UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
--------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________to____________________
Commission file number_________________________________________________
STONE STREET BANCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1949352
- ---------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
232 SOUTH MAIN STREET, MOCKSVILLE, NORTH CAROLINA
-------------------------------------------------
(Address of principal executive offices)
(Zip Code)
27028
-------------------------------------------------
(Registrant's telephone number, including area code)
(704) 634-5936
-------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (2) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
_____ _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 1,825,050 of common stock as
----------------------------
of August 9, 1996.
- ------------------
STONE STREET BANCORP, INC.
INDEX
- --------------------------------------------------------------------------------
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Financial Statements:
Consolidated Statements of Financial Condition -
June 30, 1996 (Unaudited) and December 31, 1995 1-2
Consolidated Statements of Operations - Three
Months and Six Months Ended June 30, 1996 and
1995 (Unaudited) 3
Consolidated Statement of Stockholder's Equity
for the Six Months Ended June 30, 1996 (Unaudited) 4
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1996 and 1995 (Unaudited) 5-6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 9
Signatures
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
JUNE 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
- -----------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
ASSETS
- ------
CASH AND DUE FROM BANKS $ 1,886,631 $ 2,161,597
INTEREST-BEARING DEPOSITS 16,102,750 2,736,699
FEDERAL FUNDS SOLD 127,723
INVESTMENT SECURITIES
Securities held-to-maturity
(market value-June 30, 1996-$7,758,755;
December 31, 1995-$3,865,725) 7,762,186 3,844,977
Securities available for sale,
at market value 1,813,528 2,302,344
------------ ------------
Total 9,575,714 6,147,321
LOANS RECEIVABLE-Net 78,670,108 75,096,569
OFFICE PROPERTIES AND EQUIPMENT-Net 900,739 948,886
ACCRUED INTEREST RECEIVABLE:
Investment securities 86,129 64,867
Loans 79,403 38,963
DEFERRED INCOME TAXES 344,888 333,900
REFUNDABLE INCOME TAXES 14,178 20,912
PREPAID EXPENSES AND OTHER ASSETS 138,912 136,936
CASH SURRENDER VALUE OF LIFE INSURANCE 64,246 64,246
------------ ------------
TOTAL $107,991,421 $ 87,750,896
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
DEPOSITS:
Savings Accounts $ 8,771,457 $ 9,309,033
Money Market and NOW Accounts 4,133,158 4,348,464
Time, $100,000 and over 5,768,103 5,033,864
Other Time 49,774,584 54,343,861
------------ ------------
Total deposits 68,447,302 73,035,222
FEDERAL HOME LOAN BANK ADVANCES 1,000,000
AMOUNTS PAYABLE UNDER REMITTANCE
SERVICE AGREEMENT 337,943 594,572
ADVANCE PAYMENTS BY BORROWERS FOR
TAXES AND INSURANCE 115,017 43,273
ACCRUED INTEREST PAYABLE 152,809 146,578
CASH DIVIDENDS PAYABLE 200,755
ACCRUED INCOME TAXES
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 409,149 369,654
------------ ------------
$ 69,662,975 $ 75,189,299
------------ ------------
See notes to consolidated financial statements
1
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONT'D)
JUNE 30, 1996 AND DECEMBER 31, 1995
(Unaudited)
- ----------------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1996 1995
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock, no par value,
20,000,000 authorized;
1,825,050 issued and outstanding $ 38,895,444
Unearned ESOP shares (1,083,792)
Preferred stock, no par value
5,000,000 shares authorized, no shares
issued and outstanding
Retained Earnings 542,503 $ 12,563,030
Unrealized loss on securities
on securities available-for-sale
net of applicable deferred taxes (25,709) (1,433)
------------ ------------
Total stockholders' equity 38,328,446 12,561,597
------------ ------------
TOTAL $107,991,421 $ 87,750,896
============ ============
See notes to consolidated financial statements
2
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
- -------------------------------------------------------------------------------
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995 JUNE 30, 1996 JUNE 30, 1995
------------- ------------- ------------- -------------
INTEREST INCOME:
Interest and fees on loans $ 1,648,718 $ 1,449,043 $ 3,273,810 $ 2,863,888
Interest on investment:
U.S. Treasury and
Government Agency 75,132 59,583 120,504 121,514
Mortgage backed securities 28,321 8,178 35,474 15,717
Municipal Securities 15,279 23,385 31,881 48,264
Other interest 314,453 74,551 394,532 146,681
------------- ------------- ------------- -------------
Total interest income 2,081,903 1,614,740 3,856,201 3,196,064
------------- ------------- ------------- -------------
COST OF FUNDS:
Interest on time deposits 800,288 791,382 1,680,603 1,515,983
Interest on interest
bearing demand deposits 17,663 20,038 36,190 41,339
Interest on savings deposits 65,082 71,705 174,668 150,502
Interest of FHLB advances 932 8,394
------------- ------------- ------------- -------------
Total interest expense 883,965 883,125 1,899,855 1,707,824
------------- ------------- ------------- -------------
NET INTEREST INCOME 1,197,938 731,615 1,956,346 1,488,240
PROVISION FOR LOAN LOSSES 15,000 15,000
------------- ------------- ------------- -------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,182,938 731,615 1,941,346 1,488,240
------------- ------------- ------------- -------------
OTHER OPERATING INCOME:
Loan fees and charges 12,087 21,288 23,073 29,903
Other fees and commissions 14,194 14,493 26,613 28,780
Other - net 2,811 2,316 5,787 7,890
------------- ------------- ------------- -------------
Total other income 29,092 38,097 55,473 66,573
------------- ------------- ------------- -------------
OTHER OPERATING EXPENSES:
Compensation and related
benefits 246,020 243,656 502,774 473,655
Insurance 39,196 42,524 83,088 83,106
Occupancy and equipment 37,754 56,182 138,397 114,493
Other 44,411 55,674 83,004 100,771
------------- ------------- ------------- -------------
Total 367,381 398,036 807,263 772,025
------------- ------------- ------------- -------------
INCOME BEFORE INCOME TAXES 844,649 371,676 1,189,556 782,788
INCOME TAXES 305,345 140,360 446,298 293,715
------------- ------------- ------------- -------------
NET INCOME $ 539,304 $ 231,316 $ 743,258 $ 489,073
============= ============= ============= =============
NET INCOME PER SHARE $ .30 $ N/A $ .41 $ N/A
============= ============= ============= =============
See notes to consolidated financial statements
3
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(Unaudited)
- -------------------------------------------------------------------------------
COMMON STOCK
----------------------------- UNEARNED RETAINED
SHARES AMOUNT ESOP SHARES EARNINGS TOTAL
------------ ------------- ------------- -------------- -------------
Balance at December 31, 1995 1 $ 15 $ 15
Common stock issuance, net
of conversion expenses of
$1,043,336 1,825,049 26,332,399 26,332,399
Purchase of ESOP shares (1,083,792) (1,083,792)
Capital of Mocksville
Savings Bank, SSB 12,563,030 12,563,030
Net income for six months
ended June 30, 1996 $ 743,258 743,258
Cash dividends (200,755) (200,755)
Unrealized gain (loss) on
securities available-for-
sale, net of applicable
deferred income tax of
$4,206 (25,709) (25,709)
------------ ------------- ------------- ------------- -------------
Balance at June 30, 1996 1,825,050 $ 38,895,444 (1,083,792) $ 516,794 $ 38,328,446
============ ============= ============= ============= =============
See notes to consolidated financial statements.
4
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
- -------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
--------------- ---------------
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 743,258 $ 489,073
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 48,147 44,445
Decrease (increase) in accrued
interest receivable (61,702) 33,262
Decrease (increase) in other
assets (1,976) (117,981)
Decrease (increase) in refundable
income taxes 6,734 61,464
Cash dividends payable 200,755
Increase (decrease) in accounts payable
under remittance service agreement (256,629) 67,779
Increase (decrease) in accrued interest
payable 6,231 2,452
Increase (decrease) in accounts payable
and accrued liabilities 39,495 92,971
Increase (decrease) in accrued income
taxes 0 14,251
(Increase) decrease in deferred income
taxes (10,988) 37,442
------------ -----------
Net cash provided by (used in)
operating activities 713,325 725,158
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (3,573,539) (3,810,264)
Purchase of held-to-maturity securities (3,452,669)
Proceeds from maturities of held-to-
maturity 1,262,216
Purchase of property and equipment (1,701)
------------ -----------
Net cash provided by (used in)
investing activities $ (7,026,208) $ (2,549,749)
------------ -----------
See notes to consolidated financial statements
5
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CON'T)
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
- --------------------------------------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 1996 JUNE 30, 1995
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits $ (4,587,920) $ 313,418
Increase (decrease) in advance payments
by borrowers for taxes and insurance 71,744 80,494
Increase (decrease) in Federal Home
Loan Bank Advances (1,000,000)
Issuance of common stock, net 26,332,414
Purchase of ESOP shares (1,083,792)
Cash dividends paid (200,755)
------------- -------------
Net cash provided by financing activities 19,531,691 393,912
------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 13,218,808 (1,430,679)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 4,898,296 5,385,188
------------- -------------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 18,117,104 $ 3,954,509
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the periods for:
Interest $ 1,893,624 $ 1,705,372
============= =============
Income taxes $ 439,584 $ 218,000
============= =============
See notes to consolidated financial statements
6
STONE STREET BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. In the opinion of management, the accompanying financial statements contain
all adjustments necessary to present fairly the consolidated financial
position of Stone Street Bancorp, Inc. as of June 30, 1996 and 1995, and
the results of operations for the six months ended June 30, 1996 and 1995,
and the consolidated statement of cash flows for the six months ended June
30, 1996 and 1995.
The accounting policies, followed by the Holding Company are set forth in
Note 1 to the Company's financial statements included in Form 10-K on file
with the Securities and Exchange Commission.
2. The consolidated financial statements include the financial results of
Stone Street Bancorp, Inc. and its wholly-owned subsidiary, Mocksville
Savings Bank, Inc., SSB.
3. The results of operations for the three and six month periods ended June
30, 1996, are not necessarily indicative of the results expected for the
full year.
4. Earnings per share of common stock has been determined based on the pro
forma weighted average number of common shares 1,825,050 for the three
month period ended June 30, 1996 and the six month period ended June 30,
1996.
5. The Holding Company loaned $1,083,792 to the ESOP for the purchase of
common stock. The plan provides for the purchase of up to 8% of the common
stock issued by the Holding Company. The terms of the loan provides for
repayment over a fifteen year period beginning March 31, 1997.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
----------------------------------------------------------------------
FINANCIAL CONDITION
For the six months ended June 30, 1996, total assets increased
approximately $20,241,000 or 23.07% primarily as a result of the stock
conversion of Mocksville Savings Bank, Inc, SSB which provided
$26,332,000 of capital to the Holding Company. Interest bearing
deposits as a result increased $13,366,000 and liquidity was available
to fund the additional loan growth of $3,574,000 or 4.76%. Investment
securities increased $3,428,000 or 55.77% during this six month period.
Funds totalling $1,083,792 were loaned to the ESOP during the second
quarter of 1996 to finance the purchase of Holding Company stock for
the ESOP Plan. Deposits decreased $4,588,000 or 6.28% as some
customers used their deposits to purchase stock in the Holding Company.
The FHLB advance of $1,000,000 was repaid during this period with the
liquidity provided from the stock issuance. Stockholders' equity
increased $25,767,000 as a result of the $26,332,000 of funds provided
through the stock issuance and the net income of $743,258 for the six
months ended June 30, 1996. Cash dividends of $.11 per share totalling
$200,755 were declared for the second quarter of 1996 and reduced
stockholders' equity for the period.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 and 1995
Net income for the three months ended June 30, 1996 was $539,304
compared to $231,316 for the comparable period in 1995. Total interest
income increased $467,200 or 28.93% while total interest expense
remained at relatively the same level $883,965 and $883,125 for the
three month periods ended June 30, 1996 and 1995, respectively. Net
interest margin increased $466,300 but was reduced by a $15,000 loan
loss provision in the second quarter of 1996. Other operating income
decreased from $38,100 in 1995 to $29,100 in 1996 for the three month
periods. Other operating expenses remained relatively steady at
$368,000 in 1996 and $398,000 in 1995. Income tax expense increased by
$165,000 in 1996 compared to 1995 due primarily to the increase in
interest income.
Six Months Ended June 30, 1996 and 1995
Net income for the six months ended June 30, 1996 was $743,258 compared
to $489,073 for the comparable period in 1995. Interest income
increased $660,100 or 20.65% while interest expense increased $192,000
or 11.24% thus resulting in an increase in net interest income of
$468,100 or $453,100 after deducting the loan loss provision of $15,000
for the six month period in 1996. Other operating income decreased from
$66,600 in 1995 to $55,500 in 1996 while other operating expenses
increased from $772,000 in 1995 to $807,300 in 1996, a $35,300 or 4.57%
increase. The increase in other operating expense was primarily
comprised of a $29,000 or 6.15% increase in compensation and related
benefits, a $24,000 or 20.88% increase in occupancy and equipment
expense net of a $17,800 decrease in all other operating costs. Income
tax expense increased from $294,000 in 1995 to $446,300 in 1996 due to
the increase in taxable income primarily due to the $660,100 increase
in interest income during the six month period compared to the prior
year period.
8
PART II - OTHER INFORMATION
Item 6b. Reports on Form 8-K
There were no Form 8-K's filed during the Second Quarter of 1996.
9
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Holding
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
STONE STREET BANCORP, INC.
Date: By:
----------------------------- --------------------------------
J. Charles Dunn
President and Chief Executive Officer
Date: By:
----------------------------- --------------------------------
Marjorie D. Foster
Controller