<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 September 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 September 30, 1997
-----------------------------------------------------------------------
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
----------------------------
(thousands of dollars)
<S> <C> <C>
ASSETS
Cash and Due From Banks $ 15,193 $ 21,611
Interest Bearing Deposits in Other Banks 12,813 9,905
Federal Funds Sold 3,325 6,220
Investment Securities:
Available for Sale (Cost of $70,196 in
1997 and $85,901 in 1996) 70,428 85,866
Held to Maturity (Estimated Market Value
of $19,974 in 1997 and $18,738 in 1996) 19,472 18,158
Loans 244,620 231,057
Less: Unearned Interest (20) (15)
Allowance for Loan Losses (3,908) (4,024)
--------- ---------
Loans, Net 240,692 227,018
--------- ---------
Interest Receivable 5,072 5,383
Premises and Equipment, Net 7,254 7,193
Other Real Estate 844 447
Other Assets 2,098 2,235
--------- ---------
TOTAL ASSETS 377,191 384,036
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 40,279 $ 43,368
Interest Bearing:
NOW Accounts 57,531 56,265
Money Market Deposit Accounts 28,981 33,332
Savings 14,465 13,185
Time ($100,000 and above) 81,686 82,204
Other Time 99,716 101,293
--------- ---------
Total Deposits 322,658 329,647
Other Borrowed Money 8,960 11,718
Securities Sold Under Agreements to Repurchase 1,200 1,200
Interest Payable 3,249 3,279
Other Liabilities 1,269 871
--------- ---------
Total Liabilities 337,336 346,715
--------- ---------
Shareholders' Equity (Note 3):
Common Stock, 3,752,218 Shares Issued
And Outstanding in 1997, 3,752,525 in 1996 3,752 3,753
Additional Paid-In Capital 7,266 7,272
Retained Earnings 28,684 26,319
Net Unrealized Gain/(Loss) on Investment
Securities Available for Sale 153 (23)
--------- ---------
Shareholders' Equity 39,855 37,321
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 377,191 $ 384,036
========= =========
</TABLE>
See notes to consolidated financial statements
<PAGE> 3
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
1997 1996
---------------------------
(thousands of dollars)
<S> <C> <C>
INTEREST INCOME
Loans (Including fees) $ 18,517 $ 17,487
Interest Bearing Deposits 440 456
Investments:
U.S. Treasury 1,012 1,069
U.S. Government Agencies 2,319 2,557
States and Political Subdivisions 817 738
Dividend Income 142 108
Federal Funds Sold 155 311
---------- ----------
Total Interest Income 23,402 22,726
---------- ----------
INTEREST EXPENSE
NOW Accounts 1,367 1,357
Money Market Deposits Accounts 618 937
Savings 334 313
Time Deposits ($100,000 and above) 3,797 3,350
Other Time Deposits 4,233 4,327
Other 560 433
---------- ----------
Total Interest Expense 10,909 10,717
---------- ----------
NET INTEREST INCOME 12,493 12,009
Provision for Loan Losses 737 630
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 11,756 11,379
---------- ----------
NON-INTEREST INCOME
Service Charges on Deposits 1,558 1,414
Fees for Trust Services 158 140
Other 375 310
---------- ----------
Total Non-interest Income 2,091 1,864
---------- ----------
NON-INTEREST EXPENSE
Salaries 3,142 3,016
Other Personnel Expense 1,148 919
Occupancy Expense, Net 648 582
Equipment Expense 946 742
Other 2,246 2,493
---------- ----------
Total Non-interest Expense 8,130 7,752
---------- ----------
INCOME BEFORE INCOME TAXES 5,717 5,491
Provision for Income Taxes 1,708 1,683
---------- ----------
NET INCOME 4,009 3,808
========== ==========
EARNINGS PER COMMON SHARE (NOTE 3) 1.07 1.01
DIVIDENDS PER COMMON SHARE (NOTE 3) 0.44 0.36
AVERAGE NUMBER OF SHARES
OUTSTANDING (NOTE 3) 3,752,420 3,752,646
========== ==========
</TABLE>
See notes to consolidated financial statements
<PAGE> 4
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended
September 30,
1997 1996
---------------------------
(thousands of dollars)
<S> <C> <C>
INTEREST INCOME
Loans (Including fees) $ 6,371 $ 5,998
Interest Bearing Deposits 151 154
Investments:
U.S. Treasury 301 331
U.S. Government Agencies 696 880
States and Political Subdivisions 274 238
Dividend Income 45 36
Federal Funds Sold 40 103
---------- ----------
Total Interest Income 7,878 7,740
---------- ----------
INTEREST EXPENSE
NOW Accounts 454 439
Money Market Deposits Accounts 220 335
Savings 114 107
Time Deposits ($100,000 and above) 1,247 1,136
Other Time Deposits 1,406 1,429
Other 185 157
---------- ----------
Total Interest Expense 3,626 3,603
---------- ----------
NET INTEREST INCOME 4,252 4,137
Provision for Loan Losses 270 169
---------- ----------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 3,982 3,968
---------- ----------
NON-INTEREST INCOME
Service Charges on Deposits 525 491
Fees for Trust Services 69 51
Other 145 60
---------- ----------
Total Non-interest Income 739 602
---------- ----------
NON-INTEREST EXPENSE
Salaries 1,082 1,034
Other Personnel Expense 386 324
Occupancy Expense, Net 225 216
Equipment Expense 333 273
Other 748 1,038
---------- ----------
Total Non-interest Expense 2,774 2,885
---------- ----------
INCOME BEFORE INCOME TAXES 1,947 1,685
Provision for Income Taxes 580 549
---------- ----------
NET INCOME 1,367 1,136
========== ==========
EARNINGS PER COMMON SHARE (NOTE 3) 0.36 0.30
DIVIDENDS PER COMMON SHARE (NOTE 3) 0.15 0.12
AVERAGE NUMBER OF SHARES
OUTSTANDING (NOTE 3) 3,752,218 3,752,611
========== ==========
</TABLE>
See notes to consolidated financial statements
<PAGE> 5
FIRST BANKING COMPANY OF SOUTHEAST GEORGIA
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
September 30,
1997 1996
-----------------------
(thousands of dollars)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 4,009 $ 3,808
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Provision for Depreciation 784 593
Provision for Loan Losses 737 630
(Gain) Loss on Sale of Other Real Estate 6 (3)
Gain on Call of Securities (6) (7)
(Gain) Loss on Sale of Premises and Equipment 15 (1)
Net Accretion of Premiums and Discounts on Securities (152) (449)
Changes in Assets and Liabilities:
(Increase) Decrease in Interest Receivable 311 (313)
(Increase) Decrease in Other Assets 46 (96)
Decrease in Interest Payable (30) (54)
Increase (Decrease) in Other Liabilities 398 (468)
-------- --------
Net Cash Provided by Operating Activities 6,118 3,640
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net Increase in Interest Bearing Deposits in Other Banks (2,908) (1,281)
(Increase) Decrease in Federal Funds Sold 2,895 (4,190)
Available-for-Sale Securities:
Proceeds from Maturity 37,761 39,574
Purchases (21,905) (61,736)
Held-to-Maturity Securities:
Proceeds from Maturity 6,645 20,023
Purchases (7,952) (3,849)
Net Increase in Loans (15,099) (10,452)
Purchases of Premises and Equipment (860) (1,934)
Proceeds from Sale of Premises and Equipment 2
Proceeds from Sale of Other Real Estate 285 202
-------- --------
Net Cash Used in Investing Activities (1,138) (23,641)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits (6,989) 18,427
Advances from the Federal Home Loan Bank 1,800 7,076
Securities Sold Under Agreements to Repurchase 1,200
Repayment of Other Borrowed Money (4,558) (5,115)
Purchase and Retirement of Fractional Shares (7) (3)
Dividends Paid (1,644) (1,249)
-------- --------
Net Cash Provided by Financing Activities (11,398) 20,336
-------- --------
INCREASE (DECREASE) IN CASH AND DUE FROM BANKS (6,418) 335
CASH AND DUE FROM BANKS AT BEGINNING OF YEAR 21,611 15,005
-------- --------
CASH AND DUE FROM BANKS AT END OF PERIOD 15,193 15,340
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (received) during the year for:
Interest 10,939 10,771
Income Taxes 1,435 1,978
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES:
Other Real Estate Acquired through Loan Foreclosure 990 275
Loans granted to facilitate the Sale of Other Real Estate 302 77
Change in Net Unrealized Gain (Loss) on
Investment Securities Available for Sale 176 (621)
</TABLE>
See notes to consolidated financial statements
<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 share 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.
<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.
<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
NINE MONTHS ENDED SEPTEMBER 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 $15,099,000 or 6.5% since year-end.
Interest bearing deposits in other banks have increased $2,908,000 (29.4%),
while federal funds sold and investment securities have decreased $2,895,000
(46.5%) and $14,124,000 (13.6%), respectively, since year-end.
Total assets have decreased $6,845,000 (1.8%) since year-end, while
total funds (deposits plus Other Borrowed Money) have decreased $9,747,000
(2.9%). Total deposits have decreased $6,989,000 (2.1%) since year-end, and
Other Borrowed Money has decreased $2,758,000 (23.5%). Demand deposits have
decreased $3,089,000 (7.1%), and savings deposits (including NOW accounts and
the liquid money market accounts) have decreased $1,805,000 (1.8%). Time
deposits over
<PAGE> 9
$100,000 have decreased approximately $518,000 (0.6%), while other time deposits
have decreased approximately $1,577,000 (1.6%).
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 September 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 18.7% 15.9% 9.1%
Total Risk-based Capital ratio 20.0 17.2 10.4
Leverage ratio 11.6 10.4 6.7
</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 10.6% at September 30, 1997 and 9.7% at
December 31, 1996.
LIQUIDITY
The percentage of net loans to total funds was 72.3% at September 30,
1997 and 69.8% at December 31, 1996. At September 30, 1997 the Banks had
$31,331,000 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 September 30, 1997, the Bulloch Bank and the Metter Bank exceeded this ratio,
while the Effingham Bank's ratio was 18.1%. By continuing to attempt to increase
deposits, the Effingham Bank's ratio can reach the desired 20% level. The
liquidity of the Company and the Banks is considered adequate to repay deposits
and other obligations, meet expected loan demand and pay dividends.
<PAGE> 10
Presented below is an interest rate sensitivity analysis of the Company
at September 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 $46,257,000, 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
$100,977,000 are not interest rate sensitive. Beyond one year, the Company is
asset-sensitive, which is beneficial in a rising rate environment.
<PAGE> 11
Interest Rate Sensitivity Analysis - September 30, 1997
<TABLE>
<CAPTION>
Term to Repricing or Maturity
Over Three Over One Over Five
Less Than Months Through Year Through Years and
Three Months One Year Five Years Insensitive Total
<S> <C> <C> <C> <C> <C>
Interest Earning Assets:
Interest Bearing
Deposits in Other Banks $12,813 $ 12,813
Investment Securities 5,238 $ 28,784 $40,005 $ 15,873 89,900
Federal Funds Sold 3,325 3,325
Loans 114,518 49,910 57,862 22,310 244,600
-------- -------- ------- -------- --------
Total Interest Earning
Assets 135,894 78,694 97,867 38,183 350,638
Non-interest Earning Assets 26,553 26,553
-------- -------- ------- -------- --------
TOTAL ASSETS $135,894 $ 78,694 $97,867 $ 64,736 $377,191
======== ======== ======= ======== ========
Interest Bearing Liabilities:
Interest Bearing Deposits $145,023 $113,612 $23,744 $282,379
Other Borrowed Money 252 1,958 4,008 $ 3,942 10,160
-------- -------- ------- -------- --------
Total Interest Bearing
Liabilities 145,275 115,570 27,752 3,942 292,539
Interest Free Deposits 40,279 40,279
Other Interest Free
Liabilities and Equity 44,373 44,373
-------- -------- ------- -------- --------
TOTAL LIABILITIES AND EQUITY $145,275 $115,570 $27,752 $ 88,594 $377,191
======== ======== ======= ======== ========
Net Interest Rate
Sensitivity Gap $ (9,381) $(36,876) $70,115 $(23,858)
Cumulative Gap (9,381) (46,257) 23,858
Net Interest Rate
Sensitivity Gap as a Percent
of Interest Earning Assets (6.9) (46.9) 71.6 (36.9)
Cumulative Gap as a Percent of
Cumulative Interest Earning
Assets (6.9) (21.6) 7.6
</TABLE>
<PAGE> 12
RESULTS OF OPERATIONS
INTEREST INCOME
Total interest on loans increased $1,030,000 (5.9%) in the first nine months of
1997 as compared to the first nine months of 1996 and increased $373,000 (6.2%)
in the third quarter of 1997 as compared to the third quarter of 1996, as a
result of an increase of $24,557,000 in the year-to-date average balance of
loans outstanding from September 30, 1996 to September 30, 1997 offset by a
decrease in yield on the loan portfolio of approximately 0.5% for that period.
Interest on investments decreased $182,000 (4.1%) in the first nine months of
this year as compared to the first nine months of 1996 and decreased $169,000
(11.4%) in the third quarter of 1997 from the third quarter of 1996, primarily
as a result of a decrease in yield on the portfolio from 6.39% during the first
nine months of 1996 to 6.35% during the first nine months of 1997, as well as a
decrease in the average balance of the investment portfolio of $2,534,000 for
that period. During the first nine months of 1997, interest on federal funds
sold decreased $156,000 (50.2%) from the first nine months of 1996 and decreased
$63,000 (61.2%) in the third quarter of 1997 as compared to the third quarter of
1996. Interest on Interest-bearing Deposits in Other Banks decreased $16,000
(3.5%) during the first nine months of 1997 from the first nine months of 1996
and decreased $3,000 (1.9%) in the third quarter 1997 from the third quarter of
1996. These decreases were the result of a decrease of 0.07% in the weighted
average yield on these short-term investments from September 30, 1996 to
September 30, 1997 as well as a decrease of $4,030,000 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.
INTEREST EXPENSE
During the first nine months of 1997, the total interest expense increased
$192,000 (1.8%) from the first nine months of 1996 and increased $23,000 (0.6%)
in the third quarter of 1997 from the third quarter of 1996. Interest on
deposits increased $65,000 (0.6%) in the first nine months of 1997 from the
first nine months of 1996 and decreased $5,000 (0.1%) in the third quarter of
this year from the third quarter of 1996. This increase is attributable to an
increase in the average balance of interest bearing deposits of $6,204,000 from
September 30, 1996 to September 30, 1997 offset by a decrease in the cost of
funds from 4.97% to 4.90% for that period. Interest on Other Borrowed Money
increased $127,000 (29.3%) in the first nine months of
<PAGE> 13
1997 from the first nine months of 1996 and increased $28,000 (17.8%) in the
third quarter of 1997 as compared to the third quarter of 1996. This increase is
the result of an increase of $2,211,000 from September 30, 1996 to September 30,
1997 in the average balance outstanding of Other Borrowed Money at a higher
average interest rate of 6.94% for the first nine months of 1997 as compared to
6.76% for the first nine months of 1996.
PROVISIONS FOR LOAN LOSSES
Provisions for loan losses for the first nine months of 1997 increased $137,000
(21.7%) from the first nine months of 1996 and increased $101,000 (59.8%) in the
third quarter of 1997 from the third 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 September 30, 1997
the allowance for loan losses was 1.6% of outstanding loans less unearned
interest. Nonperforming loans were $1,592,000 at September 30, 1997 and
$1,416,000 at December 31, 1996. These loans included those on a nonaccrual
status of $599,000 and $353,000, respectively, accruing loans contractually past
due at least 90 days of $494,000 and $207,000, respectively, and restructured
loans of $499,000 and $856,000, respectively. Net loans charged off totaled
$854,000 during the first nine months of 1997 as compared to $258,000 during the
first nine months of 1996. The increase in charge-offs is directly attributable
to one credit line on which $632,000 has been charged off.
NONINTEREST INCOME AND EXPENSE
Noninterest income increased $227,000 (12.2%) in the first nine months of 1997
from the first nine months of 1996 and increased $137,000 (22.8%) in the third
quarter of 1997 from the third quarter of 1996. These increases are reflected
primarily in an increase in service charges on deposit accounts of $144,000
during the first nine months of this year and of $34,000 during the third
quarter, as well as a $65,000 increase in Other Service Charges for the nine
month period and an $85,000 increase during the third quarter. The increases 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 increases in
Other Service Charges for the nine months and for the third quarter are the
result of increases 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, as well as increases in ATM fee income
<PAGE> 14
and commissions from annuity, mutual fund and life insurance sales.
Noninterest expense increased $378,000 (4.9%) in the first nine months of 1997
compared to the first nine months of 1996 and decreased $111,000 (3.8%) in the
third quarter of 1997 as compared to the third quarter of 1996. These increases
are the result of increases in salary and personnel expense of $355,000 and
$110,000, respectively, increases in occupancy and equipment expense of $270,000
and $69,000, respectively, and decreases in Other Expense of $247,000 and
$290,000, respectively, during the first nine months of 1997 as compared to the
first nine months of 1996 and during the third quarter of 1997 as compared to
the third 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 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 decrease in Other Expense is the
result of $361,000 in nonrecurring merger expense for the first nine months of
1996 and $262,000 in such expense for the third quarter of 1996 related to the
acquisition of the Effingham Bank, offset by an increase 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
<PAGE> 15
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 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
None
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
<PAGE> 16
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: November 12, 1997 BY: /s/ James Eli Hodges
--------------------------- ---------------------------------
JAMES ELI HODGES
PRESIDENT
DATE: November 12, 1997 BY: /s/Dwayne E. Rocker
--------------------------- ------------------------------
DWAYNE E. ROCKER
SECRETARY-TREASURER
(PRINCIPAL FINANCIAL OFFICER)
<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 NINE
MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 15,193
<INT-BEARING-DEPOSITS> 12,813
<FED-FUNDS-SOLD> 3,325
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 70,428
<INVESTMENTS-CARRYING> 19,472
<INVESTMENTS-MARKET> 19,974
<LOANS> 244,600
<ALLOWANCE> 3,908
<TOTAL-ASSETS> 377,191
<DEPOSITS> 322,658
<SHORT-TERM> 1,700
<LIABILITIES-OTHER> 4,518
<LONG-TERM> 8,460
3,752
0
<COMMON> 0
<OTHER-SE> 36,103
<TOTAL-LIABILITIES-AND-EQUITY> 377,191
<INTEREST-LOAN> 18,517
<INTEREST-INVEST> 4,290
<INTEREST-OTHER> 595
<INTEREST-TOTAL> 23,402
<INTEREST-DEPOSIT> 10,349
<INTEREST-EXPENSE> 10,909
<INTEREST-INCOME-NET> 12,493
<LOAN-LOSSES> 737
<SECURITIES-GAINS> 6
<EXPENSE-OTHER> 8,130
<INCOME-PRETAX> 5,717
<INCOME-PRE-EXTRAORDINARY> 5,717
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,009
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
<YIELD-ACTUAL> 4.86
<LOANS-NON> 599
<LOANS-PAST> 494
<LOANS-TROUBLED> 499
<LOANS-PROBLEM> 1,592
<ALLOWANCE-OPEN> 4,024
<CHARGE-OFFS> 999
<RECOVERIES> 145
<ALLOWANCE-CLOSE> 3,908
<ALLOWANCE-DOMESTIC> 3,908
<ALLOWANCE-FOREIGN> 0
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