.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MarkOne)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended: June 30, 1998
-------------
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
---------------- ---------------
Commission file number: 0-25846
CCF HOLDING COMPANY
----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Georgia 58-2173616
------- ----------
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Identification No.)
Organization)
101 North Main Street
Jonesboro, Georgia 30236
------------------------
(Address of Principal Executive Offices)
(770) 478-8881
--------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares outstanding of each of the issuer's classes of common equity:
At July 24, 1998 894,700 shares of the registrant's common stock were
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE>
FORM 10-QSB
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements:
Consolidated Balance Sheets as of
June 30, 1998 and December 31, 1997.....................1
Consolidated Statements of Income
for the three months and six months ended
June 30, 1998 and June 30, 1997 ........................2
Consolidated Statements of Cash Flows
for the six months ended
June 30, 1998 and June 30, 1997 ........................3
Notes to Consolidated Financial Statements .............4
Item 2. Management's Discussion and Analysis or Plan of Operation ..6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ......................................9
Item 2. Changes in Securities...................................9
Item 3. Defaults upon Senior Securities ........................9
Item 4. Submission of Matters to a Vote
of Security Holders ..................................9
Item 5. Other Information ......................................9
Item 6. Exhibits and Reports on Form 8-K .......................9
Signatures ........................................................10
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
CCF HOLDING COMPANY AND SUBSIDIARY
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
---- ----
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
------
Cash and due from banks $ 4,833,390 4,357,626
Federal funds sold 6,330,000 -
Interest-bearing deposits in other financial institutions 938,482 4,383,690
Investment securities available for sale 23,256,887 9,722,048
Mortgage-backed securities available for sale 451,038 1,837,509
Federal Home Loan Bank stock, at cost 1,013,200 1,013,200
Loans receivable 116,176,999 98,846,930
Less unearned income (685,066) (636,194)
Less allowance for loan losses (788,699) (669,505)
----------- ------------
Loans, net 114,703,234 97,541,231
----------- ------------
Accrued interest and dividends receivable 960,567 784,852
Premises and equipment, net 5,572,392 5,112,338
Other assets 480,247 203,550
----------- ------------
Total assets $ 158,539,437 124,956,044
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities:
Deposits:
Non-interest bearing $6,675,961 4,548,285
Interest bearing 135,232,860 86,653,055
----------- -----------
Total Deposits 141,908,821 91,201,340
Advance payments by borrowers for
property taxes and insurance 347,380 142,111
Securities sold under agreements to repurchase 3,397,125 2,392,579
Federal Home Loan Bank advances - 18,510,000
Dividends payable 133,331 -
Other liabilities 1,213,101 1,190,409
----------- -----------
Total liabilities 146,999,758 113,436,439
----------- -----------
Stockholders' Equity:
Preferred stock, no par value; 1,000,000 shares
authorized; none issued and outstanding - -
Common stock, $.10 par value; 4,000,000 shares
authorized; 906,710 shares issued in 1998 and 1997;
outstanding 894,700 in 1998 and 902,132 in 1997 90,671 90,671
Additional paid-in-capital 7,845,916 7,794,459
Retained earnings 4,271,149 4,443,500
Unearned ESOP shares (504,000) (540,000)
Unearned compensation (335,896) (394,195)
Treasury stock, at cost (142,540) (96,800)
Accumulated other comprehensive income 314,379 221,970
----------- -----------
Total stockholders' equity 11,539,679 11,519,605
----------- -----------
Total liabilities and stockholders' equity $ 158,539,437 124,956,044
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements
1
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Income
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
1998 1997 1998 1997
-------- --------- --------- ----------
<S> <C> <C> <C> <C>
Interest and dividend income:
Loans, including fees $2,581,648 1,768,541 4,958,278 3,258,536
Federal funds sold 111,034 - 152,911 -
Interest-bearing deposits in
other financial institutions 6,133 6,701 28,711 38,191
Investment securities 250,745 63,348 426,655 133,484
Mortgage-backed securities 7,124 52,560 26,136 127,797
Dividends on Federal Home Loan Bank stock 17,710 18,562 36,225 36,675
---------- --------- --------- ---------
Total interest and dividend income 2,974,394 1,909,712 5,628,916 3,594,683
Interest expense
Deposit accounts 1,680,390 794,576 2,970,195 1,526,844
Federal Home Loan Bank advances - 92,310 160,404 135,185
--------- --------- --------- ---------
Total interest expense 1,680,390 886,886 3,130,599 1,662,029
--------- --------- --------- ---------
Net interest income 1,294,004 1,022,826 2,498,317 1,932,654
Provision for loan losses 60,000 32,500 120,000 51,500
--------- --------- --------- ---------
Net interest income after provision
for loan losses 1,234,004 990,326 2,378,317 1,881,154
--------- --------- --------- ---------
Other income:
Service charges on deposit accounts 86,884 38,030 185,449 88,590
Gain on sale of loans - - - 24,647
Gain on sale of investments and mortgage-backed
securities 30,028 178,851 135,417 355,565
Other operating income 23,767 33,920 62,628 118,059
--------- --------- --------- ---------
Total other income 140,679 250,801 383,494 586,861
--------- --------- --------- ---------
Other expenses:
Salaries and employee benefits 750,619 713,268 1,486,996 1,398,777
Loss on retirement of fixed assets. 344
Occupancy 177,181 242,172 442,611 440,755
Federal insurance premiums 23,317 10,709 45,446 20,630
Other 363,180 251,657 639,428 534,704
--------- --------- --------- ---------
Total other expenses 1,314,297 1,217,806 2,614,481 2,395,210
--------- --------- --------- ---------
Income before income taxes 60,386 23,321 147,330 72,805
Income tax expense 21,561 6,622 51,990 25,482
--------- --------- --------- ---------
Net income 38,825 16,699 95,340 47,323
--------- ---------- --------- ---------
Basic Net income per share $ .05 $ .02 $ .11 $ .05
========= ========== ========= =========
Diluted Net income per share $ .04 $ .02 $ .11 $ .05
========= ========== ========= =========
Dividends declared per common share $ .16 $ .25 $ .32 $ .25
========= ========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
- -------------------------------------
Net income $ 95,340 47,323
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Provision for loan losses 120,000 51,500
Depreciation, amortization, and accretion, net 208,925 92,226
Amortization of management stock bonus plan expense 68,549 97,109
ESOP Compensation Expense 82,657
Net gain on sale of investment securities and
mortgage-backed securities (135,417) (355,565)
Net gain on sale of loans -
(Increase) decrease in accrued interest and
dividends receivable (175,715) 87,891
Increase in other assets (276,697) (679,897)
Increase in other liabilities (19,109) 172,524
Other, net - (24,305)
------------ ------------
Net cash provided by (used in) operating activities (31,467) (511,194)
------------ ------------
Cash flows from investing activities:
- -------------------------------------
Proceeds from maturing investment securities-
available for sale - 914,405
Proceeds from sales of investment securities-
available for sale 1,402,995 553,488
Purchases of investment securities-available for sale (14,727,695) (989,063)
Principal repayments on mortgage-backed securities-
available for sale 220,899 946,779
Proceeds from sales of mortgage-backed securities-
available for sale 1,167,169 5,261,442
Loan (originations) repayments, net (17,282,003) (19,208,926)
Proceeds from sale of loans -- 1,803,570
Premises and Equipment Retired 296,695
Purchases of premises and equipment (966,375) (990,100)
------------ ------------
Net cash (used in) provided by investing activities (29,888,315) (11,708,405)
------------ ------------
Cash flows from financing activities:
- -------------------------------------
Net increase (decrease) in savings and
demand deposit accounts 16,712,943 2,081,672
Net increase in certificates of deposits 33,994,538 9,193,307
Net increase (decrease) in repos 1,004,546
Increase (Decrease) in Federal Home Loan Bank advances (18,510,000) 2,300,000
Net increase in advance payments by
borrowers for property taxes and insurance 205,269 65,589
Dividends paid (133,709) (405,010)
ESOP shares allocated 57,600
Cash paid in lieu of fractional shares (651) -
Common stock repurchased (51,190) (1,457,052)
------------ ------------
Net cash provided by (used in) financing activities 33,221,746 (11,836,106)
------------ ------------
Increase (decrease) in cash and cash equivalents 3,301,964 (383,493)
Cash and cash equivalents at beginning of period $ 8,741,316 4,747,486
------------ ------------
Cash and cash equivalents at end of period 12,043,280 $ 4,363,993
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 1,680,390 $ 1,518,614
============ ============
Income taxes paid $ 15,000 63,860
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
---------------------
The consolidated financial statements for the three and six month periods ended
June 30, 1998 and 1997 are unaudited and reflect all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of management,
necessary for a fair presentation of the financial position, operating results,
and cash flows for the interim periods. Accordingly, they do not include all
information and disclosures required by generally accepted accounting principles
for complete financial statements.
The results of operations for the six month period ended June 30, 1998 are not
necessarily indicative of the results for the entire year ending December 31,
1998.
2. Accounting Policies
-------------------
Reference is made to the accounting policies of the Company described in the
notes to the consolidated financial statements contained in the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31, 1997 filed with the
Securities and Exchange Commission.
3. Reclassifications
-----------------
Certain amounts in the prior period financial statements have been reclassified
to conform to the presentation used in the current period consolidated financial
statements.
4. Cash Dividend
-------------
On March 17, 1998, the Company declared a cash dividend of $.16 per share to
stockholders of record on April 1, 1998. These dividends were paid on April 15,
1998.
On June 12, 1998, the Company declared a cash dividend of $.16 per share to
stockholders of record on July 1, 1998. These dividends were paid on July 15,
1998.
5. Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income
---------------------------------------------------------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130"). This statement established standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. SFAS 130 requires all items that are required to be
recognized under accounting standards as components of comprehensive income to
be reported in an annual financial statement that is displayed in equal
prominence with the other annual financial statements. For interim period
financial statements, enterprises are required to disclose a total for
comprehensive income in those financial statements. The term "comprehensive
income" is used in SFAS 130 to describe the total of all components of
comprehensive income including net income. "Other comprehensive income" refers
to revenues, expenses, gains, and losses that are included in comprehensive
income but excluded from earnings under current accounting standards. Currently,
"other comprehensive income" for the Company consists solely of items previously
recorded as a component of shareholders' equity under SFAS 115, Accounting for
Certain Investments in Debt and Equity Securities. The Company has adopted the
interim-period disclosure requirements of SFAS 130 effective March 31, 1998 and
will adopt the annual financial statement reporting and disclosure requirements
of SFAS 130 effective December 31, 1998.
Total comprehensive income (loss) for the three months and six months ending
June 30, 1998 was $53,603 and $110,118 respectively. For the three months and
six months ending June 30, 1997 comprehensive income was $172,975 and $203,599
respectively.
4
<PAGE>
6. Earnings Per Share
------------------
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per
Share. SFAS No. 128 supersedes Accounting Principles Board Opinion No. 15,
Earnings Per Share, and specifies the computation, presentation, and
disclosure requirements for earnings per share (EPS). SFAS No. 128 replaces
the presentation of primary EPS and fully diluted EPS with a presentation
of basic and diluted EPS, respectively. SFAS No. 128 also requires dual
presentation of basic and diluted EPS on the face of the income statement
for all entities with complex capital structures. All prior period EPS data
has been restated to conform with SFAS No. 128.
Basic EPS excludes dilution and is computed by dividing net income by
weighted average shares outstanding which includes Management Stock Bonus
Plan shares which have been awarded whether vested or not and exclude
unallocated shares under the Company's employee stock ownership plan until
they are committed to be released for allocation. Diluted EPS is computed
by dividing net income by weighted average shares outstanding plus
potential common stock resulting from dilutive stock options.
All average share and per share data in the accompanying consolidated
financial statements and all share and per share data have been restated to
reflect the 10% stock dividend declared in December 1997, which was
effected on January 15, 1998.
SFAS No. 128 requires the presentation on the face of the statement of
income of earnings per share with and without the dilutive effects of
potential common stock issuances from instruments such as options,
convertible securities and warrants. Additionally, the new statement
requires the reconciliation of the amounts used in the computation of both
"basic earnings per share" and "diluted earnings per share" as follows:
<TABLE>
<CAPTION>
For the three months ended June 30, 1998
Per Share
Net Earnings Common Shares Amount
------------ ------------- ------
<S> <C> <C> <C>
Basic earnings per share $38,825 839,329 $0.05
Effect of dilutive common stock issuances:
Stock options 52,020
------- -------
Diluted earnings per share $38,825 891,349 $0.04
======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
For the three months ended June 30, 1997
Per Share
Net Earnings Common Shares Amount
------------ ------------- ------
<S> <C> <C> <C>
Basic earnings per share $16,699 846,386 $0.02
Effect of dilutive common stock issuances:
Stock options 21,206
------- -------
Diluted earnings per share $16,699 867,592 $0.02
======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30, 1998
Per Share
Net Earnings Common Shares Amount
------------ ------------- ------
<S> <C> <C> <C>
Basic earnings per share $95,340 839,543 $0.11
Effect of dilutive common stock issuances:
Stock options 50,307
------- -------
Diluted earnings per share $95,340 889,850 $0.11
======= ======= =====
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30, 1997
Per Share
Net Earnings Common Shares Amount
------------ ------------- ------
<S> <C> <C> <C>
Basic earnings per share $47,323 871,338 $0.05
Effect of dilutive common stock issuances:
Stock options 22,025
------- -------
Diluted earnings per share $47,323 893,363 $0.05
======= ======= =====
</TABLE>
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CCF Holding Company (the "Company") may from time to time make written or oral
"forward-looking statements", including statements contained in the Company's
filings with the Securities and Exchange Commission (including this report on
Form 10QSB), in its reports to stockholders and in other communications by the
Company, which are made in good faith by the Company pursuant to the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These forward looking statements involve risks and uncertainties, such as
statements of the Company's plans, objectives, expectations, estimates and
intentions, that are subject to change based on various important factors (some
of which are beyond the Company's control). The following factors, among others,
could cause the Company's financial performance to differ materially from the
plans, objectives, expectations, estimates and intentions expressed in forward
looking statements: the strength of the United States economy in general and the
strength of the local economies in which the Company conducts operations; the
effects of, and changes in, trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System, inflation, interest rate and market and monetary fluctuations;
the timely development of and acceptance of new products and services of the
Company and the perceived overall value of these products and services by users,
including the features, pricing and quality compared to competitors' products
and services; the willingness of users to substitute competitors' products and
services for the Company's products and services; the success of the Company in
gaining regulatory approval of its products and services, when required; the
impact of changes in financial services' laws and regulations (including laws
concerning taxes, banking, securities and insurance); technological changes,
acquisitions; changes in consumers spending and saving habits; and the success
of the Company at managing the risks involved in the foregoing.
The Company cautions that these important factors are not exclusive. The Company
does not undertake to update any forward looking statement, whether written or
oral, that may be made from time to time by or on behalf of the Company.
Comparison of Financial Condition at June 30, 1998 and December 31, 1997
Assets - The Company's assets increased by 26.8%, or $33.6 million, between
December 31, 1997 and June 30, 1998. Loans receivable increased 17.5% to $114.7
million at June 30, 1998, up $17.2 million from $97.5 million at December 31,
1997. The Company's loan growth is primarily centered in the commercial real
estate lending and single family construction loans. Commercial real estate
loans have increased approximately $7.7 million and construction loans by
approximately $2.8 million. Consumer loans have shown substantial growth of 100%
or $4.4 million since December 31, 1997. This is primarily due to the
establishment of an indirect lending department which totals $2.6 million in
outstandings at June 30, 1998. These loans are primarily for the financing of
home improvement, water craft and recreational vehicles.
Premises and equipment increased by $460,000 or 9% during the six month period
ended June 30, 1998. This is due primarily to the renovation of two existing
offices in Morrow and Forest Park Georgia.
The unrealized gain on investment securities on December 31, 1997 was $221,970.
At June 30, 1998 the unrealized gain was $314,379.
Liabilities - Total deposits during the six months ended June 30, 1998 grew to
$141 million, an increase of $50.7 million, or 56%, from $91.2 million at
December 31, 1997. Deposit growth was primarily in certificates of deposit which
increased approximately $31 million. This growth was the result of a marketing
campaign to increase deposits which provided the necessary funding for the
balance sheet growth and the payment of the balance due at the Federal Home Loan
Bank, $18.5 million. Transaction accounts (checking, NOW and money markets) grew
approximately $17 million during the six months ending June 30, 1998. This
growth is due to the expansion into the new markets of Henry and Fayette
Counties and the increasing recognition of Heritage Bank as a full service
community bank.
Stockholders' Equity - Stockholders' equity increased $20,074 or .1%, from
December 31, 1997 to June 30, 1998. This increase was the result of the
Company's net income, Employee stock ownership plan allocations, management
stock bonus plan expense and unrealized gains on securities available for sale.
The Company has declared two quarterly dividend totaling $134,023 and $133,331
respectively which partially offset the increase in stockholders equity. The
ratio of stockholders' equity as a percentage of total assets decreased to 7.2%
at June 30, 1998 from 9.2% at December 31, 1997. Book value per share increased
from $12.81 at December 31, 1997 to $12.90 at June 30, 1998.
6
<PAGE>
Comparison of Operating Results for the Three Months Ended June 30, 1998 and
1997
Performance Overview
Net Income - The Company's net income of $38,825 for the three-month period
ended June 30, 1998 increased by $22,126, or 132%, from a net income of $16,699
for the same period in 1997. The increase in net income for the three month
period ended June 30, 1998, was primarily the result of an increase of net
interest income, generated through loan growth.
Net Interest Income - Net interest income for the three-month period ended June
30, 1998 increased $271,000 or 26.5%, from $1,022,826 in 1997 to $1,294,004 for
the same period in 1998. The increase in the average balance of loans receivable
during the three-month period ended June 30, 1998, compared to the same period
in 1997, resulted in a $813,000 or 46%, increase in interest income from loans
to $2.6 million from $1.8 million, respectively. Investment and mortgage-backed
securities interest income increased $142,000 from 1997 to 1998, to $258,000
from $116,000. Interest on Federal funds sold for same period increased from $0
to $111,000. Interest expense increased $793,000 to $1.68 million for the
three-month period ended June 30, 1998 from $887,000 for the same period in
1997. This increase is the result of the increase in deposits during the quarter
ended June 30, 1998.
Provision for Loan Losses - The Bank's provision for loan losses increased by
$27,500 for the three month period ended June 30, 1998 compared to the same
period in 1997, increasing to $60,000 from $32,500. Management periodically
evaluates the adequacy of the allowance for loan losses, including an evaluation
of past loan loss experience, current economic conditions, volume, growth and
collateral of the loan portfolio. Management also reviews classified assets,
including those loans and assets listed as non-performing. Management currently
believes that its allowance for loan losses is adequate. However, there can be
no assurances that further additions will not be needed. Management will
continue to monitor and adjust the allowance as necessary in future periods
based on growth in the loan portfolio, loss experience which has been minimal,
and the continued expected changing mix of loans in the loan portfolio. If the
size of the loan portfolio continues to increase and the relative proportion in
that portfolio of commercial and construction loans increases, it is expected
that the provision for loan losses will increase at an adequate level. Loans
internally classified as Substandard for the period ending June 30, 1998 totaled
$1.1 million and for the period ending December 31, 1997 substandard loans
totaled $762,000. The increase was due to the addition of one loan which was
placed on non accrual during the first quarter due to its past due status of
more than 90 days. Management believes that this loan is adequately secured and
no loss is anticipated. There were no loans classified as doubtful or loss for
either period. Non accrual loans decreased during this quarter by a net of
$15,000.
Other Income - Other income decreased 44%, or $110,000 to $141,000 in the
three-month period ended June 30, 1998 from $251,000 for the same period in
1997. This decrease was primarily due to a decrease in the Gain on Sale of
Securities. The gain of sale of securities for the current period was $30,000 as
compared to $179,000 for the same period last year. This difference is offset by
an increase of $50,000 in service charge income on deposit accounts from $38,000
in the quarter ending June 1997 to $87,000 in the quarter ending June 1998.
Other Expenses - Other expenses for the three month period ended June 30, 1998
increased 8% from $1.2 million for the three-month period ended June 30, 1997 to
$1.3 million for the same period in 1998, an increase of $96,000. $37,000 of
this increase, is the result of increased salary expense. Salaries and employee
benefits increased to $750,000 for the three month period ended June 30, 1998
compared to $713,000 during the same three-month period in 1997. In addition,
occupancy expense decreased $65,000 to $177,000 for the three-month period ended
June 30, 1998 from $242,000 during the same period in 1997. This decrease is due
primarily to the establishment of two new facilities during 1997 which increased
expenses for that period. Insurance premiums have increased by $13,000 for the
current period due to the increasing deposit base. Likewise, computer processing
expenses increased from $68,000 during the quarter ended June 1997 to $88,000
for the current quarter.
Liquidity Resources - The Company's wholly-owned subsidiary, Heritage Bank (the
"Bank") is required to maintain minimum levels of liquid assets as defined by
the Office of Thrift Supervision (OTS) regulations. The OTS minimum required
liquidity ratio is 4%. The Bank's liquidity ratio averaged 17.29% during the
quarter ending June 1998 compared to 13% during June 1997. The Bank manages its
liquidity levels in order to meet funding needs for deposit outflows, payments
of real estate taxes and escrow accounts on mortgage loans, loan funding
commitments, and repayments of borrowings, when applicable. The primary source
of funds are deposits, amortization and prepayments of loans, the sale and
maturity of investment and mortgage-backed securities, short-term Federal Home
Loan Bank advances and funds provided by operations.
7
<PAGE>
Year 2000 - The internal task force established by the Company has completed
both the Awareness and Assessment phases of this project. The recommendations
for renovation and validation have been completed. A test lab has been
established to verify the compliance of software used by the Company. All
validation and implementation procedures are expected to be completed by June
30, 1999. The Company has been reviewed by two regulatory agencies on its Year
2000 progress. There were no significant finding noted in either review. The
Bank's third party vendor, FISERV Solutions, Inc. has begun testing which should
be completed by September 1998. The Company will continue to closely monitor the
progress all of its vendors, including correspondent banks, and will
aggressively address potential problems as they arise. The Bank expects its
expenses related to the Year 2000 for 1998 to be less than $25,000. The budget
for 1999 is currently being created, Year 2000 expenses, if any, will be
included. Loan officers have completed surveys to identify any customers that
may be impacted by the Year 2000 issues; none have been identified to date.
Comparison of Operating Results for the Six Months Ended June 30, 1998 and 1997
Performance Overview
Net Income - The Company's net income of $95,340 for the six month period ended
June 30, 1998 reflected an increase of $48,017 or 101%, from a net income of
$47,323 for the same period in 1997. The increase in net income for the six
month period ended June 30, 1998, was primarily due to an increase of net
interest income, generated through loan growth. Net loans outstanding have
increased by 40% or $82 million since June 1997.
Net Interest Income - Net interest income for the six month period ended June
30, 1998 increased $566,000 or 29.2%, from $1.9 million in 1997 to $2.5 million
for the same period in 1998. The increase in the average balance of loans
receivable during the six month period ended June 30, 1998, compared to the same
period in 1997, resulted in a $1,700,000 or 47%, increase in interest income
from loans to $5.0 million from $3.2 million, respectively. Investment and
mortgage-backed securities interest income increased $192,000 from the quarter
ending June 1997 to the quarter ending June 1998, to $453,000 from $261,000.
Interest on Federal funds sold for the same period increased from $0 to
$153,000. Interest expense increased $1.5 million to $3.13 million for the six
month period ended June 30, 1998 from $1.66 million for the same period in 1997.
This increase is the result of the growth in deposits during the six months
ended June 30, 1998.
Provision for Loan Losses - The Bank's provision for loan losses increased by
$68,500 for the six month period ended June 30, 1998 compared to the same period
in 1997. The provision increased from $51,500 during the six month period ending
June 30, 1997 to $120,000 during the same period in 1998. This increase was
necessary to maintain the level of reserve to outstandings, due to the strong
growth in the loan portfolio. Management will continue to monitor and adjust the
allowance as necessary in future periods.
Other Income - Other income decreased 35%, or $203,000 to $383,000 in the six
month period ended June 30, 1998 from $586,000 for the same period in 1997. This
decrease was primarily due to a decrease in the Gain on Sale of Securities. The
gain of sale of securities for the current period was $178,000 as compared to
$356,000 for the same period last year. This difference is offset by an increase
of $97,000 or 110% in service charge income on deposit accounts from $88,000 in
the six months ending June 1997 to $185,000 in the six months ending June 1998.
Other Expenses - Other expenses for the six month period ended June 30, 1998
increased 9% from $2.4 million for the six month period ended June 30, 1997 to
$2.6 million for the same period in 1998, an increase of $219,000. Salaries and
employee benefits increased by $88,000 for the six month period ended June 30,
1998 compared to the same six month period in 1997. Occupancy expense leveled to
an increase of only $2,000 or 0.4% for the six months ended June 1997.
Income Taxes - Effective tax rates during the two six month periods were
comparable as there were no changes in statutory tax rates.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
NONE
Item 2. Changes in Securities and Use of Proceeds.
NONE
Item 3. Defaults upon Senior Securities.
NONE
Item 4. Submission of Matters to a Vote of Security Holders.
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 11 - Computation of Per Share Earnings
(b) A form 8-K (dated June 11, 1998) for items 4 and 7 was filed on June
18, 1998 concerning the appointment of a new accountant.
9
<PAGE>
CCF HOLDING COMPANY AND SUBSIDIARY
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CCF HOLDING COMPANY
Date: August 13, 1998 BY:\s\ David B. Turner
----------------------------------
David B. Turner
President and
Chief Executive Officer
Date: August 13, 1998 BY:\s\ Mary Jo Rogers
----------------------------------
Mary Jo Rogers
Vice President and
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION DERIVED FROM THE
QUARTERLY REPORT ON FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL INFORMATION.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 4,834
<INT-BEARING-DEPOSITS> 938
<FED-FUNDS-SOLD> 6,330
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 23,708
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 115,388
<ALLOWANCE> 789
<TOTAL-ASSETS> 158,539
<DEPOSITS> 141,909
<SHORT-TERM> 3,397
<LIABILITIES-OTHER> 1,694
<LONG-TERM> 0
0
0
<COMMON> 91
<OTHER-SE> 11,449
<TOTAL-LIABILITIES-AND-EQUITY> 158,539
<INTEREST-LOAN> 4,958
<INTEREST-INVEST> 453
<INTEREST-OTHER> 218
<INTEREST-TOTAL> 5,629
<INTEREST-DEPOSIT> 2,970
<INTEREST-EXPENSE> 3,131
<INTEREST-INCOME-NET> 2,498
<LOAN-LOSSES> 120
<SECURITIES-GAINS> 135
<EXPENSE-OTHER> 2,614
<INCOME-PRETAX> 147
<INCOME-PRE-EXTRAORDINARY> 147
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 95
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
<YIELD-ACTUAL> 3.50
<LOANS-NON> 553
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,073
<ALLOWANCE-OPEN> 729
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 789
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
