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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number 333-12293
PEOPLES BANCORP, INC.
(Name of small business issuer in its charter)
Georgia 58-2265412
(State of Incorporation) (I.R.S. Employer Identification No.)
119 Maple Street, Carrollton, GA
(Address of principal executive office)
30117
(Zip Code)
(770) 838-9608
(Issuer's telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act: Common stock, par
value $.01
Check whether 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
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B in this form, and will not be contained, to the best of
Registrant's knowledge, in definitive Proxy or Information Statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
Registrant's revenues for its fiscal year ended December 31, 1999 were
$3,266,846.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 1, 2000 was $4,162,140 based on the initial offering price
of $10.00 per share, although there is no established trading market.
There were 800,000 shares of Registrant's common stock outstanding at March 15,
2000.
Documents Incorporated By Reference: None.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT
Peoples Bancorp, Inc. (the "Company" or "PBI"), Carrollton, Georgia, was
incorporated as a Georgia business corporation for the purpose of becoming a
bank holding company by acquiring all of the common stock of Peoples Bank of
West Georgia, Carrollton, Georgia (the "Bank") upon its formation. The Company
filed applications to the Board of Governors of the Federal Reserve System (the
"Board") and the Georgia Department of Banking and Finance (the "DBF") for prior
approval to become a bank holding company. The Company received Board approval
on December 30, 1996, and the DBF approval on December 18, 1996. The Company
became a bank holding company within the meaning of the federal Bank Holding
Company Act (the "Act") and the Georgia bank holding company law (the "Georgia
Act") on March 3, 1997. The Bank currently is the sole operating subsidiary of
the Company. On October 11, 1996, the Bank received the approval of its Articles
of incorporation from the DBF and its permit to begin business was issued by the
DBF on February 28, 1997. The Bank opened for business on March 3, 1997. The
deposits at the Bank are insured by the Federal Deposit Insurance Corporation
(the "FDIC").
(b) BUSINESS OF ISSUER
The Bank conducts a general commercial banking business in its primary service
area, emphasizing the banking needs of individuals and small- to medium-sized
businesses. The Company and the Bank conduct business from the new main office
opened in 1999 located at 119 Maple Street, Carrollton, Georgia 30117. The Bank
has also opened a branch office at 6670 Church Street in Douglasville, Georgia.
As of December 31, 1999, PBI and the Bank had consolidated total assets of
approximately $49.6 million, total deposits of approximately $38.8 million and
total stockholders' equity of approximately $8.0 million.
The Company is authorized to engage in any activity permitted by law to a
corporation, subject to applicable Federal regulatory restrictions on the
activities of bank holding companies. The Company was formed for the purpose of
becoming a holding company to own 100% of the stock of the Bank. The holding
company structure provides the Company with greater flexibility than the Bank,
while the Company has no present plans to engage actively in any nonbanking
business activities, management anticipates studying the feasibility of
establishing or acquiring subsidiaries to engage in other business activities to
the extent permitted by law.
The principal business of the Bank is to accept deposits from the public and to
make loans and other investments in and around Carroll County, Georgia, its
primary service area.
The Bank offers a full range of deposit services that are typically available
from financial institutions, including NOW accounts, demand, savings and other
time deposits. In addition, retirement accounts such as Individual Retirement
Accounts are available. All deposit accounts are insured by the FDIC up to the
maximum amount currently permitted by law.
The Bank offers a full range of commercial and consumer loans. The Bank makes
loans to individuals for purposes such as home mortgage financing, personal
vehicles and various consumer purchases, and other personal and family needs.
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The Bank makes commercial loans to businesses primarily in the primary service
area for purposes such as providing equipment and machinery purchases,
commercial real estate purchases and working capital.
The Bank's lending philosophy is to make loans, taking into consideration the
safety of the Bank's depositors' funds, the preservation of the Bank's
liquidity, the interest of the Company's shareholders, and the welfare of the
community. Interest income from the Bank's lending operations is the principal
component of the Bank's income, so therefore prudent lending is essential for
the prosperity of the Bank.
The principal sources of income for the Bank are interest and fees collected on
loans, interest and dividends collected on other investments, and mortgage
brokerage fees. The principal expenses of the Bank are interest paid on
deposits, employee compensation, office expenses, and other overhead expenses.
The Bank's business plan for its initial years of operation relies principally
upon local advertising and promotional activity and upon personal contacts by
its directors, officers and shareholders to attract business and to acquaint
potential customers with the Bank's personalized services. The Bank intends to
emphasize a high degree of personalized client service in order to be able to
provide for each customer's banking needs. The Bank's marketing approach will
emphasize the advantages of dealing with an independent, locally-owned and
managed state chartered bank to meet the particular needs of individuals,
professionals and small-to- medium-size businesses in the community. All banking
services will be continually evaluated with regard to their profitability and
efforts will be made to modify the Bank's business plan if the plan does not
prove successful. The Bank does not currently offer trust or permissible
securities services.
SUPERVISION AND REGULATION
REGULATION OF THE BANK. The operations of the Bank are subject to state and
federal statutes applicable to state chartered banks whose deposits are insured
by the FDIC and the regulations of the DBF and the FDIC. Such statutes and
regulations relate to, among other things, required reserves, investments,
loans, mergers and consolidations, issuances of securities, payment of
dividends, establishment of branches and other aspects of the Bank's operations.
Under the provisions of the Federal Reserve Act, the Bank is subject to certain
restrictions on any extensions of credit to the Company or, with certain
exceptions, other affiliates, and on the taking of such stock or securities as
collateral on loans to any borrower. In addition, the Bank is prohibited from
engaging in certain tie-in arrangements in connection with any extension of
credit or the providing of any property or service.
The Bank, as a state chartered bank, will be permitted to branch only to the
extent that banks are permitted to branch under Georgia law. In January 1996,
the Georgia legislature passed a bill designed to eliminate Georgia's current
intra-county branching restrictions. The new legislation provided that effective
after July 1, 1996, banks in Georgia, with prior approval of the DBF (and the
appropriate federal regulatory authority), could establish additional branches
in up to three new counties in the state per year. On July 1, 1998, full
statewide branching went into effect as Georgia banks may establish new branches
in any county in the state with prior approval of the appropriate regulatory
authorities.
The FDIC adopted final risk-based capital guidelines for all FDIC insured state
chartered banks
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that are not members of the Federal Reserve System effective December 31, 1990.
As of December 31, 1992, all banks are required to maintain a minimum ratio of
total capital to risk weighted assets of 8 percent (of which at least 4 percent
must consist of Tier 1 capital). Tier 1 capital of state chartered banks (as
defined in regulations) generally consists of (i) common stockholders equity;
(ii) noncumulative perpetual preferred stock and related surplus; and (iii)
minority interests in the equity accounts of consolidated subsidiaries.
In addition, the FDIC adopted a minimum ratio of Tier 1 capital to total assets
of banks. This capital measure is generally referred to as the leverage capital
ratio. The FDIC has established a minimum leverage capital ratio of 3 percent if
the FDIC determines that the institution is not anticipating or experiencing
significant growth and has well-diversified risk, including no undue interest
rate exposure, excellent asset quality, high liquidity, good earnings and, in
general, is considered a strong banking organization, rated Composite 1 under he
Uniform Financial Institutions Rating System. Other financial institutions are
expected to maintain leverage capital at least 100 to 200 basis points above the
minimum level. Banking regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations, including a proposal
to add an interest rate risk component to risk-based capital requirements. At
December 31, 1999, the Bank exceeded the minimum Tier 1, risk-based and leverage
capital ratios.
The Federal Deposit Insurance Corporation Improvement Act of 1991, enacted in
December 1991 ("FDICIA"), specifies, among other things, the following five
capital standard categories for depository institutions: (i) well capitalized,
(ii) adequately capitalized, (iii) undercapitalized, (iv) significantly
undercapitalized and (v) critically undercapitalized. FDICIA imposes
progressively more restrictive constraints on operations, management and capital
distributions depending on the category in which an institution is classified.
Each of the federal banking agencies has issued final uniform regulations that
became effective December 19, 1992, which, among other things, define the
capital levels described above. Under the final regulations, a bank is
considered "well capitalized" if it (i) has a total risk-based capital ratio of
10% or greater, (ii) has a Tier 1 risk-based capital ratio of 6% or greater,
(iii) has a leverage ratio of 5% or greater, and (iv) is not subject to any
order or written directive to meet and maintain a specific capital level for any
capital measure. An "adequately capitalized" bank is defined as one that has (i)
a total risk-based capital ratio for 8% or greater, (ii) a Tier 1 risk-based
capital ratio of 4% or greater and (iii) a leverage ratio of 4% or greater. An
"undercapitalized" bank is defined as one that has (i) a total risk-based
capital ratio of less than 8%, (ii) a Tier I risk-based capital ratio of less
than 4% or (iii) a leverage ratio of less than 3%. A "significantly
undercapitalized" bank is defined as one that has (i) a total risk-based capital
ratio of less than 6%, (ii) a Tier 1 risk-based capital ratio of less than 3% or
(iii) a leverage ratio of less than 3%. A bank is "critically undercapitalized"
if the bank has a leverage ratio equal to or less than 2%. The applicable
federal regulatory agency for a bank that is "well capitalized" may reclassify
it as "adequately capitalized" or "undercapitalized" and subject the institution
to the supervisory actions applicable to the next lower capital category, if it
determines that the Bank is in an unsafe or unsound condition or deems the bank
to be engaged in an unsafe or unsound practice and not to have corrected the
deficiency. As of December 31, 1999, the Bank met the definition of a "well
capitalized" institution.
"Undercapitalized" depository institutions, among other things, are subject to
growth limitations, are prohibited, with certain exceptions, from making capital
distributions, are limited in their ability to obtain funding from a Federal
Reserve Bank and are required to submit a capital restoration plan. The federal
banking agencies may not accept a capital plan without determining, among other
things, that the plan is based on realistic assumptions and is likely to
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succeed in restoring the depository institution's capital. In addition, for a
capital restoration plan to be acceptable, the depository institution's parent
holding company must guarantee that the institution will comply with such
capital restoration plan and provide appropriate assurances of performance. If a
depository institution fails to submit an acceptable plan, including if the
holding company refuses or is unable to make the guarantee described in the
previous sentence, it is treated as if it is "significantly undercapitalized".
Failure to submit or implement an acceptable capital plan also is grounds for
the appointment of a conservator or a receiver. "Significantly undercapitalized"
depository institutions may be subject to a number of additional requirements
and restrictions such as orders to sell sufficient voting stock to become
adequately capitalized, requirements to reduce total assets, and cessation of
receipt of deposits from correspondent banks. "Critically undercapitalized"
institutions, among other things, are prohibited from making any payments of
principal and interest on subordinated debt, and are subject to the appointment
of a receiver or conservator.
Under FDICIA, the FDIC is permitted to provide financial assistance to an
insured bank before appointment of a conservator or receiver only if (i) such
assistance would be the least costly method of meeting the FDIC's insurance
obligations, (ii) grounds for appointment of a conservator or a receiver exist
or are likely to exist, (iii) it is unlikely that the bank can meet all capital
standards without assistance and (iv) the bank's management has been competent,
has complied with applicable laws, regulations, rules and supervisory directives
and has not engaged in any insider dealing, speculative practice or other
abusive activity.
The Bank is subject to FDIC deposit insurance assessments for the Bank Insurance
Fund ("BIF"). The FDIC has implemented a risk-based assessment system whereby
banks are assessed on a sliding scale depending on their placement in nine
separate supervisory categories. Recent legislation provides that BIF insured
institutions, such as the Bank, will share the Financial Corporation ("FICO")
bond service obligation. Previously, only Savings Association Insurance Fund
("SAIF") insured institutions were obligated to contribute to the FICO bond
service. The BIF deposit insurance premium will be less than $.02 per $100 of
BIF insured deposits for the highest-rated institutions.
On April 19, 1995, the federal bank regulatory agencies adopted uniform
revisions to the regulations promulgated pursuant to the Community Reinvestment
Act (the "CRA"), which are intended to set standards for financial institutions.
The revised regulation contains three evaluation tests: (a) a lending test which
will compare the institution's market share of loans in low and moderate income
areas to its market share of loans in its entire service area and the percentage
of a bank's outstanding loans to low and moderate income areas or individuals,
(b) a services test which will evaluate the provision of services that promote
the availability of credit to low and moderate income areas, and (c) an
investment test, which will evaluate an institution's record of investments in
organizations designed to foster community developments, mall and minority owned
businesses and affordable housing lending, including state and local government
housing or revenue bonds. The regulation is designed to reduce the paperwork
requirements of the current regulations and provide regulatory agencies,
institutions, and community groups with a more objective and predictable manner
with which to evaluate the CRA performance of financial institutions. The rule
became effective on January 1, 1996 when evaluation under streamlined procedures
began for institutions with total assets of less than $250 million that are
owned by a holding company with total assets of less than $1 billion.
Congress and various federal agencies (including, in addition to the bank
regulatory agencies, the Department of Housing and Urban Development, the
Federal Trade Commission and the
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Department of Justice (collectively, the "Federal Agencies") responsible for
implementing the nation's fair lending laws have been increasingly concerned
that the prospective home buyers and other borrowers are experiencing
discrimination in their efforts to obtain loans. The Justice Department filed
suit against financial institutions which it determined had discriminated,
seeking fines and restitution for borrowers who allegedly suffered from
discriminatory practices. Most, if not all, of these suites have been settled
(some for substantial sums) without a full adjudication on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what constitutes
discrimination in lending and to specify the factors the agencies will consider
in determining if lending discrimination exists, announced a joint policy
statement detailing specific discriminatory practices prohibited under the Equal
Credit Opportunity Act and the Fair Housing Act. In the policy statement, three
methods of establishing discrimination in lending were identified: (a) overt
evidence of discrimination, when a lender blatantly discriminates on a
prohibited basis, or (b) where there is no showing that the treatment was
motivated by intent to discriminate against a person, and (c) evidence of
disparate impact, when a lender applies a practice uniformly to all applicants,
but the practice has a discriminatory effect on a protected class, even where
such practices are neutral on their face and are applied equally, unless the
practice can be justified on the basis of business necessity.
REGULATION OF THE COMPANY. The Company is a bank holding company within the
meaning of the Federal Bank Holding Company Act (the "Act") and the Georgia bank
holding company law (the "Georgia Act"). As a bank holding company, the Company
is required to file with the Federal Reserve Board (the "Board") an annual
report and such additional information as the Board may require pursuant to the
Act. The Board may also make examinations of the Company and each of its
subsidiaries. Bank holding companies are required by the Act to obtain approval
from the Board prior to acquiring, directly or indirectly, ownership or control
of more than 5% of the voting shares of a bank. The Act also prohibits bank
holding companies, with certain exceptions, from acquiring more than 5% of the
voting shares of any company that is not a bank and from engaging in any
nonbanking business (other than a business closely related to banking as
determined by the Board) or from managing or controlling banks and other
subsidiaries authorized by the Act or furnishing services to, or performing
services for, its subsidiaries without the prior approval of the Board. The
Board is empowered to differentiate between activities that are initiated de
novo by a bank holding company or a subsidiary and activities commenced by
acquisition of a going concern. The Company has no present intention to engage
in nonbanking activities. As a bank holding company, the Company is subject to
capital adequacy guidelines as established by the Board. The Board established
risk based capital guidelines for bank holding companies effective March 15,
1989. Beginning on December 31, 1992, the minimum required ratio for total
capital to risk weighted assets became 8 percent (of which at least 4 percent
must consist of Tier 1 capital). Tier 1 capital (as defined in regulations of
the Board) consists of common and qualifying preferred stock and minority
interests in equity accounts of consolidated subsidiaries, less goodwill and
other intangible assets required to be deducted under the Board's guidelines.
The Board's guidelines apply on a consolidated basis to bank holding companies
with total consolidated assets of $150 million or more. For bank holding
companies with less than $150 million in total consolidated assets (such as the
Company), the guidelines will be applied on a bank only basis, unless the bank
holding company is engaged in nonbanking activity involving significant leverage
or has significant amount of debt outstanding that is held by the general
public. The Board has stated that risk based capital guidelines establish
minimum standards and that bank holding companies generally are expected to
operate well above the minimum standards. The
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Company is also a bank holding company within the meaning of the Georgia Act,
which provides that, without the prior approval of the DBF, it is unlawful (i)
for any bank holding company to acquire direct or indirect ownership or control
of more than 5% of the voting shares of any bank, (ii) for any bank holding
company or subsidiary thereof, other than a bank, to acquire all or
substantially all of the assets of a bank, or (iii) for any bank holding company
to merge or consolidate with any other bank holding company. It also is unlawful
for any company to acquire direct or indirect ownership or control of more than
5% of the voting shares of any bank in Georgia unless such bank has been in
existence and continuously operating or incorporated as a bank for a period of
five years or more prior to the date of application to the DBF for approval of
such acquisition. Bank holding companies themselves are prohibited from
acquiring another bank until the initial bank in the bank holding company has
been incorporated for a period of twenty-four months. The Riegle-Neal Interstate
Banking and Branching Efficiency Act of 1994 (the "Interstate Banking Act"),
subject to certain restrictions, allows adequately capitalized and managed bank
holding companies to acquire existing banks across state lines, regardless of
state statutes that would prohibit acquisitions by out-of-state institutions.
Further, effective June 1, 1997, a bank holding company may consolidate
interstate bank subsidiaries into branches and a bank may merge with an
unaffiliated bank across state lines to the extent that the applicable states
have not "opted out" of interstate branching prior to such effective date. Some
states may elect to permit interstate mergers prior to June 1, 1997. The
Interstate Banking Act generally prohibits an interstate acquisition (other than
the initial entry into a state by a bank holding company) that would result in
either the control of more than (i) 10% of the total amount of insured deposits
in the United States, or (ii) 30% of the total insured deposits in the home
state of the target bank, unless such 30% limitation is waived by the home state
on a basis which does not discriminate against out-of-state institutions. As a
result of this legislation, the Company may become a candidate for acquisition
by, or may itself seek to acquire, banking organizations located in other
states. The Riegle Community Development and Regulatory Improvement Act of 1994
(the "Improvement Act") provides for the creation of a community development
financial institutions' fund to promote economic revitalization in community
development. Banks and thrift institutions are allowed to participate in such
community development banks. The Improvement Act also contains (i) provisions
designed to enhance small business capital formation and to enhance disclosure
with regard to high cost mortgages for the protection of consumers, and (ii)
more than 50 regulatory relief provisions that apply to banks and thrift
institutions, including the coordination of examinations by various federal
agencies, coordination of frequency and types of reports financial institutions
are required to file and reduction of examinations for well capitalized
institutions.
Bank holding companies may be compelled by bank regulatory authorities to invest
additional capital in the event a subsidiary bank experiences either significant
loan losses or rapid growth of loans or deposits. In addition, the Company may
be required to provide additional capital to any additional banks it acquires as
a condition to obtaining the approvals and consents of regulatory authorities in
connection with such acquisitions.
The Company and the Bank are subject to the Federal Reserve Act, Section 23A,
which limits a bank's "covered transactions" (generally, any extension of
credit) with any single affiliate to no more than 10% of a bank's capital and
surplus. Covered transactions with all affiliates combined are limited to no
more than 20% of a bank's capital and surplus. All covered and exempt
transactions between a bank and its affiliates must be on terms and conditions
consistent with safe and sound banking practices, and a bank and its
subsidiaries are prohibited from purchasing low quality assets from the bank's
affiliates. Finally, Section 23A requires that all of a bank's extensions of
credit to an affiliate be appropriately secured by collateral. The
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Company and the Bank are also subject to Section 23B of the Federal Reserve Act,
which further limits transactions among affiliates. Sections 22(g) and 22(h) of
the Federal Reserve Act and implementing regulations also prohibit extensions of
credit by a state non-member bank (such as the Bank) to its directors, officers
and controlling shareholders on terms which are more favorable than those
afforded other borrowers, and impose limits on the amounts of loans to
individual affiliates and all affiliates as a group.
The United States Congress and the Georgia General Assembly periodically
consider and adopt legislation that results in, and could further result in,
deregulation, among other matters, of banks and other financial institutions.
Such legislation could modify or eliminate geographic restrictions on banks and
bank holding companies and current prohibitions with other financial
institutions, including mutual funds, securities brokerage firms, insurance
companies, banks from other states and investment banking firms. The effect of
any such legislation on the business of the Company or the Bank cannot be
accurately predicted. The Company cannot predict what legislation might be
enacted or what other implementing regulations might be adopted, and if enacted
or adopted, the effect thereof.
MONETARY POLICY
The earnings of the Bank are affected by domestic and foreign economic
conditions, particularly by the monetary and fiscal policies of the United
States Government and its agencies.
The Federal Reserve has had, and will continue to have, an important impact on
the operating results of commercial banks through its power to implement
national monetary policy in order, among other things, to mitigate recessionary
and inflationary pressures by regulating the national money supply.
The techniques used by the Federal Reserve include setting the reserve
requirements of member banks and establishing the discount rate on member bank's
borrowings. The Federal Reserve also conducts open market transactions in United
States Government securities.
Periodically, bills are pending before the United States Congress which contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. Among such bills are
proposals to prohibit banks and bank holding companies from conducting certain
types of activities, to subject banks to increased disclosure and reporting
requirements, to eliminate on a regional or other basis the present restriction
on interstate expansion by banks or bank holding companies, to alter the
statutory separation of commercial and investment banking and to alter the
powers of thrift institutions and other competitors of banks. It cannot be
predicted whether or in what form any of these proposals will be adopted or the
extent to which the business of the Company may be affected thereby.
COMPETITION
The banking business is highly competitive. The Bank competes with other
commercial banks in its primary service area.
Banks generally compete with other financial institutions through the banking
products and services offered, the pricing of services, the level of service
provided, the convenience and availability of services, and the degree of
expertise and the personal manner in which services are offered. The Bank
encounters strong competition from most of the financial institutions in
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the Bank's primary service area. In the conduct of certain areas of its banking
business, the Bank also competes with credit unions, consumer finance companies,
insurance companies, money market mutual funds and other financial institutions,
some of which are not subject to the same degree of regulation and restrictions
imposed upon the Bank. Many of these competitors have substantially greater
resources and lending limits than the Bank has and offer certain services, such
as trust services, that the Bank does not provide presently. Management believes
that competitive pricing and personalized service will provide it with a method
to compete effectively in the primary service area.
EMPLOYEES
As of December 31, 1999, the Bank employed 16 full-time employees and three
part-time employees. Except for the officers of the Bank who presently serve as
officers of the Company, the Company does not have any employees. Neither the
Company nor the Bank is a party to any collective bargaining agreement, and
management believes the Bank enjoys satisfactory relations with its employees.
ITEM 2. DESCRIPTION OF PROPERTIES.
The operations of the Company and the Bank are conducted in a main office
building located at 119 Maple Street, Carrollton, Georgia. The office consists
of an approximately 25,000 square foot four-story building, of which two floors
are being lease out unaffiliated third parties. The Bank also has a branch of
located at 6670 Church Street in Douglasville, Georgia. That building is
one-story brick building with approximately 5,000 square feet of space.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor the Bank is a party to any pending legal proceedings,
other than routine litigation incidental to the Bank's business, which
management believes would have a material effect upon the operations or
financial condition of the Company or the Bank.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the Company's
fourth quarter of the fiscal year ended December 31, 1999.
PART II
ITEM 5. MARKET FOR ISSUER'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no established trading market for the Company's common stock, which was
first issued on January 28, 1997 at a price of $10.00 per share. As of March 15,
2000, the Company had 369 shareholders of record.
Under the Georgia Business Corporation Code, the Company may from time to time
make distributions, including the payment of dividends, to its shareholders in
money, indebtedness or other property (except its own shares) unless, after
giving effect to such distribution, the Company would not be able to pay its
debts as they become due in the usual course of business or the Company's total
assets would be less than the sum of its total liabilities, plus the amount that
would be needed, if the Company were to be dissolved at the time of the
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distribution, to satisfy any preferential rights of shareholders upon
dissolution. The Company may also distribute its shares pro rata and without
consideration to its shareholders or to the shareholders of one or more classes
or series, which constitutes a share dividend.
However, the only current source of funds with which the Company can pay
dividends is from amounts received as dividends from the Bank. The Board of
Directors of the Bank is limited in its ability to pay cash dividends on the
outstanding capital stock of the Bank without regulatory approval. The Georgia
Financial Institutions Code provides that dividends may be declared and paid
only from a bank's cumulative retained earnings which have not been appropriated
as permanent capital. Approval from the Department is required prior to the
payment of dividends by a bank under certain circumstances. Generally, a bank
may declare and pay dividends without the prior approval of the Department so
long as (i) a bank's ratio of equity capital to adjusted total assets equals or
exceeds 6%, (ii) the aggregate amount of dividends declared or anticipated to be
declared by a bank in the calendar year does not exceed 50% of such bank's net
profits after taxes but before dividends for the prior calendar year, and (iii)
the total classified assets at the most recently completed and delivered
examination of the bank do not exceed 80% of the equity capital reflected at
such examination.
The Company does not anticipate paying dividends on its common stock in the
immediate future.
No assurance can be given that dividends will be declared by the Company, or if
declared, what the amount of the dividends will be or whether such dividends,
once declared, would continue.
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ITEM 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following is a discussion of the financial condition of Peoples Bancorp.,
Inc. (PBI) and its bank subsidiary, Peoples Bank of West Georgia at December 31,
1999 and 1998 and the results of operations for the years then ended. The
purpose of this discussion is to focus on information about PBI's financial
condition and results of operations which are not otherwise apparent from the
audited consolidated financial statements. Reference should be made to those
statements and the selected financial data presented elsewhere in this report
for an understanding of the following discussion and analysis.
Forward-Looking Statements
PBI may from time to time make written or oral forward-looking statements,
including statements contained in PBI's filings with the Securities and Exchange
Commission and its reports to stockholders. Statements made in the Annual
Report, other than those concerning historical information, should be considered
forward-looking and subject to various risks and uncertainties. Such
forward-looking statements are made based upon management's belief as well as
assumptions made by, and information currently available to, management pursuant
to "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. PBI's actual results may differ materially from the results anticipated in
forward-looking statements due to a variety of factors, including governmental
monetary and fiscal policies, deposit levels, loan demand, loan collateral
values, securities portfolio values, interest rate risk management; the effects
of competition in the banking business from other commercial banks, thrifts,
mortgage banking firms, consumer finance companies, credit unions, securities
brokerage firms, insurance companies, money market funds and other financial
institutions operating in PBI's market area and elsewhere, including
institutions operating through the Internet, changes in governmental regulation
relating to the banking industry, including regulations relating to branching
and acquisitions, failure of assumptions underlying the establishment of
reserves for loan losses, including the value of collateral underlying
delinquent loans and other factors. PBI cautions that such factors are not
exclusive. PBI does not undertake to update any forward-looking statement that
may be made from time to time by, or on behalf of, PBI.
Overview
PBI's 1999 results were highlighted by becoming cumulatively profitable in its
second full year of operations with a net income of $255,000. PBI also moved
into its 24,000 square foot facility located in downtown Carrollton in November
1999. PBI has expanded its geographic market by adding a loan production office
in Villa Rica in late 1999 and a full-service branch in Douglasville in January
of 2000. The physical improvements and market expansion should provide steady
growth for PBI in the future.
<PAGE>
Financial Condition at December 31, 1999 and 1998
Following is a summary of PBI's balance sheets for the years indicated:
December 31,
1999 1998
(Dollars in Thousands)
Cash and due from banks $ 1,556 $ 1,038
Interest-bearing deposits in banks 199 198
Federal funds sold 2,023 1,450
Securities 11,696 11,314
Loans, net 29,772 17,846
Premises and equipment 3,798 2,379
Other assets 572 298
------- ------
$ 49,616 $ 34,523
====== ======
Total deposits $ 38,764 $ 26,391
Other borrowings 2,500 -
Other liabilities 401 247
Stockholders' equity 7,951 7,885
------- ------
$ 49,616 $ 34,523
====== ======
Financial Condition at December 31, 1999 and 1998
As of December 31, 1999, PBI had total assets of $49.6 million, an increase of
44% since December 31, 1998. Total interest-earning assets were $44.1 million at
December 31, 1999 or 88.82% of total assets as compared to 89.86% at December
31, 1998. PBI's primary interest-earning assets at December 31, 1999 were loans,
which made up 68.42% of total interest-earning assets as compared to 58.22% at
December 31, 1998. PBI's loan to deposit ratio was 77.78% as compared to 68.44%
at December 31, 1998. Deposit growth of $12.3 million and advances from the
Federal Home Loan Bank of $2.5 have been used primarily to fund loan growth of
$12.1 million and fixed asset purchases of $1.8 million.
PBI's investment portfolio, consisting of U.S. Agency, mortgage-backed, and
equity securities, amounted to $11.7 million at December 31, 1999. Unrealized
losses on securities amounted to $207,000 at December 31, 1999. Management has
not specifically identified any securities for sale in future periods which, if
so designated, would require a charge to operations if the market value would
not be reasonably expected to recover prior to the time of sale.
PBI has 67% of its loan portfolio collateralized by real estate located in PBI's
primary market area of Carroll County and surrounding counties. PBI's real
estate mortgage and construction portfolio consists of loans collateralized by
one- to four-family residential properties (51%), construction loans to build
one- to four-family residential properties (18%), and nonresidential
<PAGE>
properties consisting primarily of small business commercial properties (31%).
PBI generally requires that loans collateralized by real estate not exceed 80%
of the collateral value.
PBI's remaining 33% of its loan portfolio consists of commercial, consumer, and
other loans. PBI requires collateral commensurate with the repayment ability and
creditworthiness of the borrower.
The specific economic and credit risks associated with PBI's loan portfolio,
especially the real estate portfolio, include, but are not limited to, a general
downturn in the economy which could affect unemployment rates in PBI's market
area, general real estate market deterioration, interest rate fluctuations,
deteriorated or non-existing collateral, title defects, inaccurate appraisals,
financial deterioration of borrowers, fraud, and any violation of banking
protection laws. Construction lending can also present other specific risks to
the lender such as whether developers can find builders to buy lots for home
construction, whether the builders can obtain financing for the construction,
whether the builders can sell the home to a buyer, and whether the buyer can
obtain permanent financing. Currently, real estate values and employment trends
in PBI's market area are stable with no indications of a significant downturn in
the general economy.
PBI attempts to reduce these economic and credit risks not only by adherence to
loan to value guidelines, but also by investigating the creditworthiness of the
borrower and monitoring the borrower's financial position. Also, PBI establishes
and periodically reviews its lending policies and procedures as well as having
independent loan review. State banking regulations limit exposure by prohibiting
secured loan relationships that exceed 25% of the Bank's statutory capital and
unsecured loan relationships that exceed 15% of the Bank's statutory capital.
Liquidity and Capital Resources
The purpose of liquidity management is to ensure that there are sufficient cash
flows to satisfy demands for credit, deposit withdrawals, and other needs of
PBI. Traditional sources of liquidity include asset maturities and growth in
core deposits. A company may achieve its desired liquidity objectives from the
management of assets and liabilities and through funds provided by operations.
Funds invested in short-term marketable instruments and the continuous maturing
of other earning assets are sources of liquidity from the asset perspective. The
liability base provides sources of liquidity through deposit growth, the
maturity structure of liabilities, and accessibility to market sources of funds.
Scheduled loan payments are a relatively stable source of funds, but loan
payoffs and deposit flows fluctuate significantly, being influenced by interest
rates and general economic conditions and competition. PBI attempts to price its
deposits to meet its asset/liability objectives consistent with local market
conditions.
The liquidity and capital resources of the Bank are monitored on a periodic
basis by State and Federal regulatory authorities. As determined under
guidelines established by those regulatory authorities and internal policy, the
Bank's liquidity was considered satisfactory.
<PAGE>
At December 31, 1999, PBI had loan commitments outstanding of $5.3 million.
Because these commitments generally have fixed expiration dates and many will
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. If needed, the Bank has the ability on a
short-term basis to borrow and purchase Federal funds from other financial
institutions. At December 31, 1999, the Bank has arrangements with two
commercial banks for short-term advances of $3,500,000.
At December 31, 1999, PBI's and the Bank's capital ratios were considered
adequate based on regulatory minimum capital requirements. PBI's stockholders'
equity increased due to net income in 1999 of $255,000 and decreased due to
unrealized losses on securities available-for-sale, net of tax, of $189,000. For
regulatory purposes, the net unrealized losses on securities available-for-sale
are excluded in the computation of the capital ratios.
In the future, the primary source of funds available to PBI will be the payment
of dividends by its subsidiary Bank. Banking regulations limit the amount of the
dividends that may be paid without prior approval of the Bank's regulatory
agency. As of December 31, 1999, $117,000 was available for dividend payment to
the holding company without regulatory approval.
The minimum capital requirements to be considered well capitalized under prompt
corrective action provisions and the actual capital ratios for PBI and the Bank
as of December 31, 1999 are as follows:
Actual
-------------------------------------
Regulatory
PBI Bank Requirements
--- ---- ------------
Leverage capital ratio 17.40% 13.37% 5.00%
Risk-based capital ratios:
Core capital 25.23 19.50 6.00
Total capital 26.41 20.69 10.00
These ratios may decline as asset growth continues, but, as earnings improve to
support the growth, should remain in excess of the regulatory minimum
requirements.
Management believes that its liquidity and capital resources are adequate and
will meet its foreseeable short and long-term needs. Management anticipates that
it will have sufficient funds available to meet current loan commitments and to
fund or refinance, on a timely basis, its other material commitments and
liabilities.
Management is not aware of any known trends, events or uncertainties that will
have or that are reasonably likely to have a material effect on its liquidity,
capital resources or operations. Management is also not aware of any current
recommendations by the regulatory authorities which, if they were implemented,
would have such an effect.
<PAGE>
Effects of Inflation
- --------------------
The impact of inflation on banks differs from its impact on non-financial
institutions. Banks, as financial intermediaries, have assets which are
primarily monetary in nature and which tend to fluctuate in concert with
inflation. A bank can reduce the impact of inflation if it can manage its rate
sensitivity gap. This gap represents the difference between rate sensitive
assets and rate sensitive liabilities. PBI, through its asset-liability
committee, attempts to structure the assets and liabilities and manage the rate
sensitivity gap, thereby seeking to minimize the potential effects of inflation.
For information on the management of PBI's interest rate sensitive assets and
liabilities, see the "Asset/Liability Management" section.
Results of Operations For The Years Ended December 31, 1999 and 1998
Following is a summary of PBI's operations for the periods indicated.
Years Ended December 31,
1999 1998
(Dollars in Thousands)
Interest income $ 3,055 $ 2,129
Interest expense 1,495 957
Net interest income 1,560 1,172
Provision for loan losses 200 121
Other income 212 210
Other expenses 1,267 1,087
Pretax income 305 174
Income taxes 50 -
Net income 255 174
Net Interest Income
- -------------------
PBI's results of operations are determined by its ability to effectively manage
interest income and expense, to minimize loan and investment losses, to generate
non-interest income, and to control operating expenses. Since interest rates are
determined by market forces and economic conditions beyond the control of PBI,
PBI's ability to generate net interest income is dependent upon its ability to
obtain an adequate net interest spread between the rate paid on interest-bearing
liabilities and the rate earned on interest-earning assets.
<PAGE>
The net yield on average interest-earning assets was 4.16% in 1999 as compared
to 4.35% in 1998. Average loans increased by $9.5 million which accounted for
the majority of a $10.5 million increase in total average interest-earning
assets. Average interest-bearing liabilities increased by $12.3 million with
average interest-bearing demand and time deposits accounting for the vast
majority of this increase. The rate earned on average interest-earning assets
increased to 8.15% in 1999 from 7.89% in 1998. The rate paid on average
interest-bearing liabilities was 4.80% in 1999 and 5.09% in 1998.
The net yield on average interest-earning assets was 4.35% in 1998 as compared
to 5.38% in 1997. Average loans increased by $8.9 million which accounted for
the majority of a $14.8 million increase in total average interest-earning
assets. Average interest-bearing liabilities increased by $13.1 million with
average interest-bearing demand and time deposits accounting for the vast
majority of this increase. The rate earned on average interest-earning assets
increased to 7.89% in 1998 from 7.61% in 1997. The rate paid on average
interest-bearing liabilities was 5.09% in 1998 and 4.66% in 1997.
Provision for Loan Losses
- -------------------------
The provision for loan losses was $200,000 in 1999 as compared to $121,000 in
1998. The amounts provided were due primarily to the growth of the portfolio.
Based upon management's evaluation of the loan portfolio, management believes
the reserve for loan losses to be adequate to absorb possible losses on existing
loans that may become uncollectible. This evaluation considers past due and
classified loans, underlying collateral values, and current economic conditions
which may affect the borrower's ability to repay. As of December 31, 1999, PBI
had nonaccrual loans totaling $11,000. There were no impaired or nonaccrual
loans as of December 31, 1998. The allowance for loan losses as a percentage of
total loans at December 31, 1999 and 1998 was 1.25% and 1.19%, respectively.
Other Income
- ------------
Other income consists of service charges on deposit accounts and other
miscellaneous revenues and fees. Other income was $212,000 in 1999 as compared
to $210,000 in 1998. The Bank had a decrease in mortgage origination fees of
$15,000 while service charges on deposit accounts increased $25,000.
Other income was $210,000 in 1998 as compared to $97,000 in 1997. The increases
are due to PBI being open for an entire year versus ten months in 1997, and an
increase in mortgage loan origination fees of $63,000.
Other Expenses
- --------------
Other expenses were $1,267,000 in 1999 as compared to $1,087,000 in 1998, an
increase of $180,000. Salaries and employee benefits increased by $136,000 due
to an increase in the number of full time employees from 10 to 19 and normal
salary increases. Equipment and occupancy expenses increased by $2,000. The
increase was due to overall increased equipment and occupancy expenses of
$100,000 being offset by rental income from the rental of its banking facilities
in the amount of $98,000. Approximately $33,000 is expected from
<PAGE>
rents in 2000. Other operating expenses increased by $43,000 which is primarily
due to first-time directors fees paid of $36,000, increased data processing
costs of $17,000, and other miscellaneous increases associated with PBI's
expanding operations, and decreased organization costs of $70,000.
Other expense for 1998 consists of salaries and employee benefits ($585,000),
equipment and occupancy expenses ($69,000), and other operating expenses
($363,000). The increases over 1997 ($84,000 for salaries and employee benefits,
and $24,000 for other operating expenses) are due primarily to PBI being open
for an entire year versus only ten months in 1997. The decrease in equipment and
occupancy expenses of $15,000 is due primarily to the purchase of PBI's current
banking facilities in late 1997. The facilities had been rented in 1997 at a
cost of $24,000. PBI also adopted SOP 98-5 which required the write-off of
$70,000 of organization costs.
Income Tax
- ----------
During 1999, PBI recognized an income tax expense of $50,000. Due to previous
net operating losses, there was no tax expense for 1998 or 1997. The effective
tax rate of 16%, as compared to the statutory Federal rate of 34%, is due to the
recognition of $55,000 of deferred tax assets previously accorded a valuation
allowance.
Asset/Liability Management
- --------------------------
It is PBI's objective to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing, and capital policies. Certain
officers are charged with the responsibility for monitoring policies and
procedures that are designed to ensure acceptable composition of the
asset/liability mix. It is the overall philosophy of management to support asset
growth primarily through growth of core deposits of all categories made by local
individuals, partnerships, and corporations.
PBI's asset/liability mix is monitored on a regular basis with a report
reflecting the interest rate-sensitive assets and interest rate-sensitive
liabilities being prepared and presented to the Board of Directors of the Bank
on a monthly basis. The objective of this policy is to monitor interest
rate-sensitive assets and liabilities so as to minimize the impact of
substantial movements in interest rates on earnings. An asset or liability is
considered to be interest rate-sensitive if it will reprice or mature within the
time period analyzed, usually one year or less. The interest rate-sensitivity
gap is the difference between the interest-earning assets and interest-bearing
liabilities scheduled to mature or reprice within such time period. A gap is
considered positive when the amount of interest rate-sensitive assets exceeds
the amount of interest rate-sensitive liabilities. A gap is considered negative
when the amount of interest rate-sensitive liabilities exceeds the interest
rate-sensitive assets. During a period of rising interest rates, a negative gap
would tend to adversely affect net interest income, while a positive gap would
tend to result in an increase in net interest income. Conversely, during a
period of falling interest rates, a negative gap would tend to result in an
increase in net interest income, while a positive gap would tend to adversely
affect net interest income. If PBI's assets and liabilities were equally
flexible and moved concurrently, the impact of any increase or decrease in
interest rates on net interest income would be minimal.
<PAGE>
A simple interest rate "gap" analysis by itself may not be an accurate indicator
of how net interest income will be affected by changes in interest rates.
Accordingly, PBI also evaluates how the repayment of particular assets and
liabilities is impacted by changes in interest rates. Income associated with
interest-earning assets and costs associated with interest-bearing liabilities
may not be affected uniformly by changes in interest rates. In addition, the
magnitude and duration of changes in interest rates may have a significant
impact on net interest income. For example, although certain assets and
liabilities may have similar maturities or periods of repricing, they may react
in different degrees to changes in market interest rates. Interest rates on
certain types of assets and liabilities fluctuate in advance of changes in
general market rates, while interest rates on other types may lag behind changes
in general market rates. In addition, certain assets, such as adjustable rate
mortgage loans, have features (generally referred to as "interest rate caps and
floors") which limit changes in interest rates. Prepayment and early withdrawal
levels also could deviate significantly from those assumed in calculating the
interest rate gap. The ability of many borrowers to service their debts also may
decrease during periods of rising interest rates.
Changes in interest rates also affect PBI's liquidity position. PBI currently
prices deposits in response to market rates and it is management's intention to
continue this policy. If deposits are not priced in response to market rates, a
loss of deposits could occur which would negatively affect PBI's liquidity
position.
At December 31, 1999, PBI's cumulative one year interest rate-sensitivity gap
ratio was 59%. PBI's targeted ratio is 80% to 120% in this time horizon. This
indicates that PBI's interest-bearing liabilities will reprice during this
period at a rate faster than PBI's interest-earning assets. For internal
reporting purposes, PBI does not consider interest-bearing demand and savings
accounts to be interest rate sensitive. Adjusting for these deposits, PBI's
cumulative one year interest rate-sensitivity gap ratio would be 92%. PBI
believes that competitive market rates are being paid for certificates of
deposit, and as long as the rates remain competitive, liquidity, while not
assured, should not be materially adversely affected.
The following table sets forth the distribution of the repricing of PBI's
interest-earning assets and interest-bearing liabilities as of December 31,
1999, the interest rate- sensitivity gap, the cumulative interest
rate-sensitivity gap, the interest rate-sensitivity gap ratio and the cumulative
interest rate-sensitivity gap ratio. The table also sets forth the time periods
in which earning assets and liabilities will mature or may reprice in accordance
with their contractual terms. However, the table does not necessarily indicate
the impact of general interest rate movements on the net interest margin since
the repricing of various categories of assets and liabilities is subject to
competitive pressures and the needs of PBI's customers. In addition, various
assets and liabilities indicated as repricing within the same period may in
fact, reprice at different times within such period and at different rates.
<PAGE>
<TABLE>
<CAPTION>
After After
Three One
Months Year but
Within but Within After
Three Within Five Five
Months One Year Years Years Total
(Dollars in Thousands)
Interest-earning assets:
<S> <C> <C> <C> <C> <C>
Interest-bearing
deposits in banks $ 99 $ 100 $ -- $ -- $ 199
Federal funds sold 2,023 -- -- -- 2,023
Securities 875 3,737 3,559 3,525 11,696
Loans 9,979 3,848 15,881 441 30,149
----- ----- ------ --- ------
12,976 7,685 19,440 3,966 44,067
------ ----- ------ ----- ------
Interest-bearing liabilities:
Interest-bearing demand
deposits 12,487 -- -- -- 12,487
Savings 209 -- -- -- 209
Certificates, less than
$100,000 2,570 5,811 2,775 -- 11,156
Certificates, $100,000
and over 7,139 4,484 1,363 -- 12,986
Other borrowings -- 2,500 -- -- 2,500
----- ----- -----
22,405 12,795 4,138 -- 39,338
------ ------ ----- ------
Interest rate sensitivity
gap $ (9,429) $ (5,110) $ 15,302 $ 3,966 $ 4,729
======== ======== ======== ======== ========
Cumulative interest rate
sensitivity gap $ (9,429) $(14,539) $ 763 $ 4,729
======== ======== ======== ========
Interest rate sensitivity
gap ratio 0.58 0.60 4.70 --
==== ==== ====
Cumulative interest rate
sensitivity gap ratio 0.58 0.59 1.02 1.12
==== ==== ==== ====
</TABLE>
Year 2000 Disclosures
Based on a review of PBI's business since January 1, 2000, PBI has not
experienced any material effects of the Year 2000 problem. Although PBI has not
been informed of any material risks associated with the Year 2000 problem from
third parties, there can be no assurance that PBI will not be impacted in the
future. PBI will continuously monitor its business applications and maintain
contact with its third party vendors and key business partners to resolve any
Year 2000 problems that may arise in the future. The costs incurred by PBI to
address Year 2000 issues were approximately $35,000.
<PAGE>
SELECTED FINANCIAL INFORMATION AND STATISTICAL DATA
The tables and schedules on the following pages set forth certain significant
financial information and statistical data with respect to: the distribution of
assets, liabilities and stockholders' equity of PBI, the interest rates
experienced by PBI; the investment portfolio of PBI; the loan portfolio of PBI,
including types of loans, maturities, and sensitivities of loans to changes in
interest rates and information on nonperforming loans; summary of the loan loss
experience and reserves for loan losses of PBI; types of deposits of PBI and the
return on equity and assets for PBI.
<PAGE>
DISTRIBUTION OF ASSETS, LIABILITIES, AND
STOCKHOLDERS' EQUITY:
INTEREST RATES AND INTEREST DIFFERENTIALS
Average Balances
The condensed average balance sheet for the years indicated is presented below.
(1)
Years Ended December 31,
1999 1998
(Dollars in Thousands)
ASSETS
Cash and due from banks $ 909 $ 578
Interest-bearing deposits in banks 157 169
Taxable securities 12,102 10,481
Securities valuation account (65) 45
Federal funds sold 2,857 3,418
Loans (2) 22,364 12,907
Reserve for loan losses (271) (152)
Other assets 3,298 1,078
------- -------
$ 41,351 $ 28,524
======== ========
Total interest-earning assets $ 37,480 $ 26,975
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 2,025 $ 1,755
Interest-bearing demand 11,786 6,858
Savings 263 195
Time 19,024 11,765
------- -------
Total deposits $33,098 $20,573
Other borrowings 63 --
Other liabilities 277 173
------- -------
Total liabilities 33,438 20,746
------- -------
Stockholders' equity 7,913 7,778
------- -------
$41,351 $28,524
======= =======
Total interest-bearing liabilities $31,136 $18,818
======= =======
(1) For each category, average balances were determined using the daily average
balances during the year.
(2) Nonaccrual loans in the amount of $8,000 were included in average loans for
1999. There were no nonaccrual loans included in average loans for 1998.
<PAGE>
Interest Income and Interest Expense
The following tables set forth the amount of PBI's interest income and interest
expense for each category of interest-earning assets and interest-bearing
liabilities and the average interest rate for total interest-earning assets and
total interest-bearing liabilities, net interest spread and net yield on average
interest-earning assets.
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Average Average
Interest Rate Interest Rate
(Dollars in Thousands)
INTEREST INCOME:
<S> <C> <C> <C> <C>
Interest and fees on loans (1) $2,222 9.94% $1,323 10.25%
Interest on taxable securities 680 5.62 608 5.81
Interest on Federal funds sold 144 5.03 188 5.50
Interest on deposits in banks 9 5.96 10 5.87
------ ---- ------ ----
Total interest income $3,055 8.15 $2,129 7.89
------ ---- ------ ----
INTEREST EXPENSE:
Interest on interest-bearing
demand deposits $ 431 3.65 $ 263 3.84
Interest on savings deposits 6 2.25 6 2.84
Interest on time deposits 1,054 5.54 688 5.85
Interest on other borrowings 4 6.35 -- --
------ ---- ------ ----
Total interest expense 1,495 4.80 957 5.09
------ ---- ------ ----
NET INTEREST INCOME $1,560 $1,172
====== ======
Net interest spread 3.35% 2.80%
==== ====
Net yield on average interest-earning assets 4.16% 4.35%
==== ====
</TABLE>
(1) Interest and fees on loans includes $235,000 and $151,000 of loan fee
income for the years ended December 31, 1999 and 1998, respectively. There
was no interest income recognized on nonaccrual loans during 1999 or 1998.
<PAGE>
Rate and Volume Analysis
The following table describes the extent to which changes in interest rates and
changes in volume of interest-earning assets and interest-bearing liabilities
have affected PBI's interest income and expense during the year indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) change in volume (change
in volume multiplied by old rate); (2) change in rate (change in rate multiplied
by old volume); and (3) a combination of change in rate and change in volume.
The changes in interest income and interest expense attributable to both volume
and rate have been allocated proportionately on a consistent basis to the change
due to volume and the change due to rate.
<TABLE>
<CAPTION>
Year Ended December 31,
1999 vs. 1998
Changes Due To:
Increase
Rate Volume (Decrease)
(Dollars in Thousands)
Increase (decrease) in:
Income from interest-earning assets:
<S> <C> <C> <C>
Interest and fees on loans $ (42) $ 941 $ 899
Interest on taxable securities (20) 92 72
Interest on Federal funds sold (15) (29) (44)
Interest on deposits in banks (1) - (1)
----- ------- -----
Total interest income (78) 1,004 926
----- ------- -----
Expense from interest-bearing liabilities:
Interest on interest-bearing
demand deposits (13) 181 168
Interest on savings deposits (1) 1 -
Interest on time deposits (38) 404 366
Interest on other borrowings - 4 4
----- ------- -----
Total interest expense (52) 590 538
----- ------- -----
Net interest income $ (26) $ 414 $ 388
===== ======= =====
</TABLE>
<PAGE>
INVESTMENT PORTFOLIO
Types of Investments
The carrying amounts of securities at the dates indicated, which are all
classified as available-for-sale, are summarized as follows:
December 31,
1999 1998
(Dollars in Thousands)
U.S. Treasury and other U.S. Government
agencies and corporations $ 2,476 $ 3,029
Mortgage-backed securities 9,055 8,081
------- -------
11,531 11,110
Equity securities 165 204
------- -------
$11,696 $11,314
======= =======
Maturities
The amounts of securities in each category as of December 31, 1999 are shown in
the following table according to contractual maturity classifications (1) one
year or less, (2) after one year through five years, (3) after five years
through ten years and (4) after ten years. Equity securities are not included in
the table because they have no contractual maturity.
<TABLE>
<CAPTION>
After one year After five years
One year or less through five years through ten years
Amount Yield (1) Amount Yield (1) Amount Yield (1)
U.S. Treasury and
other U.S. Government
<S> <C> <C> <C> <C> <C> <C>
agencies and corporations $1,984 4.81% $ 492 7.07% $ -- -%
Mortgage-backed securities -- -- 2,000 5.98 3,499 6.05
------ ----- -----
$1,984 4.81 $2,492 6.20 $3,499 6.05
====== ==== ====== ==== ====== ====
</TABLE>
<TABLE>
<CAPTION>
After ten years Total
Amount Yield (1) Amount Yield (1)
U.S. Treasury and
other U.S. Government
<S> <C> <C> <C> <C>
agencies and corporations $ -- --% $ 2,476 5.26%
Mortgage-backed securities 3,556 5.97 9,055 6.01
------ -------
$3,556 5.97 $11,531 5.85
====== =======
</TABLE>
(1) Yields were computed using coupon interest, adding discount accretion or
subtracting premium amortization, as appropriate, on a ratable basis over
the life of each security. The weighted average yield for each maturity
range was computed using the carrying value of each security in that range.
<PAGE>
LOAN PORTFOLIO
The amount of loans outstanding at the indicated dates are shown in the
following table according to the type of loan.
December 31,
1999 1998
(Dollars in Thousands)
Commercial $ 5,586 $ 4,298
Real estate-construction 3,759 3,637
Real estate-mortgage 16,472 7,772
Consumer instalment loans and other 4,332 2,354
------- -------
30,149 18,061
Less allowance for loan losses (377) (215)
------- -------
Net loans $29,772 $17,846
======= =======
Maturities and Sensitivities of Loans to Changes in Interest Rates
Total loans as of December 31, 1999 are shown in the following table according
to contractual maturity classifications (1) one year or less, (2) after one year
through five years, and (3) after five years.
(Dollars in Thousands)
Commercial
One year or less $ 4,344
After one year through five years 1,242
After five years --
-------
5,586
=======
Construction
One year or less 3,021
After one year through five years 738
After five years --
-------
3,759
=======
Other
One year or less 7,840
After one year through five years 12,614
After five years 350
-------
20,804
-------
$30,149
=======
<PAGE>
The following table summarizes loans at December 31, 1999 with the due dates
after one year which have predetermined and floating or adjustable interest
rates.
(Dollars in Thousands)
Predetermined interest rates $14,729
Floating or adjustable interest rates 215
-------
$14,944
=======
Risk Elements
Information with respect to nonaccrual, past due, and restructured loans at
December 31, 1999 and 1998 is as follows:
December 31,
1999 1998
(Dollars in Thousands)
Nonaccrual loans $11 $ 0
Loans contractually past due ninety
days or more as to interest or
principal payments and still accruing 4 0
Restructured loans 0 0
Loans, now current about which there are
serious doubts as to the ability of the
borrower to comply with loan repayment terms 0 0
Interest income that would have been recorded
on nonaccrual and restructured loans under
original terms 1 0
Interest income that was recorded on
nonaccrual and restructured loans 0 0
It is the policy of the Bank to discontinue the accrual of interest income when,
in the opinion of management, collection of such interest becomes doubtful. This
status is accorded such interest when (1) there is a significant deterioration
in the financial condition of the borrower and full repayment of principal and
interest is not expected and (2) the principal or interest is more than ninety
days past due, unless the loan is both well-secured and in the process of
collection.
Loans classified for regulatory purposes as loss, doubtful, substandard, or
special mention that have not been included in the table above do not represent
or result from trends or uncertainties which management reasonably expects will
materially impact future operating results, liquidity, or capital resources.
These classified loans do not represent material credits about which management
is aware of any information which causes management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms.
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
The following table summarizes average loan balances for the year determined
using the daily average balances during the period of banking operations;
changes in the allowance for loan losses arising from loans charged off and
recoveries on loans previously charged off; additions to the allowance which
have been charged to operating expense; and the ratio of net charge-offs during
the period to average loans.
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
(Dollars in Thousands)
<S> <C> <C>
Average amount of loans outstanding $22,364 $12,907
======= =======
Balance of allowance for loan losses
at beginning of year $ 215 $ 101
------- -------
Loans charged off
Commercial and financial 29 --
Real estate mortgage -- --
Instalment 11 12
------- -------
40 12
------- -------
Loans recovered
Commercial and financial -- --
Real estate mortgage -- --
Instalment 2 5
------- -------
2 5
------- -------
Net charge-offs 38 7
------- -------
Additions to allowance charged to operating
expense during year 200 121
------- -------
Balance of allowance for loan losses
at end of year $ 377 $ 215
======= =======
Ratio of net loans charged off during the
year to average loans outstanding .17% .06%
======= =======
</TABLE>
Allowance for Loan Losses
The allowance for loan losses is maintained at a level that is deemed
appropriate by management to adequately cover all known and inherent risks in
the loan portfolio. Management's evaluation of the loan portfolio includes a
periodic review of loan loss experience, current economic conditions which may
affect the borrower's ability to pay and the underlying collateral value of the
loans.
<PAGE>
As of December 31, 1999 and 1998, management had made no allocations of its
allowance for loan losses to specific categories of loans. Based on management's
best estimate, the allocation of the allowance for loan losses to types of
loans, as of the indicated dates, is as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
Percent of loans in Percent of loans in
each category each category
Amount to total loans Amount to total loans
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial $ 94 19 % $ 54 24 %
Real estate construction loans 94 12 54 20
Real estate mortgage loans 132 55 75 43
Consumer instalment
loans and other 57 14 32 13
-- -- -- --
$377 100 % $215 100 %
==== === ==== ===
</TABLE>
<PAGE>
DEPOSITS
Average amount of deposits and average rates paid thereon, classified as to
noninterest-bearing demand deposits, interest-bearing demand deposits, savings
deposits, and time deposits, for the year is presented below.(1)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
Amount Percent Amount Percent
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 2,025 -- % $ 1,755 -- %
Interest-bearing demand deposits 11,786 3.65 6,858 3.84
Savings deposits 263 2.25 195 2.84
Time deposits 19,024 5.54 11,765 5.85
------- -------
$33,098 $20,573
======= =======
</TABLE>
(1) Average balances were determined using the daily average balances during
the year.
The amounts of time certificates of deposit issued in amounts of $100,000 or
more as of December 31, 1999 are shown below by category, which is based on time
remaining until maturity of (1) three months or less, (2) over three through six
months, (3) over six through twelve months, and (4) over twelve months.
(Dollars in Thousands)
Three months or less $ 7,139
Over three months through six months 1,502
Over six through twelve months 2,982
Over twelve months 1,363
-------
Total $ 12,986
======
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY
The following rate of return information for the year indicated is presented
below.
Years Ended December 31,
1999 1998
Return on assets (1) 0.62% 0.61%
Return on equity (2) 3.22 2.24
Dividend payout ratio (3) - -
Equity to assets ratio (4) 19.14 27.27
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends declared per share of common stock divided by net income per
share.
(4) Average common equity divided by average total assets.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required by this Item are included in the portions of
the Company's 1999 Annual Report to Shareholders filed as Exhibit 13 to this
Report and incorporated herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There are no changes in or disagreements with accountants on accounting and
financial disclosure.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The following table sets forth the name of each director of the Company, his or
her age at March 27, 2000, and a brief description of their principal occupation
and business experience for the preceding five years. Except as otherwise
indicated, each director has been or was engaged in his or her present or last
principal occupation, in the same or similar position for more than five years.
All of the Company's directors have served in such capacity since the inception
of the Company in 1996 except as indicated below.
<PAGE>
- --------------------------------------------------------------------------------
NAME AGE PRINCIPAL OCCUPATION
- ---- --- --------------------
- --------------------------------------------------------------------------------
Timothy I. Warren 39 Mr. Warren is the President, Chief
Executive Officer and a Director of the
Company and the Bank. Mr. Warren was
President, Chief Executive Officer and a
Director of the Community Bank of
Carrollton from April 1991 to July 1996,
when that bank was merged into Regions
Bank, and the President, Chief Executive
Officer and Director of the Bank of
Villa Rica from February, 1996 and until
that bank was also merged into Regions
Bank in July 1996. Mr. Warren then
served as an area manager for Regions
Bank in the former bank market areas
until leaving Regions Bank in August
1996 to assume his current positions
with the Company and the Bank.
- --------------------------------------------------------------------------------
Lawrence J. Alligood 61 Mr. Alligood has served as a Director
since September 1997. Mr. Alligood is a
pathologist who has practiced with the
Carroll Pathology Group since August
1994, and who has owned a medical
laboratory since 1982.
- --------------------------------------------------------------------------------
John B. Bohannon 53 Mr. Bohannon has been President of First
Realty Association, Inc. since 1974.
- --------------------------------------------------------------------------------
Ann C. Carter 51 Ms. Carter is an interior design
specialist.
- --------------------------------------------------------------------------------
J. Wayne Garner 48 Mr. Garner became a Director in February
1998. He was the Commissioner of the
Georgia Department of Corrections from
December 1995 until March 1999. He has
been the owner of First Family Funeral
Home located in Carrollton since
November 1997. Mr. Garner was the
President of the Whitley-Garner Funeral
Home located in Douglasville, Georgia
from October 1982 until October 1997.
- --------------------------------------------------------------------------------
Lester H. Harmon 54 Mr. Harmon has been the owner and
President of West Georgia Crown and
Bridge since 1974.
- --------------------------------------------------------------------------------
William P. Johnson 67 Mr. Johnson has practiced law in
Carrollton, Georgia since 1957, and is a
senior partner in the law firm of
Johnson, Word and Simmons. Mr. Johnson
currently is the President of Universal
Furniture, and a Director of Temple
Manufacturing.
- --------------------------------------------------------------------------------
Phillip Kauffman 53 From December 1989 through December
1996, Mr. Kauffman was the President of
Leuco-Henderson, a tooling manufacturer.
Since December 1996, Mr. Kauffman has
managed personal investments and
investment properties.
- --------------------------------------------------------------------------------
Jeff R. Matthews 44 Mr. Matthews has been self-employed as a
timber dealer and real estate developer
since 1978.
- --------------------------------------------------------------------------------
Charles J. Puckett 67 Mr. Puckett was the owner and President
of People's Dodge/Chrysler/Jeep from
1977 to January 1998. Since January
1998, Mr. Puckett has managed investment
properties.
- --------------------------------------------------------------------------------
William C. Seaton 51 Mr. Seaton has been the President of
Seaton Development Co., Inc., a real
estate development company, since May
1973. From August 1985 until January
1995, Mr. Seaton co-owned Eagle Outdoor
Advertising, Inc., which is involved in
building and marketing billboards. Mr.
Seaton has been the sole owner of that
firm since January 1995.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Mark S. Swindle 51 Mr. Swindle has been President of BSA
Activewear, a manufacturer of active
sportswear apparel, since May, 1989.
- --------------------------------------------------------------------------------
There are no arrangements or understandings between the Company and any person
pursuant to which any of the above persons have been or will be elected a
director. There are no family relations between any of the directors or
executive officers. No director is a director of another bank or bank holding
company.
The Company's Articles of Incorporation provide for a classified Board of
Directors with approximately one-third of the members standing for election each
year. The three directors who were original members of Class I with initial
terms expiring at the 1997 Annual Meeting of Shareholders of the Company and who
will now stand for re-election at the Annual Meeting of Shareholders in 2000 are
Ms. Carter and Messrs. Harmon and Seaton. The members of Class II whose initial
terms expired at the Annual Meeting of Shareholders in 1998 and who were
reelected are Messrs. Bohannon, Matthews and Swindle. The initial terms members
of Class III whose initial terms expired at the Annual Meeting of Shareholders
in 1999 and who were reelected are Messrs. Johnson, Kauffman, Puckett and
Warren. When Messrs. Alligood and Garner were added as members of the Board of
Directors, they were added to Class I. Each of Mr. Alligood and Mr. Garner was
elected at the by the shareholders Annual Meeting of Shareholders in 1998 to
Class I directorships expiring at the Annual Meeting of Shareholders in 2000.
The following table sets forth the name of the current Executive Officers of the
Bank who are not directors of the Company, their age and principal occupation
for the last five years. Executive Officers of the Company and the Bank are
elected annually by the Board of Directors.
- --------------------------------------------------------------------------------
NAME AGE PRINCIPAL OCCUPATION
- ---- --- --------------------
- --------------------------------------------------------------------------------
Elaine B. Lovvorn 56 Elaine Lovvorn is Secretary of the
Company and Senior Vice President, Chief
Financial Operations Officer of the
Bank. Mrs. Lovvorn assisted in the
organization of Carroll National Bank in
July 1987, and served as that bank's
Cashier through September 1991 when it
was acquired by Synovus Financial
Corporation. She then joined The
Community Bank of Carrollton as a Senior
Vice President and Controller in March
1992, remaining there through February
1994 before returning to her home town
of Bowdon to serve as the manager of a
$40 million branch of Carrollton Federal
Savings and Loan Association. Mrs.
Lovvorn then rejoined The Community Bank
in November 1994 and remained there
through August 1996, when that bank was
converted into a Regions Bank branch and
Mrs. Lovvorn joined the Company.
- --------------------------------------------------------------------------------
David L. Bryan 36 David Bryan is the Senior Credit Officer
of the Bank. Mr. Bryan served as
Assistant Vice President of NationsBank
from April 1987 to November 1992. He was
an Assistant Vice President of First
Commerce Bank Cornelia, Georgia from
November of 1992 until September of 1994
when he joined the Bank of Villa Rica.
Mr. Bryan served as Senior Credit
Officer and Vice President of the Bank
of Villa Rica until he joined the Bank
in January of 1997.
- --------------------------------------------------------------------------------
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
EXECUTIVE COMPENSATION
The Company does not separately compensate any of its directors or executive
officers. The following sets forth certain information concerning the
compensation of the Bank's chief executive officer during fiscal years 1999,
1998 and 1997. No other executive officer received annual compensation in excess
of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION Long Term
----------------------------------------------- Compensation
Awards
- -----------------------------------------------------------------------------------------------------------------------------------
Securities
Name and Other Annual Underlying All Other
Principal Fiscal Compensation Options Compensation
Position Year Salary ($) Bonus ($) ($)(1) (#)(2) ($)
-------- ------ ---------- --------- -------- ------- --------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Timothy I. Warren 1999 $145,000 - - 10,000 (2)
President and
Chief Executive 1998 $137,066 - - 15,000
Officer
1997 $135,000 - - -
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Compensation does not include any perquisites and other personal benefits
which may be derived from business-related expenditures that in the aggregate do
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
reported for such person.
(2) Pursuant to Mr. Warren's Employment Agreement with the Bank, Mr. Warren
will be entitled to one years' annual base salary as severance pay upon
termination of his employment without cause. In addition, the Company has
granted options with respect to 15,000 shares to Mr. Warren under the terms of
his employment agreement, with an exercise price per share equal to the initial
offering price of $10.00. Mr. Warren received options to purchase 15,000 shares
at an exercise price of $10.00 per share in 1998 and options to purchase 10,000
shares at an exercise price of $10.00 per share in 1999.
EMPLOYMENT AGREEMENTS
Timothy I. Warren has entered into an employment agreement with the Bank to
serve as President and Chief Executive Officer of the Company and the Bank
providing for an annual minimum base salary of $135,000. Mr. Warren agreed to be
paid at the annual rate of $100,000 until the Company accepted subscriptions for
the minimum 625,000 shares. Mr. Warren may receive a performance bonus ranging
from 0% to 50% of annual base salary and will be awarded based upon the Bank's
performance and upon the Bank's composite rating received in its most recent
report of examination by its primary Federal regulatory authority.
In addition, the Company has implemented an Employee Incentive Stock Option Plan
for employees of the Bank and reserved a total of 75,000 shares out of the
Company's total authorized shares for the plan. Options with respect to 31,500
shares have been issued, including options for 25,000 shares to Mr. Warren.
Mr. Warren's employment agreement also provides for employee benefits such as
annual vacation, the use of a Bank-owned automobile, life and medical insurance
with dependent coverage, dental insurance, country club membership and
reimbursement for reasonable business related expenses.
Mr. Warren's employment agreement provides for a severance pay for Mr. Warren in
the event of Mr. Warren's termination (except for cause) after a change of
control of the Bank. Under the employment agreement, the term "control" means
the acquisition of 25 percent or more of the voting securities of the Bank by
any person, or persons acting as a group within the meaning of
<PAGE>
Section 13(d) of the Securities Exchange Act of 1934 or the acquisition of
between 10 percent and 25% if the Board of Directors of the Bank or the
Comptroller of the Currency, the Federal Deposit Insurance Corporation or the
Federal Reserve Bank has made a determination that such acquisition constitutes
or will constitute control of the Bank.
The employment agreement provides that if the employee is terminated after 365
days as a result of change of control, the employee shall be entitled to receive
his salary through the last day of the calendar month of the termination, or
payment in lieu of the notice period. In addition, Mr. Warren would receive an
amount equal to three times his then existing annual base salary. The employment
agreement further provides that the payment shall also be made in connection
with, or within 120 days after, a change of control of the Bank if such change
of control was opposed by Mr. Warren on the Bank's Board of Directors. This
payment would be in addition to any amount otherwise owed to the employee
pursuant to the employment agreement.
In the event of a change of control, the following items would be automatically
considered due and payable to Mr. Warren under the employment agreement: (i)
non-forfeitable deferred compensation shall be paid in full: (ii) long-term
performance plan objective payments as described in Section II, 2, f, shall be
declared accomplished and earned based upon performance up to date of the change
of control; and (iii) in the event that the employee is a participant in a
restricted stock plan, or share option plan, and such plan is terminated
involuntarily as a result of the change of control, all stock and options shall
be declared 100% vested and distributed.
DIRECTOR COMPENSATION
The Company and the Bank did not compensate any of its directors for their
services as directors prior to 1999. The directors of the Bank began to receive
a fee for attending full Board and Board committee meetings during 1999. The
committee meeting fees are $25 per meeting, while the full Board meeting fees
were $210 per meeting from March 1999 through June 1999, increasing to $320 per
meeting based on increased Bank profitability from July through December 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the shares of
common stock of the Company owned as of March 27, 2000 (i) by each person who
beneficially owns more than 5% of shares of common stock of the Company, (ii) by
each of the Company's directors, and (iii) by all directors and executive
officers of the Company as a group.
- --------------------------------------------------------------------------------
Percentage
Name of Beneficial Owner(1) Number of Shares Ownership(3) and Options
- --------------------------- ---------------- ------------------------
- --------------------------------------------------------------------------------
Lawrence Alligood 20,000 2.5%
Director
John B. Bohannon 20,100(4) 2.5%
Organizer and Director
- --------------------------------------------------------------------------------
Ann C. Carter
Organizer and Director 10,000 1.2%
- --------------------------------------------------------------------------------
J. Wayne Garner
Director 14,750 1.8%
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Lester H. Harmon
Organizer and Director 11,000 1.4%
- --------------------------------------------------------------------------------
William P. Johnson
Organizer and Director
306 Tanner Street
Carrollton, Georgia 30117 60,200(5) 7.5%
- --------------------------------------------------------------------------------
Phillip Kauffman
Organizer and Director
500 Ind. Ct. West
Villa Rica, Georgia 30180 82,706(6) 10.3%
- --------------------------------------------------------------------------------
Jeff R. Matthews
Organizer and Director 35,200(7) 4.1%
- --------------------------------------------------------------------------------
Charles J. Puckett
Organizer and Director
2208 Bankhead Highway 97,280(8) 12.2%
Carrollton, Georgia 30117
- --------------------------------------------------------------------------------
William C. Seaton
Organizer and Director 10,000 1.2%
- --------------------------------------------------------------------------------
Mark S. Swindle
Organizer and Director 10,250 1.3%
- --------------------------------------------------------------------------------
Timothy I. Warren
President, Chief Executive
Officer, Organizer and Director 50,400(9) 6.0%
- --------------------------------------------------------------------------------
All current directors and
executive(2)(3) officers as a
group (14 persons) 440,286 51.4%
- --------------------------------------------------------------------------------
- ----------------
(1) Except as otherwise indicated, the persons named in the above table have
sole voting and investment power with respect to all shares shown as
beneficially owned by them. The information as to beneficial ownership has
been furnished by the respective persons listed in the above table.
(2) Includes shares deemed to be beneficially owned through the right to
exercise options (which will be granted) within 60 days.
(3) Based upon 800,000 shares outstanding as of March 15, 2000, and 56,500
shares subject to currently exercisable options.
(4) Includes 7,500 shares held by Mr. Bohannon's wife and 12,600 shares owned
jointly by them and with respect to which Mr. Bohannon will share voting
and investment power.
(5) Includes 200 shares held by Mr. Johnson's wife.
(6) Includes 23,956 shares held by Mr. Kauffman's wife or minor child.
(7) Includes 2,700 shares held by Mr. Matthews as custodian for his minor
children.
(8) Includes 10,000 shares held by Mr. Puckett's spouse.
(9) Includes 100 Shares owned by Mr. Warren's wife and 300 shares held by Mr.
Warren as custodian for his minor children. Includes 40,000 shares that are
subject to currently exercisable options.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Certain executive officers and directors of the Company and the Bank, and
principal shareholders of the Company and affiliates of such persons have, from
time to time, will engage
<PAGE>
in banking transactions with the Bank. All loans or other extensions of credit
will be made by the Bank to such individuals in the ordinary course of business
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with unaffiliated
parties and will be believed by management to not involve more than the normal
risk of collectibility or present other unfavorable features. As of December 31,
1999, there were an aggregate of $4,477,000 of loans and open lines of credit to
executive officers and directors of the Company and the Bank, and principal
shareholders of the Company and affiliates of such persons.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
EXHIBIT NUMBERS
---------------
3.1 Articles of Incorporation (Incorporated by reference to the
Company's Registration Statement on Form SB-1 (Registration No.
333-12293) (the "SB-1"), Exhibit 3.1)
3.2 Bylaws (Incorporated by reference to the SB-1, Exhibit 3.2)
10.1 Employment Contract between Timothy I. Warren and the Company
(Incorporated by reference to the SB-1, Exhibit 10.1)
11 Computation of Earnings per Share (Incorporated by reference to Note
8 to Financial Statements filed as Exhibit 13 hereto)
13 Financial Statements from 1999 Annual Report to Shareholders
21 Subsidiaries of the Company (Incorporated by reference to Exhibit 21
to the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1997)
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K
No Reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1998.
<PAGE>
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
duly caused this Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PEOPLES BANCORP, INC.
Date: March 28, 2000 By: /TIMOTHY I. WARREN/
-------------------------------
Timothy I. Warren
President
In accordance with the Exchange Act, this Report has been signed below by the
following persons on behalf of the Registrant and in the capacities indicated on
the dates indicated:
SIGNATURE TITLE DATE
/TIMOTHY I. WARREN/ President and Director
- ----------------------------- (Principal Executive Officer) March 28, 2000
Timothy I. Warren
/LAWRENCE J. ALLIGOOD/ Director March 28, 2000
- -----------------------------
Lawrence J. Alligood
/JOHN B. BOHANNON/ Director March 28, 2000
- -----------------------------
John B. Bohannon
/ANN C. CARTER/ Director March 28, 2000
- -----------------------------
Ann C. Carter
/J. WAYNE GARNER/ Director March 28, 2000
- -----------------------------
J. Wayne Garner
/LESTER H. HARMON/ Director March 28, 2000
- -----------------------------
Lester H. Harmon
/WILLIAM P. JOHNSON/ Director March 28, 2000
- -----------------------------
William P. Johnson
/PHILLIP KAUFFMAN/ Director March 28, 2000
- -----------------------------
Phillip Kauffman
<PAGE>
/JEFF R. MATHEWS/ Director March 28, 2000
- -----------------------------
Jeff R. Mathews
/CHARLES J. PUCKETT/ Director March 28, 2000
- -----------------------------
Charles J. Puckett
/WILLIAM C. SEATON/ Director March 28, 2000
- -----------------------------
William C. Seaton
/MARK S. SWINDLE/ Director March 28, 2000
- -----------------------------
Mark S. Swindle
/ELAINE B. LOVVORN/ Senior Vice President
- ----------------------------- and Chief Financial Officer
Elaine B. Lovvorn (Principal Financial and
Accounting Officer) March 28, 2000
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(D) OF THE EXCHANGE ACT BY NON-REPORTING ISSUERS.
Copies of the annual report and proxy statement provided to the Issuer's
shareholders for the Issuer's 2000 Annual Meeting of Shareholders will be
furnished to the Commission.
<PAGE>
Exhibit 13
Financial Statements from 1999 Annual Report to Shareholders
[INSERT FINANCIAL STATEMENTS HERE]
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1999
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT........................................ 1
FINANCIAL STATEMENTS
Consolidated balance sheets....................................... 2
Consolidated statements of income................................. 3
Consolidated statements of comprehensive income................... 4
Consolidated statements of stockholders' equity................... 5
Consolidated statements of cash flows............................. 6 and 7
Notes to consolidated financial statements........................ 8-28
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
To the Board of Directors
Peoples Bancorp, Inc.
Carrollton, Georgia
We have audited the accompanying consolidated balance sheets of
Peoples Bancorp, Inc. and subsidiary as of December 31, 1999 and 1998, and the
related consolidated statements of income, comprehensive income, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Peoples Bancorp, Inc. and subsidiary as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
February 17, 2000
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1999 1998
------ -------------- --------------
<S> <C> <C>
Cash and due from banks $ 1,556,046 $ 1,038,570
Interest-bearing deposits in banks 199,284 198,000
Federal funds sold 2,023,404 1,450,158
Securities available-for-sale 11,695,721 11,313,513
Loans 30,149,432 18,061,341
Less allowance for loan losses 376,817 214,502
-------------- -------------
Loans, net 29,772,615 17,846,839
Premises and equipment 3,798,492 2,379,161
Other assets 570,033 296,588
--------------- --------------
Total assets $ 49,615,595 $ 34,522,829
=============== ==============
Liabilities and Stockholders' Equity
------------------------------------
Deposits
Noninterest-bearing demand $ 1,925,700 $ 1,594,945
Interest-bearing demand 12,486,766 8,030,661
Savings 209,228 336,826
Time, $100,000 and over 12,985,886 9,033,111
Other time 11,155,939 7,395,598
--------------- --------------
Total deposits 38,763,519 26,391,141
Other borrowings 2,500,000 0
Other liabilities 401,016 246,669
--------------- --------------
Total liabilities 41,664,535 26,637,810
--------------- --------------
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, par value $.01; 1,000,000 shares
authorized; none issued or outstanding - -
Common stock, par value $.01; 10,000,000 shares authorized;
800,000 shares issued and outstanding 8,000 8,000
Capital surplus 7,970,587 7,970,587
Retained earnings (deficit) 109,704 (145,348)
Accumulated other comprehensive income (loss) (137,231) 51,780
--------------- ---------------
Total stockholders' equity 7,951,060 7,885,019
--------------- ---------------
Total liabilities and stockholders' equity $ 49,615,595 $ 34,522,829
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
2
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------- ------------
<S> <C> <C>
Interest income
Loans $ 2,222,506 $ 1,322,987
Taxable securities 679,694 608,452
Federal funds sold 143,606 187,996
Deposits in banks 9,388 9,900
------------- ------------
Total interest income 3,055,194 2,129,335
------------- ------------
Interest expense
Deposits 1,490,512 957,097
Other borrowings 4,400 0
------------- ------------
Total interest expense 1,494,912 957,097
------------- ------------
Net interest income 1,560,282 1,172,238
Provision for loan losses 199,500 121,400
------------- ------------
Net interest income after provision for loan losses 1,360,782 1,050,838
------------- ------------
Other income
Service charges on deposit accounts 69,708 45,191
Other operating income 126,231 136,888
Gain on sales of securities available-for-sale 15,713 28,279
------------- ------------
Total other income 211,652 210,358
------------- ------------
Other expenses
Salaries and employee benefits 721,357 585,092
Equipment and occupancy expenses 70,616 68,486
Other operating expenses 475,777 363,376
------------- ------------
Total other expenses 1,267,750 1,016,954
------------- ------------
Income before income taxes and cumulative
effect of a change in accounting principle 304,684 244,242
Income tax expense 49,632 -
------------- ------------
Income before cumulative effect of a
change in accounting principle 255,052 244,242
Cumulative effect of a change in accounting principle - (70,094)
------------- ------------
Net income $ 255,052 $ 174,148
============= ============
Basic and diluted earnings per common share before
cumulative effect of a change in accounting principle $ 0.32 $ 0.31
Cumulative effect of a change in accounting principle - (0.09)
------------- ------------
Basic and diluted earnings per common share $ 0.32 $ 0.22
============= ============
</TABLE>
See Notes to Consolidated Financial Statements.
3
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
Net income $ 255,052 $ 174,148
------------- ------------
Other comprehensive income (loss):
Unrealized gains (losses) on securities available-for-sale:
Unrealized holding gains (losses) arising during period,
net of tax (benefits) of $(91,202) and $36,289, respectively (178,640) 37,147
Reclassification adjustment for gains realized
in net income, net of tax of $5,342 and $9,615,
respectively (10,371) (18,664)
------------- ------------
Other comprehensive income (loss) (189,011) 18,483
------------- ------------
Comprehensive income $ 66,041 $ 192,631
============= ============
</TABLE>
See Notes to Consolidated Financial Statements.
4
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Stock Capital Retained Earnings Comprehensive Stockholders'
-------------------------
Shares Par Value Surplus (Deficit) Income (Loss) Equity
--------- ----------- ------------ ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 800,000 $ 8,000 $ 7,970,587 $ (319,496) $ 33,297 $ 7,692,388
Net income 0 0 0 174,148 0 174,148
Other comprehensive income 0 0 0 0 18,483 18,483
--------- ---------- ------------ -------------- -------------- --------------
Balance, December 31, 1998 800,000 8,000 7,970,587 (145,348) 51,780 7,885,019
Net income 0 0 0 255,052 0 255,052
Other comprehensive loss 0 0 0 0 (189,011) (189,011)
--------- ---------- ------------ -------------- -------------- --------------
Balance, December 31, 1999 800,000 $ 8,000 $ 7,970,587 $ 109,704 $ (137,231) $ 7,951,060
========= ========== ============ ============== ============== ==============
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998
----------------------- -----------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 255,052 $ 174,148
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 45,170 32,466
Write-off of organization costs - 70,094
Deferred income taxes (61,670) (45,922)
Provision for loan losses 199,500 121,400
Gain on sales of securities available-for-sale (15,713) (28,279)
Loss on sales of premises and equipment 4,925 -
Increase in interest receivable (106,016) (94,459)
Increase in interest payable 101,652 63,174
Other operating activities 43,480 60,848
----------------------- -----------------------
Net cash provided by operating activities 466,380 353,470
----------------------- -----------------------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks (1,284) (198,000)
Purchases of securities available-for-sale (4,922,082) (10,549,246)
Proceeds from sales of securities available-for-sale 2,200,520 4,519,336
Proceeds from maturities of securities available-for-sale 2,069,512 1,786,316
Net (increase) decrease in Federal funds sold (573,246) 3,280,166
Net increase in loans (12,125,276) (9,273,090)
Proceeds from sale of premises and equipment 340,100 -
Purchase of premises and equipment (1,809,526) (1,915,525)
----------------------- -----------------------
Net cash used in investing activities (14,821,282) (12,350,043)
----------------------- -----------------------
FINANCING ACTIVITIES
Net increase in deposits 12,372,378 12,583,176
Proceeds from other borrowings 2,500,000 -
----------------------- -----------------------
Net cash provided by financing activities 14,872,378 12,583,176
----------------------- -----------------------
Net increase in cash and due from banks 517,476 586,603
Cash and due from banks at beginning of year 1,038,570 451,967
----------------------- -----------------------
Cash and due from banks at end of year $ 1,556,046 $ 1,038,570
======================= =======================
</TABLE>
6
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
1999 1998
----------------------- -----------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES
Cash paid (received) for:
Interest $ 1,393,260 $ 893,923
Income taxes $ 91,922 $ (4,296)
NONCASH TRANSACTION
Unrealized (gains) losses on securities available-for-sale $ 285,555 $ (45,157)
</TABLE>
See Notes to Consolidated Financial Statements.
7
<PAGE>
PEOPLES BANCORP, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Peoples Bancorp, Inc. (the "Company") is a bank holding company
whose business is conducted by its wholly-owned subsidiary, Peoples
Bank of West Georgia (the "Bank"). The Bank is a commercial bank
located in Carrollton, Carroll County, Georgia. The Bank provides a
full range of banking services in its primary market area of Carroll
County and the surrounding counties.
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiary. Significant intercompany transactions
and accounts are eliminated in consolidation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities as
of the balance sheet date and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates. Material estimates that are particularly
susceptible to significant change in the near term relate to the
determination of the allowance for loan losses and deferred tax
assets.
Cash and Due From Banks
Cash on hand, cash items in process of collection, and amounts due
from banks are included in cash and due from banks.
The Company maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Securities
Securities are classified based on management's intention on the
date of purchase. Securities which management has the intent and
ability to hold to maturity would be classified as held-to-maturity
and recorded at amortized cost. Currently, all securities are
classified as available-for-sale and recorded at fair value with net
unrealized gains and losses reported in other comprehensive income,
net of tax.
Interest and dividends on securities, including amortization of
premiums and accretion of discounts, are included in interest
income. Realized gains and losses from the sale of securities are
determined using the specific identification method.
Loans
Loans are reported at their outstanding principal balances less the
allowance for loan losses. Interest income is accrued based on the
principal balance outstanding.
Nonrefundable loan fees and costs incurred for loans are deferred
and recognized in income over the life of the loans.
The allowance for loan losses is maintained at a level that
management believes to be adequate to absorb potential losses in the
loan portfolio. Loan losses are charged against the allowance when
management believes the uncollectibility of a loan is confirmed.
Subsequent recoveries are credited to the allowance. Management's
determination of the adequacy of the allowance is based on an
evaluation of the portfolio, past loan loss experience, current
economic conditions, volume, growth, composition of the loan
portfolio, and other risks inherent in the portfolio. This
evaluation is inherently subjective as it requires material
estimates that are susceptible to significant change including the
amounts and timing of future cash flows expected to be received on
impaired loans. In addition, regulatory agencies, as an integral
part of their examination process, periodically review the Company's
allowance for loan losses, and may require the Company to record
additions to the allowance based on their judgment about information
available to them at the time of their examinations.
9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans (Continued)
The accrual of interest on loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When accrual of interest is discontinued, all
unpaid accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with
the contractual terms of the loan agreement. Individually identified
impaired loans are measured based on the present value of payments
expected to be received, using the contractual loan rate as the
discount rate. Alternatively, measurement may be based on observable
market prices or, for loans that are solely dependent on the
collateral for repayment, measurement may be based on the fair value
of the collateral. If the recorded investment in the impaired loan
exceeds the measure of fair value, a valuation allowance is
established as a component of the allowance for loan losses. Changes
to the valuation allowance are recorded as a component of the
provision for loan losses.
Premises and Equipment
Land is carried at cost. Premises and equipment are carried at cost
less accumulated depreciation. Depreciation is computed principally
by the straight-line method over the estimated useful lives of the
assets.
Other Real Estate Owned
Other real estate owned represents properties acquired through
foreclosure. Other real estate owned is held for sale and is carried
at the lower of the recorded amount of the loan or fair value of the
properties less estimated selling costs. Any write-down to fair
value at the time of transfer to other real estate owned is charged
to the allowance for loan losses. Subsequent gains or losses on sale
and any subsequent adjustment to the value are recorded as other
expenses.
10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for
the applicable year. Deferred income tax assets and liabilities are
determined using the balance sheet method. Under this method, the
net deferred tax asset or liability is determined based on the tax
effects of the differences between the book and tax bases of the
various balance sheet assets and liabilities and gives current
recognition to changes in tax rates and laws.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax
benefit associated with certain temporary differences will be
realized. A valuation allowance is recorded for those deferred tax
items for which it is more likely than not that realization will not
occur in the near term.
The Company and the Bank file a consolidated income tax return. Each
entity provides for income taxes based on its contribution to income
taxes (benefits) of the consolidated group.
Earnings Per Common Share
Basic earnings per common share are computed by dividing net income
by the weighted average number of shares of common stock
outstanding. Diluted earnings per share are computed by dividing net
income by the sum of the weighted-average number of shares of common
stock outstanding and potential common shares. Potential common
shares consist of stock options.
Cumulative Effect of a Change in Accounting Principle
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start
Up Activities". SOP 98-5 requires that costs of start-up activities
and organization costs be expensed as incurred. SOP 98-5 became
effective for financial statements for fiscal years beginning after
December 15, 1998. Early adoption was encouraged for fiscal years in
which financial statements have not been issued. During 1998, the
Company wrote off $70,094 of unamortized organization costs upon
adoption of SOP 98-5. Prior to the adoption of SOP 98-5, the Company
was amortizing organization costs over a five year period.
11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income
Statement of Financial Accounting Standards ("SFAS") No. 130,
("Reporting Comprehensive Income"), describes comprehensive income
as the total of all components of comprehensive income, including
net income. Other comprehensive income refers to revenues, expenses,
gains and losses that under generally accepted accounting principles
are included in comprehensive income but excluded from net income.
Currently, the Company's other comprehensive income consists of
unrealized gains and losses on available-for-sale securities.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The effective date of this statement has been deferred
by SFAS No. 137 until fiscal years beginning after June 15, 2000.
However, the statement permits early adoption as of the beginning of
any fiscal quarter after its issuance. The Company expects to adopt
this statement effective January 1, 2001. SFAS No. 133 requires the
Company to recognize all derivatives as either assets or liabilities
in the balance sheet at fair value. For derivatives that are not
designated as hedges, the gain or loss must be recognized in
earnings in the period of change. For derivatives that are
designated as hedges, changes in the fair value of the hedged
assets, liabilities, or firm commitments must be recognized in
earnings or recognized in other comprehensive income until the
hedged item is recognized in earnings, depending on the nature of
the hedge. The ineffective portion of a derivative's change in fair
value must be recognized in earnings immediately. Management has not
yet determined what effect the adoption of SFAS No. 133 will have on
the Company's earnings or financial position.
There are no other recent accounting pronouncements that have had,
or are expected to have, a material effect on the Company's
financial statements.
12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------- ------------- ------------- ------------
<S> <C> <C> <C>
Securities Available-for-Sale
December 31, 1999:
U. S. Government and
agency securities $ 2,497,711 $ - $ (22,380) $ 2,475,331
Mortgage-backed securities 9,238,431 17,633 (200,754) 9,055,310
Equity securities 166,680 - (1,600) 165,080
-------------- ------------- ------------- -------------
$ 11,902,822 $ 17,633 $ (224,734) $ 11,695,721
============== ============= ============= =============
December 31, 1998:
U. S. Government and
agency securities $ 3,009,927 $ 20,315 $ (1,406) $ 3,028,836
Mortgage-backed securities 8,039,859 44,169 (3,601) 8,080,427
Equity securities 185,273 18,977 - 204,250
-------------- ------------- ------------- -------------
$ 11,235,059 $ 83,461 $ (5,007) $ 11,313,513
============== ============= ============= =============
</TABLE>
The amortized cost and fair value of securities as of December 31,
1999 by contractual maturity are shown below. Maturities may differ
from contractual maturities of mortgage-backed securities because the
mortgages underlying the securities may be called or prepaid with or
without penalty. Therefore, these securities and equity securities are
not included in the maturity categories in the following summary.
<TABLE>
<CAPTION>
Securities Available-for-Sale
--------------------------------
Amortized Fair
Cost Value
------------- -------------
<S> <C> <C>
Due in less than one year $ 1,997,711 $ 1,983,456
Due from one year to five years 500,000 491,875
Mortgage-backed securities 9,238,431 9,055,310
Equity securities 166,680 165,080
------------- -------------
$ 11,902,822 $ 11,695,721
============= =============
</TABLE>
Securities with a carrying value of $1,166,000 and $1,692,000 at
December 31, 1999 and 1998, respectively, were pledged to secure
public deposits and for other purposes.
13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. SECURITIES (Continued)
Gains and losses on sales of securities available-for-sale consist of
the following:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------
1999 1998
---------- -----------
<S> <C> <C>
Gross gains $ 15,950 $ 28,279
Gross losses (237) -
---------- -----------
Net realized gains $ 15,713 $ 28,279
========== ===========
</TABLE>
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Commercial $ 5,586,000 $ 4,298,000
Real estate - construction 3,759,000 3,637,000
Real estate - mortgage 16,472,000 7,772,000
Consumer, instalment and other 4,332,432 2,354,341
------------- -------------
30,149,432 18,061,341
Allowance for loan losses (376,817) (214,502)
------------- -------------
Loans, net $ 29,772,615 $ 17,846,839
============= =============
</TABLE>
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Balance, beginning of year $ 214,502 $ 101,000
Provision for loan losses 199,500 121,400
Loans charged off (39,279) (12,897)
Recoveries of loans previously charged off 2,094 4,999
------------ ------------
Balance, end of year $ 376,817 $ 214,502
============ ============
</TABLE>
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
The total recorded investment in impaired loans was $10,943 and $-- at
December 31, 1999 and 1998, respectively. There were no impaired loans
that had related allowances determined in accordance with SFAS No.
114, ("Accounting by Creditors for Impairment of a Loan") at December
31, 1999 and 1998. The average recorded investment in impaired loans
for 1999 and 1998 was $8,401 and $--. Interest income recognized for
cash payments received on impaired loans was not material for the
years ended December 31, 1999 and 1998.
The Company has granted loans to certain directors, executive
officers, and their related entities. The interest rates on these
loans were substantially the same as rates prevailing at the time of
the transaction and repayment terms are customary for the type of loan
involved. Changes in related party loans for the year ended December
31, 1999 are as follows:
<TABLE>
<S> <C>
Balance, beginning of year $ 5,321,786
Advances 4,494,966
Repayments (4,786,225)
Changes in related parties (218,980)
--------------
Balance, end of year $ 4,811,547
==============
</TABLE>
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Land $ 1,200,000 $ 1,221,100
Buildings and improvements 2,056,081 116,409
Equipment 620,879 204,071
Construction and equipment installation in - 892,452
progress
------------- -------------
3,876,960 2,434,032
Accumulated depreciation (78,468) (54,871)
------------- -------------
$ 3,798,492 $ 2,379,161
============= =============
</TABLE>
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 4. PREMISES AND EQUIPMENT (Continued)
The Company leases to nonrelated entities portions of its banking
facilities under operating lease agreements. Rental income from these
leases was $33,050 for the year ended December 31, 1999. The Company
had nonrecurring other rental income of $64,917 in 1999. The total
rental income of $97,967 is reported as a reduction of equipment and
occupancy expense.
In 1999, the Company entered into an operating lease agreement of
certain of its branch facilities with a director of the Company. The
lease requires monthly rental of $1,225 per month through April of
2002. Rental expense incurred under this lease for the year ended
December 31, 1999 amounted to $9,800.
NOTE 5. DEPOSITS
The scheduled maturities of time deposits at December 31, 1999 are as
follows:
<TABLE>
<S> <C>
2000 $ 20,003,932
2001 1,401,294
2002 2,145,539
2003 562,560
2004 28,500
-------------
$ 24,141,825
=============
</TABLE>
At December 31, 1999 and 1998, the Company had related party deposits
of $6,360,736 and $6,310,408, respectively. Related party deposits for
December 31, 1999 included one depositor's accounts totaling
$5,898,397.
NOTE 6. OTHER BORROWINGS
Other borrowings consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Advance from Federal Home Loan Bank with interest payable
monthly at 6.35%, due on June 1, 2000 $ 2,500,000 $ -
============= =============
</TABLE>
The advance from the Federal Home Loan Bank is collateralized by a
blanket floating lien on qualifying first mortgage loans and the
Company's investment in Federal Home Loan Bank stock.
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7. EMPLOYEE BENEFIT PLANS
The Company has a 401(k) retirement plan covering substantially all
employees. Contributions to the plan charged to expense for the years
ended December 31, 1999 and 1998 amounted to $31,757 and $28,254,
respectively.
The Company has reserved 75,000 shares of common stock for issuance to
key employees under an incentive stock option plan. Options may be
granted at prices equal to the fair market value of the shares at the
date of grant and are exercisable as determined by the Company's Stock
Option Plan Committee. The options expire ten years from the date of
grant. Other pertinent information related to the options is as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------------------------
1999 1998
-------------------------------- --------------------------------
Weighted- Weighted-
average average
Number Exercise Price Number Exercise Price
------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C>
Under option, beginning of year 21,500 $ 10.00 - $ -
Granted 10,000 10.00 21,500 10.00
Exercised - - - -
Terminated - - - -
----------- ----------
Under option and exercisable, end of year 31,500 10.00 21,500 10.00
=========== ==========
Weighted average remaining contractual life 9 10
=========== ==========
Weighted average fair value of
options granted during the year $ 4.86 $ 3.97
============ ==========
</TABLE>
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 7. EMPLOYEE BENEFIT PLANS (Continued)
As permitted by SFAS No. 123 ("Accounting for Stock-Based
Compensation"), the Company recognizes compensation cost for stock-
based employee compensation awards in accordance with APB Opinion No.
25, ("Accounting for Stock Issued to Employees"). The Company
recognized no compensation cost for stock-based employee compensation
awards for the years ended December 31, 1999 and 1998, respectively.
If the Company had recognized compensation cost in accordance with
SFAS No. 123, net income and earnings per common share would have been
reduced as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1999
---------------------------------
Basic and
Diluted
Earnings
Net Income Per Share
------------- -------------
<S> <C> <C>
As reported $ 255,052 $ 0.32
Stock-based compensation,
net of related tax effect (32,085) (0.04)
------------- -------------
As adjusted $ 222,967 $ 0.28
============= =============
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1998
---------------------------------
Basic and
Diluted
Earnings
Net Income Per Share
------------- -------------
<S> <C> <C>
As reported $ 174,148 $ 0.22
Stock-based compensation,
net of related tax effect (56,310) (0.07)
------------- -------------
As adjusted $ 174,148 $ 0.22
============= =============
</TABLE>
The fair value of the options granted was based upon the Black-Scholes method
of valuing options using the following weighted-average assumptions:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
------------ -------------
<S> <C> <C>
Risk-free interest rate 6.77% 5.12%
Expected life of the options 10 years 10 years
Expected dividends (as a percent of the fair
value of the stock) 0% 0%
Volatility 0% 0%
</TABLE>
18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Current $ 111,302 $ 77,942
Deferred (6,445) (25,713)
Change in valuation allowance (55,225) (52,229)
------------- -------------
Income tax expense $ 49,632 $ -
============= =============
</TABLE>
The Company's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before
income taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------------
1999 1998
----------------------------- ----------------------------
Amount Percent Amount Percent
------------- ----------- ------------ ----------
<S> <C> <C> <C>
Income taxes at statutory rate $ 103,593 34 % $ 59,210 34 %
Other items 1,264 - (6,981) (4)
Change in valuation allowance (55,225) (18) (52,229) (30)
------------- ------ ------------ ------
Income tax expense $ 49,632 16 % $ - - %
============= ====== ============ ======
</TABLE>
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1999 1998
------------- -------------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $ 91,335 $ 44,781
Preopening expenses 34,743 50,777
Securities available-for-sale 69,870 -
Other 19,130 20,701
------------- -------------
215,078 116,259
Valuation allowance - (55,225)
------------- -------------
215,078 61,034
------------- -------------
Deferred tax liabilities
Depreciation 37,616 15,112
Securities available-for-sale - 26,674
------------- -------------
37,616 41,786
------------- -------------
Net deferred tax assets $ 177,462 $ 19,248
============= =============
</TABLE>
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. EARNINGS PER COMMON SHARE
The following is a reconciliation of net income and weighted-average
shares outstanding used in determining basic and diluted earnings per
common share (EPS):
<TABLE>
<CAPTION>
Year Ended December 31, 1999
----------------------------------------------------------
Net Weighted-Average Per share
Income Shares Amount
--------------- ------------------- ----------------
<S> <C> <C> <C>
Basic EPS $ 255,052 800,000 $ 0.32
================
Effect of Dilutive Securities
Stock options - -
--------------- -------------------
Diluted EPS $ 255,052 800,000 $ 0.32
=============== =================== ================
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1998
----------------------------------------------------------
Net Weighted-Average Per share
Income Shares Amount
--------------- ------------------- ----------------
<S> <C> <C> <C>
Basic EPS $ 174,148 800,000 $ 0.22
================
Effect of Dilutive Securities
Stock options - -
--------------- -------------------
Diluted EPS $ 174,148 800,000 $ 0.22
=============== =================== ================
</TABLE>
Because the exercise price of the stock options approximate the fair
value of the Company's common stock, the stock options have no dilutive
effect.
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into off-
balance-sheet financial instruments which are not reflected in the
financial statements. These financial instruments include commitments
to extend credit and standby letters of credit. Such financial
instruments are included in the financial statements when funds are
disbursed or the instruments become payable. These instruments involve,
to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheet.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. A summary of the Company's
commitments is as follows:
December 31,
-----------------------------
1999 1998
------------- -------------
Commitments to extend credit $ 5,307,000 $ 3,471,000
Standby letters of credit 90,000 73,000
------------- -------------
$ 5,397,000 $ 3,544,000
============= =============
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many
of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The credit risk involved in issuing these financial
instruments is essentially the same as that involved in extending
loans to customers. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit,
is based on management's credit evaluation of the customer. Collateral
held varies but may include real estate and improvements, marketable
securities, accounts receivable, inventory, equipment, and personal
property.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loans to
customers. Collateral held varies as specified above and is required
in instances which the Company deems necessary.
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management of the Company, any
liability resulting from such proceedings would not have a material
effect on the Company's financial statements.
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer
loans to customers in Carroll County and surrounding counties. The
ability of the majority of the Company's customers to honor their
contractual loan obligations is dependent on the economy in these
areas. Sixty-seven percent of the Company's loan portfolio is
concentrated in real estate loans. The other significant
concentrations of credit by type of loan are set forth in Note 3.
The Company, as a matter of policy, does not generally extend credit
to any single borrower or group of related borrowers in excess of 25%
of statutory capital or approximately $1,500,000.
NOTE 12. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends
that may be declared without prior regulatory approval. At December
31, 1999, approximately $117,000 of dividends could be declared
without regulatory approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to
meet minimum capital requirements can initiate certain mandatory, and
possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must meet
specific capital guidelines that involve quantitative measures of the
assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other factors.
Prompt corrective provisions are not applicable to bank holding
companies.
Quantitative measures established by regulation to ensure capital
adequacy require the Company and Bank to maintain minimum amounts and
ratios of Total and Tier I capital to risk-weighted assets and of Tier
I capital to average assets. Management believes, as of December 31,
1999, the Company and the Bank met all capital adequacy requirements
to which they are subject.
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12. REGULATORY MATTERS (Continued)
As of December 31, 1999, the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Bank must maintain minimum Total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
in the following table. There are no conditions or events since that
notification that management believes have changed the Bank's
category.
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
--------------------------- ------------------------ -------------------------
Amount Ratio Amount Ratio Amount Ratio
------------- ---------- ------------ -------- ------------- --------
(Dollars in Thousands)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1999:
Total Capital to Risk Weighted
Assets
Consolidated $ 8,465 26.41% $ 2,565 8% $ N/A N/A
Bank $ 6,520 20.69% $ 2,521 8% $ 3,151 10%
Tier I Capital to Risk Weighted
Assets
Consolidated $ 8,088 25.23% $ 1,283 4% $ N/A N/A
Bank $ 6,143 19.50% $ 1,261 4% $ 1,891 6%
Tier I Capital to Average Assets
Consolidated $ 8,088 17.40% $ 1,860 4% $ N/A N/A
Bank $ 6,143 13.37% $ 1,838 4% $ 2,297 5%
December 31, 1998:
Total Capital to Risk Weighted
Assets
Consolidated $ 8,047 38.49% $ 1,673 8% $ N/A N/A
Bank $ 6,123 29.54% $ 1,659 8% $ 2,073 10%
Tier I Capital to Risk Weighted
Assets
Consolidated $ 7,833 37.46% $ 837 4% $ N/A N/A
Bank $ 5,909 28.51% $ 830 4% $ 1,244 6%
Tier I Capital to Average Assets
Consolidated $ 7,833 23.55% $ 1,331 4% $ N/A N/A
Bank $ 5,909 17.86% $ 1,324 4% $ 1,655 5%
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on estimates using discounted cash flow models. Those models are
significantly affected by the assumptions used, including the discount
rates and estimates of future cash flows. In that regard, the derived
fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. The use of different
methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1999
and 1998. Such amounts have not been revalued for purposes of these
financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts
presented herein.
Cash, Due From Banks, Interest-bearing Deposits in Banks, and
Federal Funds Sold:
The carrying amounts of cash, due from banks, interest-bearing
deposits in banks, and Federal funds sold approximate their fair
value.
Securities:
Fair values for securities are based on available quoted market
prices. The carrying values of equity securities with no readily
determinable fair value approximate fair values.
Loans:
For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. For other loans, the fair values are estimated using
discounted cash flow models, using current market interest rates
offered for loans with similar terms to borrowers of similar credit
quality. Fair values for impaired loans are estimated using
discounted cash flow models or based on the fair value of the
underlying collateral.
Deposits:
The carrying amounts of demand deposits, savings deposits, and
variable-rate certificates of deposit approximate their fair values.
Fair values for fixed-rate certificates of deposit are estimated
using discounted cash flow models, using current market interest
rates offered on certificates with similar remaining maturities.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Other Borrowings:
The carrying amounts of other borrowings approximate their fair
values.
Accrued Interest:
The carrying amounts of accrued interest approximate their fair
values.
Off-Balance Sheet Instruments:
The fair values of the Company's off-balance-sheet financial
instruments are based on fees charged to enter into similar
agreements. However, commitments to extend credit and standby
letters of credit do not represent a significant value to the
Company until such commitments are funded. The Company has
determined that these instruments do not have a distinguishable fair
value and no fair value has been assigned.
The carrying amounts and estimated fair values of the Company's
financial instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
---------------------------------- ----------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks,
interest-bearing deposits
in banks, and Federal
funds sold $ 3,778,734 $ 3,778,734 $ 2,686,728 $ 2,686,728
Securities available-for-sale 11,695,721 11,695,721 11,313,513 11,313,513
Loans 29,772,615 30,135,863 17,846,839 18,055,935
Accrued interest receivable 372,969 372,969 266,953 266,953
Financial liabilities:
Deposits 38,763,519 38,721,694 26,391,141 26,550,012
Other borrowings 2,500,000 2,500,000 - -
Accrued interest payable 256,463 256,463 154,811 154,811
</TABLE>
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. SUPPLEMENTARY FINANCIAL DATA
Components of other operating income and expenses in excess of 1% of
total revenue are as follows:
Years Ended December 31,
----------------------------
1999 1998
--------------- ----------
Other income:
Mortgage origination fee income $ 117,884 $ 132,956
Other expenses:
Legal and professional 57,798 55,040
Advertising 44,019 66,841
Data processing 65,186 47,720
Stationery and supplies 33,917 20,939
NOTE 15. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets,
statements of income, and cash flows of Peoples Bancorp, Inc. as of
and for the years ended December 31, 1999 and 1998:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Assets
Cash $ 1,393,317 $ 1,739,306
Interest-bearing deposits in banks 100,284 -
Securities available-for-sale 22,380 204,250
Investment in subsidiary 6,007,413 5,947,915
Premises and equipment 416,819 -
Other assets 10,847 1,353
--------------- ---------------
Total assets $ 7,951,060 $ 7,892,824
=============== ===============
Liabilities, other $ - $ 7,805
Stockholders' equity 7,951,060 7,885,019
--------------- ---------------
Total liabilities and stockholders' equity $ 7,951,060 $ 7,892,824
=============== ===============
</TABLE>
26
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Income
Interest and dividends $ 5,451 $ -
Gain on sales of securities available-for-sale 12,005 -
--------------- ---------------
17,456 -
--------------- ---------------
Expenses, other 6,697 39,649
--------------- ---------------
Income (loss) before income tax benefits and equity in
undistributed earnings of subsidiary 10,759 (39,649)
Income tax (benefits) (9,910) -
--------------- ---------------
Income (loss) before equity in
undistributed earnings of subsidiary 20,669 (39,649)
Equity in undistributed earnings of subsidiary 234,383 213,797
--------------- ---------------
Net income $ 255,052 $ 174,148
=============== ===============
</TABLE>
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 15. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 255,052 $ 174,148
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Gain on sales of securities available-for-sale (12,005) -
Write-off of organization costs - 38,374
Equity in undistributed earnings of subsidiary (234,383) (213,797)
Other operating activities (10,848) 3,057
--------------- ---------------
Net cash provided by (used in) operating activities (2,184) 1,782
--------------- ---------------
INVESTING ACTIVITIES
Net increase in interest-bearing deposits in banks (100,284) -
Purchases of securities available-for-sale (23,980) (185,273)
Proceeds from sales of securities available-for-sale 197,278 -
Purchase of premises and equipment (416,819) -
--------------- ---------------
Net cash used in investing activities (343,805) (185,273)
--------------- ---------------
Net decrease in cash (345,989) (183,491)
Cash at beginning of year 1,739,306 1,922,797
--------------- ---------------
Cash at end of year $ 1,393,317 $ 1,739,306
=============== ===============
</TABLE>
28
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,556,046
<INT-BEARING-DEPOSITS> 199,284
<FED-FUNDS-SOLD> 2,023,404
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,695,721
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 30,149,432
<ALLOWANCE> 376,817
<TOTAL-ASSETS> 49,615,595
<DEPOSITS> 38,763,519
<SHORT-TERM> 2,500,000
<LIABILITIES-OTHER> 401,016
<LONG-TERM> 0
0
0
<COMMON> 8,000
<OTHER-SE> 7,943,060
<TOTAL-LIABILITIES-AND-EQUITY> 49,615,595
<INTEREST-LOAN> 2,222,506
<INTEREST-INVEST> 679,694
<INTEREST-OTHER> 152,994
<INTEREST-TOTAL> 3,055,194
<INTEREST-DEPOSIT> 1,490,512
<INTEREST-EXPENSE> 1,494,912
<INTEREST-INCOME-NET> 1,560,282
<LOAN-LOSSES> 199,500
<SECURITIES-GAINS> 15,713
<EXPENSE-OTHER> 1,267,750
<INCOME-PRETAX> 304,684
<INCOME-PRE-EXTRAORDINARY> 255,052
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 255,052
<EPS-BASIC> 0.32
<EPS-DILUTED> 0.32
<YIELD-ACTUAL> 4.16
<LOANS-NON> 11,000
<LOANS-PAST> 4,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 215,000
<CHARGE-OFFS> 40,000
<RECOVERIES> 2,000
<ALLOWANCE-CLOSE> 377,000
<ALLOWANCE-DOMESTIC> 377,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
