<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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: 333-34908
North Georgia Community Financial Partners, Inc.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia Applied For
---------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
350 W. Belmont Drive, Calhoun, Georgia 30701
------------------------------------------------
(Address of principal executive offices)
(706) 629-6499
-------------------------------
(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
---- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of November 1, 2000: 904,167; no par value.
Transitional Small Business Disclosure Format Yes No X
---- ----
<PAGE>
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
--------------------------------------------------------------------------------
INDEX
-----
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet - September 30, 2000............. 3
Consolidated Statements of Operations and Comprehensive
Loss - 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...... 7
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings.................................... 13
Item 2 - Change in Securities................................. 13
Item 3 - Defaults Upon Senior Securities...................... 13
Item 4 - Submission of Matters to a Vote of Security Holders.. 13
Item 5 - Other Information.................................... 13
Item 6 - Exhibits and Reports on Form 8-K..................... 13-14
Signatures.................................................... 15
2
<PAGE>
PART I - FINANCIAL INFORMATION
FINANCIAL STATEMENTS
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2000
(Unaudited)
Assets
------
Cash and due from banks $ 1,843,731
Federal funds sold 2,195,000
Securities available-for-sale, at fair value 5,960,851
Loans 30,557,348
Less allowance for loan losses 329,650
-----------
Loans, net 30,227,698
-----------
Premises and equipment 2,166,805
Other assets 345,421
-----------
Total assets $42,739,506
===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $ 3,881,704
Interest-bearing demand 19,201,419
Savings 1,873,295
Time 9,987,159
-----------
Total deposits 34,943,577
Federal funds purchased 441,451
Other liabilities 182,973
-----------
Total liabilities 35,568,001
-----------
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, no par value; 2,000,000 shares authorized;
none issued or outstanding -
Common stock, no par value; 10,000,000 shares authorized;
904,167 shares issued and outstanding 9,321,401
Accumulated deficit (2,111,462)
Accumulated other comprehensive loss (38,434)
-----------
Total stockholders' equity 7,171,505
-----------
Total liabilities and stockholders' equity $42,739,506
===========
See Notes to Consolidated Financial Statements.
3
<PAGE>
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE LOSS
THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- -----------------------------
2000 1999 2000 1999
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income
Loans $ 677,947 $ 164,766 $1,600,793 $ 250,715
Taxable securities 94,631 34,725 198,527 155,481
Federal funds sold 16,480 2,089 51,500 47,287
--------- --------- ---------- ----------
Total interest income 789,058 201,580 1,850,820 453,483
--------- --------- ---------- ----------
Interest expense
Deposits 371,607 60,707 836,109 103,398
Other borrowings 9,189 7,150 28,632 25,416
--------- --------- ---------- ----------
Total interest expense 380,796 67,857 864,741 128,814
--------- --------- ---------- ----------
Net interest income 408,262 133,723 986,079 324,669
Provision for loan losses 80,000 27,500 170,000 85,500
--------- --------- ---------- ----------
Net interest income after
provision for loan losses 328,262 106,223 816,079 239,169
--------- --------- ---------- ----------
Other operating income 54,902 52,280 143,581 150,264
--------- --------- ---------- ----------
Other expenses
Salaries and employee benefits 237,100 172,909 691,977 528,962
Occupancy and equipment expenses 63,200 96,385 185,585 166,776
Loss on sales of securities available-for-sale 26,573 - 26,573 -
Other operating expenses 173,120 91,093 553,900 327,246
--------- --------- ---------- ----------
Total other expenses 499,993 360,387 1,458,035 1,022,984
--------- --------- ---------- ----------
Loss before income taxes (116,829) (201,884) (498,375) (633,551)
Income tax expense - - - -
--------- --------- ---------- ----------
Net loss (116,829) (201,884) (498,375) (633,551)
--------- --------- ---------- ----------
Other comprehensive income (loss):
Unrealized gains (losses) on securities
available-for-sale arising during period 50,535 (934) 33,170 (31,835)
--------- --------- ---------- ----------
Comprehensive loss $ (66,294) $(202,818) $ (465,205) $ (665,386)
========= ========= ========== ==========
Basic and diluted losses per common share $ (0.13) $ (0.29) $ (0.56) $ (0.91)
========= ========= ========== ==========
Weighted average shares outstanding (basic
and diluted) 903,776 700,000 897,959 700,000
========= ========= ========== ==========
Cash dividends per common share $ - $ - $ - $ -
========= ========= ========== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (498,375) $ (633,551)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 119,111 73,839
Loss on sales of securities available-for-sale 26,573 -
Provision for loan losses 170,000 85,500
Increase in other assets (172,214) (87,982)
Increase (decrease) in other liabilities 66,871 (58,833)
------------ ------------
Net cash used in operating activities (288,034) (621,027)
------------ ------------
INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale 721,406 -
Purchases of securities available-for-sale (4,246,950) (2,454,784)
Net increase in Federal funds sold (880,000) (195,000)
Net increase in loans (13,754,135) (8,619,540)
Purchase of premises and equipment (87,939) (607,911)
------------ ------------
Net cash used in investing activities (18,247,618) (11,877,235)
------------ ------------
FINANCING ACTIVITIES
Net increase in deposits 18,028,548 8,092,965
Repayment of notes payable - (2,125,704)
Net increase in Federal funds purchased 441,451 500,000
Net proceeds from sale of common stock 368,243 938,216
------------ ------------
Net cash provided by financing activities 18,838,242 7,405,477
------------ ------------
Net increase (decrease) in cash and due from banks 302,590 (5,092,785)
Cash and due from banks, beginning of period 1,541,141 6,063,295
------------ ------------
Cash and due from banks, end of period $ 1,843,731 $ 970,510
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The financial information for North Georgia Community Financial
Partners, Inc. (the "Company") 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 nine month periods ended
September 30, 2000 are 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.
NOTE 3. ACQUISITION
On July 14, 2000, the Company consummated an agreement with North
Georgia National Bank (the "Bank") whereby the Company acquired all of
the outstanding common stock of the Bank. The Company now operates as
a one-bank holding company with the Bank operating as its wholly-owned
subsidiary.
6
<PAGE>
NORTH GEORGIA COMMUNITY FINANCIAL PARTNERS, INC.
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 the Bank during the periods
included in the accompanying financial statements.
SPECIAL CAUTIONARY NOTICE REGARDING FORWARD LOOKING STATEMENTS
The management's discussion and analysis which follows contains
forward-looking statements in addition to historical information
including, but not limited to, statements regarding management's
beliefs, current expectations, estimates and projections about the
financial services industry, the economy, and about the Company in
general. Such forward-looking statements are subject to certain
factors that could cause actual results to differ materially from
historical results or anticipated events, trends, or results. These
factors include, but are not limited to:
. Increased competition with other financial institutions,
. Lack of sustained growth in the economy of Gordon County,
. Rapid fluctuations in interest rates,
. The inability of the Company to maintain regulatory capital
standards, and
. Changes in the legislative and regulatory environment.
The purpose of the following discussion is to address information
relating to the financial condition and results of operations of the
Company that may not be readily apparent from a review of the
financial statements and notes thereto, which are included in the Form
10-QSB.
7
<PAGE>
Liquidity and Capital Resources
As of September 30, 2000, the liquidity ratio of the Company, as
determined under guidelines established by regulatory authorities, was
satisfactory. Management considers the Company's liquidity to be
adequate to meet operating and loan funding requirements. The
liquidity ratio (i.e. cash, short-term assets, and marketable assets
divided by deposits and other borrowings) for the Company was
approximately 28%. As the Company grows, management will continue to
monitor liquidity and make adjustments as deemed necessary.
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
------------------------- Regulatory
Minimum
Consolidated Bank Requirement
------------ ----- -----------
<S> <C> <C> <C>
Leverage capital ratios 18.94% 18.92% 4.00%
Risk-based capital ratios:
Core capital 21.02 21.00 4.00
Total capital 21.99 21.96 8.00
</TABLE>
As the Company continues to grow and the loan portfolio increases, 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>
September 30, December 31,
2000 1999 Increase (Decrease)
--------------------------------- ---------------------------
(Dollars in Thousands) Amount Percent
--------------------------------- --------- ----------
<S> <C> <C> <C> <C>
Cash and due from banks $ 1,844 $ 1,541 $ 303 19.66 %
Securities 5,961 2,428 3,533 145.51
Federal funds sold 2,195 1,315 880 66.92
Loans, net 30,228 16,644 13,584 81.61
Premises and equipment 2,167 2,199 (32) (1.46)
Other assets 345 173 172 99.42
------- ------- -------
$42,740 $24,300 $18,440 75.88
======= ======= =======
Deposits $34,944 $16,915 $18,029 106.59 %
Federal funds purchased 441 -- 441 --
Other liabilities 183 116 67 57.76
Stockholders' equity 7,172 7,269 (97) (1.33)
------- ------- -------
$42,740 $24,300 $18,440 75.88
======= ======= =======
</TABLE>
As indicated in the above table, the Company's total assets grew at a rate of
75.88% for the first nine months of 2000. Strong deposit growth of $18,029,000
was invested primarily in loans and securities. The Company's loan to deposit
ratio has decreased from 99.58% at December 31, 1999 to 86.36% at September 30,
2000 as deposit growth has increased. The high growth rates are not uncommon
for a de novo bank The Company's total equity has decreased by year-to-date
losses of $498,000 and offset by decreased unrealized losses on securities
available-for-sale of $33,000. This net equity decrease has been partially
offset by net proceeds of $368,000 received from the sale of common stock in a
private offering.
9
<PAGE>
Results of Operations For The Three Months Ended September 30, 2000 and 1999 and
for the 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
2000 1999 (Decrease)
------- ------- ----------
(Dollars in Thousands)
-------------------------------------
<S> <C> <C> <C>
Interest income $ 789 $ 202 $ 587
Interest expense 381 68 313
----- ------ ------
Net interest income 408 134 274
Provision for loan losses 80 28 52
Other income 55 52 3
Other expense 500 360 140
------ ------ ------
Net loss $ (117) $ (202) $ 85
====== ====== ======
<CAPTION>
Nine Months Ended
September 30,
Increase
2000 1999 (Decrease)
------- ------- ----------
(Dollars in Thousands)
-------------------------------------
<S> <C> <C> <C>
Interest income $1,851 $ 453 $1,398
Interest expense 865 129 736
------ ------ ------
Net interest income 986 324 662
Provision for loan losses 170 85 85
Other income 144 150 (6)
Other expense 1,458 1,023 435
------ ------ ------
Net loss $ (498) $ (634) $ 136
====== ====== ======
</TABLE>
As indicated in the above table, the Company's net interest income has increased
by $274,000 and $662,000 for 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 4.53% during the first nine months of 2000 as compared to 4.41% for
the previous year. The increases in net interest income and net interest margin
are due primarily to the increased volume of average loans which have become a
larger component of average interest-earning assets.
The provision for loan losses increased by $52,000 and $85,000 for the third
quarter and first nine months of 2000 as compared to the same periods in 1999.
The overall increase is due primarily to the loan growth and management's view
of the inherent risk in the loan portfolio. The Company's allowance for loan
losses as a percentage of total loans amounted to 1.08% at September 30, 2000 as
compared to 1.19% 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 is as
follows:
<TABLE>
<CAPTION>
September 30,
--------------------------------
2000 1999
-------- --------
(Dollars in Thousands)
--------------------------------
<S> <C> <C>
Nonaccrual loans $32 $0
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 0 0
Restructured loans 0 0
Loans, now current about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms 0 0
Interest income that would have been recorded on nonaccrual
and restructured loans under original terms 2 0
Interest income that was recorded on nonaccrual and restructured loans 0 0
</TABLE>
It is the policy of the Bank 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>
Nine Months Ended
September 30,
-------------------------------------
2000 1999
-------------- --------------
(Dollars in Thousands)
-------------------------------------
<S> <C> <C>
Average amount of loans outstanding $23,738 $3,269
======= ======
Balance of allowance for loan losses at beginning of period $ 200 $ 0
------- ------
Loans charged off
Commercial and financial 26 0
Real estate mortgage 0 0
Instalment 14 0
------- ------
40 0
------- ------
Loans recovered
Commercial and financial 0 0
Real estate mortgage 0 0
Instalment 0 0
------- ------
0 0
------- ------
Net charge-offs 40 0
------- ------
Additions to allowance charged to operating expense during period 170 85
------- ------
Balance of allowance for loan losses at end of period $ 330 $ 85
======= ======
Ratio of net loans charged off during the period to
average loans outstanding .17% --%
======= ======
</TABLE>
Other income has remained stable during the third quarter and first nine months
of 2000 as compared to the same periods in 1999 due to increased service charges
on deposit accounts being offset by decreased fees associated with mortgage loan
origination activities.
Other expenses increased during the third quarter and first nine months of 2000
as compared to the same periods in 1999 by $140,000 and $435,000 due to normal
increased operating costs associated with the Company's growth. The Company
also recognized losses on the sales of securities available-for-sale during the
third quarter of 2000 in the amount of $27,000.
The Company has recorded no income tax provisions due to cumulative net
operating losses.
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 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.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company
is a party or of which any of its property is the subject.
ITEM 2. CHANGE IN SECURITIES
(a) not applicable
(b) not applicable
(c) During the third quarter of 2000, the Company sold 625 shares of
unregistered common stock for $12.00 per share to Thomas M.
Kinnamon, a director of the Company, and 625 shares of
unregistered common stock for $12.00 per share to David J. Lance,
also a director of the Company. The registration statement and
prospectus requirements of the Securities Act of 1933 do not apply
to these transactions because they did not involve a public
offering and are exempt from registration under Section 4(2) of
the Securities Act and the regulations promulgated thereunder.
(d) not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
Exhibit Number Exhibit
2.1 Agreement and Plan of Share Exchange.1/
3.1 Articles of Incorporation.1/
3.2 Bylaws.1/
13
<PAGE>
4.1 Instruments Defining the Rights of Security
Holders. See Articles of Incorporation at
Exhibit 3.1 hereto and Bylaws at Exhibit 3.2
hereto.
21.1 Subsidiaries of the registrant.1/
27.1 Financial Data Schedule.
__________________________
1/ Incorporated herein by reference to exhibit of same number in
the Company's Registration Statement on Form S-4, File No. 333-
34908, declared effective by the SEC on June 9, 2000.
(b) Reports on Form 8-K.
On August 17, 2000, the Company filed a Form 8-K with the SEC to
report that:
. As a result of the reorganization of North Georgia National
Bank, Calhoun, Georgia, into a one-bank holding company
structure, the former shareholders of the Bank acquired control
of the Company; and
. Also as a result of the reorganization, the Company acquired
ownership of 100% of the Bank.
The Form 8-K incorporated audited financial statements of the Bank
as of December 31, 1999 and 1998 and unaudited financial
statements of the Bank as of March 31, 2000 and 1999 by reference
to the financial reports in Part I of the Company's Registration
Statement on Form S-4, File No. 333-34908, declared effective by
the SEC on June 9, 2000.
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.
(Registrant) NORTH GEORGIA COMMUNITY
FINANCIAL PARTNERS, INC.
DATE: November 10, 2000 BY: /s/ David J. Lance
----------------- --------------------------------------------
David J. Lance, President
(Principal Executive Officer)
DATE: November 10, 2000 BY: /s/ Rhonda C. Massengill
----------------- ---------------------------------------------
Rhonda C. Massengill, Chief Financial Officer
(Principal Financial and Accounting Officer)
15
