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 March 31, 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
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 May 12, 1999.
(Page 1 of 16)
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Balance Sheets
March 31, December 31,
1999 1998
ASSETS (Unaudited) (Unaudited)
- ------ ----------- -----------
Cash and due from banks $ 4,026,407 $ 3,145,678
Federal funds sold 600,888 5,265,242
---------- ----------
Total cash and cash equivalents $ 4,627,295 $ 8,410,920
Investment securities:
Securities available-for-sale,
at market value 5,549,519 6,033,966
Loans, net 76,898,392 68,869,563
Property & equipment, net 3,427,104 3,455,659
Other assets 896,515 839,704
---------- ----------
Total Assets $91,398,825 $87,609,812
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Liabilities:
Deposits
Non-interest bearing deposits $10,290,590 $10,470,065
Interest bearing deposits 70,139,796 66,664,814
---------- ----------
Total deposits $80,430,386 $77,134,879
Other liabilities 604,510 365,709
---------- ----------
Total Liabilities $81,034,896 $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 March
31, 1999 and December 31, 1998 $ 1,380,000 $ 1,380,000
Paid-in-capital 7,966,961 7,955,261
Retained earnings 999,824 744,224
Unrealized gain securities
available-for-sale 17,144 29,739
---------- ----------
Total Shareholders' Equity $10,363,929 $10,109,224
---------- ----------
Total Liabilities and
Shareholders' Equity $91,398,825 $87,609,812
========== ==========
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Statements of Income
For the three months
ended March 31,
--------------------------
1999 1998
---- ----
Interest income $1,747,661 $1,417,512
Interest expense 794,789 652,667
--------- ---------
Net interest income $ 952,872 $ 764,845
Provision for possible loan losses 60,000 45,000
--------- ---------
Net interest income after provision
for possible loan losses $ 892,872 $ 719,845
--------- ---------
Other income
Gain on sale of mortgage loans $ 841 $ 2,148
Service charges 23,250 18,531
Other fees 106,448 84,066
Rental income 6,900 5,400
--------- ---------
Total other income $ 137,439 $ 110,145
--------- ---------
Salaries and benefits $ 310,398 $ 249,834
Advertising 26,010 23,526
Depreciation 52,990 36,149
Amortization 6,856 2,806
Data processing 18,505 9,216
Regulatory fees and assessments 11,056 8,734
Other operating expenses 181,896 126,844
--------- ---------
Total operating expenses $ 607,711 $ 457,109
--------- ---------
Net income before taxes $ 422,600 $ 372,881
Income taxes 167,000 159,600
--------- ---------
Net income $ 255,600 $ 213,281
--------- ---------
Other comprehensive
income net of tax:
Unrealized holding (losses) on
securities available for sale (12,595) 5,296
--------- ---------
Comprehensive income $ 243,005 $ 218,577
========== =========
Basic income per share $ .19 $ .18
========== =========
Diluted income per share $ .18 $ .17
========== =========
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
March 31,
---------------------------
1999 1998
---- ----
Cash flows from operating activities: $ 536,344 $ 335,045
---------- ----------
Cash flows from Investing Activities:
Purchase of fixed assets $ (24,435) $ (11,425)
(Increase) in loans (8,088,829) (5,803,807)
Purchase of securities, AFS 1,000,000 - -
Maturities, calls, paydowns, AFS 1,486,088 - -
---------- ----------
Net cash used in investing activities $(7,627,176) $(5,815,232)
---------- ----------
Cash flows from Financing Activities:
Increase in deposits $ 3,295,507 $ 6,104,638
Options, restricted stock 11,700 - -
---------- ----------
Cash (used by) financing activities $ 3,307,207 $ 6,104,638
---------- ----------
Net (decrease) in cash
and cash equivalents $(3,783,625) $ 624,451
Cash and cash equivalents,
beginning of period 8,410,920 4,029,952
---------- ----------
Cash and cash equivalents,
end of period $ 4,627,295 $ 4,654,403
========== ==========
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
Thomasville, Georgia
Notes to Consolidated Financial Statements (Unaudited)
March 31, 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 period ended March 31, 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 areas 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
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 (the "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.
Total consolidated assets increased by $3.8 million to $91.4 million during
the three-month period ended March 31, 1999. The increase was generated
through a $3.3 million increase in deposits, and a $200,000 increase each in
payables and retained profits. The Bank utilized the above funds to increase
loans.
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 March
31, 1999 financial statements evidence a satisfactory liquidity position as
total cash and cash equivalents amounted to $4.6 million, representing 5.1% of
total assets. Investment securities, which amounted to $5.5 million or 6.1%
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 three-month period ended March 31, 1999, total deposits
increased from $77.1 million to $80.4 million, representing an annualized
increase of 17.2%. 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
March 31, 1999 by regulator
Leverage ratio 10.6% 4.0%
Risk weighted ratio 14.1% 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 March 31, 1999 and 1998, net income amounted
to $255,600 and $213,281, respectively. On a per share basis, basic and
diluted income for the three-month period ended March 31, 1999 amounted to
$.19 and $.18, respectively. For the three-month period ended March 31, 1998,
basic and diluted income per share amounted to $.18 and $.17, respectively.
The improvement in net income for the three-month period ended March 31, 1999
as compared to the three-month period ended March 31, 1998, is primarily due
to the following:
a. Average total earning assets have increased from $63.3 million at
March 31, 1998 to $81.6 million at March 31, 1999. The net
increase of $18.3 million represents a 28.9% 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
$1,417,512 for the three-month period ended March 31, 1998 to
$1,747,661 for the three-month period ended March 31, 1999. The
increase of $330,149 represents a 23.3% 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 9.04% to 8.56% for the
twelve-month periods ended March 31, 1998 and 1999, respectively.
This was due to competitive pricing on loan products and to the
general economic environment.
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 $ 3,879 $ 46 4.74%
Securities 5,597 75 5.36%
Loans 72,129 1,627 9.02%
-------- ------- ----
Total $ 81,605 $ 1,747 8.56%
======== ======= ====
Deposits and borrowings $ 79,067 $ 794 4.02%
======== ======= ====
Net interest income $ 953
=======
Net yield on earning assets 4.67%
====
Net interest income has increased from $764,845 for the three-month period
ended March 31, 1998 to $952,872 for the three-month period ended March 31,
1999, a net increase of $188,027, or 24.6%. Note that the net yield on
earning assets declined from 9.04% to 8.56% for the three-month periods ended
March 31, 1998 and 1999, respectively, and that the cost of funds declined
from 4.32% to 4.02% for the above periods.
d. Other income has increased from $110,145 for the three-month period
ended March 31, 1998 to $137,439 for the three-month period ended
March 31, 1999. This increase is primarily due to the increase in
volume of transaction accounts. Other income as a percentage of
total assets declined slightly, from .61% to .60% for the three-
month periods ended March 31, 1998 and 1999, respectively.
e. Total operating expenses have increased from $457,109 for the three-
month period ended March 31, 1998 to $607,711 for the three-month
period ended March 31, 1999. Total operating expenses as a
percentage of total assets increased from 2.55% to 2.66% over the one
year span from March 31, 1998 to March 31, 1999. The increase in
the above ratio is due primarily to the opening of a second
banking facility in Thomasville, Georgia.
At December 31, 1998, the allowance for loan losses amounted to $868,477. By
March 31, 1999, the allowance had grown to $916,471. Despite the increase,
however, the allowance for loan losses, as a percentage of gross loans,
declined from 1.25% to 1.18% during the three-month period ended March 31,
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. 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
develop and modify a "worst case scenario" contingency plan which will, among
other things, anticipate that the Company'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 provided in case of equipment failure, manual
posting of transactions, hiring of temporary additional personnel and telephone
verification of information normally received by electronic means. The Company
participated in user group testing with the core bank processing vendor. The
Company will conduct on-site tests of the remaining mission-critical products
where feasible. The Company also recognizes the importance of determining that
its borrowers are facing the Year 2000 problem in a timely manner to avoid
deterioration of its loan portfolio solely due to this issue. All material
relationships have been identified to assess the inherent risks. The Company
plans to work on a one-on-one basis with any borrower who has been identified
as having a high Year 2000 risk exposure. The Bank has budgeted $25,000 for
expenses associated with Year 2000 compliance. Less than $10,000 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 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 March 31, 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: May 12, 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 March 31, 1999 and 1998 and is qualified in its entirety by
reference to such financial statements.
Item Number Item Description Amount
March 31,
1999 1998
9-03(1) Cash and due from banks $ 4,026,407 1,611,332
9-03(2) Interest bearing deposits 0 0
9-03(3) Federal funds sold - purchased
securities for sale 600,888 3,043,071
9-03(4) Trading account assets 0 0
9-03(6) Investment and mortgage backed
securities held for sale 5,549,519 4,201,125
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 77,814,863 59,916,316
9-03(7)(2) Allowance for losses 916,471 690,596
9-03(11) Total assets 91,398,825 71,477,138
9-03(12) Deposits 80,430,386 64,107,050
9-03(13) Short-term borrowings 186,258 0
9-03(15) Other liabilities 418,252 683,118
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 1,200,000
9-03(22) Other stockholders' equity 8,983,929 5,486,970
9-03(23) Total liabilities and
stockholders' equity 91,398,825 71,477,138
9-04(1) Interest and fees on loans 1,626,741 1,336,981
9-04(2) Interest and dividends
on investments 120,920 80,531
9-04(4) Other interest income 0 0
9-04(5) Total interest income 1,747,661 1,417,512
9-04(6) Interest on deposits 794,789 649,253
9-04(9) Total interest expense 794,789 652,667
9-04(10) Net interest income 952,872 764,845
9-04(11) Provision for loan losses 60,000 45,000
9-04(13)(h) Investment securities gains/losses 0 0
9-04(14) Other expenses 607,711 457,109
9-04(15) Income/loss before income tax 422,600 372,881
9-04(17) Income/loss before
extraordinary items 422,600 372,881
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 255,600 213,281
9-04(21) Earnings per share - basic .19 .18
9-04(21) Earnings per share - diluted .18 .17
I.B.5. Net yield - interest earning
assets - actual 4.67% 4.83%
III.C.1(a) Loans on non-accrual 188,199 0
III.C.1(b) Accruing loans past due
90 days or more 13,856 0
III.C.1(c) Troubled debt restructuring 66,129 0
III.C.2. Potential problem loans 1,488,874 1,088,000
IV.A.1 Allowance for loan losses -
beginning of period 868,477 644,913
IV.A.2 Total chargeoffs 13,193 684
IV.A.3 Total recoveries 1,187 1,367
IV.A.4 Allowance for loan losses -
end of period 916,471 690,596
IV.B.1 Loan loss allowance allocated to
domestic loans 890,071 680,000
IV.B.2 Loan loss allowance allocated to
foreign loans 0 0
IV.B.3 Loan loss allowance - unallocated 26,400 10,596
