<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, 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 30274-0775
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 May 1, 1996, there were 448,003 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
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I. Financial Information
Financial Information
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 7-10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
Page 2 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
(unaudited)
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 2,598,093 1,801,384
Federal funds sold 3,030,000 2,400,000
Securities available-for-sale, at fair value 7,494,488 7,911,069
Securities held-to-maturity, at cost
(approximate fair value of $10,795,694
and $13,177,962, respectively) 10,763,556 13,100,344
Loans 32,020,527 32,195,423
Less allowance for loan losses 1,308,436 1,220,156
----------- -----------
Loans, net 30,712,091 30,975,267
----------- -----------
Premises and equipment, net 2,020,668 2,042,952
Other assets 1,243,463 1,247,834
----------- -----------
Total assets $57,862,359 59,478,850
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Demand deposits:
Noninterest-bearing $10,860,357 12,476,377
Interest-bearing 12,874,470 13,936,985
Savings deposits 2,660,182 2,405,273
Certificates of deposit, $100,000 and over 7,264,290 5,936,958
Certificates of deposit, other 18,277,244 19,096,429
----------- -----------
Total deposits 51,936,543 53,852,022
Subordinated convertible debentures 1,500,000 1,500,000
Other liabilities 297,952 285,854
----------- -----------
Total liabilities 53,734,495 55,637,876
----------- -----------
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 (2,786,837) (2,989,605)
Net unrealized losses on
securities available-for-sale (228,927) (313,049)
----------- -----------
Total stockholders' equity 4,127,864 3,840,974
----------- -----------
Total liabilities and
stockholders' equity $57,862,359 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
Three months ended March 31, 1996 and 1995
(Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest income:
Loans, including fees $ 784,375 863,857
Federal funds sold 33,653 21,316
Investment securities - taxable 285,124 230,006
----------- -----------
Total interest income 1,103,152 1,115,179
----------- -----------
Interest expense:
Deposits 445,432 392,583
Federal funds purchased - 482
Subordinated convertible debentures 40,179 39,747
Total interest expense 485,611 432,812
----------- -----------
Net interest income 617,541 682,367
----------- -----------
Provision for loan losses - -
Net interest income after
provision for loan losses 617,541 682,367
Other income:
Service charges on deposit accounts 91,093 105,240
Insurance commissions 358 1,517
Other operating income 25,718 21,798
----------- -----------
Total other income 117,169 128,555
----------- -----------
Other expenses:
Salaries and employee benefits 256,355 267,830
Net occupancy 44,998 47,866
Furniture and equipment 29,040 37,473
Other operating expenses 201,549 271,330
----------- -----------
Total other expenses 531,942 624,499
----------- -----------
Net income $ 202,768 186,423
=========== ===========
Net income per share based on average
outstanding shares of 448,003 and $ 0.45 0.42
=========== ===========
diluted shares of 698,003 $ 0.35 0.32
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 4 of 11
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31, 1996 and 1995
(unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 202,768 186,423
----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 30,557 37,722
Provision for other real estate losses - 50,000
Changes in other assets and liabilities:
(Increase) decrease in other assets 4,371 (121,947)
Increase (decrease) in other liabilities 12,098 (20,698)
----------- -----------
Total adjustments 47,026 (54,923)
----------- -----------
Net cash provided by operating activities 249,794 131,500
----------- -----------
Cash flows from investing activities:
Proceeds from maturities of securities
available-for-sale 702 648,189
Purchases of securities held-to-maturity (160,093) (565,921)
Proceeds from maturities of securities
held-to-maturity 2,996,882 313,636
Net decrease in loans 263,175 188,801
Purchases of premises and equipment (8,273) (4,930)
Proceeds from sales of other real estate - 342,000
----------- -----------
Net cash provided by investing activities 3,092,393 921,775
----------- -----------
Cash flows from financing activities:
Net decrease in demand deposits
and savings accounts (2,423,626) (2,950,711)
Net increase in certificates of deposits 508,147 2,675,167
----------- -----------
Net cash (used in) financing activities (1,915,479) (275,544)
----------- -----------
Net increase in cash and cash equivalents 1,426,708 777,731
Cash and cash equivalents at beginning
of period 4,201,385 4,531,144
----------- -----------
Cash and cash equivalents at end of period $ 5,628,093 5,308,875
=========== ===========
Supplemental disclosures of cash paid
during the period for:
Interest, net of amounts capitalized $ 445,258 414,325
=========== ===========
Income taxes $ - -
=========== ===========
Supplemental information on non-cash
investing activities:
Unrealized (gains) on securities
available-for-sale $ (84,122) (43,894)
=========== ===========
Principal balances on loans transferred
to other real estate $ - 60,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
Page 5 of 11
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 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 consolidated financial statements for March 31, 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-month
periods then ended have been included.
Page 6 of 11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION FOR THE THREE-MONTH PERIODS ENDED
March 31, 1996 and 1995
The following is a discussion of the Company's financial condition at March
31, 1996 compared to December 31, 1995, and the results of its operations for
the three-month period ended March 31, 1996 compared to the three-month period
ended March 31, 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 three months of 1996, total assets decreased $1,616,491 or
2.72% as compared to amounts at December 31, 1995. The majority of this decrease
was due to maturities and calls of securities in order to cover the deposit
declines experienced the first of each year.
During the first three months of 1996, other assets increased $5,629 or
.45% as compared to amounts at December 31, 1995. The majority of this increase
was in prepaid accounts which increased $44,526 and a decrease in interest
earned but not collected on loans due to the decrease in the interest rates and
loan outstanding.
As of March 31, 1996, deposits decreased $1,645,479 or 3.07% as compared to
December 31, 1995. Noninterest-bearing deposits decreased $1,616,020 and
interest-bearing deposits decreased $299,459. The decrease in noninterest-
bearing deposits was due to the normal reduction in these type deposits during
the first quarter of the year. 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 $7,264,290.
LIQUIDITY
Liquidity, as defined by net cash, short-term investments and other
marketable assets as a percent of deposits was 42.90% at March 31, 1996. 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, 1996:
<TABLE>
<CAPTION>
Time Horizon
- --------------------------------------------------------------------------------
(Amounts in thousands) 3 months 12 months 24 months 36 months
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Interest sensitive assets $24,691 37,242 44,027 47,980
Interest sensitive liabilities 22,570 36,726 38,919 39,918
------- ------ ------ ------
Assets less liabilities $ 2,121 516 5,108 8,062
======= ====== ====== ======
Ratio 1.09 1.01 1.13 1.20
======= ====== ====== ======
</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
Due to net unrealized gains on securities-for-sale and earnings, the
Company's capital ratios have improved, as measured by its average stockholders'
equity to average assets ratio which was 6.79% and 5.71% for the quarter ended
March 31, 1996 and 1995, respectively, and its ratio of stockholders' equity to
assets which was 7.13% and 6.46% at March 31, 1996 and December 31, 1995,
respectively.
At March 31, 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 9.15% 5,326 4.00% 2,329 5.15% 2,997
Tier 1 risk-based 14.78% 5,326 4.00% 1,441 10.78% 3,885
Total risk-based 16.06% 5,787 8.00% 2,882 8.06% 2,905
</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.
At March 31, 1996, all capital expenditures planned for 1996 are only for
renovation and equipment purchases.
RESULTS OF OPERATIONS
The following highlights some of the more significant fluctuations during
the three months ended March 31, 1996 as compared to the comparable period in
1995.
INTEREST INCOME
Total interest income for the three-month period ended March 31, 1996
decreased $12,027 or 1.08% from the comparable period in 1995. Increased volume
of average interest-earning assets accounted for $65,516 of the change, while
decreased rates on these assets accounted for ($77,543) of the overall change.
INTEREST EXPENSE
Total interest expense for the three-month period ended March 31, 1996
increased $52,799 or 12.20% from the same period in 1995. Increased volume of
average interest-bearing liabilities accounted for $27,968, while increased
rates accounted for $24,831 of the overall change.
Page 8 of 11
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
NET INTEREST INCOME
Net interest income for the three-month period ended March 31, 1996
decreased $64,826 or 9.50% from the comparable period in 1995. Increased volume
accounted for $37,549 of the increase, while decreased rates accounted for
($102,375) of the overall change. Interest margins of 4.58% and 5.62% and rate
spread relationship of 3.70% and 4.80% for 1996 and 1995 have decreased due in
large part to the decrease in the rates earned on interest-earning assets in
1996 when compared to the first quarter of 1995.
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, 1996 and 1995 due
to decreases in the loan portfolio in 1996 and 1995 and recoveries of previously
charged-off loans. Net recoveries of loans for the three months ended March 31,
1996 amounted to $88,279 compared to net charge-offs of $3,655 for the
comparable period in 1995. The following summarizes nonperforming loans and
allowance for loan losses data as of March 31, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
March, 1996 December, 1995
----------- --------------
<S> <C> <C>
Nonaccrual loans $ 631,000 631,000
Past-due loans greater than 90 days 0 0
Restructured loans 543,000 506,000
---------- ---------
Total nonperforming loans $1,174,000 1,137,000
========== =========
Potential problem loans $ 226,000 230,000
========== =========
Nonperforming loans / total loans 4.37% 4.25%
Nonperforming loans / allowance for
loan losses 107.00% 93.18%
Allowance for loan losses / total loans 4.09% 3.79%
</TABLE>
The nonaccrual loans are the same loans as reported at year end. Two of the
nonaccrual loans in the amount of $596,000 could result in an increase in other
real estate in the second 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 the addition
of one credit.
Potential problem loans represent one loan that is presently performing;
however, management has serious doubts concerning the ability of the borrower to
meet contractual repayment terms. The potential problem loans decreased due to
payments on this one large credit.
OTHER INCOME
Other income decreased $11,386 or 8.86% for the three-month period ended
March 31, 1996 from the comparable period in 1995. Decreased service charges as
a result of a reduction in deposits, a reduction of overdrafts, and fewer
insufficient funds charges accounted for $14,147 of the decrease.
Page 9 of 11
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
OTHER EXPENSES
Other expenses for the three-month period ended March 31, 1996 decreased
$92,557 or 14.82% from the comparable period in 1995. Decreased salaries and
employee benefits as a result of a reduction in personnel accounted for $11,475
or 12.40% of the decrease. A large decrease of over $30,000 in FDIC insurance
premiums was a major part of this reduction. Also a reduction of $50,000 in OREO
provision for losses contributed to this decrease.
NET INCOME
Net income for the three-month period ended March 31, 1996 increased
$16,345 from the comparable period in 1995. The increase is the result of a
reduction in other expenses which was partially offset by reduced net interest
margin.
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 March 31, 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: 5/1/96 /s/ Charles M. Barnes
------ ---------------------
Charles M. Barnes, President
(Chief Executive Officer)
Date: 5/1/96 /s/ Allette B. Cheaves
------ ----------------------
Allette B. Cheaves, Senior Vice President
(Secretary and Treasurer)
Date: 5/1/96 /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> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 2,598,093 2,198,873
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 3,030,000 3,110,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 7,494,488 9,800,045
<INVESTMENTS-CARRYING> 10,763,556 3,435,979
<INVESTMENTS-MARKET> 10,765,694 3,384,251
<LOANS> 32,020,527 33,823,537
<ALLOWANCE> 1,308,436 1,278,291
<TOTAL-ASSETS> 57,862,359 54,281,200
<DEPOSITS> 51,936,543 49,303,736
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 297,952 261,023
<LONG-TERM> 1,500,000 1,500,000
0 0
0 0
<COMMON> 4,480,030 4,480,030
<OTHER-SE> (352,166) (1,263,589)
<TOTAL-LIABILITIES-AND-EQUITY> 57,862,359 54,281,200
<INTEREST-LOAN> 784,375 863,857
<INTEREST-INVEST> 285,124 230,006
<INTEREST-OTHER> 33,653 21,316
<INTEREST-TOTAL> 1,103,152 1,115,179
<INTEREST-DEPOSIT> 445,432 392,583
<INTEREST-EXPENSE> 485,611 432,812
<INTEREST-INCOME-NET> 617,541 682,367
<LOAN-LOSSES> 0 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 531,942 624,499
<INCOME-PRETAX> 202,768 186,423
<INCOME-PRE-EXTRAORDINARY> 202,768 186,423
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 202,768 186,423
<EPS-PRIMARY> 0.45 0.42
<EPS-DILUTED> 0.35 0.32
<YIELD-ACTUAL> 0 0
<LOANS-NON> 631,000 293,993
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 543,000 510,000
<LOANS-PROBLEM> 226,000 701,580
<ALLOWANCE-OPEN> 1,220,000 1,282,000
<CHARGE-OFFS> 14,000 97,000
<RECOVERIES> 102,000 93,000
<ALLOWANCE-CLOSE> 1,308,000 1,278,000
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,308,000 1,278,000
</TABLE>
