<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 . . . June 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 August 10, 1996, there were 697,999 shares of the registrant's Common
Stock, $10.00 par value, outstanding.
<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 4. Submission of Matters to a Vote of Security
Holders.................................... 10
Item 6. Exhibits and Reports on Form 8-K .......... 10
Signatures............................................ 11
2
<PAGE>
PART I. Financial Information
<TABLE>
<CAPTION>
ITEM 1. TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
(unaudited)
1996 1995
----- -----
<S> <C> <C>
ASSETS
- ------
Cash and due from banks $ 3,754,507 1,801,384
Federal funds sold 2,040,000 2,400,000
Securities available-for-sale,
at fair value 7,044,686 7,911,069
Securities held-to-maturity,
at cost (approximate fair value of
$12,135,833 and $13,177,962,
respectively) 12,169,780 13,100,344
Loans 33,709,666 32,195,423
Less allowance for loan losses 1,426,513 1,220,156
------------ ----------
Loans, net 32,283,153 30,975,267
------------ ----------
Premises and equipment, net 1,993,067 2,042,952
Other assets 1,131,125 1,247,834
------------ ----------
Total assets $60,416,318 59,478,850
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits:
Noninterest-bearing $12,761,408 12,476,377
Interest-bearing 13,591,384 13,936,985
Savings deposits 2,846,865 2,405,273
Certificates of deposit, $100,000
and over 7,480,214 5,936,958
Certificates of deposit, other 17,512,892 19,096,429
----------- -----------
Total deposits 54,192,763 53,852,022
Subordinated convertible debentures 1,500,000 1,500,000
Other liabilities 332,611 285,854
----------- -----------
Total liabilities 56,025,374 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 (2,524,717) (2,989,605)
Net unrealized losses on
securities available-for-sale (227,967) (313,049)
---------- -----------
Total stockholders' equity 4,390,944 3,840,974
---------- -----------
Total liabilities and
stockholders' equity $60,416,318 59,478,850
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Six months ended Three months ended
June 30 June 30
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Interest income:
Loans, including fees $1,556,578 1,691,921 772,203 828,064
Federal funds sold 80,433 75,022 46,780 53,706
Investment securities
- taxable 575,771 477,461 290,647 247,455
---------- --------- --------- ---------
Total interest income 2,212,782 2,244,404 1,109,630 1,129,225
---------- --------- --------- ---------
Interest expense:
Deposits 857,475 854,216 412,043 461,633
Federal funds purchased - 482 - -
Subordinated convertible
debentures 79,423 81,796 39,244 42,049
----------- ---------- ---------- ---------
Total interest expense 936,898 936,494 451,287 503,682
----------- ---------- ---------- ----------
Net interest income 1,275,884 1,307,910 658,343 625,543
----------- ---------- ---------- ----------
Provision (credit)
for loan losses (25,000) - (25,000) -
Net interest income
after provision for
loan losses 1,300,884 1,307,910 683,343 625,543
---------- ---------- ---------- ----------
Other income:
Service charges on
deposit accounts 186,172 205,155 95,079 99,915
Insurance commissions 351 1,858 (7) 341
Other operating income 33,558 39,931 7,840 18,133
---------- ---------- ---------- ---------
Total other income 220,081 246,944 102,912 118,389
---------- ---------- ---------- ---------
Other expenses:
Salaries and employee
benefits 479,001 521,426 222,646 253,596
---------- ---------- ---------- ----------
Net occupancy 87,227 94,726 42,229 46,860
Furniture and equipment 61,843 79,148 32,803 41,675
Other operating expenses 428,006 520,217 226,457 248,887
---------- ---------- ---------- --------
Total other expenses 1,056,077 1,215,517 524,135 591,018
--------- ----------- ---------- ---------
Net income $ 464,888 339,337 262,120 152,914
========== =========== ========== =========
Net income per share
based on average
outstanding
shares of 448,003 and $ 1.04 0.76 0.59 0.34
========== ========== ========== =========
diluted shares
of 698,003 $ 0.78 0.60 0.43 0.28
========== ========== ========== =========
See accompanying notes to consolidated financial statements.
</TABLE>
4
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 464,888 339,337
---------- ---------
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 61,328 75,813
Provision (credit) for loan losses (25,000) -
Provision for other real estate losses - 55,000
Changes in other assets and liabilities:
Decrease (increase) in other assets 86,709 (61,307)
Increase in other liabilities 46,757 40,282
---------- ---------
Total adjustments 169,794 109,788
---------- ---------
Net cash provided by operating
activities 634,682 449,125
----------- ---------
Cash flows from investing activities:
Proceeds from maturities of
securities available-for-sale 453,485 645,897
Purchases of securities held-to-
maturity (3,834,264) (6,126,563)
Proceeds from maturities of
securities held-to-maturity 5,262,807 621,153
Net (increase) decrease in loans (1,282,887) 1,785,507
Purchases of premises and equipment (11,443) (21,475)
Proceeds from sales of other real
estate 30,000 343,000
----------- -----------
Net cash provided by (used in)
investing activities 617,698 (2,752,481)
----------- -----------
Cash flows from financing activities:
Net increase (decrease) in demand
deposits and savings
accounts 381,022 (501,957)
Net (decrease) increase in
certificates of deposits (40,280) 3,367,157
----------- -----------
Net cash provided by financing
activities 340,742 2,865,200
----------- -----------
Net increase in cash and cash
equivalents 1,593,122 561,844
Cash and cash equivalents
at beginning of period 4,201,385 4,531,144
----------- -----------
Cash and cash equivalents
at end of period $ 5,794,507 5,092,988
============ ===========
Supplemental disclosures of cash
paid during the period for:
Interest, net of amounts capitalized $ 876,272 893,059
============ ===========
Income taxes $ - -
============ ===========
Supplemental information on non-cash
investing activities:
Unrealized (gains) losses
on securities available-for-sale $ (85,082) 161,295
============ ===========
Principal balances on loans
transferred to other real estate $ - 60,000
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
TARA BANKSHARES CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 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 June 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
six-month periods then ended have been included.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION FOR THE THREE AND SIX-MONTH PERIODS ENDED
JUNE 30, 1996 and 1995
-----------------------------------------------------------
The following is a discussion of the Company's financial condition at June
30, 1996 compared to December 31, 1995, and the results of its operations for
the three- and six-month periods ended June 30, 1996 compared to the three- and
six-month periods ended June 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 six months of 1996, total assets increased $937,468 or
1.58% as compared to amounts at December 31, 1995. Net maturities of securities
of $1,882,000 and year to date earnings have been reinvested in loans and to
build up cash reserves necessary to retire up to $1,500,000 of debentures which
the Company called on June 15, 1996. Subsequent to June 30, 1996, all holders of
the debentures converted all of the debentures to common stock, therefore no
cash outlay by the Company was required.
As of June 30, 1996, deposits increased $340,741 or .63% as compared to
December 31, 1995. Noninterest-bearing deposits increased $285,031 and interest-
bearing deposits increased $55,710. The increase was due to normal growth in
deposits. Included in the total deposits were certificates of deposit of
$100,000 or more totaling $7,480,214.
Liquidity
Liquidity, as defined by net cash, short-term investments and other
marketable assets as a percent of deposits was 41.39% at June 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
June 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 $ 23,129 35,359 43,671 47,618
Interest sensitive liabilities 21,684 37,824 39,249 40,307
---------- --------- --------- -------
Assets less liabilities $ 1,445 (2,465) 4,422 7,311
========== ========= ========= =======
Ratio 1.07 0.93 1.11 1.18
========== ========= ========= =======
</TABLE>
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.
7
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
Capital Resources
With operating profits 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 6.87% and 5.77% for the quarters ended
June 30, 1996 and 1995, respectively, and its ratio of stockholders' equity to
assets which was 7.27% and 6.46% at June 30, 1996 and December 31, 1995,
respectively.
At June 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 8.96% 5,296 4.00% 2,365 4.96% 2,931
Tier 1 risk-based 14.13% 5,296 4.00% 1,500 10.13% 3,796
Total risk-based 15.41% 5,777 8.00% 2,999 7.41% 2,778
</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. The effects to the Company
for 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 six-month periods ended June 30, 1996 as compared to
the comparable periods in 1995.
Interest Income
Total interest income for the three- and six-month periods ended June 30,
1996 decreased $19,595 or 1.74% and $31,622 or 1.41% from the comparable
periods in 1995. The decrease in interest income on interest-bearing assets
over the three-month period and the six-month period is attributable to
decreased rates on these assets in the amount of $51,074 in the three-month
period and $197,628 in the six-month period, which decrease was offset by
increased volume of average interest-earning assets in the amount of $31,749 in
the three-month period and $166,006 in the six-month period.
Interest Expense
Total interest expense for the three- and six-month periods ended June 30,
1996 decreased $52,395 or 10.40% and $404 or .04% respectively from the
comparable periods in 1995. The decrease in interest expense on interest-
bearing liabilities over the three-month period and the six-month period is
attributable to decreased rates on the average interest-bearing liabilities in
the amount of $57,627 in the three-month period and $45,044 in the six-month
period, which was offset by increased volume of average interest-bearing
liabilities in the amount of $5,232 in the three-month period and $47,821 in
the six-month period.
8
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
Net Interest Income
Net interest income for the three and six-month periods ended June 30, 1996
increased $32,800 or 5.24% for the three-month period and decreased $ 32,026 or
2.45% from the comparable periods in 1995. Increased volume accounted for
$26,247 of the change in net interest income for the three-month period and
$118,185 for the six-month period, while increased rates accounted for $6,553
of the change in net interest income for the three-month period and
decreased rates accounted for $152,584 for the six-month period. The interest
margin of 5.38% and rate spread relationship of 4.50% for 1995 have decreased
to 4.75% and 3.9 % 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 six 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 six-month periods
ended June 30, 1996 and 1995. However, a credit to the provision for loan
losses of $25,000 was recorded in June 1996 due to recoveries of previously
charged off loans and reduced loan charge offs. Net recoveries of loans
for the three-month and six-month periods ended June 30, 1996 amounted to
$143,077 and $231,356 compared to net charge-offs for the three-month period of
$3,655 and net recoveries for the six-month period of $19,245 in 1995.
The following summarizes nonperforming loans and allowance for loan losses
data as of June 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
March, 1996 December, 1995
------------ ---------------
<S> <C> <C>
Nonaccrual loans $ 641,000 631,000
Past-due loans greater than 90 days 0 0
Restructured loans 457,000 506,000
------------- ------------
Total nonperforming loans $ 1,098,000 1,137,000
============= ============
Potential problem loans $ 204,000 230,000
============= ============
Nonperforming loans / total loans 3.26% 4.25%
Nonperforming loans / allowance for loan losses 76.97% 93.18%
Allowance for loan losses / total loans 4.23% 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 third 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 decreased due to payments 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 credit.
9
<PAGE>
Management's Discussion and Analysis or Plan
of Operation, Continued
Other Income
Other income decreased $15,477 or 13.07% and $26,863 or 10.88% for the three
and six-month periods ended June 30, 1996 from the comparable periods in 1995.
Service charges as a result of a reduction in deposits, a reduction of
overdrafts, and fewer insufficient funds charges accounted for the majority of
the change in other income for the three- and six-month periods, respectively,
from the comparable periods in 1995.
Other Expenses
Other expenses for the three- and six-month periods ended June 30, 1996
decreased $66,883 or 11.32% and $159,440 or 13.12% from the comparable periods
in 1995. Lower salaries and employee benefits as a result of a reduction in
personnel accounted for a decrease of $30,950 and $42,425 for the three-and six-
month periods.
Net Income
Net income for the three- and six-month periods ended June 30, 1996
increased $109,206 and $125,551 from the comparable periods in 1995. The
increase is the result of a decrease in salaries and other operating expenses.
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's annual stockholders' meeting was held on May 15, 1996. Notice
of the meeting was mailed on March 31, 1996 to each stockholder of record as of
March 31, 1996. A motion was approved to elect eight Board of Directors to serve
one-year terms until the annual meeting of shareholders in 1997 consisting of
James W. Babb, Jr., Charles M. Barnes, Don A. Barnette, Jimmy W. Benefield, C.
Wallace Carrouth, George E. Glaze, Sanford E. Gruskin, and A. Gene Lee. The
motion was approved by 296,637 shares voted by proxy. There were 280 shares
voted negative in person. No other matters were voted upon at the meeting.
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 June 30, 1996.
10
<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: 8/12/96 /s/ Charles M. Barnes
------ ---------------------
Charles M. Barnes, President
(Chief Executive Officer)
Date: 8/12/96 /s/ Steve T. Warren
------ -------------------
Steve T. Warren, Senior Vice President
(Chief Financial and Accounting Officer)
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> JUN-30-1996 JUN-30-1995
<CASH> 3,754,507 2,482,988
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 2,040,000 2,610,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 7,044,686 9,919,768
<INVESTMENTS-CARRYING> 12,169,780 8,689,072
<INVESTMENTS-MARKET> 12,135,833 8,726,869
<LOANS> 33,709,666 32,246,056
<ALLOWANCE> 1,426,513 1,297,515
<TOTAL-ASSETS> 32,283,153 57,753,240
<DEPOSITS> 54,192,763 52,444,480
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 322,611 322,004
<LONG-TERM> 1,500,000 1,500,000
0 0
0 0
<COMMON> 4,480,030 4,480,030
<OTHER-SE> (89,086) (993,274)
<TOTAL-LIABILITIES-AND-EQUITY> 60,416,318 57,753,240
<INTEREST-LOAN> 1,556,578 1,691,921
<INTEREST-INVEST> 575,771 552,483
<INTEREST-OTHER> 80,433 0
<INTEREST-TOTAL> 2,212,782 2,244,404
<INTEREST-DEPOSIT> 857,475 854,216
<INTEREST-EXPENSE> 936,898 936,494
<INTEREST-INCOME-NET> 1,275,884 1,307,901
<LOAN-LOSSES> (25,000) 0
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 1,056,077 1,215,517
<INCOME-PRETAX> 464,888 339,337
<INCOME-PRE-EXTRAORDINARY> 464,888 339,337
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 464,888 339,337
<EPS-PRIMARY> 1.04 0.76
<EPS-DILUTED> 0.78 0.60
<YIELD-ACTUAL> 0 0
<LOANS-NON> 641,000 706,844
<LOANS-PAST> 0 0
<LOANS-TROUBLED> 457,000 726,000
<LOANS-PROBLEM> 204,000 315,110
<ALLOWANCE-OPEN> 1,220,000 1,282,000
<CHARGE-OFFS> 15,000 230,000
<RECOVERIES> 247,000 245,000
<ALLOWANCE-CLOSE> 1,427,000 1,297,000
<ALLOWANCE-DOMESTIC> 0 0
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 1,427,000 1,297,000
</TABLE>
