<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2000.
------------------
or
[_] Transition Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 For the transition period from _______________ to ________________.
Commission File No. 0-23980
-------
Georgia Bank Financial Corporation
----------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2005097
------- ----------
(State of Incorporation) (I.R.S. Employer Identification No.)
3530 Wheeler Road, Augusta, Georgia 30909
-----------------------------------------
(Address of principal executive offices)
(706) 738-6990
--------------
(Issuer's telephone number, including area code)
Not Applicable
--------------
(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 the latest practicable date:
2,077,486 shares of common stock, $3.00 par value per share, issued and
outstanding as of September 30, 2000.
<PAGE>
GEORGIA BANK FINANCIAL CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
Part I
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999 3
Consolidated Statements of Income for the quarters
ended September 30, 2000 and September 30, 1999 and the
nine months ended September 30, 2000 and September 30, 1999 4
Consolidated Statements of Cash Flows for the
nine months ended September 30, 2000 and September 30, 1999 5
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Item 3 Quantitative and Qualitative Disclosures about Market Risk 16
Part II Other Information
Item 1. Legal Proceedings *
Item 2. Changes in Securities *
Item 3. Defaults Upon Senior Securities *
Item 4. Submission of Matters to a Vote of Security Holders *
Item 5. Other Information *
Item 6. Exhibits and Reports on Form 8-K *
Signature 18
</TABLE>
* No information submitted under this caption
1
<PAGE>
PART I
FINANCIAL INFORMATION
2
<PAGE>
GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------------------------------
<S> <C> <C>
Cash and due from banks $ 12,663,782 $ 13,642,007
Federal funds sold 5,540,000 9,830,000
Interest bearing deposits in other banks 500,000 -
------------ ------------
Cash and cash equivalents 18,703,782 23,472,007
Investment Securities
Available-for-sale 70,182,829 60,054,449
Held-to-maturity, at cost (fair values of
$8,619,831 and $7,102,288, respectively) 8,722,546 7,281,743
Loans 269,740,236 239,031,667
Less allowance for loan losses (4,004,102) (3,591,613)
------------ ------------
Loans, net 265,736,134 235,440,054
Premises and equipment, net 10,582,467 10,481,160
Accrued interest receivable 3,288,235 2,792,978
Other real estate 16,942 16,942
Intangible assets, net 400,492 492,806
Other assets 2,682,239 2,068,970
------------ ------------
$380,315,666 $342,101,109
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Non-interest bearing $ 48,077,463 $ 43,171,186
Interest bearing
NOW accounts 37,601,801 34,659,905
Savings 97,443,908 94,010,408
Money management accounts 16,000,935 14,674,717
Time deposits over $100,000 51,494,168 45,454,055
Other time deposits 48,616,927 51,150,474
------------ ------------
299,235,202 283,120,745
Federal funds purchased and securities sold
under repurchase agreements 27,909,925 11,331,388
Advances from Federal Home Loan Bank 17,000,000 15,000,000
Other borrowed funds 1,000,000 1,000,000
Accrued interest and other liabilities 2,730,749 1,832,245
------------ ------------
Total liabilities 347,875,876 312,284,378
------------ ------------
Stockholders' equity
Common Stock, $3.00 par value; authorized 10,000,000
shares; issued 2,093,152 in 2000 and 1999; outstanding
2,077,486 in 2000 and 2,093,152 in 1999 6,279,456 6,279,456
Additional paid-in capital 21,259,955 21,259,955
Retained earnings 6,071,302 3,166,195
Accumulated other comprehensive (loss) (750,135) (888,875)
Treasury Stock, at cost, 15,666 shares (420,788) -
------------ ------------
Total stockholders' equity 32,439,790 29,816,731
------------ ------------
$380,315,666 $342,101,109
============ ============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------- ---------------------------
2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income
Loans, including fees $6,289,211 $5,110,058 $17,793,049 $14,699,110
Investment securities 1,232,981 979,550 3,587,426 2,784,763
Federal funds sold 94,062 123,298 403,722 274,630
Interest bearing deposits in other banks 9,031 - 23,375 -
----------- ----------- ----------- ------------
7,625,285 6,212,906 21,807,572 17,758,503
----------- ----------- ----------- ------------
Interest Expense
Deposits 3,255,680 2,572,955 9,282,424 7,259,536
Federal funds purchased and securities sold
under repurchase agreements 247,631 123,472 552,466 265,651
Other borrowings 267,269 138,673 765,892 439,167
----------- ----------- ----------- ------------
3,770,580 2,835,100 10,600,782 7,964,354
----------- ----------- ----------- ------------
Net Interest Income 3,854,705 3,377,806 11,206,790 9,794,149
Provision for loan losses 250,000 591,000 748,000 1,015,000
----------- ----------- ----------- ------------
Net interest income after provision for loan losses 3,604,705 2,786,806 10,458,790 8,779,149
----------- ----------- ----------- ------------
Non-interest Income
Service charges and fees on deposits 753,927 686,188 2,091,594 1,989,146
Gain on sale of loans 360,744 163,935 599,257 592,313
Investment securities gain (loss), net - 1,520,919 (28,517) 1,519,791
Miscellaneous income 72,091 50,518 237,918 185,377
----------- ----------- ----------- ------------
1,186,762 2,421,560 2,900,252 4,286,627
----------- ----------- ----------- ------------
Non-interest Expense
Salaries 1,540,365 1,137,050 4,074,006 3,438,980
Employee benefits 408,327 461,730 1,161,697 1,134,312
Occupancy expenses 453,492 414,548 1,273,647 1,232,707
Other operating expenses 841,811 1,266,780 2,402,585 2,697,002
----------- ----------- ----------- ------------
3,243,995 3,280,108 8,911,935 8,503,001
----------- ----------- ----------- ------------
Income before income taxes 1,547,472 1,928,258 4,447,107 4,562,775
Income tax expense 527,300 593,500 1,542,000 1,559,551
----------- ----------- ----------- ------------
Net Income $1,020,172 $1,334,758 $ 2,905,107 $ 3,003,224
=========== =========== =========== ============
Basic income per share $ 0.49 $ 0.64 $ 1.39 $1.43
Weighted average common shares outstanding 2,081,340 2,093,152 2,087,722 2,093,152
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net Income $ 2,905,107 $ 3,003,224
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 855,500 854,107
Provision for loan losses 748,000 1,015,000
Net investment securities losses (gains), net of related donation expense 28,517 (1,039,316)
Net (accretion of discount) amortization of premium on investment securities (36,141) 64,275
Gain on disposal of premises and equipment (53,893) (1,020)
Gain on the sale of other real estate - (19,824)
Gain on sale of loans (599,257) (592,313)
Real estate loans originated for sale (30,484,631) (26,592,477)
Proceeds from sales of real estate loans 30,481,383 28,831,183
Net increase in accrued interest receivable (495,257) (559,235)
Net (increase) decrease in prepaid expense (14,990) 125,520
Net (increase) decrease in other assets (669,750) 1,017,492
Net increase in accrued interest and other liabilities 898,504 139,813
----------- -----------
Net cash provided by operating activities 3,563,092 6,246,429
----------- -----------
Cash flows from investing activities
Proceeds from sales of available-for-sale securities 2,927,861 15,349,100
Proceeds from maturities of available-for-sale securities 3,732,173 11,818,734
Proceeds from maturities of held-to-maturity securities 416,033 280,112
Purchase of held-to-maturity securities (1,864,517) (2,823,849)
Purchase of available-for-sale securities (16,391,298) (30,654,130)
Purchase of FHLB stock (171,600) -
Proceeds from redemption of FHLB stock - 211,200
Net increase in loans (30,441,575) (28,970,898)
Net purchase of premises and equipment (1,399,056) (333,509)
Proceeds from the sale of other real estate - 509,382
Proceeds from the sale of premises and equipment 588,456 29,482
----------- -----------
Net cash used in investing activities (42,603,523) (34,584,376)
----------- -----------
Cash flows from financing activities
Net increase in deposits 16,114,457 19,244,441
Net increase in federal funds purchased and
securities sold under repurchase agreements 16,578,537 15,647,910
Proceeds from notes and bonds payable - 50,000
Advances from Federal Home Loan Bank 22,000,000 10,000,000
Payments of Federal Home Loan Bank advances (20,000,000) (5,000,000)
Purchase of treasury stock (420,788) -
----------- -----------
Net cash provided by financing activities 34,272,206 39,942,351
----------- -----------
</TABLE>
5
<PAGE>
GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
2000 1999
----------- -----------
<S> <C> <C>
Net (decrease) increase in cash and cash equivalents (4,768,225) 11,604,404
Cash and cash equivalents at beginning of period 23,472,007 9,916,911
----------- ------------
Cash and cash equivalents at end of period $18,703,782 $21,521,315
=========== ============
Supplemental disclosures of cash paid during the period for:
Interest $10,730,957 $ 8,396,255
=========== ============
Income taxes $ 1,417,000 $ 1,353,413
=========== ============
</TABLE>
See notes to consolidated financial statements.
6
<PAGE>
GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
September 30, 2000
Note 1 - Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Georgia Bank Financial Corporation and its wholly-owned subsidiary, Georgia Bank
& Trust Company. Significant intercompany transactions and accounts are
eliminated in the consolidation.
The financial statements for the nine months ended September 30, 2000 and 1999
are unaudited and have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These consolidated financial statements
should be read in conjunction with the audited consolidated financial statements
and footnotes included in the Company's annual report on Form 10-KSB for the
year ended December 31, 1999.
In the opinion of management, all adjustments necessary to present fairly the
financial position and the results of operations and cash flows for the interim
periods have been made. All such adjustments are of a normal recurring nature.
The results of operations are not necessarily indicative of the results of
operations which the Company may achieve for the entire year.
Note 2 - Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 is effective for
financial statements for all fiscal quarters of fiscal years beginning after
June 15, 1999. In June 1999, the FASB issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the effective date
of FASB Statement No. 133." SFAS 133, as amended, is now effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The Company
does not believe the provisions of SFAS 133 will have a significant impact on
the financial statements upon adoption.
Note 3 - Comprehensive Income
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130
establishes standards for reporting and displaying comprehensive income and its
components in a full set of general purpose financial statements. The primary
component of the differences between net income and comprehensive income for the
Company is net unrealized gains and losses on investment securities. Total
comprehensive income for the nine months ended September 30, 2000 was $3,043,847
compared to $570,655 for the nine months ended September 30, 1999 and for the
three months ended September 30, 2000 was $1,040,118 compared to $440,157 for
the three months ended September 30, 1999.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
--------------------------
The Company may, from time-to-time, make written or oral forward-looking
statements, including statements contained in the Company's filings with the
Securities and Exchange Commission (the "Commission") and its reports to
shareholders. Statements made in such documents, other than those concerning
historical information, should be considered forward-looking and subject to
various risks and uncertainties. Such forward-looking statements are made based
upon management's belief as well as assumptions made by, and information
currently available to, management pursuant to "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. The Company's actual results
may differ materially from the results anticipated in forward-looking statements
due to a variety of factors, including governmental monetary and fiscal
policies, deposit levels, loan demand, loan collateral values, securities
portfolio values, and interest rate risk management; the effects of competition
in the banking business from other commercial banks, savings and loan
associations, mortgage banking firms, consumer finance companies, credit unions,
securities brokerage firms, insurance companies, money market mutual funds and
other financial institutions operating in the Company's market area and
elsewhere, including institutions operating through the Internet; changes in
governmental regulation relating to the banking industry, including regulations
relating to branching and acquisitions; failure of assumptions underlying the
establishment of reserves for loan losses, including the value of collateral
underlying delinquent loans, and other factors. The Company cautions that such
factors are not exclusive. The Company does not undertake to update any
forward-looking statement that may be made from time to time by, or on behalf
of, the Company.
Performance Overview -- Net Income
----------------------------------
The Company's net income for the third quarter of 2000 was $1,020,000, which was
a decrease of $315,000 (23.6%) compared to net income of $1,335,000 for the
third quarter of 1999. Earnings per share for the three months ended September
30, 2000 were $0.49 compared to $0.64 for the three months ended September 30,
1999. The decrease was primarily attributable to a non-recurring net gain
resulting from the sales and donation of investment securities which occurred in
the third quarter of 1999 (see further discussion under "non-interest income"
below). In addition, the Company recorded a higher provision for loan losses in
the third quarter of 1999 due to the growth in the Company's loan portfolio and
modifications to risk factors in the Company's loan loss reserve analysis.
8
<PAGE>
Net income for the first nine months of 2000 was $2,905,000, a decrease of
$98,000 (3.3%) when compared to net income of $3,003,000 for the first nine
months of 1999. Earnings per share for the nine months ended September 30, 2000
were $1.39 compared to $1.43 for the nine months ended September 30, 1999. The
decrease was primarily attributable to the non-recurring net gain mentioned
above offset by an increase in net interest income for the nine months ended
September 30, 2000 which was a result of continued growth in loans as well as
higher yielding investment securities. The annualized return on average assets
for the Company was 1.04% for the nine months ended September 30, 2000, compared
to 1.25% for the same period last year. The annualized return on average
stockholders' equity was 12.13% for the nine months ended September 30, 2000
compared to 13.60% for the comparable period in 1999. The 2000 returns have also
been impacted by start-up costs for the trust department and costs related to
the mortgage operations expansion.
Total assets of $380.3 million at September 30, 2000 reflects an increase of
$38.2 million (11.2%) from year-end 1999 and an increase of $44.9 million
(13.4%) over September 30, 1999. Total assets at December 31, 1999 included
higher cash and federal funds sold balances in anticipation of funding any Year
2000 cash needs. These funds were reduced in early 2000 and invested in higher
yielding investment securities. The growth in total assets has been largely due
to growth in the loan portfolio. Total loans at September 30, 2000 were $265.7
million which represented an increase of $30.3 million (12.9%) from December 31,
1999 and an increase of $34.2 million (14.8%) from September 30, 1999.
Total deposits have grown $16.1 million (5.7%) since December 31, 1999 and $28.5
million (10.5%) since September 30, 1999. Given the slower growth rate in
deposits than loans, the Company has increased its securities sold under
repurchase agreements and advances from the Federal Home Loan Bank. The balance
of securities sold under repurchase agreements has increased $16.6 million
(146.9%) from December 31, 1999 and $9.5 million (51.6%) since September 30,
1999. Advances from the Federal Home Loan Bank have increased by $2.0 million
since December 31, 1999 and $3.0 million since September 30, 1999.
Net Interest Income
-------------------
Net interest income increased $477,000 (14.1%) in the third quarter of 2000
compared to the third quarter of 1999 and $1,413,000 (14.4%) during the first
nine months of 2000 compared to the same period in 1999. The increase in both
the three-month and nine-month periods is due primarily to an increase in
interest income resulting from an increase in the volume of loans for the nine-
month period ended September 30, 2000 as well as higher interest rates on new
loans and variable rate loans tied to prime. Interest earning assets increased
$38.5 million (12.17%) over December 31, 1999. Loans, historically the highest
yielding component of interest earning assets, increased $30.7 million (12.8%)
over December 31, 1999. Investment securities increased $11.5 million (17.0%)
over December 31, 1999.
9
<PAGE>
The increase in interest income was offset by an increase in interest expense
for both the three month and nine month periods. The increase in interest
expense was a result of increases in interest bearing deposit balances of $11.2
million (4.7%) since December 31, 1999 coupled with higher interest rates. In
addition, higher volumes of other borrowings to fund loan growth contributed to
the increase in interest expense.
The Company's net interest margin increased from 4.19% for the nine months ended
September 30, 1999 to 4.27% for the nine months ended September 30, 2000 for the
reasons noted above.
Non-interest Income
-------------------
Non-interest income decreased $1.2 million (51.0%) compared to the three month
period ended September 30, 1999 and $1.4 million (32.3%) compared to the nine
month period ended September 30, 1999. The decrease in non-interest income was
attributable to a non-recurring gain on the sale of 223,500 shares and donation
of 125,000 shares of Towne Services, Inc. common stock to Georgia Bank
Foundation, Inc. in the third quarter of 1999. The Company recognized a gain of
$1.8 million on the sale and donation of the common stock which was offset by a
loss on the sale of other investment securities of $291,000. The other
investment securities were sold to allow the Company to reinvest in higher
yielding investment securities. Additionally, the Company has experienced
increases in service charges and fees on deposits of $68,000 (9.9%) over third
quarter 1999 and $102,000 (5.2%) over the nine-month period ended September 30,
1999 due to increases in volumes of deposit accounts. The gain on sale of loans
increased $197,000 (120.1%) over the third quarter 1999 and $7,000 (1.2%) over
the nine month period ended September 30, 1999 which is attributable to the
expansion of mortgage operations in June 2000 and the resulting increase in
mortgage loan originations. Also, miscellaneous income increased $22,000 (42.7%)
over third quarter 1999 and $53,000 (28.3%) over the nine-month comparable 1999
period. These increases are primarily attributable to increases in retail
investment income of $14,000 over the third quarter of 1999 and $29,000 over the
nine-month comparable 1999 period.
10
<PAGE>
Non-interest Expense
--------------------
Non-interest expense decreased $36,000 (1.1%) from the third quarter of 1999 and
increased $409,000 (4.8%) over the first nine months of 1999. Salary and
benefits expense increased $350,000 (21.9%) in the third quarter of 2000
compared to the third quarter of 1999 and increased $662,000 (14.5%) for the
nine month period ended September 30, 2000 when compared to the nine months
ended September 30, 1999. The increases in salary and benefits expense for both
the quarter and nine-month period are the result of the establishment of a trust
department in late March and the expansion of the mortgage department in June
and the continued expansion in the Company's local market that is reflected in
additions to staff. Commissions that are based upon production, such as the
mortgage and retail investment functions, have increased over the comparable
1999 quarter and nine-month period due to increased sales production in these
areas. Moderate increases in occupancy expense of $39,000 (9.4%) over the third
quarter of 1999 and $41,000 (3.3%) over the comparable nine months of 1999
resulted from the Company utilizing existing owned facilities for the trust and
mortgage operations expansion and for other staff additions. The decrease in
other operating expenses of $425,000 (33.5%) for the three months ended
September 30, 2000 and $294,000 (10.9%) for the nine months ended September 30,
2000 is primarily a result of the donation expense of $480,000 recognized in the
third quarter of 1999 in conjunction with the donation of Towne Services, Inc.
common stock to Georgia Bank Foundation, Inc.
Income Taxes
------------
Income taxes in the third quarter of 2000 totaled $527,000, an increase of
$66,000 over the third quarter of 1999 and a decrease of $18,000 from the
comparable nine month period in 1999. The effective tax rate for the nine
months ended September 30, 2000 and 1999 was 34.1% and 34.7%, respectively.
Income taxes are provided in interim periods based on the estimated effective
tax rate expected to be applicable for the full fiscal year.
Asset Quality
-------------
The table on page 14 shows the current and prior period amounts of non-
performing assets. Non-performing assets were $2.0 million at September 30,
2000, compared to $1.2 million at December 31, 1999 and $2.1 million at
September 30, 1999. The ratio of non-performing assets to total loans and other
real estate was 0.75% at September 30, 2000, compared to 0.50% at December 31,
1999 and 0.89% at September 30, 1999. The control and monitoring of non-
performing assets continues to be a priority of management.
Loans past due 90 days or more and still accruing were $31,000 at September 30,
2000 compared to $44,000 at December 31, 1999 and $25,000 at September 30, 1999.
11
<PAGE>
Additions to the allowance for loan losses are made periodically to maintain the
allowance at an appropriate level based upon management's analysis of potential
risk in the loan portfolio. The amount of the loan loss provision is determined
by an evaluation of the level of loans outstanding, the level of non-performing
loans, historical loan loss experience, delinquency trends, the amount of actual
losses charged to the allowance in a given period, and an assessment of economic
conditions. A provision for losses in the amount of $250,000 was charged to
expense for the quarter ended September 30, 2000 compared to $591,000 for the
quarter ended September 30, 1999. At September 30, 2000, the ratio of
allowance for loan losses to total loans was 1.48% compared to 1.50% at December
31, 1999 and 1.47% at September 30, 1999. The allowance for loan losses was
slightly lower at September 30, 2000 compared to December 31, 1999 due to an
increase in charge-offs during the third quarter of 2000. Management considers
the current allowance for loan losses appropriate based upon its analysis of the
potential risk in the portfolio, although there can be no assurance that the
assumptions underlying such analysis will continue to be correct.
Liquidity and Capital Resources
-------------------------------
The Company's liquidity remains adequate to meet operating and loan funding
requirements. The loan to deposit ratio at September 30, 2000 was 90.14%
compared to 84.43% at December 31, 1999 and 86.99% at September 30, 1999. The
increasing level of the loan to deposit ratio reflects that loans continue to
grow at a faster rate than deposits as noted previously. As a result, the
Company has utilized borrowings from the Federal Home Loan Bank and securities
sold under repurchase agreements to fund additional growth. At September 30,
2000, the Company had an additional $7.0 million available on its advances from
the Federal Home Loan Bank.
Stockholders' equity to total assets was 8.53% at September 30, 2000 compared to
8.72% at December 31, 1999. This decrease reflects the growth of the Company
during the first nine months of the year. The capital of the Company and the
Bank exceeded all required regulatory guidelines at September 30, 2000. The
Company's Tier 1 risk-based, total risk-based and the leverage capital ratios
were 11.48%, 12.74%, and 8.90%, respectively, at September 30, 2000. The
schedule on page 15 reflects the current regulatory capital levels in more
detail, including comparisons to the regulatory minimums.
12
<PAGE>
Effects of Inflation and Changing Prices
----------------------------------------
Inflation generally increases the cost of funds and operating overhead and to
the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction and to the same
extent as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates. In addition, inflation can increase
a financial institution's cost of goods and services purchased, the cost of
salaries and benefits, occupancy expense and similar items. Inflation and
related increases in interest rates generally decrease the market value of
investments and loans held and may adversely affect liquidity, earnings, and
stockholders' equity. Mortgage originations and refinancings tend to slow as
interest rates increase, and can reduce the Company's earnings from such
activities and the income from the sale of residential mortgage loans in the
secondary market.
13
<PAGE>
GEORGIA BANK FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands)
(Unaudited)
Nine Months Ended September 30,
------------------------------
PROFITABILITY 2000 1999
------------- ------- -------
Return on average assets * 1.04% 1.25%
Return on average equity * 12.13% 13.60%
ALLOWANCE FOR LOAN LOSSES
-------------------------
Beginning balance, January 1 $3,591 $2,715
Provision charged to expense 748 1,015
Recoveries 81 70
Loans charged off 416 343
Ending balance, September 30 $4,004 $3,457
NON-PERFORMING ASSETS September 30, 2000 December 31, 1999 September 30, 1999
---------------------
Non-accrual loans $2,000 $1,190 $2,082
Other real estate owned 17 17 17
Restructured loans -- -- --
------ ------ ------
Total non-performing $2,017 $1,207 $2,099
assets
====== ====== ======
LOANS PAST DUE 90 DAYS
OR MORE AND STILL
ACCRUING $ 31 $ 44 $ 25
====== ====== ======
* Annualized
14
<PAGE>
<TABLE>
<CAPTION>
Georgia Bank Financial Corporation
and
Georgia Bank & Trust Company
Regulatory Capital Requirements
September 30, 2000
(Dollars in Thousands)
Actual Required Excess
Amount Percent Amount Percent Amount Percent
---------------------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Georgia Bank Financial Corporation
Risk-based capital:
Tier 1 capital $33,210 11.48% 11,571 4.00% 21,639 7.48%
Total capital 36,840 12.74% 23,142 8.00% 13,698 4.74%
Tier 1 leverage ratio 33,210 8.90% 14,927 4.00% 18,283 4.90%
Georgia Bank & Trust Company
Risk-based capital:
Tier 1 capital $30,908 10.76% 11,490 4.00% 19,418 6.76%
Total capital 34,504 12.01% 22,981 8.00% 11,523 4.01%
Tier 1 leverage ratio 30,908 8.32% 14,857 4.00% 16,051 4.32%
</TABLE>
15
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company has not provided quantitative and qualitative disclosures about
market risk as required by Item 305 of Regulations S-K because it has previously
met the requirements of a small business issuer. The Company will be required to
provide this disclosure for the year ending December 31, 2000 and interim
periods subsequent to that date.
16
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
There are no material pending legal proceedings to which the Company
or any of its subsidiaries is a party or of which any of their
property is 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
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Company incorporated by
reference from the Company's registration statement on Form SB-2
filed August 20, 1997 (Registration No. 333-34037).
3.2 Bylaws of the Company (Incorporated by reference to the
Company's Form 10-SB, dated April 29, 1994).
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None
17
<PAGE>
GEORGIA BANK FINANCIAL CORPORATION
Form 10-Q Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GEORGIA BANK FINANCIAL CORPORATION
Date: November 9, 2000 By: /s/ Ronald L. Thigpen .
---------------- -----------------------------------------
Ronald L. Thigpen
Executive Vice President, Chief
Operating Officer (Duly Authorized
Officer of Registrant and Principal
Financial Officer)
18
