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 March 31, 1998
[ ] 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 April 30, 1998, there
were 2,154,094 shares issued and 1,973,975 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 March 31, 1998 (unaudited) and December
31, 1997
Consolidated Statements of Earnings for the Three Months Ended March 31,
1998 and 1997 (unaudited)
Consolidated Statements of Comprehensive Income for the Three Months Ended
March 31, 1998 and 1997 (unaudited)
Consolidated Statements of Cash Flows for the Three Months Ended March 31,
1998 and 1997 (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>
COMMUNITY FIRST BANKING COMPANY
Consolidated Balance Sheets
(In thousands of dollars)
<TABLE>
<CAPTION>
ASSETS Unaudited
March 31 December 31
1998 1997
---- ----
<S> <C> <C>
Cash and due from banks ......................................... 10,138 10,766
Interest-bearing deposits in financial institutions ............. 1,566 1,863
Federal funds sold and repurchase agreements .................... 19,025 17,655
------ ------
Cash & cash equivalents ...................................... 30,729 30,284
Securities available for sale ................................... 91,185 49,492
Securities held to maturity ..................................... 5,954 6,006
Other investments ............................................... 2,328 2,269
Mortgage loans held for sale .................................... 2,407 789
Loans, net ...................................................... 271,016 283,602
Premises & equipment net ........................................ 9,077 9,095
Accrued interest receivable ..................................... 3,196 3,169
Other real estate ............................................... 6,701 6,628
Other assets .................................................... 3,428 2,959
======== ========
Total assets ................................................. 426,021 394,293
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand ........................................................ 16,227 18,734
Interest-bearing demand ....................................... 55,833 51,198
Savings ....................................................... 39,691 38,273
Time .......................................................... 160,219 161,431
Time, over $100,000 ........................................... 44,545 45,895
-------- --------
Total deposits ............................................. 316,515 315,531
Federal Home Loan Bank advances ................................. 45,055 5,495
Subordinated debentures ......................................... 900 900
Accrued interest payable & other liabilities .................... 4,126 3,329
-------- --------
Total liabilities .......................................... 366,596 325,255
-------- --------
Stockholders' Equity:
Convertible preferred stock, par value $.01, 96,542 shares issued 2,064 --
Common stock, $.01 par, 10,000,000 authorized, 2,154,094 issued. 22 24
Additional paid in capital ...................................... 36,121 47,040
Unearned ESOP shares and stock awards ........................... (5,243) (3,476)
Retained earnings ............................................... 25,137 24,725
Accumulated other comprehensive income .......................... 1,324 725
-------- --------
Total stockholders' equity ................................. 59,425 69,038
======== ========
Total liabilities & stockholders' equity ........................ 426,021 394,293
======== ========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
COMMUNITY FIRST BANKING COMPANY
Consolidated Statements of Earnings
(Unaudited)
(In thousands of dollars - except per share data)
<TABLE>
<CAPTION>
Three months ended
March 31
1998 1997
-------------
<S> <C> <C>
Interest income:
Interest and fees on loans ..................................... 6,605 6,241
Interest-bearing deposits and federal funds sold ............... 364 152
Interest and dividends on investment securities:
U.S. Treasury ............................................... 45 7
U.S. Govt. agency and mortgage-backed ....................... 867 798
State, county & municipals .................................. 29 28
Other ....................................................... 78 47
----- -----
Total interest income ..................................... 7,988 7,273
----- -----
Interest Expense:
Interest on deposits:
Demand ...................................................... 353 361
Savings ..................................................... 300 253
Time ........................................................ 2,901 2,922
----- -----
3,554 3,536
----- -----
Interest on FHLB advances & subordinated debentures ........... 264 261
----- -----
Total interest expense .................................... 3,818 3,797
----- -----
Net interest income ....................................... 4,170 3,476
----- -----
Provision for loan losses ...................................... 154 95
----- -----
Net interest inc. after provision for loan losses .... 4,016 3,381
----- -----
Noninterest income:
Service charges on deposits ................................. 697 605
Gain on call of securities available for sale ............... 51 --
Miscellaneous ............................................... 427 207
----- -----
Total noninterest income ............................. 1,175 812
----- -----
Noninterest expenses:
Salaries and employee benefits .............................. 1,851 1,803
ESOP & retirement expense ................................... 426 --
Occupancy and equipment ..................................... 559 544
Deposit insurance premiums .................................. 46 12
Other operating expense ..................................... 1,267 1,278
----- -----
Total noninterest expense ............................. 4,149 3,637
----- -----
Earnings before income tax expense .................... 1,042 556
Income tax expense ............................................. 335 188
----- -----
Net earnings .................................... 707 368
===== =====
Basic earnings per common share ................................ 0.34 N/A
Diluted earnings per common share .............................. 0.34 N/A
Dividends per common share ..................................... 0.15 N/A
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
COMMUNITY FIRST BANKING COMPANY
Consolidated Statements of Comprehensive Income
(Unaudited - in thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1998 1997
--------------------
<S> <C> <C>
Net earnings.................................................................... 707 368
Other comprehensive income, net of income taxes:
Unrealized gains on securities available for sale:
Unrealized gains arising during the period, net of tax
of $326 and $152, respectively............................................ 633 295
Less: Reclassification adjustment for gains included
in net earnings, net of tax of $17.......................................... (34) --
--- ---
Other comprehensive income...................................................... 599 295
--- ---
COMPREHENSIVE INCOME ........................................................... 1,306 663
===== =====
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
COMMUNITY FIRST BANKING COMPANY
Consolidated Statements of Cash Flows
(Unaudited - in thousands of dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31
1998 1997
-----------------
<S> <C> <C>
Net earnings ................................................................................................. 707 368
Adjustments to reconcile net earnings to net cash provided by (used in) operating activities:
Depreciation, amortization and accretion ................................................................... 328 336
Provision for loan losses .................................................................................. 153 95
Gain on call of securities available for sale .............................................................. (51) --
ESOP and stock award compensation expense .................................................................. 450 --
Change in:
Mortgage loans held for sale ............................................................................. (1,618) (286)
Accrued interest receivable .............................................................................. (28) (783)
Other real estate owned .................................................................................. (73) (359)
Other assets ............................................................................................. (482) (177)
Accrued interest payable ................................................................................. 288 127
Accrued expenses and other liabilities ................................................................... 525 503
------- -------
Net cash provided by (used in) operating activities ................................................... 199 (176)
------- -------
Cash flows from investing activities:
Proceeds from sales and calls of securities available for sale ............................................. 8,051 534
Proceeds from maturities of securities held to maturity .................................................... 51 1,126
Purchases of other investments ............................................................................. (60) --
Proceeds from sales of other investments ................................................................... -- 219
Purchases of securities available for sale ................................................................. (49,066) (9,850)
Net change in loans ........................................................................................ 12,433 (7,340)
Proceeds from sale of real estate .......................................................................... -- 9
Purchases of premises and equipment ........................................................................ (336) (833)
------- -------
Net cash used in investing activities ................................................................. (28,927) (16,135)
------- -------
Cash flows from financing activities:
Net change in demand and savings deposits .................................................................. 3,545 10,873
Net change in time deposits ................................................................................ (2,560) 1,520
Payment of FHLB advances ................................................................................... (440) (65)
Proceeds from borrowing of FHLB advances ................................................................... 40,000 --
Treasury stock purchases ................................................................................... (11,078) --
Cash dividend paid ......................................................................................... (294) --
------- -------
Net cash provided by financing activities .............................................................. 29,173 12,328
------- -------
Net change in cash and cash equivalents ................................................................ 445 (3,983)
------- -------
Cash and cash equivalents at beginning of year ............................................................... 30,284 23,097
------- -------
Cash and cash equivalents at quarter end ..................................................................... 30,729 19,114
======= =======
Supplemental disclosure of cash flow information:
Cash paid for:
Interest ................................................................................................ 3,530 3,671
Income taxes ............................................................................................ 350 --
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
COMMUNITY FIRST BANKING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1. NATURE OF BUSINESS
GENERAL
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 100% of the outstanding capital stock of Carrollton Federal Bank,
FSB (the "Savings Bank"). The Savings Bank was organized on August 1, 1994 as a
federal savings bank subsidiary of CF Mutual Holdings (the "Mutual Holding
Company"), a federally chartered mutual holding company. Prior to that date, the
predecessor of the Savings Bank had operated as a mutual savings bank since
1929.
On June 27, 1997, a plan of conversion and reorganization (the
"Conversion") whereby the Company became the unitary holding company for the
Savings Bank and the dissolution of the Mutual Holding Company was completed.
On December 29, 1997, the Savings Bank converted from a federal savings
bank regulated by the Office of Thrift Supervision (the "OTS") to a Georgia
chartered state commercial bank regulated by the Georgia Department of Banking
and Finance (the "Georgia Department") and concurrently changed the name of the
institution to Community First Bank (the "Bank").
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 on December 31, 1997, which are audited) have
been prepared in accordance with instructions to Form 10Q. 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
accompanying consolidated financial statements include the accounts of the
Company and the Bank. All significant intercompany items have been eliminated.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results of operations that may be expected for the
year ended December 31, 1998. The accompanying consolidated financial statements
and related notes of Community First Banking Company and subsidiary should be
read in conjunction with the audited consolidated financial statements and
related notes included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
NOTE 3. EARNINGS PER COMMON SHARE
Earnings per common share calculations for the three month period ended March
31, 1998 are presented based on the net earnings for the three months divided by
the weighted average number of shares outstanding, or 2,055,744 shares. Net
earnings per common share are not presented for the three months ended March 31,
1997 since shares issued in conjunction with the conversion and offering were
not outstanding for the period. Diluted earnings per common share takes into
account the effect of dilution from the assumed exercise of all outstanding
stock options. Diluted earnings per common share is calculated by dividing net
earnings by the average number of common shares outstanding adjusted for the
incremental shares resulting from the exercise of dilutive options during the
period, or 2,077,846 shares.
NOTE 4. RECENTLY ISSUED ACCOUNTING STANDARDS
On January 1, 1998, The Company adopted Statement of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income". This Statement establishes
standards for the reporting and display of comprehensive income and its
components in the financial statements. Comprehensive income is defined as the
change in equity of a business enterprise during a period from transactions and
other events and circumstances from nonowner sources. For the Company,
comprehensive income includes net income reported in the statements of earnings
and changes in the fair value of securities available for sale reported as a
component of stockholders' equity.
In February 1998, the Financial Accounting Standards Board issued Statement No.
132, "Employer's Disclosures about Pensions and Other Postretirement Benefits".
The new statement revises employers' disclosures about pension and other
postretirement benefit plans but does not change the measurement or recognition
provisions of those plans. Statement No. 132 provides additional information to
facilitate financial analysis and eliminates certain disclosures which are no
longer useful. The statement is effective for fiscal years beginning after
December 15, 1997. The statement is not expected to have a material impact on
the consolidated financial statements of the Company.
NOTE 5. DIVIDENDS DECLARED
On February 19, 1998, the Board of Directors of the Company approved a cash
dividend of $.15 per share payable April 1, 1998 for stockholders of record on
March 15, 1998. The dividends are accrued in the March 31, 1998 consolidated
balance sheet.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1998 AND DECEMBER 31, 1997
On March 31, 1998, the Company had total assets of $426.0 million compared to
$394.3 million at December 31, 1997. This increase of $31.7 million or 8% is
primarily due to the purchase of available for sale securities which increased
$41.7 million or 84.2% during the three month period. Securities purchased were
government agency bonds issued by FHLMC and FNMA totaling $25.5 million and
Federal Home Loan Bank (FHLB) bonds totaling $14.5 million. These bonds have a
federal tax equivalent yield of 6.59% with an average duration of 4.96 years.
The purchase of bonds was funded by borrowing $40 million from the FHLB on the
Bank's available line of credit.
Net loans decreased $12.6 million or 4.4% during the first quarter of 1998. Of
this decrease, $6.9 million were mortgage loans, $2.5 million were consumer
loans, $2.7 million were commercial loans and $.4 million of credit card loans.
Mortgage loans held for sale increased $1.6 million due to an increase in
refinancing activity. These decreases in net loans can be attributed to
increased reliance on the secondary market for mortgage loans, increased
refinancing activity, more stringent underwriting criteria in regard to consumer
lending and normal seasonal fluctuation in commercial loan outstandings.
Other assets increased $.5 million primarily as a result of the purchase of an
interest rate cap on February 27, 1998. This interest rate cap was purchased as
part of an arbitrage transaction where the Bank borrowed $40 million of FHLB 7
yr./2 yr. callable advances, and purchased $40 million in bonds.
Total deposit liabilities increased $984 thousand or .3% from December 31, 1997
through March 31, 1998. Demand deposits increased $2.1 million or 3.0%, savings
deposits increased $1.4 million or 3.7% and time deposits decreased $2.6 million
or 1.2%. FHLB advances increased $39.6 million at March 31, 1998 as compared to
December 31, 1997, primarily due to the aforementioned arbitrage transaction.
Accrued interest payable and other liabilities increased $797 thousand or 23.9%
during the first quarter of 1998. This increase was primarily the result of: (i)
an increase of $288 thousand in accrued interest payable primarily due to the
increase in FHLB advances and (ii) an increase of $369 thousand in escrow
accounts.
On January 8, 1998, 96,542 shares of convertible preferred stock awards were
issued under the Management Recognition Plan. The stock awards are being
amortized as earned over a five year period.
On December 29, 1997 the Board of Directors of the Company authorized a stock
repurchase program whereby the Company intends to purchase up to 600,000 shares
of its common stock through open market purchases. In accordance with this plan,
259,468 shares of treasury stock were acquired and retired during the first
quarter 1998 at an average cost of $42.69 per share.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1998
AND 1997
GENERAL. Net earnings totaled $707 thousand for the three months ended March 31,
1998, an increase of 92.1% from the $368 thousand earned in the same three-month
period in 1997. This increase in earnings is primarily the result of an increase
of 20.0% in net interest income and an increase of 44.7% in noninterest income,
these increases were partially offset by an increase of 14.1% in non-interest
expense and an increase of 78.2% in income tax expense. These and other
significant fluctuations are discussed below.
NET INTEREST INCOME. Net interest income for the three months ended March 31,
1998 increased $694 thousand or 20.0% over the same three-month period in 1997.
Total interest income increased $715 thousand or 9.8%, while interest expense
increased $21 thousand or .6%. This increase in earnings on interest bearing
assets was caused by the change in mix of the loan portfolio, higher levels of
loans, higher levels of federal funds sold and higher levels of investment
securities. The loan portfolio is moving away from residential mortgage loans
and into higher yielding commercial and consumer loans. The average balance of
loans by type for the first quarters of 1998 and 1997 were as follows:
Average Balances
First Quarter
1998 1997
---- ----
(In thousands)
Mortgage loans 120,065 142,559
Consumer loans 63,762 63,262
Credit card loans 4,079 4,705
Commercial loans 92,906 61,799
------ ------
280,811 272,325
======= =======
Interest income on loans increased $364 thousand or 5.8% for the first quarter
1998 compared to the same quarter in 1997, while the average balance increased
$8.5 million or 3.1%. Interest income on federal funds sold and interest bearing
deposits increased $212 thousand or 139.5% for the three months ended March 31,
1998 compared to the same three months ended March 31, 1997. The average balance
of federal funds sold for the first quarter 1998 and 1997 was $25.2 million and
$11.7 million respectively. Interest income on investment securities increased
$139 thousand or 15.8% while the average balance of investment securities
increased $15.2 million or 30.1%.
The net interest rate spread measures the difference between the average yield
on earning assets and the average rate paid on interest bearing sources of
funds. The net interest rate spread for the quarters ended March 31, 1998 and
1997 was 3.90% and 3.93% respectively. This decrease was primarily the result of
the increase in the amount of investment securities and the average rates earned
on these securities. The average rate earned on investment securities decreased
by 79 basis points for the quarter ended March 31, 1998 compared to the same
quarter in 1997. This decrease was the result of higher yielding investments
being called and lower yields on newly purchased investment securities. Yields
on interest earning assets other than investment securities increased for the
three months ended March 31, 1998 compared to the three months ended March 31,
1997. Average yields paid on total funding sources decreased by 6 basis points
for the quarter ended March 31, 1998 compared to the same quarter in 1997.
The following table presents average balances and associated rates earned and
paid for all interest earning assets and interest bearing liabilities for the
three months ended March 31, 1998 and 1997. (dollars in thousands)
<TABLE>
<CAPTION>
Quarter ended March 31, 1998 Quarter ended March 31, 1997
--------------------------------------- ---------------------------------------
Average Interest Effective Average Interest Effective
Balance Yield Rate Balance Yield Rate
<S> <C> <C> <C> <C> <C> <C>
Loans net 277,912 6,605 9.64% 270,241 6,241 9.37%
Interest Bearing Deposits & FF Sold 25,238 364 5.84% 11,682 152 5.27%
Securities 65,485 1,019 6.31% 50,325 880 7.10%
- -------------------------------------------------------------------------------- ----------------------------------------
368,635 7,988 8.79% 332,248 7,273 8.88%
- -------------------------------------------------------------------------------- ----------------------------------------
Demand Deposits 53,906 353 2.66% 47,304 361 3.09%
Savings 39,017 300 3.11% 35,395 253 2.90%
Certificates of Deposit 205,145 2,901 5.73% 210,104 2,922 5.64%
Borrowings 18,745 264 5.72% 18,258 261 5.80%
- -------------------------------------------------------------------------------- ----------------------------------------
316,812 3,818 4.89% 311,062 3,797 4.95%
- -------------------------------------------------------------------------------- ----------------------------------------
Net interest income & spread 4,170 3.90% 3,476 3.93%
</TABLE>
PROVISION FOR LOAN LOSSES. The provision for loan losses was $154 thousand for
the three months ended March 31, 1998 compared to $95 thousand for the three
months ended March 31, 1997. 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. Management
deemed the allowance for loan losses adequate at March 31, 1998
NONPERFORMING ASSETS AND PAST DUE LOANS. Nonperforming assets, comprised of
nonaccrual loans (loans on which payments are more than 90 days past due) and
other real estate owned totaled $7.3 million or 1.7% of total assets at March
31, 1998, and $7.1 million or 1.9% of total assets at March 31, 1997. The
majority of nonperforming assets or $4.9 million at March 31, 1998 were the
result of foreclosure on five loans to one borrower represented by two parcels
of undeveloped land. These same loans were on nonaccrual status at March 31,
1997.
OTHER INCOME. Total noninterest income increased $363 thousand, or 44.7%, for
the three months ended March 31, 1998 versus the same three months in 1997.
Miscellaneous income for the three months ended March 31, 1998 includes a $169
thousand commission rebate on insurance sales. Gain on calls of securities
available for sale includes a $51 thousand dollar gain on the call of a FNMA
bond in the first quarter of 1998. There were no sales or calls in the first
quarter of 1997. Service charges on deposits increased $92 thousand or 15.2% for
the first quarter of 1998 verses the same period in 1997 because of the increase
in the number of transaction accounts and the fee structure on these accounts.
The number of customer demand deposit accounts of the Bank increased by 1,597
accounts or 8.4% as of March 31, 1998 compared to March 31, 1997. Fees on
transaction accounts were increased during the first quarter 1998 as the result
of an independent review of the Bank's fee structure that was performed in the
fourth quarter of 1997.
OTHER EXPENSES. Total noninterest expenses increased $512 thousand or 14.1% for
the three months ended March 31, 1998 as compared to the same three months in
1997. This increase is primarily the result of compensation expense related to
the ESOP and Management Recognition Plan which totaled $426 thousand for the
three months ended March 31, 1998. These benefits were not in place during the
same three months in 1997. Salaries and related benefits increased $48 thousand
or 2.6%, as a result of annual salary adjustments. Deposit insurance premiums
increased $34 thousand for the three months ended March 31, 1998 compared to the
same three months in 1997. This is the result of a credit for $34 thousand
received in the first quarter 1997 for overpayment of the special SAIF
assessment paid in the fourth quarter 1996. Occupancy expense has increased $15
thousand, or 2.8%, and other operating expenses, decreased $11 thousand or .9%
for the quarter ended March 31, 1998 versus the same three months in 1997.
INCOME TAXES. Income tax expense for the quarter ended March 31, 1998 was $335
thousand which reflects an effective tax rate of 32.1 percent. The same three
months in 1997 had income tax expense of $188 thousand or 33.8%. The difference
in these rates and the statutory rate is primarily the result of interest income
on tax exempt securities.
LIQUIDITY AND CAPITAL RESOURCES. The Company's liquidity, represented by cash
and cash equivalents, is a product of its operating, investing and financing
activities. The Company's primary sources of funds are deposits, amortization,
prepayments and maturities of outstanding loans, maturities of investment
securities, mortgage-backed securities and other short-term investments and
funds provided from operations. While scheduled loan amortization and maturing
investment securities, mortgage-backed securities and short-term investments are
relatively predictable sources of funds, deposit flows and loan prepayments are
greatly influenced by general interest rates, economic conditions and
competition. The Company manages the pricing of its deposits to maintain a
steady deposit balance. In addition, the Company invests excess funds in
overnight deposits and other short-term interest-earning assets which provide
liquidity to meet lending requirements. The Company has generally been able to
generate enough cash through the retail deposit market, its traditional funding
source, to offset the cash utilized in investing activities. As an additional
source of funds, the Bank may borrow from the FHLB of Atlanta. At March 31,
1998, the Bank had outstanding advances from the FHLB of Atlanta in the amount
of $45.1 million. Such advances were used in the Bank's normal operations and
investing activities.
At March 31, 1998, total stockholders' equity was $59.4 million, or 13.94% of
total assets compared to $69.0 million, or 17.5% of total assets at December 31,
1997. This decrease is primarily due to treasury stock purchases during the
first quarter of 1998 in accordance with the Company's planned stock repurchase
program.
As of March 31, 1998, the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At March 31,1998, the Bank's total
risk-based capital, tier 1 risk-based capital and tier 1 leverage ratios
amounted to 14.8%, 13.8% and 10.1%, respectively, compared to regulatory
requirements of 8.0%, 4.0% and 4.0%, respectively.
YEAR 2000 ISSUES. The Company is currently addressing the many areas affected by
the Year 2000 computer issue. A Year 2000 plan has been approved by the Board of
Directors which includes contacting all of the software vendors that maintain
the computer programs that the Company relies upon. This plan provides that the
Company will obtain assurances from these software vendors that their product
will be Year 2000 compliant. All systems potentially affected will be evaluated.
The plan also includes contacting large commercial loan customers to determine
their readiness for this issue. At this time, it is anticipated that many, if
not all of these changes, should be ready for testing by December 31, 1998.
Since many of the programs used by the Company are "off-the-shelf" as compared
to "highly customized," the cost to address these matters is not expected to
have a material impact on future operating results or financial condition. This
area is changing very rapidly and the actual results may differ from what has
been anticipated.
The Company has identified all hardware and software that need date-sensitive
testing to comply with the Year 2000 issue. Vendors and suppliers have been
contacted for information concerning their products and company's readiness for
the Year 2000 issue. The Company is utilizing both inside and outside resources
for testing of all hardware and software. The Company's main supplier of core
processing software and our core processing service provider will begin testing
of their products during the second and third quarters of 1998. The Company
internally has completed testing hardware and should have internal software
testing starting during the second quarter of 1998. All testing and corrective
processes for Year 2000 problems should be completed by December 31, 1998.
The total budget for the Year 2000 efforts has not been completed. To date,
$252,000 has been set aside to address hardware replacement and upgrades. All
expenses associated with year 2000 corrections will be expensed in the year
incurred and will be funded through normal operating cash flow.
The costs and completion dates for testing and corrections of Year 2000 problems
are based on management's best estimates, which were derived utilizing numerous
assumptions of future events including the continued availability of certain
resources, third party modification plans and other factors. However, there can
be no guarantee that these estimates will be achieved and actual results could
differ materially from those plans. Specific factors that might cause such
material differences include, but are not limited to, the availability and cost
of personnel trained in this area, the ability to locate and correct all
relevant computer programs, and similar uncertainties.
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
No matter was submitted to a vote of security holders through the
solicitation of proxies or otherwise during the quarter ended
March 31, 1998.
ITEM 5. OTHER INFORMATION
None.
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 March
31, 1998.
<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: May 12, 1998 /s/ Gary D. Dorminey
----------------------
Gary D. Dorminey
President
(Principal Executive Officer)
Date: May 12, 1998 /s/ C. Lynn Gable
-------------------
C. Lynn Gable
Chief Financial Officer
(Principal Financial Officer)
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