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 March 31, 2002
Or
[_] Transition Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 For the transition period from _____ to
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 __
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State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
At May 7, 2002, the Company had 3,122,482 shares outstanding of its $4 par
common stock.
Transitional Small Business Disclosure Format (check one): Yes___ No X
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MountainBank Financial Corporation
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 in
the following pages.
Balance Sheets at March 31, 2002 (Unaudited) and December 31, 2001 (Audited) ............ 3
Statement of Operations (Unaudited) for the Three Months Ended March 31, 2002 and 2001... 4
Statement of Changes in Stockholders' Equity for the years ended December 31, 2001 and
2000 (Audited) and the three months ended March 31, 2002 (Unaudited) .................. 5
Statement of Cash Flows (Unaudited) for the Three Months Ended March 31, 2002 and 2001 .. 6
Notes to the Unaudited 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 ............................................................ 14
Item 2. Changes in Securities ........................................................ 14
Item 3. Defaults Upon Senior Securities .............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders .......................... 14
Item 5. Other Information ............................................................ 14
Item 6. Exhibits and Reports on Form 8-K ............................................. 14
Signatures .............................................................................. 15
2
MountainBank Financial Corporation
Balance Sheets
At March 31, 2002 (Unaudited) and December 31, 2001 (Audited)
March 31, 2002 December 31, 2001
-------------- -----------------
Assets
Cash and due from banks $ 22,599,907 $ 10,125,801
Interest bearing deposits with banks 271,839 524,767
Federal funds sold 5,344,000 -
Investment securities available for sale 29,746,217 34,626,207
Restricted equity securities 9,888,700 10,761,398
Loans, net of allowance for loan losses of $8,294,620 at
March 31, 2002 and $7,113,269 at December 31, 2001 522,499,786 483,871,913
Property and equipment, net 7,442,785 7,203,652
Accrued income 3,375,972 3,248,609
Intangible assets, net 2,737,544 2,820,307
Other assets 8,021,749 7,940,308
---------------------- ---------------------
Total assets $ 611,928,499 $ 561,122,962
====================== =====================
Liabilities and Stockholders' Equity
Liabilities
Noninterest-bearing deposits $ 48,645,881 $ 41,187,520
Interest-bearing deposits 462,140,183 426,319,154
---------------------- ---------------------
Total deposits 510,786,064 467,506,674
Federal funds purchased and
Securities sold under agreements to repurchase 5,154,871 5,239,949
Short-term debt 1,250,000 1,250,000
Long-term debt 42,652,448 42,633,140
Obligations under capital lease 729,219 735,567
Accrued interest payable 4,642,627 4,778,290
Other liabilities 1,747,711 1,963,950
---------------------- ---------------------
Total liabilities 566,962,940 524,107,570
---------------------- ---------------------
Commitments and contingencies
Stockholders' equity
Preferred stock, no par value; 3,000,000 shares authorized;
and 369,081 and 92,667 shares issued and outstanding
at March 31, 2002 and December 31, 2001, respectively 8,857,944 2,224,008
Common stock, $4 par value; 10,000,000 shares authorized;
and 3,112,022 and 3,112,699 shares issued and outstanding
at March 31, 2002 and December 31, 2001, respectively 12,448,088 12,450,796
Surplus 18,578,434 18,584,215
Retained earnings 5,231,823 3,692,648
Acumulated other comprehensive income (loss) (150,730) 63,725
---------------------- ---------------------
Total stockholders' equity 44,965,559 37,015,392
---------------------- ---------------------
Total liabilities and stock holders' equity $ 611,928,499 $ 561,122,962
====================== =====================
MountainBank Financial Corporation
Statement of Operations (Unaudited)
For the three months ended March 31, 2002 and March 31, 2001
2002 2001
---- ----
Interest income
Loans and fees on loans $ 10,051,198 $ 5,252,655
Federal funds sold 8,251 91,494
Investment securities, taxable 408,193 526,873
Investment securities, nontaxable 24,045 8,941
Deposits with banks 1,402 51,794
Dividends 29,697 12,172
Other 15,925 -
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Total interest income 10,538,711 5,943,929
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Interest expense
Deposits 3,679,858 3,410,865
Federal funds purchased and securities sold under
agreements to repurchase 41,341 53,514
Other borrowed funds 571,674 14,209
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Total interest expense 4,292,873 3,478,588
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Net interest income 6,245,838 2,465,341
Provision for loan losses 1,300,000 627,000
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Net interest income after provision for loan losses 4,945,838 1,838,341
------------ ------------
Noninterest income
Service charges on deposit accounts 492,137 148,885
Mortgage origination income 565,154 130,845
Gain on sale of securities 245,145 -
Other service charges and fees 97,632 87,354
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Other income 1,400,068 367,084
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Noninterest expense
Salaries and employee benefits 1,958,253 762,762
Occupancy expense 473,699 253,249
Other expense 1,249,779 474,099
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Total noninterest expense 3,681,731 1,490,110
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Income before income taxes 2,664,175 715,315
Income tax expense 1,125,000 210,000
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Net income $ 1,539,175 $ 505,315
============ ============
Earnings per share $ 0.49 $ 0.23
============ ============
Diluted earnings per share $ 0.41 $ 0.20
============ ============
Weighted average shares outstanding 3,112,522 2,246,899
============ ============
4
MountainBank Financial Corporation
Statement of Changes in Stockholders' Equity For the two years ended December
31, 2001, 2000 (Audited) and the three months ended March 31, 2002 (Unaudited)
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Accumulated
Stock Other
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Preferred Common Retained Comprehensive
Amount Amount Surplus Earnings Income (Loss) Total
------ ------ ------- -------- ------------- -----
Balance, December 31, 1999 $ - $ 5,769,730 $ 4,385,302 $ 126,541 $ (59,081) $ 10,222,492
Comprehensive income
Net Income - - - 1,055,969 - 1,055,969
Net change in unrealized
appreciation on investment
securities available for sale - - - - 198,332 198,332
------------
Total comprehensive income 1,254,301
Fractional shares purchased - (323) 323 - - -
Shares sold - 1,705,325 5,005,128 - - 6,710,453
Stock options exercised - 13,020 10,153 23,173
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Balance December 31, 2000 - 7,487,752 9,400,906 1,182,510 139,251 18,210,419
===============================================================================================
Comprehensive income
Net Income - - - 2,510,138 - 2,510,138
Net change in unrealized
appreciation on investment
securities available for sale - - - - (75,526) (75,526)
------------
Total comprehensive income 2,434,612
Shares sold 2,224,008 - - - - 2,224,008
Shares issued to acquire
PremierMortgage Associates, Inc. - 80,000 220,000 - - 300,000
Shares issued to acquire
First Western Bank - 2,751,364 11,005,456 - - 13,756,820
Stock options exercised - 56,548 32,985 - - 89,533
Stock split, effected in
the form of a dividend - 2,075,132 (2,075,132) - - -
-----------------------------------------------------------------------------------------------
Balance December 31, 2001 2,224,008 12,450,796 18,584,215 3,692,648 63,725 37,015,392
===============================================================================================
Comprehensive income
Net Income - - - 1,539,175 - 1,539,175
Net change in unrealized
appreciation on investment
securities available for sale - - - - (214,455) (214,455)
------------
Total comprehensive income 1,324,720
Shares sold 6,633,936 - - - - 6,633,936
Stock options exercised - 360 840 - - 1,200
Dissenters' Shares - (1,800) (7,889) - - (9,689)
Fractional shares purchased - (1,268) 1,268 - - -
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Balance March 31, 2002 $ 8,857,944 $ 12,448,088 $ 18,578,434 $ 5,231,823 $ (150,730) $ 44,965,559
===============================================================================================
5
MountainBank Financial Corporation
Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2002 and 2001
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Cash flows from operating activities March 31, 2002 March 31, 2001
-------------- --------------
Net income $ 1,539,175 $ 505,315
Adjustments to reconcile net income (loss) to net cash provided by operations:
Depreciation and amoritization 295,545 106,258
Provision for loan losses 1,300,000 627,000
Net gain on sales of securities (245,145) -
Accretion of discount on securities, net of amortization of premiums (530) (105)
Changes in assets and liabilities:
Accrued income (127,363) (106,994)
Other real estate owned (159,218) -
Other assets 184,277 88,142
Accrued interest payable (135,663) 1,319,407
Other liabilities (196,931) (263,969)
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Net cash provided (used) by operating activities 2,454,147 2,275,054
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Cash flows from investing activities
Net (increase) decrease in federal funds sold (5,344,000) 9,220,000
Net decrease in interest-bearing deposits with banks 252,928 3,531,149
Purchases of investment securities (10,758,564) (3,070,246)
Maturities of investment securities 1,884,644 3,016,731
Sales of investment securities 14,551,327 -
Net increase in loans (39,927,873) (44,513,310)
Purchases of property and equipment (451,914) (200,121)
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Net cash used in investing activities (39,793,452) (32,015,797)
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Cash flows from financing activities
Net increase in demand, NOW and savings deposits 7,458,361 2,380,455
Net increase in time deposits 35,821,029 17,484,020
Net (decrease) increase in Federal funds purchased securities sold under
agreements to repurchase (85,078) 5,467,741
Net increase in notes payable - 5,000,000
Repayment of obligations under capital lease (6,348) (5,891)
Proceeds from the exercise of stock options 1,200 10,882
Proceeds from the issuance of preferred stock, net 6,633,936 -
Purchase of dissenter's common stock shares (9,689) -
------------ ------------
Net cash provided by financing activities 49,813,411 30,337,207
------------ ------------
Net increase in cash and cash equivalents 12,474,106 596,464
Cash and cash equivalents, beginning 10,125,801 7,797,745
------------ ------------
Cash and cash equivalents, ending $ 22,599,907 $ 8,394,209
============ ============
Supplemental disclosures of cash flow information
Interest paid $ 4,428,536 $ 2,159,181
============ ============
Income taxes paid $ 1,125,000 $ 170,285
============ ============
6
MountainBank Financial Corporation
Notes to Unaudited Financial Statements
March 31, 2002
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Note 1. Organization and Summary of Significant Accounting Policies
Organization:
MountainBank Financial Corporation (the "Company") was incorporated on
January 10, 2001 by the Board of Directors of MountainBank (the "Bank") for
the sole purpose of acquiring the Bank and serving as the Bank's parent
bank holding company. 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
the terms of an Agreement and Plan of Reorganization and Share Exchange
dated January 11, 2001. The Company is regulated by the Federal Reserve of
Richmond.
On December 31, 2001, the Company acquired First Western Bank, located
in Burnsville, N.C. and merged it into MountainBank. The first quarter of
2002 represents the first quarter of operations for the combined banks.
MountainBank ("the Bank") is a state chartered, full service
commercial banking institution, insured by the FDIC and incorporated under
the laws of North Carolina. The Bank operates fifteen full service banking
offices located in nine western North Carolina counties as well as a
mortgage brokerage operation headquartered in Greenwood, S.C. The Bank is
subject to regulation by the FDIC and the North Carolina State Banking
Commission. As MountainBank Financial Corporation is a single bank holding
company, much of the following discussion relates both to the Company and
the Bank and will speak to both entities interchangeably.
Basis of Presentation:
The financial statements as of March 31, 2002 and for the periods
ended March 31, 2002 and 2001, have been prepared by the Company without
audit, pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, the information furnished in
these interim financial statements reflects all adjustments necessary to
present fairly the Company's financial position, results of operations,
cash flows and changes in shareholders' equity 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, 2001, included in the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 2001.
7
MountainBank Financial Corporation
Notes to Unaudited Financial Statements
March 31, 2002
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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 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 2001 Financial Statements incorporated in its 2001 Form
10-KSB.
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 March 31, 2002 was
approximately $88.4 million.
Properties and Equipment:
Company 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 Financial Corporation
Management Discussion and Analysis
March 31, 2002
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ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The following discussion and analysis is provided to address
information about the Company's financial condition and results of
operations 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 March 31, 2002 Compared with December 31,
2001
During the first quarter of 2002, the Company continued to grow at a
relatively rapid rate. However, management has determined to slow "organic"
or internal growth rates during 2002 from the 100% annualized rates
experienced each year since the Company's inception to a range of 25% to
40%. This still represents exceptionally rapid growth as compared to peer
institutions and will require substantial expansion of the Company's
geographic footprint via entering new markets not currently being served.
In addition to internal growth, management intends to find strategic merger
partners who share common goals relating to institutional performance and
the creating of shareholder value with whom to combine. Management intends
to be very selective in such activity and does not intend to acquire other
companies simply for the sake of growth. Management's intent is to grow the
Company so as to provide additional liquidity in its stock making ownership
of the company more attractive to a broader base of investors and to attain
sufficient size so as to achieve greater economies of scale and operating
efficiency.
As a result, the Company's total assets increased $50.8 million, or
9.05%, from December 31, 2001 to March 31, 2002. During this period,
earning assets increased $39.1 million, or 7.29%. Loans continue to
represent the Company's largest earning asset by far. During the first
quarter of 2002, outstanding loans increased $39.8 million, or 8.11%.
Growth in both earning assets and loans slowed on a percentage basis during
the period as management seeks to become more relationship oriented with
its marketing efforts and as growth is more selective. Cash and due from
accounts increased substantially during the first quarter, principally as a
result of the acquisition of First Western Bank and the merger of that
company's assets into MountainBank. Management expects to reduce cash and
due from balances as the two banks become more tightly integrated over the
next quarter. Federal funds sold increased while securities decreased
during the quarter as the Bank's available for sale securities portfolio
was reconfigured following the First Western merger. Also, management began
shortening the duration of the Bank's investment portfolio in anticipation
of slowly rising interest rates later this year.
9
MountainBank Financial Corporation
Management Discussion and Analysis
March 31, 2002
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Deposits increased $43.3 million, or 9.26%, from December 31, 2001 to
March 31, 2002. Noninterest-bearing demand deposits increased $7.46
million, or 18.11%, over the same period. Management has established a goal
of increasing demand, NOW and money market totals as a percent of total
deposits over fiscal 2002. As a result, NOW accounts increased during the
quarter in the amounts of $19.70 million or 62.25% and savings and money
market deposit accounts increased $8.14 million or 10.82%, respectively.
Certificates of deposit increased $7.98 million or 2.50% during the period.
During the first quarter, the Company continued its Preferred Stock
offering that was begun in the later part of December 2001. During the
first three months of 2002, an additional $6.6 million in Preferred Stock
was issued, bringing the total amount of Preferred Stock to $8.86 million
at March 31, 2002. As of the date of this report, the Company's Preferred
Stock offering has been concluded with an additional $1.35 million being
issued in the second quarter of 2002. The final total of Series A Preferred
Stock issued by the Company amounted to approximately $10.2 million.
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 March
31, 2002, the Company's liquidity position was deemed adequate by
management to meet all know 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. Managing interest rate risk, net interest margin and the
overall leverage of the Company's balance sheet becomes increasingly
important as the Company continues to grow and expand into other markets.
As the Company's growth begins to be slowed in comparison to prior years,
management intends to increase transactional deposits and reduce the Bank's
percentage of certificates of deposits. Over time, this process should
enhance the Bank's interest margin and allow for additional flexibility in
managing overall funding costs. However, management expects to continue to
have deposits more heavily weighted toward certificates of deposit for the
foreseeable future.
10
MountainBank Financial Corporation
Management Discussion and Analysis
March 31, 2002
- --------------------------------------------------------------------------------
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
accurate as the Bank's simulation model. The Bank's balance sheet remains
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 as compared with a
flat rate scenario. The opposite would be expected during periods of
declining rates.
While the Bank's balance sheet has grown over the three months of
2002, 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, 2001.
At March 31, 2002, the Company's equity to assets ratio was 7.35%.
The Company's Leverage and Risk Based capital ratios along with its Total
Risk Based capital ratio were 7.32%, 7.72% and 8.98%, respectively. For the
Bank, Leverage and Risk Based capital ratios were 8.39% and 8.85% and its
Total Risk Based capital ratio was 10.10%. The Preferred Stock issuance
conducted by the Company during the first quarter enhanced total and
primary equity ratios for both the Company and the Bank. Management expects
to conclude a Trust Preferred debt offering during the second quarter of
2002 which will further enhance capital ratios. It is expected that this
issuance will be sufficient to support the Company's projected 2002 growth.
At March 31, 2002, the Bank's equity exceeded the minimum requirements of a
"well
11
MountainBank Financial Corporation
Management Discussion and Analysis
March 31, 2002
- --------------------------------------------------------------------------------
capitalized" institution as defined by federal banking regulations and the
Company was considered to be adequately capitalized at the same date.
Results of Operations for the Three Month Periods Ended March 31, 2002
Compared with the Same Period in 2001
The first quarter of 2002 produced a significant increase in the
Company's earnings. As compared to the first quarter of 2001, the Company's
earnings increased $1.03 million or 204.60%. Predominately, this increase
was attributed to both internal growth and the acquisition of First Western
Bank. The integration and profitability of the First Western Bank
acquisition has exceeded the Company's projections to date and was a
significant contributor to the Company's overall increase in earnings
during the first quarter of 2002. During the three month period ended March
31, 2002, net interest income increased $3.8 million, or 153.35%, from the
same period last year. The increase is attributable to the internal growth
experienced by the Company during 2001 and in the first quarter of 2002 as
well as the acquisition of First Western Bank. During the period, average
gross loans increased $291.8 million, or 132.01%, resulting in an increase
of $4.8 million or 91.35% in interest earned on loans. As a result of the
significant decrease in interest rates during 2001, this increase was
somewhat less than would otherwise have been the case given the significant
amount of loan growth experienced. This comprised all the $4.6 million or
77.30% increase in total interest income as declines in income were
experienced in deposits with banks, Federal funds sold and securities as a
result of declines in interest rates as well as some changes in the volume
of these assets from year to year.
Interest expense increased $815 thousand, or 23.41%, primarily due
to the overall increase in volume of interest bearing deposits. These
average deposit amounts increased $66.3 million or 18.02% during the first
quarter of 2002 as compared to the same period in 2001.
Management determines the adequacy of the Bank's allowance for loan
losses based on a number of factors including reviewing and evaluating its
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.
12
MountainBank Financial Corporation
Management Discussion and Analysis
March 31, 2002
- --------------------------------------------------------------------------------
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 first three months of 2002, the Bank's provision for loan
losses more than doubled as compared with the same period during 2001,
increasing $673 thousand to $1.3 million. This increase was due in part to
increased loan volume but also, as a result of the continuing weak economy,
to an increase in the ratio of allowance for loan losses to total loans.
Management has deemed it prudent to increase this ratio in the event the
domestic economy does not recover during 2002 and the potential for loan
losses increases as a result. Consequently, the Company's ratio of
allowance to total loans was increased to 1.56% at March 31, 2002 from
1.45% at December 31, 2001. Non-performing assets and loans past due over
30 days totaled 1.05% at March 31, 2002.
Non-interest income increased $1.03 million or 281.40% during the
first quarter of 2002. The primary contributors to this substantial
increase were mortgage origination fees which increased $434 thousand or
331.93% and service charges on deposit accounts which increased $343
thousand or 230.55%. This particular increase was driven principally
through the offering of a new checking account overdraft product that was
introduced during the fourth quarter of 2001. Also, as a result of the
restructuring of the Bank's securities portfolio, a gain on the sale of
securities was recognized during the first quarter that amounted to $245
thousand.
Non-interest expense for the first quarter of 2001 increased by $2.2
million or 147.08%. This increase resulted principally of increases of $1.2
million in personnel expense as a result of increasing the Bank's branch
network and the acquisition of First Western Bank. Occupancy costs also
increased substantially due to this reason. Costs associated with the
Bank's facilities increased $220 thousand or 87.05% during the first
quarter of 2002. Increases in general and administrative expense increased
$775 thousand or 163.61%. The most significant items contributing to this
increase were increases in telecom, data processing and professional
services. These increases were also due in large part to the overall
expansion of the Company's business locations and volume.
13
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
During the first quarter of 2002, the Company issued 276,414 additional
shares of its Series A Preferred Stock through a private placement.
This issuance generated additional capital of $6.6 million during the
period.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits.
None.
Reports on 8-K.
The Company filed a report on Form 8-K with the Securities and Exchange
Commission on January 14, 2002. This report disclosed the successful
closing of the Company's acquisition of First Western Bank and its
subsequent merger into MountainBank affected as of the close of
business on December 31, 2001.
14
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: May 13, 2002 /s/ J.W. Davis
---------------
J. W. Davis
President & Chief Executive Officer
(Duly Authorized Officer)
Date: May 13, 2002 /s/ Gregory L. Gibson
----------------------
Gregory L. Gibson
Chief Financial Officer
15