SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 For the Fiscal Year Ended December 31, 1999
Commission File No. 333-44161
PSB BANCGROUP, INC.
A Florida Corporation (IRS Employer Identification No. 59-3454146)
500 South 1st Street
Lake City, FL 32025
(904) 754-0002
Securities Registered Pursuant to Section 12(b) of the Securities Exchange Act
of 1934:
NONE
Securities Registered Pursuant to Section 12(g) of the Securities Exchange Act
of 1934:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained in this form, and will not be contained, to the best of
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of the Firm 10-KSB or any amendment to
this Form 10-KSB. [ ]
Revenues for the fiscal year ended December 31, 1999: $379,056
The aggregate market value of the common stock of the Registrant held by
nonaffiliates of the Registrant (323,654 shares) on March 3, 2000, was
approximately $2,912,886. As of such date, no organized trading market existed
for the common stock of the Registrant. The aggregate market value was computed
by reference to recent trading activity of the common stock of the registrant at
$9.00 per share. For the purposes of this response, directors, officers and
holders of 5% or more of the Registrant's common stock are considered the
affiliates of the Registrant at that date.
The number of shares outstanding of the Registrant's common stock, as of March
3, 2000: 514,478 shares of $0.01 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
1. Portions of the Audited Consolidated Financial Statements for the year
ended December 31, 1999. (Part II)
2. Portions of Proxy Statement for the 2000 Annual Meeting of Shareholders.
(Part III)
<PAGE>
TABLE OF CONTENTS
Consolidated -- PSB BancGroup, Inc., and its subsidiary are referred to as
("Registrant").
Page Number
PART I
Item 1 Business ...................................................... 3
Item 2 Properties ....................................................11
Item 3 Legal Proceedings .............................................11
Item 4 Submission of Matters to a Vote of Security Holders ...........12(1)
PART II
Item 5 Market for Common Equity and Related Stockholder Matters ......12(1)
Item 6 Management's Discussion and Analysis of Financial Condition and
Results of Operations .........................................12(1)
Item 7 Financial Statements and Supplementary Data ...................19(1)
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ...........................19
PART III
Item 9 Directors and Executive Officers of the Registrant ............19(2)
Item 10 Executive Compensation ........................................20(2)
Item 11 Security Ownership of Certain Beneficial Owners
and Management ..............................................20(2)
Item 12 Certain Relationships and Related Transactions ................20
PART IV
Item 13 Exhibits, Financial Statement Schedules, and Reports on
Form 8-KSB ..................................................20
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(1) These items are incorporated by reference from Registrant's Audited
Consolidated Financial Statements for the year ended December 31, 1999.
(2) The material required by Items 9 through 11 is hereby incorporated by
reference from Registrant's definitive Proxy Statement pursuant to
Instruction G of Form 10-KSB.
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PART I
ITEM 1. - BUSINESS
General
PSB BancGroup, Inc. ("PSB") is a one-bank holding company as defined by the Bank
Holding Company Act of 1956, as amended. PSB, which is headquartered in Lake
City, Florida, owns 100% of the issued and outstanding common stock of Peoples
State Bank ("Bank"). Collectively, PSB and the Bank are referred to as the
"Company."
PSB was incorporated under the laws of the State of Florida on June 30, 1997, to
acquire 100 percent of the share to be issued by the Bank during its
organizational stage and to enhance the Bank's ability to serve its future
customers' requirements for financial services. PSB provides flexibility for
expansion of the Company's banking business through possible acquisition of
other financial institutions and to provide additional banking-related services
which the traditional commercial bank may not provide under present laws.
Subsidiaries
As of December 31, 1999, PSB had one subsidiary, Peoples State Bank, a
state-chartered commercial bank. The Bank opened for business on April 28, 1999.
The Bank is a full service commercial bank, without trust powers. The Bank
provides such consumer services as U.S. Savings Bonds, travelers checks, Bank
checks and cashier's checks. The Bank offers a full range of interest-bearing
and noninterest-bearing deposit accounts, which include:
Commercial and Retail Checking Accounts
Competitively Priced Money Market Accounts
Individual Retirement Accounts
Regular Interest Bearing Statement Savings Accounts
U.S. Certificates of Deposit
The Bank also offers a wide range of loan products, which include:
Commercial Loans
Real Estate Loans
Consumer Loans
Forward-Looking Statements
This report contains certain "forward-looking" statements, as such term is
defined in the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission in its rules, regulations and releases, which
represent the company's expectations or beliefs, including, but not limited to,
statements concerning the Company's operations, economic performance, financial
condition, growth and acquisition strategies, investments and future operational
plans. For this purpose, any statements contained herein that are not statements
of historical fact may be deemed to be forward-looking statements. Without
limiting the generality of the foregoing, words such as "may", "will", "expect",
"relieve", "anticipate", "intent", "could", "estimate", "might", or "continue",
or the negative or other variations thereof or comparable terminology are
intended to identify forward-looking statements. These statements by their
nature involve substantial risks and uncertainties, certain of which are beyond
our control, and actual results may differ materially, depending on a variety of
important factors, including uncertainty related to our operations, mergers or
acquisitions, governmental regulation, the value of the assets and any other
factors discussed in this and other Company filings with the Securities and
Exchange Commission.
Year 2000 Compliance
Our operating and financial systems have been found to be compliant; the "Y2K
Problem" did not adversely affect our operations.
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<TABLE>
SELECTED FINANCIAL DATA
At December 31, or for the Year then Ended
(Dollars in thousands, except per share figures)
1999 1998
At Year End:
<S> <C> <C>
Cash and Cash Equivalents ......................................... $ 3,258 $ 45
Securities ........................................................ 2,475 -
Loans, Net ........................................................ 4,235 -
All Other Assets .................................................. 828 399
------ -------
Total Assets ............................................. $ 10,796 $ 444
====== =======
Deposit Accounts .................................................. $ 6,560 $ -
All Other Liabilities ............................................. 59 465
Stockholders' Equity (Deficit) .................................... 4,177 (21)
------ -------
Total Liabilities and Stockholders' Equity (Deficit)...... $ 10,796 $ 444
====== =======
For the Year:
Total Interest Income ............................................. $ 366 $ 28
Total Interest Expense ............................................ 91 9
------ ------
Net Interest Income ............................................... 275 19
Provision for Loan Losses ......................................... 42 -
====== ======
Net Interest Income After Provision for Loan Losses ............... 233 19
Noninterest Income ................................................ 12 -
Noninterest Expenses .............................................. 574 280
====== ======
Loss Before Income Tax Credit ..................................... (329) (261)
Income Taxes (benefit) ............................................ (124) (98)
------ ------
Net Loss .......................................................... $ (205) $ (163)
====== ======
Basic Loss Per Share .............................................. $ (.49) $ (41.39)
====== ======
Diluted Loss Per Share ........................................... $ (.49) $ (41.39)
====== ======
Ratios and Other Data:
Return on Average Assets .......................................... (3.32%) (1)
Return on Average Equity .......................................... (6.71%) (1)
Average Equity to Average Assets .................................. 49.42% (1)
Interest-Rate Spread During the Period ............................ 2.12% (1)
Net Yield on Average Interest-Earning Assets ...................... 4.64% (1)
Noninterest Expenses to Average Assets ............................ 9.30% (1)
Ratio of Average Interest-Earning Assets to
Average Interest-Bearing Liabilities ........................... 2.65% (1)
Nonperforming Loans and Foreclosed Real Estate as
A Percentage of Total Assets at End of Year .................... - -
Allowance for Loan Losses as a Percentage
Of Total Loans at End of Year .................................. .99% (1)
Total Number of Banking Offices ................................... 1 (1)
Total Shares Outstanding at End of Year ........................... 514,478 3,942
Book Value Per Share at End of Year ............................... $ 8.12 $ (5.43)
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<FN>
(1) The Bank began operations on April 28, 1999, such information is not
meaningful in 1998.
</FN>
</TABLE>
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Market Area and Competition
Our primary service are is Lake City, Florida. Lake City has been experiencing
steady growth in both population and banking deposits in recent years, is the
primary commercial and residential center located in the Northern part of
Columbia County, Florida. Columbia County maintains a steady commercial,
industrial and agricultural base, which has been expanding in recent years. The
largest employers in the County include:
o Columbia County School o Homes of Merit
o VA Medical Center o Lake City Medical Center
o Aero Corporation o PCS Phosphate
o Florida Department of Transportation o Wal-Mart
o Columbia Correctional Center o Anderson Columbia Company
Agricultural activities in Columbia County center around the cattle, timber and
other farming operations. There is strong competition among financial
institutions in Lake City. There are six commercial banking offices and one
savings and loan office within our primary service area. There are five
commercial banks with a total of 11 branches operating in Lake City. Of these
five banks, one is affiliated with a major bank holding company. There are no
savings associations headquartered in Lake City, however, one savings
association and one credit union operate two branches in Lake City and one
credit union is headquartered there. Financial products are now provided by
financial institutions located outside of the primary service area through the
Internet. The Company also competes with non-financial institutions such as
insurance companies, consumer finance companies, brokerage houses and other
business entities that now target once traditional banking business.
We believe that we can meet these competitive challenges by providing prompt,
personalized service to our customers. "People" answer our telephones, not voice
mail and customers are notified promptly as to whether we can satisfy their loan
request.
Investments
As of December 31, 1999, investment securities, federal funds sold and
interest-earning deposits in other banks comprised approximately 44.5% of the
Company's assets and net loans comprised approximately 39.2% of the Company's
assets. To date, we have invested primarily in obligations of the United States
or obligations guaranteed as to principal and interest by the United States,
other taxable securities and in time deposits. In addition, the Company enters
into Federal Funds transactions with its principal correspondent banks, and acts
as a seller of such funds.
Deposits
We offer a wide range of interest-bearing and noninterest-bearing deposit
accounts, including commercial and retail checking accounts, money market
accounts, individual retirement accounts, regular interest bearing statement
savings accounts and certificate of deposit with fixed and variable rates and a
range of maturity date options. The sources of our deposits are residents,
businesses and employees of businesses within our market area, which are
generated through the personal solicitation of our officers and directors,
direct mail solicitation and advertisements published in the local media. We pay
competitive interest rates on time and savings deposits to meet our loan funding
needs. See "ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS, Asset and Liability Management."
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Loan Portfolio
We offer a full complement of lending services, which include commercial,
consumer/installment and real estate loans.
Commercial lending is directed principally toward businesses whose demands for
funds fall within our legal lending limits and which are potential deposit
customers of the Bank.. This category of loans includes loans made to
individual, partnership or corporate borrowers, and obtained for a variety of
business purposes. Particular emphasis is placed on loans to small and
medium-sized businesses.
Real estate loans consist of residential and commercial first and second
mortgage loans.
Consumer loans consist primarily of installment loans to individuals for
personal, family and household purposes, including automobile loans to
individuals and pre-approved lines of credit. This category of loans also
includes term loans secured by second mortgages on the residences of borrowers
for a variety of purposes including home improvements, education and other
personal expenditures.
Our general practice is not to accrue interest on loans delinquent over 90 days,
unless fully secured and in the process of collection. The accrued and unpaid
interest is reversed against current income and thereafter interest is
recognized only to the extent payments are received. Non-accrual loans are
restored to accrual basis when interest and principal payments are current and
prospects for recovery are no longer in doubt.
As of December 31, 1999, there were no loans where known information about
possible credit problems of borrowers causes management to have serious doubts
as to the ability of such borrowers to comply with the present loan repayment
terms.
The majority of our loans are secured by real estate in Columbia County,
Florida. Accordingly, the ultimate collectibility of a substantial portion of
the loan portfolio is susceptible to changes in market conditions in the County.
See "ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, Asset and Liability Management."
Loan Loss Reserves
In considering the adequacy of our allowance for loan losses, we considered that
as of December 31, 1999, 71.9% of our outstanding loans are in the commercial
loan category, including loans secured by commercial real estate. Commercial
loans are generally considered by management to have greater risk than other
categories of loans in our loan portfolio. However, the majority of these
commercial loans at December 31, 1999, were made on a secured basis, with
collateral consisting primarily of real estate, accounts receivable, inventory,
assignment of mortgages and equipment. We believe that the secured condition of
the preponderant portion of its commercial loan portfolio reduces any risk of
loss inherently present in commercial loans.
Our consumer loan portfolio at December 31, 1999, consisted primarily of lines
of credit and installment loans secured by automobiles, boats and other consumer
goods. We believe that the risk associated with these types of loans has been
adequately provided for in the loan loss reserve.
Residential real estate mortgage loans constitute 13.0% of outstanding loans at
December 31, 1999. These loans are considered to have minimal risk due to the
fact that these loans represent conventional residential real estate mortgages
where the amount of the original loan does not exceed 80% of the appraisal value
of the collateral or is otherwise covered by private mortgage insurance.
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The Company's Board of Directors monitors the loan portfolio monthly in order to
enable it to evaluate the adequacy of the allowance for loan losses. The
allowance for loan losses represents the cumulative total of monthly provisions
for loan losses plus recoveries of amounts previously charged off, less net
charge-offs. The allowance for loan losses is established through a provision
for loan losses charged to expense. Loans are charged off against the allowance
when management believe the collectibility of principal is unlikely. The monthly
provision for loan losses is based on our judgment, after considering known and
inherent risks in the portfolio, past loss experience of the Company, adverse
situations that may affect the borrower's ability to repay, assumed values of
the underlying collateral securing the loans, the current and prospective
financial condition of the borrower, and the prevailing and anticipated economic
condition of the local market.
The Company maintains an allowance for loan losses at a level that we believe is
sufficient to absorb all estimated losses in the loan portfolio. The allowance
for loan losses is made up of two primary components: (i) amounts allocated to
loans based on collateral type and (ii) amounts allocated for loans reviewed on
an individual basis in accordance with a credit risk grading system. At December
31, 1999, $42,382 or .9% of outstanding loans had been allocated for loan
losses.
Correspondent Banking
Correspondent banking involves the providing of services by one bank to another
bank which cannot provide that service for itself from an economic or practical
standpoint. We purchase correspondent services offered by larger banks,
including check collections, purchase or sale of Federal Funds, security
safekeeping, investment services, coin and current supplies, overline and
liquidity loan participations and sales of loans to or participations with
correspondent banks.
As of December 31, 1999, the Company did not have any loan participations. As
our loan demand grows, our intent is to sell loan participations to
correspondent banks with respect to loans which exceed our lending limit of
approximately $1,044,000.
Data Processing
Our data processing servicing agreement is with The InterCept Group. The
servicing agreement provides us with a full range of data processing services
including an automated general ledger, deposit accounting, commercial, real
estate and installment lending data processing, central information file ("CIF")
and ATM processing. Under our data processing servicing agreement, the Company
pays a monthly fee based on the type, kind and volume of data processing
services provided, priced at a stipulated rate schedule.
Employees
The Company currently employs 8 full time persons, including three officers.
Additional persons will be hired as needed.
Monetary Policies
The results of operations of the Bank are affected by credit policies of
monetary authorities, particularly the Federal Reserve Board. The instruments of
monetary policy employed by the Federal Reserve Board include open market
operations in U.S. Government securities, changes in the discount rate on member
bank borrowings, changes in reserve requirements against member bank deposits
and limitations on interest rates which member banks may pay on time and savings
deposits. In view of changing conditions in the national economy and in the
money market, as well as the effect of action by monetary and fiscal
authorities, including the Federal Reserve Board, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demands, or
the business and earnings of the Company.
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Supervision and Regulation
General. The Company operates in a highly regulated environment. Our business
activities, which are governed by statute, regulation and administrative
policies, are supervised by the Federal Reserve Board, the Florida Department of
Banking and Finance ("Department") and the Federal Deposit Insurance Corporation
("FDIC").
PSB is regulated by the Federal Reserve Board under the Bank Holding Company Act
of 1956, as amended, which requires every bank holding company to obtain the
prior approval of the Federal Reserve Board before acquiring more than 5% of the
voting shares of any bank or all or substantially all of the assets of a bank,
and before merging or consolidating with another bank holding company. The
Federal Reserve Board (pursuant to regulation and published policy statements)
has maintained that a bank holding company must serve as a source of financial
strength to its subsidiary banks. In adhering to the Federal Reserve Board
policy, PSB may be required to provide financial support for a subsidiary bank
at a time when, absent such Federal Reserve Board policy, PSB may not deem it
advisable to provide such assistance.
A bank holding company is generally prohibited from acquiring control of any
company which is not a bank and from engaging in any business other than the
business of banking or managing and controlling banks. However, there are
certain activities which have been identified by the Federal Reserve Board to be
so closely related to banking as to be a proper incident thereto and thus
permissible for bank holding companies.
As a state-chartered bank, the Bank is subject to the supervision of the
Department, the FDIC and the Federal Reserve Board. The Bank may establish
branch offices anywhere within the State of Florida. The Bank is also subject to
the Florida banking and usury laws restricting the amount of interest which it
may charge in making loans or other extensions of credit.
Lending Limits. Loans and extensions of credit by state banks are subject to
legal lending limitations. Under state law, a state bank may grant unsecured
loans and extensions of credit in an amount up to 15% of its unimpaired capital
and surplus to any person. In addition, a state bank may grant additional loans
and extensions of credit to the same person up to 10% of its unimpaired capital
and surplus, provided that the transactions are fully secured. This 10%
limitation is separate from, and in addition to, the 15% limitation for
unsecured loans. Loans and extensions of credit may exceed the general lending
limit if they qualify under one of several exceptions. At December 31, 1999, our
loans to one borrower limit was $1,044,000. The Bank had no loans in excess of
its legal lending limit.
Capital Requirements. Both PSB and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board, the FDIC and the Department.
Both the Federal Reserve Board and the FDIC have established risk-based capital
guidelines for bank holding companies and bank which make regulatory capital
requirements more sensitive to differences in risk profiles of various banking
organizations. The capital adequacy guidelines issued by the Federal Reserve
Board are applied to bank holding companies on a consolidated basis with the
banks owned by the holding company. The FDIC's risk capital guidelines apply
directly to state banks regardless of whether they are a subsidiary of a bank
holding company. Both agencies' requirements (which are substantially similar)
provide that banking organizations must have capital equivalent to 8% of
weighted risk assets. The risk weights assigned to assets are based primarily on
credit risks. Depending upon the riskiness of a particular asset, it is assigned
to a risk category. For example, securities with an unconditional guarantee by
the United States government are assigned to the lowest risk category. A risk
weight of 50% is assigned to loans secured by owner-occupied one to four family
residential mortgages. The aggregate amount of assets assigned to each risk
category is m8ultipled by the risk weight assigned to that category to determine
the weighted values, which are added together to determine the total
risk-weighted assets. At December 31, 1999, the Bank's total risk-based capital
and Tier I ratio were 65.37% and 64.68%, respectively. Both the Federal Reserve
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Board and the FDIC have also implemented minimum capital leverage ratios to be
used in tandem with the risk-based guidelines in assessing the overall capital
adequacy of bank and bank holding companies. Under these rules, banking
institutions are required to maintain a ratio of 3% "Tier I" capital to total
assets (net of goodwill). Tier I capital includes common stockholders equity,
noncumulative perpetual preferred stock and minority interests in the equity
accounts of consolidated subsidiaries.
Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well- diversified risk,
excellent asset quality, high liquidity, good earnings and in general, have to
be considered strong banking organizations, rated composite 1 under the CAMELS
rating system for banks or the BOPEC rating system for bank holding companies.
Institutions with lower rating and institutions with high levels of risk or
experiencing or anticipating significant growth would be expected to maintain
ratios 100 to 200 basis points above the stated minimums.
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"),
created five "capital categories" ("well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized") which are defined in the Act and which are used to determine
the severity of corrective action the appropriate regulator may take in the
event an institution reaches a given level of undercapitalization. For example,
an institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will take
to become adequately capitalized. Upon approving the plan, the regulatory will
monitor the institutions' compliance. Before a capital restoration plan will be
approved, any entity controlling a bank (i.e., a consecutive calendar quarters).
The liability of the holding company is limited to the lesser of 5% of the
institution's total assets or the amount which is necessary to bring the
institution into compliance with all capital standards. In addition,
"undercapitalized" institutions will be restricted from paying management fees,
dividends and other capital distributions, will be subject to certain asset
growth restrictions and will be required to obtain prior approval from the
appropriate regulator to open new branches or expand into new lines of business.
As an institution drops to lower capital levels, the extent of action to be
taken by the appropriate regulatory increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be critically
undercapitalized.
In response to the directive issued under the Act, the regulators have adopted
regulations which, among other things, prescribe the capital thresholds for each
of the five capital categories established by the Act. The following table
reflects the capital thresholds:
Total Risk- Tier I Risk - Tier I
Based Capital Based Capital Leverage
Ratio Ratio Ratio
Well capitalized(1) 10% 6% 5%
Adequately Capitalized(1) 8% 4% 4%(2)
Undercapitalized(3) < 8% < 4% < 4%
Significantly Undercapitalized(3) < 6% < 3% < 3%
Critically Undercapitalized - - < 2%
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(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
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As of December 31, 1999, our Bank was considered to be well capitalized, in that
we had $4.0 million in Total Capital (to risk weighted assets) or a 65.4% ratio;
$3.9 million in Tier I Capital (to risk weighted assets) or 64.7% ratio; and
$3.9 million in Tier I Capital (to average assets) or a 42.3% ratio.
The Act also provided that banks must meet new safety and soundness standards.
In order to comply with the Act, the Federal Reserve Board and the FDIC adopted
a final Rule which institutes guidelines defining operational and managerial
standards relating to internal controls, loan documentation, credit
underwriting, interest rate exposure, asset growth, director and officer
compensation, asset quality, earnings and stock valuation. Both the capital
standards and the safety and soundness standards, which the Act implements, were
designed to bolster and protect the deposit insurance fund.
Regulatory Examinations. As a bank holding company, PSB and its subsidiary are
subject to examination by the Federal Reserve Board. PSB is required to file
with the Federal Reserve Board an annual report of its operations at the end of
each fiscal year and such additional information as the Federal Reserve Board
may require pursuant to the Act.
The Bank is subject to examination and review by the Department and the FDIC.
The Bank submits to the Department and the FDIC quarterly reports of condition,
as well as such additional reports as may be required by the state banking laws
and FDIC regulations.
Interstate Branching. Under the Riegle-Neal Interstate Banking and Branching
Efficiency Act of 1994, restrictions on interstate acquisitions of banks by bank
holding companies were repealed, such that PSB and any other bank holding
company is able to acquire any Florida-based bank, subject to certain deposit
percentage and other restrictions. The legislation also provides that, unless an
individual state elects beforehand either: (i) to accelerate the effective date,
or (ii) to prohibit out-of-state banks from operating interstate branches within
its territory, on or after June 1, 1997, adequately capitalized and management
bank holding companies will be able to consolidate. De novo branching by an
out-of-state bank is permitted only if it is expressly permitted by the laws of
the host state. The authority of a bank to establish and operate branches within
a state will continue to be subject to applicable state branching laws. Florida
permits interstate branching by acquisition, but does not allow de novo
branching.
Recent Legislation. In November 1999, the financial services regulations were
significantly reformed with the passage of the Gramm-Leach-Bliley Act ("GLA").
The GLA provides for streamlining of the regulatory oversight functions of the
various federal banking agencies. Of significance, the GLA permits bank holding
companies that are well managed, well capitalized and that have at least a
satisfactory Community Reinvestment Act rating to operate as Financial Holding
Companies ("FHC"). In addition to activities that are permissible for bank
holding companies and their subsidiaries, the GLA permits FHCs and their
subsidiaries to engage in a wide range of other activities that are "financial
in nature" or are incidental to financial activities. These new activities will
enable the Company to engage in new lines of business.
The GLA also requires financial institutions to permit, with few exceptions,
their customers to "opt out" of having their personal financial information
shared with nonaffiliated third parties. The GLA also bars financial
institutions from disclosing customer account numbers to direct marketers and
mandates that institutions provide annual disclosure to their customers
regarding the institution's privacy policies and procedures.
34 Act Reporting. PSB's shares of common stock are registered under the
Securities Act of 1933. PSB is required to file periodic public disclosure
reports with the Securities and Exchange Commission ("SEC") pursuant to the
Securities and Exchange Act of 1934 and the regulations promulgated thereunder.
Reports include a Form 10-KSB, a required annual report that must contain a
complete overview of our business, financial, management, regulatory, legal,
ownership and organizational status and a Form 10-QSB, which must be filed with
the SEC at the end of each fiscal quarter.
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Although Form 10-KSB requires the inclusion of audited financial statements,
unaudited statements are sufficient for inclusion on Form 10-QSB. Additionally,
any significant non-recurring events that occur during the subject quarter, as
well as changes in securities, any defaults and the submission of any matters to
a vote of security holders, must also be reported on Form 10-QSB.
Additionally, if any of six significant events (a change in control, an
acquisition or disposition of significant assets, bankruptcy or receivership, a
change in certifying accountant, any resignation of directors or a change in
fiscal year end) occurs in a period between the filing of Form 10-KSB or a Form
10-QSB, such event must be reported on a Form 8-KSB within 15 days of the event.
PSB is also subject to the Proxy Rules contained in Rule 14A with regard to
soliciting proxies for annual or special meetings of shareholders.
Individual directors, officers and owners of more than 10% of our stock, must
also file individual disclosures of the amount of our securities (stock, options
or warrants) they beneficially own and of any transactions in such securities to
which they are parties. The initial status of all such persons was reported on
individual Form 3s. Subsequent securities transactions will be reported on Form
4 as they occur, and an annual report of ownership is filed on Form 5. In
certain instances, the filing of a Form 4 or a Form 5 can relieve the reporting
individual of their duty to file the other.
Recently, the National Association of Securities Dealers adopted a rule
requiring the audit committees of Board of Directors of reporting corporations
such as PSB to undertake certain organizational and operational steps. The
Securities and Exchange Commission is considering adopting a similar rule. These
standards will require our audit committee to be comprised solely of
independent, non-employee directors who are financially literate. Furthermore,
the audit committee will need to adopt a formal charter defining the scope for
its operations. The SEC's proposed rule will also require our auditors to review
the financial statements contained in our Form 10-QSBs, in addition to our Form
10-KSBs.
The scope of regulation and permissible activities of the Company is subject to
change by future federal and state legislation.
ITEM 2. - DESCRIPTION OF PROPERTY
The Bank commenced operations on April 28, 1999, in a temporary facility located
at 500 South First Street, Lake City, Florida. On December 19, 1999, we broke
ground on the permanent facility, a one-story, 5,487 square foot bank building,
located on the same property immediately behind the temporary facility. PSB's
headquarters will also be located at the permanent facility.
ITEM 3. - LEGAL PROCEEDINGS
The only material pending legal proceedings to which PSB and the Bank is a party
is the lawsuit filed by C.F. Douglas, the Bank's former President and Chief
Executive Officer. The lawsuit was filed following his termination for "just
cause". Mr. Douglas is alleging that the Company breached his employment
contract and that certain officers tortiously interfered with his employment
contract. He further alleges that he was mislead by certain directors during his
contra negotiations. This matter has been stayed by the Circuit Court, pending
arbitration. The Company believes that it will be successful in defending its
position.
There are no other 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, 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.
-11-
<PAGE>
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS
During the period covered by this report and to date, there has been no
established public trading market for Registrant's common stock.
As of March 3, 2000, the approximate number of holders of record of PSB's common
stock was 198. The exact number is not known since some of the shares are held
by brokers in street name. To date, PSB has not paid any dividends on its common
stock. It is the present policy of the Board of Directors to reinvest earnings
for such period of time as is necessary to ensure the success of the operations
of the Company. There are no current plans to initiate payment of cash
dividends, and future dividend policy will depend on our earnings, capital
requirements, financial condition and other factors considered relevant by the
Board of Directors of the Company.
The Bank is restricted in its ability to pay dividends under Florida banking
laws and by regulations of the Federal Deposit Insurance corporation. Pursuant
to Section 658.37, Florida Statutes, a state bank may not pay dividends from its
capital. All dividends must be paid out of net profits then on hand, after
charging off bad debts, depreciation, and other worthless assets. Payment of
dividends out of net profits is further limited by Federal regulation which
prohibits the payment of dividends, if such payment would bring the Bank's
capital below required levels.
ITEM 6. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Year Ended December 31, 1999
General
PSB BancGroup, Inc. ( "PSB") was incorporated on June 30, 1997. PSB owns 100% of
the outstanding common stock of Peoples State Bank (the "Bank"). Collectively,
PSB and the Bank are referred to as the "Company". PSB's only business is the
ownership and operation of the Bank.
The Bank is a Florida state-chartered commercial bank and its deposits are
insured by the Federal Deposit Insurance Corporation. The Bank opened for
business on April 28, 1999, and provides community banking services to
businesses and individuals in Columbia County, Florida.
Credit Risk
Our primary business is making commercial, business, consumer and real estate
loans. That activity entails potential loan losses, the magnitude of which
depend on a variety of economic factors affecting borrowers which are beyond our
control. While underwriting guidelines and credit review procedures have been
instituted to protect the Company from avoidable credit losses, some losses will
inevitably occur. At December 31, 1999, the Company had no nonperforming assets
or charge-off experience.
-12-
<PAGE>
The following table presents information regarding the Company's total allowance
for losses, as well as the allocation of such amounts to the various categories
of loans (dollars in thousands):
At December 31, 1999
Loans to Total
----------------------
Amount Loans
------ -----
Commercial Real Estate Loans .................. $ 23 53.9%
Residential Real Estate Loans ................. 5 13.0
Commercial Loans .............................. 8 18.0
Consumer Loans ................................ 6 15.1
--- -----
Total Allowance for Loan Losses ............... $ 42 100.0%
=== =====
The allowance for loan losses represented .99% of the total loans outstanding at
December 31, 1999.
The following table sets forth the composition of the Company's loan portfolio
at December 31, 1999 (dollars in thousands):
% of
Amount Total
------ -----
Commercial Real Estate ......................... $ 2,311 53.9%
Residential Real Estate ........................ 558 13.0
Commercial ..................................... 770 18.0
Consumer ....................................... 645 15.1
----- -----
4,284 100.0%
=====
Less:
Deferred Fees ......................... (7)
Allowance for Credit Losses ........... (42)
-----
Loans, net ..................................... $ 4,235
=====
Liquidity and Capital Resources
The Company's primary source of cash during the year ended December 31, 1999,
was from the proceeds from the sale of the common stock of $4.4 million and net
deposit inflows of $6.6 million. Cash was used primarily to purchase investment
securities, to originate loans and to fund construction of a permanent building.
Outstanding loan commitments at December 31, 1999, totaled $0.7 million and we
exceeded our regulatory liquidity requirements.
The following table sets forth the carrying value of the Company's securities
portfolio:
At December 31, 1999
(In thousands)
Securities Held to Maturity -
U.S. Government Agency Securities ............ $ 1,000
==========
Securities Available for Sale -
U.S. Government Agency Securities ............ $ 1,475
==========
-13-
<PAGE>
The following table sets forth, by maturity distribution at December 31, 1999,
certain information pertaining to the securities portfolio as follows (dollars
in thousands):
<TABLE>
After One Year
One Year or Less to Five Years Total
---------------------- ----------------------- -----------------------
Carrying Average Carrying Average Carrying Average
Value Yield Value Yield Value Yield
Securities Held To Maturity -
<S> <C> <C> <C> <C> <C> <C>
U.S. Government Agency
Securities ..................... $ 500 5.21% $ 500 5.58% $1,000 5.39%
===== ==== ===== ==== ====== ====
Securities Available For Sale -
U.S. Government Agency
Securities...................... $ - - % $1,475 6.45% $1,475 6.45%
===== ==== ===== ==== ======
</TABLE>
Results of Operations
Our operating results depend primarily on the Company's net interest income,
which is the difference between interest income on interest-earning assets and
interest expense on interest-bearing liabilities, consisting primarily of
deposits. Net interest income is determined by the difference between yields
earned on interest-earning assets and rates paid on interest-bearing liabilities
("interest-rate spread") and the relative amounts of interest-earning assets and
interest-bearing liabilities. Our interest-rate spread is affected by
regulatory, economic and competitive factors that influence interest rates, loan
demand and deposit flows. In addition, our net earnings are also affected by the
level of nonperforming loans and foreclosed real estate, as well as the level of
its noninterest income, and its noninterest expense, such as salaries and
employee benefits, occupancy and equipment costs and income taxes.
The following table sets forth, for the periods indicated, information
regarding: (i) the total dollar amount of interest and dividend income of the
Company from interest-earning assets and the resultant average yield; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average costs; (iii) net interest/dividend income; (iv) interest rate
spread; (v) net interest margin. Average balances are based on average daily
balances.
[TABLE FOLLOWS THIS PAGE]
-14-
<PAGE>
<TABLE>
Year Ended December 31, 1999
---------------------------------------------------
Average Interest and Average
Balance Dividends Yield/Rate
------------- ------------ ----------
(Dollars in thousands)
Interest-Earning Assets:
<S> <C> <C> <C>
Loans ............................................... $ 1,357 $ 131 9.65%
Securities .......................................... 930 58 6.24%
Other Interest-Earning Assets (1).................... 3,661 178 4.86%
----- ---
Total Interest-Earning Assets .............. 5,948 $ 367 6.17%
Noninterest-Earning Assets ................................... 236 === ====
-----
Total Assets ............................... 6,184
=====
Interest-Bearing Liabilities:
Savings, Money Market and NOW Deposits .............. $ 813 $ 20 2.46%
Certificates of Deposit ............................. 1,297 59 4.55%
Other Borrowings .................................... 136 12 8.82%
----- ---
Total Interest-Bearing Liabilities ......... 2,246 91 4.05%
Noninterest Bearing Demand Deposits .......................... 614 ===
Other Noninterest-Bearing Liabilities ........................ 268
Stockholders' Equity ......................................... 3,056
-----
Total Liabilities and Stockholders'
Equity ..................................... $ 6,184
=====
Net Interest/Dividend Income ................................. $ 276
===
Interest-Rate Spread (2) ..................................... 2.12%
====
Net Interest Margin (3) ...................................... 4.64%
====
Ratio of Average Interest -Earning Assets to Average
Interest-Bearing Liabilities ........................ 2.65
- ----------------------------- =====
<FN>
(1) Includes interest-bearing deposits and federal funds sold.
(2) Interest-rate spread represents the difference between the average
yield on interest-earning assets and the average cost of
interest-bearing liabilities.
(3) Net interest margin is net interest income dividend by average interest-
earning assets.
</FN>
</TABLE>
Results of Operations For Year Ended December 31, 1999
General. Net loss for the year ended December 31, 1999, was $(205,437) or $(.49)
per share. During the year ended December 31, 1999, the Company had not
achieved the average asset size necessary to operate profitably.
Interest Income and Expense. Interest income totaled $366,992 for the year ended
December 31, 1999, Interest income earned on loans was $130,804. The
average loan portfolio balance for the year ended December 31, 1999,
was $1.4 million and the weighted average yield was 9.65%.
-15-
<PAGE>
Interest on securities was $57,608. The average investment securities
portfolio was $.9 million, with a weighted average yield of 6.24%.
Interest on federal funds sold and deposits in banks totaled $178,580.
The average balance of these assets was $3.7 million, with a weighted
average yield of 4.86%.
Interest expense on deposit accounts amounted to $79,226 for the year
ended December 31, 1999. The weighted average cost of deposits was
3.74%.
Provision for Loan Losses. The provision for loan losses is charged to earnings
to bring the total allowance to a level deemed appropriate by
management and is based upon the volume and type of lending conducted
by the Company, industry standards, the amount of nonperforming loans
and general economic conditions, particularly as they relate to the
Company's market areas, and other factors related to the collectibility
of the Company's loan portfolio. The provision for the year ended
December 31, 1999, was $42,382.
Other Expense. Other expense totaled $574,814 for the year ended December 31,
1999. Compensation and benefits was the largest, amounting to $324,670.
Income Taxes. The Company recognized a credit for income taxes, as well as a
deferred tax asset, because we believe it is more likely than not that
the Company will be able to generate taxable income in the future to
offset these amounts.
Asset and Liability Management
As part of our asset and liability management, the Company has emphasized
establishing and implementing internal asset-liability decision processes, as
well as communications and control procedures to aid in managing our earnings.
We believe that these processes and procedures provide the Company with better
capital planning, asset mix and volume controls, loan-pricing guidelines, and
deposit interest-rate guidelines, which should result in tighter controls and
less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the extent
to which such assets and liabilities are "interest rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap". An asset or
liability is said to be interest rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given period. The
gap ratio is computed as RSA/RSL. A gap ratio of 1.0% represents perfect
matching. A gap is considered negative when the amount of interest-rate
sensitive liabilities exceeds interest-rate sensitive assets. During a period of
rising interest rates, a negative gap would adversely affect net interest
income, while a positive gap would result in an increase in net interest income.
During a period of falling interest rates, a negative gap would result in an
increase in net interest income, while a positive gap would adversely affect net
interest income. In order to minimize the potential for adverse effects of
material and prolonged increases in interest rates on the results of operations,
we continue to monitor asset and liability management policies to better match
the maturities and repricing terms of its interest-earning assets and
interest-bearing liabilities. Such policies have consisted primarily of: (i)
emphasizing the origination of adjustable-rate loans; (ii) maintaining a stable
core deposit base; and (iii) maintaining a significant portion of liquid assets
(cash and short-term securities).
The following table sets froth certain information relating to the Company's
interest-earning assets and interest-bearing liabilities at December 31, 1999,
that are estimated to mature or are scheduled to reprice within the period shown
(dollars in thousands):
[TABLE FOLLOWS THIS PAGE]
-16-
<PAGE>
<TABLE>
More
More More Than One More
Than Three Than Six Year to Than Over
Three Months to Months to Five Five Ten
Months Six Months One Year Years Years Years Total
------ ---------- --------- -------- ------- ------ -----
Loans (1):
<S> <C> <C> <C> <C> <C> <C> <C>
Variable Rate ................... $ 2,148 $ - $ - $ - $ - $ - $ 2,148
Fixed Rate ...................... 304 - - 1,184 434 214 2,136
------ --------- ------- ------- ------ ----- ------
Total Loans ............ 2,452 - - 1,184 434 214 4,284
Federal Funds Sold and Interest-
Bearing Deposits ...................... 2,328 - - - - - 2,328
Securities (2) ........................... - 500 - 1,975 - 9 2,484
------ --------- ------- ------ ------ ----- ------
Total Rate-Sensitive Assets ..... $ 4,780 $ 500 $ - $ 3,159 $ 434 $ 223 $ 9,096
====== ========= ======= ====== ====== ===== ======
Deposit Accounts (3):
Savings, NOW and Money Market
Deposits .......................... $ 2,267 $ - $ - $ - $ - $ - $ 2,267
Time Deposits ......................... 264 997 1,532 593 - - 3,386
------ --------- ------- ------ ------ ----- ------
Total Rate-Sensitive $ 2,531 $ 997 $ 1,532 $ 593 $ - $ - $ 5,653
====== ========= ======= ====== ====== ===== ======
Liabilities
GAP Repricing Differences................. $ 2,249 $ (497) $ (1,532) $ 2,566 $ 434 $ 223 $ 3,443
====== ========= ======= ====== ====== ===== ======
Cumulative GAP ........................... $ 2,249 $ 1,752 $ 220 $ 2,786 $ 3,220 $ 3,443
====== ========= ======= ====== ====== =====
Cumulative GAP/Total Assets .............. 20.83% 16.23% 2.04% 25.81% 29.83% 31.89%
===== ===== ==== ===== ===== =====
- --------------------------
<FN>
(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust, rather
than in the period in which the loans mature. Fixed-rate loans are
scheduled, including repayment, according to their maturities.
(2) Securities are scheduled through the maturity dates, includes Federal Home
Loan Bank stock.
(3) Money market, NOW, and savings deposits are regarded as readily accessible,
withdrawable accounts. All other time deposits are scheduled through the
maturity dates.
</FN>
</TABLE>
The following table reflects the contractual principal repayments by period of
the Company's loan portfolio at December 31, 1999 (in thousands):
<TABLE>
Residential Commercial
Commercial Mortgage Real Estate Consumer
Years Ending December 31, Loans Loans Loans Loans Total
- ------------------------ ----------- ------------ ------------ --------- --------
<S> <C> <C> <C> <C> <C>
2000 ................................. $ 326 $ 52 $ 879 $ 192 $ 1,449
2001 ................................. 160 46 477 168 851
2002 ................................. 89 45 249 147 530
2003 ................................. 85 40 228 132 485
2004 & Beyond ........................ 110 375 478 6 969
----- ----- ----- ----- -----
Total ........................... $ 770 $ 558 $ 2,311 $ 645 $ 4,284
===== ===== ===== ===== =====
</TABLE>
Of the $2.8 million of loans due after 2000, 75.2% of these loans have fixed
interest rates and 24.8% have adjustable interest rates.
-17-
<PAGE>
The following table sets forth total loans originated and repaid during 1999 (in
thousands):
Year Ended
December 31, 1999
Originations:
Commercial Loans ........................ $ 810
Commercial Real Estate Loans ............ 2,402
Residential Mortgage Loans .............. 725
Consumer Loans .......................... 685
-----
Total Loans Originated .............. 4,622
Principal Reductions ......................... (338)
-----
Increase In Total Loans ...................... $ 4,284
=====
The following table shows the distribution of, and certain other information
relating to, the Company's deposit accounts by type (dollars in thousands):
At December 31, 1999
--------------------
% of
Amount Deposits
------ --------
Demand Deposits ............................. $ 907 13.8%
NOW Deposits ................................ 749 11.5
Money Market Deposits ....................... 1,410 21.5
Savings Deposits ............................ 108 1.6
----- -----
Subtotal ............................... 3,174 48.4
----- -----
Certificate of Deposits:
4.00% - 4.99% .......................... 944 14.4
5.00% - 5.99% .......................... 2,018 30.7
6.00% - 6.99% .......................... 424 6.5
----- -----
Total Certificates of Deposit (1) ........... 3,386 51.6
----- -----
Total Deposit ............................... $ 6,560 100.0%
===== =====
- --------------------------
(1) Included individual retirement accounts ("IRAs") totaling $264,000 at
December 31, 1999, all of which are in the form of certificates of deposit.
The following table presents, by various interest rates categories, the amounts
of certificates of deposit at December 31, 1999, which mature during the periods
indicated (in thousands):
<TABLE>
Year Ending December 31,
---------------------------------------------------
2000 2001 2002 2003 Total
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
4.00% - 4.99% .................................. $ 944 $ - $ - $ - $ 944
5.00% - 5.99% .................................. 1,792 135 8 83 2,018
6.00% - 6.99% .................................. 57 350 - 17 424
----- --- ---- ---- -----
Total Certificates of Deposit ............. $ 2,793 $485 $ 8 $ 100 $3,386
===== === ==== ==== =====
</TABLE>
-18-
<PAGE>
Jumbo certificates ($100,000 and over) mature as follows (in thousands):
December 31, 1999:
Due Three Months or Less ........................... $ -
Due Over Three Months to Six Months ................ 400
Due Over six Months to One Year .................... 801
Due Over One Year .................................. -
Total ......................................... $ 1,201
Impact of Inflation and Changing Prices
The financial statements and related data presented herein have been prepared in
accordance with GAAP, which requires the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time, due to inflation. Unlike most
industrial companies, substantially all of the assets and liabilities of the
Company are monetary in nature. As a result, interest rates have a more
significant impact on the Company's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services, since
such prices are affected by inflation to a larger extent than interest rates.
Future Accounting Requirements
Financial Accounting Standards 133 - Accounting for Derivative Investments and
Hedging Activities requires companies to record derivatives on the balance sheet
as assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for, depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair market value or cash
flows. The Company will be required to adopt this Statement January 1, 2001.
This Statement is not expected to have a material impact on the Company.
ITEM 7. - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Registrant hereby incorporates by reference the Report of the Independent
Auditors and the 1999 Audited Consolidated Financial Statements filed as Exhibit
22.2 under Item 13 herein.
ITEM 8. - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS
None.
PART III
ITEM 9. - DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Registrant hereby incorporates by reference the sections entitled "Election of
Directors" and "Board of Directors Meeting" contained at pages 4 through 6 of
the Proxy Statement filed as Exhibit 22.1 under Item 13 herein.
-19-
<PAGE>
ITEM 10. - EXECUTIVE COMPENSATION
Registrant hereby incorporates by reference the section entitled "Executive
Compensation" contained at pages 6 through 8 of the Proxy Statement filed as
Exhibit 22.1 under Item 13 herein.
ITEM 11. - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
Registrant hereby incorporates by reference the sections entitled
"Security Ownership of Certain beneficial Owners" and "Election of
Directors" contained at pages 2 through 6 of the Proxy Statement filed
as Exhibit 22.1 under Item 13 herein.
(b) Security Ownership of Management
Registrant hereby incorporates by reference the section entitled
"Election of Directors" contained at pages 3 through 6 of the Proxy
Statement filed as Exhibit 22.1 under Item 13 herein.
(c) Changes in Control
Management is not aware of any arrangements, including any pledge by
any person of securities of Registrant, which the operation of may, at
a subsequent date, result in a change of control of the Company.
ITEM 12. - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has $1.2 million of loans outstanding to the PSB's directors, executive
officers, their associates and members of the immediate families of such
directors and executive officers.
PART IV
ITEM 13. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed with or incorporated by
reference into this report. The exhibits which are denominated by an
asterisk (*) were previously filed as a part of, and are hereby
incorporated by reference from PSB's Registration Statement on Form SB-2
under the Securities Act of 1933, ad declared effective with the Securities
and Exchange Commission on June 8, 1998, Registration No. 333-44161. The
exhibit numbers correspond to the exhibit numbers in the reference
documents.
Exhibit No. Description of Exhibit
---------- ----------------------
* 3.1 Articles of Incorporation of PSB
* 3.2 Bylaws of PSB
* 4.1 Specimen Common Stock Certificate
* 4.2 Specimen Warrant Certificate
* 4.4 PSB's January 9, 1998 Warrant Plan
* 10.1 Employment Agreement by and among PSB, the Bank and Robert W.
Woodard
* 10.2 Land Purchase Agreement
10.3 Employment Agreement by and among PSB, the Bank and Wesley T.
Small
22.1 PSB's 2000 Annual Meeting Proxy Statement
22.2 Audited Consolidated Financial Statements for the year ended
December 31, 1999.
27.0 Financial Data Schedule
(b) Reports on Form 8-KSB. Registrant did not file any reports on Form 8-KSB
during the last quarter of 1999.
-20-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 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.
PSB BancGroup, Inc.
Dated: March 21, 2000 By: /s/Alton C. Milton, Sr.
------------------------------------
Alton C. Milton, Sr.
Chairman of the Board
Dated: March 21, 2000 By: /s/Robert W. Woodard
------------------------------------
Robert W. Woodard
Chief Executive Officer, President and
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following person on behalf of the Registrant and in
the capacities and on the dates indicated:
/s/John W. Burns, III March 21, 2000
- ------------------------------
JOHN W. BURNS, III
Class I Director
/s/Robert M. Eadie March 21, 2000
- ------------------------------
ROBERT M. EADIE
Class I Director
/s/Shipla U. Mhatre March 21, 2000
- ------------------------------
SHIPLA U. MHATRE
Class II Director
/s/Alton C. Milton, Jr. March 21, 2000
- ------------------------------
ALTON C. MILTON, JR.
Class II Director
/s/Alton C. Milton, Sr. March 21, 2000
- ------------------------------
ALTON C. MILTON, SR.
Chairman of the Board and Class III Director
/s/Andrew T. Moore March 21, 2000
- ------------------------------
ANDREW T. MOORE
Class III Director
/s/Robert W. Woodard March 21, 2000
- ------------------------------
ROBERT W. WOODARD
Chief Executive Officer, President
and Principal Financial Officer
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
PSB's Proxy Statement and the 1999 audited Consolidated Financial Statements
are included as Exhibits 22.1 and 22.2 of this filing.
-21-
EXHIBIT 10.3
Employment Agreement
by and among
PSB, the Bank and
Wesley T. Small
<PAGE>
EMPLOYMENT AGREEMENT
BY AND AMONG
PEOPLES STATE BANK
AND
PSB BANCGROUP, INC.
AND
WESLEY T. SMALL
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into this 9th day of
November 1999, by and among PEOPLES STATE BANK, a Florida chartered commercial
bank ("Bank"), PSB BANCGROUP, INC., the Bank's parent holding-company and a
Florida Corporation ("Corporation"), and WESLEY T. SMALL ("Employee"). The Bank,
the Corporation and the Employee are collectively referred to herein as the
"Parties."
RECITALS
WHEREAS, the Bank and the Corporation wish to retain Employee as the
Bank's President and Chief Executive Officer to perform the duties and
responsibilities as are described in this Agreement and as the Bank's Board of
Directors ("Board") may assign to Employee from time to time; and
WHEREAS, Employee desires to become employed by the Bank and to serve
as the Bank's President and Chief Executive Officer in accordance with the terms
and provisions of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto represent, warrant, undertake,
covenant and agree as follows:
OPERATIVE TERMS
1. Employment and Term. The Bank shall employ Employee and Employee
shall be employed pursuant to the terms of this Agreement to perform the
services specified in Section 2 herein. The initial term of employment shall be
for a period of twelve (12) months, commencing on November 15, 1999.
Upon mutual written agreement, the Parties may extend the term of this
Agreement for two six- month periods (the "Extensions"). Prior to agreeing to
either of the Extensions, the Board shall review Employee's performance and this
Agreement.
In the event the Employee gives notice of termination of employment,
the Bank may elect, at its sole option, to have the term of this Agreement
expire immediately or upon the thirtieth (30th) day following the delivery to
the Bank and the Corporation of such notice of termination. Except as otherwise
provided in the following paragraph with respect to a voluntary termination for
Good Reason, a voluntary employment termination by the Employee shall result in
the termination of the rights and obligations of the Parties under this
Agreement; provided, however, that the terms and provisions of Section 12 shall
continue to apply.
In the event the Bank desires to involuntarily terminate the employment
of Employee (for purposes of this Agreement, a voluntary employment termination
1
<PAGE>
by the Employee for Good Reason shall be treated as an involuntary termination
of the Employee's employment without Cause), the Bank shall deliver to the
Employee a notice of termination, and the following provisions shall apply:
(a) In the event the involuntary termination is for Cause, this Agreement
shall terminate immediately upon delivery to the Employee of such notice of
termination. Such a termination for Cause shall result in the termination
of all rights and obligations of the Parties under this Agreement.
(b) In the event the involuntary termination is without Cause, the Employee
shall be entitled to receive the severance benefits set forth in Sections
9(f) and 9(g) herein.
2. Position, Responsibilities and Duties. During the term of
this Agreement, Employee shall serve in the following capacities and shall
fulfill the following responsibilities and duties:
(a) Specific Duties: Employee shall serve as the Bank's President
and Chief Executive Officer, through election by the Board. In
such capacity, Employee shall have the same powers, duties and
responsibilities of supervision and management of the Bank
usually accorded to a President and Chief Executive Officer of
similar financial institutions. In addition, Employee shall use
his best efforts to perform the duties and responsibilities
enumerated in this Agreement and any other duties assigned to
Employee by the Board and to utilize and develop contacts and
customers to enhance the business of the Bank. Specifically,
Employee shall devote his full business time and attention and
use his best efforts to accomplish and fulfill the following
duties and responsibilities, as well as other duties assigned to
Employee from time to time by the Board:
(i) manage Bank personnel;
(ii) serve on such committees as appointed by the Board from
time to time;
(iii) supervise all Bank activities;
(iv) work closely with the Bank's Executive Vice President,
Robert W. Woodard, specifically in the area of Bank
operations;
(v) keep the Board informed of important developments
concerning the Bank's activities, industry developments
and regulatory initiatives affecting the Bank;
(vi) maintain adequate expense records relating to
Employee's activities on behalf of the Bank;
(vii) recommend marketing efforts to increase the business
of the Bank;
(viii) coordinate with the Bank's Executive Vice President,
other officers, accountants, auditors and counsel to
the extent necessary to further the business of the
Bank, keeping in compliance with government
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<PAGE>
laws and regulations and otherwise keeping the Bank in
as good a financial and legal posture as possible; and
(ix) conduct and undertake all other activities,
responsibilities, and duties normally expected to be
undertaken and accomplished by a President and Chief
Executive Officer of a financial institution similar in
scope and operation to the Bank's business.
(b) General Duties: During the term of this Agreement, and except
for illness, vacation periods and leaves of absences, Employee
shall devote all of his working time, attention, skill and best
efforts to accomplish and faithfully perform all of the duties
assigned to Employee on a full-time basis. Employee shall, at all
times, conduct himself in a manner that will reflect positively
upon the Bank. Employee shall obtain such licenses, certificates,
accreditations and professional memberships and designations as
the Bank may reasonably require. Employee shall join and maintain
membership in such social and civic organizations as Employee or
the Board deems appropriate to foster the Bank's contacts and
business network in the community.
3. Compensation. During the term of this Agreement, Employee
shall be compensated as follows:
(a) Base Salary: Employee shall receive an annual salary of
$75,000 (the "Base Salary") in equal installments, in accordance
with the Bank's standard payroll practices, reduced appropriately
by deductions for federal income withholding taxes, social
security taxes and other deductions required by applicable laws.
The Bank may adjust the Base Salary from time to time based upon
the Board's evaluation of Employee's performance. In no event,
however, will the Base Salary be reduced without Employee's
written concurrence.
(b) Benefit Plans: During the term of this Agreement, the
Employee will be entitled to participate in and receive the
benefits of any profit-sharing plans, 401(k) plans, deferred
compensation plans, or other plans, benefits and privileges given
to employees and executives of the Bank which are currently in
effect at the execution of this Agreement or which may come into
existence thereafter, to the extent the Employee is otherwise
eligible and qualifies to so participate in and receive such
benefits or privileges. The Bank shall not make any changes in
such plans, benefits or privileges which would adversely affect
the Employee's rights or benefits thereunder, unless such change
occurs pursuant to a program applicable to all executive officers
(Vice President or above) of the Bank and does not result in a
proportionately greater adverse change in the rights of or
benefits to the Employee as compared with any other executive
officer of the Bank. Nothing paid to the Employee under any plan
or arrangement presently in effect or made available in the
future shall be deemed to be in lieu of the Base Salary payable
to the Employee pursuant to Section 3 herein.
4. Payment of Business Expenses. Employee is authorized to incur
reasonable expenses in performing his duties. The Bank will reimburse Employee
for authorized expenses, according to the Bank's established policies, promptly
after Employee's presentation of an itemized account of such expenditures.
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<PAGE>
5. Vacation. Employee is entitled to three (3) weeks paid
vacation time per year on a non-cumulative basis. Two (2) weeks of the
vacation must be taken during two (2) consecutive weeks.
6. Fringe Benefits.
(a) Medical Benefits: Employee is entitled to participate in all
medical and health care benefit plans through health insurance,
corporate funds, medical reimbursement plans or other plans, if
any, provided, or to be provided, by the Bank for its employees.
(b) Club Memberships and Education: The Bank will reimburse
Employee for membership dues for joining service organizations
such as the Rotary Club or Kiwanis Club. The Bank will also
reimburse Employee for admission or attendance fees for
educational meetings or seminars offered by such organizations as
the Florida Bankers Association.
7. Disability/Illness.
(a) Illness: Employee shall be paid his full Base Salary for any
period of his illness or incapacity: provided that such illness
or incapacity does not render Employee unable to perform his
duties under this Agreement for a period longer than three (3)
consecutive months. At the end of such three-month period, the
Bank may terminate Employee's employment and this Agreement.
(b) Disability: If the Bank terminates this Agreement pursuant to
Employee's disability as determined under Section 7(a) herein,
the Bank shall pay to Employee, as a disability payment, an
amount equal to Employee's monthly Base Salary, payable in
accordance with the Bank's standard payroll practices, commencing
on the effective date of Employee's termination and ending on the
earlier of:
(i) the date Employee returns to full time employment in
his capacity as the Bank's President and Chief
Executive Officer;
(ii) Employee's full time employment by another financial
institution;
(iii) three (3) months after the date of such termination,
after which Employee will be entitled to receive
benefits under any disability insurance plan provided
by the Bank; or
(iv) the date of Employee's death.
The Bank may satisfy its obligations under this Section, at its option,
through the purchase of disability insurance. The provisions of such
policy will control the amounts paid to Employee. Such disability
insurance will be coordinated with any disability plans made available
to Employee pursuant to Section 6 herein.
(c) Continuation of Coverages: During any period of illness or
disability, the Bank will continue any other life, health and
disability coverages for Employee substantially identical to the
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<PAGE>
coverages maintained prior to Employee's termination for
disability. Such coverages shall cease upon the earlier of:
(i) Employee's full time employment by another financial
institution;
(ii) one (1) year after the date of such termination (with
the exception of disability insurance coverage); or
(iii) the date of Employee's death.
(d) No Reduction in Base Salary: During the period in which
Employee is disabled or subject to illness or incapacity, other
than as described in Section 7(b) herein, there shall be no
reduction in Employee's Base Salary.
8. Death During Employment. In the event of Employee's death
during the term of this Agreement, the Bank's obligation to Employee shall be
limited to the portion of Employee's compensation which would be payable up to
the first working day of the first month after Employee's death, except that any
compensation payable to Employee under any benefit plan maintained by the Bank
will be paid pursuant to its terms.
9. Termination.
(a) Illness, Incapacity or Death: This Agreement shall terminate
upon Employee's illness, incapacity or death in accordance with
the provisions of Sections 7 and 8 herein.
(b) Termination for Cause: The Bank shall have the right, at any
time, upon prior written notice of termination satisfying the
requirements of Section 11 herein, to terminate the Employee's
employment hereunder, including termination for Cause. For the
purpose of this Agreement, termination for Cause shall mean
termination for personal dishonesty, incompetence, willful
misconduct, material breach of fiduciary duty, intentional
failure to perform the duties stated in this Agreement, willful
violation of any law, rule or regulation (other than traffic
violations or similar offenses), willful violation of a final
cease-and-desist order, personal default on indebtedness to a
third party which is not corrected within 30 days from the date
of default, willful or intentional breach or negligence or
misconduct in the performance of such duties or material breach
of any provision of this Agreement as determined by a court of
competent jurisdiction or in final agency action by a federal or
state regulatory agency having jurisdiction over the Bank. For
purposes of this Section, no act, or failure to act, on the
Employee's part shall be considered "willful" unless done, or
omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best
interest of the Bank; provided that any act or omission to act by
the Employee in reasonable reliance upon an opinion of counsel to
The Bank shall not be deemed to be willful. In the event Employee
is terminated for Cause, Employee shall have no right to
compensation or other benefits for any period after such date of
termination.
(c) Involuntary Termination: If the Employee is terminated by the
Bank other than for Cause or in connection with a
Change-in-Control of the Corporation (as defined in Section 9[e]
herein), Employee's right to compensation and other benefits
5
<PAGE>
under this Agreement shall be as set forth in Sections 9(f)(i)
and 9(g) herein. In the event the Employee is terminated by the
Bank in connection with a Change-in-Control of the Corporation,
Employee's right to compensation and other benefits under this
Agreement shall be as set forth in Sections 9(f)(ii) and 9(h)
herein.
(d) Termination for Good Reason: Employee may terminate his
employment hereunder for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean (i) a failure by the Bank to
comply with any material provision of this Agreement, which
failure has not been cured within ten business (10) days after a
notice of such noncompliance has been given by the Employee to
the Bank; or (ii) subsequent to a Change-in-Control of the
Corporation as defined in Section 9(e) herein and without the
Employee's express written consent, any of the following shall
occur: the assignment to the Employee of any duties inconsistent
with the Employee's positions, duties, responsibilities and
status with the Bank immediately prior to a Change-in-Control of
the Corporation; a change in the Employee's reporting
responsibilities, titles or offices as in effect immediately
prior to a Change-in- Control of the Corporation; any removal of
the Employee from, or any failure to re-elect the Employee to,
any of such positions, except in connection with a termination of
employment for Cause, disability, death, or removal pursuant to
Sections 9(a) or 9(b) herein; a reduction by the Bank in the
Employee's annual salary as in effect immediately prior to a
Change-in- Control of the Corporation; the failure of the Bank to
continue in effect any bonus, benefit or compensation plan, life
insurance plan, health and accident plan or disability plan in
which the Employee is participating at the time of a
Change-in-Control of the Corporation, or the taking of any action
by the Bank which would adversely affect the Employee's
participation in or materially reduce the Employee's benefits
under any of such plans, or the transfer of the Employee to any
location outside of Columbia County, Florida or the assignment of
substantial duties to the Employee to be completed outside
Columbia County, Florida.
(e) Change-in-Control: "Change-in-Control" is defined herein to
mean an event where a person: (i) directly or indirectly, or
acting through one or more other persons, owns, controls or has
power to vote more than 50% of any class of the then outstanding
voting securities of the Corporation; or (ii) controls in any
manner the election of the directors of the Corporation. For
purposes of this Agreement, a Change-in-Control shall be deemed
not to have occurred in connection with a reorganization,
consolidation, or merger of the Corporation where the
stockholders of the Corporation, immediately before the
consummation of the transaction, will own over 50% of the total
combined voting power of all classes of stock entitled to vote of
the surviving entity immediately after the transaction.
(f) Severance Payment:
(i) If the Employee shall terminate his employment for
Good Reason as defined in Section 9(d) herein, or
if the Employee is terminated by the Bank for other
than Cause pursuant to Section 9(c) herein, then in
lieu of any further salary payments to the Employee
for periods subsequent to the date of termination,
the Employee shall be paid, as severance, twelve
(12) months Base Salary;
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(ii) In the event Employee's employment is terminated
as a result of a Change-in-Control or a Change-in-
Control of the Corporation occurs within twelve
(12) months of the Employees' involuntary
termination or termination for Good Reason,
Employee shall be entitled to a severance payment
equal to his current Base Salary. Any payment under
Section 9(f)(i) and 9(f)(ii) shall be made in
substantially equal semi-monthly installments
on the fifteenth and last days of each month until
paid in full.
(g) Additional Severance Benefits: Unless the Employee is
terminated for Cause pursuant to Section 9(b) herein,
pursuant to Section 10(b) herein, or pursuant to a
termination of employment by the Employee for other than
Good Reason, the Bank shall maintain in full force and
effect, for the continued benefit of the Employee for the
remaining term of this Agreement, or twelve (12) months
(whichever is longer), all Employee benefit plans and
programs in which the Employee was entitled to participate
immediately prior to the date of termination; provided,
however, that the Employee's continued participation is
possible under the general terms and provisions of such
plans and programs. Further, the Bank shall pay for the same
or similar benefits if such benefits are available to the
Employee on an individual or group basis as a result of
contractual or statutory provisions requiring or permitting
such availability including, but not limited to, health
insurance covered under COBRA.
(h) Mitigation: Employee shall not be required to mitigate
the amount of any payment provided for in Sections 9(f) and
9(g) of this Agreement by seeking other employment or
otherwise.
10. Required Provisions by Regulation. The Parties acknowledge
that the laws and regulations governing the Bank require that certain provisions
be provided in each employment agreement with officers and employees of the
Bank. The Parties agree to be bound by the following provisions:
(a) Suspension/Temporary Prohibition: If the Employee is
suspended and/or temporarily prohibited from participating
in the conduct of the Bank's affairs by a notice served
under Section 655.037 Florida Statutes or under Section 8(e)
or (g)(1) of the Federal Deposit Insurance Act [12 U.S.C.
ss.1818(e)(3) and (g)(1)] the Bank's obligations under this
Agreement shall be suspended as of the date of such service
unless stayed by appropriate proceedings. If the charges and
the notice are dismissed, the Bank may in its discretion:
(i) pay the Employee all or part of his compensation
withheld while the obligations under this Agreement
are suspended; and
(ii) reinstate (in whole or part) any of the Bank's
obligations which were suspended.
(b) Permanent Prohibition: If the Employee is removed and/or
permanently prohibited from participating in the conduct of
the Bank's affairs by an order issued under Section 655.037
Florida Statutes or Section 8(e)(4) or (g)(1) of the Federal
Deposit Insurance Act [12 U.S.C.ss.1818(e)(4) or (g)(1)],
all of the Bank's obligations under this Agreement shall
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<PAGE>
terminate as of the effective date of the order, but the
Employee's vested rights, if any shall not be affected.
(c) Default Under FDIA: If the Bank is in default [as
defined in Section 3(x)(1) of the Federal Deposit Insurance
Act], all obligations under this Agreement shall terminate
as of the date of default, but this subsection of this
Agreement shall not affect the Employee's vested rights if
any.
(d) Regulatory Termination: All obligations under this
Agreement shall be terminated, except to the extent that a
determination has been made that continuation of this
Agreement is necessary for continued operation of the Bank:
(i) by the Director or his or her designee, at
the time the Federal Deposit Insurance
Corporation ("FDIC") enters into an
agreement to provide assistance to or on
behalf of the Bank under the authority
contained in Section 13(c) of the Federal
Deposit Insurance Act; or
(ii) by the Department or the Director or his or
her designee, at the time the Department or
the Director or his or her designee approves
a supervisory merger to resolve problems
related to operation of the Bank or when the
Bank's determined by the Director to be in
unsafe or unsound condition.
Any of the Employee's rights that have already
vested, however, shall not be affected by such
action. For purposes of this subsection of this
Agreement, the term "Director" shall mean the
Director of the FDIC.
11. Notice of Termination.
(a) Employee's Notice: Employee shall have the right, upon
prior written notice of termination of not less than thirty
(30) days, to terminate his employment hereunder. In such
event, Employee shall have no right after the date of
termination to compensation or other benefits as provided in
this Agreement, unless such termination is for "Good
Reason", as defined in Section 9(d) herein. If the Employee
provides a notice of termination for Good Reason, the date
of termination shall be the date on which the notice of
termination is given.
(b) Specificity: Any termination of the Employee's
employment by the Bank or by Employee shall be communicated
by written notice of termination to the other Party hereto.
For purposes of this Agreement, a "notice of termination"
shall mean a dated notice which shall: (i) indicate the
specific termination provision in the Agreement relied upon;
(ii) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
the Employee's employment under the provision so indicated;
and (iii) set forth the date of termination, which shall be
not less than thirty (30) days nor more than forty-five (45)
days after such notice of termination is given, except in
the case of the Bank's termination of the Employee's
employment for Cause, in which case date of termination
shall be the date such notice of termination is given.
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<PAGE>
(c) Delivery of Notices: All notices given or required to be
given herein shall be in writing, sent by United States
first-class certified or registered mail, postage prepaid,
by way of overnight carrier or by hand delivery. If to the
Employee (or to the Employee's spouse or estate upon the
Employee's death) notice shall be sent to Employee's
last-known address, and if to the Bank and the Corporation,
notice shall be sent to their respective corporate
headquarters. All such notices shall be effective when
deposited in the mail if sent via first- class certified or
registered mail, or upon delivery if by hand delivery or
sent via overnight carrier. Any Party, by notice in writing,
may change or designate the place for receipt of all such
notices.
12. Post-Termination Obligations. The Bank shall pay to Employee
such compensation as is required pursuant to this Agreement; provided, however,
any such payment shall be subject to Employee's post-termination cooperation.
Such cooperation shall include the following:
(i) Employee shall furnish such information and
assistance as may be reasonably required by
the Bank or the Corporation in connection
with any litigation or settlement of any
dispute between the Bank and/or the
Corporation and a borrower and/or any other
third parties (including without limitation
serving as a witness in court or other
proceedings);
(ii) Employee shall provide such information or
assistance to the Bank and/or the
Corporation in connection with any
regulatory examination by any state or
federal regulatory agency;
(iii) Employee shall keep the Bank's trade secrets
and other proprietary or confidential
information secret to the fullest extent
practicable, subject to compliance with all
applicable laws.
Upon submission of proper receipts, the Bank shall promptly reimburse
Employee for any reasonable expenses in current by Employee in complying with
the provisions of this Section.
13. Attorneys' Fees. In the event that any claim or controversy
hereunder is the subject of any litigation or arbitration between or among the
Parties, the prevailing party shall be entitled to an award of all reasonable
costs, including attorneys' fees.
14. Indebtedness. If during the term of this Agreement, Employee
becomes indebted to the Bank for any reason, the Bank may, at its election, set
off and collect any sums due Employee out of any amounts which the Bank may owe
Employee from his Base Salary or other compensation. Furthermore, upon the
termination of this Agreement, all sums owed by Employee shall become
immediately due and payable. Employee shall pay all expenses and attorneys' fees
actually or necessarily incurred by the Bank in connection with any collection
proceeding for Employee's indebtedness to us. Notwithstanding any of the
foregoing, any indebtedness to us secured by a mortgage on Employee's residence
shall not be subject to the foregoing provisions, and shall be governed by the
loan documents evidencing such indebtedness.
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15. Maintenance of Trade Secrets and Confidential Information.
Employee shall use his best efforts and utmost diligence to guard and protect
all of the Bank's trade secrets and confidential information. Employee shall
not, either during the term or after termination of this Agreement, for whatever
reason, use, in any capacity, or divulge or disclose in any manner, to any
Person, the identity of the Bank's customers, or its customer lists, methods of
operation, marketing and promotional methods, processes, techniques, systems,
formulas, programs or other trade secrets or confidential information relating
to the Bank's business. Upon termination of this Agreement or Employee's
employment, for any reason, Employee shall immediately return and deliver to the
Bank all records and papers and all matters of whatever nature which bear trade
secrets or confidential information relating to the Bank.
16. Competitive Activities.
(a) Limitation on Outside Activities: Employee agrees that during
the term of this Agreement, except with the express consent of
the Board, Employee will not, directly or indirectly, engage or
participate in, become a director of, or render advisory or other
services for, or in connection with, or become interested in, or
make any financial investment in any firm, corporation, business
entity or business enterprise competitive with or to any business
of the Bank; provided, however, that Employee shall not be
precluded or prohibited from owning passive investments,
including investments in the securities of other financial
institutions, so long as such ownership does not require Employee
to devote substantial time to management or control of the
business or activities in which Employee has invested.
(b) Agreement Not to Compete: Employee acknowledges that by
virtue of his employment with the Bank, Employee will acquire an
intimate knowledge of the activities and affairs of the Bank,
including trade secrets and other confidential matters. Employee,
therefore, agrees that during the term of this Agreement, and for
a period of eight (8) months (in the event Employee does not
receive severance compensation) or fourteen (14) months (in the
event Employee does receive severance compensation) following the
termination of Employee's employment hereunder, Employee shall
not become employed, directly or indirectly, whether as an
Employee, independent contractor, consultant, or otherwise, with
a federally-insured financial institution located in, or with any
business enterprise, business entity or Person whose intent is to
organize another financial institution in, Columbia County,
Florida.
Employee further agrees that for a period of twelve (12) months
following the termination of Employee's employment hereunder for
any reason, Employee shall not directly or indirectly solicit the
business of any then current customer of the Bank, regardless of
whether or not Employee was responsible for generating such
customer's business for the Bank. This restriction shall apply to
both loan customers and depositors of the Bank.
Employee hereby agrees that the duration of the anticompetitive
covenant set forth herein is reasonable, and its geographic scope
is not unduly restrictive.
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17. Remedies for Breach.
(a) Arbitration: The Parties agree that, except for the specific
remedies for injunctive relief as contained in Section 17(b) and
other equitable relief, any controversy or claim arising out of
or relating to this Agreement, or any breach thereof, including,
without limitation, any claim that this Agreement or any portion
thereof is invalid, illegal or otherwise voidable, shall be
submitted to binding arbitration before and in accordance with
the Rules of the American Arbitration Association and judgment
upon the determination and/or award of such arbitrator may be
entered in any court having jurisdiction thereof; provided,
however, that this clause shall not be construed to permit the
award of punitive damages to either Party. The prevailing Party
to said arbitration shall be entitled to an award of reasonable
attorney's fees. The venue for arbitration shall be in Columbia
County, Florida.
(b) Injunctive Relief: The Parties acknowledge and agree that the
services to be performed by Employee are special and unique and
that money damages cannot fully compensate the Bank in the event
of Employee's violation of the provisions of Section 16 of this
Agreement. Thus, in the event of a breach of any of the
provisions of such Section, Employee agrees that the Bank, upon
application to a court of competent jurisdiction, shall be
entitled to an injunction restraining Employee from any further
breach of the terms and provision of such Section. Should the
Bank prevail in an action seeking an injunction restraining
Employee, Employee shall pay all costs and reasonable attorneys'
fees incurred by the Bank in and relating to obtaining such
injunction. Such injunctive relief may be obtained without bond
and Employee's sole remedy, in the event of the entry of such
injunction, shall be the dissolution of such injunction. Employee
hereby waives any and all claims for damages by reason of the
wrongful issuance of any such injunction.
(c) Cumulative Remedies: Notwithstanding any other provision of
this Agreement, the injunctive relief described in Section 17(b)
herein and all other remedies provided for in this Agreement
which are available to the Bank as a result of Employee's breach
of this Agreement, are in addition to and shall not limit any and
all remedies existing at or in equity which may also be available
to the Bank.
18. Assignment. This Agreement shall inure to the benefit of and
be binding upon the Employee, and to the extent applicable, his heirs, assigns,
executors, and personal representatives, and to the Bank and the Corporation,
and to the extent applicable, their successors, and assigns, including, without
limitation, any person, partnership, or corporation which may acquire all or
substantially all of the Bank's or the Corporation's assets and business, or
with or into which the Bank or Corporation may be consolidated or merged, and
this provision shall apply in the event of any subsequent merger, consolidation,
or transfer, unless such merger or consolidation or subsequent merger or
consolidation is a transaction of the type which would result in termination
under Sections 10(c) and 10(d) herein.
19. Miscellaneous.
(a) Amendment of Agreement: Unless as otherwise provided herein,
this Agreement may not be modified or amended except in writing
signed by the Parties.
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(b) Certain Definitions: For purposes of this Agreement, the
following terms whenever capitalized herein shall have the
following meanings:
(i) "Person" shall mean any natural person,
corporation, partnership (general or
limited), trust, association or any other
business entity.
(ii) "Attorneys' Fees" shall include the legal
fees and disbursements charged by attorneys
and their related expenses, court costs,
paralegal fees, etc. incurred in settlement,
trial, appeal or in bankruptcy proceedings.
(c) Headings for Reference Only: The headings of the Sections and
the Subsections herein are included solely for convenient
reference and shall not control the meaning of the interpretation
of any of the provisions of this Agreement.
(d) Governing Law/Jurisdiction: This Agreement shall be construed
in accordance with and governed by the laws of the State of
Florida. Any litigation involving the Parties and their rights
and obligations hereunder shall be brought in the appropriate
court in Columbia County, Florida.
(e) Severability: If any of the provisions of this Agreement
shall be held invalid for any reason, the remainder of this
Agreement shall not be affected thereby and shall remain in full
force and effect in accordance with the remainder of its terms.
(f) Entire Agreement: This Agreement and all other documents
incorporated or referred to herein, contain the entire agreement
of the Parties and there are no representations, inducements or
other provisions other than those expressed in writing herein.
This Agreement amends, supplants and supersedes any and all prior
agreements between the Parties.
(g) Waiver: No course of conduct by the Parties and no delay or
omission of any Party to exercise any right or power given under
this Agreement shall: (i) impair the subsequent exercise of any
right or power, or (ii) be construed to be a waiver of any
default or any acquiescence in or consent to the curing of any
default while any other default shall continue to exist, or be
construed to be a waiver of such continuing default or of any
other right or power that shall theretofore have arisen. Any
power and/or remedy granted by law and by this Agreement to any
Party hereto may be exercised from time to time, and as often as
may be deemed expedient. All such rights and powers shall be
cumulative to the fullest extent permitted by law.
(h) Pronouns: As used herein, words in the singular include the
plural, and the masculine include the feminine and neuter gender,
as appropriate.
(i) Recitals: The Recitals set forth at the beginning of this
Agreement shall be deemed to be incorporated into this Agreement
by this reference as if fully set forth herein, and this
Agreement shall be interpreted with reference to and in light of
such Recitals.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first written above.
EMPLOYEE PEOPLES STATE BANK
/s/ Wesley T. Small By: /s/ A. C. Milton
- ------------------------- --------------------------
Wesley T. Small, Employee A.C. Milton,
Chairman of the Board and
Acting Chief Executive Officer
and President
/s/ Penny Cooper /s/ Jimmie Kirk
- ------------------------- ---------------------------
Witness Witness
PSB BANCGROUP, INC.
By: /s/ Robert W. Woodard
---------------------------
Robert W. Woodard,
President and Chief Executive
Officer
/s/ Jimmie Kirk
----------------------------
Witness
13
EXHIBIT 22.1
PSB's 2000 Annual Meeting
Proxy Statement
<PAGE>
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PSB BANCGROUP, INC.
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March 17, 2000
Dear Fellow Shareholders:
We cordially invite you to attend the 2000 Annual Meeting of
Shareholders of PSB BancGroup, Inc. ("PSB"), the parent holding company for
Peoples State Bank. Our Annual Meeting will be held at the First Baptist Church
located at 206 East Orange Steet, Lake City, Florida 32055, on April 18, 2000 at
2:00 p.m., Eastern Standard Time.
The Notice of the Annual Meeting and Proxy Statement attached to this
letter describe the formal business to be transacted at the Annual Meeting and
provide material information concerning that business. Directors and officers of
PSB, as well as a representative of the accounting firm Hacker, Johnson, Cohen &
Grieb, P.A., will be present at the Annual Meeting to respond to your questions.
YOUR VOTE IS IMPORTANT. Please sign, date and mail the enclosed Proxy
Card in the postage-paid envelope which has been provided for your use. If you
attend the Annual Meeting and prefer to vote in person, you will be able to do
so.
On behalf of the Board of Directors and all the employees of PSB, we
look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Robert W. Woodard
Robert W. Woodard
President and Chief Executive Officer
<PAGE>
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PSB BANCGROUP, INC.
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NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 18, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Shareholders
("Annual Meeting") of PSB BancGroup, Inc. ("PSB"), will be held at the First
Baptist Church located at 206 East Orange Street, Lake City, Florida 32055 on
April 18, 2000 at 2:00 p.m., Eastern Standard Time, for the following purposes:
Proposal I To elect two Class I members of the Board of
Directors;
Proposal II To approve PSB's Amended 1998 Employee Stock
Option and Limited Rights Plan;
Proposal III To appoint the firm of Hacker, Johnson, Cohen &
Grieb as the independent auditors for PSB for the
fiscal year ending December 31, 2000; and
Proposal IV To adjourn the Annual Meeting to solicit
additional proxies in the event there are not
sufficient votes to approve Proposals I, II or III.
The Board of Directors has fixed the close of business on February 18,
2000, as the record date for the determination of shareholders entitled to
notice of and to vote at this Annual Meeting. Only holders of common stock of
record at the close of business on that date will be entitled to vote at this
Annual Meeting, or at any adjournments thereof. In the event there are
insufficient votes for a quorum to approve any proposal at the time of the
Annual Meeting, the Annual Meeting may be adjourned in order to permit further
solicitation of proxies by PSB.
By Order of the Board of Directors
/s/ Jimmie A. Kirk
Jimmie A. Kirk
Corporate Secretary
Lake City, Florida
March 17, 2000
<PAGE>
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PSB BANCGROUP, INC.
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500 South 1st Street, Suite 1
Lake City, Florida 32025
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PROXY STATEMENT
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Solicitation and Voting of Proxies
This Proxy Statement and the accompanying Proxy Card are being
furnished to shareholders of record as of February 18, 2000, in connection with
the solicitation of proxies by the Board of Directors of PSB BancGroup, Inc.,
Lake City, Florida ("PSB"), the parent holding company for Peoples State Bank
("Bank") to be voted at the 2000 Annual Meeting of Shareholders ("Annual
Meeting"). Please note that PSB and the Bank are collectively referred to herein
as the "Company." The Annual Meeting is being held at the First Baptist Church,
206 East Orange Street, Lake City, Florida 32055, on April 18, 2000 at 2:00
p.m., Eastern Standard Time. The 1999 Annual Report, including the financial
statements for the fiscal year ended December 31, 1999, accompanies this Proxy
Statement, which is first being mailed to shareholders on or about March 17,
2000.
Regardless of the number of shares of common stock that you may own, it
is important that your shares be represented by proxy or be present in person at
the Annual Meeting. Shareholders are requested to vote by completing the
enclosed Proxy Card and returning it, signed and dated, in the enclosed
postage-paid envelope. We urge you to indicate your vote in the spaces provided
on the Proxy Card. Proxies solicited by the Board of PSB will be voted in
accordance with the directions given therein. Where no instructions are
indicated, proxies will be voted "FOR" the election of two Class I directors
each for three-year terms; "FOR" the approval of the Amended 1998 Employee Stock
Option and Limited Rights Plan; "FOR" the appointment of Hacker, Johnson, Cohen
& Grieb, P.A. as the Company's independent auditors for the fiscal year ending
December 31, 2000; and "FOR" the adjournment of the Annual Meeting to solicit
additional proxies in the event that there are not sufficient votes to approve
any one or more of the foregoing Proposals.
The Board of Directors does not have knowledge of any additional
business that will be presented for consideration at the Annual Meeting.
Execution of a proxy, however, confers on the designated proxy holders
discretionary authority to vote the shares in accordance with their best
judgment on other business, if any, that may properly come before this Annual
Meeting, or any adjournment thereof.
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
1
<PAGE>
It is important that proxies be returned promptly. Whether you plan to
be present in person at the Annual Meeting or not, please vote, sign and date
the enclosed Proxy Card and return it in the enclosed envelope which does not
require postage if mailed in the United States.
Revocation of Proxy
Your presence at the Annual Meeting will not automatically revoke your
proxy. You may, however, revoke a proxy at any time prior to its exercise by
filing with the Corporate Secretary a written notice of revocation, by
delivering to the Company a duly executed proxy bearing a later date, or by
attending the Annual Meeting and voting in person.
Voting Procedures
Under the Florida Business Corporation Act ("Act"), directors are
elected by a plurality of the votes cast at a meeting at which a quorum is
present. Our Bylaws provide that a majority of shares entitled to vote and
represented in person or by proxy at a meeting of the shareholders constitutes a
quorum. Other matters are approved if affirmative votes cast by the holders of
shares represented at a meeting at which a quorum is present and entitled to
vote on the subject matter exceed votes opposing the action, unless a greater
number of affirmative votes or voting by classes is required by the Act or our
Articles or Incorporation. Abstentions and broker non-votes have no effect under
Florida law.
The close of business on February 18, 2000, has been fixed by the Board
of Directors as the "Record Date" for determination of shareholders entitled to
notice of and to vote at this Annual Meeting and any adjournments thereof. The
total number of shares of common stock outstanding on the Record Date was
515,034 shares.
Each shareholder of record on the Record Date has the right to vote, in
person or by proxy, the number of shares owned by him or her for as many persons
as there are directors to be elected. Our Bylaws do not provide for cumulative
voting; rather, shareholders have a right to one vote per share owned on any
matters presented for shareholder vote. Thus, for example, if a shareholder owns
five shares, that shareholder may vote a maximum of five shares for each
director to be elected.
Security Ownership of Certain Beneficial Owners
The following table contains information concerning the only person
known by management to be the beneficial owners of more than five percent (5%)
of the outstanding shares of PSB common stock as of the Record Date.
[Table Follows This Page]
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
2
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Name/Address of Number of Percent of
Beneficial Owner Shares(1) Class
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ABC Bancorp 49,000 9.08%
310 First Street, SE
Moultrie, Georgia 31768
Samuel F. Brewer 56,840 10.46
512 West Montgomery Street
Lake City, Florida 32025-5118
Frank A. Broome, III 43,000 8.01
2902 224th Street
Lake City, Florida 32024
John W. Burns, III 32,600 6.14
RR 13 Box 319
Lake City, Florida 32055
Jasper and Marthalene Davis 31,200 5.88
Family Partnership, LLP
936 Gordon Avenue
Thomasville, Georgia 32792
Renny B. Eadie, III 39,000 7.30
Rt. 22, Box 2913
Lake City, Florida 32024
Robert M. Eadie 39,000 7.30
Rt. 13, Box 559
Lake City, Florida 32055
George or James Fletcher 36,000 6.75
P.O. Box 578
Branford, Florida 32008
Lois and Laurie Kirby(2) 43,468 8.10
P.O. Box 567
Lake City, Florida 32056
Shilpa U. Mhatre 39,068 7.31
Rt. 18, Box 600
Lake City, Florida 32025
Alton C. Milton, Sr. 27,800 5.26
2732 S. First Street
Lake City, Florida 32025
Alton C. Milton, Jr. 27,800 5.26
2732 S. First Street
Lake City, Florida 32025
Andrew T. Moore 33,512 6.30
104 Fairway Drive
Lake City, Florida 32055
Roger W. Ratliff 50,000 9.26
14860 S.E. CR 137
Jasper, Florida 32052
[Footnotes Follow This Page]
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
3
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(1) Includes warrants to purchase common stock. Also includes shares for which
the named person:
o has sole voting and investment power,
o has shared voting and investment power with a spouse, or
o holds in an IRA or other retirement plan program, unless otherwise
indicated in these footnotes, but
o does not includes shares that may be acquired by exercising stock options.
(2) 21,734 shares held in the Laurie G. Kirby Revocable Trust and
21,734 shares held in the Lois F. Kirby Revocable Trust.
PROPOSAL I -- ELECTION OF DIRECTORS
The Board of Directors of PSB is presently comprised of seven members,
two of whom also serve as directors of the Bank. Our Articles of Incorporation
provide for three classes of directors with staggered three year terms. This
year, Class I directors are standing for election. At the 2001 Annual Meeting,
Class II directors will stand for election and at the 2002 Annual Meeting, Class
III directors will stand for election. No person being nominated as a director
is being proposed for election pursuant to any agreement.
The two nominees for Class I directors named below have both indicated
that they are willing to stand for election and will serve if elected as
directors. Should either of the two nominees become unable or unwilling to
serve, proxies will be voted for the election of such other person or persons as
the Board may choose to nominate.
The following table sets forth the business experience, age and
beneficial ownership of PSB common stock for each director and director nominee,
as well as the beneficial ownership of PSB common stock for each non-director
officer.
CLASS I DIRECTOR NOMINEES --
TERMS EXPIRING IN 2003
John W. Burns, III, age 39, is a State Farm Insurance Agent in Lake City,
Florida. Mr. Burns was born and raised in Lake City. He graduated from Stetson
University in DeLand, Florida, in 1981 with a BA. He has been a State Farm
Insurance Agent since 1989 and was named one of the top 50 agents in the country
in 1990. He has served as President, Treasurer and Campaign Chairman of the
United Way of Suwannee Valley. Mr. Burns is currently a member of the Lake City
Elks Lodge and the Lake City Rotary Club.
32,600 shares of common stock*
6.14% of common stock outstanding
Robert M. Eadie, age 48, a native of Lake City, Florida, graduated from Columbia
High School and received an AA from Lake City Community College. After serving
in the U.S. Army, Mr. Eadie joined his father in the family business in 1975.
Since then, he has managed Lake City Industries, Inc., a lumber and building
supply business. He presently serves as the company's President, and as Vice
President of Columbia Ready Mix, Inc. Mr. Eadie is a member of First Baptist
Church, the Masonic Lodge, the Shrine Club and the Lake City York Rite.
39,000 shares of common stock*
7.30% of common stock outstanding
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
4
<PAGE>
CONTINUING DIRECTORS
CLASS II DIRECTORS -- TERMS EXPIRING IN 2001
Shilpa U. Mhatre, age 46, received a BS in Microbiology from the University of
Bombay in 1974. For the past 21 years, Ms. Mhatre has operated the business
office for Psychiatric Associates of Lake City, P.A., a successful medical
practice owned by her husband. In addition, she has owned and managed several
residential and commercial properties in Lake City for the past 15 years and is
part owner of The Plantations, a 48-bed adult living facility in Lake City.
39,068 shares of common stock*
7.31% of common stock outstanding
Alton C. Milton, Jr., age 30, is a 1988 graduate of Columbia High School, Lake
City, Florida. Upon graduation he and his father became joint partners of M & M
Farms, a venture that includes tree and cattle farming. In 1991, Mr. Milton
joined his father in the Sunshine True Value Hardware Store, in Lake City,
Florida, and now serves as its Vice President and as Vice President of Sunshine
Electrical & Plumbing Supply, Inc., a wholesaler and distributor of plumbing and
electrical supplies. Mr. Milton's father is Alton C. Milton, Sr., who is also a
director of PSB.
27,800 shares of common stock*
5.26% of common stock outstanding
CLASS III DIRECTORS -- TERMS EXPIRING IN 2002
Alton C. Milton, Sr., age 65, is a native of Columbia County. Mr. Milton
received his GED from Columbia High School in 1957. In 1975, he opened Sunshine
True Value Hardware, wholly owned by him and his son. He served as director of
Lake City Federal Savings & Loan, which later became Sun Federal, which was
merged with Anchor Savings & Loan in 1986. He is a member of the Lake City
Chamber of Commerce and a member of the Deep Creek Advent Christian Church. Mr.
Milton also serves as a director of the Bank.
27,800 shares of common stock*
5.26% of common stock outstanding
Andrew T. Moore, age 48, attended The Bolles School, Jacksonville, Florida, from
1966-70 and graduated from Jacksonville University in 1974 with a BS in
Business. Mr. Moore joined the family business, Rountree-Moore Ford/Toyota, in
May of 1974 and is presently its Vice President and General Manager. He has
served as President and Treasurer of the Lake City Kiwanis Club, five years as a
Board Member of the Lake City/Columbia County Chamber of Commerce and three
years as a Columbia County Boys Club Board Member.
33,512 shares of common stock*
6.30% of common stock outstanding
Robert W. Woodard, age 50, is the President and Chief Executive Officer of PSB,
and the Executive Vice President of the Bank. Mr. Woodard began his banking
career in 1969. He moved to Lake City, Florida, in 1987 where he joined Barnett
Bank of North Central Florida as Vice President, Commercial Loans. In August,
1992, he joined CNB National Bank (Lake City) as Vice President, Commercial
Loans. Mr. Woodard left CNB in 1997 to organize PSB and the Bank. He serves as
Florida Bankers Association Group III Chairman and on the City of Lake City
Planning and Zoning Board. He is an active member of First Baptist Church, Lake
City, Florida. Mr. Woodard also serves as a director of the Bank.
22,200 shares of common stock*
4.22% of common stock outstanding
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
5
<PAGE>
NON-DIRECTOR OFFICER
Jimmie A. Kirk. Mr. Kirk is the Vice President and Corporate Secretary of PSB
and Cashier and Corporate Secretary of the Bank.
0 shares of common stock
0.00% of common stock outstanding
All PSB Directors and Officers as a Group (8 persons)
221,980 shares of common stock
35.46% of common stock outstanding
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* Includes Warrants to purchase common stock. Includes shares for which the
named person:
o has sole voting and investment power,
o has shared voting and investment power with a spouse, or
o holds in an IRA or other retirement plan program, unless otherwise
indicated in these footnotes, but
o does not includes shares that may be acquired by exercising stock options.
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The Board of Directors Recommends That Shareholders Vote "For"
the Two Board Nominated Class I Directors.
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REPORT OF THE BOARD OF DIRECTORS
Meetings and Compensation of Directors
The Board of Directors of PSB conducts its business through meetings of
the full Board. At this time the Company does not compensate its directors for
their service on the Board or their attendance at Board meetings. During the
fiscal year ended December 31, 1999, the Board of Directors met 20 times. Except
for Ms. Shilpa U. Mhatre and Mr. Andrew T. Moore, none of the directors attended
fewer than 75% of the total meetings held. Ms. Mhatre attended 60% of the Board
meetings and Mr. Moore attended 70% of the Board meetings.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth, for the fiscal years ended December 31,
1999, 1998 and 1997, the total compensation paid to or accrued by the Chief
Executive Officer and President of the Company.
<TABLE>
<CAPTION>
Annual Compensation
- --------------------------------------------------------------------------------------------------------------------------------
Restricted
Name and Principal Directors' Other Annual Stock
Position Year Salary Bonus Fees Compensation(1) Awards Options
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Robert W. Woodard 1999 $ 67,500 - - $ 4,279 - -
President/CEO of the 1998 67,500 - - 4,279 - -
Company and 1997 36,616 - - 2,321 - -
Executive Vice
President of the Bank
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<FN>
(1) Family health insurance coverage. The value of all other personal
benefits received by Mr. Woodard was less than the required reporting
threshold.
</FN>
</TABLE>
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
6
<PAGE>
Executive Compensation Policies and Program
The compensation of the Company's executive officers is determined by
the respective Boards of Directors, excluding any director who is also an
executive officer. Only Mr. Woodard, President and Chief Executive Officer of
PSB, and Mr. Small, Chief Executive Officer and President of the Bank, serve as
both directors and as executive officers. Initially, the respective Chief
Executive Officers determine the salary range recommendations for all employees,
including executives other than themselves. The Chief Executive Officers then
present their recommendations to their Boards which review and analyze all
information that has been submitted. Thereafter, the respective Boards determine
the compensation of all executive officers, including the compensation of the
Chief Executive Officers. The Company's executive compensation program is
designed to:
o Attract and retain qualified management;
o Enhance short-term financial goals; and
o Enhance long-term shareholder value.
The Company strives to pay each executive officer the base salary that
would be paid on the open market for a fully qualified officer of that position.
The level of base salaries for the Chief Executive Officers for the Company and
other executive officers are determined by the respective Board of Directors are
based upon competitive norms, derived from annual surveys published by several
independent banking institutes or private companies specializing in financial
analysis of financial institutions. Such surveys provide information regarding
compensation of financial institution officers and employees based on size and
geographic location of the financial institution and serve as a benchmark for
determining executive salaries. The Company sets their compensation ranges at or
near the median for executives at similar financial institutions. Actual salary
changes are based upon an evaluation of each individual's performance based upon
established objectives and specific job description objectives, as well as the
overall performance of the Company. Through and including 1999, there were no
bonuses paid to any of the Company's employees.
Board Interlocks and Insider Participation in Compensation Decisions
Robert W. Woodard, President and Chief Executive Officer of PSB and
Executive Vice President of the Bank, is a member of PSB's and the Bank's Board
of Directors. Mr. Woodard participated in the Boards' deliberations regarding
executive compensation, but did not participate in any deliberations regarding
his own compensation or transactions. Wesley T. Small is the President and Chief
Executive Officer of the Bank and a member of the Bank's Board. Mr. Small
participated in deliberations of the Bank's Board regarding executive
compensation, but did not participate in any deliberations regarding his own
compensation or transactions.
Employment Contracts
The PSB and the Bank have jointly entered into employment agreements
with two of their executive officers, Robert W. Woodard, President and Chief
Executive Officer of PSB and Executive Vice President of the Bank, and Wesley T.
Small, President and Chief Executive Officer of the Bank. The following is a
summary of their employment agreements:
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
7
<PAGE>
Robert W. Woodard's employment agreement was significantly amended and
re-executed on July 28, 1997. Pursuant to its terms, Mr. Woodard is to receive a
base salary, plus reimbursement of reasonable business expenses.
The original term of Mr. Woodard's employment agreement was two years,
with the Company having the annual right to renew the agreement for successive
one year terms, so the agreement may always have a two-year term. On July 20,
1999, the Board again decided to extend Mr. Woodard's agreement for one
additional year, so that it now expires on June 16, 2001. Any party may
terminate the agreement by delivering to the other parties a notice of
termination. The date of termination may be no less than 30 days after delivery
of the notice.
Mr. Woodard's employment agreement provides for termination by the
Company for reasons other than for "just cause," and by Mr. Woodard for "good
reason," as those terms are defined in the employment agreement. In the event
the employment agreement is terminated by the Company for reasons other than for
"just cause" or by Mr. Woodard for "good reason," he shall be entitled to a
severance payment. The severance payment will be a sum equal to Mr. Woodard's
total compensation for the remainder of the term of the employment agreement,
payable in semi-monthly sums, plus any accrued incentive compensation.
If Mr. Woodard becomes disabled, he would be entitled to receive his
monthly base salary until the earlier of three months, the date he returns to
work, the date he begins work, at another financial institution, or his death.
In the event of Mr. Woodard's death, his estate shall be entitled to that
portion of his compensation that would have been payable up to the first working
day of the first month after his death.
The employment agreement also permits Mr. Woodard to terminate his
employment voluntarily. In the event of a voluntary termination, or a
termination for just cause, all rights and benefits under the contract shall
immediately terminate.
Wesley T. Small's employment agreement became effective on November 15,
1999, and has a term of one year. Upon mutual agreement of the Company and Mr.
Small, his employment agreement may be extended for two six-month periods. Under
the employment agreement, Mr. Small is entitled to receive a base salary, plus
reimbursement of reasonable business expenses. A specific condition of Mr.
Small's employment agreement is that he works closely with Robert W.
Woodard in the area of bank operations.
In the event Mr. Small's employment is terminated for reasons other
than for "just cause," or if he terminates his employment for "good reason," as
those terms are defined in his employment agreement, he shall receive as a
severance payment, one year of his base salary, payable in semi-monthly
installments. Should Mr. Small become disabled during the term of his employment
agreement, he would be entitled to receive his monthly base salary until the
earlier of three months, the date he returns to work, the date he begins work at
another financial institutions or his death. In the event of Mr. Small's death,
his estate shall be entitled to that portion of Mr. Small's compensation that
would have been payable up to the first working day of the first month after his
death.
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
8
<PAGE>
The employment agreement permits Mr. Small to terminate his employment
voluntarily. In the event of a voluntary termination, or a termination for just
cause, all rights and benefits under the contract shall immediately terminate.
RELATED TRANSACTIONS
During 1999, four members of either PSB's Board or the Bank's Board, or
their related business interests, had loans or lines of credit from the Bank
that total more than $50,000. These loans and lines of credit were made on the
same terms as extensions of credit are made to the Bank's unaffiliated
customers. Their terms are summarized in the following table.
<TABLE>
<CAPTION>
Highest
Outstanding
Name Balance in 1999 Type of Credit Interest Rate
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Frank A. Broome, III $ 122,000 Residential Mortgage 7.00%
Robert M. Eadie 200,000* Commercial Line Prime + 0.25%
19,706* Commercial Loan 7.00%
10,000 Executive Line Prime + 0.25%
Renny B. Eadie, III 200,000* Commercial Line Prime + 0.25%
19,706* Commercial Loan 7.00%
Alton C. Milton, Sr. 50,000 Executive Line Prime + 0.25%
33,909 Commercial Loan 7.20%
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<FN>
* Extensions of credit to Lake Cities Industries, Inc. The two $200,000
Commercial Line items represent the same line and the two $19,706
Commercial Loan items represent the same loan. Robert M. Eadie and
Renny B. Eadie, III are shareholders and officers of Lake Cities
Industries, Inc.
</FN>
</TABLE>
PROPOSAL II -- APPROVAL OF THE AMENDED 1998
KEY EMPLOYEE STOCK OPTION AND LIMITED
RIGHTS PLAN
The Board of Directors has adopted the Amended 1998 Employee Stock
Option and Limited Rights Plan ("Plan") for the benefit of officers and other
key employees of the Company. A copy of the Plan is attached hereto as Appendix
A.
The Plan provides for a maximum of 10% of the outstanding shares of PSB
common stock to be issued pursuant to the exercise of either incentive or
non-statutory stock options ("Options") granted under the Plan, unless adjusted
as provided in Section 14 of the Plan. The Plan also provides for the granting
of "Limited Rights" (stock appreciation rights) simultaneously with the grant of
any Option.
Under the Plan, participants, at the discretion of the Compensation
Committee (presently the Board), may be granted Options to purchase common stock
at a price not less than 100% of its "Fair Market Value" (as that term is
defined in the Plan) on the date the option is granted, or $9.00, whichever is
greater.
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
9
<PAGE>
No Options may be exercised less than three nor more than 10 years
after the date of their grant. Limited Rights may only be exercised after six
months from the date of their grant and only in the following circumstances: (i)
a change in control of the Company occurs; (ii) the underlying Option is
exercisable; and (iii) the Fair Market Value of the underlying shares on the
date of exercise is greater than the Option's exercise price.
Options and Limited Rights are not transferable, except in the case of
death. Furthermore, if a participant's employment is terminated for any reason
other than for cause, their Options and Limited Rights may be exercised by them
or their estate for varying periods of time, up to one year, depending on the
Limited Right or type of Option held and the reason for termination of
employment. In the case of a termination for cause, all Options and Limited
Rights will terminate immediately.
The Plan is subject to approval of the holders of a majority of PSB's
outstanding common stock at this Annual Meeting. All Options granted before
shareholder approval of the Plan are contingent upon receipt of such approval.
As of the date of this Proxy Statement, Robert W. Woodard is the only employee
to have been granted Options. Mr. Woodard was granted an incentive Option to
purchase 10,000 shares of stock on July 28, 1997.
The terms of the Program may be amended by the Board of Directors
except that no amendment may increase the maximum number of shares included in
the Plan, reduce the exercise price of the Options, extend the period during
which Options may be granted or exercised, or permit any grant to a person who
is not a full-time employee of PSB or its subsidiaries.
- --------------------------------------------------------------------------------
The Board of Directors Recommends That Shareholders Vote "For"
the Approval of the Amended 1998 Employee Stock Option and
Limited Rights Plan.
- --------------------------------------------------------------------------------
PROPOSAL III -- APPOINTMENT OF AUDITORS FOR
FISCAL YEAR ENDING DECEMBER 31, 2000
The Board of Directors intends to retain the accounting firm of Hacker,
Johnson, Cohen & Grieb, P.A., as the Company's independent auditors for the
fiscal year ending December 31, 2000. A representative from the firm of Hacker,
Johnson, Cohen & Grieb, P.A., is expected to be present at the Annual Meeting to
respond to shareholder questions.
- --------------------------------------------------------------------------------
The Board of Directors Recommends That Shareholders Vote "For"
the Appointment of Hacker, Johnson, Cohen & Grieb, P.A., as the
Independent Auditors for the Fiscal Year Ending December 31, 2000.
- --------------------------------------------------------------------------------
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PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
10
<PAGE>
PROPOSAL IV -- ADJOURNMENT OF ANNUAL MEETING
PSB seeks your approval to adjourn the Annual Meeting in the event that
the number of proxies sufficient to approve Proposals I, II or III are not
received by April 18, 2000. In order to permit proxies that have been received
at the time of the Annual Meeting to be voted for adjournment, the Company is
submitting the question of adjournment as a separate matter for your
consideration. If it becomes necessary to adjourn the Annual Meeting, and the
adjournment is for a period of less than 30 days, no notice of the time and
place of the adjourned meeting need be given the shareholders, other than an
announcement made at the Annual Meeting.
- --------------------------------------------------------------------------------
The Board of Directors Recommends That Shareholders Vote "For"
the Adjournment of the Annual Meeting.
- --------------------------------------------------------------------------------
Shareholder Proposals
In order to be eligible for inclusion in PSB's proxy materials for next
year's Annual Meeting of Shareholders, any shareholder's proposal to take action
at such meeting must be received at the Company's corporate office at 500 South
1st Street, Suite 1, Lake City, Florida 32025, no later than November 19, 2000.
Any such proposals shall be subject to the requirements of the proxy rules
(Regulation 14A) adopted under the Securities Exchange Act of 1934.
Notice of Business to be Conducted at
an Annual Meeting and Shareholder Nominations
Our Bylaws provide an advance notice procedure for certain business,
including nominations for directors, to be brought before an annual meeting. In
order for a shareholder to properly bring business before an annual meeting, the
shareholder must give written notice to the Corporate Secretary of the Company
not less than ten days before the time originally fixed for such meeting.
Solicitation
The cost of soliciting proxies on behalf of the Board of Directors for
the Annual Meeting will be borne by PSB. Proxies may be solicited by directors,
officers or regular employees of the Company in person or by telephone,
telegraph or mail. We are requesting persons, firms and corporations holding
shares in their names, or in the names of their nominees for the benefit of
others, to send proxy materials to and obtain proxies from such beneficial
owners. PSB will reimburse the proxy holders for their reasonable out-of-pocket
expenses.
Availability of Additional Information
A copy of the 1999 Annual Report for the fiscal year ended December 31,
1999, accompanies this Proxy Statement. The Annual Report includes Financial
Statements for the Company. Additional copies of the 1999 Annual Report maybe
obtained by contacting Robert W. Woodard, President and Chief Executive Officer,
PSB BancGroup, Inc., 500 South 1st Street, Suite 1, Lake City, Florida 32025,
telephone number (904) 754-0002.
------------------------------------
PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
11
<PAGE>
Other Matters Which May Properly Come Before the Meeting
The Board of Directors knows of no other business which will be
presented for consideration at the Annual Meeting other than those matters
described above in this Amended Proxy Statement. However, if any other matters
should properly come before the Annual Meeting, it is intended that the proxies
solicited hereby will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.
PSB BancGroup, Inc.
Dated: March 17, 2000
------------------------------------
PSB BANCGROUP, INC. PROXY STATEMENT
500 South 1st Street, Suite 1, Lake City, Florida 32025
12
<PAGE>
APPENDIX A
------------------
THE PSB BANCGROUP, INC.
AMENDED 1998 EMPLOYEE STOCK OPTION AND LIMITED RIGHTS PLAN
1. PURPOSE
The purpose of The PSB BancGroup, Inc. ("Company") 1998 Employee Stock
Option and Limited Rights Plan ("Plan") is to advance the interests of the
Company, its wholly owned subsidiary Peoples State Bank and its shareholders by
providing key employees of the Company and its affiliates, upon whose judgment,
initiative and efforts the successful conduct of the business of the Company and
its affiliates largely depends, with an additional incentive to perform in a
superior manner, as well as, to attract people of experience and ability.
2. DEFINITIONS
(a) "Board of Directors" means the Board of Directors of the
Company.
(b) "Affiliate" means (i) a member of a controlled group of
corporations of which the Company is a member or (ii) an
unincorporated trade or business which is under common control
with the Company as determined in accordance with Section
414(c) of the Internal Revenue Code 1986, as amended ("Code")
and the regulations issued thereunder. For purposes hereof, a
"controlled group of corporations" shall mean a controlled
group of corporations as defined in Section 1563(a) of the
Code determined without regard to Sections 1563(a)(4) and
(e)(3)(C).
(c) "Award" means an Award of Non-Statutory Stock Options,
Incentive Stock Options, and/or Limited Rights granted under
the provisions of the Plan.
(d) "Committee" means the Compensation Committee of the Board of
Directors.
(e) "Plan Year or Years" means a calendar year or years commencing
on or after January 1, 1998.
(f) "Date of Grant" means the actual date on which an Award is
granted by the Committee.
(g) "Common Stock" means the common stock of the Company, par
value, $0.01 per share.
(h) "Fair Market Value" means, when used in connection with the
Common Stock on a certain date, the reported closing price of
the Common Stock as reported by the National Association of
Securities Dealers Automated Quotation System (as published by
the Wall Street Journal, if published) on the day prior to
such date or if the Common Stock was not traded on such date,
on the next preceding day on which the Common Stock was traded
thereon. If the Common Stock is not traded on a national
market reported by the National Association of Securities
1
<PAGE>
APPENDIX A
------------------
Dealers Automated Quotation System, the Fair Market Value
means the average of the closing bid and ask sale prices on
the last previous date on which a sale is reported in an
over-the-counter transaction. In the absence of any
over-the-counter transactions, the Fair Market Value means the
highest price at which the stock has sold in an arms length
transaction during the 90 days immediately following the grant
date. In the absence of an arms length transaction during such
90 days, Fair Market Value means the book value of the common
stock or the issue price of $9.00 per share, whichever is
higher.
(i) "Limited Right" means the right to receive an amount of cash
based upon the terms set forth in Section 9 herein.
(j) "Disability" means the permanent and total inability by reason
of mental or physical infirmity, or both, of an employee to
perform the work customarily assigned to him. Additionally, a
medical doctor selected or approved by the Board of Directors
must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it
appears probable that such Disability will be permanent during
the remainder of said participant's lifetime.
(k) "Termination for Cause" means the termination upon an
intentional failure to perform stated duties, breach of a
fiduciary duty involving personal dishonesty, which results in
material loss to the Company or one of its affiliates or
willful violation of any law, rule or regulation (other than
traffic violations or similar offenses) or final
cease-and-desist order issued to the Company or one of its
affiliates.
(l) "Participant" means an employee of the Company or its
affiliates chosen by the Committee to participate in the Plan.
(m) "Change in Control" of the Company means a change in control
that would be required to be reported in response to Item 6(e)
of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended ("Exchange Act")
or any successor disclosure item; provided that, without
limitation, such a Change in Control (as set forth in 12
U.S.C. Section 1841[a][2] of the Bank Holding Company Act of
1956, as amended) shall be deemed to have occurred if any
person (as such term is used in Sections 13[d] and 14[d] of
the Exchange Act in effect on the date first written above),
other than any person who on the date hereof is a director or
officer of the Company, (i) directly or indirectly, or acting
through one or more other persons, owns, controls or has power
to vote 25% or more of any class of the then outstanding
voting securities of the Company; or (ii) controls in any
manner the election of the directors of the Company. For
purposes of this Agreement, a "Change in Control" shall be
deemed not to have occurred in connection with a
2
<PAGE>
APPENDIX A
------------------
reorganization, e.g. consolidation or merger of the Company
where the stockholders of the Company, immediately before the
consummation of the transaction, will own at least 50% of the
total combined voting power of all classes of stock entitled
to vote of the surviving entity immediately after the
transaction.
(n) "Normal Retirement" means retirement at the normal or early
retirement date as set forth in any tax qualified plan of the
Company or its Affiliates.
(o) "Vesting" means the number of annual installments in which a
participant will be permitted to exercise an option, which in
no event shall be fewer than three (3) installments.
3. ADMINISTRATION
The Plan shall be administered by the Compensation Committee of the
Board of Directors. The Committee is authorized, subject to the provisions of
the Plan, to establish such rules and regulations as it deems necessary for the
proper administration of the Plan and to make whatever determinations and
interpretations in connection with the Plan it deems as necessary or advisable.
All determinations and interpretations made by the Committee shall be binding
and conclusive on all Participants in the Plan and on their legal
representatives and beneficiaries.
4. TYPES OF AWARDS
Awards under the Plan may be granted in any one or a combination of the
following, as defined below in Sections 7 through 9 of the Plan:
(a) Incentive Stock Options;
(b) Non-Statutory Stock Options; and
(c) Limited Rights.
5. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 13 herein, the maximum
number of shares reserved for issuance under the Plan is 10% of the number of
shares of Common Stock outstanding as of the date the Company terminates its
1998 stock offering. To the extent that options or rights granted under the Plan
are exercised, the shares covered will be unavailable for future grants under
the Plan; to the extent that options together with any related rights granted
under the Plan terminate, expire or are canceled without having been exercised
or, in the case of Limited Rights exercised for cash, new Awards may be made
with respect to these shares.
6. ELIGIBILITY
Officers and other employees of the Company or its affiliates shall be
eligible to receive Incentive Stock Options, Non-Statutory Stock Options and/or
Limited Rights under the Plan. Directors who are not employees or officers of
the Company or its affiliates shall not be eligible to receive Awards under the
Plan.
3
<PAGE>
APPENDIX A
------------------
7. NON-STATUTORY STOCK OPTIONS
7.1 Grant of Non-Statutory Stock Options. The Committee may, from time
to time, grant Non-Statutory Stock Options to eligible employees.
Non-Statutory Stock Options granted under this Plan are subject to the
following terms and conditions:
(a) Price. The purchase price per share of Common Stock
deliverable upon the exercise of each Non-Statutory Stock
Option shall not be less than 100% of the Fair Market Value of
the Common Stock on the date the option is granted or $9.00
per share whichever is higher. Shares may be purchased only
upon full payment of the purchase price. Payment of the
purchase price may be made, in whole or in part, through the
surrender of shares of the Common Stock of the Company at the
Fair Market Value of such shares determined in the manner
described in Section 2(h).
(b) Terms of Options. The term during which each Non-Statutory
Stock Option may be exercised shall be determined by the
Committee, but in no event shall a Non-Statutory Stock Option
be exercisable in whole or in part in less than 3 nor more
than 10 years and one day from the Date of Grant.
The Committee shall determine the date on which each Non-Statutory
Stock Option shall become exercisable in installments. The shares
comprising each installment may be purchased in whole or in part at any
time after such installment becomes purchasable. The Committee, in its
sole discretion, or the Participant if so provided in his written
agreement executed pursuant to Section 11, may accelerate the time at
which any Non-Statutory Stock Option may be exercised in whole or in
part. Notwithstanding the above, in the event of a Change in Control of
the Company, all Non-Statutory Stock Options shall become immediately
exercisable and consistent with the time period for exercise provided
in Section 7.1(c).
(c) Termination of Employment. Upon the termination of an
employee's service for any reason other than Disability,
Normal Retirement, death or Termination for Cause, his
Non-Statutory Stock Options shall be exercisable only as to
those shares which were immediately purchasable by him at the
date of termination, but only for a period of six (6) months
following termination, provided that in no event shall the
period extend beyond the expiration of the Non-Statutory Stock
Option term. In the event of Termination for Cause, all rights
of the terminated employee under his Non-Statutory Stock
Options shall expire upon termination. In the event of the
death, Disability or Normal Retirement of any employee, all
Non-Statutory Stock Options held by the employee, whether or
not exercisable at such time, shall be exercisable by the
employee or his legal representatives or beneficiaries for one
year following the date of his death, Normal Retirement or
cessation of employment due to Disability, provided that in no
event shall the period extend beyond the expiration of the
Non-Statutory Stock Option term.
4
<PAGE>
APPENDIX A
------------------
8. INCENTIVE STOCK OPTIONS
8.1 Grant of Incentive Stock Options. The Committee may, from time to
time, grant Incentive Stock Options to eligible employees. Incentive
Stock Options granted pursuant to the Plan shall be subject to the
following terms and conditions:
(a) Price. The purchase price per share of Common Stock
deliverable upon the exercise of each Incentive Stock Option
shall be not less than 100% of the Fair Market Value of the
Common Stock on the date the Incentive Stock Option is granted
or $9.00 per share whichever is higher. However, if an
employee owns stock equal to more than 10% of the total
combined voting power of all classes of Common Stock of the
Company (or, under Section 424(d) of the Code, is deemed to
own Common Stock representing more than 10% of the total
combined voting power of all such classes of Common Stock),
the purchase price per share of Common Stock deliverable upon
the exercise of each Incentive Stock Option shall not be less
than 110% of the Fair Market Value of the Common Stock on the
date the Incentive Stock Option is granted. Shares may be
purchased only upon payment of the full purchase price.
Payment of the purchase price may be made, in whole or in
part, through the surrender of shares of the Common Stock of
the Company at the Fair Market Value of such shares determined
in the manner described in Section 2(h) herein.
(b) Amounts of Options. Incentive Stock Options may be granted
to any eligible employee in such amounts as determined by the
Committee; provided that the amount granted is consistent with
the terms of Section 422 of the Code. In the case of an option
intended to qualify as an Incentive Stock Option, the
aggregate Fair Market Value (determined as of the time the
option is granted) of the Common Stock with respect to which
Incentive Stock Options granted are exercisable for the first
time by the Participant during any calendar year (under all
plans of the Participant's employer corporation and its parent
and subsidiary corporations) shall not exceed $100,000. The
provisions of this Section 8.1(b) shall be construed and
applied in accordance with Section 422(d) of the Code and the
regulations, if any, promulgated thereunder.
(c) Terms of Options. The term during which each Incentive
Stock Option may be exercised shall be determined by the
Committee, but in no event shall an Incentive Stock Option be
exercisable in whole or in part in less than 3 nor more than
10 years from the Date of Grant. If any employee, at the time
an Incentive Stock Option is granted to him, owns Common Stock
representing more than 10% of the total combined voting power
of the Company (or, under Section 424(d) of the Code, is
deemed to own Common Stock representing more than 10% of the
total combined voting power of all such classes of Common
Stock, by reason of the ownership of such classes of Common
Stock, directly or indirectly, by or for any brother, sister,
spouse, ancestor or lineal descendent of such employee, or by
or for any corporation, partnership, estate or trust of which
such employee is a shareholder, partner or beneficiary), the
Incentive Stock Option granted to him shall not be exercisable
after the expiration of five years from the Date of Grant. No
Incentive Stock Option granted under this Plan is transferable
except by will or the laws of descent and
5
<PAGE>
APPENDIX A
------------------
distribution and is exercisable in his lifetime only by the
employee to which it is granted.
The Committee shall determine the date on which each Incentive Stock
Option shall become exercisable and may provide that an Incentive Stock
Option shall become exercisable in installments. The shares comprising
each installment may be purchased in whole or in part at any time after
such installment becomes purchasable; provided, however, that, in the
case of an Incentive Stock Option intended to qualify for the tax
treatment available pursuant to Section 422 of the Code upon exercise,
the amount able to be first exercised in a given year is consistent
with the terms of Section 422 of the Code. The Committee, in its sole
discretion, or the Participant if so provided in his written agreement
executed pursuant to Section 11, may accelerate the time at which any
Incentive Stock Option may be exercised in whole or in part. However,
in the case of an Incentive Stock Option intended to qualify for the
tax treatment available pursuant to Section 422 of the Code upon
exercise, such acceleration must be consistent with the terms of
Section 422 of the Code. Notwithstanding the above in the event of a
Change in Control of the Company all Incentive Stock Options shall
become immediately exercisable consistent with the time period for
exercise provided in Section 8.1(d).
(d) Termination of Employment. Upon the termination of an
employee's service for any reason other than Disability,
Normal Retirement, death or Termination for Cause, his
Incentive Stock Options shall be exercisable only as to those
shares which were immediately purchasable by him at the date
of termination, but only for: (i) a period of three months
following termination in the case of an Incentive Stock Option
intended to qualify for the tax treatment available pursuant
to Section 422 of the Code upon exercise, and (ii) a period of
one year following termination in the case of an Incentive
Stock Option not intended to be eligible for the tax treatment
available pursuant to Section 422 of the Code upon exercise.
In the event of Termination for Cause, all rights of the
terminated employee under his Incentive Stock Options shall
expire upon termination. In no event shall the period extend
beyond the expiration of the Incentive Stock Option term.
In the event of death or Disability of any employee, all Incentive
Stock Options held by such employee, whether or not exercisable at such
time, shall be exercisable by the employee or his legal representatives
or beneficiaries for one year following the date of his death or
cessation of employment due to Disability. Upon termination of an
employee's service due to Normal Retirement, all Incentive Stock
Options held by such employee, whether or not exercisable at such time,
shall be exercisable for a period of one year following the date of his
Normal Retirement; provided, however, that such option shall not be
eligible for treatment as an Incentive Stock Option in the event such
option is exercised more than three months following the date of his
Normal Retirement. In no event shall the period extend beyond the
expiration of the Incentive Stock Option term.
9. LIMITED RIGHTS
9.1 Grant of Limited Rights. The Committee may grant a Limited Right
simultaneously with the grant of any option, with respect to all or
6
<PAGE>
APPENDIX A
------------------
some of the shares covered by such option. Limited Rights granted under
this Plan are subject to the following terms and conditions:
(a) Terms of Rights. In no event shall a Limited Right be
exercisable in whole or in part before the expiration of six
months from the date of grant of the Limited Right. A Limited
Right may be exercised only upon the occurrence of all of the
following conditions: (i) a Change in Control of the Company;
(ii) the underlying option is eligible to be exercised; and
(iii) the Fair Market Value of the underlying shares on the
day of exercise is greater than the exercise price of the
related option.
Upon exercise of a Limited Right, the related option shall cease to be
exercisable. Upon exercise or termination of an option, any related
Limited Rights shall terminate. The Limited Rights may be for no more
than 100% of the difference between the exercise price and the Fair
Market Value of the Common Stock subject to the underlying option. The
Limited Right is transferable only when the underlying option is
transferable and under the same conditions.
(b) Payment. Upon exercise of a Limited Right, the holder
shall promptly receive from the Company an amount of cash
equal to the difference between the Fair Market Value on the
Date of Grant of the related option and the Fair Market Value
of the underlying shares on the date the Limited Right is
exercised, multiplied by the number of shares with respect to
which such Limited Right is being exercised.
(c) Termination of Employment. Upon the termination of an
employee's service for any reason other than Disability,
Normal Retirement, death or Termination for Cause, any Limited
Rights held by him shall be exercisable only as to those
shares of the related option which were immediately
purchasable at the date of termination and for a period of
three months following termination. In the event of
Termination for Cause, all Limited Rights held by him shall
expire immediately.
Upon termination of an employee's employment for reason of death, or
Disability, all Limited Rights held by such employee shall be
exercisable by the employee or his legal representative or
beneficiaries for a period of one year from the date of such
termination with respect to Limited Rights related to Incentive Stock
Options, as well as, with respect to Limited Rights related to
Non-Statutory Stock Options. Upon termination of an employee's
employment for reason of Normal Retirement, all Limited Rights held by
such employee shall be exercisable by the employee or his legal
representative or beneficiary for one year with respect to both Limited
Rights granted with respect to Incentive Stock Options and with respect
to Limited Rights granted with respect to Non-Statutory Stock Options.
In no event shall the period extend beyond the expiration of the term
of the related option.
10. RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY
An optionee shall have no rights as a shareholder with respect to any
shares covered by a Non-Statutory and/or Incentive Stock Option until the date
of issuance of a stock certificate for such shares. Nothing in this Plan or in
any Award granted confers on any person any right to continue in the employ of
the Company or its affiliates or to continue to perform services for the Company
7
<PAGE>
APPENDIX A
------------------
or its affiliates or interferes in any way with the right of the Company or its
affiliates to terminate his services as an officer or other employee at any
time.
No Award under the Plan shall be transferable by the optionee other
than by will or the laws of descent and distribution and may only be exercised
during his lifetime by the optionee, or by a guardian or legal representative.
No such transfer of the Award by the Participant by will or the laws of descent
and distribution shall be effective to bind the Company unless the Company shall
have been furnished with written notice thereof and such other evidence as the
Committee administering the Plan may deem necessary or desirable to establish
the validity of the transfer. The Award shall not be pledged, hypothecated,
sold, assigned, transferred or otherwise encumbered or disposed of except as
provided herein. Any purported pledge, hypothecation, sale, assignment, transfer
or other encumbrance or disposition of the Award contrary to the provisions
hereof shall be null and void and without effect. The levy of any execution,
attachment, or similar process upon the Award shall be null and void and without
effect.
11. CALL PROVISION
In the event the capital of the Company or its wholly owned banking
subsidiaries falls below minimum requirements, as determined by its primary
state or federal regulator, then the Board of Directors may call any or all of
the options granted and outstanding under this Plan. Such call shall be in
writing ("Notice") and shall provide that the option holder shall have 45 days
to exercise the option or forfeit all rights thereunder. Any options called but
not exercised shall expire 45 days from the date of such Notice and rights
thereunder shall terminate.
12. AGREEMENT WITH GRANTEES
Each Award of options, and/or Limited Rights will be evidenced by a
written agreement, executed by the Participant and the Company which describes
the conditions for receiving the Awards including the date of Award, the
purchase price if any, applicable periods, and any other terms and conditions as
may be required by the Board of Directors or applicable securities law.
13. DESIGNATION OF BENEFICIARY
A Participant may, with the consent of the Committee, designate a
person or persons to receive, in the event of death, any stock option or Limited
Rights Award to which he would then be entitled. Such designation will be made
upon forms supplied by and delivered to the Company and may be revoked in
writing. If a Participant fails effectively to designate a beneficiary, then his
estate will be deemed to be the beneficiary.
14. DILUTION AND OTHER ADJUSTMENTS
In the event of any change in the outstanding shares of Common Stock of
the Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, the Committee will make such adjustments to
previously granted Awards, to prevent dilution or enlargement of the rights of
the Participant, including any or all of the following:
8
<PAGE>
APPENDIX A
------------------
(a) adjustments in the aggregate number or kind of shares of
Common Stock which may be awarded under the Plan;
(b) adjustments in the aggregate number or kind of shares of
Common Stock covered by Awards already made under the Plan;
(c) adjustments in the purchase price of outstanding Incentive
and/or Non-Statutory Stock Options, or any Limited Rights
attached to such options.
No such adjustments may, however, materially change the value of
benefits available to a Participant under a previously granted Award.
15. WITHHOLDING
There will be deducted from each distribution of cash and/or Common
Stock under the Plan the amount of tax required to be withheld by any
governmental authority, if any.
16. AMENDMENT OF THE PLAN
The Board of Directors may at any time, and from time to time, modify
or amend the Plan in any respect; provided however, that if necessary to
continue to qualify the Plan under the Securities and Exchange Commission Rule
16(b)-3, shareholder approval would be required for any such modification or
amendments which:
(a) increases the maximum number of shares for which options may
be granted under the Plan (subject, however, to the provisions
of Section 13 hereof);
(b) reduces the exercise price at which Awards may be granted;
(c) extends the period during which options may be granted or
exercised beyond the times originally prescribed; or
(d) changes the persons eligible to participate in the Plan.
Failure to ratify or approve amendments or modifications to Subsections
(a) through (d) of this Section by shareholders shall be effective only as to
the specific amendment or modification requiring such ratification. Other
provisions, sections, and subsections of this Plan will remain in full force and
effect.
No such termination, modification or amendment may affect the rights of
a Participant under an outstanding Award.
17. EFFECTIVE DATE OF PLAN
The Plan shall be adopted by the Board of Directors and shall become
effective upon such date of adoption, or other date as determined by the Board.
Following the Effective Date of the Plan, the Plan shall be submitted to
shareholders for approval. If the Plan shall not be approved by shareholders the
Plan and any Awards granted thereunder shall be null and void.
9
<PAGE>
APPENDIX A
------------------
18. TERMINATION OF THE PLAN
The right to grant Awards under the Plan will terminate upon the
earlier of ten (10) years after the Effective Date of the Plan or the issuance
of Common Stock or the exercise of options or related rights equaling the
maximum number of shares reserved under the Plan as set forth in Section 5. The
Board of Directors has the right to suspend or terminate the Plan at any time,
provided that no such action will, without the consent of a Participant,
adversely affect his rights under a previously granted Award.
19. APPLICABLE LAW
The Plan will be administered in accordance with the laws of the State
of Florida.
Adopted this 25th day of March, 1998 by the Company's Board of
Directors.
/s/ Robert W. Woodard
Robert W. Woodard, President
Adopted on the _____ day of ________________, 1998 by the Company's
Shareholders.
---------------------------------------
10
<PAGE>
EXHIBIT 22.2
Audited Consolidated
Financial Statements
for the year ended
December 31, 1999
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Lake City, Florida
Audited Consolidated Financial Statements
At December 31, 1999 and 1998 and For the Years Then Ended
(Together with Independent Auditors' Report)
<PAGE>
Independent Auditors' Report
Board of Directors
PSB BancGroup, Inc.
Lake City, Florida:
We have audited the accompanying consolidated balance sheets of PSB
BancGroup, Inc. and Subsidiary (the "Company") at December 31, 1999 and 1998,
and the related consolidated statements of operations, changes in stockholders'
equity (deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the Company
at December 31, 1999 and 1998, and the results of its operations and its cash
flows for the years then ended, in conformity with generally accepted accounting
principles.
/s/ Hacker, Johnson, Cohen & Grieb, PA
HACKER, JOHNSON, COHEN & GRIEB PA
Tampa, Florida
February 8, 2000
<PAGE>
<TABLE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
At December 31,
----------------------------
1999 1998
---- ----
Assets
<S> <C> <C>
Cash and due from banks $ 929,837 17,520
Interest-bearing deposits with banks 145,833 27,048
Federal funds sold 2,182,000 -
---------- -------
Total cash and cash equivalents 3,257,670 44,568
Securities available for sale 1,475,027 -
Securities held to maturity 1,000,000 -
Loans receivable, net of allowance for loan losses of $42,382 4,235,120 -
Premises and equipment, net 366,500 232,687
Accrued interest receivable 79,439 -
Federal Home Loan Bank stock, at cost 9,400 -
Deferred income taxes 250,095 119,285
Other assets 122,990 47,043
---------- -------
Total assets $ 10,796,241 443,583
========== =======
Liabilities and Stockholders' Equity (Deficit)
Liabilities:
Noninterest-bearing demand deposits 907,021 -
Savings, NOW and money-market deposits 2,267,127 -
Time deposits 3,386,261 -
---------- -------
Total deposits 6,560,409 -
Other borrowings - 465,000
Accrued interest payable and other liabilities 58,562 -
---------- -------
Total liabilities 6,618,971 465,000
---------- -------
Commitments and contingencies (Notes 4, 7, 14 and 15)
Stockholders' equity (deficit):
Preferred stock, $.01 par value, 2,000,000 shares authorized,
none issued and outstanding - -
Common stock, $.01 par value; 8,000,000 shares authorized,
514,478 and 3,942 shares issued and outstanding in
1999 and 1998 5,145 40
Additional paid-in capital 4,587,657 177,350
Accumulated deficit (404,244) (198,807)
Accumulated other comprehensive income (loss) (11,288) -
---------- -------
Total stockholders' equity (deficit) 4,177,270 (21,417)
---------- -------
Total liabilities and stockholders' equity (deficit) $ 10,796,241 443,583
========== =======
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
2
<PAGE>
<TABLE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Year Ended December 31,
-----------------------
1999 1998
---- ----
Interest income:
<S> <C>
Loans receivable $ 130,804 -
Securities 57,608 -
Other interest-earning assets 178,580 27,504
------- -------
Total interest income 366,992 27,504
------- -------
Interest expense:
Deposits 79,226 -
Borrowings 12,071 9,034
------- -------
Total interest expense 91,297 9,034
------- -------
Net interest income 275,695 18,470
Provision for loan losses 42,382 -
------- -------
Net interest income after provision for loan losses 233,313 18,470
------- -------
Noninterest income-
Service charges on deposit accounts and other fees 12,064 -
------- -------
Noninterest expenses:
Salaries and employee benefits 324,670 144,870
Occupancy expense 67,602 56,366
Professional fees 43,939 36,148
Data processing 55,795 -
Telephone expense 10,385 7,158
Printing and office supplies 20,138 8,381
Other 52,285 26,626
------- -------
Total noninterest expenses 574,814 279,549
------- -------
Loss before income tax benefit (329,437) (261,079)
Income tax benefit (124,000) (97,904)
------- -------
Net loss $(205,437) (163,175)
======= =======
Loss per share, basic and diluted $ (.49) (41.39)
======= =======
Weighted-average number of shares outstanding, basic and diluted 420,156 3,942
======= =======
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
3
<PAGE>
<TABLE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity (Deficit)
Accumulated
Other
Compre- Total
Additional hensive Stockholders'
Common Stock Paid-In Accumulated Income Equity
Shares Amount Capital Deficit (Loss) (Deficit)
------ ------ ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 3,942 $ 40 177,350 (35,632) - 141,758
Comprehensive income (loss)-
Net loss - - - (163,175) - (163,175)
------ ----- ---------- ------- ------ ---------
Balance at December 31, 1998 3,942 40 177,350 (198,807) - (21,417)
---------
Comprehensive income (loss):
Net loss - - - (205,437) - (205,437)
Net unrealized loss on
securities available
for sale, net of tax
of $6,810 - - - - (11,288) (11,288)
---------
Comprehensive income
(loss) (216,725)
---------
Conversion of common stock of
organizers (see Note 11) 15,768 157 (157) - - -
Common stock issued, net of
stock issuance costs of
$37,500 493,768 4,938 4,401,474 - - 4,406,412
Proceeds from issuance of
common stock, exercise
of warrants 1,000 10 8,990 - - 9,000
------- ----- --------- ------- ------ ---------
Balance at December 31, 1999 514,478 $ 5,145 4,587,657 (404,244) (11,288) 4,177,270
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
4
<PAGE>
<TABLE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Year Ended December 31,
1999 1998
----------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net loss $ (205,437) 163,175)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 12,085 -
Provision for loan losses 42,382 -
Deferred income tax benefit (124,000) 97,904)
Net amortization of deferred loan fees 6,834 -
Increase in accrued interest receivable (79,439) -
Increase in other assets (75,947) (4,508)
Increase in accrued interest payable and other liabilities 58,562 -
---------- ------
Net cash used in operating activities (364,960) (265,587)
---------- -------
Cash flows from investing activities:
Purchase of securities available for sale (1,493,125) -
Purchase of securities held to maturity (1,000,000) -
Net increase in loans (4,284,336) -
Purchase of Federal Home Loan Bank stock (9,400) -
Purchase of premises and equipment (145,898) (232,687)
---------- -------
Net cash used in investing activities (6,932,759) (232,687)
---------- -------
Cash flows from financing activities:
Net increase in deposits 6,560,409 -
Net (decrease) increase in borrowings (465,000) 465,000
Net proceeds from issuance of common stock 4,415,412 -
---------- -------
Net cash provided by financing activities 10,510,821 465,000
Net increase (decrease) in cash and cash equivalents 3,213,102 (33,274)
Cash and cash equivalents at beginning of year 44,568 77,842
---------- -------
Cash and cash equivalents at end of year $ 3,257,670 44,568
========== =======
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $ 47,383 18,470
========== =======
Income taxes $ - -
========== =======
Noncash transaction-
Accumulated other comprehensive income (loss),
unrealized loss on securities available for sale, net of tax $ (11,288) -
========== =======
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
5
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
At December 31, 1999 and 1998 and for the Years Then Ended
(1) Summary of Significant Accounting Policies
General. PSB BancGroup, Inc. ("PSB") was incorporated on June 30, 1997. PSB
owns 100% of the outstanding common stock of Peoples State Bank (the
"Bank") (collectively the "Company"). PSB was organized simultaneously
with the Bank and its only business is the ownership and operation of
the Bank. The Bank is a (Florida) state-chartered commercial bank and
its deposits are insured by the Federal Deposit Insurance Corporation.
The Bank opened for business on April 28, 1999 and offers a variety of
community banking services to businesses and individuals through its
banking office located in Lake City, Florida.
Basis of Presentation. The accompanying consolidated financial statements
of the Company include the accounts of PSB and the Bank. All
significant intercompany accounts and transactions have been
eliminated in consolidation. The accounting and reporting practices of
the Company conform to generally accepted accounting principles and to
general practices within the banking industry.
Use of Estimates. In preparing consolidated financial statements in
conformity with generally accepted accounting principles, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the balance sheet
and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates. Material
estimates that are particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan
losses and deferred tax assets.
Cash and Cash Equivalents. For purposes of the consolidated statements of
cash flows, cash and cash equivalents include cash and balances due
from banks, interest-bearing deposits with banks and federal funds
sold.
Securities. Securities may be classified as either trading, held to
maturity or available for sale. Trading securities are held
principally for resale and recorded at their fair values. Unrealized
gains and losses on trading securities are included immediately in
earnings. Held-to-maturity securities are those which the Company has
the positive intent and ability to hold to maturity and are reported
at amortized cost. Available-for-sale securities consist of securities
not classified as trading securities nor as held-to-maturity
securities. Unrealized holding gains and losses, net of tax, on
available-for-sale securities are excluded from earnings and reported
in other comprehensive income. Gains and losses on the sale of
available-for-sale securities are recorded on the trade date and are
determined using the specific-identification method. Premiums and
discounts on securities are recognized in interest income using the
interest method over the period to maturity.
Loans Receivable. Loans receivable that management has th intent and
ability to hold for the foreseeable future or un til maturity or
pay-off are reported at their outstanding principal adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or
costs.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the
related loan.
(continued)
6
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Loans Receivable, Continued. The accrual of interest on loans is
discontinued at the time the loan is 90 days delinquent unless the
credit is well-secured and in process of collection. In all cases,
loans are placed on nonaccrual or charged-off at an earlier date if
collection of principal or interest is considered doubtful.
All interest accrued but not collected for loans that are placed on
nonaccrual or charged-off is reversed against interest income. The
interest on these loans is accounted for on the cash-basis or
cost-recovery method, until qualifying for return to accrual. Loans
are returned to accrual status when all the principal and interest
amounts contractually due are brought current and future payments are
reasonably assured.
Allowance for Loan Losses. The allowance for loan losses is established as
losses are estimated to have occurred through a provision for loan
losses charged to earnings. Loan losses are charged against the
allowance when management believes the uncollectibility of a loan
balance is confirmed. Subsequent recoveries, if any, are credited to
the allowance.
The allowance for loan losses is evaluated on a regular basis by
management and is based upon management's periodic review of the
collectibility of the loans in light of historical experience, the
nature and volume of the loan portfolio, adverse situations that may
affect the borrower's ability to repay, estimated value of any
underlying collateral and prevailing economic conditions. This
evaluation is inherently subjective as it requires estimates that are
susceptible to significant revision as more information becomes
available.
A loan is considered impaired when, based on current information and
events, it is probable that the Company will be unable 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 for commercial and commercial real
estate loans 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.
Large groups of smaller balance homogeneous loans are collectively
evaluated for impairment. Accordingly, the Company does not separately
identify individual consumer and residential real estate loans for
impairment disclosures.
Premises and Equipment. Land is carried at cost. Premise and equipment are
stated at cost less accumulated depreciation and amortization.
Depreciation expense is computed using the straight-line method over
the estimated useful life of each type of asset.
(continued)
7
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Transfer of Financial Assets. Transfers of financial assets are accounted
for as sales, when control over the assets has been surrendered.
Control over transferred assets is deemed to be surrendered when (1)
the assets have been isolated from the Company, (2) the transferee
obtains the right (free of conditions that constrain it from taking
advantage of that right) to pledge or exchange the transferred assets,
and (3) the Company does not maintain effective control over the
transferred assets through an agreement to repurchase them before
their maturity.
Income Taxes. Deferred tax assets and liabilities are determined using the
liability (or balance sheet) method. Under this method, the net
deferred tax asset or liability is determined based on the tax effects
of the temporary differences between the book and tax bases of the
various balance sheet assets and liabilities and gives current
recognition to changes in tax rates and laws.
Organizational Costs. Net preopening and organizational costs, which were
incurred prior to commencement of banking operations, totaled $227,202
and were charged to expense as incurred. In addition to common stock
purchased by the organizers (See Note 10), the Company obtained a line
of credit from a financial institution to fund organizational costs.
This line of credit was paid-off with proceeds from the common stock
offering.
Off-Balance-Sheet Instruments. In the ordinary course of business the
Company has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit and unused lines of credit.
Such financial instruments are recorded in the financial statements
when they are funded.
Fair Values of Financial Instruments. The fair value of a financial
instrument is the current amount that would be exchanged between
willing parties, other than in a forced liquidation. Fair value is
best determined based upon quoted market prices. However, in many
instances, there are no quoted market prices for the Company's various
financial instruments. In cases where quoted market prices are not
available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. Accordingly, the fair value estimates
may not be realized in an immediate settlement of the instrument. SFAS
107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented may not necessarily represent
the underlying fair value of the Company. The following methods and
assumptions were used by the Company in estimating fair values of
financial instruments:
Cash and Cash Equivalents. The carrying amounts of cash and cash
equivalents approximate their fair value.
Securities. Fair values for securities held to maturity and available
for sale are based on quoted market prices, where available. If quoted
market prices are not available, fair values are based on quoted
market prices of comparable instruments. The carrying amount of
Federal Home Loan Bank stock approximates fair value.
Loans. For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. Fair values for fixed-rate mortgage (e.g. one-to- four family
residential), commercial real estate and commercial loans are
estimated using discounted cash flow analyses, using interest rates
currently being offered for loans with similar terms to borrowers of
similar credit quality. Fair values for nonperforming loans are
estimated using discounted cash flow analysis or underlying collateral
values, where applicable.
(continued)
8
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(1) Summary of Significant Accounting Policies, Continued
Fair Values of Financial Instruments, Continued. Accrued Interest
Receivable. Book value approximates fair value.
Deposit Liabilities. The fair values disclosed for demand, NOW,
money-market and savings deposits are, by definition, equal to the
amount payable on demand at the reporting date (that is, their
carrying amounts). Fair values for fixed-rate certificates of deposit
are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule
of aggregated expected monthly maturities of time deposits.
Borrowed Funds. The carrying amounts of other borrowings approximate
their fair values.
Off-Balance-Sheet Instruments. Fair values for off-balance-sheet
lending commitments are based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the counterparties' credit standing.
Loss Per Share. Basic and diluted loss per share have bee computed on the
basis of the weighted- average number of common shares outstanding
during the periods.
Advertising. The Company expenses all media advertising as incurred.
Future Accounting Requirements. Financial Accounting Standards 133 -
Accounting for Derivative Investments and Hedging Activities requires
companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company will be required to
adopt this Statement January 1, 2001. Management does not anticipate
that this Statement will have a material impact on the Company.
(2) Securities
Securities have been classified according to management's intent. The
carrying amount of securities and their approximate fair values at
December 31, 1999 are as follows:
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -------
Available for sale-
U.S. Government
Agency securities $1,493,125 - (18,098) 1,475,027
========= ========== ====== =========
(continued)
9
<PAGE>
<TABLE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(2) Securities, Continued
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- -------
Held to maturity-
<S> <C> <C> <C> <C>
U.S. Government
Agency securities $ 1,000,000 - (11,719) 988,281
There were no sales of securities in 1999.
The scheduled maturities of securities at December 31, 1999 are as follows:
Available for Sale Held to Maturity
----------------------- ----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ------ --------- -----
<S> <C> <C> <C>
Due in less than one year $ - - 500,000 497,500
Due from one to five years 1,493,125 1,475,027 500,000 490,781
--------- --------- --------- -------
$ 1,493,125 1,475,027 1,000,000 988,281
========= ========= ========= =======
</TABLE>
(3) Loans Receivable
The components of loans receivable are as follows:
At December 31,
1999
--------------
Commercial $ 769,829
Commercial real estate 2,311,677
Residential real estate 557,704
Consumer and other 645,126
---------
4,284,336
Deduct:
Net deferred loan fees (6,834)
Allowance for loan losses (42,382)
---------
Loans, net $ 4,235,120
=========
(continued)
10
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(3) Loans Receivable, Continued
An analysis of the change in the allowance for loan losses follows:
Year Ended
December 31,
1999
-----------
Beginning balance $ -
Provision for loan losses 42,382
------
Ending balance $ 42,382
======
The Bank had no impaired loans at or for the year ending December 31, 1999.
(4) Premises and Equipment
A summary of premises and equipment follows:
At December 31,
----------------
1999 1998
---- ----
Land $ 176,744 176,744
Leasehold improvements 19,873 -
Furniture and equipment 84,812 55,943
Construction in process 97,156 -
------- -------
Total, at cost 378,585 232,687
Less accumulated depreciation and amortization (12,085) -
------- -------
Premises and equipment, net $ 366,500 232,687
======= =======
The Company currently leases its office facilities under a operating
lease. This lease expires in the second quarter of the year 2000 when
the Company expects to move into their permanent banking office. The
permanent banking office will be owned by the Company and is under
construction at December 31, 1999. The Company has purchase
commitments of approximately $1.2 million to complete this facility.
Rent expense under operating leases during the years ended December
31, 1999 and 1998 was $13,200 and $11,700, respectively. Future
minimum rental payments under this noncancelable lease for the year
ending December 31, 2000 is $8,162.
(continued)
11
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(5) Deposits
The aggregate amount of time deposits with a minimum denomination of
$100,000, was approximately $1.2 million at December 31, 1999.
A schedule of maturities of time deposit follows:
Year Ending
December 31, Amount
------------ -----------
2000 $ 2,793,250
2001 485,289
2002 7,500
2003 100,222
---------
$ 3,386,261
=========
(6) Credit Risk
The Company grants the majority of its loans to borrowers throughout the
Lake City, Florida area. Although the Company has a diversified loan
portfolio, a significant portion of its borrowers' ability to honor
their contracts is dependent upon the economy in Lake City, Florida.
(7) Financial Instruments
The Company 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 are commitments to extend
credit and unused lines of credit and may involve, to varying degrees,
elements of credit and interest-rate risk in excess of the amount
recognized in the consolidated balance sheet. The contract amounts of
these instruments reflect the extent of involvement the Company has in
these financial instruments.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and unused lines of credit is represented by the contractual
amount of those instruments. The Company uses the same credit policies
in making commitments as it does for on-balance-sheet instruments.
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 some of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Company evaluates each customer's credit worthiness
on a case-by-case basis. The amount of collateral obtained if deemed
necessary by the Company upon extension of credit is based on
management's credit evaluation of the counterparty.
(continued)
12
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(7) Financial Instruments, Continued
The estimated fair values of the Company's financial instruments were as
follows (in thousands):
At December 31,
1999 1998
------------------- -----------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ------- -------- -------
Financial assets:
Cash and cash equivalents $ 3,258 3,258 45 45
Securities available for sale 1,475 1,475 - -
Securities held to maturity 1,000 988 - -
Loans receivable, net 4,235 4,225 - -
Accrued interest receivable 79 79 - -
Federal Home Loan Bank stock 9 9 - -
Financial liabilities:
Deposit liabilities 6,560 6,683 - -
Other borrowings - - 465 465
A summary of the amounts of the Company's financial instruments, which
approximate fair value, with off balance sheet risk at December 31, 1999
follows (in thousands):
Unfunded loan commitments $ 748
====
Unused lines of credit $ 221
====
(8) Income Taxes
The income tax benefit consisted of the following:
Year Ended December 31,
1999 1998
Deferred:
Federal $(105,876) (83,594)
State (18,124) (14,310)
-------- ------
Total deferred benefit $(124,000) (97,904)
======== ======
(continued)
13
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(8) Income Taxes, Continued
The reasons for the differences between the statutory Federal income tax rate
and the effective tax rate are summarized as follows:
<TABLE>
Year Ended December 31,
1999 1998
------------------- ---------------
% of % of
Pretax Pretax
Amount Loss Amount Loss
------ ------ ------ ------
<S> <C> <C> <C> <C>
Income tax benefit at statutory rate $(112,008) (34.0)% $(88,767) (34.0)%
Increase (decrease) resulting from:
State taxes, net of federal tax benefit (11,962) (3.6) (9,445) (3.6)
Other (30) - 308 .1
------- ----- ------- ----
$(124,000) (37.6)% $(97,904) (37.5)%
======= ===== ======= ====
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented
below.
<TABLE>
At December 31,
1999 1998
------ ------
Deferred tax assets:
<S> <C> <C>
Organizational and preopening costs $ 140,796 114,780
Net operating loss carryforwards 130,185 4,505
Charitable contributions 412 -
Unrealized loss on securities available for sale 6,810 -
------- -------
Deferred tax assets 278,203 119,285
------- -------
Deferred tax liabilities:
Accrual to cash conversion 25,963 -
Allowance for loan losses 1,807 -
Accumulated depreciation 338 -
------- -------
Deferred tax liabilities 28,108 -
------- -------
Net deferred tax asset $ 250,095 119,285
======= =======
</TABLE>
At December 31, 1999, the Company has approximately the following net
operating loss carryforwards available to offset future taxable income:
Expiration
2012 $ 2,600
2018 9,400
2019 334,000
-------
$ 346,000
=======
(continued)
14
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(9) Related Party Transactions
At December 31, 1999, officers and directors of the Compan and entities
in which they hold a financial interest had approximately $272,000 of
loans with the Company.
(10) Stock Option Plan
The Company has adopted a stock option plan, subject to shareholder
approval, for employees of the Company. Under the plan, the total
number of options which may be granted is 51,347. As of December 31,
1999, no options had been formally granted.
(11) Stockholders' Equity
The Bank is subject to certain restrictions on the amount of dividends
that it may declare without prior regulatory approval. At December 31,
1999, the Bank has no amounts available for dividends.
As of December 31, 1999, the Company has sold 514,478 shares of common
stock, which includes the exercise of 1,000 warrants (see below), for
an aggregate of $4.4 million. The Company incurred $37,500 in offering
expenses relating to their public offering of the Company's common
stock and warrants. Offering expenses were deducted from the proceeds
received from the sale of common stock and warrants.
During the initial offering period shares were offered in units with a unit
consisting of one share of common stock and one warrant. Each warrant
entitles the holder thereof to purchase one additional share of common
stock for $9 per share during the 48 month period ending June 8, 2002.
There were 512,478 warrants outstanding as of December 31, 1999.
As of December 31, 1998, the Company had sold 3,942 shares of common
stock to its organizers for an aggregate of $177,390. Such shares were
converted on a five shares for one share basis at the closing of the
common stock offering. In addition the organizers received five
warrants for each share converted. Each warrant entitles the holder to
purchase one share of common stock at $9 per share. The shares
converted and warrants outstanding are included in the totals in the
previous paragraphs.
(12) Regulatory Matters
The Bank is subject to various regulatory capital requirements
administered by the regulatory 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 Company'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 their assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The capital amounts and
classification are also subject to qualitative judgements by the
regulators about components, risk weightings, and other factors.
(continued)
15
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(12) Regulatory Matters, Continued
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and percentages (set
forth in the following table) of total and Tier 1 capital (as defined
in the regulations) to risk-weighted assets (as defined) and of Tier 1
capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1999, that the Bank met all capital
adequacy requirements to which they are subject.
As of December 31, 1999, the most recent notification from the regulatory
authorities categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized
as well capitalized, an institution must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage percentages as set
forth in the following tables. There are no conditions or events since
that notification that management believes have changed the Bank's
category. The Bank's actual capital amounts and percentages as of
December 31, 1999 are also presented in the table (dollars in
thousands).
<TABLE>
Minimum
To Be Well
Capitalized Under
Minimum Capital Prompt Corrective
Actual Requirement Action Provisions:
----------------------- -------------------- -----------------------
Amount % Amount % Amount %
------ ------ ------- ----- ------- ------
As of December 31, 1999:
<S> <C> <C> <C> <C> <C> <C>
Total capital to Risk-
Weighted assets $ 3,748 61.60% $ 487 8.00% $ 608 10.00%
Tier I Capital to Risk-
Weighted Assets 3,696 60.75 243 4.00 365 6.00
Tier I Capital
to Average Assets 3,696 39.91 370 4.00 463 5.00
</TABLE>
(continued)
16
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(13) Parent Company Only Financial Information
The Holding Company's unconsolidated financial information is as follows:
Condensed Balance Sheets
At December 31,
1999 1998
---- ----
Assets
Cash and interest-bearing deposits $ 131,970 44,568
Investment in subsidiary 3,935,500 -
Other assets 109,800 399,015
--------- -------
Total assets $ 4,177,270 443,583
========= =======
Liabilities and Stockholders' Equity (Deficit)
Borrowings - 465,000
Stockholders equity (deficit) 4,177,270 (21,417)
--------- -------
Total liabilities and stockholders'
equity (deficit) $ 4,177,270 443,583
========= =======
Condensed Statements of Operations
Year Ended
December 31,
1999 1998
---- ----
Revenues $ 72,284 27,504
Expenses (107,461) (190,679)
------- -------
Loss before loss of subsidiary (35,177) (163,175)
Loss of subsidiary (170,260) -
------- -------
Net loss $(205,437) (163,175)
======= =======
(continued)
17
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(13) Parent Company Only Financial Information, Continued
Condensed Statements of Cash Flows
Year Ended
December 31,
-----------------------
1999 1998
---- ----
Cash flows from operating activities:
Net loss $ (205,437) (163,175)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Equity in undistributed loss of subsidiaries 170,260 -
Net decrease (increase) in other assets 289,215 (335,099)
--------- -------
Net cash provided by operatin activities 254,038 (498,274)
Cash flows from investing activities -
Net investment in subsidiary (4,117,048) -
--------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 4,415,412 -
Net (decrease) increase in borrowings (465,000) 465,000
--------- -------
Net cash provided by financing activities 3,950,412 465,000
--------- -------
Net increase (decrease) in cash and cash equivalents 87,402 (33,274)
Cash and cash equivalents at beginning of the year 44,568 77,842
--------- -------
Cash and cash equivalents at end of year $ 131,970 44,568
========= =======
Noncash transaction - change in investment in
subsidiary due to change in accumulated other
comprehensive income (loss), net of tax $ (11,288) -
========= =======
(14) Contingency
The former president and chief executive officer has filed a civil action
against the Company and certain of its officers and directors. The
action concerns his employment contract and he is seeking certain
monetary damages. Management believes, based on the opinion of legal
counsel, that the Company will not incur any liability in connection
with this civil action.
(15) Year 2000 Issues
The Company's operating and financial systems have been found to be
compliant; the "Y2K Problem" has not adversely affected the Company's
operations nor does management expect that it will.
(continued)
18
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(16) Selected Quarterly Results (Unaudited)
The following table presents summarized quarterly data (in thousands,
except per share amounts):
Year Ended December 31, 1999
----------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter Total
------- ------- ------- -------- ------
Interest income $ 53 53 108 152 366
Interest expense 8 10 24 49 91
---- ---- ---- ---- ----
Net interest income 45 43 84 103 275
Provision for loan losses - 5 11 26 42
---- ---- ---- ---- ----
Net interest income after
provision for loan
losses 45 38 73 77 233
---- ---- ---- ---- ----
Noninterest income - 1 5 6 12
Noninterest expense 67 170 155 182 574
---- ---- ---- ---- ----
Loss before income tax benefit (22) (131) (77) (99) (329)
Income tax benefit (8) (49) (29) (38) (124)
---- ---- ---- ---- ----
Net loss $ (14) (82) (48) (61) (205)
==== ==== ==== ==== ====
Basic and diluted loss per common
share (.14) (.16) (.09) (.10) (.49)
==== ==== ==== ==== ====
19
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Form
10-KSB for the year ended December 31, 1999 and is qualified in its entirety by
refernce to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-01-1999
<PERIOD-END> Dec-31-1999
<CASH> 930
<INT-BEARING-DEPOSITS> 146
<FED-FUNDS-SOLD> 2,182
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,475
<INVESTMENTS-CARRYING> 1,000
<INVESTMENTS-MARKET> 988
<LOANS> 4,277
<ALLOWANCE> 42
<TOTAL-ASSETS> 10,796
<DEPOSITS> 6,560
<SHORT-TERM> 0
<LIABILITIES-OTHER> 59
<COMMON> 5
<LONG-TERM> 0
0
0
<OTHER-SE> 4,172
<TOTAL-LIABILITIES-AND-EQUITY> 10,796
<INTEREST-LOAN> 131
<INTEREST-INVEST> 58
<INTEREST-OTHER> 178
<INTEREST-TOTAL> 367
<INTEREST-DEPOSIT> 79
<INTEREST-EXPENSE> 91
<INTEREST-INCOME-NET> 276
<LOAN-LOSSES> 42
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 575
<INCOME-PRETAX> (329)
<INCOME-PRE-EXTRAORDINARY> (329)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (205)
<EPS-BASIC> (.49)
<EPS-DILUTED> (.49)
<YIELD-ACTUAL> 4.64
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 42
<ALLOWANCE-DOMESTIC> 42
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
