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 September 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

incorporation or organization)

 

No.)

 

100 North Main Street, Greeneville, Tennessee

 

37743-4992

(Address of principal executive offices)

 

(Zip Code)

 

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

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

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.  (Check one:)

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 November 7, 2006, the number of shares outstanding of the issuer’s common stock was: 9,805,733.

 




 

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 — September 30, 2006 and December 31, 2005.

 

Condensed Consolidated Statements of Income and Comprehensive Income - For the three and nine months ended September 30, 2006 and 2005.

 

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

 

Condensed Consolidated Statements of Cash Flows - For the nine months ended September 30, 2006 and 2005.

 

Notes to Condensed Consolidated Financial Statements.

 

 

1




 

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

 

 

 

September 30,
2006

 

December 31,
2005*

 

 

 

(Unaudited)

 

 

 

ASSETS

 

 

 

 

 

Cash and due from banks

 

$

41,474

 

$

46,136

 

Federal funds sold and other

 

28,004

 

28,387

 

Securities available for sale

 

43,142

 

48,868

 

Securities held to maturity (with a market value of $2,674 and $3,335)

 

2,690

 

3,379

 

FHLB, Bankers Bank and other stock, at cost

 

6,964

 

6,489

 

Loans held for sale

 

2,195

 

2,686

 

Loans, net of unearned interest

 

1,493,878

 

1,378,642

 

Allowance for loan losses

 

(21,616

)

(19,739

)

Premises and equipment, net

 

54,125

 

49,985

 

Goodwill and other intangible assets

 

38,811

 

39,622

 

Other assets

 

37,601

 

35,534

 

Total assets

 

$

1,727,268

 

$

1,619,989

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

 

 

 

 

 

Liabilities

 

 

 

 

 

Deposits

 

$

1,242,810

 

$

1,295,879

 

Federal funds purchased

 

75,000

 

-

 

Repurchase agreements

 

22,601

 

17,498

 

FHLB advances and notes payable

 

173,058

 

105,146

 

Subordinated debentures

 

13,403

 

13,403

 

Accrued interest payable and other liabilities

 

18,737

 

20,042

 

Total liabilities

 

1,545,609

 

1,451,968

 

 

 

 

 

 

 

Shareholders’ equity

 

 

 

 

 

Common stock: $2 par, 15,000,000 shares authorized, 9,796,349 and 9,766,336 shares outstanding

 

19,593

 

19,533

 

Additional paid-in capital

 

71,542

 

70,700

 

Retained earnings

 

90,723

 

78,158

 

Accumulated other comprehensive loss

 

(199

)

(370

)

Total shareholders’ equity

 

181,659

 

168,021

 

Total liabilities and shareholders’ equity

 

$

1,727,268

 

$

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 Nine Months Ended September 30, 2006 and 2005
(Amounts in thousands, except share and per share data)

 

 

 

Three Months Ended
September 30,

 

Nine Months Ended
September 30,

 

 

 

2006

 

2005

 

2006

 

2005

 

 

 

(Unaudited)

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

29,600

 

$

21,335

 

$

83,481

 

$

59,265

 

Investment securities

 

752

 

626

 

2,032

 

1,691

 

Federal funds sold and other

 

15

 

154

 

110

 

597

 

 

 

30,367

 

22,115

 

85,623

 

61,553

 

Interest expense

 

 

 

 

 

 

 

 

 

Deposits

 

8,828

 

6,285

 

25,517

 

16,048

 

Borrowings

 

3,009

 

1,282

 

6,617

 

3,558

 

 

 

11,837

 

7,567

 

32,134

 

19,606

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

18,530

 

14,548

 

53,489

 

41,947

 

 

 

 

 

 

 

 

 

 

 

Provision for loan losses

 

1,661

 

1,704

 

3,969

 

4,386

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for loan losses

 

16,869

 

12,844

 

49,520

 

37,561

 

 

 

 

 

 

 

 

 

 

 

Noninterest income

 

 

 

 

 

 

 

 

 

Service charges and fees

 

4,125

 

3,159

 

11,357

 

8,137

 

Other

 

1,066

 

637

 

3,617

 

2,298

 

 

 

5,191

 

3,796

 

14,974

 

10,435

 

 

 

 

 

 

 

 

 

 

 

Noninterest expense

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

6,768

 

5,366

 

19,425

 

15,710

 

Occupancy and furniture and equipment expense

 

2,046

 

1,821

 

6,155

 

5,334

 

Other

 

4,322

 

3,054

 

12,941

 

10,344

 

 

 

13,136

 

10,691

 

38,521

 

31,388

 

 

 

 

 

 

 

 

 

 

 

Income before income taxes

 

8,924

 

5,949

 

25,973

 

16,608

 

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

 

3,415

 

2,273

 

9,885

 

6,283

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

5,509

 

$

3,676

 

$

16,088

 

$

10,325

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

5,672

 

$

3,639

 

$

16,259

 

$

10,193

 

 

 

 

 

 

 

 

 

 

 

Per share of common stock:

 

 

 

 

 

 

 

 

 

Basic earnings

 

$

0.56

 

$

0.48

 

$

1.64

 

$

1.35

 

Diluted earnings

 

$

0.56

 

$

0.47

 

$

1.63

 

$

1.33

 

Dividends

 

$

0.12

 

$

0.12

 

$

0.36

 

$

0.36

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

9,790,058

 

7,710,871

 

9,782,255

 

7,670,502

 

Diluted

 

9,900,396

 

7,805,458

 

9,893,417

 

7,765,343

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

3




 

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

 

 

 

Common
Stock

 

Additional
Paid-in
Capital

 

Retained
Earnings

 

Accumulated
Other
Comprehensive
Loss

 

Total
Shareholders’
Equity

 

 

 

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, January 1, 2006

 

$

19,533

 

$

70,700

 

$

78,158

 

$

(370

)

$

168,021

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of 30,013 shares under stock option plan

 

60

 

577

 

-

 

-

 

637

 

Stock-based compensation

 

-

 

265

 

-

 

-

 

265

 

Dividends paid ($.36 per share)

 

-

 

-

 

(3,523

)

-

 

(3,523

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

Net income

 

-

 

-

 

16,088

 

-

 

16,088

 

Change in unrealized gains, net of taxes

 

-

 

-

 

-

 

171

 

171

 

Total comprehensive income

 

 

 

 

 

 

 

 

 

16,259

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, September 30, 2006

 

$

19,593

 

$

71,542

 

$

90,723

 

$

(199

)

$

181,659

 

 

See accompanying notes.

4




 

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

 

 

September 30,
2006

 

September 30,
2005

 

 

 

(Unaudited)

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

Net income

 

$

16,088

 

$

10,325

 

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

 

 

 

 

 

Provision for loan losses

 

3,969

 

4,386

 

Depreciation and amortization

 

3,105

 

2,673

 

Security amortization and accretion, net

 

(25

)

23

 

Loss on sale of securities

 

8

 

-

 

FHLB stock dividends

 

(250

)

(196

)

Net gain on sale of mortgage loans

 

(583

)

(339

)

Originations of mortgage loans held for sale

 

(45,459

)

(29,234

)

Proceeds from sales of mortgage loans

 

46,534

 

26,463

 

Increase in cash surrender value of life insurance

 

(575

)

(426

)

Net loss from sales of fixed assets

 

1

 

20

 

Stock compensation expense

 

265

 

-

 

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

 

(129

)

66

 

Deferred tax benefit

 

(1,391

)

(1,227

)

Net changes:

 

 

 

 

 

Other assets

 

(1,477

)

(1,962

)

Accrued interest payable and other liabilities

 

(1,306

)

(1,891

)

Net cash provided from operating activities

 

18,775

 

8,681

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of securities available for sale

 

(7,943

)

(21,310

)

Proceeds from sale of securities available for sale

 

1,100

 

-

 

Proceeds from maturities of securities held for sale

 

12,862

 

2,611

 

Proceeds from maturities of securities held to maturity

 

690

 

1,003

 

Purchase of life insurance

 

(41

)

(3,657

)

Net change in loans

 

(120,011

)

(174,770

)

Proceeds from sale of other real estate

 

3,944

 

2,088

 

Proceeds from sale of fixed assets

 

38

 

8

 

Improvements to other real estate

 

(47

)

-

 

Premises and equipment expenditures

 

(6,473

)

(2,857

)

Net cash used in investing activities

 

(115,881

)

(196,884

)

 

 

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Net change in deposits

 

(53,068

)

136,842

 

Net change in federal funds purchased and repurchase agreements agreements

 

80,103

 

(2,475

)

Proceeds from FHLB advances and notes payable

 

304,270

 

214,757

 

Proceeds from subordinated debentures

 

-

 

3,093

 

Repayments of FHLB advances and notes payable

 

(236,358

)

(229,737

)

Dividends paid

 

(3,523

)

(2,754

)

Proceeds from issuance of common stock

 

637

 

44,150

 

Net cash provided from financing activities

 

92,061

 

163,876

 

Net change in cash and cash equivalents

 

(5,045

)

(24,327

)

Cash and cash equivalents, beginning of year

 

74,523

 

70,648

 

Cash and cash equivalents, end of period

 

$

69,478

 

$

46,321

 

 

 

 

 

 

 

Supplemental disclosures — cash and noncash

 

 

 

 

 

Interest paid

 

$

31,825

 

$

19,507

 

Income taxes paid

 

10,003

 

4,951

 

Loans converted to other real estate

 

4,148

 

4,816

 

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

 

171

 

(132

)

 

See accompanying notes.

5




 

GREENE COUNTY BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 nine months ended September 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 September 30, 2006, 342,798 shares remained available for future grant.  The compensation cost that has been charged against income for this plan was approximately $81,000 and $265,000 for the three and nine months ended September 30, 2006, respectively.  The Company has not recorded a deferred tax liability associated with the stock options issued during 2006, as all options issued have been incentive stock options.

6




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 September 30, 2006 and 2005. The Company granted 90,261 and 71,228 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.

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 year’s 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 the 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 September 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 September 30, 2006 and changes during the nine month period ended September 30, 2006 is presented below:

 

 

 

Options

 

Weighted
Average
Exercise
Price

 

Weighted
Average
Remaining
Contractual
Term

 

Aggregate
Intrinsic
Value

 

Outstanding at beginning of year

 

396,910

 

$

21.65

 

 

 

 

 

Granted

 

90,261

 

28.90

 

 

 

 

 

Exercised

 

(30,013

)

21.23

 

 

 

 

 

Forfeited

 

(8,237

)

28.26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2006

 

448,921

 

$

23.01

 

6.1 years

 

$

5,950

 

 

 

 

 

 

 

 

 

 

 

Options exercisable at September 30, 2006

 

263,530

 

$

20.81

 

4.5 years

 

$

4,018

 

 

 

 

 

 

 

 

 

 

 

 

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 nine months ended September 30, 2006 and 2005, was $288 and $62 respectively. The total fair value of shares vesting during the nine months ended September 30, 2006 and 2005, was $265 and $279, respectively. As of September 30, 2006, there was $1,122 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 2.3 years.

During the nine months ended September 30, 2006, the amount of cash received from the exercise of stock options was $637.

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 No. 25. The impact of the adoption of SFAS No. 123R is as follows:

 

 

Three Months Ended
September 30, 2006

 

Nine Months Ended
September 30, 2006

 

 

 

 

 

 

 

Income before income tax expense

 

$

(81

)

$

(265

)

Net income

 

$

(81

)

$

(265

)

 

 

 

 

 

 

Basic earnings per common share

 

$

(0.01

)

$

(0.03

)

Diluted earnings per share

 

$

(0.01

)

$

(0.03

)

 

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 three months and nine months ended September 30, 2005:

 

 

Three Months Ended
September 30, 2005

 

Nine Months Ended
September 30, 2005

 

 

 

 

 

 

 

Net income:

 

 

 

 

 

As reported

 

$

3,676

 

$

10,325

 

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

 

4

 

11

 

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

 

(40

)

(170

)

 

 

 

 

 

 

Pro forma

 

$

3,640

 

$

10,166

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

As reported

 

$

0.48

 

$

1.35

 

Pro forma

 

$

0.48

 

$

1.35

 

 

 

 

 

 

 

Diluted earnings per common share:

 

 

 

 

 

As reported

 

$

0.48

 

$

1.33

 

Pro forma

 

$

0.48

 

$

1.31

 

 

8




NOTE 3 — LOANS

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

 

September 30,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Commercial

 

$

260,709

 

$

245,285

 

Commercial real estate

 

862,526

 

729,254

 

Residential real estate

 

287,529

 

319,797

 

Consumer

 

89,389

 

90,682

 

Other

 

4,757

 

3,476

 

Unearned interest

 

(11,032

)

(9,852

)

Loans, net of unearned interest

 

$

1,493,878

 

$

1,378,642

 

 

 

 

 

 

 

Allowance for loan losses

 

$

(21,616

)

$

(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 nine months ended September 30, 2006 and twelve months ended December 31, 2005 were as follows:

 

September 30,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Balance at beginning of year

 

$

19,739

 

$

15,721

 

Add (deduct):

 

 

 

 

 

Reserve acquired in acquisition

 

 

1,467

 

Provision

 

3,969

 

6,365

 

Loans charged off

 

(3,134

)

(5,583

)

Recoveries of loans charged off

 

1,042

 

1,769

 

Ending balance

 

$

21,616

 

$

19,739

 

 

 

 

 

 

 

 

 

September 30,
2006

 

December 31,
2005

 

 

 

 

 

 

 

Loans past due 90 days still on accrual

 

$

65

 

$

809

 

Nonaccrual loans

 

4,823

 

5,915

 

Total

 

$

4,888

 

$

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 nine months ended September 30, 2005, 60,185 options were excluded from the effect of dilutive securities because they are anti-dilutive. For the three and nine months ended September 30, 2006, all options are included because the fair market value of the options exceeded the exercise price.

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

 

 

Three Months Ended September 30,

 

 

 

2006

 

2005

 

 

 

Income

 

Shares

 

Income

 

Shares

 

 

 

(Numerator)

 

(Denominator)

 

(Numerator)

 

(Denominator)

 

 

 

 

 

 

 

 

 

 

 

Basic EPS

 

 

 

 

 

 

 

 

 

Income available to common shareholders

 

$

5,509

 

9,790,058

 

$

3,676

 

7,710,871

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities

 

 

 

 

 

 

 

 

 

Stock options outstanding

 

 

110,338

 

 

94,587

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

Income available to common shareholders plus assumed conversions

 

$

5,509

 

9,900,396

 

$

3,676

 

7,805,458

 

 

 

 

Nine Months Ended September 30,

 

 

 

2006

 

2005

 

 

 

Income

 

Shares

 

Income

 

Shares

 

 

 

(Numerator)

 

(Denominator)

 

(Numerator)

 

(Denominator)

 

Basic EPS

 

 

 

 

 

 

 

 

 

Income available to common shareholders

 

$

16,088

 

9,782,255

 

$

10,325

 

7,670,502

 

 

 

 

 

 

 

 

 

 

 

Effect of dilutive securities

 

 

 

 

 

 

 

 

 

Stock options outstanding

 

 

111,162

 

 

94,841

 

 

 

 

 

 

 

 

 

 

 

Diluted EPS

 

 

 

 

 

 

 

 

 

Income available to common shareholders plus assumed conversions

 

$

16,088

 

9,893,417

 

$

10,325

 

7,765,343

 

 

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 September 30, 2006

 

 

 

Bank

 

Other
Segments

 

Holding
Company

 

Eliminations

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

17,423

 

$

1,400

 

$

(293

)

$

 

$

18,530

 

Provision for loan losses

 

1,347

 

314

 

 

 

1,661

 

Noninterest income

 

4,681

 

689

 

47

 

(226

)

5,191

 

Noninterest expense

 

11,995

 

1,205

 

162

 

(226

)

13,136

 

Income tax expense (benefit)

 

3,370

 

223

 

(178

)

 

3,415

 

Segment profit

 

$

5,392

 

$

347

 

$

(230

)

$

 

$

5,509

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets at September 30, 2006

 

$

1,689,896

 

$

32,872

 

$

4,500

 

$

 

$

1,727,268

 

 

Three months ended September 30, 2005

 

 

 

Bank

 

Other
Segments

 

Holding
Company

 

Eliminations

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

13,366

 

$

1,410

 

$

(228

)

$

 

$

14,548

 

Provision for loan losses

 

1,408

 

296

 

 

 

1,704

 

Noninterest income

 

3,468

 

524

 

8

 

(204

)

3,796

 

Noninterest expense

 

9,672

 

1,072

 

151

 

(204

)

10,691

 

Income tax expense (benefit)

 

2,194

 

222

 

(143

)

 

2,273

 

Segment profit

 

$

3,560

 

$

344

 

$

(228

)

$

 

$

3,676

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment assets at September 30, 2005

 

$

1,363,774

 

$

30,229

 

$

11,577

 

$

 

$

1,405,580

 

 

Nine months ended September 30, 2006

 

 

 

Bank

 

Other
Segments

 

Holding
Company

 

Eliminations

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

50,065

 

$

4,252

 

$

(828

)

$

 

$

53,489

 

Provision for loan losses

 

3,188

 

781

 

 

 

3,969

 

Noninterest income

 

13,594

 

1,767

 

289

 

(676

)

14,974

 

Noninterest expense

 

35,208

 

3,515

 

474

 

(676

)

38,521

 

Income tax expense (benefit)

 

9,704

 

675

 

(494

)

 

9,885

 

Segment profit

 

$

15,559

 

$

1,048

 

$

(519

)

$

 

$

16,088

 

 

Nine months ended September 30, 2006

 

 

 

Bank

 

Other
Segments

 

Holding
Company

 

Eliminations

 

Totals

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income (expense)

 

$

38,053

 

$

4,434

 

$

(540

)

$

 

$

41,947

 

Provision for loan losses

 

3,435

 

951

 

 

 

4,386

 

Noninterest income

 

9,411

 

1,442

 

197

 

(615

)

10,435

 

Noninterest expense

 

28,299

 

3,256

 

448

 

(615

)

31,388

 

Income tax expense (benefit)

 

5,983

 

655

 

(355

)

 

6,283

 

Segment profit

 

$

9,747

 

$

1,014

 

$

(436

)

$

 

$

10,325

 

 

11




 

Asset Quality Ratios

As of and for the period ended September 30, 2006

 

 

 

Bank

 

Other

 

Total

 

 

 

 

 

 

 

 

 

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

 

0.29

%

1.63

%

0.33

%

Nonperforming assets as a percentage of total assets

 

0.38

%

2.02

%

0.42

%

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

 

1.28

%

7.92

%

1.45

%

Allowance for loan losses as a percentage of nonperforming loans

 

436.81

%

486.49

%

442.23

%

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

 

0.14

%

2.72

%

0.20

%

 

 

 

 

 

 

 

 

 

As of and for the period ended September 30, 2005

 

 

 

Bank

 

Other

 

Total

 

 

 

 

 

 

 

 

 

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

 

0.54

%

1.69

%

0.58

%

Nonperforming assets as a percentage of total assets

 

0.70

%

1.85

%

0.78

%

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

 

1.26

%

7.92

%

1.45

%

Allowance for loan losses as a percentage of nonperforming loans

 

231.14

%

468.86

%

248.45

%

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

 

0.17

%

4.22

%

0.29

%

 

 

 

 

 

 

 

 

 

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.  This agreement was extended on August 30, 2006 and SunTrust’s obligation to make advances to the Company under the credit agreement terminates on August 31, 2007.  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 goals 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 changes in economic conditions that could adversely impact borrowers;

·                                          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 and a trust and money management function.

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 September 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 the fourth quarter of 2006. The Company has also purchased land in Knox County and is planning to open a new branch during 2007 or 2008.

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 nine months ended September 30, 2006, compared to the same periods 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 the 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 three and nine months, ended September 30, 2006 as compared to the same periods in 2005.

The Company’s net interest margin for the quarter and nine months ended September 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 September 30, 2006, the Company had total consolidated assets of approximately $1,727,268, total consolidated deposits of approximately $1,242,810, total consolidated loans, net of unearned interest, of approximately $1,493,878, and total consolidated shareholders’ equity of approximately $181,659.  The Company’s annualized return on average shareholders’ equity for the three and nine months ended September 30, 2006, was 12.22% and 12.17%, respectively, and its return on average total assets for the same periods was 1.32% 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 $21,616, or 1.45%, of total loans, net of unearned interest, was an adequate estimate of losses within the loan portfolio as of September 30, 2006.  This estimate resulted in a provision for loan losses on the income statement of $1,661 and $3,969, respectively, for the three and nine months ended September 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 September 30, 2006 was $5,509 as compared to $3,676 for the same period in 2005. This increase of $1,833, or 49.86%, resulted primarily from a $3,982, or 27.37%, 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 $2,445, or 22.87%, increase in total noninterest expense from $10,691 for the three months ended September 30, 2005 to $13,136 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 nine months ended September 30, 2006 was $16,088 as compared to $10,325 for the same period in 2005.  The increase of $5,763, or 55.82%, reflects substantially the same trends that existed during the quarter ended September 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 September 30, 2006, net interest income was $18,530 as compared to $14,548 for the same period in 2005, representing an increase of 27.37%.

The Company’s average balance for interest-earning assets increased 19.73% from $1,271,835 for the three months ended September 30, 2005 to $1,522,750 for the three months ended September 30, 2006. The Company experienced a 22.97% growth in average loan balances from $1,190,852 for the three months ended September 30, 2005 to $1,464,356 for the three months ended September 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 17.42% from $1,123,275 for the three months ended September 30, 2005 to $1,318,931 for the three months ended September 30, 2006. The Company experienced a 7.77% growth in average interest bearing deposits from $1,018,231 for the three months ended September 30, 2005 to $1,097,370 for the three months ended September 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 91 basis points from the three months ended September 30, 2005 to the three months ended September 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

 

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

%

 

August 8, 2006

 

 

5.25

%

 

 

0.00

%

 

 

5.25

%

 

September 20, 2006

 

 

5.25

%

 

 

0.00

%

 

 

5.25

%

 

 

The Company’s cost of interest-bearing liabilities increased by 89 basis points from the three months ended September 30, 2005 to the three months ended September 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 nine months ended September 30, 2006, net interest income increased by $11,542, or 27.52%, to $53,489, from $41,947 for the same period in 2005, and the same trends outlined above with respect to the three months ended September 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

 

 

 

September 30,

 

 

 

2006

 

2005

 

 

 

Average

 

 

 

Average

 

Average

 

 

 

Average

 

 

 

Balance

 

Interest

 

Rate

 

Balance

 

Interest

 

Rate

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans(1)

 

$

1,464,356

 

$

29,600

 

8.02

%

$

1,190,852

 

$

21,335

 

7.11

%

Investment securities

 

57,226

 

752

 

5.21

%

62,860

 

626

 

3.95

%

Other short-term investments

 

1,168

 

15

 

5.10

%

18,123

 

154

 

3.37

%

Total interest-earning assets

 

$

1,522,750

 

$

30,367

 

7.91

%

$

1,271,835

 

$

22,115

 

6.90

%

Noninterest earning assets

 

148,418

 

 

 

 

 

104,047

 

 

 

 

 

Total assets

 

$

1,671,168

 

 

 

 

 

$

1,375,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Now accounts, money market and savings

 

$

467,112

 

$

2,447

 

2.08

%

$

406,431

 

$

1,449

 

1.41

%

Time deposits

 

630,258

 

6,381

 

4.02

%

611,800

 

4,836

 

3.14

%

Total interest-bearing deposits

 

$

1,097,370

 

$

8,828

 

3.19

%

$

1,018,231

 

$

6,285

 

2.45

%

Securities sold under repurchase agreements and short-term borrowings

 

42,775

 

531

 

4.93

%

13,551

 

98

 

2.87

%

FHLB advances and notes payable

 

165,383

 

2,202

 

5.28

%

78,090

 

974

 

4.95

%

Subordinated debentures

 

13,403

 

276

 

8.17

%

13,403

 

210

 

6.22

%

Total interest-bearing liabilities

 

$

1,318,931

 

$

11,837

 

3.56

%

$

1,123,275

 

$

7,567

 

2.67

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

152,035

 

 

 

 

 

120,460

 

 

 

 

 

Other liabilities

 

19,868

 

 

 

 

 

14,686

 

 

 

 

 

Total noninterest bearing liabilities

 

171,903

 

 

 

 

 

135,146

 

 

 

 

 

Total liabilities

 

1,490,834

 

 

 

 

 

1,258,421

 

 

 

 

 

Shareholders’ equity

 

180,334

 

 

 

 

 

117,461

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,671,168

 

 

 

 

 

$

1,375,882

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

$

18,530

 

 

 

 

 

$

14,548

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate spread

 

 

 

 

 

4.35

%

 

 

 

 

4.23

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net yield on interest-earning assets

 

 

 

 

 

4.83

%

 

 

 

 

4.54

%


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

18




 

<

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2006

 

2005

 

 

 

Average

 

 

 

Average

 

Average

 

 

 

Average

 

 

 

Balance

 

Interest

 

Rate

 

Balance

 

Interest

 

Rate

 

Interest-earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans(1)

 

$

1,428,177

 

$

83,481

 

7.82

%

$

1,137,400

 

$

59,265

 

6.97

%

Investment securities

 

56,084

 

2,032

 

4.84

%

58,229

 

1,691

 

3.88

%

Other short-term investments

 

2,998

 

110

 

4.91

%

28,446

 

597

 

2.81

%

Total interest-earning assets

 

$

1,487,259

 

$

85,623

 

7.70

%

$

1,224,075

 

$

61,553

 

6.72

%

Noninterest earning assets

 

147,364

 

 

 

 

 

103,577

 

 

 

 

 

Total assets

 

$

1,634,623

 

 

 

 

 

$

1,327,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

 

Now accounts, money market and savings

 

$

497,576

 

$

7,703

 

2.07

%

$

399,016

 

$

3,476

 

1.16

%

Time deposits

 

627,269

 

17,814

 

3.80

%

578,403

 

12,572

 

2.91

%

Total interest-bearing deposits

 

$

1,124,845

 

$

25,517

 

3.03

%

$

977,419

 

$

16,048

 

2.20

%

Securities sold under repurchase agreements and short-term borrowings

 

33,156

 

1,135

 

4.58

%

15,646

 

282

 

2.41

%

FHLB advances and notes payable

 

121,417

 

4,706

 

5.18

%

76,978

 

2,771

 

4.81

%

Subordinated debentures

 

13,403

 

776

 

7.74

%

11,364

 

505

 

5.94

%

Total interest-bearing liabilities

 

$

1,292,821

 

$

32,134

 

3.32

%

$

1,081,407

 

$

19,606

 

2.42

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest bearing liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Demand deposits

 

147,049

 

 

 

 

 

117,930

 

 

 

 

 

Other liabilities

 

18,535

 

 

 

 

 

14,387

 

 

 

 

 

Total noninterest bearing liabilities

 

165,584

 

 

 

 

 

132,317

 

 

 

 

 

Total liabilities

 

1,458,405

 

 

 

 

 

1,213,724

 

 

 

 

 

Shareholders’ equity

 

176,218

 

 

 

 

 

113,928

 

 

 

 

 

Total liabilities and shareholders’ equity

 

$

1,634,623

 

 

 

 

 

$

1,327,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

 

 

$

53,489