UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File Number: 000-26033
First Deposit Bancshares, Inc.
---------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Georgia 58-2443683
- ------------------------------------------- -----------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8458 Campbellton Street, Douglasville, Georgia 30134-1803
---------------------------------------------------------------
(Address of principal executive offices)
(770) 942-5108
---------------------------
(Issuer's telephone number)
N/A
--------------------------------------------------------------------------
(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 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
----- ----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of August 1, 2000; 1,389,150; no par value.
Transitional Small Business Disclosure Format Yes No X
----- -----
FIRST DEPOSIT BANCSHARES, INC. AND SUBSIDIARY
- --------------------------------------------------------------------------------
INDEX
-----
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Condensed Consolidated Balance Sheet - June 30, 2000.............3
Condensed Consolidated Statements of Income and Comprehensive
Income - Three and Six Months Ended June 30, 2000 and 1999....4
Condensed Consolidated Statements of Cash Flows - Six
Months Ended June 30, 2000 and 1999............................5
Notes to Condensed Consolidated Financial Statements.............6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations....................7
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders........12
Item 6 - Exhibits and Reports on Form 8-K...........................12
Signatures..........................................................13
2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FIRST DEPOSIT BANCSHARES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(Unaudited)
(Dollars in Thousands)
Assets
- ------
Cash and due from banks $ 834
Interest bearing deposits in banks 2,920
Federal funds sold 125
Securities available-for-sale, at fair value 16,921
Securities held-to-maturity (fair value $2,090) 2,146
Loans 107,092
Less allowance for loan losses 1,094
-----------
Loans, net 105,998
-----------
Premises and equipment 2,815
Real estate held for development and sale 1,188
Other assets 1,328
-----------
Total assets $ 134,275
===========
Liabilities and Shareholders' Equity
- ------------------------------------
Deposits
Demand $ 5,533
Interest-bearing demand 12,801
Savings 15,448
Time deposits 56,580
-----------
Total deposits 90,362
Federal Home Loan Bank advances 18,500
Other liabilities 1,410
-----------
Total liabilities 110,272
-----------
Commitments and Contingent Liabilities
Shareholders' Equity
- --------------------
Preferred stock, no par, 10,000,000 authorized,
none issued
Common stock, no par, 10,000,000 authorized,
1,575,000 issued 15,021
Retained earnings 11,278
Accumulated other comprehensive loss (311)
Unearned ESOP shares (1,134)
-----------
24,854
Less cost of treasury stock (851)
-----------
Total shareholders' equity 24,003
-----------
Total liabilities and shareholders' equity $ 134,275
===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
FIRST DEPOSIT BANCSHARES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------- -------------------------------------
2000 1999 2000 1999
-------------- -------------- ---------------- ----------------
Interest income
Loans $ 2,074 $ 1,707 $ 3,913 $ 3,377
Taxable securities 311 54 621 121
Interest-bearing deposits and
Federal funds sold 31 96 62 173
--------------- --------------- ---------------- ----------------
Total interest income 2,416 1,857 4,596 3,671
--------------- --------------- ---------------- ----------------
Interest expense
Deposits 1,042 943 1,980 1,928
Other borrowings 249 70 393 139
--------------- --------------- ---------------- ----------------
Total interest expense 1,291 1,013 2,373 2,067
--------------- --------------- ---------------- ----------------
Net interest income 1,125 844 2,223 1,604
Provision for loan losses 22 15 37 30
--------------- --------------- ---------------- ----------------
Net interest income after
provision for loan losses 1,103 829 2,186 1,574
--------------- --------------- ---------------- ----------------
Other income 262 260 558 362
--------------- --------------- ---------------- ----------------
Other expenses
Salaries and employee benefits 403 325 787 634
Occupancy and equipment expenses 93 81 179 150
Other operating expenses 346 245 629 458
--------------- --------------- ---------------- ----------------
Total other expenses 842 651 1,595 1,242
--------------- --------------- ---------------- ----------------
Income before income taxes 523 438 1,149 694
Income tax expense 207 197 450 278
--------------- --------------- ---------------- ----------------
Net income 316 241 699 416
Other comprehensive loss:
Unrealized losses on securities available-for-sale
arising during period, net of tax (51) (81) (93) (81)
--------------- --------------- ---------------- ----------------
Comprehensive income $ 265 $ 160 $ 606 $ 335
=============== =============== ================ ================
Basic and diluted earnings (losses) per
common share $ 0.23 $ N/A $ 0.49 $ N/A
=============== =============== ================ ================
Weighted average shares outstanding $ 1,389,150 $ N/A $ 1,421,065 $ N/A
=============== =============== ================ ================
Dividends declared per common share $ 0.08 $ N/A $ 0.16 $ N/A
=============== =============== ================ ================
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
FIRST DEPOSIT BANCSHARES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
(Dollars in Thousands)
2000 1999
--------------- --------------
OPERATING ACTIVITIES
Net income $ 699 $ 416
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 105 176
ESOP compensation expense 17 -
Provision for loan losses 37 30
Decrease in real estate held
for development and sale 150 -
Other operating activities 496 775
--------------- --------------
Net cash provided by operating activities 1,504 1,397
--------------- --------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale (1,117) (8,136)
Proceeds from maturities of securities available-for-sale 12 1,471
Proceeds from sales of securities available-for-sale 500 -
Purchases of securities held-to-maturity - (1,000)
Proceeds from maturities of securities held-to-maturity 129 77
Net decrease in Federal funds sold 1,325 665
Net increase in interest-bearing deposits in banks (2,920) -
Net increase in loans (17,221) (1,020)
Decrease in ESOP loan 126 -
Purchase of premises and equipment (1,039) (168)
--------------- --------------
Net cash used in investing activities (20,205) (8,111)
--------------- --------------
FINANCING ACTIVITIES
Net increase in deposits 6,519 32,525
Net increase in other borrowings 9,500 -
Purchase of treasury stock (851) -
Dividends paid (232) -
--------------- --------------
Net cash provided by financing activities 14,936 32,525
--------------- --------------
Net increase (decrease) in cash and due from banks (3,765) 25,811
Cash and due from banks, beginning of period 4,599 7,557
--------------- --------------
Cash and due from banks, end of period $ 834 $ 33,368
=============== ==============
The accompanying notes are an integral part of these condensed consolidated
financial statements.
5
FIRST DEPOSIT BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The consolidated financial information included herein is unaudited;
however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of
management, necessary for a fair statement of results for the interim
periods.
The results of operations for the three and six month periods ended
June 30, 2000 are not necessarily indicative of the results to be
expected for the full year.
NOTE 2. CURRENT ACCOUNTING DEVELOPMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities".
The effective date of this statement has been deferred by SFAS No. 137
until fiscal years beginning after June 15, 2000. However, the
statement permits early adoption as of the beginning of any fiscal
quarter after its issuance. The Company expects to adopt this statement
effective January 1, 2001. SFAS No. 133 requires the Company to
recognize all derivatives as either assets or liabilities in the
balance sheet at fair value. For derivatives that are not designated as
hedges, the gain or loss must be recognized in earnings in the period
of change. For derivatives that are designated as hedges, changes in
the fair value of the hedged assets, liabilities, or firm commitments
must be recognized in earnings or recognized in other comprehensive
income until the hedged item is recognized in earnings, depending on
the nature of the hedge. The ineffective portion of a derivative's
change in fair value must be recognized in earnings immediately.
Management has not yet determined what effect the adoption of SFAS No.
133 will have on the Company's earnings or financial position.
There are no other recent accounting pronouncements that have had, or
are expected to have, a material effect on the Company's financial
statements.
6
FIRST DEPOSIT BANCSHARES, INC. AND SUBSIDIARY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
First Deposit Bancshares, Inc. ("First Deposit") was formed to acquire
the capital stock of Douglas Federal Bank (the "Bank") in connection
with its conversion from a mutual federal savings bank to a stock
federal savings bank. The conversion was approved by the Bank's
depositors on June 25, 1999 and the offering of 1,575,000 shares of the
common stock of First Deposit was closed on July 8, 1999. Until July 8,
1999, First Deposit had no operations, had not issued any common stock,
and did not own the Bank. Prior to July 8, 1999, there were no
outstanding shares of common stock. The results of operations for the
three and six months ended June 30, 1999 and the financial condition as
of June 30, 1999 consist only of the Bank.
Cautionary Statement about Forward-Looking Statements
This quarterly report contains "forward looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. When
used in this report, the words "believes," "expects," "anticipates,"
"estimates," and similar words and expressions are generally intended
to identify forward-looking statements. Statements that describe the
Company's future strategic plans, goals, or objectives are also
forward-looking statements, including those regarding the intent,
belief, or current expectations of management and are not guarantees of
future performance, results, or events and involve risks and
uncertainties, and that actual results and events may differ materially
from those in the forward-looking statements as a result of various
factors including, but not limited to, (i) general economic conditions
in the markets in which the Company operates, (ii) competitive
pressures in the markets in which the Company operates, (iii) the
effect of future legislation or regulatory changes on the Company's
operations, and (iv) other factors described from time to time in the
Company's filings with the Securities and Exchange Commission. The
forward-looking statements included in this report are made only as of
the date hereof. The Company undertakes no obligation to update such
forward-looking statements to reflect subsequent events or
circumstances.
7
Liquidity and Capital Resources
Liquidity management involves the matching of the cash flow requirements of
customers who may be either depositors desiring to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs and the ability of the Company to meet those needs. The Company seeks to
meet liquidity requirements primarily through management of short-term
investments, monthly amortizing loans, maturing single payment loans, and
maturities and prepayments of securities. Also, the Company maintains
relationships with correspondent banks which could provide funds on short
notice.
The liquidity and capital resources of the Company and Bank are monitored on a
periodic basis by management and Federal regulatory authorities. Management
reviews liquidity on a periodic basis to monitor and adjust liquidity as
necessary. Management has the ability to adjust liquidity by selling securities
available for sale, selling participations in loans generated by the Company and
accessing available funds through various borrowing arrangements. The Company's
short-term investments and available borrowing arrangements are adequate to
cover any reasonably anticipated immediate need for funds.
As of June 30, 2000, the liquidity ratio of the Bank was 20.15% and, as
determined under guidelines established by regulatory authorities, was
considered satisfactory and within management's target ratio.
At June 30, 2000, the capital ratios of the Company and the Bank were adequate
based on regulatory minimum capital requirements. The minimum capital
requirements and the actual capital ratios for the Company and Bank are as
follows:
Actual
Regulatory
First Deposit Douglas Minimum
Bancshares, Inc. Federal Bank Requirement
----------------- ------------ ------------
Leverage capital ratios 18.04 % 12.75 % 4.00 %
Risk-based capital ratios:
Core capital 35.44 20.79 4.00
Total capital 36.92 22.04 8.00
Financial Condition
The Company's total assets increased by $16.4 million, or 13.88% for the six
months ended June 30, 2000. Total loans increased $17.2 million, or 19.16% for
the same period. The loan to deposit ratio as of June 30, 2000 was 107.19% as
compared to 72.23% at June 30, 1999, reflecting continued strong loan demand. In
order to satisfy this growing demand, the Company has continued to obtain
Federal Home Loan Bank advances to fund loan growth and maintain adequate
liquidity. At June 30, 2000, deposits were $90.4 million, up $6.6 million from
$83.8 million at December 31, 1999. Total shareholders' equity decreased to
$24.0 million at June 30, 2000 from $24.3 million at December 31, 1999. The
decrease of $300,000 is primarily the net of treasury stock purchased of
$851,000, dividends paid of $232,000, reduction of unearned ESOP shares of
$126,000 and net income of $699,000. The purchase of treasury stock is the
result of the stock repurchase plan announced on March 15, 2000.
8
Results of Operations For The Three and Six Months Ended June 30, 2000 and 1999
The Company's net interest income increased by $281,000 and $619,000 for the
three and six month periods ended June 30, 2000 as compared to the same periods
in 1999. The Company's net interest margin increased to 3.75% for the six months
ended June 30, 2000 as compared to 3.28% for the same period in 1999. The
increase in the net interest margin is due primarily to an increase in average
interest-earning assets which is directly related to the stock offering in 1999.
Interest-earning assets increased from $97.6 million at June 30, 1999 to $129.2
million at June 30, 2000. The net interest margin is expected to gradually
increase as available funds are invested in loans versus securities and
interest-bearing deposits in banks.
The provision for loan losses increased $7,000 for the three and six month
periods in 2000 as compared to the same periods in 1999. The increase in
provision for loan losses for 2000 is primarily due to the overall increase in
the volume of loans as compared to 1999. The Company's allowance for loan losses
to total loans amounted to 1.02% and 1.18% at June 30, 2000 and December 31,
1999, respectively. Nonaccrual loans and net charge-offs have decreased by
$213,000 and $3,000, respectively, as of June 30, 2000 compared to the same
period in 1999. The allowance for loan losses is maintained at a level that is
deemed appropriate by management to adequately cover all known and inherent
risks in the loan portfolio. Management's evaluation of the loan portfolio
includes a continuing review of loan loss experience, current economic
conditions which may affect the borrower's ability to repay and the underlying
collateral value.
Information with respect to nonaccrual, past due, and restructured loans at June
30, 2000 and 1999 is as follows:
June 30,
---------------------------------
2000 1999
--------------- ---------------
(Dollars in Thousands)
---------------------------------
Nonaccrual loans $ 597 $ 810
Loans contractually past due ninety days or more as to interest
or principal payments and still accruing - -
Restructured loans - -
Loans, now current about which there are serious doubts as to the
ability of the borrower to comply with loan repayment terms - -
and restructured loans under original terms
Interest income that was recorded on nonaccrual and restructured loans - -
It is the policy of the Company to discontinue the accrual of interest income
when, in the opinion of management, collection of such interest becomes
doubtful. This status is accorded such interest when (1) there is a significant
deterioration in the financial condition of the borrower and full repayment of
principal and interest is not expected and (2) the principal or interest is more
than ninety days past due, unless the loan is both well-secured and in the
process of collection.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity or capital resources.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.
9
Information regarding certain loans and the allowance for loan loss for the six
months ended June 30, 2000 and 1999 is as follows:
2000 1999
--------------- ---------------
(Dollars in Thousands)
---------------------------------
Average amount of loans outstanding $ 96,805 $ 85,540
=============== ===============
Balance of allowance for loan losses at beginning of period $ 1,057 $ 1,000
--------------- ---------------
Loans charged off
Commercial and financial $ - $ -
Real estate mortgage (5)
Instalment - -
--------------- ---------------
- (5)
--------------- ---------------
Loans recovered
Commercial and financial - 2
Real estate mortgage - -
Instalment - -
--------------- ---------------
- 2
--------------- ---------------
Net charge-offs - (3)
--------------- ---------------
Additions to allowance charged to operating expense during period 37 30
--------------- ---------------
Balance of allowance for loan losses at end of period $ 1,094 $ 1,027
=============== ===============
Ratio of net loans charged off during the period to
average loans outstanding - % - %
=============== ===============
Other income increased by $196,000 for the six month period ended June 30, 2000
as compared to the same period in 1999. The single most significant increase was
an increase of $116,000 in gains on sale of real estate held for development and
sale for the six month period ended June 30, 2000 as compared to 1999.
Other notable increases for the six months ended June 30, 2000 compared to 1999
were increases in gains on sale of loans of $40,000 and service charges on
deposit accounts of $13,000.
Other expenses increased for the three and six month periods in 2000 as compared
to the same periods in 1999 by $191,000 and $353,000, respectively. For the six
month period ended June 30, 2000, salaries and employee benefits increased
$153,000, occupancy and equipment expenses increased $29,000, and other
operating expenses increased $171,000, as compared to the same period in 1999.
The increase in salaries and employee benefits represents normal increases in
officer and employee compensation, the addition of two management employees plus
nine other employees, an increase in accruals totaling $53,000 for profit
sharing and ESOP contributions. The number of full-time equivalent employees was
49 and 38 at June 30, 2000 and 1999, respectively. The increase in other
operating expenses is primarily attributable to $108,000 in holding company
operating expenses plus increase at the bank level related to the increased
volume of loan and deposit activity.
10
The Company's provision for income taxes increased by $172,000 for the six month
period in 2000 as compared to the same period in 1999 due to increased taxable
income. The Company's effective tax rate decreased to 39% for the first six
months of 2000 as compared to 40% for the first six months of 1999.
Net income increased by $75,000 and $283,000 for the three and six months ended
June 30, 2000 as compared to the same period in 1999. This increase is a
combination of the increase in net interest income directly related to the
increase in interest-bearing accounts and the gains on sale of real estate held
for development and sale.
The Company is not aware of any other known trends, events or uncertainties,
other than the effect of events as described above, that will have or that are
reasonably likely to have a material effect on its liquidity, capital resources
or operations. The Company is also not aware of any current recommendations by
the regulatory authorities which, if they were implemented, would have such an
effect.
11
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
(a) The annual meeting of the stockholders of the Company was held
on June 13, 2000.
(b) The following directors were elected at the meeting to serve
terms through the year indicated:
Carlton H. Boyd 2003
Joseph H. Fowler 2003
(c) The 2000 Stock Incentive Plan was approved.
(d) Mauldin & Jenkins, LLC was ratified as the Company's
independent auditors for fiscal year 2000.
The shares represented at the meeting (1,054,492 shares or
70.2%) voted as follows:
Item (b) For Against Abstain Total
Carlton H. Boyd 1,052,000 0 2,492 1,054,492
Joseph H. Fowler 1,052,000 0 2,492 1,054,492
Item (3) For Against Abstain Total
Approval of 2000
Stock Incentive Plan 710,628 25,950 317,914 1,054,492
Item (c) For Against Abstain Total
Ratification of
Mauldin &
Jenkins, LLC 1,047,153 5,426 1,913 1,054,492
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. 2000 Stock Option Plan
27. Financial Data Schedule
(b) Reports on Form 8-K
None
12
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FIRST DEPOSIT BANCSHARES, INC.
DATE: 8-11-00 BY: /s/ J. David Higgins
----------------- -------------------------------------------------
President, Chief Executive Officer and Treasurer
DATE: 8-11-00 BY: /s/ John L. King
----------------- -------------------------------------------------
Executive Vice President and Chief Financial
Officer
13