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, 1998
-----------------
[ ] 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 December 31, 1998.
4,798,972
1
<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, 1998 and September 30, 1998. 3
Consolidated Income Statements for the
Three Months Ended December 31, 1998 & 1997. 4
Consolidated Cash Flow Statements for
the Three Months ended December 31, 1998 & 1997 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 14
2
<PAGE>
FIRST GEORGIA HOLDING, INC
CONSOLIDATED BALANCE SHEETS
Assets: 12/31/98 09/30/98
--------------------------------
Cash and cash equivalents:
Cash and due from banks $ 5,426,809 4,433,585
Federal funds sold 7,730,000 12,180,000
Interest bearing deposits in other banks 1,437,485 1,096,581
--------------------------------
Cash and cash eqivalents 14,594,294 17,710,166
Investment securities to be held to maturity,
fair value approximately $16,395,000 at
December 31, 1998 and $11,768,000 at
September 30, 1998 16,347,090 11,565,230
Loans receivable, net 156,140,446 151,252,636
Real Estate Owned 490,012 644,084
Federal Home Loan Bank stock, at cost 1,160,300 1,160,300
Premises and equipment, net 4,708,549 4,502,239
Accrued interest receivable 1,124,505 1,052,830
Intangible assets, net 890,065 917,995
Other assets 1,538,038 1,657,059
--------------------------------
$196,993,299 190,462,539
================================
Liabilities and Stockholders' Equity
Liabilities:
Deposits $169,860,218 162,890,105
Federal Home Loan Bank advances 8,600,000 8,600,000
Accrued interest payable 593,926 572,581
Accrued expenses and other liabilities 1,778,552 2,718,641
--------------------------------
180,832,696 174,781,327
--------------------------------
Stockholders' Equity
Common stock, $1.00 par value. 10,000,000 shares
authorized; 4,798,972 and 3,052,319 shares issued
and outstanding at June 30, 1998 and
September 30, 1997, respectively 4,798,972 4,798,972
Additional paid-in capital 3,037,565 3,116,021
Retained earnings 8,324,066 7,766,219
--------------------------------
16,160,603 15,681,212
--------------------------------
$196,993,299 190,462,539
================================
See accompanying notes to consolidated financial statements
3
<PAGE>
FIRST GEORGIA HOLDING, INC.
CONSOLIDATED INCOME STATEMENTS
Three Months Ended
---------------------------------------
12/31/98 12/31/97
---------------------------------------
Interest Income:
Loans $3,556,064 3,356,763
Interest on Fed funds sold 169,745 --
Interest on investments 222,671 182,827
Other 434 12,566
------------------------
Total interest income 3,948,914 3,552,156
------------------------
Interest Expense:
Deposits 1,933,177 1,659,487
Advances and other borrowings 130,039 225,043
------------------------
Total interest expense 2,063,216 1,884,530
------------------------
Net interest income 1,885,698 1,667,626
Provision for Loan Losses 56 1,127
------------------------
Net interest income after
provision for loan losses 1,885,642 1,666,499
------------------------
Other Income:
Loan servicing fees 206,638 187,759
Deposit service charges 359,662 234,409
Gain on sale of foreclosed property 16,193 --
Other operating income 51,431 10,807
------------------------
Total other income 633,924 432,975
------------------------
Other Expenses:
Salaries and employee benefits 801,982 672,323
Premises and occupancy costs 274,136 285,172
Amortization of intangibles 15,876 27,930
Federal insurance premiums 4,500 19,942
Other operating expenses 514,839 347,957
------------------------
Total other expenses 1,611,333 1,353,324
------------------------
Income before income taxes 908,233 746,150
Income taxes 350,385 281,357
------------------------
Net Income $ 557,848 464,793
========================
Income per share of common stock $ 0.12 0.10
========================
Weighted average number of shares outstanding 4,798,972 4,798,972
See accompanying notes to consolidated financial statements.
4
<PAGE>
FIRST GEORGIA HOLDING, INC.
CONSOLIDATED CASH FLOW STATEMENTS
THREE MONTHS ENDED DECEMBER 31,
1998 1997
----------------------------------------
OPERATING ACTIVITIES:
Net income $ 557,648 464,793
Adjustments to reconcile net income
to net cash provided by operations:
Provision for loan losses 56 1,127
Depreciation and amortization 89,656 99,515
Amortization of intangibles 27,930 27,930
Amortization of deferred loan fees (23,219) (24,478)
(Gain)/Loss on sale of REO (16,193) --
(Increase) Decrease in accrued
interest receivable (71,675) (31,289)
Increase (decrease) in other assets 40,764 180,921
Increase (decrease) in accrued expenses
and liabilities (918,744) (7,075)
-------------------------------
Net Cash Provided By Operating Activities (313,777) 711,444
-------------------------------
INVESTING ACTIVITIES:
Principal payments received on
mortgage-backed securities 1,376,272 146,703
Maturities of investment securities -- --
Purchase of investment securities (6,132,363) (698,353)
Loan originations, net of principal repayments (4,864,647) (6,430,908)
Purchase of Premesis and equipment (321,735) (201,353)
Proceeds from the sale of real estate 170,265 --
-------------------------------
Net Cash Used By Investing Activities (9,772,208) (7,183,911)
-------------------------------
FINANCING ACTIVITIES:
Net increase (decrease) in deposits 6,970,113 3,877,062
(Repayments of) Proceeds from other borrowings -- 3,000,000
Proceeds from FHLB Advances 3,200,000 2,750,000
Repayments of FHLB Advances (3,200,000) (3,400,000)
Net Proceeds from stock options -- --
Cash Dividends paid -- --
-------------------------------
Net Cash Provided by Financing Activities 6,970,113 6,227,062
-------------------------------
Increase In Cash And Cash Equivalents (3,115,872) (245,405)
Cash and Cash equivalents at beginning of year 17,710,166 4,509,127
-------------------------------
Cash and cash equivalents at end of quarter $ 14,594,294 4,263,722
===============================
See accompanying notes to consolidated financial statements
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 statements contain all adjustments necessary to present fairly the
financial position of First Georgia Holding, Inc. as of December 31, 1998 and
September 30, 1998. Also included are the results of its operations and changes
in financial position for the three months ended December 31, 1998 and 1997 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, 1998.
(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 9.70% and 6.58% at December 31, 1998 and September 30, 1998,
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 fiscal 1999.
CAPITAL RESOURCES
The following is a reconciliation at June 30, 1998 of the Bank's equity
capital to regulatory capital, under generally accepted accounting principles:
First Georgia Bank
Stockholders' Equity 15,737,000
Less:
Intangible Assets 890,000
------------
Tangible Capital 14,847,000
Plus:
Qualifying intangible assets 890,000
------------
Core Capital 15,737,000
Plus:
Supplemental Capital 979,000
------------
Risk-based Capital 16,716,000
============
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, 1998, the Bank met all three capital
requirements.
7
<PAGE>
The Bank's regulatory capital and the required minimum amounts at December
31, 1998 are summarized as follows:
Required Minimum
Bank Capital Amount Excess (Deficiency)
------------------------------------------------------------------
% $ % $ % $
------------------------------------------------------------------
Tangible
Capital: 7.58% 14,847,000 1.50% 2,938,000 6.08% 11,909,000
Core
Capital: 8.00% 15,737,000 4.00% 7,870,000 4.00% 7,867,000
Risk-Based
Capital: 10.22% 16,716,000 8.00% 13,090,000 2.22% 3,626,000
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, 1998, the Bank's Tier 1 risk-based capital ratio was
9.62%. 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.
8
<PAGE>
The Bank's capital position changed during the quarter ended December 31,
1998. 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
INTEREST INCOME
Interest income on loans increased $199,301, or 5.94%, for the three month
period ended December 31, 1998 as compared to the same period in 1997. 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 $39,844,
or 21.79% for the quarter ended December 31, 1998 compared to December 31, 1997.
As the Bank's deposit base has increased, more funds have been shifted out of
Fed funds sold and into higher yield investments. Other interest income for the
quarter ended December 31, 1998 decreased 12,132, or 96.55% as compared to the
same quarter ended December 31, 1997. The Bank has shifted more of its excess
cash into Fed funds sold, which generates more income, and out of interest
bearing deposits. In the last quarter, the Bank has seen steady growth in its
deposit balances. Consequently, the bank has been able to put money into short-
term earning vehicles, such as overnight Fed Funds.
INTEREST EXPENSE
Interest Expense increased $178,686 (9.48%) for the quarter ended December
31, as compared to the same period in 1997. Interest on deposits increased
$273,690 (16.49%) for the three month period ended December 31, compared to the
same periods ended December 31, 1997. While the Bank did experience some
increase in interest bearing deposits, the non-interest earning deposits grew
approximately 2,359,000. 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 $95,004, or 42.22% for the ending December 31, 1998. The
increased flow of money into the Bank from deposits has made it possible to pay
off several Federal Home Loan Bank advances the Bank had.
NET INTEREST INCOME
Net Interest Income increased $218,072, or 13.08% for the quarter ended
December 31, 1998 as compared to the same period 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.
9
<PAGE>
PROVISION FOR LOAN LOSSES
The provision for loan losses expense decreased $1,071 for the quarter
ended December 31, 1998 as compared to the same periods ended December 31, 1997.
The loan loss provision at December 31, 1998 was over $970,000, 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, 1998 increased $219,143, or 13.15% from the same period last year.
OTHER INCOME
Other Income for the quarter increased $200,949, or 46.41% from the same
quarter the previous. Deposit service charges increased 125,253, or 53.43% for
the quarter ended December 31, 1998 as compared to the same time last year. The
increase in deposit accounts is the reason for this increase. As the Bank adds
more deposit accounts to its portfolio, this figure will continue to grow. Loan
servicing fees increased $18,879, (10.05%) for the quarter ended December 31,
1998. The increase in loan accounts is attributable to this number. The Bank
also realized a gain on the sale of a piece of real estate acquired in
settlement of a loan in the quarter ended December 31, 1998. The Bank realized
no such gain at the same time last year.
OTHER EXPENSES
Other expenses for the quarter ended December 31, 1998 increased $258,009,
or 19.06%, over the quarter ended December 31, 1997. Personnel expense increased
$129,659, or 19.29% in the three month period ending December 31, 1998 over
December 31, 1997 The Bank has added several new employees to help with the
growth the Bank is experiencing. Management does not forsee any extraordinary
hiring concerns for the remainder of the year. Other expenses increased
$166,882, or 47.96%, for the quarter ended December 31, 1998 as compared to last
year. In October, the Bank converted to a new mainframe system which is Year
2000 compliant. The new system allows the Bank to offer outstanding customer
service. This installation is generating several data processing costs which
were not present last year.
The Bank increased its accrual for income taxes by $69,028 (24.53%) for
the quarter to keep up with the increased income.
FINANCIAL CONDITION
ASSETS
Cash and cash equivalents decreased $3,115,872, or 17.59%, over the three
month period ended December 31, 1998. With the increase in transaction deposit
accounts, the Bank shifted some of its funds into higher yielding investments.
This shift is evidenced by the $4,781,860 (41.35%) increase in investments.
Premises and equipment increased $206,310, or 4.58% due to the increased
computer equipment associated with the conversion to the new system.
Loans receivable increased $4,887,810, or 3.23% as of the quarter ended
10
<PAGE>
December 31, 1998 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
12/31/98 9/30/98
----------------------------------
Real estate mortgage loans $ 103,128,898 102,828,455
Real estate construction loans 27,674,851 27,108,632
Consumer loans 12,527,070 11,830,203
Commercial and other loans 13,970,416 10,593,354
----------------------------------
157,301,235 152,360,644
Less:
Deferred loan fees 128,845 83,035
Unearned interest income 52,833 56,341
Allowance for loan losses 979,111 968,632
----------------------------------
$ 156,140,446 151,252,636
==================================
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. At December 31, 1998, the Bank believes its
allowance for loan losses is adequate to provide for future losses.
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.
<PAGE>
ANALYSIS OF NON-ACCRUING AND PAST DUE LOANS
12/31/98 09/30/98
----------------------------------------
Non-accruing Loans
Real estate
Construction $ - -
Mortgage 2,259,611 2,343,222
Consumer 36,397 21,214
------------------------------------
Total non-accruing loans 2,296,008 2,364,436
------------------------------------
Past Due Loans
Real estate
Construction - -
Mortgage - -
Consumer 140,321 -
------------------------------------
Total past due loans - -
------------------------------------
Total non-accruing
and past due loans $ 2,296,008 2,364,436
====================================
Percentage of total loans 1.47% 1.56%
====================================
Real estate acquired
through foreclosure $ 490,012 644,084
====================================
Total non-accruing,past due
loans, and nonperforming assets. $ 2,786,020 3,008,520
====================================
<PAGE>
ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
12/31/98 12/31/97
-----------------------------------------
Beginning balance $ 968,632 955,288
Loans charged-off:
Real estate construction - -
Real estate mortgage - 185,696
Consumer and other 6,466 162,520
-----------------------------------------
Total charge offs 6,466 348,216
-----------------------------------------
Recoveries:
Real estate construction - -
Real estate mortgage 363 32,939
Consumer and other 7,802 62,632
-----------------------------------------
Total recoveries 8,165 95,571
-----------------------------------------
Net charge-offs (1,699) 252,645
Provision charged to operations 56 309,679
-----------------------------------------
Balance at end of period $ 970,387 1,012,322
=========================================
Ratio of net charge-offs to
average loans outstanding 0.00% 20.00%
=========================================
LIABILITIES
Deposits have increased $6,970,113, or 4.28%, for the three month period
ended December 31, 1998. 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.
11
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 80K
The Bank filed no reports on Form 8-K for the quarter ended December
31, 1998.
12
<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
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<PERIOD START> OCT-01-1998
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,426,809
<INT-BEARING-DEPOSITS> 1,437,485
<FED-FUNDS-SOLD> 7,730,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 16,347,090
<INVESTMENTS-MARKET> 16,395,000
<LOANS> 156,140,446
<ALLOWANCE> 979,111
<TOTAL-ASSETS> 196,993,299
<DEPOSITS> 169,860,218
<SHORT-TERM> 0
<LIABILITIES-OTHER> 2,372,478
<LONG-TERM> 8,600,000
0
0
<COMMON> 4,798,972
<OTHER-SE> 11,361,631
<TOTAL-LIABILITIES-AND-EQUITY> 196,993,299
<INTEREST-LOAN> 3,556,064
<INTEREST-INVEST> 222,671
<INTEREST-OTHER> 170,179
<INTEREST-TOTAL> 3,948,914
<INTEREST-DEPOSIT> 1,933,177
<INTEREST-EXPENSE> 2,063,216
<INTEREST-INCOME-NET> 1,885,698
<LOAN-LOSSES> 56
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,611,333
<INCOME-PRETAX> 908,233
<INCOME-PRE-EXTRAORDINARY> 908,233
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 557,848
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0.12
<YIELD-ACTUAL> 8.69
<LOANS-NON> 2,296,008
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 968,632
<CHARGE-OFFS> 6,467
<RECOVERIES> 6,522
<ALLOWANCE-CLOSE> 979,111
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 979,111
</TABLE>
