SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Mark One
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
---------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission File Number: 000-24203
GB&T Bancshares, Inc.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-2400756
- ---------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
500 Jesse Jewell Parkway, S.E.
Gainesville, Georgia 30501
(Address of principal executive offices)
(770) 532-1212
(Issuer's telephone number)
N/A
------------------------------------------------------
(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 November 1, 1999: 2,117,146 shares; $5 par value
Transitional Small Business Disclosure Format (Check One) Yes / / No /X/
<PAGE>
GB&T BANCSHARES, INC. AND SUBSIDIARY
INDEX
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<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet - September 30, 1999....................................1
Consolidated Statements of Income and Comprehensive Income -
Three months ended September 30, 1999 and 1998 and Nine months
Ended September 30, 1999 and 1998 ..............................................2
Consolidated Statements of Cash Flows - Nine Months Ended
September 30, 1999 and 1998.....................................................3
Notes to Consolidated Financial Statements.......................................4-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations........................7-13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................................14
Signatures............................................................................15
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GB&T BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(Unaudited)
(Dollars in Thousands)
Assets
Cash and due from banks $ 10,274
Interest-bearing deposits in banks 302
Federal funds sold 2,845
Securities available-for-sale, at fair value 36,067
Loans 180,681
Less allowance for loan losses 2,043
---------
Loans, Net 178,638
---------
Premises and equipment 4,736
Other assets 4,935
=========
Total Assets $ 237,797
=========
Liabilities and Stockholders' Equity
Deposits
Demand $ 24,264
Interest-bearing demand 17,939
Savings 36,218
Time deposits 113,306
---------
Total deposits 191,727
Federal Home Loan Bank Advances 19,180
Other borrowings 8,223
Other liabilities 2,301
---------
Total liabilities 221,431
---------
Stockholders' Equity
Common Stock, par value $5; 10,000,000
shares authorized; 2,116,926 shares
issued and outstanding 10,585
Capital surplus 338
Retained earnings 5,831
Accumulated other comprehensive
loss, net of tax (388)
---------
Total stockholders' equity 16,366
---------
Total liabilities and stockholders' equity $ 237,797
=========
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
<TABLE>
<CAPTION>
GB&T BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 AND
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
(Dollars in Thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- -----------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest income
Loans 4,203 3,342 11,518 9,566
Taxable securities 483 446 1,377 1,253
Nontaxable securities 41 36 118 93
Federal funds sold 16 142 139 459
Interest-bearing deposits in banks 4 7 10 17
-------- -------- -------- --------
Total interest income 4,747 3,973 13,162 11,388
-------- -------- -------- --------
Interest expense
Deposits 2,016 1,934 5,746 5,639
Other borrowings 325 37 550 84
-------- -------- -------- --------
Total interest expense 2,341 1,971 6,296 5,723
-------- -------- -------- --------
Net interest income 2,406 2,002 6,866 5,665
Provision for loan losses 105 126 315 378
-------- -------- -------- --------
Net interest income after
provision for loan losses 2,301 1,876 6,551 5,287
-------- -------- -------- --------
Other income
Service charges on deposit accounts 164 147 493 432
Mortgage origination fees 50 64 184 251
Gain on sale of loans 22 46 56 197
Other operating income 112 86 351 249
-------- -------- -------- --------
Total other income 348 343 1,084 1,129
-------- -------- -------- --------
Other expenses
Salaries and other employee benefits 992 877 2,888 2,562
Occupancy expenses 123 121 370 368
Equipment expenses 174 144 468 419
Marketing expenses 42 59 149 158
Other operating expenses 416 351 1,340 1,047
-------- -------- -------- --------
Total other expenses 1,747 1,552 5,215 4,554
-------- -------- -------- --------
Income before income taxes 902 667 2,420 1,862
Income tax expense 297 213 793 602
-------- -------- -------- --------
Net Income 605 454 1,627 1,260
-------- -------- -------- --------
Other comprehensive income:
Unrealized gains (losses) on securities
available-for-sale arising during period, net of tax (161) 124 (539) 121
======== ======== ======== ========
Comprehensive income $ 444 $ 578 $ 1,088 $ 1,381
======== ======== ======== ========
Basic earnings per common share $ 0.29 $ 0.22 $ 0.77 $ 0.60
======== ======== ======== ========
Diluted earnings per common share $ 0.27 $ 0.21 $ 0.72 $ 0.57
======== ======== ======== ========
Cash dividends per common share $ 0.06 $ 0.06 $ 0.12 $ 0.10
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GB&T BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,627 $ 1,260
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 325 312
Provision for loan losses 315 378
Other operating activities (570) (862)
-------- --------
Net cash provided by operating activities 1,697 1,088
-------- --------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (20,285) (16,134)
Proceeds from maturities of securities available-for-sale 15,460 9,137
Net (increase)decrease in interest-bearing deposits in banks (48) 85
Net (increase) decrease in Federal funds sold 6,848 (5,035)
Net increase in loans (42,503) (8,191)
Purchase of premises and equipment (539) (371)
-------- --------
Net cash used in investing activities (41,067) (20,509)
-------- --------
FINANCING ACTIVITIES
Net increase in deposits 15,280 16,668
Net increase (decrease) in FHLB advances 18,975 (25)
Net increase in other borrowings 6,010 1,923
Issuance of stock 362 --
Dividends paid (390) (217)
-------- --------
Net cash provided by financing activities 40,237 18,349
-------- --------
Net increase (decrease) in cash and due from banks 867 (1,072)
Cash and due from banks at beginning of period 9,407 9,088
======== ========
Cash and due from banks at end of period $ 10,274 $ 8,016
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GB&T BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial information included herein is
unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair
statement of results for the interim periods.
The results of operations for the three and nine month
periods ended September 30, 1999 are not necessarily
indicative of the results to be expected for the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June of 1998 the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 133, " Accounting for Derivative Instruments and
Hedging Activities." The effective date of this statement has
been deferred by Statement of Financial Accounting Standards
(SFAS) No. 137, until fiscal years beginning after June 15,
2000. However, the statement permits early adoption as of the
beginning of any fiscal quarter after its issuance. The
Company expects to adopt this statement effective January 1,
2001. SFAS No. 133 requires the Company to recognize all
derivatives as either assets or liabilities in the balance
sheet at fair value. For derivatives that are not designated
as hedges, the gain or loss must be recognized in earnings in
the period of change. For derivatives that are designated as
hedges, changes in the fair value of the hedged assets,
liabilities, or firm commitments must be recognized in
earnings, depending on the nature of the hedge. The
ineffective portion of a derivative's change in fair value
must be recognized in earnings immediately. Management has
not yet determined what effect the adoption of SFAS No. 133
will have on the Company's earnings or financial position.
4
<PAGE>
NOTE 3. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income and
weighted-average shares outstanding used in determining basic
and diluted earnings per common share (EPS):
Three Months Ended September 30, 1999
----------------------------------------------
Net Weighted-
Income Average Per share
Shares Amount
----------- ----------------- ------------
Basic EPS $ 605,000 2,113,219 $ 0.29
=========
Effect of Dilutive Securities
Stock options -- 142,550
--------- ---------
Diluted EPS $ 605,000 2,255,769 $ 0.27
========= ========= =========
Three Months Ended September 30, 1998
----------------------------------------------
Net Weighted-
Income Average Per share
Shares Amount
----------- ----------------- ------------
Basic EPS $ 454,000 2,095,171 $ 0.22
=========
Effect of Dilutive Securities
Stock options - 104,478
---------- ---------
Diluted EPS $ 454,000 2,199,649 $ 0.21
========== ========= =========
Nine Months Ended September 30, 1999
----------------------------------------------
Net Weighted-
Income Average Per share
Shares Amount
----------- ----------------- ------------
Basic EPS $1,627,000 2,108,281 $ 0.77
==========
Effect of Dilutive Securities
Stock options - 150,959
---------- ----------
Diluted EPS $1,627,000 2,259,240 $ 0.72
========== ========== =========
Nine Months Ended September 30, 1998
----------------------------------------------
Net Weighted-
Income Average Per share
Shares Amount
----------- ----------------- ------------
Basic EPS $1,260,000 2,095,171 $ 0.60
========
Effect of Dilutive Securities
Stock options - 99,629
----------- ---------
Diluted EPS $1,260,000 2,194,800 $ 0.57
========== ========= ========
5
<PAGE>
NOTE 3. EARNINGS PER COMMON SHARE, (Continued)
GB&T Bancshares, Inc. declared a stock split in the form of a
stock dividend on August 29, 1998, paid on September 21, 1998
to stockholder's of record August 31, 1998. All per share
amounts have been restated to reflect the split.
NOTE 4 On October 14, 1999, GB&T Bancshares, Inc. signed an Agreement
and Plan of Reorganization with UB&T Financial Services
Corporation ("UB&T"). This agreement provides for the merger
of UB&T with and into GB&T, with GB&T being the surviving
corporation of the merger.
6
<PAGE>
GB&T BANCSHARES, INC. AND SUBSIDIARY
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the financial position and operating results of the
Company and its bank subsidiary, Gainesville Bank & Trust, during the periods
included in the accompanying consolidated financial statements.
FORWARD-LOOKING STATEMENTS
This quarterly report contains certain forward-looking statements which
are based on certain assumptions and describe future plans, strategies, and our
expectations. These forward-looking statements are generally identified by use
of the words "believe," "expect," "intend," "anticipate," "estimate," "project,"
or similar expressions. Our ability to predict results or the actual effect of
future plans or strategies is inherently uncertain. Factors which could have a
material adverse effect on our operations include, but are not limited to,
changes in interest rates, general economic conditions, legislation and
regulation, monetary and fiscal policies of the U.S. government, including
policies of the U.S. Treasury and the Federal Reserve Board, the quality or
composition of our loan or investment portfolios, demand for loan products,
deposit flows, competition, demand for financial services in our market area and
accounting principles and guidelines. You should consider these risks and
uncertainties in evaluating forward-looking statements and should not place
undue reliance on such statements. We will not publicly release the result of
any revisions which may be made to any forward-looking statements to reflect
events or circumstances after the date of such statements or to reflect the
occurrence of anticipated or unanticipated events.
FINANCIAL CONDITION
The Company's total assets increased $41,635,000 or 21.2%, for the nine months
ended September 30, 1999. Total loans increased by $42,458,000 or 30.7% for the
nine months ended September 30, 1999. The loan to deposit ratio as of September
30, 1999 was 94.24%, over the Company's target range of 75% to 80%, as compared
to 75.09% at September 30, 1998, reflecting continued strong loan demand. In
order to satisfy this growing loan demand, the Company obtained Federal Home
Loan Bank advances and utilized growth in repurchase agreements along with
growth in deposits. The increase in the Company's loan to deposit ratio over the
targeted range is also a result of an increase of approximately $19 million in
Federal Home Loan Bank advances. These advances allowed the Company to continue
to focus on growth in core deposits versus higher yielding certificates of
deposit. These strategies also allowed the Company to satisfy strong loan demand
while maintaining adequate liquidity. The Company continues to face increasing
competitive pressures in its growing deposit market. Total deposits increased by
$15,280,000 or 8.66%, for the nine months ended September 30, 1999. The
Company's overall growth is the result of an aggressive strategic growth plan.
LIQUIDITY
As of September 30, 1999, the Bank's liquidity ratio was 21.29% compared to
29.70% at September 30, 1998. This ratio exceeded the Bank's target ratio of
20%. Liquidity is measured by the ratio of net cash, Federal funds sold and
securities to net deposits and short-term liabilities. The decrease in the
liquidity ratio is related to the strong increase in loan demand since December
31, 1998. The Bank has lines of credit available to meet any unforeseen
liquidity needs. Also, the Bank has a relationship with the Federal Home Loan
Bank of Atlanta which provides funding for loan growth on an as needed basis.
7
<PAGE>
CAPITAL
The minimum capital requirements for banks and bank holding companies require a
leverage capital to total assets ratio of at least 3%, core capital to
risk-weighted assets ratio of at least 4% and total capital to risk-weighted
assets of at least 8%.
At September 30, 1999, the capital ratios at the Company and the Bank were
adequate based on regulatory minimum capital requirements. The actual capital
ratios of the Company are as follows:
Leverage capital ratio 7.23 %
Risk-based capital ratios:
Core capital 9.29 %
Total capital 10.42 %
8
<PAGE>
RESULTS OF OPERATIONS
Net interest income increased $404,000 or 20.2% for the three months ended
September 30, 1999 compared to the same period in 1998. The net increase
consists of an increase in interest income of $774,000 or 19.5% less an increase
in interest expense of $370,000 or 18.8% for the three month period. Net
interest income increased $1,201,000 or 21.2% for the nine months ended
September 30, 1999 compared to the same period in 1998. The net increase
consists of an increase in interest income of $1,774,000 or 15.6% less an
increase in interest expense of $573,000 or 10% for the nine month period. The
increase in interest income is due primarily to the growth in total
interest-earning assets of $43 million from September 30, 1998 to September 30,
1999. Total interest-bearing liabilities increased during the same period by $39
million. The net interest margin was 4.69% and 4.68% for the nine months ended
September 30, 1999 and 1998, respectively.
The Bank's provision for loan losses decreased by $21,000 or 17% during the
three months ended September 30, 1999 as compared to the same period in 1998.
The Bank's provision for loan losses decreased by $63,000 or 17% during the nine
months ended September 30, 1999 as compared to the same period in 1998. The
allowance for loan losses at September 30, 1999 was $2,043,000 or 1.13% of total
loans compared to 1.37% at September 30, 1998. Based on management's evaluation,
the allowance is adequate to absorb any potential loan losses at September 30,
1999.
The decrease in the provision for loan losses for the nine month period ended
September 30, 1999 as compared to 1998 is based on a strong economy, minimal
increases in net charge-offs and a decline in non-accrued and past due loans.
The analysis below indicates only a slight increase in net charge-offs in the
nine months ended September 30, 1999 as compared to the same period in 1998. The
allowance for loan losses is evaluated monthly and adjusted to reflect the risk
in the portfolio. The following table summarizes the allowance for loan losses
for the nine month periods ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
--------- ---------
(Dollars in Thousands)
-------------------------
<S> <C> <C>
Average amount of loans outstanding $ 159,038 $ 122,563
========= =========
Allowance for loan losses balance, beginning of period $ 1,773 $ 1,433
--------- ---------
Less charge-offs
Commercial loans (18) (42)
Consumer loans (38) (24)
Plus recoveries
Commercial loans
2 19
Consumer loans 9 10
--------- ---------
Net charge-offs (45) (37)
--------- ---------
Plus provision for loan losses 315 378
--------- ---------
Allowance for loan losses balance, end of period $ 2,043 $ 1,774
========= =========
Ratio of net charge-offs to average loans outstanding .03% .03%
========= =========
</TABLE>
9
<PAGE>
The following table is a summary of nonaccrual, past due and restructured debt.
The numbers indicate decreases of $250,000 in nonaccrual loans and decreases of
$225,000 in past due loans over 90 days. The decrease in nonaccrual was due to
payoffs on the nonaccrual loans. There are minimal or no losses anticipated on
nonaccrual or past due loans.
<TABLE>
<CAPTION>
September 30,1999
--------------------------------------------------------
Past Due
Nonaccural 90 Days Restructured
Loans Still Debt
Accruing
---------------- --------------- ------------------
(Dollars in Thousands)
--------------------------------------------------------
<S> <C> <C> <C>
Real estate loans $ - $ 61 $ -
Commercial loans 109 13 -
Consumer loans - 18 -
---------------- --------------- ------------------
Total $ 109 $ 92 $ -
================ =============== ==================
</TABLE>
<TABLE>
<CAPTION>
September 30, 1998
--------------------------------------------------------
Past Due
Nonaccural 90 Days Restructured
Loans Still Debt
Accruing
---------------- --------------- ------------------
(Dollars in Thousands)
--------------------------------------------------------
<S> <C> <C> <C>
Real estate loans $ 339 $ 317 $ -
Commercial loans - - -
Consumer loans 20 - -
---------------- --------------- ------------------
Total $ 359 $ 317 $ -
================ =============== ==================
</TABLE>
The Company's policy is to discontinue the accrual of interest income when, in
the opinion of management, collection of such interest becomes doubtful. This
status is determined when; (1) there is a significant deterioration in the
financial condition of the borrower and full repayment of principal and interest
is not expected; and (2) the principal or interest is more than 90 days past
due, unless the loan is both well-secured and in the process of collection.
Accrual of interest on such loans is resumed when, in management's judgment, the
collection of interest and principal becomes probable.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity or capital resources.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with their loan repayment terms.
10
<PAGE>
Other income for the three months ended September 30, 1999 increased by $5,000
or 1.5% compared to the same period in 1998. Service charges increased $17,000
and other operating income increased by $26,000. These increases in other income
were offset by decreases in gain on sale of loans of $24,000, and mortgage
origination fees of $14,000. Other income for the nine months ended September
30, 1999 decreased by $45,000 or 4% compared to the same period in 1998. The
decrease in other income is primarily due to, decreases in gain on sale of loans
of $141,000 and decreases in mortgage origination fees of $67,000. The decline
in mortgage origination fees resulted from a decline in refinancing activity and
increases in interest rates. Service charges increased by $61,000, Trust fees
increased by $47,000 and other operating income increased by $55,000.
Other expenses increased by approximately $195,000 or 12.6% for the three months
ended September 30, 1999 compared to the same period in 1998. The increase is
due primarily to an increase in salaries and employee benefits of $115,000. The
increase in salaries and employee benefits is due to additional employees in the
loan area, in addition to normal increases. The remainder of the increase in
other expenses is not related to any one significant item, but includes normal
increases in operating expenses. Other expenses increased by approximately
$661,000 or 14.5% for the nine months ended September 30, 1999 compared to the
same period in 1998. The increase is due partially to an increase in salaries
and employee benefits of $326,000. The increase in salaries and employee
benefits is due to additional employees in the loan area, in addition to normal
increases. The remainder of the increase in other expenses is not related to any
one significant item, but includes normal increases in operating expenses.
Income tax expense increased by $84,000 for the three months ended September 30,
1999 compared to the three months ended September 30, 1998. Income tax expense
increased by $191,000 for the nine months ended September 30, 1999 compared to
the nine months ended September 30, 1998. The effective tax rate for the three
and nine month periods in 1999, was 33%, compared to 32% for the same periods in
1998.
Net income increased by $151,000 for the three months ended September 30, 1999
compared to the same period in 1998. Net income increased by $367,000 for the
nine months ended September 30, 1999 compared to the same period in 1998. The
increase in net income is attributable to growth in interest earning assets.
The Company is not aware of any other known trends, events or uncertainties,
other than the effect of events as described above, that will have or that are
reasonably likely to have a material effect on its liquidity, capital resources
or operations. The Company is also not aware of any current recommendations by
the regulatory authorities which, if they were implemented, would have such an
effect.
CAPABILITY OF THE COMPANY'S PROCESSING SOFTWARE TO ACCOMMODATE THE YEAR 2000
The Situation: As the end of this century draws near, there is worldwide concern
- -------------
that the year 2000 technology problems may wreak havoc on global economies. No
country, government, business or person is immune from the potential effects of
year 2000 problems. The year 2000 problem arose because many existing computer
systems and software programs use a two-digit year field. Because of this, some
computers will not properly recognize the turn of the century. A computer with a
two-digit year field may recognize the year 2000 as 1900. If not corrected, many
computer applications could fail or miscalculate data creating erroneous
results.
For a bank, year 2000 problems could be devastating if loan or deposit interest
accruals are not calculated properly. A year 2000 caused system crash could
result in a disruption of business, which in turn could cause the bank to lose a
significant portion of its customer base. Either of these situations could
result in material adverse consequences for the bank.
11
<PAGE>
To address the year 2000 problem, the Company formed a "Year 2000 Committee"
made up of key employees and directors. This Committee has been charged with the
responsibility of assessing the problem and overseeing corrective action, as
well as testing the year 2000 readiness of all equipment, software and
applications after upgrades have been made.
Readiness: Critical systems, hardware and software have received priority
- ---------
attention. As of September 30, 1999, all critical systems have been upgraded or
replaced. The related software has been upgraded to meet year 2000 standards and
has been tested to ensure proper functioning in a year 2000 environment. Upon
completion of testing the Company has identified no critical hardware or
software systems that are non-compliant. These critical systems include the
Company's core bank processing hardware and software and its automated new
accounts and loan document preparation hardware and software as well as its
document retrieval system. The Bank has upgraded its personal computers with
year 2000 compliant hardware and software to bring this area up to year 2000
standards. Several other software systems have been upgraded to be year 2000
compliant. Any new critical systems purchased will be tested for compliance. The
Company believes that there are no remaining key information technology systems
to be upgraded. The Company has also evaluated its non-information technology
systems, which include microcontrollers and other embedded computers, and notes
no significant issues to date.
Since the Bank is heavily reliant on outside vendors for many services such as
electricity, phone service, water, gas, ATM processing, bond accounting and bank
related forms, the Bank has developed a year 2000 questionnaire to help it
determine a vendors' state of year 2000 readiness. All critical vendors
contacted by the Bank have responded. Responses to date have indicated adequate
readiness. No significant weaknesses in a critical vendor have been discovered.
Major borrowers of the Bank also have been required to complete a questionnaire
to assess year 2000 readiness. Approximately 90% of such borrowers have
responded, and the Bank notes no significant issues to date.
Cost: After the Bank's assessment phase to determine the extent of its year 2000
- ----
problem, its Board of Directors approved a budget in the amount of $274,000 to
address the year 2000 issue and to purchase new equipment upgrades which
included new item processing equipment. In order to ensure adequate funds are
provided to resolve year 2000 issues, including those that may not be presently
known, the Company's year 2000 budget is subject to continuous review and
amendment. Management does not expect the cost of remediation to vary
significantly from the Company's present budget, although there can be no
assurances in this regard.
As of September 30, 1999, the Company has recognized $273,000 in year 2000
expenditures. The capitalized expenditures included $243,000 for hardware (the
majority being item processing equipment and new personal computers) and $17,000
for software. Expensed items included $8,000 to service providers for assessment
and testing and approximately $5,000 on customer awareness and education.
No other significant expenditures are expected.
The Company does not anticipate that the related overall costs will be material
to the financial condition of the Company for any single year or quarter. The
Company has not used any independent verification and validation processes to
assure the reliability of year 2000 cost estimates.
12
<PAGE>
Risks of the Bank's Year 2000 Issues: The Company believes that all significant
- ------------------------------------
remediations with respect to the Company's information technology and
non-information technology systems are complete. However, no assurance can be
given that the Company will not be exposed to potential losses resulting from
system problems associated with the change in date. There can also be no
assurance that the Company's systems that have been designed to be year 2000
compliant contain all of the necessary date code changes and that systems have
been correctly modified, or will be correctly modified in contemplation of the
year 2000.
In addition to year 2000 compliance in the Bank's internal systems, the impact
of year 2000 non-compliance by outside parties with whom the Bank may transact
business cannot be accurately gauged. The year 2000 issue may have a material
impact on the financial condition of the Bank if borrowers of the Bank become
insolvent and are, therefore, unable to repay loans as they become due as a
result of the borrowers' year 2000 non-compliance.
The Company is not aware of any critical third party relationships whose year
2000 non-compliance could result in a material adverse effect on the Company's
results of operations, liquidity and financial condition due to the date change.
The Bank's Contingency Plans: The Company believes that at worst, the Company's
- -----------------------------
computer software and hardware would not contain the necessary date code change
and, therefore, would cease operating or malfunction when the date change
occurs. In that case, the Company's contingency plan contemplates conversion to
a manual system. Management of the Company believes that the Company would be
able to continue to operate in that manner without significant loss. However,
the Company believes that its computer software and hardware systems are
substantially year 2000 compliant.
If the "worst case scenario" includes extended loss of power and
telecommunications or did not provide for continued external transaction
processing and limited hours of operation, revenue will be impacted by reduction
in generation of service charges and other product and service fees as well as
reduced investment revenue due to the inability to properly manage liquidity,
although the Company cannot quantify any such potential losses.
Long Term Projects: Year 2000 projects have not caused the Company to defer
- -------------------
other long term projects.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
None
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
GB&T BANCSHARES, INC.
DATE: 11/13/99 BY: /s/ Richard A. Hunt
------------------------
Richard A. Hunt
President and Chief Executive
Officer
DATE: 11/13/99 BY: /s/ Gregory L. Hamby
--------------------
Gregory L. Hamby
Chief Financial Officer
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