UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 

(Mark One)

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the quarterly period ended June 30, 2006

 

 

 

OR

 

 

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                                 to                                 

Commission file number   0-14289

GREENE COUNTY BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

Tennessee

 

62-1222567

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

 

 

Registrant’s telephone number, including area code: (423) 639-5111

 

100 North Main Street, Greeneville, Tennessee

 

37743-4992 

(Address of principal executive offices)

 

(Zip Code)

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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   o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  o           Accelerated filer  x           Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) YES   o   NO   x

As of August 8, 2006, the number of shares outstanding of the issuer’s common stock was: 9,788,145.

 

 




 

PART 1 — FINANCIAL INFORMATION

ITEM 1.          FINANCIAL STATEMENTS

The unaudited condensed consolidated financial statements of Greene County Bancshares, Inc. and its wholly owned subsidiaries are as follows:

Condensed Consolidated Balance Sheets — June 30, 2006 and December 31, 2005.

 

 

 

 

 

 

 

Condensed Consolidated Statements of Income and Comprehensive Income — For the three and six months
ended June 30, 2006 and 2005.

 

 

 

 

 

 

 

Condensed Consolidated Statement of Shareholders’ Equity — For the six months ended June 30, 2006.

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows — For the six months ended June 30, 2006 and 2005.

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements.

 

 

 

1




 

GREENE COUNTY BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2006 and December 31, 2005
(Amounts in thousands, except share and per share data)

 

 

 

(Unaudited)
June 30,
2006

 

December 31,
2005*

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

44,358

 

$

46,136

 

 

 

 

 

 

 

Federal funds sold and other

 

19,616

 

28,387

 

 

 

 

 

 

 

Securities available for sale

 

44,457

 

48,868

 

 

 

 

 

 

 

Securities held to maturity (with a market value of $2,696 and $3,335)

 

2,740

 

3,379

 

 

 

 

 

 

 

FHLB, Bankers Bank and other stock, at cost

 

6,879

 

6,489

 

 

 

 

 

 

 

Loans held for sale

 

2,054

 

2,686

 

 

 

 

 

 

 

Loans, net of unearned interest

 

1,437,935

 

1,378,642

 

 

 

 

 

 

 

Allowance for loan losses

 

(20,834

)

(19,739

)

 

 

 

 

 

 

Premises and equipment, net

 

52,735

 

49,985

 

 

 

 

 

 

 

Goodwill and other intangible assets

 

39,081

 

39,622

 

 

 

 

 

 

 

Other assets

 

36,609

 

35,534

 

 

 

 

 

 

 

Total assets

 

$

1,665,630

 

$

1,619,989

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

1,283,606

 

$

1,295,879

 

 

 

 

 

 

 

Federal funds purchased

 

26,000

 

 

 

 

 

 

 

 

Repurchase agreements

 

25,133

 

17,498

 

 

 

 

 

 

 

FHLB advances and notes payable

 

123,281

 

105,146

 

 

 

 

 

 

 

Subordinated debentures

 

13,403

 

13,403

 

 

 

 

 

 

 

Accrued interest payable and other liabilities

 

17,318

 

20,042

 

 

 

 

 

 

 

Total liabilities

 

1,488,741

 

1,451,968

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock: $2 par, 15,000,000 shares authorized, 9,788,145 and 9,766,336 shares outstanding

 

19,577

 

19,533

 

 

 

 

 

 

 

Additional paid-in capital

 

71,285

 

70,700

 

 

 

 

 

 

 

Retained earnings

 

86,389

 

78,158

 

 

 

 

 

 

 

Accumulated other comprehensive loss

 

(362

)

(370

)

 

 

 

 

 

 

Total shareholders’ equity

 

176,889

 

168,021

 

 

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,665,630

 

$

1,619,989

 


* Condensed from audited consolidated financial statements.

See accompanying notes.

2




 

GREENE COUNTY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Three and Six Months Ended June 30, 2006 and 2005
(Amounts in thousands, except share and per share data)

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2006

 

2005

 

2006

 

2005

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

27,781

 

$

19,851

 

$

53,881

 

$

37,930

 

Investment securities

 

649

 

592

 

1,280

 

1,065

 

Federal funds sold and other

 

59

 

260

 

95

 

443

 

 

 

28,489

 

20,703

 

55,256

 

39,438

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

 

 

 

 

 

 

 

Deposits

 

8,647

 

5,501

 

16,689

 

9,763

 

Borrowings

 

2,069

 

1,130

 

3,608

 

2,276

 

 

 

10,716

 

6,631

 

20,297

 

12,039

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

17,773

 

14,072

 

34,959

 

27,399

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

1,244

 

1,060

 

2,308

 

2,682

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision
for loan losses

 

16,529

 

13,012

 

32,651

 

24,717

 

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

Service charges and fees

 

4,001

 

2,836

 

7,232

 

4,978

 

Other

 

1,027

 

627

 

2,551

 

1,661

 

 

 

5,028

 

3,463

 

9,783

 

6,639

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

6,266

 

5,099

 

12,657

 

10,344

 

Occupancy and furniture and equipment expense

 

2,050

 

1,774

 

4,109

 

3,513

 

Other

 

4,363

 

3,549

 

8,619

 

6,840

 

 

 

12,679

 

10,422

 

25,385

 

20,697

 

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

8,878

 

6,053

 

17,049

 

10,659

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

3,395

 

2,339

 

6,470

 

4,010

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,483

 

$

3,714

 

$

10,579

 

$

6,649

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

5,498

 

$

3,732

 

$

10,587

 

$

6,554

 

 

 

 

 

 

 

 

 

 

 

Per share of common stock:

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

0.56

 

$

0.49

 

$

1.08

 

$

0.87

 

Diluted earnings

 

$

0.55

 

$

0.48

 

$

1.07

 

$

0.86

 

Dividends

 

$

0.12

 

$

0.12

 

$

0.24

 

$

0.24

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

9,785,936

 

7,650,884

 

9,778,288

 

7,649,982

 

Diluted

 

9,897,987

 

7,745,985

 

9,891,817

 

7,745,130

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

3




 

GREENE COUNTY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Six Months Ended June 30, 2006
(Amounts in thousands, except share and per share data)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Other

 

Total

 

 

 

 

 

Additional

 

 

 

Compre-

 

Share-

 

 

 

Common

 

Paid-in

 

Retained

 

hensive

 

holders’

 

 

 

Stock

 

Capital

 

Earnings

 

Loss

 

Equity

 

 

 

(Unaudited)

 

Balance, January 1, 2006

 

$

19,533

 

$

70,700

 

$

78,158

 

$

(370

)

$

168,021

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 21,809 shares under stock
option plan

 

44

 

400

 

 

 

444

 

Stock-based compensation

 

 

185

 

 

 

185

 

Dividends paid ($.24 per share)

 

 

 

(2,348

)

 

(2,348

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

10,579

 

 

10,579

 

Change in unrealized gains
(losses), net of taxes

 

 

 

 

8

 

8

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

10,587

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, June 30, 2006

 

$

19,577

 

$

71,285

 

$

86,389

 

$

(362

)

$

176,889

 

 

See accompanying notes.

4




 

GREENE COUNTY BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2006 and 2005
(Amounts in thousands)

 

 

 

June 30,

 

June 30,

 

 

 

2006

 

2005

 

 

 

(Unaudited)

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

$

10,579

 

$

6,649

 

Adjustments to reconcile net income to net cash provided
from operating activities

 

 

 

 

 

Provision for loan losses

 

2,308

 

2,682

 

Depreciation and amortization

 

2,077

 

1,763

 

Security amortization and accretion, net

 

(9

)

9

 

Loss on sale of securities

 

8

 

 

FHLB stock dividends

 

(165

)

(128

)

Net gain on sale of mortgage loans

 

(391

)

(207

)

Originations of mortgage loans held for sale

 

(29,924

)

(16,755

)

Proceeds from sales of mortgage loans

 

30,947

 

17,056

 

Increase in cash surrender value of life insurance

 

(391

)

(289

)

Net (gain) loss from sales of fixed assets

 

(2

)

19

 

Stock compensation expense

 

185

 

 

Net (gain) loss on other real estate and repossessed assets

 

(148

)

26

 

Deferred tax benefit

 

(874

)

(797

)

Net changes:

 

 

 

 

 

Other assets

 

(492

)

(1,076

)

Accrued interest payable and other liabilities

 

(2,724

)

(5,327

)

Net cash provided from operating activities

 

10,984

 

3,625

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of securities available for sale

 

(5,948

)

(16,860

)

Proceeds from sale of securities available for sale

 

985

 

 

Proceeds from maturities of securities held for sale

 

9,386

 

800

 

Proceeds from maturities of securities held to maturity

 

640

 

902

 

Purchase of life insurance

 

(41

)

(1,450

)

Net change in loans

 

(62,387

)

(115,364

)

Proceeds from sale of other real estate

 

2,571

 

1,259

 

Proceeds from sale of fixed assets

 

23

 

8

 

Improvements to other real estate

 

(47

)

 

Premises and equipment expenditures

 

(4,308

)

(1,196

)

Net cash used in investing activities

 

(59,126

)

(131,901

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Net change in deposits

 

(12,273

)

150,413

 

Net change in federal funds purchased and repurchase agreements agreements

 

33,635

 

2,558

 

Proceeds from notes payable

 

195,900

 

161,255

 

Proceeds from subordinated debentures

 

 

3,093

 

Repayments of notes payable

 

(177,765

)

(175,969

)

Dividends paid

 

(2,348

)

(1,837

)

Proceeds from issuance of common stock

 

444

 

51

 

 

 

 

 

 

 

Net cash provided from financing activities

 

37,593

 

139,564

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(10,549

)

11,288

 

Cash and cash equivalents, beginning of year

 

74,523

 

70,648

 

Cash and cash equivalents, end of period

 

$

63,974

 

$

81,936

 

 

 

 

 

 

 

 

Supplemental disclosures — cash and noncash

 

 

 

 

 

Interest paid

 

$

20,136

 

$

11,842

 

Income taxes paid

 

7,162

 

3,275

 

Loans converted to other real estate

 

3,121

 

2,570

 

Unrealized gain (loss) on available for sale securities, net of tax

 

8

 

(95

)

 

See accompanying notes.

5




GREENE COUNTY BANCSHARES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2006

Unaudited

(Amounts in thousands, except share and per share data)

NOTE 1 — PRINCIPLES OF CONSOLIDATION

The accompanying unaudited condensed consolidated financial statements of Greene County Bancshares, Inc. (the “Company”) and its wholly owned subsidiary, Greene County Bank (the “Bank”), have been prepared in accordance with accounting principles generally accepted in the United States of America for interim information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2006 are not necessarily indicative of the results that may be expected for the year ending December 31, 2006. For further information, refer to the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005. Certain amounts from prior period financial statements have been reclassified to conform to the current year’s presentation.  These reclassifications had no effect on net income or shareholders’ equity as previously reported.

Note 2 — Stock Compensation

Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment,” (“SFAS No.123R”) which was issued by the Financial Accounting Standards Board in December 2004.  SFAS No. 123R revises SFAS No. 123 “Accounting for Stock Based Compensation (“SFAS 123”),” and supersedes APB No. 25, “Accounting for Stock Issued to Employees,” (APB No. 25) and its related interpretations. SFAS No.123R  requires recognition of the cost of employee services received in exchange for an award of equity  instruments  in the  financial  statements over the  period the  employee  is  required  to perform  the  services in exchange for the award  (presumptively  the vesting period).  SFAS No. 123R also requires measurement of the cost of employee services received in exchange for an award based on the grant-date fair value of the award. SFAS No. 123R also amends SFAS No. 95 “Statement of Cash Flows,” to require that excess tax benefits be reported as financing cash inflows, rather than as a reduction of taxes paid, which is included within operating cash flows.

The Company adopted SFAS No. 123R using the modified prospective application as permitted under SFAS No. 123R.  Accordingly, prior period amounts have not been restated.  Under this application, the Company is required to record compensation expense for all awards granted after the date of adoption and for the unvested portion of previously granted awards that remain outstanding at the date of adoption.

Prior to the adoption of SFAS No. 123R, the Company used the intrinsic value method as prescribed by APB No. 25 and thus recognized no compensation expense for options granted with exercise prices equal to the fair market value of the Company’s common stock on the date of grant.

The Company maintains a 2004 Long-Term Incentive Plan, whereby a maximum of 500,000 shares of common stock may be issued to directors and employees of the Company and the Bank.  The Plan provides for the issuance of awards in the form of stock options, stock appreciation rights, restricted shares, restricted share units, deferred share units and performance awards.  Stock options granted under the Plan are typically granted at exercise prices equal to the fair market value of the Company’s common stock on the date of grant and typically have terms of ten years and vest at an annual rate of 20%.  At June 30, 2006, 342,798 shares remained available for future grant.  The compensation cost that has been charged against income for this plan was approximately $93,000 and $185,000 for the three and six months ended June 30, 2006, respectively.

The fair market value of each option award is estimated on the date of grant using the Black-Scholes option pricing model.  No options were granted during the quarters ended June 30, 2006 and 2005. The Company granted 90,261 and 71,228 of stock options for the quarters ended March 31, 2006 and 2005, respectively, with a fair value of $8.90 and $7.12, respectively, for each option.

6




 

The risk-free interest rate is based upon a U.S. Treasury instrument with a life that is similar to the expected life of the option grant.  Expected volatility is based upon the historical volatility of the Company’s common stock based upon prior years trading history.  The expected term of the options is based upon the average life of previously issued stock options. The expected dividend yield is based upon current yield on date of grant. No post-vesting restrictions exist for these options. The following table illustrates the assumptions for the Black-Scholes model used in determining the fair value of options granted to employees in the quarters ended March 31, 2006 and 2005, respectively.  No options were granted during the quarters ended June 30, 2006 and 2005.

 

 

2006

 

2005

 

Risk-free interest rate

 

4.57

%

4.20

%

Volatility

 

28.16

%

23.30

%

Expected life

 

8 years

 

8 years

 

Dividend yield

 

2.3

%

2.3

%

 

A summary of option activity under the stock option plan as of June 30, 2006 and changes during the six month period ended June 30, 2006 is presented below:

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

 

 

Exercise

 

Contractual

 

Intrinsic

 

 

 

Options

 

Price

 

Term

 

Value

 

Outstanding at beginning of year

 

396,910

 

$

21.65

 

 

 

 

 

Granted

 

90,261

 

28.90

 

 

 

 

 

Exercised

 

(21,809

)

20.38

 

 

 

 

 

Forfeited

 

(8,237

)

28.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2006

 

457,125

 

$

23.02

 

6.3 years

 

$

3,661

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at June 30, 2006

 

271,734

 

$

20.89

 

5.0 years

 

$

2,768

 

 

The total aggregate intrinsic value of options (which is the amount by which the stock price exceeded the exercise price of the options) exercised during the six months ended June 30, 2006 and 2005, was $196 and $40 respectively. The total fair value of shares vesting during the six months ended June 30, 2006 and 2005, was $185 and $214, respectively. As of June 30, 2006, there was $1,210 of total unrecognized compensation cost related to non-vested share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 2.9 years.

During the six months ended June 30, 2006, the amount of cash received from the exercise of stock options was $444.

7




 

The adoption of SFAS No. 123R and its fair value compensation cost recognition provisions are different from the nonrecognition provisions under SFAS No. 123 and the intrinsic value method for compensation cost allowed by APB 25. The effect (increase/(decrease) of the adoption of SFAS No. 123R is as follows:

 

 

Three Months
Ended
June 30, 2006

 

Six Months
Ended
June 30, 2006

 

 

 

 

 

 

 

Income before income tax expense

 

$

(93

)

$

(185

)

Net income

 

$

(93

)

$

(185

)

 

 

 

 

 

 

Basic earnings per common share

 

$

(0.01

)

$

(0.02

)

Diluted earnings per share

 

$

(0.01

)

$

(0.02

)

 

The following illustrates the effect on net income available to common shareholders if the Company had applied the fair value recognition provisions of SFAS No. 123 to the prior year’s three months and six months ended June 30, 2005:

 

 

Three Months
Ended
June 30, 2005

 

Six Months
Ended
June 30, 2005

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

As reported

 

$

3,714

 

$

6,649

 

Add: Stock-based employee compensation expense included in reported net income, net of related tax effects

 

4

 

7

 

Deduct: Total stock-based compensation expense determined under fair value-based method for all awards, net of tax

 

(40

)

(90

)

 

 

 

 

 

 

Pro forma

 

$

3,678

 

$

6,526

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

As reported

 

$

0.49

 

$

0.87

 

Pro forma

 

$

0.48

 

$

0.85

 

 

 

 

 

 

 

Diluted earnings per common share:

 

 

 

 

 

As reported

 

$

0.48

 

$

0.86

 

Pro forma

 

$

0.47

 

$

0.84

 

 

8




 

NOTE 3 — LOANS (Net)

Loans at June 30, 2006 and December 31, 2005 were as follows:

 

 

June 30,

 

December 31,

 

 

 

2006

 

2005

 

 

 

 

 

 

 

Commercial

 

$

266,416

 

$

245,285

 

Commercial real estate

 

794,090

 

729,254

 

Residential real estate

 

300,298

 

319,797

 

Consumer

 

85,526

 

90,682

 

Other

 

2,458

 

3,476

 

Unearned interest

 

(10,853

)

(9,852

)

Loans, net of unearned interest

 

$

1,437,935

 

$

1,378,642

 

 

 

 

 

 

 

Allowance for loan losses

 

$

(20,834

)

$

(19,739

)

 

Transactions in the allowance for loan losses and certain information about nonaccrual loans and loans 90 days past due but still accruing interest for the six months ended June 30, 2006 and twelve months ended December 31, 2005 were as follows:               

 

 

June 30,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Balance at beginning of year

 

$

19,739

 

$

15,721

 

Add (deduct):

 

 

 

 

 

Reserve acquired in acquisition

 

 

1,467

 

Provision

 

2,308

 

6,365

 

Loans charged off

 

(1,813

)

(5,583

)

Recoveries of loans charged off

 

600

 

1,769

 

Ending balance

 

$

20,834

 

$

19,739

 

 

 

 

June 30,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Loans past due 90 days still on accrual

 

$

65

 

$

809

 

Nonaccrual loans

 

4,816

 

5,915

 

Total

 

$

4,881

 

$

6,724

 

 

9




 

NOTE 4 — EARNINGS PER SHARE OF COMMON STOCK

Basic earnings per share (EPS) of common stock is computed by dividing net income by the weighted average number of common shares outstanding during the period. Diluted earnings per share of common stock is computed by dividing net income by the weighted average number of common shares and potential common shares outstanding during the period. Stock options are regarded as potential common shares. Potential common shares are computed using the treasury stock method. For the three and six months ended June 30, 2006, 30,485 options are excluded from the effect of dilutive securities because they are anti-dilutive; 60,185 options are similarly excluded from the effect of dilutive securities for the three and six months ended June 30, 2005.

The following is a reconciliation of the numerators and denominators used in the basic and diluted earnings per share computations for the three and six months ended June 30, 2006 and 2005:

 

 

Three Months Ended June 30,

 

 

 

2006

 

2005

 

 

 

Income

 

Shares

 

Income

 

Shares

 

 

 

(Numerator)

 

(Denominator)

 

(Numerator)

 

(Denominator)

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

Income available to common shareholders

 

$

5,483

 

9,785,936

 

$

3,714

 

7,650,884

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities

 

 

 

 

 

 

 

 

 

Stock options outstanding

 

 

112,051

 

 

95,101

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

Income available to common shareholders plus assumed conversions

 

$

5,483

 

9,897,987

 

$

3,714

 

7,745,985

 

 

 

 

 

 

Six Months Ended June 30,

 

 

 

2006

 

2005

 

 

 

Income

 

Shares

 

Income

 

Shares

 

 

 

(Numerator)

 

(Denominator)

 

(Numerator)

 

(Denominator)

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

Income available to common shareholders

 

$

10,579

 

9,778,288

 

$

6,649

 

7,649,982

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities

 

 

 

 

 

 

 

 

 

Stock options outstanding

 

 

113,529

 

 

95,148

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

Income available to common shareholders plus assumed conversions

 

$

10,579

 

9,891,817

 

$

6,649

 

7,745,130

 

 

10




 

NOTE 5 — SEGMENT INFORMATION

The Company’s operating segments include banking, mortgage banking, consumer finance, subprime automobile lending and title insurance. The reportable segments are determined by the products and services offered, and internal reporting. Loans, investments, and deposits provide the revenues in the banking operation; loans and fees provide the revenues in consumer finance, mortgage banking, and subprime lending; and insurance commissions provide revenues for the title insurance company. Consumer finance, subprime automobile lending and title insurance do not meet the quantitative threshold on an individual basis, and are therefore shown below in “Other Segments”. Mortgage banking operations are included in “Bank”.   All operations are domestic.

Segment performance is evaluated using net interest income and noninterest income. Income taxes are allocated based on income before income taxes, and indirect expenses (includes management fees) are allocated based on time spent for each segment. Transactions among segments are made at fair value. Information reported internally for performance assessment follows.

Three months ended June 30, 2006

 

 

 

Bank

 

Other
Segments

 

Holding
Company

 

Eliminations

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

16,626

 

$

1,423

 

$

(276

)

$

 

$

17,773

 

Provision for loan losses

 

999

 

245

 

 

 

1,244

 

Noninterest income

 

4,583

 

629

 

45

 

(229

)

5,028

 

Noninterest expense

 

11,514

 

1,199

 

195

 

(229

)

12,679

 

Income tax expense (benefit)

 

3,342

 

238

 

(185

)

 

3,395

 

Segment profit

 

$

5,354

 

$

370

 

$

(241

)

$

 

$

5,483

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets at June 30, 2006

 

$

1,629,798

 

$

31,544

 

$

4,288

 

$

 

$

1,665,630

 

 

Three months ended June 30, 2005

 

 

 

Bank

 

Other
Segments

 

Holding
Company

 

Eliminations

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

12,698

 

$

1,547

 

$

(173

)

$

 

$

14,072

 

Provision for loan losses

 

738

 

322

 

 

 

1,060

 

Noninterest income

 

3,163

 

516

 

6

 

(222

)

3,463

 

Noninterest expense

 

9,389

 

1,086

 

169

 

(222

)

10,422

 

Income tax expense (benefit)

 

2,212

 

257

 

(130

)

 

2,339

 

Segment profit

 

$

3,522

 

$

398

 

$

(206

)

$

 

$

3,714

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets at June 30, 2005

 

$

1,340,531

 

$

31,272

 

$

2,391

 

$

 

$

1,374,194

 

 

Six months ended June 30, 2006

 

 

 

Bank

 

Other
Segments

 

Holding
Company

 

Eliminations

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

32,642

 

$

2,852

 

$

(535

)

$

 

$

34,959

 

Provision for loan losses

 

1,841

 

467

 

 

 

2,308

 

Noninterest income

 

8,913

 

1,078

 

242

 

(450

)

9,783

 

Noninterest expense

 

23,213

 

2,310

 

312

 

(450

)

25,385

 

Income tax expense (benefit)

 

6,334

 

452

 

(316

)

 

6,470

 

Segment profit

 

$

10,167

 

$

701

 

$

(289

)

$

 

$

10,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Six months ended June 30, 2005

 

 

 

Bank

 

Other
Segments

 

Holding
Company

 

Eliminations

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

24,687

 

$

3,024

 

$

(312

)

$

 

$

27,399

 

Provision for loan losses

 

2,027

 

655

 

 

 

2,682

 

Noninterest income

 

5,943

 

918

 

189

 

(411

)

6,639

 

Noninterest expense

 

18,627

 

2,184

 

297

 

(411

)

20,697

 

Income tax expense (benefit)

 

3,789

 

433

 

(212

)

 

4,010

 

Segment profit

 

$

6,187

 

$

670

 

$

(208

)

$

 

$

6,649

 

 

11




 

Asset Quality Ratios

As of and for the period ended June 30, 2006

 

 

 

Bank

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

Nonperforming loans as a percentage of total loans net of unearned income

 

0.31

%

1.32

%

0.34

%

 

Nonperforming assets as a percentage of total assets

 

0.43

%

1.95

%

0.47

%

 

Allowance for loan losses as a percentage of total loans net of unearned income

 

1.28

%

7.90

%

1.45

%

 

Allowance for loan losses as a percentage of nonperforming loans

 

410.68

%

569.70

%

426.84

 

 

YTD Annualized net charge-offs to average total loans, net of unearned income

 

0.12

%

2.52

%

0.17

%

 

 

As of and for the period ended June 30, 2005

 

 

 

Bank

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

Nonperforming loans as a percentage of total loans net of unearned income

 

0.59

%

1.29

%

0.62

%

 

Nonperforming assets as a percentage of total assets

 

0.64

%

1.97

%

0.69

%

 

Allowance for loan losses as a percentage of total loans net unearned income

 

1.25

%

7.71

%

1.46

%

 

Allowance for loan losses as a percentage of nonperforming loans

 

213.91

%

595.64

%

235.95

%

 

YTD Annualized net charge-offs to average total loans, net of unearned income

 

0.16

%

4.19

%

0.27

%

 

 

 

 

 

 

 

 

 

 

 

As of and for the year ended December 31, 2005

 

 

 

Bank

 

Other

 

Total

 

 

 

 

 

 

 

 

 

 

 

Nonperforming loans as a percentage of total loans net of unearned income

 

0.45

%

1.68

%

0.49

%

 

Nonperforming assets as a percentage of total assets

 

0.59

%

2.37

%

0.65

%

 

Allowance for loan losses as a percentage of total loans net unearned income

 

1.26

%

7.89

%

1.43

%

 

Allowance for loan losses as a percentage of nonperforming loans

 

278.65

%

470.69

%

293.56

%

 

Net charge-offs to average total loans, net of unearned income

 

0.21

%

4.22

%

0.32

%

 

 

NOTE 6 — REVOLVING CREDIT AGREEMENT

On August 30, 2005, the Company entered into a revolving credit agreement with SunTrust Bank pursuant to which SunTrust agreed to loan the Company up to $35,000, with this amount being reduced to $15,000 after November 30, 2005.  SunTrust’s obligation to make advances to the Company under the credit agreement terminates on August 29, 2006, unless the loan is extended or earlier terminated.  The fee for maintaining this credit agreement is 0.15% per annum on the unused portion of the commitment.

 

12




ITEM 2.                           MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Forward-looking statements, which are based on assumptions and estimates and describe our future plans, strategies and expectations, are generally identifiable by the use of the words “anticipate,” “will,” “believe,” “may,” “could,” “would,” “should,” “estimate,” “expect,” “intend,” “seek,” or similar expressions.  These forward-looking statements may address, among other things, the Company’s business plans, objectives or goal for future operations or expansion, the Company’s forecasted revenues, earnings, assets or other measures of performance, or estimates of risks and future costs and benefits.  Although these statements reflect the Company’s good faith belief based on current expectations, estimates and projections, they are subject to risks, uncertainties and assumptions and are not guarantees of future performance.  Important factors that could cause actual results to differ materially from the forward-looking statements we make in this Quarterly Report on Form 10-Q include, but are not limited to, the following:

·                                          the Company’s potential growth, including its entrance or expansion into new markets, and the need for sufficient capital to support that growth;

·                                          the Company’s ability to successfully integrate the operations of any branches or banks acquired by it and to retain the customers of any such acquired branch or bank;

·                                          changes in the quality or composition of the Company’s loan or investment portfolios, including adverse developments in borrower industries or in the repayment ability of individual borrowers or issuers;

·                                          an insufficient allowance for loan losses as a result of inaccurate assumptions;

·                                          changes in interest rates, yield curves and interest rate spread relationships;

·                                          the strength of the economies in the Company’s target market areas, as well as general economic, market or business conditions;

·              changes in demand for loan products and financial services;

·              increased competition or market concentration;

·              concentration of credit exposure;

·              new state or federal legislation, regulations, or the initiation or outcome of litigation; and

·              other circumstances, many of which may be beyond the Company’s control.

If one or more of these risks or uncertainties materialize, or if any of the Company’s underlying assumptions prove incorrect, the Company’s actual results, performance or achievements may vary materially from future results, performance or achievements expressed or implied by these forward-looking statements.  All forward-looking statements included in this Quarterly Report on Form 10-Q are expressly qualified in their entirety by the cautionary statements in this section and to the more detailed risk factors included in the Company’s Annual Report on Form 10-K.  The Company does not intend to and assumes no responsibility for updating or revising any forward-looking statements contained in or incorporated by reference into this Quarterly Report on Form 10-Q, whether as a result of new information, future events or otherwise.

13




 

Presentation of Amounts

All dollar amounts set forth below, other than per-share amounts, are in thousands unless otherwise noted.

General

Greene County Bancshares, Inc. (the “Company”) is the bank holding company for Greene County Bank (the “Bank”), a Tennessee-chartered commercial bank that conducts the principal business of the Company.  The Company is the third largest bank holding company headquartered in Tennessee.  The Bank currently maintains a main office in Greeneville, Tennessee and 49 full-service bank branches primarily in East and Middle Tennessee.  In addition to its commercial banking operations, the Bank conducts separate businesses through its three wholly-owned subsidiaries: Superior Financial Services, Inc. (“Superior Financial”), a consumer finance company; GCB Acceptance Corporation (“GCB Acceptance”), a subprime automobile lending company; and Fairway Title Co., a title company formed in 1998. The Bank also operates a mortgage banking operation which has its main office in Knox County, Tennessee, and a trust and money management function doing business as Presidents Trust from an office in Wilson County, Tennessee.

On November 21, 2003, the Company entered the Middle Tennessee market by completing its acquisition of Gallatin, Tennessee-based Independent Bankshares Corporation (“IBC”).  IBC was the bank holding company for First Independent Bank, which had four offices in Gallatin and Hendersonville, Tennessee, in Sumner County, and Rutherford Bank and Trust, with three offices in Murfreesboro and Smyrna, Tennessee in Rutherford County.  First Independent Bank and Rutherford Bank and Trust were subsequently merged with the Bank, with the Bank as the surviving entity.

On November 15, 2004 the Company established banking operations in Nashville, Tennessee, with the opening of its first full-service branch of Middle Tennessee Bank & Trust, which, like all of the Bank’s bank brands, operates within the Bank’s structure.  This branch in Davidson County, Tennessee expanded the Company’s presence in the Middle Tennessee market and helped fill in the market between Sumner and Rutherford Counties.  At June 30, 2006, the Bank had three Middle Tennessee Bank & Trust branches in the Nashville area.

The Company opened a branch in Knoxville, Tennessee in late 2003 and expects to open its second branch in that city during 2006.

On December 10, 2004 the Company purchased three full-service branches from National Bank of Commerce located in Lawrence County Tennessee.  This purchase (“NBC transaction”) added to the Bank’s presence in Middle Tennessee.

On October 7, 2005, the Company purchased five bank branches in Montgomery County, Tennessee.  This purchase (the “Clarksville transaction”) also adds to the Bank’s presence in Middle Tennessee.

Growth and Business Strategy

The Company expects that, over the intermediate term, its growth from mergers and acquisitions, including acquisitions of both entire financial institutions and selected branches of financial institutions, will continue. De novo branching is also expected to be a method of growth, particularly in high-growth and other demographically-desirable markets.

The Company’s strategic plan outlines geographic expansion within a 300-mile radius of its headquarters in Greene County, Tennessee. This could result in the Company expanding westward and eastward up to and including Nashville, Tennessee and Roanoke, Virginia, respectively, east/southeast up to and including the Piedmont area of North Carolina and western North Carolina, southward to northern Georgia and northward into eastern and central Kentucky. In particular, the Company believes the markets in and around Knoxville, Nashville and Chattanooga, Tennessee are highly desirable areas with respect to expansion and growth plans.

14




 

While the Bank operates under a single bank charter, it conducts business under 18 bank brands with a distinct community-based brand in almost every market. The Bank offers local decision making through the presence of its regional executives in each of its markets, while at the same time maintaining a cost effective organizational structure in its back office and support areas.

The Bank focuses its lending efforts predominately on individuals and small to medium-sized businesses while it generates deposits primarily from individuals in its local communities. To aid in deposit generation efforts, the Bank offers its customers extended hours of operation during the week as well as Saturday banking. The Bank also offers free online banking and in the beginning of 2005 established its High Performance Checking Program which has allowed it to continue to generate a significant number of core transaction accounts with significant balances.

In addition to the Company’s business model, which is summarized in the paragraphs above, the Company is continuously investigating and analyzing other lines and areas of business.  These include, but are not limited to, various types of insurance and real estate activities. Conversely, the Company frequently evaluates and analyzes the profitability, risk factors and viability of its various business lines and segments and, depending upon the results of these evaluations and analyses, may conclude to exit certain segments and/or business lines. Further, in conjunction with these ongoing evaluations and analyses, the Company may decide to sell, merge or close certain branch facilities.

Overview

The Company’s results of operations for the three and six months ended June 30, 2006, compared to the same period in 2005, reflected an increase in net interest income due primarily to organic loan growth, higher interest rates as a result of actions from the Federal Open Market Committee (“FOMC”) and the Company’s continued expansion initiatives, including the Clarksville transaction in the fourth quarter of 2005.  This increase in net interest income was offset, in part, by increases in noninterest expense from Company’s expansion initiatives.

Reflecting improved credit quality offset in part by strong loan growth the Company’s provision for loan losses decreased for the six months ended June 30, 2006 as compared to the same period in 2005. The provision for loan loss for the three months ended June 30, 2006 increased by $184 from the same period in 2005, reflecting strong loan growth offset in part by improved credit quality.

The Company’s net interest margin for the quarter and six months ended June 30, 2006 increased from the same periods in 2005, primarily as a result of the asset sensitivity of the Company and increases by the FOMC in key rates, as well as continued optimization of funding costs.

At June 30, 2006, the Company had total consolidated assets of approximately $1,665,630, total consolidated deposits of approximately $1,283,606, total consolidated loans, net of unearned interest, of approximately $1,437,935, and total consolidated shareholders’ equity of approximately $176,889.  The Company’s annualized return on average shareholders’ equity for the three and six months ended June 30, 2006, was 12.43% and 12.15%, respectively, and its return on average total assets for the same periods was 1.34% and 1.31%, respectively.  The Company expects that its total assets, total consolidated deposits, total consolidated loans, net of unearned interest and total shareholders’ equity will continue to increase over the remainder of 2006 as a result of its expansion efforts, including its branch expansions in the Middle Tennessee, Knoxville, and Clarksville markets.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements and accompanying notes have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods.

Management continually evaluates the Company’s accounting policies and estimates it uses to prepare the consolidated financial statements.  In general, management’s estimates are based on historical experience, information from regulators and third party professionals and various assumptions that are believed to be reasonable under the facts and circumstances.  Actual results could differ significantly from those estimates made by management.

15




 

The Company believes its critical accounting policies and estimates include the valuation of the allowance for loan losses and the fair value of financial instruments and other accounts.  Based on management’s calculation, an allowance of $20,834, or 1.45%, of total loans, net of unearned interest, was an adequate estimate of losses within the loan portfolio as of June 30, 2006.  This estimate resulted in a provision for loan losses on the income statement of $1,244 and $2,308, respectively, for the three and six months ended June 30, 2006.  If the mix and amount of future charge-off percentages differ significantly from those assumptions used by management in making its determination, the allowance for loan losses and provision for loan losses on the income statement could be materially affected.

The  consolidated  financial  statements  include  certain  accounting  and disclosures  that  require  management to make estimates about fair values. Estimates of fair value are used in the accounting for securities available for sale, loans held for sale, goodwill, other intangible assets, and acquisition purchase accounting adjustments.  Estimates of fair values are used in disclosures regarding securities held to maturity, stock compensation, commitments, and the fair values of financial instruments. Fair  values  are  estimated  using  relevant  market information and other assumptions  such  as  interest  rates,  credit risk, prepayments and other factors.  The fair values of financial instruments are subject to change as influenced by market conditions.

Changes in Results of Operations

Net income.  Net income for the three months ended June 30, 2006 was $5,483 as compared to $3,714 for the same period in 2005. This increase of $1,769, or 47.63%, resulted primarily from a $3,701, or 26.30%, increase in net interest income reflecting principally increased volume of interest-earning assets arising primarily from the Company’s expansion initiatives and related growth in the loan portfolio. Offsetting this increase was a $2,257, or 21.66%, increase in total noninterest expense from $10,422 for the three months ended June 30, 2005 to $12,679 for the same period of 2006. This increase is also primarily attributable to the Company’s expansion initiatives, as discussed above.

Net income for the six months ended June 30, 2006 was $10,579 as compared to $6,649 for the same period in 2005.  The increase of $3,930, or 59.11%, reflects substantially the same trends that existed during the quarter ended June 30, 2006.

Net Interest Income.  The largest source of earnings for the Company is net interest income, which is the difference between interest earned on interest-earning assets and interest paid on deposits and other interest-bearing liabilities. The primary factors which affect net interest income are changes in volume and yields of interest-earning assets and interest-bearing liabilities, which are affected in part by management’s responses to changes in interest rates through asset/liability management. During the three months ended June 30, 2006, net interest income was $17,773 as compared to $14,072 for the same period in 2005, representing an increase of 26.30%.

The Company’s average balance for interest-earning assets increased 20.38% from $1,234,493 for the three months ended June 30, 2005 to $1,486,031 for the three months ended June 30, 2006. The Company experienced a 25.12% growth in average loan balances from $1,140,537 for the three months ended June 30, 2005 to $1,426,984 for the three months ended June 30, 2006. The growth in loans can be attributed to the Company’s expansion initiatives, including the Clarksville transaction, that occurred in the fourth quarter of 2005.

The Company’s average balance for interest bearing liabilities increased 17.60% from $1,095,925 for the three months ended June 30, 2005 to $1,288,822 for the first quarter ended June 30, 2006. The Company experienced a 13.09% growth in average interest bearing deposits from $999,911 for the three months ended June 30, 2005 to $1,130,840 for the three months ended June 30, 2006. The Company’s expansion initiatives, including the Clarksville transaction, and the implementation of the High Performance Checking program, are the primary reasons for the growth in deposits.

16




 

The Company’s yield on loans (the largest component of interest-earning assets) increased by 83 basis points from the three months ended June 30, 2005 to the three months ended June 30, 2006. The increase was primarily a result of the increases by the FOMC in the discount rate as follows:

 

FOMC Meeting

 

Beginning

 

 

 

Ending

 

Date

 

Rate

 

Increase

 

Rate

 

May 3, 2005

 

2.75

%

0.25

%

3.00

%

June 30, 2005

 

3.00

%

0.25

%

3.25

%

August 9, 2005

 

3.25

%

0.25

%

3.50

%

September 20, 2005

 

3.50

%

0.25

%

3.75

%

November 1, 2005

 

3.75

%

0.25

%

4.00

%

December 13, 2005

 

4.00

%

0.25

%

4.25

%

January 31, 2006

 

4.25

%

0.25

%

4.50

%

March 28, 2006

 

4.50

%

0.25

%

4.75

%

May 10, 2006

 

4.75

%

0.25

%

5.00

%

June 29, 2006

 

5.00

%

0.25

%

5.25

%

 

The Company’s cost of interest-bearing liabilities increased by 91 basis points from the three months ended June 30, 2005 to the three months ended June 30, 2006. The cost of raising deposits and other borrowed funds are influenced by both local market conditions as well as FOMC actions.  Management believes that these costs were prudently managed during this volatile interest rate cycle.

For the six months ended June 30, 2006, net interest income increased by $7,560, or 27.59%, to $34,959 from $27,399 for the same period in 2005, and the same trends outlined above with respect to the three months ended June 30, 2006 were observed.

17




 

The following tables set forth certain information relating to the Company’s consolidated average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the periods indicated.  These yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the periods presented.

 

 

 

Three Months Ended

 

 

 

June 30,

 

 

 

2006

 

2005

 

 

 

Average

 

 

 

Average

 

Average

 

 

 

Average

 

 

 

Balance

 

Interest

 

Rate

 

Balance

 

Interest

 

Rate

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans(1)

 

$

1,426,984

 

$

27,781

 

7.81

%

$

1,140,537

 

$

19,851

 

6.98

%

Investment securities

 

54,571

 

649

 

4.77

%

60,691

 

592

 

3.91

%

Other short-term investments

 

4,476

 

59

 

5.29

%

33,265

 

260

 

3.13

%

Total interest-earning assets

 

$

1,486,031

 

$

28,489

 

7.69

%

$

1,234,493

 

$

20,703

 

6.73

%

Noninterest earning assets

 

146,520

 

 

 

 

 

104,107

 

 

 

 

 

Total assets

 

$

1,632,551

 

 

 

 

 

$

1,338,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Now accounts, money market and savings

 

$

505,383

 

$

2,680

 

2.13

%

$

401,441

 

$

1,161

 

1.16

%

Time deposits

 

625,457

 

5,967

 

3.83

%

598,470

 

4,340

 

2.91

%

Total interest-bearing deposits

 

$

1,130,840

 

$

8,647

 

3.07

%

$

999,911

 

$

5,501

 

2.21

%

 Securities sold under repurchase agreements and short-term borrowings

 

34,783

 

397

 

4.58

%

15,014

 

95

 

2.54

%

Notes payable

 

109,796

 

1,414

 

5.17

%

70,656

 

879

 

4.99

%

Subordinated debentures

 

13,403

 

258

 

7.72

%

10,344

 

156

 

6.05

%

Total interest-bearing liabilities

 

$

1,288,822

 

$

10,716

 

3.34

%

$

1,095,925

 

$

6,631

 

2.43

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

148,937

 

 

 

 

 

116,436

 

 

 

 

 

Other liabilities

 

18,396

 

 

 

 

 

12,942

 

 

 

 

 

Total noninterest bearing liabilities

 

167,333

 

 

 

 

 

129,378

 

 

 

 

 

Total liabilities

 

1,456,155

 

 

 

 

 

1,225,303

 

 

 

 

 

Shareholders’ equity

 

176,396

 

 

 

 

 

113,297

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,632,551

 

 

 

 

 

$

1,338,600

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

$

17,773

 

 

 

 

 

$

14,072

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

4.35

%

 

 

 

 

4.30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net yield on interest-earning assets

 

 

 

 

 

4.80

%

 

 

 

 

4.57

%


(1)             Average loan balances included nonaccrual loans.  Interest income collected on nonaccrual loans has been included.

18




 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2006

 

2005

 

 

 

Average

 

 

 

Average

 

Average

 

 

 

Average

 

 

 

Balance

 

Interest

 

Rate

 

Balance

 

Interest

 

Rate

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans(1)

 

$

1,409,788

 

$

53,881

 

7.71

%

$

1,110,231

 

$

37,930

 

6.89

%

Investment securities

 

55,503

 

1,280

 

4.65

%

55,874

 

1,065

 

3.84

%

Other short-term investments

 

3,928

 

95

 

4.88

%

33,694

 

443

 

2.65

%

Total interest-earning assets

 

$

1,469,219

 

$

55,256

 

7.58

%

$

1,199,799

 

$

39,438

 

6.63

%

Noninterest earning assets

 

146,829

 

 

 

 

 

103,339

 

 

 

 

 

Total assets

 

$

1,616,048

 

 

 

 

 

$

1,303,138

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits: