U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended December 31, 1999
[ ] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended
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Commission File Number 0-23521
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GREAT PEE DEE BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 56-2050592
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
515 MARKET STREET, CHERAW, SC 29520
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(Address of principal executive office)
(843) 537-7656
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
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As of January 21, 2000, 1,874,277 shares of the issuer's common stock, $.01 par
value, were outstanding. The registrant has no other classes of securities
outstanding.
This report contains 12 pages.
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Page No.
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Part 1. FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
December 31, 1999 and June 30, 1999........................ 3
Consolidated Statements of Operations
Three Months and Six Months Ended December 31, 1999
and 1998................................................... 4
Consolidated Statements of Cash Flows
Six Months Ended December 31, 1999 and 1998................ 5
Notes to Consolidated Financial Statements................. 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security
Holders............................................ 11
Item 6. Exhibits and Reports on Form 8-K................... 11
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Part 1. Financial Information
Item 1 - Financial Statements
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Great Pee Dee Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
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December 31,
1999 June 30,
ASSETS (Unaudited) 1999*
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(In Thousands)
Cash on hand and in banks $ 940 $ 857
Interest-bearing balances in other banks 1,060 726
Investment securities available for sale, at fair value 469 450
Investment securities held to maturity, at amortized cost 4,018 3,621
Loans held for sale 157 525
Loans receivable, net 68,237 64,411
Accrued interest receivable 458 357
Premises and equipment, net 733 740
Stock in the Federal Home Loan Bank, at cost 524 524
Real estate acquired in settlement of loans 23 33
Other assets 420 357
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TOTAL ASSETS $77,039 $72,601
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts $41,530 $41,332
Advances from Federal Home Loan Bank 7,900 1,200
Accrued interest payable 49 51
Advance payments by borrowers for property taxes and
insurance 47 63
Accrued expenses and other liabilities 56 142
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TOTAL LIABILITIES 49,582 42,788
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STOCKHOLDERS' EQUITY
Preferred stock, no par value, 400,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.01 par value, 3,600,000
shares authorized; 2,224,617 shares issued 22 22
Additional paid in capital 21,607 21,530
Unearned compensation (1,710) (1,938)
Retained earnings, substantially restricted 12,126 12,006
Unrealized holding loss, net of tax (20) -
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32,025 31,620
Cost of common stock in treasury, 350,340 and
138,664 shares, respectively (4,568) (1,807)
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TOTAL STOCKHOLDERS' EQUITY 27,457 29,813
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $77,039 $72,601
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* Derived from audited financial statements
See accompanying notes.
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Great Pee Dee Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
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Three Months Ended Six Months Ended
December 31, December 31
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1999 1998 1999 1998
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(In Thousands Except
Per Share Amounts)
INTEREST INCOME
Loans $ 1,293 $ 1,129 $ 2,506 $ 2,228
Investments 81 69 159 133
Deposits in other banks and
federal funds sold 14 45 36 130
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TOTAL INTEREST INCOME 1,388 1,243 2,701 2,491
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INTEREST EXPENSE
Savings deposits 503 486 1,006 976
Borrowed funds 89 - 130 -
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TOTAL INTEREST EXPENSE 592 486 1,136 976
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NET INTEREST INCOME 796 757 1,565 1,515
PROVISION FOR LOAN LOSSES - 48 - 96
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 796 709 1,565 1,419
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NON-INTEREST INCOME 31 24 54 32
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NON-INTEREST EXPENSES
Personnel costs 248 162 497 303
Occupancy 34 27 65 47
Deposit insurance premiums 6 5 12 11
Other 105 106 196 197
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TOTAL NON-INTEREST EXPENSES 393 300 770 558
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INCOME BEFORE INCOME TAXES 434 433 849 893
PROVISION FOR INCOME TAXES 164 167 317 340
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NET INCOME $ 270 $ 266 $ 532 $ 553
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NET INCOME PER SHARE
Basic $ .15 $ .13 $ .30 $ .27
Assuming dilution .15 .13 .30 .27
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic 1,746,100 2,007,154 1,790,556 2,021,117
Assuming dilution 1,751,029 2,007,154 1,798,177 2,021,117
CASH DIVIDEND PER SHARE $ .10 $ .09 $ .19 $ .18
See accompanying notes.
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Great Pee Dee Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
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Six Months Ended
December 31,
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1999 1998
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(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 532 $ 553
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 42 23
Provision for loan losses - 96
Release of ESOP shares 77 60
Amortization of stock awards under recognition
and retention plan 166 -
Decrease in loans held for sale 368 -
Change in assets and liabilities:
Increase in accrued interest receivable (101) (36)
Decrease in accrued interest payable (2) (2)
Other (118) (134)
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 964 560
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of:
Available for sale investment securities (50) (162)
Held to maturity investment securities (500) (228)
Proceeds from maturities of held-to-maturity investments 103 -
Net increase in loans (3,826) (3,803)
Purchases of property and equipment (35) (487)
Other (10) -
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NET CASH USED
BY INVESTING ACTIVITIES (4,318) (4,680)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits 922 856
Net increase (decrease) in certificate accounts (724) 469
Proceeds from FHLB advances 6,700 -
Increase in advances from borrowers (16) (12)
Purchase of treasury stock (2,761) (766)
Cash dividends paid (350) (363)
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NET CASH PROVIDED
BY FINANCING ACTIVITIES 3,771 184
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NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 417 (3,936)
CASH AND CASH EQUIVALENTS, BEGINNING 1,583 6,923
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CASH AND CASH EQUIVALENTS, ENDING $ 2,000 $ 2,987
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See accompanying notes.
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Great Pee Dee Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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NOTE A - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial information as of and for the three and
six month periods ended December 31, 1999 and 1998, in conformity with generally
accepted accounting principles. The financial statements include the accounts of
Great Pee Dee Bancorp, Inc. (the "Company") and its wholly-owned subsidiary,
First Federal Savings and Loan Association of Cheraw ("First Federal" or the
"Bank"). Operating results for the three and six month periods ended December
31, 1999 are not necessarily indicative of the results that may be expected for
the fiscal year ending June 30, 2000.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the financial
statements filed as part of the Company's annual report on Form 10-KSB. This
quarterly report should be read in conjunction with such annual report.
NOTE B - NET INCOME PER SHARE
Basic income per share has been computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. In
accordance with generally accepted accounting principles, ESOP shares are only
considered outstanding for earnings per share calculations when they are earned
or committed to be released.
Diluted net income per share reflects the dilutive effects of unearned
recognition and retention shares and outstanding common stock options.
NOTE C - ACQUISITION OF BRANCH OFFICE
On November 5, 1999, the Company announced the signing of a definitive agreement
by which First Federal will purchase from Coastal Federal Savings Bank its
branch office located in Florence, South Carolina. The Coastal Federal Savings
Bank branch office in Florence has total deposits of approximately $23 million.
The purchase is expected to be completed during the first calendar quarter of
2000, pending regulatory approval and certain other conditions of closing.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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Comparison of Financial Condition at December 31, 1999 and June 30, 1999
The Company's total assets increased by $4.4 million during the six months ended
December 31, 1999, from $72.6 million at June 30, 1999 to $77.0 million at the
period end. Substantially all of this asset growth consisted of net loans
receivable, which increased from $64.4 million at June 30, 1999 to $68.2 million
at December 31, 1999. An increase of $6.7 million in Federal Home Loan Bank
advances, together with cash of $964,000 generated by operations, were the
primary sources for funding of the increase in loans receivable and for stock
repurchases during the six months. During the six months ended December 31,
1999, the Company purchased 211,676 treasury shares at a total cost of
approximately $2.8 million. Total stockholders' equity was $27.5 million at
December 31, 1999 as compared with $29.8 million at June 30, 1999, a decrease of
$2.3 million which resulted principally from the purchase of treasury shares. At
December 31, 1999, both the Company and the Bank continued to significantly
exceed all applicable regulatory capital requirements.
Comparison of Results of Operations for the Three Months Ended December 31, 1999
and 1998
Net Income. Net income for the quarter ended December 31, 1999 was $270,000, or
$.15 per share, as compared with net income of $266,000, or $.13 per share, for
the three months ended December 31, 1998, a net income increase of $4,000. This
relatively small increase in net income resulted principally from an increase of
$87,000 in net interest income after the provision for loan losses that was
largely offset by the recognition during the current quarter of costs of $83,000
associated with the Recognition and Retention Plan ("RRP"). Net income per share
increased because treasury share repurchases resulted in a reduction in the
weighted average number of common shares outstanding.
Net Interest Income. Net interest income for the quarter ended December 31, 1999
was $796,000 as compared with $757,000 during the quarter ended December 31,
1998, an increase of $39,000. The Company's net interest margin increased from
2.22% during the quarter ended December 31, 1998 to 2.74% for the quarter ended
December 31, 1999, as the weighted average yield on interest-earning assets
increased by 20 basis points while the weighted average cost of interest-
bearing liabilities decreased by 20 basis points. The increase in the weighted
average yield resulted principally from a larger concentration of interest-
earning assets in higher yielding loans, while the decrease in the weighted
average cost of interest-bearing liabilities resulted from lower rates paid on
customer deposit accounts. The effects of the increased margin, however, were
largely offset by a decrease of $4.0 million in the average balance of net
interest earning assets during the current quarter as compared with the
corresponding quarter of the previous year. This decrease in net interest
earning assets resulted principally from the purchase of treasury shares.
Provision for Loan Losses. There was no provision for loan losses made during
the quarter ended December 31, 1999, as compared with a provision of $48,000 for
the quarter ended December 31, 1998. There were net loan charge-offs of $10,000
during the quarter ended December 31, 1999. At December 31, 1999, nonaccrual
loans aggregated $208,000 while the allowance for loan losses stood at $444,000.
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Non-Interest Expenses. Non-interest expenses increased to $393,000 during the
quarter ended December 31, 1999 as compared with $300,000 for the quarter ended
December 31, 1998, an increase of $93,000. Direct costs of $83,000 relating to
the Company's RRP, adopted and implemented in January of 1999, were the largest
single component of this overall expense increase. In addition, occupancy costs
increased by $7,000, principally as a result of higher costs associated with the
Bank's renovated office facilities and certain costs and expenses related to the
Company's Year 2000 systems upgrades.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 37.8% and 38.6% for the quarters ended December
31, 1999 and 1998, respectively.
Comparison of Results of Operations for the Six months Ended December 31, 1999
and 1998
Net Income. Net income for the six months ended December 31, 1999 was $532,000,
or $.30 per share, as compared with net income of $553,000, or $.27 per share,
for the six months ended December 31, 1998, a net income decrease of $21,000.
This decrease in net income resulted principally because an increase of $146,000
in net interest income after the provision for loan losses was more than offset
by the recognition during the current six months of costs of $166,000 associated
with the RRP. Net income per share increased because treasury share repurchases
resulted in a reduction in the weighted average number of common shares
outstanding.
Net Interest Income. Net interest income for the six months ended December 31,
1999 was $1.6 million as compared with $1.5 million during the six months ended
December 31, 1998, an increase of $50,000. The Company's net interest margin
increased from 2.17% during the six months ended December 31, 1998 to 2.62% for
the six months ended December 31, 1999, as the weighted average yield on
interest-earning assets increased by 6 basis points while the weighted average
cost of interest-bearing liabilities decreased by 31 basis points. The increase
in the weighted average yield resulted principally from a larger concentration
of interest-earning assets in higher yielding loans, while the decrease in the
weighted average cost of interest-bearing liabilities resulted from lower rates
paid on customer deposit accounts. The effects of the increased margin, however,
were largely offset by a decrease of $3.7 million in the average balance of net
interest earning assets during the current six months as compared with the
corresponding six months of the previous year. This decrease in net interest
earning assets resulted principally from the purchase of treasury shares.
Provision for Loan Losses. There was no provision for loan losses made during
the six months ended December 31, 1999, as compared with a provision of $96,000
for the six months ended December 31, 1998. There were net loan charge-offs of
$10,000 during the six months ended December 31, 1999. At December 31, 1999,
nonaccrual loans aggregated $208,000 while the allowance for loan losses stood
at $444,000.
Non-Interest Expenses. Non-interest expenses increased to $770,000 during the
six months ended December 31, 1999 as compared with $558,000 for the six months
ended December 31, 1998, an increase of $212,000. Direct costs of $166,000
relating to the Company's RRP, adopted and implemented in January of 1999, were
the largest single component of this overall expense increase. In addition,
occupancy costs increased by $18,000, principally as a result of higher costs
associated with the Bank's renovated office facilities and certain costs and
expenses related to the Company's Year 2000 systems upgrades.
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Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 37.3% and 38.1% for the six months ended
December 31, 1999 and 1998, respectively.
Liquidity and Capital Resources
The objective of the Company's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses First
Federal's ability to meet deposit withdrawals on demand or at contractual
maturity, to repay borrowings as they mature, and to fund new loans and
investments as opportunities arise.
The Company's primary sources of internally generated funds are principal and
interest payments on loans receivable and cash flows generated from operations.
External sources of funds include increases in deposits and advances from the
FHLB of Atlanta.
First Federal is required under applicable federal regulations to maintain
specified levels of "liquid" investments in qualifying types of United States
Government, federal agency and other investments having maturities of five years
or less. Current OTS regulations require that a savings association maintain
liquid assets of not less than 4% of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less.
Monetary penalties may be imposed for failure to meet applicable liquidity
requirements. At December 31, 1999, First Federal's liquidity, as measured for
regulatory purposes, was 9.5%, or $2.5 million in excess of the minimum OTS
requirement.
First Federal is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on First
Federal's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, First Federal must meet
specific capital guidelines that involve quantitative measures of First
Federal's assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. First Federal's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors. At December 31, 1999,
First Federal's level of capital substantially exceeded all applicable
requirements.
Year 2000 Compliance Issues
The Year 2000 issue has posed business risks to most business organizations,
including the Company. In response, the Company formed a Year 2000 project team,
consisting of senior officers within the Company's operations, information
systems, financial and management areas, to ensure that the Company attained
Year 2000 compliance. All date sensitive systems were evaluated for Year 2000
compliance, with complete upgrading and testing of systems completed well in
advance of the Year 2000 date change. The Company also developed contingency
plans for its computer processes, including the use of alternative systems and
the manual processing of certain critical operations. In addition, the Company
had undertaken extensive efforts to ensure that significant vendor and customer
relationships are Year 2000 compliant. The Company's management is pleased, but
not surprised, that business continued as normal without adverse impact to the
Company during the critical date change. In coming months, the Bank will
continue monitoring external entities to assure that they have not experienced
any Year 2000 problems that could impact their relationship with the Company.
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The Company estimates that its total Year 2000 compliance costs have aggregated
approximately $175,000, including capital expenditures of approximately $141,000
and other expenses charged to operations of approximately $34,000. In addition
to the estimated costs of its Year 2000 compliance, the Company routinely makes
annual investments in technology in its efforts to improve customer service and
to efficiently manage its product and service delivery systems
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Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders was held on October 19, 1999. Of 1,984,777
shares entitled to vote at the meeting, 1,687,588 voted. The following matters
were voted on at the meeting:
1. Election of Three Directors
James C. Crawford, III, Herbert W. Watts and Cornelius B. Young were each
elected as director with at least 1,679,965 or 99% of the shares voted.
2. Ratification of Dixon Odom PLLC as independent auditors for the fiscal year
ending June 30, 2000.
Ratified with 1,676,900 or 98% of the shares voted.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
(27) Financial data schedule
(b) Reports on Form 8-K.
One report on Form 8-K was filed during the quarter ended December 31,
1999. This report was filed on November 18, 1999 to report the branch
acquisition discussed in Note C to the accompanying consolidated
financial statements.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREAT PEE DEE BANCORP, INC.
Date: January 24, 2000 By: /s/ Herbert W. Watts
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Herbert W. Watts
Chief Executive Officer
Date: January 24, 2000 By: /s/ Johnnie L. Craft
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Johnnie L. Craft
Chief Financial Officer
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