<PAGE>
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
- -------- Act of 1934 for the Quarterly period ended June 30,1997
Or
Transition report under Section 13 or 15 (d) of the Securities
- -------- Exchange Act of 1934 for the transition period from ____ to _____.
Commission File No. 333-10909
FORSYTH BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58- 2231953
(State of Incorporation) (I. R. S. Employer Identification No.)
501 Tri County Plaza, Cumming, Ga. 30130
(Address of principal executive offices)
770-886-9500
(Issuers telephone number, including area code)
Not Applicable
(Former Name, former address and former fiscal year,
if changed since last report)
Check whether the issuer:
(1) filed all reports required to be filed by Section 13 or 15(d) of the
Exchange Act during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days. X yes no
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
800,000 shares of common stock, at no par value, issued and outstanding as of
June 30, 1997.
Transitional Small Business Disclosure Format (check one): yes X no
----- -----
<PAGE>
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of March 31, 1997 and
June 30, 1997
Condensed Consolidated Statements of Income for the Three Months
ended March 31, 1997 and June 30, 1997 and Year to Date through
June 30, 1997
Condensed Consolidated Statement of Cash Flows for the Three Months
ended June 30, 1997
Notes to Consolidated Financial Statements
-2-
<PAGE>
FORSYTH BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) THREE MONTHS ENDED
March 31, June 30,
--------- --------
1997 1997
---- ----
<S> <C> <C>
Assets:
Cash and due from banks $908 $1896
Federal Funds Sold 12360 10010
Investment securities-Available for sale 3004 4757
Investment securities-Held to maturity 996 3246
Loans, net of unearned income 3181 9241
Less: allowance for loan losses (32) (93)
------- -------
Net Loans 3149 9148
Premises and equipment, net 425 478
Other assets 204 351
------- -------
Total Assets $21046 $29886
======= =======
Liabilities and Stockholders Equity
Deposits:
Non-interest-bearing demand $ 1598 $ 4550
Interest bearing:
Demand 538 907
Savings 141 287
Time, $100,000 and over 3718 5960
Other time 2631 5648
Insured Money Market 4738 4932
------- -------
Total Deposits 13364 22284
Other Liabilities 65 122
------- -------
Total Liabilities 13429 22406
------- -------
Stockholders' Equity:
Common Stock, no par value 7960 7960
Retained Earnings (179) (196)
YTD Income(loss) (164) (284)
Total Stockholders' Equity 7617 7480
------- -------
Total liabilities and stockholders' equity $21046 $29886
======= =======
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-3-
<PAGE>
FORSYTH BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
(In thousands) THREE MONTHS YEAR TO
ENDED DATE
March 31, June 30, June 30,
---------- --------- --------
1997 1997 1997
---- ---- ----
<S> <C> <C> <C>
Interest Income
Loans, including fees $36 $188 $224
Federal Funds Sold 110 149 259
Investment Securities 17 98 115
--------- --------- ---------
Total Interest Income 163 435 598
--------- --------- ---------
Interest expense
Time Deposits 35 142 177
Other Deposits 13 53 66
Other Interest Expense 7 0 7
--------- --------- ---------
Total Interest Expense 55 195 250
--------- --------- ---------
Net Interest Income 108 240 348
Provision for loan losses
(32) (61) (93)
--------- --------- ---------
Net interest income after provision
for loan losses 76 179 255
--------- --------- ---------
Non-interest income
Service charges and fees 1 8 9
Other 4 5 9
--------- --------- ---------
Total non-interest income 5 13 18
--------- --------- ---------
Non interest expenses
Salaries and employee benefits 121 155 276
Occupancy and Equipment 42 57 99
Other operating expenses 82 100 182
--------- --------- ---------
Total non-interest expenses 245 312 557
--------- --------- ---------
Income before taxes (164) (120) (284)
Income Tax expense 0 0 0
Net Income $(164) $(120) $(284)
========= ========= =========
Net income per common share and common
share equivalents $(0.15) $(0.15) $(0.36)
Weighted average number of common
shares outstanding 800,000 800,000 800,000
Dividends declared per common share $0 $0 $0
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-4-
<PAGE>
FORSYTH BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
June 30,1997
-------------
<S> <C>
Cash flow from operating activities:
Net Loss $ (120)
Adjustments to reconcile net loss to net cash used by operating activities
Depreciation, Amortization and Accretion 23
Provision for loan losses 61
Change In:
Accrued interest receivable and other assets (107)
Accrued interest payable and other liabilities 64
--------------
Net cash used by operating activities: (79)
--------------
Cash flows from investing activities:
Purchases of investment securities held to maturity and available for sale (4001)
Net change in loans (6061)
Purchase of premises and equipment (141)
--------------
Net cash used by investing activities: (10203)
--------------
Cash flows from financing activities:
Net increase in deposits 8920
Proceeds from issuance of common stock 0
--------------
Net cash provided by financing activities: 8920
--------------
Net increase (decrease) in cash and cash equivalents (1362)
Cash and Cash equivalents at beginning of period 13268
--------------
Cash and Cash equivalents at end of period $ 11906
==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements
-5-
<PAGE>
FORSYTH BANCSHARES, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
June 30, 1997
Note 1--Basis of Presentation
The accompanying financial statements include the accounts of Forsyth
Bancshares, Inc. (Company) and its wholly-owned subsidiary, The Citizens Bank
of Forsyth County (Bank). Certain information and footnote disclosures
normally included in consolidated financial statements prepared in accordance
with generally accepted accounting principles have been omitted, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, the information
furnished in the condensed consolidated financials reflects all adjustments
necessary to fairly represent the Company's financial position, results of
operations and cash flows for such interim periods. Management believes that
all interim period adjustments are of a normal recurring nature.
The financial statements for the three months ended March 31, 1997 and June
30, 1997 and the year to date through June 30, 1997 are unaudited and have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission (Commission). Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
and should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K filed with the Commission for the year ended December 31, 1996.
Note 2--Development Stage Company; Beginning of Operations
The Company was incorporated under the laws of Georgia on February 14, 1996
for the purpose of organizing the Bank. On February 3, 1997, the Bank opened
for business and the Company acquired 100% of its capital stock. The Company
capitalized the Bank at $6,500,000 as required by regulators. Since February
3, 1997, the Bank has been in operation as a commercial bank offering
traditional banking services in the Cumming, Forsyth County, Georgia area.
Accordingly, the financial data for the three and six month periods ending
June 30, 1997 and June 30, 1996 are not comparable in that until the Bank
began operations on February 3, 1997, the Company was a development stage
company and financial data for 1996 periods has not been included herein.
Furthermore, the financial data for the three months ended March 31, 1997
includes only two months of operations of the Bank.
Note 3--Summary of Significant Accounting Policies
Cash flows
For purposes of reporting cash flows, cash consists of cash in vault, cash
items, amounts due from banks and federal funds sold.
Organization costs
Costs incurred for the organization of the Company and the Bank (consisting
primarily of legal, accounting, consulting, and incorporation fees ) are being
capitalized and will amortize over a period not to exceed five years (60
months).
-6-
<PAGE>
Pre-opening expenses
Costs incurred for overhead and other operating expenses are included in the
current period's operating results.
Net loss per common share
Net loss per common share is calculated by dividing net income (loss) by the
weighted average number of common shares outstanding during the period.
Note 4--Related Party Transactions
On August 1, 1996, the Company executed a line of credit agreement with a
commercial bank to fund its organization, offering and preopening expenses.
This unsecured line of credit had an established maturity date of August 1,
1997 and accrued interest payable quarterly at the lender's prime rate of
interest. The line of credit was fully funded at $650,000 upon breaking
escrow and was satisfied and paid in full on January 21, 1997. Each organizer
of the Bank guaranteed a pro rata share of the line of credit.
Note 5--Preferred Stock
Shares of preferred stock may be issued from time to time in one or more
series as may be established by resolution of the board of directors of the
Company. Each resolution shall include the number of shares issued,
preferences, dividend provisions, special rights and limitations as determined
by the board.
Note 6--Income taxes
At December 31, 1996, the Company had a net operating loss carryforward for
tax purposes of approximately $11,000, which will expire in the year 2011 if
not previously utilized. No income tax expense or benefit was recorded for
the period ended June 30,1997, due to the loss carryforward, and the fact that
the Company shows a loss for the first half of the year.
Note 7--Commitments
The Company entered into an operating lease on the building and premises which
serve as the main office of the Company and the Bank on February 9, 1996. The
inception of the lease was the earlier of the occupation of the building or
receipt of final regulatory approval. The minimum lease payments related to
the lease are for the years 1997 through 2000 and are $67,500; $69,525;
$71,611; and $73,759, respectively. The lease is renewable at the end of the
term at prevailing market rates and also contains and option to purchase the
premises and facility.
-7-
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Forsyth Bancshares, Inc. (the "Company") was incorporated under the laws of
Georgia on February 14, 1996 for the purpose of organizing its wholly owned
subsidiary, The Citizens Bank of Forsyth County (the "Bank"). On February 3,
1997, the Bank opened for business and the Company acquired 100% of its
capital stock. During the fourth quarter of 1996 and the first quarter of
1997, the Company sold 800,000 shares of Common Stock, no par value, for a
total consideration of $8,000,000. The Bank was capitalized at $6,500,000 as
required by the Georgia Department of Banking and Finance ("Georgia
Department").
During 1996, the Company and the Bank were in the process of organizing and
obtaining the necessary approvals from regulatory agencies for opening.
Preliminary approval to charter the Bank was issued in July 1996 by the
Georgia Department and the Federal Deposit Insurance Corporation. The
Company's application to become a bank holding company pursuant to the
acquisition of the Bank was approved on November 25, 1996 by the Federal
Reserve Bank of Atlanta.
On January 30, 1997, the Bank received final approval and a permit to begin
business from the Georgia Department. The Federal Deposit Insurance
Corporation approved the Bank's application on February 3, 1997.
Since February 3, 1997, the Bank has been in operation as a commercial bank
offering traditional banking services in the Cumming, Forsyth County, Georgia
area. The Citizens Bank of Forsyth County is a local community bank catering
to the needs of small to medium sized businesses and local customers who
desire the community banking relationship and services. The Bank offers a
variety of checking, savings and time accounts, and other services such as
commercial and consumer loans, safe deposit boxes, and other services related
to banking. Since it began business, the Bank's performance has demonstrated
a significant need for its services in the Bank's market area. Forsyth
Bancshares, Inc. was formed to offer the Bank flexibility and support and at
this time does not intend to engage in any additional activities permitted by
the Federal Reserve and will function solely on the Bank's behalf.
All financial data set forth herein under the caption "Item 2 - Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
have been rounded to the nearest thousand dollars, except where otherwise
specified.
Supervision and Regulation
The Bank is subject to regulation by the Georgia Department and the Federal
Deposit Insurance Corporation. The Company's primary banking regulator is the
Board of Governors of the Federal Reserve System (the "Federal Reserve").
NET INCOME
The Company's net loss for the quarter ended June 30, 1997 was $120,000
($0.15 loss on a per share basis). The Company's loss for the six months
ended June 30, 1997 was $284,000. The Company has negative retained earnings
of $196,000 at June 30, 1997 with the total loss since inception (February 14,
1996) to $480,000. The net loss for the three months ended March 31, 1997 was
$164,000. As the Company increases its loan and securities portfolio, losses
should continue to steadily decline. The Company is beginning to stabilize
expenses, and non-interest income is increasing due to the increase in the
number of deposit accounts.
-8-
<PAGE>
NET INTEREST INCOME
Net interest income for the quarter ended June 30, 1997 was approximately
$240,000 (before the provision for loan loss allocation) compared to $108,000
for the first quarter of 1997. The increase is primarily due to the increase
in the investment and loan portfolios. Investment securities were up
$4,000,000 over the first quarter of 1997 and loans increased by approximately
6,000,000 in the second quarter of 1997.
Net interest income for the quarter ended June 30, 1997 was $179,000 (after
the provision to loan loss allocation of $61,000). This compares to $76,000
for this quarter ended March 31, 1997 in which a provision of $32,000 was
taken. The Company's net interest margin for the quarter ended June 30, 1997
was 2.22% compared to 1.87% for the quarter ended March 31, 1997, partly
resulting from increases in earning assets.
INTEREST INCOME
Interest income for the second quarter of 1997 was $435,000 compared to the
$163,000 for the first quarter of 1997. The primary components of interest
income during the three months ended June 30, 1997 were loan interest of
$188,000, federal funds sold interest of $149,000 and investment securities
interest of $98,000. For the three months ended March 31, 1997, the primary
components were federal funds sold interest of $110,000, loan interest of
$36,000, and investment securities interest of $17,000. Increases in loans
from March 31 to June 30, 1997 was $6,060,000 and was the primary reason for
the increase in interest income.
INTEREST EXPENSE
Interest expense for the three months ended June 30, 1997 was $195,000
compared to only $55,000 for the three months ended March 31, 1997. Total
deposits increased from March 31 to June 30, 1997 by approximately $8,920,000,
most of which are interest bearing time deposits. Deposit expense was the only
interest expense recorded for the quarters ending March 31 and June 30,1997.
NON-INTEREST INCOME
Non-interest income for the quarter ended June 30,1997 was $13,000 compared to
$5,000 for the quarter ended March 31, 1997. Account service charges
increased by approximately $7,000 over the previous quarter to $8,000 for the
June quarter primarily as a result of an increase in the number of deposit
accounts. As new accounts continue to be established, these charges will
likely continue to increase, thereby increasing non-interest income.
NON-INTEREST EXPENSE
Non-interest expense for quarter ended June 30,1997 was $312,000 compared to
$245,000 for the quarter ended March 31, 1997. For the three months ended
June 30, 1997 and March 31, 1997, salary expenses were $155,000 and $121,000,
respectively, occupancy and equipment expense were $57,000 and $42,000,
respectively, and other operational expenses were $100,000 and $82,000,
respectively. These expenses are incurred in the normal course of business.
The Company currently employs twelve full time employees on a consolidated
basis consisting of four officers, two customer service, three tellers, one
loan secretary, one loan operations assistant and one general overall
operations assistant. There have been no additions to staff since the opening
of the Bank on February 3, 1997.
-9-
<PAGE>
INCOME TAXES
At December 31, 1996, the Company had a net operating loss carryforward for
tax purposes of approximately $11,000, which will expire in the year 2011 if
not previously utilized. No income tax expense or benefit was recorded for
the period ended June 30,1997 due to the loss carryforward, and the fact that
the Company had a loss for the first half of the year.
ASSET QUALITY
Total assets at June 30, 1997 were approximately $29,886,000, an increase of
8,840,000 or 42% over total assets at March 31, 1997. The return on average
assets was (0.91%) for the quarter ended June 30, 1997, compared to (1.13%)
for the quarter ended March 31, 1997. Net loans increased $5,999,000 to
9,148,000 or 191% from March 31, 1997 to June 30, 1997. Other assets
increased $147,000 or 72% from March 31, 1997 to June 30, 1997. Deposits
reflected an $8,920,000 or 67% increase from March 31, 1997 to June 30, 1997.
At June 30, 1997, the Company had no past due loans and as of that date has no
chargeoffs and recoveries in the loan portfolio. There have been no gains or
losses on securities sales. There were no past due loans, chargeoffs,
recoveries, or gains or losses on sale of securities as of March 31, 1997.
The loan portfolio is periodically reviewed to evaluate the outstanding loans
and to measure both the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses and internal credit ratings. Based on this analysis,
management considers the allowance for loan losses of $93,000 at June 30, 1997
to be adequate to cover possible loan losses in the portfolio as of that date.
However, because of the inherent uncertainty of assumptions made during the
evaluation process, there can be no assurance that loan losses in future
periods will not exceed the allowance for loan losses or that additional
allocations to the allowance will not be required.
Analysis of Allowance for Loan Losses at June 30, 1997
------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Allowance for loan losses at March 31, 1997............. $ 32,000
Charge-offs: -0-
Commercial, financial, and agricultural.............. -0-
Real estate.......................................... -0-
Installment loans to individuals..................... -0-
Total................................................ -0-
Recoveries:
Commercial, financial, and agricultural.............. -0-
Real estate.......................................... -0-
Installment loans to individuals..................... -0-
Total................................................ -0-
Net charge-offs......................................... -0-
Provision for loan losses charged to income............. 61,000
----------------
Allowance for loan losses at June 30, 1997.............. $93,000
</TABLE>
-10-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Management considers the Company's liquidity to be adequate to meet operating
and loan funding requirements at June 30, 1997. At June 30, 1997, the
liquidity ratio (i.e., cash, short-term assets and marketable assets divided
by net deposits and short-term liabilities) for the bank was 83.7% and the
loan to deposit ratio was approximately 41.5% from March 31, 1997 levels.
These compare to a liquidity ratio of 118.24%, a dependency ratio of negative
74.7% and a loan to deposit ratio of 23.8% at March 31, 1997. This increase
in the loan to deposit ratio and the resulting decrease in liquidity is due
primarily to the increase in loans compared to an increase in deposits of
$8,920,000 (66.7%) from March 31, 1997 levels. At June 30, 1997, federal
funds sold were $10,010,000 providing the Bank with additional liquidity. As
the portfolio continues to grow, management will continuously monitor the
liquidity of the Bank and the Company and make adjustments as deemed
necessary.
Requirements by banking regulators now include the monitoring of risk based
capital guidelines for banks and holding companies that are designed to make
capital requirements more sensitive to differences in risk profiles and
account for off balance sheet items. Tier 1 capital includes common
shareholders' equity, qualifying perpetual preferred stock and minority
interests in equity accounts of consolidated subsidiaries but excludes
goodwill and most other intangibles and excludes the allowances for loans and
lease losses. Tier 2 capital includes the excess of any preferred stock not
included in Tier 1 capital, mandatory convertible securities, hybrid capital
instruments, subordinated debt and intermediate term-preferred stock and
general reserves for loan and lease losses up to 1.25% of risk-weighted
assets.
The Bank's and the Company's capital ratios at this early stage of the Bank's
operations exceed regulatory minimums. However, as the Company and the Bank
grow and the loan portfolio gets larger, these ratios will adjust downward.
Management will monitor these amounts on a continuous basis. The schedule on
the following page reflects the current regulatory capital levels in more
detail, including comparisons of actual capital levels to the regulatory
minimums.
-11-
<PAGE>
Forsyth Bancshares, Inc.
and
Citizens Bank of Forsyth County
Regulatory Capital Requirements
June 30, 1997
(Dollars in Thousands)
<TABLE>
<CAPTION>
Actual Required Excess
Amount Percent Amount Percent Amount Percent
------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Forsyth Bancshares, Inc.
Risk-based capital:
Tier 1 capital $7290 58% $ 241 4.00% $6999 54%
Total capital 7383 58% 1009 8.00% 6374 50%
Tier 1 leverage ratio 7290 58% 1009 4.00% 6999 50%
Citizens Bank of Forsyth
County
Risk-based capital:
Tier 1 capital $6083 48% $ 243 4.00% 5840 44%
Total capital 6132 48% 491 8.00% 5641 41%
Tier 1 leverage ratio 6083 48% 243 4.00% 5840 44%
</TABLE>
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings--Not applicable
Item 2. Changes in Securities--Not applicable
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) Exhibits
- Exhibit 27.1 - Financial Data Schedule
(b) Reports on Form 8-K - None
-13-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed by the undersigned,
thereunto duly authorized.
FORSYTH BANCSHARES, INC.
BY: /s/ DAVID S. DENTON
--------------------------------------------
Name: David S. Denton
Title: President and Chief Executive Officer
Date: August 12, 1997
-14-
<PAGE>
INDEX TO EXHIBITS
Exhibit 27.1 Financial Data Schedule
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE
30, 1997 10-Q FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,896
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,010
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,757
<INVESTMENTS-CARRYING> 3,246
<INVESTMENTS-MARKET> 3,246
<LOANS> 9,241
<ALLOWANCE> 93
<TOTAL-ASSETS> 29,886
<DEPOSITS> 22,284
<SHORT-TERM> 0
<LIABILITIES-OTHER> 122
<LONG-TERM> 0
0
0
<COMMON> 7,960
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 29,886
<INTEREST-LOAN> 224
<INTEREST-INVEST> 115
<INTEREST-OTHER> 259
<INTEREST-TOTAL> 598
<INTEREST-DEPOSIT> 250
<INTEREST-EXPENSE> 250
<INTEREST-INCOME-NET> 348
<LOAN-LOSSES> 93
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 557
<INCOME-PRETAX> (284)
<INCOME-PRE-EXTRAORDINARY> (284)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (284)
<EPS-PRIMARY> (0.30)
<EPS-DILUTED> (0.30)
<YIELD-ACTUAL> 7.37
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 32
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 93
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
