SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File Number 0-25076
GILMER FINANCIAL SERVICES, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 75-2561513
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification or
organization) Number)
218 W. Cass Street, Gilmer, Texas 75644
(Address of principal executive offices)
(903) 843-5525
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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 [ ]
Transitional Small Business Disclosure Format (check one) :
Yes [ ] No [X]
State the number of Shares outstanding of each of the issuer's classes of
common equity, as of the latest date:
As of May 21, 1998, there were 195,755 shares of the Registrant's common
stock $.01 par value issued and 191,258 shares outstanding.
<PAGE>
GILMER FINANCIAL SERVICES, INC
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
AT MARCH 31, 1998 AND JUNE 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 439,710 $ 532,292
Interest bearing deposits 2,138,513 1,364,605
Investment securities
Available for sale 735,000 0
Held to maturity 7,991 316,066
Mortgage-backed securities
Available for sale 4,355,373 4,841,083
Held to maturity 9,326,652 10,218,465
Loans receivable, net 23,722,019 23,407,057
Accrued interest receivable 461,739 348,643
Real estate and other assets
acquired in settlement of loans,net 153,816 98,690
Federal Home Loan Bank stock, at cost 513,100 495,100
Office properties and equipment, at cost 253,093 247,604
Federal income taxes 39,319 54,154
Prepaid expenses and other assets 97,246 246,870
------------ ------------
Total assets $ 42,243,571 $ 42,170,629
============ ============
LIABILITIES
Deposits $ 29,163,315 $ 29,106,164
Accrued interest payable 9,824 7,452
Advances by borrowers for taxes and ins 369,176 487,714
Accounts payable and accrued expenses 273,137 215,897
Advances from Federal Home Loan Bank 8,585,000 8,550,000
------------ ------------
Total liabilities 38,400,452 38,367,227
STOCKHOLDERS' EQUITY
Preferred Stock; $.01 par value; 2,000,000 shares
authorized; none issued
Common stock, $.01 par value, 2,000,000 shares
authorized; 195,755 shares issued 1,958 1,958
Additional paid in capital 1,624,968 1,624,968
Retained earnings 2,426,804 2,466,014
Less: Shares acquired by Employee Stock Ownership Plan (105,705) (117,450)
Shares acquired by Recognition and Retention Plan (33,180) (41,900)
Treasury Stock (4,497 shares, at cost) (56,527) (56,527)
Net unrealized loss on decline in market
value of securities available for sale (15,199) (73,661)
------------ ------------
Total stockholders' equity 3,843,119 3,803,402
------------ ------------
Total liabilities and stockholders' equity $ 42,243,571 $ 42,170,629
============ ============
</TABLE>
See accompanying notes to the consolidated financial statements.
2
<PAGE>
GILMER FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
--------- ---------
INTEREST INCOME
Loans $ 537,253 $ 509,390
Investment securities 5,306 5,493
Mortgage-backed securities 232,746 248,278
Other interest-earning assets 15,492 17,820
--------- ---------
Total interest income 790,797 780,981
INTEREST EXPENSE
Deposits 385,318 346,334
Interest on FHLB advances 129,475 127,202
--------- ---------
Total interest expense 514,793 473,536
--------- ---------
Net interest income 276,004 307,445
Provision for loan losses 10,500 6,000
--------- ---------
Net interest income after provision for
loan losses 265,504 301,445
NONINTEREST INCOME
Gain (loss) on sale of interest-bearing assets 10,283 (1,071)
Loan origination & commitment fees 10,009 16,599
Loan servicing fees 16,935 21,229
Income (loss) from real estate operations (88) (1,123)
Mortgage servicing rights 2,483 1,570
Other income 26,813 23,119
--------- ---------
Total noninterest income 66,435 60,323
NONINTEREST EXPENSE
Compensation and benefits 158,375 132,879
Occupancy and equipment 12,493 19,299
Federal insurance premium 4,432 1,442
Other expense 225,996 93,231
--------- ---------
Total noninterest expense 401,296 246,851
--------- ---------
Income (loss) before taxes (69,357) 114,917
INCOME TAX EXPENSE (23,414) 40,946
--------- ---------
Net income (loss) $ (45,943) $ 73,971
========= =========
EARNINGS (LOSS) PER SHARE
Basic $ (.25) $ .40
========= =========
Diluted $ (.24) $ .40
========= =========
See accompanying notes to consolidated financial statements.
3
<PAGE>
GILMER FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
----------- -----------
INTEREST INCOME
Loans $ 1,622,194 $ 1,462,093
Investment securities 15,322 17,751
Mortgage-backed securities 694,356 705,185
Other interest-earning assets 62,468 50,528
----------- -----------
Total interest income 2,394,340 2,235,557
INTEREST EXPENSE
Deposits 1,188,411 979,193
Interest on FHLB advances 365,149 382,202
----------- -----------
Total interest expense 1,553,560 1,361,395
----------- -----------
Net interest income 840,780 874,162
Provision for loan losses 182,500 28,000
----------- -----------
Net interest income after provision for
loan losses 658,280 846,162
NONINTEREST INCOME
Gain (loss) on sale of interest-bearing assets 10,601 (4,300)
Loan origination & commitment fees 37,320 54,286
Loan servicing fees 57,230 58,038
Income (loss) from real estate operations 985 0
Mortgage servicing rights 7,031 5,510
Other income 70,055 54,802
----------- -----------
Total noninterest income 183,222 168,336
NONINTEREST EXPENSE
Compensation and benefits 447,729 400,748
Occupancy and equipment 32,959 45,072
Federal insurance premium 13,584 24,151
Other expense 406,386 260,152
BIF/SAIF Assessment -- 164,429
----------- -----------
Total noninterest expense 900,658 894,552
----------- -----------
Income (loss) before taxes (59,156) 119,946
INCOME TAX EXPENSE (19,946) 42,656
----------- -----------
Net income (loss) $ (39,210) $ 77,290
=========== ===========
EARNINGS (LOSS) PER SHARE
Basic $ (.21) $ .42
=========== ===========
Diluted $ (.21) $ .42
=========== ===========
See accompanying notes to consolidated financial statements.
4
<PAGE>
GILMER FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
TOTAL
STOCKHOLDERS'
EQUITY
Balance at June 30, 1997 $ 3,803,402
Change in unrealized loss on decline in market
value of securities available for sale 58,462
Accrual of ESOP Plan Awards 11,745
Accrual of RRP Plan Awards 8,720
Net Income (Loss) (39,210)
-----------
Balance at March 31, 1998 $ 3,843,119
===========
See accompanying notes to consolidated financial statements
5
<PAGE>
GILMER FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
1998 1997
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income(loss) $ (39,210) $ 77,290
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation 18,315 18,315
Gain on sale of real estate owned -- 0
Provision of losses on loans and other
real estate 182,500 28,000
(Gain) Loss on sale of interest bearing assets (10,601) 4,300
Contribution to ESOP Plan 11,745 11,745
Contribution to RRP Plan 8,720 6,457
Change in assets and liabilities
(Increase) decrease in mortgage
servicing rights (7,031) (5,510)
(Increase) decrease in accrued
interest receivable (113,096) (29,603)
(Increase) decrease in prepaid
expenses and other assets 149,624 (13,422)
(Decrease) increase in advances
for taxes and insurance (118,538) (217,445)
(Decrease) increase in accrued
interest payable 2,372 (279)
(Decrease) increase in federal
income taxes 14,835 (136,770)
(Decrease) increase in deferred
loan fees (831) 10,069
(Decrease) increase in accounts
payable & accrued expenses 57,240 178,331
----------- -----------
Net cash provided by operating
activities 156,044 (68,522)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investment securities -- 0
Purchase of investment securities (735,000) 0
Capital expenditures (23,804) (42,058)
Purchase of FHLB stock (18,000) (20,600)
Proceeds from sales of mortgage loans 1,015,144 821,367
Loans originates, net of payments (1,559,870) (3,912,911)
Sales proceeds from sale of real estate owned -- 0
Purchase of mortgage-backed certificates -- 0
Purchase of securities available for sale -- 0
Sales proceeds from sale of mortgage-
backed certificates available for sale -- 0
Principal paydown on mortgage-backed
certificates 1,754,661 864,523
----------- -----------
Net cash provided by (used in)
investing activities 433,131 (2,289,679)
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (Decrease) in deposits 57,151 2,241,621
Net (decrease)increase in advances from FHLB 35,000 320,000
Repurchase of treasury stock 0 (125,700)
----------- -----------
Net cash provided by financing activities 92,151 2,435,921
----------- -----------
Net increase (decrease) in cash
and cash equivalents 681,326 77,720
CASH AND CASH EQUIVALENTS AT BEGIN OF PERIOD 1,896,897 981,144
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,578,223 $ 1,058,864
=========== ===========
See accompany notes to consolidated financial statements
6
<PAGE>
GILMER FINANCIAL SERVICES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies and practices of Gilmer Financial
Services, Inc. conform to generally accepted accounting principles and to
prevailing practices within the savings and loan industry.
The unaudited interim financial statements were prepared in accordance with
instructions for Form 10-QSB and, therefore, do not include information or
footnotes necessary for a complete presentation of financial position, results
of operations, and cash flows in conformity with generally accepted accounting
principles. However, all adjustments (consisting only of normal recurring
adjustments) which, in the opinion of management, are necessary for a fair
presentation of the financial statements have been included. The results of
operations for the three and nine month periods ended March 31, 1998 are not
necessarily indicative of the results which may be expected for an entire fiscal
year.
The OTS has adopted a regulation which requires that, for purposes of
calculating regulatory capital, unrealized gains or losses related to accounting
for certain investments in debt and equity securities under SFAS 115 are not
included in the Bank's regulatory capital. As a result of this rule at March 31,
1998, the Bank's core, tangible and risk-based capital was increased by
approximately $15,199 above the capital calculated in accordance with generally
accepted accounting principles.
NOTE 2-RECOGNITION AND RETENTION PLAN
The Board of Directors of the Company adopted and obtained stockholder approval
at the October 12, 1995 stockholder's meeting, a Recognition and Retention Plan
(RRP) to enable the Company to provide officers and employees with a proprietary
interest in the Company as incentive to contribute to its success. Officers and
employees of the Company who are selected by members of a committee appointed by
the Board of Directors of the Company will be eligible to receive benefits under
the RRP.
The Company has available to award 7,830 shares of Company stock and on October
12, 1996, the Company awarded 4,303 shares, with the remainder being reserved
for future award. The shares granted are in the form of restricted stock to be
earned and payable over a five-year period at the rate of 20% per year,
effective on the date of stockholder ratification. Compensation in the amount of
the fair market value of the common stock at the date of the grant to the
officer or employee will be recognized pro rata over the five years during which
the shares are earned and payable. The Company initially funded the RRP in
October 1995 by issuing 4303 shares of its previously authorized but unissued
common stock. In October 1996, the company repurchased 10,000 shares of its
outstanding common stock for $125,700, of these shares 4,303 shares were
contributed to the RRP to retire shares previously issued. During the year ended
June 30, 1997, the Company awarded an additional 1,200 shares and used Treasury
shares to fund the award. The remaining 4,497 shares of stock repurchased are
held in treasury shares at cost. RRP Plan expense totalled $2,907 and $8,720,
for the three and nine month periods ended March 31, 1998.
NOTE 3-EARNINGS PER SHARE
Effective with the quarter ended December 31, 1997, the Company adopted the
provisions of the Statement of Financial Accounting Standards No. 128, which
changes the method of computing and reporting earnings per share. Amounts
previously reported have been restated to conform to the new standard. Basic
earnings per share for the three and nine month periods ended March 31, 1998 and
1997 have been computed by dividing net earnings by the weighted average number
of shares outstanding. Shares controlled by the ESOP are accounted for in
accordance with Statement of Position 93-6 under which unallocated shares are
not considered in the weighted average number of shares of common stock
outstanding. Diluted earnings per share have been computed, giving effect to
outstanding stock purchase options by application of the treasury stock method.
7
<PAGE>
GILMER FINANCIAL SERVICES, INC.
NOTES TO THE UNAUDITED FINANCIAL STATEMENTS
NOTE 4-RECLASSIFICATIONS
Certain items previously reported have been reclassified to conform with current
period reporting form. The most significant change involves the adoption of the
Statement of Financial Accounting Standards No. 128, which changes the method of
computing and reporting earnings per share as described in Note 3.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Gilmer Financial Services, Inc. was formed in July of 1994 and is the
holding company and owner of 100% of the common stock of Gilmer Savings Bank
FSB, a federally chartered stock savings institution and its wholly owned
subsidiary, Gilstar Service Corporation, which offers non-depository investment
products. In this discussion and analysis, reference to the operations and
financial condition of the Company includes the operations and financial
condition of the Bank.
On February 9, 1995, the Bank completed its conversion from a mutual to a
stock savings institution. On that date, the Company issued and sold 195,755
shares of common stock at $10.00 per share to complete the conversion of the
Bank from mutual to stock form ("Conversion"). Net proceeds to the Company were
approximately $1.6 million after deducting expenses of approximately $320,000.
The Holding Company's business currently consists of the operations of the
Bank. As a consumer-oriented financial institution, the Company offers a range
of banking services to residents of its primary market area. The Company is
principally engaged in the business of attracting deposits from the general
public and investing those deposits, along with funds generated from operations
and borrowings, into mortgage, commercial, and consumer loans. The Company also
invests in mortgage and government backed securities and certificates of
deposit.
The Bank's results of operations are primarily affected by its net interest
income, which is the difference between interest income earned on its loans,
investment and mortgage-backed securities and other investments, and its cost of
funds consisting of interest paid on deposits and borrowed funds, including
Federal Home Loan Bank advances. Net income of the Bank is also affected by
non-interest income, such as loan origination and commitment fees, loan
servicing fees and other income, and non-interest expense, including
compensation and benefits, insurance premiums, losses on foreclosed real estate
and provisions for losses on loans. The Bank's net income also is affected
significantly by general economic conditions and competitive conditions,
particularly changes in market interest rates and actions of regulatory
authorities.
Financial Condition
March 31, 1998 Compared to June 30, 1997. Total assets remained relatively
constant, increasing only $73,000. The increase was primarily attributable to an
increase in net loans receivable of $315,000, an increase in investment
securities of $427,000, an increase in cash and cash equivalents of $681,000, an
increase in accrued interest receivable of $113,000 and an increase in real
estate owned of $55,000, partially offset by a decrease in mortgage-backed
securities of $1,378,000 and a decrease in prepaid expenses and other assets of
$150,000.
Cash and cash equivalents increased $681,000 from $1.9 million at June 30,
1997 to $2.6 million at March 31, 1998. The increase was primarily attributable
to principal repayments on mortgage-backed securities.
Mortgage-backed securities decreased $1,378,000 from $15.1 million at June
30, 1997 to $13.7 million at March 31, 1998. The decrease was primarily due to
principal repayments on mortgage-backed securities.
Loans receivable were $23.4 million at June 30, 1997, and $23.7 million at
March 31, 1998 an increase of $315,000, or 1.33%. The increase is primarily
attributable to an increase in originations of consumer and commercial loans.
Investment securities increased $427,000 from $316,000 at June 30, 1997 to
$743,000 at March 31, 1998. The increase was due to the purchase of $735,000 in
Upshur County Bonds held as available for sale securities, offset by $308,000 in
principal repayments.
Accrued interest receivable increased $113,000 from $349,000 at June 30,
1997 to $462,000 at March 31, 1998. The increase was primarily due to interest
payments were made on mortgage-backed securities after the quarter ended.
9
<PAGE>
Real estate and other assets increased $55,000 from $99,000 at June 30,
1997 to $154,000 at March 31, 1998. The increase was due to a foreclosure on a
single family loan of $36,000, along with an increase in other repossessed
assets of $19,000, resulting from repossession of auto loans.
Prepaid expenses and other assets decreased $150,000, from $247,000 at June
30, 1997 to $97,000 at March 31, 1998. This decrease was primarily attributable
to the write off of a receivable of $123,000 relating to a dishonored cashiers
check for $145,000 which is currently in pending litigation. Management
continues to believe that the check will ultimately be paid; however, due to the
fact that litigation is in the preliminary stages, the likelihood of success is
not determinable at this time.
Deposits remain relatively unchanged from $29.1 million at June 30, 1997,
to $29.2 million at March 31, 1998. Federal Home Loan Bank advances also
remained relatively constant, increasing only $35,000.
Advances by borrowers for taxes and insurance decreased $119,000 from
$488,000 at June 30, 1997 to $369,000 at March 31, 1998. The decrease is due to
the majority of the property taxes being paid in the last quarter of calendar
1997.
Total stockholders' equity increased $40,000 to $3,843,000 at March 31,
1998 from $3,803,000 at June 30, 1997. This increase was a result of a $58,000
decrease in unrealized loss on securities available for sale, a decrease in the
Employee Stock Ownership Plan of $12,000, and a decrease in the Recognition and
Retention Plan of $9,000, offset by a $39,000 net loss for the nine months ended
March 31, 1998. The Bank continued to exceed all of its regulatory capital
requirements at March 31, 1998, with tangible and core capital of $3.8 million
(8.89% of total adjusted assets) and risk-based capital of $4.0 million (18.48%
of risk-weighted assets).
Results of Operations
The Company's results of operations depend primarily on the level of its
net interest income and non-interest income and the amount of non-interest
expenses. Net interest income depends upon the volume of interest-earning assets
and interest-bearing liabilities and the interest rates earned or paid on them.
Comparison of Operating Results for the Three Months Ended March 31, 1998 and
1997
General. Net income(loss) for the quarter ended March 31, 1998 was
($46,000), a decrease of $120,000 from the quarter ended March 31, 1997. The
decrease was primarily due to the write off of a receivable for $123,000
relating to the dishonored cashiers check. See prepaid expenses and other assets
discussed above.
Interest Income. Interest income totaled $791,000 for the quarter ended
March 31, 1998, compared to $781,000 for the quarter ended March 31, 1997, an
increase of $10,000. The increase was primarily due to an increase in net loans
receivable.
Interest Expense. Interest expense increased $41,000 for the quarter ended
March 31, 1998 compared to March 31, 1997. The increase was primarily due to a
$39,000 increase in interest paid on deposits as a result of an increase in the
average balance of deposits for the quarter and an increase in rates.
Provision for Loan Losses. The Company maintains an allowance for loan
losses based upon management's periodic evaluation of non-performing loans,
inherent risks in the loan portfolio, economic conditions and past experience.
The provision for the three months ended March 31, 1998, increased $4,000 from
$6,000 for the three months ended March 31, 1997, to $10,000 for the three month
period ended March 31, 1998. The provision for loan losses was increased based
on management's evaluation of non-performing loans, along with management's
decision to establish additional reserves to support the growth in the consumer
and commercial portfolio.
Non-Interest Income. Non-interest income increased $6,000 from $60,000 for
the quarter ended March 31, 1997 to $66,000 for the quarter ended March 31,
1998. The increase resulted primarily from an increase of $11,000 in gain on
sale of interest-bearing assets, partially offset by a $4,000 decrease in loan
origination and commitment fees.
10
<PAGE>
Non-Interest Expense. Non-interest expense increased $154,000 from $247,000
for the quarter ended March 31, 1997, compared to $401,000 for the quarter ended
March 31, 1998. Compensation and benefits increased $25,000 to $158,000 for the
quarter ended March 31, 1998 from $133,000 for the quarter ended March 31, 1997,
due to the addition of a new employee. Other miscellaneous expenses increased
$133,000 from $93,000 for the quarter ended March 31, 19976 to $226,000 for the
quarter ended March 31, 1998, the increase was primarily due to the write off of
$123,000 of the receivable relating to the dishonored cashiers check, see
prepaid expenses and other assets.
Income Taxes. The provision for income taxes decreased $64,000 from $41,000
for the quarter ended March 31, 1997 to ($23,000) for the quarter ended March
31, 1998. The decrease is due to a decrease in net earnings before income taxes
of $120,000 for the quarter ended March 31, 1998.
Comparison of Operating Results for the Nine Months Ended March 31, 1998 and
1997
General. Net income(loss) for the nine months ended March 31, 1998 was
($39,000), a decrease of $117,000 from the nine months ended March 31, 1997. The
decrease was primarily due to a $155,000 increase in the provision for loan
losses, a decrease in net interest income of $33,000, partially offset by an
increase in other income of $15,000, along with a decrease in income taxes of
$63,000.
Interest Income. Interest income totaled $2,394,000 for the nine months
ended March 31, 1998, compared to $2,236,000 for the nine months ended March 31,
1997, an increase of $159,000. The increase was due to an increase in net loans
receivable, along with upward changes in interest rates on adjustable loans.
Interest Expense. Interest expense increased $192,000 for the nine months
ended March 31, 1998 compared to March 31, 1997. The increase was primarily due
to an increase in interest paid on deposits, resulting from an increase in the
average balance of deposits for the nine months ended March 31, 1998, and an
increase in rates.
Provision for Loan Losses. The Company maintains an allowance for loan
losses based upon management's periodic evaluation of non-performing loans,
inherent risks in the loan portfolio, economic conditions and past experience.
The provision for the nine months ended March 31, 1998, increased $150,000 from
$28,000 for the nine months ended March 31, 1997, to $183,000 for the nine
months period ended March 31, 1997.
Non-Interest Income. Non-interest income increased $15,000 from $168,000
for the nine months ended March 31, 1997 to $183,000 for the nine months ended
March 31, 1998. The increase resulted primarily from an increase of $15,000 in
gain on sale of interest-bearing assets.
Non-Interest Expense. Non-interest expense totaled $901,000 for the nine
months ended March 31, 1998, compared to $895,000 for the nine months ended
March 31, 1997, an increase of $6,000. The primary reason for this change was
the one time special assessment of 65.7 basis points of the March 31, 1995 SAIF
assessment base. The special assessment resulted in a $164,000 charge to
noninterest expense during the nine months ended March 31, 1997, compared to a
charge of $0 for the nine months ended March 31, 1998. Compensation and benefits
increased $46,000 to $447,000 for the nine months ended March 31, 1998 from
$401,000 for the nine months ended March 31, 1997, due to the addition of a new
employee, along with other benefits. Other miscellaneous expenses increased
$146,000 from $260,000 for the nine months ended March 31, 1997 to $406,000 for
the nine months ended March 31, 1998. The primary reason for this increase was
the write off of a $123,000 of the receivable relating to the dishonored
cashiers check. See prepaid expenses and other assets.
Income Taxes. The provision for income taxes decreased $63,000 from $43,000
for the nine months ended March 31, 1997 to ($20,000) for the nine months ended
March 31, 1998. The decrease is due to a decrease in net earnings before income
taxes of $117,000 for the nine months ended March 31, 1998.
11
<PAGE>
Year 2000 Policy
Effective June 19, 1997, the Bank adopted a Year 2000 Policy. This policy
implements steps to assure any problems relating to software that has been
written to use a 2 digit field in the year designation of a date has been
corrected by year end 1998. The twentieth century is assumed to be the default
in such designations, and will produce results that are wrong by 100 years when
the century is meant to be the twenty first century. The Bank is currently
testing all software to assure compliance with the Year 2000 Policy.
12
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
See Financial Condition - Prepaid expenses and other assets
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K None.
13
<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.
GILMER FINANCIAL SERVICES, INC.
Date: May 21, 1998 By: /s/ Gary P. Cooper
-------------------------------------
Gary P. Cooper
Pres. and Chief Executive Officer
(Principal Executive Officer)
Date: May 21, 1998 By: /s/ Sheri Parish
-------------------------------------
Sheri Parish
Vice President/Secretary/Treasurer
(Principal Fin. & Acct. Officer)
14
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
The schedule contains summary financial information extracted from the
quarterly report on Form 10QSB for quarter ended March 31, 1998
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 439,710
<INT-BEARING-DEPOSITS> 2,138,513
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,090,373
<INVESTMENTS-CARRYING> 9,334,643
<INVESTMENTS-MARKET> 9,382,701
<LOANS> 24,005,615
<ALLOWANCE> 283,596
<TOTAL-ASSETS> 42,243,571
<DEPOSITS> 29,532,491
<SHORT-TERM> 5,985,000
<LIABILITIES-OTHER> 282,961
<LONG-TERM> 2,600,000
0
0
<COMMON> 1,958
<OTHER-SE> 3,841,161
<TOTAL-LIABILITIES-AND-EQUITY> 42,243,571
<INTEREST-LOAN> 537,253
<INTEREST-INVEST> 238,052
<INTEREST-OTHER> 15,492
<INTEREST-TOTAL> 790,797
<INTEREST-DEPOSIT> 385,318
<INTEREST-EXPENSE> 129,475
<INTEREST-INCOME-NET> 276,004
<LOAN-LOSSES> 10,500
<SECURITIES-GAINS> 10,283
<EXPENSE-OTHER> 401,296
<INCOME-PRETAX> (69,357)
<INCOME-PRE-EXTRAORDINARY> (69,357)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,943)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.24)
<YIELD-ACTUAL> .67
<LOANS-NON> 335,123
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 283,653
<CHARGE-OFFS> 10,557
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 283,596
<ALLOWANCE-DOMESTIC> 283,596
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 265,641
</TABLE>
