<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________.
Commission File No. 33-52930
GF BANCSHARES, INC.
(Name of small business issuer in its charter)
Georgia 58-2016968
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
327 West Taylor Street, Griffin, Georgia 30223
----------------------------------------------
(Address of principal executive offices)
(770) 228-2786
---------------------
Issuer's telephone number
(including area code)
Securities registered under Section 12(b) of the Exchange Act:
Name on each exchange
Title of each class on which registered
None None
---- ----
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $1.00 Par Value
-------------------------------
Title of class
Check whether the issuer (1) has 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
--- ---
As of March 31, 1997, there were 946,730 shares of Common Stock issued and
outstanding. The registrant's voting stock is not regularly and actively traded
in any established market, and there are no regularly quoted bid and asked
prices for the registrant's voting stock.
1
<PAGE>
INDEX
<TABLE>
<CAPTION>
PART 1. FINANCIAL INFORMATION PAGE
<C> <S> <C>
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of
March 31, 1997 and June 30, 1996 3
Consolidated Statements of Income for the Three
Months and Nine Months Ended March 31,
1997 and 1996 4
Consolidated Statements of Cash Flows for the
Three Months and Nine Months Ended March 31,
1997 and 1996 5-6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Interim
Financial Condition and Results of Operations
for the Three Months and Nine Months Ended
March 31, 1997, compared to the Three Months
and Nine Months Ended March 31, 1996 11-14
PART II. OTHER INFORMATION
Schedules Omitted:
All schedules, other than those indicated above,
and below are omitted because of the absence of
the conditions under which they are required or
because the information is included in the
financial statements or related notes. 15
Signature Page: 17
</TABLE>
2
<PAGE>
Item 1. Financial Statements
GF BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION> March 31, June 30,
1997 1996
-------------- ---------------
ASSETS
<S> <C> <C>
Cash and due from banks $738,623 $813,597
Interest-bearing deposits in other banks 2,664,172 5,002,348
Investment securities available for sale 3,372,137 3,265,107
Federal Home Loan Bank stock 944,200 944,200
Loans held for sale 3,717,119 4,767,777
Loans, net 81,954,829 75,836,457
Premises and equipment, net 1,109,384 1,234,811
Real estate owned, net 647,881 500,015
Accrued interest receivable 1,264,854 1,215,952
Other assets 515,742 578,803
-------------- --------------
TOTAL ASSETS $96,928,942 $94,159,067
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
Noninterest-bearing demand $1,614,501 $1,315,932
Interest-bearing demand and money market 17,366,473 19,237,672
Savings 3,631,370 3,887,485
Time 55,799,839 54,048,892
-------------- --------------
Total Deposits 78,412,184 78,489,981
Federal Home Loan Bank advances 4,604,167 1,250,000
Unremitted funds from borrowers for taxes and insurance 43,254 281,677
Unremitted funds on loans serviced for others 583,561 575,235
Accrued interest payable 303,625 297,379
Other liabilities 444,389 538,503
-------------- --------------
TOTAL LIABILITIES 84,391,180 81,432,775
-------------- --------------
<CAPTION>
STOCKHOLDERS' EQUITY
<S> <C> <C>
Preferred stock, 2,000,000 shares authorized, none issued and
outstanding 0 0
Common stock, par value $1.00; 8,000,000 shares authorized,
946,730 and 895,946 shares issued and outstanding 946,730 895,946
Surplus 7,131,579 6,385,508
Retained earnings 4,446,989 5,438,940
Unrealized gains (losses) on investment securities available for sale 12,464 5,898
-------------- --------------
TOTAL STOCKHOLDERS' EQUITY 12,537,761 12,726,292
-------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $96,928,942 $94,159,067
============== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
GF BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months For the nine months
ended March 31, ended March 31,
--------------- ---------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INTEREST INCOME
Loans, including fees $1,981,693 $1,767,596 $5,933,961 $5,238,689
Investment securities 66,256 86,721 198,962 383,889
Interest-bearing deposits in other banks 50,908 134,097 178,633 426,277
---------- ---------- ---------- ----------
TOTAL INTEREST INCOME 2,098,857 1,988,414 6,311,556 6,048,855
---------- ---------- ---------- ----------
INTEREST EXPENSE
Interest-bearing demand and money market deposits 126,949 134,090 402,067 389,779
Savings deposits 26,878 29,619 83,416 89,233
Time deposits 808,239 833,701 2,400,378 2,632,387
Federal Home Loan Bank advances 80,110 0 240,862 0
---------- ---------- ---------- ----------
TOTAL INTEREST EXPENSE 1,042,176 997,410 3,126,723 3,111,399
---------- ---------- ---------- ----------
NET INTEREST INCOME 1,056,681 991,004 3,184,833 2,937,456
PROVISION FOR LOAN LOSSES 15,000 9,550 52,000 9,550
---------- ---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR 1,041,681 981,454 3,132,833 2,927,906
LOAN LOSSES ---------- ---------- ---------- ----------
OTHER INCOME
Service charges and fees 108,060 115,792 331,035 347,030
Gain (Loss) on loan production office operations (48,031) (62,936) 104,737 (92,317)
Other income 10,404 11,307 33,211 42,021
---------- ---------- ---------- ----------
TOTAL OTHER INCOME 70,433 64,163 468,983 296,734
---------- ---------- ---------- ----------
OTHER EXPENSE
Salaries and employee benefits 384,887 399,684 1,133,833 1,138,819
Net occupancy expense 82,395 67,814 246,858 217,497
Other expense 227,301 267,332 1,277,721 762,911
---------- ---------- ---------- ----------
TOTAL OTHER EXPENSE 694,583 734,830 2,658,412 2,119,227
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 417,531 310,787 943,404 1,105,413
INCOME TAX EXPENSE 141,800 114,300 318,100 390,346
---------- ---------- ---------- ----------
NET INCOME $275,731 $196,487 $625,304 $715,067
========== ========== ========== ==========
EARNINGS PER SHARE $0.28 $0.20 $0.64 $0.74
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 975,833 969,290 974,180 967,946
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
<TABLE>
<CAPTION>
GF BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months For the nine months
ended March 31, ended March 31,
---------------- ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $275,731 $196,487 $625,304 $715,067
Adjustments to reconcile net income to net cash provided (used) by
operating activities:
Depreciation 49,982 69,239 176,550 231,876
Provision for loan losses 15,000 9,550 52,000 9,550
(Increase) decrease in mortgage loans held for sale 2,498,694 82,828 1,050,658 35,049
Decrease in other assets (40,125) (476,897) 63,061 (473,718)
(Increase) Decrease in interest receivable (96,829) (226,187) (48,902) (70,613)
Decrease in interest payable 23,905 (7,046) 6,246 (35,371)
Increase (Decrease) in unremitted funds on loans
serviced for others (27,449) 60,640 8,326 (66,424)
Decrease in other liabilities (58,693) (256,521) (94,114) 56,202
------------ ------------ ------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 2,640,216 (547,907) 1,839,129 401,618
------------ ------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in interest-bearing time deposits in other banks 0 1,500,000 0 5,500,000
(Increase) Decrease in investment securities available for sale 27,566 0 (107,030) (1,500,000)
Proceeds from maturities of investment securities available for sale 2,898 2,499,997 31,226 2,499,997
Proceeds from sales of investment securities available for sale 0 0 0 0
Proceeds from maturities of investment securities held to maturity 0 0 0 2,500,000
Net increase in loans (216,332) (1,387,717) (6,338,820) (4,616,726)
Purchases of premises and equipment (19,808) 326,333 (55,200) 237,984
------------ ------------ ------------ ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (205,676) 2,938,613 (6,469,824) 4,621,255
------------ ------------ ------------ ------------
</TABLE>
(Continued)
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE>
GF BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
--------------------
CASH FLOWS FROM FINANCING ACTIVITIES 1997 1996
---- ----
<S> <C> <C>
Net increase (decrease) in demand, money market and savings accounts ($1,035,089) ($246,173)
Net increase (decrease) in time deposits 1,449,357 (2,602,894)
Increase (Decrease) in FHLB Advances (1,545,833) 0
Net increase (decrease) in unremitted funds for taxes and insurance (569) 180,162
Proceeds from exercise of stock options 0 0
Cash dividends paid (142,009) (179,189)
------------ -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (1,274,143) (2,848,094)
------------ -----------
NET (INCREASE) DECREASE IN CASH AND CASH EQUIVALENTS 1,160,397 (457,388)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 2,242,398 7,584,382
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,402,795 $7,126,994
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID:
Interest $1,042,175 $999,410
============ ===========
Income taxes $163,000 $209,854
============ ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Acquisition of real estate in settlement of loans $0 $73,971
============ ===========
Transfer of investment securities to available for sale $0 $0
============ ===========
For the nine months
ended March 31,
<CAPTION> -------------------
CASH FLOWS FROM FINANCING ACTIVITIES 1997 1996
---- ----
<S> <C> <C>
Net increase (decrease) in demand, money market and savings accounts ($1,828,745) $530,709
Net increase (decrease) in time deposits 1,750,947 (4,573,330)
Increase (Decrease) in FHLB Advances 3,354,167 0
Net increase (decrease) in unremitted funds for taxes and insurance (238,423) 45,634
Proceeds from exercise of stock options 34,421 27,093
Cash dividends paid (854,822) (764,639)
------------ -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 2,217,545 (4,734,533)
------------ -----------
NET (INCREASE) DECREASE IN CASH AND CASH EQUIVALENTS (2,413,150) 288,340
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,815,945 6,838,654
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,402,795 $7,126,994
============ ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID:
Interest $3,126,723 $3,113,399
============ ===========
Income taxes $407,500 $485,900
============ ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Acquisition of real estate in settlement of loans $193,139 $181,646
============ ===========
Transfer of investment securities to available for sale $0 $2,513,838
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE>
GF 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 10-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 March 31, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ended June
30, 1997. For further information, refer to the consolidated financial
statements and footnotes thereto included in GF Bancshares, Inc.'s (the
"Company") Annual Report on Form 10-K for the fiscal year ended June 30, 1996.
NOTE B
Earnings Per Share
Earnings per share and common equivalent shares are calculated by dividing net
income by the weighted average number of common and common equivalent shares
outstanding after consideration of the dilutive effect of stock options and
stock dividends declared but not paid, as of the date of issuance of financial
statements.
NOTE C
Reclassifications
Certain items in prior fiscal year-end financial statements have been
reclassified in order to be in conformity with the current fiscal year's
statement presentation. These reclassifications had no material effect on the
financial statements taken as a whole.
NOTE D
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 has
implemented SFAS 121 in fiscal 1997. The provisions of SFAS 121 require the
Company to review long-lived
7
<PAGE>
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. The adoption has not had
a material impact on the Company's earnings in the current fiscal year.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Mortgage Servicing Rights", as an
amendment to SFAS 65. The Company has implemented SFAS 122 in fiscal 1997. The
provisions of SFAS 122 eliminate the accounting distinction between rights to
service mortgage loans that are acquired through loan origination (and
subsequently sold) and those acquired through purchase. The adoption has not
had a material impact on the Company's earnings in the current fiscal year.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation." The Company has implemented SFAS 123 in fiscal 1997. SFAS 123
established 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. Based on the
provisions of the Company's stock option plans, the Company has determined that
there is no material effect from adoption of SFAS 123.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." The Company is
required to implement SFAS 125 in fiscal 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.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997. This statement supersedes APB Opinion 15, "Earnings Per Share" and
simplifies earnings per share computations by replacing Primary EPS with Basic
EPS, which shows no effect from dilutive securities. Entities with complex
capital structures will have to show Diluted EPS, which is similar to the fully
- - diluted EPS computation under APB 15. The adoption of SFAS 128 is not
expected to have a significant impact on the financial condition or results of
operations of the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 129 (SFAS 129), "Disclosure of Information About
Capital Structure." SFAS 129 is effective for financial statements issued for
periods ending after December 15, 1997. This statement consolidates existing
disclosure requirements on capital structure. The adoption of SFAS 129 is not
expected to have a significant impact on the financial condition or results of
operations of the Company.
8
<PAGE>
NOTE E
Recent Legislation
In August of 1996, President Clinton signed into law a bill containing relief
for savings institutions from recapture of bad debt reserves. The law's
provisions are effective for tax years beginning after December 31, 1995, which
impacts the Company's fiscal year ending June 30, 1997. The new law eliminates
the future use of the Internal Revenue Code Section 593 reserve method of
accounting for bad debts by savings institutions; forgives recapture of pre-1988
base year reserves; and requires the recapture of post-1987 reserves ratably
over a six-year period beginning with the first post-1995 taxable year. The
onset of recapture can be delayed for one or two years if an institution meets a
residential loan originations requirement in effect in 1996 and 1997. To
qualify for a deferral each year, an institution will be required to lend as
much in dollar terms on residential real estate as in the average of the most
recent six years. The residential loan calculation does not include refinancing
and home equity loans. The Company has not yet determined whether it qualifies
for this deferral. However, it has determined that there will not be a material
effect on earnings resulting from the recapture, due to the provision of
deferred taxes in the years when the tax provisions for bad debts exceeded
actual net loan chargeoffs.
In September of 1996, President Clinton signed into law a bill which provides
for the ultimate merger of the Savings Association Insurance Fund ("SAIF") into
the larger and fully capitalized Bank Insurance Fund ("BIF"). This legislation
requires the Company and all other depository institutions having SAIF-insured
deposits to pay a one-time assessment to recapitalize the SAIF, which had become
undercapitalized due to claims against the fund. The obligations to pay the
special assessment became fixed on September 30, 1996 and were paid on November
27, 1996. On September 30, 1996, the Company recorded a charge to earnings in
the amount of $552,850 to provide for this obligation. This charge is therefore
reflected in the Financial Statements, to which these notes are attached, and
had a negative effect on earnings for the nine months ended March 31, 1997.
The deposit insurance expense recorded for the nine months ended March 31, 1997
was $658,221, reflecting the one-time assessment, and the reccurring premium
expense of $105,371. However, the legislation also provides for a reduction in
the recurring insurance premiums on SAIF-insured deposits following the
recapitalization. Based on its risk category, the Company anticipates a
significant reduction in its recurring deposit insurance expense in the future.
9
<PAGE>
NOTE F
Supplemental Financial Data
Components of other expense in excess of 1% of total income are as follows:
<TABLE>
<CAPTION>
<S> <C>
FDIC insurance premiums $658,221
Data Processing $164,688
Telephone & Telegraph $103,047
Stationery, printing & supplies $ 71,914
Other Taxes $ 67,941
</TABLE>
10
<PAGE>
Item 2. Management's Discussion and Analysis of Interim
Financial Condition and Results of Operations for the
Three Months and Nine Months Ended March 31, 1997,
compared to the Three Months and Nine Months Ended
March 31, 1996
INTERIM FINANCIAL CONDITION
GF Bancshares, Inc. (the "Company"), reported total assets of $96,929,000 as of
March 31, 1997, compared to $94,159,000 at June 30, 1996. The most significant
change in the composition of the assets was an increase in net loans from
$75,836,000 to $81,955,000. The increase was primarily in the area of
construction loans and commercial loans. Loans held for sale decreased from
$4,768,000 at June 30, 1996, to $3,717,000 at March 31, 1997. The increase in
net loans was funded from a reduction in overnight investments, which declined
from $5,002,000 to $2,664,000, and from an increase in borrowings from the
Federal Home Loan Bank, up from $1,250,000 to $4,604,000. Deposits decreased
slightly from $78,490,000 at June 30, 1996, to $78,412,000 at March 31, 1997.
A result of the loan growth experienced from June 30, 1996, to March 31, 1997,
coupled with the lack of deposit growth, was an increase in the bank's loan
(including loans held for sale) to deposit ratio, from 103% to 109%. Management
has embarked on a course to reverse this trend through controlled loan growth
and emphasis on deposit growth. The Company's liquid assets as a percentage of
deposits were 6.49% at March 31, 1997, down from 8.34% at June 30, 1996.
Management analyzes projected loan fundings and payoffs, deposit trends, and
other market conditions as they relate to levels of cash, liquid investments,
and the funding line the Company has available from the Federal Home Loan Bank
("FHLB"). As of March 31, 1997, the Company had drawn $4,604,000 against the
FHLB line, of an available $20,000,000. Based on this analysis, Management
believes that the Company has adequate liquidity to meet its short-term
operating requirements. However, no assurances are given in this regard.
The Company measures its capital adequacy against three standards: 1) tangible
capital, expressed as a percentage of adjusted total assets, of at least 1.5%;
2) core capital, expressed as a percentage of adjusted total assets, of at least
3.0%, and: 3) risk-based capital, expressed as a percentage of risk-weighted
assets, of at least 8.0%. As of March 31, 1997, the Company's capital positions
were as follows:
11
<PAGE>
<TABLE>
<CAPTION>
Minimum
Capital Regulatory Excess
Requirement Capital Capital Ratio
<S> <C> <C> <C> <C>
Tangible Capital $1,454,000 $10,795,000 $9,341,000 11.14%
Core Capital $2,907,000 $10,795,000 $7,888,000 11.14%
Risk-based Capital $5,961,000 $11,332,000 $5,371,000 15.21%
</TABLE>
Non-performing assets declined to 2.06% of total loans and real estate acquired
through foreclosure ("OREO") at March 31, 1997, compared to 2.45% at June 30,
1996:
<TABLE>
<CAPTION>
March 31, 1997 June 30, 1996
--------------------------------
<S> <C> <C>
Nonaccrual loans $ 431,000 $ 227,000
Loans 90 days past due - 451,000
Restructured loans 691,000 706,000
OREO 652,000 500,000
------- -------
Total non-performing assets (A) $ 1,774,000 $ 1,884,000
Total loans (gross) and OREO (B) $86,324,000 $77,024,000
A/B 2.06% 2.45%
</TABLE>
The allowance for loan losses at March 31, 1997 was $725,000, compared to
$688,000 at June 30, 1996. The allowance at March 31, 1997, represented .84% of
total loans, compared to .90% at June 30, 1996. The allowance at March 31, 1997
represented 64.62% of non-performing loans (non-performing assets less OREO),
compared to 49.71% at June 30, 1996. Analysis of allowance for loan losses at
March 31, 1997:
<TABLE>
<S> <C>
Balance at June 30,1996 $688,000
--------
Chargeoffs:
Commercial -
Real estate mortgage (7,000)
Consumer (8,000)
--------
Total (15,000)
--------
Recoveries
Commercial -
Real estate mortgage -
Consumer -
Total -
Net chargeoffs (15,000)
--------
Provisions charged to income 52,000
--------
Balance at March 31, 1997 $725,000
--------
</TABLE>
12
<PAGE>
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
further periods will not exceed the allowance for loan losses, or that
additional allocations to the allowance will not be required.
RESULTS OF OPERATIONS
Three Months Results
The Company's net income was $275,000 for the three months ended March 31, 1997,
compared to net income of $196,000 for the three months ended March 31, 1996.
The improvement was due primarily to increased net interest income, reduced loss
from loan production office operations and reduced operating expense.
The Company's net interest income increased to $1,057,000 for the three months
ended March 31, 1997, compared to $991,000 in the same period in the prior year.
Interest on loans increased from $1,768,000 in the prior year, to $1,982,000 in
the current year, while interest on investment securities and interest-bearing
deposits declined from $221,000 in the prior year, to $117,000 in the current
year. These changes reflect increased loan volume, funded by reductions in
investment securities and interest bearing deposits. The higher yield on loans
resulted in the net improvement of $111,000 in total interest income. Interest
expense increased from $997,000 in the prior year, to $1,042,000 in the current
period, reflecting interest on increased Federal Home Loan Bank advances, offset
in part by reduced interest on deposits.
The Company provided $15,000 for loan losses in the current period, compared to
a provision of $10,000 in the prior year. There were no net chargeoffs in the
current period.
The Company's other income increased to $70,000 in the current quarter, compared
to $64,000 in the same quarter of the prior year. The increase is attributable
to improved results from loan production office operations.
The Company's other expenses decreased to $695,000 in the current period from
$735,000 in the same period of the prior year. The decrease was in salaries and
benefits and other expenses, offset in part by increased occupancy cost.
13
<PAGE>
Nine Months Results
The Company's net income was $625,000 for the nine months ended March 31, 1997,
compared to net income of $715,000 for the nine months ended March 31, 1996.
The primary reason for this change was a charge to earnings of $553,000 to cover
a special one-time assessment for deposit insurance by the F.D.I.C. to
recapitalize the Savings Association Insurance Fund ("SAIF"). This assessment
and charge are discussed more fully in the notes to the accompanying financial
statements. Without regard to the after-tax effect of the charge of $345,000,
the Company earned $970,000 for the current period, compared to $715,000 in the
same period in the prior year. The improvement was due primarily to increased
net interest income and increased income from loan production office operations,
primarily gains from sale of loans.
The Company's net interest income increased to $3,185,000 for the nine months
ended March 31, 1997, compared to $2,937,000 in the same period in the prior
year. Interest on loans increased from $5,239,000 in the prior year, to
$5,934,000 in the current year, while interest on investment securities and
interest-bearing deposits declined from $810,000 in the prior year, to $378,000
in the current year. These changes reflect increased loan volume, funded by
reductions in investment securities and interest-bearing deposits. The higher
yield on loans resulted in the net improvement of $263,000 in total interest
income. Interest expense increased from $3,111,000 in the prior year, to
$3,127,000 in the current period, reflecting interest on Federal Home Loan Bank
advances in the current year, offset in part by reduced interest on deposits due
to lower rates.
The Company provided $52,000 for loan losses in the current period, compared to
$10,000 in the prior year. Net chargeoffs in the current period were $15,000.
The Company's other income increased to $469,000 in the current period, compared
to $297,000 in the prior year. The increase is attributable to improved income
from loan production office operations.
The Company's other expenses increased to $2,658,000 in the current period from
$2,119,000 in the same period of the prior year. As discussed above, all of
this increase of $539,000 was due to the one-time SAIF assessment of $553,000.
The nominal decrease otherwise reflects cost containment measures undertaken by
management.
14
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8-K
Exhibit 11 Statement Re: Computation of Per Share
Earnings attached.
15
<PAGE>
GF BANCSHARES, INC.
AND SUBSIDIARY
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
($ in thousands, except
per share data) For the Three Months Ended For the Nine Months Ended
<S> <C> <C> <C> <C>
3/31/97 3/31/96 3/31/97 3/31/96
------- ------- ------- -------
Net income used for
primary share amounts $275 $196 $625 $715
---- ---- ---- ----
Weighted average of
common shares
outstanding 947 941 945 939
Add common stock equivalents
determined using the "Treasury
Stock" method representing
shares issuable upon exercise
of director and employee
stock options using average
annual market price 29 28 29 28
-- -- -- --
Weighted average number
of shares used in calculation
of primary earnings per share 976 969 974 967
--- --- --- ---
Primary earnings per share $.28 $.20 $.64 $.74
---- ---- ---- ----
</TABLE>
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GF BANCSHARES, INC
(REGISTRANT)
By:
----------------------------------
Arthur H. Hammond, E.V.P./C.F.O.
By:
----------------------------------
Ron J. Franklin, President/C.E.O.
Date: May 14, 1997
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 738,623
<INT-BEARING-DEPOSITS> 2,664,172
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 3,372,137
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 86,396,948
<ALLOWANCE> 725,000
<TOTAL-ASSETS> 96,928,942
<DEPOSITS> 78,412,184
<SHORT-TERM> 2,000,000
<LIABILITIES-OTHER> 1,374,829
<LONG-TERM> 2,604,167
0
0
<COMMON> 946,730
<OTHER-SE> 11,591,031
<TOTAL-LIABILITIES-AND-EQUITY> 96,928,942
<INTEREST-LOAN> 5,933,961
<INTEREST-INVEST> 198,962
<INTEREST-OTHER> 178,633
<INTEREST-TOTAL> 6,311,556
<INTEREST-DEPOSIT> 2,885,861
<INTEREST-EXPENSE> 3,126,723
<INTEREST-INCOME-NET> 3,184,833
<LOAN-LOSSES> 52,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,658,412
<INCOME-PRETAX> 943,404
<INCOME-PRE-EXTRAORDINARY> 943,404
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 625,304
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
<YIELD-ACTUAL> 4.19
<LOANS-NON> 431,000
<LOANS-PAST> 0
<LOANS-TROUBLED> 691,000
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 688,000
<CHARGE-OFFS> 15,000
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 725,000
<ALLOWANCE-DOMESTIC> 725,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
