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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For fiscal year ended December 31, 1999
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[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from ___________ to ____________
Commission file number 0-22451
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CBC HOLDING COMPANY
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(Name of Small Business Issuer in Its Charter)
Georgia 58-2311557
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
102 West Roanoke Drive, Fitzgerald, Georgia 31750
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(Address of Principal Executive Offices) (Zip Code)
(912) 423-4321
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(Issuer's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act: None.
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $1 Per Share
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Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for past 90 days. Yes [X] No [_]
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Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not 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. [X]
State issuer's revenues for its most recent fiscal year: $444,248
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Aggregate market value of the voting stock held by non-affiliates computed by
reference to the price at which the stock was sold, or the average bid and asked
prices of such stock, as of a specified date within the past 60 days:
$5,850,445 as of March 15, 2000
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APPLICABLE ONLY TO CORPORATE REGISTRANTS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 664,097 as of March 15, 2000
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Transitional Small Business Disclosure format (check one): Yes [ ] No [X]
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended December
31, 1999 are incorporated by reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders, held on
April 19, 2000, are incorporated by reference into Part III.
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TABLE OF CONTENTS
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Page
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PART I....................................................................................................................... 3
ITEM 1. DESCRIPTION OF BUSINESS........................................................................................ 3
ITEM 2. DESCRIPTION OF PROPERTIES...................................................................................... 20
ITEM 3. LEGAL PROCEEDINGS.............................................................................................. 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................................ 21
PART II...................................................................................................................... 21
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......................................... 21
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................... 21
ITEM 7. FINANCIAL STATEMENTS........................................................................................... 21
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........................... 22
PART III..................................................................................................................... 22
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT.............................................................................................. 22
ITEM 10. EXECUTIVE COMPENSATION......................................................................................... 22
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................. 22
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................................. 22
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K........................................................................ 23
SIGNATURES................................................................................................................... 24
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company
CBC Holding Company (the "Company") was incorporated as a Georgia
corporation on October 15, 1996 for the purpose of acquiring all of the issued
and outstanding shares of Common Stock of Community Banking Company of
Fitzgerald (the "Bank"). The Company became the holding company of the Bank
pursuant the Plan of Reorganization, dated October 25, 1996, by and among the
Company, the Bank and Interim Fitzgerald Company, a wholly-owned subsidiary of
the Company ("Interim"). Pursuant to the terms of the Plan of Reorganization,
Interim merged with and into the Bank and the shareholders of the Bank received
one share of Company Common Stock for each share of Bank Common Stock. The
merger became effective on March 31, 1997.
The Company's principal business is the ownership and management of
the Bank. The Company was organized to facilitate the Bank's ability to serve
its customers' requirements for financial services. The holding company
structure also provides flexibility for expansion of the Company's banking
business through the possible acquisition of other financial institutions and
the provision of additional capital to the Bank.
Except for two officers of the Bank who serve as officers of the
Company, the Company does not have any employees.
The Company's main office is located at 102 West Roanoke Drive,
Fitzgerald, Georgia. The Company opened a drive-through facility on Main Street
in Fitzgerald, Georgia in January 1998. The Company does not have any immediate
plans to establish additional offices.
The Bank
General
The Bank was incorporated on January 19, 1996 and began operations on
April 19, 1996. The Bank purchased certain loans and assumed certain deposits
from Bank South N.A. (now known as Bank of America) ("Bank South") pursuant to a
Purchase and Assumption Agreement, dated October 18, 1995. The Bank also
purchased its current facilities and property from Bank South pursuant to the
Purchase and Assumption Agreement.
The Bank is located in Fitzgerald, Georgia and its trade area includes
all of Ben Hill County, Georgia. Fitzgerald serves as the county seat of Ben
Hill County and is the center of banking in Ben Hill County.
The Bank was established in the Bank South branch located at 102 West
Roanoke Drive in Fitzgerald. Additionally, the Bank operates a two-lane drive
through located on Main Street in downtown Fitzgerald.
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Market Area
In 1999, Ben Hill County had a population of 17,590. The five-year
population projection for Ben Hill County is 18,584, an estimated growth of
1.13% per year. The median household income in Ben Hill County for 1999 was
reported in a market and demographic study of the area (County Rezide 1999,
Claritas) to be $26,787. The number of households in Ben Hill County was 6,409
in 1999; the number of households projected at 2004 is 6,767. The number of
persons employed in Ben Hill County in 1999, including the private, public and
home sector, was 8,462. As a regional commercial center, Fitzgerald, Georgia
has over 100 retail shops and an 80-bed full service medical center. There are
over 40 manufacturing businesses in Ben Hill County with concentration in
apparel and timberwood products, 33 wholesale trade locations, and more than
150 retail locations. Additionally, agriculture is a major industry segment in
Ben Hill County.
Lending Activities
The Bank supports Ben Hill County and portions of immediately
surrounding counties. The Bank's primary lending function is to provide short
and intermediate term credit to individuals, local businesses, and agricultural
enterprises. The Bank mitigates credit risks by maintaining conservative
underwriting standards, continuing training of lenders and support personnel,
and constant management of its loan and collateral portfolio. Interest rate
risk is actively managed through variable-rate pricing and/or utilizing short
amortizing terms (3-5 years) or balloon maturities to facilitate loan rate
adjustment. Occasionally, the Bank may allow longer term (over 5 years) loans
at fixed interest rates. These loans are approved only when the interest rate
is clearly advantageous to the Bank or when the overall customer relationship
indicates that it is in the Bank's best economic interest to accommodate the
customer.
Real Estate Loans. The Bank makes and holds real estate loans,
including construction loans, both residential and commercial, permanent
financing of residential, commercial and agricultural real estate, equity line
consumer loans and occasional closed and junior mortgages. These loans
constitute approximately 39% of total loan portfolio, 79.8% of these dollars
outstanding have a fixed interest rate and 20.2% have a variable rate. The
weighted average rate for fixed rate real estate loans having a final maturity
over 60 months, is 8.60%. Presently longer term fixed rate residential loans
outstanding are slightly higher, as a percentage of total, than might be
considered optimal; however, virtually all of these loans originated from the
portfolio purchased from Bank South and long-term financing is no longer
considered a desirable product of the Bank. The rate impact of these loans will
continue to diminish as the bank expands it's overall portfolio and as these
loans amortize and/or pay out through other means. Meanwhile they provide a
quality source of income and an asset that may be leveraged through borrowing
from FHLB should it become advantageous to do so. Current real estate lending
is generally provided on a 3 to 5 year balloon basis.
Real estate loans are normally provided to customers with acceptable
credit and ability to repay the debt at 80% loan to value as determined by
outside evaluation. Commercial real estate may require higher margins depending
on the type and quality of property under consideration. Construction loans are
based on "as built" evaluations and funds are disbursed upon officer inspection.
Due to local market characteristics, requests for speculative construction are
rare.
The Bank generally underwrites equity line credits to the same
criteria as other residential real estate loans. Due to the nature of these
credits as consumer products a loan/value ratio at 90% is
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often acceptable. Over 99% of equity line credits bear a rate that is variable
at some function of prime.
Real estate loans approved under reasonable underwriting standards
present a relatively low level of risk, especially in the absence of speculative
lending. The most prominent risks in this market are those associated with
declining economic conditions resulting in loss of industrial employment. Such
conditions may diminish the ability of individuals and commercial enterprises to
service real estate debt.
Consumer Loans. The Bank makes consumer loans consisting primarily of
installment loans to individuals for personal, family and household purposes,
including loans for automobiles, home improvement, education loans and
investments. Approximately 99% of the consumer loans are fixed rate loans
generally with maturity of 3 to 5 years. The Bank currently offers home equity
lines of credit (7.0% of total loans), which have a variable rate consumer
product. The Bank expects that most of its consumer loans will remain fixed
rate loans with maturities of 3 to 5 years. Risks associated with consumer
loans include, but are not limited to, fraud, deteriorated or non-existing
collateral, general economic downturn and customer financial problems.
Commercial Loans. Commercial lending is directed principally toward
small businesses whose demand for funds fall within the legal lending limits of
the Bank. This category of loans includes loans to individual, partnership or
corporate borrowers, for a variety of business purposes. Currently, commercial
loans equal 41.6% of total loans. Of the Bank's commercial loans, 60.6% are
adjustable rate loans or mature within one year. Fixed rate loans with
maturities of 60 months or less equal 51% of commercial loans and loans with
fixed rate maturities of over 60 months equal less than .08% of commercial
loans. Risks associated with these loans can be significant and include, but
are not limited to, fraud, bankruptcy, economic downturn, deteriorated or non-
existing collateral and changes in interest rates.
The Bank also makes loans to businesses under programs administered by
the Small Business Administration ("SBA"). Generally SBA guarantees repayment
of up to 90% of the loan amount subject to certain limitations. Normally these
loans have a variable interest rate. The guaranteed portion of these loans may
be sold to investors in the secondary market or held by the Bank depending upon
income and liquidity needs. Risks associated with the loans include, but are
not limited to, credit risk, e.g., fraud, bankruptcy, economic downturn,
deteriorated or non-existing collateral and operational risk, e.g., failure to
adhere to SBA funding and servicing requirements in order to maintain the SBA
guarantees and servicing rights.
Agricultural Loans. The Bank makes loans to agricultural producers
and to agriculture-related businesses. Virtually all of the production
agriculture-related loans are fixed rate, terms are generally 12 months or less
for operating lines. Most other loans to agricultural producers are 3 to 5 year
fixed rate loans. The Bank expects that it will continue to have a majority of
its agricultural loans with fixed rates and maturities of 12 months or less for
operating lines and 3 to 5 years for other agricultural loans. Risks associated
with such loans include, but are not limited to, inclement weather, general
economic downturn, changes in market prices of the underlying commodities
produced, fraud, bankruptcy, deteriorated and non-existing collateral and
adverse fluctuations in interest.
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Investments
In addition to loans, the Bank makes other investments primarily in
obligations of the United States or obligations guaranteed as to principal and
interest by the United States and other taxable securities. No investment in
any of those instruments exceeds any applicable limitation imposed by law or
regulation.
Deposits
The Bank offers core deposits, including checking accounts, money
market accounts, a variety of certificates of deposit, and IRA accounts. The
Bank uses an aggressive marketing plan in the overall service area, a broad
product line, and competitive services to attract deposits. The primary sources
of deposits are residents of, and businesses and their employees located in Ben
Hill County, obtained through personal solicitation by the Bank's employees,
officers and directors, direct mail solicitations and advertisements published
in the local media. Deposits are generated by offering a broad array of
competitively priced deposit services, including demand deposits, regular
savings accounts, money market deposits (transaction and investment),
certificates of deposit, retirement accounts, and other deposit or funds
transfer services which may be permitted by law or regulation and which may be
offered to remain competitive in the market.
Asset and Liability Management
The Bank manages its assets and liabilities to provide an optimum and
stable net interest margin, a profitable after-tax return on assets and return
on equity, and adequate liquidity. These management functions are conducted
within the framework of written loan and investment policies. Management's
overall philosophy is to support asset growth primarily through growth of core
deposits, which includes deposits of all categories made by individuals,
partnerships and corporations. The Bank maintains a balanced position between
rate sensitive assets and rate sensitive liabilities. Specifically, it charts
assets and liabilities on a matrix by maturity, effective duration, and interest
adjustment period, and endeavors to manage any gaps in maturity ranges.
Employees
At December 31, 1999 the Bank had 26 full-time employees and 5 part-
time employees. The Bank had 28 full-time equivalent employees at December 31,
1999. The Company considers its relationship with its employees to be
excellent.
Competition
Ben Hill County has offices of four other commercial banks. The
commercial banks include branch offices of Bank of America and SouthTrust, and
First State Bank of Ocilla, as well as the locally owned Bank of Fitzgerald.
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Supervision and Regulation
Both the Company and the Bank are subject to extensive state and federal
banking regulations that impose restrictions on and provide for general
regulatory oversight of our operations. These laws are generally intended to
protect depositors and not shareholders. The following discussion describes the
material elements of the regulatory framework that applies to us.
The Company
Since the Company owns all of the capital stock of the Bank, it is a
bank holding company under the federal Bank Holding Company Act of 1956. As a
result, the Company is primarily subject to the supervision, examination, and
reporting requirements of the Bank Holding Company Act and the regulations of
the Federal Reserve.
Acquisitions of Banks. The Bank Holding Company Act requires every bank
holding company to obtain the Federal Reserve's prior approval before:
. Acquiring direct or indirect ownership or control of any voting shares of
any bank if, after the acquisition, the bank holding company will directly
or indirectly own or control more than 5% of the bank's voting shares;
. Acquiring all or substantially all of the assets of any bank; or
. Merging or consolidating with any other bank holding company.
Under the Bank Holding Company Act, an adequately capitalized and
adequately managed bank holding company located in Georgia may purchase a bank
located outside of Georgia. Conversely, an adequately capitalized and
adequately managed bank holding company located outside of Georgia may purchase
a bank located inside Georgia. In each case, however, restrictions may be
placed on the acquisition of a bank which has only been existence for a limited
amount of time or an acquisition which may result in specified concentrations of
deposits.
Change in Bank Control. Subject to various exceptions, the Bank Holding
Company Act and the Change in Bank Control Act, together with related
regulations, require Federal Reserve approval prior to any person or company
acquiring "control" of a bank holding company. Control is conclusively presumed
to exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to exist
if a person or a company acquires 10% or more, but less than 25%, of any class
of voting securities and either the bank holding company has registered
securities under Section 12 of the Securities Act of 1934, or no other person
owns a greater percentage of that class of voting securities immediately after
the transaction.
Permitted Activities. Under the Bank Holding Company Act, a bank holding
company, which has not qualified or elected to become a financial holding
company is generally prohibited from engaging in or acquiring direct or indirect
control of more than 5% of the voting shares of any company engaged in
nonbanking activities unless prior to the enactment of the Gramm-Leach-Bliley
Act the Federal Reserve found those activities to be so closely related to
banking as to be a proper
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incident to the business of a banking. Activities that the Federal Reserve has
found to be so closely related to banking to be a proper incident to the
business of banking include:
. factoring accounts receivable,
. acquiring or servicing loans,
. leasing personal property,
. conducting discount securities brokerage activities,
. performing selected data processing services,
. acting as agent or broker in selling credit life insurance and other types
of insurance in connection with credit transactions, and
. performing selected insurance underwriting activities.
Despite prior approval, the Federal Reserve may order a bank holding company or
its subsidiaries to terminate any of these activities or to terminate its
ownership or control of any subsidiary when it has reasonable cause to believe
that the bank holding company's continued ownership, activity or control
constitutes a serious risk to the financial safety, soundness, or stability of
any of its bank subsidiaries.
On November 12, 1999 President Clinton signed the Gramm-Leach-Bliley Act,
which amends the Bank Holding Company Act and greatly expand the activities in
which bank holding companies and affiliates of banks are permitted to engage.
The Gramm-Leach-Bliley Act eliminates many federal and state law barriers to
affiliations among banks and securities firms, insurance companies, and other
financial service providers. The provisions of the Gramm-Leach-Bliley Act
relating to permitted activities of bank holding companies and affiliates of
banks became effective on March 11, 2000.
Generally, if the Company qualifies and elects to become a financial
holding company, it may engage in activities that are financial in nature or
incidental or complementary to a financial activity. Activities that the Gramm-
Leach-Bliley Act expressly lists as financial in nature include insurance
activities, providing financial, investment and advisory services, underwriting
securities and limited merchant banking activities.
To qualify to become a financial holding company, the Bank and any other
depository institution subsidiary of the Company must be well capitalized and
well managed and must have a Community Reinvestment Act rating of at least
satisfactory. Additionally, the Company must file an election with the Federal
Reserve to become a financial holding company and must provide the Federal
Reserve with 30 days written notice prior to engaging in a permitted financial
activity. Although we are eligible to elect to become a financial holding
company, we currently have no plans to make such an election.
Support of Subsidiary Institutions. Under Federal Reserve policy, bank
holding companies are expected to act as a source of financial strength for, and
to commit resources to support, their depository institution subsidiaries. This
support may be required at times when, without this Federal Reserve policy, the
bank holding company might not be inclined to provide it. In addition, any
capital loans by a bank holding company to a bank will be repaid only after its
deposits and other indebtedness are repaid in full. In the event of a bank
holding company's bankruptcy, any commitment by the bank holding company to a
federal bank regulatory agency to maintain the capital of a banking subsidiary
will be assumed by the bankruptcy trustee and entitled to a priority of payment.
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The Bank
The Bank is a commercial bank charted under the laws of the State of
Georgia. Accordingly, the FDIC and the Georgia Department of Banking and
Finance regularly examine the operations of the Bank and have the authority to
approve or disapprove mergers, the establishment of branches, and similar
corporate actions. Both regulatory agencies also have the power to prevent the
continuance or development of unsafe or unsound banking practices or other
violations of law. Additionally, the Bank's deposits are insured by the FDIC to
the maximum extent provided by law. The Bank is also subject to numerous state
and federal statutes and regulations that affect its business, activities and
operations, and it is supervised and examined by one or more state or federal
bank regulatory agencies.
Prompt Corrective Action. The Federal Deposit Insurance Corporation
Improvement Act of 1991 establishes a system of prompt corrective action to
resolve the problems of undercapitalized financial institutions. Under this
system, federal banking regulators have established five capital categories,
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized, in which all institutions are
placed. The federal banking agencies have also specified by regulation the
relevant capital levels for each of the other categories. At December 31, 1999,
we qualified for the well-capitalized category.
Federal banking regulators are required to take some mandatory supervisory
actions and are authorized to take other discretionary actions with respect to
institutions in the three undercapitalized categories. The severity of the
action depends upon the capital category in which the institution is placed.
Generally, subject to a narrow exception, the banking regulator must appoint a
receiver or conservator for an institution that is critically undercapitalized.
An institution in any of the undercapitalized categories is required to submit
an acceptable capital restoration plan to its appropriate federal banking
agency. A bank holding company must guarantee that a subsidiary depository
institution meets its capital restoration plan up to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches or engaging in any new line of business, except under
an accepted capital restoration plan or with FDIC approval. The Federal Reserve
regulations also establish procedures for downgrading an institution to a lower
capital category based on supervisory factors other than capital.
FDIC Insurance Assessments. The FDIC has adopted a risk-based assessment
system for determining an insured depository institutions' insurance assessment
rate. The system that takes into account the risks attributable to different
categories and concentrations of assets and liabilities. An institution is
placed into one of three capital categories: (1) well capitalized; (2)
adequately capitalized; and (3) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized and critically
undercapitalized. The FDIC also assigns an institution to one of three
supervisory subgroups based on a supervisory evaluation that the institution's
primary federal regulator provides to the FDIC and information that the FDIC
determines to be relevant to the institution's financial condition and the risk
posed to the deposit insurance funds. Assessments range from 0 to 27 cents per
$100 of deposits, depending on the institution's capital group and supervisory
subgroup. In addition, the FDIC imposes assessments to help pay off the $780
million in annual interest payments on the $8 billion Financing Corporation
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bonds issued in the late 1980s as part of the government rescue of the thrift
industry. This assessment rate is adjusted quarterly and ranged from 1.16 cents
to 1.22 cents per $100 of deposits in 1999.
The FDIC may terminate its insurance of deposits if it finds that the
institution has engaged in unsafe and unsound practices, is in an unsafe or
unsound condition to continue operations or has violated any applicable law,
regulation, rule, order, or condition imposed by the FDIC.
Community Reinvestment Act. The Community Reinvestment Act requires the
appropriate federal regulator, in connection with their examinations of
financial institutions within their jurisdiction, to evaluate the record of each
financial institution in meeting the credit needs of its local community,
including low and moderate-income neighborhoods. The appropriate federal
regulator considers these factors in evaluating mergers, acquisitions, and
applications to open a branch or facility. Failure to adequately meet these
criteria could impose additional requirements and limitations on the Bank.
Under the Gramm-Leach-Bliley Act, banks with aggregate assets of not more than
$250 million are subject to a Community Reinvestment Act examination only once
every 60 months if the bank receives an outstanding rating, once every 48 months
if it receives a satisfactory rating and as needed if the rating is less than
satisfactory. Additionally, under the Gramm-Leach-Bliley Act, banks are
required to publicly disclose the terms of various Community Reinvestment Act-
related agreements.
Other Regulations. Interest and other charges collected or contracted for
by the Bank are subject to state usury laws and federal laws concerning interest
rates. The Bank's loan operations are also subject to federal laws applicable
to credit transactions, such as:
. The federal Truth-In-Lending Act, governing disclosures of credit terms to
consumer borrowers;
. The Home Mortgage Disclosure Act of 1975, requiring financial institutions to
provide information to enable the public and public officials to determine
whether a financial institution is fulfilling its obligation to help meet the
housing needs of the community it serves;
. The Equal Credit Opportunity Act, prohibiting discrimination on the basis of
race, creed or other prohibited factors in extending credit;
. The Fair Credit Reporting Act of 1978, governing the use and provision of
information to credit reporting agencies;
. The Fair Debt Collection Act, governing the manner in which consumer debts
may be collected by collection agencies; and
. The rules and regulations of the various federal agencies charged with the
responsibility of implementing these federal laws.
The deposit operations of the Bank are subject to:
. The Right to Financial Privacy Act, which imposes a duty to maintain
confidentiality of consumer financial records and prescribes procedures for
complying with administrative subpoenas of financial records; and
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. The Electronic Funds Transfer Act and Regulation E issued by the Federal
Reserve to implement that act, which governs automatic deposits to and
withdrawals from deposit accounts and customers' rights and liabilities
arising from the use of automated teller machines and other electronic
banking services.
Capital Adequacy
The Company and the Bank are required to comply with the capital adequacy
standards established by the Federal Reserve, in the case of the Company, and
FDIC and Georgia Department of Banking and Finance, in the case of the Bank.
The Federal Reserve has established a risk-based and a leverage measure of
capital adequacy for bank holding companies that is substantially similar to
that adopted by the FDIC for banks under its jurisdiction.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies, to account for off-balance-sheet exposure, and to minimize
disincentives for holding liquid assets. Assets and off-balance-sheet items,
such as letters of credit and unfunded loan commitments, are assigned to broad
risk categories, each with appropriate risk weights. The resulting capital
ratios represent capital as a percentage of total risk-weighted assets and off-
balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted
assets is 8%. Total capital consists of two components, Tier 1 Capital and Tier
2 Capital. Tier 1 Capital generally consist of common shareholders' equity,
minority interests in the equity accounts of consolidated subsidiaries,
qualifying noncumulative perpetual preferred stock, and a limited amount of
qualifying cumulative perpetual preferred stock, less goodwill and other
specified intangible assets. Tier 1 Capital must equal at least 4% of risk-
weighted assets. Tier 2 Capital generally consist of subordinated debt, other
preferred stock and hybrid capital and a limited amount of loan loss reserves.
The total amount of Tier 2 Capital is limited to 100% of Tier 1 Capital. At
December 31, 1999, our consolidated ratio of total capital to risk-weighted
assets was 14.3% and our consolidated ratio of Tier 1 Capital to risk-weighted
assets was 13.1%.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and other specified
intangible assets, of 3% for bank holding companies that meet certain specified
criteria, including having the highest regulatory rating and implementing the
Federal Reserve's risk-based capital measure for market risk. All other bank
holding companies generally are required to maintain a leverage ratio of at
least 4%. At December 31, 1999, our consolidated leverage ratio was 8.7%. The
guidelines also provide that bank holding companies experiencing internal growth
or making acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant reliance
on intangible assets. The Federal Reserve considers the leverage ratio and
other indicators of capital strength in evaluating proposals for expansion or
new activities.
The Bank and the Company are also both subject to other capital guidelines
issued by the Georgia Department of Banking and Finance and the Federal Reserve,
respectively, which provide for minimum ratios of total capital to total assets.
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Failure to meet capital guidelines could subject a bank or bank holding
company to a variety of enforcement remedies, including issuance of a capital
directive, the termination of deposit insurance by the FDIC, a prohibition on
the taking of brokered deposits, and certain other restrictions on its business.
As described below, substantial additional restrictions can be imposed on FDIC-
insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."
Payment of Dividends
The Company is a legal entity separate and distinct from the Bank. The
principal source of the Company's cash flow, including cash flow to pay
dividends to its shareholders, is dividends that the Bank pays to it. Statutory
and regulatory limitations apply to the Bank's payment of dividends to the
Company as well as to the Company's payment of dividends to its shareholders.
If, in the opinion of the federal banking regulator, the Bank were engaged
in or about to engage in an unsafe or unsound practice, the federal banking
regulator could require, after notice and a hearing, that it cease and desist
from its practice. The federal banking agencies have indicated that paying
dividends that deplete a depository institution's capital base to an inadequate
level would be an unsafe and unsound banking practice. Under the Federal
Deposit Insurance Corporation Improvement Act of 1991, a depository institution
may not pay any dividend if payment would cause it to become undercapitalized or
if it already is undercapitalized. Moreover, the federal agencies have issued
policy statements that provide that bank holding companies and insured banks
should generally only pay dividends out of current operating earnings. See "--
Prompt Corrective Action" below.
The Georgia Department of Banking and Finance also regulates the Bank's
dividend payments and must approve dividend payments that would exceed 50% of
the Bank's net income for the prior year. Our payment of dividends may also be
affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
At December 31, 1999, the Bank was able to pay approximately $140,009 in
dividends to the Company without prior regulatory approval.
Restrictions on Transactions with Affiliates
The Company and the Bank are subject to the provisions of Section 23A of
the Federal Reserve Act. Section 23A places limits on the amount of:
. loans or extensions of credit to affiliates;
. investment in affiliates;
. the purchase of assets from affiliates, except for real and personal property
exempted by the Federal Reserve;
. loans or extensions of credit to third parties collateralized by the
securities or obligations of affiliates; and
12
<PAGE>
. any guarantee, acceptance or letter of credit issued on behalf of an
affiliate.
The aggregate of all of the above transactions is limited in amount, as to
any one affiliate, to 10% of a bank's capital and surplus and, as to all
affiliates combined, to 20% of a bank's capital and surplus. In addition to the
limitation on the amount of these transactions, each of the above transactions
must also meet specified collateral requirements. The Company must also comply
with certain provisions designed to avoid the taking of low-quality assets.
The Company and the Bank are also subject to the provisions of Section 23B
of the Federal Reserve Act which, among other things, prohibits an institution
from engaging in the above transactions with affiliates unless the transactions
are on terms substantially the same, or at least as favorable to the institution
or its subsidiaries, as those prevailing at the time for comparable transactions
with nonaffiliated companies.
The Bank is also subject to restrictions on extensions of credit to its
executive officers, directors, certain principal shareholders and their related
interests. These extensions of credit (1) must be made on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with third parties, and (2) must not involve
more than the normal risk of repayment or present other unfavorable features.
Privacy
The Gramm-Leach-Bliley Act also contains provisions regarding consumer
privacy. These provisions require financial institutions to disclose their
policy for collecting and protecting confidential information. Customers
generally may prevent financial institutions from sharing personal financial
information with nonaffiliated third parties except for third parties that
market the institutions' own products and services. Additionally, financial
institutions generally may not disclose consumer account numbers to any
nonaffiliated third party for use in telemarketing, direct mail marketing or
other marketing through electronic mail to the consumer.
Proposed Legislation and Regulatory Action
New regulations and statutes are regularly proposed that contain wide-
ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. We cannot predict whether
or in what form any proposed regulation or statute will be adopted or the extent
to which our business may be affected by any new regulation or statute.
Effect of Governmental Monetary Polices
Our earnings are affected by domestic economic conditions and the monetary
and fiscal policies of the United States government and its agencies. The
Federal Reserve Bank's monetary policies have had, and are likely to continue to
have, an important impact on the operating results of commercial banks through
its power to implement national monetary policy in order, among other things, to
curb inflation or combat a recession. The monetary policies of the Federal
Reserve Board have major effects upon the levels of bank loans, investments and
deposits through its open market operating in United States government
securities and through its regulation of the discount rate on borrowings of
member banks and the reserve requirements against member bank deposits. It is
not possible to predict the nature or impact of future changes in monetary and
fiscal policies.
13
<PAGE>
Selected Statistical Information
The following statistical information is provided for CBC Holding Company for
the years ended December 31, 1999 and 1998. The data is presented using daily
average balances. This data should be read in conjunction with the financial
statements appearing elsewhere in this Annual Report.
14
<PAGE>
Statistical Information
I. Distribution of Assets, Liabilities, and Stockholder's Equity; Interest Rates
and Interest Differential
The following table reflects the tax-equivalent yields of interest earning
assets and interest bearing liabilities:
<TABLE>
<CAPTION>
1999 1998
--------------------------------- ------------------------------------
Interest Tax Interest Tax
Average Income/ Equivalent Average Income/ Equivalent
Balance Expense Yield Balance Expense Yield
-------- -------- ---------- -------- --------- -----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Interest-earning deposits and fed funds sold $ 2,428 $ 121 4.98% $ 2,294 $ 119 5.19%
Investment Securities:
Taxable investment securities 12,205 703 5.76% 12,535 772 6.16%
Tax-exempt investment securities 2,195 92 6.03% 458 19 5.97%
Loans (including loan fees) 34,063 3,134 9.20% 32,552 3,063 9.41%
------- ------ ----- ------- ------ -----
Total interest earning assets 50,891 4,050 7.96% 47,839 3,973 8.30%
------ ----- ------ -----
Allowance for loan losses (448) (410)
Cash & due from banks 2,003 1,562
Premises and equipment 1,991 2,044
Other assets 2,851 3,153
------- -------
Total assets $57,288 $54,188
======= =======
Interest bearing liabilities:
Deposits:
Demand deposits 9,057 173 1.91% 8,964 177 1.97%
Savings and Money Market 7,213 230 3.19% 6,294 202 3.21%
Time deposits 27,074 1,458 5.39% 25,582 1,453 5.68%
Other borrowings 130 12 9.23% 130 12 9.23%
Total interest bearing liabilities ------- ------ ----- ------- ------ -----
43,474 1,873 4.31% 40,970 1,844 4.50%
------ ----- ------ -----
Non-interest bearing deposits 6,864 6,201
Other liabilities 214 313
Stockholders' equity 6,736 6,704
------- -------
Total liabilities and stockholders' equity $57,288 $54,188
======= =======
Net interest income $2,177 $2,129
Net interest spread 3.65% 3.80%
===== =====
Net interest yield on average earnings assets $50,891 $2,177 4.28% $47,839 $2,129 4.45%
======= ====== ===== ======= ====== =====
</TABLE>
Non-accruing loans are included in the average balances. For December 31, 1999
and 1998, average non-accruing loans were $48 thousand and $2 thousand,
respectively.
Loan fees are included in the interest income computation and were $120,418 and
$96,551 as of December 31, 1999 and 1998, respectively.
15
<PAGE>
Statistical Information, Continued
Rate and Volume Analysis - The following table reflects the change in net
interest income resulting from changes in interest rates and from asset and
liability volume. Federally tax-exempt interest is presented on a taxable-
equivalent basis assuming a 34% Federal tax rate. The change in interest
attributable to rate has been determined by applying the change in rate between
years to average balances outstanding in the later year. The change in interest
due to volume has been determined by applying the rate from the earlier year to
the change in average balances outstanding between years. Thus, changes that
are not solely due to volume have been consistently attributed to rate.
<TABLE>
<CAPTION>
1998 to 1999 1997 to 1998
Increase(decrease) Increase(decrease)
due to changes in due to changes in
---------------------- -----------------------
Yield/ Yield/
Volume Rate Net Volume Rate Net
------ ---- ---- ------ ----- -----
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Interest earning deposits and fed funds sold 7 (5) 2 28 (5) 23
Investment securities:
Taxable investment securities (20) (49) (69) (220) (19) (239)
Tax-exempt investment securities 104 (31) 73 19 - 19
Loans 142 (71) 71 397 16 413
---- ----- ---- ----- ---- -----
Total interest income 233 (156) 77 224 (8) 216
---- ----- ---- ----- ---- -----
Interest paid on:
Deposits:
Demand deposits (6) 2 (4) 17 (15) 2
Savings 40 (12) 28 6 (1) 5
Time deposits 165 (160) 5 (46) (61) (107)
Other borrowings - - - (1) 2 1
---- ----- ---- ----- ---- -----
Total interest expense 199 (170) 29 (24) (75) (99)
---- ----- ---- ----- ---- -----
</TABLE>
II. Investment Portfolio - Carrying Value of Securities
The following tables summarize the investment portfolio by type and maturity:
<TABLE>
<CAPTION>
Available for Sales
---------------------------------------------------
1999 1998
-------- --------
(Amounts in Thousands)
<S> <C> <C>
U.S. Treasury $ _ $ 505
U.S. Government Agencies 8,460 9,311
State, county and municipal 2,315 1,677
Mortgage-Backed Securities 2,768 2,795
-------- --------
Total $ 13,543 $ 14,288
======== ========
</TABLE>
16
<PAGE>
Statistical Information, Continued
<TABLE>
<CAPTION>
Expected Maturities
Available for Sale
----------------------------------------------------------------------------------------
Within After One After Five
One But Within But Within After
Year Yield Five Years Yield Ten Years Yield Ten Years Yield Total
------ ------ ----------- ----- ---------- ----- --------- ----- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury $ - - $ - - $ - - $ - - $ -
U.S. Government Agencies - - 7,980 5.7% 399 6.0% - - 8,379
State, county and municipal - - 719 6.0% 1,677 5.9% - - 2,396
Mortgage-Backed Securities 1,211 5.8% 720 5.7% 837 5.8% - - 2,768
------ ---- -------- ---- ------- ---- ------- ---- -------
Total $1,211 5.8% $ 9,419 5.7% $ 2,913 5.9% $ - - $13,543
====== ==== ======== ==== ======= ==== ======= ==== =======
</TABLE>
The Company had no securities classified as held to maturity or trading as of
December 31, 1999 and 1998.
III. Loan Portfolio
The following tables summarize the breakdown of loans by type and the
contractual maturities of selected fixed and variable rate loans:
<TABLE>
<CAPTION>
1999 1998
---- ----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Commercial $ 14,183 41.6% $12,742 39.6%
Real Estate-Construction 306 0.9% 989 3.1%
Real Estate-Mortgage 13,166 38.6% 12,738 39.5%
Installment Loans to Individuals 6,469 19.0% 5,725 17.8%
--------- ------ ------- -----
Total Loans 34,124 100.1% 32,194 100.0%
Less: Allowance for Loan losses (450) (430)
--------- -------
Total $ 33,674 $31,764
========= =======
Rate Structure
Maturity (Greater Than)One Year
------------ -----------------------
Over One Due Fixed Variable
One Year Through After Interest Interest
or Less Five Years Five Years Total Rate Rate
--------- ------------ ----------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 7,339 $ 4,199 $ 2,645 $14,183 $ 4,352 $ 2,492
Real estate-construction 306 - - 306 - -
-------- --------- --------- ------- -------- --------
Total $ 7,645 $ 4,199 $ 2,645 $14,489 $ 4,352 $ 2,492
======== ========= ========= ======= ======== ========
</TABLE>
17
<PAGE>
Statistical Information, Continued
IV. Summary of Loan Loss Experience
<TABLE>
<CAPTION>
1999 1998
---- ----
(Amounts in Thousands)
<S> <C> <C>
Allowance for possible loan losses,
beginning of period $ 430 $ 387
------- -------
Charge-offs:
Commercial 18 -
Real estate - construction - -
Real estate - mortgage - -
Consumer loans 50 25
------- -------
Total 68 25
------- -------
Recoveries:
Commercial - -
Real estate - construction - -
Real estate - mortgage - -
Consumer loans 28 8
------- -------
Total 28 8
------- -------
Net charge-offs 40 17
------- -------
Additions charged to operations 60 60
Adjustments - -
------- -------
Allowance for possible loan losses,
end of period 450 430
------- -------
Average loans outstanding, net of
unearned income $34,063 $32,552
======= =======
Ratio of net charge-offs during the
period to average loans outstanding
during the period 0.12% 0.05%
======= =======
</TABLE>
Risk Elements
(Thousands)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Loans 90 days past due $ 87 $ 40
Loans on nonaccrual 3 -
Other Real Estate - -
-------- -------
Total Nonperforming assets $ 90 $ 40
-------- -------
Total Nonperforming assets in a
Percentage of loans 0.4% 0.2%
======== =======
</TABLE>
18
<PAGE>
Statistical Information, Continued
The Bank's policy is to place loans on nonaccrual status when it appears that
the collection of principal and interest in accordance with the terms of the
loan is doubtful. Any loan which becomes 90 days past due as to principal or
interest is automatically placed on nonaccrual. Exceptions are allowed for 90-
day past due loans when such loans are well secured and in process of
collection.
Management expects to incur losses on loans from time to time when borrowers'
financial conditions deteriorate. Where feasible, loans charged down or charged
off will continue to be collected. Management considers the current
allowance adequate to cover potential losses in the loan portfolio.
The following table summarizes information concerning the allocation of the
allowance for loan losses as of December 31, 1999:
<TABLE>
<CAPTION>
Allocated % of Total
Amount Allowance
--------- ----------
<S> <C> <C>
Commercial 188 41.7%
Real Estate - Construction - 0.1%
Real Estate - Mortgage 174 38.7%
Installment Loans to Individuals 88 19.5%
Unallocated - -
--------- ----------
Total 450 100.00%
========= ==========
</TABLE>
Management takes a number of factors into consideration when determining the
additions to be made to the loan loss allowance. As a new institution, the Bank
does not have a sufficient history of portfolio performance on which to base
additions. Accordingly, additions to the reserve are primarily based on
maintaining a ratio of the allowance for loan losses to total loans in a range
of 1.00% to 1.50%. This is based on national peer group ratios and Georgia
ratios which reflect average ratios of .99% (national peer) and 1.50% (Georgia).
Under this methodology, charge-offs will increase the amount of additions to the
allowance and recoveries will reduce additions.
In addition, management performs an on-going loan review process. All new loans
are risk rated under loan policy guidelines. On a monthly basis, the composite
risk ratings are evaluated in a model which assesses the adequacy of the current
allowance for loan losses, and this evaluation is presented to the Board of
Directors each month. Large loans are reviewed periodically. Risk ratings may
be changed if it appears that new loans may not have received the proper initial
grading or, if an existing loans credit conditions have improved or worsened.
As the Bank matures, the additions to the loan loss allowance will be based more
on historical performance, the detailed loan review and allowance adequacy
evaluation.
V. Deposits
The following table summarizes the average balances and average rates for
deposit accounts:
<TABLE>
<CAPTION>
1999 1998
----------------- -----------------
Average Average Average Average
Balance Rate Balance Rate
-------- ------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Non-interest bearing deposits 6,864 6,201
Interest bearing demand deposits 9,291 1.91% 8,964 1.97%
Savings and money market
deposits 7,528 3.19% 6,294 3.21%
Time deposits 28,488 5.39% 25,582 5.68%
------- ------ ------- ------
Total average deposits $52,171 3.76% $47,041 3.91%
======= ====== ======= ======
</TABLE>
19
<PAGE>
Statistical Information, Continued
As of December 31, 1999 the amount outstanding of time certificates of
deposit of $100,000 or more was $8,682 thousand. Amounts by time remaining
until maturity on time deposits of $100,000 or more were:
<TABLE>
<CAPTION>
(Thousands)
<S> <C>
3 months or less $3,826
over 3 through 6 months 2,820
over 6 through 12 months 1,556
over 12 months 480
------
Total $8,682
======
</TABLE>
VI. Selected Financial Data (amounts in thousands, except per share amounts)
The following represents selected financial data for the years ended December
31, 1999 and 1998. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and related notes incorporated
herein by reference.
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Interest Income 4,050 3,973
Interest Expense 1,873 1,844
Net Interest Income 2,177 2,129
Provision for Loan Losses 60 60
Net Earnings 242 264
Net Earnings Per Share 0.36 0.40
Total Average Stockholder's Equity 6,736 6,704
Total Average Assets 57,288 54,188
Return on average assets 0.42% 0.49%
Return on average equity 3.59% 3.94%
Dividend payout ratio 0% 0%
Average equity to average asset ratio 11.76% 12.37%
</TABLE>
VII. Short-term Borrowings
No category of short-term borrowings exceeds 30% of stockholders' equity.
ITEM 2. DESCRIPTION OF PROPERTIES
The Bank owns the property on which its main office is located in Fitzgerald,
Georgia, at 102 West Roanoke Drive. The two-story brick building contains
approximately 11,152 square feet, with an attached drive-up canopy of
approximately 1,400 square feet. The Bank is located on approximately 1,408
acres of land and contains 39 regular parking spaces and two handicap spaces.
The building has seven teller stations inside the building, three drive-up
teller stations, and one ATM station. The drive-up window is located behind the
teller stations. The banking platform, with four personal banker positions, is
across the lobby area from the teller stations, and behind this area are six
offices for lending functions. The facility contains a training room,
operations space, and a board room on the upper level, with significant room for
expansion. The Bank opened a two-lane drive-through facility located on South
Main Street in Fitzgerald in January 1998.
20
<PAGE>
Other than normal real estate commercial lending activities of the Bank, the
Company generally does not invest in real estate, interests in real estate, real
estate mortgages, or securities of or interests in persons primarily engaged in
real estate activities.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a
party or of which any of its properties are subject; nor are there material
proceedings known to the Company to be contemplated by any governmental
authority; nor are there material proceedings known to the Company, pending or
contemplated, in which any director, officer or affiliate or any principal
security holder of the Company or any associate of any of the foregoing, is a
party or has an interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The response to this Item is partially included in the Company's Annual Report
to shareholders at page 1, and is incorporated herein by reference.
The Company did not issue or sell any unregistered shares of its Common Stock
during 1999 and 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The response to this Item is included in the Company's Annual Report to
Shareholders under the heading, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" at pages 23 through 27, and is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included in the Company's Annual Report
to Shareholders at pages 1 through 22, and are incorporated herein by reference:
Independent Auditors' Report
Financial Statements
21
<PAGE>
Consolidated Balance Sheets dated as of December 31, 1999 and 1998
Consolidated Statements of Income for the years ended December 31,
1999, 1998, and 1997.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The responses to this Item are included in the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on April 19, 2000, under the
heading, "Election of Directors" at pages 3 through 4, "Security Ownership of
Certain Beneficial Owners and Management," at pages 6 through 9, and are
incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The responses to this Item are included in the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on April 19, 2000, under the
heading, "Compensation of Executive Officers and Directors," at pages 5 through
6, and are incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The responses to this Item are included in the Company's Proxy Statement for
the Annual Meeting of Shareholders to be held on April 19, 2000, under the
heading, "Security Ownership of Certain Beneficial Owners and Management," at
pages 6 through 9, and are incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to this Item are included in the Company's Proxy Statement for
the Annual Meeting of Shareholders held on April 19, 2000, under the headings,
"Certain Relationships and Related Transactions," at page 9, and "Compensation
of Executive Officers and Directors," at pages 5 through 6, and are incorporated
herein by reference.
22
<PAGE>
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibit
-------------- -------
<C> <S>
3.1 Articles of Incorporation./1/
3.2 Bylaws./1/
4.1 Instruments Defining the Rights of Security Holders.
See Articles of Incorporation at Exhibit 3.1 hereto
and Bylaws at Exhibit 3.2 hereto.
13.1 CBC Holding Company 1999 Annual Report to
Shareholders. Except with respect to those portions
specifically incorporated by reference into this
Report, the Company's 1999 Annual Report to
Shareholders is not deemed to be filed as part of this
Report.
21.1 Subsidiaries of CBC Holding Company/1/
24.1 Power of Attorney (appears on the signature pages to
this Annual Report on 10-KSB).
27.1 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K filed in the fourth quarter of 1999: None.
/1/ Incorporated herein by reference to exhibit of same number in the
Company's Registration Statement on Form 10-SB, as amended, registration
No. 0-22451.
23
<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.
CBC HOLDING COMPANY
By: /s/ George M. Ray
-------------------------
George M. Ray
President and Chief
Executive Officer
Date: March 20, 2000
------------------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on
the signature page to this Report constitutes and appoints George M. Ray and
Sidney S. (Buck) Anderson, Jr., and each of them, his true and lawful attorneys-
in-fact and agents, with full power of substitution and resubstitution, for him
and in his name, place, and stead, in any and all capacities, to sign any and
all amendments to this Report, and to file the same, with all exhibits hereto,
and other documents in connection herewith with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
24
<PAGE>
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 and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Sidney S. (Buck) Anderson, Jr. Chairman, Director March 20, 2000
- ------------------------------------
Sidney S. (Buck) Anderson, Jr.
/s/ James Thomas Casper, III Director March 20, 2000
- ------------------------------------
James Thomas Casper, III
/s/ Charles A. Clark, Sr. Director March 20, 2000
- ------------------------------------
Charles A. Clark, Sr.
/s/ John T. Croley, Jr. Secretary, Vice Chairman, March 20, 2000
- ------------------------------------ Director
John T. Croley, Jr.
/s/ A.B.C. (Chip) Dorminy, III Director March 20, 2000
- ------------------------------------
A.B.C. (Chip) Dorminy, III
Director
- ------------------------------------
John S. Dunn
/s/ Lee Phillip Liles Director March 20, 2000
- ------------------------------------
Lee Phillip Liles
/s/ Steven L. Mitchell Director March 20, 2000
- ------------------------------------
Steven L. Mitchell
/s/ James A. Parrott, II Director March 20, 2000
- ------------------------------------
James A. Parrott, II
/s/ Jack F. Paulk Director March 20, 2000
- ------------------------------------
Jack F. Paulk
/s/ George M. Ray President and Chief March 20, 2000
- ------------------------------------ Executive Officer, Director
George M. Ray (Principal Executive, Financial
and Accounting Officer)
/s/ Hulin Reeves, Jr. Director March 20, 2000
- ------------------------------------
Hulin Reeves, Jr.
/s/ Robert E. Sherrell Director March 20, 2000
- ------------------------------------
Robert E. Sherrell
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ John Edward Smith, III Director March 20, 2000
- ------------------------------------
John Edward Smith, III
/s/ Wyndall L. Walters Director March 20, 2000
- ------------------------------------
Wyndall L. Walters
</TABLE>
26
<PAGE>
EXHIBIT INDEX
-------------
Page Number in
Exhibit Sequentially
Number Exhibit Numbered Copy
------ ------- -------------
3.1 Articles of Incorporation./1/ N/A
3.2 Bylaws./1/ N/A
4.1 Instruments Defining the Rights of Security N/A
Holders. See Articles of Incorporation at
Exhibit 3.1 hereto and Bylaws at Exhibit 3.2
hereto.
13.1 CBC Holding Company 1999 Annual Report to
Shareholders. Except with respect to those
portions specifically incorporated by
reference into this Report, the Company's
1999 Annual Report to Shareholders is not
deemed to be filed as part of this Report.
21.1 Subsidiaries of CBC Holding Company/1/ N/A
24.1 Power of Attorney (appears on the signature
pages to this Annual Report on 10-KSB).
27.1 Financial Data Schedule.
/1/ Incorporated herein by reference to exhibit of same number in the
Company's Registration Statement on Form 10-SB, as amended,
registration No. 0-22451.
<PAGE>
Exhibit 13.1
CBC HOLDING COMPANY
AND SUBSIDIARY
1999 ANNUAL REPORT
<PAGE>
CBC HOLDING COMPANY AND SUBSIDIARY
ANNUAL REPORT
YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
Page
----
INDEPENDENT AUDITORS' REPORT....................................... 1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets................................. 2
Consolidated Statements of Changes in Shareholders' Equity.. 3
Consolidated Statements of Income........................... 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statements.................. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS............................... 23
CBC Holding Company, a Georgia corporation (the "Company") is a holding
company engaged in commercial banking primarily in Ben Hill County, Georgia.
The Company currently has one subsidiary, Community Banking Company of
Fitzgerald (the "Bank"), which is active in retail and commercial banking.
The Company's common stock, $1.00 par value (the "Common Stock"), is not
traded on an established trading market. As of January 5, 2000 there were 659
holders of record of the Company's Common Stock. The Company has not paid a
dividend since its incorporation in 1996. Currently, the Company's sole source
of income is dividends from the Bank. The Bank is subject to regulation by the
Georgia Department of Banking and Finance (the "DBF"). Statutes and regulations
enforced by the DBF include parameters that define when the Bank may or may not
pay dividends. The Company's dividend policy depends on the Bank's earnings,
capital requirements, financial condition and other factors considered relevant
by the Board of Directors of the Company. No assurance can be given that any
dividends will be declared by the Company, or if declared, what the amount of
the dividends will be. All FDIC insured institutions, regardless of their level
of capitalization, are prohibited from paying any dividend or making any other
kind of distribution, if following the payment or distribution, the institution
would be undercapitalized.
This statement has not been reviewed, or confirmed for accuracy or relevance
by the Federal Deposit Insurance Corporation.
<PAGE>
[LETTERHEAD OF THIGPEN, JONES, SEATON & CO., P.C.]
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
CBC Holding Company and Subsidiary
We have audited the accompanying consolidated balance sheets of CBC Holding
Company and Subsidiary as of December 31, 1999 and 1998 and the related
consolidated statements of income, changes in shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. 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 CBC Holding
Company and Subsidiary at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1999, in conformity with generally accepted accounting
principles.
/s/ Thigpen, Jones, Seaton & Co. P.C.
January 5, 2000
Dublin, Georgia
<PAGE>
CBC HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
As of December 31,
-------------------------
1999 1998
----------- ------------
Assets
Cash and due from banks $ 2,377,839 $ 2,430,708
Federal funds sold 5,240,000 4,450,000
----------- -----------
Total cash and cash equivalents 7,617,839 6,880,708
----------- -----------
Securities available for sale, at market value 13,542,975 14,287,599
Federal Home Loan Bank stock, at cost 174,100 -
Loans, net of unearned income 34,124,389 32,194,281
Less - allowance for loan losses (450,349) (430,078)
----------- -----------
Loans, net 33,674,040 31,764,203
----------- -----------
Bank premises and equipment, less accumulated
depreciation 1,972,909 2,102,186
Intangible assets, net of amortization 2,027,185 2,316,564
Accrued interest receivable 518,175 624,225
Other assets and accrued income 202,222 51,962
----------- -----------
Total Assets $59,729,445 $58,027,447
=========== ===========
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing $ 6,982,725 $ 7,274,269
Interest-bearing 45,637,578 43,378,990
----------- -----------
Total deposits 52,620,303 50,653,259
Short-term borrowings - 111,500
Accrued interest payable 209,496 206,481
Other liabilities and accrued expenses 95,165 144,203
----------- -----------
Total liabilities 52,924,964 51,115,443
----------- -----------
Commitments and contingencies
Shareholders' Equity
Common stock, $1 par value, authorized
10,000,000 shares, issued and outstanding
664,097 shares 664,097 664,097
Paid-in capital surplus 5,976,873 5,976,873
Retained earnings 504,306 261,911
Accumulated other comprehensive income (340,795) 9,123
----------- -----------
Total shareholders' equity 6,804,481 6,912,004
----------- -----------
Total Liabilities and Shareholders' Equity $59,729,445 $58,027,447
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
-2-
<PAGE>
CBC HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Retained Accumulated
Paid-in Earnings Other
Common Capital (Accumulated Comprehensive
Stock Surplus Deficit) Income Total
-------- ---------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996, as restated $664,097 $5,976,873 $(110,439) $ 24,511 $6,555,042
----------
Comprehensive income:
Net loss - - 108,262 - 108,262
Valuation allowance adjustment on securities available for sale - - - 13,143 13,143
----------
Total comprehensive income 121,405
-------- ---------- --------- --------- ----------
Balance, December 31, 1997 664,097 5,976,873 (2,177) 37,654 6,676,447
----------
Comprehensive income:
Net income - - 264,088 - 264,088
Valuation allowance adjustment on securities available for sale - - - (28,531) (28,531)
----------
Total comprehensive income 235,557
-------- ---------- --------- --------- ----------
Balance, December 31, 1998 664,097 5,976,873 261,911 9,123 6,912,004
----------
Comprehensive income:
Net income - - 242,395 - 242,395
Valuation allowance adjustment on securities available for sale - - - (349,918) (349,918)
----------
Total comprehensive income (107,523)
-------- ---------- --------- --------- ----------
Balance, December 31, 1999 $664,097 $5,976,873 $ 504,306 $(340,795) $6,804,481
======== ========== ========= ========= ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-3-
<PAGE>
CBC HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Interest Income:
Interest and fees on loans $3,134,115 $3,062,504 $2,650,129
Interest on securities
Taxable income 702,897 771,906 1,010,852
Non-taxable income 91,835 19,174 -
Income on federal funds sold 121,094 119,219 96,080
---------- ---------- ----------
Total interest income 4,049,941 3,972,803 3,757,061
---------- ---------- ----------
Interest Expense:
Deposits 1,861,224 1,832,087 1,931,953
Other interest expense 11,852 12,030 11,419
---------- ---------- ----------
Total interest expense 1,873,076 1,844,117 1,943,372
---------- ---------- ----------
Net interest income before loan losses 2,176,865 2,128,686 1,813,689
Less - provision for loan losses 60,000 60,000 42,000
---------- ---------- ----------
Net interest income after provision for loan losses 2,116,865 2,068,686 1,771,689
---------- ---------- ----------
Other Operating Income:
Service charges on deposit accounts 297,940 280,839 247,388
Other service charges, commissions and fees 57,229 35,325 24,150
Gain on sales of investment securities available for sale - 61,752 24,501
Other income 39,138 19,195 86,873
---------- ---------- ----------
Total other operating income 394,307 397,111 382,912
---------- ---------- ----------
Other Operating Expense:
Salaries 737,072 664,927 698,663
Employee benefits 199,941 173,771 174,956
Net occupancy expenses 176,619 168,226 147,162
Equipment rental and depreciation of equipment 161,405 158,612 143,017
Amortization 289,379 226,480 225,000
Other expenses 629,286 688,191 598,869
---------- ---------- ----------
Total other operating expenses 2,193,702 2,080,207 1,987,667
---------- ---------- ----------
Income Before Income Taxes 317,470 385,590 166,934
Income tax provision 75,075 121,502 58,672
---------- ---------- ----------
Net Income $ 242,395 $ 264,088 $ 108,262
========== ========== ==========
Earnings per share:
Basic $ 0.36 $ 0.40 $ 0.16
========== ========== ==========
Diluted $ 0.36 $ 0.40 $ 0.16
========== ========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-4-
<PAGE>
CBC HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 242,395 $ 264,088 $ 108,262
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 60,000 60,000 42,000
Depreciation 153,417 139,475 123,364
Amortization 289,379 226,480 225,001
Gain on sale of securities - (61,752) (24,501)
Gain on sale of property and equipment - 141 -
Changes in accrued income and other assets 108,474 (146,944) (47,033)
Changes in accrued expenses and other liabilities (18,446) 46,810 19,334
----------- ------------ -----------
Net cash provided by operating activities 835,219 528,298 446,427
----------- ------------ -----------
Cash Flows from Investing Activities:
Net changes in loans made to customers (1,969,837) (1,843,394) (6,841,865)
Purchases of securities available for sale (4,786,438) (10,502,903) (5,021,645)
Proceeds from sales of available for sale securities - 2,500,000 6,951,715
Proceeds from maturities of securities available for sale 5,000,883 7,242,556 2,521,016
Purchase of Federal Home Loan Bank stock (174,100) - -
Property and equipment expenditures (24,140) (118,204) (91,579)
Proceeds from sales of property and other assets - 1,271 -
----------- ------------ -----------
Net cash used in investing activities (1,953,632) (2,720,674) (2,482,358)
----------- ------------ -----------
Cash Flows from Financing Activities:
Net change in deposits 1,967,044 5,850,688 (1,858,532)
Proceeds from short-term borrowings - 38,500 117,500
Payments on short-term borrowings (111,500) - (44,500)
----------- ------------ -----------
Net cash provided by (used in) financing activities 1,855,544 5,889,188 (1,785,532)
----------- ------------ -----------
Net Increase (Decrease) in Cash and Cash Equivalents 737,131 3,696,812 (3,821,463)
Cash and Cash Equivalents, Beginning of Year 6,880,708 3,183,896 7,005,359
----------- ------------ -----------
Cash and Cash Equivalents, End of Year $ 7,617,839 $ 6,880,708 $ 3,183,896
=========== ============ ===========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
-5-
<PAGE>
CBC HOLDING COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
1. Basis of Presentation and Consolidation - The consolidated financial
---------------------------------------
statements include the accounts of CBC Holding Company (the "Company")
and its wholly owned subsidiary, Community Banking Company of Fitzgerald
(the "Bank"). All significant intercompany balances and transactions
have been eliminated in consolidation.
2. Reporting Entity - The Company was incorporated as a Georgia corporation
----------------
on October 15, 1996 for the purpose of acquiring all of the issued and
outstanding shares of common stock of the Bank. The Company became the
holding company of the Bank pursuant the Plan of Reorganization, dated
October 25, 1996, by and among the Company, the Bank and Interim
Fitzgerald Company, a wholly owned subsidiary of the Company
("Interim"). Pursuant to the terms of the Plan of Reorganization,
Interim merged with and into the Bank and the shareholders of the Bank
received one share of Company common stock for each share of Bank common
stock.
Pursuant to the Plan of Reorganization, the merger of Interim with and
into the Bank was accounted for as a pooling of interests. The Bank,
which engages in banking, became a wholly owned subsidiary of the
Company on March 31, 1997 through the exchange of 664,097 shares of the
Company's common stock for all of the outstanding stock of the Bank. The
financial statements of prior years have been restated to give effect to
the reorganization. The Bank provides a variety of financial services to
individuals and small businesses through its offices in South Georgia.
The Bank offers a full range of commercial and personal loans. The Bank
makes loans to individuals for purposes such as home mortgage financing,
personal vehicles and various consumer purchases, and other personal and
family needs. The Bank makes commercial loans to businesses for purposes
such as providing equipment and machinery purchases, commercial real
estate purchases and working capital. The Bank offers a full range of
deposit services that are typically available from financial
institutions, including NOW accounts, demand, savings and other time
deposits. In addition, retirement accounts such as Individual Retirement
Accounts are available. All deposit accounts are insured by the FDIC up
to the maximum amount currently permitted by law.
The consolidated financial statements include the accounts of the
Company and the Bank. All material intercompany accounts and
transactions have been eliminated in consolidation.
3. Securities - The classification of securities is determined at the date
----------
of purchase. Gains or losses on the sale of securities are recognized
on a specific identification basis.
Securities available for sale, primarily debt securities, are recorded
at fair value with unrealized gains or losses (net of tax effect)
excluded from earnings and reported as a component of shareholders'
equity. Securities available for sale will be used as a part of the
Company's interest rate risk management strategy and may be sold in
response to changes in interest rates, changes in prepayment risk, and
other factors.
Mortgage-backed securities represent participating interests in pools of
long-term first mortgage loans originated and serviced by issuers of the
securities. Mortgage-backed securities are carried at unpaid principal
balances, adjusted for unamortized premiums and unearned discounts.
The market value of securities is generally based on quoted market
prices. If a quoted market price is not available, market value is
estimated using quoted market prices for similar securities. Premiums
and discounts are recognized in interest income using the interest
method over the period to maturity.
-6-
<PAGE>
4. Loans and Interest Income - Loans are stated at the amount of unpaid
--------------------------
principal, reduced by net deferred loan fees, unearned discounts, and a
valuation allowance for possible loan losses. Interest on simple
interest installment loans and other loans is calculated by using the
simple interest method on daily balances of the principal amount
outstanding. Loans are generally placed on non-accrual status when full
payment of principal or interest is in doubt, or when they are past due
90 days as to either principal or interest. Senior management may grant
a waiver from non-accrual status if a past due loan is well secured and
in process of collection. A non-accrual loan may be restored to accrual
status when all principal and interest amounts contractually due,
including payments in arrears, are reasonably assured of repayment
within a reasonable period, and there is a sustained period of
performance by the borrower in accordance with the contractual terms of
the loan. When interest accrual is discontinued, all unpaid accrued
interest is reversed. Interest income is subsequently recognized only
to the extent cash payments are received.
5. Allowance for Loan Losses - The allowance for loan losses is available
-------------------------
to absorb losses inherent in the credit extension process. The entire
allowance is available to absorb losses related to the loan and lease
portfolio and other extensions of credit, including off-balance sheet
credit exposures. Credit exposures deemed to be uncollectible are
charged against the allowance for loan losses. Recoveries of previously
charged-off amounts are credited to the allowance for loan losses.
Additions to the allowance for credit losses are made by charges to the
provision for credit losses.
The allowance for loan losses is maintained at a level which, in
management's judgment, is adequate to absorb credit losses inherent in
the loan portfolio. The amount of the allowance is based on management's
evaluation of the collectibility of the loan portfolio, including the
nature of the portfolio, credit concentrations, trends in historical
loss experience, specific impaired loans, economic conditions, and other
risks inherent in the portfolio. Allowances for impaired loans are
generally determined based on collateral values or the present value of
estimated cash flows. Although management uses available information to
recognize losses on loans, because of uncertainties associated with
local economic conditions, collateral values, and future cash flows on
impaired loans, it is reasonably possible that a material change could
occur in the allowance for loan losses in the near term. However, the
amount of the change that is reasonably possible cannot be estimated.
A loan is considered impaired when, based on current information and
events, it is probable that a creditor will not be able to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. Factors considered by
management in determining impairment include payment status, collateral
value, and the probability of collecting scheduled principal and
interest payments when due. Loans that experience insignificant payment
delays and payment shortfalls generally are not classified as impaired.
Management determines the significance of payment delays and payment
shortfalls on a case-by-case basis, taking into consideration all of the
circumstances surrounding the loan and the borrower, including the
length of the delay, the reasons for the delay, the borrower's prior
payment record, and the amount of the shortfall in relation to the
principal and interest owed. Impairment is measured on a loan by loan
basis by either the present value of expected future cash flows
discounted at the loan's effective interest rate, the loan's obtainable
market price, or the fair value of the collateral if the loan is
collateral dependent. Substantially all of the Bank's loans that have
been identified as impaired have been measured by the fair value of
existing collateral.
Large groups of smaller balance homogenous loans are collectively
evaluated for impairment. Accordingly, the Company does not separately
identify individual consumer loans for impairment disclosures.
-7-
<PAGE>
6. Premises and Equipment - Premises and equipment are stated at cost, less
-----------------------
accumulated depreciation. Depreciation is charged to operating expenses
over the estimated useful lives of the assets and is computed on the
straight-line method. Costs of major additions and improvements are
capitalized. Expenditures for maintenance and repairs are charged to
operations as incurred. Gains or losses from disposition of property
are reflected in operations and the asset account is reduced.
7. Other Real Estate Owned - Other real estate owned, acquired principally
-----------------------
through foreclosure, is stated at the lower of cost or net realizable
value. Loan losses incurred in the acquisition of these properties are
charged against the allowance for possible loan losses at the time of
foreclosure. Subsequent write-downs of other real estate owned are
charged against the current period's expense.
8. Intangible Assets - Goodwill is being amortized using the straight-line
-----------------
method over fifteen years. The original amount of goodwill was
$2,692,939 and has an accumulated amortization at December 31, 1999 of
$665,754, resulting in an unamortized balance of $2,027,185.
9. Income Taxes - The Company accounts for income taxes under Statement of
------------
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
which requires recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference
between the financial statement and tax bases of assets and liabilities
using enacted tax rates in effect for the year in which the differences
are expected to reverse.
The Company and the Bank file a consolidated income tax return. The Bank
computes its income tax expense as if it filed an individual return
except that it does not get any portion of the surtax allocation. Any
benefits or disadvantages of the consolidation are absorbed by the
Company. The Bank pays its allocation of federal income taxes to the
parent company or receives payment from the Company to the extent that
tax benefits are realized.
10. Cash and Cash Equivalents - For purposes of reporting cash flows, cash
-------------------------
and cash equivalents include cash on hand, amounts due from banks,
highly liquid debt instruments purchased with an original maturity of
three months or less, and federal funds sold. Generally, federal funds
are purchased and sold for one-day periods. Interest bearing deposits in
other banks with original maturities of less than three months are
included.
11. Use of Estimates - 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 disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The determination of the adequacy of the allowance for loan losses is
based on estimates that are particularly susceptible to significant
changes in the economic environment and market conditions. In connection
with the determination of the estimated losses on loans, management
obtains independent appraisals for significant collateral.
-8-
<PAGE>
The Bank's loans are generally secured by specific items of collateral
including real property, consumer assets, and business assets. Although
the Bank has a diversified loan portfolio, a substantial portion of its
debtors' ability to honor their contracts is dependent on local economic
conditions.
While management uses available information to recognize losses on
loans, further reductions in the carrying amounts of loans may be
necessary based on changes in local economic conditions. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the estimated losses on loans. Such agencies may
require the Bank to recognize additional losses based on their judgments
about information available to them at the time of their examination.
Because of these factors, it is reasonably possible that the estimated
losses on loans may change materially in the near term. However, the
amount of the change that is reasonably possible cannot be estimated.
12. Advertising Costs - It is the policy of the Company to expense
-----------------
advertising costs as they are incurred. The Company does not engage in
any direct-response, advertising and accordingly has no advertising
costs reported as assets on its balance sheet. Amounts charged to
advertising expense for the years ended December 31, 1999, 1998, and
1997 were $41,658, $35,193 and $33,493, respectively.
13. Earnings per Common Share - Basic earnings per share represents income
-------------------------
available to common shareholders divided by the weighted-average number
of common shares outstanding during the period. Diluted earnings per
share reflects additional common shares that would have been outstanding
if dilutive potential common shares had been issued, as well as any
adjustment to income that would result from the assumed conversion.
Potential common shares that may be issued by the Company relate solely
to outstanding stock options, and are determined using the treasury
stock method.
Earnings per common share have been computed based on the following:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net income $242,395 $264,088 $108,262
Less: Preferred stock dividends - - -
-------- -------- --------
Net income applicable to common stock $242,395 $264,088 $108,262
======== ======== ========
Average number of common shares outstanding 664,097 664,097 664,097
Effect of dilutive options, warrants, etc. - - -
-------- -------- --------
Average number of common shares outstanding
used to calculate diluted earnings per common
share 664,097 664,097 664,097
======== ======== ========
</TABLE>
14. Comprehensive Income - The Company adopted SFAS No. 130, "Reporting
--------------------
Comprehensive Income" as of January 1, 1998. Accounting principles
generally require that recognized revenue, expenses, gains and losses be
included in net income. Although certain changes in assets and
liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of the equity section of
the balance sheet, such items, along with net income, are components of
comprehensive income. The adoption of SFAS No. 130 had no effect on the
Company's net income or shareholders' equity.
-9-
<PAGE>
The components of other comprehensive income and related tax effects are as
follows:
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Unrealized holding gains (losses) on
available-for-sale securities $(530,179) $ 18,523 $ 44,415
Less: Reclassification adjustment for
gains realized in income - (61,752) (24,501)
--------- -------- --------
Net unrealized gains (losses) (530,179) (43,229) 19,914
Tax effect (180,261) (14,698) 6,771
--------- -------- --------
Net-of-tax amount $(349,918) $(28,531) $ 13,143
========= ======== ========
</TABLE>
B. INVESTMENT SECURITIES
---------------------
Debt and equity securities have been classified in the balance sheet according
to management's intent. The following table reflects the amortized cost and
estimated market values of investments in debt securities held at December 31,
1999 and 1998. In addition, gross unrealized gains and gross unrealized
losses are disclosed as of December 31, 1999 and 1998, in accordance with
Statement of Position 90-11 of the American Institute of Certified Public
Accountants, which is effective for financial statements covering fiscal years
ending after December 15, 1990.
The book and market values of securities available for sale were:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
----------- ------- -------- ------------
<S> <C> <C> <C> <C>
December 31, 1999:
Non-mortgage backed debt securities of:
U.S. Treasury $ - $ - $ - $ -
U.S. government agencies 8,797,628 - 338,023 8,459,605
State and Political Subdivisions 2,417,887 - 102,954 2,314,933
----------- ------- -------- -----------
Total non-mortgage backed securities 11,215,515 - 440,977 10,774,538
Mortgage backed securities 2,843,816 - 75,379 2,768,437
----------- ------- -------- -----------
Total $14,059,331 $ - $516,356 $13,542,975
=========== ======= ======== ===========
December 31, 1998:
Non-mortgage backed debt securities of:
U.S. Treasury $ 501,875 $ 3,440 $ - $ 505,315
U.S. government agencies 9,309,671 1,303 - 9,310,974
State and Political Subdivisions 1,663,208 13,354 - 1,676,562
----------- ------- -------- -----------
Total non-mortgage backed securities 11,474,754 18,097 - 11,492,851
Mortgage backed securities 2,799,023 - 4,275 2,794,748
----------- ------- -------- -----------
Total $14,273,777 $18,097 $ 4,275 $14,287,599
=========== ======= ======== ===========
</TABLE>
-10-
<PAGE>
The book and market values of pledged securities were $7,502,204 and
$7,206,819 respectively, at December 31, 1999 and $3,701,653 and $3,710,330 at
December 31, 1998. The amortized cost and estimated market value of debt
securities available for sale at December 31, 1999 and 1998, by contractual
maturity, are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or repay obligations
with or without call prepayment or penalties.
Available for Sale
----------------------------
Estimated
December 31, 1999 Amortized Cost Market Value
-------------- ------------
Non-mortgage backed securities:
Due in one year or less $ 1,002,537 $ 968,900
Due after one year through five years 8,014,450 7,729,805
Due after five years through ten years 2,198,528 2,075,833
Due after ten years - -
----------- -----------
Total non-mortgage backed securities 11,215,515 10,774,538
Mortgage backed securities 2,843,816 2,768,437
----------- -----------
Total $14,059,331 $13,542,975
=========== ===========
December 31, 1998
Non-mortgage backed securities:
Due in one year or less $ 2,501,169 $ 2,508,920
Due after one year through five years 6,810,377 6,800,649
Due after five years through ten years 2,163,208 2,183,282
Due after ten years - -
----------- -----------
Total non-mortgage backed securities 11,474,754 11,492,851
Mortgage backed securities 2,799,023 2,794,748
----------- -----------
Total $14,273,777 $14,287,599
=========== ===========
The market value is established by an independent pricing service as of the
approximate dates indicated. The differences between the book value and
market value reflect current interest rates and represent the potential loss
(or gain) had the portfolio been liquidated on that date. Security losses (or
gains) are realized only in the event of dispositions prior to maturity.
At December 31, 1999 and 1998, the Company did not hold investment securities
of any single issuer, other than obligations of the U.S. Treasury and other
U.S. Government agencies, whose aggregate book value exceeded ten percent of
shareholders' equity.
-11-
<PAGE>
C. LOANS
-----
The following is a summary of the loan portfolio by principal categories
at December 31, 1999 and 1998:
1999 1998
----------- -----------
Commercial $14,182,947 $12,741,691
Real estate--Construction 306,483 989,070
Real estate--Mortgage 13,166,213 12,737,935
Installment loans to individuals 6,468,746 5,725,585
----------- -----------
Total loans 34,124,389 32,194,281
Less:
Allowance for loan losses (450,349) (430,078)
----------- -----------
Loans, net $33,674,040 $31,764,203
=========== ===========
Overdrafts included in loans were $17,568 and $20,341 at December 31, 1999 and
1998.
D. ALLOWANCE FOR LOAN LOSSES
-------------------------
A summary of changes in allowance for loan losses of the Company for the years
ended December 31, 1999, 1998, and 1997 is as follows:
1999 1998 1997
-------- -------- --------
Beginning Balance $430,078 $386,717 $359,146
Add-Provision for possible loan losses 60,000 60,000 42,000
-------- -------- --------
Subtotal 490,078 446,717 401,146
-------- -------- --------
Less:
Loans charged off 68,512 25,519 20,719
Recoveries on loans previously charged off (28,783) (8,880) (6,290)
-------- -------- --------
Net loans charged off 39,729 16,639 14,429
-------- -------- --------
Balance, end of year $450,349 $430,078 $386,717
======== ======== ========
Loans on which the accrual of interest has been discontinued or reduced
amounted to $3,092 and $0 at December 31, 1999 and 1998, respectively. If
interest on these loans had been accrued, such income would have approximated
$3,838 and $0 for 1999 and 1998, respectively.
-12-
<PAGE>
E. BANK PREMISES AND EQUIPMENT
---------------------------
The following is a summary of asset classifications and depreciable lives for
the Bank:
<TABLE>
<CAPTION>
Useful Lives (Years) 1999 1998
-------------------- ---------- ----------
<S> <C> <C> <C>
Land $ 565,000 $ 565,000
Banking house and improvements 8-40 1,222,012 1,222,012
Equipment, furniture, and fixtures 5-10 540,108 518,142
Software and capitalized conversion costs 3 148,004 145,832
---------- ----------
Total 2,475,124 2,450,986
Less--accumulated depreciation (502,215) (348,800)
---------- ----------
Bank premises and equipment, net $1,972,909 $2,102,186
========== ==========
</TABLE>
Depreciation included in operating expenses amounted to $153,417 and $139,475
in 1999 and 1998, respectively.
F. DEPOSITS
--------
The aggregate amount of time deposits exceeding $100,000 at December 31, 1999
and 1998 was $8,682,074 and $7,115,070, respectively, and the Bank had deposit
liabilities in NOW accounts of $9,266,637 and $9,455,325 at December 31, 1999
and 1998, respectively.
At December 31, 1999, the scheduled maturities of time deposits are as
follows:
2000 $22,543,395
2001 3,107,526
2002 1,395,991
2003 1,120,918
2004 and thereafter 448,176
-----------
Total time deposits $28,616,006
===========
G. SHORT-TERM BORROWINGS
---------------------
The Bank had a line of credit for federal funds purchased of $2,000,000 and
$1,500,000 with correspondent institutions as of December 31, 1999. At
various times during the year the Bank was advanced funds against these lines,
however, at December 31, 1999, there was no outstanding balance.
-13-
<PAGE>
H. PROVISION FOR INCOME TAXES
--------------------------
The provision for income taxes was computed as follows:
1999 1998 1997
-------- -------- -------
Current tax expense $100,483 $ 85,092 $ -
Deferred tax expense (benefit) (25,408) 36,410 58,672
-------- -------- -------
Net income tax expense $ 75,075 $121,502 $58,672
======== ======== =======
Deferred income taxes are reflected for certain timing differences between
book and taxable income and will be reduced in future years as these timing
differences reverse. The reasons for the difference between the actual tax
expense (benefit) and tax expense (benefit) computed at the federal income tax
rate are as follows:
1999 1998 1997
-------- -------- -------
Tax on pretax income at statutory rate,
including effect of loss carryforwards $107,940 $131,101 $56,757
Benefit of realized net operating loss
carryovers - (33,085) -
Benefit of graduated tax rates (876) - -
Tax-exempt income (34,733) (7,902) -
Non-deductible interest expense related to
tax-exempt income 5,781 3,635 9
Non-deductible business entertainment 250 112 178
Other differences (3,287) 27,641 1,728
-------- -------- -------
Total $ 75,075 $121,502 $58,672
======== ======== =======
Net effective tax rate 23.6% 32.0% 35.1%
======== ======== =======
The sources and tax effects of temporary differences that give rise to
significant portions of deferred income tax assets (liabilities) are as
follows:
1999 1998
-------- --------
Deferred Income Tax Assets:
Net operating loss $ - $ -
Provision for loan losses, net 22,202 15,327
Unrealized loss on available for sale securities 175,561 -
Organizational costs 17,263 -
-------- --------
Total deferred tax asset 215,026 15,327
-------- --------
Deferred Income Tax Liabilities:
Unrealized gain on available for sale securities - (4,700)
Depreciation (55,898) (52,639)
-------- --------
Total deferred tax liability (55,898) (57,339)
-------- --------
Net deferred tax asset (liability) $159,128 $(42,012)
======== ========
-14-
<PAGE>
I. EMPLOYEE BENEFIT PLANS
----------------------
The Company has a 401(k)-plan covering substantially all of its employees
meeting age and length-of-service requirements. Matching contributions to the
plan are at the discretion of the Board of Directors. Retirement plan
expenses for administrative fees charged to operations amounted to $2,579 and
$1,824 for 1999 and 1998, respectively. The Company made matching
contributions of $12,452 and 14,396 for the years ended December 31, 1999 and
1998, respectively.
J. LIMITATION ON DIVIDENDS
-----------------------
The Board of Directors of any state-chartered bank in Georgia may declare and
pay cash dividends on its outstanding capital stock without any request for
approval of the Bank's regulatory agency if the following conditions are met:
1) Total classified assets at the most recent examination of the bank do
not exceed eighty (80) percent of equity capital.
2) The aggregate amount of dividends declared in the calendar year does not
exceed fifty (50) percent of the prior year's net income.
3) The ratio of equity capital to adjusted total assets shall not be less
than six (6) percent.
As of January 1, 2000, the Bank could pay dividends of $140,009 to the Company
without regulatory consent pursuant to the foregoing conditions. Dividends
paid by the Bank are the primary source of funds available to the Company.
K. FINANCIAL INSTRUMENTS
---------------------
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit and standby
letters of credit. Those instruments involve, to varying degrees, elements of
credit risk and interest rate risk in excess of the amount recognized in the
balance sheet. The contract or notional amounts of those instruments reflect
the extent of involvement the Bank has in those particular financial
instruments.
The Bank'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 or notional amount of
those instruments. The Bank uses the same credit policies in making
commitments and conditional obligations as it does for on-balance-sheet
instruments. The Bank does require collateral or other security to support
financial instruments with credit risk.
Contract or Notional Amount
---------------------------
1999 1998
---------- ----------
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $8,789,325 $8,728,325
Standby letters of credit 152,000 150,000
---------- ----------
Total $8,941,325 $8,878,325
========== ==========
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments 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 Bank evaluates each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Bank upon extension of credit is based on
management's credit evaluation. Collateral held varies but may include
accounts receivable, inventory, property, plant, and equipment, and income-
producing commercial properties.
-15-
<PAGE>
Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements,
including commercial paper, bond financing, and similar transactions. All
letters of credit are due within one year of the original commitment date.
The credit risk involved in issuing letters of credit is essentially the same
as that involved in extending loan facilities to customers.
L. COMMITMENTS AND CONTINGENCIES
-----------------------------
In the ordinary course of business, the Company has various outstanding
commitments and contingent liabilities that are not reflected in the
accompanying consolidated financial statements.
M. LEASE COMMITMENT
----------------
The Bank leases an IBM AS400, which processes the Bank's daily transactions.
The assets and liabilities under capital leases are recorded at the lower of
the present value of the minimum lease payments or the fair value of the
asset. The assets are depreciated over the lower of their related lease terms
or their estimated productive lives. Depreciation of assets under capital
leases is included in depreciation expense for 1999 and 1998. The minimum
future lease payments under capital leases as of December 31, 1999, for each
of the next two years and in the aggregate are:
2000 $20,808
2001 1,858
-------
Total minimum lease payments $22,666
=======
N. RELATED PARTY TRANSACTIONS
--------------------------
In the ordinary course of business, the Company, through the Bank, has direct
and indirect loans outstanding to or for the benefit of certain executive
officers and directors. These loans were made on substantially the same terms
as those prevailing, at the time made, for comparable loans to other persons
and did not involve more than the normal risk of collectibility or present
other unfavorable features. The following is a summary of activity during
1999 with respect to such loans to these individuals:
Balances at December 31, 1998 $ 1,336,485
New loans 946,783
Repayments (1,223,270)
-----------
Balances at December 31, 1999 $ 1,059,998
===========
In addition to the above outstanding balances, there are loan commitments of
$1,074,832 available to certain executive officers and directors that were
unused as of December 31, 1999.
The Bank also had deposits from these related parties of approximately
$1,459,191 at December 31, 1999.
-16-
<PAGE>
O. DISCLOSURES RELATING TO STATEMENTS OF CASH FLOWS
------------------------------------------------
Interest - Cash paid during the year for interest was as follows:
--------
1999 1998 1997
---------- ---------- -----------
Interest on deposits and short-term
borrowings $1,870,061 $1,890,395 $ 1,900,500
========== ========== ===========
Income taxes, net $ 111,500 $ 80,000 $ -
========== ========== ===========
Non-cash transactions - Other non-cash transactions relating to investing and
---------------------
financing activities were as follows:
1999 1998 1997
---------- ---------- -----------
Increase (Decrease) in unrealized gain
on available for sale securities $ (530,178) $ (43,229) $ 19,916
========== ========== ===========
Issuance of 664,097 shares of CBC
Holding Company common stock in
exchange for Community Banking
Company of Fitzgerald common stock $ - $ - $ 6,640,970
========== ========== ===========
Cancellation of 664,097 shares of
Community Banking Company of
Fitzgerald common stock pursuant
to merger effective March 31, 1997 $ - $ - $(6,640,970)
========== ========== ===========
Transfer of loans to Other Assets $ - $ 2,630 $ -
========== ========== ===========
P. CREDIT RISK CONCENTRATION
-------------------------
The Bank grants agribusiness, commercial, and residential loans to its
customers. Although the Bank has a diversified loan portfolio, a substantial
portion of its debtors' ability to honor their contracts is dependent on the
area's economic stability. The primary trade area for the Bank is generally
that area within fifty miles in each direction.
The distribution of commitments to extend credit approximates the distribution
of loans outstanding. Commercial and standby letters of credit were granted
primarily to commercial borrowers. The Bank does not extend credit in excess
of the legal lending limit to any single borrower or group of related
borrowers.
The Company's bank subsidiary maintains its cash balances in three financial
institutions. Accounts at each institution are secured by the Federal Deposit
Insurance Corporation up to $100,000. Uninsured balances totaled $-0- at
December 31, 1999.
Q. FAIR VALUES OF FINANCIAL INSTRUMENTS
------------------------------------
SFAS No. 107, Disclosures about Fair Value of Financial Instruments requires
-----------------------------------------------------
disclosure of fair value information about financial instruments, whether or
not recognized on the face of the balance sheets, for which it is practicable
to estimate that value. The assumptions used in the estimation of the fair
value of the Bank's financial instruments are detailed below. Where quoted
prices are not available, fair values are based on estimates using discounted
cash flows and other valuation techniques. The use of discounted cash flows
can be significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. The following disclosures should not
be considered as representative of the liquidation value of the Bank, but
rather a good-faith estimate of the increase or decrease in value of financial
instruments held by the Bank since purchase, origination, or issuance.
Cash and Short-Term Investments - For cash, due from banks, federal funds sold
-------------------------------
and interest-bearing deposits with other banks, the carrying amount is a
reasonable estimate of fair value.
Investment Securities Held to Maturity and Securities Available for Sale -
------------------------------------------------------------------------
Fair values for investment securities are based on quoted market prices.
-17-
<PAGE>
Loans and Mortgage Loans Held for Sale - The fair value of fixed rate loans is
--------------------------------------
estimated by discounting the future cash flows using the current rates at
which similar loans would be made to borrowers with similar credit ratings.
For variable rate loans, the carrying amount is a reasonable estimate of fair
value.
Deposit Liabilities - The fair value of demand deposits, savings accounts and
-------------------
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed maturity certificates of deposit is estimated
by discounting the future cash flows using the rates currently offered for
deposits of similar remaining maturities.
Federal Funds Purchased - The carrying value of federal funds purchased
-----------------------
approximates their fair value.
FHLB Advances - The fair value of the Bank's fixed rate borrowings are
-------------
estimated using discounted cash flows, based on Bank's current incremental
borrowing rates for similar types of borrowing arrangements.
Long-Term Debt and Convertible Subordinated Debentures - Rates currently
------------------------------------------------------
available to the Bank for debt with similar terms and remaining maturities are
used to estimate fair value of existing debt.
Commitments to Extend Credit, Standby Letters of Credit and Financial
---------------------------------------------------------------------
Guarantees Written - Because commitments to extend credit and standby letters
------------------
of credit are made using variable rates, the contract value is a reasonable
estimate of fair value.
Limitations - Fair value estimates are made at a specific point in time, based
-----------
on relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Bank's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of
the Bank's financial instruments, fair value estimates are based on many
judgements. These estimates are subjective in nature and involve
uncertainties and matters of significant judgement and therefore cannot be
determined with precision. Changes in assumptions could significantly affect
the estimates.
Fair value estimates are based on existing on and off-balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial instruments include the mortgage banking operation,
brokerage network, deferred income taxes, premises and equipment and goodwill.
In addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
The carrying amount and estimated fair values of the Bank's financial
instruments at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------------- ----------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Assets:
Cash and short-term investments $ 7,617,839 $ 7,617,839 $ 6,880,708 $ 6,880,708
Securities available for sale 13,542,975 13,542,975 14,287,599 14,287,599
Loans 34,124,389 33,828,550 32,194,281 31,073,023
Liabilities:
Deposits 52,620,303 52,859,841 50,653,259 50,815,429
Other borrowings - - 111,500 111,500
Unrecognized financial instruments:
Commitments to extend credit 8,789,325 8,789,325 8,728,325 8,728,325
Standby letters of credit and financial
guarantees written 152,000 152,000 150,000 150,000
</TABLE>
-18-
<PAGE>
R. OPERATING EXPENSES
------------------
Components of other operating expenses greater than 1% of total interest
income and other income for the periods ended December 31, 1999, 1998 and 1997
are:
1999 1998 1997
------- ------- -------
Supplies $40,426 $49,142 $44,253
Courier service 37,611 41,642 47,269
NCR processing 86,160 91,167 80,615
Promotional 34,934 43,977 31,302
S. REGULATORY MATTERS
------------------
The Bank is 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
Bank's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and
classification are also subject to qualitative judgements by the regulators
about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total risk-based and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December
31, 1999, the Bank meets all capital adequacy requirements to which it is
subject. As of December 31, 1999, the most recent notification from the FDIC
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, and Tier I leverage ratios as set forth in
the table. There are no conditions or events since that notification that
management believes have changed the institution's category.
-19-
<PAGE>
The Bank's actual capital amounts and ratios are also presented in the
following table:
<TABLE>
<CAPTION>
Requirement To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------- ------------------------------- ------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999
Total Risk-Based Capital To
(Risk Weighted Assets) 5,461,000 14.3% 3,055,000 (greater than) 8.0% 3,819,000 (greater than) 10.0%
Tier I Capital To
(Risk Weighted Assets) 5,011,000 13.1% 1,530,000 (greater than) 4.0% 2,295,000 (greater than) 6.0%
Tier I Capital To
(Average Assets) 5,011,000 8.7% 2,304,000 (greater than) 4.0% 2,880,000 (greater than) 5.0%
As of December 31, 1998
Total Risk-Based Capital To
(Risk Weighted Assets) 4,923,000 13.5% 2,917,000 (greater than) 8.0% 3,647,000 (greater than) 10.0%
Tier I Capital To
(Risk Weighted Assets) 4,505,000 12.4% 1,453,000 (greater than) 4.0% 2,180,000 (greater than) 6.0%
Tier I Capital To
(Average Assets) 4,505,000 8.8% 2,048,000 (greater than) 4.0% 2,260,000 (greater than) 5.0%
</TABLE>
-20-
<PAGE>
T. CONDENSED FINANCIAL STATEMENTS (PARENT COMPANY ONLY)
----------------------------------------------------
Condensed parent company financial information on CBC Holding Company at
December 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
BALANCE SHEETS As of December 31,
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Assets
Cash in subsidiary $ 98,831 $ 100,403
Investment in subsidiary, at equity in underlying net assets 6,697,674 6,907,575
Accrued income and other assets 10,970 25,129
---------- ----------
Total Assets $6,807,475 $7,033,107
========== ==========
Liabilities
Other borrowed funds $ - $ 111,500
Accrued expenses and other liabilities 2,994 9,603
---------- ----------
Total Liabilities 2,994 121,103
---------- ----------
Shareholders' Equity
Common stock, $1 par value; authorized 10,000,000 shares,
outstanding 664,097 shares 664,097 664,097
Additional paid-in surplus 5,976,873 5,976,873
Retained earnings 504,306 261,911
Accumulated other comprehensive income (340,795) 9,123
---------- ----------
Total shareholders' equity 6,804,481 6,912,004
---------- ----------
Total Liabilities and Shareholders' Equity $6,807,475 $7,033,107
========== ==========
STATEMENTS OF INCOME AND RETAINED EARNINGS Years Ended December 31,
--------------------------
1999 1998
---------- ----------
Revenues:
Dividend from subsidiary $ 140,000 $ 70,000
---------- ----------
Expenses:
Interest 7,750 6,714
Amortization 19,234 5,918
Other 32,625 46,849
---------- ----------
Total expenses 59,609 59,481
---------- ----------
Income Before Taxes and Equity Income of Subsidiary 80,391 10,519
Add - Benefit of income taxes 21,987 30,765
---------- ----------
Income Before Equity Income of Subsidiary 102,378 41,284
Equity in undistributed income of subsidiary 140,017 222,804
---------- ----------
Net Income 242,395 264,088
Retained Earnings, (Accumulated Deficit) Beginning 261,911 (2,177)
---------- ----------
Retained Earnings, Ending $ 504,306 $ 261,911
========== ==========
</TABLE>
-21-
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS For The Years Ended December 31,
------------------------------------
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 242,395 $ 264,088
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization 19,234 5,918
Equity in undistributed income of subsidiary (140,017) (222,804)
Net change in operating assets and liabilities:
Accrued income and other assets (5,075) 3,263
Accrued expenses and other liabilities (6,609) 9,229
--------- ---------
Net cash provided by operating activities 109,928 59,694
--------- ---------
Cash flows from investing activities:
Proceeds from short-term notes - 38,500
Payments on short-term debt (111,500) -
--------- ---------
Net cash provided by (used in) investing activities (111,500) 38,500
--------- ---------
Net increase (decrease) in cash and cash equivalents (1,572) 98,194
Cash and cash equivalents at beginning of year 100,403 2,209
--------- ---------
Cash and cash equivalents at end of year $ 98,831 $ 100,403
========= =========
</TABLE>
-22-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
GENERAL
- -------
The Bank was incorporated on January 19, 1996 (the "Inception Date"). From the
Inception Date to April 18, 1996, the Bank's principal activities related to its
organization, the conducting of its initial public offering, the pursuit of
approvals from the Georgia Department of Banking and Finance (the "DBF") and the
FDIC of its application to charter the Bank.
On April 18, 1996, the Bank completed the offering of its shares of the Bank's
common stock by receiving subscriber deposits for 664,097 shares at $10.00 per
share. The Bank was capitalized with $3,320,485 of common stock, par value $5.00
per share and $3,154,461 of paid-in capital and a reserve for initial operating
losses of $166,024, as required by the DBF. The Bank purchased certain loans
and assumed certain deposits from Bank South, N.A. (now known as Bank of
America) pursuant to a Purchase and Assumption Agreement dated October 18, 1995.
The Bank also purchased its current facilities and property from Bank South
pursuant to the Purchase and Assumption Agreement.
On April 19, 1996, the Bank commenced operations after receiving all regulatory
approvals and insurance on its deposits from the FDIC.
On October 25, 1996, the Bank entered into a Plan of Reorganization with the
Company and Interim Fitzgerald Company, a wholly owned subsidiary of the Company
("Interim"). Pursuant to the terms of the Plan of Reorganization, Interim
merged with and into the Bank (the "Merger") and the shareholders of the Bank
exchanged their shares of Bank common stock for Company common stock. As a
result of the Merger, the Company became the sole shareholder of the Bank,
effective March 31, 1997.
FINANCIAL CONDITION
- -------------------
The Company's total assets of $59,729,445 at December 31, 1999 are an increase
of 3.0% from $58,027,447 at December 31, 1998. At December 31, 1999, total
deposits had increased 3.9% to $52,620,303 from $50,653,259 at December 31,
1998. Total loans had grown 6.0% to $34,124,389 from $32,194,281 at December 31,
1998. This represented a loan to deposit ratio at December 31, 1999 of 64.9%
compared to 63.6% at December 31, 1998. Based on average loans of $34,063,230
and average deposits of $50,207,713 for the year ended December 31, 1999, the
average loan to deposit ratio was 67.8%. Based on average loans of $32,552,207
and average deposits of $47,041,238 for the year ended December 31, 1998, the
average loan to deposit ratio was 69.2%. Earning assets represented
approximately 88.9% and 87.8% of total assets at December 31, 1999 and 1998,
respectively.
Capital
At December 31, 1999 and 1998, the Bank's capital position was well in excess of
FDIC guidelines to meet the definition of "well-capitalized". Based on the
level of the Bank's risk-weighted assets at December 31, 1999 and 1998, the Bank
had $1.6 million and $1.2 million more capital than necessary to satisfy the
"well-capitalized" criteria. The Bank's capital adequacy is monitored quarterly
by the Bank's Asset/Liability Committee, as asset and liability growth, mix and
pricing strategies are developed.
-23-
<PAGE>
Liquidity
The Bank's internal and external liquidity resources are considered by
management to be adequate to handle expected growth and normal cash flow demands
from existing deposits and loans. At December 31, 1999, the securities
available for sale, exclusive of unrealized gains and losses, had decreased from
$14,273,777 at December 31, 1998 to $14,059,331, a decrease of $214,446 or 1.5%.
The Bank had no securities classified as held to maturity as of December 31,
1999 and 1998. Federal funds sold had increased 17.8% to $5,240,000 at December
31, 1999, up from $4,450,000 at December 31, 1998. This increase is primarily
due to growth in deposits and the Bank's decision to maintain cash in more
liquid investments as part of its contingency planning for the Year 2000.
Current deposits provide the primary liquidity resource for loan disbursements
and Bank working capital. The Bank expects earnings from loans and investments
and other banking services as well as the current loan to deposit position to
provide sufficient liquidity for both the short and long term. The Bank intends
to manage its loan growth such that deposit flows will provide the primary
funding for all loans as well as cash reserves for working capital and short to
intermediate term marketable investments.
RESULTS OF OPERATIONS
- ---------------------
General
The Company's results of operations are determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since interest
rates are determined by market forces and economic conditions beyond the control
of the Company, the ability to generate interest income is dependent upon the
Bank's ability to obtain an adequate spread between the rate earned on earning
assets and the rate paid on interest-bearing liabilities. Thus, a key
performance measure for net interest income is the interest margin or net yield,
which is taxable-equivalent net interest income divided by average earning
assets.
Net Income
For the years ended December 31, 1999 and 1998, the Company had net income of
$242,395 ($0.36 per share) and $264,088 ($0.40 per share), respectively. This
decrease was primarily attributable to the Company's gains on sales of
investment securities of $0 and $61,752 for the years ended December 31, 1999
and 1998, respectively. Also, an additional $62,899 of amortization of
organizational expenses was incurred for the year ended December 31, 1999 over
the amount recorded for the year ended December 31, 1998 in order to comply with
new accounting guidelines.
The following table shows the related results of operations ratios for Assets
and Equity for the years ended December 31, 1999 and 1998:
1999 1998
------------ ------------
Interest Income 4,050 3,973
Interest Expense 1,873 1,844
Net Interest Income 2,177 2,129
Provision for Loan Losses 60 60
Net Earnings 242 264
Net Earnings Per Share 0.36 0.40
Total Average Stockholder's Equity 6,736 6,704
Total Average Assets 57,288 54,188
Return on average assets 0.42% 0.49%
Return on average equity 3.59% 3.94%
Dividend payout ratio 0% 0%
Average equity to average asset ratio 11.76% 12.37%
-24-
<PAGE>
Interest Income / Interest Expense
For the period ended December 31, 1999, interest income from loans and
investments, including loan fees of $120,418, was $4,049,941, representing a
yield of 7.96% on average earning assets of $50,891,930. Interest expense was
$1,873,076, representing a cost of 4.31% on average interest bearing liabilities
of $43,374,093. Net interest income was $2,176,865, producing a net yield of
4.28% on average earning assets.
For the year ended December 31, 1998, interest income from loans and
investments, including loan fees of $96,551, was $3,972,803, representing a
yield of 8.30% on average earning assets of $47,839,335. Interest expense was
$1,844,117, representing a cost of 4.50% on average interest bearing liabilities
of $40,970,278. Net interest income was $2,128,686, producing a net yield of
4.45% on average earning assets.
Asset Quality
The provision for loan losses for the years ended December 31, 1999 and 1998 was
$60,000 and $60,000, respectively. Total loan charge-offs were $68,512 and
$25,285 for the years ended December 31, 1999 and 1998, respectively, and were
related to the Bank's consumer loan portfolio. At December 31, 1999 and 1998,
the Bank had loans past due 90 days or more of $86,536 and $40,743,
respectively. At December 31, 1999 and 1998, the Bank had non-accrual loans of
$3,092 and $0, respectively. The allowance for loan losses at December 31, 1999
and 1998 was $450,349 and $430,078, respectively. This represents 1.32% and
1.34% of total loans at December 31, 1999 and 1998, respectively.
Management takes a number of factors into consideration when determining the
additions to be made to the loan loss allowance. As a new institution, the Bank
does not yet have a sufficient history of portfolio performance on which to base
additions. Accordingly, additions to the reserve are primarily based on
maintaining a ratio of the allowance for loan losses to total loans in a range
of 1.00% to 1.50%. This is based on national peer group ratios and Georgia
ratios that reflect average ratios of 0.99% (national peer) and 1.50% (Georgia).
Under this methodology, charge-offs will increase the amount of additions to the
allowance and recoveries will reduce additions.
In addition, management performs an on-going loan review process. All new loans
are risk rated under loan policy guidelines. On a monthly basis, the composite
risk ratings are evaluated in a model that assesses the adequacy of the current
allowance for loan losses, and this evaluation is presented to the Board of
Directors each month. Large loans are reviewed periodically. Risk ratings may
be changed if it appears that new loans may not have received the proper initial
grading or, if on existing loans, credit conditions have improved or worsened.
As the Bank matures, the additions to the loan loss allowance will be based more
on historical performance, the detailed loan review and allowance adequacy
evaluation.
The Bank's policy is to place loans on non-accrual status when it appears that
the collection of principal and interest in accordance with the terms of the
loan is doubtful. Any loan which becomes 90 days past due as to principal or
interest is automatically placed on non-accrual. Exceptions are allowed for 90-
day past due loans when such loans are well secured and in process of
collection.
-25-
<PAGE>
Non-Interest Income
Non-interest income excluding gains on sales of investments for the years ended
December 31, 1999 and 1998 was $394,307 and $335,359, respectively. This
consisted primarily of service charges on deposit accounts which were $297,940
and $280,839 for the years ended December 31, 1999 and 1998, respectively.
Service charges on deposit accounts are evaluated against service charges from
other banks in the local market and against the Bank's own cost structure in
providing the deposit services. This income should grow with the growth in the
Bank's demand deposit account base.
Gains on sales of investment securities was $0 and $61,752 for the years ended
December 31, 1999 and 1998, respectively.
Non-Interest Expense
Non-interest expense for the years ended December 31, 1999 and 1998 was
$2,193,702 and $2,080,207, respectively. This consisted primarily of salaries
and benefits, which were $937,013 and $838,698 for the years ended December 31,
1999 and 1998, respectively. Other major expenses included in non-interest
expense for the year ended December 31, 1999 included amortization of $289,379,
supplies of $40,426, and data processing of $86,160. Other major expenses
included in non-interest expense for the year ended December 31, 1998 included
amortization of $226,480, supplies of $49,142, and data processing of $91,167.
INTEREST RATE SENSITIVITY
- -------------------------
The objective of interest rate sensitivity management is to minimize the effect
of interest rate changes on net interest margin while maintaining net interest
income at acceptable levels. The Company attempts to accomplish this objective
by structuring the balance sheet so that repricing opportunities exist for both
assets and liabilities in roughly equivalent amounts at approximately the same
time intervals. Imbalances in these repricing opportunities at any time
constitute interest rate sensitivity. An indicator of interest rate sensitivity
is the difference between interest rate sensitive assets and interest rate
sensitive liabilities; this difference is known as the interest rate sensitivity
gap.
The Bank's interest rate sensitivity position at December 31, 1999 is set forth
in the table below:
<TABLE>
<CAPTION>
Days Days Days thru 5 Years 5 Years
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Interest Rate Sensitive Assets:
Loans $11,123,815 $ 2,678,709 $ 3,799,005 $13,764,109 $ 2,755,658
Securities - - - 9,770,315 4,289,016
FHLB Stock 174,100 - - - -
Federal Funds Sold 5,240,000 - - - -
----------- ----------- ----------- ----------- -----------
Total Interest Rate Sensitive Assets $16,537,915 $ 2,678,709 $ 3,799,005 $23,534,424 $ 7,044,674
----------- ----------- ----------- ----------- -----------
Interest Rate Sensitive Liabilities:
Interest Bearing Demand Deposits $ - $ - $ - $ - $ 9,266,635
Savings and Money Market Deposits 3,972,095 - - - 3,782,842
Time Deposits 8,945,513 5,517,790 7,940,442 6,212,260 -
----------- ----------- ----------- ----------- -----------
Total Interest Rate Sensitive Liabilities $12,917,608 $ 5,517,790 $ 7,940,442 $ 6,212,260 $13,049,477
----------- ----------- ----------- ----------- -----------
Interest Rate Sensitivity GAP $ 3,620,307 $(2,839,081) $(4,141,437) $17,322,164 $(6,004,803)
----------- ----------- ----------- ----------- -----------
Cumulative Interest Rate Sensitivity GAP $ 3,620,307 $ 781,226 $(3,360,211) $13,961,953 $ 7,957,150
----------- ----------- ----------- ----------- -----------
Cumulative GAP as a % of total assets
at December 31, 1999 6.08% 1.31% -5.64% 23.44% 13.36%
---- ---- ---- ----- -----
Cumulative GAP as a % of total assets
at December 31, 1998 9.71% 6.83% -0.77% 25.16% 14.52%
---- ---- ---- ----- -----
</TABLE>
-26-
<PAGE>
Distribution of maturities for available for sale securities is based on
amortized cost. Additionally, distribution of maturities for mortgage-backed
securities is based on expected final maturities that may be different from the
contractual terms.
The interest rate sensitivity table presumes that all loans and securities will
perform according to their contractual maturities when, in many cases, actual
loan terms are much shorter than the original terms and securities are subject
to early redemption. In addition, the table does not necessarily indicate the
impact of general interest rate movements on net interest margin since the
repricing of various categories of assets and liabilities is subject to
competitive pressures and customer needs. The Bank monitors and adjusts its
exposure to interest rate risks within specific policy guidelines based on its
view of current and expected market conditions.
The Bank has established an asset/liability committee which monitors the Bank's
interest rate sensitivity and makes recommendations to the board of directors
for actions that need to be taken to maintain a targeted gap range of plus or
minus 10%. An analysis is made of the Bank's current cumulative gap each month
and presented to the board for review.
It is the policy of the Bank to include savings and NOW accounts in the over
five year repricing period in calculating cumulative gap. This methodology is
based on the Bank's experience that these deposits represent "core" deposits of
the Bank and the repricing of these deposits does not move with the same
magnitude as general market rates. The Bank's rates for these deposits are
consistently in the mid-range for the market area and this has not had an
adverse effect on the Bank's ability to maintain these deposit accounts. The
Bank believes that placing these deposits in an earlier repricing period would
force the Bank to inappropriately shorten its asset maturities to obtain the
targeted gap range. This would leave the Bank exposed to falling interest
rates, and unnecessarily reduce its net interest margin.
At December 31, 1999, the above gap analysis indicates a negative cumulative gap
position thru the one-year time interval of $3,360,211. A negative gap position
indicates that the Company's rate sensitive liabilities will reprice faster than
its rate sensitive assets, with 58% of rate sensitive liabilities and 43% of
rate sensitive assets repricing within one year. The Bank is asset sensitive,
meaning that rising rates tend to be beneficial, in the near and long term and
is liability sensitive at the three-month and one-year time horizons, meaning
that falling rates tend to be beneficial to the Bank's net interest margin. If
interest rates were to rise in excess of 200 basis points, the Bank could
experience improved earnings in the near term, but such a rate increase might
significantly reduce the demand for loans in the Bank's local market, thus
diminishing the prospects for improved earnings. If interest rates were to fall
in excess of 200 basis points, the Bank could experience a short- term decline
in net interest margin and may even have difficulty retaining maturing
certificates of deposit without having to pay above market rates.
-27-
<PAGE>
OFFICERS OF CBC HOLDING COMPANY
- -------------------------------
Sidney S. (Buck) Anderson, Jr., Chairman of the Board
George M. Ray, President and Chief Executive Officer
John T. Croley, Vice Chairman and Secretary
EXECUTIVE OFFICERS OF COMMUNITY BANKING COMPANY OF FITZGERALD
- --------------------------------------------------------------
Sidney S. (Buck) Anderson, Jr., Chairman of the Board
John T. Croley, Vice Chairman and Secretary
George M. Ray, President and Chief Executive Officer
DIRECTORS OF CBC HOLDING COMPANY AND COMMUNITY BANKING COMPANY OF FITZGERALD
- ---------------------------------------------------------------------------
S.S. (Buck) Anderson, Jr., Chairman of the Board of the Company and the Bank;
General Manager - Dixie Peanut Co.
James T. Casper, III, Certified Public Accountant, Worthington and Casper CPA
John T. Croley, Jr., Vice Chairman and Secretary of the Company and the Bank;
Attorney, sole practitioner
A.B.C. Dorminy, III, President ABCD Farms, Inc., CEO - Farmers Quality Peanut
Co. and D&F Grain Co.
John S. Dunn, Owner - Shep Dunn Construction
Lee Phillip Liles, Agency Manager - Georgia Farm Bureau Mutual Insurance Co.
Steven L. Mitchell, President Mitchell Bros. Timber Co.
James A. Parrott, II, Owner - Standard Supply Co. & Building Materials, Inc.
Jack F. Paulk, Agency Field Executive - State Farm Insurance
George M. Ray, President and Chief Executive Officer of the Company and the Bank
Robert E. Sherrell, Attorney, Jay, Sherrell & Smith
John Edward Smith, III, Attorney, Jay, Sherrell & Smith
Charles A. Clark, Sr., Owner - C & S Aircraft Service, Inc. & Ewing Dusting
Service, Inc.
Wyndall L. Walters, President - Fitzgerald Ford, Lincoln, Mercury
Hulen Reeves, Jr., Farmer
Shareholders may obtain, without charge, a copy of CBC Holding Company 1999
Annual Report to the Securities and Exchange Commission on Form 10-KSB. Written
requests should be addressed to George M. Ray, President, CBC Holding Company,
102 West Roanoke Drive, Fitzgerald, Georgia 31750.
-28-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,377,839
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,240,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 13,542,975
<INVESTMENTS-CARRYING> 174,100
<INVESTMENTS-MARKET> 0
<LOANS> 34,124,389
<ALLOWANCE> 450,349
<TOTAL-ASSETS> 59,729,445
<DEPOSITS> 52,620,303
<SHORT-TERM> 0
<LIABILITIES-OTHER> 304,661
<LONG-TERM> 0
0
0
<COMMON> 664,097
<OTHER-SE> 6,140,384
<TOTAL-LIABILITIES-AND-EQUITY> 57,729,445
<INTEREST-LOAN> 3,134,115
<INTEREST-INVEST> 794,732
<INTEREST-OTHER> 121,094
<INTEREST-TOTAL> 4,049,941
<INTEREST-DEPOSIT> 1,861,224
<INTEREST-EXPENSE> 1,873,076
<INTEREST-INCOME-NET> 2,176,865
<LOAN-LOSSES> 60,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,193,702
<INCOME-PRETAX> 317,470
<INCOME-PRE-EXTRAORDINARY> 242,395
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 242,395
<EPS-BASIC> .36
<EPS-DILUTED> .36
<YIELD-ACTUAL> 4.30
<LOANS-NON> 3,092
<LOANS-PAST> 82,000
<LOANS-TROUBLED> 1,149,123
<LOANS-PROBLEM> 430,078
<ALLOWANCE-OPEN> 430,078
<CHARGE-OFFS> 68,512
<RECOVERIES> 28,783
<ALLOWANCE-CLOSE> 450,349
<ALLOWANCE-DOMESTIC> 450,349
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
