UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20529
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 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 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 30534
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(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
State the number of shares outstanding of each of the issuer's classes of common
equity, as of August 1, 2000: 950,000; no par value.
Transitional Small Business Disclosure Format Yes No X
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<PAGE>
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
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INDEX
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Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 2000......................3
Consolidated Statements of Income and Comprehensive Income -
Three Months Ended June 30, 2000 and 1999 and Six Months
Ended June 30, 2000 and 1999...................................4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 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......14
Item 6 - Exhibits and Reports on Form 8-K.........................14
Signatures........................................................15
2
<PAGE>
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(Unaudited)
<S> <C>
Assets
------
Cash and due from banks $ 2,130,111
Interest-bearing deposits in banks 10,729
Securities available-for-sale 1,519,114
Securities held-to-maturity, fair value of $2,363,000 2,401,359
Federal funds sold 3,070,000
Loans 53,750,607
Less allowance for loan losses 538,282
-----------
Loans, net 53,212,325
-----------
Premises and equipment 3,019,787
Other assets 668,997
-----------
Total assets $66,032,422
===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Demand $ 6,317,345
Interest-bearing demand 18,322,327
Savings 672,619
Time 31,107,531
-----------
Total deposits 56,419,822
Other borrowings 50,000
Other liabilities 233,919
-----------
Total liabilities 56,703,741
-----------
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 -143,666
Accumulated other comprehensive loss -10,017
-----------
Total stockholders' equity 9,328,681
-----------
Total liabilities and stockholders' equity $66,032,422
===========
</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 JUNE 30, 2000 AND 1999 AND
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ -----------------------
2000 1999 2000 1999
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income
Loans $1,339,018 $ 683,947 $2,450,947 $1,212,780
Taxable securities 50,468 59,118 96,950 126,405
Federal funds sold 50,326 37,185 94,511 100,108
Interest-bearing deposits in banks 197 0 1,010 0
---------- ---------- ---------- ----------
Total interest income 1,440,009 780,250 2,643,418 1,439,293
---------- ---------- ---------- ----------
Interest expense
Deposits 633,790 291,673 1,138,744 535,578
Federal funds purchased 0 1,658 0 4,910
---------- ---------- ---------- ----------
Total interest expense 633,790 293,331 1,138,744 540,488
---------- ---------- ---------- ----------
Net interest income 806,219 486,919 1,504,674 898,805
Provision for loan losses 76,944 96,451 141,019 169,554
---------- ---------- ---------- ----------
Net interest income after
provision for loan losses 729,275 390,468 1,363,655 729,251
---------- ---------- ---------- ----------
Other income
Service charges and fees 74,052 36,252 128,294 68,213
Other operating income 35,448 31,389 71,818 76,958
---------- ---------- ---------- ----------
109,500 67,641 200,112 145,171
---------- ---------- ---------- ----------
Other expenses
Salaries and employee benefits 302,202 225,712 565,609 429,400
Occupancy and equipment expenses 101,371 59,903 176,398 86,665
Other operating expenses 264,460 148,064 519,373 300,323
---------- ---------- ---------- ----------
668,033 433,679 1,261,380 816,388
---------- ---------- ---------- ----------
Net income before income taxes 170,742 24,430 302,387 58,034
Income tax expense 0 0 0 0
---------- ---------- ---------- ----------
Net income 170,742 24,430 302,387 58,034
---------- ---------- ---------- ----------
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale
arising during period 334 -4,091 -798 -7,684
---------- ---------- ---------- ----------
Comprehensive income 171,076 20,339 301,589 50,350
========== ========== ========== ==========
Earnings per common share $ 0.18 $ 0.03 $ 0.32 $ 0.06
========== ========== ========== ==========
Weighted average shares outstanding $ 950,000 $ 950,000 $ 950,000 $ 950,000
========== ========== ========== ==========
Cash dividends per share of common stock $ 0 $ 0 $ 0 $ 0
========== ========== ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
2000 1999
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 302,387 $ 58,034
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 75,938 28,545
Provision for loan losses 141,019 169,554
Loss on sale of other real estate owned 4,538 0
Increase in interest receivable -205,260 -150,964
Increase in interest payable 65,210 3,925
Other operating activities -48,242 -6,088
----------- -----------
Net cash provided by operating activities 335,590 103,006
----------- -----------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks -10,729 -7,388
Net (increase) decrease in Federal funds sold -650,000 5,590,000
Purchase of securities available-for-sale -1,196,617 -554,428
Proceeds from maturities of securities available-for-sale 263,086 0
Proceeds from maturities of securities held-to-maturity 504,560 582,871
Net increase in loans -14,154,529 -16,416,280
Purchase of premises and equipment -126,169 -212,947
Proceeds from sale of other real estate 246,788 0
----------- -----------
Net cash used in investing activities -15,123,610 -11,018,172
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits 14,603,843 11,824,470
Proceeds from other borrowings 50,000 0
----------- -----------
Net cash provided by financing activities 14,653,843 11,824,470
----------- -----------
Net increase (decrease) in cash and due from banks -134,177 909,304
Cash and due from banks, beginning of period 2,264,288 903,205
----------- -----------
Cash and due from banks, end of period $ 2,130,111 $ 1,812,509
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 1,073,534 $ 536,563
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 three and six month periods ended
June 30, 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 June 30, 2000, the liquidity ratio of the Bank, as determined under
guidelines established by regulatory authorities, was satisfactory.
At June 30, 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:
Actual
------------------------------
Chestatee Chestatee Regulatory
Bancshares, State Minimum
Inc. Bank Requirement
-------------- -------------- ------------
Leverage capital ratios 14.61 % 14.68 % 4.00 %
Risk-based capital ratios:
Core capital 23.20 23.31 4.00
Total capital 24.53 24.65 8.00
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>
June 30, December 31,
2000 1999 Increase (Decrease)
-------- ------------ ------------------------
(Dollars in Thousands) Amount Percent
---------------------- -------- ------------
<S> <C> <C> <C> <C>
Cash and due from banks $ 2,130 $ 2,264 $ (134) (5.92) %
Interest-bearing deposits in banks 11 -- 11 --
Federal funds sold 3,070 2,420 650 26.86
Securities 3,920 3,492 428 12.26
Loans, net 53,212 39,245 13,967 35.59
Premises and equipment 3,020 2,970 50 1.68
Other assets 669 640 29 4.53
-------- -------- --------
$ 66,032 $ 51,031 $ 15,001 29.40
======== ======== ========
Deposits $ 56,420 $ 41,816 $ 14,604 34.92 %
Other borrowings 50 -- 50 --
Other liabilities 234 188 46 24.47
Stockholders' equity 9,328 9,027 301 3.33
-------- -------- --------
$ 66,032 $ 51,031 $ 15,001 29.40
======== ======== ========
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
29.40%. This high rate of growth is not uncommon for a de novo bank. Significant
deposit growth of $14,604,000 was primarily invested in loans and Federal funds
sold. The Company's loan to deposit ratio has increased slightly from 94.80% at
December 31, 1999 to 95.27% at June 30, 2000, indicating continued strong loan
demand in the Company's primary market area of Dawson County and surrounding
counties. Stockholders' equity has increased by $301,000 due to net income of
$302,000 and decreases in accumulated other comprehensive losses of $1,000.
9
<PAGE>
Results of Operations For The Three and Six Months Ended June 30, 2000 and 1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-------------------------------
2000 1999 Increase (Decrease)
--------------- ------------- --------------------------------
(Dollars in Thousands) Amount Percent
------------------------------- --------------- --------------
<S> <C> <C> <C> <C>
Interest income $ 1,440 $ 780 $ 660 84.56 %
Interest expense 634 293 341 116.07
------- ------- ------
Net interest income 806 487 319 65.58
Provision for loan losses 77 97 (20) (20.22)
Other income 110 68 42 61.88
Other expense 668 434 234 54.04
------- ------- ------
Net income $ 171 $ 24 $ 147 598.90
======= ======= ======
Six Months Ended
June 30,
-------------------------------
2000 1999 Increase (Decrease)
--------------- ------------- --------------------------------
(Dollars in Thousands) Amount Percent
------------------------------- --------------- --------------
Interest income $ 2,643 $ 1,439 $ 1,204 83.66 %
Interest expense 1,139 540 599 110.69
------- ------- -------
Net interest income 1,504 899 605 67.41
Provision for loan losses 141 170 (29) (16.83)
Other income 200 145 55 37.85
Other expense 1,261 816 445 54.51
------- ------- -------
Net income $ 302 $ 58 $ 244 421.05
======= ======= =======
</TABLE>
As indicated in the above table, the Company's net interest income has increased
by $319,000 and $605,000 during the second quarter and first six months of 2000
as compared to the same periods in 1999. The Company's net interest margin
decreased to 5.58% during the first six months of 2000 as compared to 5.67%
during the first six months 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 coupled with an increase in rates
paid on deposits. The average rate paid on deposits was 5.19% for the first six
months of 2000 as compared to 4.08% for the entire year of 1999.
10
<PAGE>
The provision for loan losses was $77,000 and $141,000 during the second quarter
and first six months of 2000, as compared to $97,000 and $170,000 for the same
periods in 1999. The amounts provided are due primarily to loan growth and
inherent risk in the loan portfolio. The Company's allowance for loan losses as
a percentage of total loans amounted to 1.00% at June 30, 2000 and 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.
Information with respect to nonaccrual, past due and restructured loans is as
follows:
<TABLE>
<CAPTION>
June 30,
--------------------------------
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 3 --
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 is as
follows:
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
2000 1999
--------------- ------------
(Dollars in Thousands)
------------------------------
<S> <C> <C>
Average amount of loans outstanding $47,387 $27,300
======= =======
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 141 171
------- -------
Balance of allowance for loan losses at end of period $ 538 $ 323
======= =======
Ratio of net loans charged off during the period to
average loans outstanding -% -%
======= =======
</TABLE>
Other income has increased by $42,000 and $55,000 for the second quarter and
first six months of 2000 as compared to the same periods in 1999 due primarily
to increases in service charges on deposit accounts.
Other expenses have increased by $234,000 and $445,000 for the second quarter
and first six months of 2000 as compared to the same periods in 1999. Increased
salaries and employee benefits and increased other operating expenses accounted
for the majority of the increases. Salaries and employee benefits have increased
due to an increase in the number of full time equivalent employees to 29 at June
30, 2000 from 24 at June 30, 1999 and to normal salary increases. Overall
deposit and asset growth have caused the increases in other operating expenses.
The Company has recorded no provision for income taxes due to accumulated
deficits incurred through June 30, 2000.
12
<PAGE>
Overall net income increased by $147,000 and $244,000 during the second quarter
and first six months of 2000 as compared to the same periods in 1999 due
primarily to increased net interest income of $319,000 and $605,000 being
substantially offset by increased operating costs of $234,000 and $445,000.
The Company is not aware of any known trends, events or uncertainties, other
than the effect of events as described above, that will have or 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.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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.
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.
CHESTATEE BANCSHARES, INC.
(Registrant)
DATE: August 14, 2000 BY: /s/ J. Philip Hester, Sr.
--------------- -----------------------------
J. Philip Hester, Sr., President and C.E.O.
(Principal Executive Officer)
DATE: August 14, 2000 BY: /s/ Robert W. Coile
---------------- -----------------------
Robert W. Coile, C.F.O. and Treasurer
(Principal Financial and Accounting Officer)
15
<PAGE>
Exhibit 21
Subsidiaries of the Company. State of Incorporation
---------------------------- ----------------------
Chestatee State Bank Georgia
