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, 2004.
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.
----------------------------------------------------------
(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)
(229) 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 2,936,801 shares issued and
outstanding as of November 7, 2004.
Transitional small business disclosure format (check one):
Yes No X
-------- -----------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2004 2003
ASSETS (Unaudited) (Unaudited)
------ ----------- -----------
Cash and due from banks $ 6,103,486 $ 6,142,076
Federal funds sold 5,074,648 389,703
------------ ------------
Total cash and cash equivalents $ 11,178,134 $ 6,531,779
------------ ------------
Investment securities:
Securities available-for-sale,
at market value $ 12,365,042 $ 9,410,892
Loans, net 195,596,537 179,749,910
Property & equipment, net 4,153,580 4,281,826
Goodwill, net 3,387,259 3,417,259
Other assets 2,941,342 2,098,506
------------ ------------
Total Assets $229,621,894 $205,490,172
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 22,344,253 $ 21,993,126
Interest bearing deposits 166,049,636 143,506,633
------------ ------------
Total deposits $188,393,889 $165,499,759
Federal funds purchased - - 2,264,000
Borrowings 21,515,507 19,893,654
Other liabilities 960,881 531,253
------------ ------------
Total Liabilities $210,870,277 $188,188,666
------------ ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, $1.00 par value, 10
million shares authorized, 2,936,801
(2004) and 2,934,076 (2003)
shares issued & outstanding $ 2,936,801 $ 2,934,076
Paid-in-capital 7,744,023 7,615,280
Retained earnings 8,062,987 6,759,183
Accumulated other
comprehensive (loss) 7,806 (7,033)
------------ ------------
Total Shareholders' Equity $ 18,751,617 $ 17,301,506
------------ ------------
Total Liabilities and
Shareholders' Equity $229,621,894 $205,490,172
============ ============
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,
------------------------
2004 2003
---- ----
Interest income $3,047,912 $2,634,409
Interest expense 936,285 893,046
--------- ---------
Net interest income $2,111,627 $1,741,363
Provision for possible loan losses 105,000 90,000
--------- ---------
Net interest income after provision
for possible loan losses $2,006,627 $1,651,363
--------- ---------
Other income
(Loss) on sale of mortgage loans $ (6,175) $ (14,446)
Gain on sale of assets 23,417 - -
Service charges 43,960 45,073
Other fees 594,837 510,141
--------- ---------
Total other income $ 656,039 $ 540,768
--------- ---------
Salaries and benefits $ 788,897 $ 786,973
Advertising and public relations 64,074 56,228
Depreciation 94,507 112,176
Regulatory fees and assessments 23,203 21,792
Other operating expenses 563,187 454,365
--------- ---------
Total operating expenses $1,533,868 $1,431,534
--------- ---------
Net income before taxes $1,128,798 $ 760,597
Income taxes 426,806 265,843
--------- ---------
Net income $ 701,992 $ 494,754
========= =========
Basic income per share $ .24 $ .17
========= =========
Diluted income per share $ .23 $ .16
========= =========
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,
------------------------
2004 2003
---- ----
Interest income $8,584,151 $7,771,165
Interest expense 2,630,789 2,722,780
--------- ---------
Net interest income $5,953,362 $5,048,385
Provision for possible loan losses 315,000 260,000
--------- ---------
Net interest income after provision
for possible loan losses $5,638,362 $4,788,385
--------- ---------
Other income
Gain on sale of mortgage loans $ - - $ - -
Gain on sale of assets 24,251 1,098
Service charges 130,899 133,488
Other income and fees 1,745,187 1,436,438
--------- ---------
Total other income $1,900,337 $1,571,024
--------- ---------
Salaries and benefits $2,386,911 $2,224,233
Advertising and public relations 178,749 142,247
Depreciation 304,131 319,218
Regulatory fees and assessments 70,661 65,722
Other operating expenses 1,460,708 1,270,164
--------- ---------
Total operating expenses $4,401,160 $4,021,584
--------- ---------
Net income before taxes $3,137,539 $2,337,825
Income taxes 1,158,372 824,477
--------- ---------
Net income $1,979,167 $1,513,348
========= =========
Basic income per share $ .67 $ .52
========= =========
Diluted income per share $ .65 $ .50
========= =========
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,
---------------------------
2004 2003
---- ----
Cash flows provided by operating activities $ 2,282,066 $ 1,722,966
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets $ (175,885) $ (514,110)
Maturities, calls,
paydowns, securities, AFS 3,300,000 5,280,000
Purchase of securities, AFS (6,306,287) (6,428,262)
(Increase) in loans (16,161,627) (16,410,003)
----------- -----------
Net cash used by investing activities $(19,343,799) $(18,072,375)
----------- -----------
Cash flows from financing activities:
Issuance of stock to 401(k) $ 30,358 $ - -
Options, restricted stock 101,110 69,901
(Decrease) in borrowings (642,147) (173,903)
Increase in deposits 22,894,130 14,786,982
Payment of cash dividend (675,363) (649,602)
----------- -----------
Net cash provided from
financing activities $ 21,708,088 $ 14,033,378
----------- -----------
Net increase in
cash and cash equivalents $ 4,646,355 $ (2,316,031)
Cash and cash equivalents,
beginning of period 6,531,779 13,541,634
----------- -----------
Cash and cash equivalents, end of period $ 11,178,134 $ 11,225,603
=========== ===========
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, 2003 AND 2004
Accumulated
Common Stock Other
------------------- Paid in Retained Comprehensive
Shares Par Value Capital Earnings Income Total
------ --------- ------- -------- ------ -----
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)
To effect
two-for
-one stock
split 1,443,558 1,443,558 (1,443,558) - - - - - -
--------- ---------- ---------- --------- -------- ----------
Balance,
Sept. 30,
2003 2,887,116 $ 2,887,116 $ 7,388,057 $6,315,825 $ (6,369) $16,584,629
========= ========== ========== ========= ======== ==========
-----------------------------------------------------
Balance,
December 31,
2003 1,467,038 $ 1,467,038 $ 9,082,318 $6,759,183 $ (7,033) $17,301,506
--------- ---------- ---------- --------- -------- ----------
Comprehensive Income:
---------------------
Net income,
nine-month
period ended
Sept. 30,
2004 - - - - - - 1,979,167 - - 1,979,167
Net unrealized
gain on
securities, nine-
month period
ended Sept. 30,
2004 - - - - - - - - 14,839 14,839
--------- ---------- ---------- --------- -------- ----------
Total comprehensive
income - - - - - - 1,979,167 14,839 1,994,006
Sale of
1,334 shares
to employee
401(k) plan 1,334 1,334 28,390 - - - - 29,724
To effect
two-for
-one stock
split 1,468,372 1,468,372 (1,468,372) - - - - - -
Sale of
57 shares
to employee
401(k) plan 57 57 577 - - - - 634
Stock options,
restricted
stock
(8,940
options) - - - - 101,110 - - - - 101,110
Dividends paid - - - - - - (675,363) - - (675,363)
--------- ---------- ---------- --------- -------- ----------
Balance,
Sept. 30,
2004 2,936,744 $ 2,936,801 $ 7,744,023 $8,062,987 $ 7,806 $18,751,617
========= ========== ========== ========= ======== ==========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2004
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
and nine-month periods ended September 30, 2004 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2004.
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, 2003.
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 in October 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 also offers trust services. The Bank operates
from two banking offices in Thomasville, Georgia, and depositors are each
insured up to $100,000 by the Federal Deposit Insurance Corporation, subject
to certain limitations imposed by the FDIC. In addition to the Bank, the
Company has one other subsidiary, TNB Financial Services, Inc. through which
the Company offers brokerage and money management services. On July 15,2004,
the Company effected a two-for-one stock split.
NOTE 3 - RECENT ACCOUNTING PRONOUNCEMENTS
In January 2003, the Financial Accounting Standards Board ("FASB") issued
Consolidation of Variable Interest Entities, an interpretation of Accounting
Research Bulletin No. 51 (the Interpretation), FASB Interpretation No. 46 ("FIN
46"). The purpose of this interpretation is to provide guidance on how to
identify a variable interest entity (VIE) and determine when the assets,
liabilities, non-controlling interests, and results of operations of a VIE need
to be included in a company's consolidated financial statements. A company
that holds variable interest in an entity will need to consolidate that entity
if the company's interest in the VIE is such that the company will absorb a
majority of the VIE's expected losses and or receive a majority of the VIE's
expected residual returns, if they occur. As of September 30, 2004, management
believes that the Company does not have any VIE's which would be consolidated
under the provisions of FIN 46.
In December 2003, the FASB issued a revision of FIN 46. The Revised
Interpretation codifies both the proposed modifications and other decisions
previously issued through certain FASB Staff Positions (FSPs) and supersedes
the original Interpretation to include: (1) deferring the effective date of the
Interpretation's provisions for certain variable interests, (2) providing
additional scope exceptions for certain other variable interests, (3) clarifying
the impact of troubled debt restructurings on the requirement to reconsider
(a) whether an entity is a VIE or (b) which party is the primary beneficiary of
a VIE, and (4) revising Appendix B of the Interpretation to provide additional
guidance on what constitutes a variable interest. The revised Interpretation
is effective for financial statements of periods ending after March 15, 2004.
Adoption of the revised FIN 46 did not have an adverse effect on the Company's
financial position, results of operations, or liquidity.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities," which amends and clarifies
financial accounting and reporting for derivative instruments, including
certain derivative instruments embedded in other contracts and for hedging
activities under SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," resulting in more consistent reporting of contracts
as either derivatives or hybrid instruments. SFAS No. 149 is effective for
contracts entered into or modified after June 30, 2003, and should be applied
prospectively. Adoption of SFAS No. 149 did not have a material impact on
the Company's financial position, results of operations or liquidity.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,"
which establishes standards for how certain financial instruments with
characteristics of both liabilities and equity should be measured and
classified. Certain financial instruments with characteristics of both
liabilities and equity will be required to be classified as a liability.
This statement is effective for financial instruments entered into or modified
after May 31, 2003, and July 1, 2003 for all other financial instruments with
the exception of existing mandatorily redeemable financial instruments issued
by limited life subsidiaries that have been indefinitely deferred from the
scope of the statements. Adoption of SFAS 150 did not have a material impact
on the Company's financial position, results of operations or liquidity.
In December 2003, the American Institute of Certified Public Accountants
("AICPA") issued SOP 03-3, "Accounting for Certain Loans or Debt Securities
Acquired in a Transfer," which requires loans acquired through a transfer, such
as a business combination, where there are differences in expected cash flows
and contractual cash flows due in part to credit quality be recognized at their
fair value. The excess of contractual cash flows over expected cash flows is
not to be recognized as an adjustment of yield, loss accrual, or valuation
allowance. Valuation allowances cannot be created nor "carried over" in the
initial accounting for loans acquired in a transfer on loans subject to SFAS
114, "Accounting by Creditors for Impairment of a Loan." This SOP is effective
for loans acquired after December 31, 2004, with early adoption encouraged.
Adoption of SOP 03-3 did not have a material impact on the Company's financial
position, results of operations or liquidity.
In December 2003, the FASB issued a revision of SFAS No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits." Most of the
provisions of the revised statements are effective for fiscal years ending after
December 15, 2003. The Statement requires more detailed disclosures about plan
assets, investment strategies, benefit obligations, cash flows, and the
assumptions used in accounting for the plans. Adoption of the revision to SFAS
No. 132 will not have a material impact on the Company's financial position,
results of operations or liquidity.
On December 11, 2003, the SEC Staff announced its intention to release a
Staff Accounting Bulletin in order to clarify existing accounting practices
relating to the valuation of issued loan commitments, including interest rate
lock commitments, subject to Derivative Implementation Group Issue C-13, When a
Loan Commitment is included in Scope of Statement 133. The new guidance is
expected to require all registrants to begin accounting for these commitments
subject to SFAS No. 133 as written options that would be reported as liabilities
until they are exercised or expire. The provisions of this guidance are
effective for loan commitments entered into after March 31, 2004.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
OVERVIEW
--------
Thomasville Bancshares, Inc., a Georgia corporation (the "Company"), was
formed in March 1995 to act as the holding company for Thomasville National
Bank (the "Bank"). The Bank opened for business in October 1995, and presently
operates two branches in Thomasville, Georgia. The Bank is a full service
commercial bank, with trust powers, and offers a full range of interest-bearing
and non-interest-bearing accounts, including commercial and retail checking
accounts, money market accounts, individual retirement and Keogh accounts,
regular interest-bearing statement savings accounts, certificates of deposit,
commercial loans, real estate loans, home equity loans and consumer/ installment
loans. In addition, the Bank provides such consumer services as U.S. Savings
Bonds, travelers checks, cashiers checks, safe deposit boxes, bank by mail
services, direct deposit and automatic teller services.
In September 2001, the Bank formed an operating subsidiary, TNB Financial
Services, Inc., a Georgia corporation with trust powers. On March 31, 2004, TNB
Financial Services was liquidated, with all of its operations being transferred
to the Bank. Accordingly, the trust services are still being offered by the
Bank, but through a division rather than a subsidiary.
In July 2002, the Company acquired all of the issued and outstanding
capital stock of Joseph Parker & Company, Inc. ("JPC"), a Georgia corporation
and federally registered investment advisory firm located in Thomasville,
Georgia. In July 2004, JPC's name was changed to TNB Financial Services,
Inc. ("TNBFS").
At September 30, 2004, the Bank and TNBFS together managed approximately
$329.0 million in trust, agency and custody accounts.
The Company's results of operations are largely dependent on interest
income, which is the difference between the interest earned on loans and
securities and interest paid on deposits and borrowings. The results of
operations are also affected by the level of income/fees from loans, deposits,
borrowings, as well as operating expenses, the provision for loan losses, the
impact of federal and state income taxes, and the relative levels of interest
rates and economic activity.
CRITICAL ACCOUNTING POLICIES
----------------------------
Critical accounting policies are defined as those that are reflective
of significant judgments and uncertainties, and could potentially result in
materially different financial results under different assumptions and
conditions. The Company believes that the most critical accounting policies
upon which its financial condition depends, and which involve the most complex
or subjective decisions or assessments, are as follows:
Allowance for Loan Losses
-------------------------
Arriving at an appropriate level of allowance for loan losses involves a
high degree of judgment. The Company's allowance for loan losses provides for
probable losses based upon evaluations of known and inherent risks in the loan
portfolio. Management uses historical information to assess the adequacy of
the allowance for loan losses as well as the prevailing business environment.
The allowance is increased by provisions for loan losses and by recoveries of
loans previously charged-off and reduced by loans charged-off.
Income Taxes
------------
The Company estimates income tax expense based on the amount it expects to
owe various tax authorities. Accrued taxes represent the net estimated amount
due to or to be received from taxing authorities. In estimating accrued taxes,
management assesses the relative merits and risks of the appropriate tax
treatment of transactions taking into account statutory, judicial and regulatory
guidance in the context of its tax position. Although the Company uses
available information to record accrued income taxes, underlying estimates and
assumptions can change over time as a result of unanticipated events or
circumstances such as changes in tax laws influencing the Company's overall
tax position.
Valuation of Goodwill/Intangible Assets and Analysis for Impairment
-------------------------------------------------------------------
The Company utilized the purchase method to reflect its acquisition of
JPC. Accordingly, the Company was required to record assets acquired and
liabilities assumed at their fair value which is an estimate determined by the
use of internal or other valuation techniques. These valuation estimates result
in goodwill and other intangible assets. Goodwill is subject to ongoing
periodic impairment tests and is evaluated using various fair value techniques
including multiples of price/equity and price/earnings ratios.
Additional information regarding these critical accounting policies is
set forth in the notes to the Company's financial statements included in the
Company's Form 10-KSB for the year ended December 31, 2003.
FINANCIAL CONDITION
-------------------
Total consolidated assets increased by $24.1 million to $229.6 million
during the nine-month period ended September 30, 2004. Cash and cash
equivalents increased by $4.7 million to $11.2 million; investment securities
increased by $3.0 million to $12.4 million; loans increased by $15.8 million
to $195.6 million; and all other assets increased by $0.6 million to $10.5
million. For the nine-month period ended September 30, 2004, total deposits
increased by $22.9 million to $188.4 million; borrowings increased by $0.6
million to $21.5 million; all other liabilities increased by $0.2 million to
$1.0 million; and the capital accounts increased by $1.4 million to $18.7
million.
Liquidity and Capital Resources
-------------------------------
Liquidity is the Company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of customers. The
September 30, 2004 financial statements evidence a satisfactory liquidity
position as total cash and cash equivalents amounted to $11.2 million,
representing 4.9% of total assets. Investment securities, which amounted
to $12.4 million, or 5.4% of total assets, provide a secondary source of
liquidity because they 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 by
the Bank's primary regulator, the Office of the Comptroller of the Currency
("OCC").
Bank's Regulatory
September 30, 2004 Minimum
------------------ ----------
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.
Allowance for Loan Losses
-------------------------
December 31, 2003, the allowance for loan losses amounted to $1,960,822.
At September 30, 2004, the allowance amounted to $2,066,276. As a percent of
gross loans, the allowance decreased from 1.08% to 1.05% during the nine-month
period ended September 30, 2004. 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.
Off-Balance Sheet Arrangements
------------------------------
In the ordinary course of business, the Bank may enter into off-balance
sheet financial instruments which are not reflected in the financial statements.
These instruments include commitments to extend credit and standby letters of
credit. Such financial instruments are recorded in the financial statements
when funds are disbursed or the instruments become payable.
Following is an analysis of significant off-balance sheet financial
instruments at September 30, 2004 and December 31, 2003:
At At
September 30, December 31,
2004 2003
-------- ------------
(In thousands)
Commitments to extend credit $33,105 $21,200
Standby letters of credit 4,425 2,732
------ ------
$37,530 $23,932
====== ======
RESULTS OF OPERATIONS
---------------------
For the three-month periods ended September 30, 2004 and 2003, net income
amounted to $701,992 and $494,754, respectively. On a per share basis, basic
and diluted income for the three-month period ended September 30, 2004 were
$0.24 and $0.23, respectively. For the three-month period ended September 30,
2003, basic and diluted income per share, were $0.17 and $0.16, respectively.
Management believes that the following facts are important to consider when
comparing the results of the three-month period ended September 30, 2004 with
the three-month period ended September 30, 2003:
a. Net interest income increased by approximately $370,000, while average
earning assets increased by approximately $26.1 million, resulting in
a 5.67% net yield on the increase in earning assets.
b. Although total assets increased by 14.1% during the one-year period ended
September 30, 2004, net overhead expense, defined as non-interest expense
less non-interest income, decreased from September 30, 2003 to September 30,
2004, from $891,000 to $878,000. This reflects a measured success in the
Company's strategy of increasing non-interest income and holding the
increase on non-interest expense to a minimum.
Net income for the nine-month period ended September 30, 2004 amounted to
$1,979,167, or $0.65 per diluted share. For the nine-month period ended
September 30, 2003, net income amounted to $1,513,348, or $.50 per diluted
share. Management believes that the following facts are important to consider
when comparing the results of operations for the nine-month period ended
September 30, 2004 with the nine-month period ended September 30, 2003:
a. Average total earning assets increased from $176.9 million for the nine
months ended September 30, 2003 to $203.0 million for the nine months ended
September 30, 2004. The net increase of $26.1 million represents a 14.8%
increase in average earning assets over a twelve-month period.
b. The yield on earning assets declined from 5.86% for the nine-month period
ended September 30, 2003 to 5.64% for the nine-month period ended September
30, 2004. This decline is mainly due to economic policies undertaken by the
Federal Reserve Board. However, despite the decline in the yield on average
earning assets, interest income increased from $7,771,165 for the nine-month
period ended September 30, 2003 to $8,584,151 for the nine-month period
ended September 30, 2004 as a result of 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, 2004.
(Dollars in 000's)
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- ----- ----
Federal funds sold $ 1,821 $ 14 1.03%
Securities 11,775 321 3.63%
Loans 189,382 8,249 5.81%
-------- ------- ----
Total $ 202,978 $ 8,584 5.64%
-------- ------- ----
Deposits and borrowings $ 177,067 $ 2,631 1.98%
-------- ------- ----
Net interest income $ 5,953
=======
Net yield on earning assets 3.91%
====
Net interest income increased from $5,048,385 for the nine-month period ended
September 30, 2003 to $5,953,362 for the nine-month period ended September 30,
2004, an increase of $904,977, or 17.9%. Net yield on earning assets increased
from 3.80% for the nine-month period ended September 30, 2003 to 3.91% for the
nine-month period ended September 30, 2004; the increase is attributable to two
factors:
(i) The average cost of funds decreased by 36 basis points to 1.98%;
and,
(ii) the average yield on earning assets decreased by 22 basis points to
5.64%. 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 $1,571,024 for the nine-month period ended
September 30, 2003 to $1,900,337 for the nine-month period ended September
30, 2004. As a percent of average total assets, other income increased
from 1.08% for the nine-month period ended September 30, 2003 to 1.16% for
the nine-month period ended September 30, 2004. The increase is primarily
due to the growth in fee income in trust services as well as in money
management services.
e. Total operating expenses increased from $4,021,584 for the nine-month
period ended September 30, 2003 to $4,401,160 for the nine-month period
ended September 30, 2004. As a percent of average total assets, total
operating expenses declined from 2.77% for the nine-month period ended
September 30, 2003 to 2.70% for the nine-month period ended September 30,
2004.
ITEM 3. CONTROLS AND PROCEDURES
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Management has developed and implemented a policy and procedures for
reviewing disclosure controls and procedures and internal controls over
financial reporting on a quarterly basis. Management, including the Chief
Executive Officer (the Company's principal executive and financial officer),
evaluated the effectiveness of the design and operation of disclosure controls
and procedures as of September 30, 2004 and, based on their evaluation, the
Company's Chief Executive Officer concluded that these controls and procedures
are operating effectively. Disclosure controls and procedures are the Company's
controls and other procedures that are designed to ensure that information
required to be disclosed by the Company in the reports that it files or submits
under the Securities 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
required to be disclosed by Company in the reports that it files under the
Securities Exchange Act is accumulated and communicated to management, including
the principal executive and financial officers, as appropriate to allow timely
decisions regarding required disclosure.
There were no significant changes in the Company's internal control over
financial reporting during the Company's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.
PART II. OTHER INFORMATION
Item 6. Exhibits
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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.
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 15, 2004 By: /s/Stephen H. Cheney
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Stephen H. Cheney
President and Chief Executive Officer
(Principal Executive, Financial and Accounting
Officer)