<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 2000
--------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
COMMISSION FILE NUMBER: 333-10909
Forsyth Bancshares, Inc.
-----------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-2231953
- ------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
501 TRI-COUNTY PLAZA, HIGHWAYS 9 AND 20, CUMMING, GEORGIA 30040
---------------------------------------------------------------
(Address of principal executive offices)
(770) 886-9500
---------------------------
(Issuer's telephone number)
N/A
-----------------------------------------------------
(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. Yes [X] No [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 1, 2000: 800,000; no par value.
Transitional Small Business Disclosure Format Yes [ ] No [X]
<PAGE> 2
FORSYTH BANCSHARES, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET - MARCH 31, 2000.........................3
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME (LOSS) - THREE MONTHS ENDED MARCH 31, 2000 AND 1999......4
CONSOLIDATED STATEMENTS OF CASH FLOWS - THREE
MONTHS ENDED MARCH 31, 2000 AND 1999............................5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..........................6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............7
PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........13
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.............................13
SIGNATURES............................................................14
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FORSYTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
ASSETS
------
<S> <C>
Cash and due from banks $ 2,654
Federal funds sold 3,480
Securities available-for-sale, at fair value 20,057
Securities held-to-maturity, fair value of $906 919
Loans 41,460
Less allowance for loan losses 518
-------
Loans, net 40,942
-------
Premises and equipment 1,294
Other assets 1,341
-------
TOTAL ASSETS $70,687
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
DEPOSITS
Noninterest-bearing demand $ 7,917
Interest-bearing demand 14,185
Savings 850
Time 39,425
-------
TOTAL DEPOSITS 62,377
Other liabilities 397
-------
TOTAL LIABILITIES 62,774
-------
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Common stock, no par value; 10,000,000 shares
shares authorized, 800,000 issued and outstanding 7,960
Retained earnings 570
Accumulated other comprehensive loss 617
-------
TOTAL STOCKHOLDERS' EQUITY 7,913
-------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $70,687
=======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE> 4
FORSYTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME (LOSS)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
2000 1999
------ ------
<S> <C> <C>
INTEREST INCOME
Loans $ 999 $ 675
Taxable securities 301 335
Nontaxable securities 20 12
Federal funds sold 29 69
Interest-bearing deposits in banks 1 --
------ ------
TOTAL INTEREST INCOME 1,350 1,091
------ ------
INTEREST EXPENSE
Deposits 631 564
Other borrowings 2 --
------ ------
TOTAL INTEREST EXPENSE 633 564
------ ------
NET INTEREST INCOME 717 527
PROVISION FOR LOAN LOSSES 41 2
------ ------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 676 525
------ ------
OTHER INCOME
Service charges on deposit accounts 26 24
Other operating income 10 10
------ ------
TOTAL OTHER INCOME 36 34
------ ------
OTHER EXPENSES
Salaries and other employee benefits 261 177
Occupancy and equipment expenses 80 67
Loss on sales of securities available-for-sale 14 --
Other operating expenses 176 134
------ ------
TOTAL OTHER EXPENSES 531 378
------ ------
INCOME BEFORE INCOME TAXES 181 181
INCOME TAX EXPENSE 71 63
------ ------
NET INCOME 110 118
------ ------
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Unrealized gains (losses) on securities available-for-sale
arising during period 97 (174)
------ ------
COMPREHENSIVE INCOME (LOSS) $ 207 $ (56)
====== ======
BASIC AND DILUTED EARNINGS PER COMMON SHARE $ 0.14 $ 0.15
====== ======
CASH DIVIDENDS PER SHARE OF COMMON STOCK $ -- $ --
====== ======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE> 5
FORSYTH BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
2000 1999
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 110 $ 118
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 36 29
Provision for loan losses 41 2
Other operating activities (170) (138)
------- -------
Net cash provided by operating activities 17 11
------- -------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (186) (4,349)
Proceeds from maturities of securities available-for-sale 137 1,447
Proceeds from sales of securities available-for-sale 987 -
Proceeds from maturities of securities held-to-maturity 13 34
Net (increase) decrease in Federal funds sold (1,420) 3,680
Net increase in loans (2,910) (788)
Purchase of premises and equipment (279) (62)
------- -------
Net cash used in investing activities (3,658) (38)
------- -------
FINANCING ACTIVITIES
Net increase in deposits 4,336 424
------- -------
Net cash provided by financing activities 4,336 424
------- -------
Net increase in cash and due from banks 695 397
Cash and due from banks at beginning of period 1,959 1,326
------- -------
Cash and due from banks at end of period $ 2,654 $ 1,723
======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE> 6
FORSYTH BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial information for Forsyth Bancshares, Inc.
(the "Company") included herein is unaudited; however, such information
reflects all adjustments (consisting solely of normal recurring
adjustments) which are, in the opinion of management, necessary for a
fair statement of results for the interim period.
The results of operations for the three month period ended March 31,
2000 are not necessarily indicative of the results to be expected for
the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities".
The effective date of this statement has been deferred by SFAS No. 137
until fiscal years beginning after June 15, 2000. However, the
statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Company expects to adopt this statement
effective January 1, 2001. SFAS No. 133 requires the Company to
recognize all derivatives as either assets or liabilities in the
balance sheet at fair value. For derivatives that are not designated as
hedges, the gain or loss must be recognized in earnings in the period
of change. For derivatives that are designated as hedges, changes in
the fair value of the hedged assets, liabilities, or firm commitments
must be recognized in earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings, depending on
the nature of the hedge. The ineffective portion of a derivative's
change in fair value must be recognized in earnings immediately.
Management has not yet determined what effect the adoption of SFAS No.
133 will have on the Company's earnings or financial position.
There are no other recent accounting pronouncements that have had, or
are expected to have, a material effect on the Company's financial
statements.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the financial position and operating results of the
Company and its bank subsidiary, The Citizens Bank of Forsyth County (the
"Bank"), during the periods included in the accompanying consolidated financial
statements.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
Certain of the statements made herein under the caption "Management's Discussion
and Analysis of Financial Condition and Results of Operations" ("MD&A") are
forward-looking statements for purposes of the Securities Act of 1933, as
amended (the "Securities Act") and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from future results,
performance or achievements expressed or implied by such forward-looking
statements. Such forward looking statements include statements using the words
such as "may," "will," "anticipate," "should," "would," "believe,"
"contemplate," "expect," "estimate," "continue," "may," "intend," or other
similar words and expressions of the future. Our actual results may differ
significantly from the results we discuss in these forward-looking statements.
These forward-looking statements involve risks and uncertainties and may not be
realized due to a variety of factors, including, without limitation: the effects
of future economic conditions; governmental monetary and fiscal policies, as
well as legislative and regulatory changes; the risks of changes in interest
rates on the level and composition of deposits, loan demand, and the values of
loan collateral, securities, and other interest-sensitive assets and
liabilities; interest rate risks; the effects of competition from other
commercial banks, thrifts, mortgage banking firms, consumer finance companies,
credit unions, securities brokerage firms, insurance companies, money market and
other mutual funds and other financial institutions operating in the Company's
market area and elsewhere, including institutions operating regionally,
nationally, and internationally, together with such competitors offering banking
products and services by mail, telephone, computer, and the Internet.
LIQUIDITY AND CAPITAL RESOURCES
Management considers the Company's liquidity to be adequate to meet operating
and loan funding requirements at March 31, 2000. At March 31, 2000, the
liquidity ratio (i.e. cash, short-term assets and marketable assets divided by
deposits) for the Company was approximately 44% and the loan to deposit ratio
was approximately 66%. As the portfolio grows, management will continue to
monitor the liquidity of the Company and make adjustments as deemed necessary.
Investing the Company's available funds in loans and other high yielding
interest securities will increase the Company's earning potential.
7
<PAGE> 8
Requirements by banking regulators 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. The Bank and the Company exceed the regulatory minimums on
capital requirements and ratios. However, as the Company and the Bank continue
to grow and the loan portfolio increases, these ratios should adjust downward.
Management will monitor these amounts and ratios on a continuous basis. The
minimum capital requirements and the actual capital ratios for the Company and
the Bank are as follows:
<TABLE>
<CAPTION>
ACTUAL
------------------------------
THE CITIZENS
FORSYTH BANK OF
BANCSHARES FORSYTH REGULATORY
INC. COUNTY REQUIREMENT
-------------- -------------- ---------------
<S> <C> <C> <C>
Leverage capital ratios 12.48% 10.71% 4.00%
Risk-based capital ratios:
Tier I capital 18.48 15.96 4.00
Total capital 19.60 17.11 8.00
</TABLE>
FINANCIAL CONDITION
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999 INCREASE (DECREASE)
-------------- ---------------- --------------------------------
AMOUNT PERCENT
------------ --------------
(DOLLARS IN THOUSANDS)
----------------------------------------------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,654 $ 1,959 $ 695 35.48%
Federal funds sold 3,480 2,060 1,420 68.93
Securities 20,976 21,843 (867) (3.97)
Loans, net 40,942 38,072 2,870 7.54
Premises and equipment 1,294 1,051 243 23.12
Other assets 1,341 1,224 117 9.56
------------- --------------- -------------
$ 70,687 $ 66,209 $ 4,478 6.76
============= =============== =============
Deposits $ 62,377 $ 58,040 $ 4,337 7.47%
Other liabilities 397 462 (65) (14.07)
Stockholders' equity 7,913 7,707 206 2.67
------------- --------------- -------------
$ 70,687 $ 66,209 $ 4,478 6.76
============= =============== =============
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
6.76% Deposit growth of $4,337,000 was primarily invested in loans with the
majority of the remainder invested in Federal funds sold. The Company's loan to
deposit ratio has remained consistent since December 31, 1999, remaining at
approximately 66%. Premises and equipment has increased primarily due to fixed
assets purchases associated with the Company's new branch which opened in
February of 2000. Stockholders' equity has increased by $206,000 due to net
income of $110,000 and decreases of unrealized losses on securities
available-for-sale, net of tax, of $96,000.
8
<PAGE> 9
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999 INCREASE (DECREASE)
--------------- ------------ -------------------------------
AMOUNT PERCENT
---------- -----------------
(DOLLARS IN THOUSANDS)
---------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ 1,350 $ 1,091 $ 259 23.74%
Interest expense 633 564 69 12.23
-------------- ----------- ----------
Net interest income 717 527 190 36.05
Provision for loan losses 41 2 39 1,950.00
Other income 36 34 2 5.88
Other expense 531 378 153 40.48
-------------- ----------- ----------
Pretax income 181 181 - -
Income taxes 71 63 8 12.70
-------------- ----------- ----------
Net income $ 110 $ 118 $ (8) (6.78)
============== =========== ==========
</TABLE>
As indicated in the above table, the Company's net interest income has increased
by $190,000 during the first quarter of 2000 as compared to the same period in
1999. The Company's net interest margin increased to 4.38% during the first
quarter of 2000 as compared to 3.68% for the first quarter of 1999 and 4.08% for
the entire year of 1999. The increase in net interest income and net interest
margin is due primarily to the increased volume of average interest-earning
assets, most significantly loans.
The provision for loan losses increased by $39,000 during the first quarter of
2000 as compared to the same period in 1999. This increase is due primarily to
increased loan growth and inherent risk in the loan portfolio as the Company
incurred net charge-offs of only $5,000 during the first quarter of 2000. The
Company's reserve for loan losses amounted to 1.25% at March 31, 2000 and
December 31, 1999. The allowance for loan losses is maintained at a level that
is considered appropriate by management to adequately cover all known and
inherent risks in the loan portfolio. Management's evaluation of the loan
portfolio includes a continuing review of loan loss experience, current economic
conditions which may affect the borrower's ability to repay and the underlying
collateral value.
9
<PAGE> 10
Information with respect to nonaccrual, past due and restructured loans at March
31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
MARCH 31,
---------------------------------
2000 1999
--------------- ---------------
(DOLLARS IN THOUSANDS)
---------------------------------
<S> <C> <C>
Nonaccrual loans $ 18 $ 27
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 1 -
Restructured loans - -
Loans, now current about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms - -
Interest income that would have been recorded on nonaccrual
and restructured loans under original terms 1 1
Interest income that was recorded on nonaccrual and restructured loans - -
</TABLE>
It is the policy of the Bank to discontinue the accrual of interest income when,
in the opinion of management, collection of such interest becomes doubtful. This
status is accorded such interest when (1) there is a significant deterioration
in the financial condition of the borrower and full repayment of principal and
interest is not expected and (2) the principal or interest is more than ninety
days past due, unless the loan is both well-secured and in the process of
collection.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity or capital resources.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.
10
<PAGE> 11
Information regarding certain loans and allowance for loan loss data through
March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
2000 1999
------- ------
(DOLLARS IN THOUSANDS)
----------------------------
<S> <C> <C>
Average amount of loans outstanding $41,210 $27,986
======= =======
Balance of allowance for loan losses at beginning of period $ 482 $ 360
======= =======
Loans charged off
Commercial and financial $ - $ -
Real estate mortgage - -
Instalment 5 -
------- -------
5 -
------- -------
Loans recovered
Commercial and financial - -
Real estate mortgage - -
Instalment - 2
------- -------
- 2
------- -------
Net (charge-offs) recoveries (5) 2
------- -------
Additions to allowance charged to operating expense during period 41 2
------- -------
Balance of allowance for loan losses at end of period $ 518 $ 364
======= =======
Ratio of net loans charged off during the period to
average loans outstanding .01% -%
======= =======
</TABLE>
Other income has increased during the first quarter of 2000 as compared to the
same period in 1999 by $2,000 due to increased service charges on deposit
accounts.
Other expenses increased during the first quarter of 2000 as compared to the
same period in 1999 by $153,000 due primarily to increased salaries and employee
benefits of $84,000 and other operating expenses of $42,000. Salaries and
employee benefits have increased due to a gradual increase in the number of full
time equivalent employees from 14 at the beginning of 1999 to 24 as of March 31,
2000. Other operating expenses have increased due to the overall growth of the
Company and the opening of the new branch in 2000. Occupancy and equipment
expenses are expected to increase during the next year as costs associated with
the new branch are incurred. The Company also incurred losses on sales of
securities available-for-sale of $14,000 during the first quarter of 2000 as
compared to none during the first quarter of 1999.
The Company's provision for income taxes was $71,000 for the first quarter of
2000 (effective tax rate of 39%) as compared to $63,000 for the first quarter of
1999 (effective tax rate of 35%). The increase is due to anticipated increased
state income taxes in 2000.
11
<PAGE> 12
Overall, net income has decreased by $8,000 during the first quarter of 2000 as
compared to the same period in 1999 due primarily to increased net interest
income of $190,000 being substantially offset by increased operating expenses of
$153,000 and increased provisions for loan losses of $39,000.
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27. Financial Data Schedule, (for SEC use only).
(b) Reports on Form 8-K.
None.
13
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FORSYTH BANCSHARES, INC.
(Registrant)
DATE: May 12, 2000 BY: /s/ Timothy M. Perry
----------------- --------------------------------------------
Timothy M. Perry, President and C.E.O.
(Principal Executive Officer)
DATE: May 12, 2000 BY: /s/ Holly R. Hunt
----------------- --------------------------------------------
Holly R. Hunt, Vice President, Secretary
and Treasurer
(Principal Financial and Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,654
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 3,480
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 919
<INVESTMENTS-MARKET> 906
<LOANS> 41,460
<ALLOWANCE> 518
<TOTAL-ASSETS> 70,687
<DEPOSITS> 62,377
<SHORT-TERM> 0
<LIABILITIES-OTHER> 397
<LONG-TERM> 0
0
0
<COMMON> 7,960
<OTHER-SE> (47)
<TOTAL-LIABILITIES-AND-EQUITY> 70,687
<INTEREST-LOAN> 1,999
<INTEREST-INVEST> 321
<INTEREST-OTHER> 30
<INTEREST-TOTAL> 1,350
<INTEREST-DEPOSIT> 631
<INTEREST-EXPENSE> 633
<INTEREST-INCOME-NET> 717
<LOAN-LOSSES> 41
<SECURITIES-GAINS> (14)
<EXPENSE-OTHER> 517
<INCOME-PRETAX> 181
<INCOME-PRE-EXTRAORDINARY> 110
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110
<EPS-BASIC> 0.14
<EPS-DILUTED> 0.14
<YIELD-ACTUAL> 4.38
<LOANS-NON> 18
<LOANS-PAST> 1
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 482
<CHARGE-OFFS> 5
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 518
<ALLOWANCE-DOMESTIC> 518
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
