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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1997
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: 33-95562
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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)
Not Applicable
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(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities 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
--- ---
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
On October 30, 1997, 735,868 shares of the issuer's common stock, par
value $1.00 per share, were issued and outstanding.
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BEACH FIRST NATIONAL BANCSHARES, INC.
MYRTLE BEACH, SOUTH CAROLINA
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, December 31,
1997 1996
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Assets
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Cash and due from banks $ 1,833,568 $ 672,929
Federal funds sold 2,600,000 2,560,000
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Total cash & cash equivalents $ 4,433,568 $ 3,232,929
Investment securities:
Available for sale 9,276,308 5,080,830
Loans 8,042,481 1,077,897
Premises and equipment 1,732,713 475,205
Other assets 327,612 197,146
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Total assets $ 23,812,682 $ 10,064,007
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Liabilities and Stockholders' Equity
- ------------------------------------
Liabilities:
Noninterest-bearing deposits $ 3,840,818 $ 383,128
Interest-bearing deposits 13,143,442 2,634,528
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Total deposits $ 16,984,260 $ 3,017,656
Other liabilities 116,354 85,582
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Total liabilities $ 17,100,614 $ 3,103,238
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Stockholders' 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 (504,86) (261,247)
Unrealized gain net - AFS investments 4,586 9,667
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Total stockholders' equity $ 6,712,068 $ 6,960,769
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Total liabilities and stockholders' equity $ 23,812,682 $ 10,064,007
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See accompanying Notes to Consolidated Financial Statements.
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BEACH FIRST NATIONAL BANCSHARES, INC.
MYRTLE BEACH, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30,
----------------------
1997 1996
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Interest income $ 336,121 $ 82,286
Interest expense 135,671 0
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Net interest income $ 200,450 $ 82,286
Provision for possible loan losses 34,500 0
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Net interest income after provision for possible loan losses $ 165,950 $ 82,286
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Noninterest income:
Service charges on deposits $ 9,846 $ 2
Other operating income 908 0
Securities gains (losses), net 4,213 0
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Total other income $ 14,967 $ 2
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Noninterest expense:
Salaries and employee benefits $ 127,301 $ 78,743
Depreciation 42,075 3,975
Amortization 4,397 0
Data processing 5,541 0
Regulatory fees and assessments 3,105 698
Stationery, printing and supplies 14,717 11,116
Other operating expenses 81,209 41,525
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Total other expenses $ 278,345 $ 136,057
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Net loss before taxes $ (97,428) $ (53,769)
Income tax expense 0 0
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Net loss $ (97,428) $ (53,769)
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Net loss per common share $ (.13) $ (.17)
Weighted average shares outstanding 735,868 325,577
Dividends per share $ 0 $ 0
See accompanying Notes to Consolidated Financial Statements.
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BEACH FIRST NATIONAL BANCSHARES, INC.
MYRTLE BEACH, SOUTH CAROLINA
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended
September 30,
----------------------
1997 1996
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Interest income $ 825,065 $ 183,835
Interest expense 315,809 19,306
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Net interest income $ 509,256 $ 164,529
Provision for possible loan losses 120,000 0
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Net interest income after provision for possible loan losses $ 389,256 $ 164,529
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Other income:
Service charges on deposits $ 10,844 $ 2
Other operating income 12,273 0
Securities gains (losses), net 4,255 0
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Total other income $ 27,372 $ 2
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Other expenses:
Salaries and employee benefits $ 335,636 $ 129,079
Depreciation 69,735 6,464
Amortization 13,192 0
Data processing 14,570 0
Regulatory fees and assessments 7,253 948
Stationery, printing and supplies 39,655 12,800
Other operating expenses 180,207 78,296
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Total other expenses $ 660,248 $ 227,587
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Net loss before taxes $ (243,62) $ (63,056)
Income tax expense $ 0 $ 0
========= =========
Net loss $ (243,62) $ (63,056)
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Net loss per common share $ (.33) $ (29)
Weighted average shares outstanding 735,868 217,055
Dividends per share 0 0
See accompanying Notes to Consolidated Financial Statements.
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BEACH FIRST NATIONAL BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
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1997 1996
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Cash flows from operating activities:
Net loss $ (243,62) $ (63,056)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 69,735 6,464
Provision for loan losses 120,000 0
Net decrease (increase) in available for sale securities (3,042) 0
Net decrease (increase) in other assets (130,466) 88,506
Net increase (decrease) in other liabilities 30,772 (129,060)
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Net cash provided by operating activities $ (156,621) $ (97,146)
Cash flows from investing activities:
Purchase of investment securities available for sale $ (7,775,21) $ (1,693,277)
Proceeds from maturities of securities available for sale 1,082,702 0
Proceeds from sales and calls of securities available for sale 2,495,000 0
Net (interest) decrease in loans (7,084,58) 0
Purchase of fixed assets (1,327,24) (62,387)
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Net cash provided (used) by investing activities $ (12,609,34) $ (1,755,664)
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Cash flows from financing activities:
Net increase in deposits $ 13,966,604 $ 280,785
Proceeds from issuance of common stock 0 6,368,634
Reduction in notes payable 0 (194,000)
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Net cash provided by financing activities $ 13,966,604 $ 6,455,419
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Net increase (decrease) in cash and cash equivalents $ 1,200,639 $ 4,602,609
Cash and cash equivalents at beginning of period 3,232,929 4,639
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Cash and cash equivalents at end of period $ 4,433,568 $ 4,607,248
============ ============
See accompanying Notes to Consolidated
Financial Statements.
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BEACH FIRST NATIONAL BANCSHARES, INC.
MYRTLE BEACH, SOUTH CAROLINA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B of the Securities and Exchange Commission. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. However, in
the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation have been included.
Operating results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1997. For further information, please refer to the consolidated
financial statements and footnotes thereto for the Company's fiscal year ended
December 31, 1996, included in the Company's 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.
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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.
Results of Operations
Since principal banking operations only commenced on September 23,
1996, a comparison of the September 30, 1997 results to those of September 30,
1996 are not meaningful. This discussion will therefore concentrate on the
September 30, 1997 results.
Total consolidated assets increased by $13.7 million during the
nine-month period ended September 30, 1997. This increase was generated by a
$14.0 million increase in deposits. The funds were used to increase loans by
$7.0 million, investment securities by $4.1 million, and fixed assets by $1.3
million. Cash and cash equivalents also increased by $1.2 million during this
period. The strong growth in loans is a reflection of the fact that the bank
just opened for business on September 23, 1996. The Company does not expect to
maintain this growth rate in loans. The increase in fixed assets was the result
of the construction of a new headquarters building for the Bank which was
completed in June 1997.
The Company experienced a net loss during the nine-month period ended
September 30, 1997 of ($243,620) or ($.33) per share. Net loss for the
three-month period ended September 30, 1997 amounted to ($97,428) or ($.13) 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 table presents the main components of interest earning assets and
interest bearing liabilities.
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Interest
Earning Assets/ Average Interest Yield/
Bearing Liabilities Balance Income/Cost Cost
- ----------------------- ----------- ----------- ------
Federal funds sold $ 2,194,652 $ 87,985 5.36%
Securities 8,119,154 384,537 6.33%
Loans 5,006,165 352,543 9.42%
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Total $15,319,971 $ 825,065 7.20%
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Federal funds purchased $ 24,103 $ 1,035 5.74%
Interest bearing deposits 7,929,282 314,774 5.31%
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Total $ 7,953,385 $ 315,809 5.31%
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Net interest income $ 509,256
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Net yield on earning assets 4.44%
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For the nine-month period ended September 30, 1997, net interest income
was $509,256. Earning assets increased to $20 million during that period which
was a 128% increase over December 31, 1996 figures. The largest increase in any
particular segment of earning assets occurred in loans which grew to $8.0
million at September 30, 1997 from $1.1 million at December 31, 1996. Investment
securities increased to $9.3 million at September 30, 1997 from $5.1 million at
December 31, 1996. Interest bearing deposits grew to $13.1 million at September
30, 1997, an increase of $10.5 million from December 31, 1996. These increases
reflect the Bank's continued growth since its opening on September 23, 1996.
Other income for the nine-month period ended September 30, 1997
amounted to $27,373. Of this total, service charges on deposit accounts was
$10,844. 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.
Other operating expenses for the nine-month period ended September 30,
1997 was $660,248. The largest components of noninterest expense were salaries
and benefits which totaled $335,636 and depreciation which was $69,735 for this
period.
At December 31, 1996, the allowance for loan losses amounted to
$16,502. By September 30, 1997, the allowance for loan losses had grown to
$136,502. The allowance for loan losses, as a percentage of gross loans, grew
from 1.50% to 1.66% during the nine-month period ended September 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
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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.
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 its customers. The
September 30, 1997 financial statements evidence a liquidity position,
consisting of cash and cash equivalents, of $4.4 million, representing 18.6% of
total assets. Investment securities amounted to $9.3 million, representing 39.0%
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 serves as a
source of liquidity. For the nine-month period ended September 30, 1997, total
deposits increased from $3.0 million to $17.0 million, representing an
annualized increase of 617.1%. 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 this growth rate in the
long-term. 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 long
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 of the Bank's primary regulator, the
Office of the Comptroller of the Currency.
Bank's ratios Minimum required
September 30, 1997 by regulator
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Leverage ratio 29.4% 4.0%
Risk weighted ratio 49.2% 8.0%
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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.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
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).
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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 totheCompany's Registration Statement No.
33-95562 on Form S-1).
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.
There were no reports on Form 8-K filed by the Company during
the quarter ended September 30, 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: November 12, 1997 By: /s/ William Gary Horn
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William Gary Horn
President
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