<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 March 31, 1996
------ 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:
2,325,781 shares, common stock, $1.00 par value, as of March 31, 1996
Page 1 of 10
<PAGE> 2
Item. 1 Financial Statements
HABERSHAM BANCORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
ASSETS (Unaudited)
<S> <C> <C>
Cash and due from banks .................. $ 5,156 $ 6,598
Federal funds sold ....................... 13,600 9,790
Investment securities available for sale
(estimated cost of $37,713 at March 31,
1996 and $40,035 at December 31, 1995... 37,833 40,313
Investment securities held to maturity
(estimated market value of $16,826 at
March 31, 1996, and $17,677 at
December 31, 1995) ..................... 16,779 17,498
Loans held for sale ...................... 2,945
Loans .................................... 150,713 145,434
Less: Unearned income ................. (55) (44)
Allowance for loan losses ....... (2,411) (2,336)
-------- --------
Loans, net ........................... 148,247 143,054
-------- --------
Intangible assets ........................ 3,485 3,397
Other assets ............................. 9,710 8,936
-------- --------
TOTAL ASSETS ......................... $237,755 $229,586
======== ========
LIABILITIES
Non-interest bearing deposits ............ $ 23,001 $ 23,129
Interest bearing deposits ................ 180,401 171,956
Short-term borrowings .................... 1,548 1,597
Other borrowings ......................... 3,719 3,700
Other liabilities ........................ 2,782 3,299
-------- --------
TOTAL LIABILITIES .................... 211,451 203,681
-------- --------
SHAREHOLDERS' EQUITY (Note 3)
Common stock, $1.00 par value,
10,000,000 shares authorized;
2,403,974 shares issued ................ 2,404 2,404
Additional paid-in capital ............... 8,842 8,837
Retained earnings ........................ 15,419 14,932
Unrealized gain on investment securities
available for sale ..................... 103 208
Treasury stock (at cost) ................. (464) (476)
-------- --------
TOTAL SHAREHOLDERS' EQUITY ........... 26,304 25,905
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY ............................. $237,755 $229,586
======== ========
</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 March 31, 1996 and 1995
<TABLE>
<CAPTION>
MARCH 31, 1996 MARCH 31, 1995
INTEREST INCOME
<S> <C> <C>
Loans (including fees) ..................... $ 4,109 $ 2,536
Investment securities ...................... 856 782
Other ...................................... 153 41
------- -------
TOTAL INTEREST INCOME ................... 5,118 3,359
INTEREST EXPENSE
Deposits ................................... 2,214 1,352
Other ...................................... 61 69
------- -------
TOTAL INTEREST EXPENSE .................. 2,275 1,421
NET INTEREST INCOME ........................ 2,843 1,938
Provision for loan losses .................. 90 7
------- -------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ................. 2,753 1,931
Other Income ............................... 372 250
Other Expense .............................. 2,515 1,732
------- -------
INCOME BEFORE INCOME TAXES.................. 610 449
Applicable income taxes ................... 123 72
------- -------
NET INCOME ................................. 487 377
Retained earnings at beginning of period.... 14,932 13,110
------- -------
Retained earnings at end of period ......... $15,419 $13,487
======= =======
Per Common and Common Equivalent Share:
NET INCOME ................................. $ .20 $ .22
======= =======
WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING ....... 2,396,646 1,714,940
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
HABERSHAM BANCORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
For the (Unaudited) Three-Month Periods Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1996 1995
<S> <C> <C>
Net Income ........................................ $ 487 $ 377
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for loan losses ..................... 90 7
Net (loss)gain on sale of investment securities 10
Net loss on other real estate owned ........... 60
Depreciation .................................. 159 132
Amortization of intangible assets ............. 53
Changes in assets and liabilities:
Increase in other assets ...................... (203) (331)
Increase (decrease) in other liabilities ...... (517) 149
------- -------
Net cash provided by operating activities ......... 69 404
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment securities available for sale:
Proceeds from maturity ............................ 3,692 690
Proceeds from sale ................................ 491
Purchases ......................................... (1,371) (3,393)
Investment securities held to maturity:
Proceeds from maturity ............................ 1,073 1,836
Purchases ......................................... (354) (757)
Increase in Loans held for sale .................... (2,945)
Net (increase) decrease in loans ................... (5,590) 541
(Increase) decrease in other real estate ........... (23) 3
Net additions of premises and equipment ............ (487) (123)
------- -------
Net cash used by investing activities ............. (6,005) (712)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits .......................... 8,317 6,336
Net decrease in short-term borrowings ............. (49) (520)
Net increase in other borrowings .......... ....... 19 2,200
Sale of treasury stock ............................ 17 13
------- -------
Net cash provided by financing activities ......... 8,304 8,029
------- -------
Increase (decrease) in cash and cash equivalents .... 2,368 7,721
CASH AND CASH EQUIVALENTS: BEGINNING OF PERIOD ...... 16,388 5,471
------- -------
CASH AND CASH EQUIVALENTS: END OF PERIOD ............ $18,756 $13,192
======= =======
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
<TABLE>
<S> <C>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY:
Other real estate acquired through loan foreclosures.. $ 322 $ 200
Loan made to sell other real estate .................. (14) (16)
Unrealized (gain) loss on investment securities
available for sale .................................. (105) 469
</TABLE>
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 for a fair statement of the
results of 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 1995 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, 1995.
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, 1995. 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 this 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
<PAGE> 6
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 $1,990,269 in cash 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. The total
purchase price including expenses totaled approximately $9,257,000. The merger
was accounted for as a purchase. The following presents pro forma income
statement information for the three month period ended March 31, 1995 assuming
the merger occurred on January 1, 1995 (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1995
<S> <C>
Total revenues $4,655
Net income $ 418
Net income per common share $ .18
</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 Subsidiary
On January 2, 1996, Habersham Bank formed a new subsidiary, BancMortgage
Financial Corp. ("BancMortgage"). BancMortgage is a full service mortgage
lender and servicer located in the North Atlanta Metropolitan area.
BancMortgage received approval from the Department of Banking and Finance of
the State of Georgia to begin business on January 26, 1996 and began operations
on February 1, 1996.
7. New Accounting Pronouncement
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation," which will be effective for the Company beginning January 1,
1996. SFAS No. 123 requires expanded disclosures of stock-based compensation
arrangements with employees and encourages (but does not require) compensation
cost to be measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply APB Opinion No. 25,
which recognizes compensation cost based on the intrinsic value of the equity
instrument awarded. The Company will continue to apply APB Opinion No. 25 to
its stock based compensation awards to employees and will disclose the required
pro forma effect on net income and earnings per share in the 1996 Annual
Report.
6
<PAGE> 7
Item. 2 Management's Discussion and Analysis of Financial Condition and
Results of Operations.
HABERSHAM BANCORP
Organization
Habersham Bancorp owns all of the outstanding stock of Habersham Bank
("Habersham Bank"), Security State Bank ("Security Bank"), and The Advantage
Group, Inc. (collectively the "Company"). Habersham Bank owns all of the
outstanding stock of BancMortgage Financial Corp ("BancMortgage"), a nonbank
subsidiary. The Advantage Group, Inc. is a nonbank subsidiary which engages in
the business of providing certain management consulting advice to depository
institutions. BancMortgage was organized in 1996 as a full service mortgage
lending and servicing company located in the northern Atlanta Metropolitan
area. Neither The Advantage Group, Inc. nor BancMortgage comprised a
significant portion of the financial position, results of operations or cash
flows of the Company for the quarter ended March 31, 1996. Management's
discussion and analysis, which follows, relates primarily to Habersham Bank and
Security Bank.
Material Changes in Financial Condition
The Company's total assets increased approximately $8 million during the
first quarter of 1996 reflecting an increase in Federal Funds Sold of
approximately $4 million and an increase loans of approximately $5 million
offset by a decrease in Investment Securities of approximately $3 million.
BancMortgage originated approximately $3 million of loans held for sale during
the first quarter. These increases were funded by an increase in total
deposits of approximately $8 million.
At March 31, 1996, loans over 90 day days past due and nonaccrual loans
totaled $690,092 or .46% of gross outstanding loans, as compared to $1,280,683
or .88% of gross outstanding loans at December 31, 1995. 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 first quarter of 1996.
The Company had impaired loans of $523,706 and $1,022,683 as of March 31,
1996 and December 31, 1995, respectively. No allowance was necessary for such
loans. The interest income recognized on such loans for the three months
ended March 31, 1996 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 this split.
7
<PAGE> 8
Material Changes in Results of Operations
The Company consummated its acquisition of Security Bank as of July 1, 1995.
The acquisition was accounted for as a purchase and the operations of Security
are included in the Company's operations beginning July, 1995. As of July 1,
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 consisted of deposits of $39 million and other liabilities of $1
million and equity of $5.8 million.
Total interest income for the first quarter of 1996 increased $1,759,000 or
52.4%, when compared to the first quarter of 1995. Interest income from loans
increased $1,573,000 or 62.0% due to the addition of approximately $994,000 of
income from loans of Security Bank as well as increases in the loan portfolios
of Habersham Bank and Security Bank. Loan yields increased by .42% to 10.11%
for the first quarter of 1996 when compared to yields of 9.69% for the first
quarter of 1995.
Interest income from investment securities increased $74,000 or 9.5% for
the first quarter of 1996 when compared to the first quarter of 1995. The
increase in interest income from investments was primarily due to the addition
of approximately $89,000 in income from Security Bank's investment portfolio.
Average yields on investment securities increased .51% to 5.95% for the first
quarter of 1996 when compared to 5.92% for the first quarter of 1995.
Total interest expense for the first quarter of 1996 increased $854,000 or
60.1%, when compared to the first quarter of 1995. Interest expense on
deposits increased $862,000 or 63.8%, when compared to the first quarter of
1995. The increase in interest expense on deposit accounts was primarily due
to the addition of approximately $633,000 in interest expense from Security
Bank's deposit portfolio of approximately $48 million, as well as other
increases in the deposit portfolio of Habersham Bank of approximately $8
million or 4.3% when compared to March 31, 1995. Consolidated average rates
on deposits also increased during the first quarter of 1996 when compared to
the first quarter of 1995 as follows; IMMA & NOW - from 3.2% to 3.27%; Savings
- - from 2.75% to 3.00%; Certificates of Deposit and IRA - from 5.26% to 5.92%.
Other interest expense decreased $8,000 or 11.6% when compared to the first
quarter of 1995 due primarily to the fact that the rate paid on the Federal
Home Loan Bank advances decreased from first quarter 1995 from 6.29% to 5.47%
during the first quarter of 1996.
8
<PAGE> 9
Net interest income increased approximately $905,000 or 46.7%, for the
first quarter of 1996 as a result of the items discussed above.
Other income increased $122,000 or 48.8% for the first quarter of 1996 over
the same period in 1995. This increase was due to approximately $135,000 of
other income related to Security Bank offset by decreased service charge and
commission activity.
Other expenses increased $783,000 or 45.2% for the first quarter of 1996
over the same period in 1995. This increase was due to the addition of
approximately $561,000 of expenses related to Security Bank and the additional
expenses of approximately $213,000 relating to BancMortgage operations.
Liquidity and Capital Resources
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% and Security Bank's liquidity policy requires a minimum of 30%. The
following table lists the liquidity ratios for the Banks at March 31, 1996.
<TABLE>
<S> <C>
Habersham Bank 28.09%
Security State Bank 32.09%
</TABLE>
At March 31, 1996, Habersham Bank and Security Bank were required to have
minimum Tier 1 and total capital ratios of 4% and 8%, respectively.
Additional, the Banks are required to maintain a leverage ratio (Tier 1 Capital
to total assets) of at least 4%. The Banks' ratios at that date follows:
<TABLE>
<CAPTION>
Habersham Security State
Bank Bank
<S> <C> <C>
Tier 1 11.63% 14.85%
Total Capital 12.88% 16.05%
Leverage 8.91% 11.32%
</TABLE>
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.
9
<PAGE> 10
PART II
OTHER INFORMATION
<TABLE>
<S> <C>
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
</TABLE>
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 May 10, 1996 /s/ David D. Stovall
------------------ ----------------------------------------------
President and
Chief Financial Officer
(for the Registrant and as the
Registrant's principal financial and
accounting officer)
10
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,155,659
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 13,600,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 37,833,074
<INVESTMENTS-CARRYING> 16,779,461
<INVESTMENTS-MARKET> 16,826,000
<LOANS> 153,602,587
<ALLOWANCE> 2,410,572
<TOTAL-ASSETS> 237,754,771
<DEPOSITS> 203,402,391
<SHORT-TERM> 1,548,380
<LIABILITIES-OTHER> 3,718,668
<LONG-TERM> 0
0
0
<COMMON> 2,403,974
<OTHER-SE> 23,900,366
<TOTAL-LIABILITIES-AND-EQUITY> 237,754,771
<INTEREST-LOAN> 4,108,780
<INTEREST-INVEST> 856,652
<INTEREST-OTHER> 152,992
<INTEREST-TOTAL> 5,118,424
<INTEREST-DEPOSIT> 2,213,999
<INTEREST-EXPENSE> 2,275,165
<INTEREST-INCOME-NET> 2,843,259
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,515,045
<INCOME-PRETAX> 610,220
<INCOME-PRE-EXTRAORDINARY> 610,220
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 486,922
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
<YIELD-ACTUAL> 5.44
<LOANS-NON> 523,706
<LOANS-PAST> 166,386
<LOANS-TROUBLED> 1,197,966
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2,335,788
<CHARGE-OFFS> 46,577
<RECOVERIES> 31,361
<ALLOWANCE-CLOSE> 2,410,512
<ALLOWANCE-DOMESTIC> 2,410,512
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
