<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, 2000
[ ] 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 333-07914
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CITIZENS EFFINGHAM BANCSHARES, INC.
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(Exact Name of Small Business Issuer as Specified in Its Charter)
GEORGIA 58-2357619
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
802 South Laurel Street
Post Office Box 379
Springfield, Georgia 31329
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(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, 2000
Transitional Small Business Disclosure Format (check one):
Yes [X] No [ ]
<PAGE> 2
Citizens Effingham Bancshares, Inc.
and Subsidiary
INDEX
PART I: FINANCIAL INFORMATION
<TABLE>
ITEM 1. FINANCIAL STATEMENTS PAGE
<S> <C>
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, 2000 and
December 31, 1999. 2
Consolidated Statements of Income (unaudited) - For the Nine Months
Ended September 30, 2000 and 1999 and For the Three Months Ended
September 30, 2000 and 1999 3
Consolidated Statements of Cash Flows (unaudited) - For the Nine Months
Ended September 30, 2000 and 1999. 4
Notes to Consolidated Financial Statements (unaudited) 5
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
PART II: OTHER INFORMATION 10
</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, 2000 are
not necessarily indicative of the results to be expected for the full year.
1
<PAGE> 3
CITIZENS EFFINGHAM BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
(Unaudited)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
September 30, December 31,
ASSETS 2000 1999
------------ ------------
<S> <C> <C>
Cash and due from banks $ 1,987,724 $ 2,787,749
Federal funds sold 2,670,000 2,410,000
------------ ------------
Total cash and cash equivalents 4,657,724 5,197,749
------------ ------------
Securities available for sale, at fair value 3,629,580 2,610,742
Federal Home Loan Bank stock, at cost 114,800 --
Loans, net of unearned income 46,271,022 33,579,810
Less- allowance for loan losses (576,792) (481,035)
------------ ------------
Loans, net 45,694,230 33,098,775
------------ ------------
Bank premises and equipment, less accumulated depreciation 1,844,603 1,935,866
Accrued interest receivable 568,355 366,567
Other assets and accrued income 360,218 261,224
------------ ------------
TOTAL ASSETS $ 56,869,510 $ 43,470,923
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Non-interest bearing demand $ 5,913,749 $ 4,843,875
Interest-bearing demand 44,907,035 33,646,248
------------ ------------
Total deposits 50,820,784 38,490,123
Other liabilities and accrued expenses 679,843 219,423
------------ ------------
Total liabilities 51,500,627 38,709,546
------------ ------------
Shareholders' Equity
Common stock, $1 par value, authorized 20,000,000 shares, issued
and outstanding 512,000 shares 512,000 512,000
Paid-in capital surplus 4,608,000 4,608,000
Retained earnings (accumulated deficit) 507,451 (84,269)
Deficit accumulated during development stage (220,645) (220,645)
Accumulated other comprehensive income (37,923) (53,709)
------------ ------------
Total shareholders' equity 5,368,883 4,761,377
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 56,869,510 $ 43,470,923
============ ============
</TABLE>
2
<PAGE> 4
CITIZENS EFFINGHAM BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Income
For the Three Months Ended September 30, 2000 and 1999
and For the Nine Months Ended September 30, 2000 and 1999
(UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
---------- -------- ---------- ----------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $1,184,029 $673,939 $3,163,662 $1,617,459
Income on federal funds sold 62,342 54,868 146,657 141,342
Interest on securities 51,281 30,889 137,410 62,296
---------- -------- ---------- ----------
Total interest income 1,297,652 759,696 3,447,729 1,821,097
---------- -------- ---------- ----------
INTEREST EXPENSE:
Interest on NOW and money market deposits 127,083 92,467 339,468 228,071
Interest on savings deposits 4,270 3,591 12,377 7,442
Interest on time deposits 456,437 232,183 1,168,646 560,109
---------- -------- ---------- ----------
Total interest expense 587,790 328,241 1,520,491 795,622
---------- -------- ---------- ----------
Net interest income before loan losses 709,862 431,455 1,927,238 1,025,475
Less - provision for loan losses 101,000 55,000 213,000 225,000
---------- -------- ---------- ----------
Net interest income after provision for loan losses 608,862 376,455 1,714,238 800,475
---------- -------- ---------- ----------
OTHER OPERATING INCOME:
Service charges on deposit accounts 65,217 35,999 185,096 83,985
Other service charges, commissions and fees 11,852 11,379 43,602 34,793
Other income 796 3,078 2,558 7,705
---------- -------- ---------- ----------
Total other operating income 77,865 50,456 231,256 126,483
---------- -------- ---------- ----------
OTHER OPERATING EXPENSE:
Salaries 156,285 140,659 458,813 406,579
Employee benefits 22,897 21,554 66,544 64,211
Net occupancy expenses 27,088 46,930 78,713 128,820
Equipment rental and depreciation of equipment 38,970 13,869 118,591 37,049
Other expenses 139,565 68,412 332,954 284,336
---------- -------- ---------- ----------
Total other operating expenses 384,805 291,424 1,055,615 920,995
---------- -------- ---------- ----------
INCOME BEFORE INCOME TAXES 301,922 135,487 889,879 5,963
Income tax provision 185,658 -- 298,158 --
---------- -------- ---------- ----------
NET INCOME $ 116,264 $135,487 $ 591,721 $ 5,963
========== ======== ========== ==========
INCOME PER SHARE* $ 0.23 $ 0.26 $ 1.16 $ 0.01
========== ======== ========== ==========
</TABLE>
* Net Income (Loss) / weighted average outstanding shares of 512,000.
3
<PAGE> 5
CITIZENS EFFINGHAM BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Nine Months Ended
September 30,
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 591,721 $ 5,963
Adjustments to reconcile net income to net cash provided by
operating activities:
Provision for loan losses 213,000 225,000
Depreciation 93,896 91,393
Loss on sale of property and equipment 141 --
Changes in accrued income and other assets (274,883) (258,379)
Changes in accrued expenses and other liabilities 434,520 170,035
------------ ------------
Net cash provided by (used in) operating activities 1,058,395 234,012
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in loans made to customers (12,808,455) (15,970,019)
Purchase of securities available for sale (1,003,052) (2,692,336)
Purchase of Federal Home Loan Bank stock (114,800) --
Purchases of property and equipment (2,774) (56,491)
------------ ------------
Net cash used in investing activities (13,929,081) (18,718,846)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand and savings account 3,365,969 2,013,441
Net change in other time deposits 8,964,692 15,756,466
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Net cash provided by financing activities 12,330,661 17,769,907
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (540,025) (714,927)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 5,197,749 5,523,185
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 4,657,724 $ 4,808,258
============ ============
SUPPLEMENT CASH FLOW INFORMATION:
Cash paid for interest $ 1,380,451 $ 654,625
============ ============
Cash paid for income taxes $ 19,461 $ --
============ ============
</TABLE>
4
<PAGE> 6
Citizens Effingham Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------------
(1) 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, 2000,
are not necessarily indicative of the results that may be expected for
the year ended December 31, 2000. For further information refer to the
consolidated financial statements and footnotes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1999.
(2) NEW AND PENDING PRONOUNCEMENTS
During 1999, the Company adopted FASB Statement No. 137, "Accounting
for Derivative Instruments and Hedging Activities". The statement
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts and for hedging activities.
During 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.
(3) OTHER COMPREHENSIVE INCOME
During the nine months ended September 30, 2000, the Company had
unrealized holding gains on investment securities which were reported
as comprehensive income. An analysis of accumulated other comprehensive
income since December 31, 1999 follows:
<TABLE>
<S> <C>
Accumulated other comprehensive income at December 31, 1999 $ 53,709
Other comprehensive income, net of tax:
Change in unrealized gain (loss)
on securities available for sale, net
of deferred income tax benefit of $19,536 (15,786)
Less: Reclassification adjustment for (gains) losses
realized in net income --
--------
(15,786)
--------
Accumulated other comprehensive income at September 30, 2000 $ 37,923
========
</TABLE>
5
<PAGE> 7
Citizens Effingham Bancshares, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------------
(4) SUPPLEMENTAL FINANCIAL DATA
Components of other operating expenses greater than 1% of total interest
income and other income for the periods ended September 30, 2000 and 1999
are:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
------- ------ ------- -------
<S> <C> <C> <C> <C>
Data Processing $15,121 $ 5,750 $45,613 $36,492
Supplies and printing $13,385 $11,265 $37,090 $37,364
Telephone and communications $ 6,508 $ 5,947 $19,373 $19,728
Legal fees $ 4,000 $ 5,194 $11,806 $33,922
Audit fees $ 8,700 $ 7,959 $26,100 $21,972
</TABLE>
6
<PAGE> 8
Citizens Effingham Bancshares, Inc. and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
For Each of the Nine Months in the Period Ended
September 30, 2000 and 1999
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INTERIM FINANCIAL CONDITION
Citizens Effingham Bancshares, Inc. (the "Company") reported total assets of
$56,869,510 as of September 30, 2000, compared to $43,470,923 at December 31,
1999. The most significant change in the composition of assets was an increase
in net loans from $33,098,775 to $45,694,230. Federal Home Loan Bank stock was
purchased during the second quarter at a cost of $114,800.
LIQUIDITY
The Bank's liquid assets as a percentage of total deposits were 9.2% at
September 30, 2000, compared to 13.5% at December 31, 1999. The Company has
approximately $2,250,000 in available federal fund lines of credit with
correspondent banks. However, the Company has not advanced on these lines during
2000. At least monthly, management analyzes the level of off-balance sheet
commitments such as unfunded loan equivalents, loan repayments, maturity of
investment securities, liquid investment, and available fund lines in an attempt
to minimize the possibility that a potential shortfall will exist.
CAPITAL
The capital of the Company totaled $5,368,885 as of September 30, 2000. The
capital of the Company and the Bank exceeded all prescribed regulatory capital
guidelines. Regulations require that the most highly rated banks maintain a Tier
1 leverage ratio of 3% plus an additional cushion of at least 1 to 2 percentage
points. Tier 1 capital consists of common shareholders' equity, less certain
intangibles. The Bank's Tier 1 leverage ratio was 9.9% at September 30, 2000,
compared to 11.9% at December 31, 1999. Regulations require that the Bank
maintain a minimum total risk weighted capital ratio of 8%, with one-half of
this amount, or 4%, made up of Tier 1 capital. Risk-weighted assets consist of
balance sheet assets adjusted by risk category, and off-balance sheet assets or
equivalents similarly adjusted. At September 30, 2000, the Bank had a
risk-weighted total capital ratio of 12.8%, compared to 14.5% at December 31,
1999, and a Tier I risk-weighted capital ratio of 11.6 %, compared to 13.3% at
December 31, 1999. The decrease is primarily caused by the continued growth in
the loans.
ASSET QUALITY
Nonperforming assets which include nonaccruing loans, repossessed collateral
and loans for which payments are more than 90 days past due totaled $29,824 an
increase of $29,824 from December 31, 1999. There were no related party loans
which were considered nonperforming at September 30, 2000. The composition of
the nonperforming assets is presented in the following table:
7
<PAGE> 9
Citizens Effingham Bancshares, Inc. and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
For Each of the Nine Months in the Period Ended
September 30, 2000 and 1999
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Loans on nonaccrual $ -- $ --
Loans greater than 90 days past due 29,824 --
Other repossessed collateral -- --
------- -----
Total nonperforming assets $29,824 $ --
======= =====
Total nonperforming assets as a percentage
of total loans (gross) and other real estate 0.07% 0.00%
------- -----
</TABLE>
The allowance for loan losses totaled $576,792 at September 30, 2000, a net
increase of $95,757 from December 31, 1999. The allowance for loan losses
represented 1.2% and 1.4% of total loans at September 30, 2000 and December 31,
1999, respectively. An analysis of the allowance for loan losses since December
31, 1999 follows:
<TABLE>
<S> <C>
Allowance for loan losses at December 31, 1999 $481,035
Charge-offs:
Commercial 13,065
Real Estate --
Installment 111,169
--------
Total 124,234
--------
Recoveries:
Commercial 5,172
Real Estate --
Installment 1,819
--------
Total 6,991
--------
Provision charged to income 213,000
--------
Allowance for loan losses at September 30, 2000 $576,792
========
</TABLE>
The loan portfolio is reviewed periodically to evaluate the outstanding loans
and to measure the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses, and internal credit ratings. Management's judgment as to
the adequacy of the allowance is based upon a number of assumptions about future
events which it believes to be reasonable, but which may or may not be
reasonable. However, because of the inherent uncertainty of assumptions made
during the evaluation
8
<PAGE> 10
Citizens Effingham Bancshares, Inc. and Subsidiary
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
For Each of the Nine Months in the Period Ended
September 30, 2000 and 1999
--------------------------------------------------------------------------------
process, there can be no assurance that loan losses in future periods will not
exceed the allowance for loan losses or that additional allocations to the
allowance will not be required.
The Bank was most recently examined by its primary regulatory authority in
March 1999. There were no recommendations by the regulatory authority that in
management's opinion will have material effects on the Bank's liquidity, capital
resources or operations.
INVESTMENT SECURITIES
At September 30, 2000, the Bank had $3,629,580 in investment securities
available-for-sale, compared to $2,610,742 at December 31, 1999. The net
unrealized loss on available for sale securities, net of deferred taxes, was
$37,923 on September 30, 2000. During the period ended September 30, 2000, there
were no maturities and calls of investments.
RESULTS OF OPERATIONS
Net interest income for the third quarter of 2000 was $608,862, an increase
of $232,407 (38.2%) compared to the same period for 1999. Interest income for
the third quarter of 2000 was $1,297,652, representing an increase of
$537,956 (41.5%) over the same period in 1999. The increase in interest income
was due to an increase in total loans outstanding as a result of the Company's
growth. The Company opened for business in September 1998. Interest expense for
the third quarter of 2000 increased $259,549 (44.2%) compared to the same period
in 1999. The increase in interest expense is primarily due to an increase in
interest bearing deposits since the Company opened for operations.
Amounts charged to expense related to the allowance for loan losses for the
three months ending September 30, 2000 and 1999, were $101,000 and $55,000,
respectively.
Other operating income for the third quarter of 2000 was $77,865 an increase
of $27,409 (35.2%) compared to the same period in 1999. The increase in service
charges on deposit accounts of $29,218 (44.8%) is due to an increase in the
number of accounts and deposit activity.
Other operating expenses for the third quarter of 2000 were $384,805, an
increase of $93,381 (24.3%) compared to the same period for 1999. The increase
is primarily attributable to the increase in other expenses, which is made up of
supplies, professional fees and data processing expenses.
9
<PAGE> 11
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, 2000.
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 nine months ended
September 30, 2000.
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 6, 2000
10
