U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended September 30, 1997
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
---------------- ---------------
Commission File No. 33-52930
GF BANCSHARES, INC.
(Name of small business issuer in its charter)
Georgia 58-2016968
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
327 West Taylor Street, Griffin, Georgia 30223
----------------------------------------------
(Address of principal executive offices)
(770) 228-2786
-------------------------
Issuer's telephone number
(including area code)
Securities registered under Section 12(b) of the Exchange Act:
Name on each exchange on
Title of each class which registered
None None
---- ----
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $1.00 Par Value
-----------------------------
Title of class
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No .
--- ---
As of September 30, 1997, there were 989,122 shares of Common Stock issued and
outstanding. The registrant's voting stock is not regularly and actively traded
in any established market, and there are no regularly quoted bid and asked
prices for the registrant's voting stock.
1
INDEX
PAGE
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheets as of
September 30, 1997 and June 30, 1997 3
Consolidated Statements of Income for the Three
Months Ended September 30, 1997 and 1996 4
Consolidated Statements of Cash Flows for the
Three Months Ended September 30, 1997 and 1996 5-6
Notes to Consolidated Financial Statements 7-10
Item 2. Management's Discussion and Analysis of Interim
Financial Condition or Plan of Operation for the
Three Months Ended September 30, 1997, compared
to the Three Months Ended September 30, 1996 11-14
PART II. OTHER INFORMATION
Schedules Omitted:
All schedules, other than those indicated above and below,
are omitted because of the absence of the conditions under
which they are required or because the information is
included in the financial statements or related notes. 15
Signature Page 19
2
Item 1. Financial Statements
GF BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, June 30,
1997 1997
------------- -----------
ASSETS
Cash and due from banks $ 290,216 $ 561,388
Interest-bearing deposits in other banks 5,339,866 5,169,734
Investment securities available for sale 2,927,033 2,951,887
Federal Home Loan Bank stock 944,200 944,200
Mortgage loans held for sale 3,494,918 3,862,253
Loans, net 82,636,823 81,345,192
Premises and equipment, net 1,083,142 1,112,169
Real estate owned, net 504,069 504,069
Accrued interest receivable 1,237,744 1,242,609
Other assets 460,495 745,730
----------- -----------
TOTAL ASSETS $98,918,506 $98,439,231
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing demand $ 2,609,606 $ 1,474,585
Interest-bearing demand and money market 17,861,273 18,257,241
Savings 3,719,382 3,643,434
Time 57,667,527 56,003,955
----------- -----------
Total Deposits 81,857,788 79,379,215
Federal Home Loan Bank advances 2,553,332 4,553,332
Unremitted escrow funds from borrowers 290,159 225,668
Unremitted funds on loans serviced for others 539,266 555,541
Accrued interest payable 328,235 296,705
Other liabilities 379,914 627,255
----------- -----------
TOTAL LIABILITIES 85,948,694 85,637,716
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, 2,000,000 shares authorized,
none issued and outstanding 0 0
Common stock, par value $1.00; 8,000,000 shares
authorized, 989,122 and 948,316 shares issued
and outstanding 989,122 948,316
Surplus 7,453,541 7,152,571
Retained earnings 4,511,554 4,685,434
Unrealized gains on investment securities available for sale 15,595 15,194
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 12,969,812 12,801,515
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $98,918,506 $98,439,231
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
3
GF BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the three months
ended September 30,
1997 1996
---------- ----------
INTEREST INCOME
Loans, including fees $2,070,809 $1,952,811
Investment securities 65,131 66,476
Interest-bearing deposits in other bank 63,730 61,594
---------- ----------
TOTAL INTEREST INCOME 2,199,670 2,080,881
---------- ----------
INTEREST EXPENSE
Interest-bearing demand and money market deposits 139,667 141,927
Savings deposits 28,149 28,967
Time deposits 853,774 794,543
Federal Home Loan Bank advances 56,015 46,102
---------- ----------
TOTAL INTEREST EXPENSE 1,077,605 1,011,539
---------- ----------
NET INTEREST INCOME 1,122,065 1,069,342
PROVISION FOR LOAN LOSSES 15,000 15,000
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES 1,107,065 1,054,342
---------- ----------
OTHER INCOME
Service charges and fees 103,671 118,600
Gain on loan production office operations 66,436 42,432
Other income 24,258 11,092
---------- ----------
TOTAL OTHER INCOME 194,365 172,124
---------- ----------
OTHER EXPENSE
Salaries and employee benefits 367,238 370,124
Net occupancy expense 90,854 78,228
Other expense (note E) 250,201 800,948
---------- ----------
TOTAL OTHER EXPENSE 708,293 1,249,300
---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 593,137 (22,834)
INCOME TAX EXPENSE (BENEFIT) 223,000 (22,000)
---------- ----------
NET INCOME (LOSS) $ 370,137 $ (834)
========== ==========
EARNINGS PER SHARE $ 0.38 $ (0.00)
========== ==========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING $ 965,214 $ 906,383
========== ==========
The accompanying notes are an integral part of these consolidated
financial statements.
4
GF BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months
ended September 30,
--------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ 370,137 $ (834)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation 43,619 69,104
Provision for loan losses 15,000 15,000
Decrease in mortgage loans held for sale 367,335 171,121
Decrease in other assets 285,235 316,305
Decrease in interest receivable 4,865 8,827
Increase in interest payable 31,530 14,370
Increase (decrease) in unremitted funds on
loans serviced for others (16,275) 39,190
(Increase) decrease in other liabilities (247,341) 462,806
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 854,105 1,095,889
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Principal repayments of investment securities
available for sale 25,255 -
Proceeds from maturities of investment securities
available for sale - 15,720
Net increase in loans (1,306,631) (4,421,851)
Purchases of premises and equipment (14,592) (5,935)
----------- -----------
NET CASH USED BY INVESTING ACTIVITIES $(1,295,968) $(4,412,066)
=========== ===========
(Continued)
The accompanying notes are an integral part of these consolidated
financial statements.
5
GF BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, (Continued)
(Unaudited)
For the three months
ended September 30,
--------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand, money market and savings accounts $ 815,001 $ (159,631)
Net increase (decrease) in time deposits 1,663,572 (525,989)
Repayment of FHLB Advances (2,000,000) 0
Net increase (decrease) in unremitted funds for taxes and insurance 64,491 (135,038)
Proceeds from exercise of stock options 341,776 21,031
Cash dividends paid (544,017) (523,467)
----------- -----------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 340,823 (1,323,094)
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (101,040) (4,639,271)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 5,731,122 5,815,945
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,630,082 $ 1,176,674
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID:
Interest $ 1,046,075 $ 965,437
=========== ===========
Income taxes $ 2,500 $ 255,000
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Acquisition of real estate in settlement of loans $ - $ 55,323
=========== ===========
The accompanying notes are an integral part of these consolidated
financial statements.
6
GF BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B of the Securities and Exchange Commission. Accordingly, they
do not include all of 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 September 30, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ended June
30, 1998. For further information, refer to the consolidated financial
statements and footnotes thereto included in GF Bancshares, Inc.'s (the
"Company") Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997.
EARNINGS PER SHARE
Earnings per share and common equivalent shares are calculated by dividing net
income by the weighted average number of common and common equivalent shares
outstanding after consideration of the dilutive effect of stock options as of
the date of issuance of financial statements.
NOTE B - MERGER
On May 29, 1997, the Company and Regions Financial Corporation executed a
definitive agreement (Agreement) to merge the two companies. The merger will be
accounted for as a purchase under generally accepted accounting principles. The
merger is subject to regulatory and shareholder approval and is expected to be
consummated in the fourth quarter of 1997.
These financial statements have been prepared on the basis of the Company
retaining its present corporate structure and ownership and the Bank retaining
its thrift charter. No adjustments have been made to reflect the tax
consequences of the Company being acquired, including recapture of tax loan loss
reserves; penalties for cancellation of existing contracts with vendors;
commissions for fees payable to the investment banker or other parties (other
than fee for fairness opinion); the effects of any changes in accounting
policies, principles or practices of the acquiror which differ from that of the
Company; or
7
any other expenses of the acquisition which were not actual liabilities as of
September 30, 1997 or June 30, 1997.
NOTE C - NEW AND PENDING ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of." The Company adopted
SFAS 121 in fiscal year 1997. The provisions of SFAS 121 require the Company to
review long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS 121 did not have a material impact on the
Company's earnings in fiscal year ended June 30, 1997 or in the quarter ended
September 30, 1997.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122 (SFAS 122), "Mortgage Servicing Rights", as an
amendment to SFAS 65. The Company adopted SFAS 122 in fiscal year 1997. The
provisions of SFAS 122 eliminate the accounting distinction between rights to
service mortgage loans that are acquired through loan origination (and
subsequently sold) and those acquired through purchase. The adoption did not
have a material impact on the Company's earnings in fiscal year ended June 30,
1997 or in the quarter ended September 30, 1997.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation." The Company adopted SFAS 123 in fiscal year 1997. SFAS 123
established a method of accounting for stock compensation plans based on fair
value. Companies are permitted to continue to use the existing method of
accounting but are required to disclose pro forma net income and earnings per
share as if SFAS 123 had been used to measure compensation cost. Based on the
provisions of the Company's stock option plans, the Company has determined that
there is no material effect from adoption of SFAS 123.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 125 (SFAS 125), "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities." This statement
provides accounting and reporting standards for transfers and servicing of
financial assets and extinguishments of liabilities. This statement utilizes
the financial-components approach that focuses on control. Under that approach,
after a transfer of financial assets, an entity recognizes the financial and
servicing assets it controls and the liabilities it has incurred, derecognizes
financial assets when control has been surrendered, and derecognizes liabilities
when extinguished.
SFAS 125 is effective for transfers and servicing of financial assets and
extinguishments of liabilities occurring after December 31, 1996, and is to be
applied prospectively. Earlier or retroactive application is not permitted.
However, in December 1996, The Financial
8
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 127 (SFAS 127), "Deferral of the Effective Date of Certain Provisions of
FASB Statement No. 125." This statement defers the effective date of certain
provisions for one year (December 31, 1997). The deferred provisions relate to
repurchase agreements, dollar-roll transactions, securities lending, and similar
transactions. The effective date for all other transfers and servicing of
financial assets is unchanged. Management does not believe that the adoption of
SFAS 125 will have a material impact on the Company's financial statements.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128 (SFAS 128), "Earnings Per Share." SFAS 128 is
effective for financial statements issued for periods ending after December 15,
1997. This statement supersedes Accounting Principles Board Opinion No.15 (APB
15), "Earnings Per Share" and simplifies earnings per share computations by
replacing primary earnings per share with basic earnings per share, which shows
no effects from dilutive securities. Entities with complex capital structures
will have to show diluted earnings per share, which is similar to the fully
diluted earnings per share computation under APB 15. Had SFAS 128 been
effective on September 30, 1997, the Company would have had basic earnings per
share of $.38 and diluted earnings per share of $.38 for the three months ended
September 30, 1997.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 129 (SFAS 129), "Disclosure of Information About
Capital Structure." SFAS 129 is effective for financial statements issued for
periods ending after December 15, 1997. This statement consolidates existing
disclosure requirements on capital structure. The adoption of SFAS 129 is not
expected to have a significant impact on the financial condition or results of
operations of the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income." SFAS
130 is effective July 1, 1998. Under SFAS 130, a company will begin showing
changes in assets and liabilities in a new comprehensive income statement of
alternative presentation as opposed to showing some of the items as transactions
in shareholders' equity accounts. Upon adoption, all comparative annual and
interim financial statements will present a comprehensive income statement or
alternative disclosure, for all years presented. The adoption of SFAS 130 is
not expected to have a significant impact on the financial condition or results
of operations of the Company.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 131 (SFAS 131), "Disclosures about Segments of an
Enterprise and Related Information." SFAS 131 is effective July 1, 1998, and
requires disclosure of certain financial information by segments of a company's
business. The adoption of SFAS 131 is not expected to have a significant impact
on the financial condition or results of operations of the Company.
9
NOTE D - RECENT LEGISLATION
In August of 1996, a bill was signed into law containing relief for savings
institutions from recapture of bad debt reserves. The law's provisions are
effective for tax years beginning after December 31, 1995, which impacted the
Company's fiscal year ended June 30, 1997. The new law eliminates the future
use of the Internal Revenue Code Section 593 reserve method of accounting for
bad debts by savings institutions; forgives recapture of pre-1988 base year
reserves; and requires the recapture of post-1987 reserves ratably over a six-
year period beginning with the first post-1995 taxable year. The onset of
recapture can be delayed for one or two years if an institution meets a
residential loan originations requirement in effect in 1997 and 1998. To
qualify for a deferral each year, an institution will be required to lend as
much in dollar terms on residential real estate as in the average of the most
recent six years. The residential loan calculation does not include refinancing
and home equity loans. The Company has not yet determined whether it qualifies
for this deferral. However, it has determined that there will not be a material
effect on earnings resulting from the recapture, due to the provision of
deferred taxes in the years subsequent to 1987 when the tax provisions for bad
debts exceeds actual net loan charge-offs.
Under the present Internal Revenue Code, certain events, such as the pending
merger, may cause the Company's Bank subsidiary to become ineligible to maintain
the reserve discussed above and the post-1987 tax reserve. For the thrift
(Bank) merged into a bank or nonthrift entity in a nontaxable transaction, the
ineligibility year is the year of the merger. The thrift (Bank) must restate
its post-1987 bad debt reserve to zero and include its bad debt reserves
(defined to include qualifying, nonqualifying, and supplemental reserves) in
income ratably over a six-year period beginning in the ineligibility year or a
shorter period if it ceases to engage in business during the six-year
amortization period.
In September of 1996, a bill was signed into law which provides for the
ultimate merger of the Savings Association Insurance Fund ("SAIF") into the
larger and fully capitalized Bank Insurance Fund ("BIF"). This legislation
requires the Company and all other depository institutions having SAIF-insured
deposits to pay a one-time assessment to recapitalize the SAIF, which had become
undercapitalized due to claims against the fund. The obligations to pay the
special assessment became fixed on September 30, 1996 and were paid on November
27, 1996. On September 30, 1996, the Company recorded a charge to earnings in
the amount of $552,850 to provide for this obligation. This charge is therefore
reflected in the Financial Statements, to which these notes are attached, and
had a negative effect on earnings for the three months ended September 30, 1996.
The deposit insurance expense recorded for the three months ended September 30,
1996 was $603,494, reflecting the one-time assessment, and the recurring premium
expense of $50,644. However, the legislation also provides for a reduction in
the recurring insurance premiums on SAIF-insured deposits following the
recapitalization. Based on its risk category, the Company anticipates a
significant reduction in its recurring deposit insurance expense in the future.
10
NOTE E - SUPPLEMENTAL FINANCIAL DATA
Components of other expense in excess of 1% of total income are as follows:
For the three months
ended September 30,
1997 1996
------- -------
FDIC insurance premiums $12,457 603,494
Data processing $65,810 56,035
Merger related expenses $26,786 -
Professional fees $20,689 31,956
Telephone $40,700 34,131
Stationery, printing & supplies $29,433 19,687
NOTE F - SERVICING SALE AGREEMENT
The Company entered into an agreement to sell the servicing rights of
approximately $87,000,000 in mortgage loans serviced for others. The sale price
for the servicing shall be determined by multiplying 1.06% by the principal
balance of the loan portfolio. The Company will incur legal and other
professional expenses in conjunction with this transaction. The Company will
also indemnify the Purchaser against payoff for 60 days after the sale date. The
terms and provision of the sale of the servicing are subject to other various
conditions, including the performance of due diligence by the Purchaser.
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF INTERIM FINANCIAL
CONDITION OR PLAN OF OPERATION FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1997, COMPARED TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1996
INTERIM FINANCIAL CONDITION
GF Bancshares, Inc. (the "Company"), reported total assets of $98,919,000 as of
September 30, 1997, compared to $98,439,000 at June 30, 1997. The most
significant change in the composition of the assets was an increase in net loans
from $81,345,000 to $82,637,000. The increase was primarily in the area of
construction loans and commercial loans. Loans held for sale decreased from
$3,862,000 at June 30, 1997, to $3,495,000 at September 30, 1997. The increase
in net loans was funded from the increase in deposits. Deposits increased from
$79,379,000 at June 30, 1997, to $81,858,000 at September 30, 1997.
A result of the strong loan growth experienced in recent months compared to
slower deposit growth has been a relatively high loan (including loans held for
sale) to deposit ratio. Management has embarked on a course to reverse this
trend through controlled loan growth and emphasis on deposit growth, as
reflected by the decrease in the ratio from 107% at June 30, 1997 to 105% at
September 30, 1997. The Company's liquid assets as a percentage of deposits
were 6.68% at September 30, 1997, down from 5.61% at June 30, 1997. Management
analyzes projected loan fundings and payoffs, deposit trends, and other market
conditions as they relate to levels of cash, liquid investments, and the funding
line the Company has available from the Federal Home Loan Bank ("FHLB"). As of
September 30, 1997, the Company had drawn $2,553,000 against the FHLB line, of
an available $20,000,000. Based on this analysis, Management believes that the
Company has adequate liquidity to meet its short-term operating requirements.
However, no assurances are given in this regard.
The Company measures its capital adequacy against three standards: 1) tangible
capital, expressed as a percentage of adjusted total assets, of at least 1.5%;
2) core capital, expressed as a percentage of adjusted total assets, of at least
3.0%, and: 3) risk-based capital, expressed as a percentage of risk-weighted
assets, of at least 8.0%. As of September 30, 1997, the Company's capital
positions were as follows:
Minimum
Capital Regulatory Excess
Requirement Capital Capital Ratio
----------- ----------- ---------- ------
Tangible Capital $1,480,000 $10,801,000 $9,321,000 10.94%
Core Capital $2,961,000 $10,801,000 $7,840,000 10.94%
Risk-based Capital $6,456,000 $11,364,000 $4,908,000 14.08%
12
Non-performing assets declined to 3.12% of total loans and real estate acquired
through foreclosure ("OREO") at September 30, 1997, compared to 3.38% at June
30, 1997:
September 30, 1997 June 30, 1997
------------------ -------------
Nonaccrual loans $ 1,227,000 $ 1,380,000
Loans 90 days past due 299,000 310,000
Restructured loans 589,000 598,000
OREO 504,000 504,000
----------- -----------
Total non-performing assets (A) $ 2,619,000 $ 2,792,000
----------- -----------
Total loans (gross) and OREO (B) $83,892,000 $82,589,000
A/B 3.12% 3.38%
The allowance for loan losses at September 30, 1997 was $751,000, compared to
$740,000 at June 30, 1997. The allowance at September 30, 1997, represented
.90% of total loans, compared to .90% at June 30, 1997. The allowance at
September 30, 1997 represented 35.51% of non-performing loans (non-performing
assets less OREO), compared to 32.34% at June 30, 1997. The analysis of the
activity in the allowance for loan losses is as follows:
1996 1997
-------- --------
Balance at June 30, $688,000 $740,000
-------- --------
Chargeoffs:
Commercial - -
Real estate mortgage - -
Consumer (8,000) (4 ,000)
-------- --------
Total (8,000) (4 ,000)
-------- --------
Recoveries
Commercial - -
Real estate mortgage - -
Consumer - -
Total - -
Net chargeoffs (8,000) (4,000)
-------- --------
Provisions charged to income 15,000 15,000
-------- --------
Balance at September 30, $695,000 $751,000
-------- --------
13
The loan portfolio is periodically reviewed to evaluate the outstanding loans
and to measure both the performance of the portfolio and the adequacy of the
allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses, and internal credit ratings. Management's judgment as to
the adequacy of the allowance is based upon a number of assumptions about future
events which it believes to be reasonable, but which may or may not be
reasonable. However, because of the inherent uncertainty of assumptions made
during the evaluation process, there can be no assurance that loan losses in
further periods will not exceed the allowance for loan losses, or that
additional allocations to the allowance will not be required.
RESULTS OF OPERATIONS
The Company's net income was $370,000 for the three months ended September 30,
1997, compared to a net loss of $1,000 for the three months ended September 30,
1996. The improvement was due primarily to the one-time SAIF assessment recorded
in the prior period, as discussed below.
The Company's net interest income increased to $1,122,000 for the three months
ended September 30, 1997, compared to $1,069,000 in the same period in 1996.
Interest on loans increased from $1,953,000 in the prior year, to $2,071,000 in
the current year, while interest on investment securities and interest-bearing
deposits was unchanged. The improvement reflects the increase in loan volume.
Interest expense increased from $1,012,000 in the prior year, to $1,078,000 in
the current period, reflecting the increase in deposits.
The Company provided $15,000 for loan losses in the current period, compared to
a provision of $15,000 in the prior year. There were net chargeoffs of $4,000
in the current period compared to net chargeoffs of $8,000 in the prior period.
The Company's other income increased to $194,000 in the current quarter,
compared to $172,000 in the same quarter of the prior year. The increase is
primarily attributable to improved results from loan production office
operations.
The Company's other expenses decreased to $708,000 in the current period from
$1,249,000 in the same period of the prior year. The decrease was primarily due
to the one-time SAIF assessment of $553,000 recorded in the quarter ended
September 30, 1996. Included in other expenses were merger related expenses of
$26,786 for the quarter ended September 30, 1997.
14
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8-K
Exhibit 11 Statement Re: Computation of Per Share
Earnings attached.
Exhibit 27 Financial Data Schedule
15
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.
GF BANCSHARES, INC
(REGISTRANT)
By: /s/ Arthur H. Hammond
------------------------------------
Arthur H. Hammond, E.V.P./C.F.O.
By: /s/ Ron J. Franklin
------------------------------------
Ron J. Franklin, President/C.E.O.
Date: October 31, 1997
16