<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, 1998
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)
________________________________________________________________________________
(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, 1998
- -------------------------------------------------------------------------------
Common stock, $1.00 par value 11,015,984
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
Form 10Q
INDEX
<TABLE>
<CAPTION>
Page No.
--------
Part I. Financial Information
---------------------
<S> <C>
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
Item 3. Market Risk Disclosure 17
Part II. Other Information
-----------------
Item 4. Matters Submitted to a Vote of Security Holders 18
Item 6. Exhibits and Reports on Form 8-K 18
Signatures 19
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------------------------------
<S> <C> <C>
(amounts in thousands,
except share data)
Assets
- ------
Cash and due from banks $ 43,869 43,146
Federal funds sold 30,820 33,870
Interest-earning deposits in other banks 17,942 32,465
Investment securities:
Available for sale 117,039 138,592
Held to maturity (fair value: June 30,
1998 - $33,384 and December 31,
1997 - $41,153) 32,476 40,212
Loans, net of unearned income 785,554 758,731
Less allowance for loan losses 12,577 12,339
---------- ---------
Loans, net 772,977 746,392
---------- ---------
Premises and equipment, net 25,016 26,849
Goodwill and other intangibles, net 6,732 7,284
Other assets 22,144 19,558
---------- ---------
Total assets $1,069,015 1,088,368
========== =========
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
Deposits:
Noninterest-bearing demand deposits $ 134,738 129,418
Interest-bearing deposits 803,942 830,918
---------- ---------
Total deposits 938,680 960,336
Federal funds purchased - 160
Other short-term borrowings 450 1,500
Federal Home Loan Bank advances 4,831 6,881
Long-term debt 37 39
Accrued expenses and other liabilities 10,223 10,314
---------- ---------
Total liabilities 954,221 979,230
---------- ---------
Shareholders' Equity:
Common Stock-$1 par value. Authorized
30,000,000 and 15,000,000 shares at
June 30, 1998 and December 31, 1997,
respectively: issued 11,063,071 and
10,924,699 shares at June 30, 1998 and
December 31, 1997, respectively; and
outstanding 11,004,172 and 10,865,800
shares at June 30, 1998 and December 31,
1997, respectively 11,063 10,925
Additional paid-in capital 34,842 34,282
Retained earnings 68,366 63,566
Common stock in treasury (58,899 shares),
at cost (306) (306)
Accumulated other comprehensive income 829 671
---------- ---------
Total shareholders' equity 114,794 109,138
---------- ---------
Total liabilities and shareholders' equity $1,069,015 1,088,368
========== =========
</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,
1998 1997 1998 1997
---------------------------------------------------
<S> <C> <C> <C> <C>
(amounts in thousands, except
per share data)
Interest income:
Loans, including fees $ 20,062 18,535 39,625 36,870
Federal funds sold 558 694 1,149 1,006
Interest on deposits in other banks 192 326 416 533
Investment securities:
Taxable 1,918 2,420 3,970 5,022
Nontaxable 476 598 977 1,209
-------- ------- ------- -------
Total interest income 23,206 22,573 46,137 44,640
-------- ------- ------- -------
Interest expense:
Deposits 9,638 9,995 19,373 19,560
Federal funds purchased 7 13 11 15
Federal Home Loan Bank advances 74 100 144 211
Long-term debt and other borrowings 5 72 35 107
-------- ------- ------- -------
Total interest expense 9,724 10,180 19,563 19,893
-------- ------- ------- -------
Net interest income 13,482 12,393 26,574 24,747
Provision for loan losses 502 4,216 1,009 4,877
-------- ------- ------- -------
Net interest income after
provision for loan losses 12,980 8,177 25,565 19,870
-------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts 1,561 1.402 3,058 2,483
Securities gains, net 19 5 37 161
Other operating income 1,523 1,348 3,511 2,194
-------- ------- ------- -------
Total noninterest income 3,103 2,755 6,606 4,838
-------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits 6,040 5,576 12,009 11,052
Net occupancy and equipment expense 1,477 1,653 2,947 3,039
Other operating expenses 3,070 4,755 6,316 7,540
-------- ------- ------- -------
Total noninterest expense 10,587 11,984 21,272 21,631
-------- ------- ------- -------
Income(loss) before income taxes 5,496 (1,052) 10,899 3,077
Income tax expense (benefit) 1,866 (984) 3,739 279
-------- ------- ------- -------
Net income (loss) $ 3,630 (68) 7,160 2,798
======== ======= ======= =======
Net income (loss) per share:
Basic $ 0.33 (0.01) 0.66 0.26
======== ======= ======= =======
Diluted $ 0.33 (0.01) 0.64 0.25
======== ======= ======= =======
Cash dividends declared per share $0.10875 0.10375 0.21625 0.20625
======== ======= ======= =======
</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,
1998 1997
---------------------------------
(amounts in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 11,712 10,082
-------- -------
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale 37 2,270
Principal collections and maturities of investment securities:
Available for sale 38,202 17,185
Held to maturity 8,029 3,478
Proceeds from maturities of interest-earning deposits 94,797 10,679
Purchases of investment securities held to maturity (200) (1,785)
Purchases of investment securities available for sale (16,431) (29,084)
Investment in interest-earning deposits (80,274) (26,643)
Net increase in loans (31,077) (23,935)
Proceeds from sales of real estate acquired through foreclosure 390 482
Purchases of premises and equipment (1,151) (1,271)
Proceeds from sale of premises and equipment 224 860
-------- -------
Net cash provided by (used in) investing activities 12,546 (47,764)
-------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits (21,656) 10,923
Net decrease in federal funds purchased (160) (1,000)
Net decrease in other short-term borrowings (1,050) -
Proceeds from issuance of long-term debt 1,500 2,011
Payments on long-term debt and Federal Home Loan
Bank advances (3,552) (2,065)
Dividends paid to shareholders (2,366) (1,582)
Proceeds from issuance of common stock 699 75
-------- -------
Net cash provided by (used in) financing activities (26,585) 8,362
-------- -------
Net decrease in cash and cash equivalents (2,327) (29,320)
Cash and cash equivalents at beginning of period 77,016 112,594
-------- -------
Cash and cash equivalents at end of period $ 74,689 83,274
======== =======
Supplemental disclosure of cash paid during the period for:
Interest $ 20,025 20,353
======== =======
Income taxes $ 2,034 2,391
======== =======
Supplemental schedule of noncash investing and financing
activities:
Real estate acquired through foreclosure $ 4,467 1,153
======== =======
Real estate sold and financed by the Company $ 984 980
======== =======
Net reduction in guaranteed ESOP loan recorded in
shareholders' equity $ - 86
======== =======
</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 Parent 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"), Bank of
Danielsville ("DAN"), First South Bank, National Association ("FSB") and
AmeriBank, National Association ("AMB"), (collectively "the Company").
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. 128 "Earnings Per Share"
--------------------------------------
On December 31, 1997, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS
128 supercedes Accounting Principles Board Opinion No. 15, "Earnings Per Share"
and specifies the computation, presentation, and disclosure requirements for
earnings per share (EPS). SFAS 128 replaces the presentation of primary EPS and
fully diluted EPS with a presentation of basic EPS and diluted EPS,
respectively. All prior period EPS data has been restated to conform with the
provisions of SFAS 128.
Basic EPS excludes dilution and is computed by dividing net income by the
weighted average shares outstanding. Diluted EPS is computed by dividing net
income by the weighted average shares outstanding plus potential common shares
resulting from dilutive options assuming the exercise proceeds would be used to
repurchase shares pursuant to the treasury stock method.
(3) Statement No. 130 "Reporting Comprehensive Income"
--------------------------------------------------
In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). This statement establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS 130 requires all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in an annual financial statement that is displayed in equal prominence
with the other annual financial statements. For interim period financial
statements, enterprises are required to disclose a total for comprehensive
income in those financial statements. The term "comprehensive income" is used
in SFAS 130 to describe the total of all components of comprehensive income
including net income. "Other comprehensive income"
6
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
refers to revenues, expenses, gains, and losses that are included in
comprehensive income but excluded from earnings under current accounting
standards. Currently, "other comprehensive income" for the Company consists of
items recorded as a component of shareholders' equity under SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities". The Company
has adopted the interim-period disclosure requirements of SFAS 130 effective
March 31, 1998 and will adopt the annual financial statement reporting and
disclosure requirements of SFAS 130 effective December 31, 1998.
Total comprehensive income for the six months ended June 30, 1998 was $7,318,000
compared to $2,665,000 for the six months ended June 30, 1997. Total
comprehensive income for the three months ended June 30, 1998 was $3,589,000
compared to $412,000 for the three months ended June 30, 1997.
(4) Long-Term Debt and Short-Term Borrowings
----------------------------------------
On January 30, 1998, the Company renewed a $1,500,000 revolving line of credit
with a bank which is payable on demand and matures on January 30, 1999. The
line of credit accrues interest at the Prime Lending Rate minus one percent
(1%), as defined in the agreement, and is due quarterly. The line of credit is
secured by 100% of the outstanding common stock of one of the Company's
subsidiaries. As of June 30, 1998, there were no advances under this line of
credit.
Certain 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 made payments of $3,075,524 related to advances
under these lines in the first six months of 1998 making the total advances
under these lines approximately $4.8 million. One subsidiary has a balance
outstanding of $0.8 million which matures on September 1, 2006 and bears
interest at the rate of 7.74% with principal and interest due monthly. 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 purpose of these advances was to
replace short-term deposits with longer term funds. In addition to these
advances, the 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.
7
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(5) Pending Acquisition/Sale
------------------------
On July 9, 1998, the Company and Independent Bancorp, Inc., with assets of
approximately $92 million, signed a letter of intent to merge their two
respective bank holding companies. Under the proposed merger, Independent
Bancorp shareholders will receive 3.2411 shares of Century South stock for each
share of Independent Bancorp stock. The merger is subject to regulatory and
shareholder approval.
On July 10, 1998, the Company entered into a definitive agreement for its
affiliate bank, First National Bank of Union County in Blairsville, Georgia, to
be acquired by Appalachian Bancshares, Inc. in Ellijay, Georgia. The
transaction should close not later than December 31, 1998.
(6) New Accounting Pronouncements
-----------------------------
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133).
SFAS 133 is effective for financial statements for all fiscal quarters of all
fiscal years beginning after June 15, 1999. The Company does not believe the
provisions of SFAS 133 will have a significant impact on the financial
statements upon adoption.
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,
1998, compared to December 31, 1997, and results of operations for the three and
six month periods ended June 30, 1998, compared to the three and six month
periods ended June 30, 1997. 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 1998, total assets decreased $19.4 million or
approximately 1.8%, primarily due to a decline in deposits of $21.7 million.
However, net loans grew $26.6 million or 3.6% during the first six months of
1998 and were funded by a decrease in investment securities of $29.3 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, 1998
were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Estimated
(amounts in thousands) cost gains Losses fair value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury and U.S.
Government agencies $ 76,232 701 (27) 76,906
State, county and
municipal securities 8,476 232 (11) 8,697
Mortgage-backed securities 17,585 192 (11) 17,766
Other debt securities 7,240 47 (62) 7,225
Equity securities 6,053 395 (3) 6,445
--------------------------------------------------------------
$115,586 1,567 (114) 117,039
--------------------------------------------------------------
Held to maturity:
U.S. Government agencies $ 3,901 42 (2) 3,941
State, county and
municipal securities 25,479 795 (9) 26,265
Mortgage-backed securities 1,154 20 (2) 1,172
Other debt securities 1,942 64 - 2,006
--------------------------------------------------------------
$ 32,476 921 (13) 33,384
--------------------------------------------------------------
</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, 1998 and December
31, 1997 are shown below:
<TABLE>
<CAPTION>
(amounts in millions)
June 30, December 31,
1998 1997
------------------- ----------------
<S> <C> <C>
Noninterest-bearing demand deposits $134.7 129.4
Interest-bearing demand deposits 147.6 157.3
Money market accounts 119.8 104.7
Savings deposits 55.8 64.2
Certificates of deposit and
individual retirement accounts
of $100,000 or more 127.6 130.4
Other individual retirement accounts 51.0 52.8
Other certificates of deposit 302.2 321.5
------ -----
$938.7 960.3
====== =====
</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, 1998, the Company's cash and due from banks was $43.9 million, its
federal funds sold were $30.8 million, its interest-earning deposits in other
banks were $17.9 million, and its investment securities designated as available
for sale were $117.0 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 $43.1 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, 1998.
<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 $376,117 185,322 561,439 359,684 921,123 63,497 984,620
Interest-sensitive
liabilities 431,338 271,886 703,224 105,205 808,429 831 809,260
-------- ------- ------- ------- ------- ------ -------
Interest-sensitivity gap $(55,221) (86,564) (141,785) 254,479 112,694 62,666 175,360
======== ======= ======= ======= ======= ====== =======
Ratio of interest-sensitive
assets to interest-
sensitive liabilities 0.87 0.68 0.80 3.42 1.14 76.41 1.22
======== ======= ======= ======= ======= ====== =======
</TABLE>
RESULTS OF OPERATIONS
---------------------
Net Interest Income
- -------------------
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, 1998 increased
$1,089,000 or 8.79% over the same period of 1997. For the six months ended June
30, 1998, net interest income was $26,574,000 representing an increase of
$1,827,000 or 7.38% as compared to the six months ended June 30, 1997. The
average yield earned on interest-earning assets, on a tax equivalent basis,
increased to 9.55% for the six months ended June 30, 1998 from 9.43% for the six
months ended June 30, 1997 and the average rate paid on interest-bearing
liabilities decreased to 4.86% for the six months ended June 30, 1998 from 4.92%
for the six months ended June 30, 1997. The Company's interest rate
differential increased to 4.69% from 4.51% and its net interest margin (net
interest income divided by average interest-earning assets) increased to 5.53%
for the first six months of 1998 from 5.27% for the same period of 1997.
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.
A substantial portion of the Company's loan portfolio is secured by real estate
in markets in northern, middle and coastal Georgia, southeastern Tennessee, and
southwestern North Carolina. 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 1.60% of outstanding loans at June
30, 1998 as compared to 1.63% at December 31, 1997 and 1.99% at June 30, 1997.
The allowance increased to $12,577,000 at June 30, 1998 from $12,339,000 at
December 31, 1997 and $14,350,000 at June 30, 1997. The provision for loan
losses decreased to $1,009,000 for the six months ended June 30, 1998 from
$4,877,000 for the six months ended June 30, 1997. This decrease in the
provision for loan losses was primarily due to the recording of additional
provisions in the second quarter of 1997 of approximately $3,900,000 resulting
from an in depth study of the loan portfolios at two subsidiary banks where
recent management changes had occurred and a revision of the estimation process
used by the Company. Net loan charge offs for the six months ended June 30,
1998 were $770,000 as compared to $941,000 for the six months ended June 30,
1997. Net loans charged off as a percentage of average loans was 0.20% for the
six months ended June 30, 1998 as compared to 0.27% for the six months ended
June 30, 1997.
The table on the following page summarizes the changes in the allowance for loan
losses for the six months ended June 30, 1998 and the year ended December 31,
1997.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
June 30, December 31,
1998 1997
---------------------------------
Allowance for loan losses at
beginning of year $12,339 10,414
Loans charged off 1,137 3,744
Recoveries on loans previously
charged off 367 468
------- ------
Net loans charged off 770 3,276
Provision for loan losses
charged to income 1,009 5,201
------- ------
Allowance for loan losses at
end of period $12,577 12,339
======= ======
Nonperforming Loans, Nonperforming Assets, and Underperforming Loans
- --------------------------------------------------------------------
Nonperforming loans include nonaccrual loans. The Company has not restructured
any loans of significance through June 30, 1998. 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, 1998 and December 31, 1997.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
(amounts in thousands, except ratios and percentages)
Nonperforming loans $3,762 4,595
Real estate acquired through
foreclosure and other repossessed
assets 4,881 2,347
------ -----
Nonperforming assets $8,643 6,942
====== =====
Underperforming loans $ 979 2,535
====== =====
Asset Quality Ratios:
Nonperforming loans to total loans,
net of unearned income 0.48% 0.61%
====== =====
Nonperforming assets to total loans,
net of unearned income,real estate
acquired through foreclosure, and
other repossessed assets 1.09% 0.91%
====== =====
Allowance for loan losses to
nonperforming loans 3.34x 2.69x
====== =====
Allowance for loan losses to total
loans, net of unearned income 1.60% 1.63%
====== =====
Underperforming loans to total loans,
net of unearned income 0.12% 0.33%
Nonperforming loans to total assets 0.35% 0.42%
====== =====
Nonperforming assets to total assets 0.81% 0.64%
====== =====
</TABLE>
The Company experienced an increase in nonperforming assets primarily due to the
abandonment of branches at two of the subsidiaries in the amount of $1,405,000.
The Company's management provides for 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 1998 increased $348,000 or 12.6% as
compared to the same period of 1997. This increase was primarily due to an
increase in service charges on deposit accounts of $159,000, an increase in net
securities gains (losses) of $14,000, and an increase in mortgage loan
origination fees of $350,000. This increase was partially offset by a decrease
in credit card fees of $117,000. For the first six months of 1998, noninterest
income increased $1,768,000 or 36.5%. This increase was primarily due to an
increase in service charges on deposit accounts of $575,000, an increase in
mortgage loan origination fees of $601,000, and a gain on the sale of a branch
of one of the subsidiaries in the first quarter of 1998 of $849,000. This
increase was partially offset by a decrease in net securities gains (losses) of
$124,000.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Noninterest Expense
- -------------------
The $1,397,000 or 11.7% decrease in noninterest expense for the second quarter
of 1998 as compared to the second quarter of 1997 was primarily due to a
decrease in net occupancy and equipment expense of $176,000, a decrease in
credit card expenses of $112,000, and a decrease in net foreclosed asset related
expenses of $449,000. The first six months of 1998 as compared to the same
period of 1997 resulted in a decrease of $359,000 or 1.7%. This decrease was
primarily due to a decrease in net foreclosed asset related expenses of $456,000
and a decrease in credit card expenses of $204,000. Decreases were also noted
in advertising and marketing expense, ATM related expenses, and fees associated
with the merger of CSBI and BCG of $85,000, $62,000, and $67,000 respectively.
This decrease was offset by an increase in salary and benefit expense of
$957,000 mainly due to an increase in the number of employees.
Income Tax Expense
- ------------------
The second quarter 1998 income tax expense was approximately $1,866,000, or an
effective rate of 34.0%, as compared to an income tax benefit of approximately
$984,000 for the second quarter 1997, or an effective rate of 93.5%. During the
first six months of 1998 income tax expense was approximately $3,739,000, or an
effective rate of 34.3%, compared to approximately $279,000, or an effective
rate of 9.1% for the same period in 1997. The experienced increase is primarily
attributable to the special charges taken in the second quarter of 1997.
Net Income
- ----------
The Company's second quarter 1998 net earnings were $0.33 per diluted share or
$3,630,000 as compared to a net loss of $0.01 per diluted share or $68,000 for
the second quarter of 1997, representing an increase of 3400.0%. Earnings for
the six months ended June 30, 1998 were $7,160,000 up 155.9% from $2,798,000 for
the comparable period in 1997. Earnings per share for the six months ended June
30, 1998 were $0.64 per diluted share as compared to $0.25 per diluted share for
the corresponding period ended June 30, 1997. These increases in net income are
a result of special charges recorded in the second quarter of 1997 of
approximately $4,450,000. 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,
1998 was 12.92% (annualized) as compared to 5.44% (annualized) for the six
months ended June 30, 1997. The Company's return on average assets was 1.36%
(annualized) and 0.54% (annualized) for the six month periods ended June 30,
1998 and 1997, 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, 1998 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>
For
Capital
Actual Adequacy Purposes
-------------------------------------------------------
Amount Ratio Amount Ratio
-------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of June 30, 1998:
Total Capital (to Risk
Weighted Assets): $116,596 15.3% > $60,851 > 8.0%
- -
Tier 1 Capital (to Risk
Weighted Assets): $107,064 14.1% > $30,425 > 4.0%
- -
Tier 1 Capital (to
Average Assets): $107,064 10.1% > $42,356 > 4.0%
- -
</TABLE>
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 10.53% and its ratio of shareholders' equity to
assets of 10.74% at June 30, 1998.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
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 dividend payout policy relative to its level of net income.
The impact of inflation has been minimal to the Company in recent years.
Year 2000
- ---------
The Year 2000 issue refers generally to the data structure problem that will
prevent systems from properly recognizing dates after the year 1999. For
example, computer programs and various types of electronic equipment that
process date information by reference to two digits rather than four to define
the applicable year may recognize a date using "00" as the year 1900 rather
than the year 2000. The Year 2000 problem may occur in computer software
programs, computer hardware systems and any device that relies on a computer
chip if that chip relies on date information. Even if the systems that process
date-sensitive data are Year 2000 compliant, a Year 2000 problem may exist to
the extent that the data that such systems process is not. In addition to
evaluating the Year 2000 issues relative to its own systems, companies must also
assess the ability of the third parties upon which they rely to function on
January 1, 2000 and thereafter.
The Company has appointed a Year 2000 committee with a full time Year 2000
coordinator to conduct a comprehensive review of its operational and financial
systems to determine how the year 2000 will impact operation of these systems.
The committee has developed a plan to identify all critical systems and
developed solutions for all systems that are found to not be Year 2000
compliant. To date, confirmations have been received from the Company's primary
processing vendors and counterparties that plans have been developed to address
processing transactions in the year 2000. In addition, comprehensive testing
plans have been developed to ensure all critical applications will process
normally in the year 2000. The Company has also developed a comprehensive plan
based upon each bank's unique circumstances and environment to ensure its
ability to continue functioning after January 1, 2000. Customer awareness and
preparedness is also a priority. Loan relationships which could be materially
affected by the year 2000 issue are being identified and monitored. An employee
and customer awareness campaign is scheduled to begin September 1, 1998.
Based upon the preliminary study, the Company expects to spend approximately
$1,000,000 from 1998 through 1999 to modify its computer information systems.
This estimate includes approximately $500,000 of costs that will be recorded as
capital expenditures and amortized. Project plans, precluding any unforeseen
delays, call for all critical issues to be identified and the needed changes
implemented and tested before December 31, 1998. This will allow a full year of
final testing before the century date change.
There can be no assurance that the Company's systems nor the systems of other
companies with whom the Company conducts business will be Year 2000 compliant
prior to December 31, 1999 or that failure of any such system will not have a
material adverse effect on the Company's business, operating results and
financial condition.
ITEM 3 MARKET RISK DISCLOSURE
The information called for concerning market risk of the Company is not included
as there have not been any significant changes in the market rate table as shown
in the Company's 1997 Annual Report filed on Form 10-K.
17
<PAGE>
PART II. OTHER INFORMATION
Item 4. Matters Submitted to a Vote of Security Holders
At the Annual Meeting of Shareholders held on May 13, 1998, the following
directors were elected to hold office for the coming year: William H. Anderson,
II, James R. Balkcom, Jr., William L. Chandler, Joseph W. Evans, James A.
Faulkner, Thomas T. Folger, Jr., Quill O. Healey, J. Russell Ivie, Frank C.
Jones, John B. McKibbon, III, and E. Paul Stringer.
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 27.1 Financial Data Schedule as of and for the six
months ended June 30, 1998
Exhibit 27.2 Restated Financial Data Schedule as of and for
the six months ended June 30, 1997
(b) There were no reports filed on Form 8-K for the
quarter ended June 30, 1998.
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, 1998 By: /s/ James A. Faulkner
---------------- --------------------------
James A. Faulkner
Vice Chairman and Chief
Executive Officer
DATE: August 14, 1998 By: /s/ Susan J. Anderson
---------------- --------------------------
Susan J. Anderson
Senior Vice President and
Corporate Controller
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 basic and diluted net
income per common share and common share equivalents for the three and six month
periods ended June 30, 1998 and 1997.
<TABLE>
<CAPTION>
Basic Diluted
Earnings Earnings
Per Share Per Share
----------- ---------
<S> <C> <C>
(amounts in thousands, except per share data)
For the three months ended June 30, 1998:
Net income $ 3,630 3,630
======= ======
Weighted average number of common
shares outstanding 10,941 10,941
Common share equivalents resulting
from dilutive stock options - 223
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 10,941 11,164
======= ======
Net income per common share $ 0.33 0.33
======= ======
For the three months ended June 30, 1997:
Net income $ (68) (68)
======= ======
Weighted average number of common
shares outstanding 10,833 10,833
Common share equivalents resulting
from dilutive stock options - 225
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 10,833 11,058
======= ======
Net income per common share $ (0.01) (0.01)
======= ======
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Basic Diluted
Earnings Earnings
Per Share Per Share
--------- ---------
<S> <C> <C>
(amounts in thousands, except per share data)
For the six months ended June 30, 1998:
Net income $ 7,160 7,160
======= ======
Weighted average number of common
shares outstanding 10,911 10,911
Common share equivalents resulting
from dilutive stock options - 242
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 10,911 11,153
======= ======
Net income per common share $ 0.66 0.64
======= ======
For the six months ended June 30, 1997:
Net income (loss) $ 2,798 2,798
======= ======
Weighted average number of common
shares outstanding 10,832 10,832
Common share equivalents resulting
from dilutive stock options - 213
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 10,832 11,045
======= ======
Net income (loss) per common share $ 0.26 0.25
======= ======
</TABLE>
<PAGE>
EXHIBIT 20
CHIEF EXECUTIVE OFFICER'S MESSAGE
Dear Shareholder:
We are pleased to report that Century South Banks, Inc. posted record net
earnings for the second quarter of 1998. Net income for the quarter was
$3,630,000 as compared to a loss of $68,000 for the second quarter of 1997.
Similarly, earnings per diluted share increased to $0.33 as compared to a loss
of $0.01 for the same quarter of 1997. Net income for the year through June
30, 1998 was $7,160,000 or $0.64 per diluted share as compared to $2,798,000 or
$0.25 per diluted share through June 30, 1997.
The quarterly cash dividend of $0.10875 per share paid on July 7, 1998,
represents a 4.8% increase over the same quarter of 1997 and a 1.2% increase
over the previous quarter's dividend.
Total assets at June 30, 1998 were approximately $1,069,015,000. Return on
average assets increased to 1.36% as compared to 0.54% for the six month period
ended June 30, 1997. At June 30, 1998, our reserve for loan losses was 1.60% of
total loans outstanding and nonperforming assets as a percentage of total assets
were 0.81%.
In early July, we announced the signing of a letter of intent to acquire
Independent Bancorp, Inc. and its only subsidiary, The Independent Bank of
Oxford, Alabama. We are very excited with this new acquisition and the
opportunity it gives us to expand into Alabama. The Alabama market, especially
eastern Alabama, is similar in many ways to certain of our current markets and
we feel it will add significantly to our company.
In accordance with our policy of continually reassessing and redeploying
our capital, we have made a strategic decision to divest the First National Bank
of Union County. We have entered into a definitive agreement with Appalachian
Bancshares, Inc. whereby they will acquire the First National Bank of Union
County in a transaction that should close in the fourth quarter of 1998.
As always, we want to encourage you to utilize the Century South affiliate
bank in your community.
Sincerely,
/s/ James A. Faulkner
---------------------
James A. Faulkner
Vice Chairman and
Chief Executive Officer
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
-----------------------
(amounts in thousands)
<S> <C> <C>
ASSETS
Cash and due from banks $ 43,869 $ 46,754
Federal funds sold 30,820 36,520
Interest-earning deposits in other banks 17,942 16,641
Investment Securities 149,515 198,533
Loans, net of unearned income 785,554 721,683
Allowance for loan losses (12,577) (14,350)
Premises and equipment, net 25,016 27,222
Other assets 28,876 28,548
-----------------------
Total assets $1,069,015 $1,061,551
=======================
LIABILITIES
Noninterest-bearing deposits $ 134,738 $ 129,391
Interest-bearing deposits 803,942 810,504
Other short-term borrowings 450 -
Federal Home Loan Bank advances 4,831 6,931
Long-term debt 37 1,652
Other liabilities 10,223 9,580
-----------------------
Total liabilities 954,221 958,058
=======================
SHAREHOLDERS' EQUITY
Common stock 11,063 10,896
Additional paid-in capital 34,842 34,202
Retained earnings 68,366 58,867
Reduction for ESOP loan guarantee - (247)
Common stock in treasury, at cost (306) (306)
Accumulated other comprehensive income 829 81
Total shareholders' equity 114,794 103,493
-----------------------
Total liabilities and shareholders' equity $1,069,015 $1,061,551
=======================
</TABLE>
<PAGE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
--------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $ 23,206 $ 22,573 $ 46,137 $ 44,640
Interest expense 9,724 10,180 19,563 19,893
--------------------------------------------
Net interest income 13,482 12,393 26,574 24,747
Provision for loan losses 502 4,216 1,009 4,877
Noninterest income 3,103 2,755 6,606 4,838
Noninterest expense 10,587 11,984 21,272 21,631
Income tax expense (benefit) 1,866 (984) 3,739 279
--------------------------------------------
Net income (loss) $ 3,630 $ (68) $ 7,160 $ 2,798
============================================
Weighted average common shares outstanding
assuming dilution 11,164 11,058 11,153 11,045
Net income (loss) per share assuming dilution $ 0.33 $ (0.01) $ 0.64 $ 0.25
Dividends declared per share $0.10875 $0.10375 $0.21625 $0.20625
</TABLE>
<PAGE>
CENTURYSOUTHBANKS
- ----------------------------------------------------------
INC.
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
William H. Anderson, II Chairman
J. Russell Ivie Vice Chairman
James A. Faulkner Vice Chairman & CEO
Joseph W. Evans President, COO & CFO
Tony E. Collins Executive Vice President & CAO
Stephen W. Doughty Executive Vice President & CCO
Sidney J. Wooten Executive Vice President
DIRECTORS
- --------------------------------------------------------------------------------
William H. Anderson, II, Chairman Thomas T. Folger, Jr.
J. Russell Ivie, Vice Chairman Quill O. Healey
James A. Faulkner, Vice Chairman Frank C. Jones
James R. Balkcom, Jr. John B. Mckibbon, III
William L. Chandler E. Paul Stringer
Joseph W. Evans
AFFILIATES
- --------------------------------------------------------------------------------
Bank of Dahlonega Gwinnett National Bank
60 Main Street West 3200 Peachtree Industrial Boulevard
Dahlonega, GA 30533 Duluth, GA 30136
John L. Lewis, President Terry C. Evans, President
706-864-3314 770-497-9797
The Bank of Ellijay First Community Bank of Dawsonville
Sand and Broad Street 136 Highway 400 South
Ellijay, GA 30540 Dawsonville, GA 30534
R. A. Robinson, CEO W. Keith Morris, President
C. Paul Nealey, President 706-216-5050
706-276-3400
First Bank of Polk County Peoples Bank
40 Ocoee Street 13321 Jones Street
Copperhill, TN 37317 Lavonia, GA 30553
David E. Adkisson, President J. Douglas Cleveland, President
423-496-3261 706-356-8040
Georgia First Bank Bank of Danielsville
455 Jesse Jewell Parkway Courthouse Square
Gainesville, GA 30501 Danielsville, GA 30633
Allen J. Satterfield, President L. Banister Sexton, President
770-535-8000 706-795-2121
First National Bank of Union County First South Bank, N.A.
420 Blue Ridge Highway 4951 Forsyth Road
Blairsville, GA 30512 Macon, GA 31210
Rodney B. McCombs, President Daniel M. Forrester, President
706-745-5571 912-757-2000
Fannin County Bank, N.A. Ameribank, N.A.
480 W. First Street 7393 Hodgson Memorial Drive
Blue Ridge, GA 30513 Savannah, GA 31406
Steve M. Eaton, President J. Thomas Wiley, Jr., President
706-632-2075 912-232-3800
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (UNAUDITED)
SELECTED BALANCES
- ----------------------------------------------------------------------------------------------
AS OF AND FOR SIX MONTHS
ENDED JUNE 30,
1998 1997 PERCENTAGE CHANGE
------------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C>
Loans, Net $ 772,977 $ 707,333 9.28%
Deposits 938,680 939,895 (0.13)
Total assets 1,069,015 1,061,551 7.03
Shareholders' equity 114,794 103,493 10.92
Net income 7,160 2,798 155.90
Book value per share 10.43 9.55 9.21
Net income per share assuming dilution 0.64 0.25 156.00
Weighted average common shares outstanding
assuming dilution 11,153 11,045 0.98
Nonperforming loans 3,762 3,520 6.88
Other real estate and other
nonperforming assets 4,881 2,655 83.84
FINANCIAL RATIOS
- ----------------------------------------------------------------------------------------------
Return on average assets 1.36% 0.54% 151.85%
Return on average shareholders' equity 12.92 5.44 137.50
Net interest margin (taxable equivalent) 5.53 5.27 4.93
Allowance for loan losses to loans 1.60 1.99 (19.60)
Nonperforming assets to total assets 0.81 0.58 39.66
</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, 1998:
Three month high ......................... $ 38.25
Three month low .......................... $ 24.50
Closing price ............................ $ 38.00
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 one of the following:
James A. Faulkner Susan J. Anderson Joseph W. Evans
Vice Chairman & CEO Senior Vice President & Controller President, COO & CFO
(706) 864-3915 (706) 864-3915 (912) 475-4340
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 43,869
<INT-BEARING-DEPOSITS> 17,942
<FED-FUNDS-SOLD> 30,820
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 117,039
<INVESTMENTS-CARRYING> 32,476
<INVESTMENTS-MARKET> 33,384
<LOANS> 785,554
<ALLOWANCE> 12,577
<TOTAL-ASSETS> 1,069,015
<DEPOSITS> 938,680
<SHORT-TERM> 450
<LIABILITIES-OTHER> 10,223
<LONG-TERM> 4,868
0
0
<COMMON> 11,063
<OTHER-SE> 103,731
<TOTAL-LIABILITIES-AND-EQUITY> 1,069,015
<INTEREST-LOAN> 39,625
<INTEREST-INVEST> 4,947
<INTEREST-OTHER> 1,565
<INTEREST-TOTAL> 46,137
<INTEREST-DEPOSIT> 19,373
<INTEREST-EXPENSE> 19,563
<INTEREST-INCOME-NET> 26,574
<LOAN-LOSSES> 1,009
<SECURITIES-GAINS> 37
<EXPENSE-OTHER> 21,272
<INCOME-PRETAX> 10,899
<INCOME-PRE-EXTRAORDINARY> 10,899
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,160
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.64
<YIELD-ACTUAL> 5.53
<LOANS-NON> 3,762
<LOANS-PAST> 979
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,339
<CHARGE-OFFS> 1,137
<RECOVERIES> 367
<ALLOWANCE-CLOSE> 12,577
<ALLOWANCE-DOMESTIC> 12,577
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 46,754
<INT-BEARING-DEPOSITS> 16,641
<FED-FUNDS-SOLD> 36,520
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 156,598
<INVESTMENTS-CARRYING> 41,935
<INVESTMENTS-MARKET> 0
<LOANS> 721,683
<ALLOWANCE> 14,350
<TOTAL-ASSETS> 1,061,551
<DEPOSITS> 939,895
<SHORT-TERM> 0
<LIABILITIES-OTHER> 9,850
<LONG-TERM> 8,583
0
0
<COMMON> 10,896
<OTHER-SE> 92,597
<TOTAL-LIABILITIES-AND-EQUITY> 1,061,551
<INTEREST-LOAN> 36,870
<INTEREST-INVEST> 6,231
<INTEREST-OTHER> 1,539
<INTEREST-TOTAL> 44,640
<INTEREST-DEPOSIT> 19,560
<INTEREST-EXPENSE> 19,893
<INTEREST-INCOME-NET> 24,747
<LOAN-LOSSES> 4,877
<SECURITIES-GAINS> 161
<EXPENSE-OTHER> 21,631
<INCOME-PRETAX> 3,077
<INCOME-PRE-EXTRAORDINARY> 3,077
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,798
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.25
<YIELD-ACTUAL> 5.27
<LOANS-NON> 3,520
<LOANS-PAST> 2,040
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 10,414
<CHARGE-OFFS> 941
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 14,350
<ALLOWANCE-DOMESTIC> 14,350
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
