<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
-----
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
-----
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------- ---------
Commission file number 0-13153
HABERSHAM BANCORP
- ------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-1563165
- ------------------------------------------------------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Highway 441 N., P.O. Box 1980, Cornelia, Georgia 30531
- ------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(706) 778-1000
- ------------------------------------------------------------------------
(Issuer's telephone number, including area code)
- ------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer: (1) 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 requirements 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:
2,291,771 shares, common stock, $1.00 par value, as of September 30, 1995
Page 1 of 12
<PAGE> 2
Item. 1 Financial Statements
HABERSHAM BANCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 DECEMBER 31, 1994
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks .................. $ 4,902 $ 4,451
Federal funds sold ....................... 10,060 1,020
Investment securities available for sale
(estimated cost of $35,341 at September 30,
1995 and $30,065 at December 31, 1994.... 35,266 28,530
Investment securities held to maturity
(estimated market value of $23,370 at
September 30, 1995 and $21,093 at
December 31, 1994) ..................... 22,974 21,619
Loans .................................... 140,227 100,848
Less: Unearned income ................. (89) (45)
Allowance for loan losses ....... (2,318) (1,744)
-------- --------
Loans, net ........................... 137,820 99,059
-------- --------
Intangible assets ........................ 3,448
Other assets ............................. 8,959 6,648
-------- --------
TOTAL ASSETS ......................... $223,429 $161,327
======== ========
LIABILITIES
Non-interest bearing deposits ............ $ 25,366 $ 17,100
Interest bearing deposits ................ 165,434 124,515
Short-term borrowings .................... 1,080 1,002
Other borrowings ......................... 3,700 1,500
Other liabilities ........................ 2,955 1,359
-------- --------
TOTAL LIABILITIES .................... 198,535 145,476
-------- --------
SHAREHOLDERS' EQUITY (Note 3)
Common stock, $1.00 par value,
10,000,000 shares authorized;
2,403,963 shares issued ................ 2,404 1,750
Additional paid-in capital ............... 8,812 2,446
Retained earnings ........................ 14,368 13,110
Unrealized loss on investment securities
available for sale ..................... (24) (1,013)
Treasury stock (at cost) ................. (666) (442)
-------- --------
TOTAL SHAREHOLDERS' EQUITY ........... 24,894 15,851
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ............................. $223,429 $161,327
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
HABERSHAM BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(dollars in thousands, except per share amounts)
For the (Unaudited) Three-Month Periods Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
<S> <C> <C>
INTEREST INCOME
Loans (including fees) ..................... $ 3,788 $ 2,468
Investment securities ...................... 861 706
Other ...................................... 107 18
--------- ---------
TOTAL INTEREST INCOME ................... 4,756 3,192
INTEREST EXPENSE
Deposits ................................... 2,090 1,167
Other ...................................... 116 29
--------- ---------
TOTAL INTEREST EXPENSE .................. 2,206 1,196
NET INTEREST INCOME ........................ 2,550 1,996
Provision for loan losses .................. 39 7
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ................. 2,511 1,989
Other Income ............................... 433 247
Other Expense .............................. 2,196 1,768
--------- ---------
INCOME BEFORE INCOME TAXES.................. 748 468
Applicable income taxes ................... 188 79
--------- ---------
NET INCOME ................................. 560 389
Retained earnings at beginning of period.... 13,808 12,255
--------- ---------
Retained earnings at end of period ......... $ 14,368 $ 12,644
========= =========
NET INCOME PER COMMON AND COMMON EQUIVALENT
SHARE ...................................... $ .24 $ .23
--------- ---------
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING ....... 2,323,584 1,698,350
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
HABERSHAM BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(dollars in thousands, except per share amounts)
For the (Unaudited) Nine-Month Periods Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
SEPTEMBER 30, 1995 SEPTEMBER 30, 1994
<S> <C> <C>
INTEREST INCOME
Loans (including fees) ..................... $ 8,995 $ 7,239
Investment securities ...................... 2,445 2,018
Other ...................................... 205 96
--------- ---------
TOTAL INTEREST INCOME ................... 11,645 9,353
INTEREST EXPENSE
Deposits ................................... 4,938 3,474
Other ...................................... 221 76
--------- ---------
TOTAL INTEREST EXPENSE .................. 5,159 3,550
NET INTEREST INCOME ........................ 6,486 5,803
Provision for loan losses .................. 53 80
--------- ---------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ................. 6,433 5,723
Other Income ............................... 931 703
Other Expense .............................. 5,670 5,074
--------- ---------
INCOME BEFORE INCOME TAXES.................. 1,694 1,352
Applicable income taxes ................... 352 227
--------- ---------
NET INCOME ................................. 1,342 1,125
Dividends ................................. 84 66
Retained earnings at beginning of period.... 13,110 11,585
--------- ---------
Retained earnings at end of period ......... $ 14,368 $ 12,644
========= =========
NET INCOME PER COMMON AND COMMON EQUIVALENT
SHARE ...................................... $ .69 $ .66
========= =========
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING ....... 1,947,105 1,696,045
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
HABERSHAM BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
For the (Unaudited) Nine-Month Periods Ended September 30, 1995 and 1994
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
CASH FLOWS FROM OPERATING ACTIVITIES: 1995 1994
<S> <C> <C>
Net Income ........................................ $ 1,342 $ 1,125
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses ..................... 53 80
Net loss(gain) on sale of investment securities 5 (24)
Net loss on other real estate owned ........... 100 75
Depreciation .................................. 403 432
Provision for intangible assets ............... 52
Changes in assets and liabilities, net of effects
of purchase of Security State Bank:
Increase in other assets ...................... (544) (213)
Increase in other liabilities ................. 883 281
------- --------
Net cash provided by operating activities ......... 2,294 1,756
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment securities available for sale:
Proceeds from maturity ............................ 3,139 5,835
Proceeds from sale ................................ 2,830 4,187
Purchases ......................................... (6,161) (15,485)
Investment securities held to maturity:
Proceeds from maturity ............................ 3,572 2,098
Purchases ......................................... (4,336) (4,882)
Net (increase) decrease in loans ................... (7,093) 5,167
Proceeds from sale of other real estate ............ 81 46
Net additions of premises and equipment ............ (202) (111)
Cash and cash equivalents acquired upon acquisition
of Security State Bank, net of cash payments ...... 3,219
------- --------
Net cash used by investing activities................ (4,951) (3,145)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits .......................... 9,913 1,480
Net increase in short-term borrowings ............. 78 224
Net increase (decrease) in other borrowings ....... 2,200 (1,000)
Sale of treasury stock ............................ 41 55
Cash Dividends .................................... (84) (66)
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Net cash provided by financing activities ......... 12,148 693
------- --------
Increase in cash and cash equivalents ............... 9,491 (696)
CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD ...... 5,471 8,070
------- --------
CASH AND CASH EQUIVALENTS: END OF PERIOD ............ $14,962 $ 7,374
======= ========
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
Other real estate acquired through loan foreclosures.. $ 280 $ 274
Loan made to sell other real estate .................. 16
Unrealized gain (loss) on investment securities
available for sale ................................... 1,498 (410)
</TABLE>
The Company purchased all of the capital stock of Security Bancorp, Inc. on
June 30, 1995 in exchange for 612,516 shares of Company stock and cash of
$1,990,269 paid in July 1995. In conjunction with the acquisition, liabilities
were assumed as follows:
<TABLE>
<CAPTION>
(in thousands)
<S> <C>
Fair value of assets acquired ................. $ 49,242
Purchase price ................................ (9,257)
--------
Liabilities assumed ........................... $ 39,985
=======
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
HABERSHAM BANCORP
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The condensed financial 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 periods 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 periods reported herein
are not necessarily indicative of results to be expected for the full year.
The condensed consolidated financial statements included herein should be read
in conjunction with the Company's 1994 financial statements and notes thereto,
and the Independent Auditors' Report included in the Company's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1994.
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-KSB for the fiscal year ended December 31, 1994. The Company
has consistently followed those policies in preparing this report.
3. Common Stock
Effective May 15, 1995, the Company declared a 5 for 1 stock split of its
common stock effected in the form of a 400% stock dividend. In addition,
effective April 15, 1995, the Company changed the par value of its common stock
from $2.50 to $1.00 per share and increased the number of authorized shares of
common stock to 10,000,000 shares. All references to share and per share
amounts have been retroactively adjusted to reflect the split. Also
retroactively, $875,000 has been charged to Additional Paid-In Capital and
credited to Common Stock to reflect the stock split and the change in par
value.
4. Earnings Per Share
Net income per share is computed based on the weighted average number of common
and common equivalent shares outstanding during the periods.
5. Acquisition
Effective June 30, 1995, the Company consummated its acquisition of Security
Bancorp, Inc. ("Security") by agreeing to exchange 612,516 shares of its common
stock and paid cash of $1,990,269 for the outstanding shares of Security common
stock in a merger of Security with and into the Company. The Company had
previously acquired 5% of the outstanding shares of Security.
7
<PAGE> 8
The total purchase price including expenses is expected to total approximately
$9,257,000. The merger was accounted for as a purchase and the operations of
Security were included in the Company's operations after June 30, 1995.
Intangible assets consisting of core deposits of $416,000 and goodwill of
$3,084,000 were recorded in connection with the merger and are being amortized
over a five and twenty-five year period, respectively. The following presents
pro forma income statement information for the three month period ended
September 30, 1994 and the nine month periods ended September 30, 1995 and 1994
assuming the merger occurred on July 1, 1994 and January 1, 1995 and 1994,
respectively, (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ----------------
1994 1995 1994
------ ------ ------
<S> <C> <C> <C>
Total Revenues $4,354 $14,723 $12,870
Net income $ 400 $ 1,410 $ 1,262
Net income per common share $ .17 $ .61 $ .55
</TABLE>
The pro forma financial information presented above does not purport to be
indicative of either the results of operations that would have occurred had the
acquisition taken place on the indicated dates or of future consolidated
results of operations.
6. New Accounting Pronouncements
The Company had impaired loans of $550,772 and $1,012,868 as of January 1, 1995
and September 30, 1995, respectively. No allowance was necessary for such
loans under the provisions of such statements. The interest income recognized
on such loans for the nine months ended September 30, 1995 was not material.
Item. 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations.
HABERSHAM BANCORP
Organization
Habersham Bancorp (the "Company") owns all of the outstanding stock of
Habersham Bank (the "Habersham Bank"), Security State Bank ("Security Bank"),
and The Advantage Group, Inc. The Advantage Group, Inc. is a non-bank
subsidiary which provides certain management consulting advice to depository
institutions. Management's discussion and analysis, which follows, relates to
Habersham Bank, Security Bank, and The Advantage Group, Inc., as the Company
does not have any other significant operations.
Material Changes in Financial Condition
The Company's total assets increased by $62 million to $223 million, up
from $161 million at December 31, 1994. An increase of $56 million reflects
the Company's acquisition of Security Bank, Canton, Ga as of June 30, 1995.
See Note 5 of Notes of Condensed Consolidated Financial Statements.
8
<PAGE> 9
As of June 30, 1995, Security Bank had total assets of approximately $46
million consisting of approximately $33 million in loans, $5.7 million in
investments, $5.3 million in cash and cash equivalents, and $2 million in other
assets. Liabilities of Security Bank consisted of deposits of $39 million and
other liabilities of $1 million, and equity of $5.8 million.
The remaining changes in the balance sheet at September 30, 1995 as
compared to December 31, 1994 are generally a result of the growth of Habersham
Bank and Security Bank that includes an increases in loans of approximately $6
million, in Federal Funds Sold of approximately $5 million and deposits of
approximately $10 million.
At September 30, 1995, loans over 90 day days past due and nonaccrual loans
totaled $1,391,950 or .99% of gross outstanding loans, as compared to $764,839
or .76% at December 31, 1994. The majority of this increase is attributable to
the placement in nonaccrual status of a single loan by Security Bank. The
balance of the allowance for loan losses is in accordance with the internal
calculation of the allowance for loan losses and accounts for factors such as
classified and past due loans as well as portfolio growth and diversification.
There were no significant writeoffs during the third quarter of 1995.
The Company adopted Statement of Financial Accounting Standards Number 114
and 118 as of January 1, 1995. The Company considers a loan to be impaired
when it is probable that its Banks will be unable to collect all amounts due
according to the terms of the loan agreement. The Banks measure impairment of
a loan by loan basis for real estate, commercial and agricultural loans.
Installment and other consumer loans are considered smaller balance,
homogeneous loans. Amounts of impaired loans that are not probable of
collection are charged off immediately. The Company had impaired loans of
$550,772 and $1,012,868 as of January 1, 1995 and September 30, 1995,
respectively. No allowance was necessary for such loans under the provision of
such Statements. The interest income recognized on such loans for the nine
months ended September 30, 1995 was not material.
Effective May 15, 1995, the Company declared a 5 for 1 stock split of its
common stock effected in the form of a 400% stock dividend. In addition,
effective April 15, 1995, the Company changed the par value of its common stock
from $2.50 to $1.00 per share and increased the number of authorized shares of
common stock to 10,000,000 shares. All references to share and per share
amounts have been retroactively adjusted to reflect these events.
Material Changes in Results of Operations
Total interest income for the third quarter of 1995 increased $1,564,000 or
49.0%, when compared to the third quarter of 1994. Interest income for the
first nine months of 1995 increased $2,292,000 or 24.51% as compared to the
first nine months of 1994.
9
<PAGE> 10
Interest income from loans for the third quarter of 1995 increased
$1,320,000 or 53.48% when compared to the third quarter of 1994. Interest
income from loans for the first nine months of 1995 increased $1,756,000 or
24.26% as compared to the first nine months of 1994. Loan yields increased to
10% for the first nine months of 1995 when compared to the yields of 8.92% for
the first nine months of 1994. The increase in interest income from loans was
primarily due to the addition of approximately $1 million of income from
Security Bank as well as increases in the loan portfolios of Habersham Bank and
Security Bank of approximately $3.8 million.
Interest income from investments for the third quarter of 1995 increased
$155,000 or 21.95% when compared to the third quarter of 1994. Interest income
from investments for the first nine months of 1995 increased $427,000 or 21.16%
as compared to the first nine months of 1994. Average yields on securities
increased to 5.95% for the first nine months of 1995 as compared to 5.63% for
the first nine months of 1994. The increase in interest income from
investments was primarily due to the addition of Security Bank's investment
portfolio.
Interest expense on deposits for the third quarter of 1995 increased
$923,000 or 79.09% when compared to the third quarter of 1994. Interest
expense on deposits for the first nine months of 1995 increased $1,464,000 or
42.14% when compared to the first nine months of 1994. The increase in
interest expense on deposit accounts was primarily due to the addition of
Security Bank's deposit portfolio, as well as increases in rates offered on
deposits from an average of 3.54% during the first nine months of 1994 verses
an average of 4.58% during the first nine months of 1995.
Other interest expense for the third quarter of 1995 increased $87,000 or
300% when compared to the third quarter of 1994, and other interest expense for
the first nine months of 1995 increased $145,000 or 190.79% when compared to
the first nine months of 1994 due to an additional Federal Home Loan Bank
Advance of $2.2 million in January 1995.
Net interest income for the third quarter of 1995 increased $554,000
or 27.76% when compared to the third quarter of 1994. Net interest income
increased approximately $683,000 or 11.77% for the first nine months of 1995
when compared to the first nine months of 1994. These increases are a result
of the increases in interest income, offset by the increases in interest
expense, described above.
Other income increased $186,000 or 75.30% for the third quarter of 1995
over the same period in 1994. Other income increased $228,000 or 32.43% for
the first nine months of 1995 over the same period in 1994. These increases
were due to increases in service charge activity and trust department fees
during the indicated periods, as well as activity resulting from the
acquisition of Security Bank.
10
<PAGE> 11
Other expenses increased $428,000 or 24.2% for the third quarter of 1995
over the same period in 1994. Other expenses increased $596,000 or 11.75% for
the first nine months of 1995 over the same period in 1994. These increases
were due to normal increases in employee salaries and benefits, approximately
$57,000 of additional expenses relating to the Company's MasterCard operations,
losses on other real estate owned of approximately $160,000 and other expenses
related to the operation of Security Bank.
Liquidity and Capital Resources
The Habersham Bank's liquidity policy requires that the ratio of cash and
certain short-term investments to net withdrawable deposit accounts be at least
20%. At September 30, 1995, both Habersham Bank and Security Bank exceeded
this ratio.
At September 30, 1995, Habersham Bank and Security Bank were required to
have minimum Tier 1 and total capital ratios of 4% and 8%, respectively. Both
banks actual ratios at that date for both Tier 1 and total capital ratios
exceeded 12.00%. Tier 1 leverage ratio at September 30, for both banks
exceeded 8.87%. While management believes that the current level of internal
capital is sufficient for current and foreseeable needs of the Company, capital
needs are continually evaluated by management.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
none
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) 27 Financial Data Schedule (for SEC use only)
(b) none
11
<PAGE> 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
HABERSHAM BANCORP
-----------------
(Registrant)
Date 11-13-95 /s/ David D. Stovall
------------------ --------------------------
President and
Chief Financial Officer
(for the Registrant and as the
Registrant's principal financial and
accounting officer)
12
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,901,758
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 10,060,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,265,517
<INVESTMENTS-CARRYING> 22,974,496
<INVESTMENTS-MARKET> 23,370,000
<LOANS> 140,226,656
<ALLOWANCE> 2,406,488
<TOTAL-ASSETS> 223,429,024
<DEPOSITS> 190,799,974
<SHORT-TERM> 1,080,037
<LIABILITIES-OTHER> 6,655,184
<LONG-TERM> 0
<COMMON> 2,403,974
0
0
<OTHER-SE> 22,489,855
<TOTAL-LIABILITIES-AND-EQUITY> 223,429,024
<INTEREST-LOAN> 8,995,215
<INTEREST-INVEST> 2,444,578
<INTEREST-OTHER> 204,925
<INTEREST-TOTAL> 11,644,718
<INTEREST-DEPOSIT> 4,938,149
<INTEREST-EXPENSE> 5,158,684
<INTEREST-INCOME-NET> 6,432,992
<LOAN-LOSSES> 53,043
<SECURITIES-GAINS> (5,293)
<EXPENSE-OTHER> 5,665,099
<INCOME-PRETAX> 1,694,221
<INCOME-PRE-EXTRAORDINARY> 1,694,221
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,342,088
<EPS-PRIMARY> .69
<EPS-DILUTED> .69
<YIELD-ACTUAL> 4.996
<LOANS-NON> 1,020,000
<LOANS-PAST> 372,000
<LOANS-TROUBLED> 1,249,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,744,335
<CHARGE-OFFS> 155,000
<RECOVERIES> 30,000
<ALLOWANCE-CLOSE> 2,317,859
<ALLOWANCE-DOMESTIC> 2,317,859
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
