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, 1999 Commission File Number 33-43386
------------------ --------
HARDWICK HOLDING COMPANY
------------------------------------------------------
(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 November 12, 1999
4,197,496 Shares
----------------
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <S> <C>
PART I- FINANCIAL INFORMATION
Consolidated Statements of Financial
Position at September 30, 1999 and
December 31, 1998 3
Consolidated Statements of Income
for the Three Months Ended September 30,
1999 and 1998 4
Consolidated Statements of Income
for the Nine Months Ended September 30,
1999 and 1998 5
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30,
1999 and 1998 6-7
Notes to Unaudited Consolidated Financial Statements 8-14
Management's Discussion and Analysis of
Financial Position and Results of Operations 15-26
PART II- OTHER INFORMATION 27
SIGNATURES 28
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
HARDWICK HOLDING COMPANY
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(Dollars in thousands)
SEPTEMBER 30, 1999 DECEMBER 31, 1998
------------------ -----------------
(UNAUDITED)
Assets
<S> <C> <C>
Cash and due from banks $ 22,199 $ 25,305
----------- ----------
Federal funds sold 2,346 43,648
----------- ----------
Total cash and cash equivalents 24,545 68,953
Investment securities, available-for-sale 156,574 144,169
Loans, net 310,154 298,478
Premises and equipment, net 15,220 15,055
Assets under capital lease, net 75 222
Accrued interest receivable 4,383 4,184
Excess of cost over fair value of
Subsidiaries acquired, net of amortization 3,544 3,978
Other assets 3,778 1,881
----------- ----------
Total Assets $ 518,273 $ 536,920
=========== ==========
Liabilities and Stockholders' Equity
Deposits-
Noninterest-bearing $ 94,218 $ 102,027
Interest-bearing 340,645 340,509
----------- ----------
Total deposits 434,863 442,536
Fed funds purchased and securities sold under agreements to repurchase 12,392 25,209
Other borrowed funds 11,100 8,156
Capital lease obligation 97 264
Other liabilities 5,146 4,638
----------- ----------
Total liabilities 463,598 480,803
----------- ----------
Commitments and contingencies (Notes 2 and 4)
Stockholders' Equity-
Common stock, $.50 par value, 10,000,000 shares authorized,
4,197,496 and 4,187,746 shares issued and outstanding at September 30,
1999 and December 31,1998, respectively 2,099 2,094
Additional paid-in capital 20,630 20,479
Retained earnings 35,561 33,406
Other comprehensive income-unrealized (loss) gain on investment
Securities available-for-sale, net of tax (2,797) 1,104
Less deferred compensation from restricted stock plan (818) (966)
----------- ----------
Total stockholders' equity 54,675 56,117
----------- ----------
Total liabilities and stockholders' equity $ 518,273 $ 536,920
========== ===========
(See notes to consolidated financial statements.)
</TABLE>
3
<PAGE>
HARDWICK HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the Three Months Ended
------------------------------
Sepember 30, September 30,
INTEREST INCOME: 1999 1998
----------- -------------
<S> <C> <C>
Interest and fees on loans $ 6,799 $ 7,234
Interest on investment securities-
Taxable 1,914 1,701
Nontaxable 410 305
Interest on federal funds sold and bank deposits 96 232
----------- ----------
Total interest income 9,219 9,472
----------- ----------
INTEREST EXPENSE:
Interest on deposits 3,342 3,838
Interest on securities sold under agreements to repurchase 96 59
Interest on other borrowed funds 131 118
Interest on note payable and capital lease obligations 4 4
----------- ----------
Total interest expense 3,573 4,019
----------- ----------
NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOAN LOSSES 5,646 5,453
PROVISION FOR LOAN LOSSES 0 125
----------- ----------
NET INTEREST INCOME 5,646 5,328
----------- ----------
NONINTEREST INCOME:
Service charges on deposit accounts 665 639
Securities (losses) gains, net (4) 143
Other noninterest income 587 481
----------- ----------
Total noninterest income 1,248 1,263
----------- ----------
NONINTEREST EXPENSE:
Salaries and employee benefits 2,236 2,057
Net occupancy expense 790 821
Other noninterest expense 1,684 1,716
----------- ----------
Total noninterest expense 4,710 4,594
----------- ----------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,184 1,997
PROVISION FOR INCOME TAXES 680 642
----------- ----------
NET INCOME $ 1,504 $ 1,355
=========== ==========
BASIC NET INCOME PER SHARE $ 0.36 $ 0.34
=========== ==========
DILUTED NET INCOME PER SHARE $ 0.36 $ 0.34
=========== ==========
</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,
INTEREST INCOME: 1999 1998
----------------------------
<S> <C> <C>
Interest and fees on loans $ 19,971 $ 21,734
Interest on investment securities-
Taxable 5,513 4,798
Nontaxable 1,190 876
Interest on federal funds sold and bank depositS 620 573
---------- ---------
Total interest income 27,294 27,981
INTEREST EXPENSE:
Interest on deposits 10,162 11,421
Interest on securities sold under agreements to repurchase 313 158
Interest on other borrowed funds 354 343
Interest on note payable and capital lease obligations 13 22
---------- ---------
Total interest expense 10,842 11,944
NET INTEREST INCOME BEFORE PROVISION FOR LOAN
LOAN LOSSES 16,452 16,037
PROVISION FOR LOAN LOSSES 150 425
---------- ---------
NET INTEREST INCOME 16,302 15,612
---------- ---------
NONINTEREST INCOME:
Service charges on deposit accounts 1,979 1,933
Securities (losses) gains, net (4) 161
Other noninterest income 1,868 1,626
---------- ---------
Total noninterest income 3,843 3,720
NONINTEREST EXPENSE:
Salaries and employee benefits 6,968 6,490
Net occupancy expense 2,354 2,440
Other noninterest expense 5,120 4,806
---------- ---------
Total noninterest expense 14,442 13,736
---------- ---------
INCOME BEFORE PROVISION FOR INCOME TAXES 5,703 5,596
PROVISION FOR INCOME TAXES 1,766 1,805
---------- ---------
NET INCOME $ 3,937 $ 3,791
========== =========
BASIC NET INCOME PER SHARE $ 0.95 $ 0.95
========== =========
DILUTED NET INCOME PER SHARE $ 0.95 $ 0.94
========== =========
</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,
CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998
--------------------------
<S> <C> <C>
Net income $ 3,937 $ 3,791
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 150 425
Provision for depreciation and amortization 1,658 1,758
Loss on disposition of premises and equipment 47 0
Gain on disposition of other real estate owned (40) (10)
Amortization (accretion) of investment security discounts and premiums 8 (32)
Deferred income tax benefit (161) (155)
Securities loss (gains), net 4 (161)
Increase in accrued interest receivable (199) (368)
(Increase) decrease in other assets (1,937) 895
Increase in other liabilities 350 681
-------- --------
Net cash provided by operating activities 3,817 6,824
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of investment securities available-for-sale 1,846 12,612
Proceeds from sales of investment securities available-for-sale 7,879 10,366
Purchases of investment securities available-for-sale (26,042) (40,059)
Net cash flows from loans originated and principAl collected on loans (12,044) 8,472
Proceeds from disposal of other real estate 241 65
Purchases of premises and equipment (1,053) (1,551)
-------- --------
Net cash used by investing activities (29,173) (10,095)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits, now accounts, and savings
accounts (10,280) 9,920
Net cash flows from sales and maturities of certificates of deposit 2,607 3,903
Net decrease in federal funds purchased and securities sold under agreement to
repurchase (12,817) (14,825)
Increase (decrease) in other borrowed fundS 2,944 (56)
Payments on capital lease obligations (167) (155)
Proceeds from issuance of commoN stock due to exercise of stock options 304 1,770
Payments of cash dividends (1,643) (1,496)
-------- --------
Net cash used by financing activities $(19,052) $ (939)
-------- --------
</TABLE>
6
<PAGE>
HARDWICK HOLDING COMPANY
& SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS-(CONTINUED)
(Unaudited)
(In Thousands)
<TABLE>
FOR THE NINE- MONTHS ENDED
SEPTEMBER 30,
----------------------------
1999 1998
-----------------------------
<S> <C> <C>
NET DECREASE IN CASH AND CASH EQUIVALENTS $ (44,408) $ (4,210)
CASH AND CASH EQUIVALENTS, beginning of period 68,953 38,515
------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 24,545 $ 34,305
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 11,022 $ 11,534
============ =============
Cash paid during the period for income taxes $ 1,735 $ 1,895
=========== =============
Noncash transactions during the period ended:
Net (decrease) increase in deferred compensation from issue of restricted
stock $ (148) $ 300
========== =============
</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) 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, 1999 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
counterparties to the financial instruments 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 diversified loan portfolio, a significant portion of
the Company's loans originates 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 are 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 unfavorably affect the
results of operations of the Company.
8
<PAGE>
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, 1999, were approximately $75,007,000. HBT and FNBNWG evaluate each
customer's creditworthiness on a case-by-case basis. The amount of collateral,
if deemed necessary by HBT and FNBNWG, 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 $3,720,000 outstanding at September 30, 1999.
(3) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. The
Statement requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate, and assess the effectiveness
of transactions that receive hedge accounting.
In June 1999, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of the Effective Date of FASB
Statement No. 133". This Statement changed the effective date for SFAS No. 133
to all fiscal quarters of all fiscal years beginning after June 15, 2000.
Earlier application is encouraged. Statement 133 cannot be applied
retroactively. Statement 133 must be applied to (a) derivative instruments and
9
<PAGE>
(b) certain derivative instruments embedded in hybrid contracts that were
issued, acquired, or substantively modified after December 31, 1998 (and, at the
company's election, before January 1, 1999).
The Company has not yet quantified the impacts of adopting Statement 133 on its
financial statements and has not determined the timing of or method of its
adoption of Statement 133. However, the Statement could increase volatility in
earnings and other comprehensive income.
In October 1998, the FASB issued SFAS No. 134, "Accounting for Mortgage-Backed
Securities Retained After the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise," which is effective for the fiscal quarter
beginning after December 15, 1998. This statement amends FASB No. 65,
"Accounting for Certain Mortgage Banking Activities," to require that after the
securitization of mortgage loans held for sale, an entity engaged in mortgage
banking activities classify the resulting mortgage-backed securities or other
retained interests based on its ability and intent to sell or hold those
investments. As the Company does not securitize its mortgage loans held for sale
or hold mortgage loans for sale, this statement does not apply.
(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,
when resolved, none of these matters will have a significant effect on the
Company's financial condition or results of operations.
(5) EARNINGS PER SHARE
Earnings per share are calculated on the basis of basic and dilutive weighted
average number of shares outstanding. The basic weighted average number of
shares outstanding was 4,138,779 and 3,972,284 for the nine-month period ending
September 30, 1999 and 1998, respectively. The diluted weighted average number
of shares outstanding was 4,156,830 and 4,050,168 for the nine-month period
ending September 30, 1999 and 1998, respectively.
(6) SEGMENT INFORMATION
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," requires disclosure of certain information related to the
Company's reportable operating segments. The reportable segments were determined
based on management's internal reporting approach, which is separated by each
subsidiary. The reportable segments are comprised of the two banks owned by the
holding company, as well as the holding company itself. Each bank provides a
wide array of banking services to consumer and commercial customers and earns
interest income from loans made to customers and investments in securities
available for sale. Each bank also recognizes certain fees related to deposit,
lending, and other services provided to customers. The holding company earns
10
<PAGE>
income by providing loans to insiders, receiving dividends from the two banks,
and by providing management services to the banks. The holding company incurs no
interest expense, but does incur certain administrative expenses related to
operations. No transactions with a single customer contributed 10% or more to
the Company's total revenue. The accounting policies for each segment are the
same as those used by the Company. The segment results include certain overhead
allocations and intercompany transactions that were recorded at estimated market
prices. All intercompany transactions have been eliminated to determine the
consolidated balances. The results for the three reportable segments are
included in the following tables (in thousands):
<TABLE>
<CAPTION>
For the Three Months Ended September 30, 1999
----------------------------------------------------------------------
HBT FNB HHC Eliminations Consolidated
--- --- --- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total interest income $ 5,169 $ 3,981 $ 101 $ 32 $ 9,219
Total interest expense 2,044 1,561 0 32 3,573
Net interest income 3,125 2,420 101 0 5,646
Provision for loan losses 0 0 0 0 0
Net interest income after provision 3,125 2,420 101 0 5,646
Total noninterest income 896 352 1,715 1,715 1,248
Total noninterest expense 2,549 2,026 310 175 4,710
Income before taxes 1,472 746 1,506 1,540 2,184
Provision (benefit) for income taxes 403 275 2 0 680
Net income 1,069 471 1,504 1,540 1,504
Other significant items:
Total assets 298,905 208,833 55,857 45,322 518,273
Investment in subsidiaries 0 0 45,029 45,029 0
Depreciation, amortization, and accretion (net) 156 183 7 0 346
Total expenditures for long-lived assets
23 245 14 0 282
Revenues from external customers:
Total interest income 5,169 3,981 69 0 9,219
Total noninterest income 896 352 0 0 1,248
Total income 6,065 4,333 69 0 10,467
Revenues from affiliates:
Total interest income 0 0 32 32 0
Total noninterest income 0 0 1,715 1,715 0
Total income 0 0 1,747 1,747 0
</TABLE>
11
<PAGE>
(6) SEGMENT INFORMATION-continued
<TABLE>
<CAPTION>
For The Three Months Ended September 30, 1998
-------------------------------------------------------------------
HBT FNB HHC Eliminations Consolidated
--- --- --- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total interest income $ 5,142 $ 4,245 $ 96 $ 11 $ 9,472
Total interest expense 2,230 1,800 0 11 4,019
Net interest income 2,912 2,445 96 0 5,453
Provision for loan losses 50 75 0 0 125
Net interest income after provision 2,862 2,370 96 0 5,328
Total noninterest income 865 398 1,643 1,643 1,263
Total noninterest expense 2,391 1,580 432 (191) 4,594
Income before taxes 1,336 1,188 1,307 1,834 1,997
Provision (benefit) for income taxes 386 304 (48) 0 642
Net income 950 884 1,355 1,834 1,355
Other significant items:
Total assets 280,081 208,469 56,319 47,600 497,269
Investment in subsidiaries 0 0 46,329 46,329 0
Depreciation, amortization, and accretion (net) 187 178 202 0 567
Total expenditures for long-lived assets 339 274 78 0 691
Revenues from external customers:
Total interest income 5,142 4,245 85 0 9,472
Total noninterest income 865 398 0 0 1,263
Total income 6,007 4,643 85 0 10,735
Revenues from affiliates:
Total interest income 0 0 11 11 0
Total noninterest income 0 0 1,643 1,643 0
Total income 0 0 1,654 1,654 0
</TABLE>
12
<PAGE>
(6)SEGMENT INFORMATION-continued
<TABLE>
<CAPTION>
For The Nine Months Ended September 30, 1999
--------------------------------------------------------------------
HBT FNB HHC Eliminations Consolidated
--- --- --- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total interest income $ 15,318 $ 11,779 $ 292 $ 95 $ 27,294
Total interest expense 6,207 4,730 0 95 10,842
Net interest income 9,111 7,049 292 16,452
Provision for loan losses 0 150 0 0 150
Net interest income after provision 9,111 6,899 292 0 16,302
Total noninterest income 2,703 1,140 4,910 4,910 3,843
Total noninterest expense 7,464 6,098 1,423 543 14,442
Income before taxes 4,350 1,941 3,779 4,367 5,703
Provision (benefit) for income taxes 1,197 727 (158) 0 1,766
Net income 3,153 1,214 3,937 4,367 3,937
Other significant items:
Total assets 296,884 212,754 55,857 47,222 518,273
Investment in subsidiaries 0 0 45,029 45,029 0
Depreciation, amortization, and accretion (net) 488 550 628 0 1,666
Total expenditures for long-lived
assets 87 942 24 0 1,053
Revenues from external customers:
Total interest income 15,318 11,779 197 0 27,294
Total noninterest income 2,703 1,140 0 0 3,843
Total income 18,021 12,919 197 0 31,147
Revenues from affiliates:
Total interest income 0 0 95 95 0
Total noninterest income 0 0 4,910 4,910 0
Total income 0 0 5,005 5,005 0
</TABLE>
-13-
<PAGE>
(6) SEGMENT INFORMATION-continued
<TABLE>
<CAPTION>
For The Nine Months Ended September 30, 1998
------------------------------------------------------------------
HBT FNB HHC Eliminations Consolidated
--- --- --- ------------ ------------
<S> <C> <C> <C> <C> <C>
Total interest income $15,296 $12,426 $ 282 $ 23 $27,981
Total interest expense 6,594 5,373 0 23 11,944
Net interest income 8,702 7,053 282 0 16,037
Provision for loan losses 200 225 0 0 425
Net interest income after provision 8,502 6,828 282 0 15,612
Total noninterest income 2,530 1,190 4,638 4,638 3,720
Total noninterest expense 7,195 5,444 1,246 149 13,736
Income before taxes 3,837 2,574 3,674 4,489 5,596
Provision (benefit) for income taxes 1,111 811 (117) 0 1,805
Net income 2,726 1,763 3,791 4,489 3,791
Other significant items:
Total assets 280,004 208,398 56,319 47,452 497,269
Investment in subsidiaries 0 0 46,329 46,329 0
Depreciation, amortization, and accretion (net) 611 524 591 0 1,726
Total expenditures for long-lived assets 478 995 78 0 1,551
Revenues from external customers:
Total interest income 15,296 12,426 259 0 27,981
Total noninterest income 2,530 1,190 0 0 3,720
Total income 17,826 13,616 259 0 31,701
Revenues from affiliates:
Total interest income 0 0 23 23 0
Total noninterest income 0 0 4,638 4,638 0
Total income 0 0 4,661 4,661 0
</TABLE>
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
POSITION AND RESULTS OF OPERATIONS
FINANCIAL POSITION
- ------------------
Total assets decreased by approximately $18,647,000 from approximately
$536,920,000 at December 31, 1998, to approximately $518,273,000 at September
30, 1999. The principal fluctuations were in federal funds sold, cash and due
from banks, investment securities available-for-sale, net loans and other
assets. Federal funds sold decreased approximately $41,302,000 from
approximately $43,648,000 at December 31, 1998 to approximately $2,346,000 at
September 30, 1999, a decrease of 94.6%. Cash and due from banks decreased
approximately $3,106,000 from approximately $25,305,000 at December 31, 1998 to
approximately $22,199,000 at September 30, 1999, a decrease of 12.3%. The
decreases were partially offset by an increase in investment securities
available-for-sale of approximately $12,405,000 from approximately $144,169,000
at December 31, 1998 to approximately $156,574,000 at September 30, 1999, an
increase of 8.6%. Net loans increased by approximately $11,676,000,
approximately 3.9%, from approximately $298,478,000 at December 31, 1998, to
approximately $310,154,000 at September 30, 1999. Other assets increased by
approximately $1,897,000 from approximately $1,881,000 at December 31, 1998 to
approximately $3,778,000 at September 30, 1999. HHC's cash and cash equivalents
reflected a decrease of approximately $44,408,000 or 64.4% for the nine-month
period ended September 30, 1999. This decrease is due to the pick up of a new
account during December 1998 with large balances deposited at one of the banks
along with the accounts for property tax payments at both banks which are
subsequently withdrawn during January of each year.
Savings and other interest-bearing deposit accounts remained relatively the same
while non-interest bearing accounts decreased approximately $7,809,000 or 7.65%
when compared with December 31, 1998, from approximately $102,027,000. It is
management's opinion that HHC maintains competitive deposit rates while
exercising prudent strategies in competing with local institutions. Average
rates paid on deposits for the current period were approximately 4.0% compared
with approximately 4.6% for the same period in the preceding year.
At September 30, 1999, HHC's financial position continued to reflect strong
equity and liquidity, with an equity to assets ratio of 10.6%. At September 30,
1999, 67% of HHC's loans were in real estate loans (including mortgage and
construction loans), 18% in commercial loans (including agricultural loans), 7%
in consumer loans (including credit cards) and other loans were 8%. HHC's loan
to deposit ratio was approximately 73% at September 30, 1999, and 46% of all
deposits were invested in time certificates of deposit.
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 with it. At
September 30, 1999 approximately $11,100,000 was outstanding under the Federal
Home Loan Bank lines of credit.
15
<PAGE>
The following table represents the changes in consolidated stockholders' equity
for the nine months ended September 30, 1999 (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Balance, December 31, 1998 $ 56,117,000
Net income 3,937,000
Change in unrealized gains (losses) on securities available-for-sale,
net of tax (3,901,000)
Issuance of common stock due to exercise of stock options 304,000
Dividends declared (1,782,000)
===========
Balance, September 30, 1999 $ 54,675,000
===========
</TABLE>
RESULTS OF OPERATIONS
- ---------------------
For the three months ended September 30, 1999 and 1998:
Net Interest Income
Net interest income after provision for loan losses for the three month period
ended September 30, 1999 was approximately $5,646,000 which was approximately
$193,000 or 3.5% greater than the $5,453,000 for the same period the year
before. There were no loan loss provisions in the current three months ended
September 30, 1999, compared with approximately $125,000 for the same period in
the previous year. Total interest income decreased by approximately $253,000 or
2.7% while total interest expense decreased approximately $446,000 or 11.1% for
the three-month period ended September 30, 1999, as compared to the three months
ended in the previous year.
Yields on interest-bearing assets averaged 7.8%, down approximately 53 basis
points from the same period the year before. Total average interest-bearing
assets increased by approximately $18,157,000 or 4.0% for the current period
when compared with the three-months ended September 30, 1998. Average loans for
the three months ended September 30, 1999 increased approximately $3,209,000 or
1.1% more than the average loans for the three months ended September 30, 1998.
The average yield on loans for the three months ended September 30, 1999 was
8.9%, which reflects a decrease of approximately 79 basis points when compared
with the three months ended September 30, 1998.
There were approximately $1,383,000 in nonaccrual loans at September 30, 1999
and accruing loans contractually past due ninety days or more were approximately
$489,000 at September 30, 1999. This compares to approximately $900,000 in
nonaccrual and approximately $499,000 in loans past due ninety days or more and
still accruing at December 31, 1998. The increase in nonaccrual loans of
approximately $483,000 from December 31, 1998 is an indication that the
customers of the Company have slowed in making the payments on their obligations
therefore requiring the credits to be placed in a nonaccrual status. Management
is of the opinionthat loan loss allowances are adequate to cover any losses, if
such nonaccrual loans should migrate to a charged off status.
16
<PAGE>
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 $27,000 during the
three-month period ended September 30, 1999.
Rates paid on interest-bearing liabilities averaged 4.0% for the three months
ended September 30, 1999, down approximately 60 basis points from the three
months ended September 30, 1998. 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 slightly
during the remainder of the year.
Noninterest Income
Total other noninterest income decreased approximately $15,000 or 1.2% for the
three months ended September 30, 1999, as compared with the three months ended
September 30, 1998. The decrease is primarily due to a decrease in net gains
from sales of investment securities available-for-sale of approximately $147,000
while being partially offset by an increase in service charges on deposits of
approximately $26,000 and an increase in other miscellaneous noninterest income
of approximately $106,000 which was mostly from the increase in credit card fee
income.
Noninterest Expense
Total noninterest expense increased by approximately $116,000, or 2.5% for the
three months ended September 30, 1999, as compared to the same period ended in
the preceding year. The increase is due principally to increases of
approximately $179,000 in salary and employee benefits while being partially
offset by a decrease in net occupancy expense of approximately $31,000 and other
noninterest expense of approximately $32,000.
Income Tax Provision
The effective tax rates reported for the three months ended September 30, 1999
and 1998 were 31.1% and 32.1%, respectively.
17
<PAGE>
RESULTS OF OPERATIONS
For the nine months ended September 30, 1999 and 1998:
Net Interest Income
Net interest income after provision for loan losses for the nine month period
ended September 30, 1999 was approximately $16,302,000, which was approximately
$690,000 or 4.4% greater than the $15,612,000 for the same period the year
before. Total interest income decreased by approximately $687,000 or 2.5% while
total interest expense decreased approximately $1,102,000 or 9.2% for the nine
month period ended September 30, 1999, as compared to the nine-months ended in
the previous year. There were approximately $150,000 in provisions for loan
losses for the current period as compared with approximately $425,000 in the
nine month period ended September 30, 1998. Management is of the opinion that
the provisions made against operations are adequate to cover incrured losses
that may be charged off in future periods and from assets that have been placed
in a nonperforming status within the current period.
Yields on interest-bearing assets averaged 7.8% for the current period,
approximately 60 basis points less the same period the year before. Total
average interest-bearing assets increased by approximately $24,046,000 or 5.4%
for the current period when compared with the nine months ended September 30,
1998. Average loans for the nine months ended September 30, 1999 decreased
approximately $6,362,000 or 2.1% less than the average loans for the nine months
ended September 30, 1998. The average yield on loans for the nine months ended
September 30, 1999 was 9.0%, approximately 60 basis points less than the nine
months ended September 30, 1998.
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 $75,000 during the nine
month period ended September 30, 1999. Nonaccrual loan interest collected and
reported in the nine month period ended September 30, 1999 was approximately
$4,000.
Rates paid on interest-bearing liabilities averaged 4.0% for the nine-months
ended September 30, 1999 compared with 4.6% for the nine-months ended September
30, 1998. Rates paid in the current nine month period on average were
approximately 50 basis points less than the rates paid on average for the year
ended December 31, 1998. 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 slightly during the
remainder of the year.
Noninterest Income
Total noninterest income increased approximately $123,000 for the nine-months
ended September 30, 1999, as compared with the nine-months ended September 30,
1998. The increase is primarily due to an increase in other miscellaneous
noninterest income of approximately $242,000 and an increase in service charges
on deposit accounts of approximately $46,000. The increases were partially
offset by a decrease in net gains from sales and calls of investment securities
held available-for-sale of approximately $165,000. Principal increases in other
miscellaneous noninterest income were approximately $47,000 in trust income and
gains on sale of other real estate of approximately $30,000, approximately
$148,000 in credit card fee income and approximately $17,000 in other
miscellaneous income.
18
<PAGE>
Noninterest Expense
Total noninterest expense increased by approximately $706,000 or 5.1% for the
nine months ended September 30, 1999, as compared to the same period ended in
the preceding year. The increase is due principally to increases in salary and
employee benefits of approximately $478,000 and approximately $314,000 in other
noninterest expense, while being offset partially by a decrease in net occupancy
expense of approximately $86,000. The increase in other noninterest expense is
due principally by the increases in data processing of approximately $125,000,
credit card fees of approximately $102,000, promotions of approximately $15,000,
charitable contributions of approximately $16,000, professional fees of
approximately $42,000, loss on distribution of assets of approximately $47,000,
postage of approximately $8,000 and other miscellaneous noninterest expense
decreases of approximately $41,000.
Income Tax Provision
The effective tax rate reported for the nine months ended September 30, 1999 and
1998 was 30.9% and 32.3%, respectively. Contributing to the decrease in the
effective tax rate for the nine-month period ending September 30, 1999, when
compared to that of September 30, 1998, was an increase in nontaxable investment
securities interest income of approximately $314,000.
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, liquidearning 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, 1999, cash and cash equivalents
decreased approximately $44,408,000 or 64.4% from December 31, 1998. HBTC
obtained a new account relationship with a local utility, which transferred
large balance accounts into HBTC during December 1998, which were later reduced
significantly during January 1999. Both subsidiary banks of the Company receive
a large volume of property tax payments during the month of December that are
subsequently withdrawn by the various taxing authorities that have accounts with
the Company's subsidiary banks.
Operating activities provided cash and cash equivalents of approximately
$3,817,000. Investing and financing activities used cash and cash equivalents of
approximately $29,173,000 and $19,052,000, respectively. Net income of
approximately $3,937,000, provision for loan losses of approximately $150,000,
depreciation and amortization not requiring the use of cash of approximately
$1,658,000, a loss on disposition of premises of approximately $47,000 and
19
<PAGE>
premium amortization on investment securities of approximately $8,000,
approximately $4,000 in net loss on sale of investment securities held-for-sale
and an increase in other liabilities of approximately $350,000 contributed to
operating activities providing cash and cash equivalents. Operating activities
using cash and cash equivalents were a gain on the disposition of real estate
owned of approximately $40,000, deferred income tax benefits of approximately
$161,000, an increase in accrued interest receivable of approximately $199,000,
and an increase in other assets of approximately $1,937,000.
The cash and cash equivalents used by investing activities were principally due
to purchases of investment securities available-for-sale of approximately
$26,042,000, loans originated and principal collected on loans of approximately
$12,044,000 and purchases of premises and equipment of approximately $1,053,000.
The cash and cash equivalents used by investing activities were partially offset
by proceeds from maturities of investment securities available-for-sale of
approximately $1,846,000, proceeds from sales of investment securities
available-for-sale of approximately $7,879,000 and proceeds from disposal of
other real estate of approximately $241,000.
The cash and cash equivalents used by financing activities were due principally
to decreases in federal funds purchased and securities sold under agreement to
repurchase of approximately $12,817,000, payments of cash dividends of
approximately $1,643,000, a net decrease in NOW accounts, demand deposits and
savings accounts of approximately $10,280,000, and payments on capital lease
obligations of approximately $167,000. Financing activities providing cash were
net cash provided from sales and maturities of certificates of deposit of
approximately $2,607,000 and approximately $304,000 from issuance of common
stock due to exercise of stock options and an increase in other borrowed funds
of approximately $2,944,000.
YEAR 2000
The "year 2000 issue" arises from the widespread use of
computer programs that rely on two-digit codes to perform computations or
decision-making functions. Many of these programs may fail due to an inability
to properly interpret date codes beginning January 1, 2000. For example, such
programs may misinterpret "00" as the year 1900 rather than 2000. In addition,
some equipment, controlled by microprocessor chips, may not deal appropriately
with the year "00". The Registrant has developed a plan that will assure the
Registrant of being ready to process in the year 2000. The plan involves costs
such as purchasing both hardware and software and will entail the use of both
internal and external personnel. Modifications and upgrades have been performed
on the majority of the Registrant's existing systems. These costs are being
expensed as incurred. The Registrant's mainframe processing is outsourced to a
vendor which is one of the largest bank processing companies in the United
States. The Registrant is in regular communication with this vendor as both
companies prepare for processing in year 2000.
20
<PAGE>
There is no assurance that the Registrant's customers and
vendors will be ready to process in the year 2000. The inability of one of the
Registrant's significant customers or vendors to process in the year 2000 could
have a material effect on the financial condition and results of operations of
the Registrant for the year 2000 and years thereafter.
Impact of the Year 2000 Issues
- ------------------------------
Generally, the year 2000 risk involves computer programs and
computer hardware that are not able to perform without interruption into the
year 2000. The arrival of the year 2000 poses a unique worldwide challenge to
the ability of all systems to correctly recognize such a date change; computer
applications that rely on the date field could fail or create erroneous results.
Such erroneous results could affect interest, payment or due dates or could
cause the temporary inability to process transactions, send invoices or engage
in similar normal business activities. If it is not adequately addressed by HHC
or its suppliers and borrowers, the year 2000 issue could result in a material
adverse impact on HHC's financial condition and results of operations.
HHC's State of Readiness
- ------------------------
HHC has been assessing its year 2000 readiness since 1996. HHC
has formed a committee charged with the task of identifying and remediating date
recognition problems in both Information Technology ("IT") and Non-IT systems.
Guided by requirements as well as examination by banking regulators, the
committee has developed a comprehensive plan to assess HHC's year 2000 readiness
with respect to both IT and non-IT systems. HHC's inventory of such systems is
complete and HHC believes its IT and non-IT systems are year 2000 compliant and
has not found any mission critical system to be deficient.
HHC has completed the remediation or replacement of its
systems. Testing occurred in 1998, and testing is almost over but will continue
util the end of 1999. HHC believes that it has identified all major internal
business and operational functions that will be impacted by the year 2000 date
change. HHC's mainframe processing is outsourced to a third party vendor and the
software for year 2000 has been in service since October 1998. The application
testing was completed in October of 1998. The "street testing", i.e., testing
for year end, quarter ends, leap year and future years, was completed on March
31, 1999. Both subsidiary banks of HHC have been through Phase II examinations
by their respective regulatory authorities without any major concerns being
brought to the attention of their Boards of Directors and or management.
21
<PAGE>
Cost Associated With Year 2000 Issues
- -------------------------------------
HHC does not anticipate that its year 2000 related costs will
be material to its financial condition or results of operations. HHC has
estimated that its total costs for the evaluation, remediation and testing of
its IT and non-IT systems in connection with the year 2000 issue will be
approximately $811,000. Approximately $707,000 has been incurred to date of
which approximately $503,000 has been capitalized and is to be amortized over
the respective useful lives while approximately $204,000 has been charged
against operations. The $104,000 remaining in the budget for the year 2000
project will be included in the expenditures for the last three months of 1999
and the first three months of year 2000. Of the remaining budget, approximately
$11,000 will be capitalized and approximately $93,000 will be charged against
operations as incurred during the last three months of 1999 and the first three
months of year 2000.
Risk of Third-Party Year 2000 Issues
- ------------------------------------
The impact of year 2000 non-compliance by outside parties with
whom HHC transacts business cannot be accurately gauged. HHC has surveyed its
major business partners to ascertain their year 2000 readiness. Although not all
are year 2000 compliant at this date, HHC has received certain assurances that
such third parties will be ready for the year 2000 date change by the end of
1999. HHC and its major third party partners have completed testing and
reviewing of all critical year 2000 date issues in their systems.
The most likely worst case scenario for HHC is that there may
be no power to support its systems. This case would be handled in the same
manner in which it handles winter and summer storms that down power lines.
Members of the HHC year 2000 committees have attended meetings held by the State
of Georgia, and the counties and cities where the Bank subsidiaries are located.
The utilities in its operating area have stated that any embedded technology
that causes power outages due to year 2000 will be handled by using the same
emergency procedures used during serious storms and the delay would be minimal
at most.
Customer Awareness and Borrower Risk Assessment
- -----------------------------------------------
HHC has aggressively worked to educate its depositors and
borrowers regarding year 2000 issues. HHC has hosted community seminars,
developed statement stuffers, and placed detailed brochures about the year 2000
issue in all its branch lobby locations. Risk assessments on borrowers have been
completed and HHC has initiated a year 2000 assessment procedure during loan
review and approval for all new and renewed loans.
Year 2000 Contingency Planning
- ------------------------------
The Registrant's Corporate Disaster Contingency and Recovery
Plan was established in the fourth quarter of 1992. Its present contingency plan
covers both natural and man-made disasters, but is not specific enough to handle
the year 2000 Event. For year 2000 purposes all financial institutions are
regulated very closely by departments of the federal government and operate in
uniformity through the Federal Financial Institutions Examination Council or
"FFIEC". The FFIEC has established specific guidelines for financial
institutions to develop a year 2000 contingency plan. The Registrant's Board of
Directors has approved the FFIEC guidelines for use in developing our
contingency plan.
22
<PAGE>
The corporate contingency plan called for a multi-phase
approach in the development process. The first phase was to develop the
responsibility and reporting line of command. Each subsidiary appointed a
command post consisting of the bank president, the highest-ranking manager
representing each division within the company, and the year 2000 coordinator.
The command post approved a line of business committee that represented the
supervisor of each department within the company and a backup for each one of
the committee members. This individual is referred to as the Line of Business
Coordinator or Rapid Response Team Member. Using the FFIEC guidelines as a
checklist project approach, the contingency plan format was developed and
approved by the command post. The approach and plan was communicated to the line
of business committee through officially documented committee meetings and
individual interviews.
The project approach approved by the command post and the
bank's Board of Directors was for each line of business committee member to
develop a matrix of all duties and functions performed on a daily, weekly,
monthly, quarterly, annually, as needed, or demand basis. The matrix also
reflected all personnel within a department indexed by which employees were
responsible for each duty or function, and all employees who were cross-trained
on each duty as a backup. The line of business coordinator developed a matrix of
only critical duties or functions from the master matrix list. The second matrix
became the critical duties and functions list that was used to develop a risk
analysis and contingency report. The risk analysis and contingency planning
report includes the following information:
o The duty or function.
o A risk category group code for each duty or function (i.e., staff
problems, utility outages, software problems).
o The degree of negative impact on business if the event should occur.
o Pre-implementation mitigating actions that must be done to prepare for
the event and how to address it afterwards.
o Proposed workaround for each contingency and the description of the
basis for taking the approach for that duty or function. o Name of
person to contact if the situation occurs.
The risk analysis and contingency planning report was used to develop the
content for the actual contingency plan.
The Registrant's Year 2000 Contingency Plan contains the following information:
23
<PAGE>
STAFFING AND WORK SCHEDULES: Expected work and vacation schedules
before, during, and after the event are listed along with a
personnel contact list.
RECOVERY SUPPORT TEAM: A team of well trained and fully empowered
employees who will identify and correct any disruption to the
business during and after the event. The employee's name,
address, home phone, alternate phone, cellular phone, and
electronic mail address are listed. The list of employees also
indicates if they are line of business or command post members
and if they live more than 30 miles from the main office.
ASSUMPTIONS: Lists include certain assumptions that an employee
may use in developing the contingency plan based on decisions
already made by management. The assumptions are segmented by the
last quarter of 1999, and the periods of December 30, 1999 to
January 10, 2000 and January 11, 2000 to April 15, 2000.
PLANS AND PRIORITIES: These are segmented by the time periods
described in the Assumptions section above. This section
documents the communication plan during the three periods covered
by the event plan and identifies the duties and plans to continue
normal operating procedures.
Y-2K CONTINGENCY PLAN: Documentation of the steps to be taken if
an interruption occurs and is listed by category of problem
(i.e., utility outage, software problem).
EMPLOYEE LOCATION DIRECTIONS: Detailed navigational directions to
an employee's home for emergency purposes and possible
communication disruptions.
UNRESOLVED ISSUES: Description of any issues that remain
unresolved by the line of business coordinator. This section will
continue to be reviewed by the line of business committee and the
year 2000 coordinator until all issues are resolved.
The Registrant's corporate contingency plan was completed by
December 31, 1998 and approved by the Board of Directors of the Registrant and
reviewed by the Board of Directors of each of the bank subsidiaries. The board
and management of each bank understand that these plans will be reviewed and
changed periodically due to staff and procedure changes. It is the
responsibility of each line of business coordinator to review these plans with
each employee in their departments. The contingency plans will be tested in the
fourth quarter of 1999. This test will be conducted under the scrutiny of our
internal auditors, the Year 2000 coordinator, and an outside consultant. The
line of business or year 2000 committee reviews progress on the contingency
plans biweekly and the command post and Board of Directors review progress once
a month.
24
<PAGE>
MARKET RISK MANAGEMENT
- ----------------------
A 100 basis point increase in interest rates would result in
an increase in interest margin of approximately $94,000 which is a change of
approximately $60,000 from the $154,000 increase in interest margin that would
have occurred at December 31, 1998 if there had been a 100 basis points increase
in interest rates at that time. The effect on the net interest margin is not a
significant amount and well within the Company's policy.
CAPITAL RESOURCES
- -----------------
HHC and its subsidiary banks are subject to a minimum Tier 1
capital to risk-weighted assets ratio of 4% and a total capital (Tier 1 plus
Tier 2) to risk-weighted assets ratio of 8%. 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 3%. 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.
The following tables represent HHC's regulatory capital position at September
30, 1999 (in thousands):
<TABLE>
<CAPTION>
Risk Based Capital Ratios: Amount Ratio
----------- --------
<S> <C> <C> <C>
Tier 1 Capital $ 53,928 13.47%
Tier 1 Capital minimum requirement $ 16,017 4.00%
---------- ---------
Excess $ 37,911 9.47%
=========== =========
Total Capital $ 58,961 14.72%
Total Capital minimum requirement $ 32,034 8.00%
---------- ---------
Excess $ 26,927 6.72%
=========== =========
Risk adjusted assets net of goodwill and
nonallowable loan loss allowance $ 400,425
Leverage Ratio:
Tier 1 Capital to adjusted total assets ("Leverage Ratio")
$ 53,928 10.50%
Minimum leverage requirement $ 15,412 3.00%
---------- ---------
Excess $ 38,516 7.50%
=========== ========
Average total assets, net of goodwill <F1> $ 513,748
<FN>
<F1> Average total assets, net of goodwill for the three months ended September 30, 1999.
</FN>
</TABLE>
25
<PAGE>
HHC is a legal entity separate and distinct from the Banks. Most of the revenues
of HHC result from dividends paid to it by the Banks. There are statutory and
regulatory requirements applicable to the payment of dividends by the subsidiary
banks as well as by HHC to its shareholders. HHC paid cash dividends of $544,000
or $.13 per share on January 19, 1999, which had been declared at December 31,
1998. HHC paid $539,000 or $.13 per share of common stock on April 19, 1999 and
$539,000 or $.13 per share on July 19, 1999 HHC had declared a cash dividends of
$704,000 or $.17 per share of common stock as of September 30, 1999, which was
subsequently paid on October 19, 1999.
26
<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) Exhibit 27 - Financial Data Schedule (For Sec Use Only).
(b) Form 8-K - None.
27
<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 12, 1999 By: /s/ Michael Robinson
Michael Robinson
Executive Vice President,
Chief Financial Officer
(Principal Financial Officer
and Duly Authorized Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000787465
<NAME> HARDWICK HOLDING COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 22,149
<INT-BEARING-DEPOSITS> 50
<FED-FUNDS-SOLD> 2,346
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 156,574
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 310,154
<ALLOWANCE> 7,234
<TOTAL-ASSETS> 518,273
<DEPOSITS> 434,863
<SHORT-TERM> 12,489
<LIABILITIES-OTHER> 5,146
<LONG-TERM> 11,100
0
0
<COMMON> 2,099
<OTHER-SE> 52,576
<TOTAL-LIABILITIES-AND-EQUITY> 518,273
<INTEREST-LOAN> 19,971
<INTEREST-INVEST> 7,323
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 27,294
<INTEREST-DEPOSIT> 10,162
<INTEREST-EXPENSE> 10,842
<INTEREST-INCOME-NET> 16,452
<LOAN-LOSSES> 150
<SECURITIES-GAINS> (4)
<EXPENSE-OTHER> 14,442
<INCOME-PRETAX> 5,703
<INCOME-PRE-EXTRAORDINARY> 5,703
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,937
<EPS-BASIC> 0.95
<EPS-DILUTED> 0.95
<YIELD-ACTUAL> 7.75
<LOANS-NON> 1,383
<LOANS-PAST> 489
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 7,119
<CHARGE-OFFS> 296
<RECOVERIES> 261
<ALLOWANCE-CLOSE> 7,234
<ALLOWANCE-DOMESTIC> 7,234
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
