<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, 1997
-----------------
[ ] 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.)
Village Shopping Center, Hwy. 441
Post Office Box 1250, Clayton, Georgia 30525
------------------------------------------------------
(Address of principal executive offices)
(706) 782-7100
---------------------------
(Issuer's telephone number)
N/A
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(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, 1997: 400,691
Transitional Small Business Disclosure Format (Check One) Yes No X
----- -----
<PAGE>
FIRST CLAYTON BANCSHARES, INC.
AND SUBSIDIARY
<TABLE>
<CAPTION>
INDEX
-----
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheet - June 30, 1997..............................1
Consolidated Statements of Income - Three and
Six Months Ended June 30, 1997 and 1996.............................2
Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1997 and 1996...........................3 and 4
Notes to Consolidated Financial Statements..............................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..............6-9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holder............................................10
Item 6. Exhibits and Reports on Form 8-K..................................11
Signatures.................................................................12
</TABLE>
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Assets
- ------
<S> <C>
Cash and due from banks $ 2,223,457
Interest-bearing deposits in banks 3,859
Federal funds sold 350,000
Securities available-for-sale, at fair value 6,604,548
Securities held-to-maturity, at cost (fair value $4,694,093) 4,698,569
Loans 48,252,123
Less allowance for loan losses 491,381
-----------------------
Loans, net 47,760,742
-----------------------
Premises and equipment 1,513,812
Other assets 1,146,102
-----------------------
Total assets $ 64,301,089
=======================
<CAPTION>
Liabilities and Stockholders' Equity
- ------------------------------------
<S> <C>
Deposits
Demand $ 7,291,983
Interest-bearing demand 7,793,520
Savings 2,711,474
Time deposits 39,852,371
-----------------------
Total deposits 57,649,348
Federal funds purchased 750,000
Other liabilities 214,073
-----------------------
Total liabilities 58,613,421
-----------------------
Stockholders' equity
Common stock, par value $1; 10,000,000 shares authorized;
427,827 shares issued 427,827
Capital surplus 3,850,443
Retained earnings 1,858,893
Unrealized (losses) on securities available-for-sale, net of tax (4,605)
-----------------------
6,132,558
Less cost of 27,136 shares of treasury stock 444,890
-----------------------
Total stockholders' equity 5,687,668
-----------------------
Total liabilities and stockholders' equity $ 64,301,089
=======================
</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, 1997 AND 1996 AND
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------------- --------------------------------------------
1997 1996 1997 1996
-------------------- ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 1,223,332 $ 951,283 $ 2,399,216 $ 1,866,621
Taxable securities 147,150 162,001 300,071 325,368
Nontaxable securities 25,065 22,562 50,125 43,468
Federal funds sold 10,482 15,606 18,944 61,049
Interest-bearing deposits in banks 29 - 59 -
-------------------- ------------------ ------------------- -------------------
Total interest income 1,406,058 1,151,452 2,768,415 2,296,506
-------------------- ------------------ ------------------- -------------------
Interest expense
Deposits 708,830 565,009 1,373,882 1,147,799
Federal funds purchased 845 - 845 -
-------------------- ------------------ ------------------- -------------------
Total interest expense 709,675 565,009 1,374,727 1,147,799
-------------------- ------------------ ------------------- -------------------
Net interest income 696,383 586,443 1,393,688 1,148,707
Provision for loan losses 32,500 24,999 65,000 49,999
-------------------- ------------------ ------------------- -------------------
Net interest income
after provision for
loan losses 663,883 561,444 1,328,688 1,098,708
-------------------- ------------------ ------------------- -------------------
Other income 80,829 65,787 154,912 142,021
-------------------- ------------------ ------------------- -------------------
Other expenses
Salaries and other employee
benefits 216,294 168,147 433,351 327,993
Occupancy and equipment
expenses 70,245 67,764 141,504 134,768
Other operating expenses 157,422 145,705 314,131 268,837
-------------------- ------------------ ------------------- -------------------
Total other expenses 443,961 381,616 888,986 731,598
-------------------- ------------------ ------------------- -------------------
Income before income
taxes 300,751 245,615 594,614 509,131
Income tax expense 99,675 86,177 201,638 167,769
-------------------- ------------------ ------------------- -------------------
Net income $ 201,076 $ 159,438 $ 392,976 $ 341,362
==================== ================== =================== ===================
Net income per share of
common stock based on
weighted average number of
shares outstanding during
period $ 0.50 $ 0.39 $ 0.98 $ 0.82
==================== ================== =================== ===================
Weighted average shares
outstanding 400,430 409,499 400,411 416,947
==================== ================== =================== ===================
Cash dividends per share of
common stock $ - $ - $ - $ -
==================== ================== =================== ===================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
--------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 392,976 $ 341,362
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 72,053 65,000
Provision for loan losses 65,000 49,999
Increase in interest receivable (75,790) (125,208)
Increase (decrease) in interest payable 32,331 (29,051)
Gain on sale of securities available-for-sale (8,833) (1,241)
Other operating activities (57,698) (104,871)
--------------------- -------------------
Net cash provided by operating activities 420,039 195,990
--------------------- -------------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (1,987,755) (1,539,947)
Proceeds from sales of securities available-for-sale 1,504,665 1,392,656
Proceeds from maturities of securities available-for-sale 201,124 573,267
Purchases of securities held-to-maturity - (341,987)
Proceeds from maturities of securities held-to-maturity 705,143 489,229
Net decrease in Federal funds sold 20,000 4,975,000
Net (increase) decrease in interest-bearing deposits in banks (59) 3,677
Net increase in loans (6,047,514) (5,265,360)
Purchase of premises and equipment (127,975) (26,421)
--------------------- -------------------
Net cash (used in) provided by investing activities (5,732,371) 260,114
--------------------- -------------------
FINANCING ACTIVITIES
Net increase (decrease) in deposits 5,075,581 (39,935)
Net increase in Federal funds sold 750,000 -
Purchase of shares for the treasury - (411,434)
Proceeds from sale of treasury shares 6,300 -
--------------------- -------------------
Net cash provided by (used in) financing activities 5,831,881 (451,369)
--------------------- -------------------
Net increase in cash and due from banks 519,549 4,735
Cash and due from banks, beginning of period 1,703,908 2,266,014
--------------------- -------------------
Cash and due from banks, end of period $ 2,223,457 $ 2,270,749
===================== ===================
</TABLE>
3
<PAGE>
FIRST CLAYTON BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 1,342,463 $ 1,176,850
Income taxes $ 264,248 $ 243,854
NONCASH TRANSACTION
Unrealized losses on securities available-for-sale $ 13,378 $ 121,120
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
FIRST CLAYTON BANCSHARES, INC. 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 six month period ended June 30, 1997
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. 128,
Earnings Per Share. SFAS No. 128 establishes standards for computing
and presenting earnings per share (EPS) and applies to entities with
publicly held common stock or potential common stock. This Statement
simplifies the standards for computing earnings per share previously
found in APB Opinion No. 15, Earnings Per Share, and makes them
comparable to International EPS standards. It replaces the presentation
of primary EPS with a presentation of basic EPS. It also requires dual
presentation of basic and diluted EPS on the face of the income
statement for all entities with complex capital structures and requires
a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation. The effective date of this Statement is for financial
statements issued for periods ending after December 15, 1997. The
adoption of this Statement is not expected to have a material effect on
the earnings per share amount that is disclosed in these quarterly
financial statements.
NOTE 3. BUSINESS COMBINATION
On June 12, 1997, the Company entered into an Agreement and Plan of
Merger with United Community, Inc., a Georgia corporation. Under this
agreement, the Company will merge with and into United. Upon
consummation of the merger, each share of the Company's common stock
issued and outstanding will be converted into and exchanged for the
right to receive 1.6136 shares of United's common stock. Consummation
of the merger is subject to certain conditions, including approval of
the agreement by the Boards of Directors and the shareholders of both
Companies and approval of the merger by various regulatory agencies.
The merger is expected to be completed in the third quarter of 1997 and
will be accounted for as a pooling of interests.
5
<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, 1997, the Company reported growth in assets of approximately
$6,228,000 or 10.72% as compared to December 31, 1996. Total loans increased by
$6,029,000 or 14.28% for the six months ended June 30, 1997. This increase was
funded by an increase in total deposits of $5,076,000 or 9.65% during the same
period.
Liquidity
As of June 30, 1997, the liquidity ratio was 20.09% compared to 25.54% at June
30, 1996. This is below the Bank's target ratio of 30%. Liquidity is measured by
the ratio of net cash, Federal funds sold and securities to net deposits and
short-term liabilities. The decrease in the liquidity ratio is related to the
significant increase in loans totaling $12,256,000 since June 30, 1996. The
Company, however, has lines of credit available to meet any unforeseen liquidity
needs. The Bank has established a relationship with the Federal Home Loan Bank
of Atlanta which provides funding for loan growth on an as needed basis.
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 at least 8%.
Selected financial information relating to the Bank's minimum capital
requirements for the period ended June 30, 1997 is as follows:
<TABLE>
<S> <C>
Leverage capital ratio 9.08%
Risk-based capital ratios:
Core capital 14.85%
Total capital 16.11%
</TABLE>
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Results of Operations
Net interest income increased $245,000 or 21.33% for the six months ended June
30, 1997 compared to the same period in 1996. The net increase consists of an
increase in interest income of $472,000 or 20.55% less an increase in interest
expense of $227,000 or 19.77% for the six month period. The significant increase
in interest income is due primarily to the growth in the loan portfolio of
34.05% from June 30, 1996 to June 30, 1997. Total interest-bearing deposits
increased during the same period by $7,196,000 or 16.67%.
The Company's provision for loan losses increased by $15,000 or 30% during the
six months ended June 30, 1997 as compared to the same period in 1996. The
allowance for loan losses at June 30, 1997 was $491,381 or 1.02% of total
outstanding loans compared to .99% at June 30, 1996. Based on management's
evaluation, the reserve is adequate to absorb anticipated loan losses at June
30, 1997.
The following table furnishes information on the loan loss reserve for the
current six month reporting period and the same period for 1996.
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(Dollars in Thousands)
----------------------
<S> <C> <C>
Beginning balance $ 445 $ 339
Less charge-offs
Commercial loans (1) (8)
Consumer loans (19) (33)
Plus recoveries
Consumer loans 1 8
Plus provision 65 49
--------- ---------
Balance, end of period $ 491 $ 355
========= =========
</TABLE>
The loan loss reserve for the Company is evaluated monthly and adjusted to
reflect the risk in the portfolio.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
The following table is a summary of nonaccrual, past due and restructured debt.
<TABLE>
<CAPTION>
June 30, 1997
------------------------------------------------------
Past Due
Nonaccural 90 Days Restructured
Loans Still Accruing Debt
--------------- ---------------- -----------------
(Dollars in Thousands)
------------------------------------------------------
<S> <C> <C> <C>
Real estate loans $ 5 $ - $ -
Commercial loans 17 2 -
Consumer loans 58 68 -
--------------- ---------------- -----------------
Total $ 80 $ 70 $ -
=============== ================ =================
<CAPTION>
June 30, 1997
------------------------------------------------------
Past Due
Nonaccural 90 Days Restructured
Loans Still Accruing Debt
--------------- ---------------- -----------------
(Dollars in Thousands)
------------------------------------------------------
<S> <C> <C> <C>
Real estate loans $ 297 $ 145 $ -
Commercial loans 46 2 -
Consumer loans 13 42 -
--------------- ---------------- -----------------
Total $ 356 $ 189 $ -
=============== ================ =================
</TABLE>
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above 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 of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.
Other operating income for the six months ended June 30, 1997 increased by
$12,900 or 9.08% compared to the same period in 1996. The increase in other
operating income is primarily due to an increase in credit life income of $9,000
which is attributable to the growth in loans and an increase of $3,150 in early
redemption penalties.
Other expenses increased by approximately $157,000 or 21.50% for the six month
period ending June 30, 1997 compared to the same period in 1996. The increase is
due primarily to an increase in salaries and employee benefits of $105,000 which
can be partially attributed to an increase of three full time employees. The
increase is also due to an increase of $20,000 in consulting fees incurred by
the Bank and an increase in convention and meeting expenses of $9,400 compared
to 1996. The increase in full time employees is directly related to the increase
in loans and deposits.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
Income tax expense increased by $34,000 for the six months ended June 30, 1997
compared to the six months ended June 30, 1996. The effective tax rate for the
period in 1997 was 34% compared to 33% for the same period in 1996. The increase
in the effective tax rate is primarily related to the increase in state income
taxes.
Net income increased for the six months ended June 30, 1997 by $52,000 compared
to the same period in 1996. The increase in net income is attributable to the
continued growth in interest-earning assets, particularly higher yielding loans.
The Company is not aware of any other known trends, events or uncertainties,
other than the effect of events as described above, that will have or that are
reasonably likely to have a material effect on its liquidity, capital resources
or operations. The Company is also not aware of any current recommendations by
the regulatory authorities which, if they were implemented, would have such an
effect.
9
<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
11, 1997. 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 400,391. A total of 236,317
shares (59%) 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>
John Martin 235,917 200 200
Mark Smith 236,117 - 200
Lamar Edwards 235,817 300 200
Betsy Fowler 235,917 200 200
Colie Whitaker 235,817 200 300
Ronald Vandiver 236,117 - 200
Robert Blalock 236,117 - 200
</TABLE>
10
<PAGE>
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
None.
11
<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: BY: /s/ John R. Martin
------------------------- ------------------------
President and Chairman
DATE: BY: /s/ J. Mark Smith
------------------------- ------------------------
Chief Executive Officer and Principal
Financial and Accounting Officer of
First Clayton Bank & Trust Company
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 6-30-97
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 2,223,457
<INT-BEARING-DEPOSITS> 3,859
<FED-FUNDS-SOLD> 350,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 6,604,548
<INVESTMENTS-CARRYING> 4,698,569
<INVESTMENTS-MARKET> 4,694,093
<LOANS> 48,252,123
<ALLOWANCE> 491,381
<TOTAL-ASSETS> 64,301,089
<DEPOSITS> 57,649,348
<SHORT-TERM> 750,000
<LIABILITIES-OTHER> 214,073
<LONG-TERM> 0
0
0
<COMMON> 427,827
<OTHER-SE> 5,259,841
<TOTAL-LIABILITIES-AND-EQUITY> 64,301,089
<INTEREST-LOAN> 2,399,216
<INTEREST-INVEST> 350,196
<INTEREST-OTHER> 19,003
<INTEREST-TOTAL> 2,768,415
<INTEREST-DEPOSIT> 1,373,882
<INTEREST-EXPENSE> 1,374,727
<INTEREST-INCOME-NET> 1,393,688
<LOAN-LOSSES> 65,000
<SECURITIES-GAINS> 8,833
<EXPENSE-OTHER> 888,986
<INCOME-PRETAX> 594,614
<INCOME-PRE-EXTRAORDINARY> 392,976
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 392,976
<EPS-PRIMARY> .98
<EPS-DILUTED> .98
<YIELD-ACTUAL> 4.84
<LOANS-NON> 80,000
<LOANS-PAST> 70,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 444,936
<CHARGE-OFFS> 19,334
<RECOVERIES> 779
<ALLOWANCE-CLOSE> 491,381
<ALLOWANCE-DOMESTIC> 491,381
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 491,381
</TABLE>
