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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 29549
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
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
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Commission file number 0-15956
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Bank of Granite Corporation
(Exact name of registrant as specified in its charter)
Delaware 56-1550545
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Post Office Box 128, Granite Falls, N. C. 28630
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(Address of principal executive offices) (Zip Code)
(704) 496-2000
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) 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 CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, $1 par value - 9,033,432 shares outstanding as of April 30, 1997.
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BANK OF GRANITE CORPORATION AND SUBSIDIARY
INDEX PAGE
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PART I FINANCIAL INFORMATION:
Financial Statements:
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 3
Consolidated Statements of Income
Three Months Ended March 31, 1997
and 1996 4
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997
and 1996 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 7
PART II Other Information 9
SIGNATURE 10
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BANK OF GRANITE CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (unaudited)
MARCH 31, DECEMBER 31,
1997 1996
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ASSETS:
Cash and cash equivalents:
Cash and due from banks $ 21,771,334 $ 24,336,258
Interest-bearing deposits 30,445 10,025
Federal funds sold 11,200,000 4,500,000
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Total cash and cash equivalents 33,001,779 28,846,283
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Investment securities:
Available for sale, at fair value 50,553,106 51,195,230
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Held to maturity, at amortized cost 77,657,283 77,449,108
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Loans 326,864,526 320,280,400
Allowance for loan losses (4,991,293) (4,793,889)
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Net loans 321,873,233 315,486,511
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Premises and equipment, net 8,405,008 8,103,713
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Accrued interest receivable 4,731,643 4,272,255
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Other assets 2,344,234 2,196,756
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TOTAL $ 498,566,286 $ 487,549,856
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand $ 76,806,509 $ 78,480,411
NOW accounts 59,712,082 60,575,240
Money market accounts 29,788,921 27,290,026
Savings 23,483,094 22,271,033
Time deposits of $100,000 or more 91,906,520 88,267,044
Other time deposits 121,891,139 120,814,237
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Total deposits 403,588,265 397,697,991
Securities sold under agreement to repurchase 3,469,272 2,955,234
Accrued interest payable 1,752,391 1,978,712
Other liabilities 3,935,473 1,611,805
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Total liabilities 412,745,401 404,243,742
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SHAREHOLDERS' EQUITY:
Common stock, $1.00 par value, authorized-
10,000,000 shares; issued and outstanding-
1997 - 9,033,432; 1996 - 9,008,570 9,033,432 9,008,570
Capital surplus 21,932,970 21,690,069
Retained earnings 54,876,178 52,430,332
Net unrealized gain (loss) on securities
available for sale, net of deferred
income taxes (21,695) 177,143
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Total shareholders' equity 85,820,885 83,306,114
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TOTAL $ 498,566,286 $ 487,549,856
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Bank of Granite Corporation and Subsidiary
Consolidated Statements of Income (unaudited)
For The Three Months Ended March 31, 1997 1996
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INTEREST INCOME:
Interest and fees on loans $7,996,717 $7,552,316
Federal funds sold 54,509 69,913
Interest-bearing deposits 298 --
Investments:
U.S. Treasury 293,739 222,938
U.S. Government agencies 586,261 591,102
States and political subdivisions 793,912 753,392
Other 214,275 172,459
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Total interest income 9,939,711 9,362,120
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INTEREST EXPENSE:
Time deposits of 100,000 or more 1,244,696 1,210,056
Other time and savings deposits 2,247,090 2,273,655
Federal funds purchased and securities
sold under agreements to repurchase 44,162 44,091
Other borrowed funds 362 156
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Total interest expense 3,536,310 3,527,958
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NET INTEREST INCOME 6,403,401 5,834,162
PROVISION FOR LOAN LOSSES 255,000 185,000
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,148,401 5,649,162
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OTHER INCOME:
Service charges on deposits accounts 784,142 705,755
Other service fees and commissions 292,384 255,835
Other 262,690 286,323
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Total other income 1,339,216 1,247,913
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OTHER EXPENSES:
Salaries and wages 1,222,979 1,151,028
Profit sharing and employee benefits 353,578 381,214
Occupancy expense, net 112,690 99,443
Equipment rentals, depreciation, and maintenance 212,178 198,620
Other 600,711 605,329
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Total other expenses 2,502,136 2,435,634
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INCOME BEFORE INCOME TAXES 4,985,481 4,461,441
INCOME TAXES 1,728,758 1,515,000
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NET INCOME $3,256,723 $2,946,441
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PER SHARE AMOUNTS:
Net income $ .36 $ .33
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Cash dividends $ .09 $ .08
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Book Value $ 9.50 $ 8.43
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BANK OF GRANITE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE THREE MONTHS ENDED MARCH 31 1997 1996
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Increase (Decrease ) in cash and cash equivalents
Cash flows from operating activities:
Interest received $ 9,520,516 $ 8,953,875
Fees and commissions received 1,364,468 1,247,913
Interest paid (3,762,631) (3,726,259)
Cash paid to suppliers and employees (2,967,204) (2,534,162)
Income taxes paid (517,623) (526,797)
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Net cash provided by operating activities 3,637,526 3,414,570
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Cash flows from investing activities:
Proceeds from maturities of securities available for sale 3,100,000 5,100,000
Proceeds from maturities of securities held to maturity 800,000 3,215,000
Purchases of securities available for sale (1,290,052) (4,082,827)
Purchases of securities held to maturity (772,760) (2,990,938)
Net increase in loans (6,681,722) (1,151,677)
Proceeds from disposals of fixed assets 20,000 --
Capital expenditures (518,694) (175,796)
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Net cash used in investing activities (5,343,228) (86,238)
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Cash flows from financing activities:
Net increase (decrease) in demand deposits, NOW accounts
and savings accounts 1,173,896 (969,987)
Net increase in certificates of deposit 4,716,378 3,701,343
Net increase in federal funds purchased and
securities sold under agreements to repurchase 514,038 716,610
Net proceeds from issuance of common stock 267,763 37,860
Dividends paid (810,877) (718,153)
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Net cash provided by financing activities 5,861,198 2,767,673
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Net increase (decrease) in cash and cash equivalents 4,155,496 6,096,005
Cash and cash equivalents at beginning of period 28,846,283 21,121,179
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Cash and cash equivalents at end of period $ 33,001,779 $ 27,217,184
============ ============
Reconciliation of net income to net cash
provided by operating activities:
Net Income $ 3,256,723 $ 2,946,441
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Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 197,924 185,367
Provision for loan losses 255,000 185,000
Premium amortization (discount accretion), net 40,193 37,387
Increase in taxes payable 1,211,135 988,203
Increase in accrued interest receivable (459,388) (445,632)
Decrease in interest payable (226,321) (198,301)
(Increase ) decrease in other assets 25,252 (86,598)
Decrease in other liabilities (662,467) (197,297)
Gain of sale of fixed assets (525) --
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Total adjustments 380,803 468,129
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Net cash provided by operating activities $ 3,637,526 $ 3,414,570
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Supplemental Disclosure of Non-Cash Transactions:
Change in net unrealized gain (loss) on securities available for sale 331,568 (337,834)
Matured securities held to maturity, funds not yet collected 1,500,000 1,000,000
Purchased securities available for sale, not yet settled (275,000) (1,340,052)
Transfer to Other Real Estate Owned 40,000 --
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BANK OF GRANITE CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to present fairly the
financial position of Bank of Granite Corporation and subsidiary as of
March 31, 1997 and December 31, 1996, and the results of their
operations and their cash flows for the three month periods ended March
31, 1997 and 1996.
The accounting policies followed are set forth in Note 1 to the
Corporation's 1996 Annual Report to Shareholders on file with the
Securities and Exchange Commission.
2. Earnings per share have been computed using the weighted average number
of shares of common stock and dilutive common stock equivalents
outstanding, of 9,094,027 and 9,016,402.
3. In the normal course of business there are various commitments and
contingent liabilities such as commitments to extend credit, which are
not reflected on the financial statements. The unused portions of loan
commitments at March 31, 1997 and December 31, 1996 were $56,431,000
and $56,138,000, respectively. Additionally, standby letters of credit
of approximately $2,326,000 and $2,251,000 were outstanding at March
31, 1997 and December 31, 1996, respectively. Management does not
anticipate any significant losses to result from these transactions.
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BANK OF GRANITE CORPORATION AND SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS
CHANGES IN FINANCIAL CONDITION
MARCH 31, 1997 COMPARED WITH DECEMBER 31, 1996
Total assets increased $11,016,430 from December 31, 1996 to March 31, 1997.
This 2.26% of growth in assets resulted primarily from an increase in deposits
of $5,890,274 or 1.48% and the reinvestment of $2,445,846 of net earnings, less
cash dividends paid. As a result, cash and cash equivalents increased
$4,155,496, and gross loans reflected a growth of $6,584,126 or 2.06%.
Securities decreased by $102,381, excluding unrealized losses on available for
sale securities of $36,135 and unrealized gains of $295,433, at March 31, 1997
and December 31, 1996, respectively. Deposits increased $5,890,274 or 1.48%.
Non-time deposits increased $1,173,896 or .62%, while time deposits increased
$4,716,378 or 2.26%. The loan-to-deposits ratios were 80.99% and 80.53% on March
31, 1997 and December 31, 1996, respectively. Other liabilities increased
$2,323,668. Of this amount, $1,775,000 represents an accrued liability for
securities purchased but not yet settled and $1,211,135 for accrued income
taxes. Common stock outstanding increased by 24,862 shares due to the exercise
of stock options and provided cash of $267,763. Retained earnings reflect the
payment of $810,877 in cash dividends and earnings of $3,256,723. The Company
had a $21,695 unrealized loss, net of deferred income taxes, on held available
for sale securities. The Company's liquidity position remained strong.
The Bank intends to invest approximately $1 million in technology during the
next six months. New plans are in place to upgrade old back-office operations
equipment and replace it with state of the art technology. One change will be
the conversion to a new check-imaging system. This system will allow for faster
check processing, improved research capabilities and marketing opportunities.
On April 28, 1997, the Bank opened it's twelfth full-service office. This office
is the Bank's first supermarket office and is located in the nearby community of
Baton, NC. Additional plans are underway to open another supermarket office and
one brick and mortar office during 1997.
RESULTS OF OPERATIONS FOR THE THREE
MONTH PERIOD ENDED MARCH 31, 1997
COMPARED WITH THE SAME PERIOD IN 1996
Increases in interest income are primarily attributable to increases in volume.
Gross loans increased by 2.06% while the prime rate increased by approximately
two basis points over the comparable quarter in 1996. The increase in interest
expense is attributable to increases in interest bearing time deposits and
slightly higher yields paid on time deposits.
The provision for loan losses charged to operations is an amount sufficient to
bring the allowance for loan losses to an estimated balance considered to be
adequate to absorb potential losses in the portfolio. Management's determination
of the adequacy of the allowance is based on an evaluation of the portfolio,
current economic conditions, historical loan loss experience and other risk
factors.
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This evaluation is heavily dependent upon estimates and appraisals which are
susceptible to rapid changes because of changing economic conditions and the
economic prospects of borrowers. The bank's delinquency ratio was 1.24% on March
31, 1997. During the quarter, management charged $255,000 to operations for the
addition to the allowance for loan losses during the first quarter. At March 31,
1997 the loan loss reserve was 1.55% of net loans outstanding.
At March 31, 1997 and 1996, the recorded investment in loans that are considered
to be impaired under SFAS No. 114 was $935,736 ($731,935 of which was on a
nonaccrual basis) and $646,139 ($312,209 of which was on nonaccrual basis),
respectively. The average recorded balance of impaired loans during 1997 and
1996 was not significantly different from the balance at March 31, 1997 and
1996, respectively. The related allowance for loan losses determined in
accordance with SFAS No. 114 for these loans was $455,988 and $347,038 at March
31, 1997 and 1996, respectively. For the quarters ended March 31, 1997 and 1996,
the Bank recognized interest income on those impaired loans of approximately
$6,825 and $8,102, respectively.
Non-interest income increased $91,303 or 7.32% compared to $1,247,913 in 1996.
The increase reflects deposit growth and higher volumes in the bank's
non-traditional banking services. Fees from the sales of annuities increased
$32,189. The sales did not result in a cannibalization of deposits. Other
expenses increased by $66,502 or 2.73%. Employee salaries and benefits comprised
$44,315 or 66.64% of the increase in non-interest expense. The increase in
salaries and benefits reflects general pay increases, the increased costs of
providing benefits and an increase in number of employees.
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PART II OTHER INFORMATION
ITEM 4 - OTHER INFORMATION
Bank of Granite Corporation's Annual Shareholders Meeting was held on
April 28, 1997. Submission of matters to be voted upon resulted in the
following:
1. Approval of an Incentive Stock Option Plan in the amount of 100,000
shares of common stock.
2. Members of the Corporation's Board of Directors were reelected to serve
until the next annual meeting. They are John A. Forlines, Jr., Charles
M. Snipes, John N. Bray, Robert E. Cline, Barbara F. Freiman, Hugh R.
Gaither, and Boyd C. Wilson, Jr.
3. Shareholders ratified the selection of Deloitte & Touche LLP as the
Corporation's independent auditors for the year ending December 31,
1997.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A) Exhibits
27 -Financial Data Schedule (for SEC use only)
B) Reports on Form 8-K
No reports on Form 8-K have been filed for the
quarter ended March 31, 1997.
Items 1,2,3,4 and 5 are inapplicable and are omitted.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Bank of Granite Corporation
(Registrant)
Date: April 30, 1997 /s/Randall C. Hall
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Randall C. Hall
Vice President and Chief Financial
and Principal Accounting Officer
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