UNITED STATE SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20529
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2004
Commission File Number: 000-13663
SCBT FINANCIAL CORPORATION
(exact name of registrant as specified in its charter)
SOUTH CAROLINA 57-0799315
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
520 GERVAIS STREET, COLUMBIA, SOUTH CAROLINA 29201
(Address of principal executive offices) (Zip Code)
(803) 277-2175
(Registrant's telephone number, including area 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 ( )
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act.) Yes ( X ) No ( )
Indicate the number of shares outstanding
of each of issuer's class of securities:
Class Outstanding as of March 31, 2004
Common Stock, $2.50 par value 7,719,390
SCBT FINANCIAL CORPORATION
INDEX
Part I: Financial Information
Item 1 - Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 2004 and December 31, 2003
Condensed Consolidated Statements of Changes
In Shareholders' Equity -
Three Months Ended
March 31, 2004 and 2003
Condensed Consolidated Statements of Income -
Three Months Ended
March 31, 2004 and 2003
Condensed Consolidated Statements of Cash Flows -
Three Months Ended
March 31, 2004 and 2003
Notes to Consolidated Financial Statements
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market
Risk - Reference is made to Management's Discussion and Analysis of
Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-K for the year ended December 31, 2003
Item 4 - Controls and Procedures
Part II: Other Information
Item 1 - Legal Proceedings
Item 2 - Change in Securities
Item 6 - Exhibits and Reports on Form 8-K
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SCBT FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(In thousands of dollars, except par value)
3/31/2004 12/31/2003
(Unaudited) (Note 1)
------------- -------------
ASSETS
------
Cash and cash equivalents:
Cash and due from banks $ 39,319 $ 38,541
Interest-bearing deposits with banks 55 4,083
Federal funds sold and securities
purchased under agreements to resell 38,000 4,500
-----------------------------
Total cash and cash equivalents 77,374 47,124
-----------------------------
Investment securities:
Held-to-maturity (fair value of
$28,420 in 2004 and $30,952 in 2003) 26,882 29,487
Available-for-sale 117,197 122,522
-----------------------------
Total investment securities 144,079 152,009
-----------------------------
Loans held for sale 18,633 12,346
-----------------------------
Loans 991,209 939,538
Less, unearned income (561) (778)
Less, allowance for loan losses (12,234) (11,700)
-----------------------------
Loans, net 978,414 927,060
-----------------------------
Premises and equipment, net 32,963 32,647
-----------------------------
Other assets 28,168 26,506
-----------------------------
Total assets $ 1,279,631 $ 1,197,692
=============================
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Deposits:
Noninterest-bearing 198,015 $ 169,192
Interest-bearing 803,056 777,086
-----------------------------
Total deposits 1,001,071 946,278
Federal funds purchased and securities
sold under agreements to repurchase 101,511 80,967
Notes payable 52,025 52,050
Other liabilities 10,014 6,048
-----------------------------
Total liabilities 1,164,621 1,085,343
-----------------------------
Shareholders' equity:
Common stock - $2.50 par value;
authorized 40,000,000 shares; issued
and outstanding 7,719,390 and
7,690,186 shares 19,298 19,225
Surplus 62,933 62,722
Retained earnings 31,841 29,787
Accumulated other comprehensive income 938 615
-----------------------------
Total shareholders' equity 115,010 112,349
-----------------------------
Total liabilities and shareholders'
equity $ 1,279,631 $ 1,197,692
=============================
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
--------------------------------------
SCBT FINANCIAL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
------------------------------------------
(Unaudited)
(Dollars in thousands)
ACCUMULATED
OTHER
COMMON STOCK RETAINED COMPREHENSIVE
------------------
SHARES AMOUNT SURPLUS EARNINGS INCOME (LOSS) TOTAL
--------- ------ ------- -------- -----------------------
BALANCE, DECEMBER 31, 2002 7,673,339 19,183 62,423 20,071 1,819 103,496
---------
Comprehensive income:
Net income - - 3,421 - 3,421
Change in net unrealized gain
(loss) on securities
available-for-sale, net of
tax effects - - - (159) (159)
---------
Total comprehensive income 3,262
---------
Cash dividends declared at $.16
per share - - (1,228) - (1,228)
---------
Exercised stock options 1,348 3 19 - - 22
---------
Employee stock purchases 2,247 6 41 - - 47
---------
Restricted stock awards 2,000 5 44 - - 49
-----------------------------------------------------------
BALANCE, MARCH 31, 2003 7,678,934 $19,197 $62,527 $22,264 $1,660 $105,648
===========================================================
BALANCE, DECEMBER 31, 2003 7,690,186 19,225 62,722 29,787 615 112,349
---------
Comprehensive income:
Net income - - 3,366 - 3,366
Change in net unrealized gain
(loss) on securities
available-for-sale, net of
tax effects - - - 323 323
---------
Total comprehensive income 3,689
---------
Cash dividends declared at $.17
per share - - (1,312) - (1,312)
---------
Exercised stock options 44,607 111 676 - - 787
---------
Employee stock purchases 2,432 6 56 - - 62
---------
Repurchase of common stock (17,835) (44) (521) - - (565)
-----------------------------------------------------------
BALANCE, MARCH 31, 2004 7,719,390 $19,298 $62,933 $31,841 $938 $115,010
===========================================================
THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THE FINANCIAL STATEMENTS
-----------------------------------------
SCBT FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
-------------------------------------------
(Unaudited)
(In thousands of dollars, except per share data)
Three Months Ended
-------------------
3/31/2004 3/31/2003
--------- ---------
Interest income:
Loans, including fees $ 14,045 $ 14,585
Investment securities:
Taxable 1,114 1,329
Tax-exempt 308 368
Money market funds 11 36
Federal funds sold and securities
purchased under agreements to resell 66 55
Deposits with banks 15 -
-------------------
Total interest income 15,559 16,373
-------------------
Interest expense:
Deposits 2,337 3,289
Federal funds purchased and securities
sold under agreements to repurchase 117 169
Notes payable 653 615
-------------------
Total interest expense 3,107 4,073
-------------------
Net interest income:
Net interest income 12,452 12,300
Provision for loan losses 788 839
-------------------
Net interest income after provision for
loan losses 11,664 11,461
-------------------
Noninterest income:
Service charges on deposit accounts 2,808 2,867
Other service charges and fees 2,908 2,514
-------------------
Total noninterest income 5,716 5,381
-------------------
Noninterest expense:
Salaries and employee benefits 6,831 6,710
Net occupancy expense 781 660
Furniture and equipment expense 1,073 1,021
Other expense 3,801 3,238
-------------------
Total noninterest expense 12,486 11,629
-------------------
Earnings:
Income before provision for income taxes 4,894 5,213
Provision for income taxes 1,528 1,792
-------------------
Net income $ 3,366 $ 3,421
===================
Earnings per share:
Basic $ 0.44 $ 0.45
===================
Diluted $ 0.43 $ 0.44
===================
Cash dividends per common share $ 0.17 $ 0.16
===================
THE ACCOMPANYING NOTES ARE AN
INTEGRAL PART OF THE FINANCIAL STATEMENTS
-----------------------------------------
SCBT FINANCIAL CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------
(Unaudited)
(In thousands of dollars)
Three Months Ended
--------------------
3/31/2004 3/31/2003
--------- ---------
Cash flows from operating activities:
Net income $ 3,366 $ 3,421
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization 613 526
Provision for loan losses 788 839
Gain on sale of premises and equipment (172) -
Net amortization of investment securities 128 214
Net change in miscellaneous assets and
liabilities (4,256) 7,198
--------- ---------
Net cash provided by operating activities 467 12,198
--------- ---------
Cash flows from investing activities:
Proceeds from sales of investment securities
available-for-sale - -
Proceeds from maturities of investment
securities held to maturity 2,592 857
Proceeds from maturities of investment
securities available-for-sale 27,722 36,659
Purchases of investment securities available-
for-sale (21,989) (37,749)
Net increase in customer loans (52,347) (18,760)
Recoveries of loans previously charged off 204 128
Proceeds from sale of other real estate -
Purchases of premises and equipment (896) (3,230)
Proceeds from sale of premises and equipment 214 -
--------- ---------
Net cash used by investing activities (44,500) (22,095)
--------- ---------
Cash flows from financing activities:
Net increase in demand deposits 54,793 43,241
Net increase in federal funds purchased
and securities sold under agreements to
repurchase 20,543 1,428
Proceeds from issuance of debt - -
Repayment of debt (25) -
Common stock issuance 62 96
Common stock repurchase (565) -
Dividends paid (1,312) (1,228)
Stock options exercised 787 22
--------- ---------
Net cash provided by financing activities 74,283 43,559
--------- ---------
Net increase in cash and cash equivalents $ 30,250 $ 33,662
Cash and cash equivalents at beginning of period 47,124 40,514
--------- ---------
Cash and cash equivalents at end of period $ 77,374 $ 74,176
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THE FINANCIAL STATEMENTS
--------------------------------------
SCBT FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation:
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles 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. Certain prior period information has been reclassified to conform
to the current period presentation. Operating results for the three months ended
March 31, 2004 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2004.
In April 2004, The Mortgage Banc was incorporated as a wholly-owned
subsidiary of South Carolina Bank and Trust, N.A., as a start-up entity and
vehicle for future growth in the mortgage lending business.
The condensed consolidated balance sheet at December 31, 2003, has been
derived from the audited financial statements at that date, but does not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements.
The information contained in the consolidated financial statements and
accompanying footnotes included in the Company's annual report on Form 10-K for
the year ended December 31, 2003 should be referenced when reading these
unaudited condensed consolidated financial statements.
Note 2 - Recent Accounting Pronouncements:
On March 9, 2004, the Securities and Exchange Commission staff issued Staff
Accounting Bulletin ("SAB") No. 105, Application of Accounting Principles to
Loan Commitments. SAB No. 105 summarizes the view of the staff regarding the
application of generally accepted accounting principles to loan commitments
accounted for as derivative instruments including recognition of the loan
commitment and financial statement disclosures. The Company does not expect the
requirements of SAB No. 105 to have a material impact on its financial condition
or results of operations.
Note 3- Retirement Plan
The components of net periodic pension cost recognized during the three
months ended March 31, 2004 and 2003 are as follows:
(In thousands of dollars)
Three Months Ended
-------------------
3/31/2004 3/31/2003
--------- ---------
Service cost $ 166 $ 163
Interest cost 179 169
Expected return on assets (198) (178)
Amortization of prior service cost (10) -
Recognized net actuarial gain 47 44
--------- ---------
Total $ 184 $ 198
========= =========
The Company contributed $220,000 to the Plan during the first quarter of
2004 and may contribute up to the allowable tax deduction limit of $821,000 for
the year 2004.
Note 4 - Earnings Per Share:
Basic earnings per share is calculated by dividing net income by the
weighted-average shares of common stock outstanding during each period. Diluted
earnings per share is based on the weighted-average shares of common stock
outstanding during each period plus the maximum dilutive effect of common stock
issuable upon exercise of stock options. The weighted average number of shares
and equivalents are determined after giving retroactive effect to stock
dividends and stock splits. Weighted-average shares outstanding used in
calculating earnings per share for the three months ended March 31, 2004 and
2003 are as follows:
Three Months Ended
--------------------
3/31/2004 3/31/2003
--------- ---------
Basic 7,710,396 7,673,581
Diluted 7,800,907 7,732,209
Dividends per share are calculated using the current equivalent number of
common shares outstanding at the time of the dividend based on the Company's
shares outstanding.
Note 5 - Stock-Based Compensation:
During 1999 and 1996, Company adopted stock option plans under which
incentive and nonqualified stock options may be granted periodically to key
employees and non-employee directors. With the exception of options granted to
directors under the 1999 plan, which may be exercised at any time prior to
expiration, options granted under the plans may not be exercised in whole or in
part within one year following the date of the grant, and thereafter become
exercisable in 25% increments over the next four years.
On April 27, 2004, the Company's shareholders approved the SCBT Financial
Corporation Stock Incentive Plan (the "2004 Plan"). The 2004 Plan replaces the
1999 Stock Option Plan, although outstanding options granted under the 1999 Plan
will continue to be outstanding and governed by the provisions of the 1999 Plan.
No further new grants or awards will be made from the 1999 Plan. The 2004 Plan
permits the Company to grant incentive and nonqualified stock options and stock
appreciation rights and to award shares of common stock, restricted stock, and
phantom stock. There are 600,000 shares of the Company's common stock available
under the 2004 plan. Each director, officer and employee of the Company and its
subsidiaries potentially may participate in the 2004 Plan, which allows grants
and awards through January 15, 2014, except for certain reload options.
The Company applies the intrinsic value method in accounting for its
stock-based compensation plans in accordance with Accounting Principles Board
Opinion No. 25. Under the intrinsic value method, no stock-based employee
compensation cost is, or is expected to be, reflected in net income, as all
options granted under the plans had an exercise price equal to the market value
of the underlying common stock on the date of grant. Had stock-based employee
compensation costs of the Company's stock option plans been determined based on
the fair value at the grant dates for awards under those plans consistent with
the method prescribed by SFAS 123, as amended by SFAS 148, the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated:
Three Months Ended
-------------------
(In thousands of dollars, except per share data) 3/31/2004 3/31/2003
--------- ---------
Net income, as reported $ 3,366 $ 3,421
Less, total stock-based employee
compensation expense determined under fair
value based method, net of related tax effects 56 57
-------------------
Pro forma net income $ 3,310 $ 3,364
===================
Earnings per share:
Basic - as reported $ 0.44 $ 0.45
===================
Basic - pro forma $ 0.43 $ 0.44
===================
Diluted - as reported $ 0.43 $ 0.44
===================
Diluted - pro forma $ 0.42 $ 0.44
===================
The effect of applying SFAS No. 123 in the above pro forma disclosure is
not indicative of future amounts. The Company anticipates making awards in the
future under its stock-based compensation plans.
The fair value of each stock option grant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions:
Three Months Ended
--------------------
3/31/2004 3/31/2003
--------- ---------
Dividend yield 2.47% 2.55%
Expected life 10 years 10 years
Expected volatility 26.0% 30.0%
Risk-free interest rate 4.26% 3.82%
Note 6 - Commitments and Contingent Liabilities:
In the normal course of business, the Company makes various commitments and
incurs certain contingent liabilities, which are not reflected in the
accompanying financial statements. The commitments and contingent liabilities
include guarantees, commitments to extend credit and standby letters of credit.
At March 31, 2004, commitments to extend credit and standby letters of credit
totaled $280,900,000. The Company does not anticipate any material losses as a
result of these transactions.
SCBT FINANCIAL CORPORATION AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion relates to the financial statements contained in
this report. For further information refer to Management's Discussion and
Analysis of Financial Condition and Results of Operations appearing in SCBT
Financial Corporation's Annual Report on Form 10-K for the year ended December
31, 2003.
Statements included in Management's Discussion and Analysis of Financial
Condition and Results of Operations which are not historical in nature are
intended to be, and are hereby identified as, forward looking statements for
purposes of the safe harbor provided by Section 21E of the Securities and
Exchange Act of 1934, as amended. SCBT Financial Corporation cautions readers
that forward-looking statements are subject to certain risks and uncertainties
that could cause actual results to differ materially from forecasted results.
Such risk factors include, among others, the following possibilities: (1) Credit
risk associated with an obligor's failure to meet the terms of any contract with
the bank or otherwise fail to perform as agreed; (2) Interest rate risk
involving the effect of a change in interest rates on both the bank's earnings
and the market value of portfolio equity; (3) Liquidity risk affecting the
bank's ability to meet its obligations when they come due; (4) Price risk
focusing on changes in market factors that may affect the value of traded
instruments in mark-to-market portfolios; (5) Transaction risk arising from
problems with service or product delivery; (6) Compliance risk involving risk to
earnings or capital resulting from violations of or nonconformance with laws,
rules, regulations, prescribed practices, or ethical standards; (7) Strategic
risk resulting from adverse business decisions or improper implementation of
business decisions; and (8) Reputation risk that adversely affects earnings or
capital arising from negative public opinion.
SCBT Financial Corporation (the "Company") is a bank holding company
incorporated under the laws of South Carolina in 1985. The Company owns 100
percent of South Carolina Bank and Trust, National Association, a national bank
which opened for business in 1932 and 100 percent of South Carolina Bank and
Trust of the Piedmont, National Association, a national bank which opened for
business in 1996. The Company engages in no significant operations other than
the ownership of its subsidiaries.
Several initiatives were undertaken during the first quarter of 2004. In
February the corporate name change was announced, as management sought to more
closely identify the holding company with its banking subsidiaries, as well as
to reflect the expansion of banking activities into more South Carolina
communities. In March the Company moved its stock listing to the NASDAQ National
Market, which features a multiple market-maker system, and began trading under
the "SCBT" symbol in order to enhance the stock's visibility and liquidity.
South Carolina Bank and Trust, N.A. completed two bank branch transactions,
first acquiring an in-market branch facility in Denmark, South Carolina, and
then selling its Cameron, South Carolina branch. Early in the second quarter of
2004, plans were underway to expand the Company's mortgage lending operations.
The Mortgage Banc, incorporated in April as a wholly owned subsidiary of South
Carolina Bank and Trust, N.A., is a start-up entity and vehicle for future
growth in the mortgage lending business. Also in April, the Company's subsidiary
banks sold their credit card portfolios and entered into agreements for future
credit card lending and collections with a third-party servicing organization.
Some of the major services that the Company provides through its banking
subsidiaries include checking, NOW accounts, savings and time deposits of
various types, alternative investment products such as annuities and mutual
funds, loans for businesses, agriculture, real estate, personal use, home
improvement and automobiles, credit cards, letters of credit, home equity lines
of credit, safe deposit boxes, bank money orders, wire transfer services, trust
services, discount brokerage services, correspondent banking services, and use
of ATM facilities. The Company has no material concentration of deposits from
any single customer or group of customers, and no significant portion of its
loan portfolio is concentrated within a single industry or group of related
industries. There are no material seasonal factors that would have a material
adverse effect on the Company. The Company does not have foreign loans or
deposits.
For the first quarter of 2004, the Company had consolidated net income of
$3,366,000, a decrease of 1.6 percent from $3,421,000 earned in the first
quarter of 2003. Diluted earnings per share were $0.43 for the first quarter of
2004, compared with $0.44 in the prior year. Annualized returns on average
assets and average shareholders' equity for the three months ended March 31,
2004 were 1.10 percent and 11.96 percent, respectively, compared to 1.20 percent
and 13.23 percent, respectively, for the first quarter of 2003.
NET INTEREST INCOME
For the first quarter of 2004, net interest income was $12,452,000, an
increase of $152,000, or 1.2 percent, over $12,300,000 for the same period in
2003. This increase was largely the result of significantly lower rates paid on
higher average levels of interest-bearing liabilities in the first three months
of 2004, as compared with the first quarter of 2003.
The yield on a major portion of the Company's earning assets adjusts
simultaneously, but to varying degrees of magnitude, with changes in the general
level of interest rates. Comparing the first three months of 2004 and 2003
yields on earning assets declined more rapidly than interest rates paid on
interest-bearing liabilities. For the three months ended March 31, 2004, the
non-tax equivalent yield on earning assets was 5.44 percent, compared with 6.11
percent during the same period in 2003, a decrease of 67 basis points. For the
same comparative periods, the cost of interest-bearing liabilities used to
support these assets decreased 51 basis points from 1.84 percent in 2003 to 1.33
percent in 2004. The taxable equivalent net interest margin decreased 26 basis
points from 4.70 percent in the first quarter of 2003 to 4.44 percent for the
first quarter of 2004. Historically low interest rates continue to pressure the
net interest margin. Because deposit rates are currently at levels that make
significant further decreases unlikely, management's focus is on maintaining
earning asset yields and seeking opportunities to enhance future returns. The
ability of depository institutions to support current net interest margin levels
is contingent on a number of influences, including a continuing low interest
rate environment, general economic conditions, the political climate and
domestic and foreign events.
Loans comprise the Company's largest category of earning assets. As of
March 31, 2004, loans outstanding, net of unearned income, were $990,648,000,
compared with $938,760,000 at December 31, 2003. This represents an increase of
$51,888,000 or 5.5 percent, with significant growth in commercial real estate,
residential mortgage and home equity loan categories. For the quarter ended
March 31, 2004, interest and fees on loans were $14,045,000, compared with
$14,581,000 for the comparable period in 2003, a decrease of $536,000, or 3.7
percent. This decrease was the result of lower lending rates, which offset the
loan portfolio growth factor.
For the three months ended March 31, 2004, loans averaged $962,598,000 and
decreased in yield by 77 basis points to 5.80 percent on a non-tax equivalent
basis, compared to $870,994,000 with a non-tax equivalent yield of 6.57 for the
same period in 2003.
Investment securities, the second largest category of earning assets, are
utilized as a vehicle for the employment of excess funds, to provide liquidity,
to fund loan demand or deposit liquidation, and to pledge as collateral for
certain deposits and purchased funds. At March 31, 2004, investment securities
were $144,079,000, compared to $152,009,000 at December 31, 2003. The
composition of the portfolio remained relatively consistent during the first
three months of 2004, with a continued bias toward relatively short-term and
shorter average life securities in the continuing low rate environment.
For the quarter ended March 31, 2004, interest earned on investment
securities was $1,422,000, compared with $1,697,000 for the comparable period in
2003. This decrease of $275,000, or 16.2 percent resulted from both lower
interest yields and lower average outstanding balances from year to year. For
the first three months of 2004, investment securities averaged $145,464,000 with
a yield of 4.19 percent on a taxable equivalent basis, compared to an average of
$167,987,000 and yield of 4.93 percent for the first quarter of 2003. The
investment securities portfolio included no balance in short-term securities
investments at the end of the first quarter of 2004, compared with $36,454,000 a
March 31, 2003. For the first quarter of 2004, holdings in short-term securities
averaged $707,000, down considerably from the average of $23,519,000 a year
earlier.
There were no gains or losses on sales of securities during the first
quarters of 2004 and 2003. As of March 31, 2004, the Company had unrealized
gains of $1,538,000 and $1,026,000, respectively, in the held-to-maturity and
available-for-sale securities portfolio segments.
Although securities classified as available-for-sale may be sold from time
to time to meet liquidity or other needs, it is not the normal practice of the
Company to trade this segment of the investment securities portfolio. While
management has the ability and generally holds these assets on a long-term basis
or until maturity, the short-term investments noted above may be converted at an
earlier point, depending on changes in interest rates and alternative investment
opportunities.
As of March 31, 2004, the Company had no holdings in money market funds,
compared with $25,500,000 one year earlier. These short-term investments
averaged $4,824,000 for the first three months of 2004 and earned $11,000.
During the first three months of 2003, money market funds averaged $12,234,000,
earning $36,000.
During the first three months of 2004, interest-bearing liabilities
averaged $936,786,000 with an average rate of 1.33 percent. This compares to an
average balance of $898,671,000 and rate of 1.84 percent for same period in
2003, a decrease of 51 basis points. At March 31, 2004, approximately 40 percent
of interest-bearing liabilities had fixed rates and were expected to renew at
prevailing market rates as they mature.
Noninterest-bearing deposits were $198,015,000 at March 31, 2004, an
increase of $28,823,000, or 17 percent, from $169,192,000 at December 31, 2003.
During the same three-month period, interest-bearing deposits grew by
$25,970,000, or 3.3 percent, from $777,086,000 to $803,056,000. The Company paid
interest of $2,337,000 in the first quarter of 2004 on average interest-bearing
deposits of $793,789,000, compared with $3,289,000 paid on an average of
$758,053,000 in the comparable 2003 period.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three months ended March 31, 2004 was
$788,000, compared with $839,000 for the first quarter of 2003, a decrease of
6.1 percent. The provision reflects favorable asset quality measures, including
net charge-offs as a percentage of average loans of 0.11 percent for the first
quarter of 2004, compared with a 0.31 percent result a year earlier. The
allowance for loan losses was $12,234,000, or 1.23 percent, of loans, net of
unearned income, at March 31, 2004 and $11,700,000, or 1.25 percent, of
outstanding loans at December 31, 2003. The current allowance provides 1.77
times coverage of period end nonperforming loans, which totaled $6,912,000, or
0.70 percent, of period end loans. The allowance for loan losses also provides
approximately 12 times coverage of first quarter annualized net charge-offs. Net
charge-offs for the first quarter were $254,000, or an annualized 0.11 percent
of average loans, net of unearned income. In the prior year, net charge offs
were $671,000, or an annualized 0.31 percent, of first quarter average loans.
While signs of economic recovery may be observed at the national level, in
South Carolina the outlook remains more guarded. In the past, both upward and
downward trends in the state's business environment have tended to lag the U.S.
market overall. During this period, management anticipates that the Company
could experience loan charge-off activity in the coming year that would be
generally comparable to levels experienced in recent periods.
Management determines the adequacy of the allowance for loan losses by
utilizing its internal risk rating system, credit reviews and regulatory agency
examinations to assess the quality of the loan portfolio and identify problem
loans. The allowance is currently considered to be adequate.
Other real estate owned includes certain real estate acquired as a result
of foreclosure and property not intended for bank use. As of March 31, 2004,
other real estate owned was $1,554,000, compared with $1,465,000 at December 31,
2003 and $496,000 at the end of the first quarter of 2003.
NONINTEREST INCOME AND EXPENSE
Noninterest income for the first quarter of 2004 was $5,716,000, compared
with $5,381,000 for the same period in 2003, an increase of $335,000, or 6.2
percent. The 2004 results were largely due to a $782,000 gain on the sale of the
Cameron branch of South Carolina Bank and Trust, offsetting a slight decline in
service charges on deposit accounts and 41.8 percent lower secondary market
mortgage origination fees, resulting from a decline in refinance activity begun
in the fourth quarter of 2003. In the quarterly comparisons, fees from trust and
fiduciary services decreased 25.0 percent, from $184,000 to $138,000.
For the first quarter of 2004, noninterest expense was $12,486,000, an
increase of $857,000, or 7.4 percent, from $11,629,000 for the same period in
the previous year. Salaries and employee benefits increased $121,000, or 1.8
percent, to $6,831,000 from the first quarter of 2003 to the first quarter of
2004. In year-to-year first quarter comparisons, furniture and equipment expense
rose 5.1 percent to $1,073,000 and net occupancy expense was up 18.3 percent to
$781,000. Other expense was $3,801,000 in the first quarter of 2004, an increase
of $563,000, or 17.4 percent, from the first quarter of 2002. Contributing to
these increases were non-recurring expenses of $266,000 associated with several
2004 first quarter initiatives referenced earlier. These include acquisition
expenses of the Denmark bank branch, costs incurred in the corporate name change
process, fees associated with the new listing on the NASDAQ Stock Market, and
consulting fees in connection with contract analyses for cost reduction
opportunities. Other increases resulted from higher salary and benefit expenses
due to commissions paid on increased loan production and regular merit
adjustments, and higher furniture, equipment and occupancy costs associated with
additional banking facilities, including the year-old corporate headquarters in
Columbia.
NET INCOME
Net income was $3,366,000 for the first quarter of 2004, a decrease of
$55,000, or 1.6 percent, compared with $3,421,000 in the first quarter of 2003.
As described above, earnings were impacted by the 7.4 percent increase in
noninterest expense, partially offset by substantially smaller-than-normal
increases in net interest income and noninterest income. These atypically small
increases in operating revenue are largely attributable to net interest margin
and refinance lending challenges in this ongoing low interest rate environment.
CAPITAL RESOURCES AND LIQUIDITY
The ongoing capital requirements of the Company have been met through
retained earnings, less the payment of cash dividends. As of March 31, 2004,
shareholders' equity was $115,010,000, an increase of $2,661,000, or 2.4
percent, from $112,349,000 at December 31, 2003.
The Company and its subsidiaries are subject to certain risk-based capital
guidelines. Certain ratios measure the relationship of capital to a combination
of balance sheet and off balance sheet risks. The values of both balance sheet
and off balance sheet items are adjusted to reflect credit risk. Under the
guidelines promulgated by the Board of Governors of the Federal Reserve System,
which are substantially similar to those of the Comptroller of the Currency,
Tier 1 capital must be at least 4 percent of risk-weighted assets, while total
capital must be at least 8 percent of risk-weighted assets. The Corporation's
Tier 1 risk-weighted asset capital ratio at March 31, 2004 was 11.21 percent,
compared to 11.81 percent at December 31, 2003. The total risk-weighted asset
capital ratio was 12.46 at the end of the first quarter of 2004, compared with
13.06 at the end of 2003.
In conjunction with the risk-based ratios, the regulatory agencies have
also prescribed a leverage capital ratio for assessing capital adequacy. The
minimum leverage ratio required for banks is between 3 and 5 percent, depending
on the institution's composite rating as determined by its regulators. The
Company's leverage ratio was 8.88 percent as of March 31, 2004 and 9.13 percent
as of December 31, 2003. The Company's capital ratios currently well exceed the
minimum standards.
Liquidity is the ability of the Company to generate sufficient cash to meet
its financial obligations, which arise primarily from the withdrawal of
deposits, extension of credit and payment of operating expenses. Asset liquidity
is maintained by the maturity structure of loans, investment securities and
other short-term investments. Management has policies and procedures governing
the length of time to maturity on loans and investments. Normally, changes in
the earning asset mix are of a longer-term nature and are not utilized for
day-to-day corporate liquidity needs.
The Company's liabilities provide liquidity on a day-to-day basis. Daily
liquidity needs are met from deposit levels or from the Company's use of federal
funds purchased and securities sold under agreements to repurchase. Additional
liquidity can be secured from lines of credit extended to the Company from its
correspondent banks. Management believes that its liquidity position is
adequate.
Item 4. CONTROLS AND PROCEDURES
Within ninety days prior to the date of this report, the Company carried
out an evaluation, under the supervision and with the participation of the
Company's management, including the Company's President and Chief Executive
Officer and the Chief Financial Officer, of the effectiveness of the design and
operation of the Company's disclosure controls and procedures pursuant to
Exchange Act Rule 13a-14. Management necessarily applied its judgment in the
process of reviewing these controls and procedures, which, by their nature, can
provide only reasonable assurance regarding management's control objectives.
Based upon this evaluation, the Company's President and Chief Executive Officer
and the Chief Financial Officer concluded that the Company's disclosure controls
and procedures are effective in timely alerting them as to material information
relating to the Company, including its consolidated subsidiaries, required to be
included in the Company's Exchange Act filings.
There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect internal controls subsequent
to the date the Company carried out its evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
Neither SCBT Financial Corporation nor its subsidiaries is a party to nor
is any of their property subject to any material or other pending legal
proceedings, other than in the ordinary routine proceedings incident to their
business.
Item 2. Change in Securities:
(a) through (d): Not applicable.
(e) Issuer Purchases of Equity Securities:
In February 2004 SCBT Financial Corporation announced a program with no
formal expiration date to repurchase up to 250,000 of its common shares. The
following table reflects activity in this program during the first quarter:
(d) Maximum
(c) Total Number ( or
Number of Approximate
Shares (or Dollar Value)
Units) of Shares (or
Purchased as Units) that
(a) Total Part of May Yet Be
Number of (b) Average Publicly Purchased
Shares (or Price Paid per Announced Under the
Units) Share (or Plans or Plans or
Period Purchased Unit) Programs Programs
- --------------------------------------------------------------------------------------------------------------------
January 1 - January 31 0 0 0 250,000
February 1 - February 29 0 0 0 250,000
March 1 - March 31 3,075 $31.69 3,075 246,925
---------------------- -------------------------
Total 3,075 3,075
====================== =========================
Also during the quarter, the Company redeemed 14,760 of its shares at
$31.70 per share from an executive officer under an approved program designed to
facilitate stock option exercises under the 1999 stock option plan.
Item 3. Defaults Upon Senior Securities: .
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders:
Not applicable.
Item 5. Other Information:
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K:
(a) The following is a list of exhibits to this report:
Exhibit No. Description of Exhibit
3.1 Articles of Incorporation of the Registrant, as amended
3.2 Bylaws of the Registrant, as amended
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
(b) Reports on Form 8-K:
Current Report on Form 8-K, Items 7 and 9, dated January 16, 2004 and
furnished to the Securities and Exchange Commission on January 16, 2004.
Current Report on Form 8-K, Item 9, dated February 20, 2004 and furnished
to the Securities and Exchange Commission on February 20, 2004.
Current Report on Form 8-K, Item 9, dated March 8, 2004 and furnished to
the Securities and Exchange Commission on March 8, 2004.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCBT FINANCIAL CORPORATION
Date: May 7, 2004 /s/ C. John Hipp, III
---------------------
President and Chief Executive Officer
Date: May 7, 2004 /s/ Richard C. Mathis
---------------------
Executive Vice President and Chief
Financial Officer
Exhibit Index
Exhibit No. Description of Exhibit
3.1 Articles of Incorporation of the Registrant, as amended
3.2 Bylaws of the Registrant as amended
31 Rule 13a-14(a)/15d-14(a) Certifications.
32 Section 1350 Certifications.
ARTICLES OF INCORPORATION
OF
SCBT FINANCIAL CORPORATION
(As originally adopted February 21, 1985 and subsequently amended through
February 20, 2004).
FIRST: The name of the corporation is SCBT Financial Corporation
SECOND: The duration of the corporation is perpetual.
THIRD: The street and post office address of its initial registered office
in the State of South Carolina shall be 520 Gervais Street, Columbia,
South Carolina, 29201, County of Richland, and the name of its initial
registered agent at such address is C. John Hipp, III.
FOURTH: The specific purpose or purposes for which the corporation is
organized, stated in general terms are: to exercise all powers of a
banking holding company which is registered with the Board of
Governors of the Federal Reserve System under the Bank Holding Company
Act of 1956, as amended, and to engage in any and all banking and
non-banking activities allowed for such a bank holding company under
state and federal law, and to engage in any lawful act or activity for
which corporations may be organized under the Business Corporation Act
of South Carolina.
FIFTH: The aggregate number of shares which the corporation shall have the
authority to issue is Twenty Million (40,000,000) shares of one class
of Common Stock each of which shall have a par value of Two Dollars
Fifty Cents ($2.50).
SIXTH: The capital stock of the corporation may be issued for valid
corporate purposes upon authorization by the Board of Directors of the
corporation without prior stockholder approval. Such authorization by
the Board of Directors may be made by a majority or other vote of the
Board as may be provided in the Bylaws of the corporation. The
provisions of this Article Sixth may only be amended or repealed by
the affirmative vote of the holders of not less than eighty percent
(80%) of the outstanding voting stock of the corporation.
SEVENTH: The corporation shall have the right to purchase its own shares to
the extent of unreserved and unrestricted earned surplus available
therefore and to the extent of unreserved and unrestricted capital
surplus available therefore.
EIGHTH: The affirmative vote of the holders of not less than eighty percent
(80%) of the outstanding voting stock of the corporation is required
in the event that the Board of Directors of the corporation does not
recommend to the stockholders of the corporation a vote in favor of
(1) a merger, exchange or consolidation of the corporation with, or
(2) a sale, exchange or lease of all or substantially all of the
assets of the corporation to, any person or entity. For purposes of
this provision, substantially all of the assets shall mean assets
having a fair market value or book value, whichever is greater, of 25
percent or more of the total assets as reflected on a balance sheet of
the corporation as of a date no earlier than 45 days prior to any
acquisition of such assets. The affirmative vote of the holders of not
less than eighty percent (80%) of the outstanding voting stock of the
corporation is required to amend or repeal the provisions of this
Article Eighth.
NINTH: The affirmative vote of the holders of not less than 80% of the
outstanding shares of all voting stock of the corporation and the
affirmative vote of the holders of not less than 67% of the
outstanding shares of voting stock held by stockholders other than the
Controlling Party shall be required for the approval or authorization
of any merger, consolidation, or sale, exchange or lease of all or
substantially all the assets of the corporation (as defined in Article
Eighth of this Articles of Incorporation) shall be required to approve
or authorize any such transaction involving any shareholder owning or
controlling 20% or more of the corporation's voting stock at the time
of the proposed transaction ("Controlling Party"); provided, however,
that these voting requirements shall not be applicable in such
transactions (a) in which the cash or fair market value of the
property, securities or other consideration to be received (which
includes common stock of this corporation retained by its existing
shareholders in such a transaction in which the corporation is the
surviving entity) per share by holders of common stock of the
corporation in such transaction is not less than the highest per share
price (with appropriate adjustments for recapitalizations and for
stock splits, stock dividends, and distributions), paid by the
Controlling Party in the acquisition of any of its holdings of the
corporation's common stock in the three years preceding the
announcement of the proposed transaction; or (b) recommended by the
majority of the entire Board of Directors. The affirmative vote of not
less than eighty percent (80%) of the outstanding voting stock of the
corporation is required to amend or repeal the provisions of this
Article Ninth. The requirements of this Article Ninth are in addition
to and separate from any consent or approval that may be required by
those Articles of Incorporation to authorize any merger,
consolidation, or sale, exchange or lease of all or substantially all
the assets of the Corporation (as defined in Article Eighth).
TENTH: Shareholders can remove directors with or without cause only by the
affirmative vote of the holders of eighty (80%) of the Corporation's
shares. Cause shall mean fraudulent or dishonest acts or gross abuse
of authority in the discharge of duties to the Corporation and shall
be established after written notice of specific charges and the
opportunity to meet and refute such charges.
ELEVENTH: The Board of Directors of the corporation shall consist of a
maximum of twenty (20) persons. Directors may increase membership on
the Board up to this maximum, but may not do so once the maximum
membership is reached. The terms of the members of the Board of
Directors elected at the first annual shareholders meeting shall be
set so as to implement staggered terms, i.e., the terms of one-third
(or as near one-third as possible) of the Directors shall be one year,
the terms of one-third shall be two years and the terms of one-third
shall be three years. Thereafter, one-third of the Directors shall be
elected by a majority of the votes cast at each annual meeting of the
shareholders or by similar vote at any special meeting called for the
purpose, to serve three-year terms. Each Director shall hold office
until the expiration of the term for which he is elected, except as
otherwise stated in the Bylaws, and thereafter until his successor has
been elected and qualified. The affirmative vote of the holders of not
less than eighty percent (80%) of the outstanding voting stock of the
corporation is required to amend or repeal the provisions of this
Article Eleventh.
TWELFTH: The number of directors constituting the initial Board of
Directors is seventeen (17). The names and addresses of the persons
who shall serve as directors until the first annual meeting of
shareholders or until their successors are elected and qualified are:
J. Gavin Appleby
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
J. Donald Collier
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
W. B. Cox
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
Austin Cunningham
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
C. Parker Dempsey
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
Clarence F. Evans
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
John L. Gramling, Jr.
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
Charlton B. Horger
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
F. O. Hutto, Jr.
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
R. H. Jennings, III
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
Edward V. Mirmow, Jr.
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
J. C. McAlhany
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
R. Park Newton, Jr.
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
J. A. Richardson, Jr.
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
Jesse D. Shirer
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
Henry Tecklenburg, Jr.
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
Howard E. Thomas
345 John C. Calhoun Dr., S.E.
Orangeburg, SC 29115
THIRTEENTH: Shareholders shall not have cumulative voting rights.
FOURTEENTH: The holders of the shares of the corporation shall have no
preemptive rights to acquire any shares in the corporation.
FIFTEENTH: Article deleted by amendment on April 23, 1996.
SIXTEENTH: A majority of the entire Board of Directors shall have the power
to alter, amend or repeal the Bylaws of the corporation. Shareholders
may alter, amend, or repeal the bylaws only by the affirmative vote of
the holders of eighty (80%) of outstanding stock of the corporation.
SEVENTEENTH: Article deleted by amendment on April 23, 1996.
EIGHTEENTH: A special meeting of shareholders, called by shareholders, the
Board of Directors or any members thereof, or any officer of the
corporation, to consider a vote in favor of a merger or consolidation
of the corporation with or a sale, exchange or lease of substantially
all of the assets of the corporation to any person or entity, as
defined under Articles Eighth and Ninth of these Articles of
Incorporation, which is not recommended by the Board of Directors of
the corporation, shall require attendance in person or by proxy of
eighty percent (80%) of the shareholders of the corporation in order
for a quorum for the conduct of business to exist. Such a meeting may
not be adjourned absent notice if a quorum is not present. Such eighty
percent (80%) quorum requirement will apply at any annual meeting
called to consider such a non-Board recommended transaction.
NINETEENTH: No director of the corporation shall be personally liable to
the corporation or its shareholders for monetary damages for breach of
his fiduciary duty as a director occurring after the effective date
hereof; provided, however, the foregoing shall not eliminate or limit
the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its shareholders; (ii) for acts or
omissions not in good faith or which involve gross negligence,
intentional misconduct, or a knowing violation of law; (iii) imposed
for unlawful distributions as set forth in Section 33-8-330 of the
South Carolina Business Corporation Act of 1988, as amended from time
to time (the "Act"), or (iv) for any transaction from which the
director derived an improper personal benefit. This provision shall
eliminate or limit the liability of a director only to the maximum
extent permitted from time to time by the Act or any successor law or
laws. Any repeal or modification of the foregoing protection by the
shareholders of the corporation shall not adversely affect any right
or protection of a director of the corporation existing at the time of
such repeal or modification.
TWENTIETH: When evaluating any proposed plan of merger, consolidation,
exchange or sale of all, or substantially all, of the assets of the
Corporation, the Board of Directors shall consider the interests of
the employees of the Corporation and the community or communities in
which the Corporation and its subsidiaries, if any, do business in
addition to the interest of the Corporation's shareholders.
CERTIFICATION
I certify that this is a true and correct copy of the Articles of
Incorporation of SCBT Financial Corporation as originally adopted and as
subsequently amended.
April 7, 2004 /s/ James C. Hunter, Jr., Secretary
- ------------- -----------------------------------
Date James C. Hunter, Jr., Secretary
BYLAWS OF
SCBT FINANCIAL CORPORATION
(And Subsequently Amended Through January 15, 2004)
ARTICLE I
MEETINGS OF SHAREHOLDERS
1. Annual Meeting. The annual meeting of the shareholders shall be held on
the fourth Tuesday in April of each year at its principal office unless a
different time or place, either within or without South Carolina, is designated
by the Directors.
2. Special Meetings. Special meetings of the shareholders may be called by
the President, the Chairman of the Board of Directors, a majority of the Board
of Directors, or by the holders of not less than ten percent (10%) of all the
shares entitled to vote at such meeting. The place of such meetings shall be
designated by the directors.
3. Notice of Shareholder Meetings. Written or printed notice stating the
place, day, and hour of the meeting, and, such other notice as required by the
provisions of the South Carolina Business Corporation Act, and in the case of a
special meeting, the purpose or purposes for which the meeting is called and the
person or persons calling the meeting, shall be delivered either personally or
by mail by or at the direction of the President, Chairman of the Board of
Directors, Secretary, officer, or person calling the meeting, to each
shareholder of record entitled to vote at the meeting, not less than ten (10)
nor more than fifty (50) days before the date of the meeting. If such notice is
mailed, it shall be deemed to be delivered when deposited in the United States
mail addressed to the shareholder at the address as it appears on the stock
transfer books of the Corporation, with postage thereon prepaid. The Person
giving such notice shall certify that the notice required by this paragraph has
been given. If at any meeting Bylaws are to be altered, repealed, amended, or
adopted, notices or waivers thereof shall so state. A shareholder may waive
notice of any meeting, in writing, either before or after the meeting.
4. Quorum Requirements. Absent a provision in the Articles of Incorporation
stating otherwise, a majority of the shares entitled to vote shall constitute a
quorum for the transaction of business. A meeting may be adjourned despite the
absence of a quorum, and notice of an adjourned meeting need not be given if the
time and place to which the meeting is adjourned are announced at the meeting at
which the adjournment is taken and the adjournment is for a period of less than
thirty (30) days. If the adjournment is for thirty (30) days or more, notice of
the adjourned meeting shall be given pursuant to Article I, Section 3 of these
Bylaws. When a quorum is present at any meeting, a majority in interest of the
stock there represented shall decide any question brought before such meeting,
unless the question is the one upon which, by express provision of this
Corporation's Articles, these Bylaws or by the laws of South Carolina, a larger
or different vote is required, in which case such express provisions shall
govern the decision of such question.
5. Voting and Proxies. Every shareholder entitled to vote at a meeting may
do so either in person or by written proxy, executed by the shareholder or his
duly appointed attorney-in- fact, which proxy shall be filed with the secretary
of the meeting before being voted. Such proxy shall entitle the holders thereof
to vote at any adjournment of such meeting, but shall not be valid after the
final adjournment thereof.
6. Matters Considered at Shareholder Meetings. No matter shall be
considered or voted on at any meeting of shareholders unless such matter has
been submitted to the secretary of the corporation in writing by a record
shareholder of the corporation not less than forty-five (45) days prior to the
date of the meeting at which the matter is to be considered. The information
submitted to the secretary shall include the name and address of the shareholder
making the submission and the text of the resolution to be voted on.
7. Conduct of Meetings.
(a) Meetings of shareholders shall be presided over by the chairman of the
Board of Directors or, in his absence, by the Vice Chairman or another director
or executive officer designated by the Board of Directors. The presiding officer
shall determine all questions of order or procedure and his rulings shall be
final.
(b) The Secretary of the Corporation, with the assistance of such agents as
may be designated by the secretary, shall make all determinations of the
validity of proxies presented and ballots cast.
(c) In the event that any person or group other than the Board of Directors
hold proxies for more than ten (10) other shareholders, any vote taken with
respect to any contested matter, determined to be such by the presiding officer,
shall be taken in the following manner:
(i) Shareholders wishing to vote in person shall obtain ballots from
the secretary and cast their votes. After a period determined to
be reasonable by the presiding officer, no further voting in
person shall be permitted.
(ii) Thereafter, persons holding proxies shall obtain a ballot from
the secretary which shall be in a form to permit the votes cast
with respect to each appointment of proxy to be identified as
such and shall fill out such ballot, and return it together with
the original appointments of proxies to the Secretary. After a
period determined to be reasonable by the presiding officer, the
polls shall be closed and no further voting on the question shall
be allowed.
(iii)If the number of proxies held by persons or groups other than
the Board of Directors is high, the presiding officer may, after
consultation with the Secretary, adjourn the meeting for up to
seventy-two (72) hours, to permit the counting of the votes;
provided, however, that the presiding officer may, in his
discretion, permit other business, including the casting of other
votes, to be transacted prior to any such adjournment.
ARTICLE II
BOARD OF DIRECTORS
1. Composition of Board of Directors. The corporation shall have a Board of
Directors consisting of active directors, whose qualifications, election,
number, etc. are described and discussed in this Article II and throughout these
Bylaws. Whenever the terms "director" or "Board of Directors" or "Board" are
used herein or in other corporate documents, the terms shall include active
directors only.
2. Qualification and Election of Active Directors.
(a) Directors, other than those serving on the initial Board of Directors
of the Corporation, must be shareholders, not under twenty-five (25) years of
age and not over 72 years of age at the time of the shareholders' meeting at
which they are elected by the shareholders. These age restrictions shall not
apply to any Board member who is exempt from age restrictions for service on the
Board of SCBT Financial Corporation, Orangeburg, South Carolina, pursuant to the
1969 Bank shareholders' resolution. In the event that a director attains age 72
during his or her term of office, he or she shall serve only until the next
shareholders' meeting after his or her 72nd birthday, at which time his or her
successor shall be appointed to serve out the remainder of his or her term. The
terms of the initial Board of Directors elected by the shareholder(s) shall be
set so as to implement staggered terms, i.e. the terms of one-third (or as near
one-third as possible) of the directors shall be one year, the terms of
one-third shall be two years and the terms of one-third shall be three years.
Thereafter, one-third of the directors shall be elected by a majority of the
votes cast at each annual meeting of the shareholders, or by similar vote at any
special meeting called for the purpose, to serve three year terms. Each director
shall hold office until the expiration of the term for which he or she is
elected, except as stated above, and thereafter until his or her successor has
been elected and qualified. Any vacancy occurring in the Board of Directors,
including vacancies occurring in the Board by reason of removal with or without
cause or increase in membership, shall be filled by appointment by the remaining
directors, and any director so appointed shall serve until the next shareholders
meeting wherein directors are elected.
(b) Nomination of Directors. The Board of Directors shall nominate, upon
recommendation of the executive committee, the Board's nominees for the Board of
Directors to the shareholders. No other person shall be a nominee or be eligible
to be a director of the corporation unless that person shall have first been
nominated by a record shareholder of the corporation in writing delivered to the
secretary of the corporation not less than forty-five (45) days prior to the
meeting of shareholders at which directors are to be elected. The written
nomination must state the name of the nominee, the address of the nominee and
the number of shares of stock of the corporation beneficially owned by the
nominee, as well as the name and address of the shareholder making the
nomination.
3. Number. The maximum number of active directors is fixed by the Articles
and may be altered only by amendment thereto, but shall never be less than the
number required by law. Not less than sixty (60) days prior to the annual
meeting of shareholders, the Board of Directors shall set the number of
directors (not to exceed the maximum for the Corporation). The Board of
Directors may, by a vote of the majority of the full Board, between annual
meetings of the shareholders, increase the membership of the Board up to the
maximum number set out in the Articles and by like vote appoint qualified
persons to fill the vacancies created thereby.
4. Meetings. The annual meeting of the Board of Directors shall be held
immediately after the adjournment of the annual meeting of the shareholders, at
which time the officers of the Corporation shall be elected. The Board may also
designate more frequent intervals for regular meetings. Special meetings may be
called at any time by any one director or any two officers of the Corporation in
addition to those parties entitled to call such meetings under South Carolina
law.
5. Notice of Directors' Meetings. The annual and all regular Board meetings
may be held without notice. Special meetings shall be held with not less than
one hour notice of such meeting to be given to each director, which notice shall
be given on a best efforts basis by those calling the meeting. Notice may be
waived in writing before or after a meeting. If the meeting is one at which
Bylaws are to be altered, repealed, or adopted both waivers and notices must so
state. Notice of a special meeting may be called by the Chairman, the President
or any three (3) Directors. If the notice of the meeting is not given in writing
at least two (2) days prior to the meeting no action shall be taken at the
meeting unless such action is approved by the affirmative vote of a majority of
the entire Board of Directors.
6. Quorum and Vote. The presence of a majority of the directors shall
constitute a quorum for the transaction of business. A meeting may be adjourned
despite the absence of a quorum, and notice of an adjourned meeting need not be
given if the time and place to which the meeting is adjourned are fixed at the
meeting at which the adjournment is taken. The vote of a majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board, unless the vote of a greater number is required by the Articles,
these Bylaws, or by the laws of South Carolina.
7. Appointment of Chairman, Executive and Other Committees. The Chairman of
the Board of Directors of the Corporation shall also serve as an officer of the
Corporation. There shall be a standing committee of the Corporation appointed by
the Board of Directors to be known as the executive committee consisting of the
chairman of the Board, the President and up to six (6) members of the Board of
Directors. Nominations to the executive committee shall be made to the Board by
the chairman. The executive committee may appoint senior officers to attend all
meetings. Each member of the executive committee shall serve until his successor
is appointed. The Chairman shall serve as chairman of the executive committee.
The Board of Directors of the Corporation may, by resolution adopted by a
majority of its members, delegate to the executive committee the power to
exercise all authority of the Board of Directors in the management of affairs of
the corporation and property of the corporation. The Board of Directors, by
resolution adopted by a majority of its members, may designate such other
committees with designations of authority, as it deems appropriate. Members of
such committees shall be nominated by the Chairman and appointed by the Board of
Directors.
8. Powers. In addition to other powers specifically set out herein or that
apply under South Carolina or other applicable law, the Board of Directors shall
have the power to manage and administer the affairs of the Corporation and to do
and perform all lawful acts with respect to the affairs of the Corporation
except those that may be specifically reserved to the share-holders under South
Carolina or other applicable law.
9. Contracts with Interested Directors. No contract or other transaction
between this Corporation and any other corporation shall be affected by the fact
that any director of this Corporation is interested in, or is a director or
officer of, such other corporation, and any director, individually or jointly,
may be a party to, or may be interested in, any contract or transaction of this
Corporation or in which this Corporation is interested; and no contract, or
other transaction, of this Corporation with any person, firm, or corporation,
shall be affected by the fact that any director of this Corporation is a party
to, or is interested in, such contract, act, or transaction, or is in any way
connected with such person, firm, or corporation, and every person who may
become a director of this Corporation is hereby relieved from any liability that
might otherwise exist from contracting with the Corporation for the benefit of
himself or any firm, association, or corporation in which he may be in any way
interested.
10. Special Considerations by Directors. The directors of this Corporation
shall consider all factors they deem relevant in evaluating any proposed tender
offer or exchange offer for the Corporation's stock, any proposed merger or
consolidation of the Corporation with or into another Corporation and any
proposal to purchase or otherwise acquire all of the assets of the Corporation.
The directors shall evaluate whether the proposal is in the best interests of
the Corporation by considering the best interests of the shareholders and other
factors the directors determine to be relevant, including the social, legal and
economic effects on employees, customers and the communities served by the
Corporation and its subsidiary or subsidiaries. The directors shall evaluate the
consideration being offered to the shareholders in relation to the then current
market value of the Corporation, the then current market value of shares of the
Corporation in a freely negotiated transaction, and the directors' estimate of
the future value of shares of the Corporation as an independent entity.
11. Election of Directors to Subsidiaries of the Corporation. The Board of
Directors of the corporation shall elect, upon nomination by the executive
committee, Directors of all wholly owned subsidiary corporations of the
corporation.
ARTICLE III
OFFICERS
1. Number. The Corporation shall have a President, a Chairman of the Board,
one or more Vice Presidents, a Secretary, a Treasurer, and such other officers
as the Board of Directors shall from time to time deem necessary. Any two or
more offices may be held by the same person. The President of the Corporation
shall be its Chief Executive Officer and shall serve as an ex-officio member of
all committees. The Chairman of the Board, and any Vice President of the Board,
may but need not be an employee of the Corporation.
2. Election and Term. The officers shall be elected by the Board at its
annual meeting. Each officer shall serve until the expiration of the term for
which he is elected, and thereafter until his successor has been elected and
qualified.
3. Duties. All officers shall have such authority and perform such duties
in the management of the Corporation as are normally incident to their offices
and as the Board of Directors may from time to time provide.
ARTICLE IV
RESIGNATIONS, REMOVALS AND VACANCIES
1. Resignations. Any officer or director may resign at any time by giving
written notice to the Chairman of the Board of Directors, the President, or the
Secretary. Any such resignation shall take effect at the time specified therein,
or, if no time is specified, then upon its acceptance by the Board of Directors.
2. Vacancies. Newly created directorships resulting from an increase in the
number of directors, and vacancies occurring in any office or directorship for
any reason, including removal of an officer or director with or without cause,
may be filled by the vote of a majority of the directors then in office, even if
less than a quorum exists.
ARTICLE V
CAPITAL STOCK
1. Stock Certificates. Every shareholder shall be entitled to a certificate
or certificates of capital stock of the Corporation in such form as may be
prescribed by the Board of Directors. Unless otherwise decided by the Board of
Directors, such certificates shall be signed by the President or a Vice
President and the Secretary or Assistant Secretary of the Corporation.
2. Transfer of Shares. Any share or shares of stock may be transferred on
the books of the Corporation by delivery and surrender of the properly assigned
certificate, but subject to any restrictions on transfer imposed by either the
applicable securities laws or any shareholder agreement.
3. Loss of Certificates. In the case of the loss, mutilation, or
destruction of a certificate of stock, a duplicate certificate may be issued
upon such terms as the Board of Directors shall prescribe.
ARTICLE VI
ACTION BY CONSENT
Shareholders may act without a meeting on written consent, setting forth
the action so taken, signed by the holders of all outstanding shares entitled to
vote thereon or their attorneys-in-fact or proxy holders. Such consent shall be
filed with the Secretary as part of the corporate records.
Directors or any executive or other committee can act without a meeting on
action taken by a majority thereof, or by a much larger vote as the Articles or
Bylaws require, if all directors or committee members execute, before or after
the action taken, a written consent thereto and the consent is filed in the
records of the Corporation. Action which is permitted to be taken only when
authorized at a meeting of the Board or committee, can be taken without a
meeting, if before or after the action, all Board or committee members consent
thereto in writing and the consent is filed in the minute book of the Board or
committee. Such consent shall have the same effect as a vote of the Board for
all purposes.
ARTICLE VII
INDEMNIFICATION
1. Right to Indemnification. Any person who at any time serves or has
served as a director of the Corporation, or who, while serving as a director of
the Corporation, serves or has served, at the request of the Corporation, as a
director, officer, partner, trustee, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or as a trustee or
administrator under an employee benefit plan, shall have the right to be
indemnified by the Corporation to the fullest extent permitted by law against
(a) reasonable expenses, including attorneys' fees, incurred by him in
connection with any threatened, pending or completed civil, criminal,
administrative, investigative or arbitrative action, suit or proceeding (and any
appeal therein), whether or not brought by or on behalf of the Corporation,
seeking to hold him liable by reason of the fact that he is or was acting in
such capacity, and (b) reasonable payments made by him in satisfaction of any
judgment, money decree, fine (including an excise tax assessed with respect to
an employee benefit plan), penalty or settlement for which he may have become
liable in any such action, suit or proceeding.
2. Right to Advancement of Expenses. The right to indemnification conferred
in this Article VII shall include the right to be paid by the Corporation the
reasonable expenses (including attorney's fees) incurred in defending any such
action, suit or proceeding in advance of its final disposition (hereinafter an
"advancement of expenses"); provided, however, that, if required by law, an
advancement of expenses incurred by a claimant shall be made only if: (a) the
claimant furnishes the Corporation with a written affirmation of his good faith
belief that he met the standard of conduct required by law; and (b) the claimant
furnishes the Corporation with a written undertaking, executed personally on his
behalf, to repay the advance if it is ultimately determined that he did not meet
the standard of conduct.
3. Payment of Indemnification and Advancement of Expenses. The Board of
Directors of the Corporation shall take all such action as may be necessary and
appropriate to authorize the Corporation to pay the indemnification and
advancement of expenses required by this Article VII, including, without
limitation, making a determination that indemnification and/or advancement of
expenses is permissible in the circumstances and a good faith evaluation of the
manner in which the claimant acted and of the reasonable amount of indemnity or
expenses due him. The Board of Directors may appoint a committee or special
counsel to make such determination and evaluation.
4. Right of Indemnitee to Bring Suit. If a claim under this Article VII is
not paid in full by the Corporation within sixty (60) days after a written claim
has been received by the Corporation, except in the case of a claim for an
advancement of expenses, in which case the applicable period shall be twenty
(20) days, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole or
in part in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the claimant
shall be entitled to be paid also for the expense of prosecuting or defending
such suit. In (i) any suit brought by a claimant to enforce a right to
indemnification or advancement of expenses hereunder, it shall be a defense
that, and (ii) in any suit brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the claimant
has not met the applicable standard for indemnification and/or advancement of
expenses to the fullest extent permitted by law. A determination by the
Corporation (including its Board of Directors, any committee of the Board of
Directors, independent legal counsel, or the shareholders) that a claimant has
not met such applicable standard of conduct shall not create a presumption that
the claimant has not met the applicable standard of conduct or, in the case of
such a suit brought by a director, be a defense to such suit. In any suit
brought by a claimant to enforce a right to indemnification or to an advancement
of expenses hereunder, or brought by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the burden of proving that
the claimant is not entitled to be indemnified, or to such advancement of
expenses, under this Article VII or otherwise shall be on the Corporation.
5. Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Corporation would
have the power to indemnify such person against such expense, liability or loss
under applicable law.
6. Indemnification of Officers, Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the advancement of expenses to
any officer, employee or agent of the Corporation to the fullest extent of the
provisions of this Article VII with respect to the indemnification and
advancement of expenses of directors of the Corporation.
7. Binding and Nonexclusive. Any person who at any time after the adoption
of this Article VII serves or has served in the aforesaid capacity for or on
behalf of the Corporation shall be deemed to be doing or to have done so in
reliance upon, and as consideration for, the right of indemnification and
advancement of expenses provided herein. Such right shall inure to the benefit
of the legal representatives of any such person and shall be exclusive of any
other rights to which such person may be entitled apart from the provision of
this Article VII.
ARTICLE VIII
AMENDMENT OF BYLAWS
These bylaws may be amended, added to, or repealed either by: (1) the
affirmative vote of the holders of eighty percent (80%) of the shares entitled
to vote, or (2) a majority vote of the entire Board of Directors.
CERTIFICATION
I certify that this is a true and correct copy of the Bylaws of SCBT
Financial Corporation as originally adopted and as subsequently amended.
April 8, 2004 /s/ James C. Hunter, Jr.
------------- -----------------------
Date James C. Hunter, Jr., Secretary