SECURITIES AND EXCHANGE COMMISSION
WASHINGTON DC
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, 2001
Or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
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MountainBank Financial Corporation
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(Exact name of the registrant as specified in its charter)
North Carolina 56-2237240
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(State of Incorporation) (I.R.S. Employer Identification No.)
201 Wren Dr., Hendersonville, N.C. 28792
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(Address of principal executive offices)
(828) 697-0030
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(Issuer's telephone number, including area code)
Check whether the issuer: (1) 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 [ ]
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
At August 2, 2001, the Company had 1,873,461 shares outstanding of its
$4 par common stock.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
MountainBank
Form 10-QSB
Table of Contents
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL INFORMATION
The financial statements of MountainBank Financial Corporation are set
forth as follows.
Balance Sheets at June 30, 2001 and December 31, 2000............. 3
Statement of Operations for the Three and Six Months Ended
June 30, 2001 and 2000............................................ 4
Statement of Cash Flows for the Six Months Ended June 30,
2001 and 2000..................................................... 5
Statement of Changes in Shareholders' Equity through June 30,
2001 and 2000..................................................... 6
Notes to Financial Statements..................................... 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS................ 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................... 15
Item 2. Changes in Securities................................. 15
Item 3. Defaults Upon Senior Securities....................... 15
Item 4. Submission of Matters to a Vote of Security Holders... 15
Item 5. Other Information..................................... 15
Item 6. Exhibits and Reports on Form 8-K...................... 15
Signatures........................................................ 16
2
MountainBank Financial Corporation
Balance Sheets
At June 30, 2001 and December 31, 2000
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June 30, 2001 December 31, 2000
-------------- -----------------
Assets
Cash and due from banks $ 6,151,127 $ 7,797,745
Interest bearing deposits with banks 22,199,695 3,667,612
Federal funds sold 10,039,000 9,220,000
Investment securities available for sale 43,434,794 35,415,821
Restricted equity securities 1,421,200 453,300
Loans, net of allowance for loan losses of $4,424,528 at
June 30, 2001 and $3,006,842 at December 31, 2000 315,714,002 197,372,973
Property and equipment, net 2,831,096 2,322,157
Accrued income 2,513,827 2,007,804
Other assets 1,393,476 851,608
-------------- --------------
Total assets $ 405,698,217 $ 259,109,020
============== ==============
Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits $ 25,351,163 $ 15,531,055
Interest-bearing deposits 320,380,568 217,807,421
-------------- --------------
Total deposits 345,731,731 233,338,476
Federal funds purchased and
Securities sold under agreements to repurchase 3,603,485 3,145,147
FHLB advance 25,000,000 0
Note payable 5,000,000 --
Obligations under capital lease 747,986 759,804
Accrued interest payable 5,479,949 2,840,440
Other liabilities 1,073,179 814,734
-------------- --------------
Total liabilities 386,636,330 240,898,601
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Commitments and contingencies
Stockholders' equity
Common stock, $4 par value; 10,000,000 shares
authorized; 1,871,938 and 1,873,461 shares issued and
outstanding at December 31, 2000 and June 30, 2001 7,493,844 7,487,752
Surplus 9,404,066 9,400,906
Retained earnings (deficit) 1,979,441 1,182,510
Unrealized appreciation on investment securities
available for sale 184,536 139,251
-------------- --------------
Total stockholders' equity 19,061,887 18,210,419
-------------- --------------
Total liabilities and stock holders' equity $ 405,698,217 $ 259,109,020
============== ==============
3
MountainBank Financial Corporation
Statement of Operations
For the Six and Three Months Ended June 30, 2001 and 2000
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Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2001 2000 2001 2000
------------ ------------ ----------- -----------
Interest income
Deposits with banks $ 95,111 $ 178,927 $ 146,905 $ 339,169
Federal funds sold 97,909 63,249 189,403 115,387
Investment securities, taxable 514,040 376,406 1,062,026 664,892
Loans and fees on loans 6,418,697 2,886,171 11,671,352 5,123,497
----------- ----------- ----------- -----------
Total interest income 7,125,757 3,504,753 13,069,686 6,242,945
----------- ----------- ----------- -----------
Interest expense
Deposits 3,794,146 1,871,445 7,205,011 3,337,074
Federal funds purchased and securities sold under
agreements to repurchase 55,814 33,523 109,328 56,854
Other borrowed funds 332,403 21,032 346,612 34,576
----------- ----------- ----------- -----------
Total interest expense 4,182,363 1,926,000 7,660,951 3,428,504
----------- ----------- ----------- -----------
Net interest income 2,943,394 1,578,753 5,408,735 2,814,441
Provision for loan losses 865,000 395,000 1,492,000 785,000
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 2,078,394 1,183,753 3,916,735 2,029,441
----------- ----------- ----------- -----------
Noninterest income
Service charges on deposit accounts 202,590 112,725 351,475 209,106
Mortgage origination income 189,506 102,984 320,351 196,747
Gain on sale of loan 0 0 0 150,977
Other service charges and fees 110,984 57,762 198,338 85,003
----------- ----------- ----------- -----------
Other income 503,080 273,471 870,164 641,833
----------- ----------- ----------- -----------
Noninterest expense
Salaries and employee benefits 1,097,811 567,723 1,860,573 1,035,841
Occupancy expense 297,299 161,139 550,548 300,202
Other expense 684,748 344,579 1,158,847 599,759
----------- ----------- ----------- -----------
Total noninterest expense 2,079,858 1,073,441 3,569,968 1,935,802
----------- ----------- ----------- -----------
Income before income taxes 501,616 383,783 1,216,931 735,472
Income tax expense 210,000 107,940 420,000 220,538
----------- ----------- ----------- -----------
Net income $ 291,616 $ 275,843 $ 796,931 $ 514,934
=========== =========== =========== ===========
Basic earnings per share $ 0.16 $ 0.17 $ 0.43 $ 0.34
=========== =========== =========== ===========
Diluted earnings per share $ 0.14 $ 0.16 $ 0.39 $ 0.31
=========== =========== =========== ===========
Weighted average shares outstanding 1,873,461 1,607,509 1,873,461 1,524,970
=========== =========== =========== ===========
4
MountainBank Financial Corporation
Statements of Cash Flows
For the Six and Three Months Ended June 30, 2001 and 2000
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Cash flows from operating activities June 30, 2001 June 30, 2000
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Net income (loss) $ 796,931 $ 514,934
Adjustments to reconcile net income (loss)
to net cash provided by operations:
Depreciation and amoritization 225,844 132,605
Provision for loan losses 1,492,000 785,000
Deferred income taxes -- --
Accretion of discount on securities, net of
amortization of premiums (39) (4,509)
Changes in assets and liabilities:
Accrued income (506,023) (298,620)
Other real estate owned -- --
Other assets (541,868) (339,522)
Accrued interest payable 2,639,509 523,649
Other liabilities 258,445 148,670
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Net cash provided (used) by operating activities 4,364,799 1,462,207
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Cash flows from investing activities
Net (increase) decrease in federal funds sold (819,000) 1,570,000
Net (increase) decrease in interest-bearing deposits with banks (18,532,083) (236,237)
Purchases of investment securities (17,316,055) (12,197,415)
Maturities of investment securities 8,374,506 1,160,618
Net increase in loans (119,833,029) (43,469,503)
Purchases of property and equipment (734,783) (306,752)
------------- -------------
Net cash used in investing activities (148,860,444) (53,479,289)
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Cash flows from financing activities
Net increase in noninterest-bearing deposits 9,820,108 1,932,630
Net increase in interest-bearing deposits 102,573,147 41,785,288
Net increase in Federal funds purchased securities sold under
agreements to repurchase 458,338 5,344,451
Net increase in notes payable 5,000,000 --
Increase in FHLB advances 25,000,000 --
Repayment of obligations under capital lease (11,818) (9,225)
Proceeds from the exercise of stock options 9,252 --
Proceeds from the issuance of common stock, net -- 4,648,800
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Net cash provided by financing activities 142,849,027 53,701,944
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Net increase in cash and cash equivalents (1,646,618) 1,684,862
Cash and cash equivalents, beginning 7,797,745 4,298,207
------------- -------------
Cash and cash equivalents, ending $ 6,151,127 $ 5,983,069
============= =============
Supplemental disclosures of cash flow information
Interest paid $ 5,021,442 $ 2,904,855
============= =============
Income taxes paid $ 420,000 $ 220,538
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5
MountainBank Financial Corporation
Statement of Changes in Stockholders' Equity
For the Six and Three Months Ended June 30, 2001 and 2000
- --------------------------------------------------------------------------------------------------------------------------
Accumulated
Common Stock Other
--------------------------- Retained Comprehensive
Shares Amount Surplus Earnings Income Total
------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1999 1,442,433 $ 5,769,730 $ 4,385,302 $ 126,541 $ (59,081) $ 10,222,492
Comprehensive income
Net Income 514,934 514,934
Net change in unrealized
appreciation on investment
securities available for sale 91,892 91,892
------------
Total comprehensive income 606,826
Shares issued pursuant to
secondary stock offering 292,493 1,169,975 3,478,825 4,648,800
---------------------------------------------------------------------------------------
Balance June 30, 2000 1,734,926 $ 6,939,705 $ 7,864,127 $ 641,475 $ 32,811 $ 15,478,118
=======================================================================================
Balance, December 31, 2000 1,871,938 $ 7,487,752 $ 9,400,906 $ 1,182,510 $ 139,251 $ 18,210,419
Comprehensive income --
Net Income 796,931 796,931
Net change in unrealized
appreciation on investment
securities available for sale 45,285 45,285
------------
Total comprehensive income 842,216
Shares issued pursuant to
secondary stock offering
and Employee and Director
stock option plans 1,523 6,092 3,160 9,252
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Balance June 30, 2001 1,873,461 $ 7,493,844 $ 9,404,066 $ 1,979,441 $ 184,536 $ 19,061,887
=======================================================================================
6
MountainBank
Notes to Financial Statements
June 30, 2001
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Note 1. Organization and Summary of Significant Accounting Policies
Organization:
MountainBank Financial Corporation (the "Company") is a single bank
holding company incorporated on January 10, 2001 by the Board of Directors
of MountainBank (the "Bank"). Prior to its acquisition of the Bank, the
Company conducted no business or operations other than those activities
related to the acquisition. On March 30, 2001, the Company acquired the
Bank under North Carolina law and in accordance with the terms of an
Agreement and Plan of Reorganization and Share Exchange dated January 11,
2001 (the "Agreement").
MountainBank, the Company's wholly owned bank subsidiary, is a state
chartered, full service commercial banking institution, insured by the FDIC
and incorporated under the laws of North Carolina. The Bank currently
operates nine full service banking offices, one loan production office and
an administration center. The Bank's full service offices are located in
Hendersonville, N.C. (2), Columbus, N.C., Fletcher, N.C., Asheville, N.C.,
Lake Lure, N.C., Forest City, N.C., Marion, N.C. and Waynesville, N.C. The
Bank has received approval from regulators to open an additional branch
office in Morganton, N.C. and expects to open this office by year end 2001.
The Bank is subject to regulation by the FDIC and the North Carolina State
Banking Commission.
Basis of Presentation:
The financial statements as of June 30, 2001 and for the periods
ended June 30, 2001 and 2000, have been prepared by MountainBank Financial
Corporation without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
information furnished in the interim financial statements reflects all
adjustments necessary to present fairly the Company's financial position,
results of operations and cash flows for such interim periods. Management
believes that all interim period adjustments are of a normal recurring
nature. These financial statements should be read in conjunction with the
Company's audited financial statements and the notes thereto as of December
31, 2000, included its Annual Report on Form 10KSB for the fiscal year
ended December 31, 2000.
Statements in this report as to the Company's projections for
expansion, capital expenditures, earnings and other such issues as well as
for future financial or economic performance of the Company are "forward
looking" statements, and are being provided in reliance upon the "safe
harbor" provision of the Private Securities Litigation Reform Act of 1995.
Important factors that could cause actual results or events to differ
materially
7
MountainBank
Notes to Financial Statements
June 30, 2001
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from those projected, estimated, assumed or anticipated in any such forward
looking statements include changes in general economic conditions in the
Company's markets, loan losses, including loan losses resulting from
adverse economic conditions, increased competition, any loss of the
Company's key management personnel, changes in governmental regulations and
other factors.
The accounting and reporting policies of the Company follow generally
accepted accounting principles and general practices within the financial
services industry. The accounting policies followed are set forth in Note 1
to the Company's 2000 Financial Statements incorporated in the Company's
2000 Form 10KSB.
Commitments and Other Contingencies:
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. Management does not anticipate any
significant losses to result from these transactions. The unfunded portion
of loan commitments and standby letters of credit as of June 30, 2001 was
$58.0 million.
Properties and Equipment:
Bank properties and equipment are stated at cost less accumulated
depreciation. Depreciation is computed by the straight-line method over
periods of two to thirty-five years for capital leases and leasehold
improvements and from two to twenty years for furniture and equipment.
8
MountainBank
Management Discussion and Analysis
June 30, 2001
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company currently conducts all business through its wholly owned
subsidiary, MountainBank. The Bank conducts its business through nine full
service branch offices in Henderson, Polk, Buncombe, Rutherford, McDowell,
and Haywood counties in western North Carolina. Additionally, the Bank
opened a loan production office in Morganton, North Carolina during the
first quarter of 2001, and will complete the acquisition of a full-service
mortgage center located in Greenwood, South Carolina during the third
quarter of 2001. The following discussion and analysis is provided to
address information about the financial condition and results of operations
of the Company and the Bank which is not otherwise apparent from the
financial statements included in this report. Reference should be made to
those statements for an understanding of the following discussion and
analysis.
Changes in Financial Condition June 30, 2001 Compared with December 31,
2000
The Company continued to experience very rapid growth during the
first six months of 2001. During that period, total assets increased $146.6
million, or 56.57%, while earning assets increased $148.1 million, or
59.44%, over the same six month period. Loans, the Company's largest
earning asset, increased $119.8 million, or 59.77%, during the period,
primarily as a result of the continuing penetration of the Bank in its
current geographic markets and the opening of new offices. Short-term
interest bearing accounts increased substantially at June 30, 2001
principally as a result of a certificate of deposit campaign conducted via
the Bank's Internet banking site. This liquidity was acquired to fund
lending efforts over the next several months. These deposits, totaling
approximately $51 million, were acquired at costs lower than those of CDs
generated through the Bank's retail distribution channel at the time of the
campaign and represent an initial step in broadening the Company's
wholesale funding sources. While management does not anticipate significant
ongoing Internet campaigns, deposit acquisition via the Internet has been
incorporated into the Bank's funding and liquidity plans and is expected to
be utilized periodically. The Bank's securities portfolio increased $4.1
million or 11.39% during the period as some additional funding was used to
acquire pledgeable assets. During the second quarter, the Company invested
in guaranteed insurance contracts bearing interest rates above those
available in the government guaranteed bond market. These contracts are
variable rate in nature.
Deposits increased $112.4 million, or 48.17%, from December 31, 2000
to June 30, 2001, with non-interest bearing demand deposits increasing
$9.8 million, or 63.22%, over the same six month period. Interest bearing
deposits, primarily certificates of
9
MountainBank
Management Discussion and Analysis
June 30, 2001
- --------------------------------------------------------------------------------
deposit, increased $102.6 million, or 47.09%. A sizeable portion of this
increase resulted from the aforementioned Internet CD campaign conducted
during the second quarter. At June 30, 2001, the Bank's loan to deposit
ratio was 92.60% as compared to 85.88% at December 31, 2000.
During the first six months of the year, new liabilities were added
to the Company's balance sheet. A $25 million advance from the Federal Home
Loan Bank of Atlanta was entered into during the second quarter. This ten
year wholesale funding arrangement bears a fixed cost of 4.53% but may be
repriced to a floating rate of LIBOR flat if three month LIBOR exceeds 7%
at any quarter end following the first anniversary of the inception of this
advance. Management believes that the diversification of funding sources is
crucial in managing funding costs as deposits become more commoditized. It
is anticipated that wholesale funding strategies such as FHLB borrowings
and the use of the Internet will continue to play a role in the Company's
funding plan by supplementing funding acquired via tradition retail
channels. The note payable of $5.0 million reported on the June 30, 2001
balance sheet represents a mezzanine borrowing from a correspondent bank.
This borrowing was used primarily by the parent company to purchase
additional stock from the bank thereby enhancing the Bank's capital ratios.
It is expected that this borrowing will be liquidated in the second half of
2001 through the acquisition of additional common stock and Trust Preferred
debt. During the first six months of 2001, common stock outstanding
increased 1,523 shares, or .10% as a result of stock option exercises.
Liquidity, Interest Rate Sensitivity, Capital Adequacy and Market Risks
The objectives of the Company's liquidity management policy include
providing adequate funds to meet the needs of depositors and borrowers at
all times, as well as providing funds to meet the basic needs for on-going
operations of the Bank and regulatory requirements. Management's goal is to
maintain sufficient liquidity for these purposes while limiting the market
volatility of the Bank's available for sale securities portfolio and
returning a positive spread to the Federal funds rate over time. At June
30, 2001, management considered the Company's liquidity position to be
adequate to meet expected liquidity demands.
Management and the Board of Directors view the monitoring and
managing of the Company's asset/liability position to be of strategic
importance. The Bank's aggressive plans for growth necessitate relatively
aggressive pricing policies for both assets and liabilities. Thus, managing
interest rate risk, interest margins and the overall leverage of the
Company's balance sheet becomes increasingly important as growth and
10
MountainBank
Management Discussion and Analysis
June 30, 2001
- --------------------------------------------------------------------------------
expansion into other markets continues. Management considers the Company's
deposit base to be generally stable and not overly vulnerable to volatility
experienced in national financial markets in recent years; however, the
Company does realize the importance of minimizing such volatility while at
the same time balancing growth and earnings capacity as well as maximizing
shareholder value. During the first half of 2001, the velocity of the
Company's loan production accelerated thus requiring modifications to the
Company's liquidity plan. As discussed above, new sources of funding have
been added which are expected to both provide supplemental funding to
support ongoing loan production and assist in the overall management of
funding costs. It is management's opinion that the addition of these
funding sources has strengthened the Company's liquidity management
process.
The Bank uses several modeling techniques to measure interest rate
risk. Its primary method is the simulation of net interest income under
varying interest rate scenarios. Management believes this methodology is
preferable in that it takes into account the pricing strategies management
would undertake in response to rate changes, whereas other methods such as
interest rate shock analysis do not take these into consideration.
Periodically, the Bank also utilizes traditional gap analysis to
measure interest rate sensitivity. Gap analysis measures the difference or
gap between the volume of interest-earning assets and interest-bearing
liabilities repricing over a specific time period. This method, however,
addresses only the magnitude of funding mismatches and does not address the
magnitude or relative timing of rate changes and is not considered as
precise as the Bank's simulation model. The Bank's balance sheet is
asset-sensitive over the short term (approximately one year), and then
shifts to liability-sensitive in future periods. The result of this is that
in the near term, more assets than liabilities are subject to immediate
repricing as market rates change. Because most of the Bank's securities
portfolio, all overnight investments and approximately one-third of its
loan portfolio, bear variable rates, they reprice more rapidly than rate
sensitive interest-bearing deposits. During periods of rising rates, this
results in increased net interest income. However, in periods of sustained
rising rates, the fixed rate component of the Bank's loan portfolio would
begin to negatively impact net interest income after the first year of such
conditions and would result in lower net interest income than in a flat
rate scenario. The opposite would be expected during periods of declining
rates.
While the Bank's balance sheet has grown substantially over the first
six months of 2001, the mix of its rate-sensitive assets and liabilities
has not changed sufficiently to result in a material change in its interest
rate sensitivity since reported at December 31, 2000.
11
MountainBank
Management Discussion and Analysis
June 30, 2001
- --------------------------------------------------------------------------------
At June 30, 2001, the Bank's equity to assets ratio stood at 6.18%.
As a result of the rapid growth experienced during the first six months of
2001, the Company's capital ratios have declined. In response, management
and the Board of Directors have adopted a capital plan which, when executed
during the second half of 2001, is expected to generate additional Tier I
capital of between $19 million to $22 million, effectively doubling the
Company's core capital. Management expects this capital to be sufficient to
support anticipated near-term growth.
Results of Operations for the Three and Six Month Periods Ended June 30,
2001 Compared with the Same Periods in 2000
During the three month period ended June 30, 2001, net interest
income increased $1.4 million, or 86.44%, from the same period last year.
The increase is primarily attributable to the overall growth and increased
volume of the Bank's balance sheet and the continuing strong loan demand
experienced in the Bank's primary lending markets. During the period,
average gross loans increased $155.8 million, or 127.90%, resulting in an
increase of $3.5 million or 122.39% in interest earned on loans.
Interest on securities and overnight investments increased $172
thousand, or 39.19%, due to higher average volumes invested during the
quarter. Average securities and overnight investments were $51.8 million
compared to $39.4 million during 2000, an increase of $12.4 million or
31.39%. Interest expense increased $2.3 million, or 117.15%, primarily due
to the overall increase in volume of deposits. Interest-bearing deposits
averaged $260.3 million compared to $137.7 million last year, an increase
of $122.6 million, or 89.05%.
During the first six months of 2001, net interest income increased
substantially to $5.4 million from $2.8 million, representing a change of
$2.6 million or 92.18%. Again, this increase resulted primarily from
continued growth, particularly with regard to the Company's loan portfolio
which averaged $249.5 million compared to $111.00 million last year, an
increase of $138.5 million, or 124.83%. Interest on securities and
overnight investments increased $471 thousand, or 60.38%, due to
significantly higher average volumes invested during the period. Average
securities and overnight investments were $47.8 million compared to $36.4
million last year, an increase of $11.4, or 31.27%.
Interest expense increased $4.2 million or 123.45%, again, primarily
due to growth in the Bank's balance sheet. Additionally, during the first
six months of the year,
12
MountainBank
Management Discussion and Analysis
June 30, 2001
- --------------------------------------------------------------------------------
the Bank has experienced some migration of deposits from money market
accounts to certificates of deposits and the difference in rate between
these two products has become more pronounced. Interest-bearing deposits
averaged $244.0 million compared to $127.2 million last year, an increase
of $116.8 million, or 91.82%.
Management determines the allowance for loan losses based on a number
of factors including reviewing and evaluating the Company's loan portfolio
in order to identify potential problem loans, credit concentrations and
other risk factors connected to the loan portfolio as well as current and
projected economic conditions locally and nationally. Upon loan
origination, management evaluates the relative quality of each loan and
assigns a corresponding loan grade. All loans are periodically reviewed to
determine both the initial and ongoing accuracy of these loan grades. The
loan grading system assists management in determining the overall risk in
the loan portfolio.
Management realizes that general economic trends greatly affect loan
losses and no assurances can be made that further charges to the loan loss
allowance may not be significant in relation to the amount provided during
a particular period or that further evaluation of the loan portfolio based
on conditions then prevailing may not require sizable additions to the
allowance, thus necessitating similarly sizable charges to operations.
During the three and six month periods ended June 30, 2001, management
determined a charge to operations of $865 thousand and $1.5 million,
respectively, was sufficient to bring the loan loss reserve to a balance
considered to be adequate to absorb estimated potential losses in the
portfolio. At June 30, 2001 the loan loss reserve was 1.38% of loans
outstanding. Excluding government guaranteed, sold and cash collateralized
loans, the allowance for loan losses was 1.42%.
At June 30, 2001 and 2000, the Bank had $348.5 thousand and $87.3
thousand, respectively, in loans that were considered to be impaired under
SFAS No. 114. All of these credits were on a non-accruing basis.
For the quarter ended June 30, 2001, noninterest income totaled
$503.1 thousand, up $229.6 thousand, or 83.95%, from $273.5 thousand earned
in the same period of 2000. Fees on deposit accounts increased $89.9
thousand or 79.72% during the second quarter as compared with the second
quarter of 2000. Origination fees generated from the origination and sale
of mortgage loans increased $86.5 thousand. Fees from other services
increased $53.2 thousand or 92.14% in the second quarter of 2001 in
comparison to the same period in 2000. This increase resulted primarily
from increased sales of commissioned insurance products.
13
MountainBank
Management Discussion and Analysis
June 30, 2001
- --------------------------------------------------------------------------------
Second quarter 2001 noninterest expenses totaled $2.1 million, up
$1.0 million or 93.76%, from $1.1 million in the same quarter of 2000.
Personnel costs increased $530.1 thousand or 93.4% resulting from staffing
increases required as the Bank has opened new offices and grown its
infrastructure to support its retail banking network. Other non-interest
expenses totaled $684.7 thousand during the second quarter of 2001, up
$340.1 thousand, or 98.69%, from $344.6 thousand in the same quarter a year
ago. Of the $340.1 thousand increase, $74.3 thousand was attributed to
increases in data processing and data telecom fees. Additionally, printing
and supplies expense recorded a $79.7 thousand increase during the period.
For the six months ended June 30, 2001, noninterest income totaled
$870.2 thousand, up $228.3 thousand, or 35.57%, from $641.8 thousand earned
in the first six months of 2000. During the period, service charges on
deposit accounts increased $142.4 thousand, or 68.08% while fees on
mortgage originations increased from $196.7 thousand to $320.3 thousand, an
increase of $123.6 thousand, or 62.82%.
Total noninterest expenses were $3.6 million during the first six
months of 2001, representing an increase of $1.6 million, or 84.42%, from
$1.9 million in the same period of 2000. As was the case for the second
quarter, year-to-date increases in the various overhead captions were
principally impacted by the continuing growth of the Bank and the building
of infrastructure to support ongoing expansion. For the period, personnel
expense totaled $1.9 million, up $824.7 thousand, or 79.62%, from $1.0
million in the same period of 2000. Year-to-date occupancy expense
increased $250.3 thousand, or 83.39%. Other non-interest expense totaled
$1.2 million for the six months ended June 30, 2001, up $559.1 thousand, or
93.22%, from $599.8 thousand in the same period of 2000. Of the $559.1
thousand increase in other non-interest expenses, $160.8 thousand related
to increases in data processing and data telecom fees and $73.2 thousand
related to printing and supplies.
14
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
At the date of this filing, the registrant was a party to no legal
proceedings and management was unaware of any pending matters for
which litigation was considered likely.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The following is the result of voting on proposals presented at the
Bank's Annual Shareholders' Meeting held May 21, 2001, at which
1,873,461 shares were entitled to vote.
Proposal 1 - Election of three directors of the Company for three
years or until their successors are duly elected and
qualified.
All directors were elected with at least 975,952
shares voted in favor.
Proposal 2 - Ratification of Appointment of Independent Accountants:
Proposal to ratify the appointment of Larrowe & Company,
PLLC as the Bank's independent public accountants for
2001.
For - 972,783; Against - 0; Abstain - 3,984
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
None.
Reports on 8-K.
Form 8-K12G3; Dated March 30, 2001; filed April 13, 2001;
Disclosing Finalization of the Formation of MountainBank
Financial Corporation and the Acquisition of MountainBank.
Form 8-K12G3/A; Dated March 30, 2001; filed May 7, 2001;
Amendment to Form 8-K12G3 Filed April 13, 2001 Disclosing
Finalization of the Formation of MountainBank Financial
Corporation and the Acquisition of MountainBank.
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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.
MountainBank Financial Corporation
Date: August 8, 2001 /s/ J.W. DAVIS
-----------------------------------
J. W. Davis
President & Chief Executive Officer
(Duly Authorized Officer)
Date: August 8, 2001 /s/ GREGORY L. GIBSON
-----------------------------------
Gregory L. Gibson
Principal Accounting Officer
16