<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 . . . September 30, 1996
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: (770) 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 November 7, 1996, there were 697,999 shares of the registrant's Common
Stock, $10.00 par value, outstanding.
Page 1 of 11
<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 income............................... 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................................ 10
Signatures............................................................... 11
Page 2 of 11
<PAGE>
PART I. Financial Information
ITEM 1. TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
September 30, 1996 and December 31, 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
ASSETS
- ------
<S> <C> <C>
Cash and due from banks $ 3,158,928 1,801,384
Federal funds sold 320,000 2,400,000
Securities available-for-sale, at fair value 6,817,012 7,911,069
Securities held-to-maturity, at cost (approximate fair value of
$10,939,864 and $13,177,962, respectively) 10,936,958 13,100,344
Loans 37,498,406 32,195,423
Less allowance for loan losses 1,368,504 1,220,156
------------- -------------
Loans, net 36,129,902 30,975,267
------------- -------------
Premises and equipment, net 2,052,724 2,042,952
Other assets 1,014,256 1,247,834
------------- -------------
Total assets $ 60,429,780 59,478,850
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Demand deposits:
Noninterest-bearing $ 14,120,000 12,476,377
Interest-bearing 11,884,886 13,936,985
Savings deposits 2,673,197 2,405,273
Certificates of deposit, $100,000 and over 8,507,858 5,936,958
Certificates of deposit, other 16,571,728 19,096,429
------------- -------------
Total deposits 53,757,669 53,852,022
Subordinated convertible debentures - 1,500,000
Other liabilities 347,018 285,854
------------- -------------
Total liabilities 54,104,687 55,637,876
------------- -------------
Stockholders' equity:
Common stock, $10 par value, authorized 2,000,000
shares; issued and outstanding 697,999 shares and
448,003 shares, respectively 6,979,990 4,480,030
Additional paid-in capital 1,663,614 2,663,598
Accumulated deficit (2,113,993) (2,989,605)
Net unrealized losses on securities available-for-sale (204,518) (313,049)
------------- -------------
Total stockholders' equity 6,325,093 3,840,974
------------- -------------
Total liabilities and stockholders' equity $ 60,429,780 59,478,850
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 3 of 11
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30 September 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $ 2,409,213 2,524,652 852,635 832,731
Federal funds sold 122,823 112,771 42,390 37,749
Investment securities - taxable 857,205 765,854 281,434 288,393
----------- ----------- ----------- -----------
Total interest income 3,389,241 3,403,277 1,176,459 1,158,873
----------- ----------- ----------- -----------
Interest expense:
Deposits 1,265,550 1,344,173 408,075 489,957
Federal funds purchased 336 482 336 -
Subordinated convertible debentures 99,910 124,297 20,487 42,501
----------- ----------- ----------- -----------
Total interest expense 1,365,796 1,468,952 428,898 532,458
----------- ----------- ----------- -----------
Net interest income 2,023,445 1,934,325 747,561 626,415
----------- ----------- ----------- -----------
Provision (credit) for loan losses (100,000) - (75,000) -
Net interest income after provision
(credit) for loan losses 2,123,445 1,934,325 822,561 626,415
----------- ----------- ----------- -----------
Other income:
Service charges on deposit accounts 281,952 297,570 95,780 92,415
Insurance commissions 401 2,529 50 671
Other operating income 56,422 76,618 22,864 36,687
----------- ----------- ----------- -----------
Total other income 338,775 376,717 118,694 129,773
----------- ----------- ----------- -----------
Other expenses:
Salaries and employee benefits 706,416 744,860 227,415 223,434
Net occupancy 150,688 141,538 63,461 46,812
Furniture and equipment 88,940 110,096 27,097 30,948
Other operating expenses 640,564 727,001 212,558 206,784
----------- ----------- ----------- -----------
Total other expenses 1,586,608 1,723,495 530,531 507,978
----------- ----------- ----------- -----------
Net income $ 875,612 587,547 410,724 248,210
=========== =========== =========== ===========
Net income per share:
Primary earnings per share $ 1.69 1.31 0.62 0.55
=========== =========== =========== ===========
Fully diluted earnings per share $ N/A 1.02 N/A 0.42
=========== =========== =========== ===========
Weighted average shares outstanding:
Primary earnings per share 518,257 448,003 657,239 448,003
=========== =========== =========== ===========
Fully diluted earnings per share N/A 698,003 N/A 698,003
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 11
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1996 and 1995
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 875,612 587,547
--------------- ---------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 89,288 105,010
Net gains on sale of other real estate (19,109)
Provision (credit) for loan losses (100,000) -
Provision for other real estate losses - 65,000
Changes in other assets and liabilities:
Decrease (increase) in other assets 143,578 (419,963)
Increase in other liabilities 61,164 55,829
--------------- ---------------
Total adjustments 194,030 (213,233)
--------------- ---------------
Net cash provided by operating activities 1,069,642 374,314
--------------- ---------------
Cash flows from investing activities:
Proceeds from maturities of securities available-for-sale 705,086 1,393,833
Purchases of securities held-to-maturity (4,624,257) (8,201,380)
Proceeds from maturities of securities held-to-maturity 7,285,145 1,307,695
Net (increase) decrease in loans (5,054,636) 1,622,738
Purchases of premises and equipment (99,060) (29,649)
Proceeds from sales of other real estate 90,000 486,109
--------------- ---------------
Net cash used in investing activities (1,697,722) (3,420,654)
--------------- ---------------
Cash flows from financing activities:
Net (decrease) increase in demand deposits and savings
accounts (140,552) 778,922
Net increase in certificates of deposits 46,199 3,679,305
Cash paid for partial shares resulting from debenture
conversion (24) -
--------------- ---------------
Net cash provided by (used in) financing activities (94,377) 4,458,227
--------------- ---------------
Net increase (decrease) in cash and cash equivalents (722,457) 1,411,887
Cash and cash equivalents at beginning of period 4,201,385 4,531,144
--------------- ---------------
Cash and cash equivalents at end of period $ 3,478,928 5,943,031
=============== ===============
Supplemental disclosures of cash paid during the period for:
Interest, net of amounts capitalized $ 1,279,080 1,414,083
=============== ===============
Income taxes $ - -
=============== ===============
Supplemental information on non-cash investing activities:
Unrealized gains on securities available-for-sale $ (108,640) (150,070)
=============== ===============
Principal balances on loans transferred to other real estate $ - 60,000
=============== ===============
Supplemental information on non-cash financing activities:
Subordinated debentures converted to common stock $ 1,499,976 -
=============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 11
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 1996 and 1995
(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 financial statements for September 30, 1996 and 1995
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- and
nine-month periods then ended have been included.
(1) Earnings Per Share
Effective July 15, 1996, the Company called all outstanding subordinated
convertible debentures, issuing 249,996 shares in the conversion. Because of the
conversion, the Company no longer has any diluting securities. Therefore, fully
diluted earnings per share for the nine and three month periods ended September
30, 1996 is not applicable. If the conversion had taken place at the beginning
of the year, earnings per share for the nine and three month periods ended
September 30, 1996, would have been $1.25 and $.59, respectively.
Page 6 of 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION FOR THE THREE AND NINE-MONTH PERIODS ENDED
SEPTEMBER 30, 1996 and 1995
-------------------------------------
The following is a discussion of the Company's financial condition at
September 30, 1996 compared to December 31, 1995, and the results of its
operations for the three- and nine-month periods ended September 30, 1996
compared to the three- and nine-month periods ended September 30, 1995. These
comments should be read in conjunction with the financial statements and related
notes appearing elsewhere in this report.
Financial Condition
During the first nine months of 1996, total assets increased $950,930 or
1.60% as compared to December 31, 1995. The majority of this increase was in
cash due to timing of cash letters sent for credit. The largest change in assets
was the shift from Federal funs sold and securities into the loan portfolio
Loans increased $5,302,983 or 16.47% while securities and Federal funds sold
decreased $5,337,443 or 22.80% from December 31, 1995. This increase in loans
was due largely to one short term loan for $3,000,000 being made in September
which will mature in the fourth quarter.
During the first nine months of 1996, other assets decreased $233,578 or
18.72% as compared to December 31, 1995. The majority of this decrease was in
interest earned and not collected which decreased $75,811 due to two rate drops
during late 1995 and the first of 1996 and other real estate which decreased
$90,000 which was offset by an increase in prepaid expenses and prepaid
insurance.
As of September 30, 1996, deposits decreased $94,353 or .18% as compared to
December 31, 1995. Noninterest-bearing deposits increased $1,643,623 and
interest-bearing deposits decreased $1,737,976. The increase in noninterest-
bearing deposits was due to normal growth in deposits while the large decrease
in interest-bearing deposits was result of the lower rates being offered by the
bank. Included in the total deposits were certificates of deposit of $100,000 or
more totaling $8,507,858.
Liquidity
Liquidity, as defined by net cash, short-term investments and other
marketable assets as a percent of deposits was 35.38% at September 30, 1996. The
federal funds sold position, investment securities portfolio, federal funds
lines with correspondent banks, and loan repayments should provide liquidity as
deposits mature. 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 September 30, 1996:
<TABLE>
<CAPTION>
Time Horizon
- --------------------------------------------------------------------------------
(Amounts in thousands) 3 months 12 months 24 months 36 months
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest sensitive assets $ 26,524 36,106 41,898 45,817
Interest sensitive liabilities 23,455 36,359 37,651 38,661
---------- ---------- ----------- ---------
Assets less liabilities $ 3,069 (253) 4,247 7,156
========== ========== =========== =========
Ratio 1.13 0.99 1.11 1.19
========== ========== =========== =========
</TABLE>
Page 7 of 11
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
If interest rates rise, 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, conversion of debentures to common stock and
unrealized gains on investment securities, the Company's capital ratios have
improved, as measured by its average stockholders' equity to average assets
ratio which was 8.48% and 5.89% for the quarters ended September 30, 1996 and
1995, respectively, and its ratio of stockholders' equity to assets which was
10.47% and 6.46% at September 30, 1996 and December 31, 1995, respectively.
At September 30, 1996, the Bank's regulatory capital and the required
minimum amounts under existing regulations were as follows:
<TABLE>
<CAPTION>
(Dollar Amounts in Thousands)
Bank Regulatory Regulatory Required Required
Capital Capital Capital Minimum Minimum Excess Excess
% $ % $ % $
<S> <C> <C> <C> <C> <C> <C>
Tier 1 leverage 9.54% 5,726 4.00% 2,400 5.54% 3,326
Tier 1 risk-based 13.98% 5,726 4.00% 1,639 9.98% 4,087
Total risk-based 15.25% 6,248 8.00% 3,277 7.25% 2,971
</TABLE>
Regulatory authorities have adopted an interest rate risk component to
minimum required regulatory capital. Such requirement may increase the level of
minimum required regulatory capital in the future. The effects to the Company of
such an increase are not presently determinable.
All capital expenditures planned for 1996 should be only for renovation and
equipment purchases.
Results of Operations
The following highlights some of the more significant fluctuations during
the three- and nine-month periods ended September 30, 1996 as compared to the
comparable periods in 1995.
Interest Income
Total interest income for the three-month and nine-month periods ended
September 30, 1996 increased $17,586 or 1.52% and decreased $14,036 or .41%,
respectively from the comparable periods in 1995. The increase in the three-
month period is attributable to increased volume of average interest-earning
assets accounting for $62,601 offset by decreased rates being earned on such
assets accounting for ($45,015) of the change. The decrease in the nine-month
period is attributable to decreased rates being earned on average interest-
earning assets accounting for ($233,979) offset by increased volume of such
assets accounting for $219,943 of the change.
Page 8 of 11
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
Interest Expense
Total interest expense for the three- and nine-month periods ended
September 30, 1996 decreased $103,560 or 19.45% and $103,156 or 7.02%
respectively from the comparable periods in 1995. Decreased volume of average
interest-bearing liabilities accounted for $32,435 of the change in interest
expense in the three-month period and $22,170 in the nine-month period, while
decreased rates paid on these average interest-bearing liabilities accounted for
$71,125 of the change in the three-month period and $80,986 in the nine-month
period.
Net Interest Income
Net interest income for the three- and nine-month periods ended September
30, 1996 increased $121,146 or 19.34% for the three-month period and $89,120 or
4.61% from the comparable periods in 1995. The increase in the three-month
period is attributable to increased volume accounting for $95,036 and increased
rates accounting for $26,110 of the change. The increase in the nine-month
period is attributable to increased volume accounting for $242,113, offset by
decreased rates accounted for ($152,993) of the change. The interest margin of
5.00% and rate spread relationship of 4.10% for 1995 have decreased to 4.91% and
3.90% respectively for 1996. The change in net interest margin was due in large
part to the decrease in the interest rates on interest-bearing assets during the
first nine months of 1996.
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. No provision
for loan losses was recorded for the three-and nine-month periods ended
September 30, 1996 and 1995. However, a credit to the provision for loan losses
of $100,000 was recorded as of September 1996 due to recoveries of previously
charged off loans and reduced loan charge offs. Net recoveries of loans for the
three-month and nine-month periods ended September 30, 1996 amounted to $143,077
and $248,347, respectively compared to net charge-offs for the three- and nine
month periods of $109,799 and $94,230, respectively for the comparable periods
in 1995.
The following summarizes nonperforming loans and allowance for loan losses
data as of September 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
September,1996 December, 1995
--------------- ---------------
<S> <C> <C>
Nonaccrual loans $ 339,000 631,000
Past-due loans greater than 90 days - -
Restructured loans 657,000 506,000
----------------- ---------------
Total nonperforming loans $ 1,098,000 1,137,000
================= ===============
Potential problem loans $ - 230,000
================= ===============
Nonperforming loans / total loans 2.93% 4.25%
Nonperforming loans / allowance for
loan losses 80.23% 93.18%
Allowance for loan losses / total loans 3.65% 3.79%
</TABLE>
Page 9 of 11
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
The nonaccrual loans are the same loans as reported at year end. One
nonaccrual loan could result in an increase in other real estate in the fourth
quarter as the foreclosure process is being considered. Past-due loans did not
change due to the diligence of the loan officers' collection efforts.
Restructured loans increased due to restructuring of the problem loan from the
prior quarter.
Other Income
Other income decreased $11,079 or 8.54% and $37,942 or 10.07% for the
three- and nine-month periods ended September 30, 1996 from the comparable
periods in 1995. Service charges and other operating income as a result of a
reduction in deposits, a reduction of overdrafts, and fewer insufficient funds
charges accounted for the majority of the decrease in other income for the
three- and nine-month periods, respectively, from the comparable periods in
1995.
Other Expenses
Other expenses for the three-month period ended September 30, 1996
increased $22,553 or 4.44% and for the nine-month period decreased $136,887 or
7.94% from the comparable periods in 1995. During the nine-month period salaries
and employee benefits decreased $38,444 primarily due to the departure of one
officer, net occupancy increased $10,150 due to an increase in repairs and
maintenance of $22,033 offset by a decrease in real estate taxes and utilities
of $12,693, furniture and equipment decreased $21,156 due to a decrease in
depreciation expense and equipment maintenance of $24,308 and other operating
expenses decreased $86,437 primarily due to a decrease in the FDIC assessment of
$61,386 and a decrease in legal expenses of $14,525 from the comparable period
in 1995. During the three-month period salaries and employee benefits increased
$3,981 as a result of normal increases in salaries and personnel, net occupancy
increased $16,649 due to an increase in repairs and maintenance, furniture and
equipment decreased $3,851 due to a decrease in depreciation expense and
equipment maintenance and other operating expenses increased $5,774 primarily
due to an increase in directors fees from the comparable period in 1995.
Net Income
Net income for the three- and nine-month periods ended September 30, 1996
increased $162,514 and $288,065 from the comparable periods in 1995. The
increase is the result of an increase in net interest income and a decrease in
other operating expenses.
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.
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 September 30, 1996.
Page 10 of 11
<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: 11/07/96 /s/ Charles M. Barnes
--------- ---------------------
Charles M. Barnes, President
(Chief Executive Officer)
Date: 11/07/96 /s/ Steve T. Warren
-------- -------------------
Steve T. Warren, Senior Vice President
(Chief Financial and Accounting Officer)
Page 11 of 11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> SEP-30-1996 SEP-30-1995
<CASH> 3,158,928 2,043,031
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 320,000 3,900,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 6,817,012 9,660,608
<INVESTMENTS-CARRYING> 10,936,958 9,577,347
<INVESTMENTS-MARKET> 10,939,864 9,624,619
<LOANS> 37,498,406 32,299,026
<ALLOWANCE> 1,368,504 1,187,717
<TOTAL-ASSETS> 60,429,780 59,598,799
<DEPOSITS> 53,757,69 54,037,507
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 347,018 337,550
<LONG-TERM> 0 1,500,000
0 0
0 0
<COMMON> 6,979,990 4,480,030
<OTHER-SE> (654,897) (756,288)
<TOTAL-LIABILITIES-AND-EQUITY> 60,429,780 59,598,799
<INTEREST-LOAN> 2,409,213 2,524,652
<INTEREST-INVEST> 857,205 765,854
<INTEREST-OTHER> 122,823 112,771
<INTEREST-TOTAL> 3,389,241 3,403,277
<INTEREST-DEPOSIT> 1,265,550 1,344,173
<INTEREST-EXPENSE> 1,365,796 1,468,952
<INTEREST-INCOME-NET> 2,023,445 1,934,325
<LOAN-LOSSES> (100,000) 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 1,586,608 1,723,495
<INCOME-PRETAX> 875,612 587,547
<INCOME-PRE-EXTRAORDINARY> 875,612 587,547
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 875,612 587,547
<EPS-PRIMARY> 1.69 1.31
<EPS-DILUTED> 0 1.02
<YIELD-ACTUAL> 0 0
<LOANS-NON> 339,000 668,000
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 657,000 588,000
<LOANS-PROBLEM> 0 263,000
<ALLOWANCE-OPEN> 1,220,157 1,281,947
<CHARGE-OFFS> 22,535 400,300
<RECOVERIES> 270,882 306,070
<ALLOWANCE-CLOSE> 1,368,504 1,187,717
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,368,504 1,187,717
</TABLE>
