents
24. | Subsequent Events — Unaudited |
F-42
Table of Contents
25. | Condensed Financial Information (Parent Company Only) |
December 31 | ||||||||
2005 | 2004 | |||||||
(In thousands) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 5,046 | $ | 10,659 | ||||
Investment securities | 5,000 | — | ||||||
Investments in wholly-owned subsidiaries | 198,929 | 97,113 | ||||||
Investments in unconsolidated subsidiaries | 9,813 | 20,122 | ||||||
Premises and equipment | 3,917 | 45 | ||||||
Other assets | 3,001 | 591 | ||||||
Total assets | $ | 225,706 | $ | 128,530 | ||||
LIABILITIES | ||||||||
Long-term borrowings | $ | 14,000 | $ | — | ||||
Subordinated debentures | 44,755 | 20,619 | ||||||
Other liabilities | 1,094 | 1,301 | ||||||
Total Liabilities | 59,849 | 21,920 | ||||||
Stockholders’ Equity | ||||||||
Preferred stock — A | 21 | 21 | ||||||
Preferred stock — B | 2 | — | ||||||
Common stock | 121 | 266 | ||||||
Capital surplus | 146,285 | 90,455 | ||||||
Retained earnings | 27,331 | 17,295 | ||||||
Accumulated other comprehensive loss | (7,903 | ) | (858 | ) | ||||
Treasury stock at cost | — | (569 | ) | |||||
Total stockholders’ equity | 165,857 | 106,610 | ||||||
Total liabilities and stockholders’ equity | $ | 225,706 | $ | 128,530 | ||||
F-43
Table of Contents
Years Ended December 31 | |||||||||||||
2005 | 2004 | 2003 | |||||||||||
(In thousands) | |||||||||||||
Income | |||||||||||||
Dividends from subsidiaries | $ | 10,664 | $ | 1,010 | $ | 8,944 | |||||||
Other income | 926 | 6,333 | 283 | ||||||||||
Total income | 11,590 | 7,343 | 9,227 | ||||||||||
Expense | 4,988 | 2,489 | 371 | ||||||||||
Income before income taxes and equity in undistributed net income of subsidiaries | 6,602 | 4,854 | 8,856 | ||||||||||
Provision for income taxes | (1,603 | ) | 1,553 | — | |||||||||
Income before equity in undistributed net income of subsidiaries | 8,205 | 3,301 | 8,856 | ||||||||||
Equity in undistributed net income (loss) of subsidiaries | 3,241 | 5,858 | (5,087 | ) | |||||||||
Net Income | $ | 11,446 | $ | 9,159 | $ | 3,769 | |||||||
F-44
Table of Contents
Years Ended December 31 | |||||||||||||||
2005 | 2004 | 2003 | |||||||||||||
(In thousands) | |||||||||||||||
Cash flows from operating activities | |||||||||||||||
Net income | $ | 11,446 | $ | 9,159 | $ | 3,769 | |||||||||
Items not requiring (providing) cash | |||||||||||||||
Depreciation | 138 | 4 | — | ||||||||||||
Gain on sale of equity investment | (465 | ) | (4,410 | ) | — | ||||||||||
Equity in undistributed income of subsidiaries | (3,241 | ) | (5,858 | ) | 5,087 | ||||||||||
Equity in loss (income) of unconsolidated affiliates | 592 | (1,560 | ) | (937 | ) | ||||||||||
Changes in other assets | (1,669 | ) | 15 | (340 | ) | ||||||||||
Other liabilities | (320 | ) | 639 | 198 | |||||||||||
Net cash provided by (used in) operating activities | 6,481 | (2,011 | ) | 7,777 | |||||||||||
Cash flows from investing activities | |||||||||||||||
Purchases of premises and equipment | (276 | ) | (49 | ) | — | ||||||||||
Investment in unconsolidated subsidiaries | (9,091 | ) | (180 | ) | (8,592 | ) | |||||||||
Capital contribution to subsidiaries | (4,000 | ) | — | (35,097 | ) | ||||||||||
Return of capital from subsidiaries | 27,246 | — | — | ||||||||||||
Purchase of subsidies | (48,988 | ) | — | (12,576 | ) | ||||||||||
Proceeds from sale of investment in RBI | — | 13,546 | — | ||||||||||||
Purchase of investment securities | (5,000 | ) | — | — | |||||||||||
Net cash (used in) provided by investing activities | (40,109 | ) | 13,317 | (56,265 | ) | ||||||||||
Cash flows from financing activities | |||||||||||||||
Net proceeds from stock issuance | 425 | 24 | 27,734 | ||||||||||||
Purchase of treasury stock | — | (549 | ) | (20 | ) | ||||||||||
Issuance of subordinated debentures | 15,000 | — | 20,090 | ||||||||||||
Issuance of long-term borrowings | 14,000 | — | — | ||||||||||||
Dividends paid | (1,410 | ) | (869 | ) | (93 | ) | |||||||||
Net cash provided by (used in) financing activities | 28,015 | (1,394 | ) | 47,711 | |||||||||||
(Decrease) increase decrease in cash and cash equivalents | (5,613 | ) | 9,912 | (777 | ) | ||||||||||
Cash and cash equivalents, beginning of year | 10,659 | 747 | 1,524 | ||||||||||||
Cash and cash equivalents, end of year | $ | 5,046 | $ | 10,659 | $ | 747 | |||||||||
F-45
Table of Contents
/s/ BKD, LLP |
F-46
Table of Contents
March 31, | December 31, | ||||||||
2006 | 2005 | ||||||||
(In thousands, | |||||||||
except share data) | |||||||||
(Unaudited) | |||||||||
Assets | |||||||||
Cash and due from banks | $ | 42,700 | $ | 39,248 | |||||
Interest-bearing deposits with other banks | 5,323 | 5,431 | |||||||
Cash and cash equivalents | 48,023 | 44,679 | |||||||
Federal funds sold | 19,558 | 7,055 | |||||||
Investment securities — available for sale | 525,257 | 530,302 | |||||||
Loans receivable | 1,246,146 | 1,204,589 | |||||||
Allowance for loan losses | (24,435 | ) | (24,175 | ) | |||||
Loans receivable, net | 1,221,711 | 1,180,414 | |||||||
Bank premises and equipment, net | 52,376 | 51,762 | |||||||
Foreclosed assets held for sale | 663 | 758 | |||||||
Cash value of life insurance | 6,900 | 6,850 | |||||||
Investments in unconsolidated affiliates | 12,689 | 9,813 | |||||||
Accrued interest receivable | 11,540 | 11,158 | |||||||
Deferred tax asset, net | 9,433 | 8,821 | |||||||
Goodwill | 37,527 | 37,527 | |||||||
Core deposit and intangibles | 10,775 | 11,200 | |||||||
Other assets | 14,458 | 11,152 | |||||||
Total assets | $ | 1,970,910 | $ | 1,911,491 | |||||
Liabilities and Stockholders’ Equity | |||||||||
Deposits: | |||||||||
Demand and non-interest-bearing | $ | 225,340 | $ | 209,974 | |||||
Savings and interest-bearing transaction accounts | 538,860 | 512,184 | |||||||
Time deposits | 743,243 | 704,950 | |||||||
Total deposits | 1,507,443 | 1,427,108 | |||||||
Federal funds purchased | — | 44,495 | |||||||
Securities sold under agreements to repurchase | 98,545 | 103,718 | |||||||
FHLB and other borrowed funds | 139,305 | 117,054 | |||||||
Accrued interest payable and other liabilities | 11,846 | 8,504 | |||||||
Subordinated debentures | 44,731 | 44,755 | |||||||
Total liabilities | 1,801,870 | 1,745,634 | |||||||
Stockholders’ equity: | |||||||||
Preferred stock A, par value $0.01 in 2006 and 2005; 2,500,000 shares authorized in 2006 and 2005; 2,090,812 and 2,076,195 shares issued and outstanding in 2006 and 2005, respectively | 21 | 21 | |||||||
Preferred stock B, par value $0.01 in 2006 and 2005; 3,000,000 shares authorized in 2006 and 2005; 169,760 and 169,079 shares issued and outstanding in 2006 and 2005, respectively | 2 | 2 | |||||||
Common stock, par value $0.01 in 2006 and 2005; 25,000,000 shares authorized in 2006 and 2005; shares issued and outstanding 12,129,355 in 2006 and 12,113,865 in 2005 | 121 | 121 | |||||||
Capital surplus | 146,638 | 146,285 | |||||||
Retained earnings | 30,449 | 27,331 | |||||||
Accumulated other comprehensive loss | (8,191 | ) | (7,903 | ) | |||||
Total stockholders’ equity | 169,040 | 165,857 | |||||||
Total liabilities and stockholders’ equity | $ | 1,970,910 | $ | 1,911,491 | |||||
F-47
Table of Contents
Three Months Ended | ||||||||||
March 31, | ||||||||||
2006 | 2005 | |||||||||
(In thousands, except | ||||||||||
per share data) | ||||||||||
(Unaudited) | ||||||||||
Interest income: | ||||||||||
Loans | $ | 21,842 | $ | 11,585 | ||||||
Investment securities | ||||||||||
Taxable | 4,725 | 4,241 | ||||||||
Tax-exempt | 967 | 521 | ||||||||
Deposits — other banks | 41 | 8 | ||||||||
Federal funds sold | 159 | 6 | ||||||||
Total interest income | 27,734 | 16,361 | ||||||||
Interest expense: | ||||||||||
Interest on deposits | 9,529 | 4,695 | ||||||||
Federal funds purchased | 304 | 122 | ||||||||
FHLB and other borrowed funds | 1,476 | 681 | ||||||||
Securities sold under agreements to repurchase | 870 | 458 | ||||||||
Subordinated debentures | 749 | 399 | ||||||||
Total interest expense | 12,928 | 6,355 | ||||||||
Net interest income | 14,806 | 10,006 | ||||||||
Provision for loan losses | 484 | 1,051 | ||||||||
Net interest income after provision for loan losses | 14,322 | 8,955 | ||||||||
Non-interest income: | ||||||||||
Service charges on deposit accounts | 2,052 | 1,692 | ||||||||
Other services charges and fees | 611 | 438 | ||||||||
Trust fees | 152 | 118 | ||||||||
Data processing fees | 193 | 106 | ||||||||
Mortgage banking income | 411 | 292 | ||||||||
Insurance commissions | 284 | 241 | ||||||||
Income from title services | 237 | 144 | ||||||||
Increase in cash value of life insurance | 51 | 64 | ||||||||
Equity in loss of unconsolidated affiliates | (116 | ) | — | |||||||
Gain on sale of SBA loans | 34 | 230 | ||||||||
Loss on securities, net | — | (43 | ) | |||||||
Other income | 492 | 531 | ||||||||
Total non-interest income | 4,401 | 3,813 | ||||||||
Non-interest expense: | ||||||||||
Salaries and employee benefits | 7,348 | 5,260 | ||||||||
Occupancy and equipment | 2,005 | 1,492 | ||||||||
Data processing expense | 567 | 433 | ||||||||
Other operating expenses | 3,699 | 2,451 | ||||||||
Total non-interest expense | 13,619 | 9,636 | ||||||||
Income before income taxes | 5,104 | 3,132 | ||||||||
Income tax expense | 1,588 | 943 | ||||||||
Net income available to all shareholders | 3,516 | 2,189 | ||||||||
Less: Preferred stock dividends | (155 | ) | (130 | ) | ||||||
Income available to common shareholders | $ | 3,361 | $ | 2,059 | ||||||
Basic earnings per share | $ | 0.28 | $ | 0.18 | ||||||
Diluted earnings per share | $ | 0.24 | $ | 0.16 | ||||||
F-48
Table of Contents
�� | |||||||||||||||||||||||||||||||||||
Accumulated | |||||||||||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Retained | Comprehensive | Treasury | ||||||||||||||||||||||||||||||
Stock A | Stock B | Stock | Capital Surplus | Earnings | Income (Loss) | Stock | Total | ||||||||||||||||||||||||||||
(In thousands, except share data(1)) | |||||||||||||||||||||||||||||||||||
Balances at December 31, 2004 | $ | 21 | $ | — | $ | 266 | $ | 90,455 | $ | 17,295 | $ | (858 | ) | $ | (569 | ) | $ | 106,610 | |||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 2,189 | — | — | 2,189 | |||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Unrealized loss on investment securities available for sale, net of tax effect of $3,835 | — | — | — | — | — | (5,411 | ) | — | (5,411 | ) | |||||||||||||||||||||||||
Reclassification adjustment for gains included in income, net of $31 tax effect | — | — | — | — | — | 44 | — | 44 | |||||||||||||||||||||||||||
Comprehensive income | (3,178 | ) | |||||||||||||||||||||||||||||||||
Issuance of 3,750,813 common shares pursuant to acquisition of TC Bancorp | — | — | 125 | 45,193 | — | — | — | 45,318 | |||||||||||||||||||||||||||
Net issuance of 6,810 shares of common stock from exercise of stock options | — | — | 1 | 56 | — | — | — | 57 | |||||||||||||||||||||||||||
Cash dividends — Preferred Stock A, $0.06 per share | — | — | — | — | (130 | ) | — | — | (130 | ) | |||||||||||||||||||||||||
Cash dividends — Common Stock, $0.01 per share | — | — | — | — | (122 | ) | — | — | (122 | ) | |||||||||||||||||||||||||
Balances at March 31, 2005 | 21 | — | 392 | 135,704 | 19,232 | (6,225 | ) | (569 | ) | 148,555 | |||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 9,257 | — | — | 9,257 | |||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Unrealized loss on investment securities available for sale, net of tax effect of $1,528 | — | — | — | — | — | (2,155 | ) | — | (2,155 | ) | |||||||||||||||||||||||||
Reclassification adjustment for gains included in income, net of $351 tax effect | — | — | — | — | — | 495 | — | 495 | |||||||||||||||||||||||||||
Unconsolidated affiliates unrecognized loss on investment securities available for sale, net of taxes recorded by the unconsolidated affiliate | — | — | — | — | — | (18 | ) | — | (18 | ) | |||||||||||||||||||||||||
Comprehensive income | 7,579 | ||||||||||||||||||||||||||||||||||
Three for one stock split | — | — | 78 | (78 | ) | — | — | — | — | ||||||||||||||||||||||||||
Reclassification for change in par value from $0.10 to $0.01 per share | — | — | (352 | ) | 352 | — | — | — | — | ||||||||||||||||||||||||||
Net issuance of 33,231 shares of common stock from exercise of stock options | — | — | — | 400 | — | — | — | 400 | |||||||||||||||||||||||||||
Fractional shares associated with acquisition of TC Bancorp | — | — | — | (7 | ) | — | — | — | (7 | ) | |||||||||||||||||||||||||
Issuance of 335,526 common shares pursuant to acquisition of Mountain View Bancshares, Inc. | — | — | 3 | 4,247 | — | — | — | 4,250 | |||||||||||||||||||||||||||
Issuance of 162,039 Preferred B shares pursuant to acquisition of Marine Bancorp, Inc. | — | 2 | — | 6,267 | — | — | — | 6,269 | |||||||||||||||||||||||||||
Issuance of 15,366 shares of preferred stock A from exercise of stock options | — | — | — | 2 | — | — | — | 2 | |||||||||||||||||||||||||||
Issuance of 7,040 shares of preferred stock B from exercise of stock options | — | — | — | 130 | — | — | — | 130 | |||||||||||||||||||||||||||
Purchase of 16,289 shares of preferred stock A | — | — | — | (163 | ) | — | — | — | (163 | ) | |||||||||||||||||||||||||
Retirement of treasury stock | — | — | — | (569 | ) | — | — | 569 | — | ||||||||||||||||||||||||||
Cash dividends — Preferred Stock A, $0.19 per share | — | — | — | — | (390 | ) | — | — | (390 | ) | |||||||||||||||||||||||||
Cash dividends — Preferred Stock B, $0.33 per share | — | — | — | — | (54 | ) | — | — | (54 | ) | |||||||||||||||||||||||||
Cash dividends — Common Stock, $0.06 per share | — | — | — | — | (714 | ) | — | — | (714 | ) | |||||||||||||||||||||||||
Balances at December 31, 2005 | 21 | 2 | 121 | 146,285 | 27,331 | (7,903 | ) | — | 165,857 |
F-49
Table of Contents
Accumulated | |||||||||||||||||||||||||||||||||||
Other | |||||||||||||||||||||||||||||||||||
Preferred | Preferred | Common | Retained | Comprehensive | Treasury | ||||||||||||||||||||||||||||||
Stock A | Stock B | Stock | Capital Surplus | Earnings | Income (Loss) | Stock | Total | ||||||||||||||||||||||||||||
(In thousands, except share data(1)) | |||||||||||||||||||||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 3,516 | — | — | 3,516 | |||||||||||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||
Unrealized loss on investment securities available for sale, net of tax effect of $179 | — | — | — | — | — | (282 | ) | — | (282 | ) | |||||||||||||||||||||||||
Unconsolidated affiliates unrecognized loss on investment securities available for sale, net of taxes recorded by the unconsolidated affiliate | — | — | — | — | — | (6 | ) | — | (6 | ) | |||||||||||||||||||||||||
Comprehensive income | 3,228 | ||||||||||||||||||||||||||||||||||
Net issuance of 16,174 shares of common stock from exercise of stock options | — | — | — | 143 | — | — | — | 143 | |||||||||||||||||||||||||||
Issuance of 14,617 shares of preferred stock A from exercise of stock options | — | — | — | 2 | — | — | — | 2 | |||||||||||||||||||||||||||
Issuance of 948 shares of preferred stock B from exercise of stock options | — | — | — | 8 | — | — | — | 8 | |||||||||||||||||||||||||||
Tax benefit from stock options exercised | — | — | — | 84 | — | — | — | 84 | |||||||||||||||||||||||||||
Share-based compensation | — | — | — | 116 | — | — | — | 116 | |||||||||||||||||||||||||||
Cash dividends — Preferred Stock A, $0.06 per share | — | — | — | — | (131 | ) | — | — | (131 | ) | |||||||||||||||||||||||||
Cash dividends — Preferred Stock B, $0.14 per share | — | — | — | — | (24 | ) | — | — | (24 | ) | |||||||||||||||||||||||||
Cash dividends — Common Stock, $0.02 per share | — | — | — | — | (243 | ) | — | — | (243 | ) | |||||||||||||||||||||||||
Balances at March 31, 2006 | $ | 21 | $ | 2 | $ | 121 | $ | 146,638 | $ | 30,449 | $ | (8,191 | ) | $ | — | $ | 169,040 | ||||||||||||||||||
(1) | All share and per share amounts have been restated to reflect the effect of the 2005 three for one stock split. |
F-50
Table of Contents
Period Ended March 31, | ||||||||||
2006 | 2005 | |||||||||
(In thousands) | ||||||||||
(Unaudited) | ||||||||||
Operating Activities | ||||||||||
Net income | $ | 3,516 | $ | 2,189 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||
Depreciation | 1,090 | 647 | ||||||||
Amortization/ Accretion | 665 | 488 | ||||||||
Share-based compensation | 116 | — | ||||||||
Tax benefits from stock options exercised | (84 | ) | — | |||||||
Gain on sale of assets | (89 | ) | (558 | ) | ||||||
Provision for loan losses | 484 | 1,051 | ||||||||
Deferred income tax expense (benefit) | (420 | ) | 159 | |||||||
Equity in loss of unconsolidated affiliates | 116 | — | ||||||||
Increase in cash value of life insurance | (50 | ) | (64 | ) | ||||||
Originations of mortgage loans held for sale | (22,115 | ) | (13,875 | ) | ||||||
Proceeds from sales of mortgage loans held for sale | 23,384 | 14,480 | ||||||||
Changes in assets and liabilities: | ||||||||||
Accrued interest receivable | (382 | ) | �� | (466 | ) | |||||
Other assets | (3,306 | ) | 4,211 | |||||||
Accrued interest payable and other liabilities | 3,426 | (2,881 | ) | |||||||
Net cash provided by operating activities | 6,351 | 5,381 | ||||||||
Investing Activities | ||||||||||
Net increase (decrease) in federal funds sold | (12,503 | ) | 5,880 | |||||||
Net increase in loans | (44,207 | ) | (31,383 | ) | ||||||
Purchases of investment securities available for sale | (38,823 | ) | (18,958 | ) | ||||||
Proceeds from maturities of investment securities available for sale | 43,132 | 19,750 | ||||||||
Proceeds from sales of investment securities available for sale | — | 16,015 | ||||||||
Proceeds from sale of loans | 540 | 2,612 | ||||||||
Proceeds from foreclosed assets held for sale | 801 | 191 | ||||||||
Purchases of premises and equipment, net | (1,704 | ) | (1,307 | ) | ||||||
Acquisition of financial institution, net funds disbursed | — | 8,757 | ||||||||
Investments in unconsolidated affiliates | (3,000 | ) | (9,091 | ) | ||||||
Net cash used in investing activities | (55,764 | ) | (7,534 | ) | ||||||
Financing Activities | ||||||||||
Net increase (decrease) in deposits | 80,335 | (2,950 | ) | |||||||
Net increase (decrease) in securities sold under agreements to repurchase | (5,173 | ) | 20,770 | |||||||
Net increase (decrease) in federal funds purchased | (44,495 | ) | — | |||||||
Net increase (decrease) in FHLB and other borrowed funds | 22,251 | 1,127 | ||||||||
Proceeds from exercise of stock options | 153 | 57 | ||||||||
Tax benefits from stock options exercised | 84 | — | ||||||||
Dividends paid | (398 | ) | (252 | ) | ||||||
Net cash provided by financing activities | 52,757 | 18,752 | ||||||||
Net change in cash and due from banks | 3,344 | 16,599 | ||||||||
Cash and cash equivalents — beginning of year | 44,679 | 19,813 | ||||||||
Cash and cash equivalents — end of year | $ | 48,023 | $ | 36,412 | ||||||
F-51
Table of Contents
1. | Nature of Operations and Summary of Significant Accounting Policies |
Nature of Operations |
Operating Segments |
Use of Estimates |
Principles of Consolidation |
Investments in Unconsolidated Affiliates |
F-52
Table of Contents
March 31, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Assets | 261,779 | 44,332 | ||||||
Liabilities | 203,825 | 43,000 | ||||||
Equity | 57,954 | 1,332 | ||||||
Net income (loss) | (512 | ) | — |
Interim financial information |
Earnings per Share |
2006 | 2005 | |||||||
(In thousands) | ||||||||
Net income available to all shareholders | $ | 3,516 | $ | 2,189 | ||||
Less: Preferred stock dividends | (155 | ) | (130 | ) | ||||
Income available to common shareholders | $ | 3,361 | $ | 2,059 | ||||
Average shares outstanding | 12,123 | $ | 11,745 | |||||
Effect of common stock options | 79 | 135 | ||||||
Effect of preferred stock options | 28 | 27 | ||||||
Effect of preferred stock conversions | 2,162 | 1,641 | ||||||
Diluted shares outstanding | 14,392 | $ | 13,548 | |||||
Basic earnings per share | $ | 0.28 | $ | 0.18 | ||||
Diluted earnings per share | $ | 0.24 | $ | 0.16 |
2. | Acquisitions |
F-53
Table of Contents
F-54
Table of Contents
3. | Investment Securities |
March 31, 2006 | ||||||||||||||||
Available for Sale | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | (Losses) | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 165,262 | $ | 12 | $ | (4,960 | ) | $ | 160,314 | |||||||
Mortgage-backed securities | 254,014 | 8 | (8,579 | ) | 245,443 | |||||||||||
State and political subdivisions | 104,526 | 1,219 | (759 | ) | 104,986 | |||||||||||
Other securities | 14,979 | — | (465 | ) | 14,514 | |||||||||||
Total | $ | 538,781 | $ | 1,239 | $ | (14,763 | ) | $ | 525,257 | |||||||
December 31, 2005 | ||||||||||||||||
Available for Sale | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | (Losses) | Fair Value | |||||||||||||
(In thousands) | ||||||||||||||||
U.S. government-sponsored enterprises | $ | 162,165 | $ | 27 | $ | (4,723 | ) | $ | 157,469 | |||||||
Mortgage-backed securities | 264,666 | 16 | (8,209 | ) | 256,473 | |||||||||||
State and political subdivisions | 102,928 | 1,279 | (746 | ) | 103,461 | |||||||||||
Other securities | 13,571 | — | (672 | ) | 12,899 | |||||||||||
Total | $ | 543,330 | $ | 1,322 | $ | (14,350 | ) | $ | 530,302 | |||||||
F-55
Table of Contents
4. | Loans Receivable and Allowance for Loan Losses |
March 31, | December 31, | |||||||||
2006 | 2005 | |||||||||
(In thousands) | ||||||||||
Real estate: | ||||||||||
Commercial real estate loans | ||||||||||
Non-farm/non-residential | $ | 422,618 | $ | 411,839 | ||||||
Construction/land development | 331,532 | 291,515 | ||||||||
Agricultural | 13,197 | 13,112 | ||||||||
Residential real estate loans | ||||||||||
Residential 1-4 family | 220,273 | 221,831 | ||||||||
Multifamily residential | 36,425 | 34,939 | ||||||||
Total real estate | 1,024,045 | 973,236 | ||||||||
Consumer | 39,599 | 39,447 | ||||||||
Commercial and industrial | 166,025 | 175,396 | ||||||||
Agricultural | 8,287 | 8,466 | ||||||||
Other | 8,190 | 8,044 | ||||||||
Total loans receivable before allowance for loan losses | 1,246,146 | 1,204,589 | ||||||||
Allowance for loan losses | 24,435 | 24,175 | ||||||||
Total loans receivable, net | $ | 1,221,711 | $ | 1,180,414 | ||||||
2006 | 2005 | ||||||||
(Dollars in thousands) | |||||||||
Balance, beginning of year | $ | 24,175 | $ | 16,345 | |||||
Additions | |||||||||
Provision charged to expense | 484 | 1,051 | |||||||
Twin City Bank allowance for loan losses | — | 4,742 | |||||||
Deductions | |||||||||
Losses charged to allowance, net of recoveries of $262 and $105 for the first three months of 2006 and 2005, respectively | 224 | 156 | |||||||
Balance, March 31 | $ | 24,435 | 21,982 | ||||||
Additions | |||||||||
Provision charged to expense | 2,776 | ||||||||
Marine Bank and Bank of Mountain View allowance for loan losses | 3,022 | ||||||||
Deductions | |||||||||
Losses charged to allowance, net of recoveries of $745 for the last nine months of 2005 | 3,605 | ||||||||
Balance, end of year | $ | 24,175 | |||||||
F-56
Table of Contents
March 31, | December 31, | ||||||||
2006 | 2005 | ||||||||
(In thousands) | |||||||||
Gross carrying amount | $ | 13,457 | $ | 13,457 | |||||
Accumulated amortization | 2,682 | 2,257 | |||||||
Net carrying amount | $ | 10,775 | $ | 11,200 | |||||
6. | Deposits |
F-57
Table of Contents
March 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Line of Credit, due 2009, at a floating rate of 0.75% below Prime, secured by bank stock | $ | — | $ | 14,000 | ||||
FHLB advances, due 2006 to 2020, 1.98% to 5.96% secured by residential real estate loans | 123,248 | 99,118 | ||||||
Total long-term borrowings | $ | 123,248 | $ | 113,118 | ||||
8. | Subordinated Debentures |
March 31, | December 31, | |||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Subordinated debentures, due 2033, fixed at 6.40%, during the first five years and at a floating rate of 3.15% above the three-month LIBOR rate, reset quarterly, thereafter, callable in 2008 without penalty | $ | 20,619 | $ | 20,619 | ||||
Subordinated debentures, due 2030, fixed at 10.60%, callable in 2010 with a penalty ranging from 5.30% to 0.53% depending on the year of prepayment, callable in 2020 without penalty | 3,493 | 3,516 | ||||||
Subordinated debentures, due 2033, floating rate of 3.15% above the three-month LIBOR rate, reset quarterly, callable in 2008 without penalty | 5,155 | 5,155 | ||||||
Subordinated debentures, due 2035, fixed rate of 6.81% during the first ten years and at a floating rate of 1.38% above the three-month LIBOR rate, reset quarterly, thereafter, callable in 2010 without penalty | 15,464 | 15,465 | ||||||
Total subordinated debt | $ | 44,731 | $ | 44,755 | ||||
F-58
Table of Contents
9. | Income Taxes |
2006 | 2005 | ||||||||
(In thousands) | |||||||||
Current: | |||||||||
Federal | $ | 1,675 | $ | 654 | |||||
State | 333 | 130 | |||||||
Total current | 2,008 | 784 | |||||||
Deferred: | |||||||||
Federal | (350 | ) | 133 | ||||||
State | (70 | ) | 26 | ||||||
Total deferred | (420 | ) | 159 | ||||||
Provision for income taxes | $ | 1,588 | $ | 943 | |||||
2006 | 2005 | |||||||
Statutory federal income tax rate | 35.00 | % | 35.00 | % | ||||
Effect of nontaxable interest income | (6.19 | ) | (5.81 | ) | ||||
Cash surrender value of life insurance | (0.35 | ) | (0.70 | ) | ||||
State taxes | 1.98 | 2.23 | ||||||
Other | 0.69 | (0.61 | ) | |||||
Effective income tax rate | 31.13 | % | 30.11 | % | ||||
F-59
Table of Contents
March 31, | December 31, | ||||||||
2006 | 2005 | ||||||||
(In thousands) | |||||||||
Deferred tax assets: | |||||||||
Allowance for loan losses | $ | 9,421 | $ | 9,229 | |||||
Deferred compensation | 246 | 249 | |||||||
Defined benefit pension plan | 109 | 109 | |||||||
Stock options | 77 | — | |||||||
Non-accrual interest income | 466 | 466 | |||||||
Investment in unconsolidated subsidiary | 382 | 336 | |||||||
Unrealized loss on securities | 5,297 | 5,105 | |||||||
Other | 280 | 349 | |||||||
Gross deferred tax assets | 16,278 | 15,843 | |||||||
Deferred tax liabilities: | |||||||||
Accelerated depreciation on premises and equipment | 2,175 | 2,237 | |||||||
Core deposit intangibles | 4,048 | 4,211 | |||||||
Market value of cash flow hedge | 38 | 25 | |||||||
FHLB dividends | 420 | 393 | |||||||
Other | 164 | 156 | |||||||
Gross deferred tax liabilities | 6,845 | 7,022 | |||||||
Net deferred tax assets | $ | 9,433 | $ | 8,821 | |||||
10. | Common Stock and Stock Compensation Plans |
F-60
Table of Contents
2005 | ||||
(In thousands | ||||
except per share | ||||
data) | ||||
Basic pro forma | ||||
Net income available to common shareholders — as reported | $ | 2,059 | ||
Less: Total stock-based employee compensation cost determined under the fair value based method, net of tax | 18 | |||
Net income available to common shareholders — pro forma | $ | 2,041 | ||
Basic earnings per share — as reported | $ | 0.18 | ||
Basic earnings per share — pro forma | 0.17 | |||
Diluted pro forma | ||||
Net income — as reported | $ | 2,189 | ||
Less: Total stock-based employee compensation cost determined under the fair value based method, net of tax | 18 | |||
Net income — pro forma | $ | 2,171 | ||
Diluted earnings per share — as reported | $ | 0.16 | ||
Diluted earnings per share — pro forma | 0.16 |
F-61
Table of Contents
For Three Months Ended | For the Year Ended | |||||||||||||||
March 31, 2006 | December 31, 2005 | |||||||||||||||
Weighted- | Weighted- | |||||||||||||||
Average | Average | |||||||||||||||
Shares | Exercisable | Shares | Exercisable | |||||||||||||
(000) | Price | (000) | Price | |||||||||||||
Outstanding, beginning of year | 630 | $ | 9.50 | 453 | $ | 9.46 | ||||||||||
Granted | 354 | 13.18 | 75 | 12.67 | ||||||||||||
Options of acquired institution | — | — | 168 | 10.80 | ||||||||||||
Forfeited | — | — | (23 | ) | 8.78 | |||||||||||
Exercised | (16 | ) | 9.40 | (43 | ) | 11.48 | ||||||||||
Outstanding, end of period | 968 | 11.22 | 630 | 10.07 | ||||||||||||
Exercisable, end of period | 481 | $ | 9.50 | 497 | $ | 9.50 | ||||||||||
For Three Months Ended | For the Year Ended | |||||||
March 31, 2006 | December 31, 2005 | |||||||
Expected dividend yield | 0.61 | % | 0.63 | % | ||||
Expected stock price volatility | 10.54 | % | 10.00 | % | ||||
Risk-free interest rate | 4.77 | % | 4.39 | % | ||||
Expected life of options | 9 years | 13 years |
Options Outstanding | Options Exercisable | |||||||||||||||||||
Weighted- | ||||||||||||||||||||
Options | Average | Weighted- | Options | Weighted- | ||||||||||||||||
Outstanding | Remaining | Average | Exercisable | Average | ||||||||||||||||
Shares | Contractual Life | Exercise | Shares | Exercise | ||||||||||||||||
Exercise Prices | (000) | (in years) | Price | (000) | Price | |||||||||||||||
$ 7.33 to $ 8.33 | 223 | 6.2 | $ | 7.45 | 221 | $ | 7.45 | |||||||||||||
$ 9.33 to $10.31 | 126 | 7.8 | 10.14 | 111 | 10.18 | |||||||||||||||
$11.34 to $11.67 | 80 | 7.8 | 11.40 | 71 | 11.36 | |||||||||||||||
$12.67 to $12.67 | 184 | 10.7 | 12.67 | 78 | 12.67 | |||||||||||||||
$13.18 to $13.18 | 355 | 8.8 | 13.18 | — | — | |||||||||||||||
968 | 481 | |||||||||||||||||||
F-62
Table of Contents
11. | Non-Interest Expense |
2006 | 2005 | ||||||||
(In thousands) | |||||||||
Salaries and employee benefits | $ | 7,348 | $ | 5,260 | |||||
Occupancy and equipment | 2,005 | 1,492 | |||||||
Data processing expense | 567 | 433 | |||||||
Other operating expenses: | |||||||||
Advertising | 558 | 466 | |||||||
Amortization of intangibles | 425 | 309 | |||||||
ATM expense | 118 | 100 | |||||||
Directors’ fees | 204 | 86 | |||||||
Due from bank service charges | 70 | 74 | |||||||
FDIC and state assessment | 125 | 122 | |||||||
Insurance | 223 | 136 | |||||||
Legal and accounting | 282 | 176 | |||||||
Other professional fees | 134 | 106 | |||||||
Operating supplies | 229 | 150 | |||||||
Postage | 163 | 121 | |||||||
Telephone | 220 | 123 | |||||||
Other expense | 948 | 482 | |||||||
Total other operating expenses | 3,699 | 2,451 | |||||||
Total non-interest expense | $ | 13,619 | $ | 9,636 | |||||
12. | Concentration of Credit Risks |
13. | Significant Estimates and Concentrations |
F-63
Table of Contents
14. | Commitments and Contingencies |
15. | Regulatory Matters |
F-64
Table of Contents
16. | Additional Cash Flow Information |
Three Months Ended | ||||||||
March 31, | ||||||||
2006 | 2005 | |||||||
(In thousands) | ||||||||
Interest paid | $ | 12,903 | $ | 6,098 | ||||
Income taxes paid | — | 1,350 |
17. | Recent Accounting Pronouncements |
F-65
Table of Contents
F-66
Table of Contents
F-67 | ||||
Audited Consolidated Financial Statements | ||||
F-68 | ||||
F-69 | ||||
F-70 | ||||
F-71 | ||||
F-72 |
/s/ ERNST & YOUNG LLP |
F-67
Table of Contents
December 31 | |||||||||
2004 | 2003 | ||||||||
Assets | |||||||||
Cash and due from banks | $ | 9,038,802 | $ | 9,221,345 | |||||
Federal funds sold | 3,660,000 | — | |||||||
Investment securities — available for sale | 327,189,427 | 194,278,868 | |||||||
Loans receivable | 261,926,661 | 204,884,112 | |||||||
Allowance for loan losses | (4,740,649 | ) | (3,483,498 | ) | |||||
Loans receivable, net | 257,186,012 | 201,400,614 | |||||||
Bank premises and equipment, net | 14,590,106 | 11,099,596 | |||||||
Investments in unconsolidated affiliates | 9,243,360 | 8,659,251 | |||||||
Accrued interest receivable | 2,658,800 | 1,605,161 | |||||||
Goodwill | 1,132,109 | 98,389 | |||||||
Core deposit intangible, net | 288,503 | — | |||||||
Other real estate owned | — | 1,712,700 | |||||||
Income tax receivable | 138,536 | 534,571 | |||||||
Other assets | 5,223,518 | 1,996,500 | |||||||
Total assets | $ | 630,349,173 | $ | 430,606,995 | |||||
Liabilities and Stockholders’ Equity | |||||||||
Deposits: | |||||||||
Demand, non-interest-bearing | $ | 56,183,562 | $ | 39,438,879 | |||||
Savings and interest-bearing transaction accounts | 165,244,655 | 107,226,763 | |||||||
Time certificates of deposit | 278,715,558 | 177,820,899 | |||||||
Total deposits | 500,143,775 | 324,486,541 | |||||||
Federal funds purchased | — | 9,630,000 | |||||||
Securities sold under agreements to repurchase | 45,754,078 | 35,551,396 | |||||||
Federal Home Loan Bank borrowings | 20,883,900 | — | |||||||
Accrued interest and other liabilities | 1,928,152 | 696,475 | |||||||
Total liabilities | 568,709,905 | 370,364,412 | |||||||
Stockholders’ equity: | |||||||||
Common stock, par value $0.01; 3,000,000 shares authorized; 2,286,515 and 2,283,075 shares issued and outstanding in 2004 and 2003, respectively | 22,865 | 22,831 | |||||||
Capital surplus | 61,217,100 | 61,122,534 | |||||||
Retained earnings | 2,688,362 | 157,331 | |||||||
Accumulated other comprehensive loss | (2,289,059 | ) | (1,060,113 | ) | |||||
Total stockholders’ equity | 61,639,268 | 60,242,583 | |||||||
Total liabilities and stockholders’ equity | $ | 630,349,173 | $ | 430,606,995 | |||||
F-68
Table of Contents
Year ended December 31 | ||||||||||
2004 | 2003 | |||||||||
Interest income: | ||||||||||
Loans | $ | 12,297,715 | $ | 8,830,893 | ||||||
Investment securities: | ||||||||||
Taxable | 7,948,791 | 4,365,984 | ||||||||
Tax-exempt | 522,771 | 129,280 | ||||||||
Federal funds sold | 68,020 | 54,793 | ||||||||
Total interest income | 20,837,297 | 13,380,950 | ||||||||
Interest expense: | ||||||||||
Interest on deposits | 6,804,296 | 4,089,339 | ||||||||
Federal funds purchased | 60,556 | 22,040 | ||||||||
Federal Home Loan Bank borrowings | 390,081 | — | ||||||||
Securities sold under agreements to repurchase | 150,778 | 449,495 | ||||||||
Total interest expense | 7,405,711 | 4,560,874 | ||||||||
Net interest income | 13,431,586 | 8,820,076 | ||||||||
Provision for loan losses | 1,260,000 | 1,667,000 | ||||||||
Net interest income after provision for loan losses | 12,171,586 | 7,153,076 | ||||||||
Non-interest income: | ||||||||||
Service charges on deposit accounts | 1,756,345 | 917,933 | ||||||||
Other income, charges, and fees | 733,415 | 744,306 | ||||||||
Equity in income (loss) of unconsolidated affiliates | 396,471 | (97,589 | ) | |||||||
Gain on sale of securities | 115,534 | 257,842 | ||||||||
Total non-interest income | 3,001,765 | 1,822,492 | ||||||||
Non-interest expense: | ||||||||||
Salaries and employee benefits | 5,233,085 | 3,831,782 | ||||||||
Occupancy and equipment | 2,399,576 | 1,488,441 | ||||||||
Other operating expenses | 3,886,137 | 3,075,920 | ||||||||
Total non-interest expense | 11,518,798 | 8,396,143 | ||||||||
Income before income taxes | 3,654,553 | 579,425 | ||||||||
Income tax expense | 1,123,522 | 138,404 | ||||||||
Net income | $ | 2,531,031 | $ | 441,021 | ||||||
F-69
Table of Contents
Accumulated | |||||||||||||||||||||||
Other | |||||||||||||||||||||||
Retained | Comprehensive | ||||||||||||||||||||||
Common | Capital | (Deficit) | Income | ||||||||||||||||||||
Stock | Surplus | Earnings | (Loss) | Total | |||||||||||||||||||
Balances at January 1, 2003 | $ | 14,069 | $ | 37,073,816 | $ | (283,690 | ) | $ | 203,295 | $ | 37,007,490 | ||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||
Net income | — | — | 441,021 | — | 441,021 | ||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Unrealized losses on investment securities available for sale, net of $738,513 tax effect | — | — | — | (1,433,584 | ) | (1,433,584 | ) | ||||||||||||||||
Reclassification adjustment for gains included in income, net of $87,666 tax effect | — | — | — | 170,176 | 170,176 | ||||||||||||||||||
Comprehensive loss, net | (822,387 | ) | |||||||||||||||||||||
Issuance of stock awards — 3,440 shares | 35 | 94,565 | — | — | 94,600 | ||||||||||||||||||
Sale of stock offerings, net of offering costs of $37,140 — 872,728 shares | 8,727 | 23,954,153 | — | — | 23,962,880 | ||||||||||||||||||
Balances at December 31, 2003 | 22,831 | 61,122,534 | 157,331 | (1,060,113 | ) | 60,242,583 | |||||||||||||||||
Comprehensive income (loss): | |||||||||||||||||||||||
Net income | — | — | 2,531,031 | — | 2,531,031 | ||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Unrealized losses on investment securities available for sale, net of $923,354 tax effect | — | — | — | (1,300,242 | ) | (1,300,242 | ) | ||||||||||||||||
Reclassification adjustment for gains included in income, net of $44,238 tax effect | — | — | — | 71,296 | 71,296 | ||||||||||||||||||
Comprehensive gain, net | 1,302,085 | ||||||||||||||||||||||
Issuance of stock awards — 3,440 shares | 34 | 94,566 | — | — | 94,600 | ||||||||||||||||||
Balances at December 31, 2004 | $ | 22,865 | $ | 61,217,100 | $ | 2,688,362 | $ | (2,289,059 | ) | $ | 61,639,268 | ||||||||||||
F-70
Table of Contents
Year ended December 31 | ||||||||||
2004 | 2003 | |||||||||
Operating Activities | ||||||||||
Net income | $ | 2,531,031 | $ | 441,021 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Depreciation | 865,901 | 470,441 | ||||||||
Amortization | 687,127 | 30,672 | ||||||||
Loss on sale of assets | 1,584 | — | ||||||||
Gain on sale of securities available for sale | (115,534 | ) | (257,842 | ) | ||||||
Stock bonus compensation | 94,600 | 94,600 | ||||||||
Provision for loan losses | 1,260,000 | 1,667,000 | ||||||||
Deferred income taxes | (197,514 | ) | (38,901 | ) | ||||||
Equity in (income) loss of unconsolidated affiliates | (396,471 | ) | 97,589 | |||||||
Originations of mortgage loans held for sale | (14,238,978 | ) | (34,668,915 | ) | ||||||
Proceeds from sale of mortgage loans held for sale | 14,526,628 | 34,583,265 | ||||||||
Changes in operating assets and liabilities: | ||||||||||
Accrued interest receivable | (1,026,639 | ) | (603,971 | ) | ||||||
Other assets | 222,991 | (145,981 | ) | |||||||
Accrued interest and other liabilities | 1,570,712 | (558,747 | ) | |||||||
Net cash provided by operating activities | 5,785,438 | 1,110,231 | ||||||||
Investing Activities | ||||||||||
Purchases of investment securities | (262,677,805 | ) | (251,189,651 | ) | ||||||
Purchase of FHLB stock | (2,373,100 | ) | — | |||||||
Proceeds from maturities of investment securities | 69,246,288 | 109,795,286 | ||||||||
Proceeds from sales of investment securities | 57,909,309 | 40,958,645 | ||||||||
Net increase in loans | (51,422,048 | ) | (74,978,741 | ) | ||||||
Net (increase) decrease in federal funds sold | (3,660,000 | ) | 4,000,000 | |||||||
Purchases of bank premises and equipment, net | (3,762,582 | ) | (6,802,533 | ) | ||||||
Proceeds on sale of other real estate owned | 1,718,351 | — | ||||||||
Cash acquired in branch acquisition | 9,332,790 | — | ||||||||
Investments in unconsolidated affiliates | (180,000 | ) | (8,718,500 | ) | ||||||
Net cash used in investing activities | (185,868,797 | ) | (186,935,494 | ) | ||||||
Financing Activities | ||||||||||
Net proceeds from common stock issuance | — | 23,962,880 | ||||||||
Net increase in deposits | 158,574,234 | 139,899,045 | ||||||||
Net increase in securities sold under agreements to repurchase | 10,072,682 | 14,181,793 | ||||||||
Net increase in FHLB borrowings | 20,883,900 | — | ||||||||
Increase (decrease) in federal funds purchased | (9,630,000 | ) | 9,630,000 | |||||||
Net cash provided by financing activities | 179,900,816 | 187,673,718 | ||||||||
Net change in cash and due from banks | (182,543 | ) | 1,848,455 | |||||||
Cash and due from banks at beginning of year | 9,221,345 | 7,372,890 | ||||||||
Cash and due from banks at end of year | $ | 9,038,802 | $ | 9,221,345 | ||||||
Cash paid for: | ||||||||||
Interest | $ | 6,825,407 | $ | 4,598,276 | ||||||
Income taxes | 925,000 | 1,355,000 |
F-71
Table of Contents
1. | Summary of Significant Accounting Policies |
Nature of Operations |
Principles of Consolidation |
Use of Estimates |
Investment Securities |
F-72
Table of Contents
Foreclosed Assets Held for Sale |
Bank Premises and Equipment |
Bank premises | 15-40 years | |||
Furniture, fixtures, and equipment | 3-15 years |
F-73
Table of Contents
Intangible Assets |
Investments in Unconsolidated Affiliates |
2004 | 2003 | |||||||
Assets | $ | 325,941,080 | $ | 371,857,655 | ||||
Liabilities | 279,745,658 | 328,521,425 | ||||||
Equity | 46,195,422 | 43,336,230 | ||||||
Net income | 2,540,134 | 57,979 |
Securities Sold Under Agreements to Repurchase |
F-74
Table of Contents
Income Taxes |
Advertising and Public Relations |
Employee Benefit Plan |
Regulatory Requirements |
Statement of Cash Flows |
Fair Values of Financial Instruments |
F-75
Table of Contents
Recent Accounting Pronouncements |
F-76
Table of Contents
2. | Investment Securities |
December 31, 2004 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Obligations of U.S. Government-sponsored enterprises | $ | 117,770,213 | $ | 811 | $ | (1,174,033 | ) | $ | 116,596,991 | |||||||
Obligations of states and political subdivisions | 22,076,141 | 72,932 | (123,459 | ) | 22,025,614 | |||||||||||
Mortgage-backed securities | 188,654,661 | 90,237 | (2,577,410 | ) | 186,167,488 | |||||||||||
Other securities | 2,410,623 | — | (11,289 | ) | 2,399,334 | |||||||||||
Total | $ | 330,911,638 | $ | 163,980 | $ | (3,886,191 | ) | $ | 327,189,427 | |||||||
December 31, 2003 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Obligations of U.S. Government-sponsored enterprises | $ | 79,538,193 | $ | 112,001 | $ | (872,536 | ) | $ | 78,777,658 | |||||||
Obligations of states and political subdivisions | 9,792,402 | 96,709 | (63,497 | ) | 9,825,614 | |||||||||||
Mortgage-backed securities | 49,183,030 | 224,659 | (239,702 | ) | 49,167,987 | |||||||||||
CMO agency | 57,071,475 | 92,711 | (956,577 | ) | 56,207,609 | |||||||||||
Corporate bonds | 300,000 | — | — | 300,000 | ||||||||||||
Total | $ | 195,885,100 | $ | 526,080 | $ | (2,132,312 | ) | $ | 194,278,868 | |||||||
F-77
Table of Contents
December 31, 2004 | ||||||||
Amortized | Estimated | |||||||
Cost | Market Value | |||||||
Due in one year or less | $ | 53,281,065 | $ | 52,783,421 | ||||
Due after one year through five years | 194,429,616 | 192,167,811 | ||||||
Due after five years through ten years | 43,881,720 | 43,385,718 | ||||||
Due after ten years | 39,319,237 | 38,852,477 | ||||||
Total | $ | 330,911,638 | $ | 327,189,427 | ||||
December 31, 2004 | ||||||||||||||||||||||||
Less Than 12 Months | 12 Months or More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
Obligations of U.S. Government-sponsored enterprises | $ | 81,882,213 | $ | 579,689 | $ | 28,405,656 | $ | 594,345 | $ | 110,287,869 | $ | 1,174,034 | ||||||||||||
Obligations of states and political subdivisions | 9,302,704 | 91,838 | 947,212 | 31,621 | 10,249,916 | 123,459 | ||||||||||||||||||
Mortgage-backed securities | 98,414,968 | 1,383,684 | 6,885,771 | 117,578 | 105,300,739 | 1,501,262 | ||||||||||||||||||
CMO agency | 28,104,053 | 344,960 | 17,527,979 | 715,921 | 45,632,032 | 1,060,881 | ||||||||||||||||||
Other securities | 2,039,031 | 26,555 | — | — | 2,039,031 | 26,555 | ||||||||||||||||||
$ | 219,742,969 | $ | 2,426,726 | $ | 53,766,618 | $ | 1,459,465 | $ | 273,509,587 | $ | 3,886,191 | |||||||||||||
F-78
Table of Contents
December 31, 2003 | ||||||||||||||||||||||||
12 Months or | ||||||||||||||||||||||||
Less Than 12 Months | More | Total | ||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
Value | Loss | Value | Loss | Value | Loss | |||||||||||||||||||
Obligations of U.S. Government- sponsored enterprises | $ | 59,745,460 | $ | 872,536 | $ | — | $ | — | $ | 59,745,460 | $ | 872,536 | ||||||||||||
Obligations of states and political subdivisions | 2,899,641 | 63,496 | — | — | 2,899,641 | 63,496 | ||||||||||||||||||
Mortgage-backed securities | 17,917,233 | 239,703 | — | — | 17,917,233 | 239,703 | ||||||||||||||||||
CMO agency | 43,496,657 | 956,577 | — | — | 43,496,657 | 956,577 | ||||||||||||||||||
$ | 124,058,991 | $ | 2,132,312 | $ | — | $ | — | $ | 124,058,991 | $ | 2,132,312 | |||||||||||||
3. | Loans Receivable and Allowance for Loan Losses |
December 31 | |||||||||
2004 | 2003 | ||||||||
Real estate: | |||||||||
Residential 1–4 family | $ | 25,128,672 | $ | 17,153,581 | |||||
Nonfarm/nonresidential | 98,814,335 | 75,094,703 | |||||||
Agricultural | 806,059 | 860,940 | |||||||
Construction/land development | 52,488,020 | 42,876,017 | |||||||
Multifamily residential | 2,324,423 | 2,375,833 | |||||||
Total real estate | 179,561,509 | 138,361,074 | |||||||
Consumer | 9,439,963 | 8,615,990 | |||||||
Commercial and industrial | 72,738,948 | 57,766,364 | |||||||
Agricultural (non-real estate) | 186,241 | 140,684 | |||||||
261,926,661 | 204,884,112 | ||||||||
Allowance for loan losses | (4,740,649 | ) | (3,483,498 | ) | |||||
$ | 257,186,012 | $ | 201,400,614 | ||||||
F-79
Table of Contents
Year ended December 31 | |||||||||
2004 | 2003 | ||||||||
Balance — beginning of year | $ | 3,483,498 | $ | 2,277,920 | |||||
Loans charged-off | (128,764 | ) | (478,314 | ) | |||||
Recoveries on loans previously charged-off | 125,915 | 16,892 | |||||||
Net charge-offs | (2,849 | ) | (461,422 | ) | |||||
Provision charged to operating expense | 1,260,000 | 1,667,000 | |||||||
Balance — end of year | $ | 4,740,649 | $ | 3,483,498 | |||||
4. | Concentration of Credit Risks |
5. | Bank Premises and Equipment |
December 31 | ||||||||
2004 | 2003 | |||||||
Land | $ | 4,253,095 | $ | 2,438,336 | ||||
Buildings | 7,920,133 | 6,005,498 | ||||||
Leasehold improvements | 263,320 | 270,960 | ||||||
Furniture, fixtures, and equipment | 4,058,307 | 3,408,757 | ||||||
16,494,855 | 12,123,551 | |||||||
Accumulated depreciation | (1,904,749 | ) | (1,023,955 | ) | ||||
Bank premises and equipment, net | $ | 14,590,106 | $ | 11,099,596 | ||||
F-80
Table of Contents
6. | Income Taxes |
December 31 | |||||||||
2004 | 2003 | ||||||||
Current: | |||||||||
Federal | $ | 1,234,140 | $ | 166,075 | |||||
State | 86,896 | 11,230 | |||||||
Total current | 1,321,036 | 177,305 | |||||||
Deferred: | |||||||||
Federal | (163,985 | ) | (38,901 | ) | |||||
State | (33,529 | ) | — | ||||||
Total deferred | (197,514 | ) | (38,901 | ) | |||||
Provision for income taxes | $ | 1,123,522 | $ | 138,404 | |||||
December 31 | ||||||||
2004 | 2003 | |||||||
Statutory federal income tax rate | 34.00 | % | 34.00 | % | ||||
Effect of nontaxable interest income | (4.85 | ) | (7.58 | ) | ||||
Other | 1.59 | (2.53 | ) | |||||
Effective income tax rate | 30.74 | % | 23.89 | % | ||||
December 31 | |||||||||
2004 | 2003 | ||||||||
Deferred tax assets: | |||||||||
Allowance for loan losses | $ | 1,815,195 | $ | 1,184,389 | |||||
Investment in unconsolidated subsidiary | 30,932 | 132,755 | |||||||
Unrealized loss on securities available for sale | 1,425,235 | 546,119 | |||||||
Other | 8,907 | 87,992 | |||||||
Gross deferred tax assets | 3,280,269 | 1,951,255 | |||||||
Deferred tax liabilities: | |||||||||
Accelerated depreciation on premises and equipment | 794,136 | 560,392 | |||||||
Other | 24,036 | 5,396 | |||||||
Gross deferred tax liabilities | 818,172 | 565,788 | |||||||
Net deferred tax assets included in other assets | $ | 2,462,097 | $ | 1,385,467 | |||||
F-81
Table of Contents
7. | Related Party Transactions |
F-82
Table of Contents
8. | Non-Interest Expense |
2004 | 2003 | ||||||||
Salaries and employee benefits | $ | 5,233,085 | $ | 3,831,782 | |||||
Occupancy and equipment | 2,399,576 | 1,488,441 | |||||||
Other operating expenses: | |||||||||
Advertising | 797,272 | 684,787 | |||||||
ATM expense | 115,956 | 72,502 | |||||||
Directors’ fees | 97,200 | 102,487 | |||||||
Due from bank service charges | 90,404 | 80,998 | |||||||
FDIC and state assessment | 180,478 | 106,528 | |||||||
Insurance | 169,060 | 124,720 | |||||||
Legal and accounting | 141,187 | 207,004 | |||||||
Other professional fees | 1,576,541 | 1,084,320 | |||||||
Operating supplies | 245,335 | 244,180 | |||||||
Postage | 117,378 | 87,121 | |||||||
Telephone | 112,837 | 80,941 | |||||||
Amortization | 38,987 | — | |||||||
Other | 203,502 | 200,332 | |||||||
Total non-interest expense | $ | 11,518,798 | $ | 8,396,143 | |||||
9. | Commitments and Contingencies |
Commitments to Extend Credit |
Interest Rate Risk |
F-83
Table of Contents
10. | Leases |
2005 | $ | 342,000 | ||
2006 | 337,500 | |||
2007 | 326,000 | |||
2008 | 326,000 | |||
2009 | 328,000 | |||
Thereafter | 1,494,000 | |||
$ | 3,153,500 | |||
11. | Time Certificates of Deposit |
2005 | $ | 244,603,673 | ||
2006 | 24,763,517 | |||
2007 | 4,218,772 | |||
2008 | 2,864,502 | |||
2009 | 2,265,094 | |||
Total time deposits | $ | 278,715,558 | ||
12. | Stockholders’ Equity |
13. | Stock-Based Compensation |
F-84
Table of Contents
2004 | ||||||||||||
Employees | Directors | Total | ||||||||||
Outstanding — beginning of the year | 38,350 | 23,000 | 61,350 | |||||||||
Granted | — | — | — | |||||||||
Exercised | — | — | — | |||||||||
Cancelled | — | (500 | ) | (500 | ) | |||||||
Outstanding — end of the year | 38,350 | 22,500 | 60,850 | |||||||||
Exercisable at end of the year | 34,950 | 7,500 | 42,450 | |||||||||
2003 | ||||||||||||
Employees | Directors | Total | ||||||||||
Outstanding — beginning of the year | 37,600 | 15,000 | 52,600 | |||||||||
Granted | 1,000 | 8,000 | 9,000 | |||||||||
Exercised | — | — | — | |||||||||
Cancelled | (250 | ) | — | (250 | ) | |||||||
Outstanding — end of the year | 38,350 | 23,000 | 61,350 | |||||||||
Exercisable at end of the year | 27,280 | 3,000 | 30,280 | |||||||||
2003 | ||||
Risk-free interest rate | 3.05% | |||
Dividend yield | 0.00 | |||
Expected dividend yield increase | 0.00 | |||
Expected stock volatility | 0.01 | |||
Weighted-average expected life | 6.50 years |
F-85
Table of Contents
Outstanding Options | ||||||||||||||||||||||
Weighted- | Options Exercisable | |||||||||||||||||||||
Average | ||||||||||||||||||||||
Remaining | Weighted- | Weighted- | ||||||||||||||||||||
Exercise | Options | Contractual | Average | Options | Average | |||||||||||||||||
Prices | Outstanding | Life (in Years) | Exercise Price | Exercisable | Exercise Price | |||||||||||||||||
$ | 25.00 | 36,350 | 10.24 | $ | 25.00 | 34,350 | $ | 25.00 | ||||||||||||||
27.50 | 24,500 | 13.35 | 27.50 | 8,100 | 27.50 | |||||||||||||||||
60,850 | 42,450 | |||||||||||||||||||||
2004 | 2003 | |||||||
Net income, as reported | $ | 2,531,031 | $ | 441,021 | ||||
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects | 65,823 | 72,000 | ||||||
Deduct: Total stock-based compensation expense determined under fair value-based method for all awards, net of related tax effects | (118,226 | ) | (116,153 | ) | ||||
Net income, as adjusted | $ | 2,478,628 | $ | 396,868 | ||||
14. | Borrowings |
Description | Maturities | Amount | ||||||
1.93% Federal Home Loan Bank borrowings with interest due monthly | January 2005 | $ | 10,444,000 | |||||
1.596% to 1.601% Federal Home Loan Bank borrowings with interest due monthly | September 2005 | 10,439,900 | ||||||
$ | 20,883,900 | |||||||
F-86
Table of Contents
15. | Financial Instruments |
December 31, 2004 | December 31, 2003 | |||||||||||||||||
Carrying | Carrying | |||||||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||||
Financial assets: | ||||||||||||||||||
Cash and due from banks | $ | 9,038,802 | $ | 9,038,802 | $ | 9,221,345 | $ | 9,221,345 | ||||||||||
Federal funds sold | 3,660,000 | 3,660,000 | — | — | ||||||||||||||
Investment securities — available for sale | 327,189,247 | 327,189,247 | 194,278,868 | 194,278,868 | ||||||||||||||
Loans receivable, net | 257,186,012 | 255,962,000 | 201,400,614 | 202,009,446 | ||||||||||||||
Accrued interest receivable | 2,658,800 | 2,658,800 | 1,605,161 | 1,605,161 | ||||||||||||||
Financial liabilities: | ||||||||||||||||||
Deposits: | ||||||||||||||||||
Demand, non-interest-bearing | $ | 56,183,562 | $ | 56,183,562 | $ | 39,438,879 | $ | 39,438,879 | ||||||||||
Savings and interest-bearing transaction accounts | 165,244,655 | 165,244,655 | 107,226,763 | 107,226,763 | ||||||||||||||
Time certificates of deposit | 278,715,558 | 279,924,000 | 177,820,899 | 178,665,765 | ||||||||||||||
Accrued interest and other liabilities | 1,928,152 | 1,928,152 | 696,475 | 696,475 | ||||||||||||||
Federal funds purchased | — | — | 9,630,000 | 9,630,000 | ||||||||||||||
Securities sold under agreements to repurchase | 45,754,078 | 45,754,078 | 35,551,396 | 35,551,396 | ||||||||||||||
Federal Home Loan Bank borrowings | 20,883,900 | 20,883,900 | — | — |
16. | Regulatory Matters |
F-87
Table of Contents
For Capital | |||||||||||||
Actual | Adequacy Purposes | ||||||||||||
Amount | Ratio | Ratio | |||||||||||
TCBancorp, Inc. (consolidated): | |||||||||||||
Total risk-based capital | $ | 67,245,000 | 17.01 | % | 8.00 | % | |||||||
Tier I risk-based capital | 62,504,000 | 15.81 | 4.00 | ||||||||||
Leverage ratio | 62,504,000 | 10.56 | 3.00 | ||||||||||
Twin City Bank: | |||||||||||||
Total risk-based capital | $ | 57,847,186 | 14.97 | % | 8.00 | % | |||||||
Tier I risk-based capital | 53,106,537 | 13.74 | 4.00 | ||||||||||
Leverage ratio | 53,106,537 | 8.98 | 3.00 |
For Capital | |||||||||||||
Actual | Adequacy Purposes | ||||||||||||
Amount | Ratio | Ratio | |||||||||||
TCBancorp, Inc. (consolidated): | |||||||||||||
Total risk-based capital | $ | 64,687,805 | 22.65 | % | 8.00 | % | |||||||
Tier I risk-based capital | 61,204,307 | 21.43 | 4.00 | ||||||||||
Leverage ratio | 61,204,307 | 18.48 | 3.00 | ||||||||||
Twin City Bank: | |||||||||||||
Total risk-based capital | $ | 55,721,058 | 20.14 | % | 8.00 | % | |||||||
Tier I risk-based capital | 52,262,520 | 18.89 | 4.00 | ||||||||||
Leverage ratio | 52,262,520 | 15.81 | 3.00 |
17. | Subsequent Event |
F-88
Table of Contents
F-89
Table of Contents
/s/Hacker, Johnson & Smith PA |
F-90
Table of Contents
December 31, | ||||||||||
2004 | 2003 | |||||||||
($ in thousands, | ||||||||||
except per share | ||||||||||
amounts) | ||||||||||
Assets | ||||||||||
Cash and due from banks | $ | 5,031 | 4,248 | |||||||
Federal funds sold | 3,426 | 2,106 | ||||||||
Cash and cash equivalents | 8,457 | 6,354 | ||||||||
Securities available for sale | 19,009 | 10,266 | ||||||||
Loans, net of allowance for loan losses of $2,105 in 2004 and $1,364 in 2003 | 190,790 | 134,993 | ||||||||
Premises and equipment, net | 5,187 | 5,010 | ||||||||
Federal Home Loan Bank stock, at cost | 1,802 | 802 | ||||||||
Accrued interest receivable | 875 | 610 | ||||||||
Deferred income tax asset | 958 | 551 | ||||||||
Other assets | 768 | 688 | ||||||||
Total | $ | 227,846 | 159,274 | |||||||
Liabilities and Stockholders’ Equity | ||||||||||
Liabilities: | ||||||||||
Noninterest-bearing demand deposits | 32,197 | 22,780 | ||||||||
Savings, NOW and money-market deposits | 72,004 | 48,753 | ||||||||
Time deposits | 73,481 | 55,619 | ||||||||
Total deposits | 177,682 | 127,152 | ||||||||
Federal Home Loan Bank advances | 27,423 | 16,035 | ||||||||
Federal funds purchased | 5,565 | — | ||||||||
Other borrowings | 851 | 1,046 | ||||||||
Junior subordinated debentures | 5,155 | 5,155 | ||||||||
Official checks | 1,048 | 1,104 | ||||||||
Accrued interest payable | 257 | 167 | ||||||||
Other liabilities | 1,061 | 681 | ||||||||
Total liabilities | 219,042 | 151,340 | ||||||||
Commitments (Notes 4, 10 and 17) | ||||||||||
Stockholders’ equity: | ||||||||||
Common stock, $0.10 par value; 5,000,000 shares authorized; 635,208 and 631,008 shares issued and outstanding in 2004 and 2003 | 64 | 63 | ||||||||
Additional paid-in capital | 5,892 | 5,843 | ||||||||
Retained earnings | 2,951 | 1,983 | ||||||||
Accumulated other comprehensive income (loss) | (103 | ) | 45 | |||||||
Total stockholders’ equity | 8,804 | 7,934 | ||||||||
Total | $ | 227,846 | 159,274 | |||||||
F-91
Table of Contents
Year Ended | ||||||||||
December 31, | ||||||||||
2004 | 2003 | |||||||||
(In thousands) | ||||||||||
Interest income: | ||||||||||
Loans | $ | 9,705 | 7,663 | |||||||
Securities | 659 | 409 | ||||||||
Other interest-earning assets | 94 | 62 | ||||||||
Total interest income | 10,458 | 8,134 | ||||||||
Interest expense: | ||||||||||
Deposits | 2,438 | 1,871 | ||||||||
Junior subordinated debentures | 297 | 167 | ||||||||
Other borrowings | 558 | 313 | ||||||||
Total interest expense | 3,293 | 2,351 | ||||||||
Net interest income | 7,165 | 5,783 | ||||||||
Provision for loan losses | 821 | 451 | ||||||||
Net interest income after provision for loan losses | 6,344 | 5,332 | ||||||||
Noninterest income: | ||||||||||
Deposit account fees | 707 | 509 | ||||||||
Other fees and service charges | 251 | 197 | ||||||||
Gain on sale of loans held for sale | 155 | — | ||||||||
Mortgage brokerage fees | 500 | 631 | ||||||||
Loss on sale of securities available for sale | — | (3 | ) | |||||||
Other | 113 | 86 | ||||||||
Total noninterest income | 1,726 | 1,420 | ||||||||
Noninterest expenses: | ||||||||||
Salaries and employee benefits | 3,893 | 3,703 | ||||||||
Occupancy | 957 | 880 | ||||||||
Data processing | 614 | 475 | ||||||||
Professional fees | 82 | 81 | ||||||||
Advertising and promotion | 135 | 125 | ||||||||
Stationery and supplies | 140 | 108 | ||||||||
Telephone | 140 | 137 | ||||||||
Other | 584 | 515 | ||||||||
Total noninterest expenses | 6,545 | 6,024 | ||||||||
Earnings before income taxes | 1,525 | 728 | ||||||||
Income taxes | 557 | 264 | ||||||||
Net earnings | $ | 968 | 464 | |||||||
F-92
Table of Contents
Accumulated | ||||||||||||||||||||||||||
Common Stock | Other | |||||||||||||||||||||||||
Additional | Comprehensive | Total | ||||||||||||||||||||||||
Number of | Paid-In | Retained | Income | Stockholders’ | ||||||||||||||||||||||
Shares | Amount | Capital | Earnings | (Loss) | Equity | |||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||
Balance at December 31, 2002 | 630,000 | $ | 63 | 5,829 | 1,519 | 187 | 7,598 | |||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||
Net earnings | — | — | — | 464 | — | 464 | ||||||||||||||||||||
Net change in unrealized gain on securities available for sale, net of tax | — | — | — | — | (142 | ) | (142 | ) | ||||||||||||||||||
Comprehensive income | 322 | |||||||||||||||||||||||||
Stock options exercised, including tax benefit of $2 | 1,008 | — | 14 | — | — | 14 | ||||||||||||||||||||
Balance at December 31, 2003 | 631,008 | 63 | 5,843 | 1,983 | 45 | 7,934 | ||||||||||||||||||||
Comprehensive income: | ||||||||||||||||||||||||||
Net earnings | — | — | — | 968 | — | 968 | ||||||||||||||||||||
Net change in unrealized gain on securities available for sale, net of tax | — | — | — | — | (107 | ) | (107 | ) | ||||||||||||||||||
Change in unrealized loss on derivative instrument, net of tax | — | — | — | — | (41 | ) | (41 | ) | ||||||||||||||||||
Comprehensive income | 820 | |||||||||||||||||||||||||
Stock options exercised | 4,200 | 1 | 49 | — | — | 50 | ||||||||||||||||||||
Balance at December 31, 2004 | 635,208 | $ | 64 | 5,892 | 2,951 | (103 | ) | 8,804 | ||||||||||||||||||
F-93
Table of Contents
Year Ended | |||||||||||
December 31, | |||||||||||
2004 | 2003 | ||||||||||
(In thousands) | |||||||||||
Cash flows from operating activities: | |||||||||||
Net earnings | $ | 968 | 464 | ||||||||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 456 | 335 | |||||||||
Credit for deferred income taxes | (307 | ) | (228 | ) | |||||||
Provision for loan losses | 821 | 451 | |||||||||
Loss on sale of securities available for sale | — | 3 | |||||||||
Increase in accrued interest receivable | (265 | ) | (76 | ) | |||||||
Increase in accrued interest payable | 90 | 50 | |||||||||
Increase in other assets | (80 | ) | (305 | ) | |||||||
Decrease official checks | (56 | ) | (319 | ) | |||||||
Increase in other liabilities | 311 | 451 | |||||||||
Gain on sale of loans held for sale | (155 | ) | — | ||||||||
Proceeds from sale of loans held for sale | 24,469 | — | |||||||||
Origination of loans held for sale | (25,880 | ) | — | ||||||||
Net cash provided by operating activities | 372 | 826 | |||||||||
Cash flows from investing activities: | |||||||||||
Net purchase of securities available for sale | (15,922 | ) | (8,381 | ) | |||||||
Proceeds from sale of securities available for sale | — | 1,001 | |||||||||
Maturities and calls of securities available for sale | 3,000 | 3,000 | |||||||||
Principle repayments on securities available for sale | 4,000 | 3,320 | |||||||||
Net increase in loans | (55,113 | ) | (43,871 | ) | |||||||
Net purchase of premises and equipment, net | (572 | ) | (735 | ) | |||||||
Purchase of Federal Home Loan Bank stock | (1,000 | ) | (375 | ) | |||||||
Net cash used in investing activities | (65,607 | ) | (46,041 | ) | |||||||
Cash flows from financing activities: | |||||||||||
Net increase in deposits | 50,530 | 28,754 | |||||||||
Increase in Federal Home Loan Bank advances | 11,388 | 10,532 | |||||||||
Decrease in other borrowings | (195 | ) | (621 | ) | |||||||
Increase in federal funds purchased | 5,565 | — | |||||||||
Proceeds from sale of junior subordinated debentures | — | 5,155 | |||||||||
Proceeds from stock options exercised | 50 | 12 | |||||||||
Net cash provided by financing activities | 67,338 | 43,832 | |||||||||
Net increase (decrease) in cash and cash equivalents | 2,103 | (1,383 | ) | ||||||||
Cash and cash equivalents at beginning of year | 6,354 | 7,737 | |||||||||
Cash and cash equivalents at end of year | $ | 8,457 | 6,354 | ||||||||
Supplemental disclosure of cash flow information: | |||||||||||
Cash paid during the year for: | |||||||||||
Interest | $ | 3,203 | 2,301 | ||||||||
Income taxes | $ | 774 | 266 | ||||||||
Noncash transactions: | |||||||||||
Change in other comprehensive income: | |||||||||||
Change in unrealized gain on securities available for sale, net of tax | $ | (107 | ) | (142 | ) | ||||||
Change in unrealized loss on derivative investment, net of tax | $ | (41 | ) | — | |||||||
Tax benefit associated with stock options exercised | $ | — | 2 | ||||||||
F-94
Table of Contents
(1) | Description of Business and Summary of Significant Accounting Policies |
F-95
Table of Contents
F-96
Table of Contents
Year Ended | ||||||||
December 31, | ||||||||
2004 | 2003 | |||||||
Net earnings, as reported | $ | 968 | 464 | |||||
Deduct: Total stock-based employee compensation determined under the minimum value method for all awards, net of related tax effect | (43 | ) | (22 | ) | ||||
Proforma net earnings | $ | 925 | 442 | |||||
F-97
Table of Contents
Year Ended | ||||||||
December 31, | ||||||||
2004 | 2003 | |||||||
Risk-free interest rate | 4.77 | % | 4.45 | % | ||||
Dividend yield | — | % | — | % | ||||
Expected volatility | — | % | — | % | ||||
Expected life in years | 10 | 10 | ||||||
Per share fair value of options at grant date | $ | 5.07 | 4.27 | |||||
Before | Tax | After | ||||||||||||
Tax | Effect | Tax | ||||||||||||
Year Ended December 31, 2004: | ||||||||||||||
Holding losses | $ | (179 | ) | 72 | (107 | ) | ||||||||
Holding losses on derivative instrument | (69 | ) | 28 | (41 | ) | |||||||||
Net unrealized holding loss | $ | (248 | ) | 100 | (148 | ) | ||||||||
Year Ended December 31, 2003: | ||||||||||||||
Holding losses | (238 | ) | 94 | (144 | ) | |||||||||
Losses included in net earnings | 3 | (1 | ) | 2 | ||||||||||
Net unrealized holding loss | $ | (235 | ) | 93 | (142 | ) | ||||||||
F-98
Table of Contents
Cash and Cash Equivalents. The carrying amounts of cash and cash equivalents approximate their fair value. | |
Securities. Fair values for securities available for sale are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. | |
Loans. For variable-rate loans that reprice frequently and have no significant change in credit risk, fair values are based on carrying values. Fair values for certain fixed-rate loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality. | |
Federal Home Loan Bank Stock. Fair value of the Company’s investment in Federal Home Loan Bank stock is based on its redemption value. | |
Deposit Liabilities. The fair values disclosed for demand, NOW, money-market and savings deposits are, by definition, equal to the amount payable on demand at the reporting date (that is, their carrying amounts). Fair values for fixed-rate time deposits are estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregated expected monthly maturities of time deposits. | |
Other Borrowings and Federal Funds Purchased. The carrying amounts of other borrowings and federal funds purchased approximate fair value. | |
Federal Home Loan Bank Advances and Junior Subordinated Debentures. Fair values for these borrowings are estimated using discounted cash flow analysis based on the Company’s current incremental borrowing rates for similar types of borrowings. | |
Derivative Instrument. Fair value for the derivative instrument (interest-rate swap) is based on current settlement value. | |
Accrued Interest. The carrying amounts of accrued interest approximate their fair values. | |
Off-Balance-Sheet Financial Instruments. Fair values for off-balance-sheet lending commitments are based on rates currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties’ credit standing. |
F-99
Table of Contents
(2) | Securities Available for Sale |
Gross | Gross | ||||||||||||||||
Amortized | Unrealized | Unrealized | Approximate | ||||||||||||||
Cost | Gains | Losses | Fair Value | ||||||||||||||
December 31, 2004: | |||||||||||||||||
U.S. Government-sponsored enterprises and corporations | $ | 2,000 | 1 | (14 | ) | 1,987 | |||||||||||
Collateralized mortgage obligations | 7,380 | 28 | (50 | ) | 7,358 | ||||||||||||
Mortgage-backed securities | 9,732 | 20 | (88 | ) | 9,664 | ||||||||||||
$ | 19,112 | 49 | (152 | ) | 19,009 | ||||||||||||
December 31, 2003: | |||||||||||||||||
U.S. Government-sponsored enterprises and corporations | $ | 3,498 | 56 | (6 | ) | 3,548 | |||||||||||
Collateralized mortgage obligations | 2,789 | 16 | (12 | ) | 2,793 | ||||||||||||
Mortgage-backed securities | 3,404 | 22 | (17 | ) | 3,409 | ||||||||||||
Corporate debt | 499 | 17 | — | 516 | |||||||||||||
$ | 10,190 | 111 | (35 | ) | 10,266 | ||||||||||||
F-100
Table of Contents
Amortized | Fair | ||||||||
Cost | Value | ||||||||
Due in one year or less | $ | 500 | 501 | ||||||
Due after one year through five years | 1,500 | 1,486 | |||||||
Collateralized mortgage obligations | 7,380 | 7,358 | |||||||
Mortgage-backed securities | 9,732 | 9,664 | |||||||
Total | $ | 19,112 | 19,009 | ||||||
Gross proceeds | $ | 1,001 | ||
Gross realized losses | $ | (3 | ) | |
Less Than | Over | |||||||||||||||
Twelve Months | Twelve Months | |||||||||||||||
Gross | Gross | |||||||||||||||
Unrealized | Fair | Unrealized | Fair | |||||||||||||
Losses | Value | Losses | Value | |||||||||||||
U.S. Government-sponsored enterprises and corporations | $ | (14 | ) | 1,485 | — | — | ||||||||||
Collateralized mortgage obligations | (33 | ) | 4,230 | (17 | ) | 719 | ||||||||||
Mortgage-backed securities | (72 | ) | 6,337 | (16 | ) | 1,396 | ||||||||||
Total securities available for sale | $ | (119 | ) | 12,052 | (33 | ) | 2,115 | |||||||||
F-101
Table of Contents
(3) | Loans |
At December 31, | ||||||||||
2004 | 2003 | |||||||||
Commercial real estate | $ | 95,296 | 70,201 | |||||||
Commercial | 12,953 | 9,919 | ||||||||
Residential real estate | 82,559 | 54,735 | ||||||||
Consumer | 2,628 | 1,955 | ||||||||
Total loans | 193,436 | 136,810 | ||||||||
Deduct: | ||||||||||
Deferred loan fees, net | (541 | ) | (453 | ) | ||||||
Allowance for loan losses | (2,105 | ) | (1,364 | ) | ||||||
Loans, net | $ | 190,790 | 134,993 | |||||||
Year Ended | |||||||||
December 31, | |||||||||
2004 | 2003 | ||||||||
Balance at beginning of year | $ | 1,364 | 922 | ||||||
Provision for loan losses | 821 | 451 | |||||||
Recoveries | 15 | 17 | |||||||
Charge-offs | (95 | ) | (26 | ) | |||||
Balance at end of year | $ | 2,105 | 1,364 | ||||||
At December 31, | |||||||||
2004 | 2003 | ||||||||
Land | $ | 1,582 | 1,582 | ||||||
Buildings | 3,520 | 3,287 | |||||||
Furniture and equipment | 1,442 | 1,110 | |||||||
Leasehold improvements | 70 | 63 | |||||||
Vehicles | 68 | 68 | |||||||
Total, at cost | 6,682 | 6,110 | |||||||
Less accumulated depreciation and amortization | (1,495 | ) | (1,100 | ) | |||||
Premises and equipment, net | $ | 5,187 | 5,010 | ||||||
F-102
Table of Contents
Year Ending December 31, | Amount | |||
2005 | $ | 196 | ||
2006 | 160 | |||
2007 | 99 | |||
2008 | 71 | |||
2009 | 73 | |||
Thereafter | 373 | |||
$ | 972 | |||
Year Ending December 31, | Amount | |||
2005 | $ | 43,901 | ||
2006 | 10,146 | |||
2007 | 3,106 | |||
2008 | 11,837 | |||
2009 | 4,491 | |||
$ | 73,481 | |||
December 31, | |||||||||
2004 | 2003 | ||||||||
Public funds on deposit | $ | 37,959 | 27,987 | ||||||
Collateral: | |||||||||
Securities at fair value | $ | 16,092 | 5,618 | ||||||
Letter of credit(1) | $ | 12,000 | 9,000 | ||||||
(1) | The letter of credit was issued by the Federal Home Loan Bank. |
F-103
Table of Contents
Interest Rate | At December 31, | ||||||||||||||||
Year Ending December 31, | 2004 | 2003 | 2004 | 2003 | |||||||||||||
2004 | — | % | 1.99 | % | $ | — | 4,500 | ||||||||||
2005 | 2.11 | % | 2.18 | % | 14,050 | 6,202 | |||||||||||
2006 | 2.65 | % | 2.75 | % | 8,000 | 2,000 | |||||||||||
2007 | 3.26 | % | 3.26 | % | 600 | 800 | |||||||||||
2008 | 5.34 | % | 5.96 | % | 1,523 | 991 | |||||||||||
2009 | 2.96 | % | 5.05 | % | 2,250 | 542 | |||||||||||
2011(1) | 4.53 | % | 4.53 | % | 1,000 | 1,000 | |||||||||||
Total | $ | 27,423 | 16,035 | ||||||||||||||
(1) | The FHLB has a one time call option on December 5, 2006. |
F-104
Table of Contents
F-105
Table of Contents
At December 31, 2004 | At December 31, 2003 | ||||||||||||||||
Carrying | Fair | Carrying | Fair | ||||||||||||||
Amount | Value | Amount | Value | ||||||||||||||
Financial assets: | |||||||||||||||||
Cash and cash equivalents | $ | 8,457 | 8,457 | 6,354 | 6,354 | ||||||||||||
Securities available for sale | 19,009 | 19,009 | 10,266 | 10,266 | |||||||||||||
Loans, net | 190,790 | 194,778 | 134,993 | 140,817 | |||||||||||||
Accrued interest receivable | 875 | 875 | 610 | 610 | |||||||||||||
Federal Home Loan Bank stock | 1,802 | 1,802 | 802 | 802 | |||||||||||||
Financial liabilities: | |||||||||||||||||
Deposits | 177,682 | 178,041 | 127,152 | 127,689 | |||||||||||||
Federal Home Loan Bank advances | 27,423 | 27,300 | 16,035 | 16,124 | |||||||||||||
Other borrowings | 851 | 851 | 1,046 | 1,046 | |||||||||||||
Federal funds purchased | 5,565 | 5,565 | — | — | |||||||||||||
Junior subordinated debentures | 5,155 | 5,155 | 5,155 | 5,155 | |||||||||||||
Derivative: | |||||||||||||||||
Interest rate swap (loss position) | (69 | ) | (69 | ) | — | — |
Estimated | ||||||||||||
Contract | Carrying | Fair | ||||||||||
Amount | Amount | Value | ||||||||||
Unused loan commitments | $ | 12,206 | — | — | ||||||||
Unused lines of credit | $ | 9,624 | — | — | ||||||||
Standby letters of credit | $ | 329 | — | — | ||||||||
Letters of credit outstanding to FHLB | $ | 12,000 | — | — | ||||||||
F-106
Table of Contents
Year Ended | ||||||||||
December 31, | ||||||||||
2004 | 2003 | |||||||||
Current: | ||||||||||
Federal | $ | 731 | 417 | |||||||
State | 133 | 75 | ||||||||
Total current | 864 | 492 | ||||||||
Deferred: | ||||||||||
Federal | (262 | ) | (194 | ) | ||||||
State | (45 | ) | (34 | ) | ||||||
Total deferred | (307 | ) | (228 | ) | ||||||
$ | 557 | 264 | ||||||||
Year Ended December 31, | |||||||||||||||||
2004 | 2003 | ||||||||||||||||
% of Pretax | % of Pretax | ||||||||||||||||
Amount | Earnings | Amount | Earnings | ||||||||||||||
Income taxes at statutory Federal rate | $ | 519 | 34.0 | % | $ | 248 | 34.0 | % | |||||||||
Increase (decrease) resulting from: | |||||||||||||||||
State taxes, net of Federal tax benefit | 57 | 3.7 | 27 | 3.7 | |||||||||||||
Tax-exempt income | (37 | ) | (2.4 | ) | (24 | ) | (3.3 | ) | |||||||||
Other | 18 | 1.2 | 13 | 1.9 | |||||||||||||
$ | 557 | 36.5 | % | $ | 264 | 36.3 | % | ||||||||||
F-107
Table of Contents
At December 31, | ||||||||||
2004 | 2003 | |||||||||
Deferred tax assets: | ||||||||||
Allowance for loan losses | $ | 778 | 500 | |||||||
Deferred compensation | 122 | 59 | ||||||||
Accumulated depreciation | 12 | 23 | ||||||||
Unrealized loss on securities available for sale | 41 | — | ||||||||
Unrealized loss on derivative instrument | 28 | — | ||||||||
Total deferred tax assets | 981 | 582 | ||||||||
Deferred tax liabilities: | ||||||||||
Deferred loan costs | (23 | ) | — | |||||||
Unrealized gain on securities available for sale | — | (31 | ) | |||||||
Total deferred tax liabilities | (23 | ) | (31 | ) | ||||||
Net deferred tax asset | $ | 958 | 551 | |||||||
F-108
Table of Contents
Number | Range of Per | Weighted- | Aggregate | |||||||||||||
of | Share Option | Average Per | Option | |||||||||||||
Shares | Price | Share Price | Price | |||||||||||||
Outstanding at December 31, 2002 | 40,975 | $ | 11.87-12.31 | 11.91 | 488 | |||||||||||
Options granted | 5,000 | 12.31 | 12.31 | 62 | ||||||||||||
Options exercised | (1,008 | ) | (11.87 | ) | (11.87 | ) | (12 | ) | ||||||||
Options forfeited | (210 | ) | (11.87 | ) | (11.87 | ) | (2 | ) | ||||||||
Outstanding at December 31, 2003 | 44,757 | 11.87-12.50 | 11.97 | 536 | ||||||||||||
Options granted | 9,000 | 12.93 | 12.93 | 116 | ||||||||||||
Options exercised | (4,200 | ) | (11.87 | ) | (11.87 | ) | (50 | ) | ||||||||
Options forfeited | (210 | ) | (11.87 | ) | (11.87 | ) | (2 | ) | ||||||||
Outstanding at December 31, 2004 | 49,347 | $ | 11.87-12.93 | 12.16 | 600 | |||||||||||
Number of | Weighted-Average | |||||||
Year Ending | Shares | Exercise Price | ||||||
Currently | 34,897 | $ | 12.03 | |||||
2005 | 5,800 | 12.54 | ||||||
2006 | 5,800 | 12.53 | ||||||
2007 | 2,050 | 12.93 | ||||||
2008 | 800 | 12.93 | ||||||
49,347 | $ | 12.16 | ||||||
F-109
Table of Contents
Minimum To Be Well | ||||||||||||||||||||||||||
For Capital | Capitalized Under | |||||||||||||||||||||||||
Adequacy | Prompt Corrective | |||||||||||||||||||||||||
Actual | Purposes | Action Provisions | ||||||||||||||||||||||||
Amount | % | Amount | % | Amount | % | |||||||||||||||||||||
As of December 31, 2004: | ||||||||||||||||||||||||||
Total capital to Risk-Weighted assets: | ||||||||||||||||||||||||||
Bank | $ | 15,588 | 8.65 | % | $ | 14,422 | 8.00 | % | $ | 18,028 | 10.00 | % | ||||||||||||||
Consolidated | 16,012 | 8.97 | 14,287 | 8.00 | N/A | N/A | ||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||||
Bank | 13,483 | 7.48 | 7,211 | 4.00 | 10,817 | 6.00 | ||||||||||||||||||||
Consolidated | 11,134 | 6.23 | 7,144 | 4.00 | N/A | N/A | ||||||||||||||||||||
Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||||
Bank | 13,483 | 6.38 | 8,447 | 4.00 | 10,559 | 5.00 | ||||||||||||||||||||
Consolidated | 11,134 | 5.27 | 8,447 | 4.00 | N/A | N/A | ||||||||||||||||||||
As of December 31, 2003: | �� | |||||||||||||||||||||||||
Total capital to Risk-Weighted assets: | ||||||||||||||||||||||||||
Bank | $ | 13,761 | 12.17 | % | $ | 9,045 | 8.00 | % | $ | 11,307 | 10.00 | % | ||||||||||||||
Consolidated | 14,252 | 12.57 | 9,071 | 8.00 | N/A | N/A | ||||||||||||||||||||
Tier 1 Capital to Risk-Weighted Assets: | ||||||||||||||||||||||||||
Bank | 12,522 | 11.07 | 4,523 | 4.00 | 6,784 | 6.00 | ||||||||||||||||||||
Consolidated | 9,861 | 8.70 | 4,536 | 4.00 | N/A | N/A | ||||||||||||||||||||
Tier 1 Capital to Average Assets: | ||||||||||||||||||||||||||
Bank | 12,522 | 8.12 | 6,165 | 4.00 | 7,707 | 5.00 | ||||||||||||||||||||
Consolidated | 9,861 | 6.39 | 6,171 | 4.00 | N/A | N/A |
F-110
Table of Contents
F-111
Table of Contents
F-113 | |||||
Consolidated Financial Statements | |||||
F-114 | |||||
F-115 | |||||
F-116 | |||||
F-117 | |||||
F-118 |
F-112
Table of Contents
/s/BKD, LLP |
F-113
Table of Contents
Assets | |||||||
Cash and due from banks | $ | 2,478,507 | |||||
Federal funds sold | 2,105,000 | ||||||
Cash and cash equivalents | 4,583,507 | ||||||
Available-for-sale securities | 97,044,267 | ||||||
Loans, net of allowance for loan losses of $913,938 at December 31, 2004 | 71,218,048 | ||||||
Premises and equipment | 2,513,795 | ||||||
Foreclosed assets held for sale, net | 77,767 | ||||||
Interest receivable | 1,889,320 | ||||||
Core deposit intangible | 99,417 | ||||||
Other | 42,900 | ||||||
Total assets | $ | 177,469,021 | |||||
Liabilities and Stockholders’ Equity | |||||||
Liabilities | |||||||
Deposits | |||||||
Demand | $ | 16,918,117 | |||||
Savings, NOW and money market | 44,844,318 | ||||||
Time | 83,713,439 | ||||||
Total deposits | 145,475,874 | ||||||
Interest payable and other liabilities | 341,144 | ||||||
Total liabilities | 145,817,018 | ||||||
Stockholders’ equity | |||||||
Common stock, $10 par value; authorized 10,000 shares; issued and outstanding 2004 — 7,982 shares | 79,820 | ||||||
Additional paid-in capital | 12,922,675 | ||||||
Retained earnings | 18,312,953 | ||||||
Accumulated other comprehensive income | 336,555 | ||||||
Total stockholders’ equity | 31,652,003 | ||||||
Total liabilities and stockholders’ equity | $ | 177,469,021 | |||||
F-114
Table of Contents
Interest income | ||||||
Loans | $ | 5,098,960 | ||||
Securities | ||||||
Taxable | 56,272 | |||||
Tax-exempt | 4,596,036 | |||||
Federal funds | 52,355 | |||||
Total interest income | 9,803,623 | |||||
Interest expense | ||||||
Deposits | 2,887,312 | |||||
Net interest income | 6,916,311 | |||||
Provision for loan losses | 100,000 | |||||
Net interest income after provision for loan losses | 6,816,311 | |||||
Noninterest income | ||||||
Customer service fees | 355,146 | |||||
Other service charges and fees | 115,086 | |||||
Net realized gains on sales of held-to-maturity securities | 11,275 | |||||
Other | 20,895 | |||||
Total noninterest income | 502,402 | |||||
Noninterest expense | ||||||
Salaries and employee benefits | 1,726,560 | |||||
Net occupancy expense | 93,354 | |||||
Equipment expense | 541,353 | |||||
Professional fees | 44,532 | |||||
Marketing expense | 51,476 | |||||
Printing and office supplies | 72,849 | |||||
Loss on foreclosed assets, net | 45,132 | |||||
Other | 480,202 | |||||
Total noninterest expense | 3,055,458 | |||||
Net income | $ | 4,263,255 | ||||
Earnings per share | $ | 534.11 | ||||
F-115
Table of Contents
Accumulated | |||||||||||||||||||||||||||
Common Stock | Additional | Other | |||||||||||||||||||||||||
Paid-in | Retained | Comprehensive | |||||||||||||||||||||||||
Shares | Amount | Capital | Earnings | Income | Total | ||||||||||||||||||||||
Balance, January 1, 2003 | 7,982 | $ | 79,820 | $ | 12,922,675 | $ | 14,640,366 | $ | — | $ | 27,642,861 | ||||||||||||||||
Comprehensive income | |||||||||||||||||||||||||||
Net income | — | — | — | 4,263,255 | — | 4,263,255 | |||||||||||||||||||||
Change in unrealized appreciation on available-for-sale securities | — | — | — | — | 336,555 | 336,555 | |||||||||||||||||||||
Total comprehensive income | 4,599,810 | ||||||||||||||||||||||||||
Dividends on common stock, $74 per share | — | — | — | (590,668 | ) | — | (590,668 | ) | |||||||||||||||||||
Balance, December 31, 2004 | 7,982 | $ | 79,820 | $ | 12,922,675 | $ | 18,312,953 | $ | 336,555 | $ | 31,652,003 | ||||||||||||||||
F-116
Table of Contents
Operating Activities | |||||||
Net income | $ | 4,263,255 | |||||
Items not requiring (providing) cash | |||||||
Depreciation and amortization | 403,928 | ||||||
Provision for loan losses | 100,000 | ||||||
Provision for losses on foreclosed assets | 36,690 | ||||||
Amortization of premiums and discounts on securities | (174,363 | ) | |||||
Net realized gains on held-to-maturity securities | (11,275 | ) | |||||
Gain on sale of premises and equipment | (1,632 | ) | |||||
Changes in | |||||||
Interest receivable | (165,121 | ) | |||||
Other assets | (59 | ) | |||||
Interest payable and other liabilities | 33,170 | ||||||
Net cash provided by operating activities | 4,484,593 | ||||||
Investing Activities | |||||||
Purchases of securities | (21,392,074 | ) | |||||
Proceeds from maturities of securities | 11,432,549 | ||||||
Proceeds from the sales of held-to-maturity securities | 3,211,275 | ||||||
Net change in loans | (1,829,603 | ) | |||||
Purchase of premises and equipment | (370,587 | ) | |||||
Proceeds from sales of premises and equipment | 15,269 | ||||||
Proceeds from the sale of foreclosed assets | 9,000 | ||||||
Net cash used in investing activities | (8,924,171 | ) | |||||
Financing Activities | |||||||
Net increase in demand deposits, money market, NOW and savings accounts | 1,277,741 | ||||||
Net increase in time deposits | 3,932,671 | ||||||
Dividends paid | (590,668 | ) | |||||
Net cash provided by financing activities | 4,619,744 | ||||||
Increase in Cash and Cash Equivalents | 180,166 | ||||||
Cash and Cash Equivalents, Beginning of Year | 4,403,341 | ||||||
Cash and Cash Equivalents, End of Year | $ | 4,583,507 | |||||
Supplemental Cash Flows Information | |||||||
Interest paid | $ | 2,549,358 | |||||
Sale and financing of foreclosed assets | $ | 9,000 | |||||
Real estate acquired in settlement of loans | $ | 91,456 |
F-117
Table of Contents
Note 1: | Nature of Operations and Summary of Significant Accounting Policies |
Nature of Operations |
Principles of Consolidation |
Use of Estimates |
Cash Equivalents |
Securities |
Loans |
F-118
Table of Contents
Allowance for Loan Losses |
Premises and Equipment |
Foreclosed Assets Held for Sale |
Core Deposit Intangible |
Income Taxes |
F-119
Table of Contents
Earnings Per Share |
Note 2: | Securities |
December 31, 2004 | ||||||||||||||||
Available-for-sale Securities | ||||||||||||||||
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Approximate | |||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
U.S. Government-sponsored enterprises | $ | 53,097,158 | $ | 133,892 | $ | (813,110 | ) | $ | 52,417,940 | |||||||
Mortgage-backed securities | 263,339 | 3,513 | (80 | ) | 226,772 | |||||||||||
State and political subdivisions | 43,347,215 | 1,058,557 | (46,217 | ) | 44,359,555 | |||||||||||
$ | 96,707,712 | $ | 1,195,962 | $ | (859,407 | ) | $ | 97,044,267 | ||||||||
Available-for-sale | |||||||||
Amortized | |||||||||
Cost | Fair Value | ||||||||
Within one year | $ | 655,353 | $ | 660,544 | |||||
One to five years | 3,334,972 | 3,371,885 | |||||||
Five to ten years | 23,171,507 | 23,547,919 | |||||||
After ten years | 69,282,541 | 69,197,147 | |||||||
96,444,373 | 96,777,495 | ||||||||
Mortgage-backed securities | 263,339 | 266,772 | |||||||
Totals | $ | 96,707,712 | $ | 97,044,267 | |||||
F-120
Table of Contents
Less than 12 Months | 12 Months or More | Total | |||||||||||||||||||||||
Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | ||||||||||||||||||||
Description of Securities | Value | Losses | Value | Losses | Value | Losses | |||||||||||||||||||
U.S. Government-sponsored enterprises | $ | 14,920,685 | $ | (240,542 | ) | $ | 23,540,597 | $ | (572,568 | ) | $ | 38,461,282 | $ | (813,110 | ) | ||||||||||
Mortgage-backed securities | 69,047 | (80 | ) | — | — | 69,047 | (80 | ) | |||||||||||||||||
State and political subdivisions | 2,643,949 | (22,485 | ) | 889,763 | (23,732 | ) | 3,533,712 | (46,217 | ) | ||||||||||||||||
Total temporarily impaired securities | $ | 17,633,681 | $ | (263,107 | ) | $ | 24,430,360 | $ | (596,300 | ) | $ | 42,064,041 | $ | (859,407 | ) | ||||||||||
Note 3: | Loans and Allowance for Loan Losses |
Commercial and agricultural | $ | 17,428,204 | |||
Financial institutions | 159,124 | ||||
Real estate construction | 3,327,893 | ||||
Commercial real estate | 16,841,271 | ||||
Residential real estate | 27,409,108 | ||||
Consumer | 6,849,804 | ||||
Other | 116,582 | ||||
Total loans | 72,131,986 | ||||
Less allowance for loan losses | 913,938 | ||||
Net loans | $ | 71,218,048 | |||
Balance, beginning of year | $ | 836,595 | ||
Provision charged to expense | 100,000 | |||
Losses charged off, net of recoveries of $9,631 | (22,657 | ) | ||
Balance, end of year | $ | 913,938 | ||
F-121
Table of Contents
Note 4: | Premises and Equipment |
Land | $ | 400,517 | |||
Buildings and improvements | 2,293,528 | ||||
Equipment | 2,170,826 | ||||
4,864,871 | |||||
Less accumulated depreciation | 2,351,076 | ||||
Net premises and equipment | $ | 2,513,795 | |||
Note 5: | Core Deposit Intangible |
Gross Carrying | Accumulated | |||||||
Amount | Amortization | |||||||
Core deposit intangible | $ | 662,783 | $ | 563,366 | ||||
2005 | $ | 44,186 | ||
2006 | 44,186 | |||
2007 | 11,045 | |||
$ | 99,417 | |||
Note 6: | Interest-bearing Deposits |
2005 | $ | 58,073,413 | ||
2006 | 8,373,227 | |||
2007 | 5,557,562 | |||
2008 | 8,198,130 | |||
2009 | 3,472,696 | |||
Thereafter | 38,411 | |||
$ | 83,713,439 | |||
Note 7: | Regulatory Matters |
F-122
Table of Contents
To Be Well | ||||||||||||||||||||||||||
Capitalized Under | ||||||||||||||||||||||||||
For Capital Adequacy | Prompt Corrective | |||||||||||||||||||||||||
Actual | Purposes | Action Provisions | ||||||||||||||||||||||||
Amount | Ratio | Amount | Ratio | Amount | Ratio | |||||||||||||||||||||
As of December 31, 2004 | ||||||||||||||||||||||||||
Total Capital (to risk-weighted assets) | ||||||||||||||||||||||||||
Consolidated | $ | 32,090,000 | 35.9 | % | $ | 7,142,000 | 8.0 | % | $ | 8,928,000 | N/A | |||||||||||||||
Subsidiary Bank | 26,513,000 | 29.7 | 7,133,000 | 8.0 | 8,916,000 | 10.0 | % | |||||||||||||||||||
Tier 1 Capital (to risk-weighted assets) | ||||||||||||||||||||||||||
Consolidated | 31,176,000 | 34.9 | 3,571,000 | 4.0 | 5,357,000 | N/A | ||||||||||||||||||||
Subsidiary Bank | 25,599,000 | 28.7 | 3,567,000 | 4.0 | 5,350,000 | 6.0 | ||||||||||||||||||||
Tier 1 Capital (to average assets) | ||||||||||||||||||||||||||
Consolidated | 31,176,000 | 17.7 | 7,067,000 | 4.0 | 8,833,000 | N/A | ||||||||||||||||||||
Subsidiary Bank | 25,599,000 | 14.5 | 7,067,000 | 4.0 | 8,833,000 | 5.0 |
Note 8: | Related Party Transactions |
F-123
Table of Contents
Note 9: | Pension Benefit Plan |
Note 10: | Earnings Per Share |
2004 | ||||
Net income available to shareholders | $ | 4,263,255 | ||
Average shares outstanding | 7,982 | |||
Earnings per share | $ | 534.11 |
Note 11: | Disclosures about Fair Value of Financial Instruments |
December 31, 2004 | |||||||||
Carrying | Fair | ||||||||
Amount | Value | ||||||||
Financial assets | |||||||||
Cash and cash equivalents | $ | 4,583,507 | $ | 4,583,507 | |||||
Available-for-sale securities | 97,044,267 | 97,044,267 | |||||||
Loans, net of allowance for loan losses | 71,218,048 | 69,875,479 | |||||||
Interest receivable | 1,889,320 | 1,889,320 | |||||||
Financial liabilities | |||||||||
Deposits | 145,475,874 | 145,423,576 | |||||||
Interest payable | 317,734 | 317,734 |
F-124
Table of Contents
Cash and Cash Equivalents |
Interest Receivable |
Securities |
Loans |
Deposits |
Interest Payable |
Note 12: | Significant Estimates and Concentrations |
Note 13: | Commitments and Credit Risk |
Standby Letters of Credit |
F-125
Table of Contents
Lines of Credit |
Note 14: | Acquisition |
Note 15: | Condensed Financial Information (Parent Company Only) |
December 31, 2004 | |||||
ASSETS | |||||
Cash and due from banks | $ | 3,541,997 | |||
Investment in common stock of subsidiary | 26,034,685 | ||||
Dividends receivable from subsidiary | 2,075,321 | ||||
Total assets | $ | 31,652,003 | |||
Stockholders’ Equity | $ | 31,652,003 | |||
Total liabilities and stockholders’ equity | $ | 31,652,003 | |||
F-126
Table of Contents
Year Ending | ||||||
December 31, 2004 | ||||||
Income | ||||||
Dividend income from subsidiary | $ | 4,172,162 | ||||
Total income | 4,172,162 | |||||
Expenses | ||||||
Other expenses | 50 | |||||
Total expenses | 50 | |||||
Income before equity in undistributed income of subsidiaries | 4,172,112 | |||||
Equity in undistributed income of subsidiaries | 91,143 | |||||
Net Income | $ | 4,263,255 | ||||
Year Ended | ||||||
December 31, 2004 | ||||||
Operating activities | ||||||
Net income | $ | 4,263,255 | ||||
Equity in undistributed earnings of subsidiary | (91,143 | ) | ||||
Net change in dividends receivable from subsidiary | (75,241 | ) | ||||
Net cash provided by operating activities | 4,096,871 | |||||
Financing Activities | ||||||
Dividends paid | (590,668 | ) | ||||
Net cash used in financing activities | (590,668 | ) | ||||
Net change in cash and cash equivalents | 3,506,203 | |||||
Cash and cash equivalents at beginning of year | 35,794 | |||||
Cash and cash equivalents at end of year | $ | 3,541,997 | ||||
F-127
Table of Contents
Piper Jaffray | Sandler O’Neill + Partners, L.P. |
Table of Contents
Item 13. | Other Expenses of Issuance and Distribution. |
Securities and Exchange Commission registration fee | $ | 5,537 | ||
NASD filing fee | ||||
Nasdaq listing fee | ||||
Accounting fees and expenses | ||||
Legal fees and expenses | ||||
Transfer agent and registrar fees | ||||
Printing and engraving expenses | ||||
Miscellaneous | ||||
Total | ||||
Item 14. | Indemnification of Directors and Officers. |
Item 15. | Recent Sales of Unregistered Securities. |
II-1
Table of Contents
Date of Offering | Description of Offering | Basis of Exemption | ||||
December 1, 2003 | 2,123,453 shares of class A preferred stock issued in the acquisition of 80% of the outstanding capital stock Community Financial Group | Rule 147 | ||||
December 3, 2003 | 2,374,143 (split adjusted) shares of common stock issued in a cash offering at $35 per share | Rule 147 | ||||
During 2003 | 4,500 (split adjusted) shares of common stock issued upon exercise of stock options at exercise prices ranging from $7.33 to $9.33 per share and 17,461 (split adjusted) shares of common stock issued pursuant to an employee stock bonus plan | Rule 701 | ||||
During 2003 | 8,197 shares of class A preferred stock issued upon exercise of stock options, at a converted exercise price of $0.17 per share | Rule 701 | ||||
During 2004 | 2,418 shares of class A preferred stock issued upon the exercise of stock options, at a converted exercise price of $0.17 per share | Rule 701 | ||||
January 1, 2005 | 3,750,813 (split adjusted) shares of common stock issued in the acquisition of 67.8% of the outstanding capital stock of TCBancorp | Rule 147 | ||||
June 1, 2005 | 162,039 shares of class B preferred stock issued in the acquisition of 100% of the outstanding capital stock of Marine Bancorp | Rule 506 | ||||
September 1, 2005 | 335,526 (split adjusted) shares of common stock issued in the acquisition of 100% of the outstanding capital stock of Mountain View Bancshares | Rule 147 | ||||
During 2005 | 40,041 (split adjusted) shares of common stock issued upon exercise of stock options, at exercise prices ranging from $7.33 to $12.67 per share | Rule 701 | ||||
During 2005 | 15,366 shares of class A preferred stock issued upon exercise of stock options, at a converted exercise price of $0.17 per share | Rule 701 | ||||
During 2005 | 7,040 shares of class B preferred stock issued upon exercise of stock options, at a converted exercise price of $18.41 per share | Rule 701 | ||||
From January 1, 2006 through February 28, 2006 | 16,174 (split adjusted) shares of common stock issued upon exercise of stock options, at exercise prices ranging from $7.33 to $12.67 per share | Rule 701 |
II-2
Table of Contents
Date of Offering | Description of Offering | Basis of Exemption | ||||
From January 1, 2006 through February 28, 2006 | 14,617 shares of class A preferred shares issued upon exercise of stock options, at a converted exercise price of $0.17 per share | Rule 701 | ||||
From January 1, 2006 through February 28, 2006 | 950 shares of class B preferred stock issued upon exercise of options, at a converted exercise price of $18.41 per share | Rule 701 |
Item 16. | Exhibits and Financial Statement Schedules. |
Exhibit | ||||||
Number | Description | |||||
1 | — | Form of Underwriting Agreement* | ||||
2 | .1 | — | Agreement and Plan of Merger, dated as of July 30, 2003, between CB Bancorp, Inc. and Home BancShares, Inc. and Community Financial Group, Inc.† | |||
2 | .2 | — | Agreement and Plan of Merger, dated as of December 3, 2004, between Home BancShares, Inc. and TCBancorp, Inc.† | |||
2 | .3 | — | Agreement and Plan of Merger, dated as of January 25, 2005, between Home BancShares, Inc. and Marine Bancorp, Inc.† | |||
2 | .4 | — | Stock Purchase Agreement, dated as of April 20, 2005, among Home BancShares, Inc. and the Shareholders of Mountain View Bancshares, Inc. and Mountain View Bancshares, Inc.† | |||
3 | .1 | — | Restated Articles of Incorporation of Home BancShares, Inc., as amended.† | |||
3 | .2 | — | Amendment to the Restated Articles of Incorporation of Home BancShares, Inc.† | |||
3 | .3 | — | Second Amendment to the Restated Articles of Incorporation of Home BancShares, Inc.† | |||
3 | .4 | — | Third Amendment to the Restated Articles of Incorporation of Home BancShares, Inc.† | |||
3 | .5 | — | Restated Bylaws of Home BancShares, Inc.† | |||
4 | .1 | — | Restated Articles of Incorporation of Home BancShares, Inc. (included in Exhibit 3.1)† | |||
4 | .2 | — | Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (included in Exhibit 3.2)† | |||
4 | .3 | — | Second Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (included in Exhibit 3.3)† | |||
4 | .4 | — | Third Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (included in Exhibit 3.4)† | |||
4 | .5 | — | Restated Bylaws of Home BancShares, Inc. (included in Exhibit 3.5)† | |||
4 | .6 | — | Specimen Stock Certificate representing Home BancShares, Inc. Common Stock* | |||
4 | .7 | — | Indenture, dated as of September 7, 2000, between Community Financial Group, Inc. and U.S. Bank National Association (f/k/a State Street Bank and Trust Company of Connecticut, National Association)† | |||
4 | .8 | — | Amended and Restated Declaration of Trust, dated as of September 7, 2000, by and among Community Financial Group, Inc. and U.S. Bank National Association (f/k/a State Street Bank and Trust Company of Connecticut, National Association) and Joseph Park and David Pickney, as Administrators† | |||
4 | .9 | — | Guarantee Agreement, dated as of September 7, 2000, between Community Financial Group, Inc. and U.S. Bank National Association (f/k/a State Street Bank and Trust Company of Connecticut, National Association)† | |||
4 | .10 | — | Indenture, dated as of March 26, 2003, between Home BancShares, Inc. and U.S. Bank National Association† |
II-3
Table of Contents
Exhibit | ||||||
Number | Description | |||||
4 | .11 | — | Amended and Restated Declaration of Trust, dated as of March 26, 2003, by and among Home BancShares, Inc. and U.S. Bank National Association and John W. Allison, C. Randall Sims and Randy Mayor, as Administrators† | |||
4 | .12 | — | Guarantee Agreement, dated as of March 26, 2003, between Home BancShares, Inc. and U.S. Bank National Association† | |||
4 | .13 | — | Indenture, dated as of March 26, 2003, between Marine Bancorp, Inc. and U.S. Bank National Association† | |||
4 | .14 | — | Amended and Restated Declaration of Trust, dated as of March 26, 2003, by and among Marine Bancorp, Inc. and U.S. Bank National Association and William S. Daniels and Hunter Padgett, as Administrators† | |||
4 | .15 | — | Guarantee Agreement, dated as of March 26, 2003, between Marine Bancorp, Inc. and U.S. Bank National Association† | |||
4 | .16 | — | Indenture, dated as of November 10, 2005, between Home BancShares, Inc. and U.S. Bank National Association† | |||
4 | .17 | — | Amended and Restated Declaration of Trust, dated as of November 10, 2005, by and among Home BancShares, Inc. and U.S. Bank National Association and Randy Mayor and Ron Strother, as Administrators† | |||
4 | .18 | — | Guarantee Agreement, dated as of November 10, 2005, between Home BancShares, Inc. and U.S. Bank National Association† | |||
5 | — | Opinion of Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. as to the validity of the shares of common stock being offered* | ||||
10 | .1 | — | 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc.† | |||
10 | .2 | — | Director and Executive Officer Compensation Summary† | |||
10 | .3 | — | 401(k) Plan of Home BancShares, Inc.† | |||
10 | .4 | — | Retirement Plan of Bank of Cabot, as amended and restated effective January 1, 2001† | |||
10 | .5 | — | Retirement Plan and Trust for Employees of Bank of Mountain View, as amended and restated effective September 1, 2005† | |||
10 | .6 | — | Lease Agreement, dated as of January 2000, between First State Bank of Conway and Trinity Development Company, Inc.† | |||
10 | .7 | — | Lease Agreement, dated as of February 1, 2001, between Twin City Bank and Lakewood Village Shopping Park† | |||
10 | .8 | — | Lease Agreement, dated as of April 2003, between First State Bank and Allison, Adcock, Rankin, LLC† | |||
10 | .9 | — | Lease Agreement, dated as of September 1, 2004, between First State Bank and Robert H. “Bunny” Adcock, Jr. Blind Trust Agreement dtd 6/4/03† | |||
10 | .10 | — | Lease Extension, dated December 2, 2004, between First State Bank and Trinity Development Company, Inc.† | |||
10 | .11 | — | Lease Agreement, dated August 31, 2005, between Home BancShares, Inc. and Allison, Adcock, Rankin, LLC† | |||
10 | .12 | — | Promissory Note, dated as of September 1, 2005, by Home BancShares, Inc. in favor of First Tennessee Bank National Association† | |||
10 | .13 | — | Commercial Pledge Agreement, dated as of September 1, 2005, between Home BancShares, Inc. and First Tennessee Bank National Association† | |||
10 | .14 | — | Business Loan Agreement, dated as of September 1, 2005, between Home BancShares, Inc. and First Tennessee Bank National Association† | |||
10 | .15 | — | Agreement and Plan of Merger, dated as of July 30, 2003, between CB Bancorp, Inc. and Home BancShares, Inc. and Community Financial Group, Inc. (included in Exhibit 2.1)† | |||
10 | .16 | — | Agreement and Plan of Merger, dated as of December 3, 2004, between Home BancShares, Inc. and TCBancorp, Inc. (included in Exhibit 2.2)† |
II-4
Table of Contents
Exhibit | ||||||
Number | Description | |||||
10 | .17 | — | Agreement and Plan of Merger, dated as of January 25, 2005, between Home BancShares, Inc. and Marine Bancorp, Inc. (included in Exhibit 2.3)† | |||
10 | .18 | — | Stock Purchase Agreement, dated as of April 20, 2005, among Home BancShares, Inc. and the Shareholders of Mountain View Bancshares, Inc. and Mountain View Bancshares, Inc. (included in Exhibit 2.4)† | |||
16 | .1 | — | Letter from Ernst & Young, LLP re change in certifying accountant† | |||
21 | — | Subsidiaries of Home BancShares† | ||||
23 | .1 | — | Consent of BKD, LLP | |||
23 | .2 | — | Consent of Ernst & Young, LLP | |||
23 | .3 | — | Consent of Hacker, Johnson & Smith, P.A | |||
23 | .4 | — | Consent of BKD, LLP | |||
23 | .5 | — | Consent of Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. (included in Exhibit 5)* | |||
23 | .6 | — | Awareness of BKD, LLP | |||
24 | — | Power of Attorney (on signature page)† |
* | To be filed by subsequent amendment. |
† | Previously filed. |
Item 17. | Undertakings. |
(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. | |
(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
II-5
Table of Contents
HOME BANCSHARES, INC. | |
By: /s/John W. Allison | |
John W. Allison | |
Chief Executive Officer and | |
Chairman of the Board of Directors |
Signature | Title | Date | ||||
/s/John W. Allison | Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) | May 12, 2006 | ||||
/s/Ron W. Strother* | President, Chief Operating Officer and Director | May 12, 2006 | ||||
/s/Randy E. Mayor | Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) | May 12, 2006 | ||||
/s/Richard H. Ashley* | Vice Chairman of the Board and Director | May 12, 2006 | ||||
/s/Dale A. Bruns* | Director | May 12, 2006 | ||||
/s/Richard A. Buckheim* | Director | May 12, 2006 | ||||
/s/Jack E. Engelkes* | Director | May 12, 2006 | ||||
/s/Frank D. Hickingbotham* | Director | May 12, 2006 | ||||
/s/Herren C. Hickingbotham* | Director | May 12, 2006 | ||||
/s/James G. Hinkle* | Director | May 12, 2006 |
II-6
Table of Contents
Signature | Title | Date | ||||
/s/Alex R. Lieblong* | Director | May 12, 2006 | ||||
/s/C. Randall Sims* | Secretary and Director | May 12, 2006 | ||||
/s/William G. Thompson* | Director | May 12, 2006 |
* | By Randy E. Mayor, pursuant to power of attorney. |
II-7
Table of Contents
Exhibit | ||||||
Number | Description | |||||
1 | — | Form of Underwriting Agreement* | ||||
2 | .1 | — | Agreement and Plan of Merger, dated as of July 30, 2003, between CB Bancorp, Inc. and Home BancShares, Inc. and Community Financial Group, Inc.† | |||
2 | .2 | — | Agreement and Plan of Merger, dated as of December 3, 2004, between Home BancShares, Inc. and TCBancorp, Inc.† | |||
2 | .3 | — | Agreement and Plan of Merger, dated as of January 25, 2005, between Home BancShares, Inc. and Marine Bancorp, Inc.† | |||
2 | .4 | — | Stock Purchase Agreement, dated as of April 20, 2005, among Home BancShares, Inc. and the Shareholders of Mountain View Bancshares, Inc. and Mountain View Bancshares, Inc.† | |||
3 | .1 | — | Restated Articles of Incorporation of Home BancShares, Inc., as amended.† | |||
3 | .2 | — | Amendment to the Restated Articles of Incorporation of Home BancShares, Inc.† | |||
3 | .3 | — | Second Amendment to the Restated Articles of Incorporation of Home BancShares, Inc.† | |||
3 | .4 | — | Third Amendment to the Restated Articles of Incorporation of Home BancShares, Inc.† | |||
3 | .5 | — | Restated Bylaws of Home BancShares, Inc.† | |||
4 | .1 | — | Restated Articles of Incorporation of Home BancShares, Inc. (included in Exhibit 3.1)† | |||
4 | .2 | — | Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (included in Exhibit 3.2)† | |||
4 | .3 | — | Second Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (included in Exhibit 3.3)† | |||
4 | .4 | — | Third Amendment to the Restated Articles of Incorporation of Home BancShares, Inc. (included in Exhibit 3.4)† | |||
4 | .5 | — | Restated Bylaws of Home BancShares, Inc. (included in Exhibit 3.5)† | |||
4 | .6 | — | Specimen Stock Certificate representing Home BancShares, Inc. Common Stock* | |||
4 | .7 | — | Indenture, dated as of September 7, 2000, between Community Financial Group, Inc. and U.S. Bank National Association (f/k/a State Street Bank and Trust Company of Connecticut, National Association)† | |||
4 | .8 | — | Amended and Restated Declaration of Trust, dated as of September 7, 2000, by and among Community Financial Group, Inc. and U.S. Bank National Association (f/k/a State Street Bank and Trust Company of Connecticut, National Association) and Joseph Park and David Pickney, as Administrators† | |||
4 | .9 | — | Guarantee Agreement, dated as of September 7, 2000, between Community Financial Group, Inc. and U.S. Bank National Association (f/k/a State Street Bank and Trust Company of Connecticut, National Association)† | |||
4 | .10 | — | Indenture, dated as of March 26, 2003, between Home BancShares, Inc. and U.S. Bank National Association† | |||
4 | .11 | — | Amended and Restated Declaration of Trust, dated as of March 26, 2003, by and among Home BancShares, Inc. and U.S. Bank National Association and John W. Allison, C. Randall Sims and Randy Mayor, as Administrators† | |||
4 | .12 | — | Guarantee Agreement, dated as of March 26, 2003, between Home BancShares, Inc. and U.S. Bank National Association† | |||
4 | .13 | — | Indenture, dated as of March 26, 2003, between Marine Bancorp, Inc. and U.S. Bank National Association† | |||
4 | .14 | — | Amended and Restated Declaration of Trust, dated as of March 26, 2003, by and among Marine Bancorp, Inc. and U.S. Bank National Association and William S. Daniels and Hunter Padgett, as Administrators† | |||
4 | .15 | — | Guarantee Agreement, dated as of March 26, 2003, between Marine Bancorp, Inc. and U.S. Bank National Association† | |||
4 | .16 | — | Indenture, dated as of November 10, 2005, between Home BancShares, Inc. and U.S. Bank National Association† | |||
4 | .17 | — | Amended and Restated Declaration of Trust, dated as of November 10, 2005, by and among Home BancShares, Inc. and U.S. Bank National Association and Randy Mayor and Ron Strother, as Administrators† |
Table of Contents
Exhibit | ||||||
Number | Description | |||||
4 | .18 | — | Guarantee Agreement, dated as of November 10, 2005, between Home BancShares, Inc. and U.S. Bank National Association† | |||
5 | — | Opinion of Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. as to the validity of the shares of common stock being offered* | ||||
10 | .1 | — | 2006 Stock Option and Performance Incentive Plan of Home BancShares, Inc.† | |||
10 | .2 | — | Director and Executive Officer Compensation Summary† | |||
10 | .3 | — | 401(k) Plan of Home BancShares, Inc.† | |||
10 | .4 | — | Retirement Plan of Bank of Cabot, as amended and restated effective January 1, 2001† | |||
10 | .5 | — | Retirement Plan and Trust for Employees of Bank of Mountain View, as amended and restated effective September 1, 2005† | |||
10 | .6 | — | Lease Agreement, dated as of January 2000, between First State Bank of Conway and Trinity Development Company, Inc.† | |||
10 | .7 | — | Lease Agreement, dated as of February 1, 2001, between Twin City Bank and Lakewood Village Shopping Park† | |||
10 | .8 | — | Lease Agreement, dated as of April 2003, between First State Bank and Allison, Adcock, Rankin, LLC† | |||
10 | .9 | — | Lease Agreement, dated as of September 1, 2004, between First State Bank and Robert H. “Bunny” Adcock, Jr. Blind Trust Agreement dtd 6/4/03† | |||
10 | .10 | — | Lease Extension, dated December 2, 2004, between First State Bank and Trinity Development Company, Inc.† | |||
10 | .11 | — | Lease Agreement, dated August 31, 2005, between Home BancShares, Inc. and Allison, Adcock, Rankin, LLC† | |||
10 | .12 | — | Promissory Note, dated as of September 1, 2005, by Home BancShares, Inc. in favor of First Tennessee Bank National Association† | |||
10 | .13 | — | Commercial Pledge Agreement, dated as of September 1, 2005, between Home BancShares, Inc. and First Tennessee Bank National Association† | |||
10 | .14 | — | Business Loan Agreement, dated as of September 1, 2005, between Home BancShares, Inc. and First Tennessee Bank National Association† | |||
10 | .15 | — | Agreement and Plan of Merger, dated as of July 30, 2003, between, CB Bancorp, Inc. and Home BancShares, Inc. and Community Financial Group, Inc. (included in Exhibit 2.1)† | |||
10 | .16 | — | Agreement and Plan of Merger, dated as of December 3, 2004, between Home BancShares, Inc. and TCBancorp, Inc. (included in Exhibit 2.2)† | |||
10 | .17 | — | Agreement and Plan of Merger, dated as of January 25, 2005, between Home BancShares, Inc. and Marine Bancorp, Inc. (included in Exhibit 2.3)† | |||
10 | .18 | — | Stock Purchase Agreement, dated as of April 20, 2005, among Home BancShares, Inc. and the Shareholders of Mountain View Bancshares, Inc. and Mountain View Bancshares, Inc. (included in Exhibit 2.4)† | |||
16 | .1 | — | Letter from Ernst & Young, LLP re change in certifying accountant† | |||
21 | — | Subsidiaries of Home BancShares† | ||||
23 | .1 | — | Consent of BKD, LLP | |||
23 | .2 | — | Consent of Ernst & Young, LLP | |||
23 | .3 | — | Consent of Hacker, Johnson & Smith, P.A. | |||
23 | .4 | — | Consent of BKD, LLP | |||
23 | .5 | — | Consent of Mitchell, Williams, Selig, Gates & Woodyard, P.L.L.C. (included in Exhibit 5)* | |||
23 | .6 | — | Awareness of BKD, LLP | |||
24 | — | Power of Attorney (on signature page)† |
* | To be filed by subsequent amendment. |
† | Previously filed. |