UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM 10-QSB
(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, 2006.
OR
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 0-25929
THOMASVILLE BANCSHARES, INC.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-2175800
---------------------- ---------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
301 North Broad Street, Thomasville, Georgia 31792
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(Address of Principal Executive Offices)
(229) 226-3300
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(Issuer's Telephone Number)
Not Applicable
-------------------------------
(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 [ ]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares
outstanding of each of the issuer's classes of common equity as of the latest
practicable date.
Common stock, $1.00 par value per share 2,941,135 shares issued and
outstanding as of August 11, 2006.
Transitional small business disclosure format (check one):
Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
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THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
2006 2005
ASSETS (Unaudited) (Unaudited)
------ ----------- -----------
Cash and due from banks $ 11,406,696 $ 9,660,989
Federal funds sold 5,857,813 17,921,281
------------ ------------
Total cash and cash equivalents $ 17,264,509 $ 27,582,270
------------ ------------
Investment securities:
Securities available-for-sale,
at market value $ 15,284,869 $ 12,301,618
Loans, net 233,699,119 224,358,330
Property & equipment, net 5,589,880 5,630,095
Goodwill 3,372,259 3,372,259
Other assets 4,682,184 3,221,246
------------ ------------
Total Assets $279,892,820 $276,465,818
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 30,105,733 $ 32,666,624
Interest bearing deposits 206,299,617 205,210,749
------------ ------------
Total deposits $236,405,350 $237,877,373
Borrowings 14,593,908 11,067,263
Junior subordinated debentures 4,000,000 4,000,000
Other liabilities 1,338,618 1,044,164
------------ ------------
Total Liabilities $256,337,876 $253,988,800
------------ ------------
Commitments and contingencies
Shareholders' Equity:
Common stock, $1.00 par value, 10
million shares authorized, 2,941,135
(2006) and 2,940,507 (2005)
shares issued & outstanding $ 2,941,135 $ 2,940,507
Paid-in-capital 8,240,546 8,160,931
Retained earnings 12,617,993 11,553,880
Accumulated other
comprehensive (loss) (244,730) (178,300)
------------ ------------
Total Shareholders' Equity $ 23,554,944 $ 22,477,018
------------ ------------
Total Liabilities and
Shareholders' Equity $279,892,820 $276,465,818
============ ============
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the three months
ended June 30,
---------------------------
2006 2005
---- ----
Interest income $4,893,043 $3,707,613
Interest expense 2,128,872 1,227,830
---------- ----------
Net interest income $2,764,171 $2,479,783
Provision for possible loan losses 105,000 105,000
---------- ----------
Net interest income after provision
for possible loan losses $2,659,171 $2,374,783
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Other income
Service charges on deposit accounts $ 179,446 $ 167,283
Fees, money management 251,000 255,000
Trust services 228,667 178,384
Other income and fees 176,676 101,725
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Total other income $ 835,789 $ 702,392
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Operating expenses
Salaries and benefits $1,058,259 $ 893,792
Advertising and public relations 81,754 55,285
Depreciation 106,629 98,316
Regulatory fees and assessments 23,514 25,581
Other operating expenses 633,615 581,379
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Total operating expenses $1,903,771 $1,654,353
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Net income before taxes $1,591,189 $1,422,822
Income taxes 627,300 520,099
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Net income $ 963,889 $ 902,723
========== ==========
Basic income per share $ .33 $ .31
========== ==========
Diluted income per share $ .31 $ .30
========== ==========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the six months
ended June 30,
---------------------------
2006 2005
---- ----
Interest income $9,367,986 $7,098,799
Interest expense 3,953,916 2,321,816
---------- ----------
Net interest income $5,414,070 $4,776,983
Provision for possible loan losses 210,000 210,000
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Net interest income after provision
for possible loan losses $5,204,070 $4,566,983
---------- ----------
Other income
Service charges on deposit accounts $ 357,958 $ 319,063
Fees, money management 502,000 510,000
Trust services 438,626 344,006
Other income and fees 344,578 207,339
---------- ----------
Total other income $1,643,162 $1,380,408
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Operating expenses
Salaries and benefits $2,057,556 $1,758,194
Advertising and public relations 159,662 143,867
Depreciation 179,553 196,163
Regulatory fees and assessments 50,458 52,391
Other operating expenses 1,168,150 1,121,403
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Total operating expenses $3,615,379 $3,272,018
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Net income before taxes $3,231,853 $2,675,373
Income taxes 1,281,007 967,349
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Net income $1,950,846 $1,708,024
========== ==========
Basic income per share $ .66 $ .58
========== ==========
Diluted income per share $ .64 $ .56
========== ==========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
June 30,
-----------------------------
2006 2005
---- ----
Cash flows from operating activities: $ 1,153,759 $ 1,167,037
------------ -----------
Cash flows from investing activities:
Purchase of fixed assets $ (139,338) $ (146,778)
Maturities, calls, paydowns, AFS - - 5,249,561
Purchase of securities, AFS (2,959,926) - -
(Increase) in loans (9,550,789) (3,772,358)
------------ -----------
Net cash provided by/
(used in) investing activities $(12,650,053) $ 1,330,425
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Cash flows from financing activities:
Payment of dividends $ (886,733) $ - -
Issuance of stock to 401(k) 8,644 32,021
Exercise of stock options 2,000 - -
Increase in borrowings 3,526,645 (3,381,440)
(Decrease) in deposits (1,472,023) 20,505,342
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Net cash provided by financing activities $ 1,178,533 $17,155,923
------------ -----------
Net increase/(decrease) in cash
and cash equivalents $(10,317,761) $19,653,385
Cash and cash equivalents,
beginning of period 27,582,270 6,626,106
------------ -----------
Cash and cash equivalents,
end of period $ 17,264,509 $26,279,491
============ ===========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2005 AND 2006
Accumulated
Common Stock Other
-------------------- Paid in Retained Comprehensive
Shares Par Value Capital Earnings Income Total
------ --------- ------- -------- ------ -----
Balance, Dec. 31, 2004 2,937,625 $ 2,937,625 $ 7,872,245 $ 8,739,226 $ (27,556) $19,521,540
--------- ---------- ---------- ---------- -------- ----------
Comprehensive Income:
--------------------
Net income, six-month
period ended June 30, 2005 - - - - - - 1,708,024 - - 1,708,024
Net unrealized (loss) on
securities, six-month
period ended June 30, 2005 - - - - - - - - (55,015) (55,015)
--------- ---------- ---------- ---------- -------- ----------
Total comprehensive income - - - - - - 1,708,024 (55,015) 1,653,009
Declaration of dividends - - - - - - (734,845) - - (734,845)
Sale of 1,952 shares
to employee 401K plan 1,952 1,952 30,069 - - - - 32,021
Stock options, restricted
stock (5,290 options) - - - - 70,100 - - - - 70,100
--------- ---------- ---------- ---------- -------- ----------
Balance, June 30, 2005 2,937,577 $ 2,937,577 $ 7,972,414 $ 9,712,405 $ (82,571) $20,541,825
========= ========== ========== ========== ======== ==========
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Balance, Dec. 31, 2005 2,940,507 $ 2,940,507 $ 8,160,931 $11,553,880 $(178,300) $22,477,018
--------- ---------- ---------- ---------- -------- ----------
Comprehensive Income:
--------------------
Net income, six-month
period ended June 30, 2006 - - - - - - 1,950,846 - - 1,950,846
Net unrealized (loss) on
securities, six-month
period ended June 30, 2006 - - - - - - - - (66,430) (66,430)
--------- ---------- ---------- ---------- -------- ----------
Total comprehensive income - - - - - - 1,950,846 (66,430) 1,884,416
Payment of dividends - - - - - - (886,733) - - (886,733)
Exercise of stock options 200 200 1,800 - - - - 2,000
Sale of 428 shares
to employee 401K plan 428 428 8,216 - - - - 8,644
Stock options, restricted
stock (3,142.844 options) - - - - 69,600 - - - - 69,600
--------- ---------- ---------- ---------- -------- ----------
Balance, June 30, 2006 2,941,135 $ 2,941,135 $ 8,240,546 $12,617,993 $(244,730) $23,554,943
========= ========== ========== ========== ======== ==========
Refer to notes to the consolidated financial statements.
THOMASVILLE BANCSHARES, INC.
THOMASVILLE, GEORGIA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 2006
NOTE 1 - BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three and
six-month periods ended June 30, 2006 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2006. These
statements should be read in conjunction with the consolidated financial
statements and footnotes thereto included in Form 10-KSB for the year ended
December 31, 2005.
NOTE 2 - SUMMARY OF ORGANIZATION
Thomasville Bancshares, Inc., Thomasville, Georgia (the "Company"), was
organized in January 1995 for a then proposed de novo bank, Thomasville
National Bank, (the "Bank"). The Bank commenced operations in October 1995.
The Bank is primarily engaged in the business of obtaining deposits and
providing commercial, consumer and real estate loans to the general public. The
Bank also offers trust services. The Bank operates from two banking offices,
both in Thomasville, Georgia. The Bank's depositors are each insured up to
$100,000 by the Federal Deposit Insurance Corporation, subject to certain
limitations imposed by the FDIC. In addition to the Bank, the Company has two
other subsidiaries, TNB Financial Services, Inc. ("TNBFS"), through which the
Company provides investment advisory services, and Thomasville Capital Trust I
("TCTI"), which issued $4.0 million in trust preferred securities to unrelated
investors in 2005.
NOTE 3 - INVESTMENT SECURITIES
Information pertaining to securities with gross unrealized losses at
June 30, 2006, aggregated by investment category and further segregated by
the length of time (less than or over twelve months) that the securities have
been in a continuous loss position follows:
Less than Over
Twelve Months Twelve Months Total
------------------ ------------------ ------------------
Fair Unrealized Fair Unrealized Fair Unrealized
Description Value Loss Value Loss Value Loss
----------- ----- ---- ----- ---- ----- ----
U.S. Agency and
Government
Corporations $3,927,244 $(42,196) $9,311,293 $(328,608) $13,238,537 $(370,804)
========= ======= ========= ======== ========== ========
At June 30, 2006, unrealized losses in the securities portfolio amounted
to $370,804, representing 2.43% of the total portfolio. All of the unrealized
losses relate to U.S. Agency securities and securities of U.S. government
corporations. These unrealized losses were caused by fluctuations in market
interest rates, rather than concerns over the credit quality of the issuers.
The Company believes that the U.S. Agencies and government corporations will
continue to honor their interest payments on time as well as the full debt at
maturity. Because the unrealized losses are due to fluctuations in the interest
rate, and no credit worthiness factors exist, the Company believes that the
investments are not considered other-than-temporarily impaired.
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
SFAS NO. 154, "ACCOUNTING CHANGES AND ERROR CORRECTIONS, A REPLACEMENT OF
APB OPINION NO. 20 AND FASB STATEMENT NO. 3." SFAS 154 establishes, unless
impracticable, retrospective application as the required method for reporting
a change in accounting principle in the absence of explicit transition
requirements specific to a newly adopted accounting principle. Previously,
most changes in accounting principle were recognized by including the
cumulative effect of changing to the new accounting principle in net income of
the period of the change. Under SFAS 154, retrospective application requires
(i) the cumulative effect of the change to the new accounting principle on
periods prior to those presented to be reflected in the carrying amounts of
assets and liabilities as of the beginning of the first period presented, (ii)
an offsetting adjustment, if any, to be made to the opening balance of retained
earnings (or other appropriate components of equity) for that period, and (iii)
financial statements for each individual prior period presented to be adjusted
to reflect the direct period-specific effects of applying the new accounting
principle. Special retroactive application rules apply in situations where it
is impracticable to determine either the period-specific effects or the
cumulative effect of the change. Indirect effects of a change in accounting
principle are required to be reported in the period in which the accounting
change is made. SFAS 154 carries forward the guidance in APB Opinion 20
"Accounting Changes," requiring justification of a change in accounting
principle on the basis of preferability. SFAS 154 also carries forward without
change the guidance contained in APB Opinion 20, for reporting the correction
of an error in previously issued financial statements and for a change in an
accounting estimate. SFAS 154 is effective for accounting changes and
corrections of errors made in fiscal years beginning after December 15, 2005.
Adoption of SFAS 154 did not result in a material impact on the Company's
Income, capital or financial position.
SFAS NO. 123, "SHARE-BASED PAYMENT (REVISED 2004)." SFAS 123R
establishes standards for the accounting for transactions in which an entity
(i) exchanges its equity instruments for goods or services, or (ii) incurs
liabilities in exchange for goods or services that are based on the fair value
of the entity's equity instruments or that may be settled by the issuance of
the equity instruments. SFAS 123R eliminates the ability to account for stock-
based compensation using APB 25 and requires that such transactions be
recognized as compensation cost in the income statement based on their fair
values on the measurement date, which is generally the date of the grant. SFAS
123R was to be effective for the Company on July 1, 2005; however, the required
implementation date was delayed until January 1, 2006. The Company will
transition to fair-value based accounting for stock-based compensation using a
modified version of prospective application ("modified prospective
application"). Under modified prospective application, as it is applicable to
the Company, SFAS 123R applies to new awards and to awards modified,
repurchased, or cancelled after January 1, 2006. Additionally, compensation
cost for the portion of awards for which the requisite service has not been
rendered (generally referring to non-vested awards) that are outstanding as of
January 1, 2006 must be recognized as the remaining requisite service is
rendered during the period of and/or the periods after the adoption of SFAS
123R. The attribution of compensation cost for those earlier awards will be
based on the same method and on the same grant-date fair values previously
determined for the pro forma disclosures required for companies that did not
adopt the fair value accounting method for stock-based employee compensation.
Adoption of SFAS 123R did not have a material impact on the Company's earnings
or capital accounts.
FASB STAFF POSITION (FSP) NO. 115-1, "THE MEANING OF OTHER-THAN-TEMPORARY
IMPAIRMENT AND ITS APPLICATION TO CERTAIN INVESTMENTS." FSP 115-1 provides
guidance for determining when an investment is considered impaired, whether
impairment is other-than-temporary, and measurement of an impairment loss. An
investment is considered impaired if the fair value of the investment is less
than its cost. If, after consideration of all available evidence to evaluate
the realizable value of its investment, impairment is determined to be other-
than-temporary, then an impairment loss should be recognized equal to the
difference between the investment's cost and its fair value. FSP 115-1
nullifies certain provisions of Emerging Issues Task Force (EITF) Issue No. 03-
1, "The Meaning of Other-Than-Temporary Impairment and It's Application to
Certain Investments," while retaining the disclosure requirements of EITF 03-1
which were adopted in 2003. FSP 115-1 is effective for reporting periods
beginning after December 15, 2005. Adoption of FSP 115-1 did not have a
material impact on the Company's earnings or capital accounts.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
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Thomasville Bancshares, Inc., a Georgia corporation (the "Company"), was
formed in March 1995 to organize and act as the holding company for Thomasville
National Bank (the "Bank"), a national banking association. The Bank opened for
business in October 1995, and presently operates two branches in Thomasville,
Georgia. The Bank is a full service commercial bank, with trust powers, and
offers a full range of interest-bearing and non-interest-bearing accounts,
including commercial and retail checking accounts, money market accounts,
individual retirement and Keogh accounts, regular interest-bearing statement
savings accounts, certificates of deposit, commercial loans, real estate loans,
home equity loans and consumer/installment loans. In addition, the Bank
provides such consumer services as U.S. Savings Bonds, travelers checks,
cashiers checks, safe deposit boxes, bank by mail services, internet banking,
direct deposit and automatic teller services.
In September 2001, the Bank formed an operating subsidiary, TNB Financial
Services, Inc., a Georgia corporation with trust powers. On March 31, 2004,
TNB Financial Services was liquidated, with all of its operations being
transferred to TNB Trust Services, a division of the Bank.
In July 2002, the Company acquired all of the issued and outstanding
capital stock of Joseph Parker & Company, Inc. ("JPC"), a Georgia corporation
and federally registered investment advisory firm located in Thomasville,
Georgia. In July 2004, JPC's name was changed to TNB Financial Services, Inc.
("TNBFS").
The Company's results of operations are largely dependent on interest
income, which is the difference between the interest earned on loans and
securities and interest paid on deposits and borrowings. The results of
operations are also affected by the level of income/fees from loans, deposits,
borrowings, as well as operating expenses, the provision for loan losses, the
impact of federal and state income taxes, and the relative levels of interest
rates and economic activity.
CRITICAL ACCOUNTING POLICIES
Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and could potentially result in
materially different results under different assumptions and conditions. The
Company believes that the most critical accounting policies impacting its
financial condition, and which involve the most complex or subjective
decisions or assessments, are as follows:
Allowance for Loan Losses. Arriving at an appropriate level of allowance
for loan losses involves a high degree of judgment. The Company's allowance for
loan losses provides for probable losses based upon evaluations of known and
inherent risks in the loan portfolio. Management uses historical information
to assess the adequacy of the allowance for loan losses as well as the
prevailing business environment. The allowance is increased by provisions for
loan losses and by recoveries of loans previously charged-off and reduced by
loans charged-off.
Income Taxes. The Company estimates income tax expense based on the amount
it expects to owe various tax authorities. Taxes are discussed in more detail
in Note 13 of the consolidated financial statements in the Company's Form 10-KSB
for the year ended December 31, 2005. Accrued taxes represent the net estimated
amount due to or to be received from taxing authorities. In estimating accrued
taxes, management assesses the relative merits and risks of the appropriate tax
treatment of transactions, taking into account statutory, judicial and
regulatory guidance in the context of its tax position. Although the Company
uses available information to record accrued income taxes, underlying estimates
and assumptions can change over time as a result of unanticipated events or
circumstances such as changes in tax laws influencing the Company's overall tax
position.
Valuation of Goodwill/Intangible Assets and Analysis for Impairment. The
Company utilized the purchase method to reflect its acquisition of JPC.
Accordingly, the Company was required to record assets acquired and liabilities
assumed at their fair value which is an estimate determined by the use of
internal or other valuation techniques. These valuation estimates result in
goodwill and other intangible assets. Goodwill is subject to ongoing periodic
reviews and is evaluated using various fair value techniques including multiples
of price/equity and price/earnings ratios.
Additional information regarding these critical accounting policies is set
forth in the notes to the Company's financial statements included in the
Company's Form 10-KSB for the year ended December 31, 2005.
FINANCIAL CONDITION
Total consolidated assets increased by $3.4 million, to $279.9 million,
during the six-month period ended June 30, 2006. Cash and cash equivalents
decreased by $10.3 million, to $17.3 million; investment securities increased by
$3.0 million, to $15.3 million; loans increased by $9.3 million, to $233.7
million; and other assets increased by $1.4 million, to $13.6 million. To fund
the growth in assets, deposits decreased by $1.5 million, to $219.7 million;
borrowings increased by $3.5 million, to $13.6 million; other liabilities
increased by $.3 million, to $2.0 million; and the capital accounts increased
by $1.1 million, to $23.6 million.
Liquidity and Capital Resources
Liquidity is the Company's ability to meet all deposit withdrawals
immediately, while also providing for the credit needs of customers. The
June 30, 2006 financial statements evidence a satisfactory liquidity
position as total cash and cash equivalents amounted to $17.3 million,
representing 6.2% of total assets. Investment securities, which amounted
to $15.3 million, or 5.5% of total assets, provide a secondary source of
liquidity because they can be converted into cash in a timely manner. The
Company's management closely monitors and maintains appropriate levels of
interest earning assets and interest bearing liabilities so that maturities
of assets are such that adequate funds are provided to meet customer
withdrawals and loan demand. The Company is not aware of any trends, demands,
commitments, events or uncertainties that will result in or are reasonably
likely to result in the Company's liquidity increasing or decreasing in any
material way.
The Bank maintains an adequate level of capitalization as measured by the
following capital ratios and the respective minimum capital requirements
established by the Bank's primary regulator, the Office of the Comptroller of
the Currency ("OCC").
Bank's Minimum required
June 30, 2006 by regulator
-------------- ----------------
Leverage ratio 8.8% 4.0%
Risk weighted ratio 12.5% 8.0%
Off-Balance Sheet Arrangements
In the ordinary course of business, the Bank may enter into off-balance
sheet financial instruments which are not reflected in the financial statements.
These instruments include commitments to extend credit and standby letters of
credit. Such financial instruments are recorded in the financial statements
when funds are disbursed or the instruments become payable.
Following is an analysis of significant off-balance sheet financial
instruments at June 30, 2006 and December 31, 2005.
At At
June 30, December 31,
2006 2005
---- ----
(In thousands)
Commitments to extend credit $ 47,747 $ 45,400
Standby letters of credit 6,994 5,695
------- -------
$ 54,741 $ 51,095
======= =======
RESULTS OF OPERATIONS
For the three-month periods ended June 30, 2006 and 2005, net income
amounted to $963,889 and $902,723, respectively. On a per share basis, basic
and diluted income for the three-month period ended June 30, 2006 was $0.33
and $0.31, respectively. For the three-month period ended June 30, 2005, basic
and diluted income per share, was $0.31 and $0.30, respectively. Management
believes that the following facts are important to consider when comparing the
results of the three-month period ended June 30, 2006 with the three-month
period ended June 30, 2005:
a. Net interest income increased by approximately $284,000, or by 11.5%. This
was accomplished over a time period when total assets have increased by only
7.9%.
b. The above increase combined with a $133,000 increase in non-interest income
was more than sufficient to offset the $250,000 increase in operating
expense.
Net income for the six-month period ended June 30, 2006 amounted to
$1,950,846, or $0.66 and $0.64 per basic and diluted share. For the six-month
period ended June 30, 2005, net income amounted to $1,708,024, or $0.58 and
$0.56 per basic and diluted share. Management believes that the following facts
are important to consider when comparing the results of operations for the six-
month period ended June 30, 2006 with the six-month period ended June 30, 2005:
a. Average total earning assets increased from $228.5 million for the six
months ended June 30, 2005 to $256.1 million for the six months ended
June 30, 2006. The net increase of $27.6 million represents a 12.1%
increase in average earning assets over a twelve-month period.
b. The yield on earning assets increased from 6.21% for the six-month period
ended June 30, 2005 to 7.32% for the six-month period ended June 30,
2006. This increase is mainly due to economic policies undertaken by the
Federal Reserve Board. Interest income increased from $7,098,799 for the
six-month period ended June 30, 2005 to $9,367,986 for the six-month period
ended June 30, 2006 because of the growth in average earning assets and the
higher yields on all earning asset categories.
c. Net interest income represents the difference between interest received
on interest earning assets and interest paid on interest bearing
liabilities. The following table presents the main components of
interest earning assets and interest bearing liabilities for the six-
month period ended June 30, 2006.
(Dollars in 000's)
Interest Interest
Earning Assets/ Average Income/ Yield/
Bearing Liabilities Balance Cost Cost
------------------- ------- ----- ----
Federal funds sold $ 7,499 $ 175 4.67%
Securities 15,190 337 4.44%
Loans 233,400 8,856 7.59%
-------- ------- ----
Total $ 256,089 $ 9,368 7.32%
-------- ------- ----
Deposits and borrowings $ 219,016 $ 3,954 3.61%
-------- ------- ----
Net interest income $ 5,414
=======
Net yield on earning assets 4.23%
====
Net interest income increased from $4,776,983 for the six-month period
ended June 30, 2005 to $5,414,070 for the six-month period ended June 30,
2006, an increase of $637,087, or 13.3%. The average cost of funds
increased by 125 basis points to 3.61% for the six months ended June 30,
2006 as compared to the six months ended June 30, 2005; the yield on
earning assets increased by 111 basis points over the same period. This
combined with the fact that average earning assets exceed average interest
bearing liabilities by $36.1 million caused the net yield on earning
assets to increase from 4.18% for the six-month period ended June 30, 2005
to 4.23% for the six-month period ended June 30, 2006.
d. Other income increased from $1,380,408 for the six-month period ended June
30, 2005 to $1,643,162 for the six-month period ended June 30, 2006. As a
percent of average total assets, other income decreased from 1.10% for the
six-month period ended June 30, 2005 to 1.18% for the six-month period
ended June 30, 2006.
e. Total operating expenses increased from $3,272,018 for the six-month
period ended June 30, 2005 to $3,615,379 for the six-month period ended
June 30, 2006. As a percent of average total assets, total operating
expenses declined from 2.62% for the six-month period ended June 30,
2005 to 2.60% for the six-month period ended June 30, 2006.
Allowance for Loan Losses
At December 31, 2005, the allowance for loan losses amounted to
$2,712,746; at June 30, 2006, the allowance amounted to $2,895,701. The
allowance for loan losses, as a percent of gross loans, increased from 1.19%
to 1.22% during the six-month period ended June 30, 2006. Management
considers the allowance for loan losses to be adequate and sufficient to absorb
anticipated future losses; however, there can be no assurance that charge-offs
in future periods will not exceed the allowance for loan losses or that
additional provisions to the allowance will not be required.
The Company is not aware of any current recommendation by the regulatory
authorities which, if implemented, would have a material effect on the Company's
liquidity, capital resources, or results of operations.
ITEM 3. CONTROLS AND PROCEDURES
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Management has developed and implemented a policy and procedures for
reviewing disclosure controls and procedures and internal controls over
financial reporting on a quarterly basis. Management, including the Chief
Executive Officer (who is both the Company's principal executive and principal
financial officer), evaluated the effectiveness of the design and operation of
disclosure controls and procedures as of June 30, 2006 and, based on their
evaluation, the Company's Chief Executive Officer concluded that these controls
and procedures are operating effectively. Disclosure controls and procedures
are the Company's controls and other procedures that are designed to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Securities Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the Securities and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by the Company in the reports that it files under the
Securities Exchange Act is accumulated and communicated to management, including
the principal executive and financial officers, as appropriate to allow timely
decisions regarding required disclosure.
There were no changes in the Company's internal control over financial
reporting during the Company's last fiscal quarter that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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The 2006 Annual Meeting of Shareholders of the Company was held on May 16,
2006. At the meeting, the following person was elected as a Class I director
to serve for a term of three years and until his successor is elected and
qualified: Joel W. Barrett. The following people were elected as Class II
directors to serve for a term of three years and until their successors are
elected and qualified: Charles E. Hancock, Charles H. Hodges, III, Harold
L. Jackson, and Diane W. Parker.
The number of votes cast for and withheld with respect to the election of
each nominee for director was as follows:
Votes Votes
For Withheld
--- --------
Joel W. Barrett 2,238,580 5,000
Charles E. Hancock 2,241,380 2,200
Charles H. Hodges, III 2,239,980 3,600
Harold L. Jackson 2,241,580 2,000
Diane W. Parker 2,240,980 2,600
In addition, the shareholders of the Company ratified the appointment of
Francis and Company, CPAs, as auditors for the Company and its subsidiaries
for the year ending December 31, 2006. The number of votes for, against and
abstaining with respect to the ratification of Francis and Company, CPAs was
as follows:
Votes Votes Votes
For Abstained Against
--- --------- -------
2,239,780 3,800 0
The 2006 Stock Incentive Plan was ratified by the shareholders.
Votes Votes Votes Broker
For Abstained Against Nonvotes
--- --------- ------- --------
1,539,387 3,250 5,700 695,243
The following persons did not stand for reelection at the 2006 Annual Meeting
of Shareholders as their term of office continued after the Annual Meeting:
Charles A. Balfour, Richard L. Singletary, Stephen H. Cheney, David A. Cone,
Randall L. Moore, Cochran A. Scott, Jr., and J. Mark Parker.
ITEM 6. EXHIBITS
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The following exhibits are filed with this report.
Exhibit
Number Description
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3.1 Articles of Incorporation of the Company (incorporated
herein by referenced to the Company's Registration
Statement on Form SB-2 under the Securities Act of 1933,
Registration Number 33-91536)
3.2 Bylaws of the Company (incorporated herein by referenced
to the Company's Registration Statement on Form SB-2
under the Securities Act of 1933, Registration Number
33-91536)
31.1 Certification Pursuant to Rule 13a-14(a), As Adopted
Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
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.
THOMASVILLE BANCSHARES, INC.
-------------------------------------
(Registrant)
Date: August 11, 2006 By: /s/Stephen H. Cheney
----------------- ------------------------------------
Stephen H. Cheney
President and Chief Executive Officer
(Principal Executive, Financial and Accounting
Officer)