FORM 10-QSB

U. S. Securities and Exchange Commission

Washington, D.C. 20549

(Mark One)

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended June 30, 2001
[ ] 	TRANSITIONS REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1943.

For the transition period from ___________ to _________

Commission file number 0-16657
**FIRST GEORGIA HOLDING, INC.**

Georgia
58-1781773
(State or other jurisdiction or 

incorporation or organization)
(IRS Employer Identification No.)

 

1703 Gloucester Street

Brunswick, Georgia 31520

(Issuer's Address)

(912) 267-7283

(Issuer's telephone number)

Check whether the issuer (1) has 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. Yes X No______ 

Number of shares of Common Stock outstanding as of June 30, 2001.

 

7,713,733

 

**PART 1**FINANCIAL INFORMATION
 
The consolidated financial statements of First Georgia Holding, Inc. filed as part of this report are as follows:
 
Page
Consolidated Balance Sheets as of

June 30, 2001 and September 30, 2000
3
 
 
Consolidated Income Statements for the Three Months Ended 

June 30, 2001 and 2000 and the nine months ended June 30, 2001

and 2000
4
 
 
Consolidated Cash Flow Statements for the Nine Months Ended 

June 30, 2001 and 2000
5
 
 
Notes to Consolidated Financial Statements
6
 
 
Management's Discussion and Analysis of Consolidated

Statements of Financial Condition and Results of Operation
7
 
 **PART II
Item 6. Exhibits and Reports on Form 8-k
14
 
 
 

 

 

**FIRST GEORGIA HOLDING, INC
CONSOLIDATED BALANCE SHEETS

(unaudited)
 **June 30,

2001**September 30,

2000**Assets:
 
 
Cash and cash equivalents:
 
 
Cash and due from banks
$ 11,528,801
$ 6,380,375
Federal funds sold
11,691,000
9,840,000 
Interest bearing deposits in other banks
124,872
366,385 
Cash and cash equivalents
23,344,673
16,586,760
 
 
 
Investment securities to be held to maturity, at cost

(fair value approximately $21,604,000 at

June 30, 2001 and $17,476,000 at 

September 30, 2000)
21,396,900
17,878,121
Loans receivable, net of allowance for loan losses of 

approximately $2,305,000 and $2,365,000 at

June 30, 2001 and September 30, 2000
190,801,528
193,644,376
Real estate owned
1,063,054
314,338
Federal Home Loan Bank stock, at cost
992,300
892,300
Premises and equipment, net
5,568,278
5,569,758
Accrued interest receivable
1,399,191
1,507,692
Intangible assets, net
525,932
597,653
Other assets
1,912,453
2,194,205
 
 
 
Total Assets
$ 247,004,309
$ 239,185,203
 
 
 **Liabilities and Stockholders' Equity
 
 **Liabilities:
 
 
Deposits
$ 219,847,326
$ 214,046,716
Federal Home Loan Bank advances
3,500,000
2,500,000
Other borrowings
2,000,000
2,000,000
Accrued interest receivable
677,556
719,202
Accrued expenses and other liabilities
1,333,830
1,563,679
 
227,258,712
220,829,597**Stockholders' Equity
 
 
Common stock, $1.00 par value; 10,000,000 shares 

authorized; 7,713,733 issued and outstanding
7,713,733
7,713,733
Additional paid-in capital
396,297
396,297
Retained earnings
11,535,567
10,245,576
 
 
 
Total Liabilities and Stockholders' Equity
19,645,597
18,355,606
 
 
 
 
$ 247,004,309
$ 239,185,203
 
 
See accompanying notes to consolidated financial statements.
 
 

**FIRST GEORGIA HOLDING, INC.
CONSOLIDATED INCOME STATEMENTS

(unaudited)
 
 
 
 
 
 **Three Months Ended

June 30,**Nine Months Ended

June 30,**2001**2000**2001**2000
Interest Income:
 
 
 
 
Loans
$ 4,338,713
$ 4,785,589
$ 14,217,683
$ 13,552,456
Interest on Federal funds sold
167,398
187,859
290,323
257,147
Interest on investments
401,542
285,955
1,107,665
741,355
Other
703
1,905
13,995
4,296
Total Interest Income
4,908,356
5,261,305
15,629,666
14,555,254
 
 
 
 
 
Interest Expense:
 
 
 
 
Deposits
2,501,405
2,402,190
7,555,390
6,493,047
FHLB advances and other borrowings
77,164
68,492
285,298
369,826
Total interest expense
2,578,569
2,470,682
7,840,688
6,862,873
 
 
 
 
 
Net interest income
2,329,787
2,790,623
7,788,978
7,692,381
Provision for loan losses
15,000
175,000
435,000
265,000
Net interest income after provision for loan losses
2,314,787
2,615,623
7,353,978
7,427,381
 
 
 
 
 
Other income:
 
 
 
 
Loan servicing fees
142,640
146,441
403,693
398,928
Deposit service charges
516,449
496,462
1,492,408
1,400,015
Gain on sale of real estate owned and foreclosed property
-
-
48,220
16,316
Other operating income
64,619
66,951
168,044
151,146
Total other income
723,708
709,854
2,112,365
1,966,405
 
 
 
 
 
Other Expenses:
 
 
 
 
Salaries and employee benefits
1,184,240
1,007,109
3,447,189
2,923,894
Premises and occupancy costs
436,558
515,240
1,353,099
1,454,502
Amortization of intangibles
23,907
23,907
71,721
71,721
Federal insurance premiums
16,926
9,384
53,503
43,674
Other operating expenses
640,694
598,317
1,879,135
1,696,739
Total other expenses
2,302,325
2,153,957
6,804,647
6,190,530
 
 
 
 
 
Income before income taxes
736,170
1,171,520
2,661,696
3,203,256
Income taxes
292,890
468,609
1,063,500
1,281,673
 
 
 
 
 
Net Income
$ 443,820
$ 702,911
$ 1,598,196
$ 1,921,583
 
 
 
 
 
Income per share of common stock:
 
 
 
 
Basic
$ 0.06
$ 0.10
$ 0.21
$ 0.27
Diluted
$ 0.06
$ 0.09
$ 0.21
$ 0.25
 
 
 
 
 
See accompanying notes to consolidated financial statements
 

**FIRST GEORGIA HOLDING, INC.
CONOLIDATED STATEMENT OF CASH FLOWS

(unaudited)
 **Nine Months Ended

June 30,
 **2001**2000
OPERATING ACTIVITIES:
 
 
Net Income
$ 1,598,196
$ 1,921,583
Adjustments to reconcile net income to net cash provided by operations:
 
 
Provision for loan losses
435,000
265,000
Depreciation and amortization
516,386
777,326
Amortization of intangibles
71,721
71,721
Amortization of deferred loan fees
7,130
(8,431)
Gain on Sale of real estate owned and foreclosed property
(48,220)
(16,316)
Increase in FHLB stock
-
(54,800)
Decrease (increase) in accrued interest receivable
108,501
(190,599)
(Decrease) increase in other assets
281,752
189,892
(Decrease) increase in accrued interest payable
(41,646)
130,009
Decrease in accrued expenses and other liabilities
(229,847)
(699,984)
 
 
 
Net Cash Provided By Operating Activities
2,698,973
2,385,401
 
 
 
INVESTING ACTIVITIES:
 
 
Principal payments received on mortgage-backed securities
1,534,313
1,098,682
Maturities of investment securities
1,076,718
325,000
Purchase of FHLB stock
(100,000)
-
Purchase of investment securities
(6,061,315)
(3,121,599)
Loan originations, net of principal repayments
658,800
(24,122,022)
Purchase of premises and equipment
(583,401)
(1,324,505
Proceeds from the sale of real estate owned
1,041,423
502,187
 
 
 
Net Cash Used By Investing Activities
(2,433,462)
(26,642,217)
 
 
 
FINANCING ACTIVITIES:
 
 
Net increase in deposits
5,800,610
40,664,671
Proceeds form other borrowings
-
2,000,000
Repayments of other borrowings
-
(2,860,000)
Proceeds from FHLB advances
5,000,000
-
Repayments of FHLB advances
(4,000,000)
(6,100,000)
Cash dividends paid ($0.04 and $0.08 per share, respectively)
(308,308)
(287,935)
 
 
 
Net Cash Provided by Financing Activities
6,492,402
33,416,736
 
 
 
Net increase in cash and cash equivalents
6,757,913
9,159,920
Cash and cash equivalents at beginning of year
16,586,760
7,202,566
 
 
 
Cash and cash equivalents at end of quarter
$ 23,344,673
$ 16,362,486
 
 
 
Supplemental disclosure of cash paid during the period for:
 
 
Interest
$ 4,497,619
$ 6,732,864
Income taxes
835,000
1,075,000
 
5,332,619
7,807,864
 
 
 
Supplemental disclosure of non-cash activities:
 
 
Loans transferred to real estate owned
$ 1,702,205
$ 866,329
Sale of real estate owned financed by bank
192,900
759,112
 
1,895,105
$ 1,625,441
 
 
 
See accompanying notes to consolidated financial statements
 
 
 

FIRST GEORGIA HOLDING, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) 	BASIS OF PRESENTATION

In the opinion of Management, the accompanying unaudited consolidated financial statements contain all adjustments necessary to present fairly the financial position of First Georgia Holding, Inc. as of June 30, 2001 and September 30, 2000. Also included are the results of its operations and changes in financial position for the three and nine months ended June 30, 2001 and 2000. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full year.

The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany balances and transactions have been eliminated in consolidation.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Bank's Annual Report to Shareholders, incorporated by reference into the Company's Form 10-KSB for the year ended September 30, 2000.
- EARNINGS PER SHARE
Earnings per share were calculated using the weighted-average number of shares outstanding for the period. The diluted earnings per share takes into consideration the assumed increase in shares from the conversion of stock options as well.

 **Three- Month Period Ended

June 30,
 **Nine-Month Period Ended

June 30,
 **2001**2000
 **2001**2000
Weighted average number of common

shares outstanding - Basic
7,713,733
7,198,371
 
7,713,733
7,198,371
 
 
 
 
 
 
Incremental shares from the assumed

conversion of stock options
32,474
471,745
 
32,474
493,157
 
 
 
 
 
 
Total - Diluted
7,746,207
7,670,116
 
7,746,207
7,691,528
 
 
 
 
 
 
	

The incremental shares from the assumed conversion of stock options were determined using the treasury stock method under which the assumed proceeds were equal to the amount that the Company would receive upon the exercise of the options plus the amount of total benefit that would be credited to additional paid-in-capital assuming exercise of options. The assumed proceeds are used to purchase outstanding shares at the average market price during the period.

 
ALLOWANCE FOR LOAN LOSSES

Changes in the allowance for loan losses are summarized as follows:

 **Six Months

Ended March 31,

2001**Year Ended

September 30,

2000
 
 
 
Beginning Balance
2,364,704
1,235,566
Provision charged to operations
435,000
2,640,000
Charge-offs
(633,091)
(1,653,310)
Recoveries
138,271
142,448
Balance, end of period
2,304,884
2,364,704
 

 

 

 

FIRST GEORGIA HOLDING, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

	The following discussion should be read in conjunction with the financial statements and related notes appearing elsewhere in this Form 10-QSB.

LIQUIDITY

First Georgia Bank (the "Bank") has traditionally maintained levels of liquidity above levels required by regulatory authorities. As a member of the Federal Home Loan Bank System, the Bank is required to maintain a daily average balance of cash and eligible liquidity investments equal to a monthly average of 4% of withdrawable savings and short-term borrowings. The Bank's liquidity level was 8.90% and 7.79% at June 30, 2001 and September 30, 2000, respectively.

The Bank's operational needs, demand for loan disbursements, and savings withdrawals can be met by loan principal and interest payments received, new deposits, and excess liquid assets. Significant loan demand, deposit withdrawal, increased delinquencies, and increased real estate acquired in settlement of loans (REO) could alter this condition. Management does not foresee any liquidity problems for 2001.

 

CAPITAL RESOURCES

The following is reconciliation at June 30, 2001 of the Bank's equity capital to regulatory capital, under generally accepted accounting principles:

First Georgia Bank
Stockholder's Equity
$ 21,618,000
 
 
Less:
 
Intangible assets
526,000
Tangible Capital
21,092,000
 
 
Plus:
 
Qualifying intangible assets
526,000
Core Capital
21,618,000
 
 
Plus:
 
Supplemental Capital
2,305,000
 
 
Less:
 
Deducted Capital
153,000
Risk-Based Capital
$ 23,770,000
 

Current regulations require institutions to keep minimum regulatory tangible capital equal to 1.5% of adjusted assets, minimum core capital to adjusted assets of 4% (the leverage ratio), and risk-based capital to risk-adjusted assets of 8%. The Office of Thrift Supervision (the OTS) may increase the minimum core capital, or leverage ratio, based on its assessment of the institution's risk management systems and the level of total risk in the individual institution. At June 30, 2001, the Bank met all three capital requirements.

 

The Bank's regulatory capital and the required minimum amounts at June 30, 2001 are summarized as follows:

	

 
 
 **Required Minimum
 
 
 **Bank Capital**Amount**Excess (Defiency)
Tangible Capital
8.56%
$21,092,000
1.50%
$3,697,000
7.06%
$17,395,000
 
 
 
 
 
 
 
Core Capital
8.75%
$21,618,000
4.00%
$9,879,000
4.75%
$11,739,000
 
 
 
 
 
 
 
Risk-Based Capital
11.61%
$23,770,000
8.00%
$16,378,000
3.61%
$7,392,000
 
 
 
 
 
 
 
 

The Federal Deposit Insurance Corporation Improvement Act (FDICIA) required the Federal banking agencies to take "prompt corrective action" in respect to institutions that do not meet minimum capital requirements. Along with the ratios described above, FDICIA also introduced an additional capital measurement, the Tier 1 risk-based capital ratio. The Tier 1 ratio is the ratio of Tier 1 or core capital to total risk-adjusted assets. FDICIA establishes five capital tiers: "well capitalized," "adequately capitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." The regulators summarize their minimum requirements for the five capital tiers established by the FDICIA as follows:

 
Risk-Based

Capital Ratio
Tier I Risk-Based Capital Ratio
Tier I

Leverage Ratio
Well Capitalized
10% or above
6% or above
5% or above
Adequately Capitalized
8% or above
4% or above
4% or above
Undercapitalized
Less than 8%
Less than 4%
Less than 4%
Significantly Undercapitalized
Less than 6%
Less than 3%
Less than 4%
Critically Undercapitalized
--------------------------
----------------------
2% or less
 

An unsatisfactory examination rating may cause an institution's capitalization category to be lower than suggested by its actual capital position. 

At June 30, 2001, the Bank's Tier 1 risk-based capital ratio was 10.56%. If a depository institution should fail to meet its regulatory capital requirements, regulatory agencies can require submission and funding of a capital restoration plan by the institution, place limits on its activities, require the raising of additional capital, and ultimately require the appointments of a conservator or receiver for the institution.

Total capital as well as tangible capital, core capital, and risk-based capital continued to increase during the quarter ended June 30, 2001. The mix of risk-based assets and additional earnings are the primary factors for this increase.

RESULTS OF OPERATIONS

INTEREST INCOME

Interest income on loans decreased $446,873, or 9.34%, for the three-month period ended June 31, 2001 as compared to the same period in 2000. This decrease is directly related to the decrease in average loans outstanding and an overall decrease in interest rates as compared to the same period last year. However, average loan balances over the nine-month period ended June 30, 2001 have increased compared to the same period in 2000 resulting in an increase in interest income of $665,227, or 4.91% for the nine-month period ended June 30, 2001. The interest on Federal funds sold decreased $20,461 for the quarter or $10.89% and increased $33,176, or 12.90% as compared to the same period in 2000. The decrease during the quarter was related to the reduction of interest rates paid on Federal Funds sold. The increase for the period ended June 30, 2001 as compared with the same period last year is due to an increase in the amount of Federal Funds being sold overnight. In a trend continued from the prior fiscal year, the Bank has seen significant growth in its deposit balances. The Bank is continuing to offer a variety of deposit products, such as free checking, which has been favorably accepted in the marketplace. Consequently, the Bank has been able to invest money into short-term interest earning vehicles, such as overnight Federal funds sold for the remainder of the nine-month period. Interest on investments increased $115,587 or 40.42% for the quarter and increased $366,310 or 49.41% for the nine-month period. This increase is related to the $3,518,779 increase in investment balances during the year. 

INTEREST EXPENSE

Interest on deposits increased $99,215 or 4.13% for the quarter ended June 30, 2001 and $1,062,343 or 16.36% for the nine-month period ended June 30, 2001 as compared to the same period in 2000. This increase is primarily attributable to an approximate $6 million increase in average deposit balances in the nine-month period from September 30, 2000 to June 30, 2001 as compared to the same period in 2000. The market place in which the Bank operated remains conducive to deposit growth, and the Bank has positioned its deposit products to take full advantage of the area's deposit growth. Interest on FHLB advances and other borrowings increased $8,672 or 12.66% for the quarter and decreased $84,528 or 22.86% for the nine-month period as compared to same period last year. During the third quarter, the bank paid interest on a Federal Home Loan Bank advance that was obtained during the first quarter of fiscal 2001. However, the deposit growth rapidly increased and the Bank was able to sell federal funds on a nightly basis throughout the remainder of the nine-month period. 

NET INTEREST INCOME

Net Interest Income decreased $460,836 or 16.51% for the quarter and increased $96,597 or 1.26% for the nine-month period ended June 30, 2001 over the same period ended June 30, 2000. The decrease in net interest income during the third quarter is attributable to decreasing interest rates. While increases in loan balances offset by interest earning deposits have contributed to the increase over the nine-month period, the increase in non-interest bearing deposits held by the bank has been the major reason for the increase in net interest income as compared to the same nine month period last year. Management believes this growth will continue in 2001.

PROVISION FOR LOAN LOSSES

The provision for loan losses for the nine-month period ended June 30, 2001 totaled $435,000. The loan loss provision decreased $160,000 or 91.43% for the quarter and increased $170,000 or 64.15% for the nine-month period ended June 30, 2001 as compared to the same periods in 2000. Due to decreased loan balances, Management did not find it necessary to increase the loan loss provision. Management believes the reserve is sufficient and continues to closely monitor the reserve balance. Net interest income after the provision for loan losses for the quarter ended June 30, 2001 decreased $300,836 or 11.50% from the same period last year and $73,403 or .99% for the nine-month period ended June 30, 2001 over June 30, 2000. The decrease in net interest income is directly related to the decrease in loan interest income resulting from a decrease in interest rates and decreased loan volume. 

OTHER INCOME

Other income for the quarter increased $13,854 or 1.95% from the same quarter the previous year and $145,960 or 7.42% for the nine-month period ended June 30, 2001 as compared to the same period in 2000. Loan servicing fees decreased $3,801, or 2.60% for the quarter ended June 30, 2001 and increased $4,765 or 1.19% for the nine-month period as compared to the same periods in 2000. The quarterly decrease is attributable to approximately a $12,000 increase in brokered mortgage fees offset by an approximate $16,000 decrease in late fees and mortgage fees. The increase over the nine-month period is attributable to higher fees earned on brokered mortgage loans. Deposit service charges increased $19,987 or 4.03% for the quarter ended June 30, 2001 and $92,393 or 6.60% for the nine-month period. The increase is related to increased fee income, such as service charges and insufficient funds fees. Other operating income decreased $2,332 or 3.48% for the quarter ended June 30, 2001 and increased $16,898 or 11.18% over the nine-month period as compared to the same periods last year. The quarterly decrease is a result of a $16,889 decrease in miscellaneous income offset by an$8,006 increase in check printing charges, a $3,170 increase in safe deposit fees and a $2570 increase in ATM fees. The increase over the nine-month period is primarily attributable to increased ATM fee income. Also included in other income is a gain of $48,220 for the nine-months ended June 30, 2001 on the sale of foreclosed property. There was no gain on the sale of foreclosed property for the quarter ended June 30, 2001 and there was a $31,904 increase from the same nine-month period last year related to the sale of real estate owned during the first quarter of the current fiscal year.

OTHER EXPENSES

Other expenses for the quarter ended June 30, 2001 increased $148,368, or 6.89%, over the quarter ended June 30, 2001 and $614,117 or 9.92% over the nine-month period ended June 30, 2001 as compared to the same periods last year. Salaries and employee benefits increased $177,131, or 17.59% for the three-month period ending June 30, 2001 over the same period ended June 30, 2000, and $523,295 or 17.90% for the nine-month period over the same period last year. The Bank added several new employees as a result of the growth the bank is experiencing. Premises and occupancy costs decreased $78,682 or 15.27% in the quarter ended June 30, 2001 over the quarter ended June 30, 2000, and $101,403 or 6.97% over the nine-month period ended June, 30, 2001 as compared with the same period last year. This decrease is primarily attributable to a $87,454 decrease in rent expense related to the closing of the Wal-Mart branch in April of 2000. Other operating expenses increased $42,377 or 7.08% for the quarter as compared to the same quarter last year, and increased $182,396 or 10.75% for the nine-months ended June 30, 2001 as compared to the same period in 2000. This increase results primarily from an approximate $42,000 increase in legal fees for the quarter. The increase over the nine-month period is related in part to an approximate $60,000 increase in the general insurance expense account, an approximate $46,000 increase in bad check losses, and a $18,000 increase in bank service charge expenses. General insurance expense increased due to a change in the insurance policy and related increased premiums as compared to the same nine-month period in 2000. The increases are directly related to the overall growth of the Bank during the 9-month period ended June 30, 2001 as compared to the same period last year. 

The provision for income taxes decreased by $175,710 or 37.50% for the quarter and $218,173 or 17.02% for the nine-month period ended June 30, 2001 as compared to the same period in 2000. The effective tax rate remains consistent at a rate of 38%.

 

FINANCIAL CONDITION

ASSETS

Cash and cash equivalents increased $6,757,913 or 40.74%, over the nine-month period ended June 30, 2001. With the increase in transaction deposit accounts, the Bank has maintained higher cash and cash equivalents balances. Included in cash equivalents is an increase of $1,851,000 or 18.51% in Federal funds sold during the nine-month period. Because loan volume has slightly decreased, the Bank has had more cash available and has been selling federal funds on a nightly basis. Investment balances increased $3,518,779, or 19.68%, for the nine months ended June 30, 2001. The Bank is investing more of its cash into interest earning assets. Premises and equipment decreased $1,480 or 0.03%. The decrease results primarily from $584,881 depreciation expense during the nine-month period offset by $583,401 in purchases of new equipment related to the relocation of the IT department and the remodeling of the loan and operations departments. Other assets decreased $281,752 or 12.84% during the period as compared with the same period last year. The decrease is primarily related to an approximate $11,000 decrease in the ATM account held at the Bankers Bank, a $9,700 decrease in the other repossessed assets account, and an approximate $288,000 decrease in the federal income tax payable account offset by a $13,000 increase in the credit card payment clearing account and an approximate $14,000 increase in the prepaid expense account. Real estate owned balances increased 748,716 or 238.19% over the nine-month period. This increase is related to foreclosures on several pieces of real estate being held by the bank for resale. The FHLB stock account increased $100,000 or 11.21% over the same nine-month period resulting from the purchase of additional shares of stock. Accrued interest receivable increased $108,501 or 7.20% as a direct result of decreasing loan volume.

Loans receivable decreased $2,842,848 or 1.47% as of the nine months ended June 30, 2001 over September 30, 2000. The decrease in loans is primarily attributable to a decreased loan demand resulting from a slowed economy. The allowance for loan losses decreased from $2,364,704 at September 30, 2000 to $2,304,884 at June 30, 2001. This decrease is a direct result of the decrease in the loan portfolio, offset by an increase in charge-offs. The Bank's loan portfolio at June 30, 2001 and September 30, 2000 are summarized as follows:

 

 

**LOANS RECEIVABLE
 
 
 
 **June 30,

2001**September 30,

2000
Real estate mortgage loans
$ 126,316,456
$ 128,039,030
Real estate construction loans
33,895,915
35,871,217
Consumer loans
17,507,881
17,089,161
Commercial and other loans
15,558,050
15,285,001
 
193,278,302
196,284,409
Less:
 
 
Deferred loan fees
(135,394)
(212,055)
Unearned interest income
(36,496)
(63,274)
Allowance for loan losses
(2,304,884)
(2,364,704)
 
$ 190,801,528
$ 193,644,376
 

 

ALLOWANCE FOR LOAN LOSSES

Management conducts an extensive review of the provision for loan losses on a monthly basis. Additions to the allowance for loan losses are charged to operations based upon management's evaluation of the probable losses in its loan portfolio. This evaluation considers the estimated value of the underlying collateral and such other factors as, in management's judgement, deserve recognition under existing economic conditions. While management uses the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the assumptions used in making the evaluations. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowances for losses on loan and real estate owned. Such agencies may require the Bank to recognize additions to the allowances based on their judgements of information available to them at the time of their examination.

A loan is considered impaired when it is probable that the company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Bank's impaired loans include non-accrual loans, troubled debt restructurings, and large loans more than 90 days delinquent in which full payment of principal and interest is not expected. Cash receipts on impaired loans are used to reduce principal balances. Impairment losses are included in the allowance for loan losses through a charge to the provision for loan losses. Impairment losses are measured by the present value of expected future cash flows discounted at the loan's effective interest rate, or at either the loan's observable market price or the fair value of the collateral. Adjustment to impairment losses due to changes in the fair market value of an impaired loan's underlying collateral are included in the provision for losses. Upon disposition of an impaired loan, any related valuation allowance is reversed through a charge-off to the allowance for loan losses. 

Large groups of smaller homogenous loans (consumer loans) are collectively evaluated for impairment. Commercial loans and larger balance real estate and other loans are individually evaluated for impairment. 

 

The following tables illustrate the Bank's allowance for loan losses and its problem loans. 

**ANALYSIS OF NON-ACCRUING AND PAST DUE LOANS
 
 
 
 **June 30,

2001**September 30,

2000**Non-accruing Loans
 
 
Construction
$ 138,154
$ 211,769
First Mortgage
1,330,244
3,204,748
Second Mortgage
561,022
182,759
Consumer
418,812
121,057
Total non-accruing loans
2,448,232
3,720,333
 
 
 **Past Due Loans
 
 
Real Estate
-
-
Construction
1,008,760
369,992
Mortgage
-
-
Consumer
116,961
116,409
Total past due loans
1,125,721
486,401
 
 
 **Total non-accruing and past due loans
$ 3,573,953
$ 4,206,734
 
 
 
Percentage of total loans
1.85%
2.14%
 
 
 
Real estate acquired through foreclosure
$ 1,063,054
$ 314,338
 
 
 **Total non-accruing, past due loans, and

non-performing assets
$ 4,637,007
$ 4,521,072
			

 

**ANALYSIS OF ALLOWANCE FOR LOAN LOSSES
 
 
 
 **Nine Months Ended

June 30,

2001**Year Ended

September 30,

2000
Beginning balance
$2,364,704
$1,235,566
Loans charged-off:
 
 
Real estate construction
7,639
-
Real estate mortgage
354,925
540,371
Consumer and other
270,527
1,112,939
Total Charge-offs
633,091
1,653,310
 
 
 
Recoveries:
 
 
Real estate construction
-
-
Real estate mortgage
43,445
11,344
Consumer and other
94,826
131,104
Total recoveries
138,271
142,448
 
 
 
Net charge-offs
494,820
1,510,862
 
 
 
Provision charged to operations
435,000
2,640,000
 
 
 
Balance at end of period
$2,304,884
$2,364,704
 
 
 
Ratio of net charge-offs to 

average loans outstanding
0.26%
0.77%
 

 

 

LIABILITIES

Deposits have increased $5,800,610, or 2.71%, for the nine-month period ended June 30, 2001. This increase is the result of an increase in non-interest bearing deposit accounts. First Georgia has continued to be successful in its efforts to obtain new deposit business. However, due to the large amount of maturities during the first quarter, the Bank increased its position in Federal Home Loan Bank advances, as evidenced by the increase of $1,000,000, or 40%. Accrued expenses and other liabilities decreased $229,849 or 14.70% for the nine months ended June 30, 2001. This decrease is attributable to approximately $178,000 decrease in the deposit clearing account, a $58,000 decrease in accrued expenses and an approximate $58,000 decrease in other accounts payable. An increase of approximately $30,000 in the group insurance account and a $28,000 increase in the employee stock deduction account offset these decreases. 

 

ITEM 6. EXHIBITS AND REPORTS ON FORM 8K
- Exhibits. 

There are no exhibits filed with this report,

B. Reports on Form 8-K

The Bank filed no reports on Form 8-K for the quarter ended June 30, 2001.

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.

 

Date:

 

By:

       G. Fred Coolidge III

       Secretary and Treasurer********************************************************************************************