<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report pursuant to section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the fiscal year ended September 30, 2000
------------------
[ ] Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to _____________.
Commission File No. 0-23763
Quitman Bancorp, Inc.
---------------------
(Name of Small Business Issuer in Its Charter)
Georgia 58-2365866
------------------------------------------------ -------------------
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
602 East Screven Street, Quitman, Georgia 31643
------------------------------------------------ -------------------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (912) 263-7538
-------------------
Securities registered under Section 12(b) of the None
Exchange Act: -------------------
Securities registered under Section 12(g) of the
Exchange Act:
Common Stock, par value $0.10 per share
________________________________________
(Title of Class)
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 [ ]
<PAGE> 2
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $4,747,493.
The aggregate market value of the voting stock held by non-
affiliates of the registrant, based on the average bid and asked price of
the registrant's Common Stock on December 8, 2000, was $3.9 million.
As of December 8, 2000, there were issued and outstanding 507,262
shares of the registrant's Common Stock.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the Fiscal Year
ended September 30, 2000. (Part II)
2. Portions of the Proxy Statement for the Annual Meeting of Stockholders
for the Fiscal Year ended September 30, 2000. (Parts II and III)
<PAGE> 3
PART I
------
Quitman Bancorp, Inc. (the "Company" or "Registrant") 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 (including this annual report on Form 10-KSB and the
exhibits thereto), in its reports to stockholders and in other
communications by the Company, which are made in good faith by the Company
pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995.
These forward-looking statements involve risks and uncertainties, such
as statements of the Company's plans, objectives, expectations, estimates
and intentions, that are subject to change based on various important
factors (some of which are beyond the Company's control). The following
factors, among others, could cause the Company's financial performance to
differ materially from the plans, objectives, expectations, estimates and
intentions expressed in such forward-looking statements: the strength of
the United States economy in general and the strength of the local
economies in which the Company conducts operations; the effects of, and
changes in, trade, monetary and fiscal policies and laws, including
interest rate policies of the board of governors of the federal reserve
system, inflation, interest rates, market and monetary fluctuations; the
timely development of and acceptance of new products and services of the
Company and the perceived overall value of these products and services by
users, including the features, pricing and quality compared to competitors'
products and services; the willingness of users to substitute competitors'
products and services for the Company's products and services; the success
of the Company in gaining regulatory approval of its products and services,
when required; the impact of changes in financial services' laws and
regulations (including laws concerning taxes, banking, securities and
insurance); technological changes; acquisitions; changes in consumer
spending and saving habits; and the success of the Company at managing the
risks resulting from these factors.
The Company cautions that the listed factors are not exclusive. The
Company does not undertake to update any forward-looking statement, whether
written or oral, that may be made from time to time by or on behalf of the
Company.
Item 1. Description of Business
--------------------------------
General
-------
The Company is a Georgia-chartered corporation organized in December
1997 at the direction of Quitman Federal Savings Bank (the "Bank") to
acquire all of the capital stock that the Bank issued in its conversion
from the mutual to stock form of ownership (the "Conversion"). On April 2,
1998, the Bank completed the Conversion and became a wholly owned
subsidiary of the Company. The Company is a unitary savings and loan
holding company. Changes to federal law that occurred after the end of the
<PAGE> 4
fiscal year significantly restrict the ability of the Company to affiliate
in any way with non-financial companies. However, these changes do not
impact the current business of the Company and the Company generally is not
restricted in the types of business activities in which it may engage
provided that the Bank retains a specified amount of its assets in housing-
related investments. The Company conducts no significant business or
operations of its own other than holding all of the outstanding stock of
the Bank and investing the Company's remaining portion of the net proceeds
obtained in the Conversion.
The Bank, which was founded in 1936 under the name Quitman Federal
Savings and Loan Association, is a federally chartered stock savings bank
headquartered in Quitman, Georgia. The Bank obtained its current name in
November 1997. The Bank is subject to examination and comprehensive
regulation by the Office of Thrift Supervision ("OTS") and its deposits are
federally insured by the Savings Association Insurance Fund ("SAIF"). The
Bank is a member of and owns capital stock in the Federal Home Loan Bank
(the "FHLB") of Atlanta, which is one of the 12 regional banks in the FHLB
System.
The Bank attracts deposits from the general public (primarily
certificates of deposit) and uses those deposits, together with other
funds, primarily to originate and invest in loans secured by one- to four-
family residential real estate. The Bank also originates consumer,
commercial and construction loans and uses borrowings to fund loans.
<PAGE> 5
Competition
-----------
The Bank is one of many financial institutions serving its market area
of Brooks County and parts of Lowndes County, Georgia. The competition for
deposits comes from other insured financial institutions such as commercial
banks, thrift institutions, credit unions, finance companies, and multi-
state regional banks in the Bank's market area. Deposit competition also
includes a number of insurance products sold by local agents and investment
products such as mutual funds and other securities sold by local and
regional brokers. Loan competition varies depending upon market conditions
and comes from other insured financial institutions such as commercial
banks, thrift institutions, credit unions, multi-state regional banks, and
mortgage bankers.
Lending Activities
------------------
Loan Portfolio Data. Set forth below is selected data relating to the
composition of the Company's loan portfolio by type of loan and type of
security on the dates indicated:
<TABLE>
<CAPTION>
At September 30,
--------------------------------------
2000 1999
------------------ ------------------
Amount Percent Amount Percent
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Type of Loans:
Real estate loans:
One-to-four family residential $ 36,014 70.64% $ 31,580 72.79%
Multi-family (5 or more) dwelling 856 1.68% 612 1.41%
Non residential 6,160 12.08% 6,110 14.08%
Construction 4,156 8.15% 2,801 6.46%
FHLMC pools 1 .00% 2 .00%
Share loans 552 1.08% 470 1.08%
Consumer 3,249 6.37% 1,813 4.18%
-------- -------- -------- --------
50,988 100.00% 43,388 100.00%
======== ========
Less:
Loans in process 1,426 1,825
Allowance for loan losses 438 389
Deferred loan origination fees
and costs 72 53
-------- --------
Total loans, net $ 49,052 $ 41,121
======== ========
</TABLE>
<PAGE> 6
Loan Maturity Tables. The following table sets forth the estimated
maturity of the Company's loan portfolio at September 30, 2000. The table
does not include the effects of possible prepayments or scheduled principal
repayments.
All mortgage loans are shown as maturing based on the date of the last
payment required by the loan agreement.
<TABLE>
<CAPTION>
Resi- Non Cons- Other Total
dential Resi- truction
dential
-------- -------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
Amounts due:
Within 1 year $ 6,260 $ 1,592 $ 4,156 $ 1,508 $ 13,516
Over 1 to 5 years 19,328 3,234 0 2,060 24,622
Over 5 years 11,282 1,334 0 234 12,850
-------- -------- -------- -------- --------
Total amount due $ 36,870 $ 6,160 $ 4,156 $ 3,802 $ 50,988
======== ======== ======== ========
Less:
Allowance for loan losses 438
Loans in process 1,426
Deferred loan fees 72
--------
Loans receivable, net $ 49,052
========
</TABLE>
The following table sets forth the dollar amount of all loans due
after September 30, 2001, which have pre-determined interest rates and
which have floating or adjustable interest rates.
<TABLE>
<CAPTION>
Fixed Rates Floating or Total
Adjustable
Rates
----------- ----------- -----------
(In thousands)
<S> <C> <C> <C>
Real estate:
Residential $ 30,596 $ 14 $ 30,610
Non-residential 4,568 0 4,568
Non real estate:
Share loans 75 0 75
Consumer 2,219 0 2,219
----------- ----------- -----------
$ 37,458 $ 14 $ 37,472
=========== =========== ===========
</TABLE>
One-Four-Family Residential Loans. The Bank's primary lending
activity consists of the origination of one- to four-family residential
mortgage loans secured by property located in its primary market area. The
Bank generally originates one- to four-family residential mortgage loans in
amounts up to 85% of the appraised market value or purchase price. The
maximum loan-to-value ratio on mortgage loans secured by non-owner occupied
properties generally is limited to 80%. The Bank primarily originates and
retains fixed-rate balloon loans having terms of 3 or 5 years, with
principal and interest payments calculated using up to a 25-year
amortization period. Because of the amortization period, relatively short
term and renewability of their loans, there are similarities between these
loans and ARMs, particularly from the Bank's asset/liability management
perspective. The Bank occasionally originates 15 year fixed-rate loans.
<PAGE> 7
The interest rate on the Bank's ARM loans is based on an index plus a
stated margin. The Bank may offer discounted initial interest rates on ARM
loans but it requires that the borrower qualify for the ARM loan at the
fully indexed rate (the index rate plus the margin). ARM loans provide for
periodic interest rate adjustments upward or downward.
ARM loans decrease the risk associated with changes in interest rates
by periodically repricing, but involve other risks because as interest
rates increase, the underlying payments by the borrower increase, thus
increasing the potential for default by the borrower. At the same time,
the marketability of the underlying collateral may be adversely affected by
higher interest rates.
Upward adjustment of the contractual interest rate is also limited by
the maximum periodic and lifetime interest rate adjustment permitted by the
loan documents, and, therefore is potentially limited in effectiveness
during periods of rapidly rising interest rates. At September 30, 2000,
less than 10% of the one- to four-family residential loans that the Bank
held had adjustable rates of interest.
All of the Bank's loans are originated for the Bank's portfolio. The
Bank does not conform its loans to the standards that are used in the
mortgage industry that would allow its loans to be readily sold into the
secondary market since it does not expect to sell its loans. For example,
the Bank's lending policy does not require its borrowers to obtain private
mortgage insurance on the amount of a loan that exceeds the typical loan to
value ratios used in the mortgage loan industry and the Bank may lend money
to individuals based on its review of personal circumstances that other
lenders might not consider.
Mortgage loans originated and held by the Bank generally include due-
on-sale clauses. This gives the Bank the right to deem the loan
immediately due and payable in the event the borrower transfers ownership
of the property securing the mortgage loan without the Bank's consent.
Residential Construction Loans. The Bank makes residential
construction loans on one- to four-family residential property to the
individuals who will be the owners and occupants upon completion of
construction. No principal payments are required during construction.
After that time, the payments are set at an amount that will repay the loan
over the term of the loan. The maximum loan-to-value ratio is 85%.
Because residential construction loans are not rewritten if permanent
financing is obtained from the Bank, these loans are made on terms similar
to those of the Bank's single family residential loans and may be paid off
over terms of 3 to 5 years with an amortization period of 25 years.
The Bank also originates speculative loans to residential builders who
have established business relationships with the Bank. These speculative
loans typically are made for a term of six months after which the Bank
allows one extension of six months. If after one year a unit remains
unsold, the Bank requires that the builder make a 10% principal reduction
payment and the Bank either then allows the builder to make interest
payments for 90 days before he is required to make another principal
<PAGE> 8
reduction payment, or the builder may choose that the Bank treat the loan
as a regular loan, pursuant to which he will make monthly payments for the
full term of the loan. In underwriting such loans, the Bank considers the
number of units that the builder has on a speculative bid basis that remain
unsold. The Bank's experience has been that most speculative loans are
repaid well within the twelve month period. Speculative loans are
generally originated with a loan to value ratio that does not exceed 75%.
At September 30, 2000 the Bank's largest speculative loan was $131,875,
drawn on a line of credit, and was performing in accordance with its terms.
Construction lending is generally considered to involve a higher
degree of credit risk than long-term financing of residential properties.
The Bank's risk of loss on a construction loan is dependent largely upon
the accuracy of the initial estimate of the property's value at completion
of construction and the estimated cost of construction. If the estimate of
construction cost and the marketability of the property upon completion of
the project prove to be inaccurate, the Bank may be compelled to advance
additional funds to complete the construction. Furthermore, if the final
value of the completed property is less than the estimated amount, the
value of the property might not be sufficient to assure the repayment of
the loan. For speculative loans that the Bank originates to builders, the
ability of the builder to sell completed dwelling units will depend, among
other things, on demand, pricing and availability of comparable properties,
and general economic conditions.
Non-Residential Real Estate Loans. The Bank's non-residential real
estate loans consist of commercial business loans and farm real estate
loans.
Commercial real estate loans are secured by churches, office
buildings, and other commercial properties. Farm loans are secured by the
farm land. These loans generally have not exceeded $500,000 or had terms
greater than 25 years.
Commercial and farm real estate lending entails significant additional
risks compared to residential property lending. These loans typically
involve large loan balances to single borrowers or groups of related
borrowers. The repayment of these loans typically is dependent on the
successful operation of the real estate project securing the loan. For
commercial real estate these risks can be significantly affected by supply
and demand conditions in the market for office retail space and may also be
subject to adverse conditions in the economy. For loans secured by farm
real estate, repayment may be affected by weather conditions, government
policies, and subsidies concerning farming. To minimize these risks, the
Bank generally limits this type of lending to its market area and to
borrowers who are otherwise well known to the Bank, and generally limits
the loan to value ratio to 80%.
Consumer Loans. The Bank offers consumer loans in order to provide a
wider range of financial services to its customers and because these loans
provide higher interest rates and shorter terms than many of the Bank's
other loans. The Bank's consumer loans consist of home equity, automobile,
and mobile home loans and are generally in smaller dollar amounts than the
Bank's other loans.
<PAGE> 9
Consumer loans may entail greater risk than residential mortgage
loans, particularly in the case of consumer loans that are unsecured or
secured by assets that depreciate rapidly. Repossessed collateral for a
defaulted consumer loan may not be sufficient for repayment of the
outstanding loan, and the remaining deficiency may not be collectible.
Loan Approval Authority and Underwriting. The Bank has a loan
committee, which is comprised of all 5 directors on the board, that
approves larger loans and reviews all loans approved by the officer loan
committee for consumer loans. The officer loan committee consists of three
officers. Individually, these officers may approve amounts up to $30,000
for secured loans and $10,00 for unsecured loans. Any two of these
officers may approve amounts up to $50,000 for either secured or unsecured
loans.
Loan Commitments. At September 30, 2000, commitments to cover
originations of mortgage loans totaled $1.4 million. The Bank believes
that virtually all of its commitments will be funded.
Loans to One Borrower. The maximum amount of loans which the Bank may
make to any one borrower may not exceed the greater of $500,000 or 15% of
the Bank's unimpaired capital and unimpaired surplus. The Bank may lend an
additional 10% of the Bank's unimpaired capital and unimpaired surplus if
the loan is fully secured by readily marketable collateral. At September
30, 2000, the aggregate loans outstanding of the Bank's five largest
borrowers have outstanding balances of between $658,714 and $828,105.
Nonperforming and Problem Assets
--------------------------------
Loan Delinquencies. Loans are reviewed on a monthly basis and are
placed on a non-accrual status when, in the Bank's opinion, the collection
of additional interest is doubtful. Interest accrued and unpaid at the
time a loan is placed on nonaccrual status is charged against interest
income. Subsequent interest payments, if any, are either applied to the
outstanding principal balance or recorded as interest income, depending on
the assessment of the ultimate collectibility of the loan.
Nonperforming Assets. The following table sets forth information
regarding nonaccrual loans and real estate owned, as of the dates
indicated. The Bank has no loans categorized as troubled debt
restructurings within the meaning of SFAS 15. For the year ended September
30, 2000, there was $14,200 in interest income that would have been
recorded on loans accounted for on a nonaccrual basis under the original
terms of such loans; however, interest income on these loans, which is
recorded only when received, was $10,086.
<PAGE> 10
<TABLE>
<CAPTION>
At September 30,
----------------
2000 1999
------- -------
(In thousands)
<S> <C> <C>
Loans accounted for on a non-accrual basis:
Mortgage loans:
Construction loans $ 0 $ 0
One-to-four family residentials 168 214
All other mortgage loans 0 0
Non-mortgage loans:
Commercial 0 0
Consumer 25 14
------- -------
Total 193 228
------- -------
Accruing loans contractually past due 90 days or more
Mortgage loans:
Construction loans 0 15
One-to-four family residentials 55 83
All other mortgage loans 0 0
Non-mortgage loans:
Commercial 0 0
Consumer 5 16
------- -------
Total 60 114
------- -------
Total non-accrual and accrual loans 253 342
Real estate owned 0 139
Other non-performing assets 0 0
------- -------
Total non-performing assets $ 253 $ 481
======= =======
Total non-performing loans to total loans, net .52% .83%
======= =======
Total non-performing loans to total assets .42% .65%
======= =======
Total non-performing assets to total assets .42% .91%
======= =======
</TABLE>
Classified Assets. OTS regulations provide for a classification
system for problem assets of savings associations which covers all problem
assets. Under this classification system, problem assets of savings
institutions such as the Bank are classified as "substandard," "doubtful,"
or "loss." An asset is considered substandard if it is inadequately
protected by the current net worth and paying capacity of the borrower or
of the collateral pledged, if any. Substandard assets include those
characterized by the "distinct possibility" that the savings institution
will sustain "some loss" if the deficiencies are not corrected. Assets
classified as doubtful have all of the weaknesses inherent in those
classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full," on the basis of currently
existing facts, conditions, and values, "highly questionable and
improbable." Assets classified as loss are those considered "uncollectible"
and of such little value that their continuance as assets without the
establishment of a specific loss reserve is not warranted. Assets may be
designated "special mention" because of potential weakness that do not
currently warrant classification in one of the aforementioned categories.
<PAGE> 11
When a savings association classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan
losses in an amount deemed prudent by management. General allowances
represent loss allowances which have been established to recognize the
inherent risk associated with lending activities, but which, unlike
specific allowances, have not been allocated to particular problem assets.
When a savings association classifies problem assets as loss, it is
required either to establish a specific allowance for losses equal to 100%
of that portion of the asset so classified or to charge off such amount. A
savings association's determination as to the classification of its assets
and the amount of its valuation allowances is subject to review by the OTS,
which may order the establishment of additional general or specific loss
allowances. A portion of general loss allowances established to cover
possible losses related to assets classified as substandard or doubtful may
be included in determining a savings association's regulatory capital.
Specific valuation allowances for loan losses generally do not qualify as
regulatory capital. At September 30, 2000, the Bank had $510,000,
$269,000, $0 and $0 of loans classified as special mention, substandard,
doubtful and loss, respectively.
Allowances for Loan Losses. A provision for loan losses is charged to
operations based on management's evaluation of the losses that may be
incurred in the Bank's loan portfolio. The evaluation, including a review
of all loans on which full collectibility of interest and principal may not
be reasonably assured, considers: (i) the Bank's past loan loss experience,
(ii) known and inherent risks in the Bank's portfolio, (iii) adverse
situations that may affect the borrower's ability to repay, (iv) the
estimated value of any underlying collateral, and (v) current economic
conditions.
The Bank monitors its allowance for loan losses and makes additions to
the allowance as economic conditions dictate. Although the Bank maintains
the Bank's allowance for loan losses at a level that it considers adequate
for the inherent risk of loss in its loan portfolio, future losses could
exceed estimated amounts and additional provisions for loan losses could be
required. In addition, the Bank's determination as to the amount of
allowance for loan losses is subject to review by the OTS, as part of its
examination process. After a review of the information available, the OTS
might require the establishment of an additional allowance.
<PAGE> 12
The following table illustrates the allocation of the allowance for
loan losses for each category of loans. The allocation of the allowance to
each category is not necessarily indicative of future loss in any
particular category and does not restrict the Bank's use of the allowance
to absorb losses in other loan categories.
<TABLE>
<CAPTION>
At September 30,
---------------------------------------------
2000 1999
--------------------- ---------------------
Percent of Percent of
Loans in Loans in
Each Each
Category Category
To Total To Total
Amount Loans Amount Loans
-------- ---------- -------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
At end of period allocated to:
One-to-four family $ 324 73.97% $ 286 72.8%
Multi-family 8 1.83% 6 1.4%
Other real estate 93 21.23% 81 20.5%
Consumer 13 2.97% 16 5.3%
-------- ---------- -------- ----------
Total allowance $ 438 100.00% $ 389 100.0%
======== ========== ======== ==========
</TABLE>
The following table sets forth information with respect to the Bank's
allowance for loan losses at the dates and for the periods indicated:
<TABLE>
<CAPTION>
At September 30,
----------------------
2000 1999
--------- ---------
(Dollars in thousands)
<S> <C> <C>
Total loans, net $ 49,052 $ 41,121
========= =========
Average loans outstanding $ 45,087 $ 38,759
========= =========
Allowance balances (at beginning of period 389 370
Provision:
Residential 36 15
Non-residential 0 2
Consumer 24 3
Net charge-offs (recoveries):
Residential 0 1
Non-residential 0 0
Consumer 11 0
--------- ---------
Allowance balance (at end of period) $ 438 $ 389
========= =========
Allowance for loan losses as a percent
of total loans outstanding .89% .94%
========= =========
Net loans charged off as a percent of
average loans outstanding .02% 0%
========= =========
</TABLE>
Investment Activities
Investment Securities. The Bank is required under federal regulations
to maintain a minimum amount of liquid assets which may be invested in
<PAGE> 13
specified short-term securities and certain other investments. The Company
classifies its investment securities as "available-for-sale" or "held-
to-maturity" in accordance with SFAS No. 115.
The Company's investment securities "available-for-sale" and "held-to-
maturity" portfolios at September 30, 2000 did not contain securities of
any issuer with an aggregate book value in excess of 10% of the Company's
equity, excluding those issued by the United States government agencies.
Mortgage-Backed Securities. To supplement lending activities, the
Company has invested in residential mortgage-backed securities. Mortgage-
backed securities can serve as collateral for borrowings and, through
repayments, as a source of liquidity. Mortgage-backed securities represent
a participation interest in a pool of single-family or other type of
mortgages. Principal and interest payments are passed from the mortgage
originators, through intermediaries (generally quasi-governmental
agencies) that pool and repackage the participation interests in the form
of securities, to investors such as the Company. The quasi-governmental
agencies guarantee the payment of principal and interest to investors and
include the Federal Home Loan Mortgage Company ("FHLMC"), the Government
National Mortgage Association ("GNMA"), and the Federal National Mortgage
Association ("FNMA"). Expected maturities will differ from contractual
maturities due to scheduled repayments and because borrowers may have the
right to call or prepay obligations with or without prepayment penalties.
Investment Portfolio. The following table sets forth the carrying
value of the Company's investment securities available-for-sale and held-to-
maturity portfolios, and FHLB stock at the dates indicated.
<TABLE>
<CAPTION>
At September 30,
----------------------
2000 1999
---------- ----------
(In thousands)
<S> <C> <C>
Investment securities:
U.S. Government securities available-for-sale $ 0 $ 300
U.S. Government securities held-to-maturity 0 0
U.S. Agency securities available-for-sale 4,831 4,980
U.S. Agency securities held-to-maturity 0 0
State, County and Municipal securities
available-for-sale 690 388
State, County and Municipal securities 0 0
held-to-maturity
---------- ----------
Total investment securities 5,521 5,668
Interest-bearing deposits 1,065 262
FHLB stock 320 287
Mortgage-backed securities available-for-sale 1,025 891
Mortgage-backed securities held-to-maturity 0 0
---------- ----------
Total investments $ 7,931 $ 7,108
========== ==========
</TABLE>
<PAGE> 14
The following tables set forth certain information regarding scheduled
maturities, carrying values, approximate fair values, and weighted average
yields for the Company's investments at September 30, 2000 by contractual
maturity. The following tables do not take into consideration the effects
of scheduled repayments or the effects of possible prepayments. Further,
yields on tax exempt obligations have not been computed on a tax equivalent
basis.
<TABLE>
<CAPTION>
One Year or Less
------------------
Carrying Average
Value Yield
-------- --------
(Dollars in thousands)
<S> <C> <C>
Investment securities:
U.S. Government securities $ 0 0%
U.S. Agency securities 442 5.54%
Corporate notes and bonds 0 0%
Other securities 0 0%
-------- --------
Total investment securities 442 5.54%
Interest-bearing deposits 1,065 4.96%
Federal funds sold 0 0%
FHLB stock 320 5.92%
Mortgage-backed securities 272 5.00%
-------- --------
Total investments $ 2,099 5.23%
======== ========
</TABLE>
<TABLE>
<CAPTION>
One to Five Years
------------------
Carrying Average
Value Yield
-------- --------
(Dollars in thousands)
<S> <C> <C>
Investment securities:
U.S. Government securities $ 0 0%
U.S. Agency securities 4,389 5.92%
Corporate notes and bonds 0 0%
Other securities 168 4.20%
-------- --------
Total investment securities 4,557 5.86%
Interest-bearing deposits 0 0%
Federal funds sold 0 0%
FHLB stock 0 0%
Mortgage-backed securities 0 0%
-------- --------
Total investments $ 4,557 5.86%
======== ========
</TABLE>
<TABLE>
<CAPTION>
Five to Ten Years
------------------
Carrying Average
Value Yield
-------- --------
(Dollars in thousands)
<S> <C> <C>
Investment securities:
U.S. Government securities $ 0 0%
U.S. Agency securities 0 0%
Corporate notes and bonds 0 0%
Other securities 201 5.30%
-------- --------
Total investment securities 201 5.30%
Interest-bearing deposits 0 0%
Federal funds sold 0 0%
FHLB stock 0 0%
Mortgage-backed securities 0 0%
-------- --------
Total investments $ 201 5.30%
======== ========
</TABLE>
<TABLE>
<CAPTION>
More than Ten Years
------------------
Carrying Average
Value Yield
-------- --------
(Dollars in thousands)
<S> <C> <C>
Investment securities:
U.S. Government securities $ 0 0%
U.S. Agency securities 0 0%
Corporate notes and bonds 0 0%
Other securities 321 5.14%
-------- --------
Total investment securities 321 5.14%
Interest-bearing deposits 0 0%
Federal funds sold 0 0%
FHLB stock 0 0%
Mortgage-backed securities 753 5.49%
-------- --------
Total investments $ 1,074 5.39%
======== ========
</TABLE>
<TABLE>
<CAPTION>
Total Investment Securities
----------------------------
Carrying Average Market
Value Yield Value
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Investment securities:
U.S. Government securities $ 0 0% $ 0
U.S. Agency securities 4,831 5.89% 4,831
Corporate notes and bonds 0 0% 0
Other securities 690 4.96% 690
-------- -------- --------
Total investment securities 5,521 5.77% 5,521
Interest-bearing deposits 1,065 4.96% 1,065
Federal funds sold 0 0% 0
FHLB stock 320 5.92% 320
Mortgage-backed securities 1,025 5.36% 1,025
-------- -------- --------
Total investments $ 7,931 5.61% $ 7,931
======== ======== ========
</TABLE>
Sources of Funds
----------------
General. Deposits are the Bank's major external source of funds for
lending and other investment purposes. Funds are also derived from the
receipt of payments on loans and prepayment of loans and maturities of
investment securities and mortgage-backed securities and, to a much lesser
extent, borrowings and operations. Scheduled loan principal repayments are
a relatively stable source of funds, while deposit inflows and outflows and
loan prepayments are significantly influenced by general interest rates and
market conditions.
Consumer and commercial deposits are attracted principally from within
the Bank's primary market area through the offering of a selection of
deposit instruments including checking accounts, regular savings accounts,
money market accounts, and term certificate accounts. IRA accounts are
also offered.
Certificates of Deposit. The following table indicates the amount of
the Bank's certificates of deposit of $100,000 or more by time remaining
until maturity as of September 30, 2000.
<TABLE>
<CAPTION>
Certificates
Maturity Period of Deposit
--------------- --------------
(In thousands)
<S> <C>
Within three months $ 2,125
Three through six months 2,169
Six through twelve months 3,824
Over twelve months 1,251
--------------
$ 9,369
==============
</TABLE>
Borrowings. Advances (borrowings) may be obtained from the FHLB of
Atlanta to supplement the Bank's supply of lendable funds. Advances from
<PAGE> 15
the FHLB of Atlanta are typically secured by a pledge of the Bank's stock
in the FHLB of Atlanta, a portion of the Bank's first mortgage loans, and
other assets.
The following table sets forth the terms of the Bank's short-term FHLB
advances.
<TABLE>
<CAPTION>
During the Year ended
September 30,
-----------------------
2000 1999
-------- --------
(Dollars in thousands)
<S> <C> <C>
Balance at period end $ 5,000 $ 2,500
Average balance outstanding during the period 4,230 917
Maximum amount outstanding at any month-end
during the period 5,000 3,500
Weighted average interest rate during the 6.4% 5.6%
period
Personnel
---------
At September 30, 2000 the Bank had 15 full-time employees and 3 part-
time employee. None of the Bank's employees are represented by a
collective bargaining group. The Bank believes that its relationship with
the Bank's employees is good.
Regulation
----------
Set forth below is a brief description of certain laws which relate to
the Company and the Bank. The description is not complete and is qualified
in its entirety by references to applicable laws and regulation.
Holding Company Regulation
--------------------------
General.
--------
The Company is a unitary savings and loan holding company that files
reports with the OTS and is subject to regulation and examination by the
OTS. In addition, the OTS has enforcement authority over the Company and
any non-savings institution subsidiaries. This permits the OTS to restrict
or prohibit activities that it determines to be a serious risk to the Bank.
This regulation is intended primarily for the protection of the Bank's
depositors and not for the benefit of stockholders of the Company. The
Company is also registered with the Georgia Department of Banking and
Finance.
During the fiscal year, federal law was amended to effectively
prohibit bank and savings and loan holding companies from affiliating in
any way with a non-financial company. In connection with the amendment to
federal law, the Company may now become affiliated with securities firms
and insurance companies.
These changes to federal law do not impact the current business of the
Company. Unlike savings and loan holding companies that may be created in
the future, the Company generally is not restricted in the types of
business in which it may engage, provided that the Bank maintains a
specified amount of its assets in housing related investments.
<PAGE> 16
Qualified Thrift Lender ("QTL") Test.
-------------------------------------
As the Company owns only one savings institution, it is able to
diversify its operations into activities not related to banking, but only
so long as the Bank satisfies the QTL test. If the Company controlled more
than one savings institution, it would lose the ability to diversify its
operations into nonbanking related activities, unless such other savings
institutions each also qualified as a QTL or were acquired in a supervised
acquisition. See "Savings Institution Regulation -- Qualified Thrift
Lender Test."
Savings Institution Regulation
------------------------------
General.
--------
As a federally chartered, SAIF-insured savings institution, the Bank
is subject to extensive regulation by the OTS and the Federal Deposit
Insurance Corporation ("FDIC"). Lending activities and other investments
must comply with various federal and state statutory and regulatory
requirements. The Bank is also subject to certain reserve requirements
promulgated by the Board of Governors of the Federal Reserve System
("Federal Reserve").
Insurance of Deposit Accounts.
------------------------------
The Bank's deposit accounts are insured by the SAIF to a maximum of
$100,000 for each insured member (as defined by law and regulation).
Insurance of deposits may be terminated by the FDIC upon a finding that the
institution has engaged in unsafe or unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable
law, regulation, rule, order or condition imposed by the FDIC or the
institution's primary regulator.
As a member of the SAIF, the Bank pays an insurance premium to the
FDIC. The FDIC also maintains another insurance fund, the Bank Insurance
Fund ("BIF"), which primarily insures commercial bank deposits.
Regulatory Capital Requirements.
--------------------------------
OTS capital regulations require savings institutions to meet three
capital standards: (1) tangible capital equal to 1.5% of total adjusted
assets, (2) core capital equal to at least 4% of total adjusted assets, and
(3) risk-based capital equal to 8% of total risk-weighted assets.
Regulations that enable the OTS to take prompt corrective action against
savings associations effectively impose higher capital requirements on
savings associations.
<PAGE> 17
Dividend and Other Capital Distribution Limitations.
----------------------------------------------------
The Bank must give the OTS 30 days advance notice of any proposed
declaration of dividends to the Company, and the OTS has the authority
under its supervisory powers to prohibit the payment of dividends to the
Company. In addition, the Bank may not declare or pay a cash dividend on
its capital stock if the dividend would (1) reduce the regulatory capital
of the Bank below the amount required for the liquidation account
established in connection with the conversion from mutual to stock form or
(2) reduce the amount of capital of the Bank below the amounts required in
accordance with other OTS regulations. In contrast, the Company has fewer
restrictions on the payment of dividends.
Qualified Thrift Lender Test.
-----------------------------
Savings institutions must meet a qualified thrift lender ("QTL") test.
If the Bank maintains an appropriate level of qualified thrift investments
("QTIs") (primarily residential mortgages and related investments,
including certain mortgage-related securities) and otherwise qualify as a
QTL, the Bank will continue to enjoy full borrowing privileges from the
FHLB of Atlanta. The required percentage of QTIs is 65% of portfolio
assets (defined as all assets minus goodwill and other intangible assets,
property used by the institution in conducting its business and liquid
assets in an amount not exceeding 20% of total assets). In addition,
savings institutions may include shares of stock of the FHLBs, FNMA, and
FHLMC as QTIs. Compliance with the QTL test is determined on a monthly
basis in nine out of every twelve months. As of September 30, 2000, the
Bank was in compliance with its QTL requirement.
Federal Reserve.
----------------
The Federal Reserve requires all depository institutions to maintain
noninterest- bearing reserves at specified levels against their transaction
accounts (primarily checking, NOW and Super NOW checking accounts) and non-
personal time deposits. The balances maintained to meet the reserve
requirements imposed by the Federal Reserve may be used to satisfy
liquidity requirements that are imposed by the OTS.
Proposed Regulation.
--------------------
The OTS has announced that it will consider amending its capital
standards so as to more closely conform its requirements to those of the
other federal banking agencies. The impact of this possible change is not
expected to materially impact the Bank. The impact on the Company cannot
yet be determined.
Item 2. Description of Property
--------------------------------
(a) Properties.
The Company and the Bank operate from their office at 602 East Screven
Street, Quitman, Georgia.
<PAGE> 18
(b) Investment Policies.
See "Item 1. Description of Business" above for a general description
of the Bank's investment policies and any regulatory or Board of Directors'
percentage of assets limitations regarding certain investments. The Bank's
investments are primarily acquired to produce income, and to a lesser
extent, possible capital gain.
(1) Investments in Real Estate or Interests in Real Estate. See
"Item 1. Description of Business - Lending Activities" and "Item 2.
Description of Property."
(2) Investments in Real Estate Mortgages. See "Item 1. Description
of Business - Lending Activities."
(3) Investments in Securities of or Interests in Persons Primarily
Engaged in Real Estate Activities. See "Item 1. Description of Business -
Lending Activities."
(c) Description of Real Estate and Operating Data.
Not Applicable.
Item 3. Legal Proceedings
--------------------------
There are various claims and lawsuits in which the Company or the Bank
are periodically involved, such as claims to enforce liens, condemnation
proceedings on properties in which the Bank holds security interests,
claims involving the making and servicing of real property loans, and other
issues incident to the Bank's business. In the opinion of management, no
material loss is expected from any of such pending claims or lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
------------------------------------------------------------
No matter was submitted to a vote of security holders during the
fourth quarter of the fiscal year.
PART II
-------
Item 5. Market for Common Equity and Related Stockholder Matters
-----------------------------------------------------------------
The information contained under the section captioned "Common Stock
Information" of the Company's Annual Report to Stockholders for the fiscal
year ended September 30, 2000 (the "Annual Report"), is incorporated herein
by reference.
Item 6. Management's Discussion and Analysis or Plan of Operation
------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
of the Annual Report is incorporated herein by reference.
<PAGE> 19
Item 7. Financial Statements
-----------------------------
The Registrant's financial statements listed under Item 13 are
incorporated herein by reference.
Item 8. Changes in and Disagreements with Accountants On Accounting and
Financial Disclosure
------------------------------------------------------------------------
Not applicable.
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons:
Compliance with Section 16(a) of the Exchange Act.
----------------------------------------------------------------------
The information contained under the sections captioned "Section 16(a)
Beneficial Ownership Reporting Compliance" and "Proposal I - Election of
Directors" in the Proxy Statement is incorporated herein by reference.
Item 10. Executive Compensation
--------------------------------
The information contained in the section captioned "Director and
Executive Compensation" in the Proxy Statement is incorporated herein by
reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
------------------------------------------------------------------------
Information required by this item is incorporated herein by reference
to the section captioned "Security Ownership of Certain Beneficial Owners"
in the Proxy Statement and to the first chart in the section captioned
"Proposal I - Election of Directors" in the Proxy Statement.
Item 12. Certain Relationships and Related Transactions
--------------------------------------------------------
The information required by this item is incorporated herein by
reference to the section captioned "Certain Relationships and Related
Transactions" in the Proxy Statement.
Item 13. Exhibits, List, and Reports on Form 8-K
------------------------------------------------
(a) Listed below are all financial statements and exhibits filed as
part of this report.
1. The consolidated statements of financial condition of Quitman
Bancorp, Inc. as of September 30, 2000 and 1999 and the related
consolidated statements of income, comprehensive income,
stockholders' equity and cash flows for each of the years in the two
year period ended September 30, 2000, together with the related notes
and the independent auditors' report of Stewart, Fowler & Stalvey, P.C.,
independent certified public accountants.
<PAGE> 20
2. Schedules omitted as they are not applicable.
3. The following exhibits are included in this Report or
incorporated herein by reference:
(a) List of Exhibits:
3(i) Articles of Incorporation of Quitman Bancorp, Inc. *
3(ii) Bylaws of Quitman Bancorp, Inc. *
10.1 Director Indexed Salary Continuation Plan *
10.2 Executive Indexed Salary Continuation Plan *
10.3 1999 Stock Option Plan **
10.4 1999 Restricted Stock Plan ***
13 Annual Report to Stockholders for the fiscal year ended
September 30, 2000 (only those portions incorporated by
reference are deemed "filed")
21 Subsidiaries of the Registrant****
23 Consent of Stewart, Fowler & Stalvey, P.C.
27 Financial Data Schedule (electronic filing only)
* Incorporated by reference to the identically numbered exhibit to the
registration statement on Form SB-2 (File No. 333-43063) declared
effective by the SEC on February 11, 1998.
** Incorporated by reference to Exhibit A to the proxy statement for a
special meeting held on April 13, 1999 (File No. 0-23763).
*** Incorporated by reference to Exhibit B to the proxy statement for a
special meeting held on April 13, 1999 (File No. 0-23763).
**** Incorporated by reference to the identically numbered exhibit to
the Form 10-KSB for the fiscal year ended September 30, 1998
(File No. 0-23763).
(b) Not applicable
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized as of December 27, 2000.
QUITMAN BANCORP, INC.
By: /s/ Melvin E. Plair
------------------------------------
Melvin E. Plair
President and Chief Executive
Officer
(Duly Authorized
Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on
behalf of the registrant and in the capacities indicated as of December 27,
2000.
/s/ Claude R. Butler /s/ Melvin E. Plair
----------------------------- -----------------------------
Claude R. Butler Melvin E. Plair
Chairman of the Board and President and Chief Executive
Director Officer (Principal Executive
and Financial Officer)
/s/ Robert L. Cunningham, III /s/ Peggy L. Forgione
----------------------------- ---------------------------
Robert L. Cunningham, III Peggy L. Forgione
Vice Chairman and Director Vice President and Controller
(Principal Accounting Officer)
/s/ Walter B. Holwell
-----------------------------
Walter B. Holwell
Director
/s/ John W. Romine
-----------------------------
John W. Romine
Director
/s/ Daniel M. Mitchell, Jr.
-----------------------------
Daniel M. Mitchell, Jr.
Director
<PAGE> 22
EXHIBIT 23
Consent of Independent Auditors
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (SEC File No. 333-79893) of Quitman Bancorp, Inc., of
our report dated October 16, 2000, relating to the consolidated statements
of financial condition of Quitman Bancorp, Inc. as of September 30, 2000
and 1999 and the related consolidated statements of income, comprehensive
income, stockholders' equity, and cash flows for the years then ended,
/s/ STEWART, FOWLER & STALVEY, P.C.
------------------------------------
Valdosta, Georgia
December 27, 2000
</TABLE>
