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 March 31, 1997
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OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-14230
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STONE STREET BANCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1949352
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization Identification No.)
232 SOUTH MAIN STREET, MOCKSVILLE, NORTH CAROLINA
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(Address of principal executive offices)
(Zip Code)
27028
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(Registrant's telephone number, including area code)
(704) 634-5936
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(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
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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
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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
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May 8, 1997.
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STONE STREET BANCORP, INC.
INDEX
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PAGE
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Financial Statements:
Consolidated Statements of Financial Condition -
March 31, 1997 (Unaudited) and December 31, 1996 1-2
Consolidated Statements of Operations -
Three Months Ended March 31, 1997 and 1996 (Unaudited) 3
Consolidated Statement of Stockholder's Equity
for the Three Months Ended March 31, 1997
(Unaudited) 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1997 and 1996 (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
MARCH 31, 1997 AND DECEMBER 31, 1996
- --------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
1997 1996
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(Unaudited)
ASSETS
- ------
CASH AND DUE FROM BANKS $ 1,355,691 $ 1,318,975
INTEREST-BEARING DEPOSITS 6,815,423 7,916,034
FEDERAL FUNDS SOLD 78,218 569,522
INVESTMENT SECURITIES
Securities held-to-maturity
(market value-March 31, 1997-$7,600,077;
December 31, 1996-$ 7,778,450) 7,604,332 7,736,541
Securities available for sale,
at market value 2,004,225 2,722,695
---------------------- ---------------------
Total 9,608,557 10,459,236
LOANS RECEIVABLE-Net 85,078,819 82,992,351
FEDERAL HOME LOAN BANK STOCK 741,000 666,900
OFFICE PROPERTIES AND EQUIPMENT-Net 878,066 899,551
ACCRUED INTEREST RECEIVABLE:
Investment securities 128,304 110,103
Loans 196,428 200,318
DEFERRED INCOME TAXES 377,175 376,214
REFUNDABLE INCOME TAXES - 77,102
PREPAID EXPENSES AND OTHER ASSETS 105,301 92,485
CASH SURRENDER VALUE OF LIFE INSURANCE 127,978 127,978
----------------------- ---------------------
TOTAL $ 105,490,960 $ 105,806,769
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
DEPOSITS:
Savings Accounts $ 8,457,495 $ 8,860,839
Money Market and NOW Accounts 4,187,579 3,931,960
Time, $100,000 and over 5,184,786 5,144,587
Other Time 48,446,914 48,626,880
---------------------- ---------------------
Total deposits 66,276,774 66,564,266
AMOUNTS PAYABLE UNDER REMITTANCE
SERVICE AGREEMENT 454,819 635,790
ADVANCE PAYMENTS BY BORROWERS FOR
TAXES AND INSURANCE 61,748 36,607
ACCRUED INTEREST PAYABLE 179,260 170,072
CASH DIVIDENDS PAYABLE - 401,511
ACCRUED ESOP CONTRIBUTION - 175,000
ACCRUED TAXES PAYABLE 192,153 -
ACCOUNTS PAYABLE AND ACCRUED
LIABILITIES 520,404 456,022
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TOTAL LIABILITIES $ 67,685,158 $ 68,439,268
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See notes to consolidated financial statements
1
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (CONT'D)
MARCH 31, 1997 AND DECEMBER 31, 1996
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MARCH 31, DECEMBER 31,
1997 1996
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(Unaudited)
STOCKHOLDERS' EQUITY:
Common Stock, no par value,
20,000,000 authorized;
1,825,050 issued and outstanding $ 26,332,415 $ 26,332,415
Unearned ESOP shares (2,077,961) (2,198,064)
Preferred stock, no par value
5,000,000 shares authorized, no shares
issued and outstanding
Retained Earnings 13,561,941 13,241,270
Unrealized loss on securities
available-for-sale net of
applicable deferred taxes (10,593) (8,120)
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Total stockholders' equity 37,805,802 37,367,501
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TOTAL $ 105,490,960 $ 105,806,769
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See notes to consolidated financial statements
2
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
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THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1997 1996
----------- -----------
(Unaudited) (Unaudited)
INTEREST INCOME:
Interest and fees on loans $1,754,882 $1,625,092
Interest on investment:
U.S. Treasury and
Government Agency 70,231 45,372
Mortgage backed securities 51,464 7,153
Municipal Securities 12,640 16,602
Other interest 221,147 80,079
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Total interest income 2,110,364 1,774,298
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COST OF FUNDS:
Interest on time deposits 743,196 880,315
Interest on interest bearing
demand deposits 17,761 18,527
Interest on savings deposits 65,347 109,586
Interest on FHLB advances - 7,462
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Total interest expense 826,304 1,015,890
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NET INTEREST INCOME 1,284,060 758,408
PROVISION FOR LOAN LOSSES 15,000 -
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,269,060 758,408
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OTHER OPERATING INCOME:
Loan fees and charges 12,109 10,986
Other fees and commissions 18,889 12,419
Other - net 3,187 2,976
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Total other income 34,185 26,381
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OTHER OPERATING EXPENSES:
Compensation and related benefits 286,160 256,754
Insurance 20,088 43,892
Occupancy and equipment 81,586 100,643
Other 62,654 38,593
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Total 450,488 439,882
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INCOME BEFORE INCOME TAXES 852,757 344,907
INCOME TAXES 326,766 140,953
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NET INCOME $ 525,991 $ 203,954
========== ==========
NET INCOME PER SHARE $ .29 $ N/A
========== ==========
See notes to consolidated financial statements
3
STONE STREET BANCORP, SSB
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997 (Unaudited)
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COMMON STOCK NOTE UNREALIZED
-------------------------- RECEIVABLE RETAINED HOLDING
SHARES AMOUNT ESOP EARNINGS GAINS/LOSSES TOTAL
---------- ------------- ----------- ----------- ------------ -----------
Balance at December 31, 1996 1,825,050 $ 26,332,415 (2,198,064) 13,241,270 (8,120) $37,367,501
Repayments of note receivable - ESOP 120,103 120,103
Net income for three months ended
March 31, 1997 525,991 525,991
Cash dividends paid (205,320) (205,320)
Unrealized gain (loss) on securities
available-for-sale, net of
applicable deferred
income tax of $3,737 (2,473) (2,473)
---------- ------------- ----------- ----------- ------------ -----------
Balance at March 31, 1997 1,825,050 $ 26,332,415 $(2,077,961) $13,561,941 (10,593) $37,805,802
---------- ------------- ----------- ----------- ------------ -----------
See notes to consolidated financial statements
4
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
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THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------- ----------------
(Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 525,991 $ 203,954
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation 21,485 24,803
Provision for loan loss 15,000
Decrease (increase) in accrued interest receivable (14,311) (61,495)
Decrease (increase) in other assets (12,816) (17,992)
Decrease (increase) in refundable income taxes 77,102 20,912
Increase (decrease) in accounts payable under
remittance service agreement (180,971) 5,732,651
Increase (decrease) in accrued interest payable 9,188 7,243
Increase (decrease) in accounts payable and
accrued liabilities 64,382 143,699
Increase (decrease) in accrued ESOP contribution (175,000)
Increase (decrease) in cash dividends payable (401,511)
Increase (decrease) in accrued income taxes 192,153 120,041
(Increase) decrease in deferred income taxes (961) (3,719)
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Net cash provided by operating
activities 119,731 6,170,097
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net increase in loans (2,101,468) (1,292,253)
(Purchase of) Proceeds from held-to-maturity securities 58,109 (3,020,277)
Proceeds from available-for-sale securities 715,997
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Net cash provided by (used in) investing
activities (1,327,362) (4,312,530)
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See notes to consolidated inancial statements
5
STONE STREET BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CON'T)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
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THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, 1997 MARCH 31, 1996
-------------- --------------
(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in deposits (287,492) (3,238,091)
Increase (decrease) in advance payments
by borrowers for taxes and insurance 25,141 29,163
Increase (decrease) in Federal Home Loan Bank Advances - (1,000,000)
Issuance of common stock - 26,356,602
Decrease in note receivable - ESOP 120,103
Payment of cash dividends (205,320)
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Net cash provided by financing activities (347,568) 22,147,674
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (1,555,199) 24,005,241
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 9,804,531 4,898,296
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CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 8,249,332 $ 28,903,537
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the periods for:
Interest $ 817,116 $ 1,008,647
============ =============
Income taxes $ 441,817 $ 273,862
============ =============
See notes to consolidated financial statements
6
STONE STREET BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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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 March 31, 1997 and
December 31, 1996, the results of operations for the three months ended
March 31, 1997 and 1996, and the consolidated cash flows for the three
months ended March 31, 1997 and 1996.
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 month period ended March 31,
1997, are not necessarily indicative of the results expected for the full
year.
4. The common stock was issued on March 29, 1996; therefore, earnings per
share calculations are not applicable for the three month period ended
March 31, 1996. Results of operations for the three month periods ended
March 31, 1996 represents primarily operations for Mocksville Savings
Bank, Inc., SSB and for the three month period ended March 31, 1997
includes operations for both Mocksville Savings Bank, Inc. SSB and the
Holding Company, Stone Street Bancorp Inc. The weighted average shares
outstanding for the quarter ended March 31, 1997 were 1,825,050 and was
used in calculating earnings per share for the three month period ended
March 31, 1997.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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FINANCIAL CONDITION
For the three months ended March 31, 1997, total assets decreased
$315,809 or .30%. Cash balances remained relatively stable while
interest bearing deposits and federal funds decreased $1,591,915 or
18.76% from the December, 1996 level, while investment securities
decreased $850,679 or 8.13%. These funds were used to originate loans
during the three month period ended March 31, 1997 as evidenced by the
$2,086,468 or 2.51% increase in net loans. Deposits decreased $287,492
during the first quarter of 1997 and cash dividends payable of $401,511
at December 31, 1996 were paid to stockholders during the first
quarter. Stockholders' equity increased $438,301 or 1.17% over
December, 1996. This increase is comprised of the net income of
$525,991 during the first quarter and the note receivable payment of
$120,103 on the ESOP loan and was reduced by cash dividends declared
and paid of $205,320 during the first quarter.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1997 and 1996
Net income for the three months ended March 31, 1997 was $525,991
compared to $203,954 for the comparable period in 1996. Total interest
income increased $336,066 or 18.94% while total interest expense
decreased $189,586 or 18.66%. Net interest income increased $525,652 or
69.31% but was reduced by a $15,000 loan loss provision. The increase
in net interest income resulted from interest income earned on stock
conversion proceeds invested in loans and interest bearing deposits
and lower interest expense due to a reduction in total deposits related
to the conversion and also lower interest rates paid on deposits during
the period. Other operating income increased from $26,381 in 1996 to
$34,185 in 1997 for the three month periods. Other operating expenses
increased from $439,882 in 1996 to $450,488 in 1997, an increase of
only $10,606 or 2.41%. Income tax expense increased $185,813 to provide
taxes for the $525,652 increase in net interest income during the three
month period in 1997 compared to 1996.
8
PART II - OTHER INFORMATION
Item 6b. Reports on Form 8-K
There were no Form 8-K's filed during the First Quarter of 1997.
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: 5/13/97 By: /s/ J. Charles Dunn
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J. Charles Dunn
President and Chief Executive Officer
Date: 5/13/97 By: /s/ Marjorie D. Foster
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Marjorie D. Foster
Vice President/Controller
10