<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Mark one
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 1999
--------------
[_] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT
For the transition period from ___________ to ___________
Commission File Number: 33-23062
Eufaula BancCorp, Inc.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 63-0989868
- -------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
Post Office Box 1269, Eufaula, Alabama 36072
-----------------------------------------------
Address of principal executive offices
(334) 687-3581
--------------
(Issuer's Telephone Number)
N/A
----------------------------------------------
(Former name, former address and former fiscal
year, if changed since last report)
Check whether the issuer (1) filed all reports required to 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of common equity, as of March 31, 1999-----2,620,773
----------------------------
<PAGE>
EUFAULA BANCCORP, INC. AND SUBSIDIARIES
INDEX
Part I. Page No.
Item 1. Financial Information
Consolidated Balance Sheet--March 31, 1999 3.
Consolidated Statements of Income & Comprehensive Income
three months ending March 31, 1999 and 1998. 4.
Consolidated Statements of Cash Flows;
three Months ended March 31, 1999 and 1998. 5.
Note to Consolidated Financial Statements 6.
Item 2. Management's discussion and analysis of financial
condition and results of operations; three months
ending March 31, 1999 and 1998. 7. - 9.
Signature Page 10.
Part II. Other Information
Item 4. Any matter submitted to the security holders for a vote 11.
Item 6. Exhibits and reports on Form 8-K
(a) Exhibits:
Loan Composition Summary 12.
Loans over 90 days past due and non accrual loans
Allowance for Loan Loss analysis 12.
Changes in Equity Capital 13.
Calculation of Net Income Per Share 14.
(b) Report of Form 8-K
NONE
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<PAGE>
Item 1 - Part 1 - Financial Information
EUFAULA BANCCORP, INC. & SUBSIDIARIES
Consolidated Balance Sheet
March 31, 1999
(unaudited)
(Dollars in Thousands)
ASSETS
- ------
Cash & Due from Banks $ 8,778
Interest bearing deposits in banks 54
Investment Securities:
Held to maturity 6,973
Available for Sale at est. market value 20,579
Federal Funds Sold 1,600
Loans 180,368
Less Allowance for loan losses 1,682
--------
178,686
Premises & Equipment, Net 6,287
Intangible Assets 1,372
Other Assets 4,530
--------
TOTAL ASSETS $228,859
========
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
Deposits:
Non interest-bearing demand $ 27,678
Interest-bearing Demand 58,175
Savings 5,227
Time Deposits 105,852
--------
TOTAL DEPOSITS $196,932
Federal Funds Purchased 6,150
Other Borrowings 5,000
Other Liabilities 1,809
TOTAL LIABILITIES $209,891
STOCKHOLDERS' EQUITY
Common Stock, par value $15,000,000
shares authorized: 2,620,773 shares issued 2,621
Surplus 6,026
Retained Earnings 10,319
Accumulated other comprehensive income 2
--------
Total Equity $ 18,968
--------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $228,859
========
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<PAGE>
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
Three Months Ended March 31, l999 and March 31, 1998
(unaudited)
(Dollars in Thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Interest Income
Interest & fees on loans $3,785 $2,073
Interest on Federal Funds Sold -0- 48
Interest on interest-bearing deposits 1 9
Interest on taxable securities 325 286
Interest on not-taxable securities 98 112
------ ------
$4,209 $2,528
Interest Expense
Interests on deposits $1,855 $1,087
Interest on Federal Funds Purchased/
Other Borrowed Funds 68 52
Net interest income $2,286 $1,389
Provision for loan losses 309 83
Net interest income after
provision for loan losses $1,977 $1,306
Other Operating Income
Service Charges on deposit accounts 224 180
Security Gains -0- -0-
Other Income 216 151
------ ------
440 331
Other operating expenses
Salaries & Other Employee Benefits $1,150 $ 773
Occupancy & Equipment expenses 250 202
Other operating expense 683 528
------ ------
$2,083 $1,503
Income before taxes $ 334 $ 134
Applicable Income Taxes 109 31
Net Income after Taxes $ 225 $ 103
====== ======
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period (89) 25
Less: reclassification adjustment for gains included in net
income -0- -0-
------ ------
Comprehensive Income $ 136 $ 128
Income per common share - Basic $ .086 $ .049
Income per common share - Diluted $ .082 $ .045
Average Shares outstanding 2,741,312 2,298,743
Cash dividends per share of common stock $.0425 $ .04
</TABLE>
The accompanying note is an integral part of these consolidated financial
statements.
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<PAGE>
EUFAULA BANCCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended March 31, 1999 and March 31, 1998
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 225 $ 103
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation & amortization 114 80
Provision for loan losses 293 83
Securities gains -0- -0-
(Increase) decrease in interest receivable 9 104
Increase in interest payable 94 20
Other prepaid, deferrals and accruals, net 875 870
-------- --------
Net cash provided by operating activities $ 1,610 $ 1,260
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales & maturities of investment
securities $ 888 $ 1,288
Purchase of investment securities -0- (2,023)
Net decrease in Federal Funds sold (1,600) (1,250)
Net (increase) decrease in bank-owned deposits 74 (189)
Net increase in loans (25,059) (10,968)
Purchase of property & equipment (381) (240)
-------- --------
Net cash provided by investing activities $(26,078) $(13,382)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits $ 19,416 $ 13,324
Net increase (decrease) in Fed Funds purchased 1,075 400
Net increase from issue of new stock -0- -0-
Net increase (decrease) in other borrowings 5,000 (600)
Proceeds from exercise of stock options -0- 52
Dividends paid (111) (84)
-------- --------
Net cash used in financing activities $ 25,380 $ 13,092
Net increase (decrease) in cash and due from banks 912 970
Cash & due from banks, beginning of period 7,920 6,046
Cash & due from banks, end of period $ 8,832 $ 7,016
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest $ 1,923 $ 1,151
</TABLE>
The accompanying note is an integral part of these consolidated financial
statements.
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<PAGE>
EUFAULA BANCCORP, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal
recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods.
The results of operations for the three month period ended March 31,
1999, are not necessarily indicative of the results to be expected for
the full year.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial position and operating
results during the periods included in the accompanying consolidated financial
statements.
The Company's quarterly report contains statements that constitute "forward-
looking statements" within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. The words "believe", "estimate", "expect", "intend", "anticipate" and
similar expressions and variations thereof identify certain of such forward-
looking statements, which speak only as of the dates which they were made. The
Company undertakes no obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events, or
otherwise. Readers are cautioned that any such forward-looking statements are
not guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those indicated in the forward-
looking statements as a result of various factors. Readers are cautioned not to
place undue reliance on these forward-looking statements.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
As of March 31, 1999, Eufaula BancCorp, Inc.'s total assets had increased 71%
over March of 1998, from $134,068,000 to $228,859,000. In the asset category
total investments decreased 3% from $30,081,000 in March of 1998 to $29,206,000
in March of 1999. This decrease in the investment portfolio was the result of
loan growth of the branch operations of Southern Bank of Commerce and First
American Bank. Net loans increased from $88,726,000 in March of 1998 to
$178,686,000 in March of 1999, a 101% increase. The Huntsville branch of
Southern Bank of Commerce was not operational in March of 1998 and in March of
1999 Huntsville had total loans of $46,644,000. In addition, the Florida
subsidiary, First American Bank of Walton County had loans increase from
$30,231,000 to $58,198,000. Goodwill decreased 6% from $1,450,000 to $1,372,000
and no additional goodwill has been placed on the books since the purchase of
First American Bank of Walton County.
Total Deposits increased 67% from $117,933,000 to $196,932,000. Again, the
majority of this increase comes from the branch operations that became fully
functional in the fall of 1997 and spring of 1998. Deposits in Montgomery in
March of 1999 totaled $33,218,000 and in Huntsville $29,929,000. Deposits
increased at First American Bank of Walton County from $40,320,000 in March of
1998, to $63,928,000 in March of 1999.
Total Capital increased 58% from $12,037,000 in March of 1998 to $18,968,000 in
March of 1999. The largest part of the increase in capital was due to a stock
offering, on April 27, 1998, of 492,857 shares of stock, with net proceeds of
$13.02 per share for a total capital injection of $6,417,000. This increase in
capital was needed because of the rapid growth in assets at both the Montgomery
and Huntsville operations and in the First American Bank of Walton County. The
stock issue came out at $14.00 a share and is currently trading in the $11.00
range.
The growth of the branch operations at both Southern Bank of Commerce and First
American Bank of Walton County has been very expensive and has had a substantial
impact on earnings. Total interest income at $4,209,000 is up 66% over interest
income for March 31, 1998, of $2,528,000. Noninterest income is $440,000 up 33%
from the $331,000 in noninterest income for the first three months of 1998.
Total income of $4,649,000 was up 63% over first quarter 1998 total income of
$2,859,000. Total interest expense at $1,923,000 is up 69% over the $1,139,000
for the first three months of 1998. Salaries and benefits at $1,150,000 are up
49% over the $773,000 in salaries and benefits through the first three months of
1998. The increase in interest expense is the result of the deposit gathering
functions of the two operations in Montgomery and Huntsville. The salaries and
benefits are also due to the increased personnel that have been hired in these
operations at both executive and staffing levels. The Huntsville operation,
which opened during the second quarter of 1998, had to be completely staffed
with a cadre of one president, two vice-presidents, and several staff people. As
a result of the tremendous loan growth that Eufaula BancCorp has experienced and
of our commitment to keep a loan loss reserve at a minimum of 1%, our monthly
loan loss contribution is presently $100,000 for the entire holding company.
Therefore, the provision for loan losses for the first three months of 1999, is
up $226,000.00 or 272%.
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<PAGE>
ASSET QUALITY
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Although total loans have increased significantly, the quality of loans remains
good. This is the result of subsidiary banks adhering to strict credit
standards as stated in the loan policy.
During the past year a Credit Administrator has been hired to review all loan
requests over $50,000.00. On a weekly basis, loans over $1,000,000 but less
than $2,000,000 are presented to an officer loan committee made up of the
Presidents of subsidiaries, the Loan Administrator and the Pres./CEO of the
Holding Company. This committee reviews and discusses all aspects of the loan
requests before the loan is approved.
In order to assure the quality of loans, Carrier & Company, a consulting firm,
has been engaged to perform an annual review of all large loans.
Due to rapid loan growth, the Allowance for Bad Debts is below the targeted
1.00% of loans. However, $100,000.00 is presently being expensed to this
account monthly, which should result in reaching the 1% level by June, 1999.
Management feels that the majority of loans are well collateralized, and
foresees no significant loan losses. Agriculture is a major industry in this
market; however agriculture loans are only 2.32% of total loans.
The Board of Directors, as well as Senior Management, is committed to keeping
the quality of loans at a high level.
LIQUIDITY
- ---------
As of March 31, 1999, the liquidity ratio was 21 %. Liquidity is measured by
the ratio of net cash, short-term and marketable securities to net deposits and
short-term liabilities. Management has developed a plan, and is committed to,
increasing the liquidity ratio to 25% by 6-30-99. This will be accomplished by
increasing deposits and/or selling loans. Liquidity is actively monitored on a
daily basis.
CAPITAL
- -------
Both the leverage capital ratio and the risk-based capital ratio are above the
minimum requirements.
YEAR 2000
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Management has consistently committed to ensure the Institution's daily
operations suffer little or no impact from the century date change. The
Institution has applied due diligence throughout the Y2K remediation process,
following the guidelines contained in the series of FFIEC Interagency
Statements.
To date, the Institution, through an established Y2K Committee, has completed
the following major activities in preparation for moving into the testing phase
of the Y2K remediation project:
With the help of a third party consulting firm, a comprehensive Inventory & Risk
Assessment matrix has been developed.
An extensive internal and external awareness campaign has been undertaken. The
campaign includes not only the initial awareness-raising efforts, but continues
with proactive ongoing activities to maintain heightened awareness of Y2K
implications.
Because the Institution has acquired its core systems from a highly regarded
third party, it has relatively little direct control over the renovation
process. However, the Institution contacted the core system vendor and all
other vendors identified in the inventor following the FFIEC guidelines to
assess the status of these vendors' Y2K readiness efforts.
The Institution undertook an aggressive review of its customers, identifying
those it believed could have their business operations affected by the century
date change. These customers have been approached, and the Institution is
engaged in active discussions with them regarding Y2K remediation.
-8-
<PAGE>
Management at both the senior management and board levels understands the
implications of the century date change, and has been actively engaged in
monitoring the progress of the Y2K readiness activities. Senior managers
participate in a Y2K team, with monthly reports to the board.
During the Assessment Phase, the Institution established a high-level plan that
required completing its Y2K test plan by June 30, 1998. This document was
reviewed by the Board on July 14, 1998. Testing of mission critical software was
completed on March 30, 1999.
During the 2nd week of November, 1998, bank staff tested the Data Center in
Ft.Walton Beach, Fl., and found it to be in compliance.
The cost associated with Y2K is anticipated being no more than $50,000.00.
Eufaula BancCorp, Inc.'s Board of Directors has adopted a Contingency Plans
should there be system failures due to this problem.
-9-
<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: 5-4-99 EUFAULA BANCCORP, INC.
------
BY: /s/ Greg Faison
-------------------------------------
Greg Faison, President
BY: /s/ Gloria A. Hagler
-------------------------------------
Gloria A. Hagler, Secretary/Treasurer
-10-
<PAGE>
PART II - OTHER INFORMATION
Item 4. Any matter submitted to the security holders for a vote.
The Annual meeting of the Shareholders of Eufaula BancCorp, Inc., was held
on May 12, 1998. At the meeting, the following was voted on:
1. Greg Faison was elected as a Director to serve for a term of three
years or until his successor has been elected and qualified. 1,734,432 voted for
the election of Mr.Faison. The following continue to serve as Directors of the
Company:
Janis Biggers
Michael C. Dixon
Robert M. Dixon
Thomas Harris
James J. Jaxon, Jr.
Frank McRight
2. The Company's auditors, Mauldin & Jenkins, LLC, were ratified to serve
as the Company's Independent Auditors for 1998.
1,732,232 voted for the ratification
2,200 voted against the ratification
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Loan Composition Summary
Loans over 90 days past due and non accrual loans
Allowance for Loan Losses analysis
Changes in Equity Capital
Calculation of Net Income Per Share
(b) Report on Form 8-K.
NONE
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<PAGE>
3a The composition of loans is summarized as follows:
1999 1998
---------- ---------
Commercial, Financial, $ 27,263 $11,030
Agricultural 1,982 2,904
Real Estate-Construction 37,283 8,554
Real Estate-Mortgage 89,658 50,756
Consumer 23,978 16,359
Other 402 170
TOTAL 180,566 89,773
Unearned Discount (198) (206)
Allowance for loan losses (1,682) (841)
NET LOANS $178,686 $88,726
3c-1 The following is a schedule of non accrual loans and loans past due 90
days and over:
March 31
1999 1998
Past due non accrual Past due nonaccrual
90 days or 90 days or
more more
Real Estate Loans 47 388 90
Installment Loans 5 14 11
Commercial Loans 111
3c-2 Non accrual loans were not material to the total amount of loans
outstanding.
4a Changes in the allowance for loan losses for March 31, 1999 and 1998 were
as follows:
1999 1998
Balance, beginning of year 1,389 762
Provision charged to
operations 309 83
Loans charged off (21) (9)
Rounding (1) (1)
Recoveries 6 6
Balance 9-30-98 1,682 841
1999 1998
Charge offs Recoveries Charge offs Recoveries
Installment Loans 21 6 9 6
Credit Cards & Related
Plans
Commercial and All Other
Loans
TOTALS 21 6 9 6
-12-
<PAGE>
Changes in Equity Capital
Bal. 12-31-98 $18,943
Net Income 225
Less Dividends Paid 111
Change in net unrealized holding gains
(losses) on available-for-sale securities (89)
Equity at March 31, 1999 18,968
-13-
<PAGE>
Calculation of Net Income Per Share for Dilution
- ------------------------------------------------
FOR 3 MONTHS ENDED 3-31-99 AND 3-31-98
<TABLE>
<CAPTION>
3-31-99 3-31-98
<S> <C> <C> <C> <C>
Options outstanding at $2.54 per share N/A -- 12,000 30,480
Options outstanding at $4.00 per share 192,000 768,000 210,000 840,000
Options outstanding at $9.00 per share 45,000 405,000 45,000 405,000
Options outstanding at $9.67 per share 30,000 290,100 30,000 290,100
Options outstanding at $13.50 per share 4,000 54,000 N/A --
Shares assumed to be exercised 271,000 1,517,100 297,000 1,565,580
Divide by weighted average sales price
of stock during the period $ 10.08 $ 15.94
Subtract shares that could be repurchased (150,461) 150,506 (98,217) 98,217
Additional shares outstanding for diluted EPS 120,539 198,783
Average shares currently outstanding 2,620,773 2,099,960
Total average shares outstanding - Diluted 2,741,312 2,298,743
Diluted Earnings Per share $ . 0821 $ .0448
</TABLE>
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 8,778
<INT-BEARING-DEPOSITS> 54
<FED-FUNDS-SOLD> 1,600
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 20,579
<INVESTMENTS-CARRYING> 6,973
<INVESTMENTS-MARKET> 0
<LOANS> 180,368
<ALLOWANCE> 1,682
<TOTAL-ASSETS> 178,686
<DEPOSITS> 196,932
<SHORT-TERM> 0
<LIABILITIES-OTHER> 12,959
<LONG-TERM> 0
0
0
<COMMON> 2,621
<OTHER-SE> 16,347
<TOTAL-LIABILITIES-AND-EQUITY> 228,859
<INTEREST-LOAN> 3,785
<INTEREST-INVEST> 423
<INTEREST-OTHER> 1
<INTEREST-TOTAL> 4,209
<INTEREST-DEPOSIT> 1,855
<INTEREST-EXPENSE> 68
<INTEREST-INCOME-NET> 2,286
<LOAN-LOSSES> 309
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,083
<INCOME-PRETAX> 334
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 225
<EPS-PRIMARY> .086
<EPS-DILUTED> .082
<YIELD-ACTUAL> 8.02
<LOANS-NON> 513
<LOANS-PAST> 52
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,389
<CHARGE-OFFS> 21
<RECOVERIES> 6
<ALLOWANCE-CLOSE> 1,682
<ALLOWANCE-DOMESTIC> 1,682
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
