<PAGE>
UNITED STATES 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, 1996
----------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________ to __________
COMMISSION FILE NUMBER: 33-28050-A
FIRST CLAYTON BANCSHARES, INC.
--------------------------------
(Exact name of small business issuer as specified in its charter)
GEORGIA 58-1823105
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
POST OFFICE BOX 1250, CLAYTON, GEORGIA 30525
------------------------------------------------------------
(Address of principal executive offices)
(706) 782-7100
----------------------------------------
(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 be 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 August 1, 1996: 400,191
Transitional Small Business Disclosure Format (Check One) Yes No X
--- ---
<PAGE>
FIRST CLAYTON BANCSHARES, INC.
AND SUBSIDIARY
<TABLE>
<CAPTION>
INDEX
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PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET - JUNE 30, 1996............................................. 1
CONSOLIDATED STATEMENTS OF INCOME - THREE AND
SIX MONTHS ENDED JUNE 30, 1996 AND 1995......................................... 2 AND 3
CONSOLIDATED STATEMENTS OF CASH FLOWS - SIX
MONTHS ENDED JUNE 30, 1996 AND 1995........................................... 4 AND 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS............................................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................................... 7-9
PART II. OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................................... 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K....................................................... 10
SIGNATURES
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
- ------
<S> <C>
Cash and due from banks $ 2,270,749
Securities available for sale, at fair value 4,558,544
Securities held to maturity, at cost (fair value $6,630,564) 6,635,873
Federal funds sold 680,000
Loans 35,996,455
Less allowance for loan losses (355,461)
----------------
Loans, net 35,640,994
----------------
Premises and equipment, net 1,510,609
Other assets 998,012
----------------
$ 52,294,781
================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------
Deposits
Demand $ 3,975,619
Interest-bearing demand 8,846,789
Savings 3,070,638
Certificates of deposit 31,243,451
----------------
Total deposits 47,136,497
Other liabilities 125,553
----------------
Total liabilities 47,262,050
----------------
COMMITMENTS AND CONTINGENCIES
Stockholders' equity
Common stock, par value $1; 10,000,000 shares authorized;
427,827 shares issued 427,827
Surplus 3,850,443
Retained earnings 1,257,764
Unrealized loss on securities available for sale, net of tax (48,313)
----------------
5,487,721
Less cost of 27,636 shares of treasury stock (454,990)
----------------
Total stockholders' equity 5,032,731
----------------
$ 52,294,781
================
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
1
<PAGE>
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1996 AND 1995 AND
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 951,283 $ 802,067 $ 1,866,621 $ 1,525,048
Interest on taxable securities 162,001 134,228 325,368 263,062
Interest on nontaxable securities 22,562 15,058 43,468 29,486
Interest on Federal funds sold 15,606 50,269 61,049 80,493
----------- ----------- ----------- -----------
1,151,452 1,001,622 2,296,506 1,898,089
INTEREST EXPENSE ON DEPOSITS 565,009 480,529 1,147,799 865,735
----------- ----------- ----------- -----------
Net interest income 586,443 521,093 1,148,707 1,032,354
PROVISION FOR LOAN LOSSES 24,999 19,500 49,999 37,500
----------- ----------- ----------- -----------
Net interest income after provision for
loan losses 561,444 501,593 1,098,708 994,854
----------- ----------- ----------- -----------
OTHER OPERATING INCOME
Service charges on deposit accounts 49,478 42,686 98,817 87,078
Other income 15,068 8,210 41,963 17,931
Security gains, net 1,241 - 1,241 -
----------- ----------- ----------- -----------
65,787 50,896 142,021 105,009
----------- ----------- ----------- -----------
OTHER OPERATING EXPENSES
Salaries and other employee benefits 168,147 156,028 327,993 306,643
Occupancy and equipment expenses 67,764 56,307 134,768 117,403
Stationery and supplies 24,765 16,402 49,700 32,933
FDIC assessments 500 19,747 1,000 39,493
Directors' fees 15,000 16,200 30,000 31,800
Postage expense 9,539 7,011 22,559 18,676
Software amortization 9,687 8,429 19,135 18,447
Other operating expense 86,214 61,204 146,443 115,637
----------- ----------- ----------- -----------
381,616 341,328 731,598 681,032
----------- ----------- ----------- -----------
Income before income taxes 245,615 211,161 509,131 418,831
APPLICABLE INCOME TAXES 86,177 66,730 167,769 131,323
----------- ----------- ----------- -----------
Net income $ 159,438 $ 144,431 $ 341,362 $ 287,508
=========== =========== =========== ===========
</TABLE>
2
<PAGE>
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1996 AND 1995 AND
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------------------------------------------
1996 1995 1996 1995
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
PER SHARE OF COMMON STOCK BASED ON AVERAGE
NUMBER OF SHARES OUTSTANDING DURING PERIOD
Net income $ 0.39 $ 0.34 $ 0.82 $ 0.68
============== ============= ============= ==============
AVERAGE SHARES OUTSTANDING 409,499 424,393 416,947 424,622
============== ============= ============= ==============
CASH DIVIDENDS PER SHARE OF COMMON STOCK $ - $ - $ - $ -
============== ============= ============= ==============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
3
<PAGE>
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 341,362 $ 287,508
-------------- --------------
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 65,000 82,355
Provision for loan losses 49,999 37,500
Increase in interest receivable (125,208) (4,493)
Increase (decrease) in interest payable (29,051) 59,197
Decrease in taxes payable (48,066) (81,168)
Gain on sale of securities (1,241) -
Other prepaids, deferrals and accruals, net (56,805) (34,370)
-------------- --------------
Total adjustments (145,372) 59,021
-------------- --------------
Net cash provided by operating activities 195,990 346,529
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of securities available for sale (1,539,947) (1,080,530)
Proceeds from maturities of securities available for sale 573,267 1,201,385
Proceeds from sale of securities available for sale 1,392,656
Purchases of securities held to maturity (341,987) (1,208,426)
Proceeds from maturities of securities held to maturity 489,229 1,243,545
Net (increase) decrease in Federal funds sold 4,975,000 (1,665,000)
Net (increase) decrease in bank-owned deposits 3,677 (60)
Net increase in loans (5,265,360) (4,080,331)
Purchase of premises and equipment (26,421) (8,397)
-------------- --------------
Net cash provided by (used in) investing activities 260,114 (5,597,814)
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits (39,935) 5,709,926
Purchase of shares for the treasury (411,434) (6,855)
-------------- --------------
Net cash provided by (used in) financing activities (451,369) 5,703,071
-------------- --------------
Net increase in cash and due from banks 4,735 451,786
Cash and due from banks, beginning of period 2,266,014 1,183,525
-------------- --------------
Cash and due from banks, end of period $ 2,270,749 $ 1,635,311
============== ==============
</TABLE>
4
<PAGE>
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid during period for:
Interest $ 1,176,850 $ 806,538
Income taxes 243,854 217,168
NONCASH TRANSACTION
Unrealized (gains) losses on securities available for sale 121,120 (115,453)
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
5
<PAGE>
FIRST CLAYTON BANCSHARES AND SUBSIDIARY
NOTES 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 periods ended
June 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
The Financial Accounting Standards Board has issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of", No. 122, "Accounting for Mortgage Servicing
Rights", and No. 123, "Accounting for Stock-Based Compensation", all of
which are effective for financial statements for years beginning after
December 31, 1995 and for transactions after December 31, 1995.
SFAS 121 requires that long-lived assets and certain identifiable
intangibles, including goodwill, be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. In the event that the sum of the
expected future cash flows is less than the carrying amount of an
impaired long-lived asset, an impairment loss should be recognized. The
adoption of this Statement is not expected to have a material effect on
the earnings or financial condition of the Company.
SFAS 122 requires mortgage banking enterprises to recognize as a
separate asset the rights retained to service mortgage loans for third
parties. These assets are to be based on the fair value of the mortgage
servicing rights and mortgage loans, if practicable to estimate.
Otherwise, the entire cost of purchasing or originating these loans
should be allocated to mortgage loans. The adoption of this Statement
is not expected to have a material effect on the earnings or financial
condition of the Company.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS (CONTINUED)
SFAS 123 establishes financial accounting and reporting standards for
stock-based employee compensation plans. The statement defines a fair
value based method of accounting for employee compensation plans and
encourages the adoption of all plans. However, the statement allows
previous methods of accoun ting for compensation plans to be utilized
with additional disclosures required. The adoption of this Statement is
not expected to have a material effect on the earnings or financial
condition of the Company.
7
<PAGE>
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
ITEM 2. 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
As of June 30, 1996, the Company experienced a slight decrease in total assets
and deposits along with significant growth in total loans of approximately
$5,232,000 or 17.01%, as compared to December 31, 1995. The stabilization of
total assets and deposits reflects the end of the growth associated with the
change in ownership of other community banks. The growth in loans is a
combination of the change in the banking environment, which typically occurs
gradually, and management's continuing marketing efforts to attract new loans
and other lending arrangements.
Total assets and total deposits slightly decreased during the period from
December 31, 1995 to June 30, 1996 by .64% and .08%, respectively. The
$5,232,000 increase in loans was funded primarily by a decrease in Federal funds
sold of $4,975,000 for the same time period. Investments decreased during the
same period by approximately $697,000 or 5.86%.
LIQUIDITY
As of June 30, 1996, the liquidity ratio was 25.54%, which is slightly under the
Company's target ratio of 30%. Liquidity is measured by the ratio of net cash,
short-term and marketable securities to net deposits and short-term liabilities.
The Company has available lines of credit to meet any unforeseen liquidity
needs. Management believes that this ratio is adequate to meet the liquidity
needs of the Bank.
CAPITAL
The minimum capital requirements for banks and bank holding companies require a
leverage capital to total assets ratio of at least 4%, core capital to risk-
weighted assets ratio of at least 4%, and total capital to risk-weighted assets
of 8%.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Selected financial information relating to the Bank's minimum capital
requirements for the period ended June 30, 1996 is as follows:
<TABLE>
<CAPTION>
<S> <C>
Leverage capital ratio 9.63%
Risk-based capital ratios:
Core capital 16.42%
Total capital 17.58%
</TABLE>
The capital of the Bank is adequate and is in compliance with the minimum
regulatory requirements.
Capital decreased by $148,000 during the first six months of 1996 which is the
result of the purchase of treasury stock totaling $411,434. This decrease net
of earnings to date of $341,000 and unrealized losses on securities available
for sale of $78,000 account for the change in capital. Management does not
anticipate any other significant purchases of treasury stock in the near future.
Management is not aware of any other current recommendations by the regulatory
authorities, events or trends, which, if they were to be implemented, would have
a material effect on the Company's liquidity, capital resources, or operations.
RESULTS OF OPERATIONS
Net interest income for the six months ended June 30, 1996 increased 11.27% to
$1,149,000 over the $1,032,000 for the same period in 1995. Interest income for
the six month period increased $398,000 or 20.99% while interest expense
increased by $282,000 or 32.58%. Net interest income for the three months ended
June 30, 1996 increased 12.54% to $586,000 over the $521,000 for the same period
in 1995. Interest income for the three month period increased $150,000 or
14.96% while interest expense increased by $84,000 or 17.58%. The increase in
interest income compared to the same periods in 1995 is due primarily to the
significant growth in interest-earning assets. The increase in interest expense
is consistent with increased interest rates which have gradually increased as
time deposits mature and an 18.37% growth in interest-bearing deposits since
June 30, 1995. Interest earning assets have increased by $5,828,000 or 13.86%
for the same time period.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The provision for loan losses increased for the three and six month periods
ended June 30, 1996 by $5,500 and $12,500, respectively, as compared to June 30,
1995. The Company's allowance for loan losses amounted to $355,461 or .99% of
total loans outstanding at June 30, 1996 as compared to 1.10% at December 31,
1995. Net charge-offs for the six months ended June 30, 1996 were $34,000.
Nonaccrual loans were $356,000 and $68,000 at June 30, 1996 and 1995,
respectively, and loans past due 90 days and still accruing interest were
$189,000 and $20,000 for the same periods. Management believes that the
allowance for loan losses is adequate to absorb anticipated loan losses.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention do not represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity, or capital resources. These classified loans do not represent
material credits about which management is aware which causes management to have
serious doubts as to the ability of such borrowers to comply with the loan
repayment terms.
Other income increased $37,000 or 35.25% for the six month period ended June 30,
1996 as compared to 1995. There were no significant individual items which
accounted for this increase in other income.
Other operating expenses increased $40,000 and $51,000 for the three and six
month periods ended June 30, 1996, respectively, as compared to the same periods
in 1995. The significant increases occurred in personnel expense, stationery
and supplies expense, and other expense, which increased $21,000, $17,000, and
$31,000, respectively, for the six month period ended June 30, 1996 as compared
to the same period in 1995. These increases were offset by a decrease in FDIC
assessments of $38,000. This decrease is the result of changes in the
assessment rates effective for 1996.
For the most part, the increase in other operating expenses are directly related
to the growth in loans and deposits. The number of full-time employees has
increased from 21 at June 30, 1995 to 23 as of June 30, 1996. Other operating
expenses continue to increase primarily as a result of increased marketing
efforts and the related growth.
Net income for the six months ended June 30, 1996 has increased by $54,000 when
compared to the six month period ended June 30, 1995. The subsidiary bank
continues to experience growth in loans, which has enabled the Company to
increase earnings.
Income tax expense increased by $36,000 for the six months ended June 30, 1996
as compared to the six month period ended June 30, 1995. As of June 30, 1996
and 1995, the effective tax rates were 33% and 31%, respectively.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of the Shareholders of the Company was held on April
10, 1996. At the Annual Meeting of the Shareholders, proxies were
solicited under Regulation 14 of the Securities and Exchange Act of
1934. Total shares outstanding amounted to 424,393. A total of 289,463
shares (68%) were represented by shareholders in attendance or by
proxy. The following directors were re-elected to serve a three -year
term. The results of the election were as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
------------ ----------- -----------
<S> <C> <C> <C>
Lamar Edwards 284,243 5,220 0
Robert Blalock 283,756 4,907 800
The following directors continue to serve their three-year term:
Mark Smith John Martin
Betsy Fowler Edward Bultman
Colie Whitaker Ronald Vandiver
</TABLE>
No other matters were voted upon by the shareholders.
11
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27. Financial Data Schedule
(b) Reports on Form 8-K.
None.
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.
FIRST CLAYTON BANCSHARES, INC.
DATE: August 13, 1996 BY: /s/ Robert H. Blalock
----------------- _________________________________________
Robert H. Blalock, President and Chairman
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,270,749
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 680,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 4,558,544
<INVESTMENTS-CARRYING> 6,635,873
<INVESTMENTS-MARKET> 6,630,654
<LOANS> 35,996,455
<ALLOWANCE> (355,461)
<TOTAL-ASSETS> 52,294,781
<DEPOSITS> 47,136,497
<SHORT-TERM> 0
<LIABILITIES-OTHER> 125,553
<LONG-TERM> 0
0
0
<COMMON> 427,827
<OTHER-SE> 4,604,904
<TOTAL-LIABILITIES-AND-EQUITY> 52,294,781
<INTEREST-LOAN> 1,866,621
<INTEREST-INVEST> 368,836
<INTEREST-OTHER> 61,109
<INTEREST-TOTAL> 2,296,506
<INTEREST-DEPOSIT> 1,147,799
<INTEREST-EXPENSE> 1,147,799
<INTEREST-INCOME-NET> 1,148,707
<LOAN-LOSSES> 49,999
<SECURITIES-GAINS> 1,241
<EXPENSE-OTHER> 731,598
<INCOME-PRETAX> 509,131
<INCOME-PRE-EXTRAORDINARY> 509,131
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 341,362
<EPS-PRIMARY> 0.82
<EPS-DILUTED> 0
<YIELD-ACTUAL> 2.44
<LOANS-NON> 356,000
<LOANS-PAST> 189,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 369,574
<CHARGE-OFFS> 41,000
<RECOVERIES> 2,000
<ALLOWANCE-CLOSE> 355,461
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 355,461
</TABLE>
