<PAGE> 1
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 1997 Commission file number 0-10853
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
(Exact name of registrant as specified in its charter)
Georgia 58-1458268
- ------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification no.)
40 NORTH MAIN STREET
P.O. BOX 878
STATESBORO, GEORGIA 30459
-------------------------
(Address of Principal Executive
Offices, including Zip Code)
912-764-6611
------------------------------------
(Issuer's telephone number, including area code)
NOT APPLICABLE
------------------------------------
(Former name, former address
and former fiscal year, if
changed since last report)
------------------------------------
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) and (2)
has been subject to such filing requirement for the past 90 days.
Yes X No
------- -------
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Common Stock, $1.00 Par Value 3,752,218 shares as of June 30, 1997
------------------------------------------------------------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
---------------------------
(thousands of dollars)
ASSETS
<S> <C> <C>
Cash and Due From Banks $ 15,354 $ 21,611
Interest Bearing Deposits in other Banks 13,509 9,905
Federal Funds Sold 1,650 6,220
Investment Securities:
Available for Sale (Cost of $74,529 in
1997 and $85,901 in 1996) 74,582 85,866
Held to Maturity (Estimated Market Value
of $21,178 in 1997 and $18,738 in 1996) 20,703 18,158
Loans 245,293 231,057
Less: Unearned Interest (10) (15)
Allowance for Loan Losses (3,863) (4,024)
-------- --------
Loans, Net 241,420 227,018
-------- --------
Interest Receivable 5,159 5,383
Premises and Equipment, Net 7,359 7,193
Other Real Estate 572 447
Other Assets 2,268 2,235
-------- --------
TOTAL ASSETS $382,576 $384,036
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 42,420 $ 43,368
Interest Bearing:
NOW Accounts 61,031 56,265
Money Market Deposit Accounts 26,795 33,332
Savings 14,650 13,185
Time ($100,000 and above) 84,253 82,204
Other Time 100,112 101,293
-------- --------
Total Deposits 329,261 329,647
Other Borrowed Money 9,901 11,718
Securities Sold Under Agreement to Repurchase 900 1,200
Interest Payable 2,945 3,279
Other Liabilities 647 871
-------- --------
Total Liabilities 343,654 346,715
-------- --------
Shareholders' Equity (Note 3):
Common Stock, 3,752,218 Shares Issued
and Outstanding 3,752 3,753
Surplus 7,267 7,272
Retained Earnings 27,879 26,319
Net Unrealized Gain/(Loss) on Investment
Securities Available for Sale 24 (23)
-------- --------
Shareholders' Equity 38,922 37,321
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY -------- --------
$382,576 $384,036
======== ========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 3
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1997 1996
-------------------------
(thousands of dollars)
<S> <C> <C>
INTEREST INCOME
Loans (Including fees) $12,146 $11,489
Interest Bearing Deposits 290 302
Investments:
U.S. Treasury 711 738
U.S. Government Agencies 1,622 1,677
States and Political Subdivisions 544 500
Dividend Income 95 72
Federal Funds Sold 116 208
------- -------
Total Interest Income 15,524 14,986
------- -------
INTEREST EXPENSE
NOW Accounts 913 918
Money Market Deposits Accounts 398 602
Savings 220 206
Time Deposits ($100,000 and above) 2,550 2,214
Other Time Deposits 2,827 2,898
Other 375 276
------- -------
Total Interest Expense 7,283 7,114
------- -------
NET INTEREST INCOME 8,241 7,872
Provision for Loan Losses 467 460
------- -------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,774 7,412
------- -------
NON-INTEREST INCOME
Service Charges on Deposits 1,033 924
Fees for Trust Services 89 89
Other 230 249
------- -------
Total Non-interest Income 1,352 1,262
------- -------
NON-INTEREST EXPENSE
Salaries 2,060 1,982
Other Personnel Expense 762 596
Occupancy Expense, Net 423 366
Equipment Expense 613 469
Other 1,498 1,447
------- -------
Total Non-interest Expense 5,356 4,860
------- -------
INCOME BEFORE INCOME TAXES 3,770 3,814
Provision for Income Taxes 1,128 1,134
------- -------
NET INCOME $ 2,642 $ 2,680
======= =======
EARNINGS PER COMMON SHARE (NOTE 3) $ .70 $ .71
======= =======
DIVIDENDS PER COMMON SHARE (NOTE 3) $ .29 $ .24
======= =======
AVERAGE NUMBER OF SHARES OUTSTANDING (NOTE 3) 3,752,523 3,752,525
========= =========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
June 30,
1997 1996
--------------------------
(thousands of dollars)
INTEREST INCOME
<S> <C> <C>
Loans (Including fees) $ 6,178 $ 5,757
Interest Bearing Deposits 139 136
Investments:
U.S. Treasury 353 355
U.S. Government Agencies 770 849
States and Political Subdivisions 274 248
Dividend Income 45 39
Federal Funds Sold 34 107
--------- ---------
Total Interest Income 7,793 7,491
--------- ---------
INTEREST EXPENSE
NOW Accounts 461 447
Money Market Deposits Accounts 191 303
Savings 112 103
Time Deposits ($100,000 and above) 1,259 1,069
Other Time Deposits 1,424 1,419
Other 188 154
--------- ---------
Total Interest Expense 3,635 3,495
--------- ---------
NET INTEREST INCOME 4,158 3,996
Provision for Loan Losses 236 232
--------- ---------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,922 3,764
--------- ---------
NON-INTEREST INCOME
Service Charges on Deposits 536 479
Fees for Trust Services 51 51
Other 112 132
--------- ---------
Total Non-interest Income 699 662
--------- ---------
NON-INTEREST EXPENSE
Salaries 1,044 981
Other Personnel Expense 383 321
Occupancy Expense, Net 219 184
Equipment Expense 315 234
Other 808 724
--------- ---------
Total Non-interest Expense 2,769 2,444
--------- ---------
INCOME BEFORE INCOME TAXES 1,852 1,982
Provision for Income Taxes 544 586
--------- ---------
NET INCOME $ 1,308 $ 1,396
========= =========
EARNINGS PER COMMON SHARE (NOTE 3) $ .35 $ .37
========= =========
DIVIDENDS PER COMMON SHARE (NOTE 3) $ .14 $ .10
========= =========
AVERAGE NUMBER OF SHARES OUTSTANDING (NOTE 3) 3,752,522 3,752,525
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<TABLE>
<CAPTION>
June 30,
1997 1996
----------------------
(thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $2,642 $ 2,680
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Depreciation 510 379
Provision for Loan Losses 467 460
(Gain) Loss on Sale of Other Real Estate 4 (2)
Gain on Call of Securities (5) (6)
Net Accretion of Premiums and Discounts on Securities (133) (329)
Changes in Assets and Liabilities:
(Increase) Decrease in Interest Receivable 224 (29)
Increase in Other Assets (57) (62)
Decrease in Interest Payable (334) (238)
Decrease in Other Liabilities (224) (425)
------- -------
Net Cash Provided by Operating Activities 3,094 2,428
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Increase in Interest Bearing Deposits
in Other Banks (3,604) (1,441)
Net Decrease in Federal Funds Sold 4,570 1,555
Available-for-Sale Securities:
Proceeds from Maturity 23,844 29,372
Purchases (12,384) (49,060)
Held-to-Maturity Securities:
Proceeds from Maturity 5,440 14,939
Purchases (7,952) (2,578)
Net Increase in Loans (15,114) (4,964)
Purchases of Premises and Equipment (676) (946)
Proceeds from Sale of Other Real Estate 116 157
------- -------
Net Cash Used in Investing Activities (5,760) (12,966)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits (386) 8,097
Advances from the Federal Home Loan Bank and
Federal Funds Purchased 3,800 6,526
Repayment of Other Borrowed Money (5,617) (4,842)
Purchase and Retirement of Fractional Shares (7)
Dividends Paid (1,081) (799)
Maturity of Repurchase Agreements (300)
------- -------
Net Cash Provided by Financing Activities (3,591) 8,982
------- -------
DECREASE IN CASH AND DUE FROM BANKS (6,257) (1,556)
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 21,611 15,005
------- -------
CASH AND DUE FROM BANKS AT END OF PERIOD $15,354 $13,449
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest $ 7,617 $ 7,352
Income Taxes 1,077 1,170
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Other Real Estate Acquired through Loan Foreclosure $ 430 275
Loans granted to facilitate the Sale of Other Real Estate 185 41
Change in Net Unrealized Gain (Loss) on
Investment Securities Available for Sale 47 (855)
See notes to consolidated financial statements.
</TABLE>
4
<PAGE> 6
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1.BASIS OF PRESENTATION
The consolidated financial statements of First Banking Company of Southeast
Georgia(the "Company") include the financial statements of First Bulloch Bank &
Trust Company, Metter Banking Company and First National Bank of Effingham,
wholly-owned subsidiaries. Intercompany balances and transactions have been
eliminated in consolidation.
The consolidated statements contained in this report are unaudited but reflect
all adjustments, consisting only of normal recurring accruals, which are, in
the opinion of management, necessary to a fair statement of the results for the
interim period reflected. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to applicable
rules and regulations of the Securities and Exchange Commission. The results of
operations for the interim period reported herein are not necessarily
indicative of results to be expected for the full year.
The consolidated financial statements included herein should be read in
conjunction with the financial statements and notes thereto, and the
Independent Auditors' Report included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.
2. ACCOUNTING POLICIES
Reference is made to the accounting policies of the Company described in the
notes to consolidated financial statements contained in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996. The Company has
followed those policies in preparing this report.
3. COMMON STOCK
At the Company's Annual Meeting of Shareholders held on April 25, 1996, the
shareholders approved a proposal to amend the Articles of Incorporation to
increase the number of authorized shares from 5,000,000 to 10,000,000. The par
value of First Banking's common stock is $1 and, as of May 3, 1996, 10,000,000
shares were authorized. The Banks may pay dividends to First Banking in any
year up to 50% of the previous year's net income or $2,824,000 in 1997 without
the approval of the Georgia Department of Banking and Finance.
Effective June 30, 1997, the Company declared a 5-for-4 split of its common
stock effected in the form of a 25% stock dividend. In connection with the
split, $750,505 has been transferred from Surplus to Common Stock. All
references to number of shares and to per share amounts have been retroactively
adjusted to reflect the split.
4. EARNINGS PER SHARE
Net income per share of common stock is based on the weighted average number of
shares of common stock outstanding during each period.
5
<PAGE> 7
5. IMPACT OF NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board ("FASB") issued a
Statement of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share." SFAS 128 established standards for computing and presenting earnings
per share and applies to entities with publicly held common stock or potential
common stock.
In June 1997, the FASB issued Statements of Financial Accounting Standards No.
130, "Reporting Comprehensive Income" and No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 130" and "SFAS 131"). SFAS 130
establishes standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. SFAS 131 establishes standards for, among other
things, reporting information about operating segments in annual financial
statements and requires that those enterprises report selected information
about operating segments in interim financial reports issued to shareholders.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997. SFAS 130 and SFAS 131 are effective for financial statements
issued for period beginning after December 15, 1997. None of these statements
are expected to have a material effect on the Company's financial statements.
6
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS FOR THE
SIX MONTHS ENDED JUNE 30, 1997
This discussion relates to the consolidated financial condition and
results of operations of First Banking Company of Southeast Georgia (the
"Company") and its wholly-owned subsidiaries, First Bulloch Bank & Trust
Company ("Bulloch Bank"), Metter Banking Company ("Metter Bank") and First
National Bank of Effingham ("Effingham Bank") (the "Banks"). Since the Company
has no subsidiaries other than the Banks and no activities other than those of
the Banks, the following narrative refers to the operations of the Banks.
The Company acquired the Effingham Bank on August 27, 1996 through the
merger of FNB Bancshares, Inc. ("FNB") with and into the Company. The Company
issued 340,309 shares of common stock (on a pre-split basis in relation to the
June 30, 1997 25% stock dividend) and approximately $2,800 in cash in the
merger. The financial statements appearing herein and the discussion and
analysis set forth below reflect the combined operations of the Company and
FNB.
FINANCIAL CONDITION
The Company functions as the sole owner of three commercial banks, and its
financial condition should be examined in terms of trends in sources and uses
of funds. The Company's primary use of funds historically comes from loan
demand. Loans outstanding have increased $15,114,000 or 6.5% since year-end.
Interest bearing deposits in other banks have increased $3,604,000 (36.4%),
while federal funds sold and investment securities have decreased $4,570,000
(73.5%)and $8,739,000 (8.4%), respectively, since year-end.
Total assets have decreased $1,460,000 (0.4%) since year-end, while total
funds (deposits plus Other Borrowed Money) have decreased $2,203,000 (0.6%).
Total deposits have decreased $386,000 (0.1%) since year-end, and
7
<PAGE> 9
Other Borrowed Money has decreased $1,817,000 (15.5%). Demand deposits have
decreased $948,000 (2.2%), and savings deposits (including NOW accounts and the
liquid money market accounts) have decreased $1,771,000 (2.0%). Time deposits
over $100,000 have increased approximately $2,049,000 (2.5%), while other time
deposits have decreased approximately $1,181,000 (1.2%).
Effective June 30, 1997, the Company declared a 5-for-4 stock split of its
common stock effected in the form of a 25 percent stock dividend. All
references to number of shares and to per share amounts have been retroactively
adjusted to reflect the split.
CAPITAL RESOURCES
The Banks are required to maintain minimum amounts of capital to total
"risk-weighted" assets, as defined by the banking regulators. At June 30, 1997,
the Banks were required to have minimum Tier 1 and Total Risk-Based Capital
ratios of 4% and 8%, respectively, and a leverage ratio of at least 3%. At that
date the Banks' actual ratios were as follows:
<TABLE>
<CAPTION>
Bulloch Bank Metter Bank Effingham Bank
------------ ----------- --------------
<S> <C> <C> <C>
Tier 1 Risk-based Capital ratio 18.2% 15.3% 8.8%
Total Risk-based Capital ratio 19.4 16.5 10.0
Leverage ratio 11.3 10.1 6.4
</TABLE>
These ratios qualify all three Banks for the "well-capitalized"
classification as defined by the banking regulators. The Company's ratio of
shareholders' equity to total assets was 10.2% at June 30, 1997 and 9.7% at
December 31, 1996.
LIQUIDITY
The percentage of net loans to total funds was 72.3% at June 30,1997 and
69.8% at December 31, 1996. At June 30, 1997 the Banks had $30,513,000 in cash
and due from banks, interest bearing deposits in other banks and federal funds
sold as compared with $37,736,000 at December 31, 1996. The Banks' liquidity
policies typically require that the ratio of cash and certain short-term
investments to net withdrawable deposit accounts be at least 20.0%. At June 30,
1997, the Bulloch Bank and the Metter Bank exceeded this
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<PAGE> 10
ratio, while the Effingham Bank did not. The liquidity of the Company and the
Banks is considered adequate to repay deposits and other obligations, meet
expected loan demand and pay dividends.
Presented below is an interest rate sensitivity analysis of the Company at
June 30, 1997. NOW, money market, and savings accounts have been included in
"less than three months". The analysis results in a negative one year gap of
$58,128,000, which means that the Company is liability-sensitive through one
year (a greater amount of liabilities are maturing or repricing than assets),
which is beneficial in a falling rate environment. However, the Banks'
experience has indicated that NOW, money market, and savings accounts of
$102,476,000 are not interest rate sensitive. Beyond one year, the Company is
asset-sensitive, which is beneficial in a rising rate environment.
9
<PAGE> 11
Interest Rate Sensitivity Analysis - June 30, 1997
Term to Repricing or Maturity
<TABLE>
<CAPTION>
Over Three Over One Over Five
Less Than Months through Year Through Years and
Three Months One Year Five Years Insensitive Total
Interest Earning Assets:
<S> <C> <C> <C> <C> <C>
Interest Bearing
Deposits in Other Banks $ 13,509 $ 13,509
Investment Securities 14,428 $ 26,109 $ 36,203 $18,545 95,285
Federal Funds Sold 1,650 1,650
Loans 57,870 61,886 85,486 40,051 245,293
Total Interest Earning -------- -------- -------- ------- --------
Assets 87,457 87,995 121,689 58,596 355,737
Noninterest Earning Assets 26,839 26,839
-------- -------- -------- ------- --------
TOTAL ASSETS $ 87,457 $ 87,995 $121,689 $85,435 $382,576
======== ======== ======== ======= ========
Interest Bearing Liabilities:
Interest Bearing Deposits $145,085 $115,281 $ 26,404 $ 71 $286,841
Other Borrowed Money 500 31 942 8,428 9,901
Repurchase Agreements 900 900
-------- -------- -------- ------- --------
Total Interest Bearing
Liabilities 145,585 116,212 27,346 8,499 297,642
Interest Free Deposits 42,420 42,420
Other Interest Free
Liabilities and Equity 42,514 42,514
TOTAL LIABILITIES AND EQUITY -------- -------- -------- ------- --------
$145,585 $116,212 $ 27,346 $93,433 $382,576
======== ======== ======== ======= ========
Net Interest Rate
Sensitivity Gap $(58,128) $(28,217) $ 94,343 $(7,998)
Cumulative gap (58,128) (86,345) 7,998
Net Interest Rate
Sensitivity Gap as a Percent
of Interest Earning Assets (66.5) (32.1) 77.5 (13.6)
Cumulative Gap as a Percent of
Cumulative Interest Earning
Assets (66.5) (49.2) 2.7
</TABLE>
10
<PAGE> 12
RESULTS OF OPERATIONS
INTEREST INCOME
Total interest income increased $538,000 (3.6%) in the first six months of
1997 as compared to the first six months of 1996 and increased $302,000 (4.0%)
in the second quarter of 1997 as compared to the second quarter of 1996.
Interest on loans increased $657,000 (5.7%) in the first six months of 1997 as
compared to the first six months of 1996 and increased $421,000 (7.3%) in the
second quarter of 1997 as compared to the second quarter of 1996, as a result
of an increase of $25,274,000 in the year-to-date average balance of loans
outstanding from June 30, 1996 to June 30, 1997 offset by a decrease in yield
on the loan portfolio of approximately 0.6% for that period. Interest on
investments decreased $15,000 (0.5%) in the first six months of this year as
compared to the first six months of 1996 and decreased $49,000 (3.3%) in the
second quarter of 1997 from the second quarter of 1996, primarily as a result
of a decrease in yield on the portfolio from 6.36% during the first six months
of 1996 to 6.18% during the first six months of 1997, offset by an increase in
the average balance of the investment portfolio of $467,000 for that period.
During the first six months of 1997, interest on federal funds sold
decreased $92,000 (44.2%) from the first six months of 1996 and decreased
$73,000 (68.2%) in the second quarter of 1997 as compared to the second quarter
of 1996. Interest on Interest-bearing Deposits in Other Banks decreased $12,000
(4.0%) during the first six months of 1997 from the first six months of 1996
and increased $3,000 (2.2%) in the second quarter 1997 from the second quarter
of 1996. These decreases were the result of a decrease of 0.70% in the weighted
average yield on these short-term investments from June 30, 1996 to June 30,
1997 offset by an increase of $2,900,000 in the combined average balance
carried in interest bearing deposits in other banks and federal funds sold for
that period, which are the two means of investing any excess cash from day to
day.
11
<PAGE> 13
INTEREST EXPENSE
During the first six months of 1997, total interest expense increased
$169,000 (2.4%) from the first six months of 1996 and increased $140,000 (4.0%)
in the second quarter of 1997 from the second quarter of 1996. Interest on
deposits increased $70,000 (1.0%) in the first six months of 1997 from the
first six months of 1996 and increased $6,000 (0.2%) in the second quarter of
this year from the second quarter of 1996. This increase is attributable to a
increase in the average balance of interest bearing deposits of $9,274,000 from
June 30, 1996 to June 30, 1997 offset by a decrease in the cost of funds from
4.99% to 4.91% for that period. Interest on Other Borrowed Money increased
$99,000 (35.9%) in the first six months of 1997 from the first six months of
1996 and increased $34,000 (22.1%) in the second quarter of 1997 as compared to
the second quarter of 1996. This increase is the result of an increase of
$1,513,000 from June 30, 1996 to June 30, 1997 in the average balance
outstanding of Other Borrowed Money at a higher average interest rate of 7.10%
for the first six months of 1997 as compared to 6.69% for the first six months
of 1996.
PROVISIONS FOR LOAN LOSSES
Provisions for loan losses for the first six months of 1997 increased
$7,000 (1.5%) from the first six months of 1996 and increased $4,000 (1.7%) in
the second quarter of 1997 from the second quarter of 1996. After considering
the credit worthiness of the loan portfolios, it is the opinion of the
management of the Banks that the allowance for loan losses is adequate. At June
30, 1997 the allowance for loan losses was 1.6% of outstanding loans less
unearned interest.
Nonperforming loans were $2,972,000 at June 30, 1997 and $1,416,000 at
December 31, 1996. These loans included those on a nonaccrual status of
$1,805,000 and $353,000, respectively, accruing loans contractually past due at
least 90 days of $934,000 and $207,000, respectively, and restructured loans
of $233,000 and $856,000, respectively. Net loans charged off totaled $629,000
during the first six months of 1997 as compared to $77,000 during
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<PAGE> 14
the first six months of 1996. The increase in nonaccrual loans and charge- offs
is directly attributable to one credit line on which $1,589,000 was on a
nonaccrual basis at June 30, 1997 and $502,000 charged off. Management expects
on additional charge off of $130,000 in settlement of this credit.
NONINTEREST INCOME AND EXPENSE
Noninterest income increased $90,000 (7.1%) in the first six months of
1997 from the first six months of 1996 and increased $37,000 (5.6%) in the
second quarter of 1997 from the second quarter of 1996. These increases are
reflected primarily in an increase in service charges on deposit accounts of
$109,000 during the first six months of this year offset by a $19,000 decrease
in Other Service Charges for that period. The increase in service charges on
deposits is a result of increases in the per item NSF service charge effected
in the second half of 1996 as well as an increase in the overall volume of
accounts subject to other account service charges. The $19,000 decrease in
Other Service Charges is the result of a decrease in the volume of, and thus
the income from, long-term mortgage loans, which are acquired by other banks on
a non-recourse basis concurrent with the closing of the loan.
Noninterest expense increased $496,000 (10.2%) in the first six months of
1997 compared to the first six months of 1996 and increased $325,000 (13.3%) in
the second quarter of 1997 as compared to the second quarter of 1996. These
increases are the result of increases in salary and personnel expense of
$244,000 and $125,000, respectively, increases in occupancy and equipment
expense of $201,000 and $116,000, respectively, and increases in Other Expense
of $51,000 and $84,000, respectively, during the first six months of 1997 as
compared to the first six months of 1996 and during the second quarter of 1997
as compared to the second quarter of 1996. The increase in salary and personnel
expense is primarily the result of increases in medical insurance expense, a
credit adjustment to post-retirement benefits in 1996, and the adoption of
retirement benefits for the staff of the Effingham Bank beginning in 1997. The
increase in occupancy and equipment
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<PAGE> 15
expense is the result of increases in depreciation expense related to facility
renovations, equipment purchases and the opening of two Wal-Mart Supercenters
branches in 1996. The increase in Other Expense is the result of a $30,000
credit adjustment in the second quarter of 1996 as well as increases in amounts
paid to the FDIC for deposit insurance premiums and the new FICO assessment
implemented in 1997.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable
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<PAGE> 16
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Registrant nor any of its subsidiaries is a party to, nor is
any of their property the subject of, any material pending legal proceedings,
other than ordinary routine proceedings incidental to the business of banks,
nor to the knowledge of management are any such proceedings contemplated or
threatened against the Registrant or its subsidiaries.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
At the Company's Annual Meeting of Shareholders on April 24, 1997, the
shareholders of the Company elected the following persons as Class III
directors of the Company by the votes indicated.
<TABLE>
<CAPTION>
Broker
Nominee For Against Non-votes Abstentions
<S> <C> <C> <C> <C>
Julian C. Lane, Jr. 1,953,396 0 0 5,588
Charles M. Robbins, Jr. 1,935,397 0 0 23,587
Larry D. Weddle 1,935,397 0 0 23,587
Alvin Williams 1,953,397 0 0 5,587
John M. Wilson, Jr. 1,953,397 0 0 5,587
</TABLE>
The shareholders also approved the First Banking Company of Southeast
Georgia 1997 Stock Option Plan by the votes indicated.
Voting for the Plan 1,797,571
Voting against the Plan 155,912
Abstentions 5,501
Broker Non-votes 0
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K: None
15
<PAGE> 17
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
FIRST BANKING COMPANY OF SOUTHEAST
GEORGIA
DATE: August 14, 1997 BY:/s/James Eli Hodges
----------------------- -------------------------------------
JAMES ELI HODGES
PRESIDENT
DATE: August 14, 1997 BY:/s/Dwayne E. Rocker
----------------------- -------------------------------------
DWAYNE E. ROCKER
SECRETARY-TREASURER
(PRINCIPAL FINANCIAL OFFICER)
16
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF FIRST BANKING COMPANY OF SOUTHEAST GEORGIA FOR THE SIX
MONTHS ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 15,354
<INT-BEARING-DEPOSITS> 13,509
<FED-FUNDS-SOLD> 1,650
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 74,582
<INVESTMENTS-CARRYING> 20,703
<INVESTMENTS-MARKET> 21,178
<LOANS> 245,283
<ALLOWANCE> 3,863
<TOTAL-ASSETS> 382,576
<DEPOSITS> 329,261
<SHORT-TERM> 1,400
<LIABILITIES-OTHER> 3,592
<LONG-TERM> 9,401
0
0
<COMMON> 3,752
<OTHER-SE> 35,170
<TOTAL-LIABILITIES-AND-EQUITY> 382,576
<INTEREST-LOAN> 12,146
<INTEREST-INVEST> 2,972
<INTEREST-OTHER> 406
<INTEREST-TOTAL> 15,524
<INTEREST-DEPOSIT> 6,908
<INTEREST-EXPENSE> 7,283
<INTEREST-INCOME-NET> 8,241
<LOAN-LOSSES> 467
<SECURITIES-GAINS> 5
<EXPENSE-OTHER> 5,356
<INCOME-PRETAX> 3,770
<INCOME-PRE-EXTRAORDINARY> 3,770
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,642
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.70
<YIELD-ACTUAL> 4.81
<LOANS-NON> 1,805
<LOANS-PAST> 934
<LOANS-TROUBLED> 233
<LOANS-PROBLEM> 2,972
<ALLOWANCE-OPEN> 4,024
<CHARGE-OFFS> 720
<RECOVERIES> 92
<ALLOWANCE-CLOSE> 3,863
<ALLOWANCE-DOMESTIC> 3,863
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
