<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 June 30, 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, I
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 63-0989868
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
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 June 30, 1999 - 2,620,773
---------
<PAGE>
EUFAULA BANCCORP, INC. AND SUBSIDIARIES
INDEX
Part I Page No.
Item 1 Financial Information
Consolidated Balance Sheet--June 30, 1999 3
Consolidated Statements of Income & Comprehensive Income
Three and Six Months ending June 30, 199 and 1998. 4 & 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998. 6
Note to Consolidated Financial Statements 7
Item 2 Management's discussion and analysis of financial
condition and results of operations. Three and six
months ending June 30, 1999 and 1998. 8 - 10
Signature Page 10
Part II Other Information
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 13 - 14
(b) Report of Form 8-K NONE
2
<PAGE>
EUFAULA BANCCORP, INC. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and Due From Banks $ 8,817
Interest Bearing Deposits In Banks 55
Federal Funds Sold 2,050
Securities:
Held To Maturity 7,308
Available For Sale 19,832
Loans 197,824
Less Allowance For Loan and Lease Losses 2,038
--------
195,786
Premises and Equipment
Intangible Assets 6,376
Other Assets 1,352
3,860
TOTAL ASSETS --------
245,436
LIABILITIES ========
Deposits:
Non-Interest Bearing Deposits
Savings and Interest Bearing Demand 26,974
Time Deposits 67,399
122,608
Total Deposits --------
Federal Funds Purchased 216,981
Other Borrowings
Other Liabilities 6,225
1,000
Total Liabilities 2,162
--------
CAPITAL ACCOUNTS 226,368
Common Stock, Par Value $1.00; 5,000,000
Shares authorized; 2,620,773 issued and outstanding
Surplus 2,621
Retained Earnings 6,026
Accumulated Other Comprehensive Income 10,656
(235)
Total Equity --------
TOTAL LIABILITIES AND CAPITAL ACCOUNTS 19,068
$245,436
========
</TABLE>
3
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION> 1999 1998
---- ----
<S> <C> <C>
Interest Income
Interest & fees on loans $ 4,431 $ 2,409
Interest on Federal Funds Sold 74 48
Interest on interest-bearing deposits 2 9
Interest on taxable securities 326 296
Interest on not-taxable securities 97 112
--------- ----------
4,930 2,874
Interest Expense
Interests on deposits 2,167 1,244
Interest on Federal Funds Purchased/
Other Borrowed Funds 115 45
Net interest income --------- ----------
2,648 1,585
Provision for loan losses 366 192
Net interest income after provision for loan losses --------- ----------
2,282 1,393
Other Operating Income
Service Charges on deposit accounts 259 192
Security Gains 0 0
Other Income 225 226
--------- ----------
484 418
Other operating expenses
Salaries & Other Employee Benefits 1,166 848
Occupancy & Equipment expenses 271 228
Other operating expense 651 493
--------- ---------
2,088 1,569
Income before taxes
Applicable Income Taxes 678 242
228 78
Net Income after Taxes 450 164
========= =========
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period (238) 0
Less: reclassification adjustment for gains included in
net income 0 0
---------- ----------
Comprehensive Income 212 164
Income per common share Basic .17 .06
Income per common share Diluted .16 .06
Average Shares outstanding 2,765,126 2,620,773
Cash dividends per share of common stock .0425 .04
</TABLE>
The accompanying note is an integral part of these consolidated financial
statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION> 1999 1998
---- ----
<S> <C> <C>
Interest Income
Interest & fees on loans $ 8,216 $ 4,482
Interest on Federal Funds Sold 74 96
Interest on interest-bearing deposits 3 18
Interest on taxable securities 651 582
Interest on not-taxable securities 195 224
--------- ----------
9,139 5,402
Interest Expense
Interests on deposits 4,022 2,331
Interest on Federal Funds Purchased/
Other Borrowed Funds 183 97
Net interest income 4,934 2,974
Provision for loan losses 675 275
--------- ----------
Net interest income after provision for loan losses 4,259 2,699
Other Operating Income
Service Charges on deposit accounts 483 372
Security Gains 0 0
Other Income 441 377
--------- ----------
924 749
Other operating expenses
Salaries & Other Employee Benefits 2,316 1,621
Occupancy & Equipment expenses 521 430
Other operating expense 1,334 1,021
--------- ----------
4,171 3,072
Income before taxes 1,012 376
Applicable Income Taxes 337 109
--------- ---------
Net Income after Taxes 675 267
========= =========
Other comprehensive income, net of tax:
Unrealized holding gains (losses) arising during period (327) 24
Less: reclassification adjustment for gains included in
net income 0 0
--------- ----------
Comprehensive Income 348 291
Income per common share - Basic .257 .10
Income per common share - Diluted .082 .10
Average Shares outstanding 2,620,773 2,741,312
Cash dividends per share of common stock .085 .04
</TABLE>
The accompanying note is an integral part of these consolidated financial
statements.
5
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Dollars in Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
---- ----
<S> <C> <C>
Net Income
Adjustments to reconcile net income to net cash provided $ 348 $ 267
by (used in) operating activities: 160 163
Depreciation & amortization 649 275
Provision for loan losses 0 0
Securities gains (193) 421
(Increase) decrease in interest receivable 218 55
Increase in interest payable 1,790 (446)
-------- --------
Other prepaid, deferrals and accruals, net
Net cash provided by operating activities 2,972 735
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sales & maturities of
investment securities 1,907 3,989
Purchase of investment securities (1,325) (6,523)
Net decrease in Federal Funds sold (2,050) (750)
Net (increase) decrease in bank-owned deposits 45 (1,967)
Net increase in loans (42,515) (34,826)
Purchase of property & equipment (505) (774)
-------- --------
Net cash provided by investing activities (44,443) (40,851)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 40,541 32,433
Net increase (decrease) in Fed Funds purchased 3,350 2,725
Net increase from issue of new stock 0 6,417
Net increase (decrease) in other borrowings (1,200) 0
Proceeds from exercise of stock options 0 237
Dividends paid (223) (189)
-------- ---------
Net cash used in financing activities 42,468 41,623
Net increase (decrease) in cash and due
from banks 997 1,507
Cash & due from banks, beginning of period 7,820 6,046
Cash & due from banks, end of period 8,817 7,553
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during period for:
Interest 4,222 2,428
</TABLE>
The accompanying note is an integral part of these consolidated financial
statements.
6
<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 and six month period ended
June 30, 1999, are not necessarily indicative of the results to be
expected for the full year.
7
<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.
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- ---------------------------------------------
As of June 30, 1999, Eufaula BancCorp, Inc.'s total assets had increased 51%
over June of 1998, from $163,019,000 to $245,436,000. In the asset category
total investments decreased 3% from $28,015,000 in June of 1998 to $27,140,000
in June 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 $112,392,000 in June of 1998 to
$195,786,000 in June of 1999, a 74% increase. The Huntsville branch of Southern
Bank of Commerce became operational in May of 1998. In June, 1998, total loans
in Huntsville were $14,480,000 compared to $48,869,000 in June of 1999. In
addition, the Florida subsidiary, First American Bank of Walton County had loans
increase from $36,651,000 to $70,275,000. Goodwill decreased 6% from $1,430,000
to $1,352,000, and no additional goodwill has been placed on the books since the
purchase of First American Bank of Walton County.
Total Deposits increased 58% from $137,041,000 to $216,981,000. 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
June of 1999 totaled $35,400,000 and in Huntsville $38,203,000. Deposits
increased at First American Bank of Walton County from $49,807,000 in June of
1998, to $71,625,000 in June of 1999.
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 $9,139,000 is up 69% over interest
income for June 30, 1998, of $5,402,000. Non-interest income is $924,000 up 23%
from the $749,000 in non-interest income for the first six months of 1998.
Total income of $10,063,000 was up 64% over second quarter 1998 total income of
$6,151,000. Total interest expense at $4,205,000 is up 73% over the $2,428,000
for the first six months of 1998. Salaries and benefits at $2,316,000 are up
43% over the $1,621,000 in salaries and benefits through the first six 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 $675,000 for the entire holding
company. Therefore, the provision for loan losses for the first six months of
1999, is up $400,000.00 or 245%.
ASSET QUALITY
- -------------
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.
8
<PAGE>
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.
Allowance for Bad Debts is now at 1.03% of total loans. This is a result of
large monthly expense allowances and management's commitment to reach this
target.
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 1.73% 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
- ---------
Liquidity is measured by the ratio of net cash, short-term and marketable
securities to net deposits and short-term liabilities. Liquidity is monitored on
a weekly basis. At the end of June 1999, the Liquidity Ratio for Eufaula
BancCorp was 24%. This was accomplished by increasing deposits and selling
loans.
CAPITAL
- -------
Both the leverage capital ratio and the risk-based capital ratio are above the
minimum requirements.
YEAR 2000
- ---------
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.
9
<PAGE>
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.
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.
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: August 12, 1999 EUFAULA BANCCORP, INC.
----------------------
BY: /s/ John E. Burns
---------------------------------
John E. Burns
Chief Financial Officer
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 19, 1999. At the meeting, the following was voted on:
1. Michael C. Dixon, Robert M. Dixon and James J. Jaxon, Jr. were
elected as Directors to serve for a term of three years or until
their successors have been elected and qualified. 2,029,877 voted for
the election of these directors. The following continue to serve as
Directors of the Company:
Janis Biggers
Greg Faison
Thomas Harris
Frank McRight
2. The Company's auditors, Mauldin & Jenkins, LLC, were ratified to
serve as the Company's Independent Auditors for 1999.
2,026,829 voted for the ratification
7,159 voted against the ratification
3. The Eufaula BancCorp, Inc. 1999 Stock Option Plan was ratified and
approved.
1,154,634 voted for the Option Plan
879,354 voted against the Option Plan
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
11
<PAGE>
3a THE COMPOSITION OF LOANS IS SUMMARIZED AS FOLLOWS:
1999 1998
---- ----
Commercial, Financial, $ 30,723 $ 13,044
Agricultural 3,429 3,281
Real Estate-Construction 43,441 15,587
Real Estate-Mortgage 95,485 61,779
Consumer 24,389 19,683
Other 560 176
TOTAL 198,027 113,550
Unearned Discount (203) (200)
Allowance for loan losses (2038) (958)
NET LOANS $195,786 $112,392
3c-1 THE FOLLOWING IS A SCHEDULE OF NON ACCRUAL LOANS AND LOANS PAST DUE 90
DAYS AND OVER:
June 30, 1999 June 30, 1998
---------------------------- ----------------------------
Past due Past due
90 days or more Non-accrual 90 days or more Non-accrual
--------------- ----------- --------------- -----------
Real Estate Loans 205 0 0 51
Installment Loans 3 14 13 8
Commercial Loans 16 0 0 0
3c-2 NON ACCRUAL LOANS WERE NOT MATERIAL TO THE TOTAL AMOUNT OF LOANS
OUTSTANDING.
4a CHANGES IN THE ALLOWANCE FOR LOAN LOSSES FOR JUNE 30, 1999 AND 1998
WERE AS FOLLOWS:
1999 1998
---- ----
Balance, beginning of year 1,389 762
Provision charged to operations 675 275
Loans charged off (39) (89)
Recoveries 13 10
Balance 2,038 958
12
<PAGE>
1999 1998
---- ----
Charge offs Recoveries Charge offs Recoveries
----------- ---------- ----------- ----------
Installment Loans 38 13 89 10
Credit Cards & Related Plans 1
Commercial and All Other Loans
TOTALS 39 13 89 10
CHANGES IN EQUITY CAPITAL
Balance at 12-31-98 $ 18,943
Net Income 675
Less Dividends Paid 223
Change in net unrealized holding gains
(losses) on available-for-sale securities (327)
Equity at June 30, 1999 19,068
CALCULATION OF NET INCOME PER SHARE FOR DILUTION
FOR 6 MONTHS ENDED 6-30-99 AND 6-30-98
<TABLE>
<CAPTION>
6-30-99 6-30-98
------- -------
<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
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
6-30-99 6-30-98
------- -------
<S> <C> <C> <C> <C>
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>
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JAN-30-1999
<CASH> 8,817
<INT-BEARING-DEPOSITS> 55
<FED-FUNDS-SOLD> 2,050
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 19,832
<INVESTMENTS-CARRYING> 7,308
<INVESTMENTS-MARKET> 0
<LOANS> 197,824
<ALLOWANCE> 2,038
<TOTAL-ASSETS> 245,436
<DEPOSITS> 216,981
<SHORT-TERM> 7,225
<LIABILITIES-OTHER> 2,162
<LONG-TERM> 0
0
0
<COMMON> 2,621
<OTHER-SE> 16,447
<TOTAL-LIABILITIES-AND-EQUITY> 245,436
<INTEREST-LOAN> 8,216
<INTEREST-INVEST> 523
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 9,139
<INTEREST-DEPOSIT> 4,022
<INTEREST-EXPENSE> 4,205
<INTEREST-INCOME-NET> 4,934
<LOAN-LOSSES> 675
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,171
<INCOME-PRETAX> 1,012
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 675
<EPS-BASIC> .257
<EPS-DILUTED> .082
<YIELD-ACTUAL> 0
<LOANS-NON> 14
<LOANS-PAST> 224
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,389
<CHARGE-OFFS> (39)
<RECOVERIES> 13
<ALLOWANCE-CLOSE> 2,038
<ALLOWANCE-DOMESTIC> 2,038
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
