<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10Q
[X] Quarterly Report Under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 30, 1997
or
[ ] 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: 2-75364
----------
Century South Banks, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1455591
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 Main Street West, P O Box 1000, Dahlonega, Georgia 30533
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(706) 864-1111
----------------------------------------------------
(Registrant's telephone number, including area code)
455 Jesse Jewell Parkway, P.O. Box 3366, Gainesville, Georgia 30501
-------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF JULY 31, 1997
- --------------------------------------------------------------------------
Common stock, $1.00 par value 7,767,459
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
Form 10Q
INDEX
Page No.
--------
Part I. Financial Information
---------------------
Item 1. Financial Statements
Consolidated Balance Sheets.............................. 3
Consolidated Statements of Income........................ 4
Condensed Consolidated Statements of Cash Flows.......... 5
Notes to Consolidated Financial Statements............... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9
Part II. Other Information
-----------------
Item 4. Matters Submitted to a Vote of Security Holders.......... 18
Item 6. Exhibits and Report on Form 8-K.......................... 18
Signatures............................................................ 19
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------------
(amounts in thousands, except
share data)
<S> <C> <C>
Assets
- ------
Cash and due from banks $ 35,185 34,626
Federal funds sold 31,260 38,730
Interest-earning deposits in other banks 59 677
Investment securities:
Available for sale 100,778 104,296
Held to maturity 40,845 42,474
Loans, net of unearned income 524,248 509,412
Less allowance for loan losses 11,395 7,565
-------- -------
Loans, net 512,853 501,847
-------- -------
Premises and equipment, net 18,324 18,311
Goodwill and other intangibles, net 6,347 6,712
Other assets 13,804 13,422
-------- -------
Total assets $759,455 761,095
======== =======
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
Deposits:
Noninterest-bearing demand deposits $ 83,847 75,706
Interest-bearing deposits 586,330 594,567
-------- -------
Total deposits 670,177 670,273
Federal funds purchased - 1,000
Federal Home Loan Bank advances 6,931 6,982
Long-term debt 152 241
Accrued expenses and other liabilities 6,947 7,158
-------- -------
Total liabilities 684,207 685,654
-------- -------
Shareholders' Equity:
Common Stock-$1 par value. Authorized
15,000,000 shares: issued 7,826,358 shares
and outstanding 7,767,459 and 7,761,624
shares at June 30, 1997 and December 31,
1996, respectively 7,826 7,826
Additional paid-in capital 28,855 28,780
Retained earnings 38,961 39,384
Reduction for ESOP loan guarantee (51) (137)
Common stock in treasury (58,899 and 64,734
shares at June 30, 1997 and December 31,
1996, respectively), at cost (306) (337)
Net unrealized loss on investment securities (37) (75)
-------- -------
Total shareholders' equity 75,248 75,441
-------- -------
Total liabilities and shareholders' equity $759,455 761,095
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---------------------------------------------------
(amounts in thousands, except
per share data)
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 13,430 13,065 26,590 25,709
Federal funds sold 380 330 764 875
Interest on deposits in other banks 12 7 21 14
Investment securities:
Taxable 1,652 1,792 3,256 3,392
Nontaxable 598 647 1,209 1,330
-------- ------- ------- -------
Total interest income 16,072 15,841 31,840 31,320
-------- ------- ------- -------
Interest expense:
Deposits 7,276 7,020 14,515 14,378
Federal funds purchased 13 - 15 -
Federal Home Loan Bank advances 100 117 211 247
Long-term debt and other borrowings 5 6 13 54
-------- ------- ------- -------
Total interest expense 7,394 7,143 14,754 14,679
-------- ------- ------- -------
Net interest income 8,678 8,698 17,086 16,641
Provision for loan losses 4,112 469 4,669 870
-------- ------- ------- -------
Net interest income after
provision for loan losses 4,566 8,229 12,417 15,771
-------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts 1,014 977 2,022 1,913
Securities gains (losses), net 5 179 4 216
Other operating income 625 579 1,215 1,372
-------- ------- ------- -------
Total noninterest income 1,644 1,735 3,241 3,501
-------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits 3,622 3,155 7,132 6,250
Net occupancy and equipment expense 1,143 787 2,050 1,606
Other operating expenses 2,688 2,226 4,997 4,448
-------- ------- ------- -------
Total noninterest expense 7,453 6,168 14,179 12,304
-------- ------- ------- -------
Income (loss) before income taxes (1,243) 3,796 1,479 6,968
Income tax expense (benefit) (501) 1,178 299 2,157
-------- ------- ------- -------
Net income (loss) $ (742) 2,618 1,180 4,811
======== ======= ======= =======
Net income (loss) per common share and
common share equivalent $(0.10) 0.34 0.15 0.62
======== ======= ======= =======
Cash dividends declared per share $0.10375 0.09875 0.20625 0.19625
======== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1997 1996
---------------------------------
(amounts in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 6,372 4,889
-------- -------
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale 2,270 1,190
Principal collections and maturities of investment securities:
Available for sale 14,587 18,402
Held to maturity 3,478 8,495
Proceeds from maturities of interest-earning deposits 10,679 1,960
Purchases of investment securities held to maturity (1,785) (66)
Purchases of investment securities available for sale (13,297) (39,532)
Investment in interest-earning deposits (10,061) (2,086)
Net increase in loans (15,848) (3,597)
Proceeds from sales of real estate acquired through foreclosure 482 115
Purchases of premises and equipment (1,058) (1,432)
Proceeds from sale of premises and equipment 2 12
-------- -------
Net cash used in investing activities (10,551) (16,539)
-------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits (96) 788
Net decrease in federal funds purchased (1,000) -
Net decrease in other short-term borrowings - (51)
Proceeds from issuance of long-term debt 2,011 -
Payments on long-term debt and Federal Home Loan
Bank advances (2,065) (4,258)
Dividends paid to shareholders (1,582) (1,504)
-------- -------
Net cash used in financing activities (2,732) (5,025)
-------- -------
Net decrease in cash and cash equivalents (6,911) (16,675)
Cash and cash equivalents at beginning of period 73,356 60,440
-------- -------
Cash and cash equivalents at end of period $ 66,445 43,765
======== =======
Supplemental disclosure of cash paid during the period for:
Interest $ 15,101 15,781
======== =======
Income taxes $ 2,071 2,236
======== =======
Supplemental schedule of noncash investing and financing
activities:
Real estate acquired through foreclosure $ 1,153 1,016
======== =======
Real estate sold and financed by the Company $ 980 748
======== =======
Net reduction in guaranteed ESOP loan recorded in
shareholders' equity $ 86 24
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) Basis of Presentation
---------------------
The unaudited consolidated financial statements include the accounts of
Century South Banks, Inc. ("the Company") and its wholly owned subsidiaries,
Bank of Dahlonega ("BOD"), The Bank of Ellijay ("BOE"), First Bank of Polk
County ("FBPC"), Georgia First Bank ("GFB"), First National Bank of Union County
("FNBUC"), Fannin County Bank, N.A. ("FCB"), Gwinnett National Bank ("GNB"),
First Community Bank of Dawsonville ("FCBD"), Peoples Bank ("PBL") and Bank of
Danielsville ("DAN").
These accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do not
include all information and notes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments consisting of normal recurring
accruals which, in the opinion of management, are necessary for a fair
presentation of the financial position and results of operations for the periods
covered by this report have been included.
(2) Statement No. 125 "Accounting for Transfers and Servicing of Financial
----------------------------------------------------------------------
Assets and Extinguishments of Liabilities"
------------------------------------------
In June 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125, "Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities" (Statement
125). Statement 125 provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities based on
consistent application of a financial-components approach that focuses on
control. It distinguishes transfers of financial assets that are sales from
transfers that are secured borrowings.
Under the financial-components approach, after a transfer of financial assets,
an entity recognizes all financial and servicing assets it controls and
liabilities it has incurred and derecognizes financial assets it no longer
controls and liabilities that have been extinguished. The financial-components
approach focuses on the assets and liabilities that exist after the transfer.
Many of these assets and liabilities are components of financial assets that
existed prior to the transfer. If a transfer does not meet the criteria for a
sale, the transfer is accounted for as a secured borrowing with pledge of
collateral.
Effective January 1, 1997, the Company adopted Statement 125 for reporting
transfers and servicing of financial assets and extinguishments of liabilities
occurring after December 31, 1996. Statement 125 did not have a material impact
on the Company's financial statements.
6
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(3) Statement No. 128 "Earnings Per Share"
--------------------------------------
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" (Statement 128). Statement 128 supersedes
Accounting Principles Board Opinion No. 15 "Earnings Per Share" and specifies
the computation, presentation, and disclosure requirements for earnings per
share (EPS) for entities with publicly held common stock or potential common
stock. Statement 128 replaces the presentation of primary EPS with a
presentation of basic EPS and fully diluted EPS with diluted EPS. It also
requires dual presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Statement 128 is
effective for financial statements for both interim and annual periods ending
after December 15, 1997. The expected impact on the Company's financial
statements of the provisions of Statement 128 is not expected to be material.
(4) Statement No. 129 "Disclosure of Information about Capital Structure"
---------------------------------------------------------------------
In February 1997, the FASB issued Statement of Financial Accounting Standards
No. 129, "Disclosures of Information about Capital Structure" (Statement 129).
Statement 129 is effective for financial statements for periods ending after
December 15, 1997. The Company does not expect that Statement 129 will require
significant revision of prior disclosures since the statement lists required
disclosures that have been included in a number of previously existing separate
statements or opinions.
(5) Long-Term Debt and Short-Term Borrowings
----------------------------------------
On January 29, 1997, the Company renewed a $1,500,000 unsecured revolving line
of credit with a bank which is payable on demand and matures on January 28,
1998. Interest is due on the line of credit quarterly. The revolving line of
credit accrues interest at the Prime Lending Rate minus one percent (1%) as
defined in the agreement. The line of credit is secured by 100% of the
outstanding common stock of one of the Company's affiliates (GNB). As of
June 30, 1997, there is no outstanding balance.
Eight of the Company's subsidiaries have invested in Federal Home Loan Bank
stock for the purpose of establishing credit lines with the Federal Home Loan
Bank. One of these subsidiaries drew $2,000,000 and made payments of $2,050,350
in the first six months of 1997 making the total advances under these lines
approximately $7.0 million. The $2.0 million matures on August 19, 1997 and
bears interest at the rate of 5.85%, payable monthly.
7
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Another subsidiary has drawn $4.0 million with $2.0 million maturing on December
28, 1998 and $2.0 million maturing on January 13, 1999 with interest, payable
monthly, based on the current LIBOR rate. The remaining $1.0 million matures on
September 1, 2006 and bears interest at the rate of 7.74% with principal and
interest due monthly. The purpose of these advances was to replace short-term
deposits with longer term funds. In addition to these advances, the eight
subsidiaries have additional credit available on their credit lines with the
Federal Home Loan Bank. All lines with the Federal Home Loan Bank are secured
by a blanket lien on certain real estate loans of each of the respective
subsidiaries.
(6) Pending Acquisition
-------------------
On March 17, 1997, the Company and Bank Corporation of Georgia ("BCG"),
headquartered in Macon, Georgia signed a statement of intent to merge the two
holding companies. On March 31, 1997, the Agreement and Plan of Merger was
signed and on July 11, 1997, the Agreement and Plan of Merger was amended.
Under the proposed merger, BCG shareholders will receive 1.35 shares of Century
South Banks, Inc. common stock for each share of BCG common stock. The merger
is subject to the approval of BCG shareholders and certain regulatory
authorities. Federal Reserve Board and Georgia Department of Banking and
Finance approvals have been received. Upon consummation of the merger, which is
scheduled for early fourth quarter 1997, Century South Banks, Inc. will have
assets of over $1 billion. The combined operation will maintain dual
headquarters in Dahlonega and Macon.
(7) Derivatives Disclosures
-----------------------
In January 1997, the Securities and Exchange Commission approved rule amendments
(the Release) regarding disclosures about derivative financial instruments,
other financial instruments and derivative commodity instruments. The Release
requires inclusion in the footnotes to the financial statements of extensive
detail about the accounting policies followed by a registrant in connection with
its accounting for derivative financial instruments and derivative commodity
instruments. The accounting policy requirements become effective for all
registrants for filings that include financial statements for periods ending
after June 15, 1997. The Company does not presently have any derivative
financial instruments or derivative commodity instruments as defined in the
Release.
8
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
-------
The following is a discussion of the Company's financial condition at June 30,
1997, compared to December 31, 1996, and results of operations for the three and
six month periods ended June 30, 1997, compared to the three and six month
periods ended June 30, 1996. This discussion should be read in conjunction with
the Company's unaudited consolidated financial statements and accompanying notes
appearing elsewhere in this report.
FINANCIAL CONDITION
-------------------
During the first six months of 1997, total assets decreased $1.6 million or
approximately 0.2%. However, net loans grew $11.0 million or 2.2% during the
first six months of 1997 and were funded primarily by a decrease in federal
funds sold of $7.5 million.
The amortized cost, gross unrealized gains and losses, and estimated fair value
of available for sale and held to maturity securities by type at June 30, 1997
were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(amounts in thousands) cost gains losses fair value
- -------------------------------------------------------------------------------------------------
Available for sale:
<S> <C> <C> <C> <C>
U.S. Treasury and U.S.
Government agencies $ 59,261 134 (261) 59,134
State, county and
municipal securities 13,065 321 (39) 13,347
Mortgage-backed securities 20,291 216 (108) 20,399
Other debt securities 4,492 14 (51) 4,455
Equity securities 3,404 110 (71) 3,443
--------------------------------------------------------------
$100,513 795 (530) 100,778
--------------------------------------------------------------
Held to maturity:
U.S. Government agencies $ 8,058 119 (32) 8,145
State, county and
municipal securities 28,744 752 (146) 29,350
Mortgage-backed securities 1,891 27 (11) 1,907
Other debt securities 2,152 39 - 2,191
--------------------------------------------------------------
$ 40,845 937 (189) 41,593
--------------------------------------------------------------
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Balances within the major deposit categories as of June 30, 1997 and
December 31, 1996 are shown below:
<TABLE>
<CAPTION>
(amounts in millions)
June 30, December 31,
1997 1996
---------------- ----------------
<S> <C> <C>
Noninterest-bearing demand deposits $ 83.8 75.7
Interest-bearing demand deposits 108.9 118.0
Money market accounts 25.6 23.7
Savings deposits 63.6 61.9
Certificates of deposit and
individual retirement accounts
of $100,000 or more 99.7 98.1
Other individual retirement accounts 41.5 40.5
Other certificates of deposit 247.1 252.4
------ -----
$670.2 670.3
====== =====
</TABLE>
LIQUIDITY AND INTEREST RATE SENSITIVITY
---------------------------------------
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest earning assets
and interest-bearing liabilities. Liquidity management involves the matching of
the cash flow requirements of customers, either depositors withdrawing funds or
borrowers needing loans, and the ability of the Company to meet those
requirements. Management monitors and maintains appropriate levels of assets
and liabilities so that maturities of assets are such that adequate funds are
provided to meet estimated customer withdrawals and loan requests.
The Company's liquidity position depends primarily upon the liquidity of its
assets relative to its need to respond to short-term demand for funds caused by
withdrawals from deposit accounts and loan funding commitments. Primary sources
of liquidity are scheduled payments on the Company's loans and interest on and
maturities of its investments. Occasionally, the Company will sell investment
securities available for sale in connection with the management of its income
tax position, its liquidity position, and its interest sensitivity gap. The
Company may also utilize its cash and due from banks, interest-earning deposits
in other banks, and federal funds sold to meet liquidity requirements as needed.
At June 30, 1997, the Company's cash and due from banks was $35.2 million, its
federal funds sold were $31.3 million, its interest-earning deposits in other
banks were $0.06 million, and its investment securities designated as available
for sale were $100.8 million. All of the above could be converted to cash on
relatively short notice.
The Company also has the ability, on a short-term basis, to purchase federal
funds from other financial institutions. Presently, the Company has made
arrangements with commercial banks for short-term unsecured advances of up to
approximately $39.9 million, in addition to credit which is available in the
form of Federal Home Loan Bank advances.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The relative interest rate sensitivity of the Company's assets and liabilities
indicates the extent to which the Company's net interest income may be affected
by interest rate movements. The Company's ability to reprice assets and
liabilities in the same dollar amounts and at the same time minimizes interest
rate risks. One method of measuring the impact of interest rate changes on net
interest income is to measure, in a number of time frames, the interest
sensitivity gap, by subtracting interest-sensitive liabilities from interest-
sensitive assets, as reflected in the following table. Such interest
sensitivity gap represents the risk, or opportunity, in repricing. If more
assets than liabilities are repriced at a given time in a rising rate
environment, net interest income improves; in a declining rate environment, net
interest income deteriorates. Conversely, if more liabilities than assets are
repriced while interest rates are rising, net interest income deteriorates; if
interest rates are falling, net interest income improves.
The Company's strategy in minimizing interest rate risk is to minimize the
impact of short term interest rate movements on its net interest income while
managing its middle and long-term interest sensitivity gap in light of overall
economic trends in interest rates. The following table illustrates the relative
sensitivity of the Company to changing interest rates as of June 30, 1997.
<TABLE>
<CAPTION>
0-90 days 91-365 days 1-5 years Over 5 years
Current Current Cumulative Current Cumulative Current Cumulative
-------------------------------------------------------------------------
(amounts in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Interest-sensitive assets $250,460 156,378 406,838 255,314 662,152 35,711 697,863
Interest-sensitive
liabilities 282,007 207,387 489,394 103,899 593,293 97 593,390
-------- ------- ------- ------- ------- ------ -------
Interest-sensitivity gap $(31,547) (51,009) (82,556) 151,415 68,859 35,614 104,473
======== ======= ======= ======= ======= ====== =======
Ratio of interest-sensitive
assets to interest-
sensitive liabilities 0.89 0.75 0.83 2.46 1.12 368.15 1.18
======== ======= ======= ======= ======= ====== =======
</TABLE>
RESULTS OF OPERATIONS
---------------------
Net Interest Income
- -------------------
Net interest income is an effective measurement of how well management has
balanced the Company's interest rate sensitive assets and liabilities. The
Company's net interest income is its principal source of income. Interest-
earning assets for the Company include loans, federal funds sold, interest-
earning deposits in other banks, and investment securities. The Company's
interest-bearing liabilities include its deposits, federal funds purchased,
Federal Home Loan Bank advances, other short-term borrowings, and long-term
debt.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net interest income for the three months ended June 30, 1997 decreased $20,000
or 0.23% below the same period of 1996. For the six months ended June 30, 1997,
net interest income was $17,086,000 representing an increase of $445,000 or
2.67% as compared to the six months ended June 30, 1996. The average yield
earned on interest-earning assets, on a fully tax equivalent basis, decreased to
9.41% for the six months ended June 30, 1997 from 9.64% for the six months ended
June 30, 1996 and the average rate paid on interest-bearing liabilities
decreased to 5.01% for the six months ended June 30, 1997 from 5.18% for the six
months ended June 30, 1996. The Company's interest rate differential decreased
to 4.40% from 4.46% and its net interest margin (net interest income divided by
average interest-earning assets) decreased to 5.11% for the first six months of
1997 from 5.18% for the same period of 1996.
Allowance for Loan Losses
- -------------------------
The Company provides for loan losses on a monthly basis based upon information
available at the end of each period. By such additions, management maintains
the allowance for loan losses at a level adequate to provide for losses that can
be reasonably anticipated. The level of the allowance for loan losses is based
on, among other things, management's periodic loan-by-loan evaluation of
potential losses, as well as its assessment of prevailing and anticipated
economic conditions in its market areas. Reviews are conducted throughout the
year by senior officers of the Company and by unrelated third parties. In the
second quarter of 1997, the Company recorded approximately $3.7 million in
additional loan loss provisions to reflect both the results of an in-depth study
of the loan portfolios at two subsidiary banks where recent management changes
have occurred and a revision of the estimation process used by the Company.
A substantial portion of the Company's loan portfolio is secured by real estate
in markets in northern Georgia, southeastern Tennessee, and southwestern North
Carolina. To some extent the ultimate collectibility of a substantial portion
of the Company's loan portfolio is dependent on or susceptible to changes in
market conditions in these markets.
The allowance for loan losses approximated 2.17% of outstanding loans at
June 30, 1997 as compared to 1.49% at December 31, 1996 and 1.59% at June 30,
1996. The allowance increased to $11,395,000 at June 30, 1997 from $7,565,000 at
December 31, 1996 and $7,605,000 at June 30, 1996. The provision for loan losses
increased to $4,669,000 for the six months ended June 30, 1997 from $870,000 for
the six months ended June 30, 1996. This increase in the provision for loan
losses was primarily due to the recording of the additional provisions, as
discussed above. Net loan charge offs for the six months ended June 30, 1997
were $839,000 as compared to $313,000 for the six months ended June 30, 1996.
Net loans charged off as a percentage of average loans was 0.33% for the six
months ended June 30, 1997 as compared to 0.13% for the six months ended June
30, 1996.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Nonperforming Loans, Nonperforming Assets, and Underperforming Loans
- --------------------------------------------------------------------
Nonperforming loans include nonaccrual loans. The Company has not restructured
any loans of significance through June 30, 1997. Nonperforming assets include
nonperforming loans, real estate acquired through foreclosure, securities which
are in default, and other repossessed assets. Underperforming loans consist of
loans which are past due with respect to principal or interest more than 90 days
and still accruing interest.
Accrual of interest on loans is discontinued when reasonable doubt exists as to
the full, timely collection of interest or principal or they become
contractually in default for 90 days or more as to either interest or principal
unless they are both well secured and in the process of collection. When a loan
is placed on nonaccrual status, previously accrued and uncollected interest for
the year in which the loan is placed on nonaccrual status is charged to interest
income on loans unless management believes the accrued interest is recoverable
through the liquidation of collateral.
Management is not aware of any loans classified for regulatory purposes as loss,
doubtful, substandard, or special mention that have not been disclosed below
which 1) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity,
or capital resources, or 2) 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.
The table on the following page provides information concerning nonperforming
loans, nonperforming assets, underperforming loans and certain asset quality
ratios at June 30, 1997 and December 31, 1996.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
--------- -------------
(amounts in thousands,
except
ratios and percentages)
<S> <C> <C>
Nonperforming loans $3,275 2,888
Real estate acquired through
foreclosure and other
repossessed assets 2,198 2,647
------ -----
Nonperforming assets $5,473 5,535
====== =====
Underperforming loans $2,028 1,572
====== =====
Asset Quality Ratios:
Nonperforming loans to total loans,
net of unearned income 0.62% 0.57%
====== =====
Nonperforming assets to total loans,
net of unearned income, real estate
acquired through foreclosure, and
other repossessed assets 1.04% 1.08%
====== =====
Allowance for possible loan losses
to nonperforming loans 3.48x 2.62x
====== =====
Underperforming loans to total loans,
net of unearned income 0.39% 0.31%
====== =====
Nonperforming loans to total assets 0.43% 0.38%
====== =====
Nonperforming assets to total assets 0.72% 0.73%
====== =====
</TABLE>
The Company's management provides for possible loan losses through a charge to
earnings to bring the allowance to a level which in management's judgement is
considered adequate to absorb potential losses inherent in the loan portfolio. A
substantial portion of the allowance is general in nature and is available for
the portfolio in its entirety.
Noninterest Income
- ------------------
Noninterest income for the second quarter of 1997 decreased $91,000 or 5.2% as
compared to the same period of 1996. This decrease was primarily the result of
a decrease in net securities gains (losses) of $174,000, which was offset by an
increase in service charges on deposit accounts of $37,000, an increase in
credit card fees of $21,000, and an increase in fees associated with the
Internal Revenue Service Rapid Refund program of $28,000. For the first six
months of 1997, noninterest income decreased $260,000 or 7.4%. This decrease
was primarily attributable to the inclusion of a $224,000 gain recorded in the
first quarter of 1996 relating to the sale of the mortgage servicing portfolio
and also a decrease in net securities gains (losses) of $212,000. The decrease
was partially offset by an increase in service charges on deposit accounts of
$109,000 and an increase in credit card fees of $56,000.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Noninterest Expense
- -------------------
The $1,285,000 or 20.8% increase in noninterest expense for the second quarter
of 1997 as compared to the second quarter of 1996 was primarily due to an
increase in salary and benefit expense of $467,000, an increase in net occupancy
and equipment expense of $356,000, and an increase in net foreclosed asset
related expenses of $179,000. The first six months of 1997 as compared to the
same period of 1996 resulted in an increase of $1,875,000 or 15.2%. This
increase was primarily due to an increase in salary and benefit expense of
$882,000, an increase in net occupancy and equipment expense of $444,000, and an
increase in net foreclosed asset related expenses of $135,000. Also, increases
were noted in computer fees and fees associated with the credit card program of
$115,000 and $88,000, respectively.
Income Tax Expense
- ------------------
The second quarter 1997 income tax benefit was approximately $501,000, or an
effective rate of 40.3%, as compared to approximately $1,178,000 of income tax
expense for the second quarter 1996, or an effective rate of 31.0%. During the
first six months of 1997 income tax expense was approximately $299,000, or an
effective rate of 20.2%, compared to approximately $2,157,000, or an effective
rate of 31.0% for the same period in 1996.
Net Income
- ----------
The Company's second quarter 1997 net loss was $0.10 per share or $742,000 as
compared to net earnings of $0.34 or $2,618,000 for the second quarter of 1996.
Earnings for the six months ended June 30, 1997 were $1,180,000 down 75.5% from
$4,811,000 for the comparable period in 1996. Earnings per share for the six
months ended June 30, 1997 were $0.15 per share as compared to $0.62 per share
for the corresponding period ended June 30, 1996. These decreases in net income
are a result of special charges taken in the second quarter of 1997. These
special charges totaled $2,725,000 net of related taxes. Before these charges,
second quarter net income was $1,983,000 or $0.25 per share. The special
charges consisted of additions to the loan loss provision as previously
discussed, write-offs of equipment that was determined to be obsolete, and
buyouts of various vendor contracts and leases.
Performance Ratios
- ------------------
Performance of banks is often measured by various ratio analyses. Two widely
recognized performance indicators are return on average equity and return on
average assets. The return on average equity for the six months ended June 30,
1997 was 3.12% (annualized) as compared to 13.74% (annualized) for the six
months ended June 30, 1996. The Company's return on average assets was 0.32%
(annualized) and 1.36% (annualized) for the six month periods ended June 30,
1997 and 1996, respectively. These ratios reflect the special charges taken in
the second quarter of 1997.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Capital Resources
- -----------------
The Company is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory, and possibly additional discretionary actions by
regulators that, if undertaken, could have a direct material effect on the
Company's consolidated financial statements. Under capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of assets,
liabilities, and certain off-balance sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company on a consolidated basis, and the Parent company and
subsidiary banks individually, to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier 1 capital, (as defined in the
regulations), to risk-weighted assets (as defined) and of Tier 1 capital to
average assets. Management believes, as of June 30, 1997 that the Company meets
all capital adequacy requirements to which it is subject.
The Company's actual capital amounts and ratios are presented below on a
consolidated basis:
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
-----------------------------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1997:
Total Capital
(to Risk Weighted Assets): $75,704 14.8% (Equal to $40,918 (Equal to 8.0% (Equal to $51,147 (Equal to 10.0%
or greater or greater or greater or greater
than) than) than) than)
Tier 1 Capital
(to Risk Weighted Assets): $69,249 13.5% (Equal to $20,459 (Equal to 4.0% (Equal to $30,688 (Equal to 6.0%
or greater or greater or greater or greater
than) than) than) than)
Tier 1 Capital
(to Average Assets): $69,249 9.2% (Equal to $30,124 (Equal to 4.0% (Equal to $37,656 (Equal to 5.0%
or greater or greater or greater or greater
than) than) than) than)
As of June 30, 1996:
Total Capital
(to Risk Weighted Assets): $71,439 15.5% (Equal to $36,826 (Equal to 8.0% (Equal to $46,033 (Equal to 10.0%
or greater or greater or greater or greater
than) than) than) than)
Tier 1 Capital
(to Risk Weighted Assets): $65,662 14.3% (Equal to $18,413 (Equal to 4.0% (Equal to $27,620 (Equal to 6.0%
or greater or greater or greater or greater
than) than) than) than)
Tier 1 Capital
(to Average Assets): $65,662 9.2% (Equal to $28,523 (Equal to 4.0% (Equal to $35,654 (Equal to 5.0%
or greater or greater or greater or greater
than) than) than) than)
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company continues to maintain a level of capital well in excess of
regulatory requirements and available for supporting future growth. The
Company's level of capital can be measured by its average shareholders' equity
to average assets ratio of 10.16% and its ratio of shareholders' equity to
assets of 9.91% at June 30, 1997.
Inflation
- ---------
Inflation impacts the growth in total assets in the banking industry and causes
a need to increase equity capital at higher than normal rates to meet capital
adequacy requirements. The Company copes with the effects of inflation through
effectively managing its interest rate sensitivity gap position, by periodically
reviewing and adjusting its pricing of services to consider current costs, and
through managing its level of net income relative to its dividend payout policy.
The impact of inflation has been minimal to the Company in recent years.
17
<PAGE>
PART II. OTHER INFORMATION
Item 4. Matters Submitted to a Vote of Security Holders
At the Annual Meeting of Shareholders held on April 23, 1997, the following
directors were elected to hold office for the coming year: Roger W. Bennett,
E.H. Chambers, Jr., William L. Chandler, Clarence B. Denard, James A. Faulkner,
Thomas T. Folger, Jr, Sherman Green, J. Russell Ivie, Dudley K. Owens, William
D. Reeves, C.J. (Jim) Sisson, E. Paul Stringer, Myron B. Turner, Al J. Wimpy,
and George A. Winn. The following individuals were elected as directors
emeritus: J. Marvin Anderson, Glen W. Marshall, Rodney B. McCombs, J.E. Owens,
James H. Sanders, Sr., and Forrest J. Sisk, Sr.
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
The following exhibits are attached:
Exhibit 11 Computation of Per Share Earnings
Exhibit 20 Shareholders' Report
Exhibit 27 Financial Data Schedule
(b) There were no reports filed on Form 8-K for the
quarter ended June 30, 1997.
18
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Century South Banks, Inc.
DATE: August 14, 1997 By: /s/ James A. Faulkner
-------------------- ---------------------
James A. Faulkner
President & CEO
DATE: August 14, 1997 By: /s/ Susan J. Anderson
-------------------- ---------------------
Susan J. Anderson
Senior Vice President, CFO,
and Secretary/Treasurer
19
<PAGE>
EXHIBIT 11
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
Statement re Computation of Per Share Earnings
The following computations set forth the calculations of primary and fully
diluted net income (loss) per common share and common share equivalent for the
three and six month periods ended June 30, 1997 and 1996.
<TABLE>
<CAPTION>
Primary Fully Diluted
Earnings Earnings
Per Share Per Share
--------- -------------
(amounts in thousands,
except per share data)
<S> <C> <C>
For the three months ended June 30, 1997:
Net loss $ (742) (742)
====== =====
Weighted average number of common
shares outstanding 7,767 7,767
Common share equivalents resulting
from stock options 27 27
------ -----
Adjusted weighted average number
of common and common equivalent
shares outstanding 7,794 7,794
====== =====
Net income per common and
common equivalent share $(0.10) (0.10)
====== =====
For the three months ended June 30, 1996:
Net income $2,618 2,618
====== =====
Weighted average number of common
shares outstanding 7,762 7,762
Common share equivalents resulting
from stock options 12 12
------ -----
Adjusted weighted average number
of common and common equivalent
shares outstanding 7,774 7,774
====== =====
Net income per common and
common equivalent share $ 0.34 0.34
====== =====
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Primary Fully Diluted
Earnings Earnings
Per Share Per Share
--------- -------------
(amounts in thousands,
except per share data)
<S> <C> <C>
For the six months ended June 30, 1997:
Net income $1,180 1,180
====== =====
Weighted average number of common
shares outstanding 7,767 7,767
Common share equivalents resulting
from stock options 27 27
------ -----
Adjusted weighted average number
of common and common equivalent
shares outstanding 7,794 7,794
====== =====
Net income per common and
common equivalent share $ 0.15 0.15
====== =====
For the six months ended June 30, 1996:
Net income $4,811 4,811
====== =====
Weighted average number of common
shares outstanding 7,762 7,762
Common share equivalents resulting
from stock options 13 13
------ -----
Adjusted weighted average number
of common and common equivalent
shares outstanding 7,775 7,775
====== =====
Net income per common and
common equivalent share $ 0.62 0.62
====== =====
</TABLE>
<PAGE>
CHIEF EXECUTIVE OFFICER'S MESSAGE
Dear Shareholder:
Second quarter 1997 was an unusual quarter for your Company. We have
taken special charges that resulted in a second quarter loss of $741,735 or
$0.10 per share. These special charges totaled $2,725,000 net of related taxes.
Before these special charges, second quarter net income was $1,983,000 or $0.25
per share.
It is customary in connection with mergers such as the one we will be
entering into with Bank Corporation of Georgia that the parties specifically
review their operations and make business decisions that would not have been
made were it not for the merger. The special charges consisted of an additional
loan loss provision of approximately $3.7 million to reflect both the results of
an in-depth study of the loan portfolios at two subsidiary banks (notably
Gwinnett National Bank) and a revision of the estimation process, write-offs of
equipment that has been determined to be obsolete, and buyout of various vendor
contracts and leases which we deemed advisable. As a result of our increased
provision for loan losses, our allowance for loan losses was 2.17% of total
loans outstanding at June 30, 1997.
We are confident that as a result of these business decisions, your
Company's performance and balance sheet will be much stronger as we go into
1998. The operational efficiencies to be gained as a result of the merger are
expected to enhance the core earnings of the combined companies by at least $1
--
million per year.
- -------
We are pleased to welcome Mr. Terry Evans as President and CEO of
Gwinnett National Bank in Duluth, Georgia. We are confident that, as a result
of Terry's outstanding leadership, Gwinnett National Bank will experience
significant growth in earnings and assets as he brings eight years of banking
experience in the Duluth market to us.
Total assets at June 30, 1997 were approximately $759,455,000
representing a 6.5% increase over the June 30, 1996 assets of $713,186,000. The
Company's nonperforming assets, which include loans placed on nonaccrual status
and foreclosed assets, at June 30, 1997 were $5,473,000 as compared to
$3,228,000 at June 30, 1996, and $5,535,000 at December 31, 1996. Nonperforming
assets as a percentage of loans plus foreclosed assets were 1.04% at June 30,
1997 as compared to 0.67% at June 30, 1996, and 1.08% at December 31, 1996.
Nonperforming loans as a percentage of total loans outstanding, net of unearned
income were 0.62% at June 30, 1997, as compared to 0.25% at June 30, 1996, and
0.57% at December 31, 1996.
We remain very excited about our pending merger with Bank Corporation
of Georgia. All aspects of the merger are moving forward with a scheduled
closing date of early fourth quarter 1997. We have received Federal Reserve
Board and Georgia Department of Banking and Finance approvals of the merger, and
now await other regulatory approvals as well as Bank Corporation of Georgia
shareholder approval.
We appreciate your continued support of your Company and its affiliate
banks in your community. We have, and will continue, to follow our corporate
mission of providing high quality banking services to the communities we serve,
while maximizing the return on our shareholders' investments.
Sincerely,
/s/ James A. Faulkner
-----------------------------
James A. Faulkner
President & CEO
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, June 30,
1997 1996
-------------------------
(amounts in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 35,185 $ 28,155
Federal funds sold 31,260 15,610
Interest-earning deposits in other banks 59 579
Investment securities 141,623 160,796
Loans, net of unearned income 524,248 479,526
Allowance for loan losses (11,395) (7,605)
Premises and equipment, net 18,324 16,537
Other assets 20,151 19,588
Total assets $759,455 $713,186
=========================
LIABILITIES
Noninterest-bearing deposits $ 83,847 $ 74,151
Interest-bearing deposits 586,330 552,942
Other short-term borrowings - 450
Federal Home Loan Bank advances 6,931 7,032
Long-term debt 152 325
Other liabilities 6,947 6,851
Total liabilities 684,207 641,751
-------------------------
SHAREHOLDERS' EQUITY
Common stock 7,826 7,826
Additional paid-in capital 28,855 28,780
Retained earnings 38,961 36,386
Reduction for ESOP loan guarantee (51) (202)
Common stock in treasury, at cost (306) (337)
Net unrealized loss on investment securities (37) (1,018)
-------------------------
Total shareholders' equity 75,248 71,435
-------------------------
Total liabilities and shareholders' equity $759,455 $713,186
=========================
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
------------------------------------------------
<S> <C> <C> <C> <C>
(amounts in thousands, except per share data)
Interest income $ 16,072 $ 15,841 $ 31,840 $ 31,320
Interest expense 7,394 7,143 14,754 14,679
------------------------------------------------
Net interest income 8,678 8,698 17,086 16,641
Provision for loan losses 4,112 469 4,669 870
Noninterest income 1,644 1,735 3,241 3,501
Noninterest expense 7,453 6,168 14,179 12,304
Income tax expense (benefit) (501) 1,178 299 2,157
------------------------------------------------
Net income (loss) $ (742) $ 2,618 $ 1,180 $ 4,811
================================================
Weighted average common shares outstanding
and common share equivalents 7,794 7,774 7,794 7,775
Net income (loss) per share $ (0.10) $ 0.34 $ 0.15 $ 0.62
Dividends declared per share $0.10375 $0.09875 $0.20625 $0.19625
</TABLE>
<PAGE>
CenturySouthbanks
- --------------------------------------------------------------------------------
Inc.
SENIOR OFFICERS
================================================================================
J. Russell Ivie Chairman
James A. Faulkner President & CEO
Susan J. Anderson Senior Vice President/Sec.-Treas. & CFO
Tony E. Collins Senior Vice President & COO
Gary L. Evans Senior Vice President/Asst. Secretary & CCO
Charles A. Langford Senior Investment Officer
DIRECTORS
================================================================================
J.Russell Ivie, Chairman Dudley K. Owens
Roger W. Bennett William D. Reeves
E.H. Chambers, Jr. C.J. (Jim) Sisson
William L. Chandler E. Paul Stringer
Clarence B. Denard Myron B. Turner
James A. Faulkner Al. J. Wimpy
Thomas T. Folger, Jr. George A. Winn
Sherman Green
DIRECTORS EMERITUS
================================================================================
J. Marvin Anderson J.E. Owens
Glen W. Marshall James H. Sanders, Sr.
Rodney B. McCombs Forrest J. Sisk, Sr.
AFFILIATES
================================================================================
Bank of Dahlonega Fannin County Bank, N.A.
60 Main Street West 480 W. First Street
Dahlonega, GA 30533 Blue Ridge, GA 30513
John L. Lewis, President Steve M. Eaton, President
706-864-3314 706-632-2075
The Bank of Ellijay Gwinnett National Bank
Sand and Broad Street 3200 Peachtree Industrial Boulevard
Ellijay, GA 30540 Duluth, GA 30136
C. Paul Nealey, President Terry Evans, President
706-276-3400 770-497-9797
First Bank of Polk County First Community Bank of Dawsonville
40 Ocoee Street 136 Highway 400 South
Copperhill, TN 37317 Dawsonville, GA 30534
David E. Adkisson, President Gary L. Evans, President
423-496-3261 706-216-5050
Georgia First Bank Peoples Bank
455 Jesse Jewell Parkway 13321 Jones Street
Gainesville, GA 30501 Lavonia, GA 30553
Andrew K. Walker, President J. Douglas Cleveland, President
770-535-8000 706-356-8040
First National Bank of Union County Bank of Danielsville
420 Blue Ridge Highway Courthouse Square
Blairsville, GA 30512 Danielsville, GA 30633
Rodney B. McCombs, Interim President L. Banister Sexton, President
706-745-5571 706-795-2121
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
SELECTED BALANCES
========================================================================
<TABLE>
<CAPTION>
AS OF JUNE 30,
1997 1996 PERCENTAGE CHANGE
-----------------------------------------------------
<S> <C> <C> <C>
(amounts in thousands, except per share data)
Loans, net $512,853 $471,921 8.67%
Deposits 670,177 627,093 6.87
Total assets 759,455 713,186 6.49
Shareholders' equity 75,248 71,435 5.34
Net income 1,180 4,811 (75.47)
Book value per share 9.69 9.20 5.33
Net income per share 0.15 0.62 (75.81)
Weighted average common shares outstanding
and common share equivalents 7,794 7,775 0.24
Nonperforming loans 3,275 1,186 176.14
Other real estate and other
nonperforming assets 2,198 2,042 7.64
</TABLE>
FINANCIAL RATIOS
========================================================================
<TABLE>
<S> <C> <C> <C>
Return on average assets 0.32% 1.36% (76.47)%
Return on average shareholders' equity 3.12 13.74 (77.29)
Net interest margin (taxable equivalent) 5.11 5.18 (1.35)
Allowance for loan losses to loans 2.17 1.59 36.48
Nonperforming assets to total assets 0.72 0.45 60.00
</TABLE>
<PAGE>
SHAREHOLDER INFORMATION
========================================================================
STOCK INFORMATION
Century South Banks, Inc. ("CSBI") lists its stock for trading on the
National Association of Securities Dealers Automated Quotations System
("NASDAQ"). The ticker tape symbol is "CSBI". Market price for the quarter
ended June 30, 1997:
<TABLE>
<S> <C>
Three month high.. $20.00
Three month low... $18.00
Closing price..... $18.64
</TABLE>
========================================================================
SHAREHOLDER SERVICES
Shareholders wishing to change the name or address on their stock, to
report lost certificates or to consolidate accounts should contact:
Century South Banks, Inc.
Shareholder Relations
P.O. Box 1000
Dahlonega, Georgia 30533
(706) 864-1111
========================================================================
DIVIDEND REINVESTMENT PLAN/CASH CONTRIBUTIONS
Shareholders wishing to automatically reinvest quarterly dividends
into Century South Banks, Inc. common stock or make voluntary cash contributions
should contact:
Century South Banks, Inc.
Dividend Reinvestment Plan/Cash Contributions
P.O. Box 1000
Dahlonega, Georgia 30533
(706) 864-1111
========================================================================
INVESTOR RELATIONS
Shareholders, analysts, and others seeking financial information on Century
South Banks, Inc. should contact:
James A. Faulkner Susan J. Anderson
President & CEO or Senior Vice President & CFO
(706) 864-3915 (706) 864-3915
<TABLE> <S> <C>
<PAGE>
<S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 35,185
<INT-BEARING-DEPOSITS> 59
<FED-FUNDS-SOLD> 31,260
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 100,778
<INVESTMENTS-CARRYING> 40,845
<INVESTMENTS-MARKET> 41,593
<LOANS> 524,248
<ALLOWANCE> 11,395
<TOTAL-ASSETS> 759,455
<DEPOSITS> 670,177
<SHORT-TERM> 0
<LIABILITIES-OTHER> 6,947
<LONG-TERM> 7,083
0
0
<COMMON> 7,826
<OTHER-SE> 67,422
<TOTAL-LIABILITIES-AND-EQUITY> 759,455
<INTEREST-LOAN> 26,590
<INTEREST-INVEST> 4,465
<INTEREST-OTHER> 785
<INTEREST-TOTAL> 31,840
<INTEREST-DEPOSIT> 14,515
<INTEREST-EXPENSE> 14,754
<INTEREST-INCOME-NET> 17,086
<LOAN-LOSSES> 4,669
<SECURITIES-GAINS> 4
<EXPENSE-OTHER> 14,179
<INCOME-PRETAX> 1,479
<INCOME-PRE-EXTRAORDINARY> 1,479
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,180
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
<YIELD-ACTUAL> 5.11
<LOANS-NON> 5,473
<LOANS-PAST> 2,028
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,565
<CHARGE-OFFS> 982
<RECOVERIES> 143
<ALLOWANCE-CLOSE> 11,395
<ALLOWANCE-DOMESTIC> 11,395
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
