FORM 10-QSB
U. S. Securities and Exchange Commission
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended December 31, 1997
[ ] TRANSITIONS REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1943.
For the transition period from ___________ to _________
Commission file number 0-16657
FIRST GEORGIA HOLDING, INC.
Georgia 58-1781773
- ------------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
or incorporation or organization) Identification Number)
1703 Gloucester Street
Brunswick, Georgia 31520
(912) 267-7283
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed by
section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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
---- ----
Number of shares of Common Stock outstanding as of December 31, 1997.
3,052,319
<PAGE>
PART I
FINANCIAL INFORMATION
The consolidated financial statements of First Georgia Holding, Inc.
filed as a part of this report are as follows:
Page
Consolidated Balance Sheets as of
December 31, 1997 and September 30, 1997 3
Consolidated Income Statements for the
Three Months Ended December 31, 1997 & 1996 4
Consolidated Cash Flow Statements for
the Three Months ended December 31, 1997 & 1996. 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Consolidated Statements of Financial
Condition and Results of Operations 7
PART II
Item 6. Exhibits and reports on Form 8-K 15
2
<PAGE>
FIRST GEORGIA HOLDING, INC.
CONSOLIDATED BALANCE SHEETS
12/31/97 9/30/97
------------- ------------
Assets:
Cash and cash equivalents $ 4,117,965 2,985,350
Interest bearing deposits in other banks 145,757 1,523,777
Investment securities held to maturity,
fair value approximately $10,296,000 at
December 31, 1997 and $9,692,000 at 10,186,389 9,634,453
September 30, 1997
Loans receivable, net 144,318,892 137,864,633
Real estate owned 423,000 423,000
Federal Home Loan Bank stock, at cost 1,160,300 1,160,300
Premises and equipment, net 3,282,079 3,181,618
Accrued interest receivable 992,540 960,160
Intangible assets, net 1,001,785 1,029,715
Other assets 757,568 938,491
-------------- -------------
$ 166,386,275 159,701,497
============== =============
Liabilities and Stockholders' Equity
Liabilities:
Deposits $ 133,766,998 129,889,936
Federal Home Loan Bank advances 13,700,000 14,350,000
Other borrowed money 3,000,000 -
Accrued interest payable 520,248 496,305
Accrued expenses and other liabilities 1,586,968 1,617,986
------------- -------------
152,574,214 146,354,227
------------- -------------
Stockholders' Equity
Common stock, $1.00 par value; 10,000,000
shares authorized; 3,052,319 shares
issued and outstanding at December 31,
1997 and September 30, 1997 3,052,319 3,052,319
Additional paid-in capital 4,223,197 4,223,197
Retained earnings 6,536,545 6,071,754
------------- -------------
13,812,061 13,347,270
------------- -------------
$ 166,386,275 159,701,497
============ =============
See accompanying notes to consolidated financial statements
3
<PAGE>
FIRST GEORGIA HOLDING, INC.
CONSOLIDATED INCOME STATEMENTS
12/31/97 12/31/96
------------ ------------
Interest Income:
Interest on loans $ 3,356,763 2,878,821
Interest on investments 182,827 160,392
Other interest income 12,566 79,385
------------ -----------
Total interest income 3,552,156 3,118,598
------------ -----------
Interest Expense:
Interest on deposits 1,659,487 1,555,457
Interest on borrowings 225,043 179,126
------------ -----------
Total interest expense 1,884,530 1,734,583
------------ -----------
Net interest income 1,667,626 1,384,015
Provision for loan losses 1,127 10,408
------------ -----------
Net interest income after
provision for loan losses 1,666,499 1,373,607
------------ -----------
Other Income:
Loan servicing fees 187,759 100,543
Deposit service charges 234,409 156,878
Other operating income 10,807 7,945
----------- -----------
Total other income 432,975 265,366
----------- -----------
Other Expenses:
Salaries and employee benefits 672,323 564,287
Premises and occupancy costs 285,172 257,064
Amortization of intangibles 27,930 32,934
Federal insurance premiums 19,942 67,586
Other operating expense 347,957 238,066
----------- -----------
Total other expenses 1,353,324 1,159,937
----------- -----------
Income before income taxes 746,150 479,036
Income taxes 281,357 175,536
---------- -----------
NET INCOME $ 464,793 303,500
========== ===========
Income per share of common stock $ 0.15 0.10
========== ===========
Weighted average number of shares outstanding 3,052,319 3,052,319
--------- ------------
See accompanying notes to consolidated financial statements.
4
<PAGE>
FIRST GEORGIA HOLDING, INC.
CONSOLIDATED CASH FLOW STATEMENTS
THREE MONTHS ENDED DECEMBER 31,
-------------------------------
1997 1996
-------------------------------
OPERATING ACTIVITIES:
Net Income $ 464,793 303,505
Adjustments to reconcile net income to net
cash provided by operations:
Provision for loan losses 1,127 10,408
Depreciation and amortization 99,515 98,468
Amortization of intangibles 27,930 32,934
Amortization of deferred loan fees (24,478) (56,405)
FHLB stock redemption - 415,400
(Increase) Decrease in accrued interest receivable (31,289) (52,029)
Increase (decrease) in other assets 180,921 376,191
Increase (decrease) in accrued expenses and
other liabilities (7,075) 151,945
----------- ----------
Net cash provided by operating activities 711,444 1,280,417
----------- ----------
INVESTING ACTIVITIES:
Principal payments received on
mortgage-backed securities 146,703 406,435
Maturities of investment securities - 998,750
Purchase of investment securities (698,353) -
Loan originations, net of principal payments (6,430,908) (1,493,314)
Purchase of premises and equipment (201,353) (90,639)
Proceeds from the sale of real estate acquired
in settlement of loans - 93,640
----------- ------------
Net cash used by investing activities (7,183,911) (85,128)
----------- ------------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 3,877,062 3,842,841
(Repayments of) proceeds from other borrowings 3,000,000 -
Proceeds from FHLB advances 2,750,000 -
Repayments of FHLB advances (3,400,000) (500,000)
Cash dividends paid - (162,793)
----------- -----------
Net cash provided by financing activities 6,227,062 3,180,048
----------- -----------
Increase in cash and cash equivalents (245,405) 4,375,337
Cash and cash equivalents at beginning of year 4,509,127 5,910,678
---------- ----------
Cash and cash equivalents at end of quarter $ 4,263,722 10,286,015
========== ==========
See accompanying notes to consolidated financial schedules
5
<PAGE>
FIRST GEORGIA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated
financial statementscontain all adjustments necessary to present fairly the
financial position of First Georgia Holding, Inc. as of December 31, 1997 and
September 30, 1997. Also included are the results of its operations and
changes in financial position for the three months ended December 31, 1997 &
1996. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Bank's Annual Report to Shareholders,
incorporated by reference into the Company's Form 10-KSB for the year ended
September 30, 1997.
(2) EARNINGS PER SHARE
Earnings per common share were computed using the weighted average number
of shares outstanding during the period as shown on the face of the Consolidated
Income Statements.
6
<PAGE>
FIRST GEORGIA HOLDING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY
First Georgia Bank (the Bank) has traditionally maintained levels
of liquidity above levels required by regulatory authorities. As a member of
the Federal Home Loan Bank System, the Bank is required to maintain a daily
average balance of cash and eligible liquidity investments equal to a monthly
average of 4% of withdrawable savings and short-term borrowings. The Bank's
liquidity level was 4.36% and 4.38% at December 31, 1997 and September 30, 1997,
respectively.
The Bank's operational needs, demand for loan disbursements, and savings
withdrawals can be met by loan principal, interest payments received, new
deposits, and excess liquid assets. Significant loan demand, deposit
withdrawal, increased delinquencies, and increased real estate acquired in
settlement of loans (REO) could alter this condition. Management does not
foresee any liquidity problems for 1997.
CAPITAL RESOURCES
The following is a reconciliation at December 31, 1997 of the Bank's
equity capital to regulatory capital, under generally accepted accounting
principles:
First Georgia Bank
Stockholders' Equity 13,712,000
Less:
Intangible Assets 1,002,000
------------
12,710,000
Plus:
Qualifying intangible assets 1,002,000
------------
Core Capital 13,712,000
Plus:
Supplemental Capital 1,026,000
------------
Risk-based Capital 14,738,000
============
Current regulations require institutions to keep minimum regulatory
tangible capital equal to 1.5% of adjusted assets, minimum core capital to
adjusted assets of 3% (the leverage ratio), and risk-based capital to
risk-adjusted assets of 8%. The Office of Thrift Supervision (the OTS) may
increase the minimum core capital, or leverage ratio, based on its assessment
of the institution's risk management systems and the level of total risk in
the individual institution. At December 31, 1997, the Bank met all three
capital requirements.
The Bank's regulatory capital and the required minimum amounts at
December 31, 1997 are summarized as follows:
7
<PAGE>
Required Minimum
Bank Capital Amount Excess (Deficiency)
---------------- ----------------- ------------------
----- ----------- ------ ---------- ------ -----------
% $ % $ % $
----- ----------- ------ ---------- ------ -----------
Tangible Capital 7.68% 12,710,000 1.50% 2,482,000 6.18% 10,228,000
Core Capital 8.24% 13,712,000 4.00% 6,659,000 4.24% 7,053,000
Risk-based
Capital 10.14% 14,738,000 8.00% 11,623,000 2.14% 3,115,000
The Federal Deposit Insurance Corporation Improvement Act
(FDICIA)required the Federal banking agencies to take "prompt corrective
action" in respect to institutions that do not meet minimum capital
requirements. Along with the ratios described above, FDICIA also introduced an
additional capital measurement, the Tier 1 risk-based capital ratio. The Tier
1 ratio is the ratio of Tier 1 or core capital to total risk-adjusted assets.
FDICIA establishes five capital tiers: "well capitalized," "adequately
capitalized," "undercapitalized," "significantly undercapitalized," and
"critically undercapitalized." The regulators summarize their minimum
requirements for the five capital tiers established by the FDICIA as follows:
Tier 1 Risk-Based Risk-based Leverage
Capital Ratio Capital Ratio Ratio
----------------------- ----------------- --------------
Well Capitalized 10% or above 6% or above 5% or above
Adequately Capitalized 8% or above 4% or above 4% or above
Undercapitalized Less than 8% Less than 4% Less than 3%
Significantly
Undercapitalized Less than 8% Less than 4% Less than 3%
Critically
Undercapitalized ------------- -------------- 2% or less
An unsatisfactory examination rating may cause an institution's
capitalization category to be lower than suggested by its actual capital
position.
At December 31, 1997, the Bank's Tier 1 risk-based capital ratio was
9.44%. If a depository institution should fail to meet its regulatory capital
requirements, regulatory agencies can require submission and funding of a
capital restoration plan by the institution, place limits on its activities,
require the raising of additional capital, and ultimately require the
appointments of a conservator or receiver for the institution.
The Bank's capital position changed during the quarter ended December 31,
1997. Total capital as well as tangible capital, core capital, and risk-based
capital continued to increase during the quarter. The mix of risk-based
assets and additional earnings are the primary factors for this increase.
8
<PAGE>
RESULTS OF OPERATIONS
INTEREST INCOME
Interest Income increased $433,558, or 13.90%, for the three month period
ended December 31, 1997 as compared to the same period in 1996. Interest
income on loans increased $477,942 or 16.60%, for the quarter ended
December 31, 1997, compared to the same quarter ended December 31, 1996. The
Company has been aggressive in attracting new loan business while competition
for loans remains strong and loan demand is still steady in the marketplace.
However, the Bank continues to be selective in the loans that it makes, as
evident by its low real estate foreclosed balances. Management expects loan
demand to maintain healthy levels. Interest on investments increased $22,435,
or 13.99% as the Bank purchased some investments to obtain some excess income.
Some of these investments were in municipal bonds, which are tax free. Other
interest income for the quarter ended December 31, 1997 decreased $66,819, or
84.17% as compared to the same quarter ended December 31, 1996. In 1996, the
Bank maintained high cash balances in anticipation of the sale of the Hinesville
office. With that sale now completed, the Bank is using its cash reserves to
fund the increasing loan growth.
INTEREST EXPENSE
Interest Expense increased $149,947 (8.64%) for the quarter ended
December 31, 1997 compared to December 31, 1996. Interest on deposits increased
$104,030 (6.69%) for the three month period ended December 31, 1997 over
December 31, 1996. Deposit balances increased approximately $3,900,000 in the
three month period from September 30, 1997 to December 31, 1997, and this
growth rate is expected to increase as the year goes on. The market place in
which the Bank operates is extremely conducive to deposit growth, as evidenced
by the Bank's increase in deposits. Despite the increases in deposits, the
Bank had to borrow an additional $3,000,000 in fed funds to help fund the high
loan demand. This increase is the reason interest on borrowings increased $
45,917, or 25.63%.
NET INTEREST INCOME
Net Interest Income increased $283,611, or 20.49% for the quarter.
Increases in loan balances and interest earning deposits offset the increases
in deposit balances enough to produce a favorable net interest margin.
Management believes this growth will continue throughout fiscal 1998.
PROVISION FOR LOAN LOSSES
The provision for loan losses expense decreased $9,281 (89.17%) for the
quarter ended December 31, 1997 over the quarter ended December 31, 1996. The
loan loss provision at December 31, 1997 was over $1,000,000, which is well
over the necessary regulatory requirements. Management feels the reserve is
at adequate levels and does not warrant any transfers from earnings at this
time. Net Interest Income after Provision for Loan Losses for the quarter
ended December 31, 1997 increased $292,892, or 21.32% from the same period last
year.
OTHER INCOME
Other Income for the quarter increased $167,609, a 63.16% difference from
the same quarter the previous year. The greater portion of this increase was
in loan servicing fees. Loan servicing fees increased $87,216 or 86.74% for
the quarter ended December 31, 1997 over the quarter ended December 31, 1996.
The Bank implemented a new loan origination fee structure which is constituting
this increase. Deposit service charges also had a substantial increase,
$77,531, or 49.42% over last year. The increase in deposit balances has given
the Bank an opportunity to generate more fee income, an area Management feels
is essential to profitability.
9
<PAGE>
OTHER EXPENSES
Other expenses for the quarter ended December 31, 1997 increased $193,387,
or 16.67%, over the quarter ended December 31, 1996. Personnel expense
increased $108,036, or 19.15% in the three month period ending December 31, 1997
over December 31, 1996. The Bank has added several new employees to help with
the growth the Bank is experiencing. Federal insurance premiums decreased
$47,644, or 70.49% for the three month period ended December 31, 1997 over the
same period in 1996. The special SAIF assessment lowered the insurance rate
beginning January of 1997, so going forward from this quarter will show more
parity between the two years.
Other expenses increased $109,891, or 46.16% for the quarter ended December
31, 1997 over the quarter ended December 31, 1996 as a result of increases in
two main areas. For the quarter ended December 31, 1997, advertising costs
increased $41,627 (456.58%) over the quarter ended December 31, 1996. The
Bank is in the midst of an aggressive marketing campaign to lure new business,
the results of which are the increased loan and deposit balances.
Data processing also showed significant increases. This expense increased
$22,862, or 1,063.84% from December 31, 1996 to December 31, 1997. The Bank
is incurring some costs to ensure that all computer equipment and software is
Year 2000 compliant. This process involves reprogramming, equipment, and
software upgrade costs.
The Bank accrued $281,357 in income taxes for the quarter ended
December 31, 1997, an increase of $105,821 (60.28%) over the same quarter in
1996.
FINANCIAL CONDITION
ASSETS
Cash increased $1,132,615, or 37.94%, over the three month period ended
December 31, 1997. With the increase in transaction deposit accounts, the Bank
has kept higher cash balances. Interest bearing deposits in other banks
decreased $1,378,020, or 90.43%, over the same period due to growth in the
Bank's customer deposit balances. Investment securities increased $551,936, or
5.73% with the Bank's purchase of a mortgage backed security and two municipal
bonds, The Bank also bought stock in another financial institution to secure a
line of credit.
Loans receivable increased $6,454,259, or 4.68%, as of December 31, 1997
over September 30, 1997. The Bank has been aggressive, yet selective, in
attracting new loan business. Loan demand is steady, and the bank has been
successful in drawing strong, safe loans to the bank. The Bank's Loan portfolio
is as follows:
10
<PAGE>
LOANS RECEIVABLE
12/31/97 9/30/97
------------ ------------
Real estate mortgage loans $ 103,065,275 102,419,019
Real estate construction loans 20,164,699 16,996,563
Consumer loans 10,994,846 10,383,515
Commercial and other loans 11,250,000 9,137,932
------------ ------------
145,474,820 138,937,029
Less:
Deferred loan fees 37,399 (12,921)
Unearned interest income 92,148 72,995
Allowance for loan losses 1,026,381 1,012,322
------------ ------------
$ 144,318,892 137,864,633
============ ============
Management's evaluation of the risk elements in the loan portfolio is the
basis for the allowance for loan losses. The elements include possible declines
in the value of collateral due to changing economic conditions and depreciation
over time, size and composition of the loan portfolio, and current economic
conditions that might affect a borrower's ability to pay. Review of specific
problem loans, regulatory examinations, historical charge-off experience, and
levels of nonperforming and past due loans are other elements considered.
Management reviews these factors frequently and determines if the level of
loan loss allowances is adequate. For the three month period ending
December 31, 1997, Management allocated $1,127 of earnings to the provision for
loan losses. At December 31, 1997, the Bank believes its allowance for loan
losses is adequate to provide for future losses.
The following tables illustrate the Bank's problem loans and its allowance
for loan losses. When a loan has been past due ninety days or more, Management
reevaluates the loan and its underlying risk elements to determine if it should
be placed on nonaccrual status. These loans are loans for which unpaid interest
is not recognized in income. Past due loans are loans which are ninety days or
more delinquent and still accruing interest.
11
<PAGE>
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
12/31/97 9/30/97
--------- ---------
(In Thousands)
Beginning balance $ 1,012 955
Loans charged off:
Real estate construction - -
Real estate mortgage - 185
Consumer and other 17 163
-------- --------
Total charge offs 17 348
Recoveries:
Real estate construction - -
Real estate mortgage - 33
Consumer and other 30 62
------- --------
Total recoveries 30 95
Net charge offs (13) 253
Provision charged to operations 1 310
-------- ---------
Balance at end of period $ 1,026 1,012
======== =========
Ratio of net charge
offs to
average loans outstanding 0.01% 20.00%
======== =========
12
<PAGE>
ANALYSIS OF NON-ACCRUING AND PAST DUE LOANS
12/31/97 9/30/97
---------- ----------
(In Thousands)
Non-accruing loans:
Real estate construction $ - -
Real estate mortgage 2,218 1,915
Consumer and other 93 45
--------- ---------
Total non-accruing loans 2,311 1,960
Past due loans:
Real estate construction 1,342 -
Real estate mortgage 3,551 -
Consumer and other 637 -
--------- ---------
Total past due loans 5,530 -
Total non-accruing and
past due loans 7,841 1,960
========= ==========
Percentage of total loans 5.43% 1.42%
========= ==========
Real estate acquired through
foreclosure 423 423
========= =========
Total non-accruing,
past due loans, and
nonperforming assets $ 8,264 2,383
========= =========
13
<PAGE>
LIABILITIES
Deposits have increased $3,877,062, or 2.98%, for the three month period
ended December 31, 1997. Along with loans, the Bank has been working hard to
increase its market share in Glynn County's deposit business. As the numbers
dictate, First Georgia has been somewhat successful in soliciting new deposit
business. While the Bank did decrease its borrowing position with the Federal
Home Loan Bank by $650,000 (4.53%) over the three month period, the Bank secured
a fed funds line with another institution to provide short term borrowings (or
investment of excess cash). At December 31, 1997, these borrowings stood at
$3,000,000.
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The Bank filed no reports on Form 8-K for the quarter ended
December31, 1997.
14
<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.
DATE: 02/02/98 BY: G. FRED COOLIDGE III
------------ ----------------------
G. Fred Coolidge III
Executive Vice President
Chief Financial Officer
15
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1997
<CASH> 4,118
<INT-BEARING-DEPOSITS> 146
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 10,187
<INVESTMENTS-MARKET> 10,296
<LOANS> 144,319
<ALLOWANCE> 1,026
<TOTAL-ASSETS> 166,386
<DEPOSITS> 133,767
<SHORT-TERM> 12,200
<LIABILITIES-OTHER> 2,107
<LONG-TERM> 4,500
0
0
<COMMON> 3,052
<OTHER-SE> 10,760
<TOTAL-LIABILITIES-AND-EQUITY> 166,386
<INTEREST-LOAN> 3,356
<INTEREST-INVEST> 183
<INTEREST-OTHER> 13
<INTEREST-TOTAL> 3,552
<INTEREST-DEPOSIT> 1,659
<INTEREST-EXPENSE> 1,885
<INTEREST-INCOME-NET> 1,667
<LOAN-LOSSES> 1
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,353
<INCOME-PRETAX> 746
<INCOME-PRE-EXTRAORDINARY> 746
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 465
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.14
<YIELD-ACTUAL> 9.12
<LOANS-NON> 2,311
<LOANS-PAST> 5,530
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,012
<CHARGE-OFFS> 17
<RECOVERIES> 30
<ALLOWANCE-CLOSE> 1,026
<ALLOWANCE-DOMESTIC> 1,026
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
