| Item 2 - | Management’s Discussion and Analysis or Plan of Operation | 11 | ||
| Item 3 - | Controls and Procedures | 16 | ||
| Part II. OTHER INFORMATION | ||||
| Item 1 - | Legal Proceedings | 17 | ||
| Item 2 - | Unregistered Sales of Equity Securities and Use of Proceeds | 17 | ||
| Item 3 - | Defaults Upon Senior Securities | 17 | ||
| Item 4 - | Submission of Matters to a Vote of Security Holders | 17 | ||
| Item 5 - | Other Information | 17 | ||
| Item 6 - | Exhibits | 17 | ||
| Signatures | 18 | |||
2
Table of Contents
CONSOLIDATED BALANCE SHEETS
| September 30, 2007 (Unaudited) |
December 31, 2006 (Audited) | |||||
| (in thousands, except share data) | ||||||
| ASSETS |
||||||
| Cash and due from banks |
$ | 7,141 | $ | 7,903 | ||
| Federal funds sold |
30,211 | 19,286 | ||||
| Securities available for sale, at fair value (adjusted cost of $38,805 and $44,883, respectively) |
38,831 | 44,901 | ||||
| Securities held to maturity, at cost (fair value approximates $691 and $700, respectively) |
677 | 679 | ||||
| Loans, net |
||||||
| Held for investment, net of allowance for loan losses of $1,382 and $1,373, respectively |
143,530 | 140,119 | ||||
| Held for sale |
152 | 520 | ||||
| Accrued interest receivable |
808 | 736 | ||||
| Stock in Federal Reserve Bank, at cost |
313 | 313 | ||||
| Stock in Federal Home Loan Bank of Atlanta, at cost |
401 | 409 | ||||
| Premises and equipment, net |
9,711 | 6,766 | ||||
| Other assets |
1,327 | 1,256 | ||||
| Total assets |
$ | 233,102 | $ | 222,888 | ||
| LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||
| Liabilities |
||||||
| Deposits |
||||||
| Noninterest-bearing |
$ | 53,762 | $ | 47,695 | ||
| Interest-bearing |
151,431 | 140,702 | ||||
| Total deposits |
205,193 | 188,397 | ||||
| Securities sold under agreements to repurchase |
1,045 | 3,716 | ||||
| Other borrowings |
50 | 5,050 | ||||
| Accrued interest payable |
342 | 376 | ||||
| Other liabilities |
1,783 | 945 | ||||
| Total liabilities |
208,413 | 198,484 | ||||
| Stockholders’ equity |
||||||
| Common stock, $5 par value |
||||||
| 3,000,000 shares authorized; issued and outstanding: |
||||||
| At September 30, 2007, 2,278,652 shares; At December 31, 2006, 2,277,652 shares |
11,393 | 11,388 | ||||
| Additional paid-in capital |
6,134 | 6,032 | ||||
| Retained earnings |
7,145 | 6,972 | ||||
| Accumulated other comprehensive income, net |
17 | 12 | ||||
| Total stockholders’ equity |
24,689 | 24,404 | ||||
| Total liabilities and stockholders’ equity |
$ | 233,102 | $ | 222,888 | ||
See notes to consolidated financial statements.
3
Table of Contents
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, | |||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||
| (in thousands, except share and per share data) | ||||||||||||
| Interest income |
||||||||||||
| Loans and fees on loans |
$ | 2,530 | $ | 2,421 | $ | 7,452 | $ | 7,213 | ||||
| Taxable investment securities |
491 | 262 | 1,413 | 388 | ||||||||
| Nontaxable investment securities |
13 | 12 | 38 | 36 | ||||||||
| Dividends on FRB and FHLB stock |
11 | 14 | 33 | 38 | ||||||||
| Interest on federal funds sold |
190 | 493 | 587 | 1,523 | ||||||||
| Total interest income |
3,235 | 3,202 | 9,523 | 9,198 | ||||||||
| Interest expense |
||||||||||||
| Deposits |
1,335 | 1,268 | 3,845 | 3,475 | ||||||||
| Borrowings |
11 | 144 | 68 | 438 | ||||||||
| Total interest expense |
1,346 | 1,412 | 3,913 | 3,913 | ||||||||
| Net interest income |
1,889 | 1,790 | 5,610 | 5,285 | ||||||||
| Provision for loan losses |
102 | 31 | 105 | 48 | ||||||||
| Net interest income after provision for loan losses |
1,787 | 1,759 | 5,505 | 5,237 | ||||||||
| Noninterest income |
||||||||||||
| Service charges on deposit accounts |
125 | 169 | 380 | 482 | ||||||||
| Gains on sale of loans held for sale, net |
14 | 46 | 97 | 128 | ||||||||
| Gain on sale of investment securities |
— | — | 1 | 34 | ||||||||
| Late charges and other fees on loans |
12 | 19 | 51 | 73 | ||||||||
| Gain on sale of retail credit card loans |
— | — | — | 96 | ||||||||
| Gain on sale of fixed assets |
529 | — | 529 | 1 | ||||||||
| Other |
107 | 66 | 289 | 237 | ||||||||
| Total noninterest income |
787 | 300 | 1,347 | 1,051 | ||||||||
| Noninterest expense |
||||||||||||
| Compensation |
1,002 | 1,036 | 3,163 | 3,065 | ||||||||
| Data processing |
127 | 126 | 387 | 387 | ||||||||
| Occupancy |
255 | 127 | 523 | 378 | ||||||||
| Furniture and equipment |
147 | 142 | 419 | 440 | ||||||||
| Taxes and licenses |
54 | 45 | 163 | 139 | ||||||||
| Professional fees |
66 | 109 | 286 | 400 | ||||||||
| Contract employee services |
— | 19 | 5 | 205 | ||||||||
| Marketing |
37 | 46 | 122 | 170 | ||||||||
| Telephone |
31 | 27 | 95 | 70 | ||||||||
| Stationery and supplies |
45 | 41 | 125 | 112 | ||||||||
| Loss on disposal or impairment of fixed assets |
61 | — | 61 | — | ||||||||
| Other |
232 | 193 | 628 | 605 | ||||||||
| Total noninterest expense |
2,057 | 1,911 | 5,977 | 5,971 | ||||||||
| Income before provision for income taxes |
517 | 148 | 875 | 317 | ||||||||
| Provision for income taxes |
172 | 50 | 291 | 96 | ||||||||
| Net income |
$ | 345 | $ | 98 | $ | 584 | $ | 221 | ||||
| Earnings per common share |
||||||||||||
| Basic |
$ | 0.15 | $ | 0.05 | $ | 0.26 | $ | 0.12 | ||||
| Diluted |
$ | 0.15 | $ | 0.05 | $ | 0.26 | $ | 0.12 | ||||
| Dividends per share |
$ | 0.06 | $ | 0.06 | $ | 0.18 | $ | 0.18 | ||||
| Weighted average shares outstanding – basic |
2,278,652 | 1,903,695 | 2,278,555 | 1,778,960 | ||||||||
| Effect of dilutive stock options |
— | 31,607 | — | 35,750 | ||||||||
| Weighted average shares outstanding – assuming dilution |
2,278,652 | 1,935,302 | 2,278,555 | 1,814,710 | ||||||||
See notes to consolidated financial statements.
4
Table of Contents
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
| Nine Months Ended September 30, |
||||||||
| 2007 | 2006 | |||||||
| (in thousands) | ||||||||
| Cash flows from operating activities: |
||||||||
| Net income |
$ | 584 | $ | 221 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Provision for loan losses |
105 | 48 | ||||||
| Amortization of loan yield adjustments, net |
365 | 105 | ||||||
| Depreciation, amortization and accretion, net |
(87 | ) | 88 | |||||
| Stock-based compensation |
97 | — | ||||||
| Exercise of stock options tax benefit |
3 | 110 | ||||||
| Lease incentive |
243 | — | ||||||
| Net gains on sale of: |
||||||||
| Securities |
(1 | ) | (26 | ) | ||||
| Loans |
(97 | ) | (128 | ) | ||||
| Other assets |
(489 | ) | — | |||||
| Changes in assets/liabilities, net |
||||||||
| Decrease/(Increase) in interest receivable and other assets |
(189 | ) | 131 | |||||
| Increase/(Decrease) in interest payable and other liabilities |
562 | (568 | ) | |||||
| Net proceeds from sales of loans held for sale |
465 | 1,189 | ||||||
| Net cash provided by operating activities |
1,561 | 1,170 | ||||||
| Cash flows from investing activities: |
||||||||
| Purchases of securities available for sale |
(40,823 | ) | (42,042 | ) | ||||
| Proceeds from maturities and principal repayments of securities available for sale |
32,517 | 5,427 | ||||||
| Proceeds from maturities and principal repayments of securities held to maturity |
2 | 2 | ||||||
| Proceeds from sales of securities available for sale |
14,816 | 111 | ||||||
| Proceeds from sale of other assets |
64 | — | ||||||
| Net increase in loans held for investment |
(3,880 | ) | (4,845 | ) | ||||
| Purchases of Federal Home Loan Bank stock |
(810 | ) | (101 | ) | ||||
| Redemption of Federal Home Loan Bank stock |
818 | — | ||||||
| Purchases of premises and equipment |
(3,560 | ) | (1,343 | ) | ||||
| Proceeds from sales of premises and equipment |
737 | — | ||||||
| Net cash provided by (used for) investing activities |
(119 | ) | (42,791 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of stock options |
7 | 151 | ||||||
| Net increase in deposits |
16,795 | 7,842 | ||||||
| Proceeds from Federal Home Loan Bank advances |
18,000 | — | ||||||
| Repayments of Federal Home Loan Bank advances |
(18,000 | ) | — | |||||
| Net decrease in securities sold under agreements to repurchase |
(2,671 | ) | (3,226 | ) | ||||
| Private placement issuance of stock, net of costs |
— | 2,853 | ||||||
| Stock repurchase |
— | (29 | ) | |||||
| Proceeds from other borrowings |
||||||||