U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Exchange Act
For the transition period from ______ to ______
Commission File Number:
COMMUNITY FIRST BANKING COMPANY
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-2309605
--------------------------------- ---------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
110 Dixie Street
Carrollton, Georgia 30117
(770) 834-1071
-------------------------------------------------------
(Address of Principal Executive Offices and Telephone Number)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of September 30, 1997, there
were 2,413,562 shares issued and 2,230,131 shares outstanding of the
Registrant's Common Stock, par value $.01 per share.
CONTENTS
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1997 (unaudited) and
December 31, 1996
Consolidated Statements of Earnings for the Three Months and Nine Months
Ended September 30, 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flows for the Nine Months Ended September
30, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
<TABLE>
COMMUNITY FIRST BANKING COMPANY
Consolidated Balance Sheets
<CAPTION>
Assets Unaudited
9-30-97 12-31-96
<S> <C> <C>
Cash and due from banks ................................................ 11,215,068 11,061,383
Interest-bearing deposits in financial institutions .................... 833,025 3,355,586
Federal funds sold ..................................................... 13,625,000 8,680,000
---------- ---------
Cash & cash equivalents ............................................. 25,673,093 23,096,969
Securities available for sale .......................................... 43,779,376 33,927,243
Securities held to maturity ............................................ 6,317,076 7,764,058
Other investments ...................................................... 2,379,592 2,599,741
Mortgage loans held for sale ........................................... 213,302 282,488
Loans, net ............................................................. 293,809,062 269,834,098
Premises & equipment, net .............................................. 9,931,859 9,288,592
Accrued interest receivable ............................................ 3,188,980 2,687,472
Other assets ........................................................... 9,277,483 3,050,849
--------- ---------
Total assets ........................................................ 394,569,823 352,531,510
=========== ===========
Liabilities and Stockholders' Equity
Deposits:
Demand ............................................................... 21,409,631 15,903,005
Interest-bearing demand .............................................. 48,426,060 47,288,357
Savings .............................................................. 37,781,615 34,076,732
Time ................................................................. 161,496,772 163,257,956
Time, over $100,000 .................................................. 45,906,911 47,230,149
---------- ----------
Total deposits .................................................... 315,020,989 307,756,199
Federal Home Loan Bank advances ........................................ 5,892,391 16,295,186
Subordinated debentures ................................................ 900,000 2,000,000
Accrued interest payable & other liabilities ........................... 2,519,058 1,222,602
--------- ---------
Total Liabilities ................................................. 324,332,438 327,273,987
Stockholders' Equity:
Common stock, $.01 par, 10,000,000 authorized, 2,413,562 issued,
2,230,131 outstanding ............................................. 24,136
Additional paid in capital ........................................... 46,894,219
Unearned ESOP shares ................................................. (3,668,615)
Retained Earnings .................................................... 26,836,667 25,278,036
Net unrealized (loss)gain on securities available for sale, net of tax 150,978 (20,513)
------- -------
Total stockholders' equity ........................................ 70,237,385 25,257,523
Total liabilities & stockholders' equity ............................... 394,569,823 352,531,510
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
<TABLE>
COMMUNITY FIRST BANKING COMPANY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
9/30/97 9/30/96 9/30/97 9/30/96
------- ------- ------- -------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans ....................................... 6,975,078 6,343,984 19,708,250 18,578,099
Interest-bearing deposits and federal funds sold ................. 369,308 95,493 787,817 667,727
Interest and dividends on investment securities:
U.S. Treasury ................................................. 47,930 11,172 61,679 36,536
U.S. Govt. agency and mortgage-backed ......................... 897,564 719,490 2,576,766 1,412,184
State, county & municipals .................................... 28,835 33,078 79,157 44,598
Other ......................................................... 40,860 58,225 129,310 174,896
------ ------ ------- -------
Total Interest Income ....................................... 8,359,575 7,261,442 23,342,979 20,914,040
Interest Expense:
Interest on deposits:
Demand ........................................................ 387,098 369,641 1,138,032 1,073,199
Savings ....................................................... 283,351 226,281 858,442 648,004
Time .......................................................... 2,956,474 2,877,216 8,864,785 8,384,537
--------- --------- --------- ---------
3,626,923 3,473,138 10,861,259 10,105,740
--------- --------- ---------- ----------
Interest on FHLB advances & subordinated debentures ............. 170,077 320,147 692,185 850,415
------- ------- ------- -------
Total interest expense ................................. 3,797,000 3,793,285 11,553,444 10,956,155
--------- --------- ---------- ----------
Net interest income ............................... 4,562,575 3,468,157 11,789,535 9,957,885
--------- --------- ---------- ---------
Provision for loan losses ........................................ 320,310 105,000 623,810 315,000
------- ------- ------- -------
Net interest inc. after provision for loan loss ........ 4,242,265 3,363,157 11,165,725 9,642,885
--------- --------- ---------- ---------
Other income:
Service charges on deposits ................................... 732,970 630,697 2,020,574 1,706,325
Miscellaneous ................................................. 346,034 186,010 796,399 501,300
------- ------- ------- -------
Total other income ..................................... 1,079,004 816,707 2,816,973 2,207,625
--------- ------- --------- ---------
Other expenses:
Salaries and related benefits ................................. 1,732,281 1,627,806 5,322,244 4,723,244
ESOP & retirement expense ..................................... 335,109 11,250 335,109 11,250
Occupancy and equipment ....................................... 469,720 400,427 1,388,858 1,154,548
Depository insurance premiums ................................. 46,852 1,876,684 105,116 2,182,681
Other operating ............................................... 1,388,903 1,278,481 3,972,725 3,525,972
--------- --------- --------- ---------
Total other expenses .................................... 3,972,865 5,194,648 11,124,052 11,597,695
--------- --------- ---------- ----------
Earnings (loss) before income tax expense ............... 1,348,404 (1,014,784) 2,858,646 252,815
Income tax expense (benefit) ..................................... 432,448 (377,408) 937,980 29,438
------- -------- ------- ------
Net Earnings (Loss)................................ 915,956 (637,376) 1,920,666 223,377
======= ======== ========= =======
Earnings per share (note 5) ...................................... 0.41 N/A N/A N/A
Weighted average number of common shares outstanding ............. 2,220,477 N/A N/A N/A
Dividends per share (note 7) ..................................... 0.15 N/A N/A N/A
See Notes to Consolidated Financial Statements ...................
</TABLE>
<PAGE>
<TABLE>
COMMUNITY FIRST BANKING COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
YTD YTD
9/30/97 9/30/96
------- -------
<S> <C> <C>
Net earnings 1,920,665 223,377
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation, amortization and accretion 995,647 849,901
Provision for loan losses 623,810 315,000
(Gain) or loss on sales of premises and equipment, net (19,497) 25,848
Change in:
Mortgage loans held for sale 69,186 2,475,413
Accrued interest receivable (501,508) (467,579)
Other assets 135,124 295,716
Accrued interest payable 292,697 (137,813)
Accrued expenses and other liabilities 1,003,759 1,233,935
--------------------------------------
Net cash provided by operating activities 4,519,883 4,813,798
--------------------------------------
Cash flows from investing activities:
Proceeds from sales of other investments 220,149 -
Proceeds from maturities of securities available for sale 10,967,619 278,483
Proceeds from maturities of securities held to maturity 1,446,982 1,525,383
Purchases of other investments (116,553)
Purchases of securities available for sale (20,675,678) (33,769,025)
Net change in loans (30,984,291) (3,285,780)
Proceeds from sale of real estate 53,940 -
Proceeds from sales of premises and equipment 32,115 80,000
Purchases of premises and equipment (1,624,115) (2,947,656)
Organization costs (30,181) -
--------------------------------------
Net cash used in investing activities (40,593,460) (38,235,148)
--------------------------------------
Cash flows from financing activities:
Net change in demand and savings deposits 10,349,212 8,856,120
Net change in time deposits (3,084,422) 8,829,786
(Payment) of FHLB advances (10,402,795) (3,402,794)
Borrowing of FHLB advances - 5,000,000
Payment of subordinated debentures (1,100,000) -
Cash dividend paid (362,035) -
Net Proceeds from issuance of common stock 43,249,740 -
--------------------------------------
Net cash provided by financing activities 38,649,700 19,283,112
--------------------------------------
--------------------------------------
Net change in cash and cash equivalents 2,576,123 (14,138,238)
--------------------------------------
Cash and cash equivalents at beginning of year 23,096,970 34,057,178
--------------------------------------
Cash and cash equivalents at quarter end 25,673,093 19,918,940
======================================
Supplemental schedule of non-cash investing activity:
Transfer from loans to other real estate owned 6,385,517 132,790
Cash paid during the year for income taxes 935,000 935,000
Cash paid for interest 11,260,747 11,093,968
Net change in unrealized gain (loss) on available for sale securities 150,978 37,232
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
COMMUNITY FIRST BANKING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. NATURE OF BUSINESS
Community First Banking Company (the "Company") was incorporated in the State of
Georgia on March 12, 1997, for the purpose of becoming a holding company to own
all of the outstanding capital stock of Carrollton Federal Bank, FSB (the
"Savings Bank"), an existing federally chartered stock savings bank, which was
100% owned by CF Mutual Holdings (the "Mutual Holding Company"). Upon
consummation of the plan of conversion and reorganization, ("the Conversion")
(see Note 3 below), the Company became the unitary holding company for the
Savings Bank and the Mutual Holding Company was dissolved.
NOTE 2. BASIS OF PRESENTATION
Prior to June 27, 1997, the Company had not issued any stock, had no assets or
liabilities, and had not engaged in any business activities other than of an
organizational nature. Accordingly, the financial data for periods prior to June
27, 1997 included herein reflect the operations of the consolidated Mutual
Holding Company.
The accompanying unaudited consolidated financial statements (except for
statements of financial condition at December 31, 1996, which are audited) have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions contained in 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 (none of which were
other than normal recurring accruals) necessary for a fair presentation of the
financial position and results of operations for the periods presented have been
included.
The results of operations for the nine months ended September 30, 1997 are not
necessarily indicative of the results of operations that may be expected for the
year ended December 31, 1997. For further information, refer to the audited
consolidated financial statements and footnotes thereto for the year ended
December 31, 1996, included in the Prospectus of the Company dated May 14,1997.
NOTE 3. STOCK CONVERSION
On June 27,1997 the Conversion to a stock holding company organized under the
laws of Georgia, the issuance of common stock, and dissolution of the Mutual
Holding Company were completed. In connection therewith, the Company sold
2,413,562 shares of common stock, par value $.01 per share, at an initial price
of $20 per share in a subscription offering. Costs associated with the
Conversion were approximately $1,379,000 including underwriting fees. These
conversion costs were deducted from the gross proceeds of the sale of the common
stock.
NOTE 4. EMPLOYEE STOCK OWNERSHIP PLAN
In connection with the Conversion, the Company established an employee stock
ownership plan (the "ESOP"). The ESOP purchased approximately 8%, or 193,085
shares, of the total shares of common stock sold. The Company lent $3,861,700 to
the ESOP for the purchase of the shares of common stock. All existing employees
as of June 17, 1997, over age 21 and new employees who have completed at least
1000 hours of service during a twelve month period and who have attained age 21
are eligible to participate in the ESOP. The Company will make discretionary
contributions to the ESOP in an amount not less than the amount needed to pay
any principal and interest payments required by the acquisition loan. The
Company will account for its ESOP in accordance with Statement of Position 93-6,
"Employer's Accounting for Employee Stock Ownership Plans". As shares are
committed to be released to participants, the Company will record compensation
expense equal to the average market price of the shares during the period.
During the three month period ended September 30, 1997, the Company released
9,654 shares and recorded $330,650 in related compensation expense for the
period.
NOTE 5. EARNINGS PER SHARE
The initial public offering was completed June 27, 1997. Earnings per share
calculations for the three month period ended September 30, 1997 are presented
based on the net income for the three months and the weighted average number of
shares outstanding, or 2,220,477 shares. Net earnings per share are not
presented for the nine months ended 09/30/97 since shares issued in conjunction
with the conversion and offering were not outstanding for the entire period. For
purposes of this computation, the number of shares purchased by the Company's
employee stock ownership plan which have not been committed to be released to
participant accounts are not assumed to be outstanding.
NOTE 6. RECENTLY ISSUED ACCOUNTING STANDARDS
During 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, " Earnings Per Share" (SFAS 128) and
SFAS No. 129 "Disclosure of Information About Capital Structure". SFAS 128
simplifies current standards by eliminating the presentation of primary earnings
per share (EPS) and requiring the presentation of basic EPS, which includes no
potential common shares and thus no dilution. The Statement also requires
entities with complex capital structures to present basic and diluted EPS on the
face of the income statement and also eliminates the modified treasury stock
method of computing potential common shares. SFAS 129 simply consolidates the
established accounting pronouncements on required disclosure of information
about a company's capital structure. The statement contains no new requirements
for companies that reported previously under those established accounting
pronouncements. Both standards are effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. Early
application is not permitted. Upon adoption of SFAS 128, restatement of all
prior-period EPS data presented is required. Based upon the current capital
structure of the Company, these statements will not have a material impact on
the Company's financial statements.
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" ("SFAS 130") and Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS 131"). SFAS 130 establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. SFAS 131 specifies the presentation and
disclosure of operating segment information reported in the annual report and
interim reports issued to stockholders. The provisions of both statements will
be effective for fiscal years beginning after December 15, 1997. The management
of the Company believes that the adoption of these statements will not have a
material impact on the Company's financial position, results of operations, or
liquidity.
NOTE 7. DIVIDENDS DECLARED
On August 21, 1997 the Board of Directors of the Company approved a cash
dividend of $.15 per share payable October 1, 1997 for stockholders of record on
September 15, 1997. The dividends are accrued in the September 30, 1997
consolidated balance sheet.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
Total assets at September 30, 1997 grew approximately 11.9% to $395 million from
$353 million at December 31, 1996. The increase in total assets was primarily
attributable to a $24 million (8.9%) increase in net loans, a $10 million
(29.0%) increase in securities available for sale, a $2.5 million (11.2%)
increase in cash and cash equivalents, and a $6 million (204.1%) increase in
other assets. The asset growth was funded primarily by the net proceeds of
approximately $43 million received by the Company from its initial public
offering and an increase in demand deposits of approximately $6.6 million, or
10.5%.
Total net loans grew $24 million, or 8.9%, from December 31, 1996 through
September 30, 1997. The increase in loans was primarily due to commercial
installment loans ($31 million), commercial adjustable line of credit loans
($6.5 million), commercial single pay loans ($3.6 million), and indirect
automobile loans ($4.8 million). Mortgage loans decreased $24 million during the
first nine months of 1997.
The increase in other assets resulted primarily from foreclosure on five loans
to one commercial borrower ($4.9 million). The foreclosed property is
represented by two parcels of undeveloped land. In July 1997, the Savings Bank
entered into a Purchase and Sale Agreement on the largest of the tracts of
property. This Agreement was terminated by the purchaser in October 1997.
Marketing efforts with other prospective purchasers are currently underway. No
loss is anticipated from the sale of these parcels of undeveloped land.
Premises and equipment increased by $643,267, or 6.9% primarily from the opening
of two new branches in Carrollton, Georgia. A new branch with six drive through
lanes and walk in office was constructed and opened in July 1997 in the new
McIntosh shopping center on Highway 27 South in Carrollton, Georgia. The
operations of the Savings Bank branch located inside the Kroger Grocery Store on
Highway 27 South was transferred to the new facilities at McIntosh. Another
leased branch office was opened in July 1997 located in the new Hummingbird
Citgo Station at 1201 Maple Street, Carrollton, Georgia. This facility has three
drive through windows and walk in facilities.
Total deposit growth during the period from December 31, 1996 through September
30, 1997 was $7.3 million, or 2.4%. Non-interest bearing demand deposits
increased $5.5 million, or 34.6%, and interest bearing demand deposits increased
$1.1 million, or 2.4% from December 31, 1996 through September 30, 1997. Savings
deposit liabilities increased $3.7 million, or 10.9% for the same period. Time
deposit liabilities decreased a net of $3.1 million, or 1.5% primarily as the
result of deposits being used for stock subscriptions.
Stockholder's equity increased approximately $45.0 million for the nine months
ended September 30, 1997. Approximately $43.2 million of the increase resulted
from the stock offering discussed in Note 3 to the consolidated financial
statements. Net earnings for the nine months ended September 30, 1997 were $1.9
million. Dividends paid were $362 thousand.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER
30, 1997 AND 1996
Net earnings totaled $915,956 for the three months ended September 30, 1997, a
substantial increase from the $637,376 loss reflected for the same period in
1996. The Savings Bank paid $1.7 million in November 1996 for a special Savings
Association Insurance Fund (SAIF) assessment that was levied by the FDIC to
capitalize the SAIF fund accounting for the majority of the difference in net
earnings. This assessment was accrued as an expense in September 1996.
Net Interest Income
Net interest income for the three months ended September 30, 1997 increased
$1,094,418, or 31.6%, over the same period in 1996. Interest expense on deposits
and borrowings was almost constant for both periods; therefore, the increase is
due to interest income realized on loans and interest bearing deposits and
investment securities. Interest income on loans increased $631,094 or 9.9% and
interest earned on deposits and investment securities increased $467,039 or
50.9%.
Provision for Loan Losses
The provision for loan losses increased to $320,310 for the three months ended
September 30, 1997 compared to $105,000 for the three months ended September 30,
1996. This increase has been deemed appropriate by management to reflect the
higher risk associated with the change in loan portfolio mix as well as the
increase in the size of the portfolio.
Other Income
Other income increased $262,297, or 32.1%, for the three months ended September
30, 1997 versus 1996. This is primarily the result of the increase in the volume
of transaction accounts and the fees generated by these accounts. The increase
in the volume of transaction accounts resulted primarily from the four Wal*Mart
branches opened from March through September 1996. The number of demand deposit
accounts in the Wal*Mart branches more than doubled for the period September 30,
1996 through September 30, 1997 from 2,082 to 4,247.
Other Expenses
Other expenses decreased $1,221,783, or 23.5% for the three months ended
September 30, 1997 as compared to the same period in 1996. This decrease was due
to the $1.7 million SAIF assessment recorded in September 1996. Depository
insurance premiums for the quarter ended September 30, 1997 were $46,852 as
compared with $1,876,684 for the quarter ended September 30, 1996.
Salaries and related benefits for the current quarter have increased $104,475,
or 6.4%, over the same period in 1996. Concurrently, occupancy expense has
increased $69,293, or 17.3%, and other operating expenses, which includes data
processing costs, has increased $110,421, or 8.6%. All of these increases are
primarily associated with the branch delivery expansion of the four (4) Wal*Mart
branches opened from March through September 1996 and the opening of two
traditional branches in July 1997.
The ESOP and retirement expense reflects compensation expense of $330,650
related to the release of 9,654 shares of the Company's stock in September 1997.
Accounting rules require the release to the ESOP be valued at the average market
price during the quarter, which was $34.25 per share.
Income Taxes
Income tax expense for the quarter ended September 30, 1997 was $432,448 which
reflects an effective tax rate of 32 percent. An income tax benefit of $377,408
was reflected for the quarter ended September 30, 1996 due to the loss created
by the $1.7 million SAIF assessment recorded in that quarter.
COMPARISON OF RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
AND 1996.
Net earnings were $1,920,666 for the nine months ended September 30, 1997
compared to $223,377 for the same period in 1996. Earnings in 1996 were
negatively impacted by the $1.7 million SAIF assessment discussed earlier.
Net Interest Income
Net interest income totaled $11,789,535 for the nine months ended September 30,
1997 as compared with $9,957,885 for the nine months ended September 30, 1996,
an increase of $1.8 million, or 18.4%. Interest income on loans increased
$1,130,151, or 6.1%, and interest earned on investments increased $2,520,571, or
107.9%, over the first nine months of 1996. Interest expense on deposits and
borrowings increased $597,289, or 5.5%, for the first nine months of 1997 as
compared with the same period in 1996.
Provision for Loan Losses
The provision for loan losses increased by $308,810, or 98.0%, to $623,810 for
the nine months ended September 30, 1997 from $315,000 for the nine months ended
September 30, 1996. This increase for the comparative nine months period
reflects the higher risk associated with increasing commercial and consumer
lending activities.
Other Income
Other income increased $609,348, or 27.6%, for the nine months ended September
30, 1997 versus the same period in 1996. This increase is primarily attritutable
to the fee income recognized on of transaction accounts and insurance
commissions associated with consumer lending activities.
Other Expense
Other expenses for the nine months ended September 30, 1997 were $473,643, or
4.1%, lower than the amount for the nine months ended September 30, 1996.
Depository insurance premiums, including the one-time SAIF assessment of $1.7
million, were over $2 million higher in 1996 than in the same nine month period
in 1997. Salaries, occupancy expenses, and other operating expenses all
increased over 1996 levels due to bringing new branches on-line in 1996 and
1997. Salaries increased $599 thousand, or 12.7%, occupancy and equipment
expense increased $234 thousand, or 20.3%, and other operating expense increased
$447 thousand, or 12.7%.
The ESOP & retirement expense, as discussed earlier, reflects the compensation
expense associated with the release of 9,654 shares of the Company's stock from
the unearned ESOP shares account as reflected on the balance sheet at September
30, 1997.
Income Taxes
Income tax expense increased to $937,980 for the nine months ended September 30,
1997 from $29,438 for the same period in 1996. This increase resulted from the
lower pre-tax earnings in 1996 primarily as the result of the SAIF assessment.
The effective tax rate as a percentage of pre-tax income for the nine months
ended September 30, 1997 was approximately 33%. This tax rate differs from the
statutory Federal tax rate of 34% primarily due to tax exempt interest income on
certain investment securities and loans. For the first nine months of 1997 and
1996, interest income on tax exempt investment securities was $79,157 and
$44,598, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funds are time, savings and demand deposits,
principal and interest payments on loans and securities and, to a limited
extent, borrowings from the FHLB of Atlanta. While maturities and scheduled
amortization of loans and securities provide an indication of the timing of the
receipt of funds, changes in interest rates, economic conditions and competition
strongly influence mortgage prepayment rates and savings deposit flows, reducing
the predictability of the timing of sources of funds.
On June 27, 1997 the Conversion from a federally chartered mutual holding
company to a state chartered stock holding company was completed, and all of the
capital stock of the Savings Bank was acquired by the Company. The Company
issued and sold 2,413,562 shares of its common stock, $.01 par value, at a price
of $20.00 per share in a subscription offering (the "Offering") to certain
depositors of the Savings Bank and to the Company's Employee Stock Ownership
Plan. Net proceeds from the Offering were $46.9 million, which the Company
applied as follows: $21.6 million as a contribution to the capital of the
Savings Bank; $3.9 million as a loan to the ESOP; $21.4 million retained by the
Company. At September 30, 1997, total stockholders' equity of the Company was
$70.2 million. The ratio of the Company's equity to total assets at September
30, 1997 was 17.8%.
The Savings Bank is required to maintain an average daily balance of liquid
assets and short-term liquid assets as a percentage of net withdrawable deposit
accounts plus short-term borrowings, as defined by the regulations of the Office
of Thrift Supervision (the "OTS"). The minimum required liquidity and short-term
liquidity ratios are currently 5.0% and 1.0%, respectively. At September 30,
1997, the Savings Bank's liquidity ratio was 21.5% and its short-term liquidity
ratio was 8.0%. The levels of the Savings Bank's short-term liquid assets are
dependent on the Savings Bank's operating, financing and investing activities
during any given period. Management believes it will have adequate resources to
fund all commitments on a short-term and long-term basis in accordance with its
business strategy.
The Savings Bank has other sources of liquidity if a need for additional funds
arises, including the ability to obtain FHLB of Atlanta advances of up to $53
million. The Savings Bank had $5.9 million in outstanding FHLB advances at
September 30, 1997.
The Savings Bank continued to substantially exceed all regulatory capital
requirements at September 30, 1997. The following table shows the Savings Bank's
regulatory capital amounts and ratios along with the required amounts of the
Office of Thrift Supervision.
<TABLE>
<CAPTION>
Tangible Capital Core Capital Risk-Based Capital
Amount Amount Amount
Thousands Percent Thousands Percent Thousands Percent
<S> <C> <C> <C> <C> <C> <C>
Capital for regulatory purposes Sept.
30, 1997 $46,750 12.0% $46,750 12.0% $49,560 17.5%
Minimum regulatory requirement 5,837 1.5% 11,674 3.0% 22,663 8.0%
Excess 40,913 10.5% 35,076 9.0% 26,897 9.5%
</TABLE>
NON PERFORMING ASSETS AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
Non performing assets, comprised of non-accrual loans, other real estate owned
and loans for which payments are more than 90 days past due, totaled $8.2
million at September 30, 1997, as compared to $7.5 million at December 31, 1996.
In addition, non performing assets as a percentage of total loans and other real
estate owned was 2.71% and 2.33 % at September 30, 1997 and December 31, 1996,
respectively.
Management considers the size and character of the loan portfolio, changes in
non-performing and past due loans, historical loan loss experience, the existing
risk of individual loans, concentrations of loans to specific borrowers and
existing and prospective economic conditions when determining the adequacy of
the allowance for loan losses. The allowance for loan losses totaled $2.6
million (.96% of loans outstanding) at 12/31/96 and $2.2 million (.74% of loans
outstanding) at 9/30/97. The reduction in the ratio is primarily the result of
loan growth for the first nine months of 1997. Management believes the allowance
for loan losses is adequate to absorb loss in the portfolio.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
ITEM 5. OTHER INFORMATION
In October 1997, the Savings Bank filed an application with the
Georgia Department of Banking and Finance to convert from a federal
savings bank to a state-chartered commercial bank.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed herewith:
Exhibit 27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter ended
September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNITY FIRST BANKING COMPANY
Date: November 12, 1997 /s/ Gary D. Dorminey
--------------------------
Gary D. Dorminey
President
(Principal Executive Officer)
Date: November 12, 1997 /s/ C. Lynn Gable
-------------------------
C. Lynn Gable
Chief Financial Officer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 11,215,068
<INT-BEARING-DEPOSITS> 833,025
<FED-FUNDS-SOLD> 13,625,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43,779,376
<INVESTMENTS-CARRYING> 6,317,076
<INVESTMENTS-MARKET> 6,300,016
<LOANS> 296,244,465
<ALLOWANCE> 2,222,102
<TOTAL-ASSETS> 394,569,823
<DEPOSITS> 315,020,989
<SHORT-TERM> 800,155
<LIABILITIES-OTHER> 2,519,058
<LONG-TERM> 5,992,235
0
0
<COMMON> 24,136
<OTHER-SE> 70,237,384
<TOTAL-LIABILITIES-AND-EQUITY> 394,569,823
<INTEREST-LOAN> 19,708,250
<INTEREST-INVEST> 2,846,912
<INTEREST-OTHER> 787,817
<INTEREST-TOTAL> 23,342,979
<INTEREST-DEPOSIT> 10,861,259
<INTEREST-EXPENSE> 11,553,444
<INTEREST-INCOME-NET> 11,789,535
<LOAN-LOSSES> 623,810
<SECURITIES-GAINS> 27,417
<EXPENSE-OTHER> 11,096,635
<INCOME-PRETAX> 2,858,646
<INCOME-PRE-EXTRAORDINARY> 1,920,666
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,920,666
<EPS-PRIMARY> 0.41
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 1,759,949
<LOANS-PAST> 0
<LOANS-TROUBLED> 431,720
<LOANS-PROBLEM> 1,027,000
<ALLOWANCE-OPEN> 2,601,120
<CHARGE-OFFS> 601,152
<RECOVERIES> 222,134
<ALLOWANCE-CLOSE> 2,222,102
<ALLOWANCE-DOMESTIC> 2,222,102
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
