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, 1999
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Exchange Act
For the transition period from ______ to ______
Commission File Number: 0-22543
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 26, 1999, there
were 3,282,054 shares issued and 2,580,258 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, 1999 (unaudited) and
December 31, 1998
Consolidated Statements of Earnings for the Three Months Ended
March 31, 1999 and 1998 (unaudited)
Consolidated Statements of Comprehensive Income for the Three
Months Ended March 31, 1999 and 1998 (unaudited)
Consolidated Statements of Cash Flows for the Three Months Ended March
31, 1999 and 1998 (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>
March 31, December 31,
Assets 1999 1998
(Unaudited)
<S> <C> <C>
Cash and due from banks ......................................... 7,052 10,883
Interest-bearing deposits in financial institutions ............. 720 3,553
Federal funds sold .............................................. 15,070 18,300
------ ------
Cash & cash equivalents ...................................... 22,842 32,736
Securities available for sale ................................... 69,851 71,702
Securities held to maturity ..................................... 212 232
Other investments ............................................... 3,400 2,328
Mortgage loans held for sale .................................... 204 199
Loans, net ...................................................... 268,079 264,855
Premises & equipment net ........................................ 8,016 8,160
Accrued interest receivable ..................................... 2,556 2,558
Other real estate and repossessions ............................. 5,334 5,479
Other assets .................................................... 4,432 3,737
----- -----
Total assets ................................................. 384,926 391,986
======= =======
Liabilities and Stockholders' Equity
Deposits:
Demand ........................................................ 16,304 13,611
Interest-bearing demand ....................................... 51,136 52,644
Savings ....................................................... 32,837 31,630
Time .......................................................... 150,057 146,603
Time, over $100,000 ........................................... 42,736 41,449
------ ------
Total deposits ............................................. 293,070 285,937
Note payable and other borrowings ............................... 60,880 47,945
Subordinated debentures ......................................... 900 900
Payable for branch sales ........................................ - 27,461
Accrued interest payable & other liabilities .................... 3,715 3,619
------- -------
Total liabilities .......................................... 358,565 365,862
------- -------
Stockholders' Equity:
Convertible preferred stock, par value $.01, 96,542 shares issued 1 1
Common stock, $.01 par, 10,000,000 authorized, 3,282,054 issued . 33 33
Additional paid in capital ...................................... 13,522 13,481
Unearned ESOP and MRP shares .................................... (3,897) (4,196)
Retained earnings ............................................... 27,107 26,611
Treasury stock at cost .......................................... (9,369) (9,021)
Accumulated other comprehensive income (loss) ................... (1,036) (785)
------ ----
Total stockholders' equity ................................. 26,361 26,124
------ ------
Total liabilities & stockholders' equity ........................ 384,926 391,986
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
COMMUNITY FIRST BANKING COMPANY
Consolidated Statement of Earnings
(Unaudited)
(In thousands of dollars - except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Interest income:
Interest and fees on loans ....................................... 6,251 6,605
Interest-bearing deposits and federal funds sold ................. 179 364
Interest and dividends on investment securities:
U.S. Treasury ................................................. 45 45
U.S. Govt. agency and mortgage-backed ......................... 938 867
State, county & municipals .................................... 29 29
Other ......................................................... 89 78
----- -----
Total interest income ....................................... 7,531 7,988
----- -----
Interest Expense:
Interest on deposits:
Demand ........................................................ 272 353
Savings ....................................................... 165 300
Time .......................................................... 2,598 2,901
----- -----
3,035 3,554
Interest on note payable and other borrowings..................... 957 264
----- -----
Total interest expense ................................. 3,992 3,818
----- -----
Net interest income ............................... 3,539 4,170
Provision for loan losses ........................................ 172 153
----- -----
Net interest income after provision for loan losses .... 3,367 4,017
----- -----
Noninterest income:
Service charges on deposits ................................... 582 697
Gain (Loss) on sales of securities available for sale ......... - 51
Insurance commissions ......................................... 195 252
Miscellaneous ................................................. 244 189
----- -----
Total noninterest income ............................... 1,021 1,189
----- -----
Noninterest expenses:
Salaries and employee benefits ................................ 1,553 1,851
ESOP & MRP expense ............................................ 370 426
Occupancy and equipment ....................................... 375 559
Deposit insurance premiums .................................... 45 46
Other operating expense ....................................... 985 1,283
----- -----
Total noninterest expense ............................... 3,328 4,165
----- -----
Earnings before income tax expense ...................... 1,060 1,041
Income tax expense ............................................... 297 334
----- -----
Net earnings ...................................... 763 707
===== =====
Basic earnings per share ......................................... 0.30 0.17
Diluted earnings per share ....................................... 0.28 0.17
</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,
1999 1998
---- ----
<S> <C> <C>
Net earnings ................................................................. 763 707
--- ---
Other comprehensive income (loss), net of income taxes:
Unrealized gains (losses) on securities available for sale ................. (404) 598
Income tax on unrealized gains (losses) .................................... (153) 366
---- ---
Unrealized gains (losses) arising during the period, net of tax .......... (251) 964
---- ---
Reclassification adjustment for gains included in net earnings ............ - 51
Income tax on reclassification adjustments ................................ - 17
---- ---
Reclassification adjustment for gains included in net earnings, net of tax - 34
---- ---
Other comprehensive income (loss)........................................ (251) 930
---- ---
Comprehensive income ......................................................... 512 1,637
==== =====
</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,
1999 1998
---- ----
In thousands
<S> <C> <C>
Cash flows from operating activities:
Net earnings 763 707
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation, amortization and accretion 249 329
Provision for loan losses 172 153
Deferred income tax benefit - (15)
Gain on calls and sales of securities available for sale - (51)
Gain on sale of other real estate (58) -
Loss (gain) on sales of premises and equipment, net (15) -
ESOP and MRP compensation expense 370 450
Change in:
Mortgage loans held for sale (5) (1,618)
Accrued interest receivable 2 (28)
Other real estate owned - (73)
Other assets (695) (467)
Accrued interest payable 12 288
Other liabilities 84 524
------- -------
Net cash provided by (used in) operating activities 879 199
------- -------
Cash flows from investing activities:
Proceeds from sales of securities available for sale - 8,051
Proceeds from maturities of securities held to maturity 20 51
Proceeds from maturities of securities available for sale 4,370 -
Purchases of other investments (1,072) (60)
Purchases of securities available for sale (2,998) (49,066)
Net change in loans (3,324) 12,433
Proceeds from sale of real estate and repossessions 311 -
Proceeds from sales of premises and equipment 15 -
Purchases of premises and equipment (87) (336)
------- -------
Net cash provided by (used in) investing activities (2,758) (28,927)
------- -------
Cash flows from financing activities:
Net change in demand and savings deposits 2,392 3,546
Net change in time deposits 4,741 (2,561)
Payment of FHLB advances (10,065) (440)
Proceeds from FHLB advances 24,000 40,000
Change in payable for branch sales (27,461) -
Payment of note payable (1,000) -
Treasury stock purchased (348) (11,078)
Cash dividend paid (267) (294)
------- -------
Net cash provided by financing activities (8,008) 29,173
------- -------
Net change in cash and cash equivalents (9,894) 445
------- -------
Cash and cash equivalents at beginning of year 32,736 30,284
------- -------
Cash and cash equivalents at quarter end 22,842 30,729
======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
<TABLE>
<CAPTION>
Three months ended
Supplemental disclosure of cash flow information: March 31,
1999 1998
---- ----
Cash paid for: In thousands
<S> <C> <C>
Interest 3,980 3,530
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 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 to a Georgia chartered state
commercial bank regulated by the Georgia Department of Banking and Finance and
concurrently changed the name of the institution to Community First Bank (the
"Bank").
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements (except for
statements of financial condition on December 31, 1998, 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. Certain
amounts in the prior year's financial statements have been reclassified to
conform with the 1999 presentation. These reclassifications had no effect on net
income. 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, 1999 are not
necessarily indicative of the results of operations that may be expected for the
year ended December 31, 1999. 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, 1998.
NOTE 3. EARNINGS PER COMMON SHARE
On January 21, 1999, the Company's Board of Directors declared a two-for-one
common stock split to be effected in the form of a 100% stock dividend to be
distributed on February 16, 1999 to holders of record on February 1, 1999.
Accordingly, all references to common shares outstanding and per share data
throughout the consolidated financial statements (except data related to
treasury shares) have been restated to reflect the stock split.
Earnings per common share calculations for the three month period ended March
31, 1999 and 1998 are presented based on the net earnings for the three months
divided by the weighted average number of shares outstanding, or 2,561,707
shares (three months ended March 31, 1999) and 4,111,488 shares (three months
ended March 31, 1998). Diluted earnings per common share takes into account the
effect of dilution from the assumed exercise of all outstanding stock options
and awards. 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 2,757,297 and 4,155,692 shares for the three months ended March 31,
1999 and 1998 respectively.
NOTE 4. DIVIDENDS DECLARED
On March 18, 1999 the Board of Directors of the Company approved a cash dividend
of $.11 per share payable April 1, 1999 for stockholders of record on March 18,
1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1999 AND MARCH 31, 1998
On March 31 ,1999 the Company had total assets of $384.9 million compared to
$392.0 million at December 31, 1998. This decrease in assets of $7.1 million or
1.8% is primarily due to a decrease in cash and cash equivalents of $9.9 million
which was partially offset by an increase in net loans of $3.2 million.
Securities available for sale decreased $1.9 million because of maturities.
Other assets increased $1.1 million from the purchase of FHLB stock required to
be purchased as a result of the additional advances obtained from the FHLB
during the first quarter of 1999.
Total deposit liabilities increased $7.1 million from December 31, 1998 to March
31, 1999. Certificate of deposits increased $4.7 million while demand deposits
and savings increased $2.4 million. These increases resulted primarily from
offering a new certificate of deposit product, and increased marketing efforts
of demand deposit accounts through increased advertising and employee
incentives.
Note payable and other borrowings increased $12.9 million during the period
December 31, 1998 to March 31, 1999. On January 4, 1999 the Bank borrowed $24
million from the FHLB on a daily rate credit to help fund the payable for the
sale of the Wal*Mart branches that was effective December 31, 1998. On March 16,
1999 the Bank paid $10 million to the FHLB on this credit. On February 24, 1999
the Company paid $1 million on the line of credit owed to another financial
institution.
Stockholders equity increased $237,000 during the three months ended March 31,
1999. Retained earnings increased $496,000 from earnings of $763,000 less
dividends paid of $267,000. Treasury stock increased $348,000 from the purchase
of 17,418 shares at an average price of $19.98 per share. Amortization of
unearned ESOP shares and MRP awards increased equity by $299,000. Accumulated
other comprehensive loss increased $251,000 as the result of the market value
adjustment of available for sale securities. Additional paid in capital
increased from the amortization of the MRP awards and the market value
adjustment of the ESOP shares committed to be released.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND 1998
GENERAL. Net earnings totaled $763,000 for the three months ended March 31,
1999, an increase of $56,000 or 7.9% over the $707,000 earned in the same three
months in 1998. This increase is primarily the result of lower non-interest
expense incurred during the three months ended March 31, 1999 ($3,328,000)
compared to the same three months of 1998 ($4,165,000). This reduction in
expenses was offset by lower net interest income. These and other significant
fluctuations are discussed below.
NET INTEREST INCOME. Net interest income for the three months ended March 31,
1999 decreased $631,000 or 15.1% compared to the same three-month period in
1998. Total interest income decreased $457,000 or 5.7%, while interest expense
increased $174,000 or 4.6%. The decrease in earnings on interest bearing assets
was caused by a smaller loan portfolio and higher levels of investment
securities producing lower yields. The loan portfolio mix continues to move away
from residential mortgage loans and into higher yielding commercial loans. The
average balance of loans by type for the first quarters of 1999 and 1998 were as
follows:
Average Balances
Three Months Ended
March 31,
1999 1998
---- ----
(In thousands)
Mortgage loans 113,822 120,065
Consumer loans 54,548 63,762
Credit card loans 3,239 4,079
Commercial loans 103,049 92,906
------- -------
274,658 280,812
======= =======
Interest and fee income on loans decreased $354,000 or 5.4% in the first quarter
1999 compared to the same quarter in 1998, while the average balance of loans
decreased $6.2 million or 2.2%. Interest income on federal funds sold and
interest bearing deposits decreased $185,000 or 50.8% for the three months ended
March 31, 1999 compared to the same three months of 1998. This decrease in
income on fed funds and deposits resulted from use of funds not needed for
liquidity being applied to reduce debt of the Bank and Company during the first
three months on 1999.
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, 1999 and
1998 was 3.94% and 3.90% respectively. This 4 basis point increase in the spread
resulted primarily from the lower rates paid on all deposits and debt. This was
offset by a decrease in rates earned on interest bearing assets. Average yields
paid on total funding sources decreased by 35 basis points for the quarter ended
March 31, 1999 compared to the same quarter in 1998, and average rates earned on
interest bearing assets decreased by 32 basis points.
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, 1999 and 1998. (dollars in thousands)
<TABLE>
<CAPTION>
Quarter ended March 31, 1999 Quarter ended March 31, 1998
Average Interest Effective Average Interest Effective
Balance Yield Rate Balance Yield Rate
<S> <C> <C> <C> <C> <C> <C>
Loans 271,689 6,251 9.33% 277,912 6,605 9.64%
Interest Bearing Deposits & FF Sold 14,213 179 5.11% 25,238 364 5.84%
Securities 74,600 1,101 5.99% 65,485 1,019 6.31%
- -----------------------------------------------------------------------------------------------------------------------------------
360,502 7,531 8.47% 368,635 7,988 8.79%
- -----------------------------------------------------------------------------------------------------------------------------------
Demand Deposits 65,308 272 1.69% 53,906 353 2.66%
Savings 32,117 165 2.08% 39,017 300 3.11%
Certificates of Deposit 189,591 2,598 5.56% 205,145 2,901 5.73%
Borrowings 69,831 957 5.56% 18,745 264 5.72%
- -----------------------------------------------------------------------------------------------------------------------------------
356,847 3,992 4.54% 316,813 3,818 4.89%
- -----------------------------------------------------------------------------------------------------------------------------------
Net interest income & spread 3,539 3.94% 4,170 3.90%
</TABLE>
PROVISION FOR LOAN LOSSES. The provision for loan losses was $172,000 for the
three months ended March 31, 1999 compared to $153,000 for the three months
ended March 31, 1998. At March 31, 1999, the loan loss reserve was $3.0 million
or 1.1% of total loans compared to $2.9 million or 1.0% of total loans at March
31, 1998. Management deemed the allowance for loan losses adequate at March 31,
1999.
NONPERFORMING ASSETS AND PAST DUE LOANS. Nonperforming assets, comprised of
non-accrual loans (loans on which payments are more than 90 days past due) and
other real estate owned totaled $6.2 million or 1.6% of total assets at March
31, 1999, and $7.3 million or 1.7% of total assets at March 31, 1998. The
majority of nonperforming assets or $4.9 million at March 31, 1999 and 1998 were
the result of foreclosure on five loans to one borrower represented by several
parcels of undeveloped land and a residence with acreage. On April 30, 1999, the
sale of the largest parcel of undeveloped land was completed. The sales price
was approximately $4.4 million. No gain will be realized until the completed
sale of the remaining properties. However, future periods will be positively
impacted by the conversion of $4.4 million into an earning asset.
OTHER INCOME. Total noninterest income decreased $168,000, or 14.1%, for the
three months ended March 31, 1999 versus the same three months in 1998. Service
charges on deposits decreased $115,000 or 16.5% for the first quarter of 1999
verses the same period in 1998 primarily because of the reduction in demand
deposit accounts related to the sale of three Wal*Mart branches on 12-31-98.
Income from insurance commissions decreased $57,000 or 22.6% for the three
months ended March 31, 1999 versus the same three months in 1998 as a result of
lower loan volume and stricter underwriting standards. Miscellaneous income
increased $55,000 for the quarter ended March 31, 1999 compared to the same
three months in 1998 primarily from the recognition of the gain on sale of other
real estate owned totaling $48,000.
NONINTEREST EXPENSES. Total noninterest expenses decreased $837,000 or 20.1% for
the three months ended March 31, 1999 as compared to the same three months in
1998. This decrease was primarily the result of reduced compensation, employee,
occupancy and other operating expenses resulting from the sale of three Wal*Mart
branches on December 31, 1998 in addition to the continuation of cost saving
measures initiated during 1998.
INCOME TAXES. Income tax expense for the quarter ended March 31, 1999 was
$297,000 or 28.1% of pretax income and $334,000 or 32.1% of pretax income for
the same three month period in 1998. The difference between these rates and the
statutory rate is primarily the result of interest income on tax exempt
securities and dividend received deduction on government agency preferred
stocks.
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,
1999, the Bank had outstanding advances from the FHLB of Atlanta in the amount
of $56.9 million. Such advances were used in the Bank's normal operations and
investing activities.
As of March 31, 1999 the Bank's regulatory capital was in excess of all
applicable regulatory requirements. At March 31, 1999, the Bank's total
risk-based capital, tier 1 risk-based capital and tier 1 leverage ratios
amounted to 11.2%, 10.2% and 7.2%, 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 (Plan) has been approved by the
Board of Directors which addresses whether our computer, communications and
other operating systems will operate accurately after December 31, 1999. The
Plan addresses internal and external interfaces with third party computer
systems that communicate with our system. A committee, chaired by a member of
senior management, has been established to administer the Plan.
The Company continues to refine its Year 2000 Plan begun in the latter part of
1997. The Federal Financial Institutions Examination Council (FFIEC) has
established key milestones for the testing phase. The Company's status toward
meeting those milestones are as follows:
06/30/98 Institutions should complete the development of written testing
strategies and plans. 100% COMPLETE
09/01/98 Testing of internal mission-critical systems should have started.
100% COMPLETE
12/31/98 Testing of internal mission-critical systems should be
substantially complete. Service providers should be ready to test with
customers. 100% COMPLETE (Service providers have completed proxy testing of
mission critical systems)
03/31/99 Testing with service providers should be substantially complete.
Testing with other third parties should be underway. 95% COMPLETE (Third
party testing of non-mission critical systems will be completed by
06/30/99)
06/30/99 Testing and implementation of all mission-critical systems should
be complete. 100% COMPLETE
The original budget for expenses associated with Year 2000 upgrades and
implementation has remained feasible. All mission critical hardware and software
necessary to bring the Company into Y2K compliance has been purchased and
tested. Approximately 85% of this equipment has been installed with the other
15% scheduled for completion before 6/30/99.
Management has been reviewing all of the Bank's significant commercial loan
relationships to determine how much Y2K risk may exist in the Bank's customer
base. To the extent that such risk is identified, management will request such
customers to develop their own compliance strategy and will require those
customers to keep us informed of their progress. Management's current plans are
to help the Bank's customers understand the risks involved, to share the Bank's
strategies and to encourage those customers to satisfy their compliance
requirements on time lines that are consistent with those of the Bank. The
Bank's loan agreements and credit review processes have been modified to address
this risk. The Bank's contingency plans for customers who fail to adequately
address this risk may include but will not be limited to requiring such
customers to pay off their loans.
As part of its normal business practices, the Company maintains contingency
plans in the event of emergency situations, some of which could arise from Y2K
related problems. The Company has formulated a detailed Y2K contingency plan
which assesses several possible scenarios to which the Company may be required
to react. However, the Company believes that it is not possible to know with
complete certainty all Y2K problems that could affect the Company.
The most reasonable likely worst case Y2K scenario would be one in which
electrical service or phone service is disrupted for an extended period of time.
As noted above, the Company's computer hardware and software, its commercial
customer risk and its third party vendors/supplier risk is progressing as
planned. However, the Company cannot accurately predict how many failures
related to the Y2K problem will occur with its suppliers, customers or other
third parties or the severity, duration or financial consequences of such
failures. As a result, it is possible the Company could suffer the following
consequences:
o A number of operational inconveniences and inefficiencies for the
Company, its service providers or its customers that may divert the
Company's time and attention and financial and human resources from
its ordinary business activities.
o System malfunctions that may require significant efforts by the
Company, its service providers or its customers to prevent or
alleviate material business disruptions.
Even if the Company does not incur significant costs in connection with
responding to Y2K issues, there can be no assurance that the failure or delay of
the Company's customers, vendors or other third parties in addressing these
issues or the costs involved in such process will not have a material adverse
effect on the Company's business, financial condition and results of operations.
The foregoing are forward-looking statements reflecting management's current
assessments and estimates with respect to the Company's Y2K compliance efforts
and the impact of Y2K issues on the Company's business and operations. Various
factors could cause actual plans and results to differ materially from those
contemplated by such assessments, estimates and forward-looking statements, many
of which are beyond the control of the Company. Some of these factors include,
but are not limited to, representations by the Company's vendors and customers,
technological advances, economic considerations and consumer perceptions. The
Y2K compliance program is an ongoing process involving continual evaluation and
may be subject to change in response to new developments.
The Company has also been subject to regulatory review of its overall Year 2000
Plan and will continue to be monitored by its regulators for its progress.
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
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, 1999.
<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 7, 1999 /s/ Gary D. Dorminey
----------------------
Gary D. Dorminey
President
(Principal Executive Officer)
Date: May 7, 1999 /s/ C. Lynn Gable
-------------------
C. Lynn Gable
Chief Financial Officer
(Principal Financial Officer)
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