U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2002
[_] Transition Report Under Section 13
or 15(d) of the Exchange Act
For the transition period ended ______________________
Commission File Number 0-23521
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GREAT PEE DEE BANCORP, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 56-2050592
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
515 MARKET STREET, CHERAW, SC 29520
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(Address of principal executive office)
(843) 537-7656
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X
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No ____
As of May 1, 2002, 1,765,952 shares of the issuer's common stock, $.01 par
value, were outstanding. The registrant has no other classes of securities
outstanding.
This report contains 14 pages.
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Page No.
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Part l. FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Statements of Financial Condition
March 31, 2002 and June 30, 2001 ............................................... 3
Consolidated Statements of Operations
Three Months and Nine Months Ended
March 31, 2002 and 2001 ........................................................ 4
Consolidated Statements of Cash Flows
Nine Months Ended March 31, 2002 and 2001 ...................................... 5
Notes to Consolidated Financial Statements ..................................... 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K ....................................... 13
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Part l. Financial Information
Item 1 - Financial Statements
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Great Pee Dee Bancorp, Inc. and Subsidiary
Consolidated Statements of Financial Condition
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March 31,
2002 June 30,
ASSETS (Unaudited) 2001*
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(In Thousands)
Cash on hand and in banks $ 1,039 $ 661
Interest-bearing balances in other banks 1,393 2,045
Federal funds sold 697 648
Investment securities available for sale, at fair value 451 472
Investment securities held to maturity, at amortized cost 6,504 6,264
Loans receivable, net 104,890 97,804
Loans held for sale 3,459 3,431
Accrued interest receivable 1,025 736
Premises and equipment, net 1,848 1,062
Stock in the Federal Home Loan Bank, at cost 1,000 725
Real estate acquired in settlement of loans 50 37
Other assets 2,086 2,112
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TOTAL ASSETS $ 124,442 $ 115,997
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LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposit accounts $ 81,135 $ 77,624
Advances from Federal Home Loan Bank 17,500 12,800
Accrued interest payable 79 52
Advance payments by borrowers for property taxes and insurance 71 128
Accrued expenses and other liabilities 193 263
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TOTAL LIABILITIES 98,978 90,867
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STOCKHOLDERS' EQUITY
Preferred stock, no par value, 400,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.01 par value, 3,600,000
shares authorized; 2,224,617 shares issued 22 22
Additional paid in capital 22,163 21,562
Unearned compensation (1,224) (1,369)
Retained earnings, substantially restricted 10,124 12,325
Accumulated other comprehensive loss (31) (18)
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31,054 32,522
Cost of common stock in treasury, 458,665 and
606,372 shares, respectively (5,590) (7,392)
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TOTAL STOCKHOLDERS' EQUITY 25,464 25,130
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 124,442 $ 115,997
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* Derived from audited financial statements
See accompanying notes.
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Great Pee Dee Bancorp, Inc. and Subsidiary
Consolidated Statements of Operations (Unaudited)
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Three Months Ended Nine Months Ended
March 31, March 31,
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2002 2001 2002 2001
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(In Thousands Except Share and Per Share Data)
INTEREST INCOME
Loans $ 2,048 $ 1,825 $ 6,195 $ 5,226
Investments 103 101 318 316
Deposits in other banks and federal funds sold 19 31 63 238
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TOTAL INTEREST INCOME 2,170 1,957 6,576 5,780
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INTEREST EXPENSE
Savings deposits 691 978 2,441 2,935
Borrowed funds 148 137 497 382
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TOTAL INTEREST EXPENSE 839 1,115 2,938 3,317
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NET INTEREST INCOME 1,331 842 3,638 2,463
PROVISION FOR LOAN LOSSES 150 12 375 12
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NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,181 830 3,263 2,451
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NON-INTEREST INCOME 179 147 528 401
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NON-INTEREST EXPENSES
Personnel costs 336 315 999 959
Occupancy 114 65 298 205
Other 392 249 1,072 691
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TOTAL NON-INTEREST EXPENSES 842 629 2,369 1,855
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INCOME BEFORE INCOME TAXES 518 348 1,422 997
PROVISION FOR INCOME TAXES 191 130 524 374
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NET INCOME $ 327 $ 218 $ 898 $ 623
============ ============ ============= =============
NET INCOME PER SHARE
Basic $ .20 $ .13 $ .55 $ .37
Assuming dilution .20 .13 .54 .37
CASH DIVIDEND PER SHARE $ .125 $ .10 $ .339 $ .291
WEIGHTED AVERAGE SHARES OUTSTANDING
ADJUSTED FOR 10% STOCK DIVIDEND IN
2001
Basic 1,632,639 1,646,000 1,637,232 1,663,610
Assuming dilution 1,654,975 1,646,206 1,650,021 1,663,679
See accompanying notes.
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Great Pee Dee Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
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Nine Months Ended
March 31,
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2002 2001
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(In Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 898 $ 623
Adjustments to reconcile net income to net cash provided (used) by operating
activities:
Depreciation and amortization 371 312
Provision for loan losses 375 12
Provision for foreclosed asset - 16
Release of ESOP shares 117 105
Amortization of stock awards under recognition
and retention plan 38 93
Treasury stock issued as compensation 12 12
Increase in loans held for sale (28) (2,583)
Change in assets and liabilities:
Increase in accrued interest receivable (289) (272)
Increase (decrease) in accrued interest payable 27 (113)
Other (238) 197
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NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES 1,283 (1,598)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of held to maturity investment securities (1,299) (799)
Proceeds from maturities of held-to-maturity investments 1,059 682
Net increase in loans (7,474) (7,227)
Purchases of property and equipment (275) (63)
Net cash received in branch acquisition (956) -
Other - 16
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NET CASH USED BY
INVESTING ACTIVITIES (8,945) (7,391)
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in deposit accounts 3,511 3,383
Proceeds from FHLB advances 4,700 2,500
Decrease in advances from borrowers (57) (3)
Purchase of treasury stock (179) (1,639)
Cash dividends paid (538) (483)
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NET CASH PROVIDED
BY FINANCING ACTIVITIES 7,437 3,758
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NET DECREASE IN CASH
AND CASH EQUIVALENTS (225) (5,231)
CASH AND CASH EQUIVALENTS, BEGINNING 3,354 9,131
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CASH AND CASH EQUIVALENTS, ENDING $ 3,129 $ 3,900
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See accompanying notes.
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Great Pee Dee Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
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NOTE A - BASIS OF PRESENTATION
In management's opinion, the financial information, which is unaudited, reflects
all adjustments (consisting solely of normal recurring adjustments) necessary
for a fair presentation of the financial information as of and for the three and
nine month periods ended March 31, 2002 and 2001, in conformity with accounting
principles generally accepted in the United States of America.
The financial statements include the accounts of Great Pee Dee Bancorp, Inc.
(the "Company") and its wholly-owned subsidiaries, First Federal Savings and
Loan Association of Cheraw ("First Federal" or the "Bank") and First Federal
Investment Services, Inc. Operating results for the three and nine month periods
ended March 31, 2002 are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 2002.
The organization and business of the Company, accounting policies followed by
the Company and other information are contained in the notes to the financial
statements filed as part of the Company's annual report on Form 10-KSB. This
quarterly report should be read in conjunction with such annual report.
NOTE B - NET INCOME PER SHARE
Basic income per share has been computed by dividing net income by the weighted
average number of shares of common stock outstanding during the period. In
accordance with generally accepted accounting principles, Employee Stock
Ownership Plan ("ESOP") shares are only considered outstanding for earnings per
share calculations when they are earned or committed to be released. Diluted net
income per share reflects the dilutive effects of outstanding common stock
options.
NOTE C - NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (SFAS) No. 141, Business Combinations, and SFAS
No. 142, Goodwill and Other Intangible Assets. SFAS No. 141 requires that all
business combinations entered into after June 30, 2001 be accounted for under
the purchase method. SFAS No. 142 requires that goodwill and all intangible
assets of indefinite life be periodically (at least annually) evaluated for
impairment, with any resulting impairment loss being charged against earnings.
Also, under SFAS No. 142, goodwill resulting from any business combination
accounted for in accordance with SFAS No. 141 will not be amortized, and the
amortization of goodwill related to business combinations entered into prior to
July 1, 2001 will be discontinued. Substantially all of the Company's intangible
assets were recorded in connection with its purchase in March of 2000 of a
branch office in Florence, South Carolina, and must be accounted for in
accordance with SFAS No. 72, Accounting for Certain Acquisitions of Banking or
Thrift Institutions. As a result, none of those intangible assets constitutes
goodwill that must cease to be amortized under the provisions of SFAS 142.
Accordingly, the Company's adoption of SFAS 142 on July 1, 2001 has not
significantly affected its consolidated financial statements.
NOTE D - STOCK DIVIDEND
On October 9, 2001, the Company's Board of Directors declared a 10% stock
dividend payable November 9, 2001 to shareholders of record as of October 30,
2001. This stock dividend was paid out of treasury shares. All references to net
income per share, weighted average shares outstanding and dividends have been
adjusted to reflect the effects of this stock dividend.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
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of Operations
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This Quarterly Report on Form 10-QSB may contain certain forward-looking
statements consisting of estimates with respect to the financial condition,
results of operations and business of the Company that are subject to various
factors which could cause actual results to differ materially from these
estimates. These factors include, but are not limited to, general economic
conditions, changes in interest rates, deposit flows, loan demand, real estate
values, and competition; changes in accounting principles, policies, or
guidelines; changes in legislation or regulation; and other economic,
competitive, governmental, regulatory, and technological factors affecting the
Company's operations, pricing, products and services.
Comparison of Financial Condition at March 31, 2002 and June 30, 2001
The Company generated loan growth of $7.1 million during the nine months ended
March 31, 2002, increasing net loans receivable from $97.8 million at June 30,
2001 to $104.9 million at period end. Principally as a result of this loan
growth, the Company's total assets increased by $8.4 million during the nine
months ended March 31, 2002, from $116.0 million at June 30, 2001 to $124.4
million at the period end. This growth was funded by increases of $3.5 million
and $4.7 million, respectively, in customer deposit accounts and advances from
the Federal Home Loan Bank ("FHLB") of Atlanta. Total stockholders' equity was
$25.5 million at March 31, 2002 as compared with $25.1 million at June 30, 2001,
an increase of $334,000 that resulted principally from the retention of net
income generated during the nine months. During the quarter ended December 31,
2001, the Company paid a 10% stock dividend using shares that had previously
been held in treasury. Unless otherwise indicated, references herein to net
income and dividends per share have adjusted for the effect of this stock
dividend. At March 31, 2002, the Bank continued to significantly exceed all
applicable regulatory capital requirements.
Comparison of Results of Operations for the Three Months Ended March 31, 2002
and 2001
Net Income. Net income for the quarter ended March 31, 2002 was $327,000, or
$.20 per share basic and diluted, as compared with net income of $218,000, or
$.13 per share basic and diluted, for the three months ended March 31, 2001, an
increase of $109,000, or $.07 per share. Largely as a result of growth generated
since the acquisition of a branch office in Florence, South Carolina, in March
2000, all categories of income and expense, other than interest expense, were
higher during the current quarter than during the corresponding quarter of last
year. Net interest income and non-interest income increased by $489,000 and
$32,000, respectively, while the provision for loan losses, non-interest
expenses and the provision for income taxes increased by $138,000, $213,000 and
$61,000, respectively.
Net Interest Income. Net interest income for the quarter ended March 31, 2002
was $1.3 million as compared with $842,000 during the quarter ended March 31,
2001, an increase of $489,000. The Company's net interest margin was 4.50%
during the quarter ended March 31, 2002 as compared to 3.33% for the quarter
ended March 31, 2001. The yield on average interest-earning assets decreased by
40 basis points to 7.33% during the current fiscal quarter from 7.73% for the
quarter ended March 31, 2001, reflecting the lower interest rate environment
during the current period. The Company's cost of funds dropped much more
significantly, from 5.50% to 3.41%, due principally to the repricing of
interest-bearing liabilities during the declining interest rate environment of
the last year.
Provision for Loan Losses. The provision for loan losses during the current
quarter was $150,000, while a provision for loan losses of $12,000 was made
during the quarter ended March 31, 2001. Additional discussion is presented
under the caption Provision for Loan Losses on page 11.
-7-
Non-Interest Expenses. Total non-interest expenses increased to $842,000 during
the quarter ended March 31, 2002 as compared with $629,000 for the quarter ended
March 31, 2001, an increase of $213,000. The increase in non-interest expense is
primarily due to growth, reflecting increased personnel costs, as well as
increases in costs of data processing, supplies, and other non-interest
expenses. In addition, during the current quarter the Company incurred
additional costs of $37,000 as a result of the implementation of a new data
processing system.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 36.9% and 37.4% for the quarters ended March 31,
2002 and 2001, respectively.
Comparison of Results of Operations for the Nine Months Ended March 31, 2002 and
2001
Net Income. Net income for the nine months ended March 31, 2002 was $898,000, or
$.55 per share basic and $.54 per share diluted, as compared with net income of
$623,000, or $.37 per share basic and diluted, for the nine months ended March
31, 2001, an increase of $275,000 or $.18 per share basic and $.17 per share
diluted. Largely as a result of growth generated since the acquisition of a
branch office in Florence, South Carolina, in March 2000, all categories of
income and expense, other than interest expense, were higher during the current
nine months than during the corresponding nine months of last year. Net interest
income and non-interest income increased by $1,175,000 and $127,000,
respectively, while the provision for loan losses, non-interest expenses and the
provision for income taxes increased by $363,000, $514,000 and $150,000,
respectively.
Net Interest Income. Net interest income for the nine months ended March 31,
2002 was $3.6 million as compared with $2.5 million during the nine months ended
March 31, 2001, an increase of $1.1 million. The Company's net interest margin
was 4.16% during the nine months ended March 31, 2002 as compared to 3.26% for
the nine months ended March 31, 2001. The yield on average interest-earning
assets decreased by 13 basis points to 7.53% during the current nine months from
7.66% for the nine months ended March 31, 2001. The effects of the overall
decline in the interest rate environment from period to period, which more
significantly affected the Company's yields on liquid assets, was largely offset
by a higher concentration of interest-earning assets being comprised of loans.
During the current nine month period, the yield on loans was 7.78% with loans
comprising 91.2% of interest-earning assets. For the same nine months of 2001,
the yield on loans was 7.61% with loans comprising 89.0% of total
interest-earning assets. The Company's cost of funds was much more significantly
affected by the overall decline in interest rates, decreasing from 5.55% during
the nine months ended March 31, 2001 to 4.42% during the nine months ended March
31, 2002.
Provision for Loan Losses. The provision for loan losses during the current nine
months was $375,000, while a provision for loan losses of $12,000 was made
during the nine months ended March 31, 2001. Additional discussion is presented
under the caption Provision for Loan Losses on page 11.
Non-Interest Expenses. Non-interest expenses increased to $2.4 million during
the nine months ended March 31, 2002 as compared with $1.9 million for the nine
months ended March 31, 2001, an increase of $514,000. The increase in
non-interest expense is primarily due to growth, reflecting increased personnel
costs, as well as increases in costs of data processing, supplies, and other
non-interest expenses. In addition, during the nine months the Company incurred
additional costs of $109,000 as a result of the implementation of a new data
processing system.
Provision for Income Taxes. The provision for income taxes, as a percentage of
income before income taxes, was 36.8% and 37.5% for the nine months ended March
31, 2002 and 2001, respectively.
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Asset Quality
The Company considers asset quality to be of primary importance, and employs a
formal internal loan review process to ensure adherence to the Lending Policy as
approved by the Board of Directors. An ongoing systematic evaluation process
fundamentally drives the function of determining the allowance for loan losses.
This ongoing evaluation process serves as the basis for determining, on a
monthly basis, the allowance for loan losses and any resulting provision to be
charged against earnings. Consideration is given to historical loan loss
experience, the value and adequacy of collateral, economic conditions in the
Company's market area and other factors. For loans determined to be impaired,
the allowance is based on discounted cash flows using the loan's initial
effective interest rate or the fair value of the collateral for certain
collateral dependent loans. This evaluation is inherently subjective as it
requires material estimates, including the amounts and timing of future cash
flows expected to be received on impaired loans that may be susceptible to
significant change. The allowance for loan losses represents Management's
estimate of the appropriate level of reserve to provide for probable losses
inherent in the loan portfolio.
The Company's policy regarding past due loans normally requires a prompt
charge-off to the allowance for loan losses following timely collection efforts
and a thorough review. Further efforts are then pursued through various means
available. Loans carried in a non-accrual status are generally collateralized
and the possibility of future losses is considered in the determination of the
allowance for loan losses.
Nonperforming Assets
The following table sets forth, at the dates indicated, information with respect
to the Company's nonaccrual loans, restructured loans, total nonperforming loans
(nonaccrual loans plus restructured loans), and total nonperforming assets.
March 31, June 30, March 31,
2002 2001 2001
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(Dollars in thousands)
Nonaccrual loans $ 1,493 $ 568 $ 586
Restructured loans - - -
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Total nonperforming loans 1,493 568 586
Real estate owned 50 37 6
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Total nonperforming assets $ 1,543 $ 605 $ 592
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Accruing loans past due 90 days or more $ - $ - $ -
Allowance for loan losses 943 570 547
Nonperforming loans to period end loans 1.46% .60% .63%
Allowance for loan losses to period end loans .89% .60% .59%
Allowance for loan losses to nonperforming loans 63.16% 100.35% 93.34%
Nonperforming assets to total assets 1.24% .52% .55%
The Company's financial statements are prepared on the accrual basis of
accounting, including the recognition of interest income on loans, except for
loans accounted for on a nonaccrual basis. Loans are placed on a nonaccrual
basis when there are serious doubts about the collectibility of principal or
interest. Generally, the Company's policy is to place a loan on nonaccrual
status when the loan becomes past due 90 days. Loans are also placed on
nonaccrual status in cases where it is uncertain as to whether the borrower can
satisfy the contractual terms of the loan agreement. Amounts received on
nonaccrual loans generally are applied first to principal and then to interest
only after all past due
-9-
principal has been collected. Restructured loans are those for which
concessions, including the reduction of interest rates below a rate otherwise
available to that borrower or the deferral of interest or principal, have been
granted due to the borrower's weakened financial condition. Interest is accrued
on restructured loans at the restructured rates when it is anticipated that no
loss of original principal will occur. Real estate owned consists of foreclosed,
repossessed and idled properties.
Analysis of Allowance for Loan Losses
The allowance for loan losses is established through charges to earnings in the
form of a provision for loan losses. The allowance for loan losses is increased
by provisions charged to operations and by recoveries of amounts previously
charged off, and reduced by loans charged off. The Company evaluates the
adequacy of the allowance monthly. In addition, on a monthly basis the board of
directors reviews the loan portfolio, conducts an evaluation of credit quality
and reviews the computation of the loan loss provision, recommending changes as
may be required. In evaluating the adequacy of the allowance, the Company
considers the growth, composition and industry diversification of the portfolio,
historical loan loss experience, current delinquency levels, adverse situations
that may affect a borrower's ability to repay, estimated value of any underlying
collateral, prevailing economic conditions and other relevant factors. In
addition, regulatory agencies, as an integral part of their examination process,
periodically review the allowance for loan losses and may require the Company to
make additions for estimated losses based upon judgments different from those of
Management.
The Company follows a loan review program designed to evaluate the credit risk
in the loan portfolio. Through this loan review process, the Company maintains
an internally classified watch list that helps Management assess the overall
quality of the loan portfolio and the adequacy of the allowance for loan losses.
In establishing the appropriate classification for specific assets, Management
considers, among other factors, the estimated value of the underlying
collateral, the borrower's ability to repay, the borrower's payment history and
the current delinquent status. As a result of this process, certain loans are
categorized as substandard, doubtful or loss and reserves are allocated based on
Management's judgment and historical experience.
Loans classified as "substandard" are those loans with clear and defined
weaknesses such as unfavorable financial ratios, uncertain repayment sources or
poor financial condition that may jeopardize the liquidation of the debt. They
are characterized by the distinct possibility that the Company will sustain some
losses if the deficiencies are not corrected. A reserve of 15% is generally
allocated to these loans. Loans classified as "doubtful" are those loans that
have characteristics similar to substandard loans but with an increased risk
that collection or liquidation in full is highly questionable and improbable. A
reserve of 50% is generally allocated to loans classified as doubtful. Loans
classified as "loss" are considered uncollectible and of such little value that
their continuance as bankable assets is not warranted. This classification does
not mean that the loan has absolutely no recovery or salvage value but rather it
is not practical or desirable to defer writing off this asset even though
partial recovery may be achieved in the future. As a practical matter, when
loans are identified as loss they are charged off against the allowance for loan
losses. In addition to the above classification categories, we also categorize
loans based upon loan type, assigning an allowance allocation based upon each
category.
The allowance for loan losses represents Management's estimate of an amount
adequate to provide for known and inherent losses in the loan portfolio in the
normal course of business. The Company makes specific allowances that are
allocated to certain individual loans and pools of loans based on risk
characteristics, as discussed above. In addition to the allocated portion of the
allowance for loan losses, the Company maintains an unallocated portion that is
not assigned to any specific category of loans. This unallocated portion is
intended to reserve for the inherent risk in the portfolio and the intrinsic
inaccuracies associated with the estimation of the allowance for loan losses and
its allocation to specific loan categories. While Management believes that it
uses the best information available to establish the allowance for loan losses,
future adjustments to the allowance may be
-10-
necessary and results of operations could be adversely affected if circumstances
differ substantially from the assumptions used in making the determinations.
Furthermore, while Management believe the Company has established the allowance
for loan losses in conformity with generally accepted accounting principles,
there can be no assurance that regulators, in reviewing the portfolio, will not
require an increase in the allowance for loan losses. In addition, because
future events affecting borrowers and collateral cannot be predicted with
certainty, there can be no assurance that the existing allowance for loan losses
is adequate or that increases will not be necessary should the quality of any
loans deteriorate as a result of the factors discussed herein. Any material
increase in the allowance for loan losses may adversely affect the Company's
financial condition and results of operations.
The following table shows the allocation of the allowance for loan losses at the
dates indicated. The allocation is based on an evaluation of defined loan
problems, historical ratios of loan losses and other factors that may affect
future loan losses in the categories of loans shown.
At March 31, At June 30,
2002 2001
------------------------- -------------------------
% of Total % of Total
Amount Loans /(1)/ Amount Loans /(1)/
----------- ----------- ----------- -----------
(Dollars in thousands)
Balance applicable to:
Real estate loans:
One-to-four family residential $ 506 72.5% $ 259 64.0%
Commercial 12 3.6% 175 11.1%
Construction 16 6.2% 13 10.5%
Home improvement 43 5.3% 31 5.9%
Other loans:
Commercial 116 2.2% 45 4.2%
Consumer 30 10.2% 33 4.3%
Unallocated 220 -% 14 -%
----------- ---------- ----------- ----------
Total $ 943 100.0% $ 570 100.0%
=========== ========== =========== ==========
(1) Represents total of all outstanding loans in each category as a percent
of total loans outstanding.
Provision for Loan Losses
Principally as a result of increased delinquencies and the general downturn in
the economy, both nationally and in the Company's market area, Management has
significantly increased the allowance for loan losses during the current fiscal
year. The provision for loan losses for the three and nine month periods ended
March 31, 2002 was $150,000 and $375,000 respectively, as compared with $12,000
for both the three month period and the nine month period ended March 31, 2001.
While the Company's net loan charge-offs for the nine months ended March 31,
2002 were low at $2,000, nonaccrual loans aggregated $1,493,000 at March 31,
2002, significantly higher than the totals of $568,000 and $586,000,
respectively, at June 30, 2001 and March 31, 2001. Loans secured by real estate
comprise $1,138,000, or 76%, of total nonaccrual loans at March 31, 2002,
including $1,121,000 secured by residential real estate. While Management
believes that the fair values of the real properties underlying these loans are
adequate to protect the Company's investment, general economic conditions
increase the likelihood that losses will occur, both on loans in nonaccrual
status and on some of the loans that are currently performing in accordance with
the loan terms. As a result, the Company has significantly increased the
unallocated portion of its allowance for loan losses during the current fiscal
year.
-11-
Liquidity and Capital Resources
During the quarters ended September 30, 2001, December 31, 2001 and March 31,
2002 the Company paid cash dividends of $.11 per share, $.125 per share and
$.125 per share, respectively. During the quarter ended December 31, 2001, the
Company also distributed a 10% stock dividend. Adjusted for the stock dividend,
the quarterly dividends for the first, second and third quarters of the current
fiscal year were $.10 per share, $.114 per share and $.125 per share,
respectively. Although Great Pee Dee Bancorp, Inc. anticipates that it will
continue to declare cash dividends on a regular basis, the Board of Directors
will review its policy on the payment of dividends on an ongoing basis, and such
payment will be subject to future earnings, cash flows, capital needs, and
regulatory restrictions.
Maintaining adequate liquidity while managing interest rate risk is the primary
goal of Great Pee Dee Bancorp's asset and liability management strategy.
Liquidity is the ability to fund the needs of the Bank's borrowers and
depositors, pay operating expenses, and meet regulatory liquidity requirements.
Maturing investments, loan and mortgage-backed security principal repayments,
deposits and income from operations are the main sources of liquidity. The
Bank's primary uses of liquidity are to fund loans and to make investments.
As of March 31, 2002, liquid assets (cash, interest-earning deposits, federal
funds sold and investment securities) were approximately $10.1 million, which
represents 12.4% of deposits. At that date, outstanding loan commitments were
$830,000, the undisbursed portion of construction loans was $5.8 million and
undrawn lines of credit totaled $6.3 million. Funding for these commitments is
expected to be provided from deposits, loan principal repayments, maturing
investments, income generated from operations and, to the extent necessary, from
borrowings.
Under federal capital regulations, First Federal must satisfy certain minimum
leverage ratio requirements and risk-based capital requirements. Failure to meet
such requirements can initiate certain mandatory, and possibly additional
discretionary, actions by regulators that, if undertaken, could have a direct
material effect on First Federal's financial statements. At March 31, 2002,
First Federal exceeded all such requirements.
The Bank is restricted in its ability to pay dividends and to make
distributions. A significant source of the Company's funds are dividends
received from the Bank. In fiscal 2002, the amount of dividends that can be paid
by the Bank without prior approval from regulators is an amount that should be
adequate to cover Great Pee Dee's cash requirements.
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
None
(b) Reports on Form 8-K.
During the quarter ended March 31, 2002, the Company filed no
reports on Form 8-K.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GREAT PEE DEE BANCORP, INC.
Date: May 10, 2002 By: /s/ Herbert W. Watts
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Herbert W. Watts
Chief Executive Officer
Date: May 10, 2002 By: /s/ Johnnie L. Craft
----------------------------------
Johnnie L. Craft
Chief Financial Officer
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