U.S. 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 Commission file number
ended December 31, 1999 333-13583
FIRST GEORGIA COMMUNITY CORP.
(Name of small business issuer in its charter)
Georgia 58-2261088
(State of Incorporation) (I.R.S. Employer
Identification No.)
150 Covington Street
Jackson, Georgia 30233
(Address of principal executive offices) (Zip Code)
(770) 504-1090
(Issuer's telephone number)
Securities Registered pursuant to Section 12(b) of the Exchange Act:
None
Securities Registered pursuant to Section 12(g) of the Exchange Act:
Common stock, $5.00 par value
(Title of Class)
Check whether Issuer (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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. [ ]
Registrant's revenues for its fiscal year ended December 31, 1999 were
$3,893,541.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 15, 2000 was $19,151,064.50 based on recent private sales
known to the Registrant at a price of $25.25 per share. There is no established
trading market for the Registrant's stock.
The number of shares outstanding of Registrant's class of common stock at March
15, 2000 was 758,458 shares of common stock.
Documents Incorporated by Reference: Certain pages of the 1999 Annual Report to
Shareholders and the Proxy Statement for the Annual Meeting of Shareholders to
be held on May 18, 2000 are incorporated herein by reference in Parts II, III,
and IV of this Form 10-KSB.
Transitional Small Business Disclosure Format (check one):
Yes No X
Page 1 of 69
Exhibit Index on Page 17
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TABLE OF CONTENTS
PART I Page
ITEM 1. DESCRIPTION OF BUSINESS ......................... 3
ITEM 2. DESCRIPTION OF PROPERTIES........................ 13
ITEM 3. LEGAL PROCEEDINGS................................ 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS................................. 14
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS...................... 14
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION ............................ 14
ITEM 7. FINANCIAL STATEMENTS ............................ 15
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ............................ 15
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS ............................. 15
ITEM 10. EXECUTIVE COMPENSATION .......................... 15
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT ................ 15
ITEM 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS ............................ 16
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K ................ 16
SIGNATURES ........................................................ 18
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
First Georgia Community Corp. (the "Company"), Jackson, 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 First Georgia
Community Bank, Jackson, 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 24, 1996, and the DBF approval on December 3, 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") upon the acquisition of all of the Common Stock of the Bank, which
occurred in September, 1997.
The Bank 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.
Its permit to begin business has been issued, and it opened for business on
September 8, 1997. The deposits at the Bank are insured by the Federal Deposit
Insurance Corporation (the "FDIC"), initial approval by the FDIC having been
obtained on September 30, 1996.
In October, 1996, the Company registered 800,000 shares of its common stock with
the Securities and Exchange Commission under the Securities Act of 1933. The
registration statement became effective on December 11, 1996, and the Company
began its stock offering a few days later. The stock offering was completed as
of July 7, 1997. 758,458 shares were sold in the offering, raising total capital
of $7,584,580.
(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 conducts business from its office located at 150
Covington Street, Jackson, Georgia 30233.
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
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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 Butts County, Georgia, as well as
the geographically adjacent counties, its primary service area.
The Bank offers a full range of deposit services that are typically available
from financial institutions. The Bank offers personal and business checking
accounts, interest-bearing checking accounts, savings accounts, money market
funds and various types of certificates of deposit. The Bank also offers
installment loans, real estate loans, second mortgage loans, commercial loans
and home equity lines of credit. In addition, the Bank provides such services as
official bank checks and money orders, Mastercard and VISA credit cards, safe
deposit boxes, traveler's checks, bank by mail, direct deposit of payroll and
social security checks, and US Savings Bonds. All deposit accounts are insured
by the FDIC up to the maximum amount currently permitted by law.
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 will be the
principal component of the Bank's income, so therefore prudent lending will be
essential for the prosperity of the Bank.
The principal sources of income for the Bank will be interest and fees collected
on loans, interest and dividends collected on other investments, and mortgage
brokerage fees. The principal expenses of the Bank will be 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 emphasizes 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 emphasizes 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 are
continually evaluated with regard to their profitability and efforts will be
made to modify the Bank's business plan if the Bank does not prove successful.
The Bank does not presently offer trust or permissible securities services.
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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, is 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 intra-county
branching restrictions. Beginning July 1, 1998, Georgia banks are permitted to
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 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
the 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. Management intends to operate the Bank so as to exceed the
minimum Tier 1, risk-based and leverage capital ratios.
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Bank 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.
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
under-capitalized 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 of 8% or greater, (ii) a Tier 1 risk-based
capital ratio of 4% or greater and (iii) a leverage ratio of 4% or greater, and
an "undercapitalized" bank is defined as one that has (i) a total risk-based
capital ratio of less than 8%, (ii) a Tier 1 risk-based capital ratio of less
than 4%, and (iii) a leverage ratio of less than 4%. A bank is considered
"significantly undercapitalized" if the bank has (i) a total risk-based capital
ratio of less than 6%, (ii) a Tier 1 risk-based capital ratio of less than 3%,
and (iii) a leverage ratio of less than 3%, and "critically undercapitalized" if
the bank has a ratio of tangible equity to total assets equal to or less than
2%. The applicable federal regulatory agency for a bank that is "well
capitalized" may reclassify it as an "adequately capitalized" or
"undercapitalized" institution and subject it 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.
"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 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
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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 or
restrictions, including the requirement to issue additional voting stock to
become adequately capitalized and 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 for the Bank is presently 5.2 cents
per $100 of BIF insured deposits.
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
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investment test, which will evaluate an institution's record of investments in
organizations designed to foster community development, small 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 Department of Justice (collectively, the
"Federal Agencies") responsible for implementing the nation's fair lending laws
have been increasingly concerned that prospective home buyers and other
borrowers are experiencing discrimination in their efforts to obtain loans. The
Department of Justice has 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
suits 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
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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 Company is also a bank holding company within the meaning of the Georgia
Act, which provides that, without the prior written 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 is also unlawful for any company to acquire direct or indirect ownership or
control of more than 5% of the voting shares of any
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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 Reigle-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 Reigle 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.
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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 Company and
the Bank are also subject to Section 23B of the Federal Reserve Act, which
further limits transactions among affiliates. Sections 22(b) 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.
Financial Services Modernization Act. Congress enacted the Gramm- Leach-Bliley
Financial Services Modernization Act in November, 1999. The Act repeals the
prohibition against affiliations between depository institutions and firms
principally engaged in the issue, floatation, underwriting, public sale, or
distribution of securities, and it permits the creation of financial holding
companies, including by bank holding companies. Under the Act, financial holding
companies are authorized to engage in activities deemed to be "financial" in
nature or "incidental" to such activities, as well as "complementary" activities
or services which do not present substantial risks. Prior law limited banks and
bank holding companies to activities determined to be "closely related to
banking."
The Act applies to the activities of both state and national banks and their
affiliates. The Federal Reserve Board ("FRB") will act as the "umbrella
regulator" for financial holding companies and state member banks and their
activities; however, the FRB will be required to coordinate its activities with
the OCC in the case of national banks and the FDIC in the case of state
non-member banks.
Bank holding companies satisfying the criteria specified by the Act may become
certified as financial holding companies by filing with the FRB. Bank holding
companies and their affiliate banks may not participate in such financial
affiliations unless the insured depository institutions are well capitalized and
well managed and have satisfactory CRA ratings.
The Act lists various activities that are "financial" in nature and in which
financial holding companies may engage, without approval, upon thirty days'
notice to the FRB. The listed activities
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include, among others: (i) underwriting, dealing in or making a market in
securities; (ii) insurance underwriting and agency activities; (iii) providing
financial, investment and economic advisory services; (iv) insurance company
portfolio investment activities; and (v) merchant banking.
The Act further provides that a national bank may control a "financial
subsidiary" or hold an interest in a "financial subsidiary" if the subsidiary
engages only in activities that are "financial" in nature or incidental to a
"financial" activity and in activities that are permitted for national banks to
engage in directly, and the subsidiary does not engage in insurance
underwriting, real estate development, or merchant banking. A "financial
subsidiary" is any company that is controlled by one or more insured depository
institutions other than a subsidiary that engages solely in activities permitted
for national banks or a subsidiary that a national bank is specifically
authorized to control by the express terms of a separate Federal statute.
A national bank may engage in these "financial" activities if: (i) the bank and
each depository institution affiliate are well capitalized and well managed;
(ii) aggregate total consolidated assets of all subsidiaries does not exceed the
lesser of 45% of consolidated total assets of the parent bank or $50 billion;
(iii) received OCC approval to engage in the activities; and (iv) satisfies CRA
rating requirements.
As for state banks, FDIC regulations continue to provide that state banks have,
at a minimum, the same powers as national banks. Subject to the authority,
consistent with the Act, of the FRB and the FDIC (as applicable) to regulate
various activities of state banks, the Act preserves the authority of states to
expand the powers of state banks beyond those permitted for national banks.
State law inconsistent with the Act is preempted, but state regulatory
authorities retain jurisdiction.
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 has
encountered strong competition from most of the financial institutions in 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
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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 provides it with a method to
compete effectively in the primary service area.
Employees
As of March 1, 2000, the Bank had 18 full-time employees and 6 part-time
employee. The Company does not have any employees who are not also employees of
the Bank. The Company and the Bank are not parties to any collective bargaining
agreement, and management believes the Bank has good relations with its
employees.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company acquired a 2.5 acre tract of land located at 150 Covington Street,
Jackson, Georgia, in January, 1997 for $395,000, as the site for the main office
of the Bank and the Company. On said tract of land, the Company constructed a
two-story main office with approximately 9,085 square feet of finished space.
The Bank occupies said building, opening for banking business on September 8,
1997. The main office has five inside teller stations and four outside drive-up
teller stations. The first floor also has four customer service stations, eight
enclosed office spaces (seven of which are presently occupied), a safe deposit
vault, a coupon room, a children's play room, and three customer waiting areas.
The second floor of the building is unoccupied and is used for storage space and
future expansion. In the opinion of management of the Company, the office
building and personal property of the Company and the Bank are adequately
covered by insurance.
In addition, one of the primary components of the Bank's loan portfolio is loans
secured by first or second mortgages on real estate. These loans generally
consist of commercial real estate loans, construction and developments loans,
and residential real estate loans. Loan terms are generally limited to five
years or less, although payments are frequently structured on a longer
amortization basis. Interest rates are fixed or adjustable, and are more likely
to be fixed in the case of shorter term loans. Management attempts to reduce
credit risk in the commercial real estate portfolio by emphasizing loans on
owner-occupied office and retail buildings where the loan-to-value ratio,
established by independent appraisals, does not exceed 85%. In addition, the
Bank typically requires personal guarantees of the principal owners of the
property backed with a review by the Bank of the personal financial statements
of the principal owners. The principal economic risk associated with each
category of loans, including real estate loans, is the creditworthiness of the
Bank's borrowers. The risks associated with real estate loans vary with many
economic
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factors, including employment levels and fluctuations in the value of real
estate. The Bank also originates residential real estate loans for sale into the
secondary market. The Bank limits interest rate risk and credit risk on these
loans by locking the interest rate for each loan with the secondary investor and
receiving the investor's underwriting approval prior to originating the loan.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor the Bank is a party to any pending legal proceedings
which management believes would have a material effect upon operations or
financial condition.
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
As of December 31, 1999, there were approximately 977 shareholders of record of
the Company's common stock. There is no established trading market for the
Company's common stock. The Company has 758,458 shares of its common stock
outstanding as of December 31, 1999. The Company has not paid and does not
anticipate paying dividends on its common stock in the immediate future. At
present, the only source of funds from which the Company could pay dividends
would be dividends paid to the Company by the Bank. Certain regulatory
requirements restrict the amount of dividends that can be paid to the Company by
the Bank without obtaining the prior approval of the DBF. 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Information relating to Management's Discussion and Analysis of Financial
Condition and Results of Operations appears on pages 35 through 55 of the
Company's 1999 Annual Report to Shareholders, and is incorporated by reference
in this Form 10-KSB Annual Report.
ITEM 7. FINANCIAL STATEMENTS
The consolidated financial statements, notes thereto and independent auditors'
report thereon, dated February 8, 2000, appearing on pages 3 through 33 of
Company's 1999 Annual Report to
14
<PAGE>
Shareholders, are incorporated by reference in this Form 10-KSB Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There are no disagreements with accountants on accounting and financial
disclosure.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The information concerning directors and executive officers is presented under
Identification of Directors and Executive Officers on pages 3 through 7, and
under Non-Director Executive Officers of the Bank on pages 7 and 8, of the Proxy
Statement for Annual Meeting of Shareholders, to be held May 18, 2000, which
information is incorporated by reference in this Form 10-KSB Annual Report. In
addition, the information concerning compliance with Section 16(a) of the
Exchange Act shown under Filings under Section 16(a) on page 18 of said Proxy
Statement is incorporated by reference in this Form 10-KSB Annual Report. The
information in said Proxy Statement discloses certain reporting person
delinquencies.
ITEM 10. EXECUTIVE COMPENSATION
Executive Compensation is shown under Compensation of Directors and Executive
Officers on pages 8 through 14 of the Proxy Statement for Annual Meeting of
Shareholders, to be held May 18, 2000, which is incorporated by reference in
this Form 10-KSB Annual Report.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Stock Ownership of Certain Beneficial Owners which appears on pages 17 and 18 of
the Proxy Statement for Annual Meeting of Shareholders, to be held May 18, 2000,
is incorporated by reference in this Form 10-KSB Annual Report.
Security Ownership of Directors, Nominees, Executive Officers, and Directors and
Executive Officers as a group, which appears on pages 15 through 17 of the Proxy
Statement for Annual Meeting of Shareholders, to be held May 18, 2000, is
incorporated by reference in this Form 10-KSB Annual Report.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management which appears on page 15 of the Proxy Statement for
Annual Meeting of Shareholders, to be held May 18,
15
<PAGE>
2000, is incorporated by reference in this Form 10-KSB Annual
Report.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The consolidated financial statements of the Company, notes thereto and
independent auditors' report thereon, incorporated herein by reference
from pages 3 through 33 of the Company's 1999 Annual Report to
Shareholders, have been filed as Item 7 in Part II of this report and
are attached hereto as Exhibit 13.1.
The Management's Discussion and Analysis of Financial Conditions and
Results of Operations of the Company, incorporated by reference from
pages 35 through 55 of the Company's 1999 Annual Report to
Shareholders, have been filed as Item 6 of Part II of this report and
are attached hereto as Exhibit 13.2.
16
<PAGE>
2. Exhibits
Exhibit Numbers
Sequential
Page Number
3.1* Articles of Incorporation --
3.2* Bylaws --
10.1*+ Employment Contract between John L.
Coleman and the Company --
10.2* Stock Option Agreement between the
Company and John L. Coleman --
13.1 Consolidated Financial Statements of
the Company 20
13.2 Management's Discussion and Analysis
of Financial Condition and Results of
Operations 50
21.1 Subsidiaries of the Company. The
sole subsidiary of the Company is
First Georgia Community Bank,
Jackson, Georgia, which is
wholly-owned by the Company. --
27.1 Financial Data Schedule 69
- ------------------------
*Items 3.1 through 10.2, as listed above, were previously
filed by the Company as Exhibits (with the same respective
Exhibit Numbers as indicated herein) to the Company's
Registration Statement (Registration No. 333- 13583) and such
documents are incorporated herein by reference.
+Item 10.1 is an employment-compensatory agreement.
(b) Reports on Form 8-K
No Reports on Form 8-K have been filed during the fourth quarter of the
year ended December 31, 1999.
17
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 28, 2000.
FIRST GEORGIA COMMUNITY CORP.
By: s/John L. Coleman
John L. Coleman
President and C.E.O.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on March 28, 2000.
Signature Title
s/John L. Coleman Director; President and C.E.O.
John L. Coleman
s/D. Richard Ballard Director
D. Richard Ballard
s/Charles W. Carter Director
Charles W. Carter
s/Alfred D. Fears Director
Alfred D. Fears
s/William B. Jones Director
William B. Jones
s/Harry Lewis Director; Secretary-Treasurer and
Harry Lewis C.F.O./C.A.O.
_________________________ Director
Joey McClelland
[SIGNATURES CONTINUED ON NEXT PAGE]
18
<PAGE>
_________________________ Director
Dr. Alexander Pollack
s/ Robert Ryan Director
Robert Ryan
s/James H. Warren Director
James H. Warren
_________________________ Director
George L. Weaver
Supplemental Information to be Furnished With Reports Filed Pursuant to Section
15(d) of the Exchange Act by Non-reporting Issuers:
Not Applicable.
19
<PAGE>
EXHIBIT 13.1
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1999
20
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1999
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT....................................... 1
FINANCIAL STATEMENTS
Consolidated balance sheets................................... 2
Consolidated statements of operations......................... 3
Consolidated statements of comprehensive income (loss)........ 4
Consolidated statements of stockholders' equity .............. 5
Consolidated statements of cash flows......................... 6 and 7
Notes to consolidated financial statements.................... 8-28
21
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
First Georgia Community Corp. and Subsidiary
Jackson, Georgia
We have audited the accompanying consolidated balance sheets of First Georgia
Community Corp. and subsidiary as of December 31, 1999 and 1998, and the related
consolidated statements of operations, comprehensive income (loss),
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 First Georgia
Community Corp. 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 8, 2000
22
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1999 1998
---------------- ------------------
<S> <C> <C>
Cash and due from banks $ 2,738,965 $ 675,969
Federal funds sold 2,390,000 3,410,000
Securities available-for-sale 7,795,960 5,565,028
Loans held for sale 83,889 251,605
Loans 40,345,577 24,314,616
Less allowance for loan losses 619,812 433,882
---------------- ------------------
Loans, net 39,725, 765 23,880,734
Premises and equipment 2,196,384 2,242,202
Other assets 2,402,880 325,287
---------------- ------------------
Total assets $57,333,843 $36,350,825
================ ==================
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand $ 5,820,590 $ 4,496,294
Interest-bearing demand 15,054,259 11,434,152
Savings 883,713 901,040
Time, $100,000 and over 7,261,464 4,321,355
Other time 19,165,995 8,169,062
---------------- ------------------
Total deposits 48,186,021 29,321,903
Other borrowings 1,764,714 22,241
Other liabilities 286,373 136,879
---------------- ------------------
Total liabilities 50,237,10 29,481,023
---------------- ------------------
Commitments and contingent
liabilities
Stockholders' equity
Common stock, par value
$5; 10,000,000
shares authorized; 758,458
issued and outstanding 3,792,290 3,792,290
Capital surplus 3,754,816 3,754,816
Accumulated deficit -236,911 -675,728
Accumulated other
comprehensive loss -213,460 -1,576
----------------- ---------------------
Total stockholders' equity 7,096,735 6,869,802
----------------- ---------------------
Total liabilities and
stockholders' equity $57,333,843 $ 36,350,825
================= =====================
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
<S> <C> <C>
Interest income
Loans $ 3,014,506 $ 1,641,616
Taxable securities 435,748 219,451
Federal funds sold 163,352 210,458
-------------------- --------------------
Total interest income 3,613,606 2,071,525
-------------------- --------------------
Interest expense
Deposits 1,625,486 779,294
Federal funds purchased 43,764 0
Other borrowings 0 1,256
-------------------- --------------------
Total interest expense 1,669,250 780,550
-------------------- --------------------
Net interest income 1,944,356 1,290,975
Provision for loan losses 196,500 385,000
-------------------- --------------------
Net interest income after
provision for loan losses 1,747,856 905,975
-------------------- --------------------
Other income
Service charges on deposit
accounts 172,359 121,660
Other operating income 107,576 71,210
-------------------- --------------------
Total other income 279,935 192,870
-------------------- --------------------
Other expenses
Salaries and employee
benefits 742,812 633,339
Equipment and occupancy
expenses 237,226 189,300
Other operating expenses 608,936 453,619
-------------------- --------------------
Total other expenses 1,588,974 1,276,258
-------------------- --------------------
Income (loss) before income
taxes and cumulative
effect of a change in accounting
principle 438,817 -177,413
Income tax expense 0 0
-------------------- --------------------
Income (loss) before cumulative
effect of a change in accounting
principle 438,817 -177,413
Cumulative effect of a change
in accounting principle 0 -65,329
-------------------- --------------------
Net income (loss) $ 438,817 $ -242,742
==================== ====================
Basic and diluted earnings
(losses) per common share
before cumulative effect of a
change in accounting principle $ 0.58 $ -0.23
Cumulative effect of a change in
accounting principle 0.00 -0.09
-------------------- --------------------
Basic and diluted earnings
(losses) per common share $ 0.58 $ -0.32
==================== ====================
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
<S> <C> <C>
Net income (loss) $ 438,817 $ -242,742
Unrealized holding losses on securities
available-for-sale arising during period net of tax
benefit of $109,964 and $--, respectively -211,884 -1,117
------------------ ------------------
Comprehensive income (loss) $ 226,933 $ -243,859
================== ==================
</TABLE>
See Notes to Consolidated Financial Statements.
25
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Stock Capital Accumulated Comprehensive Stockholders'
Shares Par Value Surplus Deficit Loss Equity
---------- --------------- --------------- ---------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 758,458 $ 3,792,290 $ 3,754,816 $ -432,986 $ -459 $ 7,113,661
Net loss 0 0 0 -242,742 0 -242,742
Other comprehensive loss 0 0 0 0 -1,117 -1,117
---------- --------------- --------------- ---------------- --------------- ---------------
Balance, December 31, 1998 758,458 3,792,290 3,754,816 -675,728 -1,576 6,869,802
Net income 0 0 0 438,817 0 438,817
Other comprehensive loss 0 0 0 0 -211,884 -211,884
---------- --------------- --------------- ---------------- --------------- ---------------
Balance, December 31, 1999 758,458 $ 3,792,290 $ 3,754,816 $ -236,911 $ -213,460 $ 7,096,735
========== =============== =============== ================ =============== ===============
</TABLE>
26
See Notes to Consolidated Financial Statements.
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
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 (loss) $ 438,817 $ -242,742
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation 125,415 105,662
Write-off of organization costs 0 65,329
Net (increase) decrease in loans held for sale 167,716 -251,605
Provision for loan losses 196,500 385,000
Deferred income taxes -144,417 0
Deferred compensation 11,210 0
Increase in interest receivable -113,447 -205,148
Increase in interest payable 100,253 63,339
Other operating activities 28,066 13,359
------------------------ -----------------------
Net cash provided by (used in) operating activities 810,113 -66,806
------------------------ -----------------------
INVESTING ACTIVITIES
Purchases of securities available-for-sale -3,060,200 -5,538,533
Proceeds from sale of securities available-for-sale 0 500,000
Proceeds from maturities of securities
available-for-sale 507,420 1,501,879
Net decrease in Federal funds sold 1,020,000 910,000
Net increase in loans -16,041,531 -18,220,712
Purchases of premises and equipment -79,597 -127,533
Purchase of life insurance policies -1,699,800 0
------------------------ -----------------------
Net cash used in investing activities -19,353,708 -20,974,899
------------------------ -----------------------
FINANCING ACTIVITIES
Net increase in deposits 18,864,118 20,156,813
Repayment of other borrowings -7,527 -7,156
Proceeds from other borrowings 1,750,000 0
------------------------ -----------------------
Net cash provided by financing activities 20,606,591 20,149,657
------------------------ -----------------------
Net increase (decrease) in cash and due from banks 2,062,996 -892,048
Cash and due from banks at beginning of year 675,969 1,568,017
------------------------ -----------------------
Cash and due from banks at end of year $ 2,738,965 $ 675,969
</TABLE>
27
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
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 for:
Interest $ 1,568,997 $ 717,211
Income taxes $ 145,000 $ 0
NONCASH TRANSACTIONS
Unrealized losses on securities available-for-sale $ 321,848 $ 1,117
</TABLE>
See Notes to Consolidated Financial Statements.
28
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
First Georgia Community Corp. (the Company) is a bank
holding company whose business is conducted by its
wholly-owned subsidiary, First Georgia Community Bank (the
Bank). The Bank is a commercial bank located in Jackson,
Butts County, Georgia. The Bank provides a full range of
banking services in its primary market area of Butts 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.
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. All other debt securities are classified as
available-for-sale and recorded at fair value with net
unrealized gains and losses included in other comprehensive
income, net of tax. Equity securities without a readily
determinable fair value are classified as
available-for-sale and recorded at cost.
29
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Securities (Continued)
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 Held for Sale
Loans held for sale consist of mortgage loans and are
reported at the lower of aggregate cost or fair value.
These loans are sold to investors who purchase the loans
with "locked in" interest rates agreed to by the investors
and the Company prior to funding, thereby reducing the
Company's exposure to interest rate risk.
Loans
Loans are reported at their outstanding principal balances
less deferred loan fees and the allowance for loan losses.
Interest income on loans 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 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.
30
<PAGE>
FIRST GEORGIA COMMUNITY CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans (Continued)
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, will 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.
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.
31
<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 (Losses) Per Common Share
Basic earnings (losses) per common share are computed by
dividing net income (loss) by the weighted average number
of shares of common stock outstanding. Diluted earnings
(losses) per share are computed by dividing net income
(loss) 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 of 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 had not been issued.
During 1998, the Company wrote off $65,329 of unamortized
organization costs upon adoption of SOP 98-5. Prior to the
adoption of SOP 98-5, the Company was amortizing these
costs over a five year period.
32
<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 Developments
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.
33
<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> <C>
Securities Available-for-Sale December 31, 1999:
U. S. Government and agency $ $ $
securities 8,010,184 $ - (323,424) 7,686,760
Equity securities 109,200 - - 109,200
-------------- ------------- ------------- --------------
$ 8,119,384 $ - (323,424) 7,795,960
============== ============= ============= ==============
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------- ------------- ------------- --------------
Securities Available-for-Sale December 31, 1998:
U. S. Government and agency securities $ 5,517,604 $ 3,840 $ (5,416) $ 5,516,028
Equity securities 49,000 - - 49,000
-------------- ------------- ------------- --------------
$ 5,566,604 $ 3,840 $ (5,416) $ 5,565,028
============== ============= ============= ==============
</TABLE>
The amortized cost and fair value of securities as of December
31, 1999 by contractual maturity are shown below.
<TABLE>
<CAPTION>
Securities Available-for-Sale
---------------------------------
Amortized Fair
Cost Value
--------------- ---------------
<S> <C> <C>
Due from one year to five years $ 6,510,184 $ 6,276,915
Due from five years to ten years 1,500,000 1,409,845
Equity securities 109,200 109,200
--------------- ---------------
$ 8,119,384 $ 7,795,960
=============== ===============
</TABLE>
Securities with a carrying value of $3,581,000 and $3,061,000
at December 31, 1999 and 1998 were pledged to secure public
deposits and for other purposes.
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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, financial, and agricultural $ 3,866,000 $ 2,878,000
Real estate - construction 16,555,000 4,659,000
Real estate - mortgage 17,285,000 14,936,000
Consumer instalment and other 2,714,184 1,858,913
---------------- ----------------
40,420,184 24,331,913
Deferred loan fees (74,607) (17,297)
Allowance for loan losses (619,812) (433,882)
---------------- -----------------
Loans, net $ 39,725,765 $ 23,880,734
================ =================
</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 $ 433,882 $ 72,000
Provision for loan losses 196,500 385,000
Loans charged off (12,639) (23,118)
Recoveries of loans previously charged off 2,069 -
--------------- ----------------
Balance, end of year $ 619,812 $ 433,882
================ ===============
</TABLE>
Management has identified no material amounts of impaired
loans as defined by SFAS No. 114, ("Accounting by Creditors
for Impairment of a Loan") as of 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 $ 3,124,290
Advances 3,158,839
Repayments (3,327,416)
---------------
Balance, end of year $ 2,955,713
===============
</TABLE>
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4.PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Land $ 405,265 $ 405,265
Buildings 1,469,033 1,469,033
Equipment 582,354 502,757
--------------- ---------------
2,456,652 2,377,055
Accumulated depreciation (260,268) (134,853)
--------------- ---------------
$ 2,196,384 $ 2,242,202
=============== ===============
</TABLE>
NOTE 5.DEPOSITS
The scheduled maturities of time deposits at December 31, 1999
are as follows:
<TABLE>
<S> <C>
2000 $ 18,742,869
2001 5,040,650
2002 1,193,676
2003 451,529
2004 998,735
-----------------
$ 26,427,459
=================
</TABLE>
The Company had related party deposits at December 31, 1999
and 1998 of $3,312,281 and $4,270,670, respectively.
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6. OTHER BORROWINGS
Other borrowings consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Note payable, payable in monthly installments of
$701 including interest at 4.80%, collateralized
by automobile $ 14,714 $ 22,241
Advance from Federal Home Loan Bank, interest payable
quarterly at 6.385% until August 13, 2004 when the
rate may be converted to the three month LIBOR, due
August 13, 2009, collateralized by qualifying first
mortgage loans 1,750,000 -
--------------- ---------------
$ 1,764,714 $ 22,241
=============== ===============
</TABLE>
Other borrowings at December 31, 1999 have maturities in future years as
follows:
<TABLE>
<S> <C>
Year ending December 31,
2000 $ 7,856
2001 6,858
2009 1,750,000
---------------
$ 1,764,714
===============
</TABLE>
NOTE 7. DEFERRED COMPENSATION PLAN
In 1999, the Company established a deferred compensation
plan providing for death and retirement benefits for its
directors and executive officers. The estimated amounts to
be paid under the compensation plan have been funded through
the purchase of life insurance policies on the directors and
executive officers. The balance of the policy cash surrender
values included in other assets at December 31, 1999 is
$1,717,730. Income recognized on the policies amounted to
$17,930 for the year ended December 31, 1999. The balance of
the deferred compensation included in other liabilities at
December 31, 1999 is $11,210. Expense recognized for
deferred compensation amounted to $11,210 for the year ended
December 31, 1999.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8.STOCK OPTIONS
The Company has granted options to purchase 32,500 shares of
common stock to key employees under an incentive stock option
plan. For a period of three years from the date of grant,
these options are exercisable for the lesser of the book value
of the Company's common stock at the date of exercise or $10.
Subsequent to the three year period, the options are
exercisable at book value per share. The options cannot be
exercised until the Bank is cumulatively profitable. The
options expire ten years from the date of grant.
The Company has also reserved 150,000 shares of common stock
for issuance to directors with the same exercise price,
expiration dates, and exercise restrictions as the key
employee stock options. No options have been granted to
directors as of December 31, 1999.
Other pertinent information related to the options is as
follows:
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------
1999 1998
--------------------------- ---------------------------
Weighted- Weighted-
average average
Exercise Exercise
Number Price Number Price
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Under option, beginning of year 32,500 $ 10.00 - $ -
Granted - - 32,500 10.00
Exercised - - - -
Terminated - - - -
------------ ------------
Under option, end of year 32,500 10.00 32,500 10.00
============ ============
Weighted average remaining contractual life 9 10
============ ============
Weighted average fair value of
options granted during the year - 3.97
============ ============
</TABLE>
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 year ended
December 31, 1998. If the Company had recognized compensation
cost in accordance with SFAS No. 123, net loss and losses per
share would have been increased as follows:
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8.STOCK OPTIONS (Continued)
<TABLE>
<CAPTION>
Year Ended December 31, 1998
-------------------------------------
Basic and
Diluted Losses
Net Loss Per Share
--------------- ------------------
<S> <C> <C>
As reported $ (242,742) $ (0.32)
Stock-based compensation,
net of related tax effect (80,284) (0.11)
--------------- ------------------
As adjusted $ (323,026) $ (0.43)
=============== ==================
</TABLE>
The fair value of the options granted during 1998 was based
upon the Black-Scholes method of valuing options using the
following weighted-average assumptions:
<TABLE>
<S> <C>
Risk-free interest rate 5.12%
Expected life of the options 10 Years
Expected dividends (as a percent of the fair value of the stock) 0%
Volatility 0%
</TABLE>
Because no options were granted or vested in 1999, the above
disclosures for 1999 are not presented.
NOTE 9. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------
1999 1998
--------------- ----------------
<S> <C> <C>
Current $ 175,781 $ (4,996)
Deferred (31,517) (75,686)
Change in valuation allowance (144,264) 80,682
--------------- ----------------
Income tax expense $ - $ -
=============== ================
</TABLE>
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. INCOME TAXES (Continued)
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> <C>
Income taxes at statutory rate $149,198 34 % $ (82,532) (34)%
Change in valuation allowance (144,264) (33) 80,682 33
Other (4,934) (1) 1,850 1
--------------- ---------- --------------- ----------
Income tax expense $ - -% $ - -%
=============== ========== =============== ==========
</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 163,036 106,950
Preopening and organization expenses 79,541 109,368
Net operating loss carryforward - 31,364
Securities available-for-sale 109,964 535
Other 28,322 6,581
--------------- ---------------
380,863 254,798
Valuation allowance (83,633) (228,432)
--------------- ---------------
297,230 26,366
--------------- ---------------
Deferred tax liabilities; depreciation 42,849 26,366
--------------- ---------------
Net deferred tax aspects $254,381 $ 26,366
=============== ===============
</TABLE>
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. EARNINGS (LOSSES) PER COMMON SHARE
The following is a reconciliation of net income (loss) and
weighted-average shares outstanding used in determining basic
and diluted earnings (losses) per common share:
<TABLE>
<CAPTION>
Year Ended December 31, 1999
----------------------------------------------------------
Net Weighted-Average Per Share
Income Shares Amount
--------------- -------------------- ---------------
<S> <C> <C> <C>
Basic earnings per common share $ 438,817 758,458 $ 0.58
Effect of Dilutive Securities
Stock options - - -
--------------- -------------------- ---------------
Diluted earnings per common share $ 438,817 758,458 $ 0.58
=============== ==================== ===============
Year Ended December 31, 1998
----------------------------------------------------------
Net Weighted-Average Per Share
Loss Shares Amount
--------------- -------------------- ---------------
Basic losses per common share $ (242,742) 758,458 $ (0.32)
Effect of Dilutive Securities
Stock options - - -
--------------- -------------------- ---------------
Diluted losses per common share $ (242,742) 758,458 $ (0.32)
=============== ==================== ===============
</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 11. 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.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
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:
<TABLE>
<CAPTION>
December 31,
----------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Commitments to extend credit $ 8,531,000 $ 5,842,000
Standby letters of credit 55,000 2,500
--------------- ---------------
$ 8,586,000 $ 5,844,500
=============== ===============
</TABLE>
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 loan facilities 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.
42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and
consumer loans to customers in Butts 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.
Eighty-four percent of the Company's loan portfolio is
concentrated in loans secured by real estate, of which a
substantial portion is secured by real estate in the Company's
primary market area. Accordingly, the ultimate collectibility
of the loan portfolio is susceptible to changes in market
conditions in the Company's primary market area. 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 the lesser of statutory capital or net assets
as defined, or approximately $1,604,000.
NOTE 13.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, no 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 correction action
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.
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13.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>
December 31, 1999:
Total Capital to Risk Weighted Assets:
Consolidated $ 7,899 16.81% $3,760 8% $ N/A N/A
Bank $ 7,006 14.91% $3,760 8% $ 4,699 10%
Tier I Capital to Risk Weighted Assets:
Consolidated $ 7,311 15.56% $1,880 4% $ N/A N/A
Bank $ 6,418 13.66% $1,880 4% $ 2,820 6%
Tier I Capital to Average Assets:
Consolidated $ 7,311 13.68% $2,139 4% $ N/A N/A
Bank $ 6,418 12.01% $2,139 4% $ 2,673 5%
December 31, 1998:
Total Capital to Risk Weighted Assets:
Consolidated $ 7,243 24.40% $2,375 8% $ N/A N/A
Bank $ 6,306 21.24% $2,375 8% $ 2,969 10%
Tier I Capital to Risk Weighted Assets:
Consolidated $ 6,871 23.15% $1,188 4% $ N/A N/A
Bank $ 5,934 19.99% $1,188 4% $ 1,781 6%
Tier I Capital to Average Assets:
Consolidated $ 6,871 20.74% $1,326 4% $ N/A N/A
Bank $ 5,934 17.91% $1,326 4% $ 1,657 5%
</TABLE>
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. 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, and Federal Funds Sold:
The carrying amounts of cash, due from 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.
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Other Borrowings:
The fair values of the Company's 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,
and Federal funds sold $ 5,128,965 $ 5,128,965 $ 4,085,969 $ 4,085,969
Securities available-for-sale 7,795,960 7,795,960 5,565,028 5,565,028
Loans held for sale 83,889 83,889 251,605 251,605
Loans 39,725,765 40,180,134 23,880,734 24,329,634
Accrued interest receivable 369,281 369,281 255,834 255,834
Financial liabilities:
Deposits 48,186,021 48,285,066 29,321,903 29,391,929
Other borrowings 1,764,714 1,764,714 22,241 22,241
Accrued interest payable 181,935 181,935 81,682 81,682
</TABLE>
46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15.SUPPLEMENTAL FINANCIAL DATA
Components of other operating income and expenses in excess of
1% of total revenue are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1999 1998
--------------- ---------------
<S> <C> <C>
Other income:
ATM fee income $ 54,366 45,519
Other expense:
Stationery and office supplies 66,129 43,530
Legal and professional 72,048 75,557
Data processing 127,262 58,047
Advertising 47,571 37,426
ATM processing 39,278 16,668
</TABLE>
NOTE 16.PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance
sheets, statements of operations, and cash flows of First
Georgia Community Corp. as of and for the years ended December
31, 1999 and 1998:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
Assets
<S> <C> <C>
Cash $ 907,469 $ 936,917
Investment in subsidiary 6,204,416 5,932,885
--------------- ----------------
Total assets $ 7,111,885 $ 6,869,802
=============== ================
Liabilities, other $ 15,150 $ -
Stockholders' equity 7,096,735 6,869,802
--------------- ----------------
Total liabilities and stockholders' equity $ 7,111,885 $ 6,869,802
=============== ================
</TABLE>
47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16.PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
<S> <C> <C>
Expenses
Salaries and employee benefits $ 13,200 $ -
Write-off of organization costs - 17,629
Other expenses 31,398 12,443
--------------- ----------------
Total expenses 44,598 30,072
--------------- ----------------
Loss before equity in undistributed
income (loss) of subsidiary (44,598) (30,072)
Equity in undistributed income (loss) of subsidiary 483,415 (212,670)
--------------- ----------------
Net income (loss) $438,817 $(242,742)
=============== ================
</TABLE>
48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16.PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1999 1998
--------------- ----------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 438,817 $ (242,742)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Write-off of organization costs - 17,629
Undistributed (income) loss of subsidiary (483,415) 212,670
Other operating activities 15,150 -
--------------- ----------------
Net cash used in operating activities (29,448) (12,443)
--------------- ----------------
Net decrease in cash (29,448) (12,443)
Cash at beginning of year 936,917 949,360
--------------- ----------------
Cash at end of year $ 907,469 $ 936,917
=============== ================
</TABLE>
49
<PAGE>
EXHIBIT 13.2
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following is a discussion of the financial condition of First Georgia
Community Corp. (FGC) and its bank subsidiary, First Georgia Community Bank, 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 FGC'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
FGC may from time to time make written or oral forward-looking statements,
including statements contained in FGC'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. FGC'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 FGC'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. FGC cautions that such factors are not
exclusive. FGC does not undertake to update any forward-looking statement that
may be made from time to time by, or on behalf of, FGC.
Overview
FGC's 1999 results were highlighted by the reporting of net income of $439,000
in its second full year of operations and recouping over 50% of operating losses
incurred through 1998. FGC had significant loan and deposit growth not uncommon
for a de novo bank. This growth provided a base for the first year of
profitability of FGC.
50
<PAGE>
Financial Condition at December 31, 1999 and 1998
Following is a summary of FGC's balance sheets for the years indicated:
<TABLE>
<CAPTION>
December 31,
1999 1998
(Dollars in Thousands)
<S> <C> <C>
Cash and due from banks $ 2,739 $ 676
Federal funds sold 2,390 3,410
Securities 7,796 5,565
Loans 39,726 23,881
Loans held for sale 84 251
Premises and equipment 2,196 2,242
Other assets 2,403 326
----- --------
$ 57,334 $ 36,351
====== ======
Total deposits $ 48,186 $ 29,322
Other borrowings 1,765 22
Other liabilities 286 137
Stockholders' equity 7,097 6,870
------ -------
$ 57,334 $ 36,351
====== ======
</TABLE>
Financial Condition at December 31, 1999 and 1998
As of December 31, 1999, FGC had total assets of $57.3 million, an increase of
58% over total assets as of December 31, 1998. Total interest-earning assets
were $50 million at December 31, 1999 or 87.20% of total assets as compared to
91.08% at December 31, 1998. This percentage decrease in interest-earning assets
is due in part to FGC's buildup of cash reserves in connection with Year 2000
preparedness. FGC's primary interest-earning assets at December 31, 1999 were
loans, which made up 79.63% of total interest-earning assets as compared to
72.89% at December 31, 1998. FGC's loan to deposit ratio was 82.62% as compared
to 82.30% at December 31, 1998. Deposit growth of $18.9 million has been used
primarily to fund loan growth of $15.7 million. Other assets increased due
primarily to the purchase of life insurance policies in the amount of $1.7
million which will be used to fund deferred compensation plans established for
FGC's directors and executive officers.
FGC's investment portfolio, consisting of U.S. Agency securities and equity
securities, amounted to $7.8 million at December 31, 1999. Unrealized losses on
securities amounted to $323,000 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.
51
<PAGE>
FGC has 84% of its loan portfolio collateralized by real estate located in FGC's
primary market area of Butts County and surrounding counties. FGC's real estate
mortgage and construction portfolio consists of loans collateralized by one to
four-family residential properties (23%), construction loans to build one to
four-family residential properties (49%), and nonresidential properties
consisting primarily of small business commercial properties (28%). FGC
generally requires that loans collateralized by real estate not exceed the
collateral values by the following percentages for each type of real estate loan
as follows.
<TABLE>
<S> <C>
One to four-family residential properties 90%
Construction loans on one to four-family residential properties 90%
Nonresidential property 85%
</TABLE>
FGC's remaining 16% of its loan portfolio consists of commercial, consumer, and
other loans. FGC requires collateral commensurate with the repayment ability and
creditworthiness of the borrower.
The specific economic and credit risks associated with FGC'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 FGC'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 FGC's market area are stable with no indications of a significant downturn in
the general economy.
FGC 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, FGC establishes
and periodically reviews its lending policies and procedures. 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
FGC. 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.
52
<PAGE>
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. FGC 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.
At December 31, 1999, FGC had loan commitments outstanding of $8.5 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 three
commercial banks for short-term advances of $3,500,000.
At December 31, 1999, FGC's and the Bank's capital ratios were considered
adequate based on regulatory minimum capital requirements. FGC's stockholders'
equity increased due to net income in 1999 of $439,000. FGC's stockholders'
equity decreased due to the decrease in the fair value of securities
available-for-sale, net of tax, in the amount of $212,000. 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 FGC 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. Currently, no dividends can be paid by the Bank to FGC without
regulatory approval.
The minimum capital requirements to be considered well capitalized under prompt
corrective action provisions and the actual capital ratios for FGC and the Bank
as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
Actual
Regulatory
FGC Bank Requirements
<S> <C> <C> <C>
Leverage capital ratio 13.68% 12.01% 5.00%
Risk-based capital ratios:
Core capital 15.56 13.66 6.00
Total capital 16.81 14.91 10.00
</TABLE>
At December 31, 1999, FGC had no material commitments for capital expenditures.
53
<PAGE>
These ratios should decline as asset growth continues, but will still remain in
excess of the regulatory minimum requirements. Anticipated future earnings will
also assist in keeping these ratios at satisfactory levels.
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.
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. FGC, 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 FGC'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 FGC's operations for the years indicated.
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
(Dollars in Thousands)
<S> <C> <C>
Interest income $ 3,614 $ 2,072
Interest expense 1,669 781
Net interest income 1,945 1,291
Provision for loan losses 197 385
Other income 280 193
Other expenses 1,589 1,342
Pretax income (loss) 439 (243)
Income taxes - -
Net income (loss) 439 (243)
Net Interest Income
</TABLE>
FGC's results of operations are determined by its ability to effectively manage
interest income and
54
<PAGE>
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 FGC, FGC'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.
The net yield on average interest-earning assets was 4.60% in 1999 as compared
to 5.52% in 1998. Average loans increased by $15.5 million which accounted for
the majority of a $18.9 million increase in total average interest-earning
assets. Average interest-bearing liabilities increased by $18.0 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
decreased to 8.54% in 1999 from 8.86% in 1998. The rate paid on average
interest-bearing liabilities was 4.93% for both 1999 and 1998.
The net yield on average interest-earning assets was 5.52% in 1998 as compared
to 6.19% in 1997. Average loans increased by $14.9 million which accounted for
the majority of a $20.5 million increase in total average interest-earning
assets. Average interest-bearing liabilities increased by $14.7 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 8.86% in 1998 from 7.77% in 1997. The rate paid on average
interest-bearing liabilities was 4.93% in 1998 and 4.21% in 1997.
Provision for Loan Losses
The provision for loan losses was $197,000 in 1999 as compared to $385,000 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 and
1998, FGC has no nonperforming loans or assets. The allowance for loan losses as
a percentage of total loans at December 31, 1999 and 1998 was 1.53% and 1.78%,
respectively.
Other Income
Other income consists of service charges on deposit accounts and other
miscellaneous revenues and fees. Other operating income was $280,000 in 1999 as
compared to $193,000 in 1998, an increase of $87,000. The increase is due
primarily to a $51,000 increase in service charges on deposit accounts and to
the recognition of income of $20,000 related to the increase in the cash
surrender value of life insurance policies.
Other income was $193,000 in 1998 as compared to $31,000 in 1997. The increase
is due to FGC being open for an entire year versus only four months in 1997.
55
<PAGE>
Other Expenses
Other expenses were $1,589,000 in 1999 as compared to $1,342,000 in 1998, an
increase of $247,000. Salaries and employee benefits increased by $109,000 due
to an increase in the number of employees and normal salary increases. Equipment
and occupancy expenses increased by $48,000 due primarily to increased equipment
depreciation and maintenance costs of $43,000. Other operating expenses
increased by $90,000 due primarily to increased data/ATM processing costs of
$92,000, stationery and office supplies of $23,000, and decreased organization
costs of $65,000.
Other expenses for 1998 consist of salaries and employee benefits ($634,000),
equipment and occupancy expenses ($189,000), and other operating expenses
($519,000). The increases over 1997 ($283,000 for salaries and employee
benefits, $119,000 for equipment and occupancy, and $312,000 for other operating
expenses) are due primarily to FGC being open for an entire year versus only
four months in 1997 and the growth of the Bank. FGC also adopted SOP 98-5 which
required the write-off of $65,000 of organization costs.
Income Tax
FGC had no income tax expense in 1999 due primarily to the recognition of
deferred tax assets previously accorded a valuation allowance. No income tax
expense was recognized in 1998 due to a pre-tax operating loss of $243,000.
Asset/Liability Management
It is FGC'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.
FGC'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
56
<PAGE>
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 FGC'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.
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, FGC 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 FGC's liquidity position. FGC 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 FGC's liquidity
position.
At December 31, 1999, FGC's cumulative one year interest rate-sensitivity gap
ratio was 67%. FGC's targeted ratio is 80% to 120% in this time horizon. This
indicates that FGC's interest-bearing liabilities will reprice during this
period at a rate faster than FGC's interest-earning assets. FGC is currently not
within its targeted parameters due primarily to 71% of certificates of deposit
repricing within a one year time frame as opposed to 43% of loan and securities
repricing within a one year time frame. FGC has approximately $5 million of
interest-bearing demand deposits which management considers to be core deposits,
and therefore not interest rate sensitive. Adjusting for these deposits, FGC's
cumulative one year interest rate-sensitive gap ratio would be 79%. FGC believes
that competitive market rates are being paid for certificates of deposit, and as
long as the rates remain competitive, liquidity should not be materially
adversely affected.
The following table sets forth the distribution of the repricing of FGC'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 FGC's customers. In addition, various
57
<PAGE>
assets and liabilities indicated as repricing within the same period may in
fact, reprice at different times within such period and at different rates.
<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)
<S> <C> <C> <C> <C> <C>
Interest-earning assets:
Federal funds sold $ 2,390 $ -- $ -- $ -- $ 2,390
Securities 109 -- 6,277 1,410 7,796
Loans 18,704 2,164 18,641 921 40,346
------ ----- ------ ------ ------
21,203 2,164 24,918 2,331 50,532
------ ----- ------ ----- ------
Interest-bearing liabilities:
Interest-bearing demand
deposits 15,054 -- -- -- 15,054
Savings 884 -- -- -- 884
Certificates of deposit 5,496 13,246 7,685 -- 26,427
Other borrowings 8 7 1,750 -- 1,765
------ ------ ----- ----- ------
21,442 13,253 9,435 -- 44,130
------ ------ ----- ------- -------
Interest rate sensitivity gap $ (239) $(11,089) $15,483 $2,331 $ 6,486
======== ======== ====== ======= ========
Cumulative interest rate
sensitivity gap $ (239) $(11,328) $ 4,155 $ 6,486
======== ======== ======= =======
Interest rate sensitivity
gap ratio .99 .16 2.64 --
======== ======== ======== =======
Cumulative interest rate
sensitivity gap ratio .99 .67 1.09 1.15
======== ========= ======== =======
</TABLE>
Year 2000 Disclosures
Based on a review of FGC's business since January 1, 2000, FGC has not
experienced any material effects of the Year 2000 problem. Although FGC has not
been informed of any material risks associated with the Year 2000 problem from
third parties, there can be no assurance that FGC will not be impacted in the
future. FGC 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 FGC to
address Year 2000 issues were approximately $51,000.
58
<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 FGC, the interest rates
experienced by FGC; the investment portfolio of FGC; the loan portfolio of FGC,
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 FGC; types of deposits of FGC and the
return on equity and assets for FGC.
59
<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)
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
(Dollars in Thousands)
ASSETS
<S> <C> <C>
Cash and due from banks $ 1,852 $ 1,120
Taxable securities 7,576 3,596
Securities valuation account (143) 5
Federal funds sold 3,251 3,793
Loans (2) 31,464 15,999
Reserve for loan losses (528) (252)
Other assets 2,933 2,487
------- ------
$ 46,405 $ 26,748
====== ======
Total interest-earning assets $ 42,291 $ 23,388
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 5,379 $ 3,847
Interest-bearing demand 12,691 8,614
Savings 922 657
Time 19,548 6,531
------ -------
Total deposits $ 38,540 $ 19,649
Other borrowings 693 26
Other liabilities 258 106
-------- -------
Total liabilities 39,491 19,781
------ ------
Stockholders' equity 6,914 6,967
----- -------
$ 46,405 $ 26,748
====== ======
Total interest-bearing liabilities $ 33,854 $ 15,828
====== ======
</TABLE>
[FN]
(1) For each category, average balances were determined using the daily average
balances during the year.
(2) There were no nonaccrual loans included in average loans for 1999 or 1998.
</FN>
60
<PAGE>
Interest Income and Interest Expense
The following tables set forth the amount of FGC'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)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans (1) $ 3,015 9.58% $ 1,642 10.26%
Interest on taxable securities 436 5.75 219 6.10
Interest on Federal funds sold 163 5.03 211 5.55
----- ------
Total interest income $ 3,614 8.54 $ 2,072 8.86
----- -----
INTEREST EXPENSE:
Interest on interest-bearing
demand deposits $ 535 4.21 $ 380 4.41
Interest on savings deposits 24 2.70 19 2.92
Interest on time deposits 1,066 5.45 381 5.82
Interest on other borrowings 44 6.32 1 4.80
------- -------
Total interest expense 1,669 4.93 781 4.93
----- ----
NET INTEREST INCOME $ 1,945 $ 1,291
===== =====
Net interest spread 3.61% 3.93%
==== ====
Net yield on average interest-earning assets 4.60% 5.52%
==== ====
</TABLE>
[FN]
(1) Interest and fees on loans includes $310,000 an $215,000 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.
</FN>
61
<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 FGC'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>
Years Ended December 31,
1999 vs. 1998
Changes Due To:
Increase
Rate Volume (Decrease)
(Dollars in Thousands)
<S> <C> <C> <C>
Increase (decrease) in:
Income from interest-earning assets:
Interest and fees on loans $ (115) $ 1,488 $ 1,373
Interest on taxable securities (14) 231 217
Interest on Federal funds sold (19) (29) (48)
------ ------- --------
Total interest income (148) 1,690 1,542
----- ----- -----
Expense from interest-bearing liabilities:
Interest on interest-bearing
demand deposits (18) 173 155
Interest on savings deposits (2) 7 5
Interest on time deposits (25) 710 685
Interest on other borrowings 1 42 43
---- ------- --------
Total interest expense (44) 932 888
----- ----- -----
Net interest income $ (104) $ 758 $ 654
===== ===== =====
</TABLE>
62
<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:
<TABLE>
<CAPTION>
December 31,
1999 1998
(Dollars in Thousands)
<S> <C> <C>
U.S. Government agencies $7,687 $ 5,516
Equity securities 109 49
------ -------
$ 7,796 $ 5,565
===== =====
</TABLE>
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)
<S> <C> <C> <C> <C> <C> <C>
U.S. Government
agencies $ -- -% $ 6,277 5.81% $ 1,410 6.20%
====== ===== =====
After ten years Total
Amount Yield (1) Amount Yield (1)
U.S. Government
agencies $ -- - $ 7,687 5.88%
======== =====
</TABLE>
[FN]
(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.
</FN>
63
<PAGE>
LOAN PORTFOLIO
Types of Loans
The amount of loans outstanding at the indicated dates are shown in the
following table according to the type of loan.
<TABLE>
<CAPTION>
December 31,
1999 1998
(Dollars in Thousands)
<S> <C> <C>
Commercial $ 3,866 $ 2,878
Real estate-construction 16,555 4,659
Real estate-mortgage 17,211 14,919
Consumer installment loans and other 2,714 1,859
------- -------
40,346 24,315
Less allowance for loan losses (620) (434)
-------- --------
Net loans $ 39,726 $ 23,881
========= ============
</TABLE>
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.
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Commercial
One year or less $ 2,805
After one year through five years 911
After five years 150
------
3,866
Construction
One year or less $ 12,698
After one year through five years 3,645
After five years 212
--------
16,555
Other
One year or less $ 7,016
After one year through five years 12,670
After five years 239
--------
19,925
$ 40,346
</TABLE>
64
<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.
<TABLE>
(Dollars in Thousands)
<S> <C>
Predetermined interest rates $ 16,216
Floating or adjustable interest rates 1,611
-------
$ 17,827
</TABLE>
Risk Elements
Information with respect to nonaccrual, past due, and restructured loans at
December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
(Dollars in Thousands)
<S> <C> <C>
Nonaccrual loans $ 0 $ 0
Loans contractually past due ninety
days or more as to interest or
principal payments and still accruing 0 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 0 0
Interest income that was recorded on
nonaccrual and restructured loans 0 0
</TABLE>
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.
65
<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 $ 31,464 $ 15,999
====== ======
Balance of allowance for loan losses
at beginning of year $ 434 $ 72
------- -----
Loans charged off
Commercial and financial -- --
Real estate mortgage -- 14
Instalment 13 9
------- -------
13 23
----- ------
Loans recovered
Commercial and financial -- --
Real estate mortgage -- --
Instalment 2 --
------ -------
2 --
------ -------
Net charge-offs 11 23
----- -------
Additions to allowance charged to operating
expense during year 197 385
--- -----
Balance of allowance for loan losses
at end of year $ 620 $ 434
==== =====
Ratio of net loans charged off during the
year to average loans outstanding 0.03% 0.14%
==== ====
</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.
66
<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 $124 9 % $87 12 %
Real estate - construction 93 41 65 19
Real estate - mortgage 341 43 239 61
Consumer installment
loans and other 62 7 43 8
---- ----- ---- ----
$620 100 % $434 100 %
=== === ==== ====
</TABLE>
67
<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 period of banking operations 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 $ 5,379 -- % $ 3,847 -- %
Interest-bearing demand deposits 12,691 4.21 8,614 4.41
Savings deposits 922 2.70 657 2.92
Time deposits 19,548 5.45 6,531 5.82
------ -------
$38,540 $19,649
====== ======
</TABLE>
[FN]
(1) Average balances were determined using the dail average balances.
</FN>
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.
<TABLE>
<CAPTION>
(Dollars in Thousands)
<S> <C>
Three months or less $ 2,055
Over three months through six months 1,283
Over six through twelve months 2,090
Over twelve months 1,833
-------
Total $ 7,261
=======
</TABLE>
RETURN ON ASSETS AND STOCKHOLDERS' EQUITY y$
The following rate of return information for the year indicated is presented
below.
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998
<S> <C> <C>
Return on assets (1) 0.95% (0.91)%
Return on equity (2) 6.35 (3.48)
Dividend payout ratio (3) -- --
Equity to assets ratio (4) 14.90 26.05
</TABLE>
[FN]
(1) Net income (loss) divided by average total assets.
(2) Net income (loss) divided by average equity.
(3) Dividends declared per share of common stock divided by net loss per share.
(4) Average common equity divided by average total assets.
</FN>
68
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION ENTRACTED FROM THE
FINANCIAL STATEMENTS OF THE COMPANY FOR THE FISCAL YEAR ENDED 12/31/99 FILED ON
FORM 10-KSB, AND IS QUALIFIED IN ITS ENTIRETY BY REFERNECE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001024132
<NAME> First Georgia Community Corp.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,738,965
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,390,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,795,960
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 40,345,577
<ALLOWANCE> 619,812
<TOTAL-ASSETS> 57,333,843
<DEPOSITS> 48,186,021
<SHORT-TERM> 0
<LIABILITIES-OTHER> 286,373
<LONG-TERM> 1,764,714
0
0
<COMMON> 3,792,290
<OTHER-SE> 3,304,445
<TOTAL-LIABILITIES-AND-EQUITY> 57,333,843
<INTEREST-LOAN> 3,014,506
<INTEREST-INVEST> 435,748
<INTEREST-OTHER> 163,352
<INTEREST-TOTAL> 3,613,606
<INTEREST-DEPOSIT> 1,625,486
<INTEREST-EXPENSE> 1,669,250
<INTEREST-INCOME-NET> 1,944,356
<LOAN-LOSSES> 196,500
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,588,974
<INCOME-PRETAX> 438,817
<INCOME-PRE-EXTRAORDINARY> 438,817
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 438,817
<EPS-BASIC> 0.58
<EPS-DILUTED> 0.58
<YIELD-ACTUAL> 4.60
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 434,000
<CHARGE-OFFS> 13,000
<RECOVERIES> 2,000
<ALLOWANCE-CLOSE> 620,000
<ALLOWANCE-DOMESTIC> 620,000
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
