<PAGE> 1
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 period ended June 30,
2000
[ ] Transition report under Section 13 or 15(d) of the Exchange
Act for the transition period from _____ to _____
Commission file number: 000-30805
WGNB CORP.
(Exact name of small business issuer as specified in its charter)
Georgia 58-1640130
(State of Incorporation) (I.R.S. Employer Identification No.)
201 Maple Street
P.O. Box 280
Carrollton, Georgia 30117
(Address of principal executive offices)
(770) 832-3557
(Issuer's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 [ ] No [X]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
Class Outstanding at August 7, 2000
----- -----------------------------
Common Stock, $1.25 par value 3,094,775
Transitional Small Business Disclosure Format: Yes [ ] No [X]
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements of WGNB Corp. (the "Company") are
set forth on the following pages. All adjustments have been made which, in the
opinion of management, are necessary in order to make the financial statements
not misleading.
2
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WGNB CORP.
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
3
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WGNB CORP.
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(UNAUDITED)
<TABLE>
<S> <C>
Assets
Cash and cash due from banks, including reserve requirements
of $100,000 $ 11,006,613
Federal funds sold 170,000
------------
Cash and cash equivalents 11,176,613
Securities available for sale 41,039,960
Securities held to maturity 1,000,000
Loans, net 212,372,501
Premises and equipment, net 5,653,711
Accrued interest receivable 1,744,004
Other assets 2,786,893
------------
$275,773,682
============
Liabilities and Stockholders' Equity
Deposits:
Demand $ 31,338,624
Interest bearing demand 83,907,022
Savings 7,671,719
Time 69,740,683
Time, over $100,000 30,601,546
------------
Total deposits 223,259,594
Federal Home Loan Bank advances 20,000,000
Federal funds purchased 6,169,055
Other borrowings 425,000
Accrued interest payable 1,370,391
Other liabilities 1,391,957
------------
Total liabilities 252,615,997
------------
Stockholders' equity:
Common stock, $1.25 par value, 10,000,000 shares authorized;
3,094,775 shares issued and outstanding 3,868,469
Additional paid-in capital 818,707
Retained earnings 19,505,016
Accumulated comprehensive loss (1,034,507)
------------
Total stockholders' equity 23,157,685
------------
$275,773,682
============
</TABLE>
See accompanying notes to consolidated financial statements.
4
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WGNB CORP.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- ---------------------------
2000 1999 2000 1999
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $4,984,970 $4,013,174 $ 9,676,209 $7,992,364
Interest on federal funds sold 88,959 81,383 166,968 148,629
Interest on investment securities:
U.S. Treasury -- 17,938 -- 36,877
U.S. Government agencies 466,388 461,063 933,236 901,228
State, county and municipal 173,649 146,411 358,038 258,701
Other 38,253 13,319 80,052 26,113
---------- ---------- ----------- ----------
Total interest income 5,752,219 4,733,288 11,214,503 9,363,912
---------- ---------- ----------- ----------
Interest expense:
Interest on deposits:
Demand 667,936 540,818 1,286,460 1,013,168
Savings 60,072 58,634 118,405 115,401
Time 1,434,200 1,249,548 2,783,005 2,515,291
Interest on FHLB and other borrowings 274,195 106,073 511,099 211,686
---------- ---------- ----------- ----------
Total interest expense 2,436,403 1,955,073 4,698,969 3,855,546
---------- ---------- ----------- ----------
Net interest income 3,315,816 2,778,215 6,515,534 5,508,366
Provision for loan losses 50,000 75,000 100,000 153,462
---------- ---------- ----------- ----------
Net interest income after provision for
loan losses 3,265,816 2,703,215 6,415,534 5,354,904
---------- ---------- ----------- ----------
Other income:
Service charges on deposit accounts 390,248 330,962 761,283 638,363
Miscellaneous 238,321 227,264 491,775 469,779
---------- ---------- ----------- ----------
Total other income 628,569 558,226 1,253,058 1,108,142
---------- ---------- ----------- ----------
Other expenses:
Salaries and employee benefits 1,328,713 1,127,069 2,621,734 2,230,067
Occupancy 347,147 315,926 710,330 635,786
Other operating 524,271 516,861 1,104,432 1,032,122
---------- ---------- ----------- ----------
Total other expenses 2,200,131 1,959,856 4,436,496 3,897,975
---------- ---------- ----------- ----------
Earnings before income taxes 1,694,254 1,301,585 3,232,096 2,565,071
Income taxes 591,279 468,204 1,132,114 915,176
---------- ---------- ----------- ----------
Net earnings $1,102,975 $ 833,381 $ 2,099,982 $1,649,895
========== ========== =========== ==========
Basic earnings per share $ .36 $ .27 $ .68 $ .53
========== ========== =========== ==========
Diluted earnings per share $ .35 $ .26 $ .67 $ .52
========== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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WGNB CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------------- ---------------------------
2000 1999 2000 1999
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Net earnings $1,102,975 $ 833,381 $ 2,099,982 $ 833,381
Other comprehensive income (loss), net of tax:
Unrealized gains (losses) on investment
Securities available for sale:
Unrealized gains (losses) arising during (35,921) (1,347,453) 26,554 (1,509,379)
the period
Associated benefit (taxes) 9,891 371,038 (7,312) 415,626
Less: Reclassification adjustment for -- -- (12,332) 12,980
(gains) losses
Associated taxes -- -- 3,396 (3,574)
---------- ---------- ----------- ----------
Other comprehensive income (loss) (26,030) (976,415) 10,306 (1,084,347)
---------- ---------- ----------- ----------
Comprehensive income (loss) $1,076,945 $ (143,034) $ 2,110,288 $ (250,966)
========== ========== =========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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WGNB CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 2,099,982 $ 1,649,895
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation, amortization and accretion 371,282 340,341
Provision for loan losses 100,000 153,462
Provision for deferred income taxes 45,622 29,787
Loss (gain) on sale of securities available for sale 8,936 (9,406)
Loss (gain) on sale of other real estate -- (4,894)
Change in:
Other assets (592,466) 157,576
Other liabilities 875,318 391,354
------------ ------------
Net cash provided by operating activities 2,908,674 2,708,114
------------ ------------
Cash flows from investing activities:
Proceeds from sales of securities available for sale 560,380 760,535
Proceeds from maturities of securities available for sale 2,066,840 5,940,521
Purchases of securities available for sale (2,286,470) (11,272,987)
Net change in loans (30,484,051) (8,498,214)
Purchases of premises and equipment (407,474) (900,345)
Proceeds from sales of other real estate -- 119,312
------------ ------------
Net cash used by investing activities (30,550,775) (13,850,787)
------------ ------------
Cash flows from financing activities:
Net change in deposits 8,454,193 10,950,922
Federal Home Loan Bank advances 5,000,000 --
Federal fund purchases 6,169,055 --
Proceeds from other borrowings 125,000 --
Repayment of other borrowings (50,000) (100,000)
Dividends paid (689,941) (640,743)
Issuance of common stock 24,792 26,158
Retirement of common stock (280,029) (471,011)
------------ ------------
Net cash provided by financing activities 18,753,070 9,765,326
Change in cash and cash equivalents (8,889,031) (1,377,347)
Cash and cash equivalents at beginning of period 20,065,644 15,561,652
------------ ------------
Cash and cash equivalents at end of period $ 11,176,613 $ 14,184,305
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
7
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WGNB CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
2000 1999
---------- ---------
<S> <C> <C>
Supplemental disclosure of cash flow information:
Cash paid during the quarter for:
Interest $4,426,679 3,949,396
Income taxes 1,193,939 956,980
Non-cash investing and financing activities:
Transfer of loans to other real estate 24,720 33,364
Financed sales of other real estate -- --
Change in unrealized gains (losses) on
securities available for sale, net of tax 10,306 (1,084,347)
Change in dividends payable 19,240 (6,181)
</TABLE>
See accompanying notes to consolidated financial statements.
8
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WGNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
(1) BASIS OF PRESENTATION
The consolidated financial statements include the accounts of WGNB Corp. (the
"Company") and its wholly-owned subsidiaries, West Georgia National Bank (the
"Bank") and West Georgia Credit Services, Inc. (the "Finance Company"). All
significant inter-company accounts have been eliminated in consolidation. In
some cases, certain prior period amounts have been reclassified to conform with
current year presentation.
The accompanying unaudited interim consolidated financial statements reflect all
adjustments which, in the opinion of management, are necessary to present fairly
the Company's financial position as of June 30, 2000, and the results of its
operations and its cash flows for the six-month period then ended. All such
adjustments are normal and recurring in nature. The financial statements
included herein should be read in conjunction with consolidated financial
statements and the related notes and the report of independent accountants
included in the Company's initial filing on form 10-SB which included the
results of operations for the years ended December 31, 1999 and 1998.
(2) NET EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common
shares outstanding during the period while the effects of potential common
shares outstanding during the period are included in diluted earnings per share.
The average market price during the year is used to compute equivalent shares.
All net earnings per share amounts have been restated to conform to the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 128.
Reconciliation of the amounts used in the Computation of both "basic earnings
per share" and "diluted earnings per share" for the six month periods ended June
30, 2000 and June 30, 1999 are as follows:
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 2000
Net Earnings Common Shares Earnings Per Share
------------ ------------- ------------------
<S> <C> <C> <C>
Basic earnings per share 2,099,982 3,101,942 $ .68
Effect of dilutive stock options -- 34,869 (.01)
--------- --------- -----
Diluted earnings per share 2,099,982 3,136,811 .67
========= ========= -----
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
Net Earnings Common Shares Earnings Per Share
------------ ------------- ------------------
<S> <C> <C> <C>
Basic earnings per share 1,649,895 3,129,686 $ .53
Effect of dilutive stock options -- 37,121 (.01)
--------- --------- -----
Diluted earnings per share 1,649,895 3,166,807 .52
========= ========= -----
</TABLE>
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FORWARD LOOKING STATEMENTS
This report may contain certain "forward-looking statements" including
statements concerning plans, objectives, future events or performance and
assumptions and other statements that are not statements of historical fact. The
Company cautions readers that the following important factors, among others,
could cause the Company's actual results to differ materially from the
forward-looking statements contained in this report: (i) the effect of changes
in laws and regulations, including federal and state banking laws and
regulations, with which the Company and its subsidiaries must comply, and the
associated costs of compliance with such laws and regulations either currently
or in the future as applicable; (ii) the effect of changes in accounting
policies and practices, as may be adopted by the regulatory agencies as well as
by the Financial Accounting Standards Board, or of changes in the Company's
organization, compensation and benefit plans; (iii) the effect on the Company's
competitive position within its market area of the increasing consolidation
within the banking and financial services industries, including the increased
competition from larger regional and out-of-state banking organizations as well
as non-bank providers of various financial services; (iv) the effect of changes
in interest rates; and (v) the effect of changes in the business cycle and
downturns in local, regional or national economies. The Company cautions that
the foregoing list of important factors is not exclusive. The Company does not
undertake to update any forward-looking statement, whether written or oral, that
the Company or its agents may make from time to time.
RESULTS OF OPERATIONS
OVERVIEW
Net earnings for the six months ended June 30, 2000 was $2.1 million, which
represented an increase of $450,000 or 27% compared to the six months ended June
30, 1999. Net earnings per common share increased 28% from $.53 per share to
$.68 per share when comparing the same two periods. Net earnings for the second
quarter ended June 30, 2000 was $1.1 million compared to $833,000 for the second
quarter of 1999. The second quarter of 2000 marks the first quarter that the
company earned more than $1 million in a single quarter. The improved operating
results are attributable to loan growth of $30.3 million when compared to
December 31, 1999. This loan growth caused net interest income to increase by
over $1.0 million or 18% when comparing the first six months of 2000 with the
same period in 1999.
NET INTEREST INCOME
For the first six months of 2000 compared to the same period in 1999, the
increase in interest income was $1.9 million or 20% and interest expense
increased $843,000 or 22%. Net interest income improved over $1 million or 18%
comparing the six month periods. The increase in interest income resulted from
an increase in average earning assets of approximately $40 million, while
average interest-bearing liabilities increased $28 million. The Company's net
interest margin increased approximately 13 basis points from 5.27% at June 30,
1999 to 5.40% at June 30, 2000.
OTHER INCOME AND EXPENSE
Other income for the first six months of 2000 increased $145,000 or 13% compared
to the first six months of 1999. Service charges on deposit accounts increased
$123,000 or 19% during 2000 compared to the first six months of 1999. This
increase was due primarily to increased income from non-sufficient funds
charges. Miscellaneous other income also increased by $22,000 or 5%.
Miscellaneous other income includes residential mortgage loan origination fees
as well as other fees, gains and losses.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
Other expense increased $539,000 or 14% in the first two quarters of 2000
compared to the same period in 1999. Salaries and employee benefits increased
$392,000, an 18% increase over the first six months of 1999. The increase was
primarily due to additional staffing requirements in the operations and lending
departments in the Bank. The Bank increased its full time equivalent employee
count from 105 in June of 1999 to 115 in June of 2000. The increase is also
attributable to higher pay rates for employees due to annual raises and
increased profit sharing accruals due to higher earnings.
Occupancy and other operating expenses increased $147,000 or 9% from 1999 to
2000. Increased depreciation expense attributable to operations and retail
delivery equipment and software purchases accounted for $72,000 of the increase.
These fixed assets purchases were placed in service in late 1999 in preparation
for year 2000 compliance. In addition, the Bank purchased retail delivery tools
such as a new accounts platform, temporary facilities for the Bank's anticipated
"Mirror Lake" branch, and additional ATM sites in the Bank's market area to
increase the Bank's retail presence in its growing market.
INCOME TAXES
Income tax expense for the first six months was $1.1 million in 2000 compared to
$915,000 in 1999. The effective tax rates for each of the periods ended March
31, 2000 and 1999 were 35% and 36%, respectively.
PROVISION AND ALLOWANCE FOR POSSIBLE LOAN LOSSES
The adequacy of the allowance for loan losses is determined through management's
informed judgment concerning the amount of risk inherent in the Company's loan
portfolios. This judgment is based on such factors as the change in levels of
non-performing and past due loans, historical loan loss experience, borrowers'
financial condition, concentration of loans to specific borrowers and
industries, estimated values of underlying collateral, and current and
prospective economic conditions. The allowance for loan losses at June 30, 2000
was $2.52 million or 1.17% of total loans compared to $2.28 million or 1.24% of
total loans at December 31, 1999. Management believes that the allowance for
loan losses is adequate to absorb possible loss in the loan portfolio.
NON-PERFORMING ASSETS AND PAST DUE LOANS
Non-performing assets, comprised of real estate owned, non-accrual loans and
loans for which payments are more than 90 days past due, totaled $861,000 at
June 30, 2000 compared to $505,000 at June 30, 1999. Non-performing assets as a
percentage of total loans and real estate owned at June 30, 2000 and June 30,
1999 were 0.4% and .3%, respectively.
The Company has a loan review function that continually monitors selected
accruing loans for which general economic conditions or changes within a
particular industry could cause the borrowers financial difficulties. The loan
review function also identifies loans with high degrees of credit or other
risks. The focus of loan review as well as management is to maintain a low level
of non-performing assets and return current non-performing assets to earning
status. Management is unaware of any known trends, events or uncertainties that
will have or that are reasonably likely to have a material effect on liquidity,
capital resources or operations.
11
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION, CONTINUED
FINANCIAL CONDITION
OVERVIEW
Total assets were $276 million at June 30, 2000, an increase of $21.7 million or
8.6% from December 31, 1999, which equates to an annual growth rate of almost
17%.
ASSETS AND FUNDING
At June 30, 2000 earning assets totaled $258 million, an increase of more than
$25 million from December 31, 1999. The mix of interest earning assets has
changed slightly since the beginning of 2000. Loans increased to 83% and
investment securities decreased to 17% of earning assets at June 30, 2000
compared to loans of 79% and investments of 21% of earning assets at December
31, 1999.
At June 30, 2000, interest-bearing liabilities increased $18.8 million compared
to December 1999. Non-interest-bearing deposits increased $908,000 in the first
six months of 2000 and totaled $31.3 million at June 30, 2000. Federal Home Loan
Bank advances increased $5 million in the first half of 2000 and totaled $20
million at June 30, 2000. In addition, the Bank had purchased $6.2 million of
federal funds, which it intends to convert to additional Federal Home Loan Bank
advances in the third quarter of 2000. At June 30, 2000, deposits represented
88% of interest-bearing liabilities, federal funds purchased represented 3% and
Federal Home Loan Bank advances represented 9%.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $2.9 million for the six
months ended June 30, 2000. Net cash used by investing activities totaling $30.6
million consisted primarily of a $30.5 million increase in loans outstanding.
The loans were funded by an $8.5 increase in deposits, a $5.0 million increase
in Federal Home Loan Bank advances and a $6.2 million increase in federal funds
sold. The remainder of the funding was from cash generated in previous periods.
The decrease in cash and cash equivalents for the year to date June 30, 2000 was
$8.9 million.
Total stockholders' equity at June 30, 2000 was 8.40% of total assets compared
to 8.65% at December 31, 1999. The decrease in the capital percentage is
attributed to a $22 million increase in total assets since December 31, 1999.
Nearly all of the asset growth was in loans.
At June 30, 2000, WGNB Corp. was in compliance with various regulatory capital
requirements administered by federal and state banking agencies. The following
is a table representing WGNB Corp.'s consolidated Tier-1, tangible capital, and
risk-based capital.
<TABLE>
<CAPTION>
JUNE 30, 2000
----------------------------------------------------------
ACTUAL REQUIRED EXCESS
AMOUNT % AMOUNT % AMOUNT %
-------- ----- -------- ---- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-
weighted assets) $ 26,715 12.57% $17,000 8.00% $ 9,715 4.57%
Tier 1 capital (to risk-
weighted assets) 24,192 11.38% 8,500 4.00% 15,692 7.38%
Tier 1 capital (to average
assets) 24,192 9.28% 10,421 4.00% 13,771 5.28%
</TABLE>
12
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material, pending legal proceedings to which the Company
or any of its subsidiaries is a party or of which any of their property is the
subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) Not Applicable.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this Report:
3.1 Amended and Restated Articles of Incorporation (Incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form 10-SB filed June 14, 2000 (the "Form 10-SB").
3.2 Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2
to the Form 10-SB).
4.1 See exhibits 3.1 and 3.2 for provisions of Company's Articles of
Incorporation and Bylaws Defining the Rights of Shareholders.
4.2 Specimen certificate representing shares of Common Stock (Incorporated
by reference to Exhibit 4.2 to the Form 10-SB).
4.3 Rights Agreement dated as of February 12, 1997 between the Company and
SunTrust Bank, Atlanta (Incorporated by reference to Exhibit 4.3 to the
Form 10-SB).
27 Financial Data Schedule (for SEC use only)
13
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(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended June 30,
2000.
14
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: August 14, 2000
WGNB CORP.
By: /s/ L. Leighton Alston
-----------------------
L. Leighton Alston
President and CEO
By: /s/ Steven J. Haack
-----------------------
Steven J. Haack
Treasurer
Principal Financial Officer
15
