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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the quarterly period ended June 30, 1997.
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- --- ACT OF 1934
For the transition period from _______________ to _______________
Commission File No. 33-95562
BEACH FIRST NATIONAL BANCSHARES, INC.
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(Exact name of small business issuer as specified in its charter)
South Carolina 57-1030117
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(State of Incorporation) (I.R.S. Employer Identification No.)
1550 N. Oak Street, Myrtle Beach South Carolina 29577
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(Address of Principal Executive Offices)
(803) 626-2265
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(Issuer's Telephone Number, Including Area Code)
Not Applicable
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer (1) 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 issuer 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 equity as of the latest
practicable date.
Common stock, $1.00 par value per share 735,868 shares issued and
outstanding as of August 11, 1997.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BEACH FIRST NATIONAL BANCSHARES, INC.
Myrtle Beach, South Carolina
Consolidated Balance Sheets
June 30, December 31,
1997 1996
(Unaudited) (Audited)
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ASSETS
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Cash $ 937,313 $ 672,929
Federal Funds Sold 710,000 2,560,000
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Total cash & cash equivalents $ 1,647,313 $ 3,232,929
Securities:
Available-for-sale, at fair value 8,103,023 5,080,830
Loans, net 6,030,704 1,077,897
Land, property & equipment, net 1,374,385 475,205
Other assets 287,028 197,146
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Total assets $ 17,442,453 $ 10,064,007
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LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Deposits
Non-interest bearing deposits $ 2,806,380 $ 383,128
Interest bearing deposits 7,808,803 2,634,528
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Total deposits $ 10,615,183 $ 3,017,656
Other liabilities 43,769 85,582
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Total liabilities $ 10,658,952 $ 3,103,238
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Commitments and contingencies
Shareholders' Equity:
Common stock, $1,00 par value
10,000,000 shares authorized,
735,868 shares issued and outstanding $ 735,868 $ 735,868
Paid-in-capital 6,476,481 6,476,481
Retained deficit (407,439) (261,247)
Unrealized (loss) on fair value
of securities available-for-sale (21,409) 9,667
------------ ------------
Total Shareholders' Equity $ 6,783,501 $ 6,960,769
------------ ------------
Total Liabilities and
Shareholders' Equity $ 17,442,453 $ 10,064,007
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BEACH FIRST NATIONAL BANCSHARES, INC.
Myrtle Beach, South Carolina
Unaudited Consolidated Statements of Income
For the three months
ended June 30,
-------------------------
1997 1996
--------- ---------
Interest income $ 275,528 $ 67,582
Interest expense 96,056 8,701
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Net interest income 179,472 $ 58,881
Provision for possible loan losses 45,000 0
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Net interest income after provision for
possible loan losses $ 134,472 $ 58,881
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Other income
Gain on sale of securities $ 0 $ 0
Service charges 679 0
Other fees 9,896 0
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Total other income $ 10,575 $ 0
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Salaries and benefits $ 108,254 $ 30,092
Depreciation 13,833 1,516
Amortization 4,397 0
Data processing 4,126 0
Regulatory fees and assessments 2,534 0
Stationery, printing and supplies 19,209 694
Other operating expenses 62,840 24,482
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Total expenses $ 215,193 $ 56,784
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Net (loss) before taxes $ (70,146) $ 2,097
Income Taxes 0 0
Net (loss) $ (70,146) $ 2,097
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BEACH FIRST NATIONAL BANCSHARES, INC.
Myrtle Beach, South Carolina
Unaudited Consolidated Statements of Income
For the six months
ended June 30,
-------------------------
1997 1996
--------- ---------
Interest income $ 488,944 $ 102,763
Interest expense 180,138 20,520
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Net interest income 308,806 $ 82,243
Provision for possible loan losses 85,500 0
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Net interest income after provision for
possible loan losses $ 223,306 $ 82,243
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Other income
Gain on sale of securities $ 42 $ 0
Service charges 999 0
Other fees 11,364 0
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Total other income $ 12,405 $ 0
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Salaries and benefits $ 208,335 $ 50,336
Depreciation 27,661 2,489
Amortization 8,794 0
Data processing 9,029 0
Regulatory fees and assessments 4,147 0
Stationery, printing and supplies 24,937 1,684
Other operating expenses 99,000 37,021
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Total expenses $ 381,903 $ 91,530
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Net (loss) before taxes $(146,192) $ (9,287)
Income Taxes 0 0
Net (loss) $(146,192) $ (9,287)
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BEACH FIRST NATIONAL BANCSHARES
Myrtle Beach, South Carolina
Consolidated Statements of Cash Flows
(Unaudited)
For the six months
ended June 30,
--------------------------
1997 1996
----------- -----------
Cash flows from operating activities: $ (148,475) $ (165,922)
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Cash flows from investing activities:
Purchase of securities, ASF $(4,595,125) $(2,002,917)
Maturity and paydowns on
securities, ASF 1,028,730 --
Sale of securities, ASF 496,875 --
(Increase) in loans, net (5,038,307) --
Purchase of premises and equipment (926,841) (17,727)
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Net cash used by investing activities $(9,034,668) $(2,020,644)
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Cash flows from financing activities:
Increase in common stock $ -- $ 6,262,420
Reduction in notes payable -- (194,000)
Increase in deposits 7,597,527 --
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Net cash provided by financing activities $ 7,597,527 $ 6,068,420
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Net increase in cash and cash equivalents $(1,585,616) $ 3,881,854
Cash and cash equivalents, beginning of period 3,232,929 4,639
Cash and cash equivalents, end of period $ 1,647,313 $ 3,886,493
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BEACH FIRST NATIONAL BANCSHARES, INC.
MYRTLE BEACH, SOUTH CAROLINA
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six-month period
ended June 30, 1997 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For further information, refer
to the financial statements and footnotes thereto included in Form 10-KSB for
the year ended December 31, 1996.
NOTE 2 - SUMMARY OF ORGANIZATION
Beach First National Bancshares, Inc., Myrtle Beach, South Carolina
(the "Company"), was incorporated July 28, 1995 under the laws of the State of
South Carolina for the purpose of operating as a bank holding company with
respect to a then proposed de novo bank, Beach First National Bank, Myrtle
Beach, South Carolina (the "Bank").
The Company offered its common stock for sale to the public under an
initial public offering price of $10 per share. As of December 31, 1996, when
the offering was terminated, 735,868 shares were sold, resulting in net proceeds
of $7,212,349.
During 1996, the Company obtained regulatory approval to operate a
national bank in Myrtle Beach, South Carolina. The Bank opened for business on
September 23, 1996, with a total capitalization of $6.3 million. Upon the
opening of the Bank, the Company ceased to be considered as a "development stage
enterprise" as its planned principal operations had commenced. The Bank's
deposits are each insured up to $100,000 by the Federal Deposit Insurance
Corporation.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following discussion contains forward-looking statements that
involve risks and uncertainties. The Company's actual results may differ
materially from the results discussed in the forward-looking statements, and the
Company's operating performance each quarter is subject to various risks and
uncertainties that are discussed in detail in the Company's filings with the
Securities and Exchange Commission, including the "Risk Factors" section in the
Company's Registration Statement on Form S-1 (Registration Number 33-95562) as
filed with and declared effective by the Securities and Exchange Commission.
The Company was incorporated July 28, 1995 under the laws of the State
of South Carolina for the purpose of operating as a bank holding company with
respect to the Bank. The Company sold 735,868 shares of its common stock for
$7,212,349, net of expenses. The Company commenced principal operations on
September 23, 1996 when the Bank opened for business.
Total consolidated assets increased by $7.4 million to $17.4 million
during the six-month period ended June 30, 1997. The increase was generated
primarily through a $7.6 million increase in deposits. The funds were used to
increase loans by $5.0 million, investment securities by $3.0 million, and fixed
assets
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by $899,000. Note that cash and cash equivalents declined by $1.6 million during
this period.
Liquidity and Sources of Capital
Liquidity is the Company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of customers. The June
30, 1997 financial statements evidence a liquidity position, consisting of cash
and cash equivalents, of $1.6 million, representing 9.4% of total assets.
Investment securities amounted to $8.1 million, representing 46.5% of total
assets. These securities provide a secondary source of liquidity since they can
be converted into cash in a timely manner. The Company's ability to maintain and
expand its deposit base and borrowing capabilities also serve as a source of
liquidity. For the six-month period ended June 30, 1997, total deposits
increased from $3.0 million to $10.6 million, representing an annualized
increase of 503.5%. However, this tremendous growth rate is a reflection of the
fact that the Bank just opened for business on September 23, 1996, and the
Company does not expect to maintain or duplicate this growth rate. The Company's
management closely monitors and seeks to maintain appropriate levels of interest
earning assets and interest bearing liabilities so that maturities of assets are
such that adequate funds are provided to meet customer withdrawals and loan
demand. Management expects asset and liability growth to continue at a rapid
pace during the coming months, with the growth tapering off to a slower, more
deliberate and controllable pace over the longer term, and believes capital
should continue to be adequate. However, no assurances can be given in this
regard, as rapid growth, deterioration in loan quality and poor earnings, or a
combination of these factors, could change the Company's capital position in a
relatively short period of time.
The Bank currently maintains a level of capitalization substantially in
excess of the minimum capital requirements by the Bank's primary regulator, the
OCC.
Bank's Minimum required
June 30, 1997 by regulator
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Leverage Ratio 36.7% 4.0%
Risk weighted ratio 67.0% 8.0%
Results of Operations
Since principal banking operations only commenced on September 23,
1996, a comparison of the June 30, 1997 results (when banking operations were in
progress) to those of June 30, 1996 are not meaningful. This discussion will
therefore concentrate on the June 30, 1997 results.
Net loss for the six month period ended June 30, 1997 amounted to
$146,192 or $.20 per share. Net loss for the three month period ended June 30,
1997 amounted to $70,146 or $.10 per share. The following is a brief discussion
of the more significant components of net income:
Net interest income represents the difference between interest received
on interest earning assets and interest paid on interest bearing liabilities.
The following presents, in a tabular form, the main components of interest
earning assets and interest bearing liabilities.
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ----------- ----------- ------
Federal funds sold $ 2,329,669 $ 61,164 5.29%
Securities 8,064,659 252,566 6.32%
Loans 3,713,662 175,214 9.51%
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Total $14,107,990 $ 488,944 6.99%
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Federal funds purchased $ 23,702 $ 673 5.73%
Deposits 6,683,004 179,465 5.42%
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Total $ 6,706,706 $ 180,138 5.42%
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Net Interest Income $ 308,806
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Net yield on earning assets 4.41%
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Other income for the six month period ended June 30, 1997 amounted to
$12,405. On an annualized basis, this represents .14% of total assets.
Management believes this figure is lower than it will be in future periods
because, in order to attract new banking relationships, the Bank implemented an
initial fee structure and charges that are low when compared to other banks but
which the Bank anticipates will increase in the future.
Operating expenses for the six month period ended June 30, 1997
amounted to $381,903. On an annualized basis, this represents 4.42% of total
assets.
At December 31, 1996, the allowance for loan losses amounted to
$16,502. By June 30, 1997, the allowance had grown to $102,002. The allowance
for loan losses, as a percentage of gross loans, grew from 1.50% to 1.66% during
the six month period ended June 30, 1997. The loan portfolio is periodically
reviewed to evaluate the outstanding loans and to measure both the performance
of the portfolio and the adequacy of the allowance for loan losses. This
analysis includes a review of delinquency trends, actual losses, and internal
credit ratings. Management's judgment as to the adequacy of the allowance is
based upon a number of assumptions about future events which it believes to be
reasonable, but which may or may not be reasonable. However, because of the
inherent uncertainty of assumptions made during the evaluation process, there
can be no assurance that loan losses in future periods will not exceed the
allowance for loan losses or that additional allocations to the allowance will
not be required.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Not Applicable
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
On April 30, 1997, the Company held its Annual Meeting of Shareholders for the
purpose of (a) electing five directors for three-year terms, and (b) approving
the Stock Option Plan.
Each nominee for director received the number of affirmative votes of
shareholders required for such nominee's election in accordance with the Bylaws
of the Company, with 453,248 shares voting for each nominee and 3,200 shares
withholding vote out of a total 735,868 outstanding shares, The five nominees
elected at the meeting were Michael Bert Anderson, Orvis Bartlett Buie, Michael
D. Harrington, Diane W. Sammons, and Rick H. Seagroves. The other directors of
the Company are Raymond E. Cleary III, William Gary Horn, Joe N. Jarrett, Jr.,
Richard E. Lester, Don J. Smith, Jack L. Green, Jr., Samuel Robert Spann, Jr.,
B. Larkin Spivey, Jr., and James C. Yahnis. The Stock Option Plan also received
the requisite number of affirmative votes required for approval pursuant to the
Bylaws of the Company. Of the 735,868 outstanding shares of the Company, the
voting was as follows: 442,338 shares voted for, 5,960 voted against, and 8,150
abstained.
Item 5. Other Information
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
Exhibit
Number Description
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1.1. Selling Agent Agreement, dated October 16, 1995, by and
between Capital Investment Group, Inc. and the Company
(incorporated by reference to Exhibit 1.1 to the Company's
Registration Statement No. 33-95562 on Form S-1).
3.1. Articles of Incorporation (incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement No.
33-95562 on Form S-1).
3.2. Bylaws (incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement No. 33-95562 on Form S-1).
4.1. Provisions in the Company's Articles of Incorporation and
Bylaws defining the rights of holders of the Common Stock
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement No. 33-95562 on Form S-1).
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4.2. Form of Certificate of Common Stock (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement No. 33-95562
on Form S-1).
10.1. Contract of Sale, dated April 27, 1995, by and between Nadim Baroody,
Mary Baroody, Jean P. Saad, and Miray Saad, as sellers, and Orvis
Bartlett Buie, as purchaser (incorporated by reference to Exhibit 10.1
to the Company's Registration Statement No. 33-95562 on Form S-1).
10.2. Line of Credit Note, dated April 24, 1995, by Sea Group, Ltd. to The
Bankers Bank (incorporated by reference to Exhibit 10.2 to the
Company's Registration Statement No. 33-95562 on Form S-1).
10.3. Employment Agreement, dated August 23, 1995, by and between the Company
and William Gary Horn (incorporated by reference to Exhibit 10.3 to the
Company's Registration Statement No. 33-95562 on Form S-1).*
10.4. Form of Amended and Restated Escrow Agreement, dated November __, 1995,
by and among The Bankers Bank, Capital Investment Group, Inc., and the
Company (incorporated by reference to Exhibit 10.4 to the Company's
Registration Statement No. 33-95562 on Form S-1).
10.5. Amended and Restated Escrow Agreement, dated December 1, 1995, by and
among The Bankers Bank, Capital Investment Group, Inc., and the Company
(incorporated by reference to Exhibit 10.5 of the Company's Form 10-KSB
for the fiscal year ended December 31, 1995).
10.6. Amendment to Employment Agreement, dated January 9, 1996, by and
between the Company and William Gary Horn (incorporated by reference to
Exhibit 10.6 of the Company's Form 10-KSB for the fiscal year ended
December 31, 1995).*
10.7. Stock Option Plan dated as of April 30, 1997 (incorporated by reference
to Exhibit 10.7 of the Company's Form 10-KSB for the fiscal year ended
December 31, 1996).
21.1. Subsidiaries of the Company. (incorporated by reference to Exhibit 21.1
of the Company's Form 10-QSB for the quarter ended March 30, 1996).
27.1. Financial Data Schedule. (for SEC use only).
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* Denotes executive compensation contract or arrangement.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter
ended March 31, 1997
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SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934 (the "Exchange Act"), the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BEACH FIRST NATIONAL BANCSHARES, INC.
Date: August 11, 1997 By: /s/ William Gary Horn
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William Gary Horn
President
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