EXHIBIT 28.5
Independent Auditors' Report
The Stockholders and Board of Directors
of L.S.B. Bancshares, Inc. of South Carolina
We have audited the consolidated balance sheet of L.S.B. Bancshares, Inc.
of South Carolina and subsidiaries as of December 31, 1992 and 1991, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for each of the three years in the period ended December 31, 1992.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of L.S.B. Bancshares, Inc. of
South Carolina ans subsidiaries as of December 31, 1992 and 1991, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1992, in conformity with generally accepted
accounting principles.
[SIGNATURE APPEARS HERE]
Columbia, South Carolina
March 11, 1993
Consolidated Balance Sheet
L.S.B. Bancshares, Inc. of South Carolina
- --------------------------------------------------------------------------------
(Dollars in thousands)
December 31,
-------------------
1992 1991
-------- --------
Assets
Cash and due from banks (Note 3).............................................. $ 38,741 $ 31,963
Time deposits in other banks.................................................. 100
Investment securities (estimated fair value -- 1992-$141,274;
1991-$142,492)(Note 4)..................................................... 137,779 137,589
Federal funds sold and securities purchased under agreements to resell........ 36,725 14,400
Other investments (Note 5).................................................... 16,567 9,348
Loans (Note 6 and 20)......................................................... 372,017 325,041
Unearned income............................................................. (2,246) (4,392)
Allowance for loan losses................................................... (4,716) (4,037)
-------- --------
Loans - net............................................................... 365,055 316,612
Premises and equipment - net (Note 7)......................................... 12,931 10,674
Other assets (Note 8)......................................................... 12,005 13,232
-------- --------
Total assets.............................................................. $619,803 $533,918
======== ========
Liabilities
Deposits (Note 9)
Noninterest bearing......................................................... $ 64,950 $ 47,431
Interest bearing............................................................ 474,562 430,186
-------- --------
Total deposits............................................................ 539,512 477,617
Short-term borrowings (Note 10)............................................... 32,628 14,730
Long-term debt (Note 11)...................................................... 4,000 2,000
Other liabilities............................................................. 2,831 3,219
-------- --------
Total liabilities......................................................... 578,971 497,566
-------- --------
Commitments and contingent liabilities (Note 17)
Stockholders' equity (Note 12)
Common stock - $2.50 par value; 5,000,000 shares authorized;
issued and outstanding 2,658,219 for 1992 and 2,634,057 for 1991............ 6,646 6,585
Capital surplus............................................................... 18,827 18,507
Retained earnings............................................................. 15,416 11,260
Net unrealized loss on marketable equity securities........................... (57)
-------- --------
Total stockholders' equity................................................ 40,832 36,352
-------- --------
Total liabilities and stockholders' equity................................ $619,803 $533,918
======== ========
See notes to consolidated financial statements.
Consolidated Statement of Income
L.S.B. Bancshares, Inc. of South Carolina
- --------------------------------------------------------------------------------
(Amounts in thousands, except per share)
Years Ended December 31,
-------------------------------
1992 1991 1990
------- ------- -------
Interest income
Loans, including fees......................................................... $33,244 $34,253 $34,421
Investment securities
Taxable..................................................................... 8,917 8,884 8,819
Tax-exempt.................................................................. 1,546 1,669 1,837
Trading account interest...................................................... 49
Federal funds sold and securities purchased under agreements to resell........ 774 972 1,492
Time deposits in other banks.................................................. 2 14 9
Other dividends and interest.................................................. 1,052 877 451
------- ------- -------
Total interest income..................................................... 45,584 46,669 47,029
------- ------- -------
Interest expense
Deposits...................................................................... 18,974 24,927 26,657
Short-term borrowings......................................................... 878 1,337 2,061
Long-term debt................................................................ 202 175 69
------- ------- -------
Total interest expense.................................................... 20,054 26,439 28,787
------- ------- -------
Net interest income............................................................. 25,530 20,230 18,242
Provision for loan losses (Note 6).............................................. 2,463 3,598 2,110
------- ------- -------
Net interest income after provision............................................. 23,067 16,632 16,132
------- ------- -------
Other operating income
Service charges on deposit accounts........................................... 3,074 2,989 2,705
Credit life insurance commissions............................................. 153 329 401
Gain on sale of investment securities......................................... 256 190 44
Other income.................................................................. 2,321 1,435 1,093
------- ------- -------
Total other operating income.............................................. 5,804 4,943 4,243
------- ------- -------
Other operating expenses (Note 13)
Salaries and employee benefits................................................ 10,957 9,278 8,330
Net occupancy expense......................................................... 1,087 945 940
Furniture and equipment expense............................................... 1,680 1,631 1,462
Other expense................................................................. 6,971 5,560 4,743
------- ------- -------
Total other operating expenses............................................ 20,695 17,414 15,475
------- ------- -------
Income before income taxes...................................................... 8,176 4,161 4,900
Income tax expense (Note 15).................................................... 2,407 948 841
------- ------- -------
Net income...................................................................... $ 5,769 $ 3,213 $ 4,059
======= ======= =======
Per share
Average shares outstanding.................................................... 2,643 2,621 2,599
Net income.................................................................... $ 2.18 $ 1.23 $ 1.56
See notes to consolidated financial statements.
Consolidated Statement of Changes in Stockholders' Equity
L.S.B. Bancshares, Inc. of South Carolina
- --------------------------------------------------------------------------------
(Dollars in thousands, except per share)
Net
Unrealized
Common Stock Loss on
------------------------- Marketable
Number Capital Retained Equity
of Shares Amount Surplus Earnings Securities Total
---------------------------------------------------------------------------------
Balance January 1, 1990.................... 2,591,410 $6,479 $18,050 $ 7,015 $ (153) $31,391
Net income................................. 4,059 4,059
Cash dividends declared by
merged company........................... (30) (30)
Cash dividends declared by LSB -
$.60 per share........................... (1,425) (1,425)
Sale of common stock....................... 20,098 50 222 272
Valuation adjustment on
marketable equity securities............. 40 40
---------- ------- -------- ------ -------- -------
Balance December 31, 1990.................. 2,611,508 6,529 18,272 9,619 (113) 34,307
Net income................................. 3,213 3,213
Cash dividends declared -
$.60 per share........................... (1,572) (1,572)
Sale of common stock....................... 22,549 56 235 291
Valuation adjustment on
marketable equity securities............. 113 113
--------- ------- ------- ------- --------- -------
Balance December 31, 1991.................. 2,634,057 6,585 18,507 11,260 36,352
Net income................................. 5,769 5,769
Cash dividends declared -
$.61 per share........................... (1,613) (1,613)
Sale of common stock....................... 24,162 61 320 381
Valuation adjustment on
marketable equity securities............. (57) (57)
--------- ------- -------- -------- ---------- -------
Balance December 31, 1992.................. 2,658,219 $6,646 $18,827 $15,416 $ (57) $40,832
========== ======= ======== ======== ========== =======
See notes to consolidated financial statements.
Consolidated Statement of Cash Flows
L.S.B. Bancshares, Inc. of South Carolina
- -------------------------------------------------------------------------------------------------------
(Dollars in thousands)
Years Ended December 31,
--------------------------------
1992 1991 1990
-------- -------- --------
Operating activities
Net income....................................................... $ 5,769 $ 3,213 $ 4,059
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses..................................... 2,463 3,598 2,110
Depreciation and amortization................................. 1,186 997 1,004
Writedowns of other real estate............................... 274 244 177
Deferred income taxes......................................... (394) 51 (305)
Amortization of intangibles................................... 183 51 62
Amortization of net loan fees and costs....................... 216 291 410
Accretion and premium amorization............................. 130 140 (123)
Gain on sale of investment securities......................... (256) (190) (44)
(Gain) loss on sale of other investments...................... (126) 3
(Gain) loss on sale of other real estate...................... 253 90 (66)
(Increase) decrease in interest receivable.................... 973 339 (748)
Increase (decrease) in interest payable....................... (599) (338) 148
Decrease (increase) in prepaid expenses and other receivables. 733 (897) (325)
Increase (decrease) in other accrued expenses................. 110 (107) (57)
-------- -------- --------
Net cash provided by operating activities................... 10,915 7,485 6,302
-------- -------- --------
Investing activities
Net decrease in prime deposits in other banks.................... 100 100 1
Sales of investment securities................................... 29,773 10,836 7,487
Maturities of investment securities.............................. 84,734 41,964 49,270
Purchases of investment securities............................... (114,571) (59,637) (75,814)
Sales of other investments....................................... 57,980 5,043
Purchases of other investments................................... (65,130) (9,348)
Net increase in loans made to customers.......................... (30,552) (28,771) (15,642)
Purchases of premises and equipment.............................. (3,356) (589) (640)
Sales of other real estate....................................... 2,674 1,719 1,233
Branch office acquisitions (Note 2).............................. 15,712
Other............................................................ (40)
-------- -------- --------
Net cash used by investing activities.......................... (22 ,636) (38,683) (34,145)
-------- -------- --------
Financing activities
Net increase in demand deposits, interest
checking and savings accounts.................................. 37,318 39,847 27,725
Net increase (decrease) in certificates of deposit
and other time deposits........................................ (15,160) 2,590 11,180
Net increase (decrease) in short-term borrowings................. 17,898 (3,294) (10,618)
Proceeds from long-term debt..................................... 2,000 2,000
Repayment of long-term debt...................................... (450) (50)
Sale of common stock............................................. 381 291 272
Cash dividends paid.............................................. (1,613) (1,572) (1,455)
-------- -------- --------
Net cash provided by financing activities...................... 40,824 37,412 29,054
-------- -------- --------
Increase in cash and cash equivalents............................ 29,103 6,214 1,211
Cash and cash equivalents, beginning............................. 46,363 40,149 38,938
-------- -------- --------
Cash and cash equivalents, ending................................ $ 75,466 $ 46,363 $ 40,149
======== ======== ========
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
L.S.B. Bancshares, Inc. of South Carolina
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation -- L.S.B. Bancshares, Inc.
of South Carolina (LSB), a bank holding company, and its wholly-owned
subsidiaries, The Lexington State Bank (including its wholly-owned subsidiary,
Carolina Securities Corporation) and The Community Bank of South Carolina,
provide banking services to domestic markets principally in Lexington,
Richland, Beaufort, and Hampton Counties of South Carolina. The consolidated
financial statements include the accounts of the parent company and its
subsidiaries after elimination of all significant intercompany balances and
transactions. The accounting and reporting policies of LSB and its subsidiaries
are in conformity with generally accepted accounting principles and general
practices within the banking industry.
Securities -- Investment securities are those securities that management
acquires with the intent and ability to hold until maturity. Securities chosen
for investment are selected according to several criteria including current
funding opportunities, anticipated cash flow needs, analysis of overall expected
net yield and pledging requirements. Investment securities are stated at cost,
increased by accretion of discounts and decreased by amortization of premiums
using the interest method. The gain or loss recognized on the sale of an
investment security is based on the adjusted cost of the specific certificate on
a trade date basis.
Trading account securities, primarily debt securities, are those securities that
have been purchased for resale. The carrying amounts for trading account
securities are adjusted to estimated fair value. Realized and unrealized gains
and losses resulting from such adjustments, and from recording the effects of
sales of trading account securities, are recognized in noninterest income on a
trade date basis.
Other investments include shares in mutual funds which are stated at the lower
of aggregate cost or estimated fair value. Unrealized losses on mutual funds are
recorded directly in a separate stockholders' equity account. Realized gains or
losses are determined using the specific identification method and are reflected
in income on a trade date basis.
Interest and Fees on Loans -- Interest income on installment loans is generally
recognized using the sum-of-the-months digits method. The results of using this
method were not materially different from those obtained by using the interest
method. Interest income on all other loans is recognized using the interest
method based upon the principal amounts outstanding. Loan origination and
commitment fees and certain direct loan origination costs (principally salaries
and employee benefits) are being deferred and amortized as an adjustment of the
related loan yields. Generally, these amounts are being amortized over the
contractual life of the related loans or commitments.
When a loan is 90 days past due as to interest or principal or there is serious
doubt as to collectibility, the accrual of interest income is generally
discontinued unless the estimated net realizable value of collateral is
sufficient to assure collection of the principal balance and accrued interest.
Previously accrued interest on loans placed in a nonaccrual status is reversed
against current income, and subsequent interest income is recognized when
received. When the collectibility of a significant amount of principal is in
serious doubt, the principal balance is reduced to the estimated net realizable
value of collateral by charge-off to the allowance for loan losses and any
subsequent payments are credited to the outstanding principal balance until the
loan is repaid; then, such payments are credited to the allowance for loan
losses as recoveries. A nonaccrual loan is not returned to accrual status unless
principal and interest are current and the borrower has demonstrated the ability
to continue making payments as agreed.
Allowance for Loan Losses -- An allowance for possible loan losses is maintained
at a level deemed appropriate by management to provide adequately for known and
inherent risks in the loan portfolio. The allowance is based upon a continuing
review of past loan loss experience, current economic conditions which may
affect the borrowers' ability to pay the underlying collateral value of the
loans. When it is determined that a loan will not perform substantially as
agreed, a review of the loan is initiated to ascertain whether it is more likely
than not that a loss has occurred. If it is determined that a loss is likely,
the estimated loss amount is charged off and deducted from the allowance. The
provision for possible loan losses and recoveries on loans previously charged
off are added to the allowance.
Premises and Equipment -- Premises and equipment are stated at cost, less
accumulated depreciation and amortization. The provision for depreciation and
amortization is computed by using the straight-line method. Rates of
depreciation are generally based on the following estimated useful lives:
buildings - 33 to 40 years; furniture and equipment - 3 to 15 years; leasehold
improvements - 3 to 10 years.
Other Real Estate -- Other real estate includes properties acquired through
foreclosure or acceptance of a deed in lieu of foreclosure, and loans accounted
for as in-substance foreclosures. Collateral is considered foreclosed in
substance when the borrower has little or no equity in its current fair value,
proceeds for repayment of the related loan can be expected to come only from the
operation or sale of the collateral, and the borrower has either formally or
effectively abandoned control of the collateral to LSB or has retained control
but it is doubtful that the borrower can rebuild equity or otherwise repay the
loan in the foreseeable future. Other real estate is initially recorded at the
lower of cost or the estimated fair market value less estimated selling costs.
Loan losses arising from the acquisition of such property and in recognition of
in-substance foreclosures are charged to the allowance for loan losses. An
allowance for losses on other real estate is maintained for subsequent downward
valuation adjustments.
Employee Benefit Plans -- LSB sponsors a trusteed non-contributory defined
benefit pension plan covering substantially all officers and employees meeting
certain age and service requirements. The benefits are based on years of
service and compensation during the five consecutive calendar years that
produces the highest average level of annual compensation within the last ten
years of participation. It is LSB's policy to find an amount between the
minimum funding amount required by ERISA and the maximum tax deductible
contribution. Contributions are intended to provide not only for benefits
attributed to service to date but also for those expected to be earned in the
future.
LSB also provides a trusteed profit-sharing plan which provides retirement and
other benefits to substantially all officers and employees who meet certain age
and service requirements. The plan includes a "salary reduction" feature
pursuant to Section 401(k) of the Internal Revenue Code. Under the plan and
present policies, participants are permitted to make discretionary contributions
up to 10% of annual compensation. LSB makes marching contributions of 50% of
each participants contributions until the participant's contributions reach 6%
of annual compensation.
In December 1990, the Financial Accounting Standards Board issued Statement No.
106, "Employers' Accounting for Postretirement Benefits Other Than Pensions."
This Statement requires the implementation, no later than 1993, of new
accounting and disclosure rules for benefits other than pensions, such as
postretirement health care programs. In addition, Statement No. 112, "Employers'
Accounting for Postemployment Benefits," was issued in November 1992, by the
Financial Accounting Standards Board. Statement No. 112 requires, no later than
1994, the implementation of new accounting and disclosure rules for
postemployment benefits such as payments to employees for disability, layoff, or
other event. LSB and its subsidiaries do not sponsor any postretirement
benefits, nor are any material postemployment benefits provided. Therefore, the
new requirements are not expected to have any material effect on the
consolidated financial position or results of operations of LSB.
Income Taxes -- Amounts provided for income taxes are based on income reported
for financial statement purposes. Deferred income taxes are provided for timing
differences between the period in which certain income and expense items are
recognized for financial reporting purposes and the period in which they affect
taxable income.
Earnings Per Share -- Earnings per share is calculated using the weighted
average number of shares outstanding during the year.
Statement of Cash Flows -- The statement of cash flows reports net cash
provided or used by operating, investing and financing activities and the net
effect of those flows on cash and cash equivalents. Cash equivalents include
amounts due from banks and federal funds sold and securities purchased under
agreements to recall.
During 1992, 1991 and 1990, interest paid on deposits, short-term borrowings and
long-term debt amounted to $20,653,000, $26,777,000, and $28,639,000,
respectively. Income tax payments of $2,257,000, $1,599,000, and $759,000 were
made in 1992, 1991 and 1990, respectively.
Fair Value Estimates -- Fair value estimates are made at a specific point in
time based on relevant market information about the financial instrument. These
estimates do not reflect any premium or discount that could result from offering
for sale at one time LSB's entire holdings of a particular financial instrument.
Because no active trading market exists for a significant portion of LSB's
financial instruments, fair value estimates are based on management's judgments
regarding future expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on-and-off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. For example, LSB has a substantial trust department that
contributes net fee income annually. The trust department is not a financial
instrument, and its value has not been considered into the fair value estimates.
Other significant assets and liabilities that are not considered financial
assets or liabilities include net deferred tax assets, premises and equipment
and intangible assets. In addition, the income tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect on
fair value estimates and have not been considered in the estimates.
For cash and due from banks, federal funds sold and securities purchased under
agreements to resell, accrued interest receivable and payable and short-term
borrowings, the carrying amount approximates fair value because these
instruments generally mature in 90 days or less and do not present unanticipated
credit concerns.
NOTE 2 -- BRANCH ACQUISITION
On May 7, 1992, LSB's subsidiary, The Community Bank of South Carolina, acquired
substantially all of the assets and assumed substantially all of the liabilities
of three branch offices in Beaufort, South Carolina which formerly belonged to
NationsBank of South Carolina, NA. The transaction was accounted for using the
purchase method. Accordingly, the consolidated financial statements reflect the
results of operations and the assets and liabilities of the acquired offices
since the date of acquisition. The pro forma effect of this transaction on the
consolidated operations of LSB is not material.
The principal assets acquired and liabilities assumed in the purchase are
summarized below.
(Dollars in thousands)
Loans, net...................................... $ 22,477
Premises, equipment and other assets............ 111
Intangible core deposit premium................. 1,537
Deposits and other liabilities.................. (39,837)
--------
Cash received for net liabilities assumed....... $(15,712)
========
The intangible value of core deposits represents the estimated net present value
of the future economic benefits related to use of the deposits purchased. Such
amount is being amortized in proportion to the estimated annual benefit to be
derived over a period not to exceed fifteen years.
NOTE 3 -- CASH AND DUE FROM BANKS
The banking subsidiaries are required by regulation to maintain average cash
reserve balances based on a percentage of deposits. The average amounts of the
cash reserve balances at December 31, 1992 and 1991 were approximately
$13,000,000 and $12,971,000, respectively.
NOTE 4 -- INVESTMENT SECURITIES
The aggregate carrying amount estimated fair value of investment accurities
were:
December 31,
-----------------------------------------------------------
1992 1991
-------------------------- --------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(Dollars in thousands)
U.S. Treasury and U.S. Government
agencies and corporations................................. $ 99,733 $102,357 $104,376 $108,639
Obligations of states and political subdivisions............ 22,098 22,918 25,618 26,260
Mortgage-backed securities.................................. 15,948 15,999 7,594 7,593
Other....................................................... 1
-------- -------- -------- --------
Total.................................................. $137,779 $141,274 $137,589 $142,492
======== ======== ======== ========
The aggregate carrying amount and estimated fair value of investment securities
by maturity date were as follows:
December 31,
-----------------------------------------------------------
1992 1991
-------------------------- --------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(Dollars in thousands)
Due in one year or less..................................... $ 32,506 $ 33,169 $ 43,400 $ 44,002
Due after one through five years............................ 73,403 75,487 66,905 70,359
Due after five through ten years............................ 15,922 16,619 19,689 20,538
-------- -------- -------- --------
121,831 125,275 129,994 134,899
Mortgage-backed securities.................................. 15,948 15,999 7,594 7,593
Other....................................................... 1
-------- -------- -------- --------
Total.................................................. $137,779 $141,274 $137,589 $142,492
======== ======== ======== ========
The fair value of investment securities, except certain obligations of states
and political subdivisions, is estimated based on published closing quotations
or dealers' quotes. The fair value of certain obligations of states and
political subdivisions is not readily available from market sources other than
dealer quotations; consequently, fair value estimates are based on quoted market
prices of similar instruments, adjusted for differences between the quoted
instruments and the instruments being valued.
Following are the approximate gross unrealized gains and gross unrealized losses
for investment securities:
December 31,
-----------------------------------------------------------
1992 1991
-------------------------- --------------------------
Gross Gross Gross Gross
Unrealized Unrealized Unrealized Unrealized
Gains Losses Gains Losses
------------ ---------- ---------- ----------
(Dollars in thousands)
U.S. Treasury and U.S. Government
agencies and corporations................................ $ 2,679 $ 55 $ 4,263 $
Obligations of states and political subdivisions........... 827 7 886 244
Mortage-backed securities.................................. 220 169 1
Other...................................................... 1
-------- -------- -------- --------
Total................................................. $ 3,276 $ 231 $ 5,149 $ 246
======== ======== ======== ========
The proceeds from sales of investment securities and the gross realized gains
and gross realized losses on such sales were as follows.
Years Ended December 31,
----------------------------
1992 1991 1990
------ ------ ------
(Dollars in thousands)
Proceeds from sales............................... $29,733 $10,836 $7,487
Gross realized gains.............................. 256 190 44
At December 31, 1992 and 1991, investment securities with a book value of
$122,694,000 and $97,827,000, respectively, were pledged as collateral to secure
public deposits, securities sold under agreements to repurchase, and for other
purposes.
NOTE 5 -- OTHER INVESTMENTS
Other investments are presented in the balance sheet as follows:
December 31,
----------------------
1992 1991
---------- ----------
(Dollars in thousands)
Aggregate carrying amount......................... $16,624 $9,348
Gross unrealized gains............................ 6
Gross unrealized losses........................... (57)
---------- ----------
Estimated fair value........................ $16,567 $9,354
========== ==========
The fair value of other investments is estimated based on closing quotations
published in financial newspapers.
NOTE 6 -- LOANS
Loans consisted of the following:
December 31,
-------------------------------
1992 1991
--------------------- --------
Carrying Estimated Carrying
Amount Fair Value Amount
--------- ---------- --------
(Dollars in thousands)
Commercial, financial and agricultural......... $ 56,443 $ 56,526 $ 46,034
Real estate -- construction.................... 15,247 15,231 16,775
Real estate -- mortgage........................ 235,361 236,442 193,242
Consumer installment loans..................... 64,966 65,657 68,990
--------- ---------- --------
Total loans............................... $ 372,017 $373,856 $325,041
======== ========== ========
Included in the above carrying amounts were nonperforming loans as follows:
December 31,
----------------------
1992 1991
---------- ----------
(Dollars in thousands)
Nonaccrual loans................................. $2,914 $3,544
Accruing loans 90 days or more past due.......... 298 1,224
---------- ----------
Total....................................... $3,212 $4,768
========== ==========
interest income that would have been recorded if nonaccrual loans had been in
accordance with their original terms amounted to $322,000, $430,000 and $428,000
for the years ended December 31, 1992, 1991 and 1990, respectively. Recognized
interest income on these loans was $102,000, $252,000 and $206,000 for the years
ended December 31, 1992, 1991 and 1990, respectively. There were no outstanding
commitments at December 31, 1992, to lend additional funds to debtors owing
nonaccrual loans.
Fair values are estimated for loan categories with similar financial
characteristics. Within each category, the fair value of loans is calculated by
discounting estimated cash flows through the estimated maturity using estimated
market discount rates that reflect the credit and interest rate risk inherent in
the loan. For certain categories of loans, such as variable rate loans, credit
card receivables, and other lines of credit, the carrying amount, adjusted for
credit risk, is a reasonable estimate of fair value because there is no
contractual maturity or because LSB has the ability to reprice the loans as
interest rate shifts occur. Since the discount rates are based on current loan
rates offered as well as management's estimates, the fair values presented may
not necessarily be indicative of the value negotiated in an actual sale.
Transactions in the allowance for loan losses are summarized below:
Years Ended December 31,
----------------------------------
1992 1991 1990
-------- -------- --------
(Dollars in thousands)
Balance at January 1...................... $ 4,037 $ 3,838 $ 3,570
Provision charged to expense.............. 2,463 3,598 2,110
Recoveries................................ 288 216 202
Charge-offs............................... (2,072) (3,615) (2,044)
-------- -------- --------
Balance at December 31.................... $ 4,716 $ 4,037 $ 3,838
======== ======== ========
As of December 31, 1992, there were no significant concentrations of credit risk
in any single borrower or groups of borrowers. The loan portfolio consists of
extensions of credit to businesses and individuals principally in Lexington,
Richland, Beaufort and Hampton Counties of South Carolina. Approximately 82% of
LSB's loans were made in the Lexington-Richland County area, 12% in the Hampton
County area, and 6% in the Beaufort County area. The economy of the
Lexington-Richland County area is diversified and the area is a major center of
state and county government, banking, insurance, manufacturing, service
industries and higher education. Beaufort County's economy is influenced by
tourism, the Paris Island Marine Depot and Training Center, retail businesses
and agriculture. The county is increasingly attracting retirees to live in its
coastal area. Hampton County is a rural area whose economy consists primarily of
agriculture, timber and wood products, and plastics industries. LSB's management
has established loan policies and practices that include set limitations on
loan-to-collateral value for various types of collateral, requirements for
appraisals, obtaining and maintaining current credit and financial information
to borrowers, and credit approvals.
NOTE 7 -- PREMISES AND EQUIPMENT
Premises and equipment consisted of the following:
December 31,
----------------------
1992 1991
-------- --------
(Dollars in thousands)
Land...................................... $ 2,086 $ 1,952
Buildings................................. 9,766 8,549
Leasehold improvements.................... 229 228
Furniture and equipment................... 9,599 7,623
-------- --------
Total................................ 21,680 18,352
Accumulated depreciation and
amortization............................. (8,749) (7,678)
-------- --------
Premises and equipment - net......... $ 12,931 $ 10,674
======== ========
Depreciation and amortization expense for the years ended December 31, 1992,
1991 and 1990, was $1,186,000, $997,000 and $1,004,000, respectively.
As of December 31, 1992, commitments totaling $1,769,000 had been entered into
for construction, renovations, computer equipment and software purchases for
1993.
NOTE 8 -- OTHER REAL ESTATE
Other real estate of $1,690,000 and $3,331,000, is included in other assets at
December 31, 1992 and 1991, respectively. At December 31, 1992, an allowance of
$188,000 for other real estate losses subsequent to acquisition has been
established by charges to net cost of operation of other real estate.
NOTE 9 -- DEPOSITS
Deposits consisted of the following:
December 31,
-------------------------------
1992 1991
-------------------- --------
Carrying Estimated Carrying
Amount Fair Value Amount
-------- ---------- --------
(Dollars in thousands)
Noninterest bearing demand.............. $ 64,950 $ 64,950 $ 47,431
Interest bearing transaction accounts... 208,306 208,306 171,900
Savings................................. 40,630 40,630 28,537
Time deposits $100M and over............ 42,579 43,067 42,685
Other time deposits..................... 183,047 184,247 187,064
-------- -------- --------
Total deposits...................... $539,512 $541,200 $477,617
======== ======== ========
The fair value of deposits with no stated maturity (noninterest bearing demand,
interest bearing transaction accounts and savings) is equal to the amount
payable on demand, or carrying amount, as of December 31, 1992. The fair value
of time deposits is estimated based on the discounted value of contractual cash
flows. The discount rate is estimated using the rates currently offered as of
December 31, 1992, for deposits of similar remaining maturities.
NOTE 10 -- SHORT-TERM BORROWINGS
Short-term borrowings payable were:
December 31,
--------------------
1992 1991
------- -------
(Dollars in thousands)
Federal funds purchased and securities
sold under agreements to repurchase............. $31,628 $13,730
Interest bearing demand notes issued to the
U.S. Treasury................................... 1,000 1,000
------- -------
Total......................................... $32,628 $14,730
======= =======
Federal funds purchased and securities sold under agreements to repurchase
generally mature on a one to thirty-one day basis. At December 31, 1992 and
1991, the combined weighted average interest rates related to Federal funds
purchased and securities sold under agreements to repurchase were 2.96% and
3.77%, respectively. At December 31, 1992 and 1991, the interest rates on
interest bearing notes issued to the U.S. Treasury were 2.85% and 4.02%,
respectively.
At December 31, 1992, the banking subsidiaries had unused short-term lines of
credit to purchase federal funds from unrelated banks totaling $18,500,000.
These lines of credit are available on a one to seven day basis for general
corporate purposes of the banks. All of the lenders have reserved the right to
withdraw these lines at their option.
NOTE 11--LONG-TERM DEBT
Long-term debt consisted of the following:
December 31,
----------------------
1992 1991
-------- --------
(Dollars in thousands)
L.S.B. Bancshares, Inc. of South Carolina-
5.82%, $4 million subordinated capital note,
dated 1990, with interest only due quarterly
until annual principal installments of $1,000,000
begin in 1996 with final maturity in 1999.............. $4,000 $2,000
======== ========
As of December 31, 1992, the carrying amount of LSB's long-term debt
approximates fair value because the interest rate on such debt reprices
immediately with changes in the lender's prime rate, and management is not aware
of any significant change in the credit risk associated with the debt.
Future debt maturities are as follows:
Year Ended December 31, (Dollars in thousands)
----------------------- ----------------------
1996.................................. $1,000
1997.................................. 1,000
1998.................................. 1,000
1999.................................. 1,000
------
Total............................ $4,000
======
Interest on the subordinated note fluctuates at 97% of the lender's prime rate
with LSB having certain options to fix the interest rate. The note is
subordinate to the claims of depositors. In a related loan agreement, LSB has
agreed to certain covenants including: maintenance of specified amounts of net
worth; minimum ratios of capital adequacy, income to average assets and income
to average equity; a maximum ratio of loans to deposits; maximum ratios of
problem loans and other problem assets to total loans, and that ratios of the
allowance for loan losses to problem loans and other problem assets be
maintained above prescribed levels. The loan agreement also restricts the
disposition of subsidiaries' common stock, the pledging of certain assets to
secure indebtedness, additional borrowings, and the payment of cash dividends.
Under the provisions of the loan agreement, $5,769,000 of consolidated retained
earnings are available for cash dividends after December 31, 1992, provided that
such payments would not thereafter cause net worth and ratios of capital
adequacy to decrease below the specified levels. LSB was in compliance with each
of the covenants as of December 31, 1992.
NOTE 12 -- STOCKHOLDERS' EQUITY
Sale of Common Stock -- As of July 14, 1992, LSB registered 200,000 shares of
its authorized but unissued common stock for sale through its Dividend
Reinvestment and Shareholder Stock Purchase Plan. Under this new plan, LSB is
offering all holders of its common stock the opportunity to reinvest
automatically their cash dividends in shares of common stock, and to invest up
to $1,000 in cash contributions per calendar quarter to purchase additional
shares. The price paid for shares purchased through the plan is the bid price
of the common stock reported on the NASDAQ over-the-counter market on the
trading day preceding the date an investment is made. Prior to this plan, a
dividend reinvestment plan was in effect that permitted only the reinvestment
of cash dividends to purchase shares. Shares issued under the Dividend
Reinvestment and Stock Purchase plan generally are newly issued shares.
However, LSB may purchase shares for participants in the open market.
Following is a summary of the activity in the aforementioned plans:
Years Ended December 31,
----------------------------
1992 1991 1990
-------- -------- --------
Shares reserved for Dividend Reinvestment and
Shareholder Stock Purchase Plans -- beginning.... 11,743 34,292 54,390
-------- -------- --------
Registration of additional shares.................. 200,000
--------
Shares issued to participants:
First quarter................................... 5,371 6,274 4,494
Second quarter.................................. 5,269 5,551 4,723
Third quarter................................... 4,607 5,407 4,625
Fourth quarter.................................. 8,915 5,317 6,256
-------- -------- --------
Total shares issued .......................... 24,162 22,549 20,098
-------- -------- --------
Shares reserved for Dividend Reinvestment and
Shareholder Stock Purchase Plans -- ending...... 187,581 11,743 34,292
======== ======== ========
Regulatory Capital -- LSB and its banking subsidiaries are subject to regulatory
risk-based capital adequacy standards. Under these standards, bank holding
companies and banks are required to maintain various minimum ratios of capital
to risk-weighted assets and average assets.
The following table sets forth the risk-based capital ratios of LSB and its
banking subsidiaries compared to the minimum levels prescribed by regulation:
Tier 1 Total Capital Leverage
-------- --------------- ----------
LSB....................................... 10.49% 12.65% 6.41%
The Lexington State Bank.................. 11.18% 12.39% 7.00%
The Community Bank of South Carolina...... 11.94% 13.19% 6.34%
Minimum required.......................... 4.00% 8.00% 3.00%
NOTE 13 -- OTHER OPERATING EXPENSES
Other operating expenses are summarized as follows:
Years Ended December 31,
-----------------------------
1992 1991 1990
------- ------- -------
(Dollars in thousands)
Salaries and employee benefits........................ $10,957 $ 9,278 $ 8,330
Net occupancy expense................................. 1,087 945 940
Furniture and equipment expense....................... 1,680 1,631 1,462
Other expense
Stationary, printing and supplies................... 904 746 730
Postage............................................. 612 546 467
Telephone........................................... 368 264 236
Advertising......................................... 427 377 400
Net cost of operation of other real estate.......... 509 522 251
Amortization of intangibles......................... 183 51 62
FDIC insurance assessment........................... 1,114 914 475
Other............................................... 2,854 2,140 2,122
------- ------- -------
Total............................................. $20,695 $17,414 $15,475
======= ======= =======
NOTE 14 -- RETIREMENT PLANS
The following table sets forth the funded status of LSB's pension plan and
amounts recognized in the consolidated balance sheet:
December 31,
-------------------
1992 1991
------- -------
(Dollars in thousands)
Actuarial present value of benefit obligations:
Accumulated benefit obligations, including vested
benefits of $2,272 for 1992 and $1.033 for 1991........................ $ 2,354 $ 1,080
======= =======
Projected benefit obligation for service rendered to date.................. $(4,074) $(1,714)
Plan assets at fair value, primarily listed stocks and bonds............... 2,026 1,381
------- -------
Projected benefit obligation greater than plan assets...................... (2,048) (333)
Unrecognized prior service cost............................................ 1,400 129
Unrecognized net loss...................................................... 818 248
Adjustment required to recognize minimum liability......................... (327)
------- -------
(Accrued) prepaid pension cost included in other (liabilities) assets...... $ (157) $ 44
======= =======
In accordance with Statement of Financial Accounting Standards No. 87, LSB has
recorded an adjustment, as shown in the table above, to recognize a minimum
pension liability for 1992. A corresponding offsetting asset, "Deferred pension
costs," has been recorded and included in other assets in the consolidated
balance sheet.
Net pension cost consisted of the following components:
Years Ended December 31,
-----------------------------
1992 1991 1990
------- ------- -------
(Dollars in thousands)
Service cost.......................................... $ 282 $ 376 $ 357
Interest cost......................................... 228 90 59
Actual return on plan assets.......................... (69) (42) (43)
Net amortization and deferral......................... 41 (38) 10
----- ----- -----
Net periodic pension cost......................... $ 482 $ 386 $ 383
===== ===== =====
Assumptions used in accounting for the plan were:
Years Ended December 31,
------------------------
1992 1991
------ ------
Weighted average discount rate....................... 6.75% 7.50%
Average rate of increase in future compensation
levels............................................. 5.50% 5.50%
Expected long-term rate of return on assets.......... 8.00% 8.00%
Included in expenses were contributions to the banking subsidiaries' profit-
sharing plans of $125,000, $107,000 and $83,000 for the years ended December 31,
1992, 1991 and 1990, respectively.
NOTE 15--INCOME TAXES
Income tax expense is summarized below:
Years Ended December 31,
------------------------
1992 1991 1990
------ ------ ------
(Dollars in thousands)
Currently payable
Federal............................................. $2,505 $ 750 $ 980
State............................................... 296 147 166
------ ----- ------
Total current.................................... 2,801 897 1,146
====== ===== ======
Deferred
Federal............................................. (360) 48 (286)
State............................................... (34) 3 (19)
------ ----- ------
Total deferred................................... (394) 51 (305)
------ ----- ------
Total............................................ $2,407 $ 948 $ 841
====== ===== ======
Deferred income taxes of $786,000 and $392,000 at December 31, 1992 and 1991,
respectively, are included in other assets. Deferred income taxes result from
timing differences in the recognition of certain items of income and expense for
tax and financial reporting purposes.
The principal sources of these differences and the related deferred tax effects
are as follows:
Years Ended December 31,
------------------------
1992 1991 1990
------ ------ ------
(Dollars in thousands)
Provision for loan losses............................ $ (471) $ 65 $ (317)
Accelerated depreciation............................. 39 61 124
Deferred net loan costs.............................. (14) (64) (87)
Other................................................ 52 (11) (25)
------ ---- ------
Total........................................... $ (394) $ 51 $ (305)
====== ==== ======
A reconciliation between the income tax expense and the amount computed by
applying the federal statutory rate of 34% to income before income taxes
follows:
Years Ended December 31,
------- ------- ------
1992 1991 1990
------- ------- ------
(Dollars in thousands)
Tax expense at statutory rate..................................... $ 2,780 $ 1,415 $ 1,666
State income tax, net of federal income tax benefit............... 173 99 111
Tax-exempt interest income........................................ (680) (661) (720)
Non-deductible interest expense to carry tax-exempt instruments .. 75 91 115
Tax credit for rehabilitation of historic structure............... (145)
Other............................................................. 59 4 37
Restoration of net deferred tax charges of merged company......... (223)
Net operating loss of merged company for which
no tax benefits were recognized.................................
------- ------- ------
Total......................................................... $ 2,407 $ 948 $ 841
======= ======= ======
Income tax expense related to investment security gains was $92,000, $68,000,
and $16,000 for 1992, 1991, and 1990 respectively.
In February 1992, the Financial Accounting Standards Board issued Statement No.
109, "Accounting for Income Taxes," which requires a change in the method of
accounting primarily for deferred income taxes. LSB has elected to adopt the new
accounting rule as of January 1, 1993, without restatement of prior periods. The
effects of adopting Statement No. 109 as of the adoption date have been
calculated and found by management to have no material adverse or beneficial
effect on consolidated financial position or results of operations.
NOTES 16 -- L.S.B. BANCSHARES, INC. OF SOUTH CAROLINA (PARENT COMPANY ONLY)
December 31,
------------------
1992 1991
------- -------
(Dollars in thousands)
Balance Sheet
Assets
Cash............................................. $ 171 $ 41
Time deposits in other banks..................... 100
Other investments................................ 452 1,308
Investment in banking subsidiaries............... 44,003 36,699
Land............................................. 75 170
Other assets..................................... 416 115
------- -------
Total assets................................... $45,117 $38,433
======= =======
Liabilities
Long-term debt................................... $ 4,000 $ 2,000
Other liabilities................................ 285 81
Stockholders' equity............................... 40,832 36,352
------- -------
Total liabilities and stockholders' equity..... $45,117 $38,433
======= =======
Years Ended December 31,
----------------------------
1992 1991 1990
-------- -------- --------
(Dollars in thousands)
Statement of Income
Income
Dividends from banking subsidiaries............. $ 1,607 $ 1,574 $ 1,446
Other dividends and interest.................... 39 98 110
Other income.................................... 2 9
-------- -------- --------
Total income.................................. 1,646 1,674 1,565
-------- -------- --------
Expenses
Interest expense................................ 202 167 42
Other expense................................... 286 94 229
-------- -------- --------
Total expenses................................ 488 261 271
-------- -------- --------
Income before income taxes and equity in
undistributed earnings of banking subsidiaries.. 1,158 1,413 1,294
Income tax expense (credit)....................... (153) (55) 7
Equity in undistributed earnings of banking
subsidiaries..................................... 4,458 1,745 2,772
-------- -------- --------
Net income........................................ $ 5,769 $ 3,213 $ 4,059
======== ======== ========
Years Ended December 31,
----------------------------
1992 1991 1990
-------- -------- --------
(Dollars in thousands)
Statement of Cash Flows
Operating activities
Net income...................................... $ 5,769 $ 3,213 $ 4,059
Adjustments to reconcile net income to
net cash provided by operating activities
Equity in undistributed earnings of
banking subsidiaries...................... (4,458) (1,745) (2,772)
(Gain) loss on sale of other investments... 2 (2)
Decrease in interest receivable............ 2 4 5
Increase in interest payable............... 14 1 24
(Increase) decrease in prepaid expenses
and receivables........................... (303) (109) 4
Increase (decrease) in other accrued
expenses and payables..................... 190 49 (13)
-------- -------- --------
Net cash provided by operating
activities.............................. 1,216 1,411 1,307
-------- -------- --------
Investing activities
Net decrease in time deposits in other banks.... 100 50 1
Sales of other investments...................... 951 997
Purchase of other investments................... (100) (1,307)
Investment in banking subsidiaries.............. (2,900) (2,000)
Purchases of land............................... (75)
Sales of land................................... 95 1 86
-------- -------- --------
Net cash used by investing
activities.............................. (1,854) (259) (1,988)
-------- -------- --------
Financing activities
Sale of common stock............................ 381 291 272
Net decrease in short-term borrowings........... (178)
Proceeds from long-term debt.................... 2,000 2,000
Cash dividends paid............................. (1,613) (1,572) (1,455)
-------- -------- --------
Net cash provided (used) by financing
activities.............................. 768 (1,281) 639
-------- -------- --------
Increase (decrease) in cash and cash equivalents.. 130 (129) (42)
Cash and cash equivalents, beginning.............. 41 170 212
-------- -------- --------
Cash and cash equivalents, ending................. $ 171 $ 41 $ 170
======== ======== ========
NOTE 17--COMMITMENTS AND CONTINGENT LIABILITIES
Commitments--In the normal course of business, LSB's banking subsidiaries are
parties to financial instruments with off-balance-sheet risk. These financial
instruments include commitments to extend credit, standby letters of credit and
securities lent, and have elements of credit risk in excess of the amount
recognized in the balance sheet. The exposure to credit loss in the event of
nonperformance by the other parties to these financial instruments is
represented by the contractual notional amount of those instruments. Generally,
the same credit policies used for on-balance-sheet instruments, such as loans,
are used in extending commitments, standby letters of credit, and securities
lent.
Following are the off-balance-sheet financial instruments whose contract amounts
represent credit risk:
December 31,
----------------------
1992 1991
-------- --------
(Dollars in thousands)
Loan commitments............................. $60,291 $44,891
Standby letters of credit.................... 1,751 2,144
Securities lent.............................. 8,059
Loan commitments involve agreements to lend to a customer as long as there is no
violation of any condition established in the contract. Commitments generally
have fixed expiration dates or other termination clauses and some involve
payment of a fee. Many of the commitments are expected to expire without being
fully drawn; therefore, the total amount of loan commitments does not
necessarily represent future cash requirements. Each customer's creditworthiness
is evaluated on a case-by-case basis. The amount of collateral obtained, if
any, upon extension of credit is based on management's credit evaluation of the
borrower. Collateral held varies but may include commercial and residential real
properties, accounts receivable, inventory and equipment.
Standby letters of credit are conditional commitments to guarantee the
performance of a customer to a third party. All of the standby letters of credit
expire within 1993. The credit risk involved in issuing standby letters of
credit is the same as that involved in making loan commitments to customers. As
of December 31, 1992 and 1991, approximately $499,000 and $286,000,
respectively, of the standby letters of credit were unsecured. Collateral for
secured standby letters of credit varies but may include commercial and
residential real properties, accounts receivable, inventory, equipment,
marketable securities and certificates of deposit. Since most of the letters of
credit are expected to expire without being drawn upon, the contract amounts do
not necessarily represent future cash requirements.
Securities lent represent customer securities lent to third parties. LSB's
banking subsidiaries assume credit risk on these instruments by indemnifying the
customer against the borrower's failure to return the securities. To minimize
this risk, the banking subsidiaries evaluate the creditworthiness of the
borrower on a case-by-case basis, and collateral with a market value exceeding
100% of the contract amount of securities lent is obtained.
Statement of Financial Accounting Standards No. 107 requires the discosure of
the estimated fair values of off-balance-sheet financial instruments for which
it is practicable to estimate fair value. The estimated fair values of such
off-balance-sheet financial instruments are generally based upon fees charged to
enter into similar agreements, taking into account the remaining terms of the
agreements and the counterparties' creditworthiness. The vast majority of LSB's
loan commitments do not involve the charging of a fee, and the fees associated
with outstanding standby letters of credit and securities lent are not material.
Therefore, as of December 31, 1992, the estimated fair value of LSB's
off-balance-sheet financial instruments is nominal. For loan commitments and
standby letters of credit, the committed interest rates are either variable or
approximate current interest rates offered for similar commitments. Management
is not aware of any significant change in the credit risk associated with these
commitments. Securities lent positions mature on a demand basis and do not
present unanticipated credit concerns.
Contingent Liabilities--LSB and its subsidiaries are, from time to time,
involved as defendants in various legal proceedings arising in the normal
course of business. As of December 31, 1992, one of LSB's subsidiaries banks was
named as a defendant in a lawsuit in which the plaintiff seeks damages arising
from the bank's repossession and foreclosure of collateral securing a loan.
Management believes that the bank has meritorious defenses available
and intends to vigorously contest this lawsuit. Although the amount of any
ultimate liability with respect to this matter cannot be determined with
certainty, in the opinion of management and legal counsel, these proceedings
will not have a material adverse effect on LSB's consolidated financial
position. Management and legal counsel are not aware of any other pending or
threatened litigation, or unasserted claims or assessments that could result in
losses, if any, that would be material to the consolidated financial
statements.
NOTE 18--RESTRICTIONS ON SUBSIDIARY DIVIDENDS, LOANS OR ADVANCES
South Carolina banking regulations restrict the amount of dividends that can be
paid to stockholders. All of the banking subsidiaries' dividends to LSB are
subject to the prior approval of the Commissioner of Banking and are payable
only from their undivided profits. At December 31, 1992, the banking
subsidiaries' undivided profits totaled $16,505,000. Under Federal Reserve Board
regulations, the amounts of loans or advances from the banking subsidiaries to
the parent company are also restricted.
NOTE 19--LEASING
The annual minimum rental commitments under the terms of noncancelable operating
leases as of December 31, 1992, are as follows:
(Dollars in thousands)
1993................................... $ 81
1994................................... 78
1995................................... 73
1996................................... 41
1997................................... 37
Thereafter............................. 293
----
Total minimum lease payments...... $603
====
Rental expense for all operating leases was $63,000, $265,000, and $278,000 for
the years ended December 31, 1992, 1991 and 1990, respectively. Some leases
provide for the payment of executory costs and contain options to renew.
NOTE 20--LOANS TO RELATED PARTIES
Certain executive officers and directors of the consolidated companies, their
immediate families and business interests were loan customers of, and had other
transactions in the normal course of business with, the banking subsidiaries.
Related party loans are made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions with unrelated persons and do not involve more than normal risk of
collectibility. The aggregate dollar amount of these loans was $2,977,000 and
$2,962,000 at December 31, 1992 and 1991, respectively. During 1992, $1,473,000
of new loans were made and repayments totaled $1,458,000.
NOTE 21--PENDING TRANSACTION
LSB entered into an Agreement and Plan of Merger (Agreement), as amended, dated
November 10, 1992 whereby LSB will exchange previously unissued shares of its
authorized common stock for all of the 20,000 outstanding common shares of The
Dorn Banking Company (Dorn), McCormick, South Carolina. Dorn provides banking
services to domestic markets principally in McCormick and Greenwood Counties of
South Carolina. Under the terms of the Agreement, Dorn will be merged into LSB's
subsidiary, The Lexington State Bank. The proposed business combination is
expected to be accounted for using the pooling-of-interests method.
Under terms of the Agreement, 418,944 shares of LSB common stock will be
exchanged for the 20,000 outstanding shares of Dom. Therefore, the exchange
ratio is 20.95 shares of LSB common stock for one share of Dom common stock.
The agreement is subject to approval by the stockholders of Dom and by
regulatory authorities. The Agreement may be terminated at any time prior to
the effective date of the merger by the mutual consent of the LSB and Dom Boards
of Directors, or by either party should material adverse changes occur in the
business of the other party.
The following table presents selected consolidated financial data for LSB and
Dom on an historical basis and on a pro forma combined basis:
Years Ended December 31,
----------------------------------------
1992 1991 1990
---------- ---------- ----------
(Dollars in thousands, except per share)
Results of operations
Total interest income
LSB............................... $ 45,584 $ 46,669 $ 47,029
Dom............................... 2,141 2,099 2,149
LSB and Dom pro forma............. 47,725 48,768 49,178
Total interest expense
LSB............................... $ 20,054 $ 26,439 $ 28,787
Dom............................... 1,039 1,087 1,084
LSB and Dom pro forma............. 21,093 27,526 29,871
Net interest income
LSB............................... $ 25,530 $ 20,230 $ 18,242
Dom............................... 1,102 1,012 1,065
LSB and Dom pro forma............. 26,632 21,242 19,307
Provision for loan losses
LSB............................... $ 2,463 $ 3,598 $ 2,110
Dom............................... 65 10 11
LSB and Dom pro forma............. 2,528 3,608 2,121
Investment securities gains
LSB............................... $ 256 $ 190 $ 44
Dom...............................
LSB and Dom pro forma............. 256 190 44
Total other operating income
LSB............................... $ 5,548 $ 4,753 $ 4,199
Dom............................... 160 156 141
LSB and Dom pro forma............. 5,708 4,909 4,340
Total other operating expenses
LSB............................... $ 20,695 $ 17,414 $ 15,475
Dom............................... 800 766 735
LSB and Dom pro forma............. 21,495 18,180 16,210
Income (loss) before income taxes
LSB............................... $ 8,176 $ 4,161 $ 4,900
Dom............................... 397 392 460
LSB and Dom pro forma............. 8,573 4,553 5,360
Income tax expense (credit)
LSB............................... $ 2,407 $ 948 $ 841
Dom............................... 27 (11) 8
LSB and Dom pro forma............. 2,434 937 849
Net income (loss)
LSB............................... $ 5,769 $ 3,213 $ 4,059
Dom............................... 370 403 452
LSB and Dom pro forma............. 6,139 3,616 4,511
Financial condition
Total assets (end of period)
LSB......................................... $619,803 $533,918 $493,625
Dom......................................... 31,518 26,950 24,578
LSB and Dom pro forma....................... 651,321 560,868 518,203
Loans, net of unearned income (end of period)
LSB......................................... $369,771 $320,649 $299,202
Dom......................................... 8,727 8,169 8,127
LSB and Dom pro forma....................... 378,498 328,818 307,329
Total deposits (end of period)
LSB......................................... $539,512 $477,617 $435,180
Dom......................................... 23,912 19,680 17,690
LSB and Domn pro forma...................... 563,424 497,297 452,870
Long-term debt (end of period)
LSB......................................... $ 4,000 $ 2,000 $ 2,450
Dorm........................................
LSB and Dom pro forma....................... 4,000 2,000 2,450
Stockholders' equity (end of period)
LSB......................................... $ 40,832 $ 36,352 $ 34,307
Dom......................................... 6,760 6,490 6,187
LSB and Dom pro forma....................... 47,592 42,842 40,494
Per share
Net income per share
LSB......................................... $ 2.18 $ 1.23 $ 1.56
Dom......................................... 18.50 20.15 22.60
LSB and Dom pro forma....................... 2.00 1.19 1.49
Book value per share at year end
LSB......................................... $ 15.36 $ 13.80 $ 13.14
Dom......................................... 338.00 324.50 309.35
LSB and Dom pro forma....................... 15.47 14.03 13.36