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Previous: COMMSCOPE INC, 424B3, 2000-11-09 |
Next: COMMUNITY FIRST BANKING CO, 10-Q, EX-27, 2000-11-09 |
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, 2000
[ ] 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
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(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 November 8, 2000, there
were 3,282,054 shares issued and 2,944,789 shares outstanding of the
Registrant's Common Stock, par value $.01 per share.
CONTENTS
PART I. FINANCIAL INFORMATION
---------------------
Item 1. Financial Statements Page
Consolidated Balance Sheets as of September 30, 3
2000 (unaudited) and December 31, 1999
Consolidated Statements of Earnings for the Three and 4
Nine Months Ended September 30, 2000 and 1999 (unaudited)
Consolidated Statements of Comprehensive Income for 5
the Three and Nine Months Ended September 30, 2000
and 1999 (unaudited)
Consolidated Statements of Cash Flows for the Nine Months 6
Ended September 30, 2000 and 1999 (unaudited)
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
COMMUNITY FIRST BANKING COMPANY Consolidated Balance Sheets (In thousands of dollars) September 30, December 31, 2000 1999 Assets (Unaudited) ---------- ---------- Cash and due from banks .......................................... 8,285 9,252 Interest-bearing deposits in financial institutions .............. 620 925 Federal funds sold ............................................... 1,770 220 ---------- ---------- Cash and cash equivalents ..................................... 10,675 10,397 Securities available for sale .................................... 60,624 64,665 Securities held to maturity ...................................... 171 184 Other investments ................................................ 3,112 3,173 Mortgage loans held for sale ..................................... 85 59 Loans, net ....................................................... 309,219 290,804 Premises and equipment net ....................................... 7,577 7,516 Accrued interest receivable ...................................... 3,392 3,005 Other real estate and repossessions .............................. 473 528 Other assets ..................................................... 4,882 5,717 ---------- ---------- Total assets .................................................. 400,210 386,048 ========== ========== Liabilities and Stockholders' Equity Deposits: Demand ......................................................... 17,322 13,029 Interest-bearing demand ........................................ 51,957 55,424 Savings ........................................................ 27,099 29,552 Time ........................................................... 144,690 144,347 Time, over $100,000 ............................................ 68,786 53,035 ---------- ---------- Total deposits .............................................. 309,854 295,387 Note payable and other borrowings ................................ 54,542 55,345 Federal funds purchased .......................................... 1,718 5,684 Accrued interest payable and other liabilities ................... 4,028 2,433 ---------- ---------- Total liabilities ........................................... 370,142 358,849 ---------- ---------- Stockholders' Equity: Convertible preferred stock, par value $.01, 96,542 shares issued - 1 Common stock, $.01 par, 10,000,000 authorized, 3,282,054 issued . 33 33 Additional paid in capital ...................................... 10,846 14,663 Retained earnings ............................................... 28,262 25,842 Treasury stock at cost .......................................... (6,666) (9,826) Accumulated other comprehensive loss, net of tax ................ (2,407) (3,514) ---------- ---------- Total stockholders' equity .................................. 30,068 27,199 ---------- ---------- Total liabilities and stockholders' equity ..................... 400,210 386,048 ========== ========== See Notes to Consolidated Financial Statements
COMMUNITY FIRST BANKING COMPANY Consolidated Statement of Earnings (Unaudited) (In thousands of dollars - except per share data) Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ------------------ ------------------ Interest income: Interest and fees on loans ...................................... 7,550 6,387 21,841 18,960 Interest-bearing deposits and federal funds sold ................ 28 93 85 404 Interest and dividends on investment securities: U.S. Treasury ................................................. -- -- -- 89 U.S. Govt. agency and mortgage-backed ......................... 993 1,035 3,051 2,890 State, county and municipals .................................. 1 1 4 60 Other ......................................................... 89 70 254 228 ------ ------ ------ ------ Total interest income ....................................... 8,661 7,586 25,235 22,631 ------ ------ ------ ------ Interest Expense: Interest on deposits: Demand ........................................................ 290 302 882 855 Savings ....................................................... 145 163 443 491 Time .......................................................... 3,130 2,578 8,634 7,788 ------ ------ ------ ------ 3,565 3,043 9,959 9,134 Interest on note payable and other borrowings .................... 1,043 747 3,083 2,415 ------ ------ ------ ------ Total interest expense ................................. 4,608 3,790 13,042 11,549 ------ ------ ------ ------ Net interest income ................................... 4,053 3,796 12,193 11,082 Provision for loan losses ........................................ 241 237 714 602 ------ ------ ------ ------ Net interest income after provision for loan losses .... 3,812 3,559 11,479 10,480 ------ ------ ------ ------ Noninterest income: Service charges on deposits ................................... 589 556 1,632 1,702 Gain (loss) on calls and sales of securities available for sale 123 -- 94 46 Insurance commissions ......................................... 153 176 528 537 Miscellaneous ................................................. 228 166 780 550 ------ ------ ------ ------ Total noninterest income ............................... 1,093 898 3,034 2,835 ------ ------ ------ ------ Noninterest expenses: Salaries and employee benefits ................................ 1,652 1,566 5,022 4,693 ESOP and MRP expense .......................................... -- 379 -- 2,721 Occupancy and equipment ....................................... 311 321 947 1,035 Deposit insurance premiums .................................... 38 40 69 124 Other operating ............................................... 850 861 2,630 2,725 ------ ------ ------ ------ Total noninterest expense ............................... 2,851 3,167 8,668 11,298 ------ ------ ------ ------ Earnings before income taxes ............................ 2,054 1,290 5,845 2,017 Income tax expense ............................................... 660 397 1,887 493 ------ ------ ------ ------ Net earnings (loss) ............................... 1,394 893 3,958 1,524 ====== ====== ====== ====== Basic earnings per share ......................................... 0.49 0.34 1.42 0.59 Diluted earnings per share ....................................... 0.49 0.32 1.42 0.55 See Notes to Consolidated Financial Statements
COMMUNITY FIRST BANKING COMPANY Consolidated Statements of Comprehensive Income (Unaudited - in thousands of dollars) Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 ----------------- ----------------- Net earnings ................................................................. 1,394 893 3,958 1,524 ----- ----- ----- ----- Other comprehensive income, net of income taxes: Unrealized gains (losses) on securities available for sale ................. 2,002 (1,046) 1,692 (3,020) Income tax on gains (losses) ............................................... (761) (397) (643) (1,147) ----- ----- ----- ----- Unrealized gains (losses) arising during the period, net of tax .......... 1,241 (649) 1,049 (1,873) ----- ----- ----- ----- Less: Reclassification adjustment for gains included in net earnings ....... 123 -- 94 46 Income tax on reclassification on adjustments ............................. 46 -- 36 17 ----- ----- ----- ----- Reclassification adjustment for gains (losses) in net earnings, net of tax 77 -- 58 29 ----- ----- ----- ----- Other comprehensive income (loss) ....................................... 1,318 (649) 1,107 (1,844) ----- ----- ----- ----- COMPREHENSIVE INCOME (LOSS) .................................................. 2,712 244 5,065 (320) ===== ===== ===== ===== See Notes to Consolidated Financial Statements.
COMMUNITY FIRST BANKING COMPANY Consolidated Statements of Cash Flows (Unaudited - in thousands of dollars) Nine Months Ended September 30, 2000 1999 ---- ---- Cash flows from operating activities: Net earnings ....................................................................... 3,958 1,524 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation, amortization and accretion ......................................... 531 726 Provision for loan losses ........................................................ 714 602 Deferred income tax expense ...................................................... 11 1,130 Loss on calls and sales of securities available for sale ......................... (94) (46) Gain on sale of other real estate ................................................ (50) (87) Gain on sales of premises and equipment, net ..................................... (45) (14) ESOP and MRP compensation expense ................................................ -- 2,721 Change in: Mortgage loans held for sale ................................................... (26) 140 Accrued interest receivable .................................................... (387) (275) Other assets ................................................................... (64) (1,386) Accrued interest payable ....................................................... 900 101 Other liabilities .............................................................. 738 31 ------ ------ Net cash provided by operating activities ................................... 6,186 5,167 ------ ------ Cash flows from investing activities: Proceeds from sales and calls of securities available for sale ................... 2,480 8,284 Proceeds from maturities of securities held to maturity .......................... 13 41 Proceeds from maturities of securities available for sale ........................ 3,375 6,055 Purchases of other investments ................................................... -- (1,920) Proceeds from sales of other investments ......................................... 61 1,210 Purchases of securities available for sale ....................................... -- (13,052) Net change in loans .............................................................. (18,976) (19,291) Proceeds from sale of real estate and repossessions .............................. -- 4,984 Proceeds from sales of premises and equipment .................................... 219 90 Purchases of premises and equipment .............................................. (583) (121) ------ ------ Net cash provided by (used in) investing activities ......................... (13,411) (13,720) ------ ------ Cash flows from financing activities: Net change in demand and savings deposits ........................................ (1,627) 4,798 Net change in time deposits ...................................................... 16,094 3,739 Payment of note payable and other borrowings ..................................... (9,803) (30,553) Proceeds of note payable and other borrowings .................................... 9,000 41,000 Federal funds purchased .......................................................... (3,966) -- Change in payable for branch sales ............................................... -- (27,461) Payment of subordinated debentures ............................................... -- (900) Treasury stock purchased ......................................................... (657) (348) Cash dividend paid ............................................................... (1,538) (828) ------ ------ Net cash provided by financing activities .................................... 7,503 (10,553) ------ ------ Net change in cash and cash equivalents ...................................... 278 (19,106) Cash and cash equivalents at beginning of year ..................................... 10,397 32,736 ------ ------ Cash and cash equivalents at quarter end ........................................... 10,675 13,630 ====== ====== Nine Months Ended September 30, Supplemental disclosure of cash flow information: 2000 1999 ---- ---- Cash paid for: In thousands Interest 10,649 11,448 Income taxes 2,198 400 Non-cash transactions: Issuance of treasury stock in connection with preferred stock conversion 3,817 See Notes to Consolidated Financial Statements.
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”).
The accompanying unaudited consolidated financial statements (except for the consolidated balance sheet of December 31, 1999, which is audited) have been prepared in accordance with instructions to Form 10 Q. 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 2000 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 and nine months ended September 30, 2000 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2000. 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, 1999.CFBC 1999 10K TXT
Earnings per common share calculations for the three and nine month periods ended September 30, 2000 and 1999 are presented based on the net earnings for the three and nine months divided by the weighted average number of shares outstanding, or 2,829,364 and 2,781,285 shares (three and nine months ended September 30, 2000) and 2,599,860 and 2,586,442 shares (three and nine months ended September 30, 1999). 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 convertible preferred stock during the period, or 2,829,364 and 2,792,944 shares for the three months ended September 30, 2000 and 1999 respectively, and 2,781,285 and 2,784,643 for the nine months ended September 30, 2000 and 1999 respectively.
On July 20, 2000, the Company's Board of Directors approved a recapitalization plan pursuant to which the holders of the Company's outstanding shares of Preferred Stock issued under its Management Recognition Plan (MRP) would exchange each of their shares of Preferred Stock for two shares of Common Stock, with cash being paid for any fractional shares of Common Stock to which the holder would otherwise be entitled. All of the holders of Preferred Stock issued under the MRP approved the recapitalization plan, and on August 24, 2000 the Board of Directors of the Company voted to convert the 96,542 shares of Convertible Preferred Stock originally issued as part of the Company's MRP into two shares of Common Stock in accordance with the existing conversion formula. The conversion of the preferred shares was accomplished by issuing a total of 193,074 shares of treasury stock with and average cost of $19.77 per share and payment of cash for 10 fractional shares.
On March 16, 2000 the Board of Directors of the Company approved a cash dividend of $.1725 per share payable April 1, 2000 for stockholders of record on March 17, 2000. On June 15, 2000 the Board of Directors of the Company approved a cash dividend of $.1725 per share payable July 1, 2000 for stockholders of record on June 16, 2000. On September 21, 2000 the Board of Directors of the Company approved a cash dividend of $.20 per share payable October 1, 2000 for stockholders of record on September 22, 2000.
On September 30, 2000 the Company had total assets of $400.2 million compared to $386.0 million at December 31, 1999. This increase in assets of $14.2 million or 3.7% is primarily due to a increase in net loans of $18.4 million or 6.3%. This increase in loans was partially offset by a $4.0 million decrease or -6.3% in available for sale securities. This $4.0 million decrease in available for sale securities resulted from maturities of $3.4 million, sales by the Company of equity securities of $2.5 million and a decrease in unrealized loss on available for sale securities of $1.9 million. On July 1, 2000 the Bank purchased a local insurance agency including all accounts of insurance, client lists, book of business, goodwill, equipment and furniture and fixtures. The insurance subsidiary of the Bank recorded a $250,000 intangible from this purchase which will be written off straight line over a ten-year period.
Total deposit liabilities increased $14.5 million or 4.9% from December 31, 1999 to September 30, 2000. Time deposits over $100,000 increased $15.8 million or 29.7% primarily from two brokered certificates of deposit of $6.0 million each received by the Bank in June 2000, and one brokered certificate of deposit of $8.7 million accepted in March 2000. These new brokered deposits were partially offset by a $9.0 million maturing brokered deposit in June 2000.
Time deposits less than $100,000 increased $343,000 or 0.2%. Interest-bearing demand deposits decreased $3.5 million or -6.3%, and demand deposits increased $4.3 million or 33.0%. Savings deposits decreased $2.5 million or -8.3% for the nine months ended September 30, 2000.
Note payable and other borrowings decreased $803,000 or -1.5% during the nine months ended September 30, 2000. This decrease resulted from additional net borrowings of $2.2 million by the Bank from the Federal Home Loan Bank (FHLB) and repayment by the Company of $3.0 million of notes payable to another financial institution. Federal funds purchased by the bank decreased $4.0 million in the nine months ended September 30, 2000.
Accrued interest payable and other liabilities increased $1.6 million in the nine months ended September 30, 2000. Accrued interest payable on certificates of deposit increased $824,000, escrow increased $369,000, and liabilities relating to employee bonuses and benefits increased $390,000.
Retained earnings increased $2.4 million during the nine months ended September 30, 2000. This increase represents earnings of $4.0 million less dividends declared of $1.5 million. Treasury stock increased $657,000 from the purchase of 37,733 shares of the Company’s stock at an average price of $17.42 per share. On August 24, 2000 193,074 shares of treasury stock with an average cost of $19.77 per share were issued to convert the convertible preferred stock to common stock as discussed under the heading “Note 3. Earnings per Common Share” above. Accumulated other comprehensive losses decreased $1.1 million during the nine months ended September 30, 2000.
GENERAL. Net earnings totaled $1.4 million for the three months ended September 30, 2000, an increase of $501,000 over the $893,000 reported in the three months ended September 30, 1999. This increase was primarily the result of three items; (1) an increase in net interest income of $257,000 for the three months ended September 30, 2000 compared to the same three months in 1999, (2) net gains on the sales of securities of $123,000 in the three months ended September 30, 2000 and (3) all the expenses associated with the ESOP and MRP being recognized prior to December 31, 1999.
NET INTEREST INCOME. Net interest income for the three months ended September 30, 2000 increased $257,000 or 6.8% compared to the same three-month period in 1999. Total interest income increased $1.1 million or 14.2%, while total interest expense increased $818,000 or 21.6%. The increase in interest income was caused primarily by higher average loan balances during the three months ended September 30, 2000 compared to the same three months in 1999. 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 third quarters of 2000 and 1999 were as follows:
Average Balances
Three Months Ended
September 30,
2000 1999
(In thousands)
Mortgage loans 79,490 87,705
Consumer loans 55,229 57,877
Construction loans 34,578 24,666
Commercial loans 142,973 110,206
------- -------
312,270 280,454
======= =======
Interest and fee income on loans increased $1.2 million or 18.2% in the third quarter of 2000 compared to the same quarter in 1999, while the average balance of loans increased $31.8 million or 11.3%. Interest income on federal funds sold and interest-bearing deposits decreased $65,000 or -69.9% for the three months ended September 30, 2000 compared to the same three months of 1999. This decrease in income on federal funds and deposits resulted from use of funds not needed for liquidity being used to fund loan demand. Interest and dividend income on investment securities decreased $23,000 or 2.1% during the three months ended September 30, 2000 compared to the same three months of 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 September 30, 2000 and 1999 was 4.19% and 4.19% respectively.
The following table presents average balances, associated rates earned and paid for all interest-earning assets and interest-bearing liabilities and variances caused by volume and rates for the three months ended September 30, 2000 and September 30, 1999. (dollars in thousands)
Three months ended Three months ended
September 30, 2000 September 30, 1999
Average Interest Effective Average Interest Effective Volume Rate Total
Balance Yield Rate Balance Yield Rate Variance Variance Variance
------- ----- ---- ------- ----- ---- --------------------------
Loans Net 308,415 7,550 9.79% 277,226 6,387 9.22% 719 444 1,163
Interest-Bearing Deposits - FF Sold 1,838 28 6.09% 6,537 93 5.69% (67) 2 (65)
Securities 65,056 1,083 6.66% 69,706 1,106 6.35% (74) 51 (23)
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375,309 8,661 9.23% 353,469 7,586 8.58% 578 497 1,075
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Demand Deposits 65,579 290 1.77% 70,830 302 1.71% (22) 10 (12)
Savings 27,967 145 2.07% 31,563 163 2.07% (19) 1 (18)
Certificates of Deposit 211,194 3,130 5.93% 191,174 2,578 5.39% 270 282 552
Borrowings 61,194 1,043 6.82% 51,857 747 5.76% 134 162 296
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365,934 4,608 5.04% 345,424 3,790 4.39% 363 455 818
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Net interest income and spread 4,053 4.19% 3,796 4.19%
Change 215 42 257
PROVISION FOR LOAN LOSSES. The provision for loan losses was $241,000 for the three months ended September 30, 2000 compared to $237,000 for the three months ended September 30, 1999. At September 30, 2000, the loan loss reserve was $3.8 million or 1.2% of total loans compared to $3.1 million or 1.1% of total loans at September 30, 1999. Management deemed the allowance for loan losses adequate at September 30, 2000.
NONPERFORMING ASSETS AND PAST DUE LOANS. Nonperforming assets, comprised of non-accrual loans (generally loans on which payments are more than 90 days past due) and other real estate owned totaled $2.5 million or 0.6% of total assets at September 30, 2000, and $1.3 million or 0.3% of total assets at September 30, 1999. This increase is primarily the result of one loan with a principal balance of $924,000 being placed on non-accrual in August of 2000. This loan is secured by 45 single family residential rental properties.
OTHER INCOME. Total noninterest income increased $195,000, or 21.7%, for the three months ended September 30, 2000 versus the same three months in 1999. Service charges on deposits increased $33,000 or 5.9% in the third quarter of 2000 verses the same period in 1999. The Company sold equity securities from its available for sale portfolio during the third quarter of 2000 for a gain of $123,000. Insurance commissions decreased $23,000 for the three months ended September 30, 2000 compared to the same three months of 1999. Miscellaneous income increased $62,000 in the third quarter of 2000 compared to the same quarter in 1999 primarily because of increased fee income from the brokerage subsidiary of the Bank.
NONINTEREST EXPENSES. Total noninterest expenses decreased $316,000 or 10.0% for the three months ended September 30, 2000 as compared to the same three months in 1999. This decrease was primarily the result of all the expenses associated with the ESOP and MRP being recognized prior to January 1, 2000. In the three months ended September 30, 1999 ESOP and MRP expense totaled $379,000. Salaries and employee benefits increased $86,000 for the three months ended September 30, 2000 compared to the same three months of 1999 because of an annual wage increase and additional health insurance accruals to cover higher costs experienced in recent months. Occupancy and equipment expense decreased $10,000. Deposit insurance premiums decreased $2,000 and other operating expense decreased $11,000 for the three months ended September 30, 2000 compared to the same three months of 1999.
INCOME TAXES. Income tax expense for the quarter ended September 30, 2000 was $660,000 or 32.1% of pretax income compared to $397,000 or 30.8% of pretax income for the same three months in 1999. The difference between these rates and the statutory rate is primarily the result of interest income on tax exempt securities and the dividend received deduction on government agency preferred stocks.
GENERAL. Net earnings totaled $4.0 million for the nine months ended September 30, 2000, compared to $1.5 million for the same nine months of 1999. This increase is primarily the result of the recognition of all the remaining unamortized MRP and ESOP expense prior to the beginning of the year 2000, and an increase in net interest income for the nine months ended September 30, 2000 compared to the same nine months of 1999. These and other significant fluctuations are discussed below.
NET INTEREST INCOME. Total interest income increased $2.6 million or 11.5%, and total interest expense increased $1.5 million or 12.9% for the nine months ended September 30, 2000 compared to the same nine months in 1999. The following is a rate volume analysis for the nine months ended September 30, 2000 and 1999 showing the average balances, yields and variances caused by volume and yields.
Nine Months ended Nine Months ended
September 30, 2000 September 30, 1999
Average Interest Effective Average Interest Effective Volume Rate Total
Balance Yield Rate Balance Yield Rate Variance Variance Variance
------- ----- ---- ------- ----- ---- --------------------------
Loans Net 303,569 21,841 9.59% 271,758 18,960 9.30% 2,219 662 2,881
Interest Bearing Deposits and FF Sold 1,775 85 6.38% 10,356 404 5.20% (335) 16 (319)
Securities 65,601 3,309 6.73% 69,015 3,267 6.31% (162) 204 42
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370,945 25,235 9.07% 351,129 22,631 8.59% 1,722 882 2,604
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Demand Deposits 66,764 882 1.76% 68,263 855 1.67% (19) 46 27
Savings 28,728 443 2.06% 31,908 491 2.05% (49) 1 (48)
Certificates of Deposit 204,589 8,634 5.63% 191,079 7,788 5.43% 551 295 846
Borrowings 62,634 3,083 6.56% 57,077 2,415 5.64% 235 433 668
--------------------------------------------------------------------------------------------------------------------------
362,715 13,042 4.79% 348,327 11,549 4.42% 718 775 1,493
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Net interest income and spread 12,193 4.28% 11,082 4.17%
Change 1,004 107 1,111
PROVISION FOR LOAN LOSSES. The provision for loan losses was $714,000 for the nine months ended September 30, 2000 compared to $602,000 for the nine months ended September 30, 1999. This increase has been deemed appropriate by management to reflect the higher risk associated with the change in loan portfolio mix to a higher percentage of commercial loans and increase in loan volume of the consumer finance subsidiary of the Bank.
OTHER INCOME. Total noninterest income increased $199,000, or 7.0%, for the nine months ended September 30, 2000 versus the same nine months in 1999. Service charges on deposits decreased $70,000 or -4.1%. The Company sold equity securities from its available for sale portfolio during the nine months ended September 30, 2000 for a net gain of $94,000. During the same nine months of 1999 gains on sales of securities totaled $46,000. Income from insurance commissions decreased $9,000 or -1.7% for the nine months ended September 30, 2000 compared to the same nine months in 1999. Miscellaneous income increased $230,000 or 41.8% because of fee income generated by CFB Securities, the Bank´s brokerage subsidary.
NONINTEREST EXPENSES. Total noninterest expense decreased $2.6 million or -23.3% for the nine months ended September 30, 2000 as compared to the same nine months in 1999 primarily because all the expenses associated with the MRP and ESOP were completed in the fiscal year ended December 31, 1999. These expenses totaled $2.7 million for the nine months ended September 30, 1999.
INCOME TAXES. Income tax expense for the nine months ended September 30, 2000 was $1.9 million or 32.3% of income before tax and $493,000 or 24.4% of income before tax for the same nine month period in 1999. The difference between these rates and the statutory rate is the result of interest income on tax exempt securities and the dividend received deduction on some preferred stock dividends and the relation of these tax preferred items as a percentage of earnings before income taxes. The fact that the Bank has state tax credit carry forwards also contributes to a lower income tax rate as a percent of pretax income.
LIQUIDITY AND CAPITAL RESOURCES. The Company’s liquidity, represented by cash and cash equivalents, is a product of its operating, investing and financing activities. Operating activities provided net cash proceeds of $6.2 million for the nine months ended September 30, 2000. Investing activities used $13.4 million in cash during the same nine months primarily because of a $19.0 million increase in loans. Financing activities provided $7.5 million of cash during the nine months ended September 30, 2000. Decreases in demand and savings deposits used $1.6 million, increases in time deposits provided $16.1 million, primarily from the brokered deposits discussed previously under Comparison of Financial Condition at September 30, 2000 and December 31, 1999. Notes payable and other borrowings decreased using $803,000 of cash. Federal funds purchased by the Bank decreased using $4.0 million of cash.
The asset portion of the balance sheet provides liquidity primarily through loan principal repayments, maturities of investment securities and, to a lesser extent, sales of securities. Installment loan payments are becoming an increasingly important source of liquidity for the Company as this portfolio continues to grow. Other short-term investments such as federal funds sold and maturing interest-bearing deposits with other banks are additional sources of liquidity funding.
The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and noninterest-bearing deposit accounts. These sources of liquidity are short-term in nature and are used as necessary to fund asset growth and meet short-term liquidity needs. Liquidity is also provided by advances from the FHLB of Atlanta and federal funds accommodations from other lending institutions. During the quarter ended September 30, 2000 the Bank pledged specific commercial mortgage loans and its home equity loans to the FHLB of Atlanta to provide additional sources of funding. At September 30, 2000 lendable collateral values at the Bank exceeded outstanding advances from the FHLB by $14.1 million. In August 2000 the Bank pledged certain securities to a full service securities firm for a $25 million line of credit for general liquidity needs. The Bank had no outstanding amounts on this line of credit during the quarter ended September 30, 2000.
As of September 30, 2000 the Bank’s regulatory capital was in excess of all applicable regulatory requirements. At September 30, 2000, the Bank’s total risk-based capital, tier 1 risk-based capital and tier 1 leverage ratios amounted to 10.8%, 9.6% and 7.7%, respectively, compared to regulatory requirements of 8.0%, 4.0% and 4.0%, respectively.
PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 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 September 30, 2000.
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 9, 2000 /s/ Gary D. Dorminey
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Gary D. Dorminey
President
(Principal Executive Officer)
Date: November 9, 2000 /s/ C. Lynn Gable
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C. Lynn Gable
Chief Financial Officer
(Principal Financial Officer)
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