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, 1999.
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. 0-25929
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 out-
standing 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 10, 1999.
(Page 1 of 16)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
-----------------------------
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Balance Sheets
September 30, December 31,
1999 1998
ASSETS (Unaudited) (Unaudited)
- ------ ----------- -----------
Cash and due from banks $ 3,622,104 $ 3,145,678
Federal funds sold 5,508,410 5,265,242
----------- ----------
Total cash and cash equivalents $ 9,130,514 $ 8,410,920
Investment securities:
Securities available-for-sale,
at market value 6,570,113 6,033,966
Loans, net 85,893,572 68,869,563
Property & equipment, net 3,648,845 3,455,659
Other assets 1,136,689 839,704
----------- ----------
Total Assets $106,379,733 $87,609,812
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits
Non-interest bearing deposits $ 11,155,420 $10,470,065
Interest bearing deposits 81,437,354 66,664,814
----------- ----------
Total deposits $ 92,592,774 $77,134,879
FHLB borrowings 2,000,000 - -
Other liabilities 808,074 365,709
----------- ----------
Total Liabilities $ 95,400,848 $77,500,588
----------- ----------
Commitments and contingencies
Shareholders' Equity:
Common stock, $1.00 par value, 10
million shares authorized, 1,380,000
shares issued & outstanding at June
30, 1999 and December 31, 1998 $ 1,380,000 $ 1,380,000
Paid-in-capital 7,966,961 7,955,261
Retained earnings 1,658,600 744,224
Unrealized gain securities
available-for-sale (26,676) 29,739
----------- ----------
Total Shareholders' Equity $ 10,978,885 $10,109,224
----------- ----------
Total Liabilities and
Shareholders' Equity $106,379,733 $87,609,812
=========== ==========
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Statements of Income
(Unaudited)
Three months ended
September 30,
------------------
1999 1998
---- ----
Interest income $2,040,680 $1,641,867
Interest expense 934,455 785,743
--------- ---------
Net interest income $1,106,225 $ 856,124
Provision for possible loan losses 90,000 51,000
--------- ---------
Net interest income after provision
for possible loan losses $1,016,225 $ 805,124
--------- ---------
Other income
Gain on sale of mortgage loans $ 1,970 $ 1,541
Service charges 43,875 21,043
Other fees 142,974 120,877
Rental income 6,900 5,400
--------- ---------
Total other income $ 195,719 $ 148,861
--------- ---------
Salaries and benefits $ 341,125 $ 271,103
Advertising and public relations 45,843 43,289
Depreciation 66,392 39,814
Amortization 2,131 2,806
Data processing 5,322 9,321
Regulatory fees and assessments 12,359 9,281
Other operating expenses 176,819 132,993
--------- ---------
Total operating expenses $ 649,991 $ 508,607
--------- ---------
Net income before taxes $ 561,953 $ 445,378
Income taxes 217,000 178,500
--------- ---------
Net income after taxes $ 344,953 $ 266,878
--------- ---------
Other comprehensive
income, net of tax:
Unrealized holding gains (losses)
on securities available for sale (8,481) 16,883
--------- ---------
Comprehensive income $ 336,472 $ 283,761
========= =========
Basic income per share $ .25 $ .21
========= =========
Diluted income per share $ .24 $ .20
========= =========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Statements of Income
(Unaudited)
Nine months ended
September 30,
-------------------
1999 1998
---- ----
Interest income $5,716,972 $4,607,854
Interest expense 2,586,017 2,140,859
--------- ---------
Net interest income $3,130,955 $2,466,995
Provision for possible loan losses 220,000 147,000
--------- ---------
Net interest income after provision
for possible loan losses $2,910,955 $2,319,995
--------- ---------
Other income
Gain on sale of mortgage loans $ 5,063 $ 7,958
Service charges 96,126 60,238
Other fees 390,777 288,059
Rental income 18,400 16,200
--------- ---------
Total other income $ 510,366 $ 372,455
--------- ---------
Salaries and benefits $ 973,088 $ 776,825
Advertising and public relations 114,380 106,448
Depreciation 175,698 113,092
Amortization 11,118 8,418
Data processing 34,872 27,259
Regulatory fees and assessments 34,554 26,860
Other operating expenses 555,735 375,749
--------- ---------
Total operating expenses $1,899,445 $1,434,651
--------- ---------
Net income before taxes $1,521,876 $1,257,799
Income taxes 607,500 531,100
--------- ---------
Net income after taxes $ 914,376 $ 726,699
--------- ---------
Other comprehensive
income, net of tax:
Unrealized holding gains (losses)
on securities available for sale (56,415) 22,492
--------- ---------
Comprehensive income $ 857,961 $ 749,191
========= =========
Basic income per share $ .66 $ .59
========= =========
Diluted income per share $ .64 $ .57
========= =========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Statements of Cash Flows
(Unaudited)
Nine months ended
September 30,
------------------
1999 1998
---- ----
Cash flows from operating activities: $ 1,455,454 $ 569,567
----------- -----------
Cash flows from Investing Activities:
Purchase of fixed assets $ (368,884) $ (433,820)
Maturities, paydowns on securities AFS 3,925,172 (243,900)
Purchase of securities AFS (4,517,734) - -
(Increase) in loans (17,244,009) (13,467,001)
----------- -----------
Net cash used by investing activities $(18,205,455) $(14,144,721)
----------- -----------
Cash flows from Financing Activities:
Increase in borrowings $ 2,000,000 $ - -
Options, restricted stock 11,700 - -
Sale of common stock - - 2,691,000
Increase in deposits 15,457,895 13,373,629
----------- -----------
Net cash provided from financing activities $ 17,469,595 $ 16,064,629
----------- -----------
Net increase in cash and cash equivalents $ 719,594 $ 2,489,475
Cash and cash equivalents,
beginning of period 8,410,920 4,029,952
----------- -----------
Cash and cash equivalents, end of period $ 9,130,514 $ 6,519,427
=========== ===========
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Notes to Consolidated Financial Statements (Unaudited)
September 30, 1999
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 three-
month and nine-month periods ended September 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1999. 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, 1998.
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 1998, the Company conducted a secondary public
offering and sold 180,000 shares of its $1.00 par value common stock for
$2,676,366, net of selling expenses, thus increasing the number of outstanding
shares to 1,380,000.
Note 3 - Recent Accounting Pronouncements
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 area
and major customers.
SFAS No. 132, "Employers' Disclosures About Pensions and Other
Postretirement Benefits" revises and standardizes certain disclosures which
were required under SFAS Nos. 87, 88 and 106. Generally, the new Statement uses
a separate but parallel format, eliminates less useful information, requires
additional data deemed useful by analysts, and allows some aggregation of
presentation. This Statement was adopted by the Company during 1998.
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" was issued in June, 1998 and is effective for all calendar-year
entities beginning in January, 2000. This Statement applies to all entities
and requires that all derivatives be recognized as assets or liabilities in the
balance sheet, at fair values. Gains and losses of derivative instruments not
designated as hedges will be recognized in the income statement. The Company
has not made an assessment of the expected impact that SFAS No. 133 will have on
its financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
- ---------------------------------------------------------------------------
Results of Operations
- ---------------------
Total consolidated assets increased by $18.8 million to $106.4 million during
the nine-month period ended September 30, 1999. The increase was generated
through a $15.5 million increase in deposits, a $2.0 million increase in
borrowings, a $.4 million increase in payables, and a $.9 million increase
in retained earnings. The Bank utilized the above funds to increase loans by
$17.1 million, cash and cash equivalents by $.7 million, securities by $.5
million and all other asset categories by $.5 million.
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 customers. The September 30, 1999
financial statements evidence a satisfactory liquidity position as total cash
and cash equivalents amounted to $9.1 million, representing 8.6% of total
assets. Investment securities, which amounted to $6.6 million or 6.2% 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, 1999, total deposits
increased from $77.1 million to $92.6 million, representing an annualized
increase of 26.8%. 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, ommitments,
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, 1999 by regulator
------------------ ----------------
Leverage ratio 10.6% 4.0%
Risk weighted ratio 14.2% 8.0%
As evidenced above, the Bank's capital ratios are well above the OCC's required
minimums.
Results of Operations
- ---------------------
For the three-month periods ended September 30, 1999 and 1998, net income
amounted to $344,953 and $266,878, respectively. On a per share basis, basic
and diluted income for the three-month period ended September 30, 1999 amounted
to $.25 and $.24, respectively. For the three-month period ended September 30,
1998, basic and diluted income per share amounted to $.21 and $.20,
respectively. The improvement in net income for the three-month period ended
September 30, 1999 as compared to the three-month period ended September 30,
1998, is primarily due to the following:
(i) Net interest margin increased by approximately $250,000, due to a higher
level of earning assets.
(ii) Non-interest income increased by approximately $47,000, due to both
higher volumes and fees with respect to transaction accounts.
(iii) The items above were more than adequate to cover a $140,000 increase in
other operating expenses. The increase in other operating expenses was
primarily due to (a) the hiring of new employees needed to service the
increased volume in business and (b) other expenses, such as
depreciation, supplies and postage, where the increases reflected the
Company's growth.
Net income for the nine-month period ended September 30, 1999 amounted to
$914,376, or $.64 per diluted share. These results compare favorably to the
September 30, 1998 net income of $726,699, or $.57 per diluted share. The
primary reasons for the increase in net income for the nine-month period
ended September 30, 1999 as compared to the nine-month period ended September
30, 1998 are as follows:
a. Average total earning assets have increased from $68.0 million at
September 30, 1998 to $90.7 million at September 30, 1999. The net
increase of $22.7 million represents a 33.4% increase over a twelve-
month period. There can be no assurances, however, that this level
of growth can be maintained.
b. As a consequence of the increase in earning assets, interest income,
the most significant of all revenue items, increased from $4,607,854
for the nine-month period ended September 30, 1998 to $5,716,972 for
the nine-month period ended September 30, 1999. The increase of
$1,109,118 represents a 24.1% increase over a twelve-month period.
Again, there can be no assurances that the Company can continue to
maintain this level of growth.
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.
(Dollars in 000's)
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- -------- ------
Federal funds sold $ 4,342 $ 158 4.85%
Securities 5,874 243 5.51%
Loans 80,501 5,316 8.80%
---------- --------- ----
Total $ 90,717 $ 5,717 8.40%
---------- --------- ----
Deposits and borrowings $ 87,010 $ 2,586 3.96%
---------- --------- ----
Net interest income $ 3,131
=========
Net yield on earning assets 4.60%
====
Net interest income has increased from $2,466,995 for the nine-month period
ended September 30, 1998 to $3,130,950 for the nine-month period ended September
30, 1999, a net increase of $663,960, or 26.9%. Net yield on earning assets
declined from 4.84% for the nine-month period ended September 30, 1998 to 4.60%
for the nine-month period ended September 30, 1999. The lower yield on loans
was the primary contributor to the above decline.
d. Other income has increased from $372,455 for the nine-month period
ended September 30, 1998 to $510,366 for the nine-month period ended
September 30, 1999. This increase is primarily due to the increase in
volume of transaction accounts. Other income as a percentage of
total assets has increased from .60% of total assets at September 30,
1998 to .64% of total assets at September 30, 1999.
e. Total operating expenses have increased from $1,434,651 for the nine-
month period ended September 30, 1998 to $1,899,445 for the nine-month
period ended September 30, 1999. Total operating expenses as a
percentage of total assets increased from 2.34% to 2.38% over the one
year span from September 30, 1998 to September 30, 1999. The increase
in total operating expenses is due to higher personnel costs,
professional expenses, depreciation, etc.
At December 31, 1998, the allowance for loan losses amounted to $868,477. By
September 30, 1999, the allowance had grown to $1,004,368. Despite the
increase, however, the allowance for loan losses, as a percentage of gross
loans, declined from 1.25% to 1.16% during the nine-month period ended
September 30, 1999. 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
complete. The core bank processing vendor has provided the Company with a Year
2000 software warranty, and has received an independent certification from the
Information Technology Association of America. The Company has participated
in user group testing with its core bank processing vendor. On-site tests of
mission-critical products were conducted in our Bank environment where feasible
and no problems have been identified. Contingency plans are in place should
there be disruptions outside the Bank's control. Management has developed a
"Worst case scenario" contingency plan which will, among other things,
anticipate that the Bank's deposit customers will have increased demands for
cash in the latter part of 1999. The plan also provides for copies of documents
to be produced in case of equipment failures, utilization of security personnel
in case of security equipment failure, manual processing of transactions, hiring
of temporary additional personnel and telephone verification of information
normally received by electronic means. As of September 30, 1999, the Company
has spent approximately $15,000 to upgrade its software and hardware systems to
help ensure that its systems would be Year 2000 compliant. 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.
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, 1999.
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 10, 1999 BY: /s/ Stephen H. Cheney
------------------------------------------------
Stephen H. Cheney
President and Chief Executive Officer
(Principal Executive, Financial and Accounting
Officer)
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, 1999 and 1998 and is qualified in its entirety by reference
to such financial statements.
Item Number Item Description Amount
- ----------- ---------------- September 30,
-----------------
1999 1998
---- ----
9-03(1) Cash and due from banks $ 3,622,104 $ 3,467,963
9-03(2) Interest bearing deposits 0 0
9-03(3) Federal funds sold - purchased
securities for sale 5,508,410 3,051,464
9-03(4) Trading account assets 0 0
9-03(6) Investment and mortgage backed
securities held for sale 6,610,530 4,468,806
9-03(6) Investment and mortgage backed
securities held to maturity -
carrying value 0 0
9-03(6) Investment and mortgage backed
securities held to maturity -
market value 0 0
9-03(7) Loans 86,897,940 67,555,740
9-03(7)(2) Allowance for losses 1,004,368 768,826
9-03(11) Total assets 106,379,733 81,912,146
9-03(12) Deposits 92,592,774 71,376,041
9-03(13) Short-term borrowings 2,344,890 0
9-03(15) Other liabilities 463,184 612,120
9-03(16) Long-term debt 0 0
9-03(19) Preferred stock -
mandatory redemption 0 0
9-03(20) Preferred stock -
no mandatory redemption 0 0
9-03(21) Common stocks 1,380,000 1,379,400
9-03(22) Other stockholders' equity 9,598,885 8,544,585
9-03(23) Total liabilities and
stockholders' equity 106,379,733 81,912,146
9-04(1) Interest and fees on loans 5,362,927 4,361,759
9-04(2) Interest and dividends
on investments 345,045 246,095
9-04(4) Other interest income 0 0
9-04(5) Total interest income 5,716,972 4,607,854
9-04(6) Interest on deposits , , 2,129,313
9-04(9) Total interest expense 2,586,017 2,140,859
9-04(10) Net interest income 3,130,955 2,466,995
9-04(11) Provision for loan losses 220,000 147,000
9-04(13)(h) Investment securities gains/losses 0 0
9-04(14) Other expenses 1,899,445 1,434,651
9-04(15) Income/loss before income tax 1,521,876 1,257,799
9-04(17) Income/loss before
extraordinary items $ 1,521,876 $ 1,257,799
9-04(18) Extraordinary items, less tax 0 0
9-04(19) Cumulative change in
accounting principles 0 0
9-04(20) Net income or loss 914,376 726,699
9-04(21) Earnings per share - basic .66 .59
9-04(21) Earnings per share - diluted .64 .57
I.B.5. Net yield - interest earning
assets - actual 4.60% 4.84%
III.C.1(a) Loans on non-accrual 189,643 0
III.C.1(b) Accruing loans past due
90 days or more 4,995 7,441
III.C.1(c) Troubled debt restructuring 186,385 0
III.C.2. Potential problem loans 1,316,638 788,932
IV.A.1 Allowance for loan losses -
beginning of period 868,477 644,913
IV.A.2 Total chargeoffs 85,663 26,492
IV.A.3 Total recoveries 1,554 3,405
IV.A.4 Allowance for loan losses -
end of period 1,004,368 768,826
IV.B.1 Loan loss allowance allocated to
domestic loans 980,000 751,000
IV.B.2 Loan loss allowance allocated to
foreign loans 0 0
IV.B.3 Loan loss allowance - unallocated 24,368 17,826
