<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 March 31, 2000
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.)
2325 Lakeview Parkway, Suite 450, Alpharetta, Georgia 30004-1976
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(678) 624-1366
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
60 Main Street West, P.O. Box 1000, Dahlonega, Georgia 30533
- --------------------------------------------------------------------------------
(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 May 5, 2000
- --------------------------------------------------------------------------------
Common stock, $1.00 par value 13,742,582
<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 17
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 18
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
--------------------------------------
(amounts in thousands,
except share data)
<S> <C> <C>
Assets
- ------
Cash and due from banks $ 49,953 65,373
Federal funds sold 9,832 9,080
Interest-earning deposits in other banks 2,408 2,776
Investment securities:
Available for sale 238,560 199,877
Held to maturity (fair value: March
31, 2000 - $35,187 and December 31,
1999 - $37,271) 35,544 36,714
Loans, net of unearned income 1,166,424 1,030,373
Less allowance for loan losses 17,023 15,183
---------- ---------
Loans, net 1,149,401 1,015,190
---------- ---------
Premises and equipment, net 33,998 30,318
Goodwill and other intangibles, net 10,691 4,331
Other assets 33,945 29,743
---------- ---------
Total assets $1,564,332 1,393,402
========== =========
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
Deposits:
Noninterest-bearing demand deposits $ 163,706 164,807
Interest-bearing deposits 1,172,236 1,024,802
---------- ---------
Total deposits 1,335,942 1,189,609
Federal funds purchased 15,507 11,022
Federal Home Loan Bank advances 43,110 41,491
Long-term debt 4,530 31
Other short-term borrowings 522 -
Accrued expenses and other liabilities 15,689 15,164
---------- ---------
Total liabilities 1,415,300 1,257,317
---------- ---------
Shareholders' Equity:
Common Stock-$1 par value. Authorized
30,000,000 shares; issued 13,963,344
and 13,033,856 shares at March 31, 2000
and December 31, 1999, respectively; and
outstanding 13,799,050 and 12,789,856
shares at March 31, 2000 and December
31, 1999, respectively 13,963 13,562
Additional paid-in capital 46,398 40,672
Retained earnings 96,850 92,460
Unearned compensation-restricted stock awards (648) (721)
Common stock in treasury (164,294 shares at
March 31, 2000 and 244,000 shares at
December 31, 1999, respectively), at cost (3,850) (6,014)
Accumulated other comprehensive income (loss) (3,681) (3,874)
---------- ---------
Total shareholders' equity 149,032 136,085
---------- ---------
Total liabilities and shareholders' equity $1,564,332 1,393,402
========== =========
</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
March 31,
2000 1999
---------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C>
Interest income:
Loans, including fees $27,127 22,939
Federal funds sold 299 503
Interest on deposits in other banks 58 55
Investment securities:
Taxable 3,432 1,888
Nontaxable 738 793
------- ------
Total interest income 31,654 26,178
------- ------
Interest expense:
Deposits 13,158 10,482
Federal funds purchased 178 114
Federal Home Loan Bank advances 638 212
Long-term debt and other borrowings 40 6
------- ------
Total interest expense 14,014 10,814
------- ------
Net interest income 17,640 15,364
Provision for loan losses 683 547
------- ------
Net interest income after
provision for loan losses 16,957 14,817
------- ------
Noninterest income:
Service charges on deposit accounts 1,596 1,621
Securities gains, net 81 240
Other operating income 1,652 1,411
------- ------
Total noninterest income 3,329 3,272
------- ------
Noninterest expense:
Salaries and employee benefits 7,198 6,734
Net occupancy and equipment expense 1,909 1,705
Other operating expenses 3,725 3,464
------- ------
Total noninterest expense 12,832 11,903
------- ------
Income before income taxes 7,454 6,186
Income tax expense 2,425 2,116
------- ------
Net income $ 5,029 4,070
======= ======
Net income per share:
Basic $ 0.37 0.30
======= ======
Diluted $ 0.37 0.30
======= ======
Cash dividends declared per share $ 0.13 0.12
======= ======
</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>
Three months ended
March 31,
2000 1999
-----------------------
(amounts in thousands)
<S> <C> <C>
Net cash provided by operating activities $ 665 5,719
--------- --------
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale 7,229 6,083
Principal collections and maturities of investment securities:
Available for sale 16,571 21,502
Held to maturity 1,329 1,986
Proceeds from maturities of interest-earning deposits 30,112 23,737
Purchases of investment securities held to maturity (150) (1,546)
Purchases of investment securities available for sale (32,151) (18,141)
Investment in interest-earning deposits (29,264) (21,925)
Net increase in loans (37,706) (14,773)
Proceeds from sales of real estate acquired through foreclosure 276 243
Purchases of premises and equipment (966) (2,164)
Proceeds from sale of premises and equipment 25 13
Payment for purchase of Haywood, net of cash acquired (13,020) -
--------- --------
Net cash used in investing activities (57,715) (4,985)
--------- --------
Cash flows from financing activities:
Net increase in deposits 47,710 17,544
Net increase in federal funds purchased 4,485 5,710
Net increase in other borrowings 4,696 1,472
Proceeds from issuance of Federal Home Loan Bank advances 644 -
Payments on long-term debt and Federal Home Loan
Bank advances (10,026) (2,026)
Dividends paid to shareholders (1,383) (1,290)
Purchase of treasury stock (3,850) (345)
Proceeds from issuance of common stock 106 13
--------- --------
Net cash provided by financing activities 42,382 21,078
--------- --------
Net (decrease) increase in cash and cash equivalents (14,668) 21,812
Cash and cash equivalents at beginning of period 74,453 95,388
--------- --------
Cash and cash equivalents at end of period $ 59,785 117,200
========= ========
Supplemental disclosure of cash paid during the period for:
Interest $ 14,099 12,933
========= ========
Income taxes $ 1,307 2,505
========= ========
Supplemental schedule of noncash investing and financing
activities:
Real estate acquired through foreclosure $ 458 342
========= ========
Real estate sold and financed by the Company $ 318 754
========= ========
Treasury stock issued by the Company in merger $ 6,014 98
========= ========
Issuance of common stock for acquisition $ 13,364 -
========= ========
</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,
Century South Bank of Dahlonega ("BOD"), Century South Bank of Ellijay ("BOE"),
Century South Bank of Polk County ("FBPC"), Century South Bank of Northeast
Georgia, N.A.("GFB"), Century South Bank of Fannin County, N.A. ("FCB"), Century
South Bank of Dawsonville ("FCBD"), Cenury South Bank of Lavonia ("PBL"),
Century South Bank of Danielsville ("DAN"), Century South Bank of Central
Georgia, N.A.("FSB"), Century South Bank of the Coastal Region, N.A. ("AMB"),
Century South Bank of Alabama ("IBO") and Century South Bank of the Carolinas
(collectively "the Company"). In connection with the single brand initiative,
the names of the subsidiaries were changed effective May 8, 2000.
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 March 31, 2000 was
$5,222,000 compared to $3,958,000 for the three months ended March 31, 1999.
(3) Long-Term Debt and Short-Term Borrowings
----------------------------------------
On January 30, 2000, the Company renewed a $15,000,000 revolving line of credit
with a bank which is payable on demand and matures on January 30, 2001. 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 March 31, 2000, $4,500,000 had been drawn on 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 March 31, 2000, the total advances under these lines approximated
$43.1 million. During the first quarter of 2000, $10 million matured at one of
the subsidiaries and advances of $13.9 million were obtained due to the recent
acquisitions detailed below. 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 acquisitions
-------------------
On February 15, 2000, the Company completed a merger with Lanier Bankshares,
Inc. ("LBI") and its subsidiary bank, Lanier National Bank, located in
Gainesville, Georgia. The Company issued 1,766,021 shares of its common stock
in exchange for all of the issued and outstanding shares of LBI. The
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 months ended March
31, 2000 and March 31, 1999 have been restated for the merger with LBI as
follows:
<TABLE>
<CAPTION>
Three months ended
March 31,
(Amounts in thousands) 2000 1999
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest income:
Century South Banks, Inc. exclusive
of acquisition amounts $29,215 23,838
Lanier Bankshares, Inc. and subsidiary 2,439 2,340
------- ------
Total $31,654 26,178
======= ======
Net interest income:
Century South Banks, Inc. exclusive
of acquisition amounts $16,335 14,118
Lanier Bankshares, Inc. and subsidiary 1,305 1,246
------- ------
Total $17,640 15,364
======= ======
Noninterest income:
Century South Banks, Inc. exclusive
of acquisition amounts $ 3,093 3,097
Lanier Bankshares, Inc. and subsidiary 236 175
------- ------
Total $ 3,329 3,272
======= ======
Net income:
Century South Banks, Inc. exclusive
of acquisition amounts $ 4,426 3,617
Lanier Bankshares, Inc. and subsidiary 603 453
------- ------
Total $ 5,029 4,070
======= ======
</TABLE>
7
<PAGE>
CENTURY SOUTH BANKS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Effective February 15, 2000, the Company acquired all of the issued and
outstanding shares of Haywood Bancshares, Inc. ("Haywood"), a one-bank holding
company in western North Carolina for a purchase price of approximately
$26,854,000 which included 626,469 shares of the Company's common stock at
$21.3321 per share, approximately $2,000 of cash in lieu of fractional shares,
approximately $13,264,000 in cash and other acquisition costs of approximately
$224,000. The acquisition was accounted for using the purchase method of
accounting and, hence, the results of operations of Haywood have been included
in the consolidated financial statements from the aforementioned effective date.
The assets and liabilities of Haywood, including purchase accounting
adjustments, as of the date of acquisition were as follows:
Loans, net $109,833,000
Other earning assets 31,714,000
Other assets 8,458,000
Goodwill and other intangibles 5,631,000
------------
155,636,000
Deposits 116,748,000
Other liabilities 12,034,000
------------
Purchase price $ 26,854,000
============
The following summarizes the unaudited pro forma consolidated results of
operations assuming Haywood had been acquired in a purchase accounting
transaction on January 1, 1999:
Three months ended
March 31, March 31,
2000 1999
--------- ---------
Interest income $32,494,000 28,691,000
=========== ==========
Net interest income 18,024,000 16,499,000
=========== ==========
Noninterest income 3,356,000 3,407,000
=========== ==========
Net income 5,117,000 4,300,000
=========== ==========
Diluted net income per share based
on weighted average outstanding
shares of 13,875,075 and
14,300,790 at March 31, 2000
and March 31, 1999, respectively $ 0.37 0.30
=========== ==========
(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.
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 March 31,
2000, compared to December 31, 1999, and results of operations for the three
month period ended March 31, 2000, compared to the three month period ended
March 31, 1999. This discussion should be read in conjunction with the
Company's unaudited consolidated financial statements and accompanying notes
appearing elsewhere in this report.
On February 15, 2000, the Company acquired Haywood Bancshares, Inc., a bank
holding company located in Waynesville, North Carolina, and its savings bank
subsidiary, HSB. Also, on February 15, 2000, the Company completed the
acquisition of Lanier Bankshares, Inc., a bank holding company located in
Gainesville, Georgia, and its bank subsidiary, LNB.
FINANCIAL CONDITION
-------------------
During the first three months of 2000, total assets increased $170.9 million or
approximately 12.3%, primarily due to the merger with Haywood Bancshares, Inc.
which added approximately $159.0 million in assets. This merger was accounted
for as a purchase. Exclusive of the Haywood merger, total assets increased
$12.0 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 March 31, 2000
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 $133,313 119 (4,061) 129,371
State, county and
municipal securities 22,851 405 (366) 22,890
Mortgage-backed securities 17,501 60 (266) 17,295
Other debt securities 63,953 3 (2,278) 61,678
Equity securities 7,516 - (190) 7,326
------------------------------------------------
$245,134 587 (7,161) 238,560
------------------------------------------------
Held to maturity:
U.S. Government agencies $ 3,891 5 (152) 3,744
State, county and
municipal securities 29,234 248 (501) 28,981
Mortgage-backed securities 462 5 (6) 461
Other debt securities 1,957 44 - 2,001
------------------------------------------------
$ 35,544 302 (659) 35,187
------------------------------------------------
</TABLE>
Balances within the major deposit categories as of March 31, 2000 and December
31, 1999 are shown below:
<TABLE>
March 31, December 31,
2000 1999
------------------------
(amounts in millions)
<S> <C> <C>
Noninterest-bearing demand deposits $ 163.7 164.8
Interest-bearing demand deposits 187.5 159.3
Money market accounts 194.3 171.6
Savings deposits 78.3 63.2
Certificates of deposit and
Individual retirement accounts
of $100,000 or more 220.2 215.6
Other individual retirement accounts 61.3 56.2
Other certificates of deposit 430.6 358.9
-------- -------
$1,335.9 1,189.6
======== =======
</TABLE>
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 March 31, 2000, the Company's cash and due from banks was $50.0 million, its
federal funds sold were $9.8 million, its interest-earning deposits in other
banks were $2.4 million, and its investment securities designated as available
for sale were $238.6 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 $83.8 million, in addition to credit, which is available in the
form of Federal Home Loan Bank advances. Also, the Company has a secured
revolving line of credit with a bank of $15,000,000 of which $10,500,000 was
available at March 31, 2000.
During the first quarter of 2000, the Company acquired 164,294 shares of its
common stock as treasury shares. For an approximate 3 month period ending on or
about May 15, 2000, the Company has authorized the repurchase of up to 217,706
shares as share float permits.
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 March 31, 2000.
<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 $ 440,324 237,256 677,580 531,464 1,209,044 243,724 1,452,768
Interest-sensitive
liabilities 668,215 338,427 1,006,642 193,996 1,200,638 35,267 1,235,905
--------- -------- --------- ------- --------- ------- ---------
Interest-sensitivity gap $(227,891) (101,171) (329,062) 337,468 8,406 208,457 216,863
========= ======== ======== ======= ========= ======= =========
Ratio of interest-sensitive
assets to interest-
sensitive liabilities 0.66 0.70 0.67 2.74 1.01 6.91 1.18
========= ========= ======== ======= ========= ======= =========
</TABLE>
The Company's strategy is to maintain a ratio of interest sensitive assets to
interest sensitive liabilities in the range of .80 to 1.20 at the less than one
year time frame. At March 31, 2000, the Company was slightly below this range.
However, this slight deviation is not considered significant due to the nature
of sensitivity. For example, the ratio in the one-year time frame is
significantly impacted by the classification of all interest bearing demand and
savings deposits as immediately rate sensitive for purpose of this analysis.
These accounts are generally less sensitive to short-term interest rate
movements. Derivative financial instruments, consisting primarily of interest
rate swaps and purchased floors, are components of the Company's interest risk
management profile. The Company uses these instruments to limit its sensitivity
to changes in interest rates and thus limit the volatility of net interest
income. Management currently believes its interest sensitivity position is such
that short-term interest rate movements would not materially impact its net
interest income.
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 March 31, 2000 increased
$2,276,000 or 14.81% over the same period of 1999. The average yield earned on
interest-earning assets, on a tax equivalent basis, decreased to 9.11% for the
three months ended March 31, 2000 from 9.15% for the three months ended March
31, 1999 and the average rate paid on interest-bearing liabilities increased to
4.76% for the three months ended March 31, 2000 from 4.57% for the three months
ended March 31, 1999. The Company's interest rate differential decreased to
4.35% from 4.58% and its net interest margin (net interest income divided by
average interest-earning assets) decreased to 5.11% for the first three months
of 2000 from 5.40% for the same period of 1999.
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 all other
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 1.46% of outstanding loans at March
31, 2000 as compared to 1.47% at December 31, 1999 and 1.54% at March 31, 1999.
The allowance increased to $17,023,000 at March 31, 2000 from $15,183,000 at
December 31, 1999 and $14,440,000 at March 31, 1999. The provision for loan
losses increased to $683,000 for the three months ended March 31, 2000 from
$547,000 for the three months ended March 31, 1999. Net loan charge offs for the
three months ended March 31, 2000 were $221,000 as compared to $215,000 for the
three months ended March 31, 1999. Net loans charged off as a percentage of
average loans was 0.08% for the three months ended March 31, 2000 as compared to
0.09% for the three months ended March 31, 1999.
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
three months ended March 31, 2000 and the year ended December 31, 1999.
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------------------
<S> <C> <C>
Allowance for loan losses at
beginning of year $15,183 12,853
Loans charged off 434 3,193
Recoveries on loans previously
charged off 213 798
------- ------
Net loans charged off 221 2,395
Allowances for loan losses of
loans of subsidiary purchased 1,378 -
Provision for loan losses
charged to income 683 2,593
------- ------
Allowance for loan losses at
end of period $17,023 15,183
======= ======
</TABLE>
Nonperforming Loans, Nonperforming Assets, and Underperforming Loans
- --------------------------------------------------------------------
Nonperforming loans include nonaccrual loans. The Company has not restructured
any loans of significance through March 31, 2000. Underperforming loans include
loans, which are past due with respect to principal or interest more than 90
days and still accruing interest. Nonperforming assets include nonperforming
loans, underperforming loans, real estate acquired through foreclosure,
securities that are in default, and other repossessed assets.
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,
underperforming loans, nonperforming assets, and certain asset quality ratios
at March 31, 2000 and December 31, 1999.
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
-----------------------------------------------------
(amounts in thousands, except ratios and percentages)
<S> <C> <C>
Nonperforming loans $6,144 5,153
Other nonperforming assets 2,636 2,763
Underperforming loans 682 700
------ -----
Nonperforming assets $9,462 8,616
====== =====
Asset Quality Ratios:
Nonperforming loans to total loans,
net of unearned income 0.53% 0.50%
====== =====
Nonperforming assets to total loans,
net of unearned income,real estate
acquired through foreclosure, and
other repossessed assets 0.81% 0.83%
====== =====
Allowance for loan losses to
nonperforming loans 2.77x 2.95x
====== =====
Underperforming loans to total loans,
net of unearned income 0.06% 0.07%
====== =====
</TABLE>
Noninterest Income
- ------------------
Noninterest income for the first quarter of 2000 increased $57,000 or 1.7% as
compared to the same period of 1999. This increase was primarily due to an
increase in discount brokerage fees of $125,000 and an increase in insurance
commissions of $89,000 which are partially offset by a decrease in service
charges on deposit accounts of $25,000 and a decrease in net securities gains of
$159,000.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
Noninterest Expense
- -------------------
Noninterest expense increased $929,000 for the first quarter of 2000 compared to
the first quarter of 1999. Approximately $448,000 or 48% of this increase is
represented by the noninterest expense of Haywood as such expenses have been
included since the February 15, 2000 date of acquisition. Excluding the Haywood
impact, salaries and benefits expense increased $216,000 or 3.2% in 2000
compared to 1999 and net occupancy and equipment expense increased $158,000 or
9.3% in the same period comparison. Normal compensation adjustments and growth
of the Company have resulted in these increases. Telecommunications expenses
have increased by approximately $92,000 in the first quarter of 2000 compared to
the first quarter of 1999 as the Company has expanded its subsidiary bank
network into Alabama and North Carolina. Merger-related expenses were recorded
in both the first quarter of 2000 and the first quarter of 1999 associated with
the acquisitions of Lanier and Independent. Such expenses aggregated
approximately $________ in 2000 compared to $360,000 in 1999.
Income Tax Expense
- ------------------
The first quarter 2000 income tax expense was approximately $2,425,000, or an
effective rate of 32.5%, as compared to $2,116,000 for the first quarter of
1999, or an effective rate of 34.2%.
Net Income
- ----------
The Company's first quarter 2000 net earnings were $0.37 per diluted share or
$5,029,000 as compared to $0.30 per diluted share or $4,070,000 for the first
quarter of 1999, representing an increase in net earnings of 23.6%. First
quarter of 1999 included special charges of approximately $247,300, net of
related taxes associated with the acquisition of Independent Bancorp, Inc.
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 three months ended March
31, 2000 was 13.87% (annualized) as compared to 12.02% (annualized) for the
three months ended March 31, 1999. The Company's return on average assets was
1.35% (annualized) and 1.31% (annualized) for the three month periods ended
March 31, 2000 and 1999, 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 March 31, 2000 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 March 31, 2000:
Total Capital (to Risk
Weighted Assets): $156,466 14.0% greater than or equal to $89,304 greater than or equal to 8.0%
Tier 1 Capital (to Risk
Weighted Assets): $142,474 12.8% greater than or equal to $44,652 greater than or equal to 4.0%
Tier 1 Capital (to
Average Assets): $142,474 9.5% greater than or equal to $60,266 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 9.72% and its ratio of shareholders' equity to assets
of 9.53% at March 31, 2000.
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 prevents
systems from properly recognizing dates after the year 1999. 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 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 would impact operation of these systems.
All plans were finalized, tested, and implemented before third quarter 1999.
Cash reserves for the Year 2000 issue reached $11 million by December 31, 1999.
With no significant cash withdrawals, all of these special Year 2000 cash
reserves were eliminated by January 7, 2000.
The Company spent approximately $1.2 million to modify its computer information
systems. The replacement of personal computers and software was approximately
$700,000, which was recorded as capital expenditures and amortized. The
remainder was expensed as incurred and did not have a material effect on the
Company's financial condition or results of operation.
Overall, the Company's Year 2000 program was successful. No disruption of
business occurred due to the Year 2000 issue. However, there are several dates
that have been and will be closely monitored for the coming year and in the
future. All software and computer related components will continue to be
required to undergo Year 2000 testing and/or certification.
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 1999 Annual Report filed on Form 10-K.
PART II. OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
The following exhibits are attached:
Exhibit 10.4.1 Amendment to Employment Agreement of James A.
Faulkner
Exhibit 11 Computation of Per Share Earnings
Exhibit 20 Shareholders' Report
Exhibit 27.1 Financial Data Schedule as of and for the three
months ended March 31, 2000
Exhibit 27.2 Financial Date Schedule as of and for the three
months ended March 31, 1999
(b) There were no reports filed on Form 8-K for the
quarter ended March 31, 2000.
17
<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: May 15, 2000 By: /s/ Joseph W. Evans
------------ ------------------------
Joseph W. Evans
President and Chief
Executive Officer
DATE: May 15, 2000 By: /s/ Stephen W. Doughty
------------ ---------------------------
Stephen W. Doughty
Chief Risk Management
Officer and Chief Financial
Officer
18
<PAGE>
EXHIBIT INDEX
10.4.1 Amendment to Employment Agreement of James A. Faulkner
11 Computation of Per Share Earnings
20 Shareholders' Report
27.1 Financial Data Schedule as of and for the three months ended
March 31, 2000
27.2 Financial Date Schedule as of and for the three months ended
March 31, 1999
<PAGE>
EXHIBIT 10.4.1
AMENDMENT TO EMPLOYMENT AGREEMENT
THIS AMENDMENT, dated as of August 30, 1999 (this "Amendment"), to that
certain Employment Agreement, dated as of November 1, 1995, (the "Agreement") by
and between CENTURY SOUTH BANKS, INC. ("CSBI"), a corporation organized and
existing under the laws of the State of Georgia, and JAMES A. FAULKNER
("Employee"), a resident of the State of Georgia.
RECITALS
CSBI and Employee (collectively, the "Parties") recite and declare:
A. The Parties have heretofore entered into the Agreement.
B. The Parties desire to further amend the Agreement as set forth below.
C. All capitalized terms used in this Agreement without definition shall
have the meanings assigned to them in the Agreement.
SECTION I
AMENDMENT OF SECTION 1
Section 1 of the Agreement is hereby amended to delete in its entirety the
provision of Section 1 and substitute, in lieu thereof, the following new
Section 1 as follows:
1. Employment and Duties. CSBI hereby employs Employee to serve in the
following capacities for the periods indicated:
1.1 For the period beginning on November 1, 1995 through and including
December 31, 1999, as Vice-Chairman and Chief Executive Officer of CSBI and to
perform such duties and responsibilities as customarily performed by persons
acting in such capacity. During such period, Employee will devote his full time
and efforts to his duties hereunder;
1.2 For the period beginning on January 1, 2000 and ending on December
31, 2005, as Vice-Chairman of CSBI and to serve as chairman of the Executive
Committee of the Board of Directors of CSBI primarily involved in mergers and
acquisitions and as a member of the board of directors of up to five of CSBI's
bank subsidiaries, such number to be mutually agreed upon by the Parties. During
such period, Employee will devote approximately 50% of his normal business hours
to his duties hereunder; and
1.3 For the period beginning on January 1, 2006 and ending December
31, 2011, it is contemplated that Employee will serve in the capacity comparable
to current Vice-Chairman, J. Russell Ivie, with the specific role and capacity
to be determined by CSBI's Board of Directors on or before September 30, 2005.
Notwithstanding Employee's ultimate capacity during such period, Company will
pay to Employee not less than $100,000 per annum and such benefits comparable to
that currently received by Vice-Chairman Ivie. During such period, Employee will
devote approximately 5.0% of his normal business hours to his duties hereunder.
<PAGE>
SECTION II
AMENDMENT OF SECTION 2
Section 2 of the Agreement is hereby amended to delete in its entirety the
provision of Section 2 and substitute, in lieu thereof, the following new
Section 2 as follows:
Subject to the provisions of Section 14 of this Agreement, the period of
Employee's employment under this Agreement shall be deemed to have commenced as
of November 1, 1995, and shall end December 31, 2011, unless the Employee dies
before the end of such period, in which case the period of employment shall
continue until the end of the month of such death.
SECTION III
AMENDMENT OF SECTIONS 3 and 5
Sections 3 and 5 of the Agreement are hereby amended to provide that the
compensation and benefits to be provided to Employee by CSBI shall be as
follows:
COMPENSATION
(i) For the period from January 1, 2000 to December 31, 2000 - $250,000 per
annum to be paid in 24 twice monthly payments on the fifteenth and last day of
each month hereunder;
(ii) For the period from January 1, 2001 to December 31, 2005 - $200,000
per annum to be paid in 24 twice monthly payments on the fifteenth and last day
of each month hereunder; and
(iii) For the period from January 1, 2006 to December 31, 2011 an amount
not less than $100,000 per annum to be paid in 24 twice monthly payments on the
fifteenth and last day of each month hereunder.
BENEFITS:
Employee benefits remain identical to those provided to Employee in July
1999. Further, CSBI will provide a suitable furnished and functioning office in
Dahlonega, Georgia or at such other location as the parties agree for Employee
for the period beginning January 1, 2000 and ending December 31, 2011.
SECTION IV
AMENDMENT TO REFERENCES IN SECTION 13
The firm and address reference associated with Thomas O. Powell, Esquire
shall be changed to Troutman Sanders LLP, 600 Peachtree Street, Suite 5200, Bank
of America Plaza, Atlanta, Georgia 30308 -2216. The address associated with
Employee shall be changed to ____________________, Dawsonville, Georgia _______.
2
<PAGE>
SECTION V
EFFECT OF THIS AMENDMENT
Except as expressly modified by this Amendment, the Parties ratify and
confirm the Agreement in all respects.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment on the
date first written above.
<TABLE>
<CAPTION>
ATTEST: "CSBI"
CENTURY SOUTH BANKS, INC.
<S> <C>
By: /s/ Susan J. Anderson /s/ Joseph W. Evans
------------------------------ ----------------------------
Its: Senior Vice President Joseph W. Evans, President
and Corporate Secretary
(CORPORATE SEAL)
WITNESS: "Employee"
/s/ Haroleta L. Campbell /s/ James A. Faulkner
- ------------------------ ----------------------------
Haroleta L. Campbell James A. Faulkner
</TABLE>
3
<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 month periods
ended March 31, 2000 and 1999.
<TABLE>
<CAPTION>
Basic Diluted
Earnings Earnings
Per Share Per Share
--------- ---------
(amounts in thousands, except per share data)
<S> <C> <C>
For the three months ended March 31, 2000:
Net income $ 5,029 5,029
======= ======
Weighted average number of common
shares outstanding 13,606 13,606
Common share equivalents resulting
from dilutive stock options - 80
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 13,606 13,686
======= ======
Net income per common share $ 0.37 0.37
======= ======
For the three months ended March 31, 1999:
Net income $ 4,070 4,070
======= ======
Weighted average number of common
shares outstanding 13,493 13,493
Common share equivalents resulting
from dilutive stock options - 181
------- ------
Adjusted weighted average number
of common and common equivalent
shares outstanding 13,493 13,674
======= ======
Net income per common share $ 0.30 0.30
======= ======
</TABLE>
19
<PAGE>
Exhibit 20
CHIEF EXECUTIVE OFFICER'S MESSAGE
Dear Shareholder:
We are pleased to report net earnings for Century South Banks, Inc. for
the first quarter of 2000. Net income for the quarter was $5,029,000 as compared
to $4,070,000 for the first quarter of 1999, an increase of 23.6%. Diluted
earnings per share were $0.37 for the first quarter of 2000 as compared to $0.30
for the first quarter of 1999. First quarter of 1999 included an after-tax
charge of $247,300 related to the acquisition of Independent Bancorp, Inc.
We continue to be pleased with the results of our company's operations.
Total assets at March 31, 2000 were approximately $1,564,332,000. Return on
average assets was 1.35% as compared to 1.31% for the period ended March 31,
1999. At March 31, 2000, our reserve for loan losses was 1.46% of total loans
outstanding and nonperforming assets as a percentage of total assets were 0.60%.
Our continued progress enabled us to increase our quarterly cash
dividend. The most recent dividend check you received in the amount of $0.13 per
share represents an 8.3% increase over the same quarter of 1999 and over the
previous quarter's dividend.
On February 15, 2000, the Company completed the acquisitions of Lanier
Bankshares, Inc., Gainesville, Georgia and Haywood Bancshares, Inc. in
Waynesville, North Carolina. We welcome them to the Century South Banks, Inc.
family and anticipate strong contributions from them in the future.
We appreciate your continued support of our Company and welcome your
comments and questions.
Sincerely,
Joseph W. Evans
President and
Chief Executive Officer
<PAGE>
Century South Banks, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, March 31,
2000 1999
----------------------
(amounts in thousands)
Assets
Cash and due from banks $ 49,953 $ 50,680
Federal funds sold 9,832 66,520
Interest-earning deposits in other banks 2,408 3,139
Investment securities 274,104 186,975
Loans, net of unearned income 1,166,424 937,591
Allowance for loan losses (17,023) (14,440)
Premises and equipment, net 33,998 30,096
Other assets 44,636 31,267
----------------------
Total assets $1,564,332 $1,291,828
======================
Liabilities
Noninterest-bearing deposits $ 163,706 $ 151,913
Interest-bearing deposits 1,172,236 962,474
Other short-term borrowings 15,507 10,110
Federal Home Loan Bank advances 43,111 15,584
Long-term debt 5,051 534
Other liabilities 15,689 12,707
----------------------
Total liabilities $1,415,300 $1,153,322
----------------------
Shareholders' Equity
Common stock 13,963 13,591
Additional paid-in capital 46,398 41,757
Retained earnings 96,850 85,399
Unearned compensation-restricted stock awards (648) (942)
Common stock in treasury, at cost (3,850) (1,815)
Accumulated other comprehensive income (3,681) 516
----------------------
Total shareholders' equity 149,032 138,506
----------------------
Total liabilities and shareholders' equity $1,564,332 $1,291,828
======================
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three months ended
March 31,
2000 1999*
----------------------
(amounts in thousands,
except per share data)
Interest income 31,654 26,178
Interest expense 14,014 10,814
-------------------
Net interest income 17,640 15,364
Provision for loan losses 683 547
Noninterest income 3,329 3,272
Noninterest expense 12,832 11,903
Income Tax expense 2,425 2,116
-------------------
Net income $ 5,029 4,070
===================
Weighted average common shares outstanding
assuming dilution 13,686 13,674
Net income per share assuming dilution $ 0.37 $ 0.30
Dividends declared per share $0.1300 $0.1200
* First quarter of 1999 included an after-tax charge of $247,300 related to the
acquisition of Independent Bancorp, Inc.
<PAGE>
CenturySouthbanks
- ------------------------------------------------------------------
Inc.
Executive Officers
- --------------------------------------------------------------------------------
William H. Anderson, II Chairman
James A. Faulkner Vice Chairman
J. Russell Ivie Vice Chairman
Joseph W. Evans President & CEO
Tony E. Collins Executive Vice President & CAO
Stephen W. Doughty Executive Vice President, CRMO & CFO
J. Thomas Wiley, Jr. Executive Vice President & CBO
E. Max Crook Executive Vice President
Sidney J. Wooten Executive Vice President
Directors
- --------------------------------------------------------------------------------
William H. Anderson, II, Chairman Thomas T. Folger, Jr.
James A. Faulkner, Vice Chairman Quill O. Healey
J. Russell Ivie, Vice Chairman Frank C. Jones
James R. Balkcom, Jr. John B. McKibbon, III
William L. Chandler E. Paul Stringer
Joseph W. Evans
<TABLE>
<CAPTION>
Affiliates
- --------------------------------------------------------------------------------
<S> <C>
Century South Bank of Dahlonega Century South Bank of Lavonia
60 Main Street West 10 Silo Lane
Dahlonega, GA 30533 Lavonia, GA 30553
J. Bronson Lavender, President J. Douglas Cleveland, President
706-364-3314 706-356-8040
Century South Bank of Ellijay Century South Bank of Danielsville
53 Sand Street 220 Courthouse Square
Ellijay, GA 30540 Danielsville, GA 30633
Britt H. Henderson, President L. Banister Sexton, President
706-276-3400 706-795-2121
Century South Bank of Polk County Century South Bank of Central Georgia, N.A.
40 Ocoee Street 502 Mulberry Street
Copperhill, TN 37317 Macon, GA 31210
Sidney J. Wooten, Chief Executive Officer E. Max Crook, Chief Executive Officer
James R. Quintrell, President James A. LaHaise, President
423-496-3261 912-757-2000
Century South Bank of Northeast Georgia, N.A. Century South Bank of the Coastal Region, N.A.
455 Jesse Jewell Parkway 7 East Congress Street
Gainesville, GA 30501 Savannah, GA 31406
Joseph D. Chipman, President Heys E. McMath, III, President
770-535-8000 912-232-3800
Century South Bank of Fannin County, N.A. Century South Bank of Alabama
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
Century South Bank of Dawsonville Century South Bank of the Carolinas
136 Highway 400 South 370 North Main Street
Dawsonville, Georgia 30534 Waynesville, NC 28786
Gary L. Evans, President John L. Lewis, President
706-216-5050 828-456-9092
</TABLE>
<PAGE>
FINANCIAL HIGHLIGHTS (Unaudited)
Selected Balances
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of and for three months
ended March 31,
2000 1999* Percentage Change
---------------------------------------------
(amounts in thousands, except per share data)
<S> <C> <C> <C>
Loans, net $1,149,401 $ 923,150 24.51%
Deposits 1,335,942 1,114,387 19.88
Total assets 1,564,332 1,291,828 21.09
Shareholders' equity 149,032 138,506 7.60
Net income 5,029 4,070 23.56
Book value per share 10.80 10.27 5.16
Net income per share assuming
dilution 0.37 0.30 23.33
Weighted average common shares
outstanding assuming dilution 13,686 13,674 0.09
Nonperforming loans 6,144 4,213 45.83
Other nonperforming assets 3,318 4,716 (29.64)
</TABLE>
Financial Ratios
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Return on average assets 1.35% 1.31% 3.05%
Return on average shareholders'
equity 13.87 12.02 15.39
Net interest margin (taxable
equivalent) 5.11 5.40 (5.37)
Allowance for loan losses to loans 1.46 1.54 (5.19)
Nonperforming assets to total assets 0.60 0.69 (13.04)
</TABLE>
*First quarter of 1999 included an after-tax charge of $247,300 related to 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
price for the quarter ended March 31, 2000:
Three month high.....................$25.25
Three month low......................$20.00
Closing price........................$21.00
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
Investors 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 Senior Vice President, Corporate President & CEO
(706) 864-3915 Controller, Secretary & Treasurer (678) 624-1366
(678) 624-1366
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 49,953
<INT-BEARING-DEPOSITS> 2,408
<FED-FUNDS-SOLD> 9,832
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 238,560
<INVESTMENTS-CARRYING> 35,544
<INVESTMENTS-MARKET> 35,187
<LOANS> 1,166,424
<ALLOWANCE> 17,023
<TOTAL-ASSETS> 1,564,332
<DEPOSITS> 1,335,942
<SHORT-TERM> 15,507
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