SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 333-88073
VISION BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Alabama 63-1230752
- ------------------------ ---------------------------------
(State of Incorporation) (IRS Employer Identification No.)
2201 West 1st Street
Gulf Shores, Alabama 36542
----------------------------------------
(Address of principal executive offices)
(251) 967-4212
-------------------------------
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No
--- ---
As of April 30, 2002, Vision Bancshares had 1,043,850 shares of common stock
outstanding.
Transitional Small Business Disclosure Format (Check one): Yes No X
--- ---
VISION BANCSHARES
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Consolidated Statements of Financial Condition
March 31, 2002 (unaudited) and December 31, 2001................ 2
Consolidated Statements of Income (unaudited) Three months
ended March 31, 2002 and March 31, 2001......................... 3
Consolidated Statements of Comprehensive Income (unaudited)
Three months ended March 31, 2002 and March 31, 2001............ 4
Consolidated Statements of Cash Flows (unaudited) Three
months ended March 31, 2002 and March 31, 2001.................. 5
Notes to Consolidated Financial Statements...................... 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 9
PART II. OTHER INFORMATION
Item 2 Changes in Securities........................................... 15
Item 5 Other Information............................................... 15
Item 6 Exhibits and Reports............................................ 16
SIGNATURES.............................................................. 17
INDEX TO EXHIBITS....................................................... 18
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
VISION BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
March 31, December 31,
2002 2001
---------------- ---------------
(Unaudited)
Assets
Cash $ 941,983 $ 645,080
Due from and federal funds sold 4,618,762 4,100,457
Investment securities available for sale 12,544,174 12,308,456
Loans 84,875,788 78,194,990
Less: Allowance for loan losses (1,102,811) (1,013,340)
------------ -----------
Loans, net 83,772,977 77,181,650
Premises and equipment, net 1,149,846 1,055,337
Accrued interest receivable 554,325 596,544
Deferred tax benefit 563,038 554,007
Other assets 456,534 1,310,100
------------ -----------
$104,601,639 $97,751,631
Total Assets ============ ===========
Liabilities and Stockholders' Equity
Deposits:
Noninterest-bearing $ 8,309,211 $ 6,733,749
Interest bearing 85,701,818 80,335,967
------------ -----------
Total Deposits 94,011,029 87,069,716
Accrued interest payable 190,197 234,957
Other liabilities 164,165 204,306
------------ -----------
Total Liabilities 94,365,391 87,508,979
Stockholders' Equity
Common stock, $1.00 par value; 10,000,000 authorized;
authorized; 1,043,850 and 1,043,280 shares issued and
outstanding at March 31, 2002 and December 31, 2001,
respectively 1,043,850 1,043,280
Preferred stock $1.00 par value;
1,000,000 authorized; -0- shares issued and outstanding - -
Additional paid-in capital 10,215,937 10,210,697
Retained earnings (1,021,466) (1,002,228)
Accumulated other comprehensive income (loss), net of taxes (2,073) (9,097)
------------ -----------
Total Stockholders' Equity 10,236,248 10,242,652
------------ -----------
Total Liabilities and Stockholders' Equity $104,601,639 $97,751,631
============ ===========
See Notes to Consolidated Financial Statements
2
VISION BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended March 31,
------------------------------
2002 2001
------------ ---------------
Interest Income:
Interest and fees on loans $1,663,237 $1,013,846
Interest and dividends on investment
securities-AFS 176,199 130,037
Interest income on federal funds sold 10,973 78,578
Other interest income 300 4,091
---------- ----------
Total interest income 1,850,709 1,226,552
Interest Expense:
Interest on deposits 765,108 627,542
Interest on federal funds purchased 96 -
Other short-term borrowings - -
---------- ----------
Total interest expense 765,204 627,542
Net interest income, before provision for
loan losses 1,085,505 599,010
Provision for loan losses 153,907 164,188
---------- ----------
Net interest income, after provision for
loan losses 931,598 434,822
Noninterest Income:
Service charges on deposits accounts 89,374 30,024
Other noninterest income 146,884 51,900
---------- ----------
Total noninterest income 236,258 81,924
Noninterest Expense:
Salaries and benefits 734,319 361,991
Net occupancy 107,064 50,557
Equipment expense 42,848 24,439
Data processing expense 40,719 19,721
Organization expense 32,415 -
Professional fees 55,689 26,506
Printing and office supplies 31,726 35,429
Advertising expense 22,855 11,427
Other noninterest expense 132,598 131,879
---------- ----------
Total noninterest expense 1,200,233 661,949
---------- ----------
Loss before income taxes (32,377) (145,203)
Income tax benefit (13,138) -
---------- ----------
Net loss $ (19,239) $ (145,203)
========== ==========
Loss per share - basic & diluted $ (0.02) $ (0.17)
========== ==========
Average number of shares outstanding 1,043,481 839,337
========== ==========
See Notes to Consolidated Financial Statements.
3
VISION BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended March 31,
------------------------------
2002 2001
------------------------------
Net loss $(19,239) $(145,203)
Other comprehensive income, net of income taxes:
Unrealized gains/(losses) on investment securities
available for sale arising during the period, net
of income taxes 7,025 47,740
-------- ---------
Other comprehensive loss $(12,214) $ (97,463)
======== =========
See Notes to Consolidated Financial Statements
4
VISION BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
-------------------------------
2002 2001
------------ -----------------
Cash Flows From Operating Activities:
Net loss $ (19,239) $ (145,203)
Adjustments to reconcile net income to net cash provided by
operations
Provision for loan losses 153,907 164,188
Depreciation and amortization 14,334 11,903
Deferred income tax benefit (13,138) -
(Increase)/decrease in accrued interest receivable 42,219 (54,573)
Increase/(decrease) in accrued interest payable (44,760) 16,859
(Increase)/decrease in other assets 853,565 (109,632)
Increase/(decrease) in other liabilities (40,141) (107,786)
----------- ------------
Net cash provided by (used in) operating activities 946,747 (224,244)
Cash Flows From Investing Activities:
Purchase of investment securities available for sale (1,770,722) (975,541)
Proceeds from maturities of investment securities available
of sale 1,566,422 538,419
Net (increase)/decrease in loans outstanding (6,745,234) (13,765,319)
Purchase of premises and equipment (129,128) (234,364)
----------- ------------
Net cash provided by (used in) investing activities (7,078,662) (14,436,805)
Cash Flows From Financing Activities:
Net increase/(decrease) in demand, savings and time deposits 6,941,313 8,947,725
Proceeds from the issuance of common stock 5,810 1,700
----------- ------------
Net cash provided by (used in) financing activities 6,947,123 8,949,425
----------- ------------
Net increase/(decrease) in cash and cash equivalents 815,208 (5,711,624)
Cash and cash equivalents at beginning of period 4,745,537 9,791,590
----------- ------------
Cash and cash equivalents at end of period $ 5,560,745 $ 4,079,966
=========== ============
Supplemental Cash Flow Information:
Cash paid during period for interest $ 809,964 $ 610,683
Cash paid during period for income taxes $ - $ -
See Notes to Consolidated Financial Statements.
5
VISION BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1: General
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and with the instruction to Form 10-QSB and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
necessary for the fair presentation of the consolidated financial statements
have been included. All such adjustments are of a normal recurring nature.
Certain amounts in the prior year's financial statements have been reclassified
to conform to the 2002 presentation. These reclassifications had no effect on
net income.
The results of operations for the three months ended March 31, 2002 are not
necessarily indicative of the results of operations that may be expected for the
year ending December 31, 2002. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB and the related amendments for the year
ended December 31, 2001.
On March 22, 2002, Articles of Incorporation were filed with the Alabama
Secretary of State to incorporate Vision Bancshares Financial Group, Inc. as a
wholly owned insurance subsidiary of Vision Bank, the wholly owned bank
subsidiary of Vision Bancshares, Inc. On April 2, 2002, an application was filed
with the Alabama Department of Insurance to qualify Vision Bancshares Financial
Group, Inc. as an insurance agency. This application is still pending and Vision
Bancshares Financial Group, Inc. is currently an inactive corporation.
Note 2: Financial Instruments with Off-Balance Sheet Risk
During 2001, Vision Bank became a member of the Federal Home Loan Bank of
Atlanta (FHLB-Atlanta). As a result, the Bank has access to different credit
plans offered through the FHLB-Atlanta. At March 31, 2002, the Bank had not
drawn on these credit lines, but had established a credit availability limit of
approximately $7,000,000.
6
Note 3: Related Party Transactions
In March 2002, Vision Bank entered into a lease agreement, as the tenant, with
Gulf Shores Investment Group, LLC, an Alabama limited liability company,
pursuant to which Vision Bank leased the real property on which Vision Bank's
Orange Beach, Alabama office is located. Gulf Shores Investment Group, LLC
consists of the directors of Vision Bancshares, Inc. other than Paige Ogletree.
The term of the lease was for nine years with an option to renew the lease for
three additional terms of three years each. The monthly rent on this lease is in
an amount of $10,320 per month. Lease payments to Gulf Shores Investment Group,
LLC for this lease totaled $10,320 during the quarter ended March 31, 2002.
Vision Bank also agreed to pay the landlord an additional sum to be adjusted
periodically, beginning after the first year of the lease, to coincide with the
operating cost that the landlord shall pay or becomes obligated to pay in
connection with the ownership and operation of the building. In addition, Vision
Bank agreed to pay the real estate taxes, utilities and to maintain fire and
extended coverage and general liability insurance coverage for the real
property.
Note 4: Leases
In March 2002, Vision Bank entered into a lease agreement, as the tenant, with
Gulf Shores Investment Group, LLC, an Alabama limited liability company,
pursuant to which Vision Bank leased the real property on which Vision Bank's
Orange Beach, Alabama office is located. Gulf Shores Investment Group, LLC
consists of the directors of Vision Bancshares, Inc. other than Paige Ogletree.
The term of the lease was for nine years with an option to renew the lease for
three additional terms of three years each. The monthly rent on this lease is in
an amount of $10,320 per month. Lease payments to Gulf Shores Investment Group,
LLC for this lease totaled $10,320 during the quarter ended March 31, 2002.
Vision Bank also agreed to pay the landlord an additional sum to be adjusted
periodically, beginning after the first year of the lease, to coincide with the
operating cost that the landlord shall pay or becomes obligated to pay in
connection with the ownership and operation of the building. In addition, Vision
Bank agreed to pay the real estate taxes, utilities and to maintain fire and
extended coverage and general liability insurance coverage for the real
property.
Note 5: Stock Plans
The Company has adopted an Incentive Stock Compensation ("Plan") to provide an
incentive to certain officers and key management employees of the Company and
its subsidiary. Options granted under the Plan must be at a price not less than
the fair market value of the shares at the date of grant. As of December 31,
2000, the Company had reserved 75,000 shares for issuance under the Plan. In
2001, the Company reserved additional 75,000 shares for an aggregate of 150,000
shares of common stock for issuance under the Plan. All options expire no more
than ten years from the date of grant, or 90 days after an employee's
termination. At March 31, 2002, approximately 50,500 shares remained available
for the granting of options under the Plan.
7
Note 5: Stock Plans (continued)
The Plan's Administration Committee determines vesting periods. The options
issued during 2001 and 2000 under the Plan have vesting requirements. The option
recipients are required to remain in the employment of the Company for three
years to fully vest in the options granted. These options become exercisable on
a pro-rata basis over the vesting period. 35,550 options granted under the Plan
were vested at March 31, 2002. In the event of a change in control, options
issued under this plan, become 100 percent vested.
The Company has adopted a Director Stock Plan for Directors ("Director's Plan")
whereby directors of the Company and its subsidiary may receive Common Stock in
lieu of cash directors fees. As of December 31, 2000, the Company had reserved
70,000 shares for issuance under the Director's Plan. In 2001, the Company
reserved an additional 80,000 shares for an aggregate of 150,000 shares of
common stock for issuance under the Plan. The Director's Plan Administration
Committee determines vesting periods. The options issued during 2000 and 2002,
under the Director's Plan, were 100 percent vested at the date of grant. All
options expire no more than ten years from the date of grant. At March 31, 2002,
approximately 57,000 shares remained available for the granting of options under
the Director's Plan.
The Company had adopted an Employee Stock Purchase Plan that provides active
full-time employees with a convenient way to become shareholders of the Company.
Employees will have the opportunity to subscribe to purchase shares of a series
of offerings occurring at six-month intervals. There are 7,500 shares authorized
for issuance under this Plan from authorized but unissued shares. As of March
31, 2002, 920 shares were issued under the Plan. The total subscription
liability under the Plan for all covered employees totaled 1,405 shares as of
March 31, 2002. Approximately 5,175 shares remained available for subscription
under this Plan.
Note 6: Subsequent Events
On April 16, 2002, Vision Bancshares, Inc. filed an application with the Office
of Thrift Supervision (OTS) seeking permission to organize Vision Bank, FSB as a
federal savings bank chartered by the OTS. The main office for Vision Bank,
FSB, will be located in Panama City, Florida. Vision Bank, FSB will serve as a
depository of funds and as a lender of credit for homes and other goods and
services principally to customers in Panama City, Florida and the Florida
panhandle.
On April 16, 2002, Vision Bank, the Company's wholly owned bank subsidiary,
filed a letter application with the Federal Deposit Insurance Corporation (FDIC)
and the State Banking Department seeking permission to relocate its Foley,
Alabama branch. This relocation is due to the expiration of the lease agreement
on the current Foley, Alabama branch facilities.
8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion and analysis should be read in conjunction
with the Consolidated Financial Statements and Notes presented elsewhere in this
report.
The following discussion includes "forward-looking statements" within
the meaning of section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements are not based on historical facts and may be
identified by their reference to a future period or by the use of
forward-looking terminology, such as "anticipate," "estimate," "expect," "may"
and "should." We caution you not to place undue reliance on these
forward-looking statements. Actual results could differ materially from those
indicated in such forward-looking statements due to a variety of factors. These
factors include, but are not limited to, changes in economic conditions and
government fiscal and monetary policies, changes in prevailing interest rates
and effectiveness of the Company's interest rate strategies, laws, regulations
and regulatory authorities affecting financial institutions, changes in and
effectiveness of the Company's operating or expansion strategies, geographic
concentration of the Company's assets and operations, competition from other
financial services companies, unexpected financial results or outcomes of legal
proceedings, and other risks detailed from time to time in the Company's press
releases and filings with the Securities and Exchange Commission. We undertake
no obligation to update these forward-looking statements to reflect events or
circumstances occurring after the date of this Report.
FINANCIAL CONDITION
March 31, 2002 compared to December 31, 2001
Loans
Loans comprised the largest single category of the Company's earning
assets at March 31, 2002. Loans, net of unearned income and allowance for loan
losses, were 80.1% of total assets at March 31, 2002 and 79.0% of total assets
at December 31, 2001. Total net loans were $ 83,773,000 at March 31, 2002,
representing a $6,591,000, or 8.5%, increase from the December 31, 2001 total
net loans of $77,182,000. Real estate loans increased $1,656,000, or 5.0%, to
$34,905,000 at March 31, 2002 from $33,249,000 at December 31, 2001, while
commercial loans increased $4,713,000, or 12.7%, to $41,734,000 at March 31,
2002 from $37,021,000 at December 31, 2001. Consumer and other loans increased
$312,000, or 3.9%, to $8,237,000 at March 31, 2002 from $7,925,000 at December
31, 2001. This growth in loans outstanding during the first three months of 2002
resulted from continued loan demand.
9
Investment Securities and Other Earning Assets
Investment securities increased approximately $236,000, or 1.9%, to
approximately $12,544,000 at March 31, 2002 from approximately $12,308,000 at
December 31, 2002. This growth in investment securities for the three months
ended March 31, 2002 resulted primarily from reinvestment of prior-period
principle paydowns on investment securities. The investment securities portfolio
is used to make various term investments, to provide a source of liquidity and
to serve as collateral to secure certain government deposits. At March 31, 2002,
the Company's entire investment portfolio was pledged as collateral against
government deposits. At March 31, 2002, the Bank had other short-term
investments in the form of federal funds sold of approximately $3,430,000.
Asset Quality
At March 31, 2002, the Company had non-performing assets (defined as
non-accrual loans, loans past due 90 days or greater, restructured loans,
non-accruing investment securities and other real estate) totaling $283,000,
compared to $1,316,000 in non-performing assets at December 31, 2001. This
significant reduction reflects an $872,000, or 85.7%, decline in other real
estate owned due to the sale of a large piece of foreclosed property.
Non-accrual loans declined $148,000, or 51.8%, to $138,000 at March 31, 2002
compared to $286,000 at December 31, 2001. Commercial and industrial loans
comprised 48.8% of total non-performing assets. The ratio of the allowance for
loan losses to total non-performing assets improved to 389.8% at March 31, 2002
from 77.0% at December 31, 2001. The ratio of non-performing loans to total
loans, net of unearned income, was 0.16% and the ratio of non-performing assets
to total assets was 0.27%. The Company had no restructured loans or non-accruing
investment securities at March 31, 2002. The Company had $145,000 in other real
estate owned at March 31, 2002.
The Company maintains an allowance for loan losses to absorb inherent
losses in the loan portfolio. The allowance is based upon management's estimated
range of those losses. Actual losses for these loans may vary significantly from
this estimate. The Company's allowance for loan losses was $1,103,000 and
$1,013,000 at March 31, 2002 and December 31, 2001, respectively. The ratio of
the allowance for loan losses to total loans, net of unearned income, was 1.3%
at March 31, 2002 and 1.3% at December 31, 2002. Vision Bank charged-off $65,000
during the three months ended March 31, 2002 compared to $1,000 for the same
period of 2001. Management believes that the allowance for loan losses at March
31, 2002 is adequate to absorb known risk in the Company's loan portfolio. No
assurance can be given, however, that increased loan volume, adverse economic
conditions or other circumstances will not result in increased losses in the
Company's loan portfolio or additional provisions to the allowance for loan
losses.
10
Deposits
Deposits are the Company's primary source of funds with which to
support its earning assets. Total deposits were $94,011,000 at March 31, 2002,
an increase of approximately $6,941,000, or 8.0%, over total deposits of
$87,070,000 at year-end 2001. Non-interest bearing deposits increased
$1,575,000, or 23.4%, from year-end 2001 to March 31, 2002, while
interest-bearing deposits at March 31, 2002 increased $5,366,000, or 6.7%, from
year-end 2001. Certificates of deposit of $100,000 or more decreased $1,251,000,
or 9.0%, to $12,591,000 at March 31, 2002 from approximately $13,842,000 from
year-end 2001.
Borrowed Funds
The Company had no borrowed funds outstanding at March 31, 2002 or
December 31, 2001.
Stockholders' Equity
The Company's stockholders' equity decreased $7,000, or 0.07%, from
$10,243,000 at December 31, 2001 to $10,236,000 at March 31, 2002. This decrease
resulted primarily from a net loss of $19,000, which was partially offset by
proceeds from the issuance of additional common stock for $5,000 and a reduction
of $7,000 in the accumulated other comprehensive loss, net of taxes.
Liquidity
Proceeds from the sale of stock and dividends paid by Vision Bank are
the primary source of funds available to the Company for payment of operating
expenses and dividends to its shareholders. The Board of Directors has not
declared or paid a dividend during 2002. As new corporations, it is not likely
that Vision Bancshares or Vision bank will achieve in their early years of
operations a level of profitability that would justify or allow the payment of
dividends. Vision Bancshares has not and will not likely generate any
significant earnings on its own, and it will depend upon the payment of
dividends by Vision Bank, if it is to pay dividends on its common stock. It is
expected that for at least the next year of operation for Vision Bank, all
earnings will be retained by Vision Bank for the future needs of the bank. State
and federal banking laws restrict the payment of dividends by banks, and in no
event may dividends be paid by Vision Bank during the first three years of
operation without the approval of the Alabama Banking Department and the Federal
Deposit Insurance Corporation.
The liability portion of the balance sheet provides liquidity through
various customers' interest-bearing and noninterest-bearing deposit accounts.
Funds are also available through the purchase of federal funds from other
commercial banks. As members of FHLB of Atlanta,
11
Vision Bank also has access to various credit programs to assist with liquidity
needs. Liquidity management involves the daily monitoring of the sources and
uses of funds to maintain an acceptable Company cash position.
Capital Resources
Bank regulatory authorities have placed increased emphasis on the
maintenance of adequate capital, and subsequently developed risk-based capital
guidelines. The guidelines take into consideration risk factors, as defined by
regulators, associated with various categories of assets, both on and off
balance sheet. Under the guidelines, capital strength is measured in two tiers,
which are used in conjunction with risk-adjusted assets to determine the
risk-based capital ratios. Tier I capital consists of common equity, less
goodwill and disallowed deferred tax assets. Tier II capital includes
supplemental capital components such as qualifying allowance for loan losses.
Tier I and Tier II capital components are referred to as Total Risk-Based
capital.
Tier I Leverage capital ratio is defined as the ratio of Tier I capital
to total average assets. Vision Bank has agreed with the banking regulators to
maintain a minimum Tier I Leverage capital ratio of 8.00% during the de novo
period of Vision Bank. Vision Bancshares, Inc. and Vision Bank are both
considered well capitalized at March 31, 2002 under the financial institutions
regulatory framework. The following presents Vision Bancshares, Inc. and Vision
Bank's capital position at March 31, 2002:
To Be Well
Capitalized
For Capital Under the Prompt
Adequacy Corrective Action
Actual Purposes Provisions
------------------------------ --------------------------- -----------------------------
Amount Ratio Amount Ratio Amount Ratio
------------------------------ --------------------------- -----------------------------
As of March 31, 2002
- --------------------
Total Risk-Based Capital
(to Risk-Weighted Assets)
Consolidated $11,214,847 12.73% $7,049,675 8.00% $8,812,094 10.00%
Vision Bank 10,410,407 11.82 7,046,845 8.00 8,808,556 10.00
Tier 1 Capital
(to Risk-Weighted Assets)
Consolidated 10,113,319 11.48 3,524,838 4.00 5,287,256 6.00
Vision Bank 9,309,316 10.57 3,523,423 4.00 5,285,134 6.00
Tier 1 Leverage Capital
(to Average Assets)
Consolidated 10,113,319 10.06 4,023,106 4.00 5,028,882 5.00
Vision Bank 9,309,316 9.26 4,021,059 4.00 5,026,323 5.00
12
Comparison of Results of Operations for the Three Months Ended
March 31, 2002 and March 31, 2001
Summary
The Company recorded a consolidated net operating loss after tax for
the quarter ended March 31, 2002 of $19,000, a 86.9% decrease compared to last
year's first quarter losses of $145,000. This consolidated net loss for the
first quarter of 2002 consisted of net income of $43,000 for Vision Bank and net
loss of $62,000 for Vision Bancshares, Inc. Consolidated basic and diluted net
loss per share was $0.02 for the three months ended March 31, 2002 and $0.17 for
the same period of 2001. The decrease in the Company's net loss was primarily
due to the general growth of the Company during 2001 and 2002.
Net Interest Income
Net interest income, the difference between the interest revenues on
interest-bearing assets and the cost of interest-bearing liabilities, is the
largest component of the Company's revenues. Interest income increase by $624 or
50.9% to $1,851,000 for the three months ended March 31, 2002 from $1,227,000
for the three months ended March 31, 2001. Interest and fee income on loans
increased $649 or 64.0% partially due to an increase of 108.2% in the average
loan portfolio balance to $80,792,000 for the three months ended March 31, 2002
from $38,807,000 for the comparable period in 2001. Interest income on
investment securities increased $46,000 or 35.4% primarily due to an increase in
the average securities portfolio balance of $4,935,000.
Interest expense on deposit accounts increased $137,000 or 21.8% to
$765,000 for the three months ended March 31, 2002 from $628,000 for the three
months ended March 31, 2001. Interest expense on deposits increased due to the
growth of interest bearing deposit liabilities.
As a result of these changes, net interest income, before provision for
loan losses, increased $487,000, or 81.3%, in the three months ended March 31,
2002, compared to the same period of 2001.
Provision for Loan Losses
The provision for loan losses is charged to current earnings to bring
the allowance for loan losses to a level deemed appropriate by management. The
amount of the provision for loan losses is based on the growth of the loan
portfolio, the amount of net loan losses incurred and management's estimation of
potential future losses based on an evaluation of the inherent risk in the loan
portfolio. The provision for loan losses was approximately $154,000 and $164,000
during the three months ended March 31, 2002 and 2001, respectively. This
represented a decrease of $10,000 or 6.1%. Management's decision is to maintain
the level of allowance for loan losses at a constant percentage of loans
outstanding and make provisions for actual growth
13
in the loan portfolio due to the Company's expansion activities. Management
believes the balance in the allowance for loan losses of $1,103 million at March
31, 2002 is adequate. Net charge-offs (charged-off loans less recoveries) were
$65,000 during the three months ended March 31, 2002 compared to $1,000 for the
same period of 2001.
Non-interest Income
Non-interest income for the three months ended March 31, 2002 was
$236,000, compared to $82,000 for the same period of 2001. This increase of
$154,000 was primarily due to an increase of $59,000 in service charges on
deposit accounts and an increase of $83,000 in origination and rate premiums on
mortgage loans sold in the secondary market.
Noninterest Expenses
Non-interest expenses for the three months ended March 31, 2002 were
$1,200,000, reflecting a $538,000, or 81.3%, increase over $662,000 for the same
period of 2001. The increases were mainly in salaries and employee benefits,
occupancy expense, data processing expense, and professional fees. These
increases were primarily due to the growth experienced by the Company during
this period.
Income Taxes
The income tax benefit for the three months ended March 31, 2002 was
$13,000 (an effective rate of 40.6%) compared to $0 for the comparable 2001
period. The income tax benefit was due to net losses before taxes. The Company
attempts to maximize any tax benefits and minimize any tax liabilities through
active tax planning.
14
PART II. OTHER INFORMATION
Item 2. Changes in Securities
During the first quarter of 2002, Vision Bancshares' Employee Stock Purchase
Plan issued 570 shares of common stock at 85% of the price of the shares on the
date such shares were subscribed. Under the Employee Stock Purchase Plan, 350
shares were issued at a price of $8.50 per share (85% of $10.00) and 220 shares
were issued at a price of $12.75 per share (85% of $15.00). Sales pursuant to
the Employee Stock Purchase Plan have been made in reliance upon exemptions from
registration under Section 4(2) of the Securities Act of 1933 and pursuant to
SEC Rule 701.
Item 5. Other Information
Business
On March 22, 2002, Articles of Incorporation were filed with the Alabama
Secretary of State to incorporate Vision Bancshares Financial Group, Inc. as a
wholly owned insurance subsidiary of Vision Bank, the wholly owned bank
subsidiary of Vision Bancshares, Inc. On April 2, 2002, an application was filed
with the Alabama Department of Insurance to qualify Vision Bancshares Financial
Group, Inc. as an insurance agency. This application is still pending and Vision
Bancshares Financial Group, Inc. is currently an inactive corporation.
Subsequent Events
On April 16, 2002, Vision Bancshares, Inc. filed an application with the Office
of Thrift Supervision (OTS) seeking permission to organize Vision Bank, FSB as a
federal savings bank chartered by the OTS. The main office for Vision Bank, FSB,
will be located in Panama City, Florida. Vision Bank, FSB will serve as a
depository of funds and as a lender of credit for homes and other goods and
services principally to customers in Panama City, Florida and the Florida
panhandle.
On April 16, 2002, Vision Bank, the Company's wholly owned bank subsidiary,
filed a letter application with the Federal Deposit Insurance Corporation (FDIC)
and the State Banking Department seeking permission to relocate its Foley,
Alabama branch. This relocation is due to the expiration of the lease agreement
on the current Foley, Alabama branch facilities.
15
Item 6. Exhibits and Reports
(a) The following exhibits are filed as part of this report.
Exhibit Number Description of Exhibit
- -------------- ----------------------
3.1 Amended and Restated Articles of Incorporation of Vision
Bancshares, Inc., included as Exhibit 3.1 to the
Registrant's Registration Statement on Form SB-2, Amendment
No. 1 (File Number 333-88073) and incorporated herein by
reference.
3.2 Bylaws of Vision Bancshares, Inc., included as Exhibit 3.2
to the Registrant's Registration Statement on Form SB-2
(File Number 333-88073) and incorporated herein by
reference.
10.1 Lease agreement, date March 1, 2002, between Vision Bank as
leasee and Gulf Shores Investment Group, LLC as leasor.
(b) Reports on Form 8-K
The Company did not file any Form 8-K's during the three months ended March 31,
2002.
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Vision Bancshares, Inc.
By: /s/ J. Daniel Sizemore
------------------------------------
J. Daniel Sizemore, Chairman,
Chief Executive Officer and President
Date: May 13, 2002
By: /s/ William E. Blackmon
------------------------------------
William E. Blackmon, Chief Financial
Officer and Chief Accounting Officer
Date: May 13, 2002
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INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
- -------------- ----------------------
3.1 Amended and Restated Articles of Incorporation of Vision
Bancshares, Inc., included as Exhibit 3.1 to the
Registrant's Registration Statement on Form SB-2, Amendment
No. 1 (File Number 333-88073) and incorporated herein by
reference.
3.2 Bylaws of Vision Bancshares, Inc., included as Exhibit 3.2
to the Registrant's Registration Statement on Form SB-2
(File Number 333-88073) and incorporated herein by
reference.
10.1 Lease agreement, date March 1, 2002, between Vision Bank as
leasee and Gulf Shores Investment Group, LLC as leasor.
18