<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: 33-77920
The Bank Holding Company
---------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-2060134
- ---------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 W. Taylor Street, Griffin , Georgia 30224
-------------------------------------------------------------
(Address of principal executive offices)
(770) 229-2265
--------------------------------------------
(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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes 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: 556,525
Transitional Small Business Disclosure Format (Check One) Yes No X
----- -----
<PAGE>
THE BANK HOLDING COMPANY
AND SUBSIDIARIES
================================================================================
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet - June 30, 1997........................3
Consolidated Statements of Income - Three
Months Ended June 30, 1997 and 1996 and
Six Months Ended June 30, 1997 and 1996.........................4
Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1997 and 1996.............................5
Notes to Consolidated Financial Statements........................6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations..................7-11
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K..........................12
Signatures
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
THE BANK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Assets
------
<S> <C>
Cash and due from banks $ 3,642,067
Securities available-for-sale, at fair value 22,667,297
Federal funds sold 2,850,000
Mortgage loans available-for-sale 285,877
Loans 88,123,703
Less allowance for loan losses 894,762
--------------
Loans, net 87,228,941
--------------
Premises and equipment 3,692,103
Goodwill 2,277,081
Other assets 1,963,538
--------------
$ 124,606,904
==============
<CAPTION>
Liabilities, Preferred Stock and Common Stockholders' Equity
------------------------------------------------------------
<S> <C>
Deposits
Noninterest-bearing demand $ 14,857,050
Interest-bearing demand 16,987,168
Savings 5,331,461
Time, $100,000 and over 14,784,143
Other time 56,151,161
--------------
Total deposits 108,110,983
Securities sold under repurchase agreements 1,130,000
Debentures payable 76,924
Other liabilities 2,111,070
--------------
Total liabilities 111,428,977
--------------
Commitments and contingent liabilities
Redeemable 8% preferred stock, par
value $60; 50,000 shares authorized;
40,770 shares issued and outstanding 2,446,200
--------------
Common stockholders' equity
Common stock, par value $5; 10,000,000
shares authorized; 556,525 shares issued
and outstanding 2,782,625
Capital surplus 4,491,861
Retained earnings 3,610,204
Unrealized losses on securities
available-for-sale, net of taxes (152,963)
--------------
Total common stockholders' equity 10,731,727
--------------
$ 124,606,904
==============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
THE BANK HOLDING COMPANY AND SUBSIDIARIES
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 June 30, Six Months Ended June 30,
1997 1996 1997 1996
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income
Loans $ 2,368,000 $ 2,099,094 $ 4,639,585 $ 4,202,238
Taxable securities 327,593 285,043 643,370 512,684
Nontaxable securities 1,292 6,354 3,941 13,236
Federal funds sold 52,993 29,763 113,497 89,596
------------- ------------ ------------ ------------
Total interest income 2,749,878 2,420,254 5,400,393 4,817,754
------------- ------------ ------------ ------------
Interest expense
Deposits 1,244,372 1,053,832 2,441,187 2,133,777
Federal funds purchased and securities
sold under agreements to repurchase 613 7,217 652 7,217
Note payable - 13,648 - 24,407
Debentures payable 1,452 2,182 3,052 4,004
------------- ------------ ------------ ------------
Total interest expense 1,246,437 1,076,879 2,444,891 2,169,405
------------- ------------ ------------ ------------
Net interest income 1,503,441 1,343,375 2,955,502 2,648,349
Provision for loan losses 15,000 60,000 35,000 75,000
------------- ------------ ------------ ------------
Net interest income after provision
for loan losses 1,488,441 1,283,375 2,920,502 2,573,349
------------- ------------ ------------ ------------
Other income
Service charges on deposit accounts 140,636 142,473 272,536 269,247
Security transactions, net - 14,663 - 14,663
Gain on sale of mortgage loans 118,449 150,557 194,767 310,306
Other operating income 30,685 57,626 74,732 131,041
------------- ------------ ------------ ------------
289,770 365,319 542,035 725,257
------------- ------------ ------------ ------------
Other expense
Salaries and employee benefits 514,211 484,992 1,025,620 1,040,036
Equipment expense 77,278 70,460 166,711 135,983
Occupancy expense 79,236 79,976 166,912 154,328
Goodwill amortization 46,157 46,157 92,314 92,314
Other operating expenses 347,022 350,450 723,590 676,950
------------- ------------ ------------ ------------
1,063,904 1,032,035 2,175,147 2,099,611
------------- ------------ ------------ ------------
Income before income taxes 714,307 616,659 1,287,390 1,198,995
Income tax expense 276,327 227,015 502,228 456,265
------------- ------------ ------------ ------------
Net income $ 437,980 $ 389,644 $ 785,162 $ 742,730
============= ============ ============ ============
Per share of common stock
Net income $ 0.70 $ 0.55 $ 1.24 $ 1.16
============= ============ ============ ============
Dividends $ - $ - $ - $ -
============= ============ ============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
THE BANK HOLDING COMPANY AND SUBSIDIARIES
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 $ 785,162 $ 742,730
Adjustments to reconcile net income to
net cash provided by
operating activities:
Depreciation and amortization 229,662 218,703
Provision for loan losses 35,000 75,000
Provision for bond losses 25,000 -
Gain on sales of securities
available-for-sale - (14,663)
(Increase) decrease in mortgage loans
available-for-sale 1,855,631 (61,123)
Loss on sales of other real estate - 5,531
Gain on sale of premises and equipment (9,338) -
Increase in interest receivable (59,554) (41,631)
Increase in interest payable 280,167 120,026
Other operating activities 187,879 381,553
-------------- --------------
Net cash provided by operating
activities 3,329,609 1,426,126
-------------- --------------
INVESTING ACTIVITIES
Purchases of securities
available-for-sale (5,490,688) (6,488,125)
Proceeds from sales of securities
available-for-sale - 1,018,650
Proceeds from maturities of securities
available-for-sale 4,241,522 3,939,840
Net (increase) decrease in Federal
funds sold 370,000 (60,000)
Net increase in loans (7,207,433) (2,500,624)
Proceeds from sales of other real
estate - 171,814
Purchase of premises and equipment (33,484) (554,114)
Proceeds from sale of premises and
equipment 134,511 -
-------------- --------------
Net cash used in investing
activities (7,985,572) (4,472,559)
-------------- --------------
FINANCING ACTIVITIES
Net increase in deposits 3,668,926 3,163,665
Net increase in repurchase agreements 1,130,000 -
Repayment of note payable - (500,000)
-------------- --------------
Net cash provided by financing
activities 4,798,926 2,663,665
-------------- --------------
Net increase (decrease) in cash and due
from banks 142,963 (382,768)
Cash and due from banks at beginning of
period 3,499,104 3,964,825
-------------- --------------
Cash and due from banks at end of
period $ 3,642,067 $ 3,582,057
============== ==============
CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 2,164,724 $ 2,049,379
Income taxes $ 466,533 $ 344,500
NONCASH INVESTING ACTIVITIES
Real estate acquired through
foreclosure $ 167,691 $ 137,696
============== ==============
Unrealized (gains) losses on
securities available-for-sale $ (48,433) $ 315,579
============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
THE BANK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The consolidated 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, 1997 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2. EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted average
number of shares outstanding. Earnings used in the calculation are
reduced by dividends payable to preferred stockholders of $48,924 and
$97,848 for the three and six month periods ended June 30, 1997 and
1996, respectively.
NOTE 3. 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
statement of income 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 earnings per share.
6
<PAGE>
THE BANK HOLDING COMPANY AND SUBSIDIARIES
Management's Discussion and Analysis
of Financial Condition and Results of Operations
ITEM 2.
The following is management's discussion and analysis of certain significant
factors which have affected the financial position and operating results of the
Company and its bank subsidiaries, The Bank of Spalding County (Spalding) and
the First Community Bank of Henry County (Henry) during the periods included in
the accompanying consolidated financial statements.
Liquidity and Capital Resources
As of June 30, 1997, the liquidity ratios of both Banks, as determined under
guidelines established by regulatory authorities, were satisfactory.
At June 30, 1997, the capital ratios of the Company and the Banks were adequate
based on regulatory minimum capital requirements. The minimum capital
requirements and the actual capital ratios for the Company are as follows:
<TABLE>
<CAPTION>
Actual
--------------------------------
First
Community
The Bank The Bank of Bank of
Holding Spalding Henry Regulatory
Company County County Requirement
--------- -------- -------- -----------
<S> <C> <C> <C> <C>
Leverage capital ratios 7.26% 9.21% 9.43% 4.00%
Risk-based capital ratios:
Core capital 9.40 12.26 11.88 4.00
Total capital 10.36 13.48 12.61 8.00
</TABLE>
7
<PAGE>
Financial Condition
Following is a summary of the Company's balance sheets for the periods
indicated:
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996 Increase (Decrease)
---------- ------------------ --------------------------
(Dollars in Thousands) Amount Percent
------------------------------ ----------- ----------
<S> <C> <C> <C> <C>
Cash and due from banks $ 3,642 $ 3,499 $ 143 4.09 %
Securities 22,667 21,395 1,272 5.95
Federal funds sold 2,850 3,220 (370) (11.49)
Loans 87,515 82,368 5,147 6.25
Premises and equipment 3,692 3,921 (229) (5.84)
Goodwill 2,277 2,369 (92) (3.88)
Other assets 1,964 1,796 168 9.35
----------- ------------ -----------
$ 124,607 $ 118,568 $ 6,039 5.09
=========== ============ ===========
Deposits $ 108,111 $ 104,442 $ 3,669 3.51 %
Securities sold under repurchase agreements 1,130 - 1,130 100.00
Other borrowings 77 77 - -
Other liabilities 2,111 1,589 522 32.85
Preferred stock 2,446 2,446 - -
Common stockholders' equity 10,732 10,014 718 7.17
----------- ------------ -----------
$ 124,607 $ 118,568 $ 6,039 5.09
=========== ============ ===========
</TABLE>
As indicated in the above table, the Company's total assets during 1997 have
grown at a rate of 5.09%. This increase was primarily the result of loan growth
during the second quarter of 1997. The increase was funded by a growth in
deposits and use of securities sold under repurchase agreements.
8
<PAGE>
Results of Operations For The Three Months Ended June 30, 1997 and 1996 and For
The Six Months Ended June 30, 1997 and 1996
Following is a summary of the Company's operations for the periods indicated.
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
1997 1996 Increase (Decrease)
------------ ----------- --------------------------
(Dollars in Thousands) Amount Percent
---------------------------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income $ 2,750 $ 2,420 $ 330 13.64 %
Interest expense 1,247 1,077 170 15.78
Net interest income 1,503 1,343 160 11.91
Provision for loan losses 15 60 (45) (75.00)
Other income 290 366 (76) (20.77)
Other expense 1,064 1,032 32 3.10
Pretax income 714 617 97 15.72
Income taxes 276 227 49 21.59
Net income 438 390 48 12.31
<CAPTION>
Three Months Ended June 30,
----------------------------
1997 1996 Increase (Decrease)
------------ ----------- --------------------------
(Dollars in Thousands) Amount Percent
---------------------------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income $ 5,400 $ 4,818 $ 582 12.07 %
Interest expense 2,445 2,169 276 12.72
Net interest income 2,955 2,649 306 11.55
Provision for loan losses 35 75 (40) (53.33)
Other income 542 725 (183) (25.24)
Other expense 2,175 2,100 75 3.57
Pretax income 1,287 1,199 88 7.34
Income taxes 502 456 46 10.09
Net income 785 743 42 5.65
</TABLE>
As indicated in the above tables, the Company's net interest income has
increased by $160,000 and $306,000 for the three and six month periods in 1997
as compared to the same periods in 1996. The Company's net interest margin
increased slightly during the first six months of 1997 to 5.46% from 5.45% for
the previous year.
The provision for loan losses has decreased by $45,000 and $40,000 during the
second quarter and first six months of 1997, as compared to the same periods in
1996. This change is due to a decrease of $67,000 in net charge-offs for the
first six months of 1997 as compared to the previous year. The Company's reserve
for loan losses amounted to 1.02% at June 30, 1997 as compared to 1.09% at
December 31, 1996. The allowance for loan losses is maintained at a level that
is deemed appropriate by management to adequately cover all known and inherent
risks in the loan portfolio. Management's evaluation of the loan portfolio
includes a continuing review of loan loss experience, current economic
conditions which may affect the borrower's ability to pay and the underlying
collateral value of the loans.
9
<PAGE>
Information with respect to nonaccrual, past due and restructured loans at June
30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
June 30,
----------------------------
1997 1996
------------- -----------
(Dollars in Thousands)
----------------------------
<S> <C> <C>
Nonaccrual loans $ 168 $ -
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing 198 146
Restructured loans - -
Loans, now current about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms - -
Interest income that would have been recorded on nonaccrual
and restructured loans under original terms 2 -
Interest income that was recorded on nonaccrual and restructured loans - -
</TABLE>
It is the policy of the Banks to discontinue the accrual of interest income
when, in the opinion of management, collection of such interest becomes
doubtful. This status is accorded such interest when (1) there is a significant
deterioration in the financial condition of the borrower and full repayment of
principal and interest is not expected and (2) the principal or interest is more
than ninety days past due, unless the loan is both well-secured and in the
process of collection.
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.
10
<PAGE>
Information regarding certain loans and allowance for loan loss data through
June 30, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------
1997 1996
------------ ------------
(Dollars in Thousands)
----------------------------
<S> <C> <C>
Average amount of loans outstanding $ 83,289 $ 75,412
============ ============
Balance of allowance for loan losses at beginning of period $ 882 $ 868
============ ============
Loans charged off
Commercial and financial $ 1 $ -
Real estate mortgage - 68
Instalment 31 41
------------ ------------
32 109
------------ ------------
Loans recovered
Commercial and financial - -
Real estate mortgage - 16
Instalment 10 4
------------ ------------
10 20
------------ ------------
Net charge-offs 22 89
------------ ------------
Additions to allowance charged to operating expense during period 35 75
------------ ------------
Balance of allowance for loan losses at end of period $ 895 $ 854
============ ============
Ratio of net loans charged off during the period to
average loans outstanding 0.03 0.12
============ ============
</TABLE>
Other income has decreased by $76,000 and $183,000 during the second quarter and
first six months of 1997 as compared to the same periods in 1996. The changes
are due primarily to decreases in gains on sales of mortgage loans of $32,000
and $116,000, respectively.
Other operating expenses have increased by $32,000 and $75,000 during the second
quarter and the first six months of 1997 as compared to the same periods in
1996. The increases in other expenses are due primarily to increases in
equipment expenses of $31,000 and other operating expenses of $47,000 for the
first six months of 1997 as compared to the previous year.
The Company's provision for income taxes increased by $49,000 and $46,000 during
the second quarter and first six months, respectively, as compared to the same
periods in 1996 due to higher pre tax income.
The Company is not aware of any known trends, events or uncertainties 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.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
June 30, 1997
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.
THE BANK HOLDING COMPANY
BY: /s/ Charles B. Blackmon
-----------------------------------------
Charles B. Blackmon, President
(Principal Executive, Principal Financial
and Accounting Officer)
DATE:
----------------------------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 3,642,067
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,850,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 22,667,297
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 88,123,703
<ALLOWANCE> 894,762
<TOTAL-ASSETS> 124,606,904
<DEPOSITS> 108,110,983
<SHORT-TERM> 1,130,000
<LIABILITIES-OTHER> 2,111,070
<LONG-TERM> 76,924
2,446,200
0
<COMMON> 2,782,625
<OTHER-SE> 7,949,102
<TOTAL-LIABILITIES-AND-EQUITY> 124,606,904
<INTEREST-LOAN> 4,639,585
<INTEREST-INVEST> 647,311
<INTEREST-OTHER> 113,497
<INTEREST-TOTAL> 5,400,393
<INTEREST-DEPOSIT> 2,441,187
<INTEREST-EXPENSE> 3,704
<INTEREST-INCOME-NET> 2,955,502
<LOAN-LOSSES> 35,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,175,147
<INCOME-PRETAX> 1,287,390
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 785,162
<EPS-PRIMARY> 1.24
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.46
<LOANS-NON> 168,000
<LOANS-PAST> 198,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 882,000
<CHARGE-OFFS> 32,000
<RECOVERIES> 10,000
<ALLOWANCE-CLOSE> 895,000
<ALLOWANCE-DOMESTIC> 895,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
