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, 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
---------------------- ---------------
(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)
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 November 13, 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
September 30, December 31,
2003 2002
ASSETS (Unaudited) (Unaudited)
------ ----------- -----------
Cash and due from banks $ 5,284,987 $ 11,827,153
Federal funds sold 5,940,616 1,714,481
------------ ------------
Total cash and cash equivalents $ 11,225,603 $ 13,541,634
------------ ------------
Investment securities:
Securities available-for-sale,
at market value $ 8,730,893 $ 7,658,460
Loans, net 171,049,947 154,899,944
Property & equipment, net 4,362,936 4,168,044
Goodwill 3,417,259 3,417,259
Other assets 2,390,674 1,703,006
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Total Assets $201,177,312 $185,388,347
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 19,269,297 $ 22,324,716
Interest bearing deposits 149,438,073 131,595,672
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Total deposits $168,707,370 $153,920,388
Borrowings 14,976,942 15,150,845
Other liabilities 908,371 608,374
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Total Liabilities $184,592,683 $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 8,831,615 8,761,714
Retained earnings 6,315,825 5,452,079
Accumulated other
comprehensive income (loss) (6,369) 51,389
------------ ------------
Total Shareholders' Equity $ 16,584,629 $ 15,708,740
------------ ------------
Total Liabilities and
Shareholders' Equity $201,177,312 $185,388,347
============ ============
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the three months
ended September 30,
------------------------
2003 2002
---- ----
Interest income $2,634,409 $2,582,733
Interest expense 893,046 1,122,276
--------- ---------
Net interest income $1,741,363 $1,460,457
Provision for possible loan losses 90,000 40,000
--------- ---------
Net interest income after provision
for possible loan losses $1,651,363 $1,420,457
--------- ---------
Other income
Money management fees $ 240,287 $ 264,365
Service charges 45,073 44,741
Other fees 255,408 197,496
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Total other income $ 540,768 $ 506,602
--------- ---------
Salaries and benefits $ 786,973 $ 624,634
Advertising and public relations 56,228 42,850
Depreciation 112,176 104,502
Regulatory fees and assessments 21,792 21,137
Other operating expenses 454,365 480,814
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Total operating expenses $1,431,534 $1,273,937
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Net income before taxes $ 760,597 $ 653,122
Income taxes 265,843 202,165
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Net income $ 494,754 $ 450,957
========= =========
Basic income per share $ .34 $ .30
========= =========
Diluted income per share $ .33 $ .30
========= =========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the nine months
ended September 30,
------------------------
2003 2002
---- ----
Interest income $7,771,165 $7,440,354
Interest expense 2,722,780 3,186,981
--------- ---------
Net interest income $5,048,385 $4,253,373
Provision for possible loan losses 260,000 150,000
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Net interest income after provision
for possible loan losses $4,788,385 $4,103,373
--------- ---------
Other income
Money management fees $ 708,679 $ 264,365
Service charges 133,488 122,912
Other fees 728,857 487,534
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Total other income $1,571,024 $ 874,811
--------- ---------
Salaries and benefits $2,224,233 $1,529,604
Advertising and public relations 142,247 113,215
Depreciation 319,218 259,692
Legal and professional 145,403 191,696
Repairs and maintenance 179,574 137,318
Regulatory fees and assessments 65,722 60,942
Other operating expenses 945,187 773,355
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Total operating expenses $4,021,584 $3,065,822
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Net income before taxes $2,337,825 $1,912,362
Income taxes 824,477 630,165
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Net income $1,513,348 $1,282,197
========= =========
Basic income per share $ 1.05 $ .88
========= =========
Diluted income per share $ 1.01 $ .85
========= =========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the nine-month period
ended September 30,
---------------------------
2003 2002
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Cash flows provided by operating activities $ 1,722,966 $ 1,310,064
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Cash flows from investing activities:
Increase in goodwill, tradename $ - - $ (3,494,607)
Purchase of fixed assets (514,110) (770,288)
Maturities, calls,
paydowns, securities, AFS 5,280,000 3,750,000
Purchase of securities, AFS (6,428,262) (4,808,432)
(Increase) in loans (16,410,003) (15,390,285)
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Net cash used by investing activities $(18,072,375) $(20,713,612)
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Cash flows from financing activities:
Issuance of stock $ - - $ 1,100,000
Options, restricted stock 69,901 61,800
Exercise of stock options - - 150,000
(Decrease) in borrowings (173,903) 7,479,031
Increase in deposits 14,786,982 15,531,252
Payment of cash dividend (649,602) (570,000)
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Net cash provided from
(used by) financing activities $ 14,033,378 $ 23,752,083
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Net (decrease) in
cash and cash equivalents $ (2,316,031) $ 4,348,535
Cash and cash equivalents,
beginning of period 13,541,634 6,579,878
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Cash and cash equivalents, end of period $ 11,225,603 $ 10,928,413
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Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 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,
nine-month
period ended
Sept 30, 2002 - - - - - - 1,282,197 - - 1,282,197
Net unrealized
gains on
securities,
nine-month
period ended
Sept 30, 2002 - - - - - - - - 17,780 17,780
--------- ---------- ---------- --------- -------- ----------
Total comprehensive
income - - - - - - 1,282,197 17,780 1,299,977
Issuance of
common stock 55,000 55,000 1,045,000 - - - - 1,100,000
Exercise of
options 30,000 30,000 120,000 - - - - 150,000
Stock options,
restricted
stock - - - - 61,800 - - - - 61,800
Dividends paid - - - - - - (570,000) - - (570,000)
--------- ---------- ---------- --------- -------- ----------
Balance,
Sept 30,
2002 1,480,000 $ 1,480,000 $ 9,427,708 $4,977,308 $ 45,874 $15,930,890
========= ========== ========== ========= ======== ==========
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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,
nine-month
period ended
Sept 30,
2003 - - - - - - 1,513,348 - - 1,513,348
Net unrealized
(loss) on
securities, nine-
month period
ended Sept 30,
2003 - - - - - - - - (57,758) (57,758)
--------- ---------- ---------- --------- -------- ----------
Total comprehensive
income - - - - - - 1,513,348 (57,758) 1,455,590
Stock options,
restricted
stock - - - - 69,901 - - - - 69,901
Dividends paid - - - - - - (649,602) - - (649,602)
--------- ---------- ---------- --------- -------- ----------
Balance,
Sept 30,
2003 1,443,558 $ 1,443,558 $ 8,831,615 $6,315,825 $ (6,369) $16,584,629
========= ========== ========== ========= ======== ==========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 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 and nine-month periods ended September 30, 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 Bank 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
results of operations or financial condition.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
---------------------
Total consolidated assets increased by $15.8 million to $201.2 million
during the nine-month period ended September 30, 2003. Cash and cash
equivalents decreased by $2.3 million to $11.2 million, investment securities
increased by $1.1 million to $8.7 million, loans increased by $16.2 million
to $171.0 million, and all other assets increased by $1.0 million to $9.3
million. To fund the above growth in assets, total deposits increased by
$14.9 million to $168.7 million, borrowings decreased by $.2 million to
$15.0 million, and all other liabilities increased by $.2 million to $.8
million; the capital accounts increased by $.9 million to $16.6 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, 2003 financial statements evidence a satisfactory liquidity
position as total cash and cash equivalents amounted to $11.2 million,
representing 5.6% of total assets. Investment securities, which amounted to
$8.7 million, or 4.4% 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 increase deposits and borrow funds is
part of its liquidity strategy. For the nine-month period ended September
30, 2003 deposits increased by $15.8 million, or 12.8% annualized. 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
by the Bank's primary regulator, the Office of the Comptroller of the Currency
("OCC").
Bank's Minimum required
September 30, 2003 by regulator
------------------ ----------------
Leverage ratio 8.2% 4.0%
Risk weighted ratio 10.9% 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, 2003 and 2002, net income
amounted to $494,754 and $450,957, respectively. On a per share basis, basic
and diluted income for the three-month period ended September 30, 2003 amounted
to $.34 and $.33, respectively. For the three-month period ended September 30,
2002, basic and diluted income per share each amounted to $.30. Below are two
key facts to consider when comparing the results for the three-month period
ended September 30, 2003 with the three-month period ended September 30, 2002:
a. Net interest income increased by approximately $281,000, while average
earning assets increased by approximately $24.5 million, resulting in
a 4.69% net yield on earning assets.
b. Other income increased from $507,000 for the three-month period ended
September 30, 2002 to $541,000 for the three-month period ended September
30, 2003, an increase of 6.7%. Operating expenses for these periods
have increased from $1,274,000 to $1,432,000, an increase of 12.3%.
Because operating expenses are growing at a faster rate than other income,
the net overhead expense is expected to grow over time.
Net income for the nine-month period ended September 30, 2003 amounted to
$1,513,348, or $1.01 per diluted share. For the nine-month period ended
September 30, 2002, net income amounted to $1,282,197, or $.85 per diluted
share. Below are several pertinent facts to consider when comparing the results
obtained during the nine-month period ended September 30, 2003 with the nine-
month period ended September 30, 2002:
a. Average total earning assets increased from $153.0 million for the nine
months ended September 30, 2002 to $176.9 million for the nine months ended
September 30, 2003, an increase of $23.9 million, or 15.6%.
b. The yield on earning assets declined from 6.48% for the nine-month period
ended September 30, 2002 to 5.86% for the nine-month period ended September
30, 2003. This decline is mainly in response to the Federal Reserve Board's
monetary policy actions reducing short-term rates. However, despite the
decline in the yield on average earning assets, interest income increased
from $7,440,354 for the nine-month period ended September 30, 2002 to
$7,771,165 for the nine-month period ended September 30, 2003. This
increase is due to the growth in average earning assets.
c. Net interest income represents the difference between interest received
on interest earning assets and interest paid on interest bearing
liabilities. The following table presents the main components of
interest earning assets and interest bearing liabilities for the nine-
month period ended September 30, 2003.
(Dollars in 000's)
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- ----- ----
Federal funds sold $ 6,338 $ 49 1.03%
Securities 7,394 228 4.11%
Loans 163,190 7,494 6.12%
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Total $ 176,922 $ 7,771 5.86%
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Deposits and borrowings $ 155,181 $ 2,723 2.34%
-------- ------- ----
Net interest income $ 5,048
=======
Net yield on earning assets 3.80%
====
Net interest income increased from $4,253,373 for the nine-month period ended
September 30, 2002 to $5,048,385 for the nine-month period ended September 30,
2003, an increase of $795,012, or 18.7%. Net yield on earning assets increased
from 3.71% for the nine-month period ended September 30, 2002 to 3.80% for the
nine-month period ended September 30, 2003; the increase is attributable to two
factors:
(i) The average cost of funds decreased by 83 basis points to 2.34%;
and,
(ii) the average yield on earning assets decreased by only 62 basis points
to 5.86%. The net yield on earning assets increased because the
decline in the cost of funds outpaced the decline in the average
yield on earning assets.
d. Other income increased from $874,811 for the nine-month period ended
September 30, 2002 to $1,571,024 for the nine-month period ended September
30, 2003. Other income as a percent of average total assets increased from
.70% for the nine-month period ended September 30, 2002 to 1.08% for the
nine-month period ended September 30, 2003. The significant increase in
non-interest income is due to: (i) $708,679 in fees generated by JPC during
the nine-month period ended September 30, 2003 while only $264,365 was
generated a year earlier because JPC at that time was part of the
organization for only three months, and (ii) an increase of $155,548 in the
fees generated by TNBFS during the nine-month period ended September 30,
2003 as compared to the same period a year earlier.
e. Total operating expenses increased from $3,065,822 for the nine-month
period ended September 30, 2002 to $4,021,584 for the nine-month period
ended September 30, 2003. As a percent of average total assets, total
operating expenses increased from 2.46% for the nine-month period ended
September 30, 2002 to 2.77% for the nine-month period ended September 30,
2003. The increase is mainly due to the added expense associated with the
operations of JPC.
Allowance for Loan Losses
-------------------------
At December 31, 2002, the allowance for loan losses amounted to $1,722,097, as
compared to $1,847,766 at September 30, 2003. As a percent of gross loans, the
allowance remained constant at 1.10% as of December 31, 2002 and September 30,
2003. Management considers the allowance for loan losses to be adequate
and sufficient to absorb estimated 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) Exhibits: The following exhibits are filed with this report.
Exhibit
Number Description
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31.1 Certification Pursuant to Rule 13a-14(a), As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley
Act Of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act Of 2002.
(b) Reports on Form 8-K. There were no reports on Form 8-K filed
during the quarter ended September 30, 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: November 13, 2003 BY: /s/ Stephen H. Cheney
----------------- ------------------------------------
Stephen H. Cheney
President and Chief Executive Officer
(Principal Executive, Financial and Accounting
Officer)