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 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 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
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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)
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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 November 10, 2000: 1,900,000; no par value.
Transitional Small Business Disclosure Format Yes No _X_
<PAGE>
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
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INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 2000 ...............3
Consolidated Statements of Income and Comprehensive Income -
Three Months Ended September 30, 2000 and 1999 and
Nine Months Ended
September 30, 2000 and 1999 ..................................4
Consolidated Statements of Cash Flows -
Nine Months Ended September 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 ......8
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders ....15
Item 6 - Exhibits and Reports on Form 8-K .......................15
Signatures ......................................................16
2
<PAGE>
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
Assets
------
Cash and due from banks $ 3,248,683
Interest-bearing deposits in banks 12,740
Securities available-for-sale 2,230,912
Securities held-to-maturity, fair value of $1,376,000 1,399,236
Federal funds sold 5,290,000
Loans 59,414,457
Less allowance for loan losses 588,217
-----------
Loans, net 58,826,240
-----------
Premises and equipment 3,052,209
Other assets 748,074
-----------
Total assets $74,808,094
===========
Liabilities and Stockholders' Equity
------------------------------------
<S> <C>
Deposits
Demand $ 6,637,996
Interest-bearing demand 22,336,018
Savings 899,893
Time 35,024,385
-----------
Total deposits 64,898,292
Other borrowings 50,000
Other liabilities 331,023
-----------
Total liabilities 65,279,315
-----------
Commitments and contingent liabilities
Stockholders' equity
Common stock, no par value; 10,000,000 shares
authorized; 1,900,000 shares issued and outstanding 9,482,364
Retained earnings 48,026
Accumulated other comprehensive loss -1,611
-----------
Total stockholders' equity 9,528,779
-----------
Total liabilities and stockholders' equity $74,808,094
</TABLE>
===========
See Notes to Consolidated Financial Statements.
3
<PAGE>
CHESTATEE BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 AND
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, September 30,
--------------- --------------- --------------- ---------------
2000 1999 2000 1999
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 1,542,224 $ 823,626 $ 3,993,171 $ 2,036,406
Taxable securities 64,667 64,225 161,617 190,630
Federal funds sold 67,849 41,147 163,370 141,255
--------------- ---------------- --------------- ---------------
Total interest income 1,674,740 928,998 4,318,158 2,368,291
--------------- ---------------- --------------- ---------------
Interest expense
Deposits 768,525 368,743 1,907,269 904,321
Federal funds purchased and other borrowings 1,200 32 1,200 4,942
--------------- ---------------- --------------- ---------------
Total interest expense 769,725 368,775 1,908,469 909,263
--------------- ---------------- --------------- ---------------
Net interest income 905,015 560,223 2,409,689 1,459,028
Provision for loan losses 57,500 45,433 198,519 214,987
--------------- ---------------- --------------- ---------------
Net interest income after
provision for loan losses 847,515 514,790 2,211,170 1,244,041
--------------- ---------------- --------------- ---------------
Other income
Service charges and fees 75,471 48,058 203,765 116,271
Other operating income 22,019 55,204 93,837 132,162
--------------- ---------------- --------------- ---------------
97,490 103,262 297,602 248,433
--------------- ---------------- --------------- ---------------
Other expenses
Salaries and employee benefits 330,075 223,406 895,684 652,806
Occupancy and equipment expenses 95,064 63,498 271,462 150,163
Other operating expenses 279,099 204,388 798,471 504,711
--------------- ---------------- --------------- ---------------
704,238 491,292 1,965,617 1,307,680
--------------- ---------------- --------------- ---------------
Net income before income taxes 240,767 126,760 543,155 184,794
Income tax expense 49,075 0 49,076 0
--------------- ---------------- --------------- ---------------
Net income 191,692 126,760 494,079 184,794
--------------- ---------------- --------------- ---------------
Other comprehensive income ( loss):
Unrealized gains (losses) on securities
available-for-sale arising during period 8,406 -1,207 7,608 -8,891
--------------- ---------------- --------------- ---------------
Comprehensive income $ 200,098 $ 125,553 $ 501,687 $ 175,903
=============== ================ =============== ===============
Basic and diluted earnings
per common share $ 0.10 $ 0.07 $ 0.26 $ 0.10
=============== ================ =============== ===============
Weighted average shares outstanding 1,900,000 1,900,000 1,900,000 1,900,000
=============== ================ =============== ===============
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
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 494,079 $ 184,794
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 118,229 60,176
Provision for loan losses 198,519 214,987
Loss on sale of other real estate owned 4,538 0
Increase in interest receivable -321,653 -170,422
Increase in interest payable 135,553 20,047
Other operating activities 15,835 -45,608
-------------- --------------
Net cash provided by operating activities 645,100 263,974
-------------- --------------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks -12,740 -11,273
Net (increase) decrease in Federal funds sold -2,870,000 5,550,000
Purchases of securities available-for-sale -2,828,205 -806,480
Proceeds from maturities of securities available-for-sale 1,191,282 0
Purchases of securities held-to-maturity 0 -1,398,813
Proceeds from maturities of securities held-to-maturity 1,506,683 1,971,225
Net increase in loans -19,825,944 -20,859,593
Purchase of premises and equipment -200,882 -233,767
Proceeds from sale of other real estate 246,788 0
-------------- --------------
Net cash used in investing activities -22,793,018 -15,788,701
-------------- --------------
FINANCING ACTIVITIES
Net increase in deposits 23,082,313 16,175,577
Proceeds from other borrowings 50,000 0
-------------- --------------
Net cash provided by financing activities 23,132,313 16,175,577
-------------- --------------
Net increase in cash and due from banks 984,395 650,850
Cash and due from banks, beginning of period 2,264,288 903,205
-------------- --------------
Cash and due from banks, end of period $ 3,248,683 $ 1,554,055
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for: $ 1,772,916 $ 889,216
Interest
Income taxes $ 40,554 $ 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 periods.
The results of operations for the three and nine month periods
ended September 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>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3. COMMON STOCK SPLIT
The Company declared a two-for-one split of its no-par value
common stock for shareholders of record as of October 31, 2000.
Issued and outstanding shares on the September 30, 2000 balance
sheet have been restated for the split. Earnings per share and
weighted average share information on the statements of income
have also been restated for all periods presented.
7
<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.
8
<PAGE>
Liquidity and Capital Resources
As of September 30, 2000, the liquidity ratio of the Bank, as
determined under guidelines established by regulatory
authorities, was satisfactory.
At September 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:
<TABLE>
<CAPTION>
Actual
--------------------------------
Chestatee Chestatee Regulatory
Bancshares, State Minimum
Inc. Bank Requirement
-------------- -------------- -------------
<S> <C> <C> <C>
Leverage capital ratios 13.41 % 13.48 % 4.00 %
Risk-based capital ratios:
Core capital 15.43 15.51 4.00
Total capital 16.38 16.46 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.
9
<PAGE>
Financial Condition
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
September December
30, 30,
2000 1999 Increase (Decrease)
-------- ------- ------------------
(Dollars in Thousands) Amount Percent
------------------ ------- -------
<S> <C> <C> <C> <C>
Cash and due from banks $ 3,249 $ 2,264 $ 985 43.51 %
Interest-bearing deposits in banks 13 -- 13 --
Federal funds sold 5,290 2,420 2,870 118.60
Securities 3,630 3,492 138 3.95
Loans, net 58,826 39,245 19,581 49.89
Premises and equipment 3,052 2,970 82 2.76
Other assets 748 640 108 16.88
------- ------- ------
$74,808 $51,031 $23,777 46.59
======= ======= =======
Deposits $64,898 $41,816 $23,082 55.20 %
Other borrowings 50 -- 50 --
Other liabilities 331 188 143 76.06
Stockholders' equity 9,529 9,027 502 5.56
------- ------- -------
$74,808 $51,031 $23,777 46.59
======= ======= =======
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
46.59%. This high rate of growth is not uncommon for a de novo bank. Significant
deposit growth of $23,082,000 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 91.55% at September 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 $502,000 due to net
income of $494,000 and decreases in accumulated other comprehensive losses of
8,000.
10
<PAGE>
Results of Operations For The Three and Nine Months Ended September 30, 2000 and
1999
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended
September 30, Increase (Decrease)
--------------------- -----------------------
2000 1999 Amount Percent
---------- -------- --------- ---------
(Dollars in Thousands)
---------- -------- ---------
<S> <C> <C> <C> <C>
Interest income $ 1,675 $ 929 $ 746 80.27 %
Interest expense 770 369 401 108.72
---------- -------- ----------
Net interest income 905 560 345 61.55
Provision for loan losses 57 45 12 26.56
Other income 97 103 (6) (5.59)
Other expense 704 491 213 43.34
---------- -------- ----------
Pretax income 241 127 114 89.94
Income tax expense 49 - 49 -
---------- -------- ----------
Net income $ 192 $ 127 $ 65 51.22 %
========== ======== ==========
Three Months Ended
September 30, Increase (Decrease)
--------------------- ---------------------
2000 1999 Amount Percent
---------- -------- ---------- ---------
(Dollars in Thousands)
---------- ---------- ----------
Interest income $ 4,318 $ 2,368 $ 1,950 82.33 %
Interest expense 1,908 909 999 109.89
---------- ---------- ----------
Net interest income 2,410 1,459 951 65.16
Provision for loan losses 199 215 (16) (7.66)
Other income 298 249 49 19.79
Other expense 1,966 1,308 658 50.31
---------- ---------- ----------
Pretax income 543 185 358 193.92
Income tax expense 49 - 49 -
---------- ---------- ----------
Net income $ 494 $ 185 $ 309 167.37 %
========== ========== ==========
</TABLE>
As indicated in the above table, the Company's net interest income has increased
by $345,000 and $951,000 during the third quarter and first nine months of 2000
as compared to the same periods in 1999. The Company's net interest margin
increased to 5.55% during the first nine months of 2000 as compared to 5.53%
during the first nine months of 1999 and 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 relatively small increase in net interest margin
is due to an increase in the yields earned on loans being offset by an increase
in the rate paid on deposits. The average rate paid on deposits was 5.37% for
the first nine months of 2000 as compared to 4.58% during the first nine months
of 1999 and 4.08% for the entire year of 1999.
11
<PAGE>
The provision for loan losses was $57,000 and $199,000 during the third quarter
and first nine months of 2000, as compared to $45,000 and $215,000 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 .99% at September 30, 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.
Information with respect to nonaccrual, past due and restructured loans is as
follows:
<TABLE>
<CAPTION>
September 30,
---------------------
2000 1999
---------------------
(Dollars in Thousands)
---------------------
<S> <C> <C>
Nonaccrual loans $ - $ 208
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 2 -
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 - 4
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.
12
<PAGE>
Information regarding certain loans and allowance for loan loss data is as
follows:
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------------------
2000 1999
--------------- ----------------
(Dollars in Thousands)
----------------------------------
<S> <C> <C>
Average amount of loans outstanding $ 50,687 $ 26,830
=============== ================
Balance of allowance for loan losses at beginning of period $ 397 $ 152
--------------- ----------------
Loans charged off
Commercial and financial $ - $ -
Real estate mortgage 8 -
Instalment - -
--------------- ----------------
8 -
--------------- ----------------
Loans recovered
Commercial and financial - -
Real estate mortgage - -
Installment - -
--------------- ----------------
- -
--------------- ----------------
Net charge-offs 8 -
--------------- ----------------
Additions to allowance charged to operating expense during period 199 215
--------------- ----------------
Balance of allowance for loan losses at end of period $ 588 $ 367
=============== ================
Ratio of net loans charged off during the period to
average loans outstanding .02% -%
=============== ================
</TABLE>
Other income has decreased by $6,000 and increased by $49,000 for the third
quarter and first nine months of 2000 as compared to the same periods in 1999.
Increased service charges on deposit accounts have been offset by decreased
mortgage origination fees.
Other expenses have increased by $213,000 and $658,000 for the third quarter and
first nine 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 33 at
September 30, 2000 from 26 at September 30, 1999 and to normal salary increases.
Overall deposit and asset growth have caused the increases in other operating
expenses.
The Company recorded its initial income tax provision of $49,000 during the
third quarter of 2000 due to the utilization of its net operating loss
carryover.
Overall net income increased by $65,000 and $309,000 during the third quarter
and first nine months of 2000 as compared to the same periods in 1999 due
primarily to increased net interest income of $345,000 and $951,000 being
substantially offset by increased operating costs of $213,000 and $658,000.
13
<PAGE>
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.
14
<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.
15
<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: November 14, 2000
BY: /s/ J. Philip Hester, Sr.
-------------------------
J. Philip Hester, Sr., President and C.E.O.
(Principal Executive Officer)
DATE: November 14, 2000
-----------------
BY: /s/ Robert W. Coile
-------------------
Robert W. Coile, C.F.O. and Treasurer
(Principal Financial and Accounting Officer)
16
<PAGE>
Exhibit 21
----------
Subsidiary of the Company. State of Incorporation
------------------------------------------------------------------
Chestatee State Bank Georgia
17
