<PAGE> 1
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, 1998
[ ] Transition Report Pursuant to 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from _______________ to ____________
Commission File Number 0-22891.
GEORGIA-CAROLINA BANCSHARES, INC.
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(Exact name of small business issuer as specified in its charter)
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<S> <C>
GEORGIA 58-2326075
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(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
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110 East Hill Street, Thomson, Georgia 30824
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(Address of Principal Executive Offices)
Issuers Telephone Number (706) 595-1600
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Pinnacle Bancshares, Inc.
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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
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
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Class Outstanding at June 30, 1998
- ----------------------------- ------------------------------
Common Stock, $.001 Par Value 635,380 shares
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Transitional Small Business Disclosure Format: Yes No X
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<PAGE> 2
GEORGIA-CAROLINA BANCSHARES, INC.
Form 10-QSB
Index
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheet as of June 30, 1998 1
Condensed Consolidated Statements of Income and Comprehensive
Income for the Three Months Ended June 30, 1998 and 1997, and
the Six Months Ended June 30, 1998 and 1997 2
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1998 and 1997 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES
Index to Exhibits
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<PAGE> 3
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GEORGIA-CAROLINA BANCSHARES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1998
(UNAUDITED)
(dollars in thousands)
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ASSETS
Cash and due from banks $ 1,092
Federal funds sold 3,010
Interest-bearing deposits in banks 199
Securities available-for-sale 15,778
Loans, net of allowance for loan losses of $824 20,632
Bank premises and fixed assets 2,038
Accrued interest receivable 483
Foreclosed real estate, net of allowance 253
Deferred tax benefit 176
Other assets 328
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TOTAL ASSETS $43,989
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
DEPOSITS:
Non-interest bearing $ 4,464
Interest-bearing:
NOW accounts 7,265
Savings 2,100
Money market accounts 3,025
Time deposits of $100,000, and over 4,141
Other time deposits 15,222
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TOTAL DEPOSITS 36,217
Accrued expenses and other liabilities 426
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TOTAL LIABILITIES $36,643
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STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001; 1,000,000 shares authorized; none issued $ --
Common stock, par value $.001; 9,000,000 shares authorized;
635,380 shares issued and outstanding 1
Additional paid-in capital 6,354
Retained earnings 943
Unrealized gain on securities available-for-sale, net of tax 48
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TOTAL STOCKHOLDERS' EQUITY $ 7,346
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $43,989
=======
</TABLE>
<PAGE> 4
GEORGIA-CAROLINA BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
(dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1998 1997 1997
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INTEREST INCOME
Interest and fees on loans $574 $ 1,113 $514 $1,019
Interest on taxable securities 212 403 171 343
Interest on nontaxable securities 13 31 23 46
Interest on Federal funds sold 45 88 31 39
Interest on deposits in other banks 2 4 2 5
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TOTAL INTEREST INCOME 846 1,639 741 1,452
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INTEREST EXPENSE
Interest on time deposits of $100,000 or more 61 128 71 133
Interest on other deposits 291 551 229 455
Interest on Federal funds purchased -- -- -- 2
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TOTAL INTEREST EXPENSE 352 679 300 590
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NET INTEREST INCOME 494 960 441 862
PROVISION FOR LOAN LOSSES -- -- 5 12
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NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 494 960 436 850
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NONINTEREST INCOME
Service charges on deposits 58 114 56 111
Other income 7 18 7 20
Net realized gain (loss) available-for-sale securities 7 (4) 4 --
---- ------- ---- ------
72 128 67 131
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NONINTEREST EXPENSE
Salaries and employee benefits 254 514 204 389
Occupancy expenses 47 94 40 79
Other expenses 193 354 137 262
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494 962 381 730
---- ------- ---- ------
INCOME BEFORE INCOME TAXES 72 126 122 251
INCOME TAX EXPENSE 29 28 45 80
---- ------- ---- ------
NET INCOME $ 43 $ 98 $ 77 $ 171
==== ======= ==== ======
</TABLE>
<PAGE> 5
GEORGIA-CAROLINA BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME - CONTINUED
(UNAUDITED)
(dollars in thousands, except per share amounts)
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<CAPTION>
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1998 1997 1997
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OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX
Unrealized gain (loss) on securities arising during
current period, net of reclassification adjustment
for net gains and losses included in net income $ 17 $ 35 $ 22 $ (14)
-------- -------- -------- --------
COMPREHENSIVE INCOME $ 60 $ 133 $ 99 $ 157
======== ======== ======== ========
NET INCOME PER SHARE OF COMMON STOCK:
Basic $ .07 $ .15 $ .12 $ .27
======== ======== ======== ========
Diluted $ .07 $ .15 $ .11 $ .26
======== ======== ======== ========
DIVIDENDS PER SHARE OF COMMON STOCK $ - $ .10 $ - $ .20
======== ======== ======== ========
</TABLE>
<PAGE> 6
GEORGIA-CAROLINA BANCSHARES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
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<CAPTION>
Six Months Ended
June 30,
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1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 98 $ 171
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 53 39
Provision for loan loss - 12
Deferred income tax 7 49
Adjustment to foreclosed real estate 17 5
Net (increase) decrease in accrued interest receivable (102) 20
Net increase in other assets (218) (66)
Net increase in other liabilities 54 22
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NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES (91) 252
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CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold 740 (1,430)
Net increase in interest-bearing deposits with banks (99) (99)
Net (increase) decrease in loans, net (1,660) 1,097
Net purchase and proceeds, available-for-sale securities (1,967) 713
Net purchases of premises and equipment (645) (57)
Proceeds from sale of foreclosed real estate 53 188
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NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (3,578) 412
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CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 3,279 (386)
Dividends paid (64) (127)
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 3,215 (513)
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NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS (454) 151
CASH AND DUE FROM BANKS AT BEGINNING OF PERIOD 1,546 1,088
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CASH AND DUE FROM BANKS AT END OF PERIOD $ 1,092 $ 1,239
======= =======
</TABLE>
<PAGE> 7
GEORGIA-CAROLINA BANCSHARES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Georgia-Carolina
Bancshares, Inc. (the "Company") and its wholly-owned subsidiary, First Bank of
Georgia, (formerly First Bank of East Georgia), (the "Bank"). Significant
intercompany transactions and accounts are eliminated in consolidation.
The financial statements as of and for the six months ended June 30, 1998 and
1997 are unaudited and have been prepared pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These consolidated financial statements
should be read in conjunction with the audited financial statements and notes
thereto included in the Company's annual report for the year ended December 31,
1997.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair presentation of the financial position and results for
interim periods.
The preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities and
income and expense amounts. Actual results could differ from those estimates.
NOTE 2 - EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted average number of
shares outstanding. During 1997 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share". This Statement
establishes standards for computing and presenting basic and diluted earnings
per share. As the Company has granted stock options to certain officers of the
Company, diluted earnings per share has been presented in the Statements of
Income and Comprehensive Income. See the financial statements and notes thereto
included in the Company's annual report for the year ended December 31, 1997,
for information on the outstanding stock options.
NOTE 3 - COMPREHENSIVE INCOME
During the first quarter of 1998 the Company adopted SFAS No. 130, "Reporting
Comprehensive Income". This Statement establishes standards for reporting and
display of comprehensive income in a set of financial statements. Matters of
comprehensive income have been presented in the accompanying condensed
consolidated statements of income and comprehensive income for 1998 and 1997.
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information,"
which changes the way public companies report information about segments of
their business in annual financial statements and reports issued to
shareholders. The SFAS also provides for entity wide disclosures about the
products and services an entity provides and major customers. The Company will
adopt this Statement for the year ended December 31, 1998. The adoption of this
Statement is not expected to have a material effect on the financial statements.
<PAGE> 8
NOTE 4 - NEW ACCOUNTING PRONOUNCEMENTS (CONTINUED)
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits," which revises employers'
disclosures about pension and other post-retirement benefit plans. The Statement
does not change the measurement or recognition of those plans, but required
additional information on changes in benefit obligations and fair value of plan
assets, and eliminates certain disclosures previously required by SFAS Nos. 87,
88 and 106. The Company will adopt this Statement for the year ended December
31, 1998. The adoption of this Statement is not expected to have a material
effect on the financial statements.
In June 1998, the FASB issues SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activities. This Statement is
effective for the Company's year beginning January 1, 2000. Management of the
Company is presently determining the effects of this Statement on the Company's
financial statements.
<PAGE> 9
GEORGIA-CAROLINA BANCSHARES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
The Company's net income was $43,000 for the second quarter of 1998, a decrease
of $34,000 (44.2%) from net income of $77,000 for the second quarter of 1997.
Basic earnings per share were $0.07 for the second quarter of 1998, a decrease
of $0.05 (41.7%) from $0.12 for the second quarter of 1997. Total consolidated
assets at June 30, 1998 were $43,989,000, an increase of $3,418,000 (8.4%) from
December 31, 1997 total consolidated assets of $40,571,000 and an increase of
$6,298,000 (16.7%) from June 30, 1997 total consolidated assets of $37,691,000.
The decline in net income for the three months ended June 30, 1998, primarily
resulted from an increase in personnel costs and benefits of $50,000 (24.5%), an
increase in occupancy costs of $7,000 (17.5%) and an increase in operating
expenses of $56,000 (40.9%) from the quarter ended June 30, 1997. The Company's
net income benefitted as net interest income rose to $494,000, an increase of
$53,000 (12.0%) from the quarter ended June 30, 1997.
The Company's net income was $98,000 for the six months ending June 30, 1998, a
decrease of $73,000 (42.7%) from the six months ending June 30, 1997. Basic
earnings per share for the six months ending June 30, 1998 were $0.15, a
decrease of $0.12 (44.4%) from $0.27 for the six months ended June 30, 1997. The
decrease in net income primarily resulted from an increase in noninterest
expense of $232,000 from the six months ended June 30, 1997. Net income
benefitted as net interest income rose to $960,000. An increase of $98,000
(11.4%) from the six months ended June 30, 1997.
The return on average assets was 0.46% (annualized) for the six months ended
June 30, 1998, compared to 0.91% (annualized) for the six months ended June 30,
1997. The return on average equity was 2.67% (annualized) for the six months
ended June 30, 1998, compared to 4.78% (annualized) for the six months ended
June 30, 1997.
Further discussion of significant items affecting net income are discussed in
detail below.
NET INTEREST INCOME
Net interest income is the difference between the interest and fees earned on
loans, securities, and other interest-earning assets (interest income) and the
interest paid on deposits and borrowed funds (interest expense). Higher net
interest income is a result of the relationship between the interest-earning
assets and interest-bearing liabilities.
Net interest income was $494,000 for the three months ended June 30, 1998, an
increase of $53,000 (12.0%) from $441,000 for the three months ended June 30,
1997. The increase was primarily the result of investing increased deposit
liability funds in loans and investment securities. Interest-earning assets were
$39,619,000 at June 30, 1998 compared to $33,796,000 at June 30, 1997, an
increase of $5,823,000 (17.2%). Loans, the highest yielding component of
interest-earning assets, were $20,632,000, an increase of $1,754,000 (9.3%) from
the June 30, 1997 balance of $18,878,000. At June 30, 1998, loans represented
52.0% of interest-earning assets compared to 55.9% at June 30, 1997. Investments
in securities were $15,778,000 at June 30, 1998, an increase of $3,909,000 from
the June 30, 1997 balance of $11,869,000. Interest-bearing deposits were
$31,753,000 at June 30, 1998, an increase of $5,150,000 (19.4%) from the June
30, 1997 balance of $26,603,000.
<PAGE> 10
GEORGIA-CAROLINA BANCSHARES, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
INTEREST INCOME
Interest income for the three months ended June 30, 1998 was $846,000, an
increase of $105,000 (14.2%) from the three months ended June 30, 1997. The
increase in interest income primarily resulted from the increase in
interest-earning assets previously described. Interest income on loans was
$574,000 for the three months ended June 30, 1998, an increase of $60,000
(11.7%) from the June 30, 1997 three month balance of $514,000. Interest income
on securities was $212,000 for the three months ended June 30, 1998, an increase
of $41,000 (23.9%) from the June 30, 1997 balance of $171,000.
INTEREST EXPENSE
Interest expense for the three months ended June 30, 1998 was $352,000, an
increase of $52,000 (17.3%) from $300,000 for the three months ended June 30,
1997. The increase primarily resulted from the increase in interest-bearing
deposit accounts as previously discussed.
NONINTEREST INCOME
Noninterest income was $72,000 for the three months ended June 30, 1998, an
increase of $5,000 (7.4%) from the three months ended June 30, 1997. The
increase was attributable to an increase in service charges on deposit accounts
of $2,000 (3.6%) and a $3,000 (75.0%) increase in gains on sales of securities.
NONINTEREST EXPENSE
Noninterest expense was $494,000 for the three months ended June 30, 1998, an
increase of $113,000 from the three months ended June 30, 1997. Salary and
employee benefit costs increased $50,000 (24.5%) as a result of the addition of
a new senior-lending officer subsequent to June 30, 1997. In addition,
subsequent to June 30, 1997, the Company obtained a new executive officer to
develop and manage the Company's strategic expansion to the Augusta-Georgia
market area. Occupancy expenses increased $7,000 (17.5%) as a result of
acquisitions of new equipment and as a result of leasing office space in
Augusta-Georgia for the new executive officer. Other operating expenses
increased $56,000 (40.9%) as a result of increased directors fees due to
expansion of the Company's Board of Directors, a valuation adjustment to other
real estate owned and marketing and promotion costs related to the Company's
strategic growth plans to the Augusta, Georgia market.
INCOME TAXES
Income tax expense for the second quarter of 1998 totaled $29,000, representing
a decrease of $16,000 (35.6%) from the comparable quarter in 1997. The decrease
is attributable to a decrease in income before income tax resulting from the
factors previously described.
REVIEW OF FINANCIAL CONDITION
OVERVIEW
Management continuously monitors the financial condition of the Bank in order to
protect depositors, increase retained earnings and protect current and future
earnings. Further discussion of significant items affecting the Bank's financial
condition are discussed in detail below.
<PAGE> 11
GEORGIA-CAROLINA BANCSHARES, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
ASSET QUALITY
A major key to long-term earnings growth is the maintenance of a high-quality
loan portfolio. The Bank's directive in this regard is carried out through its
policies and procedures for extending credit to the Bank's customers. The goal
and result of these policies and procedures is to provide a sound basis for new
credit extensions and an early recognition of problem assets to allow the most
flexibility in their timely disposition.
Non-performing assets were $281,000 at June 30, 1998, compared to $349,000 at
December 31, 1997 and $473,000 at June 30, 1997. The composition of
non-performing assets for each date is shown below.
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<CAPTION>
June 30, December 31, June 30,
1998 1997 1997
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Non-accrual loans $ 28,000 $ 43,000 $ 22,000
OREO, net of valuation allowance 253,000 306,000 451,000
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$281,000 $ 349,000 $473,000
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The ratio of non-performing assets to total loans and other real estate was 1.4%
at June 30, 1998, 1.8% at December 31, 1997, and 2.4% at June 30, 1997.
Reduction of non-performing assets continues to be a management priority.
Additions to the allowance for loan losses are made periodically to maintain the
allowance at an appropriate level based upon management's analysis of potential
risk in the loan portfolio. The amount of the loan loss provision is determined
by an evaluation of the level of loans outstanding, the level of non-performing
loans, historical loan loss experience, delinquency trends, the amount of actual
losses charged to the allowance in a given period, and assessment of present and
anticipated economic conditions. From the previously described analysis,
management determined that the allowance for loan losses was at an appropriate
level during the current quarter and that a charge to the provision for loan
losses during the quarter was not necessary. At June 30, 1998, the ratio of
allowance for loan losses to total loans was 3.8%. At December 31, 1997 the
ratio was 3.8% and was 4.2% at June 30, 1997. Management considers the current
allowance for loan losses appropriate based upon its analysis of the potential
risk in the portfolio, although there can be no assurance that the assumptions
underlying such analysis will continue to be correct.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is the ability of an organization to meet its financial commitments
and obligations on a timely basis. These commitments and obligations include
credit needs of customers, withdrawals by depositors, and payment of operating
expenses and dividends. The Bank does not anticipate any events which would
require liquidity beyond that which is available through deposit growth, federal
funds balances, or investment portfolio maturities. The Bank actively manages
the levels, types and maturities of earning assets in relation to the sources
available to fund current and future needs to ensure that adequate funding will
be available at all times.
The Bank's liquidity remains adequate to meet operating and loan funding
requirements. The Bank's liquidity ratio at June 30, 1998 was 56.9%, compared to
57.6% at December 31, 1997, and 62.4% at June 30, 1997.
<PAGE> 12
GEORGIA-CAROLINA BANCSHARES, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (CONTINUED)
Management is committed to maintaining capital at a level sufficient to protect
depositors, provide for reasonable growth, and fully comply with all regulatory
requirements. Management's strategy to achieve this goal is to retain sufficient
earnings while providing a reasonable return on equity. Federal banking
regulations establish certain capital adequacy standards required to be
maintained by banks. These regulations set minimum requirements for risk-based
capital of 4% for core capital ("Tier I"), 8% for total risk-based capital and
3% for the leverage ratio. At June 30, 1998, the Bank's Tier I capital was 27.1%
and total risk-based capital was 28.4%, compared to 30.0% and 31.3% at
year-ended December 31, 1997, respectively. At June 30, 1998, the Bank's
leverage ratio was 16.8% compared to 18.9% at December 31, 1997.
YEAR 2000
A critical issue affecting companies that rely extensively on electronic
data processing systems, such as the Company, is the Year 2000 issue. The Year
2000 issue has arisen due to the widespread use of computer programs that rely
on two-digit date codes to perform computations or decision-making functions.
Many of these programs may fail as a result of their inability to properly
interpret date codes beginning January 1, 2000. For example, such programs may
misinterpret "00" as the year 1900 rather than 2000. In addition, some
equipment, being controlled by microprocessor chips, may not deal appropriately
with the year "00." This could result in a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions or engage in similar normal business
activities.
The Bank primarily uses a third-party vendor for processing its primary
banking applications. During 1997, the Company formed an internal task force,
chaired by the Executive Vice President, to address the Year 2000 issue, conduct
a comprehensive review of the Company's systems and ensure that the Company
takes any necessary measures. The Company believes that its systems, those of
the Bank and its data processing vendor are currently Year 2000 compliant and
does not believe that material expenditures will be necessary to implement any
further modifications. As of June 30, 1998, the Company had spent approximately
$15,000 to upgrade its software and hardware systems to help ensure that its
systems would be Year 2000 compliant. Further, the Company has issued a
certification request to its data processing vendor seeking assurance that its
systems will be Year 2000 compliant. The vendor has responded that its systems
are Year 2000 compliant now or will be well in advance of the Year 2000.
However, there can be no assurance that unforeseen difficulties or costs will
not arise. In addition, there can be no assurance that the systems of other
companies on which the Company's systems rely, such as the Bank's data
processing vendor, will be modified on a timely basis, or that the failure by
another company to properly modify its systems will not negatively impact the
Company's systems or operations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company may, from time to time, make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
stockholders. Such forward-looking statements are made based on management's
belief as well as assumptions made by, and information currently available to,
management pursuant to "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The Company's actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including governmental monetary and fiscal policies,
deposit levels, loan demand, loan collateral values, securities portfolio values
and interest rate risk management; the effects of competition in the banking
business from other commercial banks, savings and loan associations, mortgage
banking firms, consumer finance companies, credit unions, securities brokerage
firms, insurance companies, money market mutual funds and other financial
institutions operating in the Company's market area and elsewhere, including
institutions operating through the Internet; changes in government regulations
relating to the banking industry, including regulations relating to branching
and acquisitions; failure of assumptions underlying the establishment of
reserves for loan losses, including the value of collateral underlying
delinquent loans, and other factors. The Company cautions that such factors are
not exclusive. The Company does not undertake to update any forward-looking
statements that may be made from time to time by, or on behalf of, the Company.
<PAGE> 13
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
USE OF PROCEEDS FROM SALES OF REGISTERED SECURITIES
On February 19, 1998, the Company commenced a registered public offering
(the "Offering") of a minimum of 518,519 shares and a maximum of 740,741 shares
of its common stock, $.001 par value per share (the "Common Stock"), at an
offering price of $13.50 per share. The 740,741 shares in the Offering have been
registered under the Securities Act of 1933, as amended, pursuant to an
effective Registration Statement on Form SB-2 (the "Registration Statement,"
registration number 333-41547). The Registration Statement was declared
effective by the Securities and Exchange Commission (the "Commission") on
February 19, 1998.
The shares are currently being offered on a best-efforts, 518,519 share
minimum basis by certain directors and executive officers of the Company, who
are receiving no commissions for such sales. All subscription funds tendered are
being deposited in an interest-bearing escrow account with The Bankers Bank,
Atlanta, Georgia (the "Escrow Agent") pending completion of certain offering
conditions. The Offering, unless extended, will be terminated and all
subscription funds, together with any interest earned thereon, will be promptly
returned if 518,519 shares have not been subscribed by May 20, 1998. The Company
may, at its sole discretion, extend the Offering for three consecutive 90-day
periods without notice to subscribers. As a result, if the minimum number of
shares to be sold in the Offering is not attained before then, investor funds
may be held in escrow until February 14, 1999.
As of June 30, 1998, the minimum number of shares to be sold in the
Offering had not been attained. Accordingly, as of such date, the Escrow Agent
had not released any subscription funds. As set forth in the table below, from
the effective date of the Registration Statement to June 30, 1998, the Company
had accrued expenses in connection with the Offering of approximately $200,000.
As of June 30, 1998, legal fees and expenses totaled $95,000, and accounting
fees and expenses totaled $15,000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1998 Annual Meeting of Shareholders of the Company (the "Annual
Meeting") was held on April 21, 1998. At the Annual Meeting, the following
persons were elected as directors to serve as Class I directors, for a term of
three years and until their successors are elected and qualified: Phillip G.
Farr, Samuel A. Fowler, Jr., Arthur J. Gay, Jr., Joseph D. Greene, Hugh L.
Hamilton, Jr., and William G. Hatcher.
The number of votes cast for and against the election of each nominee for
director was as follows:
<TABLE>
<CAPTION>
Votes Votes
FOR AGAINST
------- -------
<S> <C> <C>
Phillip G. Farr 451,393 0
Samuel A. Fowler, Jr. 451,393 0
Arthur J. Gay, Jr. 451,393 0
Joseph D. Greene 451,393 0
Hugh L. Hamilton, Jr. 451,393 0
William G. Hatcher 451,393 0
</TABLE>
At the Annual Meeting, the following persons were elected as directors to
serve as Class II directors, for a term of one year and until their successors
are elected and qualified: J. Randal Hall, George H. Inman and Julian W. Osbon.
<PAGE> 14
<TABLE>
<CAPTION>
Votes Votes
FOR AGAINST
------- -------
<S> <C> <C>
J. Randal Hall 451,393 0
George H Inman 451,393 0
Julian W. Osbon 451,393 0
</TABLE>
At the Annual Meeting, the following persons were elected as directors to
serve as Class III directors, to succeed themselves for a term of two years and
until their successors are elected and qualified: Patrick G. Blanchard and John
W. Lee
<TABLE>
<CAPTION>
Votes Votes
FOR AGAINST
------- -------
<S> <C> <C>
Patrick G. Blanchard 451,393 0
John W. Lee 451,393 0
</TABLE>
No other matters were presented or voted for at the Annual Meeting.
The following persons did not stand for reelection to the Board at the 1998
Annual Meeting of Shareholders as their term of office continued after the
Annual Meeting: Heyward Horton, Jr., George O. Hughes, David W. Joesbury, Sr.,
James L. Lemley, and Robert N. Wilson.
ITEM 5. OTHER INFORMATION
SHAREHOLDER PROPOSALS
The proxy statement solicited by management of the Company with respect to
the 1999 Annual Meeting of Shareholders will confer discretionary authority to
vote on any proposals of shareholders of the Company intended to be presented
for consideration at such Annual Meeting that are submitted to the Company after
February 21, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibit No. Description
----------- -----------
<S> <C> <C>
27 Financial Data Schedule (for SEC use only)
</TABLE>
(b) No reports on Form 8-K were filed during the quarter ended June
30, 1998.
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GEORGIA-CAROLINA BANCSHARES, INC.
August 13, 1998 By: /s/ Patrick G. Blanchard, Sr.
- -------------------- ------------------------------------------------
Date Patrick G. Blanchard, Sr.
President and Chief Executive Officer
(principal executive officer)
August 13, 1998 By: /s/ J. Harold Ward, Jr.
- -------------------- ------------------------------------------------
Date J. Harold Ward, Jr.
Senior Vice President, Chief Financial Officer
(principal financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
GEORGIA-CAROLINA BANCSHARES, INC.'S 6-30-98 10-QSB FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,092
<INT-BEARING-DEPOSITS> 199
<FED-FUNDS-SOLD> 3,010
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,778
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 21,456
<ALLOWANCE> 824
<TOTAL-ASSETS> 43,989
<DEPOSITS> 36,217
<SHORT-TERM> 0
<LIABILITIES-OTHER> 426
<LONG-TERM> 0
0
0
<COMMON> 3,177
<OTHER-SE> 4,169
<TOTAL-LIABILITIES-AND-EQUITY> 43,989
<INTEREST-LOAN> 1,113
<INTEREST-INVEST> 434
<INTEREST-OTHER> 92
<INTEREST-TOTAL> 1,639
<INTEREST-DEPOSIT> 679
<INTEREST-EXPENSE> 679
<INTEREST-INCOME-NET> 960
<LOAN-LOSSES> 0
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<EXPENSE-OTHER> 962
<INCOME-PRETAX> 126
<INCOME-PRE-EXTRAORDINARY> 126
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 98
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
<YIELD-ACTUAL> 8.4
<LOANS-NON> 28
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 752
<CHARGE-OFFS> 12
<RECOVERIES> 84
<ALLOWANCE-CLOSE> 824
<ALLOWANCE-DOMESTIC> 824
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 346
</TABLE>
