SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998.
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 33-36512
THOMASVILLE BANCSHARES, INC.
(Exact name of small business issuer as specified in its charter)
Georgia 58-2175800
(State of Incorporation) (I.R.S. Employer Identification No.)
301 North Broad Street Thomasville, Georgia 31792
(Address of Principal Executive Offices)
(912) 226-3300
(Issuer's Telephone Number, Including Area Code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)
Check whether the issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common equity as of the latest
practicable date.
Common stock, $1.00 par value per share 1,380,000 shares issued and
outstanding as of November 12, 1998.
(Page 1 of 14)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Balance Sheets
September 30, December 31,
1998 1997
ASSETS (Unaudited) (Unaudited)
Cash and due from banks $ 3,467,963 $ 2,447,683
Federal funds sold 3,051,464 1,582,269
Total cash and cash equivalents $ 6,519,427 $ 4,029,952
Investment securities:
Securities available-for-sale,
at market value 4,468,806 4,194,219
Loans, net 66,786,914 53,466,913
Property & equipment, net 2,805,707 2,484,979
Other assets 1,331,292 718,426
Total Assets $81,912,146 $64,894,489
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 8,805,228 $ 9,334,294
Interest bearing deposits 62,570,813 48,668,118
Total deposits $71,376,041 $58,002,412
Other liabilities 612,120 423,684
Total Liabilities $71,988,161 $58,426,096
Commitments and contingencies
Shareholders' Equity:
Common stock, $1.00 par value,
10 million shares authorized,
1,379,400 (9-30-98) and 1,200,000
(12-31-97) shares issued
& outstanding $ 1,379,400 $ 1,200,000
Paid-in-capital 7,945,801 5,418,801
Retained earnings 568,362 (158,338)
Unrealized gain
securities available-for-sale 30,422 7,930
Total Shareholders' Equity $ 9,923,985 $ 6,468,393
Total Liabilities and
Shareholders' Equity $81,912,146 $64,894,489
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Statements of Income
(Unaudited)
Three months ended
September 30,
1998 1997
Interest income $1,641,867 $1,261,826
Interest expense 785,743 571,515
Net interest income $ 856,124 $ 690,311
Provision for possible loan losses 51,000 36,000
Net interest income after provision
for possible loan losses $ 805,124 $ 654,311
Other income
Gain on sale of mortgage loans $ 1,541 $ 1,696
Gain on sale of other assets - - 1,145
Service charges 21,043 16,164
Other fees 120,877 69,675
Rental income 5,400 5,400
Total other income $ 148,861 $ 94,080
Salaries and benefits $ 271,103 $ 211,192
Depreciation 39,814 34,616
Amortization 2,806 2,806
Repairs and maintenance 10,946 13,931
Data processing 9,321 10,378
Regulatory fees and assessments 9,281 6,672
Other operating expenses 165,336 134,380
Total operating expenses $ 508,607 $ 413,975
Net income before taxes $ 445,378 $ 334,416
Income taxes 178,500 138,700
Net income $ 266,878 $ 195,716
Basic income per share $ .21 $ .16
Diluted income per share $ .20 $ .15
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Statements of Income
(Unaudited)
Nine months ended
September 30,
1998 1997
Interest income $4,607,854 $3,244,486
Interest expense 2,140,859 1,445,745
Net interest income $2,466,995 $1,798,741
Provision for possible loan losses 147,000 108,000
Net interest income after provision
for possible loan losses $2,319,995 $1,690,741
Other income
Gain on sale of mortgage loans $ 7,958 $ 2,671
Gain on sale of other assets - - 1,145
Service charges 60,238 43,736
Other fees 288,059 205,688
Rental income 16,200 16,200
Total other income $ 372,455 $ 269,440
Salaries and benefits $ 776,825 $ 592,869
Depreciation 113,092 79,301
Amortization 8,418 8,418
Repairs and maintenance 33,882 35,483
Data processing 27,259 24,798
Regulatory fees and assessments 26,860 20,632
Other operating expenses 448,315 435,809
Total operating expenses $1,434,651 $1,197,310
Net income before taxes $1,257,799 $ 762,871
Income taxes 531,100 325,400
Net income $ 726,699 $ 437,471
Basic income per share $ .59 $ .36
Diluted income per share $ .57 $ .34
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30,
1998 1997
Cash flows from operating activities: $ 569,567 $ 559,075
Cash flows from Investing Activities:
Purchase of fixed assets $ (433,820) $ (693,918)
Purchase of securities,
available-for-sale (243,900) (1,014,063)
(Increase) in loans (13,467,001) (17,056,817)
Net cash used by investing activities $(14,144,721) $(18,764,798)
Cash flows from Financing Activities:
Sale of common stock $ 2,691,000 $ - -
Increase in deposits 13,373,629 15,983,813
Net cash provided from financing activities $ 16,064,629 $ 15,983,813
Net increase in cash and cash equivalents $ 2,489,475 $ (2,221,910)
Cash and cash equivalents,
beginning of period 4,029,952 5,628,235
Cash and cash equivalents, end of period $ 6,519,427 $ 3,406,325
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1998
Note 1 - Basis of Presentation
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do
not include all 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 nine-month period ended September 30, 1998 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1998. These statements should be read in conjunction with the
consolidated financial statements and footnotes thereto included in Form 10-
KSB for the year ended December 31, 1997.
Note 2 - Summary of Organization
Thomasville Bancshares, Inc., Thomasville, Georgia (the "Company"), was
incorporated under the laws of the State of Georgia on March 30, 1995, for the
purpose of becoming a bank holding company for a proposed national bank,
Thomasville National Bank (the "Bank") to be located in Thomasville, Georgia.
In an initial public offering conducted during 1995, the Company sold and
issued 600,000 shares of its $1.00 par value common stock. Proceeds from the
above offering amounted to $5,972,407, net of selling expenses. The Company
commenced banking operations on October 2, 1995. During the first calendar
quarter of 1998, the Company declared a two-for-one stock split, effected in
the form a 100% stock dividend, thus increasing the then total number of
outstanding shares to 1,200,000. During the third calendar quarter of 1998,
the Company conducted a secondary public offering and sold 179,400 shares of
its $1.00 par value common stock for $2,667,366, net of selling expenses.
Subsequent to September 30, 1998, the secondary public offering was completed
upon the sale of 180,000 shares of the Company's $1.00 par value common stock.
Note 3 - Recent Accounting Pronouncements
Beginning January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income," which is effective for annual and
interim periods beginning after December 15, 1997. SFAS 130 establishes new
rules for the reporting and display of comprehensive income and its
components; however, the adoption of this Statement had no impact on the
Company's net income or shareholders' equity. SFAS 130 requires unrealized
gains and losses on the Company's available-for-sale securities which, prior
to adoption were reported separately in shareholders' equity, to be included
in other comprehensive income. During the third quarter and for the nine-
month period ended September 30, 1998, total comprehensive income amounted to
$283,761 and $752,191, respectively, and totaled $201,308 and $439,924
respectively, for the comparable periods in 1997.
Beginning January 1, 1998, the Company adopted the provisions of SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which is effective for annual and interim periods beginning
after December 15, 1997. This Statement establishes standards for the method
that public entities are to use when reporting information about operating
segments in annual financial statements and requires that those enterprise
reports be issued to shareholders, beginning with annual financial statements
in 1998 and for interim and annual financial statements thereafter. SFAS 131
also established standards for related disclosures about products and
services, geographic areas and major customers.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company was incorporated in Georgia on March 30, 1995 to become a bank
holding company and to own and control all of the outstanding shares of a de
novo bank, Thomasville National Bank, Thomasville, Georgia ("Bank"). In a
public offering conducted during 1995, the Company sold and issued 600,000
shares of its own $1.00 par value common stock (the "Common Stock"). The
Company then purchased 100% of the Bank's common stock for $4.8 million and
commenced banking operations on October 2, 1995. During the first calendar
quarter of 1998, the Company declared and effected a two-for-one stock split,
thus increasing the number of common shares outstanding from 600,000 to
1,200,000. In a public offering completed on October 26, 1998, the Company
sold 180,000 shares of its $1.00 par value common stock, thus increasing the
number of common shares outstanding to 1,380,000. For additional information
refer to "Part II - Item 2. Changes in Securities and Use of Proceeds."
Total consolidated assets increased by $17.0 million to $81.9 million during
the nine-month period ended September 30, 1998. The increase was generated
through a $13.4 million increase in deposits, and $200,000 and $700,000
increases in payables and retained profits, respectively. Also, the sale of
common stock provided an additional source of funds aggregating $2.7 million.
The Bank utilized the above funds to increase loans by $13.3 million, cash
and cash equivalents by $2.5 million, property and equipment by $300,000,
investments by $300,000 and other assets by $600,000.
Liquidity and Sources of Capital
Liquidity is the Company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of customer. The
September 30, 1998 financial statements evidence a satisfactory liquidity
position as total cash and cash equivalents amounted to $6.5 million,
representing 8.0% of total assets. Investment securities, which amounted to
$4.5 million or 5.5% of total assets, provide a secondary source of liquidity
because they can be converted into cash in a timely manner. In addition, the
Company's ability to maintain and expand its deposit base and borrowing
capabilities are a source of liquidity. For the nine-month period ended
September 30, 1998, total deposits increased from $58.0 million to $71.4
million, representing an annualized increase of 30.7%. There are no
assurances, however, that this level of growth can be maintained. The
Company's management closely monitors and maintains appropriate levels of
interest earning assets and interest bearing liabilities so that maturities of
assets are such that adequate funds are provided to meet customer withdrawals
and loan demand. There are no trends, demands, commitments, events or
uncertainties that will result in or are reasonably likely to result in the
Company's liquidity increasing or decreasing in any material way.
The Bank maintains an adequate level of capitalization as measured by the
following capital ratios and the respective minimum capital requirements by
the Bank's primary regulator, the Office of the Comptroller of the Currency
("OCC").
Bank's Minimum required
September 30, 1998 by regulator
Leverage ratio 11.7% 4.0%
Risk weighted ratio 15.9% 8.0%
As evidenced above, the Bank's capital ratios are well above the OCC's
required minimums. During the third quarter of 1998, the Company injected
$2.5 million into the Bank's capital accounts in order to fund future growth.
The above monies were raised by the Company through the sale of its common
stock.
Results of Operations
For the three-month periods ended September 30, 1998 and 1997, net income
amounted to $266,878 and $195,716, respectively. On a per share basis, basic
and diluted income for the three-month period ended September 30, 1998
amounted to $.21 and $.20, respectively. For the three-month period ended
September 30, 1997, basic and diluted income per share amounted to $.16 and
$.15, respectively. The improvement in net income for the three-month period
ended September 30, 1998 as compared to the three-month period ended September
30, 1997, is primarily due to the following:
(i) Net interest margin increased by approximately $166,000, due to a higher
level of earning assets.
(ii) Non-interest income increased by approximately $55,000, due to (i)
higher transaction account balances and (ii) fees.
(iii) The items above were more than adequate to cover a $95,000 increase in
other operating expenses. The increase in other operating
expenses was primarily due to the addition of new employees and to
annual merit increases.
Net income for the nine-month period ended September 30, 1998 amounted to
$726,699, or $.57 per diluted share. These results compare favorably to the
net income of $437,471, or $.34 per diluted share for the nine-month period
ended September 30, 1997. The primary reasons for the increase in net income
are as follows:
a. Average total earning assets have increased from $48.6 million at
September 30, 1997 to $68.0 million at September 30, 1998. The
net increase of $19.4 million represents a 39.9% increase over a
twelve-month period. There can be no assurances, however, that
this level of growth can be maintained.
b. As a consequence to the increase in earning assets, interest income,
the most significant of all revenue items, increased from
$3,244,486 for the nine-month period ended September 30, 1997 to
$4,607,854 for the nine-month period ended September 30, 1998.
The increase of $1,363,368 represents a 42.0% increase over a
twelve-month period. Again, there can be no assurances that the
Company can continue to maintain this level of growth. Note that
the yield on earning assets declined from 9.09% to 9.04% for the
nine-month periods ended September 30, 1998 and 1997,
respectively. This was due to competitive pricing on loan
products.
c. Net interest income represents the difference between interest
received on interest earning assets and interest paid on interest
bearing liabilities.
The following presents, in a tabular form, the main components of
interest earning assets and interest bearing liabilities.
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
Federal funds sold $ 1,738,436 $ 70,443 5.40%
Securities 4,241,009 175,652 5.52%
Loans 62,012,835 4,361,759 9.38%
Total $67,992,280 $4,607,854 9.04%
Deposits and borrowings $66,044,022 $2,140,859 4.32%
Net interest income $2,466,995
Net yield on earning assets 4.84%
Net interest income has increased from $1,798,741 for the nine-month period
ended September 30, 1997 to $2,466,995 for the nine-month period ended
September 30, 1998, a net increase of $668,254, or 37.1%. Note that the net
yield on earning assets declined from 4.93% to 4.84% for the nine-month
periods ended September 30, 1997 and 1998, respectively. This was due to
lower loan yields and a higher cost of funds for 1998 as compared to 1997.
d. Other income has increased from $269,440 for the nine-month period
ended September 30, 1997 to $372,455 for the nine-month period
ended September 30, 1998. This increase is primarily due to the
increase in volume of transaction accounts. Other income as a
percentage of total assets increased slightly, from .59% to .60%
for the nine-month periods ended September 30, 1997 and 1998,
respectively.
e. Total operating expenses have increased from $1,197,310 for the nine-
month period ended September 30, 1997 to $1,434,651 for the nine-
month period ended September 30, 1998. Despite the increase,
however, total operating expenses as a percent of total assets
declined from 2.65% to 2.34% over the one year span from September
30, 1997 to September 30, 1998. The decline in the above ratio is
an indication of an increased efficiency attained largely due to
economies of scale.
At December 31, 1997, the allowance for loan losses amounted to $644,913. By
September 30, 1998, the allowance had grown to $768,826. Despite the
increase, however, the allowance for loan losses, as a percentage of gross
loans, declined from 1.19% to 1.14% during the nine-month period ended
September 30, 1998. Management considers the allowance for loan losses to be
adequate and sufficient to absorb possible future losses; however, there can
be no assurance that charge-offs in future periods will not exceed the
allowance for loan losses or that additional provisions to the allowance will
not be required.
The Company is not aware of any current recommendation by the regulatory
authorities which, if they were to be implemented, would have a material
effect on the Company's liquidity, capital resources, or results of
operations.
Year 2000
The Bank's executive management allocated resources in February, 1998 for the
purpose of forming a Year 2000 committee. The committee was charged with
developing and carrying out a comprehensive project plan to address Year 2000
issues. The committee reports progress to the Board of Directors on a monthly
basis. The project plan incorporates guidelines set forth by the OCC, FRB and
FFIEC. The awareness and assessment phases are complete. During the
assessment phase a comprehensive inventory of all hardware, software, systems,
service providers, vendors, correspondents and embedded chips systems utilized
by the Bank was performed, with mission-critical areas given the highest
priority. Due diligence is being performed and will continue to be an on-
going process with each area to ensure vendor readiness. Renovation of vendor
products is substantially complete. The core bank processing vendor has
provided the Company with a Year 2000 software warranty. In addition, the
above vendor provided the Company with a copy of a certificate which it
obtained from the Information Technology Association of America ("ITAA")
stating that it is in compliance with ITAA guidelines and procedures relating
to Year 2000 issues. Contingency plans, such as the selection of other
vendors, have been formulated in the event that a vendor is not able to
provide a Year 2000 compliant product within the Bank's established
timeframes. The Company will participate in user group testing with the core
bank processing vendor. The Company plans to test the remaining mission-
critical products where feasible. The Bank has implemented a process to
assess and respond to large customer risk. The Bank has budgeted $25,000 for
expenses associated with Year 2000 compliance. Less than $2,500 of the
budgeted amount has been incurred to date. However, there can be no
assurances that unforseen difficulties or costs will not arise. In addition,
there can be no assurance that systems of other companies on which the
Company's systems rely, such as the Bank's data processing vendor, will be
modified on a timely basis, or that the failure by another company to properly
modify its systems will not negatively impact the Company's systems or
operations.
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On October 26, 1998, the Company completed a public offering (the "Offering")
of its Common Stock, $1.00 par value per share ("Common Stock"). The shares
of the Common Stock sold in the Offering were registered under the Securities
Act of 1933, as amended, on a Registration Statement on Form SB-2 (the
"Registration Statement," registration number 333-58545). The Registration
Statement, which registered 150,000 shares of the Common Stock, was declared
effective by the Securities and Exchange Commission on August 6, 1998.
Pursuant to Rule 462(b) of the Securities Act, the Company registered an
additional 30,000 shares of the Common Stock on August 24, 1998.
On August 6, 1998, the Company commenced the Offering. The Offering
terminated on October 26, 1998 after the Company had sold 180,000 shares of
the Common Stock. Each share of the Common Stock was sold at a price to the
public of $15.00 per share for an aggregate offering price of $2,700,000.
As set forth in the table below, from the effective date of the Registration
Statement to October 26, 1998, the Company paid expenses in the aggregate of
approximately $23,634 in connection with the Offering. All of the amounts
shown in the table below are estimated except for the Securities and Exchange
Commission (the "SEC") registration fee. None of the amounts shown were paid
directly or indirectly to any director, officer, general partner of the
Company or their associates, persons owning 10% or more of any class of equity
securities of the Company, or an affiliate of the Company.
SEC registration fee $ 797
Blue sky qualification fees and expenses 250
Printing and engraving expenses 8,200
Legal fees and expenses 9,207
Accounting fees and expenses 4,178
Mailing and distribution 1,002
$23,634
After deducting the offering expenses described above, net proceeds to the
Company from the Offering were $2,676,366. Of this amount, the Company
injected $2,500,000 into the Bank's capital accounts and the remaining
$176,366 was earmarked for general corporate purposes. None of the net
proceeds of the Offering were paid directly or indirectly to any director,
officer, general partner of the Company or their associates, persons owning
10% or more of any class of equity securities of the Company, or an affiliate
of the Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
-27.1 - Financial data schedule (for SEC use only).
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
during the quarter ended September 30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THOMASVILLE BANCSHARES, INC.
(Registrant)
Date: November 12, 1998 BY: /s/ Stephen H. Cheney
Stephen H. Cheney
President and Chief Executive Officer
(Principal Executive, Financial and Accounting
Officer)
Exhibit 27.1
Financial Data Schedule Submitted Under Item 601(a)(27) of Regulation S-B
This schedule contains summary financial information extracted from
Thomasville Bancshares, Inc. unaudited consolidated financial statements for
the period ended September 30, 1998 and is qualified in its entirety by
reference to such financial statements.
Item Number Item Description Amount
9-03(1) Cash and due from banks $ 3,467,963
9-03(2) Interest bearing deposits 0
9-03(3) Federal funds sold - purchased
securities for sale 3,051,464
9-03(4) Trading account assets 0
9-03(6) Investment and mortgage backed
securities held for sale 4,468,806
9-03(6) Investment and mortgage backed
securities held to maturity -
carrying value 0
9-03(6) Investment and mortgage backed
securities held to maturity -
market value 0
9-03(7) Loans 67,555,740
9-03(7)(2) Allowance for losses 768,826
9-03(11) Total assets 81,912,146
9-03(12) Deposits 71,376,041
9-03(13) Short-term borrowings 0
9-03(15) Other liabilities 612,120
9-03(16) Long-term debt 0
9-03(19) Preferred stock -
mandatory redemption 0
9-03(20) Preferred stock -
no mandatory redemption 0
9-03(21) Common stocks 1,379,400
9-03(22) Other stockholders' equity 8,544,585
9-03(23) Total liabilities and
stockholders' equity 81,912,146
9-04(1) Interest and fees on loans 4,361,759
9-04(2) Interest and dividends
on investments 246,095
9-04(4) Other interest income 0
9-04(5) Total interest income 4,607,854
9-04(6) Interest on deposits 2,129,313
9-04(9) Total interest expense 2,140,859
9-04(10) Net interest income 2,466,995
9-04(11) Provision for loan losses 147,000
9-04(13)(h) Investment securities gains/losses 0
9-04(14) Other expenses 1,434,651
9-04(15) Income/loss before income tax 1,257,799
Item Number Item Description Amount
9-04(17) Income/loss before
extraordinary items 1,257,799
9-04(18) Extraordinary items, less tax 0
9-04(19) Cumulative change in
accounting principles 0
9-04(20) Net income or loss 726,699
9-04(21) Earnings per share - primary .59
9-04(21) Earnings per share - fully diluted .57
I.B.5. Net yield - interest earning
assets - actual 4.84%
III.C.1(a) Loans on non-accrual 0
III.C.1(b) Accruing loans past due
90 days or more 7,441
III.C.1(c) Troubled debt restructuring 0
III.C.2. Potential problem loans 788,932
IV.A.1 Allowance for loan losses -
beginning of period 644,913
IV.A.2 Total chargeoffs 26,492
IV.A.3 Total recoveries 3,405
IV.A.4 Allowance for loan losses -
end of period 768,826
IV.B.1 Loan loss allowance allocated to
domestic loans 751,000
IV.B.2 Loan loss allowance allocated to
foreign loans 0
IV.B.3 Loan loss allowance - unallocated 17,826
