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 June 30, 1999
[ ] 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 or (IRS Employer Identification No.)
or incorporation or organization)
1703 Gloucester Street
Brunswick, Georgia 31520
(Issuer's Address)
(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 June 30, 1999.
7,198,371
1
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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
June 30, 1999 and September 30, 1998. 3
Consolidated Income Statements for the
Three Months Ended June 30, 1999 and 1998
And the Nine Months ended June 30, 1999 and 1998. 4
Consolidated Cash Flow Statements for
the Nine Months ended June 30, 1999 and 1998. 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 5. Other information 16
Item 6. Exhibits and Reports on Form 8-K 16
2
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FIRST GEORGIA HOLDING, INC.
CONSOLIDATED BALANCE SHEETS (unaudited)
Assets: 06/30/99 09/30/98
-----------------------------------
Cash and cash equivalents:
Cash and due from banks $ 5,669,333 4,433,585
Federal funds sold 1,840,000 12,180,000
Interest bearing deposits in other banks 1,042,172 1,096,581
------------ -----------
Cash and cash eqivalents 8,551,505 17,710,166
Investment securities held to maturity,
fair value approximately $14,591,464 at
June 30, 1999 and $11,768,000 at
September 30, 1998. 14,964,896 11,565,230
Loans receivable, net 166,995,565 151,252,636
Real estate owned 400,000 644,084
Federal Home Loan Bank stock, at cost 837,500 1,160,300
Premises and equipment, net 4,889,462 4,502,239
Accrued interest receivable 1,086,371 1,052,830
Intangible assets, net 717,188 917,995
Other assets 1,596,620 1,657,059
------------ ------------
$200,039,107 190,462,539
============ ============
Liabilities and Stockholders' Equity
Liabilities:
Deposits $172,740,283 162,890,105
Federal Home Loan Bank advances 7,600,000 8,600,000
Accrued interest payable 522,928 572,581
Accrued expenses and other liabilities 2,161,759 2,718,641
------------ ------------
183,024,970 174,781,327
------------ ------------
Stockholders' Equity
Common stock, $1.00 par value. 10,000,000
shares authorized; 7,198,371 and 7,198,458
shares issued and outstanding at
June 30, 1999 and September 30, 1998,
respectively 7,198,371 7,198,458
Additional paid-in capital 715,739 716,535
Retained earnings 9,100,027 7,766,219
------------ ------------
17,014,137 15,681,212
------------ ------------
$200,039,107 190,462,539
============ ============
See accompanying notes to consolidated financial statements.
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FIRST GEORGIA HOLDING, INC.
CONSOLIDATED INCOME STATEMENTS (unaudited)
Three Months Ended Nine Months Ended
---------------------- ---------------------
06/30/99 06/30/98 06/30/99 06/30/98
---------------------- ---------------------
Interest Income:
Loans $ 3,755,039 3,691,462 $ 10,866,163 10,523,168
Interest on Federal funds sold 66,702 20,460 372,221 28,040
Interest on investments 247,960 172,340 719,942 529,443
Other 2,563 2,078 3,674 14,852
---------------------- ---------------------
Total interest income 4,072,264 3,886,340 11,962,000 11,095,503
---------------------- ---------------------
Interest Expense:
Deposits 1,809,077 1,810,798 5,630,887 5,136,605
Advances and other borrowings 120,680 210,195 367,618 661,889
---------------------- ---------------------
Total interest expense 1,929,757 2,020,993 5,998,505 5,798,494
---------------------- ---------------------
Net interest income 2,142,507 1,865,347 5,963,495 5,297,009
Provision for Loan Losses 509,011 1,680 509,067 4,987
---------------------- -----------------
Net interest income after
provision for loan losses 1,633,496 1,863,667 5,454,428 5,292,022
---------------------- --------------------
Other Income:
Loan servicing fees 150,806 251,610 538,039 647,337
Deposit service charges 353,191 246,961 1,024,184 693,172
(Loss) Gain on sale of foreclosed
property (115,000) 23,586 (97,881) 29,125
Gain on sale of branch 767,011 - 767,011 -
Other operating income (11,923) 15,944 80,438 32,218
--------------------- ---------------------
Total other income 1,144,085 538,101 2,311,791 1,401,852
---------------------- --------------------
Other Expenses:
Salaries and employee benefits 832,034 754,081 2,470,204 2,155,869
Premises and occupancy costs 360,586 310,148 952,180 885,572
Amortization of intangibles 21,555 27,930 77,415 83,790
Other operating expenses 629,655 468,445 1,678,118 1,222,966
---------------------- ---------------------
Total other expenses 1,843,830 1,560,604 5,177,917 4,348,197
---------------------- ---------------------
Income before income taxes 933,751 841,164 2,588,302 2,345,677
Income taxes 354,194 311,228 966,443 873,493
---------------------- ---------------------
Net Income $ 579,557 529,936 $ 1,621,859 1,472,184
====================== =====================
Income per share of common stock
Basic $ 0.08 0.07 $ 0.23 0.21
====================== =====================
Diluted $ 0.07 0.07 $ 0.21 0.19
====================== =====================
See accompanying notes to consolidated financial statements
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FIRST GEORGIA HOLDING, INC.
CONSOLIDATED CASH FLOW STATEMENTS (unaudited)
NINE MONTHS ENDED JUNE 30,
1999 1998
----------------------------------
OPERATING ACTIVITIES:
Net income $ 1,621,859 1,472,184
Adjustments to reconcile net income
to net cash provided by operations:
Provision for loan losses 509,067 4,987
Depreciation and amortization 406,900 261,580
Amortization of intangibles 200,807 83,790
Amortization of deferred loan fees (31,131) 81,320
(Gain)/Loss on sale of REO 97,881 (30,311)
Increase in accrued interest receivable (33,541) (89,477)
Increase (decrease) in other assets 60,326 (307,554)
Increase (decrease) in accrued expenses
and liabilities (606,535) 851,723
------------ --------------
Net Cash Provided By Operating Activities 2,225,633 2,328,242
------------ --------------
INVESTING ACTIVITIES:
Principal payments received on mortgage-backed
securities 3,265,786 1,106,757
FHLB stock redemption 322,800 -
Maturities of investment securities - 1,100,000
Purchase of investment securities (6,673,361) (2,328,671)
Loan originations, net of principal repayments (16,220,865) (17,648,274)
Purchase of premises and equipment (786,214) (1,117,939)
Proceeds from the sale of real estate 146,203 522,945
------------ ------------
Net Cash Used By Investing Activities (19,945,651) (18,365,182)
------------ ------------
FINANCING ACTIVITIES:
Net increase in deposits 1,025,781 22,111,996
Proceeds from FHLB advances 3,200,000 18,350,000
Repayments of FHLB advances (4,200,000) (21,600,000)
Net liabilities of branch assumed by purchaser,
net of gain 8,824,397 -
Net proceeds from stock options - 239,663
Cash dividends paid ($0.06 per share in 1999 and
$0.0667 per share in 1998) (287,938) (320,885)
Cash paid for fractional shares (883) -
------------ --------------
Net Cash Provided by Financing Activities 8,561,357 18,780,774
------------ --------------
(Decrease) increase In Cash And Cash Equivalents (9,158,661) 2,743,834
Cash and cash equivalents at beginning of period 17,710,166 4,509,127
------------ --------------
Cash and cash equivalents at end of period $ 8,551,505 7,252,961
============ ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest $ 6,048,158 7,755,000
============= =============
Cash paid for taxes, net of refund of $180,000
in 1999 $ 633,000 1,784,145
============= =============
See accompanying notes to consolidated financial statements
5
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FIRST GEORGIA HOLDING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
(1) BASIS OF PRESENTATION
In the opinion of Management, the accompanying unaudited consolidated
financial statements contain all adjustments necessary to present fairly the
financial position of First Georgia Holding, Inc. as of June 30, 1999 and
September 30, 1998. Also included are the results of its operations and changes
in financial position for the three and nine months ended June 30, 1999 and
1998. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full year.
The consolidated financial statements include the accounts of the
Company and the Bank. All significant intercompany balances and transactions
have been eliminated in consolidation.
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, 1998.
EARNINGS PER SHARE
Earnings per share were calculated using the weighted average number of
shares outstanding for the period. The diluted earnings per share takes into
consideration the assumed increase in shares from the conversion of stock
options as well.
Three Month Period Nine Month Period
Ended June 30, Ended June 30,
---------------------------------------
1999 1998 1999 1998
--------- -------- --------- ---------
Weighted average number of common
shares outstanding - Basic 7,198,417 7,198,528 7,198,416 7,084,627
Incremental shares from the assumed
conversion of stock options 679,288 567,605 598,015 621,449
---------- --------- ---------- ---------
Total - Diluted 7,877,705 7,766,133 7,796,431 7,706,076
========== ========= ========== =========
SALE OF BRANCH
Effective April 30, 1999, the Bank completed the sale of its Blackshear
branch, which had deposits of approximately $9,000,000 and net premises and
equipment of $52,037. This transaction resulted in a gain of $767,011 which is
reported separately in the accompanying consolidated statements of operations.
6
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ALLOWANCE FOR LOAN LOSSES
Changes in the allowance for loan losses are summarized as follows:
Nine Months ended Year Ended
June 30, 1999 September 30, 1998
-----------------------------------------
Beginning balance $ 968,632 1,012,322
Provision charged to operations 509,055 6,163
Charge-offs (459,326) (243,757)
Recoveries 212,154 193,904
-----------------------------------------
Balance, end of year 1,230,515 968,632
=========================================
Management determined that a substantial contribution to the loan loss
reserve was needed in the third quarter. Such determination was based on actual
net charge-offs for the quarter of $297,371 coupled with an increase in loans
for the quarter of $7.7 million. A portion of this increase in loans results
from the Bank's expansion of commercial loan lending, which tends to be more
risky than other loans.
STOCKHOLDERS' EQUITY
On April 5, 1999, the Company's Board of Directors authorized a
three-for-two stock split effected in the form of a 50% stock dividend payable
May 19, 1999 with a cash in lieu of fractional share price of $5.38, to
shareholders of record on April 30, 1999. This split resulted in the issuance of
2,399,399 additional shares of common stock and a cash disbursement of $833 in
lieu of fractional shares. All per share and weighted average share amounts have
been restated to reflect this stock split.
SUBSEQUENT EVENT
In the Company's Board of Directors meeting on June 21, 1999, the Board
voted to pay a dividend of $0.04 per share to shareholders of record as of July
31, 1999 on August 15, 1999.
FIRST GEORGIA HOLDING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and related notes appearing elsewhere in this Form 10-Q
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 8.55% and 6.58% at June 30, 1999 and September 30, 1998, respectively.
7
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The Bank's operational needs, demand for loan disbursements, and savings
withdrawals can be met by loan principal and 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 1999.
YEAR 2000 COMPLIANCE DISCLOSURE
As the year 2000 ("Year 2000") approaches, an important business issue has
emerged regarding existing software programs and hardware. Many existing
application software products were designed to accommodate a two-digit year. For
example, "98" is stored on the system and represents 1998 and "00" represents
1900. The Bank has been working on this problem since fiscal 1997. Management
formed an Electronic Data Processing ("EDP") committee (the "Committee") in
early fiscal 1997 to address this and many other computer-related issues that
may arise. The Committee began testing all hardware and software applications
for Year 2000 readiness. Several of the Bank's computers were found to be
non-compliant with Year 2000. The Committee decided to replace these machines as
they implemented a Bank wide network to facilitate ease of information
dissemination. With the installation of the network, all computers now used in
the Bank are Year 2000 compliant.
All mission critical software for the Bank was tested as of March 1999. All
peripheral and specialized software has been tested as well. Where needed, all
non-compliant software has been updated to compliant status or replaced. In
October of 1998, the Bank converted to a new mainframe system, a product of Jack
Henry and Associates. The new software was tested to the satisfaction of the
Office of Thrift Supervision (the "OTS"), the Bank's primary regulator. The Bank
has joined with other users of the software to perform user group testing of the
mission critical software. This testing was completed in early fiscal 1999.
An additional area of concern to the Company, the Bank, and the OTS is the
effect of Year 2000 issues on its deposit and loan customers. Failure to address
Year 2000 issues could have significant implications on the ability of certain
customers to continue operations. Letters inquiring as to the readiness for Year
2000 were sent to all the Bank's commercial customers. Additional information is
provided by each branch to any customer who wishes to learn more about Year
2000. Although the Bank has taken several steps to address these issues, there
can be no assurance that these customers will be Year 2000 compliant. Failure of
certain customers to adequately address these issues could result in a negative
impact on the Company's earnings.
The Company believes the mission critical systems are currently Year 2000
compliant. The EDP committee still meets regularly to discuss Year 2000 issues.
Outside sources have performed several audits of the system with little or no
exceptions to report. Management understands that certain infrastructure
failures could arise due to undetected system or software errors. These
contingencies could adversely affect the Bank. The Bank is addressing these
contingencies in its Disaster Recovery Plan.
The Bank has experienced most of its costs associated with becoming Year
2000 compliant. The Company spent approximately $1,000,000 to become Year 2000
compliant. Nearly all of this expenditure was for new equipment and software, so
the cost will be capitalized rather than realized all in one period. Management
forsees any future costs associated with Year 2000 to be insignificant.
8
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Although the Bank has taken several measures to address Year 2000 issues,
there can be no assurances that all necessary modifications will be identified
and corrected or that unforeseen difficulties or costs will not arise.
Therefore, there can be no assurance that the failure of the Bank's internal
systems will not negatively impact the Bank's operations.
CAPITAL RESOURCES
The following is a reconciliation at June 30, 1999 of the Bank's equity
capital to regulatory capital, under generally accepted accounting principles:
First Georgia Bank
Stockholder's Equity $ 16,506,000
Less:
Intangible assets 717,000
---------------
Tangible Capital 15,789,000
Plus:
Qualifying intangible assets 717,000
---------------
Core Capital 16,506,000
Plus:
Supplemental Capital 1,230,000
---------------
Risk-based Capital $ 17,736,000
===============
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 June 30, 1999, the Bank met all three capital
requirements.
The Bank's regulatory capital and the required minimum amounts at June
30, 1999 are summarized as follows:
9
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Required Minimum Excess
Bank Capital Amount (Deficiency)
- --------------------------------------------------------------------------------
% $ % $ % $
- --------------------------------------------------------------------------------
Tangible Capital: 7.93% 15,789,000 1.50% 2,985,525 6.43% 12,803,475
Core Capital: 8.26% 16,506,000 4.00% 7,990,080 4.26% 8,515,920
Risk-based Capital: 10.11% 17,736,000 8.00% 14,039,280 2.11% 3,696,720
- --------------------------------------------------------------------------------
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 June 30, 1999, the Bank's Tier 1 risk-based capital ratio was 9.41%. 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 June 30, 1999.
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.
RESULTS OF OPERATIONS
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INTEREST INCOME
Interest income on loans increased $63,577, or 1.72%, for the three
month period ended June 30, 1999 and $342,995,or 3.26% for the nine month period
ended June 30, 1999 as compared to the same period in 1998. 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 evidenced by its low
real estate foreclosed balances. Management expects loan demand to maintain
healthy levels. Interest on investments increased $75,620, or 43.88% for the
quarter and $190,499, or 35.98% for the nine month period ended June 30, 1999
compared to June 30, 1998. As the Bank attracted significant deposit balances,
Management increased its investment holdings. For the quarter ended June 30,
1999, interest income on Federal funds sold increased $46,242, or 226.01% and
for the nine month period ended June 30, 1999, interest income on Federal funds
sold increased $344,181, or 1,227.46% as compared to the same period ended June
30, 1999. In a trend continued from the last fiscal year, the Bank has seen
tremendous growth in its deposit balances. Consequently, the bank has been able
to increase its investment in overnight Fed Funds.
INTEREST EXPENSE
Interest on deposits decreased $1,721 (0.01%) for the quarter ended
June 30, 1999 and increased $494,282 (9.62%) for the nine month period ended
June 30, 1999 as compared to the same period in 1998. Effective April 30, 1999,
the Bank sold its Blackshear, Georgia, branch. This sale resulted in the
decrease of approximately $9,000,000 in deposits. For this reason, interest on
deposits was down for the quarter yet up for the year. The decrease of deposits
attributable to the sale has quickly been replaced with deposits in its primary
market area of Glynn County. The market place in which the Bank operates is
extremely conducive to deposit growth, and the Bank has positioned its deposit
products to take full advantage of the area's deposit demand. Interest on
borrowings decreased $89,515, or 42.59% for the quarter and $294,271, or 44.46%
for the nine month period ending June, 1999. The primary source of borrowings is
in the form of Federal Home Loan Bank Advances. At June 30, 1999, the Bank had
decreased its position in advances by $3,500,000 as compared to June 30, 1998.
The influx of additional deposit monies had enabled the Bank to be liquid enough
to fund its on loan growth.
NET INTEREST INCOME
Net Interest Income increased $277,160, or 14.86% for the quarter and
$666,486, or 12.58% for the nine month period ended June 30, 1999 as compared to
the same periods last year. While increases in loan balances and interest
earning deposits have contributed to the increase, the substantial increase in
non-interest bearing deposits held by the Bank has been the deciding factor in
the quick increase. Management believes this growth will continue throughout
fiscal 1999.
PROVISION FOR LOAN LOSSES
The provision for loan losses for the three month period ended June 30,
1999 totaled $509,011, increasing significantly over the same period in 1998.
The Bank had net charge offs of $297,371 for the quarter and significant loan
growth which required an increase in the provision (See Allowance for Loan
Losses). Net Interest Income after the Provision for Loan Losses for the quarter
ended June 30, 1999 decreased $230,171, or 12.35% from the same period last year
and increased $162,206, or 3.07% for the nine month period ended June 30, 1999
over June 30, 1998. The downturn for the current quarter reflects the large
provision taken out to replenish the loan loss reserve.
OTHER INCOME
Other Income for the quarter increased $605,984, or 112.62% from the
same quarter the previous year and $909,939, or 64.91%, for the nine month
period ended June 30, 1999 as compared to June 30, 1998. The main factor for
this increase was the gain on the sale of the Blackshear branch, which was
$767,011. As the volume of deposits increased, the fee income, such as service
charges and insufficient funds fees, increased as well. Deposit service charges
increased $106,230 (43.01%) for the quarter and $331,012 (47.75%) for the nine
month period ended June 30, 1999. Loan servicing fees decreased $100,804, or
40.06% for the quarter and $109,298, or 16.88% for the nine months ended June
30, 1999. Fees earned on brokered mortgage loans are down from last year. The
rate environment at the beginning of the quarter caused for less mortgage loans
closed. However, brokered mortgage activity increased toward the latter part of
the quarter, and should be back on track for the remainder of the fiscal year.
OTHER EXPENSES
Other expenses for the quarter ended June 30, 1999 increased $283,226,
or 18.15%, over the quarter ended June 30, 1998. Other expenses for the nine
month period ended June 30, 1999 increased $829,720, or 19.08%, over the nine
month period ended June 30, 1998. Salaries and employee benefits increased
$77,953, or 10.34% in the three month period ending June 30, 1999 over June 30,
1998, and $314,335, or 14.58% for the nine month period ended June 30, 1999 over
the same period last year. To help with growth concerns, the Bank has added to
its staff of operations, data processing, and information technology personnel.
These areas now run at their fullest capacity ever and help cut larger costs in
other areas. Other operating expenses increased $161,210, or 34.41%, for the
quarter and $455,152, or 37.22% for the nine month period ended June 30, 1999 as
compared to last year. Data processing expense is responsible for most of this
increase. With the sale and conversion of the Blackshear office, Year 2000
readiness systems, and the increased workloads due to large volumes of items to
process, Management expected data processing expense to increase to the current
level.
The provision for income taxes increased by $42,966 (13.81%) for the
quarter and $92,950 (10.64%) for the nine month period ended June 30, 1999 as
compared to the same period in 1998. The effective tax rate has remained
consistent at a rate of 37%.
FINANCIAL CONDITION
ASSETS
Cash increased $1,235,748, or 27.87%, over the nine month period ended June
30, 1999. Despite the sale of the deposits associated with the Blackshear
office, transaction deposit accounts have increased significantly. Therefore,
the Bank has kept higher cash balances. The Bank used existing cash balances to
fund the assumption of liabilities in the sale of the Blackshear branch. There
fore, federal funds sold decreased $10,340,000, or 84.89%, for the nine month
period ended June 30, 1999. The Bank is quickly turning over new deposit
balances into new loan disbursements or new investments. Investment balances
increased $3,399,666, or 29.40%, for the nine months ended June 30, 1999.
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Premises and equipment increased $387,223, or 8.60%. The Bank purchased
additional computer equipment to work with the new mainframe system.
Loans receivable increased $15,742,929, or 10.41% as of the nine months
ended June 30, 1999 over September 30, 1998. 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:
LOANS RECEIVABLE
6/30/99 9/30/98
----------------------------------
Real estate mortgage loans $ 108,963,831 102,828,455
Real estate construction loans 29,339,791 27,108,632
Consumer loans 13,759,462 11,830,203
Commercial and other loans 16,409,882 10,593,354
----------------------------------
168,472,966 152,360,644
Less:
Deferred loan fees 180,575 83,035
Unearned interest income 66,311 56,341
Allowance for loan losses 1,230,515 968,632
----------------------------------
$ 166,995,565 151,252,636
==================================
ALLOWANCE FOR LOAN LOSSES
Management conducted an extensive review of the provision for loan
losses during the third quarter of fiscal 1999. It examined the adequacy of the
reserve in light of several factors.
First, the Bank has sustained substantial charge-offs during the third
quarter of 1999. Actual net charge-offs for this period were $297,371, while in
previous quarters, they had been negligible or net recoveries. In addition, the
Bank enjoyed a substantial increase in loans during the third quarter in the
amount of 7.7 million. This increase was due in part to extensive marketing
efforts.
Additionally, the Bank began to lend money to more speculative commercial
ventures during this period. Commercial loans have historically been of greater
risk than the traditional real estate lending the Bank has done in the past.
Management believes this type of lending warrants a greater reserve.
The Bank also examined the amount of unused credit commitments under lines
of credit, which it found to be substantial. Accordingly, a reserve was
established for any losses in that category. With all of these facts coupled, it
was felt that a substantial contribution to the loan loss reserve was needed in
the quarter.
The following tables illustrate the Bank's allowance for loan losses and
its problem loans. 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.
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ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
06/30/99 09/30/98
--------------------------------------
Beginning balance $ 968,632 1,012,322
Loans charged-off:
Real estate construction - -
Real estate mortgage 47,049 179,995
Consumer and other 412,277 63,762
------------------------------------
Total charge offs 459,326 243,757
------------------------------------
Recoveries:
Real estate construction - -
Real estate mortgage 171,707 78,084
Consumer and other 40,447 115,820
------------------------------------
Total recoveries 212,154 193,904
------------------------------------
Net charge-offs(recoveries) 247,172 49,853
Provision charged to operations 509,055 6,163
------------------------------------
Balance at end of period $ 1,230,515 968,632
====================================
Ratio of net charge-offs(recoveries) to
average loans outstanding 0.15% 0.03%
====================================
14
<PAGE>
ANALYSIS OF NON-ACCRUING AND PAST DUE LOANS
06/30/99 09/30/98
---------------------------------------
Non-accruing Loans (1)
Real estate
Construction $ - -
Mortgage 2,443,821 2,343,222
Consumer 44,884 21,214
-------------------------------------
Total non-accruing loans 2,488,705 2,364,436
-------------------------------------
Past Due Loans (2)
Real estate
Construction - -
Mortgage - -
Consumer - -
-------------------------------------
Total past due loans - -
-------------------------------------
Total non-accruing
and past due loans $ 2,488,705 2,364,436
=====================================
Percentage of total loans 1.49% 1.56%
=====================================
Real estate acquired
through foreclosure $ 400,000 644,084
=====================================
Total non-accruing, past due
loans, and nonperforming assets. $ 2,888,705 3,008,520
=====================================
(1) Non-accruing loans are loans for which unpaid interest is not
recognized in income.
(2) Past due loans are 90 days or more delinquent for which interest
is still accruing
LIABILITIES
Deposits have increased $9,850,178, or 6.05%, for the nine month period
ended June 30, 1999. The Bank sold approximately $9,000,000 in deposits at its
Blackshear branch. So in actuality, the Bank increased deposits approximately
$18,000,000 in the nine month period, and used $9,000,000 of the growth to fund
the sale. The Bank has been working hard to increase its market share of
deposits in Glynn County. This increase reflects that First Georgia has been
fairly successful in soliciting new deposit business. With the increase of
deposit balances, the Bank has paid off several of its Federal Home Loan Bank
advances, as evidenced by the decrease of $1,000,000, or 11.63%. Much of this
16
<PAGE>
money was replaced with the inflow of non-interest bearing deposits.
PART II
ITEM 5. OTHER INFORMATION
The Bank had a 3 for 2 stock split for shareholders of record as of April
30, 1999. The additional stock was issued May 19, 1999, with a cash in lieu of
fractional share price of $5.38.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
Exhibits.
The following exhibit is filed with this report.
Exhibit No. Description
27.1 Financial Data Schedule (for SEC use only)
B. Reports on Form 8-K
The Bank filed no reports on Form 8-K for the quarter ended
June 30, 1999.
16
<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:______________________ BY:__________________
G. Fred Coolidge III
Secretary and Treasurer
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<PERIOD START> OCT-01-1998
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1999
<CASH> 5,669,333
<INT-BEARING-DEPOSITS> 1,042,172
<FED-FUNDS-SOLD> 1,840,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 14,964,896
<INVESTMENTS-MARKET> 14,591,464
<LOANS> 166,995,565
<ALLOWANCE> 1,230,515
<TOTAL-ASSETS> 200,039,107
<DEPOSITS> 172,740,283
<SHORT-TERM> 3,000,000
<LIABILITIES-OTHER> 2,684,687
<LONG-TERM> 4,600,000
0
0
<COMMON> 7,198,371
<OTHER-SE> 9,815,766
<TOTAL-LIABILITIES-AND-EQUITY> 17,014,137
<INTEREST-LOAN> 10,866,163
<INTEREST-INVEST> 719,942
<INTEREST-OTHER> 375,895
<INTEREST-TOTAL> 11,962,000
<INTEREST-DEPOSIT> 5,630,887
<INTEREST-EXPENSE> 5,998,505
<INTEREST-INCOME-NET> 5,963,495
<LOAN-LOSSES> 509,067
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 5,177,917
<INCOME-PRETAX> 2,588,302
<INCOME-PRE-EXTRAORDINARY> 2,588,302
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,621,859
<EPS-BASIC> 0.23
<EPS-DILUTED> 0.21
<YIELD-ACTUAL> 4.30
<LOANS-NON> 2,488,705
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 968,632
<CHARGE-OFFS> 459,326
<RECOVERIES> 212,154
<ALLOWANCE-CLOSE> 1,230,515
<ALLOWANCE-DOMESTIC> 1,230,515
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
