Message to Shareholders
Dear Fellow Shareholders,
It is our pleasure to present our 2nd Quarter, 2008 Financial Report to you.
Our total assets are $367,625,549, up $6,139,150, or 1.70% for the first six months of 2008. Net loans have increased by $5,602,374, or 2.12%, while deposits increased by $1,975,168, or 0.64% during this six-month period. Federal funds sold decreased as balances were used to support growth in loans and investment securities.
Stockholders’ equity increased by $68,681 for the first six months of 2008. The increase is the result of net income for the period less dividends paid and decreases in the market value of investment securities, which result in a direct charge to equity. In particular, the market value of the Bank’s investment in U.S. Government Agency preferred stock has dropped considerably due to continued turmoil in the mortgage markets. If the values decline further, management may be compelled by accounting rules to recognize a portion of the decrease in market value as a charge to current earnings. If so, the result would be a decrease to current earnings, however, stockholders’ equity would not be significantly impacted, as changes in the market value of investments are routinely recognized as an adjustment to equity. Likewise, such an adjustment will not affect the Bank’s status as being well-capitalized for regulatory capital purposes. Total stockholders’ equity at June 30, 2008 was $30,359,554, which represents a book value of $17.66 per share.
Our net income was $652,005 for the quarter ended June 30, 2008, compared to $786,930 for the same period last year. The decrease in net income was due primarily to recent decreases in interest rates. Since September 2007, the Federal Reserve has lowered its target overnight borrowing rate by 3.25%, resulting in immediate reductions in federal funds interest as well as interest on loans indexed to the prime lending rate.
As always, we appreciate your support, welcome your comments and the opportunity to serve you.
Sincerely,
Jacky K. Anderson
President and CEO
Consolidated Balance Sheets |
| | June 30, 2008 | | December 31, 2007 |
| | | | |
Assets | | | | |
Cash and due from banks | | $ 10,672,764 | | $ 10,746,139 |
Federal funds sold | | 11,850,899 | | 24,637,131 |
Investment securities | | 52,657,752 | | 42,573,226 |
Loans | | 272,121,245 | | 266,486,861 |
Less allowance for loan losses | | 2,789,755 | | 2,757,745 |
Net loans | | 269,331,490 | | 263,729,116 |
Properties and equipment | | 9,133,192 | | 8,485,058 |
Accrued interest receivable | | 3,477,017 | | 2,996,261 |
Other assets | | 10,502,435 | | 8,319,468 |
Total assets | | $ 367,625,549 | | $ 361,486,399 |
| | | | |
Liabilities | | | | |
Demand deposits | | $ 43,542,588 | | $ 44,630,854 |
Interest-bearing demand deposits | | 20,015,475 | | 20,422,189 |
Savings deposits | | 36,519,745 | | 35,822,800 |
Large denomination time deposits | | 72,896,659 | | 74,466,245 |
Other time deposits | | 138,174,395 | | 133,831,606 |
Total deposits | | 311,148,862 | | 309,173,694 |
| | | | |
FHLB Advances | | 15,000,000 | | 10,000,000 |
Other Borrowings | | 10,000,000 | | 10,000,000 |
Accrued interest payable | | 594,193 | | 536,393 |
Other liabilities | | 522,940 | | 1,485,439 |
Total liabilities | | 337,265,995 | | 331,195,526 |
| | | | |
Commitments and contingencies | | | | |
| | | | |
Stockholders’ equity | | | | |
Preferred stock, $25 par value; 500,000 shares authorized; none outstanding | | -- | | -- |
Common stock, $1.25 par value; 2,000,000 shares authorized; 1,718,968 shares issued and outstanding | | 2,148,710 | | 2,148,710 |
Surplus | | 521,625 | | 521,625 |
Retained earnings | | 29,647,374 | | 29,026,036 |
Accumulated other comprehensive income (loss) | | (1,958,155) | | (1,405,498) |
Total stockholders’ equity | | 30,359,554 | | 30,290,873 |
Total liabilities and stockholders’ equity | | $ 367,625,549 | | $ 361,486,399 |
Officers
Julian L. Givens | Chairman of the Board |
Jacky K. Anderson | President & CEO |
Dennis B. Gambill | Vice President |
Brenda C. Smith | Secretary |
Blake M. Edwards | Chief Financial Officer |
| | | | | |
Consolidated Statements of Operations |
| | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2008 | | 2007 | | 2008 | | 2007 |
| | | | | | | | |
Interest Income | | | | | | | | |
Loans and fees on loans | | $ 4,793,415 | | $ 5,176,307 | | $ 9,882,500 | | $ 10,065,117 |
Interest on securities | | 598,975 | | 429,274 | | 1,075,953 | | 859,783 |
Federal funds sold | | 85,305 | | 171,573 | | 258,758 | | 349,775 |
Total interest income | | 5,477,695 | | 5,777,154 | | 11,217,211 | | 11,274,675 |
| | | | | | | | |
Interest expense | | | | | | | | |
Deposits | | 2,412,132 | | 2,581,963 | | 5,046,566 | | 5,062,314 |
FHLB Advances | | 130,000 | | - | | 221,000 | | 20,267 |
Other Borrowings | | 120,000 | | 115,788 | | 242,000 | | 236,295 |
Total interest expense | | 2,662,132 | | 2,697,751 | | 5,509,566 | | 5,318,876 |
| | | | | | | | |
Net interest income | | 2,815,563 | | 3,079,403 | | 5,707,645 | | 5,955,799 |
| | | | | | | | |
Provision for loan losses | | 125,000 | | 75,000 | | 200,000 | | 135,000 |
Net interest income after provision for loan losses | | 2,690,563 | | 3,004,403 | | 5,507,645 | | 5,820,799 |
| | | | | | | | |
Other income | | | | | | | | |
Service charges on deposit accounts | | 241,959 | | 224,582 | | 459,483 | | 342,762 |
Other income | | 358,470 | | 209,224 | | 623,374 | | 664,733 |
Total other income | | 600,429 | | 433,806 | | 1,082,857 | | 1,007,495 |
| | | | | | | | |
Other expenses | | | | | | | | |
Salaries and employee benefits | | 1,493,643 | | 1,422,051 | | 2,925,720 | | 2,801,094 |
Occupancy expense | | 92,328 | | 90,110 | | 181,035 | | 177,438 |
Equipment expense | | 240,378 | | 219,663 | | 451,340 | | 420,107 |
Other expense | | 616,638 | | 585,955 | | 1,222,102 | | 1,102,763 |
Total other expense | | 2,442,987 | | 2,317,779 | | 4,780,197 | | 4,501,402 |
Net income before income taxes | | 848,005 | | 1,120,430 | | 1,810,305 | | 2,326,892 |
| | | | | | | | |
Income taxes | | 196,000 | | 333,500 | | 467,000 | | 696,000 |
Net income | | $ 652,005 | | $ 786,930 | | $ 1,343,305 | | $ 1,630,892 |
Net income per share | | $ .38 | | $ .46 | | $ .78 | | $ .95 |
Weighted average shares outstanding | | 1,718,968 | | 1,718,968 | | 1,718,968 | | 1,718,968 |
Board of Directors
Julian L. Givens | Retired Physician | |
Carl J. Richardson | Retired | |
Jacky K. Anderson | Grayson BankShares, Inc. and The Grayson National Bank | |
Jean W. Lindsey | Walters’ Drug, Inc. | |
Dennis B. Gambill | Grayson BankShares, Inc. and The Grayson National Bank | |
Jack E. Guynn, Jr. | Guynn Enterprises, Inc. | |
Charles T. Sturgill | Grayson County Clerk of Court | |
J. David Vaughan | Vaughan Furniture | |
Thomas M. Jackson, Jr. | Attorney | |
Bryan L. Edwards | Sparta Town Manager |
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Member Federal Deposit Insurance Corporation
