Back to GetFilings.com

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

Mark One

ý          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
           EXCHANGE ACT OF 1934

                   For the quarterly period ended       June 30, 2002   

¨        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:  000-24203

GB&T Bancshares, Inc.

 500 Jesse Jewell Parkway, S.E.
          Gainesville, Georgia  30501

(770) 532-1212

Indicate by check mark whether the registrant (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 registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.   

State the number of shares outstanding of each of the issuer’s classes of common stock, as of August 9, 2002:    4,766,030 shares; no par value 

GB&T BANCSHARES, INC.

TABLE OF CONTENTS

2

  See accompanying notes to consolidated financial statements. 

3

GB&T BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)

See accompanying notes to consolidated financial statements.

4

GB&T BANCSHARES, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income

Consolidated Statements of Stockholders' Equity
Six Months Ended June 30, 2002

* Effective June 30, 2002, the Company changed its common stock from $5 par value to no par value.

5

GB&T BANCSHARES, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)

See accompanying notes to consolidated financial statements.

6

GB&T BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1.         BASIS OF PRESENTATION

The unaudited consolidated financial statements include the accounts of GB&T Bancshares, Inc. and its wholly owned subsidiaries, Gainesville Bank & Trust, United Bank & Trust, Community Trust Bank and Community Loan Company (collectively “the Company”). 

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, for interim financial information and with instructions for Form 10-Q.  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 and recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three and six-month periods ended June 30, 2002 is not necessarily indicative of the results that may be expected for the year ending December 31, 2002.

NOTE 2.        MERGER AGREEMENT WITH HOME TOWN BANK OF VILLA RICA

Effective June 13, 2002, the Company entered into an agreement and Plan of Reorganization ("the Agreement") to merge Home Town Bank of Villa Rica, Villa Rica, Georgia, into GB&T Bancshares, Inc.  Terms of the agreement call for each shareholder of Home Town Bank of Villa Rica to receive either $18.00 in cash or 1.0588 shares of GB&T capital stock for each share of Home Town Bank of Villa Rica common stock or a combination of the two.  The total cash consideration for conversion of all of the Home Town Bank of Villa Rica shares is subject to an overall limit of 50 percent.  The merger is subject to approval of the shareholders of Home Town Bank of Villa Rica and federal and state regulatory authorities.

7

GB&T BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)

NOTE 3.      EARNINGS PER COMMON SHARE (in thousands, except per share data)

Presented below is a summary of the components used to calculate basic and diluted earnings per share for the three and six month periods ended June 30, 2002 and 2001.

8

GB&T BANCSHARES, INC. AND SUBSIDIARIES

Item 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
               RESULTS OF OPERATIONS

The following is management’s discussion and analysis of certain significant factors which have affected our financial position and operating results including our wholly-owned subsidiaries, Gainesville Bank & Trust, United Bank & Trust, Community Trust Bank and Community Loan Company during the periods included in the accompanying consolidated financial statements.

Forward-Looking Statements

Some of the statements made in this quarterly report (and in other documents to which we refer) are “forward-looking statements.”  When used in this document, the words, “anticipate,” “believe,” “estimate,” and similar expressions generally identify forward-looking statements.  These statements are based on the beliefs, assumptions, and expectations of our management, and on information currently available to those members of management.  They are expressions of historical fact, not guarantees of future performance.  Forward-looking statements include information concerning possible or assumed future results of our operations.

Forward-looking statements involve risks, uncertainties, and assumptions, and certain factors could cause actual results to differ from results expressed or implied by the forward-looking statements, including:

1. economic conditions (both generally and in the markets where we operate);
2. competition from other companies that provide financial services similar to those we offer;
3. government regulation and legislation;
4. changes in interest rates; and
5. unexpected changes in the financial stability and liquidity of our credit customers.

We believe these forward-looking statements are reasonable.  You should not, however, place undue reliance on these forward-looking statements, because the future results and stockholder values of the Company may differ materially from those expressed or implied by these forward-looking statements.

Financial Condition

We reported consolidated total assets of $581 million at June 30, 2002 compared to $548 million at December 31, 2001, representing an increase of $33 million or 6.0%.  We continued to experience growth in total assets, loans and deposits during the six months ended June 30, 2002. Total loans increased by $28 million or 6.7% for the six months ended June 30, 2002.  Total deposits increased $27 million or 6.3% for the six months ended June 30, 2002.  Deposit growth almost matched loan growth during the period resulting in a loan to deposit ratio of 98.5%, up from 98.1% at December 31, 2001.

9

GB&T BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

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 our ability to meet those needs.  We seek to meet liquidity requirements primarily through management of short-term investments, monthly amortizing loans, maturing single payment loans, and maturities of securities and prepayments.  Also we maintain relationships with correspondent banks which could provide funds on short notice.  As of June 30, 2002, we had borrowed under Federal funds purchase lines and securities sold under agreement to repurchase, $12.5 million compared to $19.7 million at December 31, 2001.

Our liquidity and capital resources are monitored on a periodic basis by management, State 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 we generate and accessing available funds through various borrowing arrangements.  Our short-term investments and available borrowing arrangements are adequate to cover any reasonably anticipated immediate need for funds.

Our liquidity ratio was 18.52% at June 30, 2002, above our policy minimum ratio of 15%.  Liquidity is measured by the ratio of net cash, Federal funds sold and securities to net deposits and short-term liabilities. In the event the banks need to generate additional liquidity, funding plans would be implemented as outlined in the liquidity policy of the banks. The subsidiary banks have lines of credit available to meet any unforeseen liquidity needs.  Also, the Banks have relationships with the Federal Home Loan Bank of Atlanta, which provide funding for loan growth on an as needed basis.

10

GB&T BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

As of June 30, 2002, the Company and the Banks were considered to be well-capitalized as defined in the FDIC Improvement Act and based on regulatory minimum capital requirements.  The Company and its bank subsidiaries’ actual capital ratios are presented in the following table.

Results of Operations

Our profitability is determined by our ability to effectively manage interest income and expense, to minimize loan and security losses, to generate noninterest income, and to control operating expenses.  Since interest rates are determined by market forces and economic conditions beyond our control, our ability to generate net interest income is dependent upon our ability to obtain an adequate net interest spread between the rate paid on interest-bearing liabilities and the rate earned on interest-earning assets.  The net interest margin was 4.41% for the six months ended June 30, 2002, compared to 4.42% for the same period in 2001.  In the first six months of 2002, the yield on earning assets decreased to 7.30% from 9.07% for the same period in 2001, and the cost of interest bearing liabilities decreased to 3.35% from 5.32%. 

Net interest income increased $576,000 or 10.69% for the three months ended June 30, 2002 compared to the same period in 2001.  The net increase consists of a decrease in interest income of $1,299,000 or 11.93% less a decrease in interest expense of $1,875,000 or 34.08% for the three-month period.  Net interest income increased $776,000 or 7.26% for the six months ended June 30, 2002 compared to the same period in 2001.  The net increase consists of a decrease in interest income of $2,964,000 or 13.50% less a decrease in interest expense of $3,740,000 or 33.20% for the six-month period.  The increase in net interest income is due to a combination of the increase in the net interest spread to 3.95% for the six months ended June 30, 2002 from 3.75% for the same period in 2001 and increases in volume.

11

GB&T BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

Our provision for loan losses decreased by $260,000 or 56.03% during the three months ended June 30, 2002 as compared to the same period in 2001.  Our provision for loan losses decreased by $421,000 or 52.10% during the six months ended June 30, 2002 as compared to the same period in 2001.  The analysis below indicates a decrease of $96,000 in net charge-offs for the six months ended June 30, 2002 as compared to the same period in 2001.  The allowance for loan losses at June 30, 2002 was $5,716,000 or 1.28% of total loans compared to 1.43% at June 30, 2001.  Based on management’s evaluation, the allowance is adequate to absorb any potential loan losses at June 30, 2002.  The allowance for loan losses is evaluated monthly and adjusted to reflect the risk in the portfolio.

The following table summarizes the allowance for loan losses for the six-month period ended June 30, 2002 and 2001. 

12

GB&T BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

The following table is a summary of nonaccrual, past due and restructured debt. The numbers indicate decreases of $1,098,000 in nonaccrual loans and increases of $92,000 in past due loans over 90 days. The decrease in nonaccrual real estate loans was due primarily to the foreclosure on one loan carried in other real estate at fair value.  The majority of the nonaccrual and past due balances in consumer loans are related to Community Loan Company, our consumer finance company.  Due to the nature of the consumer finance business, these levels are normal and will consistently remain higher than those seen in the banking industry.  Community Loan Company’s reserve for loan loss is also higher to cover these higher levels of nonaccrual and past due loans.   There is minimal or no loss anticipated on the remaining real estate loans in nonaccrual and past due loans due to the value of the underlying collateral. 

Our policy is to discontinue the accrual of interest income when, in the opinion of management, collection of such interest becomes doubtful.  This status is determined 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 90 days past due, unless the loan is both well-secured and in the process of collection.  Accrual of interest on such loans is resumed when, in management’s judgment, the collection of interest and principal becomes probable.

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 their loan repayment terms.

13

GB&T BANCSHARES, INC. AND SUBSIDIARIES
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)

Other income for the three months ended June 30, 2002, increased by $72,000 or 4.69% compared to the same period in 2001.  Service charges increased by $133,000 and mortgage origination fees increased by $7,000. These increases were offset by decreases in insurance commissions of $18,000 and gain on sale of securities of $76,000.  Other income for the six months ended June 30, 2002, increased $559,000 or 19.08% compared to the same period in 2001.  Mortgage origination fees increased by $156,000, gain on sale of securities increased by $61,000 and gain on sale of assets increased by $115,000.  The increases in other income were partially offset by a $24,000 decrease in insurance commissions.  Mortgage origination fees increased as a result of refinancing activity spurred by the decline in mortgage rates.

Other expenses decreased by approximately $730,000 or 12.35% for the three months ended June 30, 2002 compared to the same period in 2001.  The decrease is due primarily to a decrease in salaries and employee benefits of $468,000 and a decrease in audit and professional fees of $231,000.  The decreases were partially offset by an increase in net occupancy and equipment expense of $72,000.  Other expenses decreased by approximately $730,000 or 6.69% for the six months ended June 30, 2002 compared to the same period in 2001.  The decrease is due primarily to a decrease in salaries and employee benefits of $342,000 and a decrease in audit and professional fees of $358,000, which is partially offset by an increase in net occupancy and equipment expense of $32,000.  The decreases in salaries and employee benefits is due to merger related contractual payments to employees paid in the second quarter of 2001 related to the merger with Community Trust Financial Services Corporation as well as the decreases in audit and professional fees which were merger related expenses.

Income tax expense increased by $440,000 and $737,000 for the three and six months ended June 30, 2002, compared to the same periods last year. The effective tax rate for the three-month period was 32.43%, compared to 49.00% for the same period in 2001.  This decrease reflects non-deductible merger expenses related to the merger of GB&T Bancshares, Inc. and Community Trust Financial Services Corporation taken in the second quarter of 2001.  The effective tax rate for the six-month period ended June 30, 2002 was 32.18% compared to 35.49% for the same period in 2001.

Net income increased by $1,198,000 or 426.33%, for the three months ended June 30, 2002 compared to the same period in 2001.  Exclusive of non-recurring merger expenses of $980,000 incurred during the second quarter of 2001 related to the merger with Community Trust Financial Services Corporation, net income increased by $218,000 or 17.29%.  Net income increased by $1,749,000 or 142.54% for the six months ended June 30, 2002 compared to the same period in 2001.  Exclusive of non-recurring expenses of $1,090,000 incurred during the six months ending June 30, 2001 related to the aforementioned merger, net income increased by $659,000 or 28.44%.

During the third quarter of 2001, we signed contracts with Jack Henry & Associates, Inc. to purchase hardware and software solutions to better equip the company for future operations.  These contracts amounted to approximately $1,200,000 and will afford us growth potential and allow us to process all affiliates on the same system.  The conversion to the new system is anticipated to be complete by the third quarter of 2002.  As of June 30, 2002, approximately $300,000 remains to be paid on the contracts.

We are 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.  We are not aware of any current recommendations by the regulatory authorities, which, if they were implemented, would have such an effect.

14

GB&T BANCSHARES, INC. AND SUBSIDIARIES

Item 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our net interest income and the fair value of our financial instruments (interest earning assets and interest bearing liabilities) are influenced by changes in market interest rates. We actively manage our exposure to interest rate fluctuations through policies established by the Asset/Liability Management Committee (the "ALCO"). The ALCO meets regularly and is responsible for approving asset/liability management policies, developing and implementing strategies to improve balance sheet positioning and net interest income and assessing the interest rate sensitivity of the Banks.

PART II - OTHER INFORMATION

Item 4.     Submission of Matters to a vote of Securities Holders

The annual meeting of the Stockholders of GB&T Bancshares, Inc. was held on May 20, 2002.  The meeting had been called pursuant to written notice for (1) the purpose of considering and voting upon the election of ten directors to constitute the Board of Directors to serve until the next annual meeting and until their successors are elected and qualified and (2) to consider an amendment to the Company’s 1997 Stock Incentive Plan to increase the number of shares of Common Stock that are available for the grant of awards under the Plan from 325,000 shares to 700,000 shares.  The results of the voting were as follows:

Item 6.     Exhibits and Reports on Form 8-K

(a)      Exhibits

99.1          Certification of Principal Executive Officer

99.2          Certification of Principal Financial Officer

(b)      Reports on Form 8-K

We did not file a report on Form 8-K during the quarter ending June 30, 2002.

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.

GB&T BANCSHARES, INC.

DATE:   8/14/2002                                                          BY: /s/ Richard A. Hunt                                 
                                                                                                Richard A. Hunt, Jr.
                                                                                                President and Chief Executive Officer

DATE:   8/14/2002                                                         BY: /s/ Gregory L. Hamby                              
                                                                                              Gregory L. Hamby
                                                                                              Executive Vice President &
                                                                                              Chief Financial Officer

16