UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20529
FORM 10-QSB
Mark One
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
-------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
Commission File Number: 000-30273
Chestatee Bancshares, Inc.
-------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-2535333
- ------------------------------- ---------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
6639 Highway 53 East, Dawsonville, Georgia
------------------------------------------
(Address of principal executive offices)
(706) 216-2265
--------------
(Issuer's telephone number)
N/A
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(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes _X_ No ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes No
--------- ---------
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 1, 2000: 950,000; $ 0 par value.
Transitional Small Business Disclosure Format (Check One) Yes No X
---- ----
<PAGE>
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
INDEX
-----
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - March 31, 2000...................3
Consolidated Statements of Income and Comprehensive Income
Three Months Ended March 31, 2000 and 1999...................4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 ..................5
Notes to Consolidated Financial Statements....................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......7
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders....13
Item 6 - Exhibits and Reports on Form 8-K.......................13
Signatures......................................................14
2
<PAGE>
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(Unaudited)
<S> <C>
Assets
Cash and due from banks $ 2,112,506
Interest-bearing deposits in banks 8,765
Federal funds sold 4,580,000
Securities available-for-sale 1,083,754
Securities held-to-maturity, fair value of $2,361,000 2,403,639
Loans 48,099,403
Less allowance for loan losses 461,338
-----------
Loans, net 47,638,065
-----------
Premises and equipment 2,996,399
Other assets 543,820
-----------
Total assets $61,366,948
===========
Liabilities and Stockholders' Equity
Deposits
Demand $ 6,435,903
Interest-bearing demand 18,265,588
Savings 634,424
Time 26,671,672
-----------
Total deposits 52,007,587
Other liabilities 201,756
-----------
Total liabilities 52,209,343
-----------
Commitments and contingent liabilities
Stockholders' equity
Common stock, no par value; 10,000,000 shares
authorized; 950,000 shares issued and outstanding 9,482,364
Accumulated deficit -314,409
Accumulated other comprehensive loss -10,350
-----------
Total stockholders' equity 9,157,605
-----------
Total liabilities and stockholders' equity $61,366,948
===========
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
2000 1999
---------- ----------
<S> <C> <C>
Interest income
Loans $1,111,929 $ 528,833
Taxable securites 46,482 67,287
Federal funds sold 44,185 62,923
Interest-bearing deposits in banks 813 0
---------- ----------
Total interest income 1,203,409 659,043
---------- ----------
Interest expense:
Deposits 504,955 243,905
Federal funds purchased 0 3,252
---------- ----------
Total interest expense 504,955 247,157
---------- ----------
Net interest income 698,454 411,886
Provision for loan losses 64,075 73,103
---------- ----------
Net interest income after
provision for loan losses 634,379 338,783
---------- ----------
Other income
Service charges and fees 54,242 31,961
Other operating income 36,370 45,569
---------- ----------
Total other income 90,612 77,530
---------- ----------
Other expenses
Salaries and employee benefits 263,407 203,688
Occupancy and equipment expenses 75,027 26,762
Other operating expenses 254,913 152,259
---------- ----------
593,347 382,709
---------- ----------
Net income before income taxes 131,644 33,604
Income tax expense 0 0
---------- ----------
Net income 131,644 33,604
---------- ----------
Other comprehensive loss:
Unrealized losses on securities available-for-sale
arising during period -1,131 -3,593
---------- ----------
Comprehensive income $ 130,513 $ 30,011
========== ==========
Basic and diluted earnings per common share $ 0.14 $ 0.04
========== ==========
Cash dividends per common share $ 0 $ 0
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
(Unaudited)
2000 1999
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 131,644 $ 33,604
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 35,116 15,000
Provision for loan losses 64,075 73,103
Gain on sale of other real estate owned -1,824 0
Increase in interest receivable -67,223 -57,427
Increase in interest payable 36,762 6,019
Other operating activities -64,817 12,964
----------- -----------
Net cash provided by operating activities 133,733 83,263
----------- -----------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks -8,765 -5,897
Net (increase) decrease in Federal funds sold -2,160,000 4,010,000
Purchase of securities available-for-sale -498,504 -2,752,693
Proceeds from maturities of securites held-to-maturity 502,280 2,000,000
Purchase of securites held-to-maturity 0 -908,558
Net increase in loans -8,456,363 -6,405,773
Purchase of premises and equipment -62,559 -215,409
Proceeds from sale of other real estate 206,788 0
----------- -----------
Net cash used in investing activities -10,477,123 -4,278,330
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits 10,191,608 3,983,320
Net increase Fedreral funds purchased 0 880,000
----------- -----------
Net cash provided by financing activities 10,191,608 4,863,320
----------- -----------
Net increase (decrease) in cash and due from banks -151,782 668,253
Cash and due from banks at beginning of year 2,264,288 903,205
----------- -----------
Cash and due from banks at end of period $ 2,112,506 $ 1,571,458
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 468,193 $ 241,138
Income taxes $ 26,454 $ 0
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
Chestatee Bancshares, Inc. (the "Company") is a bank holding company
which was formed for the purpose of acquiring the outstanding common
stock of Chestatee State Bank (the "Bank"). The acquisition of the
Bank was consummated on March 31, 2000. The Bank is a commercial bank
located in Dawsonville, Georgia.
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
period.
The results of operations for the period ended March 31, 2000 is not
necessarily indicative of the results to be expected for the full
year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities".
The effective date of this statement has been deferred by 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 or recognized in other
comprehensive income until the hedged item is 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.
There are no other recent accounting pronouncements that have had, or
are expected to have, a material effect on the Company's financial
statements.
6
<PAGE>
CHESTATEE 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 during the
period included in the accompanying consolidated financial statements.
FORWARD LOOKING STATEMENTS
Certain of the statements made herein under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" ("MD&A") are forward-looking statements for purposes of
the Securities Act of 1933, as amended (the "Securities Act") and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
as such may involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or
achievements of the Bank to be materially different from future
results, performance or achievements expressed or implied by such
forward-looking statements. Such forward looking statements include
statements using the words such as "may," "will," "anticipate,"
"should," "would," "believe," "contemplate," "expect," "estimate,"
"continue," "may," "intend," or other similar words and expressions of
the future. Our actual results may differ significantly from the
results we discuss in these forward-looking statements.
These forward-looking statements involve risks and uncertainties and
may not be realized due to a variety of factors, including, without
limitation: the effects of future economic conditions; governmental
monetary and fiscal policies, as well as legislative and regulatory
changes; the risks of changes in interest rates on the level and
composition of deposits, loan demand, and the values of loan
collateral, securities, and other interest-sensitive assets and
liabilities; interest rate risks; the effects of competition from
other commercial banks, thrifts, mortgage banking firms, consumer
finance companies, credit unions, securities brokerage firms,
insurance companies, money market and other mutual funds and other
financial institutions operating in the Company's market area and
elsewhere, including institutions operating regionally, nationally,
and internationally, together with such competitors offering banking
products and services by mail, telephone, computer, and the Internet.
7
<PAGE>
Liquidity and Capital Resources
As of March 31, 2000, the liquidity ratio of the Bank, as determined
under guidelines established by regulatory authorities, was
satisfactory.
At March 31, 2000, the capital ratios of the Company and the Bank were
adequate based on regulatory minimum capital requirements. The minimum
capital requirements and the actual capital ratios for the Company and
the Bank are as follows:
<TABLE>
<CAPTION>
Actual
--------------------------------
Chestatee Chestatee
Bancshares, State Regulatory
Inc. Bank Requirement
--------------- -------------- ---------------
<S> <C> <C> <C>
Leverage capital ratios 16.43 % 16.48 % 4.00 %
Risk-based capital ratios:
Core capital 18.27 18.32 4.00
Total capital 19.18 19.24 8.00
</TABLE>
As the Company and the Bank continue to grow, the capital ratios
will decrease to levels closer to, but still in excess of
regulatory minimum requirements.
8
<PAGE>
Financial Condition
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999 Increase (Decrease)
-------------- ---------------- --------------------------------
(Dollars in Thousands) Amount Percent
----------------------------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,113 $ 2,264 $ (151) (6.67) %
Interest-bearing deposits in banks 8 - 8 -
Federal funds sold 4,580 2,420 2,160 89.26
Securities 3,487 3,492 (5) (0.14)
Loans 47,638 39,245 8,393 21.39
Premises and equipment 2,996 2,970 26 0.88
Other assets 544 640 (96) (15.00)
-------------- ---------------- --------------
$ 61,366 $ 51,031 $ 10,335 20.25
============== ================ ==============
Deposits $ 52,007 $ 41,816 $ 10,191 24.37 %
Other liabilities 202 188 14 7.45
Stockholders' equity 9,157 9,027 130 1.44
-------------- ---------------- --------------
$ 61,366 $ 51,031 $ 10,335 20.25
============== ================ ==============
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
20.25%. This high rate of growth is not uncommon for a de novo bank. Significant
deposit growth of $10,191,000 was primarily invested in loans and Federal funds
sold. The Company's loan to deposit ratio has decreased slightly from 94.80% at
December 31, 1999 to 92.49% at March 31, 2000, indicating continued strong loan
demand in the Company's primary market area of Dawson County.
9
<PAGE>
Results of Operations For The Three Months Ended March 31, 2000 and 1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
2000 1999 Increase (Decrease)
--------------- ------------- -----------------------------------
(Dollars in Thousands) Amount Percent
------------------------------- --------------- -----------------
<S> <C> <C> <C> <C>
Interest income $ 1,203 $ 659 $ 544 82.60 %
Interest expense 505 247 258 104.30
--------------- ------------- ---------------
Net interest income 698 412 286 69.58
Provision for loan losses 64 73 (9) (12.35)
Other income 91 78 13 16.87
Other expense 593 383 210 55.04
--------------- ------------- ---------------
Net income $ 132 $ 34 $ 98 291.76
=============== ============= ===============
</TABLE>
As indicated in the above table, the Company's net interest income has increased
by $286,000 during the first quarter of 2000 as compared to the same period in
1999. The Company's net interest margin decreased to 5.59% during the first
quarter of 2000 as compared to 5.79% during the first quarter of 1999 and
increased as compared to 5.43% for the entire year of 1999. The increase in net
interest income is due primarily to the increased volume of average loans
outstanding. The fluctuations in net interest margin are due to increases and
decreases of the average balances of securities and Federal funds sold as
components of total average interest-earning assets which typically have yields
lower than loans.
The provision for loan losses was $64,000 during the first quarter of 2000 as
compared to $73,000 for the same period in 1999. The amounts provided are due
primarily to loan growth and inherent risk in the loan portfolio. The Company's
reserve for loan losses amounted to 0.96% at March 31, 2000 as compared to 1.00%
at December 31, 1999. The allowance for loan losses is maintained at a level
that is deemed appropriate by management to adequately cover all known and
inherent risks in the loan portfolio. Management's evaluation of the loan
portfolio includes a continuing review of loan loss experience, current economic
conditions which may affect the borrower's ability to repay and the underlying
collateral value.
10
<PAGE>
Information with respect to nonaccrual, past due and restructured loans at March
31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
March 31,
----------------------
2000 1999
----------------------
(Dollars in Thousands)
----------------------
<S> <C> <C>
Nonaccrual loans $ -- $ --
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 61 --
Restructured loans -- --
Loans, now current about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms -- --
Interest income that would have been recorded on nonaccrual
and restructured loans under original terms -- --
Interest income that was recorded on nonaccrual and restructured loans -- --
</TABLE>
It is the policy of the Company to discontinue the accrual of interest income
when, in the opinion of management, collection of such interest becomes
doubtful. This status is accorded such interest 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 ninety days past due, unless the loan is both well-secured and in the
process of collection.
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 the loan repayment terms.
11
<PAGE>
Information regarding certain loans and allowance for loan loss data through
March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------
2000 1999
--------------- ----------------
(Dollars in Thousands)
----------------------------------
<S> <C> <C>
Average amount of loans outstanding $ 43,576 $ 17,108
=============== ================
Balance of allowance for loan losses at beginning of period $ 397 $ 152
--------------- ----------------
--------------- ----------------
Loans charged off
Commercial and financial $ - $ -
Real estate mortgage - -
Instalment - -
--------------- ----------------
- -
--------------- ----------------
Loans recovered
Commercial and financial - -
Real estate mortgage - -
Installment - -
--------------- ----------------
- -
--------------- ----------------
Net charge-offs - -
--------------- ----------------
Additions to allowance charged to operating expense during period 64 73
--------------- ----------------
Balance of allowance for loan losses at end of period $ 461 $ 225
=============== ================
Ratio of net loans charged off during the period to
average loans outstanding -% -%
=============== ================
</TABLE>
Other income has increased during the first quarter of 2000 as compared to the
same period in 1999 by $13,000 due primarily to increased service charges of
$22,000, other miscellaneous fees of $5,000, and decreased mortgage loan
origination fees of $14,000.
Other expenses increased during the first quarter of 2000 as compared to the
same period in 1999 by $210,000 due to increased salaries and employee benefits
of $60,000, equipment and occupancy expenses of $48,000, and other operating
expenses of $102,000. Salaries and employee benefits have increased due to an
increase in the number of full time equivalent employees to 27 at March 31, 2000
from 19 at March 31, 1999 and to normal salary increases. The increases in
equipment and occupancy expenses and other expenses are due to the overall
growth of the Company.
The Company has recorded no provision for income taxes due to accumulated
deficits incurred through March 31, 2000.
Overall net income increased by $98,000 during the first quarter of 2000 as
compared to the same period in 1999 due to increased net interest income of
$286,000 being substantially offset by increased operating costs of $210,000.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company did not submit any matter during the first quarter of the fiscal
year ending March 31, 2000 to a vote of shareholders through the solicitation of
proxies or otherwise. The Bank held a special meeting of shareholders on March
21, 2000 for the purpose of considering a plan of reorganization pursuant to
which the Bank would become and thereafter operated as a wholly-owned subsidiary
of the Company. The reorganization was approved unanimously by all 652,220 of
the outstanding shares of common stock of the Bank entitled to vote and present
at the special meeting of shareholders. The shares voting in favor of the merger
represented more than the two-third (2/3) required. The reorganization was
consummated effective March 31, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
21. Subsidiaries of the Company.
27. Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K.
A report on Form 8-K12G3 was filed by the Company with the Securities
and Exchange Commission on April 13, 2000, announcing the consummation
of the Plan of Reorganization and Agreement of Merger whereby the
Company became a one-bank holding company and the Bank became its
wholly-owned subsidiary. An unaudited pro forma consolidated balance
sheet at March 31, 2000, giving effect to the reorganization, was
filed as part of the Form 8-K12G3.
13
<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.
CHESTATEE BANCSHARES, INC.
(Registrant)
DATE: May 12, 2000
------------
BY: /s/ J. Philip Hester, Sr.
----------------------------------------
J. Philip Hester, Sr., President and C.E.O.
(Principal Executive Officer)
DATE: May 12, 2000
BY: /s/ Robert W. Coile
----------------------------------------
Robert W. Coile, C.F.O. and Treasurer
(Principal Financial and Accounting Office
Exhibit 21
----------
Subsidiaries of the Company. State of Incorporation
- ---------------------------- ----------------------
Chestatee State Bank Georgia
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 2,112,506
<INT-BEARING-DEPOSITS> 8,765
<FED-FUNDS-SOLD> 4,580,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,083,754
<INVESTMENTS-CARRYING> 2,403,639
<INVESTMENTS-MARKET> 2,361,000
<LOANS> 48,099,403
<ALLOWANCE> 461,338
<TOTAL-ASSETS> 61,366,948
<DEPOSITS> 52,007,587
<SHORT-TERM> 0
<LIABILITIES-OTHER> 201,756
<LONG-TERM> 0
0
0
<COMMON> 9,482,364
<OTHER-SE> (324,759)
<TOTAL-LIABILITIES-AND-EQUITY> 61,366,948
<INTEREST-LOAN> 1,111,929
<INTEREST-INVEST> 46,482
<INTEREST-OTHER> 44,998
<INTEREST-TOTAL> 1,203,409
<INTEREST-DEPOSIT> 504,955
<INTEREST-EXPENSE> 504,955
<INTEREST-INCOME-NET> 698,454
<LOAN-LOSSES> 64,075
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 593,347
<INCOME-PRETAX> 131,644
<INCOME-PRE-EXTRAORDINARY> 131,644
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 131,644
<EPS-BASIC> .14
<EPS-DILUTED> .14
<YIELD-ACTUAL> 5.59
<LOANS-NON> 0
<LOANS-PAST> 61,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 397,000
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 461,000
<ALLOWANCE-DOMESTIC> 461,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
