<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM IO-QSB
X Quarterly report under Section 13 of 15 (d) of the Securities Exchange
- - Act of 1934 for the quarterly period ended September 30, 1996.
Transition report under Section 13 or 15 (d) of the Exchange Act for
- - the transition period from to .
--------- --------
COMMISSION FILE NUMBER 0-18827
FAYETTE COUNTY BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
<TABLE>
<CAPTION>
Georgia 58-1835725
------- ----------
<S> <C>
(State or other Jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
300 Peachtree Parkway South, Peachtree City, Georgia 30269
----------------------------------------------------------
(Address of principal executive offices)
Issuer's telephone number, including area codes (770)631-2265
-------------------------------------------------------------
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act during the preceding 12
months, and (2) has been subject to such filing requirements, for the past 90
days.
Yes X No
---- ----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
<TABLE>
<CAPTION>
Class Outstanding at November 12, 1996
----------------------------- --------------------------------
<S> <C>
Common Stock, $1.00 Par Value 643,062 shares
</TABLE>
Transitional Small Business Disclosure Format:
Yes No X
---- ----
<PAGE> 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements are provided for Fayette County
Bancshares, Inc. and subsidiary:
A. Consolidated Balance Sheets as of September 30, 1996 and
December 31, 1995.
B. Consolidated Statements of Operations for the three and nine
month periods ended September 30, 1996 and 1995.
C. Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 1996 and 1995.
D. Notes to Consolidated Financial Statements.
2
<PAGE> 3
FAYETTE COUNTY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Balance Sheets
September 30, 1996, and December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------------------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 4,090,330 $ 2,972,249
Federal funds sold 1,800,000 2,880,000
Interest-bearing deposits in other financial institutions 195,000 195,000
Investment securities held to maturity (market value
of $1,743,185 and $1,861,509, respectively) 1,659,305 1,858,720
Investment securities available for sale 13,098,454 10,891,420
Other investments 273,200 251,000
Loans, net of deferred loan fees 78,406,355 67,771,350
Less: Allowance for loan losses 1,017,553 918,036
-------------- --------------
Loans, net 77,388,802 66,853,314
Premises and equipment, net 3,395,610 3,266,404
Other real estate 399,199 68,931
Accrued interest receivable 737,534 700,771
Intangible assets, net of accumulated amortization of
$514,762 and $441,369, respectively 495,238 568,631
Other assets 423,665 426,163
-------------- --------------
TOTAL ASSETS $ 103,956,337 $ 90,932,603
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Non-interest bearing demand $ 17,173,325 $ 13,650,114
Interest-bearing demand and money market 22,161,025 21,964,114
Savings 6,427,850 5,333,685
Time deposits of $100,000 or more 15,070,166 12,301,137
Other time deposits 33,252,802 28,187,826
-------------- --------------
TOTAL DEPOSITS 94,085,168 81,436,876
Federal funds purchased and securities sold under agreements
to repurchase -0- 1,161
Accrued interest payable 755,337 1,169,413
Other liabilities 391,427 189,550
-------------- --------------
TOTAL LIABILITIES 95,231,932 82,797,000
-------------- --------------
STOCKHOLDERS' EQUITY
Common stock - $1.00 par value: 5,000,000 shares
authorized, 643,062 and 612,440 issued and outstanding 643,062 612,440
Surplus 5,561,016 5,561,016
Retained earnings 2,687,920 2,058,615
Market valuation reserve on investment securities
available for sale (167,593) (96,468)
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 8,724,405 8,135,603
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $ 103,956,337 $ 90,932,603
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
FAYETTE COUNTY BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the Three and Nine Month Periods Ended September 30, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---------------------------------------------------------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest & fees on loans $2,077,631 $1,361,980 $6,004,242 $4,208,437
Interest on taxable securities 266,087 232,535 649,603 641,387
Interest on tax exempt securities 19,418 21,399 59,630 64,308
Interest on federal funds sold 77,106 55,439 163,167 183,848
Interest on deposits with other banks 2,813 3,659 8,152 9,348
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME 2,443,055 1,675,012 6,884,794 5,107,328
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits:
Demand 201,901 134,414 526,307 459,303
Savings 36,783 30,726 108,586 92,904
Time 729,564 473,138 2,102,253 1,373,703
Interest on federal funds purchased &
securities sold under agreement to
repurchase 3,600 3,036 8,767 12,147
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 971,848 641,314 2,745,913 1,938,057
---------- ---------- ---------- ----------
NET INTEREST INCOME 1,471,207 1,033,698 4,138,881 3,169,271
PROVISION FOR LOAN LOSSES 270,000 70,000 560,000 195,000
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 1,201,207 963,698 3,578,881 2,974,271
---------- ---------- ---------- ----------
OTHER INCOME
Service charges and fees 128,031 117,181 360,204 296,058
Securities gains (losses), net 810 6 (140) 21
Gains on sale of SBA loans 71,825 38,678 71,825 63,678
Other 22,229 (3,878) 60,824 30,551
---------- ---------- ---------- ----------
TOTAL OTHER INCOME 222,895 151,987 492,713 390,308
---------- ---------- ---------- ----------
OTHER EXPENSE
Salaries and employee benefits 394,432 335,430 1,190,792 997,115
Occupancy expense 118,488 100,363 334,056 313,276
Other (Note B) 476,872 295,343 1,145,588 897,065
---------- ---------- ---------- ----------
TOTAL OTHER EXPENSE 989,792 731,136 2,670,436 2,207,456
---------- ---------- ---------- ----------
INCOME BEFORE INCOME
TAX EXPENSE 434,310 384,549 1,401,158 1,157,123
INCOME TAX EXPENSE 171,600 167,100 557,500 463,600
---------- ---------- ---------- ----------
NET INCOME $ 262,710 $ 217,449 $ 843,658 $ 693,523
=========== ========= ============ ==========
NET INCOME PER SHARE
(NOTE C) $ .39 $ .32 $ 1.25 $ 1.03
=========== ========= ============ ==========
WEIGHTED AVG NUMBER
OF SHARES OUTSTANDING 676,714 675,031 676,714 673,013
=========== ========= ============ ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
FAYETTE COUNTY BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 843,658 $ 693,523
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization of intangible 73,393 73,393
Depreciation, amortization and accretion 148,719 109,912
Provision for loan losses 60,000 195,000
Securities gains, net (140) (21)
Gains on sale of SBA Loans (71,825) (63,678)
Change in:
(Increase) decrease in interest receivable (36,763) (65,791)
Increase (Decrease) in interest payable (414,076) 578,560
(Increase) decrease in other assets 39,139 6,224
Increase (Decrease) in other liabilities 201,877 199,567
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 1,343,982 1,726,689
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in interest-bearing deposits
with other banks -0- 199,000
Purchases of investment securities available for sale (13,349,074) (3,702,979)
Purchases of other investments (22,200) -0-
Proceeds from sales of investment securities
available for sale 7,293,086 27,036
Proceeds from maturities of investment securities 200,000 5,190,000
Proceeds from maturities of investment securities
available for sale 3,750,000 -0-
Proceeds from sale of SBA loans 790,075 1,079,303
Proceeds from the sale of loans 3,767,646 -0-
Net (increase) decrease in loans (15,980,582) (21,042,667)
Purchase of bank premises and equipment (287,182) (96,981)
Sale of other real estate 68,931 424,296
----------- -----------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (13,769,300) (17,922,992)
=========== ===========
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in Federal Funds purchased
and securities sold under agreements to repurchase (1,161) (1,036,082)
Net increase (decrease) in demand and savings
deposits 4,814,287 9,582,571
Net increase (decrease) in time deposits 7,834,005 15,993,437
Proceeds from exercise of stock options -0- 60,000
Cash Dividend Payment (183,732) (152,360)
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 12,463,399 24,447,566
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 38,081 8,251,263
=========== ===========
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,852,249 2,774,407
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,890,330 $11,025,670
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID:
Interest $ 3,159,989 $ 1,378,151
=========== ===========
Income Taxes $ 628,000 $ 404,650
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH FINANCING AND
INVESTING ACTIVITIES:
Acquisition of real estate in settlement of loans $ 399,199 $ -0- -
=========== ===========
</TABLE>
5
<PAGE> 6
FAYETTE COUNTY BANCSHARES, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
NOTE A
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information, and with the instructions to Form 1O-QSB and Item 310 (b)
of Regulation S-B of the Securities and Exchange Commission. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine month period ended September 30, 1996, are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996. For further information refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
NEW AND PENDING ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of. The Company is
required to implement SFAS 121 by December 31, 1996. The provisions of SFAS
121 will require the Company to review long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. The adoption is not expected to have a
significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122). "Mortgage Servicing Rights," as
amendment to SFAS 65. The Company is required to implement SFAS 122 by December
31, 1996. The provisions of SFAS 122 eliminate the accounting distinction
between rights to service mortgage loans that are acquired through loan
origination and those acquired through purchase. The adoption is not expected to
have a significant impact on the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 (SFAS 123) in 1996. SFAS 123 establishes a method
of accounting for stock compensation plans based on fair value. Companies are
permitted to continue to use the existing method of accounting but are required
to disclose pro forma net income and earnings per share as if SFAS 123 had been
used to measure compensation cost. The adoption of SFAS 123 is not expected to
have a significant impact on the Company.
The Financial Accounting Standards Board has issued Statements of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for Transfers and Servicing
of Financial Asssets and Extinguishments of Liabilities." The Company is
required to implement SFAS 125 in 1997. SFAS 125 establishes standards for
distinguishing transfers of financial assets that are sales from transfers that
are secured borrowings. The adoption is not expected to have a significant
impact on the Company.
NOTE B
SUPPLEMENTAL FINANCIAL DATA
Components of other operating expenses of 1% of total interest and other income
for the periods ended September 30, 1996 and 1995 are as follows:
<TABLE>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Printing and supplies $ - $24,718 $86,822 $84,346
Professional fees - - - 110,931
Data Processing fees 97,909 37,143 165,159 96,365
FDIC assessment 185,443 - 222,017 91,257
Directors Fees - - 77,600 59,900
</TABLE>
6
<PAGE> 7
NOTE C
EARNINGS PER SHARE
Earnings per share have been computed on the weighted average number of common
shares outstanding during the period.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
Period ended September 30, 1996
Fayette County Bancshares, Inc. (the "Company"), reported net income of
$262,710 for the third quarter of 1996, a 20.81% increase as compared to
$217,449 for the same period in 1995. Net income for the nine month period
ended September 30, 1996, was $843,658, an increase of $150,135, or 21.64% from
the same period in 1995. Net earnings per share for the third quarter of 1996
and 1995 were $.41 and $.34, respectively. The increase in net income is
primarily attributable to the increase in net interest income and fees from
loans, net of the increase in provision for loan losses and other expenses.
Total assets increased $13,023,734 to $103,956,337 between December 31, 1995
and September 30, 1996, an increase of 14.32%.
The return on average assets for the Company was 1.19% for the nine month
period ended September 30, 1996, as compared to 1.35% for the same period last
year. The return on average shareholders' equity increased for the first nine
months of 1996 to 14.57 % as compared to 14.40% for the first nine months of
1995. Book value at September 30, 1996, was $13.57, an increase of $.29 from
December, 31, 1995.
Deposits grew $12,648,292 from December 31, 1995, an increase of 15.53%, to
$94,085,168. Noninterest bearing demand deposits accounted for $3,523,211 of
this increase, or 27.85%. Time deposits over $100,000 increased $2,769,029 to
$15,070,166, at September 30, 1996. Deposit growth is attributed to Fayette
County Bank, (the "Bank"), increasing its rates on time deposits in order to
fund loan demand. The Statement of Cash Flows shows a
net increase in loans of $15,980,582 for the nine month period ending September
30, 1996. The loan loss provision increased to $560,000 or 187% from $195,000
for the nine month period ended September 30, 1996 as compared to to the same
period ending September 30, 1995. This increase was due to the increase in
charge offs which totalled $467,387 for the nine month period ending September
30, 1996, as well as the increase in the loan portfolio. The Bank charged-off
one commercial loan totalling $325,000 during the nine period ended September
30, 1996. In order to fund liquidity needs and reduce credit risk exposure
the Bank sold a home improvement portfolio which totalled $3,767,646 during
the third quarter of 1996. The Bank also sold one SBA loan during the third
quarter of 1996 totalling $790,075 of which $71,825 was recognized as a gain.
Both of these sales generated cash that was used for funding other loan demand
as well as purchases of investment securities.
Loan growth was funded by the increase in deposits and a reduction of Fed Funds
sold, increase in loan loss provision and charge offs, which decreased from
$2,880,000 at December 31, 1995 to $1,800,000 at September 30, 1996.
Investment securities available-for-sale increased $2,207,034 during the first
nine months of 1996. The Statement of Cash Flows shows the Bank had
$11,043,086 in available-for-sale securities to be sold or mature during the
first nine months of 1996, while the Bank purchased $13,349,074 of
available-for-sale securities. The Bank also had one held-to-maturity security
to mature during the second quarter of 1996 in the amount of $200,000.
An increase in the volume of earning assets, resulted in an increase in the
Company's net interest income for the first nine months of 1996 as compared to
the first nine months of 1995. Net interest income for the nine month period
ended September 30, 1996, increased 30.59% to $4,138,881, as compared to
$3,169,271 for the same period in 1995. Net interest income for the three
month period ended September 30, 1996 was $1,471,207, up $437,509 or 42.32%
from the same period ended 1995. The increase in net interest income, due to
the increase in earning assets, was offset partially by a decline in the net
interest margin. The net interest margin for the first nine months of 1996
declined only slightly to 6.09%, as compared to 6.11% for the same nine month
period in 1995.
Other income increased to $492,713, or 26.23% from $390,308 for the nine month
periods ended September 30, 1996 and 1995, respectively. For the three month
period ending September 30, 1996, other income increased $70,908 or 46.65% to
$222,895 from $151,987 for the same period ended September 30, 1995. This is
due mainly to the sale of an SBA loan in the third quarter of 1996, in which
the Bank recognized a $71,825 gain. Service charges on deposit accounts
increased to $128,031, up $10,850 or 9.26% from $117,181 during the third
quarter of 1996, as compared to the same period of 1995. This is primarily
attributed to the increase in new accounts during
7
<PAGE> 8
this period. Other miscellaneous income increased to $60,824, compared to
$30,551, for the nine month periods ended September 30, 1996 and 1995,
respectively.
Other expenses increased $462,980 to $2,670,436, from $2,207,456, for the nine
month periods ended September 30, 1996 and 1995, respectively. On September
30, 1996, President Clinton signed a bill which assessed the financial
institutions with SAIF (Savings Association Insurance Fund) deposits at a one
time charge equal to $.675 per $100 on those deposits. In June of 1991 the
Bank purchased approximately $25 million in SAIF deposits from Anchor Savings
Bank of Fayetteville. This one time assessment amount to the bank during the
third quarter of 1996 was $167,157 which accounted for 36.10% of the $462,980
increase in other expenses. Salaries and employee benefits accounted for an
additional $193,677 of this increase. Management attributes this increase in
salaries to the addition of two senior lending officers and support staff
brought on during the second quarter of 1995.
Asset Quality
Nonperforming assets (nonaccrual and restructured loans and real estate
acquired through foreclosure (OREO) declined to .90% of total loans and
OREO at September 30, 1996, compared to 1.64 % at December 31, 1995. This
decline is primarily attributable to increases in loans.
<TABLE>
<CAPTION>
Nonperforming Assets
-----------------------------
September 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Loans on nonaccrual $311,038 $118,130
Other real estate owned 399,199 68,931
Restructured/Impaired loans -0- 912,199
Total non-performing assets $710,237 $1,099,260
Loans ninety days past due $446,166 $ 19,552
Total nonperforming assets as a percentage of total .90% 1.64%
loans and other real estate
Loans ninety days past due as a percentage of total loans .56% 0.03%
</TABLE>
The allowance for loan losses at September 30, 1996, increased $99,517 to
$1,017,553 from December 31, 1995. The allowance at September 30, 1996,
represented 1.30% of total loans compared to 1.35% at December 31, 1995. The
allowance at September 30, 1996 represented 327.14% of nonperforming loans
(nonaccrual and restructured) at September 30, 1996, compared to 89.10% of
non-performing loans at December 31, 1995.
Analysis of the Allowance for Loan Losses at
September 30, 1996
<TABLE>
<CAPTION>
<S> <C>
Allowance for loan losses at December 31, 1995 $ 918,036
----------
Charge offs:
Commercial 343,099
Real Estate 10,143
Installment 20,974
Credit Card Related 93,171
----------
Total 467,387
Recoveries:
Commercial 3,585
Real Estate -0-
Installment 3,319
Credit card related -0-
----------
Total 6,904
Net Charge-offs 460,483
----------
Provision charged to income 560,000
----------
Allowance for loan losses at September 30, 1996 $1,017,553
==========
</TABLE>
8
<PAGE> 9
As discussed in the Results of Operations, the Bank charged-off one commercial
loan totalling $325,000 during the nine month period ending September 30, 1996.
This loan was categorized as restructured at the period ending December 31,
1995. The loan portfolio is periodically reviewed to evaluate the outstanding
loans and to measure both the performance of the portfolio and the adequacy of
the allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses, and internal credit ratings. Management's judgment as
to the adequacy of the allowance is based upon a number of assumptions about
future events which it believes to be reasonable, but which may or may not be
reasonable. However, because of the inherent uncertainty of assumptions made
during the evaluation process, there can be no assurance that loan losses in
future periods will not exceed the allowance for loan losses or that additional
allocations to the allowance will not be required.
LIQUIDITY AND CAPITAL ADEQUACY
The Bank's net loan to deposit ratio increased only slightly at September 30,
1996, to 82.25 %, as compared to 82.10 % at December 31, 1995. This change is
a result of the Bank maintaining a level of loan growth constant with the level
of deposit growth. During the first nine months of 1996, deposits grew by
almost $13 million while gross loans increased by approximately $11million.
The Bank's liquid assets as a percentage of total deposits were 6.26% at
September 30, 1996, compared to 7.18% at December 31, 1995. Management also
analyzes the level of off-balance sheet commitments such as unfunded loan
equivalents, loan repayments, maturity of investment securities, liquid
investments, and available fund lines in an attempt to minimize the possibility
that a potential shortfall will exist. Based on this analysis, management
believes that the Company has adequate liquidity to meet short-term operating
requirements. However, no assurances can be given in this regard.
Shareholders equity increased 7.24% from December 31, 1995, to $8,724,405 at
September 30, 1996. The capital of the Company and the Bank exceeded all
prescribed regulatory capital guidelines. Regulations require that the most
highly rated banks maintain a minimum Tier 1 leverage ratio of 3% plus an
additional cushion of at least 1 to 2 percentage points. Tier 1 capital
consists of common shareholders' equity, less certain intangibles. The Bank's
Tier 1 leverage ratio was 8.21% at September 30, 1996, compared to 8.29% at
December 31, 1995, a decline which was due to growth in the Bank's assets.
Regulations require that the Bank maintain a minimum total risk weighted
capital ratio of 8%, with one-half of this amount, or 4%, made up of Tier 1
capital. Risk-weighted assets consist of balance sheet assets adjusted by risk
category, and off-balance sheet asset equivalents similarly adjusted. At
September 30, 30, 1996, the Bank had a risk-weighted total capital ratio of
11.02%, compared to 11.83% at December 31, 1995, and a Tier I risk-weighted
capital ratio of 9.83%, compared to 10.58% at December 31, 1995.
INVESTMENT SECURITIES
At September 30, 1996, the Bank had $13,098,454 in investment securities
available-for-sale and $1,659,305 in
securities held-to-maturity. The net unrealized loss on available-for-sale
securities, net of deferred income taxes, was $167,593 on September 30, 1996.
Investment securities comprised approximately 14 % of the Bank's assets on
September 30, 1996 and December 31, 1995. The Bank invests primarily in
obligations of the United States or obligations guaranteed as to principal and
interest by the United States and other taxable and tax exempt securities. The
Bank has included in its investment portfolio instruments described as a
derivative, primarily, structured note derivatives. Structured notes are debt
securities whose cash flow characteristics depend on one or more indexes.
Structured notes carry high credit ratings and are issued as floating-rate
instruments. In a rising interest rate environment, the market value of these
securities can decrease due to the fact that the embedded options, puts, calls,
etc., become evident. There can be no assurance that as interest rates change
in the future the amount of unrealized loss will not increase, but if these
securities are held until they mature and are repaid in accordance with their
terms, these principal losses will not be realized. The Bank also engages in
Federal Funds transactions with its principal correspondent banks and primarily
acts as a net seller of such funds. The sale of Federal Funds amounts to a
short-term loan from the Bank to another Bank.
9
<PAGE> 10
PART 11. OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company is a party
or of which its property
is the subject.
Item 2. Changes in Securities
Not Applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
quarter ended September 30, 1996.
Item 5, Other information
Not applicable.
<TABLE>
<S> <C>
Item 6. Exhibits and Report on Form 8-K
- ---------------------------------------
a). Exhibits.
Exhibit
Number Description
------ -----------
3.1* Articles of Incorporation
3.2* Bylaws
10.1** Settlement Agreement and Release with Fayette County Bancshares, Inc. and
Terry L. Miller as of October 21, 1994.
10.2** Fayette County Bancshares, Inc. Stock Option Plan.
27 Financial Data Schedule (for SEC use only)
</TABLE>
*Items 3.1 and 3.2 were previously filed by the Company as Exhibits (with the
same respective Exhibit Numbers as indicated herein) to the Company's
Registration Statement on Form S-18 (Registration No. 33-26658-A) and such
documents are incorporated herein by reference.
**Items 10.1 and 10.2 were previously filed by the Company as Exhibits 10.5
and 10.6 respectively, to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994, and such documents are incorporated herein by
reference.
b) Reports on Form 8-K. No report on Form 8-K was filed during the quarter
ended September 30, 1996.
10
<PAGE> 11
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FAYETTE COUNTY BANCSHARES, INC.
-------------------------------
(Registrant)
/s/ Ira Pat Shepherd
Date: November 12, 1996 ---------------------------
Ira Pat Shepherd,
Principal Executive Officer
/s/ Mark Kearsley
Date: November 12, 1996 ---------------------------
Mark Kearsley,
Principal Financial Officer
11
<PAGE> 12
INDEX TO EXHIBITS
Exhibit
Number Description
------ -----------
3.1 Articles of Incorporation of Company (Incorporated by reference to
Exhibit 3.1 of Registration Statement on Form S- 1 8, File
No. 33-26658-A).
3.2 Bylaws of Company (incorporated by reference to Exhibit 3.2
of Registration Statement on Form S-1 8, File No. 33-26658-A).
10.1 Settlement Agreement and Release with Company and Terry L.
Miller as of October 21, 1994, (incorporated by reference to
Exhibit 10.5 on the Annual Report on Form 10-K for the year ended
December 31, 1994).
10.2 Company Stock Option Plan (incorporated by reference to
Exhibit 10.6 of the Annual Report on Form 10-K for the year ended
December 31, 1994).
27 Financial Data Schedule (for SEC use only)
12
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4,090,330
<INT-BEARING-DEPOSITS> 195,000
<FED-FUNDS-SOLD> 1,800,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,098,454
<INVESTMENTS-CARRYING> 1,659,305
<INVESTMENTS-MARKET> 1,743,185
<LOANS> 78,406,355
<ALLOWANCE> 1,017,553
<TOTAL-ASSETS> 103,956,337
<DEPOSITS> 94,085,168
<SHORT-TERM> 0
<LIABILITIES-OTHER> 1,146,764
<LONG-TERM> 0
0
0
<COMMON> 500,000
<OTHER-SE> 8,081,343
<TOTAL-LIABILITIES-AND-EQUITY> 103,956,337
<INTEREST-LOAN> 6,004,242
<INTEREST-INVEST> 709,233
<INTEREST-OTHER> 171,319
<INTEREST-TOTAL> 6,884,794
<INTEREST-DEPOSIT> 2,737,146
<INTEREST-EXPENSE> 2,745,913
<INTEREST-INCOME-NET> 4,138,881
<LOAN-LOSSES> 560,000
<SECURITIES-GAINS> (140)
<EXPENSE-OTHER> 2,670,436
<INCOME-PRETAX> 1,401,158
<INCOME-PRE-EXTRAORDINARY> 848,658
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 843,658
<EPS-PRIMARY> 1.31
<EPS-DILUTED> 1.25
<YIELD-ACTUAL> 0
<LOANS-NON> 311,038
<LOANS-PAST> 446,166
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 918,036
<CHARGE-OFFS> 467,387
<RECOVERIES> 6,904
<ALLOWANCE-CLOSE> 1,017,553
<ALLOWANCE-DOMESTIC> 1,017,553
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
