<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 September 30, 1998
------------------
[ ] Transition report under Section 13 or 15 (d) of the Exchange Act
For the transition period from to
---------- -----------
Commission file number 333-07914
---------
CITIZENS EFFINGHAM BANCSHARES, INC.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
<TABLE>
<S> <C>
GEORGIA 58-2357619
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
</TABLE>
802 South Laurel Street
Post Office Box 379
Springfield, GA 31329
----------------------------------------
(Address of Principal Executive Offices)
(912) 754-0754
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Not Applicable
----------------------------------------------------
(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, 512,000 shares outstanding at September 30, 1998
- -------------------------------------------------------
Transitional Small Business Disclosure Format (check one):
Yes No X
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<PAGE> 2
Citizens Effingham Bancshares, Inc.
and Subsidiary
INDEX
PART I: FINANCIAL INFORMATION
<TABLE>
<S> <C>
ITEM 1. FINANCIAL STATEMENTS PAGE
The following financial statements are provided for Citizens Effingham
Bancshares, Inc. and the subsidiary bank, Citizens Bank of Effingham.
Consolidated Balance Sheets (unaudited) - September 30, 1998 and
December 31, 1997. 3
Consolidated Statements of Income (unaudited) - For the Nine Months
Ended September 30, 1998 and For the Period from April 3, 1997 (inception)
to September 30, 1998 and For the Three Months Ended September 30, 1998
and 1997. 4
Consolidated Statements of Cash Flows (unaudited) - For the Nine Months
Ended September 30, 1998 and For the Period from April 3, 1997 (inception)
to September 30, 1998. 5
Notes to Consolidated Financial Statements (unaudited). 6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II: OTHER INFORMATION 12
</TABLE>
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 nine month period ended September 30, 1998 are
not necessarily indicative of the results to be expected for the full year.
1
<PAGE> 3
CITIZENS EFFINGHAM BANCSHARES, INC.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The financial statements of Citizens Effingham Bancshares, Inc. (the
"Company") are set forth in the following pages.
<PAGE> 4
CITIZENS EFFINGHAM BANCSHARES, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
---- ----
<S> <C> <C>
Cash and due from banks $ 1,144,126 $ 3,158
Federal funds sold 5,490,000 --
---------- --------
Total cash and cash equivalents 6,634,126 3,158
---------- --------
Loans, net of unearned income 2,547,830 --
Less- allowance for loan losses (15,000) --
---------- --------
Loans, net 2,532,830 --
---------- --------
Bank premises and equipment, less accumulated depreciation 1,517,542 399,909
Accrued interest receivable 8,829 --
Other assets and accrued income 26,033 38,980
---------- --------
TOTAL ASSETS $10,719,360 $442,047
=========== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing demand $ 658,579 $ --
Interest-bearing demand 2,102,874 --
Savings 83,545 --
Time deposits over $100,000 1,539,037 --
Other time deposits 1,482,156 --
---------- --------
Total deposits 5,866,191 --
Short term notes payable -- 532,500
Accrued interest payable 8,045 1,945
Other liabilities and accrued expenses 13,373 694
---------- --------
Total liabilities 5,887,609 535,139
---------- --------
Shareholders' Equity
Common stock, $1 par value, authorized 20,000,000 shares, issued
and outstanding 512,000 shares 512,000 --
Paid-in capital surplus 4,608,000 --
Accumulated deficit (67,604) --
Deficit accumulated during the development stage (220,645) (93,092)
Accumulated other comprehensive income -- --
---------- --------
Total shareholders' equity 4,831,751 (93,092)
---------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,719,360 $442,047
=========== ========
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE> 5
CITIZENS EFFINGHAM BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND THE PERIOD FROM APRIL 3, 1997 (INCEPTION) TO SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Period Ended
September 30, September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 17,616 $ -- $ 17,616 $ --
Income on federal funds sold 16,850 -- 16,850 --
Interest on offering 131,471 -- 131,471 --
-------- -------- --------- --------
Total interest income 165,937 -- 165,937 --
-------- -------- --------- --------
INTEREST EXPENSE:
Interest on NOW and money market deposits 2,930 -- 2,930 --
Interest on savings deposits 80 -- 80 --
Interest on time deposits greater than $100,000 4,333 -- 4,333 --
Interest on other time deposits 3,601 -- 3,601 --
Other interest expense 851 -- 16,739 --
-------- -------- --------- --------
Total interest expense 11,795 -- 27,683 --
-------- -------- --------- --------
Net interest income before loan losses 154,142 -- 138,254 --
Less - provision for loan losses 15,000 -- 15,000 --
-------- -------- --------- --------
Net interest income after provision for loan losses 139,142 -- 123,254 --
-------- -------- --------- --------
OTHER OPERATING INCOME:
Service charges on deposit accounts 10 -- 10 --
Other service charges, commissions and fees 185 -- 185 --
Other income -- -- -- --
-------- -------- --------- --------
Total other operating income 195 -- 195 --
-------- -------- --------- --------
OTHER OPERATING EXPENSE:
Salaries 89,307 20,000 170,981 40,000
Employee benefits 1,119 1,429 11,204 3,097
Net occupancy expenses 3,151 3,905 11,519 7,437
Equipment rental and depreciation of equipment 388 -- 388 --
Other expenses 64,405 2,748 124,514 5,510
-------- -------- --------- --------
Total other operating expenses 158,370 28,082 318,606 56,044
-------- -------- --------- --------
INCOME BEFORE INCOME TAXES (19,033) (28,082) (195,157) (56,044)
Income tax provision -- -- -- --
-------- -------- --------- --------
NET LOSS $(19,033) $(28,082) $(195,157) $(56,044)
======== ======== ========= ========
LOSS PER SHARE* $ (0.04) $ (0.05) $ (0.38) $ (0.11)
======== ======== ========= ========
</TABLE>
* Net Loss / weighted average outstanding shares of 512,000.
See accompanying notes to consolidated financial statements
4
<PAGE> 6
CITIZENS EFFINGHAM BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
AND THE PERIOD FROM
APRIL 3, 1997 (INCEPTION) TO SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Period Ended
September 30, September 30,
1998 1997
------------ ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (195,157) $(56,044)
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 15,000 --
Changes in accrued income and other assets 4,118 --
Changes in accrued expenses and other liabilities 18,779 131
----------- --------
Net cash used in operating activities (157,260) (55,913)
----------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in loans made to customers (2,547,830) --
Purchases of property and equipment (1,117,633) (13,813)
Organization costs -- (33,215)
----------- --------
Net cash used in investing activities (3,665,463) (47,028)
----------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand and savings account 2,844,998 --
Net change in other time deposits 3,021,193 --
Proceeds from short-term note payable 160,000 112,500
Payments from short-term note payable (692,500) --
Proceeds from sale of common stock 5,120,000 --
----------- --------
Net cash provided by financing activities 10,453,691 112,500
----------- --------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,630,968 9,559
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,158 --
----------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 6,634,126 $ 9,559
=========== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest $ 21,271 $ --
=========== ========
Cash paid for income taxes $ -- $ --
=========== ========
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE> 7
Citizens Effingham Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
(1) ORGANIZATION
Citizens Effingham Bancshares, Inc. (the Company), a bank holding
company, owns 100% of the outstanding common stock of Citizens Bank of
Effingham (the Bank), which operates in the Effingham County, Georgia area.
Operations through September 7, 1998 relate primarily to expenditures by
the organizers for incorporating and organizing the Company. On September
8, 1998, the Bank opened for business to serve the Effingham County area as
a commercial bank. The Bank is chartered and regulated by the State of
Georgia Department of Banking and Finance and is insured by and subject to
regulation by the Federal Deposit Insurance Corporation. The Bank operates
out of two locations, one in Springfield, Georgia and one in Rincon,
Georgia.
The Company raised $5,120,000 through an offering of its $1 par value
common stock at $10 per share, of which $5,000,000 was used to capitalize
the Bank.
The interim financial statements included herein are unaudited but
reflect all adjustments which, in the opinion of management, are necessary
for a fair presentation of the financial position and results of operations
for the interim period presented. All such adjustments are of a normal
recurring nature. The results of operations for the nine months ended
September 30, 1998 are not necessarily indicative of the results of a full
year's operations.
(2) BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information, and with the instructions to Form 10-QSB and Item
310 (b) of Regulation S-B of the Securities and Exchange Commission.
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 (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the nine month period ended
September 30, 1998, are not necessarily indicative of the results that may
be expected for the year ended December 31, 1998.
(3) NEW AND PENDING PRONOUNCEMENTS
During February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS 128). SFAS 128 simplifies current standards by eliminating the
presentation of primary earnings per share (EPS) and requiring the
presentation of basic EPS, which includes no potential common shares and
thus no dilution. The Statement also requires entities with complex capital
structures to present basic and diluted EPS on the face of the income
statement and also eliminates the modified treasury stock method of
computing potential common shares. The Statement is effective for financial
statements issued for periods ending after December 15, 1997, including
interim periods. Early application is not permitted. Upon adoption,
restatement of all prior period EPS data presented is required. Based upon
the current capital structure of the Company, this Statement will have no
effect on the EPS calculation.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" (SFAS 130) and Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 130 establishes
standards for the reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. SFAS 131
specifies the presentation and disclosure of operating segment information
-6-
<PAGE> 8
Citizens Effingham Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
reported in the annual report and interim reports issued to stockholders.
The provisions of both statements will be effective for fiscal years
beginning after December 15, 1997. The management of the Company believes
that the adoption of these statements will not have a material impact on
the Company's financial position, results of operations, or liquidity.
During the nine months ended September 30, 1998, the Company adopted FASB
Statement No. 130, "Reporting Comprehensive Income." The statement requires
the reporting of comprehensive income in addition to net income from
operations. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income.
During the nine months ended September 30, 1998, the Company had no items
which were classified as other comprehensive income.
(4) COMMITMENTS
The organizers of Citizens Bank of Effingham have entered into an
agreement with Harry Shearouse which established him as Chief Executive
Officer and President of the Bank. This agreement obligates the Bank to pay
Mr. Shearouse an annual salary of $90,000, payable monthly and adequate
medical insurance for him and his family. The agreement also contains a
severance provision for termination without cause.
(5) YEAR 2000 COMPLIANCE ISSUES
The Company utilizes and depends upon data processing systems and
software to conduct its business. The approach of the Year 2000 presents a
problem in that many computer programs have been written using two digits
rather than four to define the applicable year. Computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900
rather that the Year 2000. For example, computer systems may compute
payment, interest, delinquency or other figures important to the operations
of the Company based on the wrong date. This could result in internal
system failure or miscalculation, and also creates risk for the Company
from third parties with whom the Company deals on financial transactions.
The FDIC has issued guidelines for insured financial institutions with
respect to Year 2000 compliance. The Company has developed a Year 2000
action plan based in part on the guidelines and timetables issued by the
FDIC. The Company's action plan focuses on four primary areas: (1)
information systems, (2) embedded systems located at the Bank's offices and
within its ATM machines, (3) third-party and customer relationships, and
(4) contingency planning. The Company has designated a Year 2000 compliance
team who are making Year 2000 readiness assessments and remediation where
necessary.
INFORMATION SYSTEMS
The Company has identified all mission-critical information ("IT")
systems and is developing a schedule for testing and remediation of such
systems. The Company has completed its inventory of mission critical
software and received certification for Year 2000 compliance from all its
software vendors prior to purchase. Testing of internal mission-critical
systems is scheduled to take place during the first quarter of 1999 and
implementation is scheduled to be complete by June 30, 1999.
-7-
<PAGE> 9
Citizens Effingham Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
EMBEDDED SYSTEMS
The Company is performing a comprehensive inventory of its embedded
systems, such as microcontrollers used to operate security systems, and has
completed its inventory of mission-critical non-IT systems. The Company is
in the process of contacting manufacturers and vendors of those components
utilized in operations to determine whether such components are Year 2000
compliant. The Company intends to remediate or replace, as applicable, any
non-compliant components and expects to complete this process for mission
critical systems by June 30, 1999. The quality of the responses from
manufacturers and vendors, the estimated impact of the individual system or
component on the Bank's operations, and the ability of the Company to
perform meaningful and verifiable tests will influence its decision
regarding whether to have independent tests conducted on its embedded
systems.
THIRD PARTY AND CUSTOMER RELATIONSHIPS
The Company is in the process of initiating communications with all
suppliers and vendors to determine the potential impact of such third
parties' failure to remediate their own Year 2000 issues. These third
parties include other financial institutions, office supply vendors and
telephone, electric and other utility companies. The Company is encouraging
its counterparts and customer to conduct their own Year 2000 assessments
and take appropriate steps to become Year 2000 compliant.
The Company outsources its principle data processing activities to a
third-party processor, and the Company is actively communicating with and
monitoring the progress of such processor to assess the impact of Year 2000
issues on such processor and its ability to continue to provide such date
processing services. The Company will consider new business relationships
with alternate providers of products and services if necessary.
Additionally, the Company has initiated communications with its larger and
commercial borrowers to assess the potential impact of Year 2000 on them
and their ability to remain current on loan repayments.
CONTINGENCY PLANS
As part of the Company's normal business practice, it maintains
contingency plans to follow in the event of emergency situations, some of
which could arise from Year 2000-related problems. The Company is in the
process of forming a detailed Year 2000 contingency plan, which will assess
several possible scenarios to which the Company may be required to react.
The Company's formal Year 2000 contingency plan is expected to be completed
by the end of first quarter 1999.
FINANCIAL IMPLICATIONS
The Company believes that, since a majority of its equipment is
relatively new, the Year 2000 problem will not pose significant internal
operational problems or generate material additional expenditures.
Maintenance, testing, and modification costs will be expensed as incurred,
while the costs of new software or hardware will be capitalized and
amortized over their useful lives. The Company does not expect the amounts
required to be expensed to resolve Year 2000 issues to have a material
effect on its financial position or results of operations.
POTENTIAL RISKS
The Year 2000 issue presents a number of risks to the business and
financial condition of the Company and the Bank. External factors, which
include but are not limited to electric, telephone and water service, are
beyond the control of the Company and the failure of such systems could
have a negative impact on the Company, its customers and third parties on
whom the Company relies for its day-to-day operations. The
-8-
<PAGE> 10
Citizens Effingham Bancshares, Inc.
and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
business of many of the Company's customers may be negatively affected by
the Year 2000 issue, and any financial difficulties incurred by the
Company's customers in connection with the century change could negatively
affect such customers' ability to repay loans to the Bank. The failure of
the Bank's computer system or applications or those operated by customers
or third parties could have a material adverse effect on the Company's
results of operations and financial condition.
The foregoing are forward-looking statements reflecting management's
current assessment and estimates with respect to the Company's Year 2000
compliance efforts and the impact of Year 2000 issues on the Company's
business and operations. Various factors could cause actual plans and
results to differ materially from those contemplated by such assessments,
estimates and forward-looking statements, many of which are beyond the
control of the Company. Some of these factors include, but are not limited
to representations by the Company's vendors and counterparties,
technological advances, economic considerations, and consumer perceptions.
The Company's Year 2000 compliance program is an ongoing process involving
continual evaluation and may be subject to change in response to new
developments.
-9-
<PAGE> 11
Citizens Effingham Bancshares, Inc.
and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
INTERIM FINANCIAL CONDITION
On March 13, 1998, the Company concluded its offering having sold 512,000
shares of common stock at $10.00 per share. This provided the Company with
$5,120,000 in capital. Operations through September 7, 1998 related
primarily to organizing the Company and pre-opening expenditures to prepare
for opening the Bank. On September 8, 1998, the Bank opened for business to
serve the Effingham County area as a commercial bank.
As of September 30, 1998, the Bank had concluded 17 days of operations,
and the Company has total assets of $10,719,360. During this period, total
deposits had grown to $5,866,191 and total loans had grown to $2,547,830.
The Bank has overnight investments at September 30, 1998 of $5,490,000.
At quarter end, the Bank's loan to deposit ratio was 43.4%. Management's
long term target for the loan to deposit ratio is 75%. The interest rates
being paid on interest bearing deposits and the service charge rates for
deposit services are comparable to local market rates. Management is making
a concerted effort to develop quality loan business in the local market and
to manage the deposit growth consistent with expected loan demand.
The deposit mix at September 30, 1998 was as follows: $658,579 (11.3% of
total deposits) in non-interest bearing demand deposits; $2,102,874 (35.8%
of total deposits) in interest checking accounts; $83,545 (1.4% of total
deposits) in savings accounts; and $3,021,193 (51.5% of total deposits) in
time deposits. As the Bank continues to grow, management expects the
deposit mix to become more heavily weighted towards the higher costing time
deposits, thus increasing the average cost of funds and reducing the Bank's
net interest margin.
LIQUIDITY
Overnight interest bearing deposits (federal funds sold) with other banks
were $5,490,000. The current investment portfolio strategy is primarily to
provide liquidity for funding loans and initial operating expenditures and
secondarily for earnings enhancement.
The Bank has established a Federal Funds Purchase line of credit with its
correspondent bank, which totals $1,200,000. This line is unsecured and is
designed to provide the Bank with short-term liquidity.
In the early months, the investment practices of the Company will limit
investments to highly liquid overnight investments in correspondent banks.
For the foreseeable future, the Bank will consider its investment portfolio
primarily as a source for liquidity and secondarily as a source for
earnings.
CAPITAL
The Company had an accumulated deficit of $288,249 as of September 30,
1998. During the first nine months of 1998, the Company incurred a net loss
of $195,157 compared to a net loss of $56,044 through September 30, 1997.
The first three quarters of 1998 reflected 17 days of banking operations
with full-time employees in the Springfield bank site, whereas through
September 30, 1997 reflected the costs associated with early stage
development of the Company when it had no earning assets.
ASSET QUALITY
The provision for loan losses for the nine months ended September 30,
1998 was $15,000 (all in the third quarter). Since the Bank's loan
portfolio is not one month old, the Bank has no historical data about loan
losses
-10-
<PAGE> 12
Citizens Effingham Bancshares, Inc.
and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
on its portfolio on which to base projections for future losses. Current
loan quality analysis does not indicate potential loan losses. Until more
substantial evidence about potential loan losses is developed, management
believes the Bank should establish an allowance for loan losses that will
approximate 1.5% of total loans. At September 30, 1998, the allowance for
loan .59% of total loans. Management expects the allowance for loan losses
to settle at the 1.5% level in the next 9 to 15 months.
RESULTS OF OPERATIONS
Premises and equipment (net of depreciation) were $1,517,542 and
consisted primarily of construction expenses for both branches as well as
furniture and fixtures acquired.
Net interest income for the nine months ended September 30, 1998 was
$138,254. In the comparable period for 1997, the Company's working capital
came from a line of credit guaranteed by the Company's organizers. All
working capital lines of credit were paid off in September 1998. The
Company had interest expense on interest bearing deposits and the lines of
credit of $27,683 for the first nine months of 1998 ($11,795 in the third
quarter).
Total interest income in the first three quarters of 1998 was $165,937
(all in the third quarter). Loan interest income and deposit interest
expenses in 1998 were not incurred until the Bank opened on September 8,
1998.
Non-interest income for the nine months ended September 30, 1998 was $195
(all in the third quarter). This consists of service charges on deposit
accounts and miscellaneous service fees.
Non-interest expense for the first three-quarters of 1998 was $318,606
($158,370 in the third quarter) compared to $56,044 for the same period in
1997. Salaries and benefits increased substantially when the Bank commenced
operations in September 1998 with 15 employees compared to only one
employee in 1997. Occupancy costs are up in 1998 with operations occurring
in the rented office space until the permanent bank building was completed.
Other operating expenses for the first nine months increased from $5,510 in
1997 to $124,514 in 1998 and include many expenses that were not necessary
in 1997, such as data processing services, business development,
professional fees, postage, supplies and communications costs.
Management does not expect the Company to make a quarterly profit until
at least the first quarter of 2000, while it establishes its position in
the local market and builds its banking services infrastructure. Management
continues to believe that the local market presents good opportunities for
business development to support a growing and profitable community bank.
Despite the anticipated losses in the first years of operations, the
Company expects earnings from loans and investments and other banking
services as well as steady deposit growth to provide sufficient liquidity
for both the short and long term. The Bank intends to manage its loan
growth such that deposit flows will provide funding for all loans as well
as cash reserves for working capital and short to intermediate term, liquid
investments.
-11-
<PAGE> 13
Citizens Effingham Bancshares, Inc.
and Subsidiary
PART II: OTHER INFORMATION:
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company is a party or
of which 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
nine months ended September 30, 1998.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
A. Exhibits - 27.1 Financial Data Schedule (for SEC use only)
B. There have been no reports filed on form 8-K for the nine months
ended September 30, 1998.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Citizens Effingham Bancshares, Inc.
/s/ Harry H. Shearouse
--------------------------------------
Harry H. Shearouse
President / Chief Executive Officer
Date: November 10, 1998
-12-
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,144,126
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,490,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 2,547,830
<ALLOWANCE> 15,000
<TOTAL-ASSETS> 10,719,360
<DEPOSITS> 5,866,191
<SHORT-TERM> 0
<LIABILITIES-OTHER> 21,418
<LONG-TERM> 0
0
0
<COMMON> 512,000
<OTHER-SE> 4,319,751
<TOTAL-LIABILITIES-AND-EQUITY> 10,719,360
<INTEREST-LOAN> 17,616
<INTEREST-INVEST> 0
<INTEREST-OTHER> 148,321
<INTEREST-TOTAL> 165,937
<INTEREST-DEPOSIT> 10,944
<INTEREST-EXPENSE> 27,683
<INTEREST-INCOME-NET> 138,254
<LOAN-LOSSES> 15,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 318,606
<INCOME-PRETAX> (195,157)
<INCOME-PRE-EXTRAORDINARY> (195,157)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (195,157)
<EPS-PRIMARY> (.38)
<EPS-DILUTED> (.38)
<YIELD-ACTUAL> 3.6
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 15,000
<ALLOWANCE-DOMESTIC> 15,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
