UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Mark One
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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[ ] 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.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-2443683
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
8458 Campbellton Street, Douglasville, Georgia 30134-1803
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(Address of principal executive offices)
(770) 942-5108
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(Registrant's telephone number)
N/A
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(Former name, former address and former fiscal year, if
changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of November 10, 2000: 1,389,150; no par value.
Transitional Small Business Disclosure Format Yes No X
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FIRST DEPOSIT BANCSHARES, INC. AND SUBSIDIARY
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INDEX
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Page No.
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet - September 30, 2000..................................................... 3
Consolidated Statements of Income and Comprehensive Income -
Three and Nine Months Ended September 30, 2000 and 1999........................................... 4
Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 2000 and 1999.......................................................... 5
Notes to Consolidated Financial Statements.......................................................... 6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations....................................................... 7
PART II. OTHER INFORMATION
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
SEPTEMBER 30, 2000
(Unaudited)
(Dollars in Thousands)
Assets
- ------
Cash and due from banks $ 417
Interest-bearing deposits in banks 4,494
Securities available-for-sale, at fair value 15,359
Securities held-to-maturity (fair value $2,094) 2,119
Loans 111,481
Less allowance for loan losses 1,117
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Loans, net 110,364
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Premises and equipment 3,283
Real estate held for development and sale 1,413
Other assets 1,330
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Total assets $ 138,779
================
Liabilities and Stockholders' Equity
- ------------------------------------
Deposits
Demand $ 4,459
Interest-bearing demand 11,799
Savings 13,447
Time deposits 64,650
----------------
Total deposits 94,355
Federal Home Loan Bank advances 18,500
Other liabilities 1,586
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Total liabilities 114,441
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Commitments and Contingent Liabilities
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 11,445
Accumulated other comprehensive loss, net of tax (143)
Unearned ESOP shares (1,134)
Less cost of treasury stock (851)
----------------
Total stockholders' equity 24,338
----------------
Total liabilities and stockholders' equity $ 138,779
================
The accompanying notes are an integral part of these financial statements.
3
FIRST DEPOSIT BANCSHARES, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------------------------- ----------------------------------------
2000 1999 2000 1999
------------------ ------------------- ------------------- ------------------
Interest income
Loans $ 2,277 $ 1,712 $ 6,190 $ 5,089
Taxable securities 296 247 917 396
Federal funds sold 42 127 104 300
------------------ ------------------- ------------------- ------------------
Total interest income 2,615 2,086 7,211 5,785
------------------ ------------------- ------------------- ------------------
Interest expense
Deposits 1,186 948 3,166 2,876
Other borrowings 297 73 690 212
------------------ ------------------- ------------------- ------------------
Total interest expense 1,483 1,021 3,856 3,088
------------------ ------------------- ------------------- ------------------
Net interest income 1,132 1,065 3,355 2,697
Provision for loan losses 23 15 60 45
------------------ ------------------- ------------------- ------------------
Net interest income after
provision for loan losses 1,109 1,050 3,295 2,652
------------------ ------------------- ------------------- ------------------
Other income 247 195 805 529
------------------ ------------------- ------------------- ------------------
Other expenses
Salaries and employee benefits 391 327 1,178 961
Occupancy and equipment expenses 117 118 326 318
Other operating expenses 328 201 927 609
------------------ ------------------- ------------------- ------------------
Total other expenses 836 646 2,431 1,888
------------------ ------------------- ------------------- ------------------
Income before income taxes 520 599 1,669 1,293
Income tax expense 198 212 648 490
------------------ ------------------- ------------------- ------------------
Net income 322 387 1,021 803
Other comprehensive income (loss)
Unrealized gains (losses) on securities
available-for-sale arising during
period, net of tax 168 (60) 74 (60)
------------------ ------------------- ------------------- ------------------
Comprehensive income $ 490 $ 327 $ 1,095 $ 743
================== =================== =================== ==================
Basic and diluted earnings
per common share $ 0.23 $ 0.26 $ 0.72 $ 0.55
Weighted average shares outstanding 1,389,150 1,449,000 1,410,349 1,449,000
Dividends declared per common share 0.08 - 0.24 -
The accompanying notes are an integral part of these financial statements.
4
FIRST DEPOSIT BANCSHARES, INC.
AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
(Dollars in Thousands)
2000 1999
-------------------- --------------------
OPERATING ACTIVITIES
Net income $ 1,021 $ 803
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 161 263
ESOP compensation expense 17 -
Provision for loan losses 60 45
(Increase) decrease in real estate held
for development and sale (75) 289
Other operating activities 446 755
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Net cash provided by operating activities 1,630 2,155
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INVESTING ACTIVITIES
Purchases of securities available-for-sale (1,117) (14,880)
Proceeds from maturities of securities available-for-sale 217 1,500
Proceeds from sale of securities available-for-sale 2,500 -
Purchases of securities held-to-maturity - (1,500)
Proceeds from maturities of securities held-to-maturity 156 181
Net decrease in Federal funds sold 1,375 665
Net increase in interest-bearing deposits (1,075) -
Net increase in loans (21,611) (3,617)
Decrease in ESOP loan (126) -
Purchase of premises and equipment (1,563) (320)
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Net cash used in investing activities (21,244) (17,971)
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FINANCING ACTIVITIES
Net increase (decrease) in deposits 10,513 (2,793)
Net increase in Federal Home Loan Bank advances 9,500 2,000
Issuance of common stock - 14,490
Purchase of treasury stock (851) -
Dividends paid (386) -
Stock offering expenses - (729)
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Net cash provided by financing activities 18,776 12,968
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Net decrease in cash and due from banks (838) (2,848)
Cash and due from banks, beginning of period 1,255 7,557
-------------------- --------------------
Cash and due from banks, end of period $ 417 $ 4,709
==================== ====================
NONCASH FINANCING ACTIVITIES
Common stock issued to ESOP - 1,260
The accompanying notes are an integral part of these financial statements.
5
FIRST DEPOSIT BANCSHARES, INC. AND SUBSIDIARY
NOTES TO 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 nine month periods ended
September 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.
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 September 30, 2000, the liquidity ratio of the Bank was 16.94% and, as
determined under guidelines established by regulatory authorities, was
considered satisfactory and within management's target ratio.
At September 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
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Regulatory
First Deposit Douglas Minimum
Bancshares, Inc. Federal Bank Requirement
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Leverage capital ratios 18.16 % 12.74 % 4.00 %
Risk-based capital ratios:
Core capital 27.46 19.28 4.00
Total capital 28.71 20.52 8.00
Financial Condition
The Company's total assets increased by $20.9 million, or 17.7% for the nine
months ended September 30, 2000. Total loans increased $21.6 million, or 24% for
the same period. The loan to deposit ratio as of September 30, 2000 was 118% as
compared to 106% at September 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 September 30, 2000, deposits were $94.4 million, up $10.6 million
from $83.8 million at December 31, 1999. Total shareholders' equity decreased
$14,000 at December 31, 1999. The decrease is primarily the net of treasury
stock purchased of $851,000, dividends paid of $386,000, reduction of unearned
ESOP shares of $126,000 and net income of $1,021,000. 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 Nine Months Ended September 30, 2000 and
1999
The Company's net interest income increased by $67,000 and $658,000 for the
three and nine month periods ended September 30, 2000, respectively, as compared
to the same periods in 1999. The Company's net interest margin increased to
3.65% for the nine months ended September 30, 2000 as compared to 3.46% 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 $107.3 million at
September 30, 1999 to $133.5 million at September 30, 2000.
The provision for loan losses increased $8,000 and $15,000 for the three and
nine month periods in 2000, respectively, 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 1.00% and 1.18% at
September 30, 2000 and December 31, 1999, respectively. Nonaccrual loans and net
charge-offs have decreased by $80,000 and $3,000, respectively, as of September
30, 2000 compared to the same periods 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
September 30, 2000 and 1999 is as follows:
September 30,
---------------------------------
2000 1999
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(Dollars in Thousands)
---------------------------------
Nonaccrual loans $ 221 $ 301
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.
9
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.
Information regarding certain loans and the allowance for loan loss for the nine
months ended September 30, 2000 and 1999 is as follows:
2000 1999
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(Dollars in Thousands)
---------------------------------
Average amount of loans outstanding $ 96,805 $ 85,900
=============== ===============
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)
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Additions to allowance charged to operating expense during period 60 45
--------------- ---------------
Balance of allowance for loan losses at end of period $ 1,117 $ 1,042
=============== ===============
Ratio of net loans charged off during the period to
average loans outstanding - % - %
=============== ===============
Other income increased by $276,000 for the nine month period ended September 30,
2000 as compared to the same period in 1999. The single most significant
increase was an increase of $115,000 in gains on sale of real estate held for
development and sale for the nine month period ended September 30, 2000 as
compared to 1999.
Other notable increases for the nine months ended September 30, 2000 compared to
1999 were increases in gains on sale of loans of $96,000 and service charges on
deposit accounts of $87,000.
10
Other expenses increased for the three and nine month periods in 2000 as
compared to the same periods in 1999 by $190,000 and $543,000, respectively. For
the nine month period ended September 30, 2000, salaries and employee benefits
increased $217,000 and other operating expenses increased $318,000, 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 and an increase in
accruals totaling $80,000 for profit sharing and ESOP contributions. The number
of full-time equivalent employees was 49 and 38 at September 30, 2000 and 1999,
respectively. The increase in other operating expenses is primarily attributable
to $186,000 in holding company operating expenses plus increases at the bank
level related to the increased volume of loan and deposit activity.
The Company's provision for income taxes increased by $158,000 for the nine
month period in 2000 as compared to the same period in 1999 due to increased
taxable income. The Company's effective tax rate was 39% for the nine months
ended September 30, 2000 and 1999.
Net income increased by $218,000 for the nine months ended September 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-earning assets 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 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
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: November 10, 2000 BY: /s/ J. David Higgins
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President, Chief Executive Officer and
Treasurer
DATE: November 10, 2000 BY: /s/ John L. King
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Executive Vice President and Chief
Financial Officer
13