SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of The Securities Exchange Act of 1934
For Quarter Ended SEPTEMBER 30, 1996 Commission File Number 33-43386
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HARDWICK HOLDING COMPANY
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(Exact name of registrant as specified in its charter)
GEORGIA 58-1408388
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
One Hardwick Square, P.O. Box 1367, Dalton, GA. 30722-1367
- ----------------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 217-3950
--------------
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 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
--- ---
Number of shares of common stock outstanding at SEPTEMBER 30, 1996
4,005,914 Shares
- ----------------<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
INDEX
Page No.
PART I- FINANCIAL INFORMATION
Consolidated Statements of Financial
Position at September 30, 1996 and
December 31, 1995 3
Consolidated Statements of Income
for the Three Months Ended September 30,
1996 and 1995 4
Consolidated Statements of Income
for the Nine Months Ended September 30,
1996 and 1995 5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30,
1996 and 1995 6-7
Notes to Unaudited Consolidated Financial
Statements 8-10
Management's Discussion and Analysis of
Financial Position and Results of Operations 11-17
PART II- OTHER INFORMATION 18
SIGNATURES 19
2
<PAGE>
HARDWICK HOLDING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
Assets (unaudited)
------------- ------------
<S> <C> <C>
Cash and due from banks $ 21,253 $ 31,171
Federal funds sold 13,300 11,100
---------- ---------
Total cash and cash equivalents 34,553 42,271
Investment securities, available-for-sale 109,043 135,206
Loans, net 265,563 239,189
Premises and equipment, net 15,421 16,410
Assets under capital lease, net 663 817
Accrued interest receivable 3,654 3,674
Excess of cost over fair value of
subsidiaries acquired, net of amortization 5,499 5,961
Other assets 2,067 1,289
---------- --------
Total assets $ 436,463 $ 444,817
========== ========
Liabilities and Stockholders' Equity
Deposits-
Noninterest-bearing $ 85,080 $ 84,104
Interest-bearing 296,244 305,847
--------- ---------
Total deposits 381,324 389,951
Fed funds purchased and securities sold under agreements to repurchase 2,261 3,536
Other borrowed funds 325 381
Note payable to bank 1,100 250
Capital lease obligation 713 844
Other liabilities 4,227 3,025
--------- ---------
Total liabilities 389,950 397,987
--------- ---------
Commitments and contingencies (Notes 2 and 4)
Stockholders' equity-
Common stock, $.50 par value, 10,000,000 shares authorized,
4,125,141 shares issued; 4,005,914 and 4,069,078 shares
outstanding at September 30,1996 and December 31,1995, respectively 2,063 2,063
Additional paid-in capital 20,233 20,233
Retained earnings 27,173 25,284
Unrealized losses on securities available-for-sale (595) 421
Less treasury stock, at cost, 119,227 and 56,063 shares at September 30,
1996 and December 31, 1995, respectively
Less deferred compensation from restricted stock plan (205) (223)
--------- ---------
Total stockholders' equity 46,513 46,830
--------- ---------
Total liabilities and stockholders' equity $ 436,463 $ 444,817
========= ========
</TABLE>
(See notes to consolidated financial statements.)
3
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
--------------------------------
September 30, September 30,
INTEREST INCOME: 1996 1995
------------- -------------
<S> <C> <C>
Interest and fees on loans $ 6,324 $ 6,120
Interest on investment securities-
Taxable 1,254 1,378
Nontaxable 387 375
Interest on fed funds sold 117 134
Total interest income 8,082 8,007
INTEREST EXPENSE:
Interest on deposits 3,185 3,248
Interest on securities sold under agreements to repurchase 28 94
Interest on other borrowed funds 8 57
Interest on note payable and capital lease obligations 32 28
Total interest expense 3,253 3,427
NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOAN LOSSES 4,829 4,580
PROVISION FOR LOAN LOSSES 150 0
NET INTEREST INCOME 4,679 4,580
NONINTEREST INCOME:
Service charges on deposit accounts 574 590
Securities gains (losses), net (2) 2
Other noninterest income 392 550
Total noninterest income 964 1,142
NONINTEREST EXPENSE:
Salaries and employee benefits 1,988 2,135
Net occupancy expense 852 881
Other noninterest expense 1,465 1,726
Total noninterest expense 4,305 4,742
INCOME BEFORE PROVISION FOR INCOME TAXES 1,338 980
PROVISION FOR INCOME TAXES 416 204
NET INCOME $ 922 $ 776
NET INCOME PER SHARE $ 0.23 $ 0.19
</TABLE>
(See notes to consolidated financial statements.)
4
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Nine Months Ended
--------------------------------
September 30, September 30,
1996 1995
--------------------------------
<S> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 18,383 $ 17,688
Interest on investment securities-
Taxable 3,960 4,197
Nontaxable 1,219 1,169
Interest on fed funds sold 310 354
-------- --------
Total interest income 23,872 23,408
-------- --------
INTEREST EXPENSE:
Interest on deposits 9,613 8,754
Interest on securities sold under agreements to repurchase 90 634
Interest on other borrowed funds 23 164
Interest on note payable and capital lease obligations 73 93
-------- --------
Total interest expense 9,799 9,645
-------- --------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOAN LOSSES 14,073 13,763
PROVISION FOR LOAN LOSSES 225 0
-------- --------
NET INTEREST INCOME 13,848 13,763
-------- --------
NONINTEREST INCOME:
Service charges on deposit accounts 1,718 1,811
Securities gains, net 8 7
Other noninterest income 1,355 1,260
-------- --------
Total noninterest income 3,081 3,078
NONINTEREST EXPENSE:
Salaries and employee benefits 6,003 6,500
Net occupancy expense 2,538 2,730
Other noninterest expense 4,286 4,481
-------- --------
Total noninterest expense 12,827 13,711
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 4,102 3,130
PROVISION FOR INCOME TAXES 1,246 740
-------- --------
NET INCOME $ 2,856 $ 2,390
======== ========
NET INCOME PER SHARE $ 0.71 $ .59
</TABLE>
(See notes to consolidated financial statements.)
5
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended
September 30,
1996 1995
--------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,856 $ 2,390
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 225 0
Provision for depreciation and amortization 1,832 1,822
Loss on disposition of premises and equipment 2 76
Accretion of investment security discounts 100 (20)
Deferred income tax provision 43 0
Securities (gains), net (8) (7)
Decrease in accrued interest receivable 20 93
(Increase) Decrease in other assets (487) 257
Increase in other liabilities 1,202 1,725
------- -------
Net cash provided by operating activities 5,785 6,336
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities available-for-sale 25,417 500
Proceeds from maturities of investment securities held-to-maturity 0 15,979
Proceeds from sales of investment securities available-for-sale 21,043 9,858
Purchases of investment securities available-for-sale (21,948) (12,007)
Purchases of investment securities held-to-maturity 0 (2,173)
Net cash flows from loans originated and principal collected on loans (26,374) (12,517)
Proceeds from disposal of premises and equipment 46 0
Purchases of premises and equipment (514) (1,477)
------- -------
Net cash used in investing activities (2,330) (1,837)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net decrease in demand deposits, NOW accounts, and savings accounts (8,862) (4,842)
Net cash flows from sales and maturities of certificates of deposit 235 12,954
Net decrease in fed funds purchased and securities sold
under agreement to repurchase (1,275) (13,772)
(Decrease) increase in other borrowed funds (56) 1,400
Proceeds from note payable to bank 1,100 0
Payments on note payable to bank and capital lease obligations (381) (173)
Purchase of treasury stock, at cost (1,208) (204)
Proceeds from exercise of stock options 0 72
Payments of cash dividends (726) (653)
------- -------
Net cash used in financing activities $(11,173) $ (5,218)
------- -------
</TABLE>
6
<PAGE>
HARDWICK HOLDING COMPANY
& SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-(Continued)
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
September 30,
-------------------------
1996 1995
-------------------------
<S> <C> <C>
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS $ (7,718) $ (719)
CASH AND CASH EQUIVALENTS, beginning of period 42,271 29,221
-------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 34,553 $ 28,502
======== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for Interest $ 8,840 $ 8,198
======== ==========
Cash paid during the period for income taxes $ 1,020 $ 580
======== ==========
Noncash transactions during the period ended:
Transfer of premises and equipment to other assets $ 211 $ 0
======== ==========
Issuance of treasury stock for deferred compensation plan $ 0 $ 240
======== ==========
Addition to assets under capital leases financed by capital lease obligations $ 0 $ 980
======== ==========
Deduction from assets from abandonment of capital lease obligations $ $ 338
======== ==========
Transfer from loans to other real estate owned $ 0 $ 80
======== ==========
</TABLE>
(See notes to consolidated financial statements.)
7
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements
include the accounts of Hardwick Holding Company (HHC) and its
wholly owned subsidiaries, Hardwick Bank and Trust Company (HBT),
Hardwick Service Corporation (HSC), and First National Bank of
Northwest Georgia (FNBNWG), collectively referred to as the
"Company". All significant intercompany balances and
transactions have been eliminated.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates,
although, in the opinion of management, such differences would
not be significant.
In the opinion of management, the accompanying unaudited
consolidated financial statements contain all adjustments
(consisting only of normal recurring adjustments) necessary for
fair statement of the consolidated financial position and the
results of operations of the Company for the interim periods.
The results of operations for the nine month period ended
September 30, 1996 are not necessarily indicative of the results
which may be expected for the entire year.
(2) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company is a participant in financial instruments with off-
balance-sheet risk. These instruments are entered into in the
normal course of business to meet the financing needs of its
customers and to reduce the Company's own exposure to
fluctuations in interest rates. These financial instruments
include commitments to extend credit and standby letters of
credit. These instruments involve, to varying degrees, elements
of credit and interest rate risk in excess of the amount
recognized in the consolidated balance sheets. The contract
amounts of these instruments reflect the extent of involvement
the Company has in particular classes of financial instruments.
The Company's exposure to credit loss in the event of
nonperformance by the counterparty to the financial instrument
for commitments to extend credit and standby letters of credit is
represented by the contractual amount of these instruments. The
Company uses the same credit and collateral policies in making
commitments and conditional obligations as it does for on-
balance-sheet instruments.
HBT and FNBNWG grant various types of loans and financial
instruments to customers within their respective market areas
(primarily Northwest Georgia). Although the Company has a
8
<PAGE>
diversified loan portfolio, a significant portion of the
Company's loans originate from customers that are directly or
indirectly related to the carpet industry. Notably,
approximately 40% of the work force in the Company's market area
is employed by companies directly related to the carpet industry.
Adverse economic trends in the carpet industry could impair these
customers' ability to repay their obligations and result
unfavorably on the results of operations of the Company.
Commitments to extend credit are agreements to lend to a customer
as long as there is no violation of any condition established in
the contract. Commitments generally have fixed expiration dates
or other termination clauses and may require payment of a fee.
Since many of the commitments are expected to expire without
being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Total commitments to extend
credit at September 30, 1996, were approximately $63,648,000.
HBT and FNBNWG evaluate each customer's creditworthiness on a
case-by-case basis. The amount of collateral obtained, if deemed
necessary by HBT and FNBNWG, upon extension of credit is based on
management's credit evaluation of the customers. Collateral held
varies but may include accounts receivable, inventory, property,
plant and equipment, residential real estate, and income-
producing commercial properties.
Standby letters of credit are conditional commitments issued by
HBT and FNBNWG to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to support
public and private borrowing arrangements, including commercial
paper, bond financing and similar transactions. The credit risk
involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The
collateral varies but may include accounts receivable, inventory,
property, plant and equipment and residential real estate for
those commitments for which collateral is deemed necessary. The
Company had irrevocable standby letters of credit of
approximately $1,390,000 outstanding at September 30, 1996.
(3) LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted Statements of
Accounting Standards No. 121 (FAS 121) Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of. The adoption of this standard did not have a
significant impact on the financial condition or results of
operations of the Company.
(4) CONTINGENCIES
The Company is involved in litigation and other legal proceedings
arising in the course of its normal business activities.
Although the ultimate outcome of these matters cannot be
determined at this time, it is the opinion of management that
none of these matters, when resolved, will have a significant
effect on the Company's financial condition or results of
operations.
9<PAGE>
(5) EARNINGS PER SHARE
Earnings per share is calculated on the basis of weighted average
number of shares outstanding, which was 4,048,172 for the nine
month period ended September 30, 1996 and 4,072,513 for the nine
month period ended September 30, 1995.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION
- ------------------
Total assets decreased by approximately $8,354,000 from
approximately $444,817,000 at December 31, 1995, to approximately
$436,463,000 at September 30, 1996. The principal fluctuations
were in loans, investment securities, federal funds sold and cash
and due from banks. Cash and due from banks decreased
approximately $9,918,000, to approximately $21,253,000 as of
September 30, 1996, from approximately $31, 171,000 at December
31, 1995. Investment securities decreased approximately
$26,163,000 to approximately $109,043,000 at September 30, 1996,
from approximately $135,206,000 at December 31, 1995. The
decreases in cash and due from banks and investment securities
were partially offset by an increase in net loans of
approximately $26,374,000 or 11.03% from approximately
$239,189,000 at December 31, 1995, to approximately $265,563,000
at September 30, 1996. HHC's cash and cash equivalents reflected
a net decrease of approximately $7,718,000 or 18.3.0% for the
nine month period ended September 30, 1996.
Savings and other interest-bearing deposit accounts decreased
approximately $9,603,000 or 3.1% during the nine-months ended
September 30, 1996, to approximately $296,244,000. It is
management's opinion that HHC maintains competitive deposit rates
while exercising prudent strategies in competing with local
institutions. Although rates paid on deposit accounts have
increased during the nine-months ended September 30, 1996, HHC
has maintained its investment strategies and has remained
competitive with the financial institutions in its market area.
Average rates paid on deposits for the current period were
approximately 4.4% compared to 3.8% for the same period in the
preceding year.
At September 30, 1996, HHC's financial position continued to
reflect strong equity and liquidity, with an equity to assets
ratio of 10.7%. At September 30, 1996, 57% of HHC's loans were
in real estate loans (including mortgage and construction loans),
20% in commercial loans (including agricultural loans), 14% in
consumer loans (including credit cards) and other loans were 9%.
HHC's loan to deposit ratio was 69% at September 30, 1996, and
45% of all deposits were invested in time deposits.
In the event of higher than anticipated requirements related to
loan commitments or deposit withdrawals, HHC's bank subsidiaries
maintain federal funds lines with regional banks. Also, the bank
subsidiaries of the Company have become members of the Federal
Home Loan Bank and have credit lines to draw from. At September
30, 1996 approximately $325,000 was outstanding under the Federal
Home Loan Bank lines of credit.
11
<PAGE>
The following table represents the changes in consolidated
stockholders' equity for the nine-months ended September 30,
1996:
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1995 $ 46,830,000
Net income 2,856,000
Change in unrealized gain on securities available-for-sale, net (1,016,000)
Purchase of treasury stock (1,208,000)
Amortization of deferred compensation-restricted stock plan 18,000
Cash dividends declared (967,000)
-------------
Balance, September 30, 1996 $ 46,513,000
=============
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
For the three-months ended September 30, 1996 and 1995:
NET INTEREST INCOME
Net interest income after provision for loan losses for the
three-month period ended September 30, 1996 was approximately
$4,679,000 which was $99,000 or 2.2% more than the $4,580,000 for
the same period the year before. Total interest income increased
by approximately $75,000 or 0.9% while total interest expense
decreased approximately $174,000 or 5.1% for the three month
period ended September 30, 1996, as compared to the three-months
ended in the previous year. Approximately $150,000 was provided
for loan losses during the three month period ended September
30, 1996, as a result of the continued growth in the loan
portfolio of the Company.
Yields on interest-bearing assets were relatively the same for
the quarter ended this year as compared with the preceding year.
Total average interest-bearing assets increased by approximately
$1,379,000 or 0.4% for the current period when compared with the
three-months ended September 30, 1995. Average loans for the
three-months ended September 30, 1996, increased approximately
$19,159,000 or 7.8% more than the average loans for the three-
months ended September 30, 1995. The average yield on loans for
the three-months ended September 30, 1996, was 9.5%, down
approximately .4% from the 9.9% for the three-months ended
September 30, 1995.
Rates paid on interest-bearing liabilities were relatively
unchanged for the three-months ended September 30, 1996 compared
with the three-months ended September 30, 1995. Rates paid in
the current three month period on average are relatively the same
as the rates paid on average for the year ended December 31,
1995. Management's liability pricing strategies include
competitive deposit rates with increased awareness of cash flow
needs within the balance sheet. Management anticipates rates to
increase during the remainder of the year.
12<PAGE>
OTHER NONINTEREST INCOME
Total other noninterest income decreased approximately $178,000
or 16% for the three-months ended September 30, 1996, as
compared with the three-months ended September 30, 1995. The
decrease is primarily due to a decrease in other gains from
abandonment of capital leases of approximately $172,000, a
decrease in net securities gains of approximately $4,000 and a
decrease in service charges on deposit accounts of approximately
$16,000. The decreases were partially offset by an increase in
credit life commissions of approximately $4,000, other fees of
$8,000 and trust income of approximately $12,000.
OTHER NONINTEREST EXPENSES
Total noninterest expenses decreased by approximately $178,000,
or 15.6% for the three-months ended September 30, 1996, as
compared to the same period ended in the preceding year. The
decrease is due principally to the decreases of approximately
$147,000 in salary and employee benefits, approximately $29,000
in occupancy expense and approximately $261,000 in other
noninterest expense. The decrease in salary and employee benefits
is due principally to the reduction in the number of employees.
The Company had approximately 231 full time equivalent employees
at September 30, 1996, compared with approximately 243 full time
equivalent employees at September 30, 1995. The decrease in
occupancy is primarily related to a decrease in repairs and
maintenance due to the low cost of the new electronic data
systems. The other noninterest expense decrease was principally
due to the reduction in losses from the abandonment of software
and computer equipment of approximately $338,000 while being
offset partially by increases in data processing expense of
approximately $88,000 and the decrease of the reversal of FDIC
fees of approximately $11,000.
INCOME TAX PROVISION
The effective tax rates reported for the three-months ended
September 30, 1996 and 1995, were 31.1% and 20.8%, respectively.
RESULTS OF OPERATIONS
- ---------------------
For the nine-months ended September 30, 1996 and 1995:
NET INTEREST INCOME
Net interest income after provision for loan losses for the nine-
month period ended September 30, 1996 was approximately
$13,848,000 which was approximately $85,000 or 0.6% more than the
$13,763,000 for the same period the year before. Total interest
income increased by approximately $464,000 or 1.9% while total
interest expense increased approximately $154,000 or 1.6% for the
nine-month period ended September 30, 1996 as compared to the
nine-months ended in the previous year. There was approximately
$225,000 in provisions for loan losses for current period as
compared with none in the nine-month period ended September 30,
1995. The provision is a result of the continued growth in the
Company's loan portfolio.
13<PAGE>
Yields on interest-bearing assets averaged 8.3% for the current
period compared with 8.1% for the same period the year before.
Total average interest-bearing assets were relatively unchanged
when compared with the nine-months ended September 30, 1995.
Average loans for the nine-months ended September 30, 1996
increased approximately $7,321,000 or 3% more than the average
loans for the nine-months ended September 30, 1995. The average
yield on loans for the nine-months ended September 30, 1996 was
relatively unchanged when compared with the nine-months ended
September 30, 1995.
Earnings from the loan portfolio have also been adversely
affected by the Company's level of nonperforming assets.
Nonaccrual loans and accruing loans contractually past due ninety
days or more were $2,216,000 at September 30, 1996 as compared to
$708,000 at December 31, 1995, representing an increase of
approximately $1,508,000. There was no other real estate at
September 30, 1996.
Nonaccrual loans have increased approximately $481,000 or 9.5%
for the nine-month period ended September 30, 1996 to
approximately $988,000 compared to approximately $507,000 at
December 31, 1995. Interest accruals on nonaccrual loans are
recorded only when they are fully current with respect to
interest and principal and when in the judgment of management,
the loans are estimated to be fully collectible as to both
principal and interest. Interest income on nonaccrual loans
which would have been reported on an accrual basis amounted to
approximately $48,000 during the nine-month period ended
September 30, 1996. Nonaccrual loan interest collected and
reported in the nine-month period ended September 30, 1996, was
approximately $68,000.
Rates paid on interest-bearing liabilities averaged 4.4% for the
nine-months ended September 30, 1996 compared with 3.9% for the
nine-months ended September 30, 1995. Rates paid in the current
nine-month period on average are relatively the same as the rates
paid on average for the year ended December 31, 1995.
Management's liability pricing strategies include competitive
deposit rates with increased awareness of cash flow needs within
the balance sheet. Management anticipates rates to increase
during the remainder of the year.
OTHER NONINTEREST INCOME
Total other income was relatively unchanged for the current nine-
months ended compared with the same period in the preceding year.
OTHER NONINTEREST EXPENSES
Total noninterest expenses decreased by approximately $884,000,
or 6.4% for the nine-months ended September 30, 1996, as compared
to the same period ended in the preceding year. The decrease is
due principally to the decrease of approximately $497,000 in
14<PAGE>
salary and employee benefits, a decrease of approximately
$192,000 in net occupancy expense and a decrease of
approximately $195,000 in other noninterest expense. Salary and
employee benefits decreased primarily as a result of the
reduction in the number of full time employees. Net occupancy
has decreased principally due to low cost of maintenance and
repairs on the new electronic data processing systems. Repairs
and maintenance were down approximately $78,000, depreciation was
down approximately $20,000, property taxes were down
approximately $83,000 and other occupancy expense was down
approximately $11,000. The decrease in other noninterest expense
was due to decreases in FDIC fees of approximately $370,000;
professional fees of approximately $21,000; supplies expense of
approximately $46,000; dues and subscriptions of approximately
$19,000; loss on disposition of assets of approximately $64,000
and ATM expense of approximately $37,000.
The decreases in other noninterest expenses were partially offset
by increases in data processing of approximately $256,000; cash
short and over of approximately $56,000; travel and entertainment
of approximately $34,000 and advertising of approximately
$16,000.
INCOME TAX PROVISION
The effective tax rates reported for the nine-months ended
September 30, 1996 and 1995 were 30% and 24%, respectively.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Liquidity is achieved through the continual maturing of interest-
earning assets, as well as by investing in short term marketable
securities. Liquidity is also available through deposit growth,
borrowing capacity, loan sales and repayments of principal on
loans and securities.
High levels of liquidity are normally obtained at a net interest
cost due to lower yields on short term, liquid earning assets and
higher interest expense usually associated with the extension of
deposit maturities. The trade-off of the level of desired
liquidity versus its cost is evaluated in determining the
appropriate amount of liquidity at any one time.
For the nine-months ended September 30, 1996, cash and cash
equivalents decreased approximately $7,718,000 or 18% from
December 31, 1995. Operating activities provided cash and cash
equivalents of approximately $5,785,000, while investing and
financing activities used approximately $2,330,000 and
$11,173,000 respectively. Net income of approximately $2,856,000,
depreciation and amortization not requiring the use of cash of
approximately $1,832,000 and a increase in other liabilities of
approximately $1,208,000 were the principal sources of funds
provided from operating activities while being partially offset
by an increase in other assets of approximately $487,000.
15<PAGE>
Funds used by investing activities were principally from net
loans originated of approximately $26,374,000, purchases of
investment securities available-for-sale of approximately
$21,948,000 and purchases of premises and equipment of
approximately $514,000, while being partially offset by
maturities and sales of investment securities available-for-sale
of approximately $25,417,000 and $21,043,000 respectively.
The cash used by financing activities was principally due to the
net decrease in deposits of approximately $8,862,000, a net
decrease in federal funds purchased and securities sold under
agreements to repurchase of approximately $1,275,000, payments on
notes payable and capital lease obligations of approximately
$381,000, purchase of treasury stock of approximately $1,208,000
and dividends paid of approximately $726,000. The cash used by
financing was partially offset by proceeds from a note payable to
bank of approximately $1,100,000.
CAPITAL RESOURCES
HHC and its subsidiary banks are subject to a minimum Tier 1
capital to risk-weighted assets ratio of 6% and a total capital
(Tier 1 plus Tier 2) to risk-weighted assets ratio of 10%. The
Federal Reserve Board ("Board") has also established an
additional capital adequacy guideline referred to as the Tier 1
leverage ratio that measures the ratio of Tier 1 Capital to
average quarterly assets. The most highly rated bank holding
companies will be required to maintain a minimum Tier 1 leverage
ratio of 5%. The required ratio will be based on the Board's
assessment of the individual bank holding company's asset
quality, earnings performance, interest-rate risk and liquidity.
Bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital
positions substantially above the minimum supervisory levels
without significant reliance on intangible assets.
16
<PAGE>
The following tables represent HHC's unaudited regulatory capital
position at September 30, 1996:
<TABLE>
<CAPTION>
Risk Based Capital Ratios: Amount Ratio
----------- -----
(thousands)
<S> <C> <C>
Tier 1 Capital $ 41,014 12.74%
Tier 1 Capital minimum requirement $ 19,309 6.00%
---------- -----
Excess $ 21,705 6.74%
========== =====
Total Capital $ 45,068 14.00%
Total Capital minimum requirement $ 32,182 10.00%
---------- -----
Excess $ 12,886 4.00%
========== =====
Risk adjusted assets net of goodwill and
excess loan loss allowance $ 321,818
Leverage Ratio:
Tier 1 Capital to adjusted total assets
("Leverage Ratio") $ 41,014 9.59%
Minimum leverage requirement $ 21,388 5.00%
---------- -----
Excess $ 19,626 4.59%
========== =====
Average total assets, net of goodwill <F1> $ 427,758
<FN>
<F1> Average total assets, net of goodwill for the three-months ended September 30, 1996.
</FN>
</TABLE>
HHC is a legal entity separate and distinct from its wholly owned
subsidiaries HBT and FNBNWG. Most of the revenues of HHC result from
dividends paid to it by HBT and FNBNWG. There are statutory and
regulatory requirements applicable to the payment of dividends by HBT and
FNBNWG as well as by HHC to its shareholders. HHC declared approximately
$967,000, or $0.24 per share and had paid approximately $726,000, or
$0.18 per share in cash dividends to its common shareholders for the
nine-months ended September 30, 1996. The dividend declared and unpaid
of approximately $241,000 or $0.06 per share at September 30, 1996, was
paid on October 19, 1996.
On October 19,1996, HHC declared and paid a special dividend of $.20 per
common share to its common shareholders for recognition of twenty years
of ownership. The funds were provided by a special dividend to HHC by
HBT, which was approved by the Georgia Department of Banking and Finance.
17
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
PART II
ITEM 1. LEGAL PROCEEDINGS
HHC is not aware of any material pending legal proceedings to which HHC
or any of its subsidiaries is a party or to which any of their property
is subject.
ITEM 2. CHANGES IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a.) Exhibits
--------
Exhibit 10.4 - Restricted Stock Award Agreement by and
among Hardwick Holding Company, First National Bank of
Northwest Georgia, and Sam Smith.
Exhibit 10-5 - Restricted Stock Award Agreement by and
among Hardwick Holding Company, First National Bank of
Northwest Georgia, and Richard E. Drews
Exhibit 27- Financial Data Schedule (for SEC use only)
b.) Reports on Form 8-K. There were no reports on Form 8-K.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned duly authorized.
CORPORATION HARDWICK HOLDING COMPANY
- ----------- ------------------------
Date: November 11, 1996 By: /s/Michael Robinson
Michael Robinson
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
19
HARDWICK HOLDING COMPANY
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT made as of this 3rd day of June,
1996, by and among HARDWICK HOLDING COMPANY, a Georgia
corporation (the "Corporation"), FIRST NATIONAL BANK OF NORTHWEST
GEORGIA, a wholly-owned subsidiary of the Corporation (the
"Bank") and SAM SMITH (the "Executive");
WHEREAS, the Bank has two divisions, Peoples First
National Bank in Cartersville, Georgia ("Cartersville") and
Calhoon First National Bank in Calhoon, Georgia ("Calhoon"); and
WHEREAS, the Executive is employed by Cartersville and
is an integral part of the Bank's management team; and
WHEREAS, the Corporation and the Bank wish to assure
both themselves and their key employees of continuity of
management and objective control of the Corporation and the Bank;
and
WHEREAS, the Corporation and the Bank consider it
desirable and in their best interests to provide the Executive
with an added incentive to advance the interests of the
Corporation and the Bank through grants of restricted stock of
the Corporation, subject to the terms and conditions provided for
herein; and
WHEREAS, the Corporation and the Bank further consider
it desirable and in their best interests to enter into an
agreement which provides that in the event the Executive's
employment is terminated in conjunction with a change in control
of the Corporation, the Executive shall, subject to the terms and
conditions provided for herein, receive a termination payment,
which payment is not intended to exceed the compensation the
Executive could have reasonably expected to receive in absence of
a change in control of the Corporation;
NOW, THEREFORE, the parties agree as follows:
1. RESTRICTED STOCK AWARD. (a) Subject to the
provisions of Paragraphs 2 and 3 below, the Corporation agrees to
award to Executive shares of the Corporation's restricted Common
Stock, $0.50 par value per share (the "Restricted Stock"), if
Cartersville's "Average Loan Balance" (as defined in Paragraph
1(b) below) determined during the period December 1 until January
31 of each applicable year (the "Measurement Period") equals or
exceeds the applicable Target Level for such year as set forth in
the following schedule:
<PAGE>
Number of Shares of
Measurement Period for Average Loan Restricted Stock to
Determining Average Balance be Awarded if Target
Loan Balance Target Level Level is Achieved
------------ ------------ --------------------
December 1- January $ 40,000,000 2,500 shares
31, 1997 or or
$ 45,000,000 5,000 shares
December 1- January $ 48,000,000 2,500 shares
31, 1998 or or
$ 53,000,000 5,000 shares
December 1- January $ 60,000,000 2,500 shares
31, 1999 or or
$ 70,000,000 5,000 shares
December 1- January $ 85,000,000 All remaining shares
31, 2000
December 1- January $ 95,000,000 All remaining shares
31, 2001
December 1- January $110,000,000 All remaining shares
31, 2002
In no event shall the aggregate number of shares of Restricted
Stock awarded to Executive pursuant to this Agreement exceed a
maximum of 5,000 shares. If, during a particular Measurement
Period, the higher of two applicable Target Levels is achieved,
only the number of shares applicable to the higher Target Level
shall be awarded.
(b) Cartersville's Average Loan Balance shall be
computed by the Corporation's accountants net of "allowance for
loan and lease losses" in accordance with industry banking
standards. For purposes of computing the Average Loan Balance:
(i) loans originated by Cartersville in which Hardwick Bank and
Trust ("Hardwick") participates shall be counted; (ii) loans
originated by Hardwick in which Calhoon participates shall be
disregarded; and (iii) loans originated by unrelated banks in
which Cartersville participates shall count only if such loans
are fully priced in accordance with Cartersville's origination
standards for comparable loans.
(c) Following the determination of the Cartersville's
Average Loan Balance for the applicable Measurement Period, the
Executive will be issued a certificate (or certificates)
representing the shares of Restricted Stock, if any, awarded for
such Measurement Period. For purposes of this Agreement, the
shares of Restricted Stock shall be deemed to have been awarded
on the December 31 occurring during the applicable Measurement
Period (the "Award Date").
(d) On and after the Award Date, the Executive will be
considered a shareholder with respect to all of the shares of
awarded Restricted Stock (including those shares which remain
forfeitable), including the right to vote such shares, and to
receive all dividends and other distributions with respect to
such shares. If, as a result of a stock split, stock dividend,
combination of shares, or any other exchange for other securities
by reclassification, reorganization, merger, recapitalization or
otherwise, the Executive as owner of the shares of Restricted
Stock will be entitled to new, additional or different shares of
stock or securities; any such new, additional or different shares
or securities shall be subject to the same rights and
restrictions as the shares of Restricted Stock.
2. VESTING OF RESTRICTED STOCK. The Restricted Stock
shall become nonforfeitable in accordance with the following
provisions:
(a) Shares of Restricted Stock awarded to Executive
pursuant to Paragraph 1 above shall become nonforfeitable as of
March 20, 2008, provided Executive is employed by the Bank or
Corporation on such date. Except as provided in Paragraph 2(b)
below, in the event Executive terminates his employment for any
reason prior to such date, any and all awards of Restricted Stock
made to Executive shall be immediately forfeited and canceled as
of Executive's date of termination without any payment therefor.
(b) Notwithstanding the provisions of (a) above, in
the event of a Change in Control of the Corporation, as defined
in Paragraph 4, all shares of Restricted Stock which had been
awarded to Executive pursuant to Paragraph 1 above shall become
nonforfeitable.
3. RESTRICTIONS ON RESTRICTED STOCK. The Restricted
Stock shall be subject to the following restrictions:
(a) During his employment with the Corporation and/or
the Bank, the Executive shall not have the right to sell,
transfer, assign, pledge, hypothecate or otherwise convey his
interest in the shares of Restricted Stock (whether or not such
interest is nonforfeitable), without the prior written consent of
the Corporation. Any attempt to transfer or assign the shares of
Restricted Stock in violation of this transfer restriction shall
not be recognized by the Corporation and shall be null and void.
The transfer and assignment restrictions provided for in this
Paragraph (a) shall expire upon the earlier of March 20, 2008 or
a Change in Control as defined in Paragraph 4.
(b) The share certificate(s) representing the shares
of Restricted Stock shall have endorsed thereon a legend
reflecting the restrictions of this Paragraph 3.
4. BENEFITS PAYABLE UPON CHANGE IN CONTROL.
(a) No provision of this Paragraph 4 shall be
operative unless, during the term of this Agreement, there has
been a Change in Control of the Corporation. Upon such a Change
in Control of the Corporation, all the provisions of this
Paragraph 4 shall become operative immediately.
(b) If a Change in Control occurs during the term of
this Agreement and the Executive's employment is terminated (i)
within twelve (12) months following the date of the Change in
Control, or (ii) within six (6) months prior to the date of the
Change in Control as a part of such Change in Control, as a
result of Involuntary Termination or Voluntary Termination, the
Executive shall be entitled to a lump sum cash payment equal to
2.99 times the greater of the Executive's total compensation as
shown on his federal W-2 Form (or similar form replacing such
form) or the Executive's annualized rate of salary, each
determined for the calendar year preceding the calendar year in
which the Executive's employment is terminated, reduced by the
Market Value of the shares of nonforfeitable Restricted Stock to
which the Executive is entitled pursuant to Paragraph 2 of this
Agreement. The payment to the Executive shall be made not later
than fifteen (15) days after his termination of employment.
(c) For the purposes of this Paragraph 4, the
following terms shall have the meanings set forth below:<PAGE>
(i) The term "Change in Control" shall mean (A)
the acquisition, directly or indirectly, by any
"person" (excluding any "person" who on the date hereof
owns or controls 10% or more of the voting power of the
Corporation's Common Stock), as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended, within any twelve (12) month
period of securities of the Corporation representing an
aggregate of twenty-five percent (25%) or more of the
combined voting power of the Corporation's then
outstanding securities; provided, that for purposes of
this definition, "acquisition" shall not include shares
which are received by a person through gift,
inheritance, under a will or otherwise through the laws
of descent and distribution; (B) during any period of
two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of the
Corporation (the "Board"), cease for any reason to
constitute at least a majority thereof, unless the
election of each new director was approved in advance
by a vote of at least a majority of the directors then
still in office who were directors at the beginning of
the period; or, (C) the occurrence of any other event
or circumstance which is not covered by (i) or (ii)
above which the Board determines affects control of the
Corporation and adopts a resolution that such event or
circumstance constitutes a Change in Control for the
purposes of this Agreement.
(ii) The term "Cause" shall mean and be limited
to any act that constitutes, on the part of the
Executive, fraud, dishonesty, a felony or gross
malfeasance of duty and that directly results in
material injury to the Corporation or the Bank.
(iii) The term "Disability" shall mean the
Executive's inability as a result of physical or mental
incapacity to substantially perform his duties for the
Corporation or the Bank on a full-time basis for a
period of six (6) months.
(iv) The term "Involuntary Termination" shall
mean termination of employment that is involuntary on
the part of the Executive and that occurs for reasons
other than for Cause, Disability, voluntary retirement
(including early retirement) within the meaning of the
Corporation's retirement plan, or death.
(v) The term "Voluntary Termination" shall mean
termination of employment that is voluntary on the part
of the Executive, and, in the judgment of the
Executive, is due to (A) a reduction of the Executive's
responsibilities resulting from the assignment to the
Executive of any duties inconsistent with his position,
duties or responsibilities as in effect immediately
prior to the Change in Control; (B) a reduction in the
Executive's compensation or benefits, or (C) a forced
relocation of the Executive or significant increase in
the Executive's travel requirements. A termination
shall not be considered voluntary within the meaning of
this Agreement if such termination is a result of
Cause, Disability, voluntary retirement (including
early retirement) within the meaning of the
Corporation's retirement plan, or death of the
Executive.<PAGE>
(vi) The term "Market Value" shall mean a price
in no event less than the average price per share paid for the
Corporation's Common Stock during the three (3) month period
preceding the occurrence of a Change in Control.
5. LIMITATION OF BENEFITS.
(a) Notwithstanding anything in this Agreement to the
contrary, if any of the compensation or benefits payable, or to
be provided, to the Executive by the Corporation under this
Agreement are treated as Excess Severance Payments (whether alone
or in conjunction with payments or benefits outside of this
Agreement), the compensation and benefits provided under this
Agreement shall be modified or reduced in the manner provided in
Paragraph (b) below to the extent necessary so that the
compensation and benefits payable or to be provided to Executive
under this Agreement that are treated as Severance Payments, as
well as any compensation or benefits provided outside of this
Agreement that are so treated, shall not cause the Corporation to
have paid an Excess Severance Payment. In computing such amount,
the parties shall take into account all provisions of Code
Section 280G, and the regulations thereunder, including making
appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation.
(b) In the event that the amount of any Severance
Payments which would be payable to or for the benefit of the
Executive under this Agreement must be modified or reduced to
comply with this Paragraph, the Executive shall direct which
Severance Payments are to be modified or reduced; provided,
however, that no increase in the amount of any payment shall be
made without the consent of the Corporation.
(c) This Paragraph shall be interpreted so as to avoid
the imposition of excise taxes on the Executive under Section
4999 of the Code or the disallowance of a deduction to the
Corporation pursuant to Section 280G(a) of Code with respect to
amounts payable under this Agreement. In connection with any
Internal Revenue Service examination, audit or other inquiry, the
Corporation and Executive agree to take action to provide, and to
cooperate in providing, evidence to the Internal Revenue Service
(and, if applicable, the state revenue department) that the
compensation and benefits provided under this Agreement do not
result in the payment of Excess Severance Payments.
(d) In addition to the limits otherwise provided in
this Article, to the extent permitted by law the Executive may in
his sole discretion elect to reduce (or change the timing of) any
payments he may be eligible to receive under this Agreement to
prevent the imposition of excise taxes on the Executive under
Section 4999 of the Code or otherwise reduce or delay liability
for taxes owed under the Code.
(e) For the purposes of this Paragraph 5, the
following terms shall have the meanings set forth below:
(i) The term "Excess Severance Payment" shall
have the same meaning as the term "excess parachute
payment" defined in Section 280G(b)(1) of the Code.
(ii) The term "Severance Payment" shall have the
same meaning as the term "parachute payment" defined in
Section 280G(b)(2) of the Code.
<PAGE>
(iii) The term "Reasonable Compensation" shall
have the same meaning as provided in Section 280G(b)(4)
of the Code.
6. MISCELLANEOUS. (a) This Agreement shall be
binding upon, and inure to the benefit of, the Executive and his
executors, representatives and assigns, and the Corporation and
the Bank and their successors and assigns.
(b) This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of
Georgia.
(c) The Executive represents and warrants that he is
acquiring the shares of Restricted Stock for investment purposes
only, and not with a view to distribution thereof. The Executive
is aware that the shares of Restricted Stock will not be
registered under the federal or any state securities laws and
that, in addition to the other restrictions on the shares, they
may not be able to be transferred unless an exemption from
registration is available. By making this award of Restricted
Stock, the Corporation is not undertaking any obligation to
register the shares of Restricted Stock under any federal or
state securities laws.
(d) This Agreement and the award of Restricted Stock
shall not be construed as giving to the Executive the right to be
retained in the employ of the Corporation, the Bank or any of
their affiliates.
(e) The Executive shall be responsible for all
federal, state and local income taxes payable with respect to
this award of Restricted Stock. The Executive shall have the
right to make such elections under the Internal Revenue Code of
1986, as amended, as are available in connection with this award
of Restricted Stock.
(f) This Agreement may only be amended by an
instrument in writing executed by both of the parties.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
Executive: HARDWICK HOLDING COMPANY
/s/ Sam Smith By: /s/ Kenneth Boring
Title: Chairman
FIRST NATIONAL BANK OF
NORTHWEST GEORGIA
By: /s/ David J. L_________
Title: President
HARDWICK HOLDING COMPANY
RESTRICTED STOCK AWARD AGREEMENT
THIS AGREEMENT made as of this 13th day of August,
1996, by and among HARDWICK HOLDING COMPANY, a Georgia
corporation (the "Corporation"), FIRST NATIONAL BANK OF NORTHWEST
GEORGIA, a wholly-owned subsidiary of the Corporation (the
"Bank") and RICHARD E. DREWS (the "Executive");
WHEREAS, the Bank has two divisions, Peoples First
National Bank in Cartersville, Georgia ("Cartersville") and
Calhoun First National Bank in Calhoun, Georgia ("Calhoun"); and
WHEREAS, the Executive is employed by Cartersville and
is an integral part of the Bank's management team; and
WHEREAS, the Corporation and the Bank wish to assure
both themselves and their key employees of continuity of
management and objective control of the Corporation and the Bank;
and
WHEREAS, the Corporation and the Bank consider it
desirable and in their best interests to provide the Executive
with an added incentive to advance the interests of the
Corporation and the Bank through grants of restricted stock of
the Corporation, subject to the terms and conditions provided for
herein; and
WHEREAS, the Corporation and the Bank further consider
it desirable and in their best interests to enter into an
agreement which provides that in the event the Executive's
employment is terminated in conjunction with a change in control
of the Corporation, the Executive shall, subject to the terms and
conditions provided for herein, receive a termination payment,
which payment is not intended to exceed the compensation the
Executive could have reasonably expected to receive in absence of
a change in control of the Corporation;
NOW, THEREFORE, the parties agree as follows:
1. RESTRICTED STOCK AWARD. (a) Subject to the
provisions of Paragraphs 2 and 3 below, the Corporation agrees to
award to Executive shares of the Corporation's restricted Common
Stock, $0.50 par value per share (the "Restricted Stock"), if
Cartersville's "Average Loan Balance" (as defined in Paragraph
1(b) below) determined during the period December 1 until January
31 of each applicable year (the "Measurement Period") equals or
exceeds the applicable Target Level for such year as set forth in
the following schedule:
<PAGE>
Number of Shares of
Measurement Period for Average Loan Restricted Stock to
Determining Average Balance be Awarded if Target
Loan Balance Target Level Level is Achieved
------------ ------------ --------------------
December 1- January $ 40,000,000 833 shares
31, 1997 or or
$ 45,000,000 1,666 shares
December 1- January $ 48,000,000 833 shares
31, 1998 or or
$ 53,000,000 1,666 shares
December 1- January $ 60,000,000 834 shares
31, 1999 or or
$ 70,000,000 1,668 shares
December 1- January $ 85,000,000 All remaining shares
31, 2000
December 1- January $ 95,000,000 All remaining shares
31, 2001
December 1- January $110,000,000 All remaining shares
31, 2002
In no event shall the aggregate number of shares of Restricted
Stock awarded to Executive pursuant to this Agreement exceed a
maximum of 5,000 shares. If, during a particular Measurement
Period, the higher of two applicable Target Levels is achieved,
only the number of shares applicable to the higher Target Level
shall be awarded.
(b) Cartersville's Average Loan Balance shall be
computed by the Corporation's accountants net of "allowance for
loan and lease losses" in accordance with industry banking
standards. For purposes of computing the Average Loan Balance:
(i) loans originated by Cartersville in which Hardwick Bank and
Trust ("Hardwick") participates shall be counted; (ii) loans
originated by Hardwick in which Calhoun participates shall be
disregarded; and (iii) loans originated by unrelated banks in
which Cartersville participates shall count only if such loans
are fully priced in accordance with Cartersville's origination
standards for comparable loans.
(c) Following the determination of the Cartersville's
Average Loan Balance for the applicable Measurement Period, the
Executive will be issued a certificate (or certificates)
representing the shares of Restricted Stock, if any, awarded for
such Measurement Period. For purposes of this Agreement, the
shares of Restricted Stock shall be deemed to have been awarded
on the December 31 occurring during the applicable Measurement
Period (the "Award Date").
(d) On and after the Award Date, the Executive will be
considered a shareholder with respect to all of the shares of
awarded Restricted Stock (including those shares which remain
forfeitable), including the right to vote such shares, and to
receive all dividends and other distributions with respect to
such shares. If, as a result of a stock split, stock dividend,
combination of shares, or any other exchange for other securities
by reclassification, reorganization, merger, recapitalization or
otherwise, the Executive as owner of the shares of Restricted
Stock will be entitled to new, additional or different shares of
stock or securities; any such new, additional or different shares
or securities shall be subject to the same rights and
restrictions as the shares of Restricted Stock.
2. VESTING OF RESTRICTED STOCK. The Restricted Stock
shall become nonforfeitable in accordance with the following
provisions:
(a) Shares of Restricted Stock awarded to Executive
pursuant to Paragraph 1 above shall become nonforfeitable as of
March 20, 2008, provided Executive is employed by the Bank or
Corporation on such date. Except as provided in Paragraph 2(b)
below, in the event Executive terminates his employment for any
reason prior to such date, any and all awards of Restricted Stock
made to Executive shall be immediately forfeited and canceled as
of Executive's date of termination without any payment therefor.
(b) Notwithstanding the provisions of (a) above, in
the event of a Change in Control of the Corporation, as defined
in Paragraph 4, all shares of Restricted Stock which had been
awarded to Executive pursuant to Paragraph 1 above shall become
nonforfeitable.
3. RESTRICTIONS ON RESTRICTED STOCK. The Restricted
Stock shall be subject to the following restrictions:
(a) During his employment with the Corporation and/or
the Bank, the Executive shall not have the right to sell,
transfer, assign, pledge, hypothecate or otherwise convey his
interest in the shares of Restricted Stock (whether or not such
interest is nonforfeitable), without the prior written consent of
the Corporation. Any attempt to transfer or assign the shares of
Restricted Stock in violation of this transfer restriction shall
not be recognized by the Corporation and shall be null and void.
The transfer and assignment restrictions provided for in this
Paragraph (a) shall expire upon the earlier of March 20, 2008 or
a Change in Control as defined in Paragraph 4.
(b) The share certificate(s) representing the shares
of Restricted Stock shall have endorsed thereon a legend
reflecting the restrictions of this Paragraph 3.
4. BENEFITS PAYABLE UPON CHANGE IN CONTROL.
(a) No provision of this Paragraph 4 shall be
operative unless, during the term of this Agreement, there has
been a Change in Control of the Corporation. Upon such a Change
in Control of the Corporation, all the provisions of this
Paragraph 4 shall become operative immediately.
(b) If a Change in Control occurs during the term of
this Agreement and the Executive's employment is terminated (i)
within twelve (12) months following the date of the Change in
Control, or (ii) within six (6) months prior to the date of the
Change in Control as a part of such Change in Control, as a
result of Involuntary Termination or Voluntary Termination, the
Executive shall be entitled to a lump sum cash payment equal to
2.99 times the greater of the Executive's total compensation as
shown on his federal W-2 Form (or similar form replacing such
form) or the Executive's annualized rate of salary, each
determined for the calendar year preceding the calendar year in
which the Executive's employment is terminated, reduced by the
Market Value of the shares of nonforfeitable Restricted Stock to
which the Executive is entitled pursuant to Paragraph 2 of this
Agreement. The payment to the Executive shall be made not later
than fifteen (15) days after his termination of employment.
(c) For the purposes of this Paragraph 4, the
following terms shall have the meanings set forth below:<PAGE>
(i) The term "Change in Control" shall mean (A)
the acquisition, directly or indirectly, by any
"person" (excluding any "person" who on the date hereof
owns or controls 10% or more of the voting power of the
Corporation's Common Stock), as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended, within any twelve (12) month
period of securities of the Corporation representing an
aggregate of twenty-five percent (25%) or more of the
combined voting power of the Corporation's then
outstanding securities; provided, that for purposes of
this definition, "acquisition" shall not include shares
which are received by a person through gift,
inheritance, under a will or otherwise through the laws
of descent and distribution; (B) during any period of
two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of the
Corporation (the "Board"), cease for any reason to
constitute at least a majority thereof, unless the
election of each new director was approved in advance
by a vote of at least a majority of the directors then
still in office who were directors at the beginning of
the period; or, (C) the occurrence of any other event
or circumstance which is not covered by (i) or (ii)
above which the Board determines affects control of the
Corporation and adopts a resolution that such event or
circumstance constitutes a Change in Control for the
purposes of this Agreement.
(ii) The term "Cause" shall mean and be limited
to any act that constitutes, on the part of the
Executive, fraud, dishonesty, a felony or gross
malfeasance of duty and that directly results in
material injury to the Corporation or the Bank.
(iii) The term "Disability" shall mean the
Executive's inability as a result of physical or mental
incapacity to substantially perform his duties for the
Corporation or the Bank on a full-time basis for a
period of six (6) months.
(iv) The term "Involuntary Termination" shall
mean termination of employment that is involuntary on
the part of the Executive and that occurs for reasons
other than for Cause, Disability, voluntary retirement
(including early retirement) within the meaning of the
Corporation's retirement plan, or death.
(v) The term "Voluntary Termination" shall mean
termination of employment that is voluntary on the part
of the Executive, and, in the judgment of the
Executive, is due to (A) a reduction of the Executive's
responsibilities resulting from the assignment to the
Executive of any duties inconsistent with his position,
duties or responsibilities as in effect immediately
prior to the Change in Control; (B) a reduction in the
Executive's compensation or benefits, or (C) a forced
relocation of the Executive or significant increase in
the Executive's travel requirements. A termination
shall not be considered voluntary within the meaning of
this Agreement if such termination is a result of
Cause, Disability, voluntary retirement (including
early retirement) within the meaning of the
Corporation's retirement plan, or death of the
Executive.<PAGE>
(vi) The term "Market Value" shall mean a price
in no event less than the average price per share paid for the
Corporation's Common Stock during the three (3) month period
preceding the occurrence of a Change in Control.
5. LIMITATION OF BENEFITS.
(a) Notwithstanding anything in this Agreement to the
contrary, if any of the compensation or benefits payable, or to
be provided, to the Executive by the Corporation under this
Agreement are treated as Excess Severance Payments (whether alone
or in conjunction with payments or benefits outside of this
Agreement), the compensation and benefits provided under this
Agreement shall be modified or reduced in the manner provided in
Paragraph (b) below to the extent necessary so that the
compensation and benefits payable or to be provided to Executive
under this Agreement that are treated as Severance Payments, as
well as any compensation or benefits provided outside of this
Agreement that are so treated, shall not cause the Corporation to
have paid an Excess Severance Payment. In computing such amount,
the parties shall take into account all provisions of Code
Section 280G, and the regulations thereunder, including making
appropriate adjustments to such calculation for amounts
established to be Reasonable Compensation.
(b) In the event that the amount of any Severance
Payments which would be payable to or for the benefit of the
Executive under this Agreement must be modified or reduced to
comply with this Paragraph, the Executive shall direct which
Severance Payments are to be modified or reduced; provided,
however, that no increase in the amount of any payment shall be
made without the consent of the Corporation.
(c) This Paragraph shall be interpreted so as to avoid
the imposition of excise taxes on the Executive under Section
4999 of the Code or the disallowance of a deduction to the
Corporation pursuant to Section 280G(a) of Code with respect to
amounts payable under this Agreement. In connection with any
Internal Revenue Service examination, audit or other inquiry, the
Corporation and Executive agree to take action to provide, and to
cooperate in providing, evidence to the Internal Revenue Service
(and, if applicable, the state revenue department) that the
compensation and benefits provided under this Agreement do not
result in the payment of Excess Severance Payments.
(d) In addition to the limits otherwise provided in
this Article, to the extent permitted by law the Executive may in
his sole discretion elect to reduce (or change the timing of) any
payments he may be eligible to receive under this Agreement to
prevent the imposition of excise taxes on the Executive under
Section 4999 of the Code or otherwise reduce or delay liability
for taxes owed under the Code.
(e) For the purposes of this Paragraph 5, the
following terms shall have the meanings set forth below:
(i) The term "Excess Severance Payment" shall
have the same meaning as the term "excess parachute
payment" defined in Section 280G(b)(1) of the Code.
(ii) The term "Severance Payment" shall have the
same meaning as the term "parachute payment" defined in
Section 280G(b)(2) of the Code.
<PAGE>
(iii) The term "Reasonable Compensation" shall
have the same meaning as provided in Section 280G(b)(4)
of the Code.
6. MISCELLANEOUS. (a) This Agreement shall be
binding upon, and inure to the benefit of, the Executive and his
executors, representatives and assigns, and the Corporation and
the Bank and their successors and assigns.
(b) This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of
Georgia.
(c) The Executive represents and warrants that he is
acquiring the shares of Restricted Stock for investment purposes
only, and not with a view to distribution thereof. The Executive
is aware that the shares of Restricted Stock will not be
registered under the federal or any state securities laws and
that, in addition to the other restrictions on the shares, they
may not be able to be transferred unless an exemption from
registration is available. By making this award of Restricted
Stock, the Corporation is not undertaking any obligation to
register the shares of Restricted Stock under any federal or
state securities laws.
(d) This Agreement and the award of Restricted Stock
shall not be construed as giving to the Executive the right to be
retained in the employ of the Corporation, the Bank or any of
their affiliates.
(e) The Executive shall be responsible for all
federal, state and local income taxes payable with respect to
this award of Restricted Stock. The Executive shall have the
right to make such elections under the Internal Revenue Code of
1986, as amended, as are available in connection with this award
of Restricted Stock.
(f) This Agreement may only be amended by an
instrument in writing executed by both of the parties.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
Executive: HARDWICK HOLDING COMPANY
/s/ Richard E. Drews By: /s/ Kenneth Boring
Title:Chairman
FIRST NATIONAL BANK OF
NORTHWEST GEORGIA
By: /s/ David J. L_________
Title: President
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000787465
<NAME> HARDWICK HOLDING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 21,234
<INT-BEARING-DEPOSITS> 19
<FED-FUNDS-SOLD> 13,300
<TRADING-ASSETS> 0
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<LOANS> 272,110
<ALLOWANCE> 6,547
<TOTAL-ASSETS> 436,463
<DEPOSITS> 381,324
<SHORT-TERM> 3,361
<LIABILITIES-OTHER> 4,227
<LONG-TERM> 1,038
0
0
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<INTEREST-TOTAL> 23,872
<INTEREST-DEPOSIT> 9,613
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<LOAN-LOSSES> 225
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<INCOME-PRETAX> 4,102
<INCOME-PRE-EXTRAORDINARY> 4,102
<EXTRAORDINARY> 0
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<NET-INCOME> 2,853
<EPS-PRIMARY> .71
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<YIELD-ACTUAL> 4.33
<LOANS-NON> 988
<LOANS-PAST> 1,228
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</TABLE>
