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, 2003.
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-25929
THOMASVILLE BANCSHARES, INC.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-2175800
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(State of Incorporation) (I.R.S. Employer
Identification No.)
301 North Broad Street, Thomasville, Georgia 31792
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(Address of Principal Executive Offices)
(229) 226-3300
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(Issuer's Telephone Number, Including Area Code)
Not Applicable
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(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
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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 1,443,558 shares issued and
outstanding as of May 15, 2003.
Transitional small business disclosure format (check one):
Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
2003 2002
ASSETS (Unaudited) (Unaudited)
------ ----------- -----------
Cash and due from banks $ 3,326,877 $ 11,827,153
Federal funds sold 6,213,065 1,714,481
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Total cash and cash equivalents $ 9,539,942 $ 13,541,634
------------ ------------
Investment securities:
Securities available-for-sale,
at market value $ 6,336,661 $ 7,658,460
Loans, net 160,680,589 154,899,944
Property & equipment, net 4,228,104 4,168,044
Goodwill 3,417,259 3,417,259
Other assets 1,689,271 1,703,006
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Total Assets $185,891,826 $185,388,347
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 17,082,699 $ 22,324,716
Interest bearing deposits 130,509,246 131,595,672
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Total deposits $147,591,945 $153,920,388
Borrowings 21,143,034 15,150,845
Other liabilities 884,232 608,374
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Total Liabilities $169,619,211 $169,679,607
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Commitments and contingencies
Shareholders' Equity:
Common stock, $1.00 par value, 10
million shares authorized, 1,443,558
shares issued & outstanding $ 1,443,558 $ 1,443,558
Paid-in-capital 8,784,064 8,761,714
Retained earnings 5,997,804 5,452,079
Accumulated other
comprehensive income 47,189 51,389
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Total Shareholders' Equity $ 16,272,615 $ 15,708,740
------------ ------------
Total Liabilities and
Shareholders' Equity $185,891,826 $185,388,347
============ ============
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the three months
ended March 31,
---------------------------
2003 2002
---- ----
Interest income $2,544,067 $2,365,824
Interest expense 906,683 1,024,929
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Net interest income $1,637,384 $1,340,895
Provision for possible loan losses 80,000 55,000
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Net interest income after provision
for possible loan losses $1,557,384 $1,285,895
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Other income
Service charges $ 44,315 $ 39,302
Other fees 463,514 138,625
Gain on sale of asset 964 888
Gain from settlement of securities 134 808
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Total other income $ 508,927 $ 179,623
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Operating expenses
Salaries and benefits $ 688,589 $ 445,308
Advertising and public relations 42,230 36,185
Depreciation 100,636 76,663
Regulatory fees and assessments 23,432 9,580
Other operating expenses 374,825 259,269
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Total operating expenses $1,229,712 $ 827,005
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Net income before taxes $ 836,599 $ 638,513
Income taxes 290,874 207,000
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Net income $ 545,725 $ 431,513
========== ==========
Basic income per share $ .38 $ .31
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Diluted income per share $ .36 $ .30
========== ==========
Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
March 31,
----------------------------
2003 2002
---- ----
Cash flows from operating activities: $ 1,011,754 $ 824,192
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Cash flows from Investing Activities:
Purchase of fixed assets $ (160,696) $ (481,015)
(Increase) in loans (5,860,645) (4,114,592)
Purchase of securities, AFS (328,201) (1,229,800)
Maturities, calls, paydowns, AFS 1,650,000 650,000
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Net cash used by investing activities $(4,699,542) $(5,175,407)
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Cash flows from Financing Activities:
Increase in borrowings $ 5,992,189 $ 4,000,000
(Decrease) in deposits (6,328,443) 3,780,864
Options, restricted stock 22,350 18,750
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Net cash used by financing activities $ (313,904) $ 7,799,614
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Net (decrease) in cash
and cash equivalents $(4,001,692) $ 3,448,399
Cash and cash equivalents,
beginning of period 13,541,634 6,579,878
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Cash and cash equivalents,
end of period $ 9,539,942 $10,028,277
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Refer to notes to the financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2002 AND 2003
Accumulated
Common Stock Other
------------------- Paid in Retained Comprehensive
Shares Par Value Capital Earnings Income Total
------ --------- ------- -------- ------ -----
Balance,
Dec 31,
2001 1,395,000 $ 1,395,000 $ 8,200,908 $4,265,111 $ 28,094 $13,889,113
--------- ---------- ---------- --------- -------- ----------
Comprehensive Income:
--------------------
Net income,
three-month
period ended
Mar. 31, 2002 - - - - - - 431,513 - - 431,513
Net unrealized
(loss) on
securities,
three-month
period ended
Mar. 31, 2002 - - - - - - - - (40,785) (40,785)
--------- ---------- ---------- --------- -------- ----------
Total comprehensive
income - - - - - - 431,513 (40,785) 390,728
Stock options,
restricted
stock - - - - 18,750 - - - - 18,750
--------- ---------- ---------- --------- -------- ----------
Balance,
Mar. 31,
2002 1,395,000 $ 1,395,000 $ 8,219,658 $4,696,624 $ (12,691) $14,298,591
========= ========== ========== ========= ======== ==========
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Balance,
December 31,
2002 1,443,558 $ 1,443,558 $ 8,761,714 $5,452,079 $ 51,389 $15,708,740
--------- ---------- ---------- --------- -------- ----------
Comprehensive Income:
---------------------
Net income,
three-month
period ended
Mar. 31,
2003 - - - - - - 545,725 - - 545,725
Net unrealized
gains on
securities, three-
month period
ended Mar. 31,
2003 - - - - - - - - (4,200) (4,200)
--------- ---------- ---------- --------- -------- ----------
Total comprehensive
income - - - - - - 545,725 (4,200) 541,525
Stock options,
restricted
stock - - - - 22,350 - - - - 22,350
--------- ---------- ---------- --------- -------- ----------
Balance,
Mar. 31,
2003 1,443,558 $ 1,443,558 $ 8,784,064 $5,997,804 $ 47,189 $16,272,615
========= ========== ========== ========= ======== ==========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 2003
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, 2003 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2003. 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, 2002.
NOTE 2 - SUMMARY OF ORGANIZATION
Thomasville Bancshares, Inc., Thomasville, Georgia (the "Company"), was
organized in January, 1995 for a then proposed de novo bank, Thomasville
National Bank, Thomasville, Georgia (the "Bank"). The Company commenced
operations on October 2, 1995. The Bank is primarily engaged in the business
of obtaining deposits and providing commercial, consumer and real estate loans
to the general public. The Bank operates from two banking offices, both in
Thomasville, Georgia. The Bank's depositors are each insured up to $100,000
by the Federal Deposit Insurance Corporation (the "FDIC"), subject to certain
limitations imposed by the FDIC. Through its subsidiary, TNB Financial
Services, Inc. ("TNBFS"), the Bank offers trust and brokerage services as well.
In addition to the Bank, the Company has one other subsidiary, Joseph Parker &
Company, Inc. ("JPC"), through which it provides investment advisory services.
Currently, JPC has approximately $200 million under management.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In December 2001, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") 01-6, "Accounting by Certain Entities (Including
Entities With Trade Receivables) That Lend to or Finance the Activities of
Others." SOP 01-6 reconciles the specialized accounting and financial reporting
guidance in the existing Banks and Savings Institutions Guide, Audits of Credit
Unions Guide, and Audits of Finance Companies Guide. The SOP eliminates
differences in accounting and disclosure established by the respective guides
and carries forward accounting guidance for transactions determined to be unique
to certain financial institutions. Adoption of this pronouncement has not had a
material impact on the Company's results of operations or financial position.
In October 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 147, "Acquisitions of Certain Financial Institutions," which addresses
accounting for the acquisition of certain financial institutions. The
provisions of SFAS No. 147 rescind the specialized accounting guidance in
paragraph 5 of SFAS No. 72 and would require unidentifiable intangible assets to
be reclassified to goodwill if certain criteria are met. Financial institutions
meeting the conditions outlined in SFAS No. 147 will be required to restate
previously issued financial statements after September 30, 2002. The adoption
of SFAS No. 147 has had no material impact on the Company's results of
operations or financial position.
In December 2002, FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure," which amended SFAS No. 123,
"Accounting for Stock-Based Compensation" to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based compensation. In addition, this statement amended the
disclosure requirements of SFAS No. 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the chosen method on
reporting results. The provisions of SFAS No. 148 are effective for annual
periods ending December 15, 2002, and for interim periods beginning after
December 15, 2002.
In November 2002, FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." It addresses the accounting for the
stand-ready obligation under guarantees. A guarantor is required to recognize a
liability with respect to its stand-ready obligation under the guarantee even if
the probability of future payments under the guarantee is remote. The initial
liability will be measured as the fair value of the stand-ready obligation.
Additionally, the Interpretation addresses the disclosure requirements for
guarantees including the nature and terms of the guarantees, maximum potential
for future amounts and the carrying amount of the liabilities. The disclosure
requirements are effective for interim and annual financial statements ending
after December 15, 2002. The initial recognition and measurement provisions are
effective for all guarantees within the scope of Interpretation 45 issued or
modified after December 31, 2002. Commercial letters of credit and other loan
commitments, which are commonly thought of as guarantees of funds were not
included in the scope of interpretation. The Company has made relevant
disclosures in the current year financial statements. The Company does not
expect the adoption of Interpretation No. 45 to have a material impact on its
financials.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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OVERVIEW
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Total consolidated assets increased by $.5 million to $185.9 million
during the three-month period ended March 31, 2003. Cash and cash equivalents
declined by $4.0 million to $9.5 million, investment securities declined by
$1.3 million to $6.3 million, and loans increased by $5.8 million to $160.7
million. For the three-month period ended March 31, 2003, total deposits
decreased by $6.3 million to $147.6 million, other liabilities increased by
$.3 million to $.9 million, borrowings increased by $6.0 million to $21.1
million, and the capital accounts increased by $.5 million to $16.2 million.
Although the aggregate amount of assets and liabilities was relatively
unchanged, there was a significant change in the asset mix (a shift to higher
earning assets) and in the liability-mix (a shift to wholesale funding).
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
March 31, 2003 financial statements evidence a satisfactory liquidity
position as total cash and cash equivalents amounted to $9.5 million,
representing 5.1% of total assets. Investment securities, which amounted
to $6.3 million or 3.4% of total assets, provide a secondary source of
liquidity because securities can be converted into cash in a timely manner. 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. The Company is not aware of any 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
established by the Bank's primary regulator, the Office of the Comptroller of
the Currency ("OCC").
Bank's Minimum required
March 31, 2003 by regulator
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Leverage ratio 8.4% 4.0%
Risk weighted ratio 11.3% 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 March 31, 2003 and 2002, net income
amounted to $545,725 and $431,513, respectively. On a per share basis, basic
and diluted income for the three-month period ended March 31, 2003 amounted
to $.38 and $.36, respectively. For the three-month period ended March 31,
2002, basic and diluted income per share amounted to $.31 and $.30,
respectively. The factors primarily affecting the Bank's results of operations
for the first quarter of 2003 as compared to the first quarter of 2002 are
discussed below:
a. Interest income, the most significant revenue item, increased from
$2,365,824 for the three-month period ended March 31, 2002 to $2,544,064
for the three-month period ended March 31, 2003, representing an annual
growth rate of 7.5%. The increase was primarily due to the increase in
average earning assets. Average earning assets grew from $146.7 million
at March 31, 2002 to $168.6 million at March 31, 2003, an increase of
$21.9 million, or 14.9%.
b. The yield on earning assets declined from 6.45% for the three-month period
ended March 31, 2002 to 6.03% for the three-month period ended March 31,
2003. The cost of funds also declined, from 2.91% as of March 31, 2002 to
2.45% as of March 31, 2003.
c. Net interest income, representing the difference between interest received
on interest-earning assets and interest paid on interest bearing
liabilities, increased from $1,340,895 for the three-month period ended
March 31, 2002 to $1,637,384 for the three-month period ended March 31,
2003, a net increase of $296,489, or 22.1%. Net yield on earning assets
increased from 3.66% for the three-month period ended March 31, 2002 to
3.88% for the three-month period ended March 31, 2003. The primary reason
for the increase is that the decrease in the yield on earning assets was
smaller than the decrease in the cost of funds, resulting in an increase
in the net interest margin. As a result of the Federal Reserve Board's
monetary policy actions, lower interest yields as well as lower cost of
funds are being experienced industry-wide.
The following presents, in a tabular form, the main components of
interest-earning assets and interest bearing liabilities for the three-month
period ended March 31, 2003.
(Dollars in 000's)
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- -------- ------
Federal funds sold $ 2,661 $ 8 1.13%
Securities 7,518 80 4.26%
Loans 158,452 2,456 6.20%
--------- -------- ----
Total $ 168,631 $ 2,544 6.03%
========= -------- ----
Deposits and borrowings $ 147,844 $ 907 2.45%
========= -------- ----
Net interest income $ 1,637
========
Net yield on earning assets 3.88%
====
d. Other income increased from $179,623 for the three-month period ended
March 31, 2002 to $508,927 for the three-month period ended March 31, 2003.
This increase is primarily due to (i) $235,339 of fees generated during
the three months ended March 31, 2003 by JPC, which was acquired during
the third calendar quarter of 2002, and (ii) an increase of $43,121 in the
fees generated by TNBFS during the first quarter of 2003 as compared with
the first quarter of 2002. As a percentage of average total assets, other
income increased from .46% for the three-month period ended March 31, 2002
to 1.10% for the three-month period ended March 31, 2003.
e. Total operating expenses increased from $827,005 for the three-month period
ended March 31, 2002 to $1,229,712 for the three-month period ended March
31, 2003. As a percent of average total assets, total operating expenses
increased from 2.13% for the three-month period ended March 31, 2002 to
2.65% for the three-month period ended March 31, 2003. The increase is
mainly due to the added expense associated with the operations of JPC.
Excluding expenses associated with JPC, total operating expenses increased
from $827,005 for the quarter ended March 31, 2002 to $1,045,814 for the
quarter ended March 31, 2003, or from 2.13% of average assets to 2.25% of
average assets.
Allowance for Loan Losses
-------------------------
At December 31, 2002, the allowance for loan losses amounted to
$1,722,097. At March 31, 2003, the allowance amounted to $1,797,120. The
allowance for loan losses, as a percent of gross loans, increased from 1.10%
to 1.11% during the three-month period ended March 31, 2003. Management
considers the allowance for loan losses to be adequate and sufficient to absorb
anticipated 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 implemented, would have a material effect on the Company's
liquidity, capital resources, or results of operations.
ITEM 3. CONTROLS AND PROCEDURES
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The Company's Chief Executive Officer has evaluated the Company's
disclosure controls and procedures as of a date within 90 days prior to the
date of this filing, and concluded that these controls and procedures are
effective. There have been no significant changes in internal controls or in
other factors that could significantly affect these controls subsequent to
the date of this evaluation.
Disclosure controls and procedures are the Company's controls and other
procedures that are designed to ensure that information it is required to
disclose in the reports it files under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls
and procedures include, without limitation, controls and procedures designed to
ensure that information the Company is required to disclose in the reports
that it files under the Exchange Act is accumulated and communicated to
management, including the principal executive and financial officers, as
appropriate, to allow timely decisions regarding required disclosure.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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(a) The certification pursuant to Section 906 of the
Sarbanes-Oxley Act is filed as Exhibit 99.1 hereto.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during
the quarter ended March 31, 2003.
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 15, 2003 BY: /s/ Stephen H. Cheney
----------------- ------------------------------------
Stephen H. Cheney
President and Chief Executive Officer
(Principal Executive, Financial and Accounting
Officer)
CERTIFICATION
I, Stephen H. Cheney, President and Chief Executive Officer of the
registrant, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Thomasville
Bancshares, Inc.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;
4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for
the registrant and I have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to me by others employed by
the registrant, particularly during the period in which this
quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarter report (the "Evaluation Date"); and
c) presented in this quarterly report in conclusions about the
effectiveness of the disclosure controls and procedures based on my
evaluation as of the Evaluation Date;
5. I have disclosed, based on my most recent evaluation, to the
registrant's auditors and the audit committee of registrant's board of
directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the Evaluation
Date, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: May 15, 2003
/s/ Stephen H. Cheney
-------------------------------
Stephen H. Cheney
President and Chief Executive Officer
(principal executive and financial
officer)