FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
_
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
For the transition period from _______ to ________
Commission file number 33-13714-A
BUTTON GWINNETT FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
GEORGIA 58-1766331
(State or Other Jurisdiction of (I.R.S Employer
Incorporation or Organization) Identification No.)
2230 SCENIC HIGHWAY, SNELLVILLE, GA 30278
(Address of Principal Executive Offices) (Zip Code)
(770) 978-3242
(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 __XX____ No______
APPLICABLE ONLY TO CORPORATE ISSUERS
Class Outstanding at March 31, 1998
- ---------------------------- ---------------------------------
Common Stock, $.01 Par Value 1,432,477
Transitional Small Business Disclosure Format (check one):
Yes ______ No__XX____
BUTTON GWINNETT FINANCIAL CORPORATION & SUBSIDIARY
INDEX
Part I. Financial Information Page No.
Consolidated Balance Sheet - March 31, 1998 3
Consolidated Statements of Income - Three Months
Ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 5
Notes To Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 7 - 9
Part II. Other Information
Item 6 - Exhibits and reports on Form 8-K 11
PART I. FINANCIAL INFORMATION
BUTTON GWINNETT FINANCIAL CORPORATION & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31
ASSETS 1998
Cash and due from banks $13,038,175
Investment securities, approximate
market value of $39,335,014 39,146,920
Federal funds sold 15,900,000
Total Cash and Investments 68,085,095
Loans 148,236,084
Less reserve for loan losses (2,609,246)
Net loans 145,626,838
Premises & equipment, net 3,842,767
Other assets 2,535,930
$220,090,630
============
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
Demand $ 54,935,517
Interest-bearing demand 67,642,050
Savings 4,705,536
Time over $100,000 25,160,042
Time under $100,000 41,210,012
Total deposits $193,653,157
Other liabilities 2,021,684
Total liabilities $195,674,841
Stockholders' Equity
Common stock $.01 par, 5,000,000
authorized; 1,527,639 shares issued $ 15,276
Surplus 13,334,987
Retained earnings 12,251,715
$ 25,601,978
Less cost of shares acquired for the
treasury, 95,162 shares 1,186,189
Total stockholders' equity 24,415,789
$220,090,630
============
BUTTON GWINNETT FINANCIAL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31
1998 1997
Interest income:
Interest and fees on loans $3,756,050 $3,190,782
Interest on taxable investments 468,249 430,810
Interest on nontaxable investments 33,874 41,308
Interest on bank deposits and
other investments 112,240 6,575
Interest on Federal Funds Sold 98,361 208,584
$4,468,774 $3,878,059
Interest expense:
Deposits $1,509,145 $1,325,476
$1,509,145 $1,325,476
Net interest income before provision
for loan losses $2,959,629 $2,552,583
Provision for loan loss 30,000 75,000
Net interest income $2,929,629 $2,477,583
Other income
Service charges on
deposit accounts $ 215,697 $ 184,564
Other income 97,648 83,673
$ 313,345 $ 268,237
Other expense
Salaries & employee benefits $ 662,714 $ 607,310
Equipment expense 44,783 58,639
Occupancy expense 45,553 43,482
Other operating expenses 333,269 232,259
$1,086,319 $ 941,690
Net income before applicable
income taxes $2,156,655 $1,804,130
Applicable income taxes 783,900 645,000
Net income $1,372,755 $1,159,130
========== ==========
Basic earnings per common share $ 0.96 $ 0.85
========== ==========
Diluted earnings per common share $ 0.92 $ 0.79
========== ==========
Dividends per share of common stock $ 1.00 $ 0.60
========== ==========
BUTTON GWINNETT FINANCIAL CORPORATION & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,372,755 $1,159,130
Adjustments to reconcile net income
to net cash provided by
operating activities
Depreciation 40,447 45,883
Provision for loan losses 30,000 75,000
Increase in taxes payable 665,277 645,000
(Increase) in interest receivable (27,655) (64,735)
(Decrease) in interest payable (152,125) (47,638)
Other prepaids, deferrals and
accruals, net (65,260) 694,030
Total adjustments $490,684 $1,347,540
Net cash provided by
operating activities $1,863,439 $2,506,670
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investment securities (1,598,589) (5,189,298)
Proceeds from the maturity of
investment securities 7,992,289 895,000
(Increase) Decrease in Bank
Owned CD's 500,000 (500,000)
Purchases of premises and
equipment, net (10,090) (425,000)
(Increase) decrease in loans, net (3,383,591) 58,354
(Increase) decrease in federal
funds sold, net (9,135,000) 6,290,000
Net cash provided by (used in)
investing activities ($5,634,981) $1,129,056
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits, net $4,433,518 ($704,714)
Cash paid for treasury stock 0 (926,499)
Proceeds from exercise of
stock options 0 235,940
Cash dividends paid
to shareholders (1,432,477) (816,518)
Net cash provided by (used in)
financing activities $3,001,041 ($2,211,791)
Net increase (decrease) in cash
and due from banks ($770,501) $1,423,935
Cash and due from banks,
beginning of period 13,808,676 9,823,064
Cash and due from banks,
ending of period $13,038,175 $11,246,999
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 1,661,272 $ 1,373,114
Income taxes $ 150,419 $ 0
See Notes to Consolidated Financial Statements
BUTTON GWINNETT FINANCIAL CORPORATION & SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The financial information included herein is unaudited;
however, such information reflects all adjustments
(consisting solely of normal recurring adjustments)
which are, in the opinion of management, necessary for
a fair statement of results for the interim periods.
The results of operations for the three months ended
March 31, 1998 are not necessarily indicative of the
results to be expected for the full year.
Note 2. Earnings Per Common Share
Basic earnings per common share are computed by
dividing net income by the weighted-average number of
shares of common stock outstanding. Diluted earnings
per share are computed by dividing net income by the
sum of the weighted-average number of common shares
outstanding and potential common shares. Potential
common shares consist of stock options.
The following is a reconciliation of net income (the
numerator) and weighted-average shares outstanding (the
denominator) used in determining basic and diluted
earnings per common share (EPS):
Quarter Ended March 31, 1998
Weighted-Average
Net
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS $1,372,755 1,432,477 $0.96
Effect of
Dilutive Securities
Stock Options -- 63,327
Diluted EPS $1,372,755 1,495,804 $0.92
Quarter Ended March 31, 1997
Weighted-Average
Net
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS $1,159,130 1,365,358 $0.85
Effect of
Dilutive Securities
Stock Options -- 104,031
Diluted EPS $1,159,130 1,469,389 $0.79
Note 3. On February 5, 1998, the Company entered into an
Agreement and Plan of Reorganization with Premier
Bancshares, Inc. ("Premier") of Atlanta, Georgia.
Under this agreement, the Company will merge with and
into Premier. Upon consummation of the merger, each
share of Company stock will be converted into and
exchanged for the right to receive 3.885 shares of
Premier stock, subject to possible adjustment as
defined in the agreement. Consummation is subject to
certain conditions, including regulatory and
stockholder approval.
Note 4. The Board of Directors of the Company, by resolution
dated as of April 29, 1998, restructured the $1.00 per
share dividend as a dividend of $0.72 per share with the
balance of $0.28 per share to be attributed to a
subsequent quarter prior to consummation of the proposed
merger with Premier.
BUTTON GWINNETT FINANCIAL CORPORATION & SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain
significant factors which have affected the Company's financial
position and operating results during the periods included in the
accompanying consolidated financial statements.
Financial Condition
As of March 31, 1998, the Company experienced an increase in
total assets of 2.28%, as compared to December 31, 1997. Total
loans increased $3,426,902 during this period or approximately
2.36%%. Deposits increased $4,433,518 or 2.34% during this
period.
Liquidity
As of March 31, 1998, the liquidity rate was 34.8%, which
management considers to be adequate to meet the Company's funding
needs. Liquidity is measured by the ratio of net cash, short-
term and marketable securities to net deposits and short-term
liabilities.
Capital
Banking regulations require the banks and bank holding companies
to maintain minimum capital ratios to assets. At March 31, 1998,
the Company's capital ratios on a consolidated basis exceeded the
required ratios as follows:
Regulatory
Actual Requirement
Leverage capital ratio 11.09% 4.00%
Risk based capital ratios:
Core capital 14.85% 4.00%
Total capital 16.10% 8.00%
BUTTON GWINNETT FINANCIAL CORPORATION & SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Net interest income for the three months ended March 31, 1998
increased 15.95% to $2,959,629 over the $2,552,583 for the same
period in 1997. Interest income for the three month period
increased $590,715 or 15.23%, while interest expense increased
$183,669 or 13.86%. The interest income increase was due an
increase in commercial loans and bank investments. The increase
in interest expense is attributable to an increase in interest
bearing demand deposits which are a result of the marketing
efforts of the bank.
The provision for loan losses is a charge to earnings in the
current period to replenish the allowance and maintain it at a
level management has determined to be adequate. The provision
for loan losses charged to earnings totaled $30,000 during the
first quarter of 1998 and $75,000 in the same period of 1997.
The decreased provision in 1998 resulted from management's
evaluation of the loan portfolio and minimal losses during the
year. Management considers the allowance adequate to cover
potential losses in the loan portfolio.
Total other income increased approximately $45,108 or 16.82% to
$313,345 as compared to $268,237 for the same period 1997. The
increase in service charges on deposit accounts is due to an
increase in the amount charged for non-sufficient fees. The
increase in other income is primarily due to an increase in
mortgage loan origination fees, safe deposit box rent and check
printing charges as compared to the same period in 1997.
Total other expenses increased approximately 15.36% to $1,086,319
as compared to $941,690 during the first quarter of 1997. The
increase in salaries and employee benefits was due to salary
increases and other personnel expenses. The decrease in
equipment expense is attributed to a reduction in depreciation
expense and equipment repairs. There was minimal change in
occupancy expense. Other operating expenses increased by
approximately $101,000. There was an increase of approximately
$32,000 in FDIC Insurance Premiums as compared to the same period
in 1997. This is due to a refund from the BIF/SAIF funds during
the first quarter of 1997. Other real estate expense increased
$20,000 over the prior period which is attributable to a recovery
on expenses from property that was sold during the first quarter
of 1997, which is inapplicable to the first quarter of 1998. An
increase of $16,000 is related to marketing/advertising and
public relations expenses; a $13,000 increase is attributable to
miscellaneous fees; a $13,000 increase in legal and professional
expenses associated with the proposed merger expenses and an
approximate $4,000 increase in telephone expense over the same
period of 1997 is attributable to the installation of a new
telephone system.
Net income increased for the three-month period ended
March 31, 1998 by $213,625 as compared to the same period in
1997. This increase is attributable to more efficient operations
of the bank and over all growth of earning assets of the bank.
Year 2000
Like many financial institutions, the Company relies upon
computers for the daily conduct of its business and for data
processing. There is concern among industry experts that
commending on January 1,2000, computers will be unable to "read"
the new year and that there may be widespread computer
malfunctions. Management of the Company has assessed the
electronic systems, programs, applications, and other electronic
components used in its operations and is currently in the process
of determining the costs that will be incurred in connection with
the Year 2000 issue.
The Company is not aware of any known trends, events or
uncertainties, other than the effect of events as described
above, that will have or that are reasonably likely to have a
material effect on its liquidity, capital resources or
operations. The Company is also not aware of any current
recommendations by the regulatory authorities which, if they were
implemented, would have such an effect.
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits. - None
(b) Reports on Form 8-K. - The Company filed a Form 8-K dated
February 13, 1998 to report its proposed merger with Premier
in Item 1.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BUTTON GWINNETT FINANCIAL CORPORATION
Date: 5/14/98 By:/s/ Glenn S. White
Glenn S. White
President
(Principal Executive Officer)
Date: 5/14/98 By:/s/ Andrew R. Pourchier
Andrew R. Pourchier
Vice President and
Secretary-Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 13,038,175
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 15,900,000
<TRADING-ASSETS> 0
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<INVESTMENTS-CARRYING> 39,146,920
<INVESTMENTS-MARKET> 39,335,014
<LOANS> 148,236,084
<ALLOWANCE> 2,609,246
<TOTAL-ASSETS> 220,090,630
<DEPOSITS> 193,653,157
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,021,684
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0
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<COMMON> 15,276
<OTHER-SE> 24,400,513
<TOTAL-LIABILITIES-AND-EQUITY> 220,090,630
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<INTEREST-TOTAL> 4,468,774
<INTEREST-DEPOSIT> 1,509,145
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<INTEREST-INCOME-NET> 2,959,629
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<EXPENSE-OTHER> 1,086,319
<INCOME-PRETAX> 2,156,655
<INCOME-PRE-EXTRAORDINARY> 2,156,655
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