UNITED STATES SECURITIES ANDEXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-Q

Mark One

 

| [ X ]
QUARTERLY REPORT PURSUANT TO      SECTION 13 OR 15(d) OF THE SECURITIES      EXCHANGE ACT OF 1934  
          For      the quarterly period ended **June 30, 2001** 
[__]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.**(Exact name ofregistrant as specified in its charter)
 

**Georgia**(State or other jurisdiction ofincorporation or organization)
 
**58-2400756**(IRSEmployerIdentification No.)
 

**500 Jesse Jewell Parkway, S.E.Gainesville, Georgia 30501**(Address of principal executiveoffices)
 

**(770) 532-1212**(Registrant’s telephone number,including area code)

**N/A**(Former name, former address andformer fiscal year, if changed since last report)
Indicate by check mark whether theregistrant (1) filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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  [__]**APPLICABLE ONLY TO CORPORATEISSUERS**
State the number of sharesoutstanding of each of the issuer’s classes of common stock, as ofAugust 1, 2001: 4,657,950 shares; $5par value

 

 

 

 

 
**********TABLE OF CONTENTS**
 
** ****Page No.****PART I.
**FINANCIAL INFORMATION****Item 1.       FINANCIAL STATEMENTS****Consolidated Balance Sheets – June30, 2001 (Unaudited)             And December 31, 2000 **
**1****Consolidated Statements of Income(Unaudited)-       Three and six months ended June 30,2001 and 2000
**2****Consolidated Statements ofComprehensive Income (Unaudited)-       Three and six months ended June 30,2001 and 2000
** 3****Consolidated Statements ofStockholders’ Equity (Unaudited)       Six months ended June 30, 2001
** 3****Consolidated Statements of CashFlows (Unaudited) -       **Six months ended June 30, 2001 and2000**
**4****Notes to Consolidated FinancialStatements (Unaudited)**
** 5-7****Item 2.       Management’s Discussionand Analysis of                          Financial Condition and Results ofOperations
**8-13****Item 3.      Quantitative and QualitativeDisclosures About Market Risk
**13**
**PART II. **
**OTHER INFORMATION****Item 4.       Submission of Matters to aVote of Security Holders
**14****Signatures**
**15**
 

**PART 1 - FINANCIAL INFORMATION**

**ITEM 1.        FINANCIAL STATEMENTS**

**GB&T BANCSHARES, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSJUNE 30, 2001 AND DECEMBER 31, 2000**

**(Dollars in Thousands)**
  **(unaudited)**** **** **   **2001**** ****2000****Assets**         Cash and due from banks 
$ 
       14,808 $         16,244 Interest-bearing deposits in banks                895                  324 Federal funds sold            24,622               7,723 Securities available-for-sale, at fair value            80,674             84,032       Loans          392,717            384,691 Less allowance for loan losses              5,618               5,099 
     Loans, Net
          387,099            379,592       Premises and equipment            13,570             13,093 Other assets            13,585             11,392 
**Total  Assets**
 
$       535,253 
$         512,400       **Liabilities and Stockholders' Equity**           Deposits     
   Noninterest-bearing
  $         50,309 
$
         49,209 
   Interest-bearing
          374,647            352,010 
     Total deposits
          424,956            401,219       Federal funds purchased and securities     
  sold under repurchase agreements
            11,310             17,132 Federal Home Loan Bank advances            47,577             44,603 Other borrowings              3,428               2,564 Other liabilities              6,109               6,333 
**Total liabilities**
          493,380            471,851       Stockholders' Equity     
   Common Stock, par value $5; 20,000,000
     
       shares authorized;4,657,950 shares
     
       issued and outstanding, respectively
            23,290             23,284 
   Capital surplus
              1,629               1,567 
   Retained earnings
            16,206             15,586 
   Accumulated other comprehensive
     
       income, net of tax
                748                  112 

**Total stockholders' equity**
            41,873             40,549 

 
     
**Total liabilities and stockholders' equity**
 
$     535,253 $       512,400       **The accompanying notes are an integral part of these financial statements.** 
 

1

 

**GB&T BANCSHARES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMETHREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000**

 
**( In Thousands, except per share amounts)** ** ** ** ** ** ** ** ****(unaudited)**    **2001** **2000** **2001** **2000****Interest income**        
   Loans
                        9,463                        8,834                        19,113                        17,110 
   Taxable securities
                          1,061                         1,053                         2,211                       2,048 
   Nontaxable securities
                             179                            164                           363                           324 
   Federal funds sold
                             176                               61                           246                            149 
   Interest-bearing deposits in banks
                               12                              27                             20                             36 
     Total interest income
                        10,891                       10,139                      21,953                      19,667          **Interest expense**        
   Deposits
                        4,664                        3,978                       9,488                       7,649 
   Other borrowings
                            838                           933                        1,777                        1,769 
     Total interest expense
                        5,502                          4,911                       11,265                        9,418          
**Net interest income**
                        5,389                        5,228                      10,688                      10,249 Provision for loan losses                            464                           332                           808                           676 
**Net interest income after**
        
**provision for loan losses**
                        4,925                        4,896                       9,880                       9,573          **Other income**        
   Service charges on deposit accounts
                            795                           420                        1,759                        1,052 
Mortgage origination fees
                            225                              85                           380                            165 
   Insurance commissions
                             169                            146                            319                           280 
Gain on sale of loans
                                -                                 16                              13                             50 
   Gain on sale of securities
                              76                            155                             76                            143 
   Other operating income
                            270                           345                           383                           465 
**Total other income**
                         1,535                          1,167                       2,930                        2,155          **Other expenses**        
   Salaries and other employee benefits
                         3,418                        2,493                       6,248                       5,086 
   Occupancy expenses
                            356                           266                           694                           543 
   Equipment expenses
                            450                           404                           920                           826 
   Other operating expenses
                         1,685                          1,180                       3,046                        2,513 
**Total other expenses**
                        5,909                        4,343                      10,908                       8,968         
**Income before income taxes**
                             551                         1,720                        1,902                       2,760          Income tax expense                            270                           544                           675                           928          
**Net Income**

$                        281 
$                    1,176 
$
                  1,227 $                  1,832 ** **        **Earnings Per Share**        
**Basic**

 $
                      0.06 
 $
                    0.25 
$
                      0.26  $                    0.39 
**Diluted**

 $
                      0.06 
 $
                    0.24 
$
                    0.25  $                    0.38 ** **        **Weighted Average Shares**        
**Basic**
                        4,658                        4,655                       4,657                       4,655 
**Diluted**
                        4,879                          4,811                       4,882                       4,823 ** **        **Cash dividends per common share**
$                   0.075 
 $
                    0.07 $                    0.150  $                       0.14          **The accompanying notes are an integral part of these financial statements.** 
 

2
**GB&T BANCSHARES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOMETHREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
**(Dollars in thousands)** ** ** ** **    **(unaudited)** 
**June 30,**
 
**June 30,**
  **2001** **2000** **2001** **2000****Net Income**                           281                          1,176                         1,227                         1,832  ** **           Unrealized gains (losses) on securities        
    available-for-sale arising during period, net of tax
                            112                             143                            703                            (97)** **           Reclassification adjustment for gains realized on        
    securities available-for-sale in net income, net 
    
    of tax                          (51)                        (104)                         (67)                         (96)         Other comprehensive income                             61                              39                            636                           (193)         
**Comprehensive income**
 $
                     342  

$
                   1,215   $                  1,863   $                  1,639   
 
GB&T BANCSHARES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYSIX MONTHS ENDED JUNE 30, 2001
 
**(Dollars in thousands)**         **Accumulated**  **(unaudited)**         **Other** **Total**  **Common Stock** **Capital** **Retained** **Comprehensive** **Stockholders'**  **Shares********Par Value** **Surplus** **Earnings********Income** **Equity******
Balance, December 31, 2000
                      2,766   $    13,830   $                    1,145   $    9,666    $                     18  $          24,659               Restatement to reflect the pooling of            
  interests with Community Trust Financial
      
Services at December  31, 2000                       1,891                      9,455  $      422  $    5,920   $                     94  $          15,891  Balance, December 31, 2000, as restated                      4,657                     23,285                        1,567                      15,586                              112                     40,550  **Net income                             1,227      $             1,227 
   Options excercised
                                1                                5                             62     **$                67  
   Dividends declared
          
         $0.15 per share
        (607)   $              (607)
   Other comprehensive income
                                  636   $                                   636 Balance, June 30, 2001                      4,658   $    23,290   $   1,629  $   16,206    $                  748   $           41,873  ** 
 

 **
3
**GB&T BANCSHARES, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSSIX MONTHS ENDED JUNE 30, 2001 AND 2000

 
**(Dollars in Thousands)** ** **   
**(unaudited)**
     ** ** ** **      2001 2000**OPERATING ACTIVITIES**        
  Net income
     $            1,227  
  $
      1,832  
  Adjustments to reconcile net income to net cash
        
     provided by operating activities:
        
     Depreciation and amortization
                        512                 631  
     Provision for loan losses
                       808                676  
     Other operating activities
                   (1,832)            (789)         
          Net cash provided by operating activities
                        715            2,350           **INVESTING ACTIVITIES**        
   Purchases of securities available-for-sale
               (30,839)         (11,281)
   Proceeds from maturities of securities available-for-sale
                  34,197            7,692  
   Net (increase) decrease in interest-bearing deposits in banks
                      (571)            1,198  
   Purchase of life insurance
                           -             (1,650)
   Net (increase) decrease in Federal funds sold
                (16,899)          5,732  
   Net increase in loans
                   (8,315)      (35,667)
   Purchase of premises and equipment
                     (937)         (1,370)        
          Net cash used in investing activities
               (23,364)      (35,346)        **FINANCING ACTIVITIES**        
   Net increase in deposits
                 23,737          24,546  
   Net increase in FHLB advances
                    2,974           10,974  
   Net increase (decrease) in other borrowings
                  (4,958)           1,829  
   Issuance of stock
                          67                   10  
   Dividends paid
                     (607)            (523)
          Net cash provided by financing activities
                   21,213          36,836           Net increase (decrease) in cash and due from banks                   (1,436)          3,840           Cash and due from banks at beginning of period                  16,244           14,249           Cash and due from banks at end of period    
$
         14,808 
    $
    18,089           **The accompanying notes are an integral part of these financial statements.**        
 
 
** **
4
** **** **
 

**GB&T BANCSHARES, INC. ANDSUBSIDIARIES****NOTES  TO CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)
 

 

NOTE 1.**            BASIS OF PRESENTATION**
The accompanying unauditedconsolidated financial statements have been prepared in accordance withgenerally accepted accounting principles for interim financial information andwith instructions for Form 10-Q. Accordingly, they do not include all of theinformation and footnotes required by generally accepted accounting principlesfor complete financial statements. In the opinion of management, all adjustments(consisting of normal and recurring adjustments and merger related expenses)considered necessary for a fair presentation have been included. The results ofoperations for the six-month period ended June 30, 2001 is not necessarilyindicative of the results that may be expected for the year ending December 31,2001.

Prior period financialinformation has been restated for a business combination with Community TrustFinancial Services Corporation (and its wholly-owned subsidiaries, CommunityTrust Bank, Community Loan Company, and Metroplex Appraisals, Inc.), which wasconsummated on June 30, 2001, and accounted for as a pooling of interests inconformity with generally accepted principles. Prior period financialinformation has also been restated to include ownership of 49% of the equity ofCash Transactions, LLC. Cash Transactions, LLC is treated as an unconsolidatedsubsidiary for financial reporting purposes, and, accordingly, the Company’sinterest is reflected in the consolidated financial statements at itsproportionate share.

 

5

 

 
**NOTE 2.            EARNINGS PER COMMON SHARE
Presented below is a summary ofthe components used to calculate basic and diluted earnings per share for thethree and six month periods ended June 30, 2001 and 2000.

Quarters ended June 30,
2001
2000
Basic Earnings Per Share:
Weighted average common shares      outstanding
4,658
4,655
Net  income
$

281
$

1,176
Basic earnings per share
$

0.06
$

0.25
Diluted Earnings Per Share:
Weighted average common shares      outstanding
4,658
4,655
Net effect of the assumed      exercise of stock
Options based on the treasury      stock method
using average market prices      for the year
221
156
Total weighted average common      shares and
Common stock equivalents      outstanding
4,879
4,811
Net  income
$

281
$

1,176
Diluted       earnings per share
$

 0.06
$

0.24
Six Months ended June 30,
2001
2000
Basic Earnings Per Share:
Weighted average common shares      outstanding
4,657
4,655
Net income
$

1,227
$

1,832
Basic earnings per share
$

 0.26
$

0.39
Diluted Earnings Per Share:
Weighted average common shares      outstanding
4,657
4,655
Net effect of the assumed      exercise of stock
Options based on the treasury      stock method
using average market prices      for the year
225
168
Total weighted average common      shares and
Common stock equivalents      outstanding
4,882
4,823
Net income
$

1,227
$

1,832
Diluted earnings per share
$

0.25
$

0.38
 

6

 
**NOTE 3.          BUSINESS COMBINATIONS
On June 30, 2001, the Companyconsummated its merger with Community Trust Financial Services Corporationsubject to an agreement and plan of reorganization, dated March 16, 2001,pursuant to which Community Trust Financial Services Corporation merged with andinto GB&T Bancshares, Inc. Community Trust Financial Services stockholdersreceived 1,890,662 shares of Company Stock. The combination was accounted for asa pooling of interests.

The following unaudited datasummarizes operating data of GB&T Bancshares, Inc. and Community TrustFinancial Services Corporation prior to the merger.

 
**For the six months ended**June 30, 2001**(Dollars in Thousands)**GB&T**Community**Bancshares**Trust
Interest income
$ 15,291
$ 6,684
Interest Expense
8,279
2,986
Other income
1,325
1,598
Other expense
5,685
5,238
Net income
1,529
(302)
 

The above presentation includesone-time merger expenses for both GB&T Bancshares, Inc. and Community TrustFinancial Services Corporation. (See Management’s Discussion and Analysis ofFinancial Condition and Results of Operations)
** **
7
** **
 

GB&T BANCSHARES, INC. ANDSUBSIDIARIES
** **
**Item 2.**

** MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL****CONDITION AND RESULTS OFOPERATIONS**
** **
The following is management’sdiscussion and analysis of certain significant factors which have affected ourfinancial position and operating results including our wholly-ownedsubsidiaries, Gainesville Bank & Trust, United Bank & Trust, CommunityTrust Bank, Community Loan Company and Metroplex Appraisals, Inc. during theperiods included in the accompanying consolidated financial statements.
**Forward-Looking Statements**
Some of the statements made inthis 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 similarexpressions generally identify forward-looking statements. These statements arebased on the beliefs, assumptions, and expectations of our management, and oninformation currently available to those members of management. They areexpressions of historical fact, not guarantees of future performance.Forward-looking statements include information concerning possible or assumedfuture results of our operations.

Forward-looking statementsinvolve risks, uncertainties, and assumptions, and certain factors could causeactual results to differ from results expressed or implied by theforward-looking statements, including:
-  economic conditions (both generally and in the    markets where we operate);competition from other companies that provide    financial services similar to those we offer;government regulation and legislation;changes in interest rates; andunexpected changes in the financial stability    and liquidity of our credit customers.
We believe these forward-lookingstatements are reasonable. You should not, however, place undue reliance onthese forward-looking statements, because the future results and stockholdervalues of the Company may differ materially from those expressed or implied bythese forward-looking statements.

 
**Financial Condition**
We reported consolidated totalassets of $535 million at June 30, 2001 compared to approximately $512 millionat December 31, 2000, representing an increase of $23 million or 4.49%. Wecontinue to experience growth in total assets, loans and deposits during the sixmonths ended June 30, 2001. Total loans increased by $8 million for the sixmonths ended June 30, 2001. Total deposits increased $23.7 million for the sixmonths ended June 30, 2001. Deposit growth outpaced loan growth during theperiod resulting in a loan to deposit ratio of 91% down from 95% at December 31,2000. The increase in deposits over loans is currently in Federal Funds sold andwill fund investment securities purchases and loans. We continue to facecompetitive pressures in our growing deposit market.
** **
8
** 

 ****Liquidity and Capital Resources**
 

Liquidity management involves thematching of the cash flow requirements of customers who may be either depositorsdesiring to withdraw funds or borrowers needing assurance that sufficient fundswill be available to meet their credit needs and our ability to meet thoseneeds. We seek to meet liquidity requirements primarily through management ofshort-term investments, monthly amortizing loans, maturing single payment loans,and maturities of securities and prepayments. Also we maintain relationshipswith correspondent banks which could provide funds on short notice. As of June30, 2001, we had borrowed under Federal funds purchase lines and securities soldunder agreement to repurchase, $11.3 million compared to $17.1 million atDecember 31, 2000.

Our liquidity and capitalresources are monitored on a periodic basis by management, State and Federalregulatory authorities. Management reviews liquidity on a periodic basis tomonitor and adjust liquidity as necessary. Management has the ability to adjustliquidity by selling securities available for sale, selling participations inloans we generate and accessing available funds through various borrowingarrangements. Our short-term investments and available borrowing arrangementsare adequate to cover any reasonably anticipated immediate need for funds.

Our liquidity ratio was 22.22% atJune 30, 2001, above our target ratio of 20%. Liquidity is measured by the ratioof net cash, Federal funds sold and securities to net deposits and short-termliabilities. In the event the banks need to generate additional liquidityfunding plans would be implemented as outlined in the liquidity policy of thebanks. The subsidiary banks have lines of credit available to meet anyunforeseen liquidity needs. Also, the Banks have a relationship with the FederalHome Loan Bank of Atlanta, which provides funding for loan growth on an asneeded basis.

As of June 30, 2001 the capitalratios at the Company and the Banks were adequate based on regulatory minimumcapital requirements. The Company and its bank subsidiaries’ actual capitalamounts and ratios are presented in the following table.

FOR CAPITAL
TO BE
ADEQUACY
WELL
ACTUAL
PURPOSES
CAPITALIZED
As of June 30, 2001
Total Capital to Risk Weighted      Assets:
Consolidate
11.35%
8%
N\A
Gainesville Bank & Trust
9.18%
8%
10%
United Bank & Trust
13.41%
8%
10%
Community Trust Bank
11.14%
8%
10%
Tier I Capital to Risk      Weighted Assets:
Consolidated
10.04%
4%
N\A
Gainesville Bank & Trust
7.95%
4%
6%
United Bank & Trust
12.16%
4%
6%
Community Trust Bank
9.93%
4%
6%
Tier I Capital to Average      Assets:
Consolidated
7.73%
4%
N\A
Gainesville Bank & Trust
6.11%
4%
5%
United Bank & Trust
8.81%
4%
5%
Community Trust Bank
7.99%
4%
5%** **
9
** 

Results of Operations**
Our profitability is determinedby our ability to effectively manage interest income and expense, to minimizeloan and security losses, to generate noninterest income, and to controloperating expenses. Since interest rates are determined by market forces andeconomic conditions beyond our control, our ability to generate net interestincome is dependent upon our ability to obtain an adequate net interest spreadbetween the rate paid on interest-bearing liabilities and the rate earned oninterest-earning assets. The net yield on average interest-earning assets was4.42% for the six months ended June 30, 2001, compared to 4.86% for the sameperiod in 2000. This 44 basis point decrease is primarily due to the currentinterest rate environment. In the first six months of 2001 the yield on earningassets decreased to 9.07% from 9.33%, for the same period in 2000, while thecost of interest bearing liabilities increased to 5.32% from 5.14%. The netinterest margin is also negatively affected by faster repricing ofinterest-earning assets over interest-bearing liabilities.

Net interest income increased$161,000 or 3.1% for the three months ended June 30, 2001 compared to the sameperiod in 2000. The net increase consists of an increase in interest income of$752,000 or 7.4% less an increase in interest expense of $591,000 or 12% for thethree-month period. Net interest income increased $439,000 or 4.3% for the sixmonths ended June 30, 2001 compared to the same period in 2000. The net increaseconsists of an increase in interest income of $2,286,000 or 11.6% less anincrease in interest expense of $1,847,000 or 19.6% for the six-month period.The increase in net interest income is due primarily to growth in total loans ascompared to the same prior year period. During this period, loans accounted for$52 million, or 82% of the total growth in interest-earning assets.

Our provision for loan lossesincreased by $132,000 or 39.8% during the three months ended June 30, 2001 ascompared to the same period in 2000. The increase is the result of loan growthand an increase in net chargeoffs. Our provision for loan losses increased by$132,000 or 19.5% during the six months ended June 30, 2001 as compared to thesame period in 2000. The allowance for loan losses at June 30, 2001 was$5,618,000 or 1.43% of total loans compared to 1.34% at June 30, 2000. Based onmanagement’s evaluation, the allowance is adequate to absorb any potentialloan losses at June 30, 2001.

The increase in the provision forloan losses for the six-month period ended June 30, 2001 is based on loan growthand net charge-offs. The analysis below indicates an increase of $229,000 in netcharge-offs for the six months ended June 30, 2001 as compared to the sameperiod in 2000, which is consistent with management’s expectations. Theallowance for loan losses is evaluated monthly and adjusted to reflect the riskin the portfolio.

 

10

 

The following table summarizesthe allowance for loan losses for the six-month period ended June 30, 2001 and2000.
**2001
2000**(Dollars in Thousands)**Average amount of loans      outstanding
$**393,353
$
341,253**Allowance for loan losses      balance, beginning of period
$**5,099
$
4,233**Less charge-offs
Commercial loans**(49)
(2)
Real estate loans**(23)
-
Consumer loans**(350)

(274)
Total Charge-offs
**(422)

(276)**Plus recoveries
Commercial loans**3
9

Real estate loans**10
128
Consumer loans**120
69
Total recoveries**133
206**Net (charge-offs )recoveries**(289)
(70)**Plus provision for loan losses**808
676**Allowance for loan losses      balance, end of period
$**5,618
$
4,839**Net charge-offs (recoveries)      to      average loans**0.073%
0.021%
 

11

 

The following table is a summary ofnonaccrual, past due and restructured debt. The numbers indicate increases of$526,000 in nonaccrual loans and decreases of $298,000 in past due loans over 90days. The increase in nonaccrual loans was due to increases in real estate loansand consumer loans. There is minimal or no loss anticipated on the real estateloans in nonaccrual loans due to the value of the underlying collateral.

 

 

June 30, 2001
Past Due
Nonaccural
90 Days
Restructured
Loans
Still Accruing
Debt
(Dollars in Thousands)
Real estate loans
$
1,507
$
124
$
-
Commercial loans
13
88
-
Consumer loans
670
312

-
Total
$
2,190
$
524
$
-
June 30, 2000
Past Due
Nonaccural
90 Days
Restructured
Loans
Still Accruing
Debt
(Dollars in Thousands)
Real estate loans
$
1,314
$
366
$
-
Commercial loans
15
-
-
Consumer loans
335
456

-
Total
$
1,664
$
822
$
-
 

Our policy is to discontinue theaccrual of interest income when, in the opinion of management, collection ofsuch interest becomes doubtful. This status is determined when; (1) there is asignificant deterioration in the financial condition of the borrower and fullrepayment of principal and interest is not expected; and (2) the principal orinterest is more than 90 days past due, unless the loan is both well-secured andin the process of collection. Accrual of interest on such loans is resumed when,in management’s judgment, the collection of interest and principal becomesprobable.

Loans classified for regulatorypurposes as loss, doubtful, substandard, or special mention that have not beenincluded in the table above do not represent or result from trends oruncertainties which management reasonably expects will materially impact futureoperating results, liquidity or capital resources. These classified loans do notrepresent material credits about which management is aware of any informationwhich causes management to have serious doubts as to the ability of suchborrowers to comply with their loan repayment terms.

Other income for the three monthsended June 30, 2001, increased by $368,000 or 31.5% compared to the same periodin 2000. Service charges increased by $375,000 and mortgage origination feesincreased by $140,000. The increases in other income were partially offset by a$16,000 decrease in gain on sale of loans and a $79,000 decrease in gain on saleof securities. Other income for the six months ended June 30, 2001, increased by$775,000 or 36% compared to the same period in 2000. Service charges increasedby $707,000 and mortgage origination fees increased by $215,000. The increasesin other income were partially offset by a $37,000 decrease in gain on sale ofloans and a $67,000 decrease on gain on sale of securities. Service chargesincreases were due to new product service charges and increases in normalservice charges. The mortgage origination fee increase resulted from refinancingactivity spurred by the decline in mortgage rates.

 

12

 

Other expenses increased byapproximately $1,566,000 or 36.1% for the three months ended June 30, 2001compared to the same period in 2000. The increase is due primarily to anincrease in salaries and employee benefits of $925,000. The majority of theincrease in salaries and employee benefits is due to merger related contractualpayments to employees. Equipment and occupancy expenses increased by $136,000due to depreciation and maintenance of equipment purchased for the opening oftwo additional full service branch locations. Other operating expenses increased$505,000 or 42.8% as a result of approximately $326,000 in one-time mergerrelated expenses related to the merger of GB&T Bancshares, Inc. andCommunity Trust Financial Services Corporation. Other expenses increased byapproximately $1,940,000 or 21.6% for the six months ended June 30, 2001compared to the same period in 2000. The increase in other expenses included$1,505,000 in merger related expenses. The increase in other expenses includedan increase in salaries and employee benefits of $1,162,000. Non merger relatedsalary and employee benefit increases are due to sixteen additional employeesand normal increases in salaries and employee benefits. Equipment and occupancyexpenses increased by $245,000 for the six months ended June 30, 2001. Otheroperating expenses increased $533,000 or 21.2%

Income tax expense decreased by$274,000 and $253,000 for the three and six months ended June 30, 2001 comparedto the same periods last year. The decrease was the result of a decrease in netincome due to merger related expenses. The effective tax rate for thethree-month period was 49%, compared to 32% for the same period in 2000. Thisincrease reflects non-deductible merger expenses related to the merger ofGB&T Bancshares and Community Trust Financial Services Corporation in thecurrent period. The effective tax rate for the six-month period was 35%,compared to 33% for the same period in 2000.

Net income decreased by $895,000or 76.1%, for the three months ended June 30, 2001 compared to the same periodin 2000. This decrease resulted from approximately $1,090,000 in one time mergerrelated expenses related to the merger of GB&T Bancshares and CommunityTrust Financial Services Corporation in the current period. Net income decreasedby $605,000 or 33% for the six months ended June 30, 2001 due to these samemerger related expenses.

We are not aware of any otherknown trends, events or uncertainties, other than the effect of events asdescribed above, that will have or that are reasonably likely to have a materialeffect on its liquidity, capital resources or operations. We are not aware ofany current recommendations by the regulatory authorities, which, if they wereimplemented, would have such an effect.
** 

Item 3.          QUANTITATIVE AND QUALITATIVEDISCLOSURES ABOUT MARKET RISK**
Our net interest income and thefair value of our financial instruments (interest earning assets and interestbearing liabilities) are influenced by changes in market interest rates. Weactively manage our exposure to interest rate fluctuations through policiesestablished by the Asset/Liability Management Committee (the "ALCO").The ALCO meets regularly and is responsible for approving asset/liabilitymanagement policies, developing and implementing strategies to improve balancesheet positioning and net interest income and assessing the interest ratesensitivity of the Banks.

 

13

 

 
**PART II - OTHER INFORMATION**
 

 

Item 4.          Submission of Matters to avote of Securities Holders

The annual meeting of theStockholders of GB&T Bancshares, Inc. was held on May 8, 2000. The meetinghad been called pursuant to written notice for the purpose of considering andvoting upon the election of ten directors to constitute the Board of Directorsto serve until the next annual meeting and until their successors are electedand qualified. The results of the voting were as follows:

 

Election of Directors

**For**

**Against**

** Withheld**

Donald J. Carter

2,080,228

 0

 0

Dr. John W. Darden

2,080,228

 0

 0

Bennie E. Hewett

2,080,228

 0

 0

Richard A. Hunt, Jr.

2,078,978

 0

 1,250

James L. Lester

2,080,075

 0

 153

John E. Mansfield, Sr.

2,080,228

 0

 0

F. Abit Massey

2,080,228

 0

 0

Samuel L. Oliver 

 2,080,228

 0

 0

Alan A. Wayne 

 2,080,228

 0

 0

Phillip A. Wilheit

2,080,228

 0

 0

 

A special meeting of theshareholders of GB&T Bancshares, Inc. was held on June 18, 2001. The meetinghad been called pursuant to written notice for (1) the purpose of consideringthe issuance of 1,890,951 shares of common stock, to shareholders of CommunityTrust Financial Services Corporation in connection with that certain Agreementand Plan of Reorganization, dated March 16,2001, and (2) to consider a proposalto amend the GB&T Articles of Incorporation to increase the number ofauthorized shares of common stock of GB&T from 10,000,000 to 20,000,000.

 

**For**

**Against**

**  Withheld**

Item (1) 

 1,670,938
 2,768

 3,786
 Item (2) 
 1,666,144
 7,687 
 3,661
 

14

 
**SIGNATURES**
Pursuant to the requirements of theSecurities Exchange Act of 1934, the Registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.

 

 

GB&T BANCSHARES, INC.

 
DATE: 8/13/2001 BY: /s/Richard A. Hunt         Richard A. Hunt                         President and Chief ExecutiveOfficerDATE: 8/13/2001 
BY: /s/Gregory L. Hamby         Gregory L. Hamby           Executive Vice President &           Chief Financial Officer

 

 

 

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