<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, 1999
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: 0-26254
-------
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, 1999
----------------------------- -------------------------------
Common stock, $1.00 par value 11,767,356
<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
Item 3. Market Risk Disclosure 18
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
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
June 30, December 31,
1999 1998
--------- ------------
(amounts in thousands,
except share data)
Assets
Cash and due from banks $ 42,838 51,420
Federal funds sold 25,710 30,550
Interest-earning deposits in other banks 3,040 4,949
Investment securities:
Available for sale 173,026 131,264
Held to maturity (fair value: June
30, 1999 - $25,430 and December 31,
1998 - $41,271) 24,741 40,302
Loans, net of unearned income 893,348 846,888
Less allowance for loan losses 13,473 13,035
---------- ---------
Loans, net 879,875 833,853
---------- ---------
Premises and equipment, net 26,593 25,300
Goodwill and other intangibles, net 4,384 4,637
Other assets 26,212 24,445
---------- ---------
Total assets $1,206,419 1,146,720
========== =========
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
Deposits:
Noninterest-bearing demand deposits $ 136,980 143,008
Interest-bearing deposits 903,755 850,300
---------- ---------
Total deposits 1,040,735 993,308
Federal funds purchased 11,500 -
Federal Home Loan Bank advances 14,230 16,280
Long-term debt 33 35
Accrued expenses and other liabilities 11,401 11,045
---------- ---------
Total liabilities 1,077,899 1,020,668
---------- ---------
Shareholders' Equity:
Common Stock-$1 par value. Authorized
30,000,000 shares; issued 11,754,156
and 11,787,334 shares at June 30, 1999
and December 31, 1998, respectively; and
outstanding 11,754,156 and 11,701,435
shares at June 30, 1999 and December 31,
1998, respectively 11,754 11,787
Additional paid-in capital 35,922 36,106
Retained earnings 83,119 78,219
Unearned compensation-restricted stock awards (869) -
Common stock in treasury (0 shares at June
30, 1999 and 85,899 shares at December
31, 1998), at cost - (1,051)
Accumulated other comprehensive income (loss) (1,406) 991
---------- ---------
Total shareholders' equity 128,520 126,052
---------- ---------
Total liabilities and shareholders' equity $1,206,419 1,146,720
========== =========
See accompanying notes to consolidated financial statements.
3
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
Three months Six months
ended June 30, ended June 30,
1999 1998 1999 1998
------ ------ ------ ------
(amounts in thousands,
except per share data)
Interest income:
Loans, including fees $ 21,553 21,531 42,545 42,466
Federal funds sold 427 570 884 1,172
Interest on deposits in other banks 70 191 124 417
Investment securities:
Taxable 2,151 2,066 3,844 4,297
Nontaxable 637 690 1,279 1,398
-------- ------- ------- -------
Total interest income 24,838 25,058 48,676 49,750
-------- ------- ------- -------
Interest expense:
Deposits 9,900 10,616 19,308 21,280
Federal funds purchased 130 9 243 18
Federal Home Loan Bank advances 190 79 382 148
Long-term debt and other borrowings 7 5 13 34
-------- ------- ------- -------
Total interest expense 10,227 10,709 19,946 21,480
-------- ------- ------- -------
Net interest income 14,611 14,349 28,730 28,270
Provision for loan losses 691 562 1,179 1,114
-------- ------- ------- -------
Net interest income after
provision for loan losses 13,920 13,788 27,551 27,156
-------- ------- ------- -------
Noninterest income:
Service charges on deposit accounts 1,527 1,690 3,018 3,298
Securities gains, net 200 20 440 37
Other operating income 1,476 1,540 2,841 3,550
-------- ------- ------- -------
Total noninterest income 3,203 3,250 6,299 6,885
-------- ------- ------- -------
Noninterest expense:
Salaries and employee benefits 6,277 6,310 12,588 12,521
Net occupancy and equipment expense 1,647 1,541 3,225 3,074
Other operating expenses 3,152 3,241 6,445 6,645
-------- ------- ------- -------
Total noninterest expense 11,076 11,092 22,258 22,240
-------- ------- ------- -------
Income before income taxes 6,047 5,945 11,592 11,801
Income tax expense 1,967 1,976 3,895 3,960
-------- ------- ------- -------
Net income $ 4,080 3,969 7,697 7,841
======== ======= ======= =======
Net income per share:
Basic $0.35 0.34 0.66 0.67
======== ======= ======= =======
Diluted $0.35 0.33 0.65 0.66
======== ======= ======= =======
Cash dividends declared per share $0.12000 0.10875 0.24000 0.21625
-------- ------- ------- -------
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,
1999 1998
-------- --------
(amounts in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 9,689 12,958
-------- -------
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale 7,663 37
Principal collections and maturities of investment securities:
Available for sale 28,537 38,202
Held to maturity 1,108 8,029
Proceeds from maturities of interest-earning deposits 83,568 94,797
Purchases of investment securities held to maturity - (846)
Purchases of investment securities available for sale (66,906) (18,048)
Investment in interest-earning deposits (81,658) (80,283)
Net increase in loans (48,138) (36,376)
Proceeds from sales of real estate acquired through foreclosure 1,268 390
Purchases of premises and equipment (2,788) (1,153)
Proceeds from sale of premises and equipment 71 239
-------- -------
Net cash (used in) provided by investing activities (77,275) 4,988
-------- -------
Cash flows from financing activities:
Net increase (decrease) in deposits 47,427 (14,820)
Net increase (decrease) in federal funds purchased 11,500 (970)
Net increase in other short-term borrowings 1,850 950
Proceeds from issuance of long-term debt - 5,000
Payments on long-term debt and Federal Home Loan Bank advances (3,902) (5,552)
Dividends paid to shareholders (2,613) (2,366)
Purchase of treasury stock (345) -
Proceeds from issuance of common stock 248 699
-------- -------
Net cash provided by (used in) financing activities 54,165 (17,059)
-------- -------
Net increase (decrease) in cash and cash equivalents (13,421) 887
Cash and cash equivalents at beginning of period 81,970 78,801
-------- -------
Cash and cash equivalents at end of period $ 68,549 79,688
======== =======
Supplemental disclosure of cash paid during the period for:
Interest $ 20,467 20,025
======== =======
Income taxes $ 2,980 2,034
======== =======
Supplemental schedule of noncash investing and financing
Activities:
Real estate acquired through foreclosure $ 1,103 4,467
======== =======
Real estate sold and financed by the Company $ 167 984
======== =======
Treasury stock issued by the Company in merger $ 98 -
======== =======
</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, National Association, ("GFB"), Fannin County Bank,
N.A. ("FCB"), First Community Bank of Dawsonville ("FCBD"), Peoples Bank
("PBL"), Bank of Danielsville ("DAN"), First South Bank, National Association
("FSB"), AmeriBank, National Association ("AMB") and The Independent Bank of
Oxford ("IBO") (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. 130 "Reporting Comprehensive Income"
--------------------------------------------------
Effective January 1, 1998, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). This statement establishes standards for reporting and displaying
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 financial statements,
enterprises are required to disclose a total for comprehensive income in those
financial statements. The term "comprehensive income" is used in the statement
to describe the total of all components of comprehensive income including net
income. "Other comprehensive income" for the Company consists of items recorded
directly in shareholders' equity under SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities".
Total comprehensive income for the three months ended June 30, 1999 was
$2,191,000 compared to $3,932,000 for the three months ended June 30, 1998.
Total comprehensive income for the six months ended June 30, 1999 was $5,300,000
as compared to $7,988,000 for the six months ended June 30, 1998.
(3) Long-Term Debt and Short-Term Borrowings
----------------------------------------
On January 30, 1999, the Company renewed a $15,000,000 revolving line of credit
with a bank which is payable on demand and matures on January 30, 2000. 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 three of the Company's
subsidiaries. As of June 30, 1999, there were no advances under this line of
credit.
6
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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. At June 30, 1999, the total advances under these lines approximated $14.2
million. These advances mature at various dates through June 2008. 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.
(4) Recent acquisition
On April 13, 1999, the Company completed the merger with Independent Bancorp,
Inc. ("IBC") and its subsidiary bank, The Independent Bank of Oxford in Oxford,
Alabama. The Company issued approximately 699,108 shares of its common stock in
exchange for all of the issued and outstanding shares of IBC. This acquisition
was accounted for as a pooling of interests and, accordingly, all financial
information preceding the date of acquisition has been restated to include the
financial position and results of operations of the acquired entity. The
Company's consolidated financial statements for the three and six months ended
June 30, 1999 and June 30, 1998 have been restated for the merger with IBC as
follows:
Three months ended Six months ended
June 30, June 30,
(Amounts in thousands) 1999 1998 1999 1998
- ---------------------- -------- ------- ------- -------
Interest income:
Century South Banks, Inc. exclusive
of pre-acquisition amounts $22,848 23,206 44,721 46,137
Independent Bancorp, Inc. and
subsidiary 1,990 1,852 3,955 3,613
------- ------ ------ ------
Total $24,838 25,058 48,676 49,750
======= ====== ====== ======
Net interest income:
Century South Banks, Inc. exclusive
of pre-acquisition amounts $13,652 13,482 26,853 26,574
Independent Bancorp, Inc. and
subsidiary 959 867 1,877 1,696
------- ------ ------ ------
Total $14,611 14,349 28,730 28,270
======= ====== ====== ======
Noninterest income:
Century South Banks, Inc. exclusive
of pre-acquisition amounts $ 2,918 3,102 5,795 6,606
Independent Bancorp, Inc. and
Subsidiary 285 148 504 279
------- ------ ------ ------
Total $ 3,203 3,250 6,299 6,885
======= ====== ====== ======
Net income:
Century South Banks, Inc. exclusive
of pre-acquisition amounts $ 3,554 3,629 6,959 7,160
Independent Bancorp, Inc. and
Subsidiary 526 340 738 681
------- ------ ------ ------
Total $ 4,080 3,969 7,697 7,841
======= ====== ====== ======
7
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(5) Recent Accounting Pronouncements
--------------------------------
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes
accounting and reporting standards for derivative instruments and for hedging
activities. In June 1999, FASB issued Statement of Financial Accounting
Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities
Deferral of the Effective Date of FASB Statement No. 133: ("SFAS 137"). SFAS 137
amends the effective date of implementation of SFAS 133 to all fiscal quarters
of fiscal years beginning after June 15, 2000. The Company has not yet
determined the impact of SFAS 133 on the Company's financial statements.
Effective January 1, 1999, the Company adopted SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage-Banking Enterprise, an Amendment of FASB Statement
No. 65" ("SFAS 134"). There was no impact on the Company's financial statements
upon adoption of SFAS 134.
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,
1999, compared to December 31, 1998, and results of operations for the three and
six month periods ended June 30, 1999, compared to the three and six month
periods ended June 30, 1998. 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 1999, total assets increased $59.7 million or
approximately 5.2%, primarily due to increases in net loans of $46.0 million and
investment securities of $26.2 million. These increases were funded by deposit
growth of $47.4 million and increases in federal funds purchased of $11.5
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, 1999
were as follows:
Gross Gross
Amortized Unrealized Unrealized Estimated
(amounts in thousands) cost Gains Losses fair value
---------------------- --------- ---------- ---------- ----------
Available for sale:
U.S. Treasury and U.S.
Government agencies $ 84,611 272 (2,111) 82,772
State, county and
municipal securities 23,342 680 (77) 23,945
Mortgage-backed securities 16,554 108 (157) 16,505
Other debt securities 44,043 52 (1,130) 42,965
Equity securities 6,654 210 (25) 6,839
-------- ----- ------ -------
$175,204 1,322 (3,500) 173,026
-------- ----- ------ -------
Held to maturity:
U.S. Government agencies $ 329 17 - 346
State, county and
municipal securities 21,883 583 (3) 22,463
Mortgage-backed securities 578 9 (4) 583
Other debt securities 1,951 87 - 2,038
-------- ----- ------ -------
$ 24,741 696 (7) 25,430
-------- ----- ------ -------
Balances within the major deposit categories as of June 30, 1999 and December
31, 1998 are shown below:
(amounts in millions)
June 30, December 31,
1999 1998
-------- ------------
Noninterest-bearing demand deposits $ 137.0 143.0
Interest-bearing demand deposits 153.4 156.5
Money market accounts 142.4 121.5
Savings deposits 57.3 55.6
Certificates of deposit and
Individual retirement accounts
of $100,000 or more 169.5 156.0
Other individual retirement accounts 52.6 53.1
Other certificates of deposit 328.5 307.6
-------- -----
$1,040.7 993.3
======== =====
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND INTEREST RATE SENSITIVITY
---------------------------------------
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, 1999, the Company's cash and due from banks was $42.8 million, its
federal funds sold were $25.7 million, its interest-earning deposits in other
banks were $3.0 million, and its investment securities designated as available
for sale were $173.0 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 $43.7 million, in addition to credit, which is available in the
form of Federal Home Loan Bank advances.
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.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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, 1999.
<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 $ 344,325 181,239 525,564 442,584 968,148 151,717 1,119,865
Interest-sensitive
liabilities 475,723 341,471 817,194 92,561 909,755 19,762 929,517
--------- -------- -------- ------- ------- ------- ---------
Interest-sensitivity gap $(131,398) (160,232) (291,630) 350,023 58,393 131,955 190,348
========= ======== ======== ======= ======= ======= =========
Ratio of interest-sensitive
assets to interest-
sensitive liabilities 0.72 0.53 0.64 4.78 1.06 7.68 1.20
========= ======== ======== ======= ======= ======= =========
</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.
Net interest income for the three months ended June 30, 1999 increased $262,000
or 1.83% over the same period of 1998. For the six months ended June 30, 1999,
net interest income was $28,730,000 representing an increase of $460,000 or
1.63% as compared to the six months ended June 30, 1998. The average yield
earned on interest-earning assets, on a tax equivalent basis, decreased to 9.10%
for the six months ended June 30, 1999 from 9.55% for the six months ended June
30, 1998 and the average rate paid on interest-bearing liabilities decreased to
4.49% for the six months ended June 30, 1999 from 4.90% for the six months ended
June 30, 1998. The Company's interest rate differential decreased to 4.61% from
4.65% and its net interest margin (net interest income divided by average
interest-earning assets) decreased to 5.41% for the first six months of 1999
from 5.47% for the same period of 1998.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Allowance for Loan Losses
- -------------------------
The Company maintains an allowance for loan losses appropriate for the quality
of the loan portfolio and sufficient to meet anticipated future loan losses.
The Company utilizes a comprehensive loan review and risk identification process
and the analysis of affiliate Banks' financial trends to determine the adequacy
of the allowance. Many factors are considered when evaluating the allowance.
The Company's quarterly analysis is based on historical loss trends; migration
trends in criticized and classified loans in the portfolio; trends in past due
and nonaccrual loans; trends in portfolio volume, composition, maturity, and
concentrations; changes in local and regional economic market conditions; the
accuracy of the loan review and risk identification system; and the experience,
ability, and depth of lending personnel and management.
In determining the appropriate level of the allowance for each affiliate bank,
the Company relies primarily on analysis of the major components of the loan
portfolio such as commercial loans, commercial real estate loans, consumer
loans, construction loans, residential real estate loans, and all other loans
and unfunded commitments. The Company has established a minimum loss factor for
certain problem loan grade categories and for general categories of non-
performing loans. All significant problem loans are reviewed individually to
establish either the minimum loss factor (formula) or a specific reserve higher
than the formula. All significant non-problem loans are reserved at the greater
of the minimum loss rate for the category of loans or the weighted average
historical loss rate over a defined loss horizon as computed from the migration
analysis. Other homogenous loan pools such as the consumer loans, construction
loans, and residential mortgage loans are reserved at the greater of the minimum
loss rate or the weighted average historical loss rate as computed in the
migration analysis.
Management evaluates the allowance on a quarterly basis. The provision for loan
losses for each affiliate bank is adjusted to the appropriate level based on the
analysis methodology described above.
A substantial portion of the Company's loan portfolio is secured by real estate
in markets in northern, middle and coastal Georgia, southeastern Tennessee,
southwestern North Carolina and eastern Alabama. 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 1.51% of outstanding loans at June
30, 1999 as compared to 1.54% at December 31, 1998 and 1.56% at June 30, 1998.
The allowance increased to $13,473,000 at June 30, 1999 from $13,035,000 at
December 31, 1998 and $13,158,000 at June 30, 1998. The provision for loan
losses increased to $1,179,000 for the six months ended June 30, 1999 from
$1,114,000 for the six months ended June 30, 1998. Net loan charge offs for the
six months ended June 30, 1999 were $741,000 as compared to $478,000 for the six
months ended June 30, 1998. Net loans charged off as a percentage of average
loans was 0.17% for the six months ended June 30, 1999 as compared to 0.20% for
the six months ended June 30, 1998.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The table below summarizes the changes in the allowance for loan losses for the
six months ended June 30, 1999 and the year ended December 31, 1998.
June 30, December 31,
1999 1998
-------- ------------
Allowance for loan losses at
beginning of year $13,035 12,853
Loans charged off 1,244 3,193
Recoveries on loans previously
charged off 503 798
------- ------
Net loans charged off 741 2,395
Allowances for loan losses of
loans of bank subsidiary sold - (558)
Provision for loan losses
charged to income 1,179 3,135
------- ------
Allowance for loan losses at
end of period $13,473 13,035
======= ======
Nonperforming Loans, Nonperforming Assets, and Underperforming Loans
- --------------------------------------------------------------------
Nonperforming loans include nonaccrual loans. The Company has not restructured
any loans of significance through June 30, 1999. Nonperforming assets include
nonperforming loans, real estate acquired through foreclosure, securities that
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.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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 below provides information concerning nonperforming loans,
nonperforming assets, underperforming loans and certain asset quality ratios at
June 30, 1999 and December 31, 1998.
June 30, December 31,
1999 1998
-------- ------------
(amounts in thousands,
except ratios and percentages)
Nonperforming loans $4,188 4,631
Real estate acquired through foreclosure
and other repossessed assets 4,352 4,773
------ -----
Nonperforming assets $8,540 9,404
====== =====
Underperforming loans $ 636 841
====== =====
Asset Quality Ratios:
Nonperforming loans to total loans,
net of unearned income 0.47% 0.55%
====== =====
Nonperforming assets to total loans,
net of unearned income, real estate
acquired through foreclosure, and
other repossessed assets 0.95% 1.10%
====== =====
Allowance for loan losses to
Nonperforming loans 3.22x 2.81x
====== =====
Underperforming loans to total loans,
net of unearned income 0.07% 0.10%
====== =====
Noninterest Income
- ------------------
Noninterest income for the second quarter of 1999 decreased $47,000 or 1.5% as
compared to the same period of 1998. This decrease was primarily due to a
decrease in service charges on deposit accounts of $163,000 which was offset by
net securities gains of $180,000. Noninterest income for the six months ended
June 30, 1999 decreased $586,000 or 8.5% as compared to the same period of 1998.
This decrease was primarily due to a gain on the sale of a branch in the first
quarter of 1998 of approximately $710,000 and a decrease in service charges on
deposit accounts of $280,000. This decrease was partially offset by an increase
in net securities gains of $403,000. The decreases in service charges can be
explained by comparing average deposits for the respective periods. Average
deposits for the six months ended June 30, 1999 were $1,009,180 versus
$1,012,115 for the six months ended June 30, 1998.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Noninterest Expense
- -------------------
The $16,000 or 0.1% decrease in noninterest expense for the second quarter of
1999 as compared to the second quarter of 1998 was primarily due to a decrease
in salary and benefit expense of $33,000. This decrease was partially offset by
an increase in net occupancy and equipment expense of $106,000. The $18,000
increase in noninterest expense for the six months ended June 30, 1999 as
compared to the same period of 1998 was primarily due to an increase in salary
and employee benefits of $67,000, an increase in net occupancy and equipment
expense of $151,000 and an increase due to special charges taken in the first
quarter of 1999 of approximately $360,000 associated with the acquisition of
Independent Bancorp, Inc.. These increases were offset by a decrease in
amortization expense of $185,000 taken in the first quarter of 1998 on the sale
of a branch as mentioned above and a decrease in microfiche/microfilm expenses
of $85,000 due to the implementation of optical disk storage technology.
Income Tax Expense
- ------------------
The second quarter 1999 income tax expense was approximately $1,967,000, or an
effective rate of 32.5%, as compared to $1,976,000 for the second quarter of
1998, or an effective rate of 33.2%. During the first six months of 1999 income
tax expense was approximately $3,895,000, or an effective rate of 33.6%, as
compared to approximately $3,960,000 for the first six months of 1998, also an
effective rate of 33.6%.
Net Income
- ----------
The Company's second quarter 1999 net earnings were $0.35 per diluted share or
$4,080,000 as compared to $0.33 per diluted share or $3,969,000 for the second
quarter of 1998, representing an increase in net earnings of 6.1%. Net earnings
for the six months ended June 30, 1999 were $0.67 per diluted share or
$7,944,000, exclusive of special charges taken in the first quarter of 1999 of
approximately $247,300 net of related taxes associated with the acquisition of
Independent Bancorp, Inc. Net earnings for the six months ended June 30, 1998
were $0.63 per diluted share or $7,486,000, exclusive of an after-tax gain of
$355,000 taken in the first quarter of 1998 on the sale of a branch as
previously mentioned.
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,
1999 was 12.14% (annualized) as compared to 13.36% (annualized) for the six
months ended June 30, 1998. The Company's return on average assets was 1.32%
(annualized) and 1.38% (annualized) for the six month periods ended June 30,
1999 and 1998, respectively.
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, 1999 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>
As of June 30,1999:
Total Capital (to Risk
Weighted Assets): $137,623 15.7% is greater than or equal to $70,261 is greater than or equal to 8.0%
Tier 1 Capital (to Risk
Weighted Assets): $126,519 14.4% is greater than or equal to $35,130 is greater than or equal to 4.0%
Tier 1 Capital (to
Average Assets): $126,519 10.6% is greater than or equal to $47,812 is greater than or equal to 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 10.91% and its ratio of shareholders' equity to
assets of 10.65% at June 30, 1999.
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.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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. Each Board of Directors of the affiliate banks as well as the Board
of Directors of the Company has reviewed the overall project plans for the banks
with progress toward completion monitored regularly. To date, confirmations
have been received from the Company's primary processing vendors and
counterparties that plans have been developed to address processing of
transactions in the year 2000. The Company has reviewed all testing results to
ensure accuracy and complete preparedness. Project plans call for an ongoing
monitoring of systems to ensure full Year 2000 compliance. Contingency plans
will be monitored and updated as circumstances warrant. Regular communications
procedures have been established between the core-processing vendor and the
Company to ensure any future testing of all applications are completed and
thoroughly reviewed.
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 began on September
1, 1998 and will be ongoing through 1999. Disaster recovery and business
resumption plans have been developed based upon each Bank's unique structure.
These plans provide the Company direction in the event and unforeseen
circumstance arises due to the Year 2000. An unforeseen circumstance can be
anything from a vault not opening to a power failure to a natural disaster.
Century South's liquidity policy has been evaluated and updated to ensure an
adequate supply of cash will be on hand in the event of increased demand. All
plans will be tested and implemented before the end of third quarter 1999.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
The Company spent approximately $1,126,000 in 1998 to modify its computer
information systems. The Company expects to spend approximately $75,000 in 1999
to complete this process. The replacement of personal computers and software
will be approximately $500,000, which will be recorded as capital expenditures
and amortized. The remainder will be expensed as incurred and are not expected
to have a material effect on the Company's financial condition or results of
operations for 1999. The costs of the project have been derived from actual
expenditures plus estimated additional expenditures related to Year 2000 that
have not yet been incurred. The dates on which the Company anticipates
completion of the project along with the costs of the Year 2000 project are
based upon management's estimates, which were formulated utilizing assumptions
centered on the Year 2000 impact. There are no guarantees that these estimates
will be attained, and actual results could differ in reality from those
anticipated.
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 1998 Annual Report filed on Form 10-K.
PART II. OTHER INFORMATION
Item 4. Matters Submitted to a Vote of Security Holders
At the Annual Meeting of Shareholders held on May 26, 1999, 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, 1999
Exhibit 27.2 Financial Date Schedule as of and for the six
months ended June 30, 1998
(b) There were no reports filed on Form 8-K for the quarter ended
June 30, 1999.
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 13, 1999 By: /s/ James A. Faulkner
--------------- -----------------------------------
James A. Faulkner
Vice Chairman and Chief
Executive Officer
DATE: August 13, 1999 By: /s/ Joseph W. Evans
--------------- -----------------------------------
Joseph W. Evans
President, Chief Operating
Officer and Chief Financial
Officer
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, 1999 and 1998.
Basic Diluted
Earnings Earnings
Per Share Per Share
--------- ---------
(amounts in thousands,
except per share data)
For the three months ended June 30, 1999:
Net income $ 4,080 4,080
======= ======
Weighted average number of common
shares outstanding 11,743 11,743
Common share equivalents resulting
from dilutive stock options - 66
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 11,743 11,809
======= ======
Net income per common share $ 0.35 0.35
======= ======
For the three months ended June 30, 1998:
Net income $ 3,969 3,969
======= ======
Weighted average number of common
shares outstanding 11,640 11,640
Common share equivalents resulting
from dilutive stock options - 223
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 11,640 11,863
======= ======
Net income per common share $ 0.34 0.33
======= ======
<PAGE>
Basic Diluted
Earnings Earnings
Per Share Per Share
--------- ---------
(amounts in thousands,
except per share data)
For the six months ended June 30, 1999:
Net income $ 7,697 7,697
======= ======
Weighted average number of common
shares outstanding 11,735 11,735
Common share equivalents resulting
from dilutive stock options - 121
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 11,735 11,856
======= ======
Net income per common share $ 0.66 0.65
======= ======
For the six months ended June 30, 1998:
Net income $ 7,841 7,841
======= ======
Weighted average number of common
shares outstanding 11,610 11,610
Common share equivalents resulting
from dilutive stock options - 242
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 11,610 11,852
======= ======
Net income per common share $ 0.67 0.66
======= ======
<PAGE>
Exhibit 20
CHIEF EXECUTIVE OFFICER'S MESSAGE
Dear Shareholder:
We are pleased to report net earnings for Century South Banks, Inc. for the
second quarter of 1999. Net income for the quarter was $4,080,000 or $0.35 per
diluted share as compared to $3,969,000 or $0.33 per diluted share for the
second quarter of 1998, representing an increase in net income of 2.8%. Year-to-
date earnings at June 30, 1999 were $7,944,000 or $0.67 per diluted share,
exclusive of special charges taken in the first quarter of 1999 of approximately
$247,300, net of related taxes, associated with the acquisition of Independent
Bancorp, Inc. Year-to-date earnings at June 30, 1998 were $7,486,000 or $0.63
per diluted share, exclusive of an after-tax gain of $355,000 taken in the first
quarter of 1998 on the sale of a branch.
The quarterly cash dividend of $0.12 per share paid on July 6, 1999
represents a 10.34% increase over the same quarter of 1998 dividend.
We continue to be pleased with the results of our Company's operations.
Total assets at June 30, 1999 were approximately $1,206,419,000. Return on
average assets was 1.32% as compared to 1.38% for the six-month period ended
June 30, 1998. At June 30, 1999, our allowance for loan losses was 1.51% of
total loans outstanding and nonperforming assets as a percentage of total assets
were 0.71%. Both our allowance for loan losses and our nonperforming assets, as
a percentage of total assets, compare favorably with our peer group.
The annualized asset growth rate of 10.8%, and the annualized loan growth
rate of 12.8% in second quarter are most gratifying. This growth was attained
while maintaining a very strong net interest margin of 5.41% and an annualized
net charge-off ratio of 0.17%.
The successful integration of Independent Bank of Oxford, Alabama into the
Company was completed during the second quarter with very satisfactory results.
We are continuing our focus on strategically-located acquisition candidates, and
are encouraged that these efforts will result in additional acquisitions in the
near future.
We appreciate the dedication of our committed staff of professional
bankers, and encourage your continued support of your company.
Sincerely,
James A. Faulkner
Vice Chairman and
Chief Executive Officer
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, June 30,
1999 1998
-----------------------
(amounts in thousands)
ASSETS
Cash and due from banks $ 42,838 $ 46,543
Federal funds sold 25,710 31,370
Interest-earning deposits in other banks 3,040 17,985
Investment securities 197,767 177,698
Loans, net of unearned income 893,348 841,994
Allowance for loan losses (13,473) (13,158)
Premises and equipment, net 26,593 26,666
Other assets 30,596 30,939
-----------------------
Total assets $1,206,419 $1,160,037
=======================
LIABILITIES
Noninterest-bearing deposits $ 136,980 $ 142,931
Interest-bearing deposits 903,755 876,028
Other short-term borrowings 11,500 450
Federal Home Loan Bank advances 14,230 8,331
Long-term debt 33 37
Other liabilities 11,401 10,579
-----------------------
Total liabilities 1,077,899 1,038,356
-----------------------
SHAREHOLDERS' EQUITY
Common stock 11,754 11,762
Additional paid-in capital 35,922 35,993
Retained earnings 83,119 73,357
Unearned compensation-restricted stock awards (869) -
Common stock in treasury, at cost - (306)
Accumulated other comprehensive income (1,406) 875
-----------------------
Total shareholders' equity 128,520 121,681
-----------------------
Total liabilities and shareholders' equity $1,206,419 $1,160,037
=======================
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended Six months ended
June 30, June 30,
1999 1998* 1999 1998*
---------------------------------------------
(amounts in thousands, except per share data)
Interest income $ 24,838 $ 25,058 $ 48,676 $ 49,750
Interest expense 10,227 10,709 19,946 21,480
----------------------------------------------
Net interest income 14,611 14,349 28,730 28,270
Provision for loan losses 691 562 1,179 1,114
Noninterest income 3,203 3,250 6,299 6,885
Noninterest expense 11,076 11,092 22,258 22,240
Income tax expense 1,967 1,976 3,895 3,960
----------------------------------------------
Net income $ 4,080 $ 3,969 $ 7,697 $ 7,841
==============================================
Weighted average common
shares outstanding
assuming dilution 11,809 11,863 11,856 11,852
Net income per share
assuming dilution $ 0.35 $ 0.33 $ 0.65 $ 0.66
Dividends declared per
share $0.12000 $0.10875 $0.24000 $0.21625
. First quarter of 1998 included an after-tax gain totaling $355,000 recognized
- -------------------------------------------------------------------------------
on the sale of a branch. 1998 numbers have also been restated to reflect the
-----------------------------------------------------------------------------
acquisition of Independent Bancorp, Inc.
----------------------------------------
<PAGE>
CENTURY SOUTH BANKS
- -------------------------------------------------------------------
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
E. Max Crook Executive Vice President
J. Perry Hendrix Executive Vice President
J. Thomas Wiley, Jr. Executive Vice President
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 Peoples Bank
60 Main Street West 13321 Jones Street
Dahlonega, GA 30533 Lavonia, GA 30553
John L. Lewis, President J. Douglas Cleveland, President
706-864-3314 706-356-8040
The Bank of Ellijay Bank of Danielsville
Sand and Broad Street Courthouse Square
Ellijay, GA 30540 Danielsville, GA 30633
Britt H. Henderson, President L. Banister Sexton, President
706-276-3400 706-795-2121
First Bank of Polk County First South Bank, N.A.
40 Ocoee Street 4951 Forsyth Road
Copperhill, TN 37317 Macon, GA 31210
James R. Quintrell, President E. Max Crook, President
Sidney J. Wooten, Chief Executive Officer 912-757-2000
423-496-3261
Georgia First Bank, N.A. AmeriBank, N.A.
455 Jesse Jewell Parkway 7393 Hodgson Memorial Drive
Gainesville, GA 30501 Savannah, GA 31406
Terry C. Evans, President J. Thomas Wiley, Jr., President
J. Perry Hendrix, Chief Executive Officer 912-232-3800
770-535-8000
Fannin County Bank, N.A. The Independent Bank of Oxford
480 W. First Street 402 Main Street
Blue Ridge, GA 30513 Oxford, AL 36203
Steve M. Eaton, President Joel B. Carter, President
706-632-2075 256-835-1776
First Community Bank of Dawsonville
136 Highway 400 South
Dawsonville, GA 30534
Gary L. Evans, President
706-216-5050
<PAGE>
FINANCIAL HIGHLIGHTS (UNAUDITED)
SELECTED BALANCES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of and for six months
ended June 30,
1999 1998* Percentage Change
---------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C>
Loans, net $ 879,875 $ 828,836 6.16%
Deposits 1,040,735 1,018,959 2.14
Total assets 1,206,419 1,160,037 4.00
Shareholders' equity 128,520 121,681 5.62
Net income 7,697 7,841 (1.84)
Book value per share 10.93 10.40 5.10
Net income per share assuming dilution 0.65 0.66 (1.52)
Weighted average common shares outstanding
Assuming dilution 11,856 11,852 0.03
Nonperforming loans 4,188 3,836 9.18
Other real estate and other
Nonperforming assets 4,352 5,046 (13.75)
FINANCIAL RATIOS
- --------------------------------------------------------------------------------
Return on average assets 1.32% 1.38% (4.35)%
Return on average shareholders' equity 12.14 13.36 (9.13)
Net interest margin (taxable equivalent) 5.41 5.47 (1.10)
Allowance for loan losses to loans 1.51 1.56 (3.21)
Nonperforming assets to total assets 0.71 0.77 (7.79)
</TABLE>
. First quarter of 1998 included an after-tax gain totaling $355,000 recognized
on the sale of a branch. 1998 numbers have also been restated to reflect the
acquisition of Independent Bancorp, Inc.
<PAGE>
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
STOCK INFORMATION
Century South Banks, Inc. ("CSBI") lists its stock for trading on the Nasdaq
National Market tier of The Nasdaq Stock Market under the Symbol "CSBI". Market
prices for the quarter ended June 30, 1999 are as follows:
Three month high ......................... $ 27.50
Three month low .......................... $ 22.00
Closing price ............................ $ 22.50
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICES
Shareholders wishing to change the name or address on their stock, to report
lost certificates or to consolidate accounts should contact:
Registrar and Transfer Company
Attn: Investor Relations
10 Commerce Drive
Cranford, New Jersey 07016
(800) 368-5948
- --------------------------------------------------------------------------------
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:
Registrar and Transfer Company
Attn: Investor Relations
10 Commerce Drive
Cranford, New Jersey 07016
(800) 368-5948
- --------------------------------------------------------------------------------
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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 42,838
<INT-BEARING-DEPOSITS> 3,040
<FED-FUNDS-SOLD> 25,710
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 173,026
<INVESTMENTS-CARRYING> 24,741
<INVESTMENTS-MARKET> 25,430
<LOANS> 893,348
<ALLOWANCE> 13,473
<TOTAL-ASSETS> 1,206,419
<DEPOSITS> 1,040,735
<SHORT-TERM> 11,500
<LIABILITIES-OTHER> 11,401
<LONG-TERM> 14,263
0
0
<COMMON> 11,754
<OTHER-SE> 116,766
<TOTAL-LIABILITIES-AND-EQUITY> 1,206,419
<INTEREST-LOAN> 42,545
<INTEREST-INVEST> 5,123
<INTEREST-OTHER> 1,008
<INTEREST-TOTAL> 48,676
<INTEREST-DEPOSIT> 19,308
<INTEREST-EXPENSE> 19,946
<INTEREST-INCOME-NET> 28,730
<LOAN-LOSSES> 1,179
<SECURITIES-GAINS> 440
<EXPENSE-OTHER> 22,258
<INCOME-PRETAX> 11,592
<INCOME-PRE-EXTRAORDINARY> 11,592
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,697
<EPS-BASIC> 0.66
<EPS-DILUTED> 0.65
<YIELD-ACTUAL> 5.41
<LOANS-NON> 4,188
<LOANS-PAST> 636
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 13,035
<CHARGE-OFFS> 1,244
<RECOVERIES> 503
<ALLOWANCE-CLOSE> 13,473
<ALLOWANCE-DOMESTIC> 13,473
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 46,543
<INT-BEARING-DEPOSITS> 17,985
<FED-FUNDS-SOLD> 31,370
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 130,734
<INVESTMENTS-CARRYING> 46,964
<INVESTMENTS-MARKET> 47,630
<LOANS> 841,994
<ALLOWANCE> 13,158
<TOTAL-ASSETS> 1,160,037
<DEPOSITS> 1,018,959
<SHORT-TERM> 450
<LIABILITIES-OTHER> 10,579
<LONG-TERM> 8,368
0
0
<COMMON> 11,762
<OTHER-SE> 109,919
<TOTAL-LIABILITIES-AND-EQUITY> 1,160,037
<INTEREST-LOAN> 42,466
<INTEREST-INVEST> 5,695
<INTEREST-OTHER> 1,589
<INTEREST-TOTAL> 49,750
<INTEREST-DEPOSIT> 21,280
<INTEREST-EXPENSE> 21,480
<INTEREST-INCOME-NET> 28,270
<LOAN-LOSSES> 1,114
<SECURITIES-GAINS> 37
<EXPENSE-OTHER> 22,240
<INCOME-PRETAX> 11,801
<INCOME-PRE-EXTRAORDINARY> 11,801
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,841
<EPS-BASIC> 0.67
<EPS-DILUTED> 0.66
<YIELD-ACTUAL> 5.47
<LOANS-NON> 3,836
<LOANS-PAST> 1,263
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 12,853
<CHARGE-OFFS> 1,219
<RECOVERIES> 411
<ALLOWANCE-CLOSE> 13,158
<ALLOWANCE-DOMESTIC> 13,158
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
