<PAGE>1
US SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
_X__ Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 1998
___ Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from ___________ to ______________
Commission file number - _33-90742
GEORGIA BANCSHARES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Georgia 58-2176047
(State or Other Jurisdiction (IRS Employer Identification No.)
of Incorporation)
3333 Lawrenceville Highway
Tucker, Georgia 30084
(Address of Principal Executive Offices)
(770) 491-3333
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
Common stock, par value $4 per share: 584,228 shares
outstanding as of May 6, 1998
Traditional Small Business Disclosure Format:
Yes X No
<PAGE>2
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
INDEX
Page No.
Part I: Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (unaudited)
March 31, 1998 and December 31, 1997 2
Consolidated Statements of Earnings (unaudited)
for the Three Months Ended March 31, 1998 and
1997 3
Consolidated Statements of Comprehensive Earnings
(unaudited) for the Three Months Ended March 31,
1998 and 1997 4
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements
(unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II: Other Information 11
<PAGE>3
<TABLE>
<CAPTION>
Part I: Financial Information
Item 1. Financial Statements
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Balance Sheets
March 31, 1998 and December 31, 1997
(Unaudited)
Assets
March 31, December 31,
1998 1997
<S> <C> <C>
Cash and due from banks $ 3,531,698 3,527,565
Federal funds sold 6,400,000 7,436,000
Investment securities available for sale (amortized
cost of $18,071,581) 18,063,912 18,834,981
Loans 47,178,743 45,345,584
Less: Allowance for loan losses 752,080 696,679
Loans, net 46,426,663 44,648,905
---------- ----------
Premises and equipment, net 2,808,465 2,853,414
Other assets 2,125,772 2,055,454
--------- ---------
79,356,319 79,356,319
========== ==========
Liabilities and Stockholders' Equity
Liabilities:
Deposits:
Non-interest-bearing $ 10,843,171 10,547,045
Interest-bearing 61,146,747 61,867,454
---------- ----------
Total deposits 71,989,918 72,414,499
Other liabilities 569,893 291,043
------- -------
Total liabilities 72,559,811 72,705,542
---------- ----------
Stockholders' equity:
Common stock, $4 par value; authorized
3,000,000 shares; issued and outstanding
584,228 shares 2,336,912 2,336,912
Capital surplus 3,536,659 3,536,659
Accumulated earnings 1,033,813 896,291
Unrealized loss on investment securities, net of tax (110,685)
--------- ---------
Total stockholders' equity 6,796,699 6,650,777
$ 79,356,510 79,356,319
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>4
<TABLE>
<CAPTION>
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Statements of Earnings
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Interest income:
Loans $ 1,195,350 872,908
Investment securities 282,653 258,943
Federal funds sold 58,595 26,816
------ ------
Total interest income 1,536,598 1,158,667
--------- ---------
Interest expense:
Demand deposits 73,966 64,746
Savings deposits 47,253 47,064
Time deposits 607,255 387,035
Other - 120
------ --------
Total interest expense 728,419 498,965
-------- --------
Net interest income 808,179 659,702
Provision for loan losses 63,000 37,500
------ ------
Net interest income after provision for
loan losses 745,179 622,202
------- -------
Other income:
Service charges on deposit accounts 71,900 72,076
Gain (loss) on sales of investment securities 5,182 -
Other operating income 37,142 30,935
------ ------
Total other income 114,224 103,011
------- -------
Other expense:
Salaries and other personnel expense 294,310 280,318
Net occupancy and equipment expense 97,467 95,327
Other operating expense 183,456 187,261
------- --------
Total other expense 575,233 562,906
------- -------
Earnings before income taxes 284,170 162,307
Income tax expenses 88,227 55,311
------ -------
Net earnings $ 195,943 106,996
======= =======
Earnings per common share $ .34 .19
=== ===
Earnings per common share - assuming dilution $ .33 .18
=== ===
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>5
<TABLE>
<CAPTION>
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Statement of Comprehensive Earnings
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net earnings $ 195,943 106,996
Other comprehensive earnings, net of tax:
Unrealized gains on securities:
Unrealized holding gains arising during period 13,110 (98,611)
Less: Reclassification adjustment for gains included in net income (4,708) -
----- ------
Total other comprehensive income 8,402 (98,611)
----- ------
Comprehensive earnings $ 204,345 8,385
======= =====
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>6
<TABLE>
<CAPTION>
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 1998 and 1997
(Unaudited)
Three Months Ended
March 31,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 195,945 106,996
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Provision for loan losses 63,000 37,500
Deferred tax benefits 5,140 (92,630)
Depreciation, amortization and accretion 59,224 53,920
Loss (gain) on sales of investment securities (5,182) -
Change in assets and liabilities:
Prepaid expenses and other assets (77,777) (73,960)
Accrued expenses and other liabilities 278,850 162,448
------- --------
Net cash provided (used) by operating
activities 519,200 194,274
------- -------
Cash flows from investing activities:
Proceeds from sales, maturities and paydowns of
investment securities 2,274,973 817,418
Purchases of investment securities (1,495,378) (496,836)
Net increase in loans (1,840,758) (3,306,282)
Purchases of premises and equipment (6,900) (26,818)
------- --------
Net cash provided (used) by investing
activities (1,068,063) (3,012,518)
----------- -----------
Cash flows from financing activities:
Net change in deposits (424,581) 458,374
Dividends paid (58,423) (58,423)
-------- ---------
Net cash provided (used) by financing
activities (483,004) 399,951
--------- -------
Net increase (decrease) in cash and cash equivalents (1,031,867) (2,418,293)
Cash and cash equivalents at beginning of the period 10,963,565 6,583,556
---------- ---------
Cash and cash equivalents at end of period $ 9,931,698 4,165,263
=========== =========
Supplemental cash flow information:
Cash paid for interest $ 465,485 354,801
======== =======
Cash paid for income taxes $ 12,314 57,607
====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>7
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information, and with the instructions to Form 10-QSB and Item
310 (b) of Regulation S-B of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month
period ended March 31, 1998, are not necessarily indicative of the
results that may be expected for the year ended December 31, 1998. For
further information refer to the consolidated financial statements and
footnotes thereto included in the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1997.
(2) New Accounting Pronouncements
During the quarter, the Company adopted FASB Statement no. 130 Reporting
Comprehensive Income. The statement requires the reporting of
comprehensive income in addition to net income from operations.
Comprehensive income is a more inclusive financial reporting methodology
that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income.
During the quarter, the Company had unrealized holding gains on
investment securities which were reported as comprehensive income. The
beforetax and aftertax amount, as well as the tax (expense)benefit is
presented below:
<TABLE>
<CAPTION>
Three Months ended March 31, 1998
Tax
Before (Expense)/ After
Tax Benefit Tax
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period $ 21,131 (8,021) 13,110
Less: Reclassification adjustment for (gains) losses
realized in net income (7,588) 2,880 (4,708)
------- ----- -----
$ 13,543 (5,141) 8,402
======== ======= =====
Three Months ended March 31, 1997
Tax
Before (Expense)/ After
Tax Benefit Tax
<S> <C> <C> <C>
Unrealized gains (losses) on securities:
Unrealized holding gains (losses) arising
during period $(158,947) (60,336) (98,611)
========== ======== ========
</TABLE>
<PAGE>8
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(3) Earnings Per Share
The Company adopted FASB Statement No. 128, "Earnings Per Share" ,
effective December 31, 1997. This Statement requires the presentation of
"basic" earnings per share, which excludes the effect of dilution, and
"diluted" earnings per share, which includes the effect of dilution.
Earnings per common share amounts for the three months periods ended
March 31, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Three Months ended March 31, 1998
Net Earnings Common Share Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Earning per common share $ 195,943 584,228 $ 0.34
====
Effects of dilutive stock options - 5,025
-------- -------
Earnings per common share - assuming dilution $ 195,943 589,253 $ 0.33
======= ======= ====
</TABLE>
<TABLE>
<CAPTION>
Three Months ended March 31, 1997
Net Earnings Common Share Per Share
(Numerator) (Denominator) Amount
<S> <C> <C> <C>
Earning per common share $ 106,996 584,228 $ 0.19
====
Effects of dilutive stock options - 1,228
------- -------
Earnings per common share - assuming dilution $ 106,996 585,456 $ 0.18
======= ======= ====
</TABLE>
(4) Supplemental Financial Data
Components of other operating expenses of 1% of total interest income and
other income for the periods ended March 31, 1998 and 1997 are:
Three Months Ended
March 31,
1998 1997
---- ----
Advertising and Marketing $ 15,310 17,510
Data Processing 31,085 36,891
Postage and courier 11,514 15,268
Printing and supplies 17,570 16,931
Professional Fees 15,400 16,350
Postage and courier 11,514 15,268
<PAGE>9
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - (continued)
For Each of the Three Months in the Periods Ended
March 31, 1998 and 1997
Interim Financial Condition
Georgia Bancshares, Inc. (the "Company") reported total assets of
$79,356,510 as of March 31, 1998, compared to $79,356,319 at December 31, 1997.
The most significant change in the composition of assets was an increase in
gross loans from $45,345,584 to $47,178,743. The increase was funded from a
reduction in Federal funds investments of $1,023,000. Deposits decreased by
$424,581 (.59%) from December 31, 1997. The limited growth in assets has
resulted from management's actions to transfer growth from the certificates of
deposits to non-interest and interest-bearing demand deposits. As a result of
the loan growth, the loan to deposit ratio has increased to 64.49%. The
Company's cash and cash equivalents have decreased by $1,031,867 to $9,931,698
as of March 31, 1998.
Liquidity
The Bank's liquid assets as a percentage of total deposits was 13.80% at
March 31, 1998, compared to 15.14% at December 31, 1997. The Company has
approximately $3,900,000 in available federal fund lines of credit with
correspondent banks. The Company has not advanced on these lines during 1998.
Management analyzes the level of off-balance sheet commitments such as unfunded
loan equivalents, loan repayments, maturity of investment securities, liquid
investment, and available fund lines in an attempt to minimize the possibility
that a potential shortfall will exist. Based on this analysis, management
believes that the Company has adequate liquidity to meet short-term operating
requirements. However, no assurance can be given in this regard.
Capital
The capital of the Company totaled $6,796,699 as of March 31, 1998. The
capital of the Company and the Bank exceeded all prescribed regulatory capital
guidelines. Regulations require that the most highly rated banks maintain a Tier
1 leverage ratio of 3% plus an additional cushion of at least 1 to 2 percentage
points. Tier 1 capital consists of common shareholders' equity, less certain
intangibles. The Bank's Tier 1 leverage ratio was 8.95% at March 31, 1998,
compared to 10.30% at December 31, 1997. Regulations require that the Bank
maintain a minimum total risk weighted capital ratio of 8%, with one-half of
this amount, or 4%, made up of Tier 1 capital. Risk-weighted assets consist of
balance sheet assets adjusted by risk category, and off-balance sheet assets
equivalents similarly adjusted. At March 31, 1998, the Bank had a risk-weighted
total capital ratio of 13.39%, compared to 13.30% at December 31, 1997, and a
Tier I risk-weighted capital ratio of 12.14%, compared to 12.00% at December 31,
1997.
Asset Quality
Nonperforming assets which includes nonaccruing loans, repossessed
collateral and loans for which payments are more than 90 days past due, totaled
$722,234, an increase of $198,770 from December 31, 1997. There were no related
party loans which were considered nonperforming at March 31, 1998. The composi-
tion of the nonperforming assets is presented in the following table:
March 31, December 31,
1998 1997
Loans on nonaccrual $ 340,825 213,887
Other real estate owned 381,409 299,494
Other repossessed collateral - 10,083
-------- --------
Total nonperforming assets $ 722,234 523,464
======= ========
Total nonperforming assets as a
percentage of total loans (gross)
and other real estate 1.53% 1.16%
====== =====
<PAGE>10
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - (continued)
For Each of the Three Months in the Periods Ended
March 31, 1998 and 1997
The allowance for loan losses totaled $752,080 at March 31, 1998, an
increase of $55,401 from December 31, 1997. The allowance for loan losses
represented 1.52% and 1.56% of total loans at March 31, 1998 and December 31,
1997, respectively. An analysis of the allowance for loan losses since December
31, 1997 follows:
Allowance for loan losses at December 31, 1997 $ 696,679
Charge-offs:
Commercial -
Real Estate -
Installment 10,935
------
Total 10,935
Recoveries:
Commercial -
Real Estate -
Installment 3,336
-----
Total 3,336
Provision charged to income 63,000
Allowance for loan losses at March 31, 1998 $ 752,080
=========
As of March 31, 1998, management anticipates charging the allowance for
loan losses for approximately $110,000 related to a commercial line totaling
$156,000. The loan portfolio is reviewed periodically to evaluate the
outstanding loans and to measure the performance of the portfolio and the
adequacy of the allowance for loan losses. This analysis includes a review of
delinquency trends, actual losses, and internal credit ratings. Management's
judgment as to the adequacy of the allowance is based upon a number of
assumptions about future events which it believes to be reasonable, but which
may or may not be reasonable. However, because of the inherent uncertainty of
assumptions made during the evaluation process, there can be no assurance that
loan losses in future periods will not exceed the allowance for loan losses of
that additional allocations to the allowance will not be required.
The Bank was most recently examined by its primary regulatory authority
in July 1997. There were no recommendations by the regulatory authority that in
management's opinion will have material effects on the Bank's liquidity, capital
resources or operations.
Investment Securities
At March 31, 1998, the Bank had $18,063,912 in investment securities
available-for-sale . The net unrealized loss on available for sale securities,
net of deferred taxes, was $110,685 on March 31, 1998. The Bank invests
primarily in obligations of the United States or obligations guaranteed as to
principal and interest by the United States and other taxable and tax exempt
securities. The Bank has included in its investment portfolio instruments
described as a derivative, primarily, structured note derivatives. Structured
notes are debt securities whose cash flow characteristics depend on one or more
indexes. Structured notes carry high credit ratings and are issued as
floating-rate instruments. In a rising interest rate environment, the market
value of these securities can decrease due to the fact that the embedded
options, puts, calls, etc., become evident. There can be no assurance that
<PAGE>11
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations - (continued)
For Each of the Three Months in the Periods Ended
March 31, 1998 and 1997
as interest rates change in the future the amount of unrealized loss will not
increase, but if these securities are held until they mature and are repaid in
accordance with their terms, these principal losses will not be realized.
Results of Operations
Net interest income for the first three months of 1998 was $808,179, an
increase $148,477 (22.51%) compared to the same period for 1997. Interest income
for the first three months of 1998 was $1,536,598, representing an increase of $
377,931 (32.62%) over the same period in 1997. The growth in interest income was
primarily due to increases in loans and investment securities of $11,977,288 and
$2,612,591 since March 31, 1997. Interest expense for the first three months of
1998 increased $229,509 (45.99%) compared to the same period in 1997.
Interest-bearing deposits have increased $17,876,531 (41.31%) since March 31,
1997. The majority of the growth in interest-bearing deposits was in
certificates of deposits.
Amounts charged to expense related to the allowance for loan losses for
the first three months of 1998 increased $25,500 compared to the same period for
1997. The increase is primarily attributable to the loan growth for the first
three months in 1998 and management's belief in maintaining a high level of the
allowance for loan losses in relationship to total loans.
Other income for the first three months of 1998 was $114,224, an increase
of $11,213 (10.88%) compared to the same period in 1997. The increase in other
income is primarily due to income on alternative investments of $5,459 and gains
on sale of investment securities of $5,182.
Other expenses for the first three months of 1998 increased $5,674
(1.00%) compared to the first three months in 1997. The limited increase is due
to overstaffing and additional expenses incurred in 1997 while establishing a
new branch office. The new branch office was opened October 1, 1996.
<PAGE>12
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security-Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
None
The following Exhibits are filed with or incorporated by reference in
this Report as indicated below: 2 Plan and Agreement of Reorganization,
dated as of February 16, 1995, by and among the Bank, Interim and the
Company (incorporated by reference from Appendix A to the Proxy
Statement/Prospectus included in the Company's Registration Statement
on Form S-4, Commission File No.33-90742, filed with the Commission
on March 31, 1995 (the "S-4 Registration Statement")).
3.1 Articles of Incorporation of the Company (incorporated by reference
from Exhibit 3.1 to the S-4 Registration Statement.
3.2 Bylaws of the Company (incorporated by reference from Exhibit 3.2
to the S-4 Registration Statement).
4 Form of Certificate representing shares of the $4.00 par value
common stock of the Company (incorporated by reference from Exhibit
4.1 to the S-4 Registration Statement).
21 List of Subsidiaries of the Company (incorporated by reference
from Exhibit 21 to the Form 8-K, Commission File No.
33-90742), filed with the Commission on August 18, 1995.
<PAGE>13
GEORGIA BANCSHARES, INC.
AND SUBSIDIARY
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GEORGIA BANCSHARES, INC.
By: /s/ Ted A. Murphy
Ted A. Murphy
President and CEO
By: /s/ David L. Edgar
David L. Edgar, CPA
Principal Financial Officer
Date: May 12, 1998
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 3,531,698
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 6,400,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 18,063,912
<INVESTMENTS-CARRYING> 18,063,912
<INVESTMENTS-MARKET> 18,063,912
<LOANS> 46,426,663
<ALLOWANCE> 752,080
<TOTAL-ASSETS> 79,356,510
<DEPOSITS> 71,989,918
<SHORT-TERM> 0
<LIABILITIES-OTHER> 569,893
<LONG-TERM> 0
0
0
<COMMON> 2,336,912
<OTHER-SE> 4,459,787
<TOTAL-LIABILITIES-AND-EQUITY> 79,356,510
<INTEREST-LOAN> 1,195,350
<INTEREST-INVEST> 282,653
<INTEREST-OTHER> 58,595
<INTEREST-TOTAL> 1,536,598
<INTEREST-DEPOSIT> 728,419
<INTEREST-EXPENSE> 728,419
<INTEREST-INCOME-NET> 808,179
<LOAN-LOSSES> 63,000
<SECURITIES-GAINS> 5,182
<EXPENSE-OTHER> 575,233
<INCOME-PRETAX> 284,170
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 195,943
<EPS-PRIMARY> .34
<EPS-DILUTED> .33
<YIELD-ACTUAL> 5.02
<LOANS-NON> 340,825
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 1,173,107
<ALLOWANCE-OPEN> 696,679
<CHARGE-OFFS> 10,935
<RECOVERIES> 3,336
<ALLOWANCE-CLOSE> 752,082
<ALLOWANCE-DOMESTIC> 175,966
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 576,116
</TABLE>
