<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934
For the quarterly period ended June 30, 1997
------------------------------------
[ ] Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from to
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Commission file number 0-22451
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CBC HOLDING COMPANY
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(Exact Name of Small Business Issuer as Specified in Its Charter)
GEORGIA APPLIED FOR
------------------------------ -----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
102 West Roanoke Drive, Fitzgerald, GA 31750
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(Address of Principal Executive Offices)
(912) 423-4321
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(Issuer's Telephone Number, Including Area Code)
Not Applicable
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(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock $1 par value,
--------------------------
664,097 shares outstanding at June 30, 1997
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Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are provided for CBC Holding Company and the
subsidiary bank, Community Banking Company of Fitzgerald.
A. Consolidated Balance Sheets - June 30, 1997 and December 31, 1996.
B. Consolidated Statements of Income - For the Six Months Ended June 30,
1997 and the Period Ended June 30, 1996 and For the Three Months Ended
June 30, 1997.
C. Consolidated Statements of Cash Flows - For the Six Months Ended June
30, 1997 and the Period Ended June 30, 1996.
The consolidated financial statements furnished have not been examined by
independent certified public accountants, but reflect, in the opinion of
management, all adjustments necessary for a fair presentation of the results of
operations for the periods presented.
The results of operations for the six month period ended June 30, 1997 are not
necessarily indicative of the results to be expected for the full year.
Since the company began operations on April 18, 1996, the statement of income
for the period ended June 30, 1996 reflects operations from April 18, 1996 to
June 30, 1996. This period is provided in lieu of comparative statements for
the three month and six month periods ended June 30, 1996.
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<PAGE>
CBC HOLDING COMPANY
BALANCE SHEETS
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<TABLE>
<CAPTION>
(UNAUDITED)
As of June 30, As of December 31,
1997 1996
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<S> <C> <C>
ASSETS
Cash and due from banks $ 1,934,936 $ 1,955,359
Federal funds sold - 5,050,000
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Total cash and cash equivalents 1,934,936 7,005,359
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Securities available for sale, at fair value 17,406,176 17,900,701
Loans, net of unearned income 28,111,684 23,537,462
Allowance for loan losses (374,828) (359,146)
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Loans, net 27,736,856 23,178,316
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Bank premises and equipment, less accumulated depreciation 2,144,210 2,156,655
Accrued interest receivable 621,500 548,427
Intangible assets, net of amortization 2,656,290 2,565,772
Other assets and accrued income 185,415 324,993
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TOTAL ASSETS $52,685,383 $53,680,223
=====================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing demand deposits $ 5,105,622 $ 5,148,136
Interest-bearing demand deposits 11,464,131 11,291,918
Savings deposits 2,529,428 2,490,421
Time deposits $100,000 or more 5,641,448 6,240,653
Other time deposits 20,514,000 21,489,972
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Total deposits 45,254,629 46,661,100
Accrued interest payable 215,927 330,532
Federal funds purchased 460,000 -
Other liabilities and accrued expenses 159,128 133,549
Other borrowings 35,000 -
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Total liabilities 46,124,684 47,125,181
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Shareholders' Equity:
Common stock, $1.00 par, authorized 10,000,000 shares, issued
and outstanding 664,097 shares 664,097 664,097
Paid-in capital surplus 5,976,873 5,976,873
Accumulated deficit (98,360) (110,439)
Unrealized holding losses on available for sale securities, net
of tax 18,089 24,511
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Total shareholders' equity 6,560,699 6,555,042
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $52,685,383 $53,680,223
=====================================================================================================
</TABLE>
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<PAGE>
CBC HOLDING COMPANY
STATEMENTS OF INCOME
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<TABLE>
<CAPTION>
(UNAUDITED) (Unaudited) (Unaudited)
Six Months Period Ended Three Months
Ended June 30, June 30, Ended June 30,
1997 1996 1997
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<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,212,236 $411,586 $630,311
Interest on federal funds sold 57,184 200,158 19,312
Interest on securities - U. S. Governmental agencies 568,599 168,775 281,137
and corporations
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Total interest income 1,838,019 780,519 930,760
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INTEREST EXPENSE:
Interest on NOW and money market deposits 145,349 54,908 71,970
Interest on savings deposits 36,694 14,111 18,559
Interest on time deposits 804,733 311,895 400,781
Other interest expense 3,618 7,784 1,891
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Total interest expense 990,394 388,698 493,201
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Net interest income before loan losses 847,625 391,821 437,559
Less - provision for loan losses 21,000 - 10,500
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Net interest income after provision for loan losses 826,625 391,821 427,059
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OTHER OPERATING INCOME:
Service charges on deposit accounts 117,362 33,024 56,954
Other service charges, commissions and fees 23,426 12,167 13,104
Other income 4,257 7,079 2,114
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Total other operating income 145,045 52,270 72,172
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OTHER OPERATING EXPENSES:
Salaries 341,873 154,542 170,438
Employee benefits 87,391 36,925 41,625
Net occupancy expenses 86,723 21,883 47,413
Equipment rental and depreciation of equipment 60,646 21,001 30,338
Amortization 110,282 43,727 55,142
Other expenses 266,453 141,160 147,713
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Total other operating expenses 953,368 419,238 492,669
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INCOME BEFORE INCOME TAXES 18,302 24,853 6,562
Less - provision for income taxes 6,223 8,472 2,226
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NET INCOME $ 12,079 $ 16,381 $ 4,336
======================================================================================================
INCOME PER SHARE - based on weighted average
outstanding shares of, 664,097 $ 0.02 $ 0.02 $ 0.01
======================================================================================================
</TABLE>
Note: Since the company began operations on April 18, 1996, the statement of
income for the period ended June 30, 1996 reflects operations from April
18, 1996 to June 30, 1996. Information for this period is provided as
comparative statements for both the three month and six month periods
ended June 30, 1996.
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<PAGE>
CBC HOLDING COMPANY
STATEMENTS OF CASH FLOWS
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<TABLE>
<CAPTION>
(UNAUDITED) (Unaudited)
SIX MONTHS ENDED Period Ended
June 30, June 30,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 12,079 $ 16,381
Adjustments to reconcile net loss to net cash used in operating
activities:
Provision for loan losses 21,000 -
Depreciation 59,455 20,420
Amortization of intangible assets 110,282 43,727
Changes in accrued income and other assets (56,318) (467,590)
Changes in accrued expenses and other liabilities 36,116 7,036
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Net cash used in operating activities 182,614 (380,026)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in loans made to customers (2,341,042) (2,558,173)
Net change in available for sale securities 833,146 (14,181,485)
Purchases of property and equipment (56,428) 314,787
Proceeds from issuance of short term borrowings and federal
funds purchased 470,000 -
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Net cash used in investing activities (1,094,324) (16,424,871)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 6,640,970
Assumption of deposits on acquisition, net of reduction for
purchased assets - 17,828,165
Net change in demand and savings accounts 694,744 2,254,260
Net change in other time deposits (1,271,916) 145,624
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Net cash provided by (used in) financing activities (577,172) 26,869,019
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NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS (1,488,882) 10,064,122
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,423,818 -
- -----------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,934,936 $ 10,064,122
=====================================================================================================
</TABLE>
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<PAGE>
CBC HOLDING COMPANY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
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A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The accounting and reporting policies of CBC Holding Company conform with
generally accepted accounting principles and practices within the banking
industry. The policies that materially affect financial position and the
results of operations are summarized as follows:
1. REPORTING ENTITY - CBC Holding Company (the "Company") was incorporated as
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a Georgia corporation on October 15, 1996 for the purpose of acquiring all
of the issued and outstanding shares of common stock of Community Banking
Company of Fitzgerald (the "Bank"). The Company became the holding
company of the Bank pursuant the Plan of Reorganization, dated October 25,
1996, by and among the Company, the Bank and Interim Fitzgerald Company, a
wholly-owned subsidiary of the Company ("Interim"). Pursuant to the terms
of the Plan of Reorganization, Interim merged with and into the Bank and
the shareholders of the Bank received one share of Company common stock
for each share of Bank common stock.
On March 31, 1997, the Company acquired Community Banking Company of
Fitzgerald in a business combination accounted for as a pooling of
interests. Community Banking Company of Fitzgerald which engages in
banking, became a wholly owned subsidiary of the Company through the
exchange of 664,097 shares of the Company's common stock for all of the
outstanding stock of Community Banking Company of Fitzgerald. The
accompanying financial statements for the six months ended June 30, 1997
are based on the assumption that the companies were combined for the full
year, and the financial statements of prior years have been restated to
give effect to the combination.
2. SECURITIES - The classification of securities is determined at the date of
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purchase. Gains or losses on the sale of securities are recognized on a
specific identification basis.
Securities available for sale, primarily debt securities, are recorded at
fair value with unrealized gains or losses (net of tax effect) excluded
from earnings and reported as a component of shareholders' equity.
Securities available for sale will be used as a part of the Corporation's
interest rate risk management strategy and may be sold in response to
changes in interest rates, changes in prepayment risk, and other factors.
Investment securities, primarily debt securities, are stated at cost, net
of the amortization of premium and the accretion of discount. The
Company intends and has the ability to hold such securities on a long-term
basis or until maturity.
The market value of securities is generally based on quoted market prices.
If a quoted market price is not available, market value is estimated using
quoted market prices for similar securities.
3. LOANS AND INTEREST INCOME - Loans are stated at the amount of unpaid
-------------------------
principal, reduced by net deferred loan fees, unearned discount, and a
valuation allowance for possible loan losses. Interest on simple
interest installment loans and other loans is calculated by using the
simple interest method on daily balances of the principal amount
outstanding. Loans are generally placed on nonaccrual status when full
payment of principal or interest is in doubt, or when they are past due 90
days as to either principal or interest. Senior management may grant a
waiver from nonaccrual status if a past due loan is well secured and in
process of collection. A nonaccrual loan may be restored to accrual
status when all principal and interest amounts contractually due,
including arrearages, are reasonably assured of repayment within a
reasonable period, and there is a sustained period of performance by the
borrower in accordance with the contractual terms of the loan. When
interest accrual is discontinued, all unpaid accrued interest is reversed.
Interest income is subsequently recognized only to the extent cash
payments are received.
4. ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is available to
-------------------------
absorb losses inherent in the credit extension process. The entire
allowance is available to absorb losses related to the loan and lease
portfolio and other extensions of credit, including off-balance sheet
credit exposures. Credit exposures deemed to be uncollectible are charged
against the allowance for loan losses. Recoveries of previously charged-
off amounts are credited to the allowance for loan losses.
The adequacy of the allowance for loan losses is reviewed regularly by
management. Additions to the allowance for loan losses are made by
charges to the provision for loan losses. On a quarterly basis, a
comprehensive review of the adequacy of the allowance for loan losses is
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<PAGE>
CBC HOLDING COMPANY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
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performed. This assessment is made in the context of historical losses,
as well as existing economic conditions.
Management believes that the allowance for possible loan losses is
adequate. While management uses available information to recognize losses
on loans and other real estate, future additions to the allowance may be
necessary based on changes in economic conditions. In addition, various
regulatory agencies, as an integral part of their examination process,
periodically review the bank's allowance for possible loan losses. Such
agencies may require the bank to recognize additions to the allowance
based on their judgement of information available to them at the time of
their examination.
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of the balance sheet and revenues and expenses
for the period. Actual results could differ significantly from those
estimates. Material estimates that are particularly susceptible to
significant change in an operating cycle of one year relate to the
determination of the allowance for possible loan losses and the valuation
of real estate acquired in connection with foreclosures or in satisfaction
of loans. In connection with the determination of the allowance for
possible loans losses and real estate owned, management obtains
independent appraisals for significant properties.
In 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors for
Impairment of a Loan" (SFAS 114), which was amended in 1994 by Statement
of Financial Accounting Standards No. 118, "Accounting by Creditors for
Impairment of a Loan - Income Recognition and Disclosure" (SFAS 118).
These standards address the accounting for certain loans when it is
probable that all amounts due pursuant to the contractual terms of the
loan will not be collected. The Bank evaluates a loan for impairment when
it is placed on non-accrual status and all or a portion is internally risk
rated as substandard or doubtful. Individually identified impaired loans
are measured based on the present value of payments expected to be
received, using the historical effective loan rate as the discount rate.
Loans that are to be foreclosed or that are solely dependent on the
collateral for repayment may alternatively be measured based on the fair
value of the collateral for such loans. Measurement may also be based on
observable market prices. If the recorded investment in the loan exceeds
the measure of fair value, a valuation allowance is established as a
component of the allowance for loan losses. These standards do not apply
to larger groups of smaller-balance, homogenous loans and therefore are
principally relevant to commercial loans. For purposes of applying these
standards, the Bank considers consumer loans and other collateral based
loans of less than $41,000 to be smaller-balance, homogeneous loans.
5. PREMISES AND EQUIPMENT - Premises and equipment are stated at cost, less
----------------------
accumulated depreciation. Depreciation is charged to operating expenses
over the estimated useful lives of the assets and is computed on the
straight-line method. Costs of major additions and improvements are
capitalized. Expenditures for maintenance and repairs are charged to
operations as incurred. Gains or losses from disposition of property are
reflected in operations and the asset account is reduced.
6. OTHER REAL ESTATE OWNED - Other real estate owned, acquired principally
-----------------------
through foreclosure, is stated at the lower of cost or net realizable
value. Loan losses incurred in the acquisition of these properties are
charged against the allowance for possible loan losses at the time of
foreclosure. Subsequent write-downs of other real estate owned are
charged against the current period's expense.
7. INCOME TAXES - The liability method of accounting is used for income
------------
taxes. Under this method, deferred tax assets and liabilities are
recognized for the expected future tax consequences of existing
differences between financial reporting and tax reporting bases of assets
and liabilities, as well as for operating losses and tax credit carry-
forwards, using enacted laws and rates. Deferred tax expense represents
the net change in the deferred tax asset or liability balance during the
year. This amount, together with income taxes currently payable or
refundable for the current year, represents the total income tax expense
for the year.
8. CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, cash and
-------------------------
cash equivalents include cash on hand, amounts due from banks, highly
-7-
<PAGE>
CBC HOLDING COMPANY
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
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liquid debt instruments purchased with an original maturity of three
months or less, and federal funds sold. Generally, federal funds are
purchased and sold for one-day periods. Interest bearing deposits in
other banks with original maturities of less than three months are
included.
9. USE OF ESTIMATES - The preparation of financial statements in conformity
----------------
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
B. REGULATORY MATTERS
------------------
The Bank is subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary actions
by regulators that, if undertaken, could have a direct material effect on the
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgements by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Management believes, as of June 30, 1997, the
Bank meets all capital adequacy requirements to which it is subject. As of
June 30, 1997, the most recent notification from the FDIC categorized the Bank
as well capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized the Bank must maintain minimum
total risk-based, and Tier I leverage ratios as set forth in the table. There
are no conditions or events since that notification that management believes
have changed the institution's category.
The Bank's actual capital amounts and ratios are also presented in the Table.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------- -------------------------------------- -----------------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------- ----- --------- ----------------------------- --------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1997
Total Capital To
(Risk Weighted Assets) 4,446,000 13.9% 2,566,000 (equal to or greater than)8.0% 3,208,000 (equal to or greater than)10.0%
Tier I Capital To
(Risk-Weighted Assets) 4,071,000 12.7% 1,283,000 (equal to or greater than)4.0% 1,925,000 (equal to or greater than) 6.0%
Tier I Capital To
(Average Assets) 4,071,000 8.08% 2,016,000 (equal to or greater than)4.0% 2,520,000 (equal to or greater than) 5.0%
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------- -------------------------------------- -----------------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------- ----- --------- ----------------------------- --------- ------------------------------
As of June 30, 1996
Total Capital To
(Risk Weighted Assets) 4,323,000 16.3% 2,121,000 (equal to or greater than)8.0% 2,652,000 (equal to or greater than)10.0%
Tier I Capital To
(Risk-Weighted Assets) 3,964,000 14.9% 1,064,000 (equal to or greater than)4.0% 1,596,000 (equal to or greater than) 6.0%
Tier I Capital To
(Average Assets) 3,964,000 7.74% 2,048,000 (equal to or greater than)4.0% 2,560,000 (equal to or greater than) 5.0%
</TABLE>
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<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
results of Operation
GENERAL
The Bank was incorporated on January 19, 1996 (the "Inception Date"). From the
inception date to April 18, 1996, the Bank's principal activities related to
its organization, the conducting of its initial public offering, the pursuit of
approvals from the Georgia Department and the FDIC of its application to
charter the Bank.
On April 18, 1996, the Bank completed its offering of shares of the Bank's
common stock by receiving subscriber deposits for 664,097 shares at $10.00 per
share. The Bank was capitalized with $3,320,485 of common stock, par value
$5.00 per share and $3,154,461 of paid-in capital and a reserve for initial
operating losses of $166,024, as required by the DBF.
On April 19, 1996, the Bank commenced operations after receiving all regulatory
approvals and insurance on its deposits from the FDIC.
On October 25, 1996, the Bank entered into a Plan of Reorganization with the
Company and Interim Fitzgerald Company, a wholly-owned subsidiary of the
Company ("Interim"). Pursuant to the terms of the Plan of Reorganization,
Interim merged with and into the Bank (the "Merger") and the shareholders of
the Bank exchanged their shares of Bank common stock for Company common stock.
As a result of the Merger, the Company became the sole shareholder of the Bank,
effective March 31, 1997.
Management's discussion which follows relates to the Bank. As the Bank began
operations in the second quarter of 1996, we believe that a comparison of the
period ended December 31, 1996 and the six months ended June 30, 1997 provide a
better understanding of the Banks financial condition and results of operation.
FINANCIAL CONDITION
At December 31, 1996, the Company had concluded eight months of banking
operations with $53,680,223 in total assets and for the six months ended June
30, 1997 total assets had decreased 1.85% to $52,685,383. At December 31,
1996, total deposits had grown to $46,661,100 and total loans had grown to
$23,537,462. This represented a loan to deposit ratio at year end of 50.4%.
For the six months ended June 30, 1997, total deposits had decreased 3.01%to
$45,254,629 and total loans had grown 19.43% to $28,111,684. This represented
a loan to deposit ratio at June 30, 1997 of 62.12%.
Capital
At June 30, 1997 and December 31, 1996, the Bank's capital position was well in
excess of FDIC guidelines to meet the definition of "well- capitalized". Based
on the level of the Bank's risk weighted assets at June 30, 1997 and December
31, 1996, the Bank had $1.2 million more capital than necessary to satisfy the
"well-capitalized" criteria. The Bank's capital adequacy is monitored
quarterly by the Bank's Asset/Liability Committee, as asset and liability
growth, mix and pricing strategies are developed.
Liquidity
The Bank's internal and external liquidity resources are considered by
management to be adequate to handle expected growth and normal cash flow
demands from existing deposits and loans. At December 31, 1996, the securities
available for sale had grown from $0 at April 18, 1996 (date of acquisition) to
$17,900,701. For the six months ended June 30, 1997, the securities available
for sale had decreased 2.76% to $17,406,176. The Bank had no securities
classified as held to maturity as of June 30, 1997 and December 31, 1996.
Federal funds sold were $5,050,000 at year-end, down from $23,828,875 at April
18, 1996 (the acquisition date) due to investing of these funds in investment
securities. At June 30, 1997, federal funds sold were $-0-.
Current deposits provide the primary liquidity resource for loan disbursements
and Bank working-capital. Despite the anticipated losses in the first years of
operations, the Bank expects earnings from loans and investments and other
banking services as well as the current loan to deposit position to provide
sufficient liquidity for both the short and long term. The Bank intends to
-9-
<PAGE>
manage its loan growth such that deposit flows will provide the primary funding
for all loans as well as cash reserves for working capital and short to
intermediate term marketable investments.
Results of Operations
The Company's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and investment
losses, to generate non-interest income and to control non-interest expense.
Since interest rates are determined by market forces and economic conditions
beyond the control of the Company, the ability to generate interest income is
dependent upon the Bank's ability to obtain an adequate spread between the rate
earned on earning assets and the rate paid on interest-bearing liabilities.
Thus, a key performance measure for net interest income is the interest margin
or net yield, which is taxable-equivalent net interest income divided by
average earning assets.
The Bank had a net loss of $110,439 ($0.17 per share) from the date it began
operations to December 31,1996. For the six months ended June 30, 1997 the
Company had net income of $12,079 ($0.018 per share).
The 1996 loss represents the first eight months of operations of the Bank. For
the period ended December 31, 1996, interest income from loans and investments,
including loan fees of $37,793, was $2,582,714, representing a yield of 7.80%
on average earning assets of $47,274,610. Interest expense was $1,379,152,
representing a cost of 4.86% on average interest bearing liabilities of
$40,510,592. Net interest income was $1,203,562, producing a net yield of
3.61% on average earning assets.
For the six months ended June 30, 1997, interest income from loans and
investments, including loan fees of $29,947, was $1,838,019, representing a
yield of 7.91% on average earning assets of $46,451,681. Interest expense was
$990,394, representing a cost of 4.30% on average interest bearing liabilities
of $46,098,116. Net interest income was $847,625, producing a net yield of
3.65% on average earning assets.
The provision for loan losses for the six months ended June 30, 1997 and the
period ended December 31, 1996 and was $10,500 and $21,000, respectively.
Total loan charge-offs were $11,464 and $47,125 for the six months ended June
30, 1997 and the period ended December 31, 1996, respectively, and were
related to the Bank's consumer loan portfolio. At June 30, 1997 and December
31, 1996, the Bank had no loans past due 90 days or more. At June 30, 1997 and
December 31, 1996, the Bank had non-accrual loans of $7,514 and $0,
respectively . The allowance for loan losses at June 30, 1997 and December 31,
1996 was $371,828 and $359,146, respectively. This represents 1.32% and 1.53%
of total loans at June 30, 1997 and December 31, 1996, respectively.
Management takes a number of factors into consideration when determining the
additions to be made to the loan loss allowance. Since the Bank is approaching
the end of its first year of operations, it does not have a sufficient history
of portfolio performance on which to base additions. Accordingly, additions to
the reserve are primarily based on maintaining a ratio of the allowance for
loan losses to total loans in a range of 1.00% to 1.50%. This is based on
national peer group ratios and Georgia ratios which reflect average ratios of
0.99% (national peer) and 1.50% (Georgia). Under this methodology, charge-
offs will increase the amount of additions to the allowance and recoveries will
reduce additions.
In addition, management performs an on-going loan review process. All new
loans are risk rated under loan policy guidelines. On a monthly basis, the
composite risk ratings are evaluated in a model which assesses the adequacy of
the current allowance for loan losses, and this evaluation is presented to the
Board of Directors each month. Large loans are reviewed periodically. Risk
ratings may be changed if it appears that new loans may not have received the
proper initial grading or, if on existing loans, credit conditions have
improved or worsened.
As the Bank matures, the additions to the loan loss allowance will be based
more on historical performance, the detailed loan review and allowance adequacy
evaluation.
The Bank's policy is to place loans on non-accrual status when it appears that
the collection of principal and interest in accordance with the terms of the
loan is doubtful. Any loan which becomes 90 days past due as to principal or
interest is automatically placed on non-accrual.
Non-interest income for the six months ended June 30, 1997 and the period ended
December 31, 1996 was $145,045 and $179,597, respectively. This consisted
primarily of service charges on deposit accounts which were $117,362 for the
six months ended June 30, 1997 and $136,456 the period ended December 31, 1996
and credit life and disability insurance premium income which was $11,863 for
the six months ended June 30, 1997 and $14,054 for the period ended December
31, 1996. Service charges on deposit accounts are evaluated annually against
service charges from other banks in the local market and against the Bank's own
-10-
<PAGE>
cost structure in providing the deposit services. This income should grow with
the growth in the Bank's demand deposit account base. The credit life and
disability insurance premium income is sold primarily on consumer installment
debt and should grow with the growth in the Bank's consumer loan portfolio.
Non-interest expenses for the six months ended June 30, 1997 and the period
ended December 31, 1996 was $953,368 and $1,530,367, respectively. This
consisted primarily of salaries and benefits which were $429,264 for the six
months ended June 30, 1997 and $635,297 for the period ended December 31,
1996. Other major expenses included in non-interest expense for the six months
ended June 30, 1997 included amortization of $110,282, supplies of $19,042,
data processing of $34,135, and professional fees of $23,977. Other major
expenses included in non-interest expense for the period ended December 31,
1996 included amortization of $153,706, supplies of $85,728, data processing of
$57,749, and professional fees of $85,121.
Interest Rate Sensitivity
Improvement in earnings of the Bank depend upon continued earning asset growth,
good asset quality and a relatively stable economic environment. Management
feels it is reasonable for the Bank to continue to experience steady earning
asset growth as long as interest rates remain relatively stable. The Bank is
asset sensitive (meaning that rising rates tend to be beneficial) in the near
and long term and is liability sensitive at the one year time horizon (meaning
that falling rates tend to be beneficial) to the Bank's net interest margin.
If interest rates were to rise in excess of 200 basis points, the Bank could
experience improved earnings in the near term, but such a rate increase might
significantly reduce the demand for loans in the Bank's local market, thus
diminishing the prospects for improved earnings. If interest rates were to
fall in excess of 200 basis points, the Bank could experience a short term
decline in net interest margin and may even have difficulty retaining maturing
certificates of deposit without having to pay above market rates.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the
Company is a party or of which any of their property is the subject.
Item 2. Changes in Securities
(a) Not Applicable
(b) Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to security holders for a vote
during the three months ended June 30, 1997.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits - 27.1 Financial Data Schedule
B. There have been no reports filed on form 8-K for the three
months ended June 30, 1997.
-11-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, there unto duly
authorized.
CBC HOLDING COMPANY
Date 8/13/97 /s/ John T. Croley, Jr.
-------------------- ------------------------------
JOHN T. CROLEY, JR.
VICE CHAIRMAN / SECRETARY
-12-
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,934,936
<SECURITIES> 17,406,176
<RECEIVABLES> 28,111,684
<ALLOWANCES> 374,828
<INVENTORY> 0
<CURRENT-ASSETS> 47,884,883
<PP&E> 2,289,626
<DEPRECIATION> 145,416
<TOTAL-ASSETS> 52,685,383
<CURRENT-LIABILITIES> 46,124,684
<BONDS> 0
0
0
<COMMON> 664,097
<OTHER-SE> 5,976,873
<TOTAL-LIABILITY-AND-EQUITY> 52,685,383
<SALES> 1,838,019
<TOTAL-REVENUES> 1,983,064
<CGS> 0
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<OTHER-EXPENSES> 953,368
<LOSS-PROVISION> 21,000
<INTEREST-EXPENSE> 990,394
<INCOME-PRETAX> 18,302
<INCOME-TAX> 6,223
<INCOME-CONTINUING> 12,079
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