UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 25049
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1998
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[_] 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 ______________________________
Anson Bancorp, Inc.
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(Exact name of small business issuer as specified in its charter)
North Carolina 56-2073894
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
211 South Greene Street/Post Office Box 249
Wadesboro, North Carolina 28170
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(Address of principal executive office) (Zip code)
(704) 694-2122
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(Issuers telephone number)
N/A
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
X No
- ----- -----
As of June 19, 1998 there were issued and outstanding 585,124 shares of the
Registrant's common stock, no par value
Transitional Small Business Disclosure Format: Yes No X
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ANSON BANCORP, INC. AND SUBSIDIARY
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CONTENTS
PAGE
PART 1. FINANCIAL STATEMENTS
Item 1. Financial Statements
Condensed statements of financial condition at June 30, 1998
and September 30, 1998 (unaudited)................................ 1
Condensed statements of income for the three months ended
September 30, 1997 and 1998 (unaudited)........................... 2
Condensed statements of cash flows for the three months ended
September 30, 1997 and 1998 (unaudited)........................... 3
Notes to condensed financial statements (unaudited).................. 4
Item 2. Management's Discussion and Analysis of Financial Condition and
and Results of Operations......................................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.......................................... 9
Item 2. Changes in Securities...................................... 9
Item 3. Defaults upon Senior Securities............................ 9
Item 4. Submission of Matters to a Vote of Security Holders........ 9
Item 5. Other Information.......................................... 9
Item 6. Exhibits and Reports on Form 8-K........................... 9
SIGNATURES.................................................................. 10
This Form 10-QSB contains forward-looking statements consisting of estimates
with respect to the financial condition, results of operations and other
business of Anson Bancorp, Inc. that are subject to various factors which could
cause actual results to differ materially from those estimates. Factors which
could influence the estimates include changes in the national, regional and
local market conditions, legislative and regulatory conditions, and an adverse
interest rate environment.
ANSON BANCORP, INC. AND SUBSIDIARY
CONDENSED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED)
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June 30, September 30,
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1998 1998
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(Note 2) (Unaudited)
ASSETS
Cash and cash equivalents, including federal funds sold $ 6,433,565 $ 5,977,372
Securities held to maturity, at amortized cost 6,307,425 6,308,465
Securities available for sale, at fair value 433,000 459,081
Loans receivable, net 11,515,484 11,671,639
Accrued interest receivable 100,158 162,174
Property and equipment, net 207,665 223,571
Prepaid expenses and other assets 68,985 67,178
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Total assets $25,066,282 $24,869,480
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits $15,439,963 $15,270,634
Accounts payable and accrued expenses 133,066 31,053
Deferred income taxes 111,000 119,000
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Total liabilities 15,684,029 15,420,687
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STOCKHOLDERS' EQUITY
Capital stock 5,424,815 5,424,815
Unrealized gain on securities available for sale, net of tax 279,430 295,760
Retained earnings, substantially restricted 3,678,008 3,728,218
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Total stockholders' equity 9,382,253 9,448,793
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Total liabilities and stockholders' equity $25,066,282 $24,869,480
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See Notes to Condensed Financial Statements.
-1-
ANSON BANCORP, INC. AND SUBSIDIARY
CONDENSED STATEMENTS OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED
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September 30,
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1997 1998
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INTEREST AND DIVIDEND INCOME
Interest and fees on loans $237,624 $233,887
Interest on investments and deposits in other banks 121,443 174,652
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Total interest and dividend income 359,067 408,539
INTEREST EXPENSE ON DEPOSITS 207,542 186,024
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Net interest income 151,525 222,515
PROVISION FOR LOAN LOSSES - 2,000
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Net interest income after provision for loan losses 151,525 220,515
NONINTEREST INCOME 3,732 2,270
NONINTEREST EXPENSE
Compensation and employee benefits 72,211 81,452
Federal insurance premiums 2,602 2,575
Data processing 8,197 7,758
Legal and professional fees 675 30,041
Examinations and audit 7,910 7,836
Occupancy including depreciation 5,521 5,490
Other 15,908 28,423
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Total noninterest expense 113,024 163,575
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Income before income taxes 42,233 59,210
INCOME TAXES 7,000 9,000
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Net income $ 35,233 $ 50,210
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Basic earnings per share (Note 3) $ N/A $.09
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Diluted earnings per share (Note 3) $ N/A $.09
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Dividends per share $ 0 $ 0
======== ========
See Notes to Condensed Financial Statements.
-2-
ANSON BANCORP, INC. AND SUBSIDIARY
CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED
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September 30,
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1997 1998
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OPERATING ACTIVITIES
Net income $ 35,233 $ 50,210
Adjustments to reconcile net income to net cash provided
by (used for) operating activities
Provision for loan losses - 2,000
Provision for depreciation 3,090 3,090
Deferred income taxes (1,040) 1,863
Changes in operating assets and liabilities
Accrued interest receivable (10,226) (62,016)
Prepaid expenses and other assets (47,298) (1,807)
Accounts payable and accrued expenses (11,761) (102,013)
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Net cash used for operating activities (32,002) (108,673)
INVESTING ACTIVITIES
Investment in property and equipment - (18,996)
Net decrease (increase) in loans receivable 25,021 (158,155)
Net decrease (increase) in investments held to maturity 1,035,945 (1,040)
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Net cash provided by (used for) investing activities 1,060,966 (178,191)
FINANCING ACTIVITIES
Net decrease in savings deposits (177,812) (169,329)
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Net increase (decrease) in cash and cash
equivalents 851,152 (456,193)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,640,610 6,433,565
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CASH AND CASH EQUIVALENTS, END OF PERIOD $5,491,762 $5,977,372
========== ==========
See Notes to Condensed Financial Statements.
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ANSON BANCORP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 1 - NATURE OF BUSINESS
Anson Bancorp, Inc. (the "Company") was incorporated under the laws of the
State of North Carolina for the purpose of becoming the bank holding
company of Anson Savings Bank, Inc. (the "Bank" or "Anson Savings Bank") in
connection with the Bank's conversion from a state chartered savings bank
to a state chartered stock savings bank, pursuant to its amended and
restated Plan of Conversion. The Company was organized in 1998 to acquire
all of the common stock of Anson Savings Bank, S.S.B. upon its conversion
to stock form and the Company has no operations and conducts no business
other than owning the Bank and investing its portion of the net proceeds
received in the Conversion.
The principal business of the Bank is accepting deposits from the general
public and using those deposits and other sources of funds to make loans
secured by real estate and other forms of collateral located in the Bank's
primary market area of Anson County in North Carolina.
Anson Savings Bank's results of operations depend primarily on its net
interest income, which is the difference between interest income from
interest-earning assets and interest expense on interest-bearing
liabilities. The Bank's operations are also affected by noninterest
income, such as miscellaneous income from loans, and other sources of
revenue. The Bank's principal operating expenses, aside from interest
expense, consist of compensation and associated benefits, federal deposit
insurance premiums, occupancy costs, furniture and fixture expense, data
processing charges, professional fees and other general and administrative
expenses.
NOTE 2 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements (except for the
Condensed consolidated statement of financial condition at June 30, 1998,
which has been taken from the audited financial statements at that date)
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to
Form 10-QSB of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments (none of which were other than normal recurring accruals)
necessary for a fair presentation of the financial position and results of
operations for the periods presented have been included. The Company was
not an operating company and did not engage in any significant business
until June 1998. The results of operations for the three months ended
September 30, 1998 are not necessarily indicative of the results of
operations that may be expected for the year ended June 30, 1999. The
accounting policies followed are as set forth in Note 1 of the Notes to
Financial Statements in the 1998 annual report of the Company.
NOTE 3 - EARNINGS PER SHARE
Earnings per share are not applicable for the three months ended September
30, 1997 as Anson Savings Bank did not complete its conversion to stock
form until June 1998. Basic earnings per share for the three months ended
September 30, 1998 is based on unaudited net income earned divided by the
weighted average number of shares outstanding during the period. During
the period reported there were no dilutive securities outstanding,
therefore, basic and diluted earnings per share are the same.
-4-
ANSON BANCORP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
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NOTE 4 - SUBSEQUENT EVENT AND PLAN OF CONVERSION
On June 19, 1998, pursuant to a plan of conversion which was approved by
its members and regulators, Anson Savings Bank converted from a state
chartered mutual savings bank to a state chartered stock savings bank and
became a wholly owned subsidiary of Anson Bancorp, Inc. (the Company).
Anson Bancorp, Inc. was formed to acquire all of the common stock of Anson
Savings Bank upon its conversion to stock form. The closing of the
offering occurred on June 19, 1998 and resulted in the issuance of 585,124
shares of common stock at a price of $10 per share for proceeds of
$5,424,815 (net of $426,425 in offering costs). The Company transferred
$2,712,408 of the net proceeds to Anson Savings Bank for purchase of all of
the common stock of the Bank.
NOTE 5 - YEAR 2000
The Bank recognizes that there is a business risk in computerized systems
as the calendar rolls over into the next century. The Federal Financial
Institutions Examination Council (FFIEC) issued an interagency statement
on May 5, 1997 outlining five phases for institutions to effectively
manage the Year 2000 challenge. The phases were: Awareness, Assessment,
Renovation, Validation, and Implementation. The FFIEC encouraged
institutions to have all critical applications identified and priorities
set by September 30, 1997 and to have renovation work largely completed
and testing well underway by December 31, 1998. The Bank has an ongoing
program designed to ensure that its operational and financial systems will
not be adversely affected by Year 2000 software failures, due to
processing errors arising from calculations using the Year 2000 date. The
Board of Directors and management of the Bank have established Year 2000
compliance as a strategic initiative. While the Bank believes that it has
available resources to assure Year 2000 compliance, it is to some extent
dependent on vendor cooperation. At the present time, the Bank expects its
most critical application software vendor to have all of its systems in
compliance by December 31, 1998. The Bank expects to install the necessary
software releases in 1998 and have testing of such systems substantially
completed by December 31, 1998 and have any problems reconciled by June
30, 1999.
At this time, the Bank has not fully determined the cost of making
modifications to correct any Year 2000 problems; however, equipment and
software expenses are not expected to materially differ from past results.
The Bank routinely upgrades and purchases technologically advanced software
and hardware on a continual basis and expects to specifically evaluate and
test such purchases for Year 2000 compliance.
-5-
ANSON BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND JUNE 30, 1998
Total assets amounted to $24.87 million at September 30, 1998, compared to
$25.07 million at June 30, 1998. The decrease from June 30, 1998 to
September 30, 1998 is primarily attributed to the decrease in deposits.
Accounts payable have decreased approximately $100,000 from June 30, 1998
to September 30, 1998. This decrease is due primarily to expenses accrued
and subsequently paid related to the Bank's conversion to a state chartered
stock savings bank during the period ended June 30, 1998.
The principal category of earnings assets is loans receivable which
amounted to $11.67 million and $11.52 million at September 30, 1998 and
June 30, 1998, respectively. Loan originations for the three months ended
September 30, 1998 totaled $840,000 and were funded by loan principal
repayments of $700,000 as the loan portfolio increased by approximately
$156,000. Loan originations for the year ended June 30, 1998 totaled $2.92
million and principal repayments for 1998 totaled $2.82 million. The Bank
maintains underwriting and credit standards designed to maintain the
quality of the loan portfolio. Nonperforming loans at September 30, 1998
and June 30, 1998 totaled $129,000 and $179,000, respectively, and were
1.11% and 1.55% of total loans, respectively.
In addition to loans, the Company invests in U.S. Treasury and Government
agency securities. Management does not engage in the practice of trading
securities, rather, the Company's investment portfolio consists primarily
of investments designated and held to maturity. Investment securities,
including interest-bearing deposits and FHLB stock, at September 30, 1998
and June 30, 1998, totaled $13.01 million and $12.95 million, respectively.
The increase in investments and loans is primarily attributed to the
increase in current period income.
The Bank has experienced some decrease in savings deposits. At September
30, 1998, Anson's deposits decreased approximately $169,000 compared to
June 30, 1998. Anson has priced its deposits in a fashion to be at or near
the top of the market because of its dependence on the local market for
funds availability.
The Company's equity, which consists entirely of retained earnings, capital
stock and unrealized gains on securities available for sale, net of tax,
amounted to $9.44 million and $9.38 million at September 30, 1998 and June
30, 1998, respectively. The Bank has classified a portion of its
investments as available for sale which requires reporting such investments
at fair market value with unrealized gains or losses, net of tax, shown as
a separate component of equity. The equity component for net unrealized
gains at September 30, 1998 and June 30, 1998 amounted to $295,000 and
$279,000, respectively.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1998 AND 1997
NET INCOME. The Company's net income for the three months ended September
30, 1998 and 1997 was $50,000 and $35,000, respectively. The increase in
net income was primarily due to the increase in investments and the
increase in capital from the sale of stock.
NET INTEREST INCOME. Net interest income has increased by 46% to $220,000
for the three months ended September 30, 1998 from $151,000 for the three
months ended September 30, 1997. This increase is due primarily to an
increase in investment income from the capital raised from the sale of
stock.
NONINTEREST INCOME. Noninterest income consists primarily of fees related
to safe deposit boxes and other miscellaneous income and amounted to $3,700
and $2,300 for the three months ended September 30, 1998 and 1997,
respectively.
-6-
ANSON BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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NONINTEREST EXPENSE. Noninterest expense consisted primarily of operating
expenses for compensation and employee benefits, occupancy, legal and
professional fees, federal deposit insurance premiums, data processing
charges and other operating expenses. Noninterest expense increased to
$163,000 from $113,000 for the three months ended September 30, 1998 and
1997, respectively. This increase is primarily due to the costs associated
with operating as a public company. The Bank anticipates that its
noninterest expense may continue to increase in the future because of costs
associated with compensation, costs associated with operating as a publicly
held company, and with purchasing the computer equipment necessary for year
2000 compliance.
INCOME TAXES. Income tax expense was $9,000 and $7,000 for the three month
periods ended September 30, 1998 and 1997, respectively. The fluctuations
were primarily attributable to corresponding fluctuations in income before
income taxes.
CAPITAL RESOURCES AND LIQUIDITY
The term "liquidity" generally refers to an organization's ability to
generate adequate amounts of funds to meet its needs for cash. More
specifically for financial institutions, liquidity ensures that adequate
funds are available to meet deposit withdrawals, fund loan and capital
expenditure commitments, maintain reserve requirements, pay operating
expenses and provide funds for debt service, dividends to stockholders and
other institutional commitments. Funds are primarily provided through the
sale or maturity of investments, the ability to raise equity capital, or
maintenance of shorter-term interest-bearing deposits.
As a state chartered stock savings bank, Anson Savings Bank must maintain
liquidity in the form of cash and cash equivalents and investment
securities, including mortgage-backed securities, equal to at least 10% of
total assets. The Bank's liquidity ratio at September 30, 1998 was
considerably in excess of such requirements. Given its excess liquidity and
its ability to borrow from the Federal Home Loan Bank, the Bank believes
that it will have sufficient funds available to meet anticipated future
loan commitments, deposit withdrawals and other cash requirements.
YEAR 2000
The Bank recognizes that there is a business risk in computerized systems
as the calendar rolls over into the next century. The Federal Financial
Institutions Examination Council (FFIEC) issued an interagency statement on
May 5, 1997 outlining five phases for institutions to effectively manage
the Year 2000 challenge. The phases were: Awareness, Assessment,
Renovation, Validation, and, Implementation. The FFIEC encouraged
institutions to have all critical applications identified and priorities
set by September 30, 1997 and to have renovation work largely completed and
testing well underway by September 30, 1998. The Bank has an ongoing
program designed to ensure that its operational and financial systems will
not be adversely affected by Year 2000 software failures, due to processing
errors arising from calculations using the Year 2000 date. The Bank's
vaults are mechanical and are not subject to time or calendar failure. The
Board of Directors and management of the Bank have established Year 2000
compliance as a strategic initiative. While the Bank believes that it has
available resources to assure Year 2000 compliance, it is to some extent
dependent on vendor cooperation. At the present time, the Bank expects its
most critical application software vendor to have all of its systems in
compliance by December 31, 1998. The Bank expects to install the necessary
software releases in 1998, have testing of such systems substantially
completed by December 31, 1998 and have any problems reconciled by June 30,
1999.
-7-
ANSON BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
At this time, the Bank has not fully determined the cost of making
modifications to correct any Year 2000 problems; however, equipment and
software expenses are not expected to materially differ from past results.
The Bank routinely upgrades and purchases technologically advanced software
and hardware on a continual basis and expects to specifically evaluate and
test such purchases for Year 2000 compliance.
The Bank's loan portfolio consists primarily of residential mortgage loans
to individuals. These individuals generally are not affected by Year 2000
failures. The Bank currently makes very few commercial loans. If the Bank
increases its commercial loan portfolio, the Bank's Board of Directors
would amend its underwriting policies to address loan payment problems
associated with a borrower as a result of a disruption in income or a
commercial borrower's inability to make a timely payment.
-8-
ANSON BANCORP, INC.
PART II - OTHER INFORMATION
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ITEM 1. LEGAL PROCEEDINGS
The Company is not engaged in any legal proceedings at the present
time. From time to time, the Bank is a party to legal proceedings
within the normal course of business wherein it enforces its security
interest in loans made by it, and other matters of a like kind.
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit (27) - Financial Data Schedule
b) Not applicable
-9-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ANSON BANCORP, INC.
Dated: November 11, 1998 By: /s/ Eugene M. Ward
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Eugene M. Ward
President
Dated: November 11, 1998 By: /s/ Nancy H. Allen
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Nancy H. Allen
Treasurer and Assistance Secretary
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