SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
[_] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended ______________________
COMMISSION FILE NUMBER 0-23521
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GREAT PEE DEE BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 56-2050592
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification Number)
515 MARKET STREET, CHERAW, SC 29520
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(Address of principal executive office)
(803) 537-7656
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
YES X
----- NO _____
As of November 6, 1998, 2,176,625 shares of the issuer's common stock, $.01 par
value, were outstanding. The registrant has no other classes of securities
outstanding.
This report contains 12 pages.
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PAGE NO.
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PART 1. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Statements of Financial Condition
September 30, 1998 and June 30, 1998............................................. 3
Consolidated Statements of Operations
Three Months Ended September 30, 1998 and 1997................................... 4
Consolidated Statements of Cash Flows
Three Months Ended September 30, 1998 and 1997................................... 5
Notes to Consolidated Financial Statements....................................... 6
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........................................... 11
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PART 1. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
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GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
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September 30,
1998 June 30,
ASSETS (Unaudited) 1998*
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(In Thousands)
Cash on hand and in banks $ 896 $ 510
Interest-bearing balances in other banks 3,513 5,013
Federal funds sold - 1,400
Investment securities available for sale, at fair value 200 200
Investment securities held to maturity, at amortized cost 3,375 3,341
Loans receivable, net 59,633 56,768
Accrued interest receivable 306 278
Premises and equipment, net 378 212
Real estate acquired in settlement of loans 9 9
Stock in the Federal Home Loan Bank, at cost 495 495
Other assets 168 174
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TOTAL ASSETS $68,973 $68,400
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts $37,221 $36,663
Accrued interest payable 75 69
Advance payments by borrowers for property taxes and insurance 66 62
Accrued expenses and other liabilities 211 131
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TOTAL LIABILITIES 37,573 36,925
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STOCKHOLDERS' EQUITY
Preferred stock, no par value, 400,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.01 par value, 3,600,000
shares authorized; 2,202,125 shares issued 22 22
Additional paid in capital 21,293 21,293
ESOP loan receivable (1,652) (1,682)
Retained earnings, substantially restricted 11,947 11,842
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31,610 31,475
Cost of 17,500 shares of common stock held
by the Company in treasury (210) -
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TOTAL STOCKHOLDERS' EQUITY 31,400 31,475
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $68,973 $68,400
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* Derived from audited financial statements
See accompanying notes.
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GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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Three Months Ended
September 30,
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1998 1997
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(In Thousands Except Per Share Amounts)
INTEREST INCOME
Loans $ 1,099 $1,057
Investments 64 36
Deposits in other banks and federal funds sold 85 46
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TOTAL INTEREST INCOME 1,248 1,139
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INTEREST EXPENSE
Savings deposits 490 624
Borrowed funds - 36
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TOTAL INTEREST EXPENSE 490 660
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NET INTEREST INCOME 758 479
PROVISION FOR LOAN LOSSES 48 -
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 710 479
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OTHER INCOME 8 9
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GENERAL AND ADMINISTRATIVE EXPENSES
Personnel costs 141 93
Occupancy 20 11
Deposit insurance premiums 6 7
Other 91 41
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TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES 258 152
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INCOME BEFORE INCOME TAXES 460 336
PROVISION FOR INCOME TAXES 173 124
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NET INCOME $ 287 $ 212
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NET INCOME PER SHARE
Basic and diluted $ .14 $ -
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Weighted average common shares outstanding 2,034,492 -
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CASH DIVIDEND PER SHARE $ .09 $ -
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See accompanying notes.
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GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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Three Months Ended
September 30,
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1998 1997
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(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 287 $ 212
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 12 4
Provision for loan losses 48 -
Release of ESOP shares 30 -
Change in assets and liabilities:
(Increase) decrease in accrued interest receivable (28) 2
Increase (decrease) in accrued interest payable 6 (11)
Other 86 117
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NET CASH PROVIDED BY
OPERATING ACTIVITIES 441 324
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CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in interest-bearing balances in other banks 1,500 581
Decrease in federal funds sold 1,400 200
Purchases of:
Held to maturity investment securities (34) -
Proceeds from sales, maturities and calls of:
Held to maturity investment securities - 12
Net increase in loans (2,913) (428)
Purchases of property and equipment (178) (1)
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NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES (225) 364
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in demand deposits 295 235
Net increase (decrease) in certificate accounts 263 (991)
Increase in advances from borrowers 4 11
Dividends paid (182) -
Purchase of treasury stock (210) -
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NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 170 (745)
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NET INCREASE (DECREASE) IN
CASH ON HAND AND IN BANKS 386 (57)
CASH ON HAND AND IN BANKS, BEGINNING 510 222
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CASH ON HAND AND IN BANKS, ENDING $ 896 $ 165
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See accompanying notes.
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GREAT PEE DEE BANCORP, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NOTE A - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial information as of and for the three
month periods ended September 30, 1998 and 1997, in conformity with generally
accepted accounting principles. The financial statements include the accounts of
Great Pee Dee Bancorp, Inc. (the "Company") and its wholly-owned subsidiary,
First Federal Savings and Loan Association of Cheraw ("First Federal" or the
"Bank"). Operating results for the three month period ended September 30, 1998
are not necessarily indicative of the results that may be expected for the
fiscal year ending June 30, 1999.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the financial
statements filed as part of the Company's annual report on Form 10-KSB. This
quarterly report should be read in conjunction with such annual report.
NOTE B - NET INCOME PER SHARE
Net income per share is presented for periods subsequent to the closing of the
Company's stock offering on December 31, 1997. Net income per share has been
computed by dividing net income by the weighted average number of shares of
common stock outstanding during the period. In accordance with generally
accepted accounting principles, ESOP shares are only considered outstanding for
earnings per share calculations when they are earned or committed to be
released. No potentially dilutive securities were outstanding during the three
months ended September 30, 1998.
NOTE C - COMPREHENSIVE INCOME
On July 1, 1998, the Company adopted Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS No. 130). This pronouncement
establishes standards for the reporting and display of comprehensive income and
its components in a full set of financial statements. Comprehensive income is
defined as the change in equity during a period for non-owner transactions and
is divided into net income and other comprehensive income. Other comprehensive
income includes revenues, expenses, gains and losses that are excluded from
earnings under current accounting standards. This statement does not change or
modify the reporting or display in the statement of operations. SFAS No. 130 is
effective for the Company for interim and annual periods beginning on or after
July 1, 1998. Comparative financial statements for earlier periods are required
to reflect retroactive application of this statement. For the three months ended
September 30, 1998 and 1997, the Company has no items of other comprehensive
income. Accordingly, comprehensive income was the same as net income for each
period.
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NOTE D - STOCK REPURCHASE PLAN
On September 1, 1998, the Company's Board of Directors adopted a stock
repurchase plan under which the Company is authorized to repurchase shares of
its outstanding common stock in the open market or in privately negotiated
transactions at times deemed appropriate. Under the plan, the Company could not
use more than 5% of the outstanding common stock, or 110,106 shares. During the
quarter ended September 30, 1998, the Company repurchased 17,500 shares of its
common stock at an aggregate cost of $210,000. Such shares are held as treasury
stock at September 30, 1998.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1998 AND JUNE 30, 1998
The Company's total assets increased by $573,000 during the three months ended
September 30, 1998, from $68.4 million at June 30, 1998 to $69.0 million at the
quarter end. During the quarter, reductions of $1.5 million and $1.4 million,
respectively, in interest-bearing balances in other banks and federal funds sold
were the principal sources of funding for an increase of $2.8 million in loans
receivable, which grew from $56.8 million at the beginning of the quarter to
$59.6 million at quarter end. Total stockholders' equity was $31.4 million at
September 30, 1998 as compared with $31.5 million at June 30, 1998, a decrease
of $75,000 which resulted principally from net income of $287,000 for the
quarter, a dividend that aggregated $182,000 or $.09 per share and the purchase
of 17,500 treasury shares at an aggregate cost of $210,000. At September 30,
1998, both the Holding Company and the Bank continued to significantly exceed
all applicable regulatory capital requirements.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30,
1998 AND 1997
Net Income. Net income for the quarter ended September 30, 1998 was $287,000,
or $.14 per share, as compared with net income of $212,000 for the three months
ended September 30, 1997, an increase of $75,000. This increase in net income
resulted from an increase of $279,000 in net interest income which was partially
offset by an increase of $48,000 in the provision for loan losses and an
increase of $106,000 in general and administrative expenses.
Net Interest Income. Net interest income for the quarter ended September 30,
1998 was $758,000 as compared with $479,000 during the quarter ended September
30, 1997, an increase of $279,000. The Company received a significant infusion
of capital and liquidity with the closing of its conversion offering on December
31, 1997 that generated net proceeds of $21.1 million. By the end of the current
quarter, substantially all proceeds had been used either to fund loan growth,
fund withdrawals and maturities of interest-bearing customer deposits or to
repay borrowings. As a result, total interest income increased by $109,000 and
total interest expense decreased by $170,000 during the quarter ended September
30, 1998 as compared with the quarter ended September 30, 1997.
Provision for Loan Losses. The provision for loan losses was $48,000 and $0 for
the quarters ended September 30, 1998 and 1997, respectively. There were no net
loan charge-offs during either quarter. At September 30, 1998, nonaccrual loans
aggregated $421,000, while the allowance for loan losses stood at $402,000.
General and Administrative Expenses. General and administrative expenses
increased to $258,000 during the quarter ended September 30, 1998 as compared
with $152,000 for the quarter ended September 30, 1997, an increase of $106,000.
The most significant component of this increase relates to personnel costs which
increased by $48,000 principally as a result of personnel additions and costs
associated with the Company's ESOP. An increase of $50,000 in other general and
administrative expenses relates principally to increased costs of operations as
a publicly owned company and to costs incurred to achieve growth and expansion
of services to customers.
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Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 37.6% and 36.9% for the quarters ended September
30, 1998 and 1997, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The objective of the Company's liquidity management is to ensure the
availability of sufficient cash flows to meet all financial commitments and to
capitalize on opportunities for expansion. Liquidity management addresses First
Federal's ability to meet deposit withdrawals on demand or at contractual
maturity, to repay borrowings as they mature, and to fund new loans and
investments as opportunities arise.
The Company's primary sources of internally generated funds are principal and
interest payments on loans receivable and cash flows generated from operations.
External sources of funds include increases in deposits and advances from the
FHLB of Atlanta.
First Federal is required under applicable federal regulations to maintain
specified levels of "liquid" investments in qualifying types of United States
Government, federal agency and other investments having maturities of five years
or less. Current OTS regulations require that a savings association maintain
liquid assets of not less than 4% of its average daily balance of net
withdrawable deposit accounts and borrowings payable in one year or less.
Monetary penalties may be imposed for failure to meet applicable liquidity
requirements. At September 30, 1998, First Federal's liquidity, as measured for
regulatory purposes, was 13.8%, or $4.5 million in excess of the minimum OTS
requirement.
First Federal is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on First
Federal's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, First Federal must meet
specific capital guidelines that involve quantitative measures of First
Federal's assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. First Federal's capital amounts and
classifications are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors. At September 30, 1998,
First Federal's level of capital substantially exceeded all applicable
requirements.
THE YEAR 2000
The Year 2000 issue confronting the Company and its suppliers, customers,
customers' suppliers, and competitors centers on the inability of computer
systems to recognize the Year 2000. Many existing computer programs and systems
were originally programmed with six digit dates that provided only two digits to
identify the calendar year, without considering the upcoming change in the
century. Monitoring and managing the Year 2000 project will result in additional
direct costs. Management presently believes that with modifications to existing
software and conversions to new software, the Year 2000 matter will be mitigated
without causing a material adverse impact on operations. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 issue could have a material impact on the operations of the Company.
Relations with third parties in which electronic data is exchanged exposes the
Company to some risk of loss in the event the other party makes a mistake or is
unable to perform. In the Year 2000 context, the Company is
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working to identify where such exposure may exist and is in the process of
developing contingency plans in order to minimize risk of loss due to third
parties' Year 2000 vulnerabilities. In addition, the Company has initiated
formal communications with all of its significant suppliers and large customers
to determine the extent to which it is vulnerable to those third parties'
failure to remediate their own Year 2000 issues. There can be no guarantee that
the systems of other companies on which the Company's systems rely will be
timely converted, or that a failure to convert by another company, or a
conversion that is incompatible with the Company's systems, would not have a
material adverse effect on the Company in future periods. The full cost for
becoming Year 2000 compliant has not been determined; however, management
believes it will not be material to the Company's financial statements.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
(27) Financial data schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended
September 30, 1998.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREAT PEE DEE BANCORP, INC.
Date: November 9, 1998 By: /s/ Herbert W. Watts
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Herbert W. Watts
Chief Executive Officer
Date: November 9, 1998 By: /s/ Johnnie L. Craft
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Johnnie L. Craft
Chief Financial Officer
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