SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One):
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] For the fiscal year ended September 30, 1996,
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from
_________________________ to _________________________.
Commission File No. 0-25846
CCF HOLDING COMPANY
- --------------------------------------------------------------------------------
(Name of Small Business Issuer in Its Charter)
Georgia 58-2173616
- --------------------------------------------- -------------------
(State or Other Jurisdiction of Incorporation I.R.S. Employer
or Organization) Identification No.
101 North Main Street, Jonesboro, Georgia 30236
- --------------------------------------------- -------------------
(Address of Principal Executive Offices (Zip Code)
Issuer's Telephone Number, Including Area Code: (770) 478-8881
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.10 per share
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(Title of Class)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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____.
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $5,987,580
As of December 13, 1996 there were issued and outstanding 915,900 shares
of the registrant's Common Stock.
The registrant's voting stock trades on the Nasdaq SmallCap Market under
the symbol "CCFH." The aggregate market value of the voting stock held by
non-affiliates of the registrant, based on the average bid and asked price of
the registrant's Common Stock on December 13, 1996, was $10.9 million.
Transition Small Business Disclosure Format (check one)
YES_______ NO X
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Annual Report to Stockholders for the fiscal year
ended September 30, 1996
(Part II)
2. Portions of the Proxy Statement for the Annual Meeting of
Stockholders. (Part III)
<PAGE>
PART I
Item 1. Description of Business
- --------------------------------
General
CCF Holding Company (the "Company") is a Georgia corporation which was
organized in March 1995 at the direction of Clayton County Federal Savings and
Loan Association (the "Association") in connection with the Association's
conversion from a mutual to stock form of organization (the "Conversion"). On
July 11, 1995, the Association completed its conversion and became a wholly
owned subsidiary of the Company. The Company is a unitary savings and loan
holding company which, under existing laws, generally is not restricted in the
types of business activities in which it may engage provided the Association
retains a specified amount of its assets in housing-related investments. The
Company is not an operating company and has not engaged in any significant
business to date. As such, references herein to the Association include the
Company unless the context otherwise indicates.
The Association is a federally chartered stock savings and loan
association which originally commenced business in 1955. The Association
operates a traditional savings and loan business, attracting deposit accounts
from the general public and using these deposits, together with other funds,
primarily to originate and invest in long-term conventional loans secured by
single-family residential real estate. The Association is subject to examination
and comprehensive regulation by the Office of Thrift Supervision ("OTS") and its
deposits are insured by the Savings Association Insurance Fund ("SAIF") and have
been insured by the SAIF and its predecessor, the Federal Savings and Loan
Insurance Corporation, since 1955. The principal sources of funds for the
Association's lending activities are deposits and the amortization, repayment,
and maturity of loans and investment securities. The Association does not rely
on brokered deposits. Principal sources of income are interest on loans and
investment securities. The Association's principal expense is interest paid on
deposits.
Market Area and Competition
The Association's primary market area is Clayton County, Georgia, where
the Association operates three offices. Clayton County is part of the Atlanta,
Georgia metropolitan statistical area and home to a portion of Atlanta's
Hartsfield International Airport. The Association also solicits deposits and
makes loans in the adjacent market area of Fayette and Henry counties in
Georgia. To a much lesser extent, the Association also makes loans in Coweta,
Rockdale, Spalding, and Lamar counties, Georgia.
The Association competes for deposits with financial institutions located
in metropolitan Atlanta, super-regional banks, and several fairly new local
financial institutions. Loan competition comes from the same sources and
mortgage companies. The Association is the only savings association
headquartered in any of the three counties of Clayton, Henry, or Fayette.
Due to their size, many of the Association's competitors possess greater
financial and marketing resources. The Association competes for savings accounts
by offering depositors competitive interest rates and a high level of personal
service. The Association competes for loans primarily through the interest rates
and loan fees it charges and the efficiency and quality of services it provides
borrowers, real estate brokers, and contractors.
2
<PAGE>
Lending Activities
General. The principal lending activity of the Association is the
origination for its portfolio of adjustable-rate and fixed-rate loans secured by
one- to four-family residential real estate. Many of these loans conform to
secondary market guidelines. The Association also originates some nonconforming
first mortgage loans to serve community needs. To a much lesser extent, the
Association also originates construction loans and provides financing for
nonresidential real estate and consumer loans.
Analysis of Loan Portfolio. The following table sets forth information
concerning the composition of the Association's loan portfolio in dollar amounts
and in percentages of the loan portfolio as of the dates indicated.
At September 30,
--------------------------------------------
1996 1995
-------------------- -------------------
Amount Percent Amount Percent
------ ------- ------ -------
(Dollars in Thousands)
Mortgage Loans:
Residential (1-4 family).... $45,510 80.79% $42,754 89.12%
Construction................ 7,056 12.53 2,777 5.79
Nonresidential.............. 2,698 4.79 1,720 3.59
Consumer Loans:
Secured personal............ 566 1.01 415 0.86
Automobile.................. 306 0.54 200 0.42
Other....................... 194 0.34 109 0.22
------- ------- ------- -------
Total loans receivable.... 56,330 100.00% 47,975 100.00%
------- ======= ------- =======
Less:
Undisbursed proceeds on
loans in process.......... (3,790) (1,937)
Unamortized loan origination
fees and costs, net....... (500) (433)
Allowance for loan losses... (540) (409)
------- -------
Total loans, net.......... $51,500 $45,196
======= =======
Loan Maturity Tables. The following table sets forth the maturity of the
Association's loan portfolio at September 30, 1996. The table does not include
prepayments. Prepayments and scheduled principal repayments on loans totalled
$15.2 million and $8.0 million for the years ended September 30, 1996 and 1995,
respectively. Adjustable-rate mortgage loans are shown as maturing based on
repricing dates.
September 30, 1996
-------------------------------------------
Within One to Five After Five
One Year Years Years Total
-------- ----------- ---------- -----
(In Thousands)
Residential real estate mortgage $24,067 $1,521 $19,922 $45,510
Real estate construction..... 7,056 -- -- 7,056
Other mortgage............... 2,698 -- -- 2,698
Consumer and other installment 759 307 -- 1,066
------ ------ ------ -----
Total...................... $34,580 $1,828 $19,922 $56,330
====== ===== ====== ======
3
<PAGE>
The following table sets forth the dollar amount of all loans due after
September 30, 1997, which have fixed interest rates and which have floating or
adjustable interest rates. Adjustable-rate mortgage- loans ("ARMs") are shown
based on repricing dates.
<TABLE>
<CAPTION>
Fixed Rate Adjustable Rate
--------------- -----------------
Amount Percent Amount Percent Total
------ ------- ------ ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Residential real estate mortgage. $20,417 36.25% $1,026 1.82% $21,443
Consumer and other installment... 307 0.55 -- -- 307
------- ----- ------ ---- -------
Total.......................... $20,724 36.80% $1,026 1.82% $21,750
======= ===== ====== ==== =======
</TABLE>
One- to Four-Family Residential Loans. The Association's primary lending
activity consists of the origination of one- to four-family, owner-occupied,
residential mortgage loans secured by property located in the Association's
primary market area. The Association originates both adjustable-rate and
fixed-rate residential mortgage loans.
The Association offers ARMs that adjust every year and have terms of up to
30 years. Generally, the interest rate adjustments on ARMs are based on the
National Average Contract Rate for the Purchase of Previously Occupied Homes as
announced by the Federal Home Loan Bank ("FHLB") of Atlanta. ARMs have interest
rate floors of one-half percentage point below the initial interest rate and
carry an interest rate ceiling of 5% above the initial rate of the loans. The
maximum change on any adjustment date is 2%. The Association considers the
market factors and competition's rate on loans as well as its own cost of funds
when determining the rates on the loans that it offers.
ARMs may be made at up to 95% of the loan to value ratio. The Association
does not originate ARMs with negative amortization.
The Association also offers conventional fixed-rate mortgage loans with
terms of up to 30 years. The fixed-rate mortgages may be sold in the secondary
mortgage market with servicing retained by the Association.
The Association offers home equity lines of credit, which are revolving
lines of credit secured by a first or second mortgage on an owner occupied
property, and which are accessible to the customers by either writing a check or
requesting an advance at a branch office of the Association. The rate on such
loans is adjustable monthly, based on the highest prime rate published in The
Wall Street Journal plus 2%, with a ceiling of 18%.
Regulations limit the amount which a savings association may lend in
relationship to the appraised value of the real estate securing the loan, as
determined by an appraisal at the time of loan origination. Such regulations
permit a maximum loan-to-value ratio of 100% for residential property and 90%
for all other real estate loans. The Association's lending policies, however,
generally limit the maximum loan-to-value ratio to 80% of the appraised value of
the property, based on an independent appraisal. When the Association makes a
loan in excess of 80% of the appraised value or purchase price, private mortgage
insurance is required for at least the amount of the loan in excess of 80% of
the appraised value.
4
<PAGE>
The loan-to-value ratio, maturity, and other provisions of the residential
real estate loans made by the Association reflect the policy of making loans
generally below the maximum limits permitted under applicable regulations. The
Association requires an independent appraisal, title insurance or an attorney's
opinion, flood hazard insurance (if applicable), and fire and casualty insurance
on all properties securing real estate loans made by the Association. The
Association reserves the right to approve the selection of which title insurance
companies' policies are acceptable to insure the real estate in the loan
transactions.
While one- to four-family residential real estate loans are normally
originated with 15 to 30 year terms, such loans typically remain outstanding for
substantially shorter periods. This is because borrowers often prepay their
loans in full upon sale of the property pledged as security or upon refinancing
the original loan. In addition, substantially all of the fixed-rate residential
mortgage loans in the Association's loan portfolio contain due-on-sale clauses
providing that the Association may declare the unpaid amount due and payable
upon the sale of the property securing the loan. The Association enforces these
due-on-sale clauses to the extent permitted by law. Thus, average loan maturity
is a function of, among other factors, the level of purchase and sale activity
in the real estate market, prevailing interest rates, and the interest rates
payable on outstanding loans.
Construction Lending. The Association engages in construction lending
involving loans to qualified borrowers for construction of one- to four-family
residential properties and on a limited basis, for commercial properties. Almost
all of the Association's construction loan properties are located in the
Association's market area and nearby counties.
Construction loans are made to builders on a speculative basis and to
owners for construction of their primary residence. Loans for speculative
housing construction are made to area builders after a background check has been
made. Construction loans on one- to four-family properties are limited to a
maximum loan-to-value ratio of 90% and have a maximum maturity of 12 months
after which the loan can be converted to a permanent mortgage loan. Whether or
not the construction of the property is complete or the property securing the
loan has been sold, construction loans on nonresidential properties are
generally limited to a maximum loan-to-value ratio of 70% and also have a
maximum maturity of 12 months after which the loan can be converted to a
permanent mortgage loan.
Construction loan proceeds are disbursed in increments as construction
progresses and only after a physical inspection of the project is made by an
Association representative. Accrued interest on loan disbursements is paid
monthly. At September 30, 1996, the Association had $4.5 million in construction
loans outstanding secured by unsold properties, with $2.5 million in loans in
process (funds being held for construction progress) outstanding and attributed
to these loans.
Construction loans to owner/borrowers have either fixed or adjustable
rates and are underwritten in accordance with the same terms and requirements as
the Association's permanent mortgages on existing properties, except that the
builder must qualify as an approved contractor by the Association, and the loans
generally provide for disbursement of loan proceeds in stages during the
construction period. An approved contractor is one who has been approved by a
title insurance company that will insure the Association against mechanics'
liens or whose credit, financial statements, and experience have been approved
by the Association. Borrowers are typically required to pay accrued interest on
the outstanding balance monthly during the construction phase. At September 30,
1996, there was $2.5 million outstanding in construction loans to
owner/borrowers with $1.3 million outstanding in loans in process
5
<PAGE>
allocated to these projects. The Association originated $9.2 million and $1.3
million in construction loans on one- to four-family properties during the
fiscal years ended September 30, 1996 and 1995, respectively.
Nonresidential Real Estate Loans. The Association originates nonresidential
real estate loans, which represent a small but growing portion of the
Association's lending activities. At September 30, 1996, outstanding
nonresidential real estate loans amounted to $2.7 million. At September 30,
1996, the largest nonresidential real estate loan had a balance of $900,000 and
was secured by a day care center and was performing.
Nonresidential real estate loans consist of permanent loans secured by
small office buildings, churches, shopping centers, and other nonresidential
buildings. Nonresidential real estate secured loans are generally originated in
amounts up to 70% of the appraised value of the property. Such appraised value
is determined by an independent appraiser which has been previously approved by
the Association. Nonresidential real estate loans are generally originated on an
adjustable-rate basis with the interest rate adjusting annually and have terms
of up to 20 years.
Consumer and Other Loans. Regulations permit federally chartered savings
associations to make secured and unsecured consumer loans up to 35% of the
Association's assets. In addition, the Association has lending authority above
the 35% limit for certain consumer loans, such as home improvement loans and
loans secured by savings accounts. The Association offers consumer loans in
order to provide its customers a wider range of products and to reduce its
interest rate risk.
Consumer loans consist of savings account loans, personal secured and
unsecured loans, automobile loans, and home improvement loans. As of September
30, 1996, these consumer loans totaled $1.1 million, or 1.89% of the
Association's total loan portfolio. Substantially all of the Association's
consumer loans have fixed rates of interest.
The underwriting standards employed by the Association for consumer loans
include a determination of the applicant's payment history on other debts and an
assessment of ability to meet existing obligations and payments on the proposed
loan. In addition, the stability of the applicant's monthly income from primary
employment is considered during the underwriting process. Creditworthiness of
the applicant is of primary consideration; however, the underwriting process
also includes a comparison of the value of the security, if any, in relation to
the proposed loan amount.
Loan Underwriting Risks. The retention of ARMs in the Association's
portfolio helps to reduce the Association's exposure to changes in interest
rates. However, there are unquantifiable credit risks that could result from
potential increased payments to the borrower as a result of the repricing of
ARMs. It is possible that during periods of rapidly rising interest rates, the
risk of default on ARMs may increase due to the upward adjustment of interest
cost to the borrower. In addition, although ARMs allow the Association to
increase the sensitivity of its asset base to changes in the interest rates, the
extent of this interest rate sensitivity is limited by the periodic and lifetime
interest rate adjustment limits. Because of these considerations, the
Association has no assurance that yields on ARM loans will be sufficient to
offset increases in the Association's cost of funds.
Construction financing is generally considered to involve a higher degree
of risk of loss than long-term financing on improved, occupied real estate. Risk
of loss on a construction loan is dependent largely upon the accuracy of the
initial estimate of the property's value at completion of construction or
development and the estimated cost (including interest) of construction. During
the construction phase, a number of factors could result in delays and cost
overruns. If the estimate of construction cost proves
6
<PAGE>
to be inaccurate, it may be necessary for the Association to advance funds
beyond the amount originally committed to permit completion of the construction.
If the estimate of value proves to be inaccurate, the Association may be
confronted, at or prior to the maturity of the loan, with collateral having a
value which is insufficient to assure full repayment. As a result of the
foregoing, construction lending often involves the disbursement of substantial
funds with repayment dependent, in part, on the success of the project. If the
Association is forced to foreclose on a property prior to or at completion due
to a default, there can be no assurance that the Association will be able to
recover all of the unpaid balance of, and accrued interest on, the loan as well
as related foreclosure and holding costs. The Association has sought to lessen
this risk by limiting construction lending to qualified borrowers in the
Association's market area and by limiting the number of construction loans
outstanding at any time.
Loans secured by nonresidential real estate generally involve a greater
degree of risk than one- to four-family mortgage loans and carry larger loan
balances. This increased credit risk is a result of several factors, including
the concentration of principal in a limited number of loans and borrowers, the
effects of general economic conditions on income producing properties, and the
increased difficulty of evaluating and monitoring these types of loans.
Furthermore, the repayment of loans secured by nonresidential real estate is
typically dependent upon the successful operation or management of the related
real estate project. If the cash flow from the project is reduced, the
borrower's ability to repay the loan may be impaired. The Association seeks to
reduce these risks in a variety of ways, including limiting the size of such
loans and analyzing the financial condition of the borrower, the quality of the
collateral, and the management of the property securing the loan. The
Association also obtains personal guarantees and appraisals on each property.
Consumer loans entail greater credit risk than do residential mortgage
loans, particularly in the case of consumer loans that are unsecured or secured
by assets that depreciate rapidly. In such cases, repossessed collateral for a
defaulted consumer loan may not provide an adequate source of repayment for the
outstanding loan and the remaining deficiency often does not warrant further
substantial collection efforts against the borrower. In particular, amounts
realizable on the sale of repossessed automobiles may be significantly reduced
based upon the condition of the collateral and the lack of demand for used
automobiles.
Loan Purchases and Sales. Generally, if the Association determines that
loan sales are desirable for interest rate risk management or other purposes,
the Association may sell its 15 to 30 year, fixed-rate 80% or more loan-to-value
conventional loans. The Association uses standard Federal Home Loan Mortgage
Corporation ("FHLMC") and Federal National Mortgage Association ("FNMA")
documentation for its conventional loans. The Association sells loans directly
to FHLMC and FNMA. Loans are generally sold with servicing retained and without
recourse.
During the past five fiscal years, the Association has not purchased
loans.
7
<PAGE>
The table below indicates the Association's origination and sales of loans
during the periods indicated.
Year Ended September 30,
------------------------
1996 1995
------------ -----------
(In Thousands)
Total gross loans receivable at beginning of period... 47,975 $46,284
------- -------
Loans originated:
Residential (1 to 4 family) ........................ 11,645 7,608
Construction loans ................................. 9,221 1,287
Consumer loans ..................................... 1,675 371
Other .............................................. 3,443 409
------- -------
Total loans originated ............................... 25,984 9,675
------- -------
Loans sold:
Residential (1 to 4 family) ........................ 2,455 --
Loans purchased ...................................... -- --
Other loan activity:
Loan principal repayments .......................... 15,174 7,984
------- -------
Total gross loans receivable at end of period ........ $56,330 $47,975
======= =======
Loan Processing and Servicing Fees. In addition to interest earned on
loans, the Association recognizes fees and service charges that consist
primarily of fees charged for loan originations and loans serviced for others
and late charges. The Association recognized loan servicing fees of $55,000 and
$24,000 for the years ended September 30, 1996 and 1995, respectively. As of
September 30, 1996, the Association had $500,000 of unamortized net loan
origination fees deferred under Generally Accepted Accounting Principles
("GAAP"). As of September 30, 1996, loans serviced for FHLMC and FNMA totalled
$7.9 million. At September 30, 1996, the Association was servicing $387,000 of
loans for Habitat for Humanity for which it does not charge loan servicing fees.
Loans to One Borrower. Savings associations are subject to the same
loans-to-one borrower limits as those applicable to national banks, which under
federal law and OTS regulations, generally limit loans-to-one borrower to the
greater of $500,000 or an amount equal to 15% of unimpaired capital and
unimpaired surplus on an unsecured basis and an additional amount equal to 10%
of unimpaired capital and unimpaired surplus if the loan is secured by readily
marketable collateral (generally, financial instruments, not real estate). The
largest amount outstanding to one borrower at September 30, 1996 was
approximately $1.8 million.
Loan Delinquencies. Loans past due more than 90 days are placed on
nonaccrual and are individually examined for potential losses and the ultimate
collectibility of funds due. Loans are deemed to have no loss exposure if the
value of the property securing the loan exceeds the receivable balance on the
loan or collection is probable. Specific reserves are established to recognize
losses on nonaccruing loans on a case-by-case basis.
8
<PAGE>
Nonperforming Loans. The following table sets forth the aggregate amount
of restructured loans and loans which were contractually past due more than 90
days as to principal or interest payments as of the dates indicated and which
are considered impaired loans.
At September 30,
----------------------
1996 1995
-------- ---------
(Dollars in Thousands)
Nonperforming loans:
Restructured ....................................... $ -- $ --
Nonaccrual (more than 90 days past due)............. 601 175
------- ------
Total nonperforming loans ...................... $ 601 $ 175
======= ======
Ratio of nonperforming loans as a percentage of
total loans, net ................................... 1.17% 0.39%
Ratio of nonperforming loans as a percentage of
total assets ....................................... 0.75% 0.22%
During the years ended September 30, 1996 and 1995, gross interest income
of $18,000 and $6,000, respectively, would have been recorded on nonperforming
loans, under their original terms, if the loans had been current throughout
those periods. Interest income recognized on nonperforming loans during the
years ended September 30, 1996 and 1995 was approximately $35,000 and $8,000,
respectively.
Classified Assets. OTS regulations provide for a classification system for
problem assets of insured institutions which covers all problem assets. Under
this classification system, problem assets of insured institutions are
classified as "substandard," "doubtful," or "loss." An asset is considered
substandard if it is inadequately protected by the then current net worth and
paying capacity of the obligor or of the collateral pledged, if any. Substandard
assets include those characterized by the "distinct possibility" that the
insured institution will sustain "some loss" if the deficiencies are not
corrected. Assets classified as doubtful have all of the weaknesses inherent in
those classified substandard, with the added characteristic that the weaknesses
present make "collection or liquidation in full," on the basis of existing
facts, conditions, and values, "highly questionable and improbable." Assets
classified as loss are those considered "uncollectible" and of such little value
that their continuance as assets without the establishment of a specific loss
reserve is not warranted. Assets designated "special mention" by management are
assets included on the Association's internal watch list because of potential
weakness but which do not warrant classification in one of the aforementioned
categories.
When an insured institution classifies problem assets as either
substandard or doubtful, it may establish general allowances for loan losses in
an amount deemed prudent by management. General allowances represent loss
allowances which have been established to recognize the inherent risk associated
with lending activities, but which, unlike specific allowances, have not been
allocated to particular problem assets. When an insured institution classifies
problem assets as loss, it is required either to establish a specific allowance
for losses equal to 100% of that portion of the asset so classified or to charge
off such amount. An institution's determination as to the classification of its
assets and the amount of its valuation allowances is subject to review by the
OTS, which may recommend the establishment of additional general or specific
loss allowances. A portion of general loss allowances established to cover
possible losses related to assets classified as substandard or doubtful may be
included in determining an
9
<PAGE>
institution's regulatory capital, while specific valuation allowances for credit
losses generally do not qualify as regulatory capital. At September 30, 1996 the
Association had a general loan loss allowance of $538,000.
At September 30, 1996, the Association had approximately $1.7 million of
problem loans, $1.7 million of which were classified as substandard and $2,000
of which were classified as loss. As of September 30, 1996, the Association had
$738,000 of loans which were classified as special mention. Substandard and
special mention assets consist of 56 residential real estate loans, none of
which exceeded $198,000, five consumer loans, and two non-residential loans. The
Association believes that its allowance for loan losses is adequate to cover
potential losses on loans, however, no assurance can be given that the
Association will not be required to increase such allowance in future periods.
Analysis of the Allowance for Loan Losses. The following table sets forth
the analysis of the allowance for loan losses for the periods indicated.
<TABLE>
<CAPTION>
Years ended September 30,
-------------------------
1996 1995
------------ -----------
(Dollars in Thousands)
<S> <C> <C>
Total average loans outstanding ............................... $ 47,293 $ 44,322
======== ========
Allowance balance (at beginning of period) .................... $ 409 $ 430
Provisions for loan losses .................................... 130 5
Charge-offs:
Real estate ................................................. -- (25)
Consumer .................................................... -- (1)
Recoveries:
Consumer .................................................... 1 --
-------- --------
Allowance balance (at end of period) .......................... $ 540 $ 409
======== ========
Allowance for loan losses as a percent of net loans receivable
at end of period ............................................ 1.05% 0.90%
Net loans charged off as a percent of average loans
outstanding ................................................. --% 0.06%
Ratio of allowance for loan losses to total loans delinquent 90
days or more at end of period ............................... 89.90% 233.71%
Ratio of allowance for loan losses to total loans delinquent 90
days or more and other nonperforming assets at end of
period ...................................................... 89.90% 162.95%
</TABLE>
The allowance is an amount that management has determined to be adequate,
through its allowance for loan losses methodology, to absorb losses inherent in
existing loans and commitments to extend credit. The allowance is determined
through consideration of such factors as changes in the nature and volume of the
portfolio, overall portfolio quality, delinquency trends, adequacy of
collateral, loan concentrations, specific problem loans, and economic conditions
that may affect the borrowers' ability to pay.
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<PAGE>
Allocation of Allowance for Loan Losses. The following table sets forth
the allocation of the allowance for loan losses by loan category and the percent
of loans in each loan category to total loans for the periods indicated.
<TABLE>
<CAPTION>
At September 30,
----------------------------------------------
1996 1995
---------------------- ----------------------
Percent of Percent of
Loans in each Loans in each
Category to Category to
Amount Total Loans Amount Total Loans
------ ------------- ------ --------------
(Dollars in Thousands)
Balance at end of period applicable to:
<S> <C> <C> <C> <C>
Permanent mortgage.................. $316 80.79% $279 89.12%
Construction........................ 52 12.53 21 5.79
Nonresidential...................... 155 4.79 94 3.59
Consumer............................ 17 1.89 15 1.50
--- ------ --- ------
Total .......................... $540 100.00% $409 100.00%
=== ====== === ======
</TABLE>
Real Estate Owned. Real estate acquired by the Association as a result of
foreclosure, judgment, or deed in lieu of foreclosure is classified as real
estate owned until it is sold. When property is so acquired it is recorded at
the lower of the cost or fair value. The Association had no real estate owned at
September 30, 1996.
Investment and Mortgage-backed Securities Activities
Investment Securities. The Association is required under federal
regulations to maintain a minimum amount of liquid assets which may be invested
in specified short-term securities and certain other investments, such as the
common stock of the FHLB of Atlanta. The Association has generally maintained a
liquidity portfolio well in excess of regulatory requirements. Liquidity levels
may be increased or decreased depending upon the yields on investment
alternatives and upon management's judgment as to the attractiveness of the
yields then available in relation to other opportunities and its expectation of
future yield levels, as well as management's projections as to the short-term
demand for funds to be used in the Association's loan origination, deposit
withdrawals, and other activities.
Mortgage-backed Securities. The Association's mortgage-backed securities
portfolio consists of participation certificates issued by FHLMC, FNMA, and the
Government National Mortgage Association ("GNMA") and secured by interests in
pools of conventional mortgages originated by other financial institutions.
Mortgage-backed securities provide for monthly payments of principal and
interest and generally have contractual maturities ranging up to 30 years.
However, due to expected repayment terms being significantly less than the
underlying mortgage loan pool contractual maturities, the estimated lives of
these securities could be significantly shorter.
At September 30, 1996, the Company transferred all mortgaged-backed
securities from held to maturity to available for sale. During the years ended
September 30, 1996 and 1995, the Company sold $372,000 and $0, respectively, of
available for sale mortgage-backed securities.
11
<PAGE>
The following table sets forth certain information relating to the
Company's investment and mortgage-backed securities portfolios at the dates
indicated.
<TABLE>
<CAPTION>
At September 30
--------------------------------------------------
1996 1995
------------------------- -----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
---------------- -------- ------------ --------
(In Thousands)
Securities held to maturity:
U.S. Treasury and U.S. government
<S> <C> <C> <C> <C>
agency obligations.............. $ -- $ -- $ 8,981 $ 8,951
------- ------- ------- -------
Mortgage-backed securities:
FHLMC........................... -- -- 2,509 2,576
FNMA............................ -- -- 3,447 3,437
GNMA............................ -- -- 1,447 1,452
------- ------- ------- -------
Total........................... -- -- 7,403 7,465
------- ------- ------- -------
Total securities held to maturity -- -- 16,384 16,416
------- ------- ------- -------
Securities available for sale:
U.S. Treasury and U.S. government
agency obligations.............. 11,405 11,334 6,009 6,000
Equity security................... 783 1,170 644 690
Municipal securities.............. 869 849 -- --
------- ------- ------- -------
Total........................... 13,057 13,353 6,653 6,690
------- ------- ------- -------
Mortgage-backed securities:
FHLMC........................... 3,229 3,201 495 493
FNMA............................ 5,357 5,239 -- --
GNMA............................ 1,665 1,585 -- --
------- ------- ------- -------
Total........................... 10,251 10,025 495 493
------- ------- ------- -------
Total securities available for sale 23,308 23,378 7,148 7,183
------- ------- ------- -------
Total investment and mortgage-backed
securities portfolio.......... $23,308 $23,378 $23,532 $23,599
======= ======= ======= =======
</TABLE>
12
<PAGE>
Investment and Mortgage-backed Securities Portfolio Maturities. The
following table sets forth certain information regarding the amortized cost,
weighted average yields, and maturities of the Company's investment and
mortgage-backed securities portfolio at September 30, 1996. Expected maturities
may differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
As of September 30, 1996
-------------------------------------------------------------------------------------------------------
One Year or Less One to Five Years Five to Ten Years More than Ten Years Total
------------------ ------------------ ------------------ -------------------- -------------------------
Weighted Weighted Weighted Weighted Weighted
Amortized Average Amortized Average Amortized Average Amortized Average Amortized Average Fair
Cost Yield Cost Yield Cost Yield Cost Yield Cost Yield Value
--------- -------- --------- -------- -------- -------- ---------- -------- -------- --------- -----
(Dollars in Thousands)
Securities available for sale:
U.S. Treasury and U.S
government agency
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
obligations .............. $1,421 5.3% $9,984 6.3% $ -- --% $ -- --% $11,405 6.2% $11,334
Mortgage-backed securities. 566 6.7 1,959 5.8 3,486 6.4 4,240 6.9 10,251 6.6 10,025
Equity security............ -- -- -- -- -- -- 783 -- 783 -- 1,170
Municipal securities(1).... -- -- 250 4.7 200 4.9 419 6.0 869 5.4 849
------ --- ------- --- ------ --- ------ --- ------ --- -------
Total investment and mortgage-
backed securities portfolio $1,987 5.7% $12,193 6.2% $3,686 6.3% $5,442 5.8% $23,308 6.1% $23,378
====== === ======= === ====== === ====== === ======= === =======
</TABLE>
- ---------------------
(1) The weighted average yield for municipal securities has not been
computed on a tax equivalent basis.
13
<PAGE>
Sources of Funds
General. The major sources of the Association's funds for lending and
other investment purposes are deposits, scheduled principal repayments, and
prepayment of loans and mortgage-backed securities, maturities of investment
securities, and operations. Scheduled loan principal repayments are a relatively
stable source of funds, while deposit inflows and outflows and loan prepayments
are significantly influenced by general interest rates and market conditions.
The Association also has access to advances from the FHLB of Atlanta.
Deposits. Customer deposits are attracted principally from within the
Association's primary market area through the offering of a broad selection of
deposit instruments including noninterest-bearing demand deposit accounts,
negotiable order of withdrawal ("NOW") accounts, passbook savings, money market
deposit, term certificate accounts, and individual retirement accounts ("IRAs").
Deposit account terms vary according to the minimum balance required, the time
period the funds must remain on deposit and the interest rate.
The interest rates paid by the Association on deposits are set weekly
based upon an evaluation of the following factors: (i) the Association's
anticipated need for cash and the timing of that desired cash flow; (ii) the
interest rates offered by other local financial institutions and the degree of
competition the Association wishes to maintain; (iii) the cost of borrowing from
other sources versus the cost of acquiring funds through customer deposits; and
(iv) the Association's anticipation of future economic conditions and related
interest rates.
The following table indicates the amount of the Association's certificates
of deposit of $100,000 or more by time remaining until maturity at September 30,
1996.
Maturity Amount
- --------------------------- --------------
(In Thousands)
3 months or less........... $ 466
3-6 months................. 722
6-12 months................ 561
Over 12 months............. 752
--------
$ 2,501
========
Borrowings
Deposits are the primary source of funds of the Association's lending and
investment activities and for its general business purposes. The Association may
obtain advances from the FHLB of Atlanta to supplement its supply of lendable
funds. Advances from the FHLB of Atlanta may be secured by a pledge of the
Association's stock in the FHLB of Atlanta and a portion of the Association's
first mortgage loans and certain other assets. The Association, if the need
arises, may also access the Federal Reserve Bank discount window to supplement
its supply of lendable funds and to meet deposit withdrawal requirements. At
September 30, 1996, the Association had $2.5 million in unsecured FHLB advances.
Subsidiary Activity
The Company has one wholly owned subsidiary, the Association, which is
chartered under the laws of the United States. The Association is permitted to
invest up to 2% of its assets in the capital stock of, or secured or unsecured
loans to, subsidiary corporations, with an additional investment of 1%
14
<PAGE>
of assets when such additional investment is utilized primarily for community
development purposes. At September 30, 1996, the Association had one
wholly-owned subsidiary, CCF Financial Services, Inc. CCF Financial Services,
Inc., a Georgia corporation, was formed in 1996 to enter into a leasing
arrangement with a third party corporation to offer nondeposit investment
products to customers of the Association. The Association's investment in its
subsidiary totalled $1,000 at September 30, 1996.
Personnel
As of September 30, 1996, the Association had 38 full-time and three
part-time employees. The Company does not have any employees other than
officers. None of the Association's employees are represented by a collective
bargaining group.
Regulation
Set forth below is a brief description of certain laws which relate to the
regulation of the Company and the Association. The description does not purport
to be complete and is qualified in its entirety by reference to applicable laws
and regulations.
Company Regulation
General. The Company is a unitary savings and loan holding company subject
to regulatory oversight by the OTS. As such, the Company is required to register
and file reports with the OTS and is subject to regulation and examination by
the OTS. In addition, the OTS has enforcement authority over the Company and its
non-savings association subsidiaries, should such subsidiaries be formed, which
also permits the OTS to restrict or prohibit activities that are determined to
be a serious risk to the subsidiary savings association. This regulation and
oversight is intended primarily for the protection of the depositors of the
Association and not for the benefit of stockholders of the Company.
Qualified Thrift Lender Test. As a unitary savings and loan holding
company, the Company generally is not subject to activity restrictions, provided
the Association satisfies the Qualified Thrift Lender ("QTL") test or meets the
definition of a domestic building and loan association as set forth in section
7701 of the Internal Revenue Code of 1986, as amended (the "Code"). If the
Company acquires control of another savings association as a separate
subsidiary, it would become a multiple savings and loan holding company, and the
activities of the Company and any of its subsidiaries (other than the
Association or any other SAIF-insured savings association) would become subject
to restrictions applicable to bank holding companies unless such other
associations each also qualifies as a QTL or domestic building and loan
association and were acquired in a supervisory acquisition. See "- Regulation of
the Association - Qualified Thrift Lender Test."
Regulation of the Association
General. As a federally chartered, SAIF-insured savings association, the
Association is subject to extensive regulation by the OTS and the Federal
Deposit Insurance Corporation ("FDIC"). Lending activities and other investments
must comply with various federal statutory and regulatory requirements. The
Association is also subject to certain reserve requirements promulgated by the
Federal Reserve Board.
15
<PAGE>
The OTS, in conjunction with the FDIC, regularly examines the Association
and prepares reports for the consideration of the Association's Board of
Directors on any deficiencies that are found in the Association's operations.
The Association's relationship with its depositors and borrowers is also
regulated to a great extent by federal and state law, especially in such matters
as the ownership of savings accounts and the form and content of the
Association's mortgage documents.
The Association must file reports with the OTS and the FDIC concerning its
activities and financial condition, in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with or
acquisitions of other savings institutions. This regulation and supervision
establishes a comprehensive framework of activities in which an institution can
engage and is intended primarily for the protection of the SAIF and depositors.
The regulatory structure also gives the regulatory authorities extensive
discretion in connection with their supervisory and enforcement activities and
examination policies, including policies with respect to the classification of
assets and the establishment of adequate loan loss reserves for regulatory
purposes. Any change in such regulations, whether by the OTS, the FDIC, or the
Congress could have a material adverse impact on the Company, the Association,
and their operations.
Insurance of Deposit Accounts. The Association's deposit accounts are
insured by the SAIF to a maximum of $100,000 for each insured member (as defined
by law and regulation). Insurance of deposits may be terminated by the FDIC upon
a finding that the institution has engaged in unsafe or unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
institution's primary regulator.
The FDIC charges an annual assessment for the insurance of deposits based
on the risk a particular institution poses to its deposit insurance fund. Under
this system as of September 30, 1996, SAIF members paid within a range of 23
cents to 31 cents per $100 of domestic deposits, depending upon the
institution's risk classification. This risk classification is based on an
institution's capital group and supervisory subgroup assignment. Pursuant to the
Economic Growth and Paperwork Reduction Act of 1996 (the "Act"), the FDIC
imposed a special assessment on SAIF members to capitalize the SAIF at the
designated reserve level of 1.25% as of October 1, 1996. Based on the
Association's deposits as of March 31, 1995, the date for measuring the amount
of the special assessment pursuant to the Act, the assessment for the
Association totalled $398,000. The FDIC is expected to lower the premium for
deposit insurance to a level necessary to maintain the SAIF at its required
reserve level; however, the range of premiums had not been determined as of
September 30, 1996.
Pursuant to the Act, the Association will pay, in addition to its normal
deposit insurance premium as a member of the SAIF, an amount equal to
approximately 6.4 basis points toward the retirement of the Financing
Corporation bonds ("Fico Bonds") issued in the 1980's to assist in the recovery
of the savings and loan industry. Members of the Bank Insurance Fund ("BIF"), by
contrast, will pay, in addition to their normal deposit insurance premium,
approximately 1.3 basis points. Based on total deposits as of September 30,
1996, had the Act been in effect, the Association's annual Fico Bond premium
would have been approximately $40,000 in addition to its normal deposit
insurance premium. Beginning no later than January 1, 2000, the rate paid to
retire the Fico Bonds will be equal for members of the BIF and the SAIF. The Act
also provides for the merging of the BIF and the SAIF by January 1, 1999
provided there are no financial institutions still chartered as savings
associations at that time. Should the insurance funds be merged before January
1, 2000, the rate paid by all members of this new fund to retire the Fico Bonds
would be equal.
16
<PAGE>
Regulatory Capital Requirements. OTS capital regulations require savings
associations to meet three capital standards: (1) a tangible capital requirement
of 1.5% of total adjusted assets, (2) a leverage ratio (core capital)
requirement of 3% of total adjusted assets and (3) a risk-based capital
requirement equal to 8% of total risk-weighted assets.
As shown below, the Association's regulatory capital exceeded all minimum
regulatory capital requirements applicable to it as of September 30, 1996:
Percent of
Adjusted
Amount Assets
------- ----------
(Dollars in Thousands)
Tangible Capital:
Regulatory requirement.............. $ 1,176 1.50%
Regulatory capital.................. 12,413 15.83
------ -----
Excess............................ $11,237 14.33%
====== =====
Core Capital:
Regulatory requirement.............. $ 2,353 3.00%
Regulatory capital.................. 12,413 15.83
------ -----
Excess............................ $10,060 12.83%
====== =====
Risk-Based Capital:
Regulatory requirement.............. $ 2,755 8.00%
Regulatory capital.................. 12,951 37.60
------ -----
Excess............................ $10,196 29.60%
====== =====
Net Portfolio Value. In recent years, the Association has measured its
interest rate sensitivity by computing the "gap" between the assets and
liabilities which were expected to mature or reprice within certain periods,
based on assumptions regarding loan prepayment and deposit decay rates formerly
provided by the OTS. However, the OTS now requires the computation of amounts by
which the net present value of an institution's cash flows from assets,
liabilities, and off balance sheet items (the institution's net portfolio value,
or "NPV") would change in the event of a range of assumed changes in market
interest rates. The OTS also requires the computation of estimated changes in
net interest income over a four-quarter period. These computations estimate the
effect of an institution's NPV and net interest income of instantaneous and
permanent 100 to 400 basis point increases and decreases in market interest
rates.
NPV is the difference between incoming and outgoing discounted cash flows
from assets, liabilities, and off-balance sheet contracts. An institution's
interest rate risk is measured as the change to its NPV as a result of a
hypothetical 200 basis point change in market interest rates. A resulting change
in NPV of more than 2% of the estimated market value of its assets will require
the institution to deduct from its capital 50% of that excess change.
Institutions, such as the Association, with less than $300 million in total
assets and a risk-based capital ratio in excess of 12% are exempt from filing
information with the OTS and are exempt from making a deduction from capital.
Because the Association is not subject to the rule, the following table presents
the Association's NPV at September 30, 1996, as
17
<PAGE>
calculated by the Federal Home Loan Bank of Atlanta and based on Federal Home
Loan Bank of Atlanta assumptions utilizing raw data voluntarily provided to the
Federal Home Loan Bank of Atlanta by the Association.
The Association utilizes the NPV calculations to manage its interest rate
risk by establishing a maximum decrease in net interest income and maximum
decreases in NPV given these instantaneous changes in interest rates. The
greater the change in NPV, positive or negative, the more interest rate risk is
assumed to exist with the institution. However, computations of prospective
effects of hypothetical interest rate changes are based on numerous assumptions,
including relative levels of market interest rates, loan prepayments and deposit
run-offs, and should not be relied upon as indicative of actual results.
Further, the computations do not contemplate any actions the Association may
undertake in response to changes in interest rates.
Change Interest Estimated Amount of Percent of Percentage
Rates (basis points) NPV Change(1) NPV(2) Change from Base
- -------------------- --------- --------- ---------- ----------------
(Dollars in Thousands)
+400 $11,551 (4,754) 93.08% (29.16)%
+300 12,799 (3,506) 103.13 (21.50)
+200 14,047 (2,258) 113.19 (13.85)
+100 15,176 (1,129) 122.29 (6.92)
-- 16,305 -- 131.38 --
-100 17,060 755 137.47 4.63
-200 17,815 1,510 143.55 9.26
-300 18,143 1,838 146.20 11.28
-400 18,472 2,167 148.84 13.29
- -----------------
(1) Represents the excess (deficiency) of the estimated NPV assuming the
indicated change in interest rates minus the estimated NPV assuming no
change in interest rates.
(2) Calculated as the amount of change in the estimated NPV divided by the
estimated NPV assuming no change in interest rates.
The Association is exempt from deducting the interest rate risk component
from its risk-based capital due to its asset size and level of risk-based
capital. Based on the table, net interest income should decline with
instantaneous increases in interest rates while net interest income should
increase with instantaneous declines in interest rates.
Dividend and Other Capital Distribution Limitations. OTS regulations
require the Association to give the OTS 30 days advance notice of any proposed
declaration of dividends to the Company, and the OTS has the authority under its
supervisory powers to prohibit the payment of dividends to the Company. In
addition, the Association may not declare or pay a cash dividend on its capital
stock if the effect thereof would be to reduce the regulatory capital of the
Association below the amount required for the liquidation account to be
established pursuant to the Association's Plan of Conversion.
OTS regulations impose limitations upon all capital distributions by
savings institutions, such as cash dividends, payments to repurchase or
otherwise acquire its shares, payments to shareholders of another institution in
a cash-out merger and other distributions charged against capital. The rule
18
<PAGE>
establishes three tiers of institutions, based primarily on an institution's
capital level. An institution that exceeds all fully phased-in capital
requirements before and after a proposed capital distribution ("Tier 1
institution") and has not been advised by the OTS that it is in need of more
than the normal supervision can, after prior notice but without the approval of
the OTS, make capital distributions during a calendar year equal to the greater
of (i) 100% of its net income to date during the calendar year plus the amount
that would reduce by one-half its "surplus capital ratio" (the excess capital
over its fully phased-in capital requirements) at the beginning of the calendar
year, or (ii) 75% of its net income over the most recent four quarter period.
Any additional capital distributions require prior regulatory approval. As of
September 30, 1996, the Association was a Tier 1 institution. In the event the
Association's capital fell below its fully phased-in requirement or the OTS
notified it that it was in need of more than normal supervision, the
Association's ability to make capital distributions could be restricted. In
addition, the OTS could prohibit a proposed capital distribution by any
institution, which would otherwise be permitted by the regulation, if the OTS
determines that such distribution would constitute an unsafe or unsound
practice.
Finally, a savings association is prohibited from making a capital
distribution if, after making the distribution, the savings association would be
undercapitalized (not meet any one of its minimum regulatory capital
requirements).
In contrast, the Company has fewer restrictions on dividends. During the
fiscal years ended September 30, 1996 and 1995, the dividend payout ratio
(dividends declared per share divided by net income per share) of the Company
was 122.22% and 0%, respectively.
Qualified Thrift Lender Test. Savings institutions must meet either the
QTL test pursuant to OTS regulations or the definition of a domestic building
and loan association in section 7701 of the Code. If the Association maintains
an appropriate level of certain specified investments (primarily residential
mortgages and related investments, including certain mortgage-related
securities) and otherwise qualifies as a QTL or a domestic building and loan
association, it will continue to enjoy full borrowing privileges from the FHLB
of Atlanta. The required percentage of investments under the QTL test is 65% of
assets while the Code requires investments of 60% of assets. An association must
be in compliance with the QTL test or definition of domestic building and loan
association on a monthly basis in nine out of every 12 months. As of September
30, 1996, the Association was in compliance with its QTL requirement and met the
definition of a domestic building and loan association.
Federal Reserve System. The Federal Reserve Board requires all depository
institutions to maintain non-interest bearing reserves at specified levels
against their transaction accounts (primarily checking, NOW, and Super NOW
checking accounts) and non-personal time deposits. The balances maintained to
meet the reserve requirements imposed by the Federal Reserve Board may be used
to satisfy the liquidity requirements that are imposed by the OTS. However, at
September 30, 1996, the Association was in compliance with this requirement.
Item 2. Description of Property
- ---------------------------------
(a) Properties.
The Company owns no real property but utilizes the offices of the
Association. The Association operates from its main office and two branch
offices, all of which are owned by the Association.
19
<PAGE>
The Association obtains rental income through the leasing of space in its
main office building and an office building and small house adjacent to its
Forest Park Branch. During the fiscal years ended September 30, 1996 and 1995,
such rental income was $49,000, and $51,000, respectively.
(b) Investment Policies.
See "Item 1. Business" above for a general description of the
Association's investment policies and any regulatory or Board of Directors'
percentage of assets limitations regarding certain investments. All of the
Association's investment policies are reviewed and approved by the Board of
Directors of the Association, and such policies, subject to regulatory
restrictions (if any), can be changed without a vote of stockholders. The
Association's investments are primarily acquired to produce income, and to a
lesser extent, possible capital gain.
(1) Investments in Real Estate or Interests in Real Estate. See "Item 1.
Business - Lending Activities," "Item 1. Business - Regulation - Regulation of
the Association," and "Item 2. Description of Property. (a) Properties" above.
(2) Investments in Real Estate Mortgages. See "Item 1. Business - Lending
Activities" and "Item 1. Business - Regulation - Regulation of the Association."
(3) Investments in Securities of or Interests in Persons Primarily Engaged
in Real Estate Activities. See "Item 1. Business - Lending Activities," and
"Item 1. Business - Regulation -
Regulation of the Association."
(c) Description of Real Estate and Operating Data.
Not Applicable.
Item 3. Legal Proceedings
- ---------------------------
The Company and the Association, from time to time, are party to ordinary
routine litigation, which arises in the normal course of business, such as
claims to enforce liens, condemnation proceedings, on properties in which the
Association holds security interests, claims involving the making and servicing
of real property loans, and other issues incident to the business of the Company
and the Association. In the opinion of management, no material loss is expected
from any of such pending claims or lawsuits.
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended September 30, 1996.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
- ------------------------------------------------------------------
The information contained under the section captioned "Stock Market
Information" in the Company's Annual Report for the fiscal year ended September
30, 1996 (the "Annual Report"), is incorporated herein by reference.
20
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation
- -------------------------------------------------------------------
The information contained in the section captioned "Management's
Discussion and Analysis or Plan of Operation" in the Annual Report is
incorporated herein by reference.
Item 7. Financial Statements
- ------------------------------
The Company's consolidated financial statements in the Annual Report are
incorporated herein by reference.
Item 8. Changes in and Disagreements With Accountants on Accounting and
- --------------------------------------------------------------------------------
Financial Disclosure
- --------------------
Not Applicable.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
- --------------------------------------------------------------------------------
with Section 16(a) of the Exchange Act
- --------------------------------------
The information contained under the section captioned "I - Information
with Respect to Nominees for Director, Directors Continuing in Office, and
Executive Officers" in the Company's definitive proxy statement for the
Company's Annual Meeting of Stockholders to be held on January 23, 1997 (the
"Proxy Statement") is incorporated herein by reference.
Item 10. Executive Compensation
- --------------------------------
The information contained under the section captioned "Director and
Executive Officer Compensation" in the Proxy Statement is incorporated herein by
reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
- ------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners
Information required by this item is incorporated herein by
reference to the section captioned "Voting Securities and Principal
Holders Thereof" in the Proxy Statement.
(b) Security Ownership of Management
Information required by this item is incorporated herein by
reference to the section captioned "I - Information with Respect to
Nominees for Director, Directors Continuing in Office, and Executive
Officers" in the Proxy Statement.
(c) Management of the Company knows of no arrangements, including any
pledge by any person of securities of the Company, the operation of
which may at a subsequent date result in a change in control of the
Registrant.
21
<PAGE>
Item 12. Certain Relationships and Related Transactions
- --------------------------------------------------------
The information required by this item is incorporated herein by reference
to the section captioned "Certain Relationships and Related Transactions" and
"Voting Securities and Principal Holders Thereof" in the Proxy Statement.
Item 13. Exhibits, List and Reports on Form 8-K
- ------------------------------------------------
(a)(1) The Consolidated Financial Statements, including the notes thereto, and
Independent Auditors' Report included in the Annual Report, listed below,
are incorporated herein by reference.
1. Independent Auditors' Report
2. CCF Holding Company and Subsidiaries
(a) Consolidated Balance Sheets at September 30, 1996 and 1995
(b) Consolidated Statements of Income for the years ended
September 30, 1996, 1995, and 1994
(c) Consolidated Statements of Stockholders' Equity for the years
ended September 30, 1996, 1995, and 1994
(d) Consolidated Statements of Cash Flows for the years ended
September 30, 1996, 1995, and 1994
(e) Notes to Consolidated Financial Statements
(a)(2) All schedules have been omitted because the required information
is either inapplicable or included in the Notes to Consolidated
Financial Statements.
(a)(3) Exhibits are either filed or attached as part of this Report or
incorporated herein by reference.
3.1 Articles of Incorporation of CCF Holding Company*
3.2 Bylaws of CCF Holding Company*
3.3 Management Stock Bonus Plan**
10.2 1995 Stock Option Plan**
10.3 Employment Agreement with David B. Turner
13 Annual Report to Stockholders for the fiscal year ended September
30, 1996.
21 Subsidiaries of the Registrant
23 Consent of KPMG Peat Marwick LLP
27 Financial Data Schedule
22
<PAGE>
(b) Reports on Form 8-K.
None.
(c) Exhibits to this Form 10-KSB are attached or incorporated by
reference as stated above.
- --------------------------
* Incorporated by reference to the Registrant's Registration Statement
on Form S-1 declared effective by the Commission on May 15, 1995 (File
No. 33-90612)
** Incorporated by reference to the Registrant's proxy statement for the
annual meeting of stockholders held January 23, 1996 as filed with the
Commission on December 15, 1995 (File No. 0-25846)
23
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CCF HOLDING COMPANY
Dated: December 26, 1996 By:/s/ David B. Turner
-------------------------------
David B. Turner
President, Chief Executive
Officer, and Director (Duly
Authorized Representative)
Pursuant to the requirement of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: /s/ David B. Turner By: /s/ John B. Lee, Jr.
----------------------------------- -------------------------------
David B. Turner John B. Lee, Jr.
President, Chief Executive Officer, Chairman of the Board
and Director (Principal Executive
Officer)
Date: December 26, 1996 Date: December 26, 1996
By: /s/ Edwin S. Kemp, Jr. By: /s/ Charles S. Tucker
---------------------------------- -------------------------------
Edwin S. Kemp, Jr. Charles S. Tucker
Director Treasurer, Secretary, and
Director
Date: December 26, 1996 Date: December 26, 1996
By: /s/ Joe B. Mundy By: /s/ Thomas L. Sawyer
--------------------------------- -------------------------------
Joe B. Mundy Thomas L. Sawyer
Director Vice President and Chief
Financial Officer
(Principal Accounting and
Financial Officer)
Date: December 26, 1996 Date: December 26, 1996
EMPLOYMENT AGREEMENT
THIS AGREEMENT entered into this 26th day of January, 1995 ("Effective
Date"), by and between Clayton County Federal Savings and Loan Association (the
"Association") and David B. Turner (the "Employee").
WHEREAS, the Employee has heretofore been employed by the Association as
Chief Executive Officer and is experienced in all phases of the business of the
Association; and
WHEREAS, the parties desire by this writing to set forth the continuing
employment relationship of the Association and the Employee.
NOW, THEREFORE, it is AGREED as follows:
1. Employment. The Employee is employed in the capacity as the Chief
Executive Officer of the Association. The Employee shall render such
administrative and management services to the Association and any to-be-formed
parent savings and loan holding company ("Parent") as are currently rendered and
as are customarily performed by persons situated in a similar executive
capacity. The Employee shall also promote, by entertainment or otherwise, as and
to the extent permitted by law, the business of the Association and Parent. The
Employee's other duties shall be such as the Board of Directors for the
Association (the "Board of Directors" or "Board") may from time to time
reasonably direct, including normal duties as an officer of the Association.
2. Base Compensation. The Association agrees to pay the Employee during the
term of this Agreement a salary at the rate of $75,000 per annum, payable in
cash not less frequently than monthly; provided, that the rate of such base
salary and total compensation shall be reviewed by the Board of Directors not
less often than annually, and Employee shall be entitled to receive annually an
increase in base salary at such percentage or in such an amount as the Board of
Directors in its sole discretion may decide at such time upon a determination
and resolution of the Board of Directors that the performance of the Employee
has met the requirements and standards of the Board, and that such base salary
shall be increased. .
3. Discretionary Bonus. The Employee shall be entitled to participate in
an equitable manner with all other senior management employees of the
Association in discretionary bonuses that may be authorized and declared by the
Board of Directors to its senior management employees from time to time. No
other compensation provided for in this Agreement shall be deemed a substitute
for the Employee's right to participate in such discretionary bonuses when and
as declared by the Board of Directors.
<PAGE>
4. (a) Participation in Retirement and Medical Plans. The Employee shall be
entitled to participate in any plan of the Association relating to pension,
profit-sharing, or other retirement benefits and medical coverage or
reimbursement plans that the Association may adopt for the benefit of its
employees.
(b) Employee Benefits; Expenses. The Employee shall be eligible to
participate in any fringe benefits which may be or may become applicable to the
Association's senior management employees, including by example, participation
in any stock option or incentive plans adopted by the Board of Directors of
Association or Parent, club memberships, a reasonable expense account, and any
other benefits which are commensurate with the responsibilities and functions to
be performed by the Employee under this Agreement. The Association shall
reimburse Employee for all reasonable out-of-pocket expenses which Employee
shall incur in connection with his service for the Association.
5. Term. The term of employment of Employee under this Agreement shall be
for the period commencing on the Effective Date and ending three years
thereafter on January 25, 1998. Additionally, on each annual anniversary date
from the Effective Date, the term of employment under this Agreement shall be
extended for an additional one year period beyond the then effective expiration
date upon a determination and resolution of the Board of Directors that the
performance of the Employee has met the requirements and standards of the Board,
and that the term of such Agreement shall be extended.
6. Loyalty; Noncompetition.
(a) The Employee shall devote his full time and attention to the
performance of his employment under this Agreement. During the term of
Employee's employment under this Agreement, the Employee shall not engage in any
business or activity contrary to the business affairs or interests of the
Association or Parent.
(b) Nothing contained in this Paragraph 6 shall be deemed to prevent or
limit the right of Employee to invest in the capital stock or other securities
of any business dissimilar from that of the Association or Parent, or, solely as
a passive or minority investor, in any business.
7. Standards. The Employee shall perform his duties under this Agreement in
accordance with such reasonable standards expected of employees with comparable
positions in comparable organizations and as may be established from time to
time by the Board of Directors.
8. Vacation and Sick Leave. At such reasonable times as the Board of
Directors shall in its discretion permit, the Employee shall be entitled,
without loss of pay, to absent himself
2
<PAGE>
voluntarily from the performance of his employment under this Agreement, with
all such voluntary absences to count as vacation time; provided that:
(a) The Employee shall be entitled to annual vacation leave in accordance
with the policies as are periodically established by the Board of Directors for
senior management employees of the Association.
(b) The Employee shall not be entitled to receive any additional
compensation from the Association on account of his failure to take vacation
leave and Employee shall not be entitled to accumulate unused vacation from one
fiscal year to the next, except in either case to the extent authorized by the
Board of Directors for senior management employees of the Association.
(c) In addition to the aforesaid paid vacations, the Employee shall be
entitled without loss of pay, to absent himself voluntarily from the performance
of his employment with the Association for such additional periods of time and
for such valid and legitimate reasons as the Board of Directors in its
discretion may determine. Further, the Board of Directors shall be entitled to
grant to the Employee a leave or leaves of absence with or without pay at such
time or times and upon such terms and conditions as the Board of Directors in
its discretion may determine.
(d) In addition, the Employee shall be entitled to an annual sick leave
benefit as established by the Board of Directors for senior management employees
of the Association. In the event that any sick leave benefit shall not have been
used during any year, such leave shall accrue to subsequent years only to the
extent authorized by the Board of Directors for employees of the Association.
9. Termination and Termination Pay.
The Employee's employment under this Agreement shall be terminated upon
any of the following occurrences:
(a) The death of the Employee during the term of this Agreement, in which
event the Employee's estate shall be entitled to receive the compensation due
the Employee through the last day of the calendar month in which Employee's
death shall have occurred.
(b) The Board of Directors may terminate the Employee's employment at any
time, but any termination by the Board of Directors other than termination for
Just Cause, shall not prejudice the Employee's right to compensation or other
benefits under the Agreement. The Employee shall have no right to receive
compensation or other benefits for any period after termination for
3
<PAGE>
Just Cause. Termination for "Just Cause" shall include termination because of
the Employee's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order, or material
breach of any provision of the Agreement.
(c) Except as provided pursuant to Section 12 herein, in the event
Employee's employment under this Agreement is terminated by the Board of
Directors without Just Cause, the Association shall be obligated to continue to
pay the Employee the salary provided pursuant to Section 2 herein, up to the
date of termination of the term (including any renewal term) of this Agreement
and the cost of Employee obtaining all health, life, disability, and other
benefits which the Employee would be eligible to participate in through such
date based upon the benefit levels substantially equal to those being provided
Employee at the date of termination of employment.
(d) If the Employee is removed and/or permanently prohibited from
participating in the conduct of the Association's affairs by an order issued
under Sections 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act ("FDIA")
(12 U.S.C. 1818(e)(4) and (g)(1)), all obligations of the Association under this
Agreement shall terminate, as of the effective date of the order, but the vested
rights of the parties shall not be affected.
(e) If the Association is in default (as defined in Section 3(x)(1) of
FDIA) all obligations under this Agreement shall terminate as of the date of
default, but this paragraph shall not affect any vested rights of the
contracting parties.
(f) All obligations under this Agreement shall be terminated, except to
the extent determined that continuation of this Agreement is necessary for the
continued operation of the Association: (i) by the Director of the Office of
Thrift Supervision ("Director of OTS"), or his or her designee, at the time that
the Federal Deposit Insurance Corporation ("FDIC") or the Resolution Trust
Corporation enters into an agreement to provide assistance to or on behalf of
the Association under the authority contained in Section 13(c) of FDIA; or (ii)
by the Director of the OTS, or his or her designee, at the time that the
Director of the OTS, or his or her designee approves a supervisory merger to
resolve problems related to operation of the Association or when the Association
is determined by the Director of the OTS to be in an unsafe or unsound
condition. Any rights of the parties that have already vested, however, shall
not be affected by such action.
(g) The voluntary termination by the Employee during the term of this
Agreement with the delivery of no less than 60 days written notice to the Board
of Directors, other than pursuant to Section 12(b), in which case the Employee
shall be entitled to receive only
4
<PAGE>
the compensation, vested rights, and all employee benefits up to the date of
such termination.
(h) Notwithstanding anything herein to the contrary, any payments made to
the Employee pursuant to the Agreement, or otherwise, shall be subject to and
conditioned upon compliance with 12 USC ss.1828(k) and any regulations
promulgated thereunder.
10. Suspension of Employment . If the Employee is suspended and/or
temporarily prohibited from participating in the conduct of the Association's
affairs by a notice served under Section 8(e)(3) or (g)(1) of the FDIA (12
U.S.C. 1818(e)(3) and (g)(1)), the Association's obligations under the Agreement
shall be suspended as of the date of service, unless stayed by appropriate
proceedings. If the charges in the notice are dismissed, the Association shall,
(i) pay the Employee all or part of the compensation withheld while its contract
obligations were suspended and (ii) reinstate any of its obligations which were
suspended.
11. Disability. If the Employee shall become disabled or incapacitated to
the extent that he is unable to perform his duties hereunder, by reason of
medically determinable physical or mental impairment, as determined by a doctor
engaged by the Board of Directors, Employee shall nevertheless continue to
receive the compensation and benefits provided under the terms of this Agreement
as follows: 100% of such compensation and benefits for a period of 12 months,
but not exceeding the remaining term of the Agreement, and 65% thereafter for
the remainder of the term of the Agreement. Such benefits noted herein shall be
reduced by any benefits otherwise provided to the Employee during such period
under the provisions of disability insurance coverage in effect for Association
employees. Thereafter, Employee shall be eligible to receive benefits provided
by the Association under the provisions of disability insurance coverage in
effect for Association employees. Upon returning to active full-time employment,
the Employee's full compensation as set forth in this Agreement shall be
reinstated as of the date of commencement of such activities. In the event that
the Employee returns to active employment on other than a full-time basis, then
his compensation (as set forth in Paragraph 2 of this Agreement) shall be
reduced in proportion to the time spent in said employment, or as shall
otherwise be agreed to by the parties.
12. Change in Control.
(a) Notwithstanding any provision herein to the contrary, in the event of
the involuntary termination of Employee's employment under this Agreement,
absent Just Cause, in connection with, or within twelve (12) months after, any
change in control of the Association or Parent, Employee shall be paid an amount
equal to the product of 2.99 times the Employee's "base amount" as defined in
Section 280G(b)(3) of the Internal Revenue Code of 1986, as
5
<PAGE>
amended (the "Code") and regulations promulgated thereunder. Said sum shall be
paid, at the option of Employee, either in one (1) lump sum within thirty (30)
days of such termination discounted to the present value of such payment using
as the discount rate the "prime rate" as published in the Wall Street Journal
Eastern Edition as of the date of such payment, or in periodic payments over the
next 36 months or the remaining term of this Agreement whichever is less, as if
Employee's employment had not been terminated, and such payments shall be in
lieu of any other future payments which the Employee would be otherwise entitled
to receive under Section 9 of this Agreement. Notwithstanding the forgoing, all
sums payable hereunder shall be reduced in such manner and to such extent so
that no such payments made hereunder when aggregated with all other payments to
be made to the Employee by the Association or the Parent shall be deemed an
"excess parachute payment" in accordance with Section 280G of the Code and be
subject to the excise tax provided at Section 4999(a) of the Code. The term
"control" shall refer to the ownership, holding or power to vote more than 25%
of the Parent's or Association's voting stock, the control of the election of a
majority of the Parent's or Association's directors, or the exercise of a
controlling influence over the management or policies of the Parent or
Association by any person or by persons acting as a group within the meaning of
Section 13(d) of the Securities Exchange Act of 1934. The term "person" means an
individual other than the Employee, or a corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or any other form of entity not specifically listed herein.
(b) Notwithstanding any other provision of this Agreement to the contrary,
Employee may voluntary terminate his employment under this Agreement within
twelve (12) months following a change in control of the Association or Parent,
and Employee shall thereupon be entitled to receive the payment described in
Section 12(a) of this Agreement, upon the occurrence, or within ninety (90) days
thereafter, of any of the following events, which have not been consented to in
advance by the Employee in writing: (i) if Employee would be required to move
his personal residence or perform his principal executive functions more than
thirty-five (35) miles from the Employee's primary office as of the signing of
this Agreement; (ii) if in the organizational structure of the Association or
Parent, Employee would be required to report to a person or persons other than
the Board of the Association or Parent; (iii) if the Association or Parent
should fail to maintain Employee's base compensation in effect as of the date of
the Change in Control and the existing employee benefits plans, including
material fringe benefit, stock option and retirement plans; (iv) if Employee
would be assigned duties and responsibilities other than those normally
associated with his position as referenced at Section 1, herein; (v) if Employee
would not be elected or reelected to the Board of Directors of the Association;
or (vi) if Employee's responsibilities or authority have in any way been
materially diminished or reduced.
6
<PAGE>
(c) In the event any dispute shall arise between the Employee and the Bank
as to the terms or interpretation of this Agreement, including this Section 12,
whether instituted by formal legal proceedings or otherwise, including any
action taken by Employee to enforce the terms of this Section 12 or in defending
against any action taken by the Bank or Parent, the Bank or Parent shall
reimburse Employee for all costs and expenses, including reasonable attorneys'
fees, arising from such dispute, proceedings or actions following issuance of a
legal judgement by a court of competent jurisdiction finding in favor of the
Employee or the settlement of the dispute by the parties. Such settlement to be
approved by the Board of the Bank or the Parent may include a provision for the
reimbursement by the Bank or Parent to the Employee for all costs and expenses,
including reasonable attorneys' fees, arising from such dispute, proceedings or
actions, or the Board of the Bank or the Parent shall authorize such
reimbursement of such costs and expenses by separate action upon a written
action and determination of the Board that payment of such costs and expenses is
not detrimental to the Bank or the Parent. Such reimbursement shall be paid
within ten (10) days of Employee furnishing to the Bank or Parent evidence,
which may be in the form, among other things, of a canceled check or receipt, of
any costs or expenses incurred by Employee.
13. Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Association or Parent which shall acquire,
directly or indirectly, by merger, consolidation, purchase or otherwise, all or
substantially all of the assets or stock of the Association or Parent.
(b) Since the Association is contracting for the unique and personal
skills of the Employee, the Employee shall be precluded from assigning or
delegating his rights or duties hereunder without first obtaining the written
consent of the Association.
14. Amendments. No amendments or additions to this Agreement shall be
binding upon the parties hereto unless made in writing and signed by both
parties, except as herein otherwise specifically provided.
15. Applicable Law. This agreement shall be governed by all respects
whether as to validity, construction, capacity, performance or otherwise, by the
laws of the State of Georgia, the extent that Federal law shall be deemed to
apply.
7
<PAGE>
16. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
17. Entire Agreement. This Agreement together with any understanding or
modifications thereof as agreed to in writing by the parties, shall constitute
the entire agreement between the parties hereto.
8
CCF HOLDING COMPANY
ANNUAL REPORT
For the Fiscal Year Ended
September 30, 1996
------------------------------------------------
<PAGE>
CCF HOLDING COMPANY
ANNUAL REPORT
- ------------------------------------------------------------------------------
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Letter to Stockholders.................................................... 1
Corporate Profile and Stock Market Information............................ 2
Selected Financial and Other Data......................................... 3
Management's Discussion and Analysis...................................... 4
Independent Auditors' Report............................................. 12
Consolidated Financial Statements........................................ 13
Notes to Consolidated Financial Statements............................... 21
Office Locations and Other Corporate Information......................... 47
<PAGE>
[CCF HOLDING COMPANY LOGO]
December 23, 1996
Dear Fellow Stockholders:
We are proud to report that 1996 has been a very successful year for Clayton
Federal.
The conversion to a stock company now has us well positioned for tomorrow's
challenges.
Our stock offering has been, and continues to be, profitable for investors.
Extensive planning to increase shareholder value has gone well beyond first year
goals. From its initial offering price of $10 per share we have recently reached
an all time high of $15.25 and have paid $.55 in regular and special dividends
in the past year and we have declared another $.50 of regular and special
dividends payable in January 1997. We continue to manage our capital through
stock repurchases and fixed asset investments in an effort to increase
shareholder value.
Additionally, we have hired new people with extensive commercial banking
experience to supplement our already outstanding staff.
The Board of Directors appreciates your continued support and confidence.
Through the collective efforts of our loyal management team, and employees, we
are pleased to report the financial results that are detailed in the following
pages.
We are eagerly looking forward to 1997. Banking has never been brighter at
Clayton Federal.
Very truly yours,
/s/ David B. Turner
D.B. Turner
President
-1-
<PAGE>
CCF HOLDING COMPANY
Corporate Profile and Related Information
CCF Holding Company (the "Company") is a Georgia corporation organized in March
1995 at the direction of Clayton County Federal Savings and Loan Association
(the "Association") in connection with the Association's conversion from a
mutual to stock form of organization (the "Conversion"). On July 11, 1995, the
Association completed the Conversion and became a wholly owned subsidiary of the
Company. The Company is a unitary savings and loan holding company which, under
existing laws, generally is not restricted in the types of business activities
in which it may engage provided the Association retains a specified amount of
its assets in housing-related investments.
The Association is a federally chartered stock savings and loan association
which originally commenced business in 1955. The Association's primary market
area is currently Clayton County, Georgia, where the Association operates three
offices. Clayton County is part of the Atlanta, Georgia metropolitan statistical
area and home to a portion of Atlanta's Hartsfield International Airport. The
Association also solicits deposits and makes loans in the adjacent market area
of Fayette and Henry counties in Georgia. To a much lesser extent, the
Association also makes loans in Coweta, Rockdale, Spalding, and Lamar counties,
Georgia. The Association is subject to examination and comprehensive regulation
by the Office of Thrift Supervision ("OTS") and its deposits are federally
insured by the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation ("FDIC"). The Association is a member of and owns
capital stock in the Federal Home Loan Bank ("FHLB") of Atlanta, which is one of
the 12 regional banks in the FHLB System.
The Association attracts deposits from the general public and uses such deposits
primarily to invest in and originate loans secured by first mortgages on
owner-occupied, one- to four-family residences in its market area and, to a
lesser extent, to invest in investment securities. The principal sources of
funds for the Association's lending activities are deposits and the
amortization, repayment, and maturity of loans and investment securities. The
Association does not rely on brokered deposits. Principal sources of income are
interest on loans and investment securities. The Association's principal expense
is interest paid on deposits.
Stock Market Information
Since its issuance in July 1995, the Company's common stock ("Common Stock") has
been traded on the Nasdaq SmallCap Market under the trading symbol of "CCFH."
The daily stock quotation for the Company is published under the symbols "CCF."
The following table reflects high and low bid quotations as published by USA
Today and The Wall Street Journal as well as dividend information. The
quotations reflect inter-dealer prices, without retail mark-up, mark-down, or
commission, and may not represent actual transactions.
<TABLE>
<CAPTION>
Dividends
Date High Low Declared Dividends Paid
---- ---- --- --------- ---------------
<S> <C> <C> <C> <C>
July 11, 1995 to September 30, 1995 $11.75 $10.75 $ -- $ --
October 1, 1995 to December 31, 1995 12.75 11.25 .35 --
January 1, 1996 to March 31, 1996 12.75 11.50 -- .35
April 1, 1996 to June 30, 1996 12.50 11.3125 .20 --
July 1, 1996 to September 30, 1996 13.25 11.50 -- .20
</TABLE>
The number of shareholders of record of Common Stock as of the record date of
December 13, 1996, was approximately 400. This does not reflect the number of
persons or entities who held stock in nominee or "street" name through various
brokerage firms. At December 13, 1996, there were 915,900 shares outstanding.
The
-2-
<PAGE>
Company's ability to pay dividends to stockholders is primarily dependent upon
the dividends it receives from the Association. The Association may not declare
or pay a cash dividend on any of its stock if the effect thereof would cause the
Association's regulatory capital to be reduced below (1) the amount required for
the liquidation account established in connection with the Conversion, or (2)
the regulatory capital requirements imposed by the OTS.
- -------------------------------------------------------------------------------
SELECTED FINANCIAL AND OTHER DATA
- -------------------------------------------------------------------------------
Financial Condition (Dollars in thousands)
At September 30,
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- --------- --------- --------- -------
Total Amount of:
<S> <C> <C> <C> <C> <C>
Assets............................... $80,283 $79,822 $69,080 $71,115 $72,347
Loans receivable, net................ 51,500 45,196 44,244 47,255 52,461
Mortgage-backed securities........... 10,025 7,896 6,804 7,079 6,523
Investment securities................ 13,353 15,671 12,795 9,528 5,288
Liabilities ......................... 65,843 62,501 62,866 65,214 67,185
Deposits............................. 61,822 61,132 61,598 64,050 65,966
FHLB advances........................ 2,500 -- -- -- --
Stockholders' equity................. 14,440 17,322 6,214 5,901 5,163
Other Data:
Net income .......................... 473 604 431 739 701
Average assets....................... 79,348 72,229 70,533 71,627 73,909
Average equity....................... 16,733 8,973 6,061 5,540 4,785
Total number of customer service
facilities(1)....................... 3 4 4 4 4
Full service offices................. 1 1 1 1 1
</TABLE>
- ---------------------------------
(1) These facilities provide all banking services with the exception of
mortgage loans, which are processed only at the main office.
- -------------------------------------------------------------------------------
Summary of Operations (Dollars in thousands)
Year Ended September 30,
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- --------- -------- --------- ------
<S> <C> <C> <C> <C> <C>
Total interest income................... $5,573 $5,021 $4,872 $5,248 $6,001
Total interest expense.................. 2,527 2,479 2,245 2,637 3,680
------ ------ ----- ----- -----
Net interest income................... 3,046 2,542 2,627 2,611 2,321
Provision for loan losses............... 130 5 69 98 95
------ ------ ----- ----- -----
Net interest income after provision
for loan losses..................... 2,916 2,537 2,558 2,513 2,226
Other income............................ 415 328 346 362 462
Other expenses(1)....................... 2,715 1,968 1,904 1,750 1,618
----- ----- ----- ----- -----
Income before income taxes and cumulative
effect of change in accounting principle 616 897 1,000 1,125 1,070
Income tax expense...................... 143 293 363 386 369
----- ----- ----- ----- -----
Income before cumulative effect of change
in accounting principle................. 473 604 637 739 701
Cumulative effect of change in
accounting principle.................. -- -- 206 -- --
----- ----- ----- ----- -----
Net income............................ $ 473 $ 604 $ 431 $ 739 $ 701
===== ===== ===== ===== =====
</TABLE>
- ---------------------------------
(1) For 1996, included a $398,000 one time assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") of the FDIC.
-3-
<PAGE>
- -------------------------------------------------------------------------------
Key Operating Ratios
At or for the Year Ended September 30,
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Performance Ratios: 1996 1995 1994 1993 1992
---------- --------- -------- -------- -------
Return on average assets (net income
<S> <C> <C> <C> <C> <C>
divided by average total assets) ............ 0.60% 0.84% 0.61% 1.03% 0.95%
Return on average equity (net income
divided by average equity) .................. 2.83 6.73 7.11 13.34 14.65
Average interest-earning assets to
average interest-bearing liabilities ........ 122.83 110.75 106.50 106.69 103.77
Net interest rate spread ...................... 3.27 3.31 3.68 3.52 3.10
Net yield on average interest-earning asset.... 4.04 3.70 3.89 3.77 3.29
Net interest income after provision for loan
losses to total other expenses .............. 107.40 128.93 134.38 143.59 137.58
Earnings per share (1) ........................ $ 0.45 $ 0.19 N/A N/A N/A
Capital Ratios:
Book value per share (1) ...................... $ 14.68 $ 14.55 N/A N/A N/A
Average equity to average assets ratios
(average equity divided by average total
assets) ..................................... 21.09% 12.42% 8.59% 7.73% 6.47%
Equity-to-assets (End of Period) .............. 17.99 21.70 9.00 8.30 7.14
Asset Quality Ratios:
Non-performing loans to total loans, net ...... 1.17 0.39 0.41 2.31 1.16
Non-performing loans to total assets .......... 0.75 0.22 0.26 1.53 0.84
Allowance for loan losses to nonperforming
loans ....................................... 89.90 233.71 237.63 33.15 43.26
</TABLE>
- ------------------------
(1) There were no shares outstanding prior to the consummation of the
Company's initial public offering on July 11, 1995. The number of shares
outstanding as of September 30, 1995 was 1,190,250 and 983,332, net of
16,668 shares held as treasury shares and in trust for the MSBP as of
September 30, 1996, including shares held by the Association's Employee
Stock Ownership Plan ("ESOP"). For purposes of presenting net income per
share, only post-Conversion net income is considered.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
General
The earnings of the Company depend primarily on the earnings of the Association.
The largest components of the Association's net income are net interest income,
which is the difference between interest income and interest expense, and other
income derived primarily from loan origination and commitment fees.
Consequently, the Association's earnings are dependent on its ability to
originate loans, net interest income, and the relative amounts of
interest-earning assets and interest-bearing liabilities. The Association's net
income is also affected by its provision for loan losses and foreclosed real
estate as well as the amount of other expenses, such as salaries and employee
benefits, occupancy and equipment, and federal deposit insurance premiums.
Earnings of the Association also are affected significantly by general economic
and competitive conditions, particularly changes in market interest rates,
government policies, and actions of regulatory authorities.
-4-
<PAGE>
Business Strategy
The Association's business strategy is to endeavor to be a flexible, efficient,
and financially stable community financial services institution providing a
range of real estate lending services, commercial lending, and consumer
financial products primarily to the Clayton, Fayette, and Henry County, Georgia
areas. The management of the Association has identified and sought to pursue
four primary strategic objectives: (1) to maintain an adequate amount of
regulatory capital; (2) to reduce interest rate risk; (3) to maintain good asset
quality through continued emphasis on well underwritten consumer, commercial,
and residential lending; and (4) to broaden our product and customer base to
become a more diversified financial institution.
1. Regulatory Capital. Prior to the Conversion, the Association sought to
manage its size and asset quality in order to allow its capital ratios to
increase in order to comply with and safely exceed the regulatory capital
requirements. During this period, management did not price its deposits
competitively by increasing interest rates paid, which to a limited extent,
allowed the deposit base to shrink. To further this strategy, the
Association did not aggressively seek to increase its market share of loans
nor to expand the market area for lending. This strategy resulted in the
Association increasing its capital ratios, and when combined with the
proceeds from the Conversion, the Association's capital was well in excess
of all of its risk-based capital requirements. The Association has used
some of the proceeds from the Conversion to make one- to four-family
mortgage loans, acquire property for future branch expansion and repurchase
shares of the Company's stock.
2. Reduction of Interest Rate Risk. The Association has sought to decrease
its interest rate risk through the origination of adjustable-rate mortgage
loans when market conditions permit. During the past five years, the
Association has sold a portion of its fixed-rate mortgage loans in the
secondary market. The emphasis in the loan portfolio will be to increase
the volume of loans that reprice at least annually.
3. Asset Quality. The Association continues to seek to maintain its asset
quality through emphasizing residential lending activity in its lending
market. At September 30, 1996, 93.3% of the Association's gross loan
portfolio consisted of one- to four-family residential mortgages. At
September 30, 1996, the Association's ratio of nonperforming loans to total
assets was 0.75%.
4. Product and Customer Base. The Association will seek to expand its
customer base through the development of more extensive commercial,
consumer and non-deposit related products.
The Association intends to maintain profitability and manage interest rate risk
principally through continued emphasis on adjustable-rate loan production when
market conditions permit. The management of the Association believes that there
are opportunities for growth within the Association's primary market area and
adjacent market areas, and the Association intends to manage the growth of
deposits and loans in a manner that will ensure its ability to comply with
current and future capital requirements as well as manage interest rate risk.
Asset and Liability Management
Interest Rate Sensitivity. The ability to maximize net interest income is
largely dependent upon achieving a positive interest rate spread that can be
sustained during fluctuations in prevailing interest rates. The Association,
like many other thrift institutions, is subject to interest rate risk as a
result of the difference in the maturity of interest-bearing liabilities
(including deposits) and interest-earning assets (including loans) and the
volatility of interest rates. Because most deposit accounts, given their shorter
terms to maturity, react more quickly to market
-5-
<PAGE>
interest rate movements than do traditional mortgage loans, increases in
interest rates may have a substantial adverse effect on the Association's
earnings. Conversely, this same mismatch will generally benefit the
Association's earnings during periods of declining or stable interest rates.
The Association's net interest rate spread was 3.68% for the year ended
September 30, 1994, decreased to 3.31% at September 30, 1995, and decreased to
3.27% at September 30, 1996. If rates increase, there may be a negative impact
on the Association's net interest rate spread and earnings as deposits reprice
faster than loans.
The Association attempts to manage the interest rates it pays on deposits while
maintaining a stable deposit base and providing quality services to its
customers. The Association has continued to rely primarily upon deposits as its
source of funds. To the extent the Association is unable to invest these funds
in loans originated in the Association's market area, it will continue to
purchase (i) mortgage-backed securities and (ii) high quality investment
securities.
In an effort to manage interest rate risk and protect it from the negative
effect of increases in interest rates, the Association has instituted certain
asset and liability management measures, including the following: 1) reduce the
maturities or terms to repricing of interest-earning assets by emphasizing the
origination of adjustable rate loans and the purchase of relatively short-term
interest-earning investments and mortgage-backed securities; 2) lengthen the
maturities of interest-bearing liabilities by encouraging depositors to invest
in longer term deposit products offered by the Association; 3) increase the
amount of less rate-sensitive deposits by actively seeking NOW (checking)
accounts; 4) encourage long-term depositors to maintain their accounts with the
Association through expanded customer products and services; and 5) leverage the
excess capital of the Association.
-6-
<PAGE>
Average Balance Sheets. The following table sets forth certain information
relating to the Association's average balance sheets and reflects the average
yield on assets and average cost of liabilities for the periods indicated. Such
yields and costs are derived by dividing income or expense by the average
balance of assets or liabilities, respectively, for the periods presented.
Average balances are derived from month-end balances. Management does not
believe that the use of month-end balances instead of daily average balances has
caused any material differences in the information presented.
<TABLE>
<CAPTION>
For the Years Ended September 30,
At September 30, -------------------------------------------------------------
1996 1996 1995
---------------------- ----------------------------- ---------------------------
Weighted Interest Interest
Historical Average Average Income/ Yield/ Average Income/ Yield/
Balance Rates Balance Expense Rate Balance Expense Rate
---------- -------- ------- -------- ----- ------- ------- ------
Assets (Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Loans(1) ................................ $51,500 7.76% $47,293 $ 3,844 8.13% $44,322 $ 3,578 8.07%
Mortgage-backed securities............... 10,025 6.90 9,526 618 6.49 6,595 428 6.49
Investment securities ................... 13,353 6.22 15,597 920 5.90 12,976 723 5.57
FHLB Stock .............................. 1,013 7.40 1,013 74 7.31 1,013 74 7.31
Interest-earning deposits in other
financial institutions ................ 513 7.02 1,986 117 5.89 3,789 218 5.75
------- ------- ------- ------- -------
Total interest-earning assets.......... 76,404 7.37 75,415 5,573 7.39 68,695 5,021 7.31
---- ------- ---- ------- ----
Other noninterest-earning assets............ 3,879 3,933 3,534
------- ------- -------
Total assets .......................... $80,283 $79,348 $72,229
======= ======= =======
Liabilities and stockholders' equity:
Interest-bearing liabilities:
Demand deposits(2) ...................... $14,094 1.65 $13,016 236 1.81 $12,551 271 2.16
Passbook savings ........................ 11,659 2.03 11,817 274 2.32 13,770 367 2.67
Time deposits ........................... 36,069 5.49 36,140 2,001 5.54 35,707 1,841 5.16
FHLB advances ........................... 2,500 6.05 423 16 3.78 -- -- --
------- ------- ------- ------- -------
Total interest-bearing liabilities..... 64,322 4.04 61,396 2,527 4.12 62,028 2,479 4.00
------- ---- ------- ------- ---- ------- ------- ----
Other noninterest-bearing liabilities....... 1,521 1,219 1,228
Stockholders' equity ........................ 14,440 16,733 8,973
------- ------- -------
Total liabilities and
stockholders' equity................. $80,283 $79,348 $72,229
======= ======= =======
Excess of interest-earning assets
over interest-bearing liabilities.......... $12,082 $14,019 $ 6,667
======= ======= =======
Ratio of interest-earning assets
to interest-bearing liabilities............ 118.78% 122.83% 110.75%
====== ====== ======
Net interest income ......................... $ 3,046 $2,542
======= ======
Net interest spread(3) ...................... 3.27% 3.31%
==== ====
Net yield on average
interest-earning assets(4) ................ 4.04% 3.70%
==== ====
</TABLE>
- ------------------------------
(1) Average balances include nonaccrual loans.
(2) Includes noninterest-bearing demand accounts which are not material.
(3) Net interest spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net yield on average interest-earning assets represents net interest income
as a percentage of average interest-earning assets.
-7-
<PAGE>
Rate/Volume Analysis. The following table describes the extent to which changes
in interest rates and changes in volume of interest-earning assets and
interest-bearing liabilities have affected the Association's interest income and
expense during the periods indicated. For each category of interest-earning
asset and interest-bearing liability, information is provided as to changes in
volume (change in volume multiplied by old rate) and changes in rates (change in
rate multiplied by old volume). The net change attributable to changes in both
volume and rate has been allocated proportionately to the change due to volume
and the change due to rate.
<TABLE>
<CAPTION>
Years Ended September 30,
---------------------------------------------------
1996 compared to 1995 1995 compared to 1994
------------------------ -----------------------
Changes due to Changes due to
------------------------ -----------------------
Rate/ Rate/
Volume Yield Total Volume Yield Total
------ ----- ----- ------ ----- -----
(In Thousands)
Interest income:
<S> <C> <C> <C> <C> <C> <C>
Loans ...................................... $ 240 $ 26 $ 266 $(101) $ (4) $(105)
Mortgage-backed securities ................. 190 -- 190 (21) 11 (10)
Investment securities ...................... 146 51 197 86 35 121
FHLB Stock ................................. -- -- -- -- 21 21
Interest-earning deposits in other financial
institutions ............................. (104) 3 (101) 56 66 122
----- ----- ----- ----- ----- -----
Total interest income .................. $ 472 $ 80 $ 552 $ 20 $ 129 $ 149
===== ===== ===== ===== ===== =====
Interest expense:
Demand deposits ........................... $ 10 $ (45) $ (35) $ (33) $ (4) $ (37)
Passbook savings .......................... (52) (41) (93) (12) (12) (24)
Time deposits ............................. 21 139 160 26 269 295
FHLB advances ............................. 16 -- 16 -- -- --
----- ----- ----- ----- ----- -----
Total interest expense ................. $ (5) $ 53 $ 48 $ (19) $ 253 $ 234
===== ===== ===== ===== ===== =====
Net interest income .................... $ 504 $ (85)
===== =====
</TABLE>
-8-
<PAGE>
Comparison of Financial Condition at September 30, 1996 and September 30, 1995
Total assets increased $767,000 between the two dates due to increased lending
from funds provided from increased deposits and use of FHLB advances.
Stockholders' equity decreased by $2.9 million to $14.4 million at September 30,
1996 from $17.3 million at September 30, 1995. The decrease was attributable to
repurchases of Common Stock totalling $2.3 million, the $579,000 purchase of the
1995 management stock bonus plan ("MSBP") shares and dividends totalling
$600,000, that were only partially offset by net income of $473,000, employee
stock ownership plan shares allocated totalling $101,000 and unrealized gains on
the fair value of securities available for sale of $22,000. The Company carries
at fair value its securities available for sale, with unrealized gains and
losses, net of income tax effects, recorded as a separate component of
stockholders' equity in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 115. Because of the Company's portfolio of securities
classified as available for sale, the Company could continue to experience
volatility in the fair value of such securities during periods of changing
market interest rates. During fiscal year 1996, the Company decided to transfer
approximately $9.3 million of investment securities and $8.3 million of mortgage
backed securities from held to maturity to available for sale. Management
decided to make this transfer in order to provide additional liquidity for the
purpose of funding its new commercial loan product line.
Deposits of the Association are insured by the SAIF as administered by the
Federal Deposit Insurance Corporation ("FDIC"). As a member of the SAIF, the
Association paid an insurance premium to the FDIC equal to a minimum of 0.23% of
its total deposits. The FDIC also maintains another insurance fund, the Bank
Insurance Fund ("BIF"), which primarily insures commercial bank deposits.
Effective September 30, 1995, the FDIC lowered the insurance premium on BIF
insured deposits to a range of between 0.04% and 0.31% of deposits, with the
result that most commercial banks would pay the lowest rate of 0.04%. Effective
January 1, 1996, the annual insurance premium for most BIF members was lowered
to $2,000. These reductions in insurance premiums for BIF members placed SAIF
members at a competitive disadvantage to BIF members.
Effective September 30, 1996, federal law was revised to mandate a one-time
special assessment on SAIF members such as the Association of approximately
.657% of deposits held on March 31, 1995. The Association recorded a $398,000
pre-tax expense for this assessment at September 30, 1996. Beginning January 1,
1997, deposit insurance assessments for SAIF members are expected to be reduced
to approximately .064% of deposits on an annual basis through the end of 1999.
During this same period, BIF members are expected to be assessed approximately
.013% of deposits. Thereafter, assessments for BIF and SAIF members should be
the same and SAIF and BIF may be merged. It is expected that these continuing
assessments for both SAIF and BIF members will be used to repay outstanding
Financing Corporation bond obligations. Assuming these changes occur, beginning
January 1, 1997, the rate of deposit insurance assessed the Association will
decline by approximately 70%.
The continuing disparity in insurance premiums between those required for the
Association and BIF members could allow BIF members to attract and retain
deposits at higher interest rates and at a lower effective cost than the
Association. This could put competitive pressure on the Association to raise its
interest rates paid on deposits, thus increasing its cost of funds and possibly
reducing net interest income. Although the Association has other sources of
funds, these other sources may have higher costs than those of deposits.
-9-
<PAGE>
Comparison of Operating Results For The Years Ended September 30, 1996 and 1995
Net Income. The Company's net income decreased by $130,000 from $603,000
in fiscal 1995 to $473,000 in fiscal 1996. This decrease was primarily due to
the one time FDIC SAIF assessment of $398,000.
Net Interest Income. Net interest income (before provision for loan
losses) increased from $2.5 million in 1995 to $3.0 million in 1996. This
increase was primarily due to an increase in interest income on loans of
$266,000, more than offsetting the increase in interest expense on deposits and
FHLB advances of $48,000. These changes were due primarily to the average rates
earned on the Association's loans increasing more significantly than the average
rate paid on deposits during 1996 and the higher volume of average loan balances
during 1996.
Provision For Loan Losses. The Association increased the provision for
loan losses from $5,000 in 1995 to $130,000 in 1996. The increase was due to
management's assessment of the slowing local economy, the trends of increasing
consumer debt and higher bankruptcies, and the Company's increase in lending
activities. The Association's allowance for loan losses increased from $409,000
at September 30, 1995, to $540,000 at September 30, 1996. Management believes
that its allowance for loan losses is adequate, however, additional provisions
for loan losses have been re-established, due to the growth of the loan
portfolio.
Other Income. Other income increased from $327,000 in 1995 to $415,000 in
1996. This increase was attributable primarily to non recurring income from
sales of loans and investment securities.
Other Expenses. Other expenses increased from $1.97 million during fiscal
1995 to $2.72 million during fiscal 1996, representing an approximate 38.0%
increase. The increase is primarily due to the $398,000 SAIF assessment in 1996.
Net directors' fees and salaries increased $157,000 or 15.3%. Employee benefits
expenses, as a result of the Employee Stock Ownership Plan ("ESOP") and MSBP,
increased by $103,000. The increase in employee benefits expense was also
affected by the reversal of $84,000 of accrued pension costs due to the
Association's termination of the pension plan during 1995. Group insurance
expenses decreased by $20,000. Occupancy expenses increased by $26,000 due to
expense related to partial redecorating of the Association's main office and a
technology upgrade in computers.
Income Tax Expense. Income tax expense as a percent of income before taxes
decreased from 32.7% in 1995 to 23.1% in 1996. This decrease is due in part to
costs associated with an attempt in 1995 at establishing a mutual holding
company and investment income on tax exempt municipal investments.
Liquidity Resources
The Association is required to maintain minimum levels of liquid assets as
defined by the OTS regulations. The OTS minimum required liquidity ratio is 5%
and the minimum short-term liquidity ratio is 1%. Short-term liquidity at
September 30, 1996 was 40.2%. The Association adjusts its liquidity levels in
order to meet funding needs for deposit outflows, payment of real estate taxes
from escrow accounts on mortgage loans, loan funding commitments, and repayment
of borrowings, when applicable. The Association adjusts its liquidity level as
appropriate to meets it asset/liability objectives. The primary source of funds
are deposits, amortization and prepayments of loans and mortgage-backed
securities, maturity of investments, and funds provided from operations. As an
alternative to supplement liquidity needs, the Association has the ability to
borrow from the Federal Home Loan Bank of Atlanta. Scheduled
-10-
<PAGE>
loan amortization and maturing investment securities are a relatively
predictable source of funds, however, deposit flow and loan prepayments are
greatly influenced by, among other things, market interest rates, economic
conditions, and competition. The Association's liquidity, represented by cash,
cash equivalents, and securities available for sale, is a product of its
operating, investing, and financing activities.
Impact of Inflation and Changing Prices
The financial statements and related data have been prepared in accordance with
generally accepted accounting principles which require the measurement of
financial position and operating results in terms of historical dollars, without
consideration for changes in the relative purchasing power of money over time
caused by inflation.
Unlike industrial companies, nearly all of the assets and liabilities of a
financial institution are monetary in nature. As a result, interest rates have a
more significant impact on a financial institution's performance than general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the price of goods and services, since
such goods and services are affected by inflation. In the current interest rate
environment, liquidity and the maturity structure of the Association's assets
and liabilities are critical to the maintenance of acceptable performance
levels.
-11-
<PAGE>
[KPMG Peat Marwick LLP Letterhead]
303 Peachtree Street, N.E. Telephone 404 222 3000 Telefax 404 222 3050
Suite 2000
Atlanta, GA 30308
Independent Auditors' Report
The Board of Directors and Stockholders
CCF Holding Company and Subsidiaries
Jonesboro, Georgia:
We have audited the accompanying consolidated balance sheets of CCF Holding
Company and subsidiaries (the "Company") as of September 30, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended September 30, 1996.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CCF Holding Company
and subsidiaries as of September 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended September 30, 1996, in conformity with generally accepted accounting
principles.
As discussed in notes 1 and 9, the Company changed its method of accounting for
income taxes as of October 1, 1993 to adopt the provisions of the Financial
Accounting Standards Board's Statement of Financial Accounting Standards (SFAS)
No. 109, "Accounting for Income Taxes." As discussed in note 1, the Company
changed its method of accounting for investments and mortgage-backed securities
to adopt the provisions of the Financial Accounting Standards Board's SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities," at
September 30, 1994.
/s/KPMG Peat Marwick LLP
November 15, 1996, except for note 18
which is as of December 9, 1996
-12-
Member Firm of
Klynveld Peat Marwick Goerdeler
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
September 30, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Cash and due from banks (note 15) $ 2,133,135 1,972,853
Interest-bearing deposits in other financial institutions 512,610 6,474,593
Investment securities available for sale (note 2) 13,353,381 6,690,463
Investment securities held to maturity (fair value of
$8,950,938 at September 30, 1995 (note 2)) - 8,980,890
Mortgage-backed securities available for sale (note 3) 10,024,936 493,130
Mortgage-backed securities held to maturity (fair value
of $7,465,003 at September 30, 1995 (note 3)) - 7,402,944
Federal Home Loan Bank stock, at cost (note 7) 1,013,200 1,013,200
Loans receivable, net (note 4) 51,499,574 45,196,343
Accrued interest and dividends receivable (note 5) 511,072 524,848
Premises and equipment, net (note 6) 1,119,628 865,816
Real estate owned - 75,626
Other assets 115,004 131,662
------------- ----------
Total assets $ 80,282,540 79,822,368
============= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
- 13 -
<PAGE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity 1996 1995
------------------------------------ ---- ----
Liabilities:
<S> <C> <C>
Deposits (note 8) $ 61,821,674 61,131,515
Advance payments by borrowers for property taxes
and insurance 531,105 662,850
Deferred income taxes (note 9) 206,536 502,166
Federal Home Loan Bank advances (note 10) 2,500,000 -
Savings Association Insurance Fund assessment
payable (note 17) 397,568 -
Other liabilities 385,753 204,079
----------- -----------
Total liabilities 65,842,636 62,500,610
---------- -----------
Stockholders' equity (notes 14 and 15):
Preferred stock, no par value; 1,000,000 shares
authorized; none issued and outstanding (note 11) - -
Common stock, $.10 par value, 4,000,000 shares
authorized, 1,190,250 shares issued and outstanding (note 12) 119,025 119,025
Additional paid-in capital 10,971,714 10,964,983
Retained earnings (note 9) 6,809,054 6,935,879
Unearned ESOP shares (note 12) (630,000) (720,000)
Unearned compensation (note 12) (371,304) -
Treasury stock, at cost; 206,918 shares (2,502,009) -
Net unrealized holding gains on investment
and mortgage-backed securities available for sale 43,424 21,871
------------ ----------
Total stockholders' equity 14,439,904 17,321,758
Commitments and contingencies (notes 4, 12, and 16)
------------ ----------
Total liabilities and stockholders' equity $ 80,282,540 79,822,368
============ ==========
</TABLE>
- 14 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended September 30, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Interest and dividend income:
<S> <C> <C> <C>
Loans (including fees) $3,844,033 3,577,601 3,683,255
Interest-bearing deposits in other financial institutions 116,986 217,758 95,631
Investment securities - taxable 909,504 722,758 602,481
Investment securities - nontaxable 11,152 -- --
Mortgage-backed securities 617,592 428,325 438,002
Dividends on Federal Home Loan Bank stock 73,508 74,399 52,442
---------- ---------- ----------
Total interest and dividend income 5,572,775 5,020,841 4,871,811
---------- ---------- ----------
Interest expense:
Deposit accounts (note 8) 2,510,350 2,478,869 2,244,760
Federal Home Loan Bank advances 16,444 -- --
---------- ---------- ----------
Total interest expense 2,526,794 2,478,869 2,244,760
---------- ---------- ----------
Net interest income 3,045,981 2,541,972 2,627,051
Provision for loan losses (note 4) 129,831 5,040 68,665
---------- ---------- ----------
Net interest income after provision for
loan losses 2,916,150 2,536,932 2,558,386
---------- ---------- ----------
Other income:
Loan fees and service charges on deposit accounts 268,780 257,688 235,306
Rental income 49,279 51,335 45,890
Gain on sale of loans 36,435 -- 52,900
Net gain on sale of investment and
mortgage-backed securities 15,119 -- --
Other 45,192 18,256 11,843
---------- ---------- ----------
Total other income 414,805 327,279 345,939
---------- ---------- ----------
Other expenses:
Salaries and employee benefits (note 12) 1,188,265 1,031,018 1,004,118
Occupancy 466,760 440,920 379,671
Federal insurance premiums 146,693 140,858 156,771
Savings Association Insurance Fund assessment
(note 17) 397,568 -- --
Other 515,833 354,867 363,296
---------- ---------- ----------
Total other expenses 2,715,119 1,967,663 1,903,856
---------- ---------- ----------
Income before income taxes and cumulative
effect of change in accounting principle 615,836 896,548 1,000,469
Income tax expense (note 9) 142,500 293,000 363,000
---------- ---------- ----------
Income before cumulative effect of change
in accounting principle, carried forward $ 473,336 603,548 637,469
---------- ---------- ----------
</TABLE>
(Continued)
- 15 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Income before cumulative effect of change
in accounting principle, brought forward $ 473,336 603,548 637,469
Cumulative effect of change in accounting principle
(note 9) -- -- 206,452
---------- ---------- ----------
Net income $ 473,336 603,548 431,017
========== ========== ==========
Net income per share (note 14) $ .45 .19 --
========== ========== ==========
Weighted average shares outstanding (notes 12 and 14) 1,061,455 1,118,250 --
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
- 16 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended September 30, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Preferred stock Common stock Additional Unearned
--------------- ------------------ paid-in Retained ESOP Unearned
Shares Amount Shares Amount capital earnings shares compensation
------------- ------ ------ ------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1993 -- $-- -- $ -- -- $5,901,314 -- --
Net income -- -- -- -- -- 431,017 -- --
Implementation of change
in accounting for
investment and
mortgage-backed
securities available
for sale, net of tax
effect of $71,642 -- -- -- -- -- -- -- --
--- --- --------- ---------- ---------- --------- -------- --------
Balance, September 30, 1994 -- -- -- -- -- 6,332,331 -- --
Proceeds from sale of
common stock, net of issuance
costs (note 14) -- -- 1,190,250 119,025 10,964,983 -- (720,000) --
Unrealized gains on
investment and mortgage-backed
securities available for sale,
net of tax effect -- -- -- -- -- -- -- --
Net income -- -- -- -- -- 603,548 -- --
--- --- --------- ---------- ---------- --------- -------- --------
Balance, September 30, 1995 -- -- 1,190,250 119,025 10,964,983 6,935,879 (720,000) --
Treasury stock purchased -- -- -- -- -- -- -- --
Unrealized gains on investment
and mortgage-backed
securities available
for sale, net of tax effect -- -- -- -- -- -- -- --
Dividends declared, $0.55 per share -- -- -- -- -- (600,161) -- --
ESOP shares allocated -- -- -- -- 11,372 -- 90,000 --
Unearned compensation
under management stock
bonus plan -- -- -- -- (4,641) -- -- (371,304)
Net income -- -- -- -- -- 473,336 -- --
--- --- --------- --------- ---------- --------- -------- --------
Balance, September 30, 1996 -- $-- 1,190,250 $119,025 10,971,714 6,809,054 (630,000) (371,304)
=== === ========= ========= ========== ========= ======== ========
</TABLE>
<TABLE>
<CAPTION>
Net unrealized
holding
gains (losses)
Treasury stock on securities
-------------------- available
Shares Amount for sale Total
------ ----------- -------- -----
<S> <C> <C> <C> <C>
Balance, September 30, 1993 -- $ -- -- 5,901,314
Net income -- -- -- 431,017
Implementation of change
in accounting for
investment and
mortgage-backed
securities available
for sale, net of tax
effect of $71,642 -- -- (118,289) (118,289)
------- ----------- ------ ----------
Balance, September 30, 1994 -- -- (118,289) 6,214,042
Proceeds from sale of
common stock, net of issuance
costs (note 14) -- -- -- 10,364,008
Unrealized gains on
investment and mortgage-backed
securities available for sale,
net of tax effect -- -- 140,160 140,160
Net income -- -- -- 603,548
------- ----------- ------ ----------
Balance, September 30, 1995 -- -- 21,871 17,321,758
Treasury stock purchased 190,250 (2,299,490) -- (2,299,490)
Unrealized gains on investment
and mortgage-backed
securities available
for sale, net of tax effect -- -- 21,553 21,553
Dividends declared, $0.55 per share -- -- -- (600,161)
ESOP shares allocated -- -- -- 101,372
Unearned compensation
under management stock
bonus plan 16,668 (202,519) -- (578,464)
Net income -- -- -- 473,336
------- ----------- ------ ----------
Balance, September 30, 1996 206,918 $(2,502,009) 43,424 14,439,904
======= =========== ====== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
-17-
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended September 30, 1996, 1995, and 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
<S> <C> <C> <C>
Net income $ 473,336 603,548 431,017
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 129,831 5,040 68,665
Depreciation expense 112,357 109,019 87,709
Accretion of discounts (18,562) (18,083) (27,405)
Amortization of premiums 36,829 32,424 70,481
Amortization of unearned compensation 37,591 -- --
Net gain on sale of investment securities and
mortgage-backed securities (15,119) -- --
Amortization of deferred loan fees (115,856) (83,683) (107,239)
Deferred income tax (benefit) expense (308,683) 4,784 (47,819)
Gain on sale of loans (36,435) -- (52,900)
Federal Home Loan Bank stock dividends -- -- (25,000)
Cumulative effect of change in accounting principle -- -- 206,452
Decrease (increase) in accrued interest and
dividends receivable 13,776 (38,011) 30
Decrease (increase) in other assets 16,658 (8,388) 20,872
Dividend payable to management stock bonus plan 6,188 -- --
Savings Association Insurance Fund assessment
payable 397,568 -- --
Increase (decrease) in other liabilities 137,895 (97,673) 74,023
--------- --------- ---------
Net cash provided by operating activities 867,374 508,977 698,886
--------- --------- ---------
</TABLE>
(Continued)
- 18 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from investing activities:
Proceeds from maturing investment securities
available for sale and certificates of deposit $ 1,576,924 2,000,000 2,496,875
Proceeds from sales of investment securities
available for sale 3,000,312 -- --
Proceeds from maturing and called investment
securities held to maturity 3,992,875 -- --
Purchases of investment securities available for sale (1,632,419) -- --
Purchases of investment securities held to maturity (4,363,209) (4,658,756) (5,951,562)
Principal repayments on mortgage-backed securities
available for sale 204,836 96,647 --
Proceeds from sales of mortgage-backed securities
available for sale 371,705 -- --
Principal repayments on mortgage-backed securities
held to maturity 1,746,401 793,193 2,243,040
Purchases of mortgage-backed securities available
for sales (1,823,455) -- --
Purchases of mortgage-backed securities held to
maturity (2,853,402) (1,988,836) (2,013,734)
Loan (originations) repayments, net (8,735,992) (949,176) 383,159
Proceeds from sale of loans 2,455,221 -- 2,719,470
Purchases of premises and equipment (366,169) (62,848) (459,588)
Proceeds from disposal of premises and equipment -- 6,770 --
Sale of real estate owned 75,626 -- --
----------- ----------- -----------
Net cash used in investing activities (6,350,746) (4,763,006) (582,340)
----------- ----------- -----------
Cash flows from financing activities:
Net increase (decrease) in savings and demand
deposit accounts 1,317,457 (2,908,149) 27,947
Net (decrease) increase in certificates of deposit (627,298) 2,441,430 (2,480,064)
(Decrease) increase in advance payments by
borrowers for property taxes and insurance (131,745) 109,342 (56,931)
Treasury stock purchased (2,299,490) -- --
Federal Home Loan Bank advances 2,500,000 -- --
Proceeds from sale of common stock, net of
issuance costs -- 10,364,008 --
Dividends paid (600,161) -- --
Contribution to management stock bonus plan (578,464) -- --
ESOP shares allocated 101,372 -- --
----------- ----------- -----------
Net cash (used in) provided by financing
activities (318,329) 10,006,631 (2,509,048)
----------- ----------- -----------
(Decrease) increase in cash and cash
equivalents (5,801,701) 5,752,602 (2,392,502)
Cash and cash equivalents at beginning of year 8,447,446 2,694,844 5,087,346
----------- ----------- -----------
Cash and cash equivalents at end of year $ 2,645,745 8,447,446 2,694,844
=========== =========== ===========
</TABLE>
(Continued)
- 19 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Supplemental disclosure of cash flow information:
<S> <C> <C> <C>
Interest paid $ 2,531,331 2,480,389 2,244,760
========= =========== =========
Income taxes paid $ 297,368 295,000 389,100
========== =========== =========
Supplemental disclosures of noncash investing
and financing activities:
Real estate acquired through foreclosure of
the loan receivable $ - 75,626 -
========== =========== =========
Transfer of investment securities from held to
maturity to available for sale upon adoption
of SFAS No. 115 (note 1) $ - - 7,012,628
========== =========== =========
Transfer of mortgage-backed securities from
held to maturity to available for sale upon
adoption of SFAS No. 115 (note 1) $ - - 599,436
========== =========== =========
Transfer of investment securities from held to
maturity to available for sale at September 30,
1996 (note 2) $ 9,270,179 - -
========= =========== =========
Transfer of mortgage-backed securities from held
to maturity to available for sale at September
30, 1996 (note 3) $ 8,284,643 - -
========= =========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
- 20 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
September 30, 1996, 1995, and 1994
(1) Summary of Significant Accounting Policies
------------------------------------------
CCF Holding Company (the "Parent"), a federally chartered thrift holding
company, is a Georgia corporation organized in March 1995 to acquire all
of the common stock of Clayton County Federal Savings and Loan Association
(the "Association"). On July 11, 1995, the Parent completed an initial
public offering of common stock and raised $10,364,008 in net proceeds
through the issuance of 1,190,250 common shares, at $10 per share.
Concurrently, the Association completed a conversion from a Federally
chartered mutual savings and loan association to a Federally chartered
stock savings and loan association. Upon the conversion, the Parent
acquired all of the outstanding common stock of the Association for
$5,182,004, at which time the Association became a wholly owned subsidiary
of the Parent. Since the Parent and the Association were under common
control, the transaction was accounted for at historical cost in a manner
similar to a pooling-of-interests. The Parent and the Association (the
"Company") are primarily regulated by the Office of Thrift Supervision
("OTS") and the Federal Deposit Insurance Corporation ("FDIC"), and
undergo periodic examinations by these regulatory authorities.
The Company primarily provides single-family residential first mortgage
loans and offers various deposit products to individual customers through
its main office in Jonesboro, Georgia and two branch offices located in
Clayton County, Georgia. The Company primarily competes with other
financial institutions in its market area, which it considers to be South
Metropolitan Atlanta. CCF Financial Services, Inc. ("CFS") was
incorporated in 1996 as a new, wholly owned service corporation of the
Association, created for the purpose of engaging in securities and
investment advisory activities. CFS has engaged an unrelated third party
to provide securities and investment advisory services to customers of the
Association and the general public.
(a) Basis of Presentation
---------------------
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and to prevailing practices
within the financial institutions industry. The following is a summary
of the significant accounting policies that the Company follows in
preparing and presenting its consolidated financial statements.
The consolidated financial statements include the accounts of the
Parent, the Association, and CFS. All significant intercompany
accounts and transactions are eliminated in preparing the consolidated
financial statements.
(continued)
- 21 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ
significantly from those estimates. One estimate that is particularly
susceptible to a significant change in the near term relates to the
determination of the allowance for loan losses. In connection with the
determination of the allowance for loan losses, management obtains
independent appraisals for significant properties. Management believes
that the allowance for loan losses is adequate. While management uses
available information to recognize losses on loans, future additions
to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Company's
allowance for loan losses. Such agencies may require the Company to
recognize additions to the allowance based on their judgment about
information available to them at the time of their examination.
(b) Cash and Cash Equivalents
-------------------------
For purposes of the consolidated statements of cash flows, the Company
considers amounts due from banks and interest-bearing deposits in
other financial institutions to be cash equivalents. Generally,
interest-bearing deposits in other financial institutions are for
one-day periods.
(c) Investment and Mortgage-Backed Securities
-----------------------------------------
The Company adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" at September 30, 1994.
Under SFAS No. 115, the Company must classify its investments and
mortgage-backed securities in three categories: trading, available for
sale, or held to maturity. Trading securities are bought and held
principally for the purpose of selling them in the near term. Held to
maturity securities are those securities for which the Company has the
ability and intent to hold the security until maturity. All other
securities not classified as trading or held to maturity are
classified as available for sale.
Investment securities held to maturity are carried at cost, adjusted
for amortization of premiums and accretion of discounts over the terms
of the related securities. Mortgage-backed securities held to maturity
are carried at unpaid principal balances adjusted for unamortized
premiums and unaccreted discounts.
Available for sale securities are reported at fair value, as
determined by independent quotations, with unrealized holding gains or
losses, net of the related income taxes, excluded from income and
reported as a separate component of stockholders' equity, until
realized. Any unrealized holding gains or losses included in the
separate component of stockholders' equity relating to securities
subsequently transferred from available for sale to held to maturity
are maintained and amortized into income over the remaining life of
the security as an adjustment to yield in a manner consistent with the
amortization or accretion of the premium or discount on the associated
security. A decline in the market value below cost of any investment
or mortgage-backed security that is deemed other than temporary is
charged to income, resulting in the establishment of a new cost basis
for the security.
(Continued)
- 22 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Upon adoption of SFAS No. 115, the Company transferred investment and
mortgage-backed securities previously accounted for at amortized cost
totaling $7,612,064 to available for sale at September 30, 1994. The
estimated fair value of such securities at September 30, 1994 totaled
$7,422,133, and the Company reported the effect of the change in the
method of accounting for these investment and mortgage-backed
securities as a separate component of stockholders' equity. The net
unrealized holding losses on securities available for sale at
September 30, 1994 amounted to $118,289, net of income taxes of
$71,642.
Purchase premiums and discounts are amortized or accreted to interest
income over the life of the related security as an adjustment to yield
using the effective interest method. For mortgage-backed securities,
such amortization and accretion is determined taking into
consideration assumed prepayment patterns. Dividend and interest
income are recognized when earned. Realized gains and losses for
securities sold are included in income on the trade date, and are
derived using the specific identification method for determining the
cost of securities sold.
(d) Loans
-----
Loans are stated at their unpaid principal balances, less, where
applicable, undisbursed proceeds on loans in process, unamortized loan
origination fees, and allowance for loan losses.
Loan origination fees collected, net of certain direct loan
origination costs, are deferred and recognized into income using the
interest method as an adjustment of the yield over the lives of the
underlying loans.
The Company extends credit to customers throughout its market area,
which includes Clayton, Henry, and Fayette Counties. Most of the
Company's loans are secured by real estate in these Georgia counties
and a substantial portion of its borrowers' ability to repay such
loans is dependent upon the economy in the Company's market area.
The allowance for loan losses is adjusted through provisions for loan
losses charged to operations. Loans are charged off against the
allowance for loan losses when management believes that the collection
of the principal is unlikely. Subsequent recoveries are added to the
allowance. The allowance is an amount that management has determined
to be adequate through its allowance for loan losses methodology to
absorb losses inherent in existing loans and commitments to extend
credit. The allowance is determined through consideration of such
factors as changes in the nature and volume of the portfolio, overall
portfolio quality, delinquency trends, adequacy of collateral, loan
concentrations, specific problem loans, and economic conditions that
may affect the borrowers' ability to pay.
(Continued)
- 23 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
During 1993, the Financial Accounting Standards Board (FASB) issued
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan." SFAS
No. 114 requires impaired loans to be measured based on the present
value of expected future cash flows, discounted at the loan's
effective interest rate, or at the loan's observable market price, or
the fair value of the collateral if the loan is collateral dependent,
beginning in fiscal 1996. Loans that are determined to be impaired
require a valuation allowance equivalent to the amount of impairment.
The valuation allowance is to be established by a charge to the
provision for loan losses. In October 1994, the FASB issued SFAS No.
118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," which amends the requirements of SFAS
No. 114 regarding interest income recognition and related disclosure
requirements. The Company adopted SFAS No. 114 and SFAS No. 118
prospectively on October 1, 1995, and based on the level of impaired
loans, the effect of adoption was not material.
A loan is considered impaired when, based on current information and
events, it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the note agreement.
Cash receipts on impaired loans which are accruing interest are
applied to principal and interest under the contractual terms of the
loan agreement. Cash receipts on impaired loans which the accrual of
interest has been discontinued are applied to reduce the principal
amount of such loans until the principal has been recovered and are
recognized as interest income thereafter.
Additional funds for lending are provided by selling whole and
participating interests in real estate loans. Gains or losses on the
sale of such loans are recognized at settlement dates and are computed
as the difference between the sales proceeds and the carrying value of
the loans. Such gains or losses are adjusted by the amount of any
excess servicing fee receivables or payables resulting from the
transactions. Such excess servicing fee receivables or payables are
amortized using a method approximating a level yield over the
estimated remaining life of such loans, taking into account assumed
prepayment patterns.
Interest income is recognized using the simple interest method on the
balance of the principal amount outstanding. The accrual of interest
income is discontinued on loans which become contractually past due by
90 days. Interest previously accrued but not collected is reversed
against current period interest income when such loans are placed on
nonaccrual status. Interest accruals are recorded on such loans only
when they are brought fully current with respect to interest and
principal and when, in the judgment of management, the loans are
estimated to be fully collectible as to both principal and interest.
(e) Premises and Equipment
----------------------
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is recorded on a straight-line basis over
the estimated useful lives of the related assets.
(Continued)
- 24 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(f) Real Estate Owned
-----------------
Real estate acquired through foreclosure, consisting of properties
obtained through foreclosure proceedings or acceptance of a deed in
lieu of foreclosure, is reported on an individual asset basis at the
lower of cost or fair value, less disposal costs. Fair value is
determined on the basis of current appraisals, comparable sales, and
other estimates of value obtained principally from independent
sources. When properties are acquired through foreclosure, any excess
of the loan balance at the time of foreclosure over the fair value of
the real estate held as collateral is recognized and charged to the
allowance for loan losses. Subsequent write-downs are charged to a
separate allowance for losses pertaining to real estate owned,
established through provisions for estimated losses on real estate
owned charged to operations. Based upon management's evaluation of the
real estate acquired through foreclosure, additional expense is
recorded when necessary in an amount sufficient to restore the
allowance to an adequate level. Gains recognized on the disposition of
the properties are recorded in other income.
Costs of improvements to real estate are capitalized, while costs
associated with holding the real estate are charged to operations.
(g) Income Taxes
------------
Effective October 1, 1993, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," by electing to report the cumulative
effect of the change in accounting principle, and did not restate any
prior periods. The cumulative effect of the change in accounting for
income taxes was an increase in the net deferred tax liability of
$206,452, which was reported separately in the consolidated statement
of income for the year ended September 30, 1994.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred taxes of a
change in tax rates is recognized in income in the period that
includes the enactment date.
(h) Net Income Per Share
--------------------
Net income per common share is based on the weighted average number of
shares outstanding during each period including consideration of
common stock equivalents derived from dilutive stock options. During
1996, the dilutive effect of the stock options was not significant.
(Continued)
- 25 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(i) Recent Accounting Pronouncement
-------------------------------
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation." SFAS No. 123 established financial
accounting and reporting standards for stock-based employee
compensation plans. Those plans include all arrangements by which
employees receive shares of stock or other equity instruments of the
employer or the employer incurs liabilities to employees in amounts
based on the price of the employer's stock. Such instruments include
stock purchase plans, stock options, restricted stock, and stock
appreciation rights. SFAS No. 123 also applies to transactions in
which an entity issues its equity instruments to acquire goods or
services from nonemployees.
A new method of accounting for stock-based compensation arrangements
with employees is established by SFAS No. 123. The new method is a
fair value based method rather than the intrinsic value based method.
However, SFAS No. 123 does not require an entity to adopt the new fair
value based method for purposes of preparing its basic financial
statements. Entities are allowed (1) to continue to use their existing
method or (2) adopt the SFAS No. 123 fair value based method. The
selected method would apply to all of an entity's compensation plans
and transactions.
SFAS No. 123 requires that an employer's financial statements include
certain disclosures about stock-based employee compensation
arrangements regardless of the method used to account for them. The
accounting requirements of this statement are effective for
transactions entered into in fiscal years that begin after December
15, 1995. The disclosure requirements are effective for financial
statements for fiscal years beginning after December 15, 1995. The
Company has not determined the impact of adopting SFAS No. 123.
(2) Investment Securities
---------------------
At September 30, 1996 and 1995, investment securities available for sale
consisted of the following:
<TABLE>
<CAPTION>
September 30, 1996
--------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
agency obligations $ 11,405,631 11,699 83,549 11,333,781
Equity security 782,790 387,335 - 1,170,125
Municipal securities 868,807 - 19,332 849,475
----------- -------- -------- -----------
$ 13,057,228 399,034 102,881 13,353,381
============= ======= ======= ==========
</TABLE>
(Continued)
- 26 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
September 30, 1995
----------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
agency obligations $ 6,008,546 12,387 20,470 6,000,463
Equity security 644,550 45,450 - 690,000
---------- ------ ------ ----------
$ 6,653,096 57,837 20,470 6,690,463
============= ====== ====== =========
</TABLE>
At September 30, 1996, the Company transferred all investment securities
held to maturity to available for sale. At September 30, 1995, investment
securities held to maturity consisted of the following:
<TABLE>
<CAPTION>
September 30, 1995
--------------------------------------------
Gross Gross
Amortized unrealized unrealized Fair
cost gains losses value
---- ----- ------ -----
<S> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
agency obligations $ 8,980,890 25,398 55,350 8,950,938
========= ====== ====== =========
</TABLE>
In 1996, the Company sold certain investment securities available for sale
for $3,000,312, and recognized a net loss of $1,815. In addition, the
Company recognized a gain of $7,125 on an investment security held to
maturity and called during 1996 for $492,875. The Company did not sell any
investment securities in 1995 or 1994.
The amortized cost and fair values of investments in debt securities at
September 30, 1996 by contractual maturity are shown below. Expected
maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
Investments
available for sale
------------------
Amortized
cost Fair value
------------ ----------
<S> <C> <C>
Due within one year $ 1,420,936 1,419,877
Due after one year through five years 10,234,695 10,163,904
Due after five years 618,807 599,475
--------- ---------
$ 12,274,438 12,183,256
============ ==========
</TABLE>
A U.S. Treasury investment security, with a fair value of $487,650 has been
pledged as of September 30, 1996 to secure public deposits. There were no
investment securities pledged at September 30, 1995.
Continued)
- 27 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Mortgage-Backed Securities
--------------------------
At September 30, 1996 and 1995, mortgage-backed securities available for
sale consisted of the following:
<TABLE>
<CAPTION>
September 30, 1996
-----------------------------------------------------------------
Unpaid Gross Gross
principal Amortized unrealized unrealized Fair
balance cost gains losses value
------- ---- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Government National Mortgage Association
Participation Certificates with interest rates
primarily ranging from 6.5% to 10.5%,
with scheduled principal maturities at
various times through 2024 $ 1,666,901 1,664,651 12,057 92,152 1,584,556
Federal Home Loan Mortgage Corporation
Participation Certificates with interest rates
ranging from 5.5% to 10.0%, with scheduled
principal maturities at various times through
2009 3,259,873 3,229,350 41,309 69,656 3,201,003
Federal National Mortgage Association
Participation Certificates, with interest rates
ranging from 5.5% to 7.8% with scheduled
principal maturities at various times through
2023 5,351,084 5,357,364 2,199 120,186 5,239,377
----------- ---------- ------ ------- ----------
$10,277,858 10,251,365 55,565 281,994 10,024,936
=========== ========== ====== ======= ==========
</TABLE>
<TABLE>
<CAPTION>
September 30, 1995
---------------------------------------------------------
Unpaid Gross Gross
principal Amortized unrealized unrealized Fair
balance cost gains losses value
------- ---- ----- ------ -----
<S> <C> <C> <C> <C>
Federal Home Loan Mortgage Corporation
Participation Certificates with
interest rates ranging from 7% to 8%, with scheduled
principal maturities through 1996 $487,610 495,379 - 2,249 493,130
======= ======= === ===== =======
</TABLE>
(Continued)
- 28 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At September 30, 1996, the Company transferred all mortgage-backed
securities held to maturity to available for sale. At September 30, 1995,
mortgage-backed securities to be held to maturity consist of the following:
<TABLE>
<CAPTION>
September 30, 1995
--------------------------------------------------------
Unpaid Gross Gross
principal Amortized unrealized unrealized Fair
balance cost gains losses value
------- ---- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Government National Mortgage Association Participation Certificates with
interest rates primarily ranging from 6.5% to 10.5%, with scheduled
principal maturities at various times through 2024 $1,424,629 1,447,053 31,597 26,553 1,452,097
Federal Home Loan Mortgage Corporation Participation Certificates with
interest rates ranging from 5.5% to 10.0%, with scheduled principal
maturities at various times through 2009 2,540,502 2,509,000 76,392 9,435 2,575,957
Federal National Mortgage Association Participation Certificates with
interest rates ranging from 5.8% to 7.8% with scheduled principal
maturities at various times through 2023 3,424,127 3,446,891 18,486 28,428 3,436,949
--------- ---------- --------- --------- ---------
$7,389,258 7,402,944 126,475 64,416 7,465,003
========== ========= ======= ====== =========
</TABLE>
There were no mortgage-backed securities pledged at September 30, 1996 or
1995.
In 1996, the Company sold for $371,705 certain mortgage-backed securities
available for sale and recognized a net gain of $9,809. The Company did not sell
any mortgage-backed securities in 1995 or 1994.
(4) Loans Receivable
At September 30, 1996 and 1995, loans receivable consisted of the
following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
First mortgage loans, substantially secured
by single family residential dwellings $ 45,509,936 42,754,387
Real estate construction loans 7,056,182 2,777,026
Other mortgage loans 2,698,314 1,719,961
Consumer and other installment loans 1,065,437 723,555
----------- -----------
56,329,869 47,974,929
Less:
Undisbursed proceeds on loans in process 3,789,924 1,937,278
Unamortized loan origination fees, net 500,080 432,460
Allowance for loan losses 540,291 408,848
----------- -----------
$ 51,499,574 45,196,343
=========== ==========
</TABLE>
(Continued)
- 29 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At September 30, 1996, the Company had outstanding commitments to originate
adjustable rate loans totaling $538,920 and fixed rate loans totaling
$298,000 for varying terms.
As of September 30, 1996 and 1995, loan participations sold to, without
recourse, and serviced for others amounted to approximately $8,320,000 and
$7,060,000, respectively.
The following is a summary of transactions in the allowance for loan losses
for the years ended September 30, 1996, 1995, and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 408,848 430,103 360,538
Provision for losses on loans 129,831 5,040 68,665
Loan charge-offs - (26,295) -
Loan recoveries 1,612 - 900
-------- ------- ------
Balance at end of year $ 540,291 408,848 430,103
=========== ======= =======
</TABLE>
As discussed in note 1, the Company adopted the provisions of SFAS No.
114, "Accounting by Creditors for Impairment of a Loan," as amended by
SFAS No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures," effective October 1, 1995. Prior periods
have not been restated.
Impaired loans at September 30, 1996 totaled $601,000, all of which were
classified as non-accrual and valued based on the fair value of the loan's
collateral, or loan balance, whichever was less. Impaired loans at
September 30, 1996 are summarized as follows:
<TABLE>
<CAPTION>
Without With impairment allowance
impairment allowance -------------------------
-------------------- Loan Allowance
Loan amount amount amount
----------- ------ ------
<S> <C> <C> <C>
Residential real estate $601,000 - -
======= ======= ========
</TABLE>
The average balance of impaired loans for the year ended September 30,
1996, was approximately $547,000 with interest income of $18,367 recognized
during 1996 on such loans.
Loans are made to officers, directors, and their associates in the ordinary
course of business on substantially the same terms as those prevailing at
the time for comparable transactions with other persons, and do not involve
more than the normal credit risk nor present other unfavorable features.
The following is a summary of activity during the year ended September 30,
1996 with respect to such aggregate loans to these individuals and their
associates:
Balance at beginning of year $ 628,407
New loans 114,644
Principal repayments (264,158)
-------
Balance at end of year $ 478,893
=======
(Continued)
- 30 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
At September 30, 1996 and 1995, the Company had approximately $601,000 and
$175,000, respectively, of nonaccrual loans. Interest income on nonaccrual
loans in 1996, 1995, and 1994, which would have been reported on an accrual
basis, amounted to approximately $18,000, $6,000, and $7,000, respectively.
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit. These instruments involve, to varying degrees, elements of credit
and interest rate risk in excess of the amount recognized in the
consolidated financial statements. The contract or notional amounts of
those instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company's exposure to credit loss, in the event of nonperformance by
the customer for commitments to extend credit is represented by the
contractual or notional amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as
it does for recorded loans.
A summary of the Company's financial instruments with off-balance sheet
risk at September 30, 1996 is as follows:
Financial instruments whose contract amounts
represent credit risk -- commitments:
Mortgage loans:
Fixed rate $ 195,000
Adjustable rate 398,920
Construction loans:
Fixed rate 103,000
Adjustable rate 140,000
-------
Total commitments $ 836,920
===========
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the agreement.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since some of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Company
evaluates each customer's creditworthiness on a case-by-case basis. The
amount of collateral obtained, if deemed necessary by the Company upon
extension of credit, is based on management's credit evaluation of the
borrower. Collateral consists primarily of residential real estate.
In the origination of mortgage loans, the Company enters into adjustable
interest rate contracts with caps and floors written with the intent of
managing its interest rate exposure. Interest rate caps and floors enable
customers and the Company to transfer, modify, or reduce their interest
rate risk. At September 30, 1996, adjustable rate mortgage loans with
interest rate caps and floors amounted to approximately $28,069,247.
(Continued)
- 31 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Accrued Interest and Dividends Receivable
-----------------------------------------
At September 30, 1996 and 1995, accrued interest and dividends receivable
consisted of the following:
1996 1995
---- ----
Loans $ 257,252 236,410
Investment securities 180,100 217,410
Mortgage-backed securities 73,720 71,028
-------- --------
$ 511,072 524,848
=========== =======
(6) Premises and Equipment
----------------------
A summary of premises and equipment at September 30, 1996 and 1995 is as
follows:
1996 1995
---- ----
Land $ 248,273 238,273
Landscaping 32,258 32,258
Office buildings 1,043,487 1,025,979
Furniture and equipment 805,338 558,533
Construction in progress 91,856 -
--------- ---------
2,221,212 1,855,043
Less accumulated depreciation 1,101,584 989,227
---------- ----------
$ 1,119,628 865,816
========= ==========
(7) Required Investment
-------------------
Investment in stock of a Federal Home Loan Bank is required of federally
insured financial institutions who utilize their services. No ready market
exists for the stock and it has no quoted market value. In accordance with
SFAS No. 115, the investment is carried at cost.
(8) Deposits
At September 30, 1996 and 1995, deposits consisted of the following:
<TABLE>
<CAPTION>
1996 1995
------------------------------------ -----------------------------------------
Weighted Weighted
average average
Range interest Range interest
Amount of rates rate Amount of rates rate
------ -------- ---- ------ -------- ----
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand
deposits $ 3,139,469 - % - % $ 1,735,302 - % - %
Passbook savings accounts 11,659,255 2.03 2.03 12,020,750 2.75 2.75
Negotiable order of withdrawal
accounts 10,954,623 1.67-2.99 2.12 10,679,838 2.25-2.50 2.69
Certificates of deposit 36,068,327 2.03-6.46 5.49 36,695,625 2.75-8.45 5.74
---------- ----------
$61,821,674 3.96% $61,131,515 4.08%
========== ==== =========== ====
</TABLE>
(Continued)
- 32 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
A summary of certificates of deposit by scheduled maturities as of
September 30, 1996 follows:
Maturing in:
Less than one year $ 26,248,425
1-2 years 5,979,152
2-3 years 1,240,686
3-4 years 1,427,293
4-5 years 1,172,771
--------------
$ 36,068,327
==============
At September 30, 1996, the Company had approximately $5,375,000 in time
deposits that were greater than or equal to $100,000.
Interest expense on deposits for the years ended September 30, 1996, 1995,
and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Passbook savings accounts $ 274,209 366,507 390,626
Negotiable order of withdrawal accounts 235,225 271,371 308,002
Certificates of deposit 2,000,916 1,840,991 1,546,132
--------- --------- ---------
$ 2,510,350 2,478,869 2,244,760
========= ========= =========
</TABLE>
(9) Income Taxes
------------
As discussed in note 1, the Company adopted SFAS No. 109, "Accounting for
Income Taxes," and recorded the cumulative effect of the change in
accounting for income taxes of $206,452 as of October 1, 1993. Prior year
financial statements have not been restated to apply the provisions of SFAS
No. 109.
The components of income tax expense for the years ended September 30,
1996, 1995, and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current expense - Federal $ 451,183 288,216 410,819
Deferred tax (benefit) expense - Federal (272,239) 8,365 (70,235)
Deferred tax (benefit) expense - State (36,444) (3,581) 22,416
---------- -------- -------
$ 142,500 293,000 363,000
========== ======= =======
</TABLE>
The Company has not incurred current state income taxes due to net
operating loss and credit carryforwards for state income tax purposes.
(Continued)
- 33 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income tax expense of the Company for the years ended September 30, 1996,
1995, and 1994 differed from the amounts computed by applying the statutory
Federal income tax rate of 34% to income before income taxes and cumulative
effect of change in accounting principle as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Tax expense at statutory rate $ 209,384 304,826 340,159
Increase (decrease) in tax expense
resulting from:
State income taxes, net of Federal
tax benefit (24,053) (2,363) 14,795
Municipal investments (3,792) - -
Other, net (39,039) (9,463) 8,046
-------- -------- --------
$ 142,500 293,000 363,000
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at September
30, 1996 and 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
---- ----
Deferred tax assets:
<S> <C> <C>
State tax credit carryforwards $ 51,121 42,744
Savings Association Insurance Fund assessment payable 149,963 -
Employee Stock Ownership Plan accrual 38,261 -
Management stock bonus plan 14,179 -
Other 9,420 7,807
-------- --------
Total gross deferred tax assets 262,944 50,551
Less valuation allowance - -
-------- --------
Net deferred tax assets 262,944 50,551
-------- --------
Deferred tax liabilities:
Loans receivable, due to allowance for loan losses 67,357 114,137
Deferred loan fees 194,926 243,966
Unrealized holding gains on securities available
for sale 26,300 13,247
Premises and equipment, primarily due to
differences in depreciation 19,660 21,282
Federal Home Loan Bank stock dividends 146,165 146,165
Prepaid expenses 15,072 13,920
-------- --------
Total gross deferred tax liabilities 469,480 552,717
------- -------
Net deferred tax liabilities $ 206,536 502,166
======= =======
</TABLE>
(Continued)
- 34 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
There was no valuation allowance for deferred tax assets as of September
30, 1996 and 1995. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion
or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of
future taxable income during the periods in which the temporary differences
resulting in the deferred tax assets become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making the
assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the related
temporary differences are deductible, management believes it is more likely
than not the Company will realize the benefits of these deductible
differences.
At September 30, 1996, the Company has state gross receipts tax credit
carryforwards of approximately $77,455 which are available to reduce future
state income taxes, if any, through 2000.
Prior to January 1, 1996, the Company was permitted under the Internal
Revenue Code ("Code") a special bad debt deduction related to additions to
tax bad debt reserves established for the purpose of absorbing losses. The
provisions of the Code permitted the Company to deduct from taxable income
an allowance for bad debts based on the greater of a percentage of taxable
income before such deduction or actual loss experience. Retained earnings
at September 30, 1996 include approximately $602,000 for which no deferred
Federal income tax liability has been recognized. The amounts represent an
allocation of income for bad debt deductions for tax purposes only.
Reduction of amounts so allocated for purposes other than tax bad debt
losses or adjustments arising from carryback of net operating losses would
create income for tax purposes only, which would be subject to the then
current corporate income tax rate.
On August 20, 1996, President Clinton signed legislation which will
eliminate the percentage of taxable income bad debt deduction for thrift
institutions for tax years beginning after December 31, 1995. This new
legislation also requires a thrift to generally recapture the excess of its
current tax reserves over its 1987 base year reserves, whereas the base
year reserves are frozen from taxation. As the Company has previously
provided deferred taxes on this amount, no additional financial statement
tax expense should result from this new legislation.
(10) Federal Home Loan Bank Advances
-------------------------------
Federal Home Loan Bank advances at September 30, 1996 consist of unsecured
term loans with principal payable at maturity and interest due monthly
based on floating daily interest rates, as follows:
6.05% maturing June 26, 1997 $ 500,000
6.05% maturing July 17, 1997 500,000
6.05% maturing August 15, 1997 500,000
6.05% maturing September 19, 1997 1,000,000
---------
$ 2,500,000
=============
(Continued)
- 35 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Preferred Stock
---------------
The Company is authorized to issue 1,000,000 shares of no par value serial
preferred stock. At September 30, 1996, there were no shares issued and
outstanding. The Board of Directors of the Company is authorized to issue
serial preferred stock and to fix and state voting powers, designations,
preferences, or other special rights of such shares and the
qualifications, limitations, and restrictions thereof, subject to
regulatory approval but without stockholder approval.
(12) Employee Benefit Plans
----------------------
(a) 401(k) Profit Sharing Plan
--------------------------
During fiscal 1995, the Company adopted a tax-qualified defined
contribution profit sharing plan (the "Plan") for the benefit of its
employees. All full-time employees become eligible to participate under
the Plan after completing one year of service. Under the Plan,
employees may voluntarily elect to defer up to 15% of their
compensation, not to exceed applicable limits. The first 5% of
employees' savings were matched during 1995 by a Company contribution
of $2.00 for each $1.00 of employee contribution. Effective October 1,
1995, such Company contributions were $1.00 for each $1.00 of employee
contribution. Such matching contributions begin to vest after three
years at a rate of 20% per year with full vesting after seven years.
Additionally, the Company may contribute an annual discretionary
contribution to the Plan based upon a number of factors, such as the
Company's retained earnings, profits, regulatory capital, and employee
performance.
Contributions by the Company to the Plan during 1996 and 1995 totaled
$29,116 and $60,247, respectively.
(b) Pension Plan
------------
The Company maintained a noncontributory pension plan which covered
substantially all full-time employees of the Company. The benefits were
based on years of service and the employee's five highest years of
compensation. The Company's philosophy was to fund annually the maximum
amount allowable as a deduction for Federal income tax purposes. During
fiscal 1995, the Board of Directors of the Company approved the
termination of the defined benefit pension plan and the establishment
of the 401(k) plan. The defined benefit pension plan went through the
process of termination and settlement during 1995, and the plan assets
for those participants who were still active employees at time of
termination were distributed primarily through deposits into individual
retirement plan accounts, with the remainder transferred to the 401(k)
plan, or paid in cash. These distributions occurred March 1, 1995. In
conjunction with the termination, the Company reversed previously
accrued pension cost totaling $84,000, which was recognized as a
reduction in salaries and employee benefits expense in 1995.
(Continued)
- 36 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Pension cost for 1994 was as follows:
Service cost for benefits earned $ 68,984
Interest cost on projected benefit obligations 30,288
Actual return on plan assets (20,794)
Net amortization and deferral (37,622)
------
Net pension expense $ 40,856
======
No pension expense was recorded during 1996 or 1995 as a result of the
Company's termination of the Plan.
(c) Employee Stock Ownership Plan
-----------------------------
During 1995, the Company also established an employee stock ownership
plan (the "ESOP"), for the exclusive benefit of participating
employees, who have completed one year of service with the Company and
have attained age 21.
The ESOP is funded by periodic contributions made by the Company in
cash or common stock. Benefits to participants may be paid either in
shares of the Company's common stock or in cash. The ESOP was approved
to borrow funds from the Company to acquire up to 10% of the common
stock of the Company. During 1995, the ESOP borrowed $720,000 from the
Company to acquire 72,000 shares of Company common stock at $10 per
share. The loan is secured by the shares purchased and earnings of the
ESOP assets, and is at an interest rate equal to a published prime
rate, adjusted quarterly. The loan is to be repaid over a ten-year
period at $72,000 per year. The shares purchased are held in a
suspense account for allocation among participants as the loan is
repaid.
At September 30, 1996, 18,000 ESOP shares have been allocated to the
participating employees. For purposes of computing net income per
share, the remaining 54,000 unallocated shares are not considered
outstanding until they are committed-to-be-released for allocation.
The Company is recognizing as compensation expense the fair market
value of the Company's common stock, adjusted at least quarterly, over
a ten-year period using the straight-line method. Compensation expense
recognized during 1996 and 1995 by the Company totaled $83,434 and
$18,000, respectively.
(d) Stock Option Plan
-----------------
In January 1996, the Company approved a stock option plan (the "Option
Plan") whereby 119,025 authorized shares are reserved for issuance by
the Company upon exercise of stock options granted to officers,
directors, and employees of the Company from time to time. Options
constitute both incentive stock options and nonincentive stock
options. Options awarded to officers and directors are exercisable at
a rate of 20% annually with the first 20% exercisable on the one-year
anniversary of the date of grant. Any shares subject to an award which
expires or is terminated unexercised will again be available for
issuance. The Option Plan has a term of ten years, unless sooner
terminated. The exercise price for the purchase of shares subject to
an incentive stock option may not be less than 100 percent of the fair
market value of the common stock on the date of grant of such option.
The exercise price per share for nonincentive stock options shall be
the price as determined by an option committee, but not less than the
fair market value of the common stock on the date of grant.
(Continued)
- 37 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Information relating to stock options during fiscal 1996 is as follows:
<TABLE>
<CAPTION>
Number Option
of shares price Total
--------- ------ -----
<S> <C> <C> <C>
Shares under option at Plan inception - $ - -
Granted - January 23, 1996 77,363 12.375 957,367
Exercised - - -
Canceled - - -
------- -------- --------
Shares under option at September 30, 1996 77,363 $ 12.375 957,367
====== ======== =======
Shares exercisable at September 30, 1996 -
======
Shares available for grant at September 30, 1996 41,662
======
</TABLE>
(e) Management Stock Bonus Plan
---------------------------
In January 1996, the Company adopted a Management Stock Bonus Plan
("MSBP"). Under the terms of the MSBP, a total of 47,610 shares of the
Company's common stock are available for the granting of awards during
a period of up to ten years. In January 1996, certain key employees and
directors were awarded a total of 30,942 shares in the form of
restricted stock, payable as the recipient's interest in the MSBP
vests. At September 30, 1996, none of these shares have vested. Twenty
percent of such awards will be vested on January 23, 1997 and 20%
annually thereafter.
The Company contributed $578,464 to the MSBP to purchase Company shares
in the open market. Unearned compensation of $371,304 for the 30,942
shares granted was recorded at the date of the award based on the
market value of the Company's stock. The unearned compensation, which
is shown as a separate component of stockholders' equity, is being
amortized over the five-year vesting period. Compensation expense was
$37,591 for the year ended September 30, 1996. The remainder of the
shares purchased and available for future grants is recorded as
treasury stock. Dividends paid on the MSBP shares granted are held in
arrears and may be distributed upon the vesting of the shares awarded.
Dividends payable on the MSBP shares granted at September 30, 1996
totaled $6,188.
(13) Fair Values of Financial Instruments
------------------------------------
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"
requires disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In cases where quoted market prices
are not available, fair values are based on estimates using present value
or other valuation techniques. Those techniques are significantly affected
by the assumptions used, including the discount rate and estimates of
future cash flows. In that regard, the derived fair value estimates cannot
be substantiated by comparison to independent markets and, in many cases,
could not be realized in immediate settlement of the instrument. These
estimates are subjective in nature and involve uncertainties and matters
of significant judgment and, therefore, cannot be determined with
precision. Changes in assumptions would significantly affect the
estimates. SFAS No. 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements.
(Continued)
- 38 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Fair value estimates are based on existing on- and off-balance-sheet
financial instruments and other recorded assets and liabilities without
attempting to estimate the fair value of anticipated future business. In
addition, tax ramifications related to the realization of unrealized gains
and losses can have a significant effect on fair value estimates and have
not been considered in any of the estimates. Accordingly, the aggregate
fair value amounts presented do not represent the underlying value of the
Company.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments and
certain other assets and liabilities:
Cash and due from banks: The carrying amounts of cash and due from
banks approximate those assets' fair values.
Interest-bearing deposits in other financial institutions: The
carrying amounts of interest-bearing deposits in other financial
institutions approximate their fair value, due to the short-term
nature of these instruments.
Investment and mortgage-backed securities: Fair values for investment
and mortgage-backed securities are based on quoted market prices,
where available. If quoted market prices are not available, fair
values are based on quoted market prices of comparable instruments.
Federal Home Loan Bank stock: The carrying amount is considered a
reasonable estimate of fair value.
Loans receivable: For variable-rate loans that reprice frequently and
with no significant change in credit risk, fair values are based on
carrying values. The fair values for all other loans are estimated
based upon a discounted cash flow analysis, using interest rates
currently being offered for loans with similar terms to borrowers of
similar credit quality.
Accrued interest and dividends receivable: The carrying amount
approximates fair value, due to the short-term nature of these
receivables.
Off-balance-sheet instruments: Fair values for the Company's
off-balance-sheet instruments are based on a comparison with terms,
including interest rate and commitment period currently prevailing to
enter into similar agreements, taking into account credit standings.
The fair values of off-balance-sheet instruments at September 30, 1996
were not material.
Deposits: Fair values for fixed-rate certificates of deposit are
estimated using a discounted cash flow analysis that applies interest
rates currently being offered on deposits of similar terms of
maturity. The carrying amounts of all other deposits, due to their
short-term nature, approximate their fair values.
Federal Home Loan Bank advances: The carrying amounts of the Federal
Home Loan Bank advances approximate their fair values as the advances
reprice daily based on a floating interest rate.
(Continued)
- 39 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The estimated fair value of the Company's financial instruments as of
September 30, 1996 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
value value
----- -----
(In thousands)
Assets:
<S> <C> <C>
Cash and due from banks $ 2,133 2,133
Interest-bearing deposits in other financial institutions 513 513
Investment and mortgage-backed securities 23,685 23,378
Federal Home Loan Bank stock 1,013 1,013
Loans receivable, net 51,500 52,548
Accrued interest receivable 511 511
Liabilities:
Deposits:
Noninterest-bearing demand deposits 3,139 3,139
Interest-bearing demand and savings 22,614 22,614
Certificates of deposit 36,068 36,145
Federal Home Loan Bank advances 2,500 2,500
</TABLE>
(Continued)
- 40 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(14) Parent Company Financial Information
------------------------------------
The following represents condensed financial information of the Parent.
The Parent's investment in the Association is reported on an equity basis.
Condensed Balance Sheets
September 30, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Investment securities available for sale, at fair value $ 1,170,125 690,000
Note receivable from Association 1,064,136 4,601,428
Investment in of Association, at equity 12,214,811 12,069,380
Land 10,000 -
Other assets 101,372 -
---------- ----------
Total assets $ 14,560,444 17,360,808
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Liabilities:
Deferred income taxes $ 146,103 17,145
Federal income taxes (receivable) payable (25,563) 21,905
---------- ----------
120,540 39,050
---------- ----------
Stockholders' equity:
Common stock 119,025 119,025
Additional paid-in capital 10,971,714 10,964,983
Retained earnings 6,809,054 6,935,879
Unearned ESOP shares (630,000) (720,000)
Unearned compensation (371,304) -
Treasury stock, at cost, 206,918 shares (2,502,009) -
Net unrealized holding gains on investment
securities available for sale 43,424 21,871
---------- ----------
Total stockholders' equity 14,439,094 17,321,758
---------- ----------
Total liabilities and stockholders' equity $ 14,560,444 17,360,808
========== ==========
</TABLE>
(Continued)
- 41 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Condensed Statements of Income
------------------------------
For the Year ended September 30, 1996 and for the Period from
March 23, 1995 (date of incorporation) to September 30, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Interest income from Association $ 203,450 63,974
Other operating income 9,775 -
Other operating expenses (14,647) -
Income tax expense (62,047) (21,905)
-------- --------
Income before equity in undistributed
income of Association 136,531 42,069
Equity in undistributed income of Association 336,805 561,479
------- -------
Net income $ 473,336 603,548
======= =======
</TABLE>
(Continued)
- 42 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Condensed Statements of Cash Flows
----------------------------------
For the Year ended September 30, 1996 and for the Period from
March 23, 1995 (date of incorporation) to September 30, 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income $ 473,336 603,548
Adjustment to reconcile net income to net cash
(used in) provided by operations:
Equity in undistributed income of Association (336,805) (561,479)
Increase in other assets (101,372) -
Federal income taxes (receivable) payable (47,468) 21,905
---------- -----------
Net cash (used in) provided by operating activities (12,309) 63,974
--------- -----------
Cash flows from investing activities:
Purchase of investment security (138,240) (644,550)
Purchase of land (10,000) -
Acquisition of Association - (5,182,004)
Net change in loan to Association 3,537,292 (4,601,428)
--------- ----------
Net cash provided by (used in) investing activities 3,389,052 (10,427,982)
--------- ----------
Cash flows from financing activity:
Proceeds from sale of common stock, net of issuance costs - 10,364,008
Treasury stock purchased (2,299,490) -
Dividends paid (600,161) -
Contribution to management stock bonus plan (578,464) -
ESOP shares allocated 101,372 -
---------- -----------
Net cash used in financing activities (3,376,743) 10,364,008
--------- ----------
Increase in cash and cash equivalents - -
Cash and cash equivalents at beginning of period - -
--------- ----------
Cash and cash equivalents at end of year $ - -
========= ==========
</TABLE>
(Continued)
- 43 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
On July 11, 1995, the Parent completed an initial public offering of common
stock and raised $10,364,008 in proceeds, net of issuance costs of
$818,492. For purposes of presenting net income per share, only
postconversion net income is considered.
At the time of conversion, the Association established a "liquidation
account" in an amount equal to the regulatory capital of the Association as
shown on its latest statement of financial condition contained in the final
prospectus used in connection with the conversion. The liquidation account
will be maintained for the benefit of depositors, as of the eligibility
record date, June 30, 1993, or supplemental eligibility record date, March
31, 1995, who continue to maintain their deposits in the Association after
conversion. In the event of a complete liquidation (and only in such an
event), each eligible depositor will be entitled to receive a liquidation
distribution from the liquidation account, in the proportionate amount of
the then current adjusted balance for deposits then held, before any
liquidation distribution may be made with respect to the stockholders.
Except for the repurchase of stock and payment of dividends by the
Association, the existence of the liquidation account will not restrict the
use or application of regulatory capital.
The amount of dividends paid to the Parent from the Association is limited
by various regulatory agencies. Under the regulations of the Office of
Thrift Supervision ("OTS"), the Association is not permitted to pay
dividends on its stock after the conversion if its regulatory capital would
thereby be reduced below (i) the amount then required for the
aforementioned liquidation account or (ii) the Association's regulatory
capital requirements. In addition, for a period of three years after
conversion, the Association may not without prior approval of the OTS
declare or pay a cash dividend on or repurchase any of the stock in an
amount in excess of 50% of the greater of (1) the Association's net income
for the fiscal year in which the dividend is declared or the repurchase is
made or (2) the average of the Association's net income for the current
fiscal year and no more than two of the immediately preceding fiscal years.
As a result of these regulatory limitations, at September 30, 1996, the
Parent's investment in the Association was substantially restricted from
transfer by the Association to the Parent in the form of cash dividends.
(15) Regulatory Matters
------------------
The Company is required to maintain noninterest-bearing cash reserve
balances. The aggregate average cash reserve balances to be maintained at
September 30, 1996 to satisfy the regulatory requirement was $195,000.
The Association is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory -- and possibly
additional discretionary -- actions by regulators that, if undertaken,
could have a direct material effect on the Association's financial
statements. Under capital adequacy guidelines and the regulatory framework
for prompt corrective action, the Association must meet specific capital
guidelines that involve quantitative measures of the Association's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Association's capital amounts and
classification are also subject to qualitative judgments by the regulators
about components, risk weightings, and other factors.
(Continued)
- 44 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Quantitative measures established by regulation to ensure capital adequacy
require the Association to maintain minimum amounts and ratios (set forth
in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital
(as defined) to average assets (as defined). Management believes, as of
September 30, 1996, that the Association meets all capital adequacy
requirements to which it is subject.
As of September 30, 1996, the most recent notification from the Office of
Thrift Supervision categorized the Association as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized, the Association must maintain minimum total risk- based,
Tier I risk-based, and Tier I leverage ratios as set forth in the table
below. There are no conditions or events since that notification that
management believes have changed the Association's capital category.
The Association's actual capital amounts and ratios are also presented in
the table below.
<TABLE>
<CAPTION>
Minimum to be well
Minimum for capitalized under
capital prompt corrective
Actual adequacy purposes action provisions
------------------- ------------------------------- ----------------------------
Amount Ratio Amount Ratio Amount Ratio
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 1996:
Total capital - risk-based
(to risk-weighted assets) $ 12,951,093 38% $ 2,755,360 greater than or equal to 8% $3,444,200 greater than or equal to 10%
Tier I capital - risk-based
(to risk-weighted assets) 12,412,619 36 1,377,680 greater than or equal to 4 2,066,520 greater than or equal to 6
Tier I capital - leverage
(to average assets) 12,412,619 16 3,136,880 greater than or equal to 4 3,921,100 greater than or equal to 5
As of September 30, 1995:
Total capital - risk-based
(to risk-weighted assets) 12,471,662 39 2,530,320 greater than or equal to 8 3,162,900 greater than or equal to 10
Tier I capital - risk-based
(to risk-weighted assets) 12,075,814 38 1,265,160 greater than or equal to 4 1,897,740 greater than or equal to 6
Tier I capital - leverage
(to average assets) 12,075,814 15 3,165,708 greater than or equal to 4 3,957,135 greater than or equal to 5
</TABLE>
(16) Commitments and Contingencies
-----------------------------
(a) Employment Agreements
---------------------
The Company entered into an employment agreement with its president and
chief executive officer on January 26, 1995. As renewed, the employment
agreement is for a term of four years with a base salary of $100,000.
The agreement may be terminated by the Company for "just cause" as
defined in the agreement. If the Company terminates without just cause,
the president will be entitled to a continuation of salary from the
date of termination through the remaining term of the agreement. The
employment agreement contains a provision stating that in the event of
involuntary termination of employment in connection with, or within one
year after, any change in control of the Company, the president will be
paid a lump-sum equal to 2.99 times his "base" salary (five-year
average). The agreement may be renewed annually by the Board of
Directors upon a determination of satisfactory performance within the
Board's sole discretion.
(Continued)
- 45 -
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company entered into an employment agreement with its Chief
Administrative Officer on July 15, 1996. The employment agreement is
for a term of two years with a base salary of $80,000. The agreement
may be terminated by the Company for "just cause" as defined in the
agreement. If the Company terminates without just cause, this officer
will be entitled to a continuation of salary from the date of
termination through the remaining term of the agreement. The employment
agreement contains a provision stating that in the event of involuntary
termination of employment in connection with, or within one year after,
any change in control of the Company, the officer will be paid a lump
sum equal to 2.99 times his "base salary" (five-year average). The
agreement may be renewed annually by the Board of Directors upon a
determination of satisfactory performance within the Board's sole
discretion.
(17) Savings Association Insurance Fund Assessment
---------------------------------------------
On September 30, 1996, the Deposit Insurance Funds Act of 1996 was passed
which, among other provisions, empowered the Federal Deposit Insurance
Corporation to impose a special assessment on Savings Association
Insurance Fund ("SAIF") assessable deposits of depository institutions.
This special assessment, which is based on SAIF-assessable deposits at
March 31, 1995, is intended to recapitalize the SAIF. The special
assessment is 65.7 basis points per $100 of insured deposits. Based on the
Company's level of insured deposits held on March 31, 1995, the Company
has recorded a charge against earnings for its accrual of the assessment
totaling $397,568 at September 30, 1996.
(18) Subsequent Events
-----------------
On December 9, 1996, the Company's board of directors approved a change in
the Company's year-end from September 30 to December 31.
During the first quarter of fiscal 1997, the Company acquired tracts of
land in both Fayetteville, Georgia and McDonough, Georgia for the purpose
of constructing future branch sites. The combined purchase price of the
properties totaled approximately $600,000.
- 46 -
<PAGE>
CCF HOLDING COMPANY
101 N. Main Street
Jonesboro, Georgia 30236
(770) 478-8881
CLAYTON COUNTY FEDERAL SAVINGS AND LOAN ASSOCIATION
Forest Park Branch Office Main Office Morrow Branch Office
822 Main Street 101 N. Main Street 2236 Lake Harbin Road
Forest Park, Georgia Jonesboro, Georgia Morrow, Georgia
Board of Directors of CCF Holding Company
and
Clayton County Federal Savings and Loan Association
John B. Lee, Jr. Edwin S. Kemp, Jr.
Chairman of the Board Attorney at Law
Public Relations Consultant to Spartan
Lincoln-Mercury, Inc. and Loewen Group David B. Turner
International, Inc. President and Chief
Executive Officer
Joe B. Mundy Charles S. Tucker
Retired (Former circuit court clerk) Retired (former county
agent for University
of Georgia)
Leonard A. Moreland
Executive Vice President*
- -------------------------
* Director of Association only
Executive Officers of CCF Holding Company and
Clayton County Federal Savings and Loan Association
David B. Turner Leonard A. Moreland
President and Chief Executive Officer Executive Vice President
Thomas L. Sawyer Edith W. Stevens
Vice President and Chief Financial Officer Vice President and Chief
Operating Officer
Richard P. Florin Charles S. Tucker
Senior Vice President Secretary and Treasurer
-----------------------------------
Corporate Counsel Independent Auditors
Edwin S. Kemp, Jr., Esquire KPMG Peat Marwick LLP
101 North Main Street 303 Peachtree Street, N.W.
Suite 203 Suite 2000
Jonesboro, Georgia 30236 Atlanta, Georgia 30308
Special Counsel Transfer Agent and Registrar
Malizia, Spidi, Sloane & Fisch, P.C. Registrar & Transfer Company
One Franklin Square 10 Commerce Drive
1301 K Street, N.W., Suite 700 East Cranford, New Jersey 07016
Washington, D.C. 20005 (908) 272-8511
------------------------------------------
The Company's Annual Report for the year ended September 30, 1996 on Form 10-KSB
is available without charge upon written request. For a copy of the Form 10-KSB
or any other investor information, please write or call David B. Turner,
President and Chief Executive Officer at the Company's Office in Jonesboro,
Georgia. The Annual Meeting of Stockholders will be held on January 23, 1997 at
4:30 p.m. at the office of the Company.
-47-
SUBSIDIARIES OF THE REGISTRANT
Jurisdiction of
Name Incorporation or Organization
---- ------------------------------
Clayton County Federal Savings and Loan United States
Association(1)
- ---------------------
(1) This subsidiary conducts business under this name and has its own
subsidiary, CCF Financial Services, Inc., a Georgia corporation.
KPMG Peat Marwick LLP
303 Peachtree Street, N.E. Telephone 404-222-3000 Telefax 404-222-3050
Suite 2000
Atlanta, GA 30308
Independent Accountants' Consent
The Board of Directors
CCF Holding Company:
We consent to incorporation by reference in the registration statement (No.
333-4194) on Form S-8 of CCF Holding Company of our report dated November 15,
1996, except for note 18, which is as of December 9, 1996, relating to the
consolidated balance sheets of CCF Holding Company and subsidiaries as of
September 30, 1996 and 1995, and the related consolidated statements of income,
stockholders' equity, and cash flows for each of the years in the three-year
period ended September 30, 1996, which report appears in the CCF Holding Company
Annual Report on Form 10-K for the fiscal year ended September 30, 1996.
Our report refers to a change in the method of accounting for income taxes in
1994 to adopt the provisions of Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes," and a change in the method of accounting for
investment securities to adopt the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," at September 30, 1994.
/s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Atlanta, Georgia
December 24, 1996
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,133
<INT-BEARING-DEPOSITS> 513
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,378
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 51,500
<ALLOWANCE> 540
<TOTAL-ASSETS> 80,283
<DEPOSITS> 61,822
<SHORT-TERM> 2,500
<LIABILITIES-OTHER> 1,521
<LONG-TERM> 0
0
0
<COMMON> 119
<OTHER-SE> 14,321
<TOTAL-LIABILITIES-AND-EQUITY> 80,283
<INTEREST-LOAN> 3,844
<INTEREST-INVEST> 1,538
<INTEREST-OTHER> 191
<INTEREST-TOTAL> 5,573
<INTEREST-DEPOSIT> 2,510
<INTEREST-EXPENSE> 2,527
<INTEREST-INCOME-NET> 3,046
<LOAN-LOSSES> 130
<SECURITIES-GAINS> 15
<EXPENSE-OTHER> 2,715
<INCOME-PRETAX> 616
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 473
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
<YIELD-ACTUAL> 4.04
<LOANS-NON> 601
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,700
<ALLOWANCE-OPEN> 409
<CHARGE-OFFS> 0
<RECOVERIES> 2
<ALLOWANCE-CLOSE> 541
<ALLOWANCE-DOMESTIC> 541
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 538
</TABLE>
