<PAGE>
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, 1995
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
Commission file number . . . . 33-14610
TARA BANKSHARES CORPORATION
GEORGIA 58-1736696
6375 Highway 85, P.O. Box 775
Riverdale, Georgia 30274
Issuer's telephone number, including area code: (404) 996-8272
--------------
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 [ ]
At May 2, 1995, there were 448,003 shares of the registrant's Common Stock,
$10.00 par value, outstanding.
1 of 12
<PAGE>
TARA BANKSHARES CORPORATION
AND SUBSIDIARY
FORM 10-QSB
Index
Part I. Financial Information
Page No.
--------
Item 1. Consolidated balance sheets............................... 3
Consolidated statements of operations..................... 4
Consolidated statements of cash flows..................... 5
Notes to consolidated financial statements................ 6
Item 2. Management's discussion and analysis or
plan of operation................................... 7
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K.......................... 11
Signatures.......................................................... 12
2 of 12
<PAGE>
PART I. Financial Information
- ------- ---------------------
ITEM 1. TARA BANKSHARES CORPORATION AND SUBSIDIARY
- -------
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 2,198,873 1,811,144
Federal funds sold 3,110,000 2,720,000
Securities available-for-sale, at fair value 9,800,045 10,404,340
Securities held-to-maturity, at cost (approximate fair
value of $3,384,251 and $3,060,262, respectively) 3,435,979 3,183,693
Loans 33,823,537 34,075,994
Less allowance for loan losses 1,278,291 1,281,947
------------- -------------
Loans, net 32,545,246 32,794,047
------------- -------------
Premises and equipment, net 2,124,541 2,157,333
Other assets 1,066,516 1,276,569
------------- -------------
Total assets $ 54,281,200 54,347,126
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Demand deposits:
Noninterest-bearing $ 10,808,183 10,614,675
Interest-bearing 10,261,869 13,082,705
Savings deposits 2,426,045 2,749,428
Certificates of deposit, $100,000 and over 6,404,251 4,704,893
Certificates of deposit, other 19,403,388 18,427,579
------------- -------------
Total deposits 49,303,736 49,579,280
Subordinated convertible debentures 1,500,000 1,500,000
Other liabilities 261,023 281,722
------------- -------------
Total liabilities 51,064,759 51,361,002
------------- -------------
Stockholders' equity:
Common stock, $10 par value, authorized 2,000,000
shares; issued and outstanding 448,003 shares 4,480,030 4,480,030
Additional paid-in capital 2,663,598 2,663,598
Accumulated deficit (3,557,509) (3,743,932)
Net unrealized losses on securities available-for-sale (369,678) (413,572)
------------- -------------
Total stockholders' equity 3,216,441 2,986,124
------------- -------------
Total liabilities and stockholders' equity $ 54,281,200 54,347,126
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
3 of 12
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended March 31, 1995 and 1994
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Interest income:
Loans, including fees $ 863,857 720,531
Federal funds sold 21,316 21,722
Interest-bearing deposits in other financial institutions - 990
Investment securities - taxable 230,006 188,447
------------- -------------
Total interest income 1,115,179 931,690
------------- -------------
Interest expense:
Deposits 392,583 355,543
Federal funds purchased 482 -
Securities sold under agreements to repurchase - 12,243
Subordinated convertible debentures 39,747 30,494
------------- -------------
Total interest expense 432,812 398,280
------------- -------------
Net interest income 682,367 533,410
------------- -------------
Provision for loan losses - -
------------- -------------
Net interest income after provision for loan losses 682,367 533,410
------------- -------------
Other income:
Service charges on deposit accounts 105,240 122,498
Insurance commissions 1,517 1,820
Net gains on sales of investment securities - 31,322
Other operating income 21,798 32,758
------------- -------------
Total other income 128,555 188,398
------------- -------------
Other expenses:
Salaries and employee benefits 267,830 331,310
Net occupancy 47,866 47,393
Furniture and equipment 37,473 48,909
Other operating expenses 271,330 294,326
------------- -------------
Total other expenses 624,499 721,938
------------- -------------
Net income (loss) $ 186,423 (130)
============= =============
Net income (loss) per share based on average outstanding
shares of 448,003 and $ 0.42 -
============= =============
diluted shares of 698,003 $ 0.32 -
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
4 of 12
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1995 and 1994
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 186,423 (130)
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation 37,722 45,881
Amortization and (accretion), net - 2,458
Securities transactions, net - (31,322)
Provision for other real estate losses 50,000 60,000
Changes in other assets and liabilities:
Increase in other assets (121,947) (50,381)
Decrease in other liabilities (20,698) (36,436)
----------- -----------
Total adjustments (54,923) (9,800)
----------- -----------
Net cash provided by (used in) operating activities 131,500 (9,930)
----------- -----------
Cash flows from investing activities:
Purchases of securities available-for-sale - (7,247,323)
Proceeds from sales of securities available-for-sale - 6,536,166
Proceeds from maturities of securities available-for-sale 648,189 459,989
Purchases of securities held-to-maturity (565,921) -
Proceeds from sales of securities held-to-maturity - -
Proceeds from maturities of securities held-to-maturity 313,636 -
Net decrease in loans 188,801 448,299
Purchases of premises and equipment (4,930) (38,855)
Proceeds from sales of other real estate 342,000 18,899
----------- -----------
Net cash provided by investing activities 921,775 177,175
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in demand deposits and savings accounts (2,950,711) 50,984
Net increase (decrease) in certificates of deposits 2,675,167 (1,017,712)
Increase (decrease) in repurchase agreements - 5,388
Proceeds from subordinated convertible debentures - 10,000
----------- -----------
Net cash (used in) financing activities (275,544) (951,340)
----------- -----------
Net increase (decrease) in cash and cash equivalents 777,731 (784,095)
Cash and cash equivalents at beginning of period 4,531,144 5,367,439
----------- -----------
Cash and cash equivalents at end of period $ 5,308,875 4,583,344
=========== ===========
Supplemental disclosures of cash paid during the period for:
Interest, net of amounts capitalized $ 414,325 395,750
=========== ===========
Income taxes $ - -
=========== ===========
Supplemental information on non cash investing activities:
Unrealized (gains) losses on securities available-for-sale $ (43,894) 218,929
=========== ===========
Principal balances on loans transferred to other real estate $ 60,000 50,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5 of 12
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1995 and 1994
(Unaudited)
(1) Management's Opinion
--------------------
The accompanying consolidated financial statements reflect the accounts of
Tara Bankshares Corporation ("Company") and its wholly-owned subsidiary, Tara
State Bank ("Bank"). The consolidated financial statements for March 31, 1995
and 1994 are unaudited; however, in the opinion of management, all adjustments,
consisting of normal accruals, necessary for a fair presentation of the
financial position, results of operations, and cash flows for the three month
periods then ended have been included.
(2) Adoption of New Accounting Principle
------------------------------------
On January 1, 1995, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No.114, "Accounting by Creditors for Impairment of a loan."
SFAS No.114 generally requires impaired loans to be measured on the present
value of expected future cash flows discounted at the loan's effective interest
rate, at the loan's observable market price or at the fair value of the
collateral if the loan is collateral dependent. A loan is impaired when it is
probable the creditor will be unable to collect all contractual principal and
interest payments due in accordance with terms of the loan agreement. The
adoption of SFAS No.114 did not have a material effect on the Company's
consolidated financial statements.
6 of 12
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
- ------- OF OPERATION FOR THE THREE-MONTH PERIODS ENDED
MARCH 31, 1995 and 1994
-----------------------------------------------------------
The following is a discussion of the Company's financial condition at March
31, 1995 compared to December 31, 1994, and the results of its operations for
the three-month period ended March 31, 1995 compared to the three-month period
ended March 31, 1994. These comments should be read in conjunction with the
financial statements and related notes appearing elsewhere in this report.
Financial Condition
- -------------------
During the first three months of 1995, total assets decreased $65,926 or
.12% as compared to amounts at December 31, 1994. The majority of this decrease
was due to maturities of securities available-for-sale and reduction of other
real estate through aggressive sales efforts.
During the first three months of 1995, other assets increased $121,947 or
21.64% as compared to amounts at December 31, 1994. The majority of this
increase was in prepaid expense accounts which increased $85,143 and an increase
in interest earned but not collected on loans due to the increase in the
interest rates.
As of March 31, 1995, deposits decreased $275,544 or .56% as compared to
December 31, 1994. Noninterest-bearing deposits increased $193,508 and interest-
bearing deposits decreased $469,052. The decrease in interest-bearing deposits
was due to IRA deposits moving to higher paying mutual funds and to the planned
reduction of higher rate deposits which matured during this quarter and were not
renewed. Included in the interest-bearing deposits were certificates of deposit
of $100,000 or more totaling $6,404,251.
Liquidity
- ---------
Liquidity, as defined by net cash, short-term investments and other
marketable assets as a percent of deposits was 36.72% at March 31, 1995. The
federal funds sold position, investment securities portfolio, federal funds
lines with correspondent banks, and loan repayments should provide liquidity to
fund new loans and fund withdrawn deposits. Management believes the ratio is
adequate in the event of a deposit decline. Management knows of no demands,
commitments, or events that will result in or that are reasonably likely to
result in the Company's liquidity increasing or decreasing in any material way.
The following summarizes the interest sensitivity position of the Company
at March 31, 1995:
<TABLE>
<CAPTION>
Time Horizon
-------------------------------------------------
3 months 6 months 12 months 24 months
---------- ---------- ---------- ----------
(Amounts in thousands)
<S> <C> <C> <C> <C>
Interest sensitive assets $ 27,947 38,158 41,446 44,312
Interest sensitive liabilities 20,215 34,237 34,237 37,158
---------- ---------- ---------- ----------
Assets less liabilities $ 7,732 3,921 7,209 7,154
========== ========== ========== ==========
Ratio 1.38 1.11 1.21 1.19
========== ========== ========== ==========
</TABLE>
7 of 12
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
If interest rates rise as anticipated by management, the ratios indicate
that profits may be positively impacted. If interest rates were to fall sharply,
the ratios indicate that profits may be negatively impacted. Management is
monitoring this position and is making more fixed-rate loans for periods up to
one year rather than variable-rate loans to further reduce the asset sensitivity
so that earnings fluctuations are less susceptible to increases or decreases in
interest rates.
Capital Resources
- -----------------
With operating profits, the Company's capital ratios have improved, as
measured by its average stockholders' equity to average assets ratio which was
5.71% and 5.61% for the quarter ended March 31, 1995 and 1994, respectively, and
its ratio of stockholders' equity to assets which was 5.49% and 5.49% at March
31, 1995 and December 31, 1994, respectively.
At March 31, 1995, the Bank's regulatory capital and the required minimum
amounts under existing regulations and MOU were as follows:
<TABLE>
<CAPTION>
Bank Required
Regulatory Minimum
Capital Amount Excess
% Amount % Amount % Amount
-------------------- ------------------- --------------------
Capital
<S> <C> <C> <C> <C> <C> <C>
Tier 1 leverage 8.8% 4,772 6.0% 3,244 2.83% 1,528
Tier 1 risk-based 12.9% 4,772 4.0% 1,480 8.90% 3,292
Total risk-based 14.2% 5,244 8.0% 2,959 6.18% 2,285
</TABLE>
Regulatory authorities have proposed an interest rate risk component to
minimum required regulatory capital which has not yet been finalized. Such
requirement, if implemented, will likely increase the level of minimum required
regulatory capital in the future for which the effects are not presently
determinable.
On March 27, 1992, the Bank entered into the terms of a Memorandum of
Understanding (the "MOU") with the Federal Deposit Insurance Corporation to take
certain corrective actions, which if not performed could result in further
regulatory sanctions. The MOU was modified on December 1, 1993. The MOU as
modified requires the maintenance of a Tier 1 capital to average quarterly
assets ratio of at least 6%; restriction of dividend payments by the Bank to the
Company without prior regulatory approval; the establishment and maintenance of
certain liquidity guidelines; revised requirements to reduce classified assets;
the establishment and maintenance of an allowance for loan losses based on
certain minimum guidelines; and restrictions on lending to borrowers with
classified loans.
At March 31, 1995, the Company believes it was in compliance with the
requirements as defined in the MOU and its subsidiary, the Bank, meets the
minimum Tier 1 capital requirements as defined in the MOU. The Bank's leverage
ratio was 8.8%, Tier 1 risk-based ratio was 12.9%, total risk-based ratio was
14.2%, and tangible equity ratio 8.8%, based on leverage capital of $4,772,000,
Tier 1 capital of $4,772,000, total risk-based capital of $5,244,000, and
tangible capital of $4,772,000, as defined.
8 of 12
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
At this time, the financial impact, if any, of regulatory actions that may
result from any future noncompliance with the requirements of the MOU cannot be
determined. Accordingly, the accompanying consolidated financial statements do
not include any adjustments that might result from these uncertainties.
All capital expenditures planned for 1995 should be only for renovation and
equipment purchases for the conversion to out-source data processing.
Results of Operations
- ---------------------
The following highlights some of the more significant fluctuations during
the three months ended March 31, 1995 as compared to the comparable period in
1994.
Interest Income
- ---------------
Total interest income for the three-month period ended March 31, 1995
increased $183,489 or 19.69% from the comparable period in 1994. Decreased
volume of average interest-earning assets accounted for ($35,020) of the change,
while increased rates on these assets accounted for $218,509 of the overall
change.
Interest Expense
- ----------------
Total interest expense for the three-month period ended March 31, 1995
increased $34,532 or 8.67% from the same period in 1994. Decreased volume of
average interest-bearing liabilities accounted for ($28,478), while increased
rates accounted for $63,010 of the overall change.
Net Interest Income
- -------------------
Net interest income for the three-month period ended March 31, 1995
increased $148,957 or 27.93% from the comparable period in 1994. Decreased
volume accounted for ($6,542) of the increase, while increased rates accounted
for $155,499 of the overall change. Interest margins of 5.62% and 4.16% and rate
spread relationship of 4.80% and 3.50% for 1995 and 1994 have increased due in
large part to the increase in the rates earned on interest-earning assets in
1995 when compared to the first quarter of 1994.
Asset Quality
- -------------
The provision for loan losses is the charge to operating earnings that
management feels is necessary to maintain an adequate allowance for loan losses.
It is based on the growth of the loan portfolio, the amount of net loan losses
incurred, and management's estimate of potential future loan losses based on an
evaluation of loan portfolio risks and certain economic factors. There was no
provision for loan losses for the three months ended March 31, 1995 and 1994 due
to decreases in the loan portfolio in 1995 and 1994 and recoveries of previously
charged-off loans. Net charge-offs of loans for the three months ended March 31,
1995 amounted to $3,655 compared to net recoveries of $61,199 for the comparable
period in 1994. The following summarizes nonperforming loans and allowance for
loan losses data as of March 31, 1995 and December 31, 1994:
9 of 12
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
<TABLE>
<CAPTION>
March, 1995 December, 1994
----------- --------------
<S> <C> <C>
Nonaccrual loans $ 293,993 374,448
Past-due loans greater than 90 days 0 7,433
Restructured loans 510,000 448,000
----------- -----------
Total nonperforming loans $ 803,993 829,881
=========== ===========
Potential problem loans $ 701,580 81,809
=========== ===========
Nonperforming loans/total loans 2.38% 2.44%
Nonperforming loans/allowance for loan losses 62.90% 64.74%
Allowance for loan losses/total loans 3.78% 3.76%
</TABLE>
The decrease in nonaccrual loans is primarily due to management's stepping
up its efforts to identify, monitor, and work out problem loans before they
become a loss. Many of the nonaccrual loans will result in an increase in other
real estate in the second quarter as the foreclosure process is underway. The
decrease in the past due loans was the result of the loan officers' collection
efforts. Restructured loans increased due to the workout of certain credits.
Potential problem loans represent loans that are presently performing;
however, management has serious doubts concerning the ability of the respective
borrowers to meet contractual repayment terms. The potential problem loans
increased due to one large credit of over $551,000.
Other Income
- ------------
Other income decreased $59,843 or 31.76% for the three-month period ended
March 31, 1995 from the comparable period in 1994. Decreased service charges as
a result of a reduction in deposits, a reduction of overdrafts, and fewer
insufficient funds charges accounted for $17,258 of the decrease. The gain in
securities in 1994 was the result of management repositioning the portfolio in
light of rising rates.
Other Expenses
- --------------
Other expenses for the three-month period ended March 31, 1995 decreased
$97,439 or 13.50% from the comparable period in 1994. Decreased salaries and
employee benefits as a result of a reduction in personnel accounted for $63,480
or 19.16% of the decrease.
Net Income
- ----------
Net income for the three-month period ended March 31, 1995 increased
$186,553 from the comparable period in 1994. The increase is the result of an
increase in interest income due to increased rates on the loan portfolio and a
reduction in other expenses.
10 of 12
<PAGE>
PART II. Other Information
- -------- -----------------
Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits filed in accordance with Item 601 of Regulation S-B.
10.1 Memorandum of Understanding dated March 27, 1992, incorporated
by reference to same exhibit in Registrant's Form 10KSB for
period ended December 31, 1992, as filed with the Commission.
10.2 Revised Memorandum of Understanding dated December 1, 1993,
incorporated by reference to same exhibit in Registrant's 10-KSB
for the period ended December 31, 1993, as filed with the
Commission.
27 Financial Data Schedule.
(b) The Company has not filed any reports on Form 8-K with the Securities and
Exchange Commission during the three months ended March 31, 1995.
11 of 12
<PAGE>
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.
TARA BANKSHARES CORPORATION
(Registrant)
Date: 5/3/95 /s/ Charles M. Barnes
------------------ ---------------------------------------
Charles M. Barnes, President
(Chief Executive Officer)
Date: 5/3/95 /s/ Allette B. Cheaves
------------------ ---------------------------------------
Allette B. Cheaves, Senior Vice President
(Secretary and Treasurer)
Date: 5/3/95 /s/ Steve T. Warren
------------------ ---------------------------------------
Steve T. Warren, Vice President
(Chief Financial and Accounting Officer)
12 of 12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994
<PERIOD-START> JAN-01-1995 JAN-01-1994
<PERIOD-END> MAR-31-1995 MAR-31-1994
<CASH> 2,198,873 1,811,144
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 3,110,000 2,720,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 9,800,045 10,404,340
<INVESTMENTS-CARRYING> 3,435,979 3,183,693
<INVESTMENTS-MARKET> 3,384,251 3,060,262
<LOANS> 33,823,537 34,794,047
<ALLOWANCE> 1,278,291 1,281,947
<TOTAL-ASSETS> 54,281,200 54,347,126
<DEPOSITS> 49,303,736 49,579,280
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 261,023 281,722
<LONG-TERM> 1,500,000 1,500,000
<COMMON> 4,480,030 4,480,030
0 0
0 0
<OTHER-SE> 0 0
<TOTAL-LIABILITIES-AND-EQUITY> 54,281,200 54,347,126
<INTEREST-LOAN> 863,857 720,531
<INTEREST-INVEST> 230,006 188,447
<INTEREST-OTHER> 21,316 22,712
<INTEREST-TOTAL> 1,115,179 931,690
<INTEREST-DEPOSIT> 392,583 355,543
<INTEREST-EXPENSE> 432,812 398,280
<INTEREST-INCOME-NET> 682,367 533,410
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 31,322
<EXPENSE-OTHER> 624,499 721,938
<INCOME-PRETAX> 186,423 (130)
<INCOME-PRE-EXTRAORDINARY> 186,423 (130)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 186,423 (130)
<EPS-PRIMARY> .42 .00
<EPS-DILUTED> .32 .00
<YIELD-ACTUAL> 0 0
<LOANS-NON> 293,993 374,448
<LOANS-PAST> 0 7,433
<LOANS-TROUBLED> 510,000 448,000
<LOANS-PROBLEM> 701,580 81,809
<ALLOWANCE-OPEN> 1,282,000 1,488,000
<CHARGE-OFFS> 97,000 0
<RECOVERIES> 93,000 62,000
<ALLOWANCE-CLOSE> 1,278,000 1,550,000
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,278,000 1,550,000
</TABLE>
