U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
Commission File Number 33-31013-A
COMMUNITY NATIONAL BANCORPORATION
A Georgia Corporation
(IRS Employer Identification No. 58-1856963)
561 East Washington Avenue-Box 2619
Ashburn, Georgia 31714-2619
(912) 567-9686
Securities Registered Pursuant to Section 12(b)
of the Securities Exchange Act of 1934:
None
Securities Registered Pursuant to Section 12(g)
of the Securities Exchange Act of 1934:
None
Check whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding twelve 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
Indicate by a check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Registrant's revenues for the fiscal year ended December 31, 1995 were
$6,590,699.
The aggregate market value of the Common Stock of the Registrant held by
nonaffiliates of the Registrant on March 1, 1996, was $3,573,768. As of such
date, no organized trading market existed for the Common Stock of the
Registrant. The aggregate market value of the Common Stock of the Registrant
held by nonaffiliates was computed by reference to the estimated fair market
value of the Company's Common Stock as of December 31, 1995 (i.e., $16.50 per
share). The estimated fair market value was determined based upon isolated
purchase/sale transactions which occurred with respect to the Company's Common
Stock during fiscal year 1995. For the purposes of this response, directors,
executive officers and holders of 5% or more of the Registrant's Common Stock
are considered the affiliates of the Registrant at that date.
The number of shares outstanding of the Registrant's Common Stock as of March
1, 1996: 353,417 shares of $5.00 par value Common Stock.
Transitional Small Business Disclosure Format:
Yes No X
DOCUMENTS INCORPORATED BY REFERENCE
None<PAGE>
PART I
Item 1. Description of Business.
A. Business Development.
Community National Bancorporation (hereinafter the "Company" or the
"Registrant") was incorporated as a Georgia corporation on August 18, 1989,
for the purpose of becoming a bank holding company owning 100% of the
outstanding stock of Community National Bank (the "Bank"), a national banking
association chartered under the laws of the United States. The Company
received approvals to become a bank holding company from the Federal Reserve
Bank of Atlanta on February 16, 1990, and from the Georgia Department of
Banking and Finance (the "Department") on February 19, 1990. On December 14,
1990, the Company completed a public offering of its common stock pursuant to
which it raised $3,520,010 from the sale of 352,001 shares of its common stock
at $10.00 per share. The Company used substantially all of the proceeds of
its public offering to purchase shares of capital stock of the Bank. The Bank
received its permit to begin business from the Office of the Comptroller of
the Currency (the "OCC") on August 6, 1990 and commenced business as a
commercial bank on August 6, 1990. Since that date, the Bank has engaged in a
general commercial banking business, emphasizing the banking needs of
individuals, and small to medium-sized business and agricultural enterprises
in its primary service area. On April 3, 1992, the Bank acquired $11.3
million of deposits from the Resolution Trust Corporation as receiver for
First Federal Savings Bank, Ashburn, Georgia.
B. Business.
1.Services Offered by the Bank.
The Bank conducts a commercial banking business serving Turner County,
Georgia. The Bank offers a full range of deposit services that are typically
available in most banks and savings and loan associations, including checking
accounts, NOW accounts, savings accounts and other deposits of various types,
ranging from daily money market accounts to longer-term certificates of
deposit. It also offers retirement accounts such as IRA's (Individual
Retirement Accounts).
The Bank also offers short to medium-term commercial, agricultural and
personal loans. Commercial loans include both secured and unsecured loans for
working capital (including inventory and receivables), business expansion
(including acquisition of real estate and improvements), and purchase of
equipment and machinery. The Bank also is qualified to participate in SBA
(Small Business Administration) lending. Agricultural loans include secured
and unsecured loans for row crop production including corn, soybeans, peanuts,
cotton and other produce. Consumer loans include secured and unsecured loans
for financing automobiles, home improvements, education and personal
investments. The Bank also offers real estate construction and acquisition
loans.
Other services the Bank offers include safe deposit boxes, travelers'
checks, direct deposit of payroll and social security checks, and automatic
drafts for various accounts. The Bank is a member of the HONOR network of
automated teller machines and offers its own credit cards.
The Bank offers these services from its main office, located on
approximately 3.3 acres between Hudson Avenue and Washington Street, Ashburn,
Turner County, Georgia, in a 9,500 square foot building constructed
in 1991-1992.
2.Market Area and Competition.
The Bank's primary service area includes all of Turner County, Georgia.
The Bank also extends credit to qualified borrowers in the contiguous counties
of Tift, Crisp and Worth. Turner County is located approximately 80 miles
north of the Georgia-Florida state line, 165 miles south of Atlanta, 38 miles
east of Albany, and 180 miles west of Savannah. The county is comprised of
the cities of Ashburn, which is the county seat, Sycamore and Rebecca and
covers an area of 293 square miles. In 1990, the population of Turner County
was 10,498, representing a 10% growth from 1980. Assuming that this rate of
growth continues in the 1990's, by the year 2000, the population of the
primary service area is expected to surpass 11,400.
Turner County's economy is dependent on agriculture. Management of the
Bank intends to continue to place a substantial portion of the Bank's assets
in agricultural loans. This sector of the economy is healthy and remains the
largest single force in the market. A large portion of the agricultural
output produced in the county is peanuts. Golden Peanut Company is located in
Ashburn and is the largest peanut shelling plant in the Southeast. Coley Farm
Services, also headquartered in Ashburn, serves primarily as a peanut buying
point for area farmers from three separate locations. Livestock is another
important segment of the economy, with the county containing the largest stock
yard in Georgia, Turner County Stock Yards. The poultry industry is a growing
component of the Turner County economy. In 1995, local farmers built
thirty-five poultry houses in Turner County at a cost of approximately $3.5
million. The farmers who built these poultry houses have entered into
contracts with Tyson Poultry to raise chickens for Tyson Poultry. These
contracts will produce local revenue in the amount of approximately $1.0
million per year. Turner County also contains light manufacturing, primarily
in the apparel and textile sector. The major employer is M&W Sportswear.
Other local manufacturing concerns include Delta Apparel, DCR Industries
and Cornerstone Manufacturing.
Management expects the moderate growth and recent commercial
development experienced in Turner County, along Interstate 75 and in adjacent
Tift County, to continue, providing a favorable environment for the Bank.
However, there is no assurance that population growth and ongoing economic
development will continue, or that the Bank will be able to exploit the growth
and development profitably even if they continue.
The Bank competes as a financial intermediary with other commercial
banks, savings and loan associations, credit unions, mortgage banking
companies, consumer finance companies, securities brokerage firms, insurance
companies, money market mutual funds, and other financial institutions.
During 1995, there was one other bank in the Bank's retail market area,
Turner County. Management estimates that as of December 31, 1995, deposits in
the county totaled $135.3 million, with the Bank having approximately 43% of
such deposits.
Banks affiliated with out-of-state financial institutions have entered
Georgia in recent years to offer limited financial services, including lending
and deposit gathering activities. Moreover, on March 16, 1994, the Georgia
legislature adopted a reciprocal interstate banking law which became effective
on July 1, 1995. In essence, the new law permits bank holding companies
headquartered in states outside of Georgia to acquire Georgia banks, provided
that Georgia bank holding companies may likewise make bank acquisitions in the
reciprocal state. In addition, on September 29, 1994, the United States
Congress adopted the Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Riegle-Neal Act"). The Riegle-Neal Act provides phased-in
authority for banking organizations to acquire banks across state lines and
for the acquisition or establishment of interstate branches. Pursuant to the
Riegle-Neal Act, effective September 29, 1995, an adequately capitalized and
adequately managed bank holding company headquartered in a state outside of
Georgia may acquire a Georgia bank without regard to whether such acquisition
is permissible under Georgia law.
In general terms, regional interstate banking laws, federal interstate
banking laws and initiatives enacted or currently being considered by the
United States Congress, as well as other federal and state laws have caused
and will continue to cause increased competition from both conventional
banking institutions and other businesses offering financial services and
products, within the financial services industry in Georgia. Many of the
financial institutions operating in Georgia have substantially greater
financial resources and offer certain services, such as trust services, that
the Bank does not expect to provide in the near future. By virtue of the
greater total capitalization of such institutions, they have substantially
higher lending limits than the Bank and substantial advertising and
promotional budgets. To compete, the Bank relies on specialized services,
responsive handling of customer needs and personal contacts by officers,
directors and staff.
3.Distribution of Assets, Liabilities and Shareholders' Equity; Interest Rates
and Interest Differential.
The following is a presentation of the average consolidated balance
sheet of the Company for the year ended December 31, 1995 and for the year
ended December 31, 1994. This presentation includes all major categories of
interest-earning assets and interest-bearing liabilities:
AVERAGE CONSOLIDATED ASSETS
Year Ended Year Ended
December 31, 1995 December 31, 1994
Cash and due from banks 1,204,213 $ 1,294,966
Interest bearing bank balances 100,000 49,589
Taxable securities 6,872,130 7,306,445
Non-taxable securities 1,978,816 1,526,311
Federal funds sold 1,521,096 4,429,384
Net Loans 49,383,546 $40,580,530
Total earning assets 59,855,588 53,892,259
Other assets 2,627,993 2,760,819
Total assets $63,687,794 $57,948,044
AVERAGE CONSOLIDATED LIABILITIES AND STOCKHOLDERS' EQUITY
Year Ended Year Ended
December 31, 1995 December 31, 1994
Non interest bearing-deposits $ 3,587,272 $ 2,961,590
NOW and money market deposits 10,054,565 11,505,244
Savings Deposits 1,261,660 1,025,703
Time Deposits 43,103,198 37,492,770
Borrowings (lease) 103,754 187,657
Federal funds purchased 334,110 ---
Other Liabilities 263,169 466,645
Total liabilities 58,707,728 53,639,609
Common Stock 1,767,085 1,765,315
Capital surplus 1,712,903 1,711,133
Retained earnings 1,543,556 853,516
Unrealized gain/loss securities (43,478) (21,529)
Total stockholders' equity 4,980,066 4,308,435
Total liabilities and
stockholders' equity $63,687,794 $57,948,044
The following is a presentation of an analysis of the net interest
earnings of the Company for the periods indicated with respect to each major
category of interest-earning asset and each major category of interest-bearing
liability. The Yield/Rate was computed on a tax equivalent basis.
Year Ended December 31, 1995
Average Average
Assets Amount Interest Yield/Rate
Interest bearing
bank balances. $ 100,000 $ 5,497 5.50%
Taxable securities 6,872,130 431,016 6.27%
Non-taxable securities 1,978,816 91,248 6.98%
Federal funds sold 1,521,096 82,601 5.43%
Net loans 49,383,546 5,590,840 11.32%
Total earning assets $59,855,588 $6,201,202 10.36%
Liabilities
NOW and money market
deposits $10,054,565 $ 320,967 3.19%
Savings deposits 1,261,660 40,644 3.22%
Time deposits 43,103,198 2,587,151 6.00%
Borrowings (lease) 103,754 7,651 7.37%
Federal funds purchased 334,110 20,784 6.22%
Total interest bearing
liabilities $54,857,287 $2,977,197 5.43%
Interest spread 4.93%
Net interest income $3,224,005
Net yield on interest earning assets 5.39%
(1) Net loans include $80,178 in loans that were placed on non-accrual
status. The Company would have earned an additional $2,808 had these
loans accrued interest throughout 1995.
(2) Interest earned on net loans includes $365,310 in loan fees and service
fees.
<PAGE>
Year Ended December 31, 1994
Average Average
Assets Amount Interest Yield/Rate
Interest bearing bank balances $49,589 $1,711 3.45%
Taxable securities 7,306,445 402,677 5.51%
Non-taxable securities 1,526,311 67,613 6.67%
Federal funds sold 4,429,384 176,069 3.98%
Net loans 40,580,530(1) 4,075,413(2) 10.04%
Total earning assets $53,892,259 $4,723,483 8.76%
Liabilities
NOW and money market
deposits $11,505,244 $364,068 3.16%
Savings deposits 1,025,703 33,292 3.25%
Time deposits 37,492,770 1,694,117 4.52%
Borrowings (lease) 187,657 14,324 7.63%
Total interest-bearing $50,311,374 $2,105,801 4.19%
liabilities
Interest spread 4.57%
Net interest income $2,617,682
Net yield on interest earning assets 4.86%
4. Rate/Volume Analysis of Net Interest Income.
The effect on interest income, interest expense and net income in the
periods indicated of changes in average balance and rate from the
corresponding prior period is shown below. The effect of a change in average
balance has been determined by applying the average rate in the earlier
period to the change in average balance in the later period, as compared with
the earlier period. The change in interest due to both volume and rate has
been allocated to volume and rate changes in proportion to the relationship
of the absolute dollar amounts of the change in each.
(1) Net loans include $81,311 in loans that were placed on non-accrual
status. The Company would have earned an additional $6,119 had these
loans accrued interest throughout 1994.
(2) Interest earned on net loans includes $255,695 in loan fees and service
fees.
<PAGE>
Year Ended December 31, 1995
Compared with Year Ended December 31, 1994
Increase (decrease) due to:
Volume Rate Total
Interest earned on:
Interest bearing
bank balances $ 2,389 $ 1,397 $ 3,786
Taxable securities (21,462) 49,801 28,339
Non-taxable securities 20,432 3,203 23,635
Federal funds sold (209,978) 116,510 (93,468)
Net loans 954,473 560,954 1,515,427
Total Interest Income $ 745,854 $731,865 $1,477,719
Interest paid on:
NOW and money market
deposits $(46,611) $3,510 $(43,101)
Savings deposits 7,660 (308) 7,352
Time deposits 280,112 612,922 893,034
Borrowings (6,200) (473) (6,673)
Federal funds purchased 20,784 -- 20,784
Total Interest Expense $255,745 $615,651 $871,396
Change in net
interest income $490,109 $116,214 $606,323
Year Ended December 31, 1994
Compared with Year Ended December 31, 1993
Increase (decrease) due to:
Volume Rate Total
Interest earned on:
Interest bearing
bank balances $(5,510) $(1,582) $(7,092)
Taxable securities (112,055) (83,772) (195,827)
Non-taxable securities 5,173 205 5,378
Federal funds sold 46,914 37,945 84,859
Net loans $142,271 $143,974 $286,245
Total Interest Incom $76,793 $96,770 $173,563
Interest paid on:
NOW and money market
deposits $48,481 $(9,818) $38,663
Savings deposits 11,083 (847) 10,236
Time deposits (66,831) (11,728) (78,559)
Borrowings (1,218) 7,163 5,945
Total Interest Expense $(8,485) $(15,230) $(23,715)
Change in net
interest income $85,278 $112,000 $197,278
5. Deposits Analysis.
The Bank offers a full range of interest-bearing and non-interest
bearing accounts, including commercial and retail checking accounts,
negotiable order of withdrawal ("NOW") accounts, individual retirement
accounts, regular interest-bearing savings accounts and certificates of
deposit with a range of maturity date options. The sources of deposits are
residents, businesses and employees of businesses within the Bank's market
area. Customers are obtained through the personal solicitation of the Bank's
officers and directors, direct mail solicitation of the Bank's officers and
directors, direct mail solicitation and advertisements published in the local
media.
The Bank pays competitive interest rates on time and savings deposits
up to the maximum permitted by law or regulation. In addition, the Bank has
implemented a service charge fee schedule competitive with other financial
institutions in the Bank's market area, covering such matters as maintenance
fees on checking accounts, per item processing fees on checking accounts,
returned check charges and the like.
<PAGE>
The following table presents, for the periods indicated, the average
amount of and average rate paid on each of the indicated deposit categories.
Year Ended
December 31, 1995
Deposit Category Average Amount Average Rate Paid
Non interest bearing
demand deposits $3,587,272 N/A
NOW and money market
deposits $10,054,565 3.19%
Savings deposits $1,261,660 3.22%
Time deposits $43,103,198 6.00%
Year Ended
December 31, 1994
Deposit Category Average Amount Average Rate Paid
Non interest bearing
demand deposits $2,961,590 N/A
NOW and money market
deposits $11,505,244 3.16%
Savings deposits $1,025,703 3.25%
Time deposits $37,492,770 4.52%
The following table indicates amounts outstanding of time certificates
of deposit of $100,000 or more and respective maturities at December 31,
1995:
Time Certificates
of Deposit
3 months or less $2,503,908
3-6 months 3,294,413
6-12 months 4,658,148
over twelve months 1,641,092
Total $12,097,561
6. Loan Portfolio Analysis.
The Company engages in a full complement of lending activities,
including commercial, consumer installment and real estate loans. A
significant number of loans are made to farmers or farming concerns.
Commercial lending is directed principally towards businesses whose
demands for funds fall within the Company's legal lending limits and which
are potential deposit customers of the Bank. These loans include loans
obtained for a variety of business purposes, and are made to individual,
partnership, or corporate borrowers. The Company places particular emphasis
on loans to small and medium sized businesses.
The Company's consumer loans consist primarily of installment loans to
individuals for personal, family and household purposes, including automobile
loans and pre-approved lines of credit to individuals. This category of
loans includes lines of credit and term loans secured by second mortgages on
residences for a variety of purposes, including home improvements, education
and other personal expenditures.
The Company's real estate loans consist of residential and commercial
first and second mortgages.
The following table presents various categories of loans contained in
the Bank's loan portfolio as of December 31, 1995 and 1994 and the total
amount of all loans for such periods:
As of December 31
1995 1994
Type of Loan
Domestic:
Commercial, financial and
agricultural $33,716,669 $26,023,979
Real estate-construction 688,037 140,000
Real estate-mortgage 8,136,175 6,637,143
Installment and other
loans to individuals 9,655,600 9,474,923
Subtotal 52,196,481 42,276,045
Allowance for
loan losses (922,613) (709,721)
Total (net of allowance) $51,273,868 $41,566,324
The following is a presentation of an analysis of maturities of
loans as of December 31, 1995 (in thousands):
Due in 1 Due In 1 To Due After
Type of Loan Year or Less 5 Years 5 Years Total
Commercial, financial and
agricultural $23,572 $9,501 $644 $33,717
Real estate-construction 688 - - - - 688
Total $24,260 $9,501 $644 $34,405
Experience of the Company has shown that some receivables will be paid
prior to contractual maturity and others will be converted, extended or
renewed. Therefore, the tabulation of contractual payments should not be
regarded as a forecast of future cash collections.
<PAGE>
The following is a presentation of an analysis of sensitivity of loans,
excluding installment and other loans to individuals, to changes in interest
rates as of December 31, 1995 (in thousands):
Due in 1 Due In 1 To Due After
Type of Loan Year or Less 5 Years 5 Years Total
Fixed rate loans $4,771 $7,462 $644 $12,877
Variable rate loans 19,489 2,039 -- 21,528
Total $24,260 $9,501 $644 $34,405
The following table presents information regarding nonaccrual, past due
and restructured loans as of December 31, 1995 and 1994 (dollars in
thousands):
As of December 31 1995 1994
Loans accounted for on a non-accrual basis:
Number: 3 2
Amount: $80 $81
Accruing loans which are contractually past due
90 days or more as to principal and interest payments:
Number: 0 0
Amount: $0 $0
Loans which were renegotiated to provide
a reduction or deferral of interest or principal
because of deterioration in the financial
position of the borrower:
Number: 0 0
Amount: $0 $0
Loans now current but for which there are serious
doubts as to the borrower's ability to comply with
existing terms:
Number: 1 3
Amount: $66 $70
As of December 31, 1995, there are no loans classified for regulatory
purposes as doubtful, substandard or special mention that have not been
disclosed in the above table, which (i) represent or result from trends or
uncertainties which management reasonably expects will materially impact
future operating results, liquidity, or capital resources, or (ii) represent
material credits about which management is aware of any information which
causes management to have serious doubts as to the ability of such borrowers
to comply with the loan repayment terms.
Loans are classified as non-accruing when the probability of collection
of either principal or interest becomes doubtful. The balance classified as
non-accruing represents the net realizable value of the account, which is the
most realistic estimate of the amount the Company expects to collect in final
settlement. If the account balance exceeds the estimated net realizable
value, the excess is written off at the time this determination is made.
At December 31, 1995, with the exception of the 3 non-accruing loans
reported above, all loans were accruing interest. There are no other loans
which are not disclosed above where known information about possible credit
problems of borrowers causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
7. Summary of Loan Loss Experience.
An analysis of the Bank's loss experience is furnished in the following
table for the years ended December 31, 1995 and 1994, as well as a breakdown
of the allowance for possible loan losses (in thousands):
Year Ended
December 31 1995 1994
Balance at beginning of period $ 710 $655
Charge-offs $(188) $(289)
Recoveries 23 22
Provision charged to Operations 378 322
Balance at end of period $ 923 $710
Ratio of allowance for loan losses to
total loans outstanding during
the period 1.77% 1.68%
Net charge-offs to average loans .33% .65%
As of December 31, 1995, the allowance for possible losses was
allocated as follows:
Percent of Loans
in Each Category to
Amount Total Loans
Commercial, financial and
agricultural $635,100 64.6%
Real estate-Construction 14,300 1.3%
Real estate-Mortgage 110,700 15.6%
Installment and other
loansto individuals 148,400 18.5%
Unallocated 14,113 --
Total $922,613 100.0%
8.Loan Loss Reserve.
In considering the adequacy of the Company's allowance for possible
loan losses, management has focused on the fact that as of December 31, 1995,
64.6% of outstanding loans were in the category of commercial, financial and
agricultural, loans. These loans are generally considered by management as
having greater risk than other categories of loans in the Company's loan
portfolio. However, 96.2% of the outstanding loans in this category at
December 31, 1995, were made on a secured basis, such collateral consisting
primarily of improved farmland real estate and equipment. Management
believes that the secured condition of the preponderant portion of its
commercial, financial and agricultural loan portfolio greatly reduces any
risk of loss inherently present in these loans.
The Company's consumer loan portfolio is also secured. At December 31,
1995, the majority of the Company's consumer loans were secured by collateral
primarily consisting of automobiles, boats and second mortgages on real
estate. Management believes that these loans involve less risk than other
categories of loans.
Real estate mortgage loans constitute 15.6% of outstanding loans.
Management considers these loans to have minimal risk due to the fact that
these loans represent conventional residential real estate mortgages where
the amount of the original loan does not exceed 80% of the appraised value of
the collateral.
The allowance for loan losses reflects an amount which, in management's
judgment, is adequate to provide for potential loan losses. Management's
determination of the proper level of the allowance for loan losses is based
on the ongoing analysis of the credit quality and loss potential of the
portfolio, actual loan loss experience relative to the size and
characteristics of the portfolio, changes in composition and risk
characteristics of the portfolio and anticipated impacts of national and
regional economic policies and conditions. Senior management and the Board
of Directors of the Bank review the adequacy of the allowance for loan losses
on a monthly basis.
Management considers the year-end allowance appropriate and adequate to
cover possible losses in the loan portfolio; however, management's judgment
is based upon a number of assumptions about future events, which are believed
to be reasonable, but which may or may not prove valid. Thus, there can be
no assurance that charge-offs in future periods will not exceed the allowance
for loan losses or that additional increases in the loan loss allowance will
not be required.
9. Investments.
As of December 31, 1995, the securities portfolio comprised
approximately 11.0% of the Company's assets, while loans comprised
approximately 79.5% of the Company's assets. The Bank invests primarily in
obligations of the United States or obligations guaranteed as to principal
and interest by the United States, other taxable securities and in certain
obligations of states and municipalities. In addition, the Bank enters into
Federal Funds transactions with its principal correspondent banks, and acts
as a net seller of such funds. The sale of Federal Funds amounts to a
short-term loan from the Bank to another bank.
The following table presents, for the years ended December 31, 1995
and 1994, the approximate market value of the Company's investments,
classified by category and by whether they are considered available-for-sale
or held-to-maturity (in thousands):
Investment Category
Available-for-Sale: December 31,
1995 1994
Obligations of U.S. Treasury
and other U.S. Agencies $4,745,782 $7,577,875
State, Municipal and
County Securities 1,916,304 --
Mortgage-Backed Securities 79,565 1,565,971
Federal Reserve Bank Stock 99,000 99,000
Federal Home Loan Bank Stock 183,300 171,900
Other Securities 100,000 407,934
Total $7,123,951 $9,822,680
Investment Category December 31,
1995 1994
Held-to-Maturity:
Municipal Securities $ -- $1,574,191
Certificate of Deposit -- 100,000
Total $ -- $1,674,191
The following table indicates, for the year ended December 31, 1995,
the amount of investments, appropriately classified, due in (i) one year or
less, (ii) one to five years, (iii) five to ten years, and (iv) over ten
years.
Investment Category
Average Weighted
Available-for-Sale: Amount Yield
Obligations of U.S. Treasury and other
U.S. Agencies
0 to 1 year $1,734,532 5.14%
Over 1 through 5 years 3,011,250 6.03%
Mortgage-Backed Securities:
0 to 1 year 44,006 7.02%
Over 1 through 5 years 35,559 8.32%
State, Municipal and County Securities
0 to 1 year 303,233 6.31%
Over 1 through 5 years 1,398,177 6.54%
Over 5 through 10 years 214,894 7.53%
Other Securities:
0 to 1 year 100,000 5.5 %
No maturity 282,300 6.0 %
Total $7,123,951 5.96%
Held-to-Maturity:
At December 31, 1995, there were no "held-to-maturity" securities.
<PAGE>
10.Return on Equity and Assets.
Returns on average consolidated assets and average consolidated equity
for the year ended December 31, 1995 and 1994 are as follows:
1995 1994
Return on average assets 1.23% 1.11%
Return on average equity 15.79% 14.96%
Equity to assets ratio 7.82% 7.43%
Dividend payout ratio 8.09% 9.83%
11.Asset/Liability Management.
It is the objective of the Bank to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the
framework of established cash, loan investment, borrowing and capital
policies. Certain of the officers of the Bank are responsible for monitoring
policies and procedures that are designed to ensure acceptable composition of
the asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits
of all categories made by individuals, partnerships and corporations.
Management of the Bank seeks to invest the largest portion of the Bank's
assets in commercial, consumer and real estate loans.
The Bank's asset/liability mix is monitored on a daily basis. A
monthly report reflecting interest-sensitive assets and interest-sensitive
liabilities is prepared and presented to the Bank's Board of Directors. The
objective of this policy is to control interest-sensitive assets and
liabilities so as to minimize the impact of substantial movements in interest
rates on the Bank's earnings.
12.Employees.
As of March 1, 1996, the Bank employed 21 full time and 4 part-time
personnel, including 3 officers. The Bank will hire additional persons as
needed, including additional tellers and financial service representatives.
Management of the Bank believes that its employee relations are good. There
are no collective bargaining agreements covering any of the Bank's employees.
13.Supervision and Regulation.
The Company and the Bank operate in a highly regulated environment, and
their business activities are governed by statute, regulation and
administrative policies. The business activities of the Company and the Bank
are closely supervised by a number of state and federal regulatory agencies,
including the Federal Reserve Board, the OCC, the Department and the Federal
Deposit Insurance Corporation ("FDIC").
The Company is regulated by the Federal Reserve Board under the federal
Bank Holding Company Act of 1956, which requires every bank holding company
to obtain the prior approval of the Federal Reserve Board before acquiring
more than 5% of the voting shares of any bank or all or substantially all of
the assets of a bank, and before merging or consolidating with another bank
holding company. The Federal Reserve Board (pursuant to regulation and
published statements) has maintained that a bank holding company must serve
as a source of financial strength to its subsidiary banks. In adhering to
the Federal Reserve Board policy, the Company may be required to provide
financial support to a subsidiary bank at a time when, absent such Federal
Reserve Board policy, the Company may not deem it advisable to provide such
assistance.
A bank holding company is generally prohibited from acquiring control
of any company which is not a bank and from engaging in any business other
than the business of banking or managing and controlling banks. However,
there are certain activities which have been identified by the Federal
Reserve Board to be so closely related to banking as to be a proper incident
thereto and thus permissible for bank holding companies, including the
following activities: acting as investment or financial advisor to
subsidiaries and certain outside companies; leasing personal and real
property or acting as a broker with respect thereto; providing management
consulting advice to nonaffiliated banks and non-bank depository
institutions; operating collection agencies and credit bureaus; acting as a
futures commission merchant; providing data processing and data transmission
services; acting as an insurance agent or underwriter with respect to limited
types of insurance; performing real estate appraisals; arranging commercial
real estate equity financing; providing securities brokerage services; and
underwriting and dealing in obligations of the United States, the states and
their political subdivisions.
Prior to September 29, 1995, interstate expansion of bank holding
companies was prohibited unless such acquisition was specifically authorized
by a statute of the state in which the target bank was located. However, the
Riegle-Neal Act, which was adopted by the United States Congress on September
29, 1994, has, as hereinafter described, significantly eased the prior
restrictions on the interstate acquisition of banks by bank holding
companies.
Pursuant to the Riegle-Neal Act, effective September 29, 1995, an
adequately capitalized and adequately managed bank holding company may
acquire a bank across state lines, without regard to whether such acquisition
is permissible under state law. A bank holding company is considered to be
"adequately capitalized" if it meets all applicable federal regulatory
capital standards.
While the Riegle-Neal Act precludes a state from entirely insulating
its banks from acquisition by an out-of-state holding company, a state may
still provide that a bank may not be acquired by an out-of-state company
unless the bank has been in existence for a specified number of years, not to
exceed five years. Additionally, the Federal Reserve Board is directed not
to approve an application for the acquisition of a bank across state lines if
(i) the applicant bank holding company, including all affiliated insured
depository institutions, controls, or after the acquisition would control,
more than ten percent of the total amount of deposits of all insured
depository institutions in the United States (the "ten percent concentration
limit") or (ii) the acquisition would result in the holding company
controlling thirty percent or more of the total deposits of insured
depository institutions in any state in which the holding company controlled
a bank or branch immediately prior to the acquisition (the "thirty percent
concentration limit"). States may waive the thirty percent concentration
limit, or may make same more or less restrictive, so long as they do not
discriminate against out-of-state bank holding companies.
The Riegle-Neal Act also provides that, beginning on June 1, 1997,
banks located in different states may merge and operate the resulting
institution as a bank with interstate branches. However, a state may (i)
prevent interstate branching through mergers by passing a law prior to June
1, 1997 that expressly prohibits mergers involving out-of-state banks or (ii)
permit such merger transactions prior to June 1, 1997. Under the Riegle-Neal
Act, an interstate merger transaction may involve the acquisition of a branch
of an insured bank without the acquisition of the bank itself, but only if
the law of the state in which the branch is located permits this type of
transaction.
A state may impose certain conditions on a branch of an out-of-state
bank resulting from an interstate merger so long as such conditions do not
have the effect of discriminating against out-of-state banks or bank holding
companies, other than on the basis of a requirement of nationwide reciprocal
treatment. The ten percent concentration limit and the thirty percent
concentration limit described above, as well as the rights of the states to
modify or waive the thirty percent concentration limit, apply to interstate
bank mergers in the same manner as they apply to the acquisition of
out-of-state banks.
A bank resulting from an interstate merger transaction may retain and
operate any office that any bank involved in the transaction was operating
immediately before the transaction. After completion of the transaction, the
resulting bank may establish or acquire additional branches at any location
where any bank involved in the transaction could have established or acquired
a branch.
The Riegle-Neal Act also provides that the appropriate federal banking
agency may approve an application by a bank to establish and operate an
interstate branch in any state that has in effect a law that expressly
permits all out-of-state banks to establish and operate such a branch.
The Company is also regulated by the Department under the Georgia Bank
Holding Company Act, which requires every Georgia bank holding company to
obtain the prior approval of the Department before acquiring more than 5% of
the voting shares of any bank or all or substantially all of the assets of a
bank or before merging or consolidating with any other bank holding company.
A Georgia bank holding company is generally prohibited from acquiring
ownership or control of 5% or more or the voting shares of any bank unless
the bank being acquired is either a bank for purposes of the federal Bank
Holding Company Act of 1956, or a federal or state savings and loan
association or a savings bank or federal savings bank whose deposits are
insured by the Federal Savings and Loan Insurance Corporation and such bank
has been in existence and continuously operating as a bank for a period of
five years or more prior to the date of application to the Department for
approval of such acquisition.
As a national bank, the Bank is subject to the supervision of the OCC
and, to a limited extent, the FDIC and the Federal Reserve Board. With
respect to expansion, national banks situated in the State of Georgia are
currently prohibited from establishing branch offices or facilities outside
of the county in which the bank's main office is located, except (i) in
adjacent counties in certain situations, or (ii) by means of a merger or
consolidation with a bank which has been in existence for at least five
years. In addition, in the case of a merger or consolidation, the acquiring
bank must have been in existence for at least 24 months prior to the merger.
However, the Georgia legislature has recently adopted legislation which, if
signed into law by the Governor of the State of Georgia, will, effective July
1, 1996, permit the subsidiary bank(s) of any bank holding company then
engaged in the banking business in the State of Georgia to establish, de
novo, upon receipt of required regulatory approval, an aggregate of up to
three additional branch banks in any county within the State of Georgia.
Effective July 1, 1998, this same legislation will permit, with required
regulatory approval, the establishment of de novo branches in an unlimited
number of counties within the State of Georgia by the subsidiary bank(s) of
the bank holding companies then engaged in the banking business in the State
of Georgia. This legislation, if enacted into law, could result in increased
competition in the Bank's market area. Although it is anticipated that the
Governor of the State of Georgia will approve the above-described
legislation, as of March 25, 1996, he had not signed same into law. As a
national bank, the Bank is subject to the Georgia banking and usury laws
restricting the amount of interest which it may charge in making loans or
other extensions of credit.
Loans and extensions of credit by national banks are subject to legal
lending limitations. Under federal law, a national bank may grant unsecured
loans and extensions of credit in an amount of up to 15% of its unimpaired
capital and surplus to any person. In addition, a national bank may grant
loans and extensions of credit to a single person in an amount up to 10% of
its unimpaired capital and surplus, provided that the transactions are fully
secured by readily marketable collateral having a market value determined by
reliable and continuously available price quotations. This 10% limitation is
separate from, and in addition to, the 15% limitation for unsecured loans.
Loans and extensions of credit may exceed the general lending limit if they
qualify under one of several exceptions. Such exceptions include certain
loans or extensions of credit arising from the discount of commercial or
business paper, the purchase of bankers' acceptances, loans secured by
documents of title, loans secured by U.S. obligations, and loans to or
guaranteed by the federal government.
Both the Company and the Bank are subject to regulatory capital
requirements imposed by the Federal Reserve Board and the OCC. The capital
adequacy guidelines issued by the Federal Reserve Board are applied to bank
holding companies on a consolidated basis with the banks owned by the holding
company. The OCC's risk-based capital guidelines apply directly to national
banks regardless of whether they are a subsidiary of a bank holding company.
Under both agencies' requirements, banking organizations must have capital
(as defined in the rules) equivalent to 8.0% of risk-weighted assets. The
risk weights assigned to assets are based primarily on credit risk. For
example, securities with an unconditional guarantee by the United States
government are assigned the lowest risk category. A risk weight of 50% is
assigned to loans secured by owner-occupied one-to-four family residential
mortgages. The aggregate amount of assets assigned to each risk category is
multiplied by the risk weight assigned to that category to determine the
weighted values, which are added together to determine total risk-weighted
assets.
Both the Federal Reserve Board and the OCC also require the maintenance
of minimum capital leverage ratios to be used in tandem with the risk-based
guidelines in assessing the overall capital adequacy of banks and bank
holding companies. Under these new rules, banking institutions are required
to maintain a ratio of "Tier 1" capital to total assets (net of goodwill) of
4.0%. Tier 1 capital includes common stockholders' equity, noncumulative
perpetual preferred stock, and minority interests in the equity accounts of
consolidated subsidiaries.
As of December 31, 1995, the Company maintained a total risk-based
capital ratio and "Tier 1" ratio of 11.7% and 10.5%, respectively. See also
the discussion under "Capital Adequacy" in Item 6 below.
Both the risk-based capital guidelines and the leverage ratio are
minimum requirements, applicable only to top-rated banking institutions.
Institutions operating at or near these levels are expected to have well
diversified risk, excellent asset quality, high liquidity, good earnings and,
in general, have to be considered strong banking organizations, rated
Composite 1 under the CAMEL rating system for banks or the BOPEC rating
system for bank holding companies. Institutions with lower ratings and
institutions with high levels of risk or experiencing or anticipating
significant growth would be expected to maintain ratios 100 to 200 basis
points above the stated minimums.
The OCC recently amended the risk-based capital guidelines applicable
to national banks in an effort to clarify certain questions of interpretation
and implementation, specifically with regard to the treatment of purchased
mortgage servicing rights ("PMSRs") and other intangible assets. The OCC's
guidelines provide that intangible assets are generally deducted from Tier 1
capital in calculating a bank's risk-based capital ratio. However, certain
intangible assets which meet specified criteria ("qualifying intangibles")
such as PMSRs are retained as a part of Tier 1 capital. The OCC currently
maintains that only PMSRs and purchased credit card relationships meet the
criteria to be considered qualifying intangibles. The OCC's guidelines
formerly provided that the amount of such qualifying intangibles that could
be included in Tier 1 capital was strictly limited to a maximum of 25% of
total Tier 1 capital. The OCC has amended its guidelines to increase the
limitation of such qualifying intangibles from 25% to 50% of Tier 1 capital
and further to permit the inclusion of purchased credit card relationships as
a qualifying intangible asset.
In addition, the OCC has adopted rules which clarify treatment of asset
sales with recourse not reported on a bank's balance sheet. Among assets
affected are mortgages sold with recourse under Fannie Mae, Freddie Mac and
Farmer Mac programs. The new rules clarify that even though those
transactions are treated as asset sales for bank Call Report purposes, those
assets will still be subject to a capital charge under the risk-based capital
guidelines.
Recent releases by the OCC contain several explanatory provisions
designed to alleviate confusion over treatment of the following issues in the
risk-based guidelines: treatment of supervisory goodwill in the definition of
capital, the unused portion of commitments, the calculation of the amount of
allowance for loan and lease losses included in Tier 2 capital, the
redemption of capital instruments, local currency claims guaranteed by
central governments which are not member countries of the Organization for
Economic Cooperation and Development ("OECD") and claims on non-OECD central
banks.
The OCC, the Federal Reserve Board and the FDIC have proposed a
revision to their risk-based capital guidelines to further ensure that those
guidelines take adequate account of interest rate risk. Interest rate risk
is the adverse effect that changes in market interest rates may have on a
bank's financial condition and is inherent to the business of banking. The
agencies have proposed two alternative methods for assessing a bank's capital
adequacy for interest rate risk. Under the first approach, the banking
agencies would establish minimum capital standards for interest rate risk
based on either a supervisory model or the bank's internal model of measuring
risk. Institutions would be required to have capital sufficient to cover the
amount of measured exposure in excess of the threshold level. The proposed
threshold level is a decline in net economic value equal to 1.0 percent of
assets. Under the second approach, a minimum capital requirement for
interest rate risk would not be set. Instead, examiners would consider
results of quantitative measures of interest rate risk along with other
factors in evaluating an institution's capital adequacy for interest rate
risk.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"Act"), enacted on December 19, 1991, provides for a number of reforms
relating to the safety and soundness of the deposit insurance system,
supervision of domestic and foreign depository institutions and improvement
of accounting standards. One aspect of the Act involves the development of a
regulatory monitoring system requiring prompt action on the part of banking
regulators with regard to certain classes of undercapitalized institutions.
While the Act does not change any of the minimum capital requirements, it
directs each of the federal banking agencies to issue regulations putting the
monitoring plan into effect. The Act creates five "capital categories"
("well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized" and "critically undercapitalized") which are
defined in the Act and which will be used to determine the severity of
corrective action the appropriate regulator may take in the event an
institution reaches a given level of undercapitalization. For example, an
institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will
take to become adequately capitalized. Upon approving the plan, the
regulator will monitor the institution's compliance. Before a capital
restoration plan will be approved, any entity controlling a bank (i.e.,
holding companies) must guarantee compliance with the plan until the
institution has been adequately capitalized for four consecutive calendar
quarters. The liability of the holding company is limited to the lesser of
five percent of the institution's total assets or the amount which is
necessary to bring the institution into compliance with all capital
standards. In addition, "undercapitalized" institutions will be restricted
from paying management fees, dividends and other capital distributions, will
be subject to certain asset growth restrictions and will be required to
obtain prior approval from the appropriate regulator to open new branches or
expand into new lines of business.
As an institution drops to lower capital levels, the extent of action
to be taken by the appropriate regulator increases, restricting the types of
transactions in which the institution may engage and ultimately providing for
the appointment of a receiver for certain institutions deemed to be
critically undercapitalized.
The Act also provides that banks will have to meet new safety and
soundness standards. In order to comply with the Act, the Federal Reserve
Board, the OCC and the FDIC have proposed rules defining operational and
managerial standards relating to internal controls, loan documentation,
credit underwriting, interest rate exposure, asset growth, director and
officer compensation, asset quality, earnings and stock valuation.
Both the capital standards and the safety and soundness standards which
the Act seeks to implement are designed to bolster and protect the deposit
insurance fund.
In response to the directive issued under the Act, the regulators have
adopted regulations which, among other things, prescribe the capital
thresholds for each of the five capital categories established under the Act.
The following table reflects these capital thresholds:
Total Risk Tier 1 Risk Tier 1
Based Capital Based Capital Leverage
Ratio Ratio Ratio
Well capitalized (1) 10% 6% 5%
Adequately capitalized(1) 8% 4% 4%(2)
Undercapitalized(3) 8% 4% 4%
Significantly undercapitalized(3) 6% 3% 3%
Critically undercapitalized 2%
(1) An institution must meet all three minimums.
(2) 3% for composite 1-rated institutions, subject to appropriate federal
banking agency guidelines.
(3) An institution falls into this category if it is below the specified
capital level for any of the three capital measures.
As a national bank, the Bank is subject to examination and review by
the OCC. This examination is typically completed on-site at least annually
and is subject to off-site review as well. The Bank submits to the OCC
quarterly reports of condition, as well as such additional reports as may be
required by the national banking laws.
As a bank holding company, the Company is required to file with the
Federal Reserve Board and the Department an annual report of its operations
at the end of each fiscal year and such additional information as the Federal
Reserve Board may require pursuant to the Act. The Federal Reserve Board may
also make examinations of the Company and each of its subsidiaries.
On March 16, 1994, the legislature of the State of Georgia enacted an
interstate banking statute which, effective July 1995, replaced the regional
interstate banking statute previously governing acquisitions of and by
Georgia-based bank holding companies. Under the new statute, acquisitions of
and by Georgia banks and bank holding companies are, under certain
circumstances and on a reciprocal basis, allowed to take place in all fifty
states, as opposed to only the twelve states which were previously covered by
the regional interstate banking statute. This legislation may have the
effect of increasing competition among financial institutions in the Bank's
market area and in the State of Georgia generally.
14.Monetary Policies.
The results of operations of the Bank are affected by credit policies
of monetary authorities, particularly the Federal Reserve Board. The
instruments of monetary policy employed by the Federal Reserve Board include
open market operations in U.S. Government securities, changes in the
discount rate on member bank borrowings, changes in reserve requirements
against member bank deposits and limitations on interest rates which member
banks may pay on time and savings deposits. In view of the changing
conditions in the national economy and the money markets, as well as the
effect of action by monetary and fiscal authorities, including the Federal
Reserve Board, no prediction can be made as to possible future changes in
interest rates, deposit levels, loan demand or the business and earnings of
the Bank.
Item 2.Description of Property.
The Bank owns its main banking facility located in an approximately
9,500 square foot building at 561 East Washington Avenue, Ashburn, Georgia
31714. The Hudson Avenue side of the property contains a house which has
been remodeled and is used for various activities, including banking and
civic functions. The bank invested approximately $1,141,396 in the
construction of the building, landscaping, and the purchase of security
devices, the main vault, furniture and fixtures.
Item 3.Legal Proceedings.
Neither the Company nor the Bank is a party to, nor is any of their
property the subject of, (a) any material pending legal proceeding which is
not routine litigation that is incidental to the business or (b) any other
material legal proceeding.
Item 4.Submission of Matters to a Vote of Security Holders.
No matter was submitted to a vote of security-holders during the fourth
quarter of the fiscal year covered by this report.
PART II
Item 5.Market for Common Equity and Related Stockholder Matters.
The Registrant's articles of incorporation authorize it to issue up to
10,000,000 shares of common stock, par value $5.00 per share. There is no
established public trading market in the stock. The Registrant sold 352,001
shares of its common stock at a price of $10.00 per share in its initial
public offering which terminated on December 14, 1990. As of March 1, 1996,
353,417 shares of the Registrant's common stock were issued and outstanding
to 475 holders of record. The Registrant is aware of isolated transactions
which have occurred since the conclusion of its initial offering; in the last
significant such transaction, 100 shares of common stock were sold for $18.00
per share.
During the first quarter of 1994, the Company declared and paid a
dividend of $63,360, i.e., $.18 per share. During the first quarter of 1995,
the Company declared and paid a dividend of $63,615, i.e., $.18 per share.
The declaration of future dividends is within the discretion of the Board of
Directors and will depend, among other things, upon business conditions,
earnings, the financial condition of the Bank and the Company, and regulatory
requirements.
The Bank is restricted in its ability to pay dividends under the
national banking laws and by regulations of the OCC. Pursuant to 12 U.S.C.
Section 56, a national bank may not pay dividends from its capital. All
dividends must be paid out of net profits then on hand, after deducting
losses and bad debts. Payments of dividends out of net profits is further
limited by 12 U.S.C. Section 60(a), which prohibits a bank from declaring a
dividend on its shares of common stock until its surplus equals its stated
capital, unless there has been transferred to surplus not less than 1/10 of
the Banks's net profits of the preceding two consecutive half-year periods
(in the case of an annual dividend). Pursuant to 12 U.S.C. Section 60(b),
the approval of the OCC is required if the total of all dividends declared
by the Bank in any calendar year exceeds the total of its net profits for
that year combined with its retained net profits for the preceding two
years, less any required transfers to surplus.
Under the OCC's regulations, the allowance for loan and lease losses
will not be considered an element of either "undivided profits then on hand"
or "net profits." Further, under the regulations, a national bank may be
able to use a portion of its capital surplus account as "undivided profits
then on hand," depending on the composition of that account. In addition,
the regulations clarify that dividends on preferred stock are not subject to
the limitations of 12 U.S.C. Section 56, while explicitly making such
dividends subject to the constraints of 12 U.S.C. Section 60. In general,
the regulations do not diminish or impair a well-capitalized banks ability to
make cash payments to its shareholders in the form of a return of capital.
Item 6.Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Discussion of the financial condition and results of operations of the
Company should be read in conjunction with the Company's consolidated
financial statements and related notes which are included elsewhere herein.
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended December 31, 1994
For the years ended December 31, 1995 and 1994, net income amounted to
$786,545 and $644,350 respectively. For 1995, primary and fully diluted
income per share of common stock was $1.96; for 1994, primary and fully
diluted income per share of common stock amounted to $1.58. Note that during
1995 and 1994, the outstanding warrants and stock options were dilutive
(i.e., upon exercise, they diluted earnings per share by more than 3%), thus
necessitating the disclosure of primary and fully diluted income per share.
Net income in 1995 increased by $142,195 primarily due to the following
reasons:
a. Average earning assets for the year ended December 31, 1994
increased from $53.9 million to $59.9 million for the year ended December 31,
1995, representing an increase of $6.0 million, or 11.1%. Below are various
components of earning assets for the periods indicated:
December 31,
1995 1994
(in 000's)
Federal funds sold $ 1,521 $ 4,429
Securities 8,951 8,882
Net loans 49,384 40,581
Total earning assets $59,856 $53,892
b. As a consequence of the increase in earning assets, the net
interest income also increased from $2,617,682 for the year ended December
31, 1994 to $3,224,005 for the year ended December 31, 1995. Additionally,
the net yield on earning assets has increased from 4.86% for the year ended
December 31, 1994 to 5.39% for the year ended December 31, 1995. The main
reason for the increase in the net yield is attributed to the shift in the
asset mix. For example, loans, the highest yielding asset, represented 75.3%
of earning assets in 1994, increasing to 82.5% in 1995. Below are various
components of interest income and expense, as well as their yield/costs for
the periods indicate
Years Ended
December 31, 1995 December 31, 1994
Interest Yield Interest Yield
Income/expense Cost Income/expense Cost
Interest income:
Federal funds sold $ 82,601 5.43% $ 176,069 3.98%
Securities 527,761 6.42 472,601 5.71
Loans 5,590,840 11.32 4,075,413 10.04
Total $ 6,201,202 10.36% $ 4,723,483 8.76%
Interest expense:
NOW and money
market deposits $ 320,967 3.19% $ 364,068 3.16%
Savings Deposits 40,644 3.22 33,292 3.25
Time Deposits 2,587,151 6.00 1,694,117 4.52
Borrowings 28,435 6.49 14,324 7.63
Total $ 2,977,197 5.43% $ 2,105,801 4.19%
Net interest income $ 3,224,005 $ 2,617,682
Net yield on earning
assets 5.39% 4.86%
Net Interest Income
The Company's results of operations are determined by its ability to
manage effectively interest income and expense, to minimize loan and
investment losses, to generate non-interest income and to control non-interest
expense. Since interest rates are determined by market forces and
economic conditions beyond the control of the Company, the ability to
generate net interest income is dependent upon the Company's ability to
maintain an adequate spread between the rate earned on earning assets and the
rate paid on interest-bearing liabilities, such as deposits and borrowings.
Thus, net interest income is the key performance measure of income.
The Company's net interest income for 1995 was $3,224,005 as compared
to $2,617,682 for 1994. Average yields on earning assets were 10.36% and
8.76% for the years ended December 31, 1995 and 1994, respectively. The
average costs of funds for 1995 increased to 5.43% from the 1994 cost of
4.19%. The net interest yield is computed by subtracting interest expense
from interest income and dividing the resulting figure by average
interest-earning assets. Net interest yields for the years ended
December 31, 1995 and 1994 amounted to 5.39% and 4.86%, respectively. The
increase in net interest yield is primarily due to the fact that the yield
on earning assets grew at a faster rate than the growth in interest
expense. Net interest income for 1995 as compared to 1994, increased by
$606,323. The increase is due to two factors: (i) the growth in average
earning assets from $53.9 million in 1994 to $59.9 million in 1995; and
(ii) a growth rate on the yield on earning assets which was greater than
the growth rate of deposits and other borrowings.
Non-Interest Income
Non-interest income for the years ended December 31, 1995 and 1994,
amounted to $389,497 and $447,659, respectively. As a percentage of average
assets, non-interest income declined from .77% in 1994 to .61% in 1995. The
primary reason for the above decline is due to the fact that in 1994 gain on
sale of securities amounted to $87,364, while in 1995, the Company
experienced a $4,066 loss from the sale of securities.
The following table summarizes the major components of non-interest
income for the periods therein indicated:
<PAGE>
Non-Interest Income
Year Ended December 31,
1995 1994
Service fees on deposit accounts $305,480 $275,359
(Loss) on sale of securities (4,066) 87,364
Miscellaneous, other 88,083 84,936
Total non-interest income $389,497 $447,659
Non-Interest Expense
Non-interest expense increased from $1,689,765 during 1994 to
$1,942,408 in 1995. As a percent of total average assets, non-interest
expense has increased from 2.91% in 1994 to 3.05% in 1995. Below are the
components of non-interest expense for the years 1995 and 1994.
Non-Interest Expense
Year Ended December 31,
1995 1994
Salaries and other personnel benefits $ 850,854 $ 744,961
Data processing charges 74,676 64,137
Depreciation, amortization 163,120 175,266
Regulatory assessment 107,699 148,997
Other expenses 746,059 556,404
Total non-interest expense $1,942,408 $1,689,765
For the year ended December 31, 1995, the allowance for loan losses
increased from $709,721 to $922,613. The allowance for loan losses as a
percent of gross loans increased from 1.68% at December 31, 1994 to 1.77% at
December 31, 1995. As of December 31, 1995, management considers the
allowance for loan losses to be adequate to absorb possible future losses.
However, there can be no assurance that charge-offs in future periods will
not exceed the allowance for loan losses or that additional provisions to the
allowance will not be required.
Liquidity and Interest Rate Sensitivity
Net interest income, the Company's primary source of earnings,
fluctuates with significant interest rate movements. To lessen the impact of
these margin swings, the balance sheet should be structured so that repricing
opportunities exist for both assets and liabilities in roughly equivalent
amounts at approximately the same time intervals. Imbalances in these
repricing opportunities at any point in time constitute interest rate
sensitivity.
Interest rate sensitivity refers to the responsiveness of
interest-bearing assets and liabilities to changes in market interest
rates. The rate sensitive position, or gap, is the difference in the
volume of rate sensitive assets and liabilities, at a given time interval.
The general objective of gap management is to manage actively rate sensitive
assets and liabilities so as to reduce the impact of interest rate
fluctuations on the net interest margin. Management generally attempts to
maintain a balance between rate sensitive assets and liabilities as the
exposure period is lengthened to minimize the Company's overall interest
rate risks. The asset mix of the balance sheet is continually evaluated in
terms of several variables: yield, credit quality, appropriate funding
sources and liquidity. To effectively manage the liability mix of the
balance sheet focuses on expanding the various funding sources. The
interest rate sensitivity position at year-end 1995 is presented below.
Since all interest rates and yield do not adjust at the same velocity, the gap
is only a general indicator of rate sensitivity.
December 31, 1995
(To the Nearest Thousand)
After After After
three six one year
Within months months but within After
Three but within but within five five
months six months one year years years Total
EARNING ASSETS
Loans $ 26,261 $ 5,108 $ 8,394 $11,404 $1,029 $52,196
Securities - - 200 1,937 4,489 498 7,124
Federal funds sold 1,250 - - - - - - - - 1,250
Total earning assets $ 27,511 $ 5,308 $10,331 $15,893 $1,527 $60,570
SUPPORTING SOURCES OF FUNDS
Interest-bearing demand
deposits and savings $ 10,175 $ - - $ - - $ - - $ - - $10,175
Certificates, less
than $100M 5,608 8,991 11,072 6,478 - - 32,149
Certificates, $100M and
over 2,504 3,295 4,658 1,641 - - 12,098
Other obligations - - - - 67 - - - - 67
Total interest-bearing
liabilities $ 18,257 $12,286 $15,797 $ 8,119 $ - - $54,489
Interest rate
sensitivity gap $ 9,224 $(6,978) $(5,466) $ 7,774 $1,527 $ 6,081
Cumulative gap 9,224 2,246 (3,220) 4,554 6,081 6,081
Interest rate
sensitivity gap ratio 1.50 .43 .65 1.96 N.A. 1.11
Cumulative interest rate
sensitivity gap ratio 1.50 1.07 .93 1.08 1.11 1.11
<PAGE>
As evidenced by the table above, the Company is cumulatively liability
sensitive from six to twelve months and asset sensitive in all other periods.
In a declining interest rate environment, a liability sensitive position (a
gap ratio of less than 1.0) is generally more advantageous since liabilities
are repriced sooner than assets. Conversely, in a rising interest rate
environment, an asset sensitive position (a gap ratio over 1.0) is generally
more advantageous, as earning assets are repriced sooner than liabilities.
As the Company continues to grow, management will continuously
structure its rate sensitivity position to best hedge against rapidly rising
or falling interest rates. The Bank's Asset/Liability Committee meets on a
quarterly basis and develops management's strategy for the upcoming period.
Such strategy includes anticipations of future interest rate movements.
Interest rate risk will, nonetheless, fall within previously adopted policy
parameters to contain any risk.
Liquidity represents the ability to provide steady sources of funds for
loan commitments and investment activities and to maintain sufficient funds
to cover deposit withdrawals and payment of debt and operating obligations.
These funds can be obtained by converting assets to cash or by attracting new
deposits. The Company's primary source of liquidity comes from its ability
to maintain and increase deposits through the Bank. Deposits grew by $2.5
million in 1995. Below are pertinent liquidity balances and ratios for the
years ended December 31, 1995 and 1994.
December, 31
1995 1994
Cash and cash equivalents $3,304,059 $5,383,503
CDs, over $100,000
to total deposits ratio 20.7% 18.7%
Loan to deposit ratio 87.8% 74.3%
Securities to total assets ratio 11.0% 18.8%
Brokered deposits - - - -
As the above balances and ratios indicate, management believes that the
Company's 1995 liquidity position is satisfactory, albeit declining form the
previous year. Management is unaware of any trends, demands, commitments,
events or uncertainties that will result in or are reasonably likely to
result in the Company's liquidity increasing or decreasing in any material
way. The Company is not aware of any current recommendations by the
regulatory authorities which, if implemented, would have a material effect on
the Company's liquidity, capital resources or results of operations.
Capital Adequacy
There are now two primary measures of capital adequacy for banks and
bank holding companies: (i) risk-based capital guidelines; and (ii) the
leverage ratio.
The risk-based capital guidelines measure the amount of a bank's
required capital in relation to the degree of risk perceived in its assets
and its off-balance sheet items. For example, cash and Treasury Securities
are placed under a zero percent risk category while commercial loans are
placed under the one hundred percent risk category. Banks are required to
maintain a minimum risk-based capital ratio of 8.0%, with at least 4.0%
consisting of Tier 1 capital. Under the risk-based capital guidelines, there
are two "tiers" of capital. Tier 1 capital consists of common shareholders'
equity, non-cumulative and cumulative (bank holding companies only),
perpetual preferred stock and minority interests. Goodwill is subtracted
from the total. Tier 2 capital consists of the allowance for loan losses,
hybrid capital instruments, term subordinated debt and intermediate term
preferred stock.
The second measure of capital adequacy relates to the leverage ratio.
The OCC has established a 3.0% minimum leverage ratio requirement. Note that
the leverage ratio is computed by dividing Tier 1 capital into total assets.
Banks that are not rated CAMEL 1 by their primary regulator should maintain a
minimum leverage ratio of 3.0% plus an additional cushion of at least 1 to 2
percent, depending upon risk profiles and other factors.
A new rule was recently adopted by the Federal Reserve Board, the OCC
and the FDIC that adds a measure of interest rate risk to the determination
of supervisory capital adequacy. In connection with this new rule, the
agencies also proposed a measurement process to measure interest rate risk.
Under this proposal, all items reported on the balance sheet, as well as
off-balance sheet items, would be reported according to maturity, repricing
dates and cash flow characteristics. A bank's reporting position would be
multiplied by duration-based risk factors and weighted according to rate
sensitivity. The net risk weighted position would be used in assessing
capital adequacy. The objective of this complex proposal is to determine the
sensitivity of a bank to various rising and declining interest rate
scenarios. This proposal is under consideration by the Federal banking
regulators.
The table below illustrates the Bank's and Company's regulatory capital
ratios at December 31, 1995.
Minimum
December 31, Regulatory
Bank 1995 Requirement
Tier 1 Capital 10.4% 4.0%
Tier 2 Capital 1.2% n/a
Total risk-based capital ratio 11.6% 8.0%
Leverage ratio 8.1% 3.0%
Company - Consolidated
Tier 1 Capital 10.5% 4.0%
Tier 2 Capital 1.2% n/a
Total risk-based capital ratio 11.7% 8.0%
Leverage ratio 8.3% 3.0%
<PAGE>
The above ratios indicate that the capital positions of the Company and
the Bank are sound and that the Company is well positioned for future growth.
Accounting Matters
Statement of Financial Accounting Standard No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107") requires the disclosure on
financial instruments of estimated fair values for those assets and
liabilities capable of being so estimated. Fair value estimates are made at
a specific point in time and are based on relevant market information which
is continuously changing. For entities with less than $150 million in
assets, SFAS 107 shall be effective for fiscal years ending after December
15, 1995. The Company adopted SFAS 107. The adoption of SFAS 107 did not
have a significant impact on the Company's consolidated financial condition
or results of operations.
Statement of Financial Accounting Standard No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments"
("SFAS 119") requires issuers and holders of derivative financial instruments
to disclose new information about these instruments. Derivatives are
financial instruments that derive their value from changes in a benchmark
based on stock prices, interest rates, commodity prices or some other agreed
upon base. Option contracts and forward contracts are two basic forms of
derivatives. For entities with less than $150 million in assets, SFAS 119
shall be effective for fiscal years ending after December 15, 1995. The
Company adopted SFAS 119. The adoption of SFAS 119 did not have a material
impact on the Company's consolidated financial condition or results of
operations.
Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS 121") establishes accounting standards for the impairment of
long-lived assets and certain identifiable intangibles, and goodwill related
to those assets. SFAS 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. In performing the review for recoverability, the entity
should estimate the future cash flows expected to results from the use of the
asset and its eventual disposition. SFAS 121 requires the above assets and
intangibles to be reported at the lower of (i) carrying amount or (ii) fair
value less selling costs. SFAS 121 is effective for fiscal years beginning
after December 15, 1995. As of December 31, 1995, the Company had not
adopted SFAS 121.
Statement of Financial Accounting Standard No. 122, "Accounting for
Mortgage Servicing Rights", ("SFAS 122") requires a mortgage banking
enterprise to recognize rights to service mortgage loans for others as a
separate asset. A mortgage banking enterprise that acquires mortgage
servicing rights through either the purchase or origination of mortgage loans
and sells or securities those loans with servicing rights retained should
allocate the total cost of the mortgage loans to (i) the mortgage servicing
rights and (ii) the loans (without the mortgage servicing rights). The above
allocation should be based on the relative fair values of (i) and (ii) above,
if it is practicable to estimate those fair values. In the event one may not
estimate the above fair values, the entire cost of purchasing or originating
the loans should be allocated to the loans and no cost should be allocated to
the mortgage servicing rights. The provisions of SFAS 122 shall be applied
prospectively in fiscal years beginning after December 15, 1995. As of
December 31, 1995, the Company had not adopted SFAS 122.
Item 7.Financial Statements and Supplementary Data.
The following financial statements are contained in this Item 7:
Independent Auditors' Report
Consolidated Balance Sheets-as of December 31, 1995 and 1994
Consolidated Statements of Income-for the years ended December 31, 1995
and 1994
Consolidated Statement of Changes in Stockholders' Equity-for the years
ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows-for the years ended December 31,
1995 and 1994
Notes to Consolidated Financial Statements
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
CONSOLIDATED FINANCIAL STATEMENTS
for the years ended
December 31, 1995 and 1994
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . . 1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets . . . . . . . . . . . . . . 2
Consolidated Statements of Income . . . . . . . . . . . 3
Consolidated Statements of Changes
in Shareholders' Equity . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . 6
Independent Auditors' Report
Board of Directors
Community National Bancorporation
Ashburn, Georgia
We have audited the accompanying consolidated balance sheets of
Community National Bancorporation (the "Company") and subsidiary as of
December 31, 1995 and 1994, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for the years then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Community National Bancorporation and subsidiary at December 31, 1995 and
1994, and the results of their consolidated operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Atlanta, Georgia
March 2, 1996
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
Consolidated Balance Sheets
ASSETS
December 31,
1995 1994
Cash and due from banks $ 2,054,059 $ 1,883,503
Federal funds sold, net (Note 3) 1,250,000 3,500,000
Total cash and cash equivalents $ 3,304,059 $ 5,383,503
Securities: (Notes 2, 4 & 5)
Available-for-sale at fair va 7,123,951 9,822,680
Held-to-maturity (Fair value of
$1,629,938 at December 31,1995) - - 1,674 191
Loans, net (Notes 2, 6, 7 & 15) 51,273,868 41,566,324
Property and equipment, net
(Notes 2 & 8) 1,090,001 1,166,912
Other assets 1,701,443 1,587,807
Total Assets $64,493,322 $61,201,417
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits
Non-interest bearing deposits $ 3,998,070 $ 4,956,350
Interest bearing deposits 54,421,891 50,992,030
Total deposits (Note 10) $58,419,961 $55,948,380
Obligation under capital
lease (Note 14) 67,330 145,588
Other liabilities 596,943 617,602
Total Liabilities $59,084,234 $56,711,570
Commitments and contingencies (Note 9)
Shareholders' Equity: (Notes 1, 15 & 18)
Common stock, $5.00 par value, 10,000,000
shares authorized, 353,417 shares issued
and outstanding at Dec. 31, 1995
and 1994 $ 1,767,085 $ 1,767,085
Paid-in-capital 1,712,903 1,712,903
Retained earnings 1,905,021 1,182,091
Unrealized gain on securities, net 24,079 (172,232)
Total Shareholders' Equity $ 5,409,088 $ 4,489,847
Total Liabilities and Shareholders'
Equity $64,493,322 $61,201,417
Refer to notes to the consolidated financial statements.
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
Consolidated Statements of Income
Years Ended December 31,
1995 1994
Interest income:
Interest and fees on loans $ 5,590,840 $ 4,075,413
Interest on investment securi 527,761 472,001
Interest on federal funds sold 82,601 176,069
Total interest income $ 6,201,202 $ 4,723,483
Interest expense:
Interest on deposits and
borrowings (Note 11) 2,977,197 2,105,801
Net interest income 3,224,005 2,617,682
Provision for possible
loan losses (Note 7) 378,000 321,500
Net interest income after provision
for possible loan losses 2,846,005 2,296,182
Other income:
Gain/(loss) on sale of
securities (Note 4) $ (4,066) $ 87,364
Service fees on deposit accounts 305,480 275,359
Miscellaneous, other 88,083 84,936
Total other income $ 389,497 $ 447,659
Other expenses:
Salaries and benefits $ 850,854 $ 744,961
Data processing expense 74,676 64,137
Regulatory fees and assessments 107,699 148,997
Depreciation and amortization 163,120 175,266
Other operating expenses (Note 12) 746,059 556,404
Total other expenses $ 1,942,408 $ 1,689,765
Income (loss) before income tax $ 1,293,094 $ 1,054,076
Income tax (Notes 2 & 13) 506,549 409,726
Net income $ 786,545 $ 644,350
Primary net income per
common share (Note 2) $ 1.96 $ 1.58
Fully diluted net income
per common share (Note 2) $ 1.96 $ 1.58
Refer to notes to the consolidated financial statements.
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
Consolidated Statements of Changes in Shareholders' Equity
for the years ended December 31, 1995 and 1994
Number Retained Unrealized Total
of Common Paid-in- Earnings Gain on Shareholders'
Shares Stock Capital (Deficit) Securities Equity
Balance,
December 31,
1993 352,001 $1,760,005 $1,705,823 $ 601,101 $ 129,174 $4,196,103
Redemption of
stock warrants 1,416 7,080 7,080 - - - - 14,160
Dividends paid - - - - - - (63,360) - - (63,360)
Net income, 1994 - - - - - - 644,350 - - 644,350
Unrealized (loss)
on securities - - - - - - - - (301,406) (301,406)
Balance,
December 31,
1994 $353,417 $1,767,085 $1,712,903 $1,182,091 $(172,232) $4,489,847
Dividends paid - - - - - - (63,615) - - (63,615)
Net income, 1995 - - - - - - 786,545 - - 786,545
Unrealized (loss)
on securities - - - - - - - - 196,311 196,311
Balance,
December 31,
1995 $353,417 $1,767,085 $1,712,903 $1,905,021 $24,079 $5,409,088
Refer to notes to the consolidated financial statements.
COMMUNITY NATIONAL BANCORPORATION
ASHBURN, GEORGIA
Consolidated Statements of Cash Flows
Years Ended
December 31,
1995 1994
Cash flows from operating activities:
Net income $ 786,545 $ 644,350
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 163,120 175,266
Net amortization of premiums on securities (430) 19,454
Loss on sale or settlements of securities 4,066 (87,364)
Provisions for loan losses 378,000 321,500
(Increase) in other assets (125,283) (534,574)
(Decrease) in liabilities (20,659) 113,560
Net cash provided by operating activities $ 1,185,359 $ 652,192
Cash flows from investing activities:
Proceeds from sales and
paydowns of investment securities $ 4,817,692 $ 4,174,687
Proceeds from maturities
of investment securities 1,685,000 3,300,000
Purchase of investment securities (1,937,097) (10,203,108)
Net increase in loans (10,085,544) (2,236,150)
Purchase of property and equipment (74,562) (45,343)
Net cash used in investing activities $ (5,594,511) $(5,009,914)
Cash flows from financing activities:
Proceeds from redemption of warrants $ - - $ 14,160
Payment of dividends (63,615) (63,360)
(Decrease) in lease obligations (78,258) (82,330)
Increase in customer deposits 2,471,581 3,245,632
Net cash provided from financing activities $ 2,329,708 $3,114,102
Net increase in cash and cash equivalents $ (2,079,444) $(1,243,620)
Cash and cash equivalents, beginning of year 5,383,503 6,627,123
Cash and cash equivalents, end of year $ 3,304,059 $ 5,383,503
Supplemental Information:
Income taxes paid $ 480,463 $ 350,540
Interest paid $ 2,842,549 $ 2,076,979
Refer to notes to the consolidated financial statements.
Community National Bancorporation
Ashburn, Georgia
Notes to Consolidated Financial Statements
December 31, 1995 and 1994
Note 1 - Organization of the Business
Community National Bancorporation, Ashburn, Georgia (the "Company") was
organized in August, 1989 to serve as a holding company for a proposed de
novo bank, Community National Bank, Ashburn, Georgia (the "Bank"). The Bank
was chartered and is currently regulated by the Office of the Comptroller of
the Currency and its deposits are each insured up to $100,000 by the Federal
Deposit Insurance Corporation. The Company purchased 100 percent of the
Bank's shares by injecting $3.3 million into the Bank's capital accounts
immediately prior to commencement of banking operations (August, 1990). The
Company has no other subsidiaries.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation and Reclassification. The consolidated financial
statements include the accounts of the Company and the Subsidiary. All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain prior year amounts have been reclassified to conform
to the current year presentation.
Basis of Accounting. The accounting and reporting policies of the
Company conform to generally accepted accounting principles and to general
practices in the banking industry. The Company uses the accrual basis of
accounting by recognizing revenues when they are earned and recognizing
expenses in the period incurred, without regarding the time of receipt or
payment of cash.
Investment Securities. The Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investment in Debt and
Equity Securities" ("SFAS 115") on January 1, 1994. SFAS 115 requires
investments in equity and debt securities to be classified into three
categories:
1. Held-to-maturity securities: These are securities which the
Company has the ability and intent to hold until maturity. These
securities are stated at cost, adjusted for amortization of
premiums and the accretion of discounts.
2. Trading securities: These are securities which are bought and
held principally for the purpose of selling in the near future.
Trading securities are reported at fair market value, and related
unrealized gains and losses are recognized in the income
statement.
3. Available-for-sale securities: These are securities which are
not classified as either held-to-maturity or as trading
securities. These securities are reported at fair market value.
Unrealized gains and losses are reported, net of tax, as separate
components of shareholders' equity. Unrealized gains and losses
are excluded from the income statement.
Loans, Interest and Fee Income on Loans. Loans are stated at the
principal balance outstanding. Unearned discount, unamortized loan fees and
the allowance for possible loan losses are deducted from total loans in the
statement of condition. Interest income is recognized over the term of the
loan based on the principal amount outstanding. Points on real estate loans
are taken into income to the extent they represent the direct cost of
initiating a loan. The amount in excess of direct costs is deferred and
amortized over the expected life of the loan.
Loans are generally placed on non-accrual status when principal or
interest becomes ninety days past due, or when payment in full is not
anticipated. When a loan is placed on non-accrual status, interest accrued
but not received is generally reversed against interest income. If
collectibility is in doubt, cash receipts on non-accrual loans are not
recorded as interest income, but are used to reduce principal.
Allowance for Possible Loan Losses. The provisions for loan losses
charged to operating expense reflect the amount deemed appropriate by
management to establish an adequate reserve to meet the present and
foreseeable risk characteristics of the current loan portfolio. Management's
judgement is based on periodic and regular evaluation of individual loans,
the overall risk characteristics of the various portfolio segments, past
experience with losses and prevailing and anticipated economic conditions.
Loans which are determined to be uncollectible are charged against the
allowance. Provisions for loan losses and recoveries on loans previously
charged-off are added to the allowance.
The Company adopted Statement of Financial Accounting Standards No.
114, "Accounting by Creditors for Impairment of a Loan," ("SFAS 114") on
January 1, 1995. Under the new standard, a loan is considered impaired,
based on current information and events, if it is probable that the Company
will be unable to collect the scheduled payments of principal or interest
when due according to the contractual terms of the loan agreement. The
measurement of impaired loans is generally based on the present value of
expected future cash flows discounted at the historical effective interest
rate, except that all collateral-dependent loans are measured for impairment
based on the fair value of the collateral. The adoption of SFAS 114 resulted
in no change to the allowance for credit losses at January 1, 1995.
In October, 1994, FASB issued Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure" ("SFAS 118"). SFAS 118 amends SFAS 114 to allow
a creditor to use existing methods for recognizing interest income on an
impaired loan, rather than the methods prescribed in SFAS 114.
Property and Equipment. Building, furniture and equipment are stated
at cost, net of accumulated depreciation. Depreciation is computed using the
straight line method over the estimated useful lives of the related assets.
Maintenance and repairs are charged to operations, while major improvements
are capitalized. Upon retirement, sale or other disposition of property and
equipment, the cost and accumulated depreciation are eliminated from the
accounts, and gain or loss is included in income from operations.
Income Taxes. The consolidated financial statements have been prepared
on the accrual basis. When income and expenses are recognized in different
periods for financial reporting purposes and for purposes of computing income
taxes currently payable, deferred taxes are provided on such temporary
differences.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109").
Under SFAS 109, deferred tax assets and liabilities are recognized for the
expected future tax consequences of events that have been recognized in the
financial statements or tax return. Deferred tax assets and liabilities are
measured using the enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be realized or
settled.
Statement of Cash Flows. For purposes of reporting cash flows, cash
and cash equivalents include cash on hand, amounts due from banks and federal
funds sold. Generally, federal funds are purchased or sold for one day
periods.
Earnings Per Share. The weighted average number of shares outstanding
as well as all of the common stock equivalents must be considered for
purposes of computing earnings per share. Common stock equivalents are
securities that enable their holders to obtain additional shares of common
stock. Options and warrants are common stock equivalents. They are used in
the computation of earnings per share only if, upon exercise, they dilute
earnings per share by 3% or more. To compute earnings per share, adjusted
net income is divided by the sum of weighted average shares of common stock
outstanding and of common stock equivalents.
Whenever the market price of a share of common stock exceeded the
exercise price of any warrant or option during the calendar years 1995 and
1994, an increase equal to the number of shares which would be issuable on
any such exercise of warrants and stock options was reflected as a common
stock equivalent. However, the rule for the treasury stock method states
that common stock equivalents may not exceed 20% of the outstanding shares.
Thus, if upon exercise, excess funds were available to acquire more than the
20% limit on common stock equivalents, any excess proceeds were assumed to be
invested in treasury securities and the income from those investments used to
adjust net income accordingly.
Purchases for purposes of the primary earnings per share calculation
were assumed to have been made at the average price of a share of common
stock during the corresponding calendar year, while purchases for purposes of
the fully diluted calculation were assumed to have been made at the calendar
year-end price of a share of stock.
1995 1994
Primary earnings per share $1.96 $1.58
Fully diluted earnings per share $1.96 $1.58
Weighted average number of common
stock and common stock equivalents 403,708 424,100
Note 3 - Federal Funds Sold
The Bank is required to maintain legal cash reserves computed by
applying prescribed percentages to its various types of deposits. When the
Bank's cash reserves are in excess of the required amount, the Bank may lend
the excess to other banks on a daily basis. As of December 31, 1995, the
Bank was a net seller of $1,250,000 in the federal funds market. At December
31, 1994, the Bank sold $3,500,000 to four banks through the use of the
federal funds market.
Note 4 - Securities Available-for-Sale
The amortized costs and estimated market values of securities
available-for-sale as of December 31, 1995 follow:
Gross Estimated
Amortized Unrealized Market
Description Cost Gains Losses Value
U.S. Treasury
securities $ 992,638 $ 1,108 $ (1,246) $ 992,500
U.S. Agency
securities 3,749,829 9,684 (6,230) 3,753,283
FRB stock 99,000 - - - - 99,000
FHLB stock 183,300 - - - - 183,300
Municipal
securities 1,884,195 32,108 - - 1,916,303
Mortgage backed
securities 78,504 1,061 - - 79,565
CDs at other banks 100,000 - - - - 100,000
Total securities $ 7,087,467 $43,960 $ (7,476) $7,123,951
The amortized costs and estimated market values of securities
available-for-sale as of December 31, 1994 are listed below:
Gross Estimated
Amortized Unrealized Market
Description Cost Gains Losses Value
U.S. Treasury
securities $ 2,082,270 $ 168 $ (59,843) $2,022,595
U.S. Agency
securities 5,693,288 - - (138,008) 5,555,280 FRB stock
99,000 - - - - 99,000
FHLB stock 171,900 - - - - 171,900
Municipal
securities 410,823 387 (3,276) 407,934
Mortgage backed
securities 1,626,357 1,029 (61,415) 1,565,971
Total securities $10,083,638 $ 1,584 $(262,542) $9,822,680
The amortized costs and estimated market values of securities
available-for-sale at December 31, 1995, by contractual maturity, are shown
in the following chart. Expected maturities may differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
Estimated
Amortized Market
Cost Value
Due in one year or less $ 2,142,653 $ 2,137,766
Due after one
through five years 4,377,254 4,409,427
Due after five
through ten years 206,756 214,893
FRB stock (no maturity) 99,000 99,000
FHLB stock (no maturity) 183,300 183,300
Mortgage-backed securities 78,504 79,565
Total investment securities $ 7,087,467 $ 7,123,951
Proceeds from sales of securities during 1995 were $4,817,692. Gross
losses of $4,066 were realized on those sales.
Proceeds from sales of securities during 1994 were $4,174,687. Gross gains
of $87,364 were realized on those sales.
As of December 31, 1995, an aggregate amount of $1,650,483, consisting
of total or portions of nine securities, were pledged as collateral for
public funds deposits aggregating $2,081,787. As of December 31, 1994, an
aggregate amount of $2,341,331, consisting of total or portions of seven
securities, were pledged as collateral for public funds deposits aggregating
$1,013,686.
Note 5 - Securities Held-to-Maturity
There were no securities classified held-to-maturity at December 31,
1995.
The amortized costs and estimated market values of securities
held-to-maturity as of December 31, 1994 follows:
Gross Estimated
Amortized Unrealized Market
Description Cost Gains Losses Value
Municipal securities $1,574,191 $ - - $(44,253) $1,529,938
CDs at other banks 100,000 - - - - 100,000
Total securities $1,674,191 $ - - $(44,253) $1,629,938
Note 6 - Loans
The composition of net loans by major loan category, as of
December 31, 1995 and 1994, follows:
December 31,
<PAGE>
1995 1994
Commercial, financial, agricultural $33,716,669 $26,023,979
Real estate - construction 688,037 140,000
Real estate - mortgage 8,136,175 6,637,143
Installment 9,655,600 9,474,923
Loans, gross $52,196,481 $42,276,045
Deduct:
Allowance for loan losses (922,613) (709,721)
Loans, net $51,273,868 $41,566,324
As of December 31, 1995, loans in the amount of $80,178 were
on non-accrual status. If interest had been accrued on those loans,
interest income
would have increased by $2,808 or $.01 per share. As of December 31, 1994,
loans in the amount of $81,311 were on non-accrual status. If interest had
been accrued on those loans, interest income would have increased by $6,119
or $.01 per share.
Note 7 - Allowance for Possible Loan Losses
The allowance for possible loan losses is a valuation reserve available
to absorb future loan charge-offs. The allowance is increased by provisions
charged to operating expenses and by recoveries of loans which were
previously written-off. The allowance is decreased by the aggregate loan
balances, if any, which were deemed uncollectible during the year.
Activity within the allowance for loan losses account for the years
ended December 31, 1995 and 1994 follows:
Year ended December 31,
1995 1994
Balance, beginning of year $ 709,721 $ 655,273
Add: Provision for loan losses 378,000 321,500
Add: Recoveries of previously
charged off amounts 22,568 22,228
Total $1,110,289 $ 999,001
Deduct: Amount charged-off (187,676) (289,280)
Balance, end of year $ 922,613 $ 709,721
Note 8 - Property and Equipment
Building, furniture, equipment, land and land improvements are stated
at cost less accumulated depreciation. Components of property and equipment
included in the consolidated balance sheets at December 31, 1995 and 1994
follow:
December 31,
1995 1994
Land $ 61,168 $ 61,168
Land improvements 43,111 30,486
Building 938,977 933,437
Furniture and equipment 680,498 624,158
Total fixed assets $1,723,754 $1,649,249
Deduct:
Accumulated depreciation (633,753) (482,337)
Total fixed assets, net $1,090,001 $1,166,912
Included in furniture and equipment are assets costing $400,881 which
are leased under two separate capital lease arrangements. Please refer to
Note 14 for additional information concerning the capital leases.
Depreciation expense for the years ended December 31, 1995 and 1994
amounted to $151,473 and $155,778, respectively. Depreciation is charged to
operations over the estimated useful lives of the assets. The estimated
useful lives and methods of depreciation for the principal items follow:
Type of Asset Life in Years Depreciation Method
Land improvements 2 Straight-line
Furniture and equipment 1 to 7 Straight-line
Building 32 Straight-line
Note 9 - Commitments and Contingencies
Please refer to Note 15 concerning contracts the Company executed with
the Bank's chief executive officer and executive vice president.
Please refer to Note 14 for the discussion concerning the lease of the
Bank's equipment.
Please refer to Note 16 concerning financial instruments with
off-balance sheet risk.
Note 10 - Deposits
The following details deposit accounts at December 31, 1995 and 1994:
December 31,
1995 1994
Non-interest bearing deposits $ 3,998,070 $ 4,956,350
Interest bearing deposits:
NOW accounts 4,836,437 5,249,485
Money market accounts 4,163,251 5,911,642
Savings 1,175,364 1,201,999
Time, less than $100,000 32,149,278 28,150,528
Time, $100,000 and over 12,097,561 10,478,376
Total deposits $58,419,961 $55,948,380
Note 11 - Interest on Deposits and Borrowings
A summary of interest expense for the years ended December 31, 1995 and
1994 follows:
December 31,
1995 1994
Interest on NOW and Super NOW accounts $ 166,959 $ 163,929
Interest on money market accounts 154,008 200,139
Interest on savings accounts 40,644 33,292
Interest on CDs under $100,000 1,836,134 1,241,271
Interest on CDs $100,000 and over 751,017 452,846
Interest on federal funds purchased 20,784 - -
Interest, other borrowings 7,651 14,324
Total interest on deposits and borrowings $2,977,197 $2,105,801
<PAGE>
Note 12 - Other Operating Expenses
A summary of other operating expenses for the years ended December 31,
1995 and 1994 follows:
December 31,
1995 1994
Stationary and supplies $ 48,942 $ 37,273
Professional fees 110,818 126,950
Courier & Postage 37,413 32,585
Advertising & business development 73,696 44,160
Repairs and maintenance 63,835 65,553
Utilities and telephone 42,542 40,467
Directors' fees 64,850 47,200
Taxes and licenses 128,544 56,333
Write-down on OREO property 50,000 - -
All other operating expenses 125,419 105,883
Total other operating expenses $746,059 $556,404
Note 13 - Income Taxes
As of December 31, 1995 and 1994, the Company's provision for income
taxes consisted of the following:
December 31,
1995 1994
Current $ 486,700 $ 363,956
Deferred 19,849 45,770
Federal income tax expense $ 506,549 $ 409,726
Deferred income taxes consist of the following:
1995 1994
Provision for loan losses $ 8,043 $ 20,235
Start-up expenses 10,500 21,176
Other 1,306 4,359
Total $ 19,849 $ 45,770
The Company's provision for income taxes differs from the amounts
computed by applying the federal income tax statutory rates to income before
income taxes.
A reconciliation of federal statutory income taxes to the
Company's actual income tax provision follows:
Year ended December 31,
1995 1994
Income taxes at statutory rate $517,238 $421,630
Tax-free investments (33,266) (23,782)
Decrease in valuation
allowance, deferred asset 8,043 20,235
Other 14,534 (8,357)
Total $506,549 $ 409,726
Included under other assets at December 31, 1995 is a net deferred tax
asset in the amount of $64,676. The tax effects of the temporary differences
that comprise the net deferred tax asset follow:
<PAGE>
Deferred tax assets:
Unrealized gain on securities $(12,405)
Provision for loan losses 258,056
Valuation allowance (180,975) 77,081
Net deferred tax asset $ 64,676
Note 14 - Capital Leases
The Bank leases equipment (under two separate agreements) that is used
in the ordinary course of business for operational needs. The leased
equipment is a component of property and equipment on the consolidated
balance sheets, and its cost is capitalized. Those costs were $247,897 in
1992 and $152,984 in 1991. The resulting liability account, obligation under
capital lease, was also reflected in the Company's consolidated balance
sheets. Note that the assets under capital leases are being depreciated and
included in the annual provision for depreciation expense.
Future minimum lease commitments under these leases at
December 31, 1995, follow:
January 1 to December 31, 1996 $ 55,706
January 1 to December 31, 1997 13,911
Thereafter - -
Total future minimum lease commitments 69,617
Less: amount representing interest (2,287)
Present value of minimum lease payments $ 67,330
Total payments during 1995 and 1994 under the two leases aggregated
$87,897 and $97,651, respectively.
Note 15 - Related Party Transactions
Stock Warrants and Options. In consideration of the directors'
financial risks and efforts in organizing the Company and the Bank, each
director was offered the opportunity to purchase investment units consisting
of one share of the Company's common stock and a warrant to purchase one
share of the Company's common stock. Each warrant entitles its holder to
purchase the Company's common stock at a price of $10.00 per share at any
time during the warrants' term of ten years. There were 97,750 units sold to
organizers during the Company's initial offering, and as of December 31, 1995
and 1994, there were 96,334 outstanding warrants.
Under certain performance criteria, the Bank's president and executive
vice president are entitled to stock options. As of December 31, 1995, the
president and executive vice president each had earned options to purchase
14,080 and 10,560 shares, respectively. The options are exercisable at
$10.00 per share and mature at the end of seven years. Both the president
and executive vice president have been granted all of the options outlined in
their respective employment agreements.
Borrowings and Deposits by Directors and Executive Officers. Certain
directors, executive officers and companies with which they are affiliated,
are customers of and have banking transactions with the Bank in the ordinary
course of business. As of December 31, 1995 and 1994, loans outstanding to
directors, their related interests and executive officers aggregated
$2,193,261 and $2,355,803, respectively. These loans were made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable arms-length transactions.
A summary of loan transactions with directors, including their
affiliates, and executive officers during 1995 and 1994 follows:
1995 1994
Balance, beginning of year $ 2,355,803 $ 2,861,630
New loans 2,135,096 2,153,560
Less: loan payments (2,297,638) (2,659,387)
Balance, end of year $ 2,193,261 $ 2,355,803
Deposits by directors and their related interests, at December 31, 1995
and 1994, approximated $1,843,997 and $1,756,571, respectively.
Total directors' fees aggregated $64,850 in 1995 and $47,200 in 1994.
Note 16 - Financial Instruments with Off-Balance Sheet Risk
In the ordinary course of business, and to meet the financing needs of
its customers, the Company is a party to various financial instruments with
off-balance sheet risk. These financial instruments, which include
commitments to extend credit and standby letters of credit, involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amounts recognized in the balance sheets. The contract amount of those
instruments reflects 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 other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amounts of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on-balance sheet
instruments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any material condition established in the
contract. Commitments generally have fixed expiration dates or other
termination clauses and may require the payment of a fee. At December 31,
1995 and 1994, unfunded commitments to extend credit were $3,709,000 and
$5,818,651, respectively. The Company evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the borrower. Collateral varies but may
include accounts receivable, inventory, property, plant and equipment, farm
products, livestock and income producing commercial properties.
At December 31, 1995 and 1994, commitments under letters of credit
aggregated approximately $269,700 and $169,000, respectively. The credit
risk involved in issuing letters of credit is essentially the same as that
involved in extending loan facilities to customers. Collateral varies but
may include accounts receivable, inventory, equipment, marketable securities
and property. Since most of the letters of credit are expected to expire
without being drawn upon, they do not necessarily represent future cash
requirements.
The Company makes commercial, agricultural, real estate and consumer
loans to individuals and businesses located in and around Turner County,
Georgia. The Company does not have a significant concentration of credit
risk with any individual borrower. However, a substantial portion of the
Company's loan portfolio is collateralized by real estate (mainly farmland)
located in and around Turner County, Georgia.
Note 17 - Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments" ("SFAS 107"), requires the disclosure of
estimated fair values for all financial instruments, both on-and-off balance
sheet assets and liabilities, whose values may be practically estimated,
along with pertinent information on those financial instruments whose values
may not be so estimated.
Fair value estimates are made at a specific point in time and are based
on relevant market information which is continuously changing. Because no
quoted market prices exist for a significant portion of the Company's
financial instruments, fair values for such instruments are based on
management's assumptions with respect to future economic conditions,
estimated discount rates, estimates of the amount and timing of future cash
flows, expected loss experience and other factors. These estimates are
subjective in nature involving uncertainties and matters of significant
judgment. Therefore, they cannot be determined with precision. Note that
changes in the assumption could significantly affect the estimates. The
following disclosures should not be considered a substitute for the
liquidation value of the Company and its subsidiaries, but rather a
good-faith estimate of the increase or decrease in value of financial
instruments held by the Company since purchase, origination or issuance.
The Company has not undertaken any steps to value any assets or liabilities
that are not considered financial instruments. For example, premises,
equipment, core deposits, intangibles and goodwill are not considered
financial instruments.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments.
1. Cash and due from banks and interest bearing deposits with other
banks: Fair value equals the carrying value of such assets.
2. Investment securities and investment securities available-for-sale:
Fair values for investment securities are based on quoted market prices.
3. Federal funds sold and securities purchased under agreements to
resell: Due to the short term nature of these assets, the carrying values of
these assets approximate their fair value.
4. Loans: For variable rate loans, (those repricing within six months
or less) fair values are based on carrying values. Fixed rate commercial
loans, other installment loans and certain real estate mortgage loans were
valued using discounted cash flows. The discount rate used to determine the
present value of these loans was based on interest rates currently being
charged by the Company on comparable loans as to credit risk and term.
5. Off-balance sheet instruments: The Company's loan commitments are
negotiated at current market rates and are relatively short-term in nature
and, as a matter of policy, the Company generally makes commitments for fixed
rate loans for relatively short periods of time. Therefore, the estimated
value of the Company's loan commitment approximates carrying amount.
6. Deposit liabilities: The fair values of demand deposits are, as
required by SFAS 107, equal to the carrying value of such deposits. Demand
deposits include non-interest bearing deposits, savings accounts, NOW
accounts and money market demand accounts.
Discounted cash flows have been used to value fixed rate term deposits
and variable rate term deposits having reached an interest rate floor. The
discount rate used is based on interest rates currently being offered by the
Company on comparable deposits as to amount and term.
7. Short-term borrowings: The carrying value of federal funds
purchased, securities sold under agreements to repurchase and other
short-term borrowings approximates their carrying values.
8. FHLB and other borrowings: The fair value of the Company's fixed
rate borrowings are estimated using discounted cash flows, based on the
Company's current incremental borrowing rates or similar types of borrowing
arrangements. The carrying amount of the Company's variable rate borrowings
approximates their fair values.
At December 31, 1995
Carrying Estimated
Amount Fair Value
Assets:
Cash and due from banks $ 2,054,059 $ 2,054,059
Investment securities
available-for-sale 7,123,951 7,123,951
Federal funds sold and
securities purchased
under agreements to resell 1,250,000 1,250,000
Loans 51,273,868 51,395,608
Liabilities:
Non-interest
bearing deposits 3,997,817 3,997,817
Interest bearing deposits 54,421,891 54,319,570
FHLB and other borrowings 67,330 67,330
Note 18 - Dividends
Dividends are paid by the Company from its assets, which are provided
mainly by dividends up-streamed from the Bank. Certain regulatory
restrictions exist, however, regarding the ability of the Bank to transfer
funds to the Company in the form of cash dividends, loans or advances.
During 1995, the Company received $40,000 in dividends from the Bank
and paid dividends in the amount of $.18 per share of common stock, or
$63,615 in the aggregate to its shareholders. During 1994, the Company
received $114,000 in dividends from the Bank and paid dividends in the amount
of $.18 per share of common stock, or $63,360 in the aggregate to its
shareholders.
Note 19 - Parent Company Financial Information
This information should be read in conjunction with the other notes to
the consolidated financial statements.
Parent Company Balance Sheets
December 31,
Assets 1995 1994
Cash $ - - $ 30,191
Accounts receivable 467 54,561
Investment in CDs 100,000 100,000
Investment in the Bank 5,322,343 4,329,605
Organizational costs, net - - 2,128
Other assets 52,247 1,000
Total Assets $5,475,057 $4,517,485
Liabilities and Shareholders' Equity
Income taxes payable $ 51,242 $ 19,204
Accounts payable 14,727 8,434
Total Liabilities $ 65,969 $ 27,638
Common stock $1,767,085 $1,767,085
Paid-in-capital 1,712,903 1,712,903
Retained earnings 1,905,021 1,182,091
Unrealized gain (loss) on securities 24,079 (172,232)
Total Capital $5,409,088 $4,489,847
Total liabilities and capital $5,475,057 $4,517,485
Parent Company Statements of Income
Years Ended December 31,
1995 1994
Revenues:
Interest income $ 5,677 $ 4,449
Dividends from Bank 40,000 114,000
Total revenues $ 45,677 $118,449
Expenses:
Professional fees $ 41,963 $ 30,555
Amortization of organization costs 2,128 3,648
Other expenses 11,468 11,770
Total expenses $ 55,559 $ 45,973
Income (loss) before
equity in undistributed
earnings of Bank $ (9,882) $ 72,476
Equity in undistributed
earnings of Bank 796,427 571,874
Net Income $786,545 $644,350
Parent Company Statements of Cash Flows
Years Ended December 31,
1995 1994
Cash flows from operating activities:
Net income $ 786,545 $ 644,350
Adjustments to reconcile net
income to net cash provided
by operating activities:
Equity in undistributed
earnings of the Bank (796,427) (571,874)
Amortization of organization costs 2,128 3,648
Decrease in receivables
and advances 2,847 (24,571)
Increase in payables 38,331 26,986
Net cash provided
by operating activities $ 33,424 $ 78,539
Cash flows from financing activities:
Proceeds from redemption of warrants $ - - $ 14,160
Payment of cash dividends (63,615) (63,360)
Net cash provided
from financing activities $ (63,615) $ (49,200)
Net (decrease) in cash
and cash equivalents $ (30,191) $ 29,339
Cash and cash equivalents,
beginning of year 30,191 852
Cash and cash equivalents, end of year $ - - $ 30,191
Note 20 - Subsequent Events
Subsequent to December 31, 1995, and prior to the date of this report,
the Company declared a dividend of $.18 per share for each share of its
common stock outstanding. Any declaration of future dividends is within the
Board of Directors' discretion and will depend, among other things, upon
business conditions, earnings, capital position and applicable regulatory
requirements.
Item 8.Changes in and Disagreements With Accountants and Financial
Disclosure.
Not applicable. The Registrant did not change accountants in 1995 and
continues to use the independent accounting firm of Francis & Company, CPAs.
PART III
Item 9.Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
A. The following table sets forth the name of each director of the
Registrant and the Bank, his/her age, positions held, and a brief description
of his/her business experience. The Registrant's current members of the
board of directors serve a term of one year. Except as otherwise indicated,
each individual has been or was engaged in his/her present or last principal
occupation, in the same or a similar position, for more than five years.
Name Age Position with Company and Bank and Principal
Occupation
T. Brinson
Brock, Sr. 39 Mr. Brock has been Vice President and Secretary
since November 1989 and a director since August
1989 of the Company and Executive Vice President,
Secretary and a director of the Bank since August
1990. Mr. Brock began his banking career in 1978
with Cordele Banking Company in Cordele, Georgia.
In 1984 he joined Ashburn Bank as Vice President
and was promoted to Senior Vice President in
charge of lending in 1987. Mr Brock also has a
beef cattle operation.
Willis R.
Collins 50 Mr. Collins has been a director of the Company
since August 1989 and of the Bank since August
1990. Mr. Collins has been a County Commissioner
since 1986. He has managed Turnco Farms since
1960 and he organized Cotton Warehouse, Inc. in
1988.
Gene Stallings
Crawford 67 Mr. Crawford has been a director of the Company
since August 1989 and of the Bank since August
1990. For over forty years Mr. Crawford has been
active in developing Crawford Cattle Company, a
beef and feeder cattle production business.
Benny Warren
Denham 65 Mr. Denham has been a director of the Company
since August 1989 and of the Bank since August
1990. Mr. Denham is a co-owner of Denham Farms
and has operated this farming business since
1951.
Lloyd Greer
Ewing 50 Mr. Ewing has been a director of the Company
since August 1989 and of the Bank since August
1990. Mr. Ewing joined Ewing Buick, Pontiac GMC
Trucks, Inc. in sales in 1973 and has progressed
through the company for the past nineteen years.
He now is a 50% owner of the business and is
General Manager. Mr. Ewing is a former member of
the Board of Directors at First Federal Savings
Bank of Turner County.
Ronald Craig
Huckaby 36 Mr. Huckaby served as a director of the Company
from August 1989 through February 13, 1996 and of
the Bank from August 1990 through February 13,
1996. Mr. Huckaby is a farmer and cattleman. He
owns 100% of Huckaby Farms, a row crop operation
in Crisp and Dooly Counties. Mr. Huckaby
resigned from his positions as a director of each
of the Company and the Bank on February 13, 1996.
Grady Elmer
Moore 61 Mr. Moore has been a director of the Company
since August 1989 and of the Bank since August
1990. Mr. Moore runs a row crop operation, G.M.
Farms, Inc., which he has pursued for the past
thirty-five years.
Sara Ruth
Raines 49 Mrs. Raines has been a director of the Company
since August 1989 and of the Bank since August
1990. Until recently, Mrs. Raines was the sole
owner of a department (clothing) store in
Ashburn.
Theron G. Reed 53 Mr. Reed has been President, Chief Executive
Officer and Treasurer since November 1989 and a
director since August 1989 of the Company and
President, Chief Executive Officer and a director
of the Bank since August 1990. Mr. Reed was
employed by the Ashburn Bank from 1965 until his
resignation in April 1989. He served as
President and CEO of that institution from March
1980 until April 1989 and prior to that he served
in various other capacities ranging from
Assistant Vice President to Vice President -
Lending.
Benjamin E.
Walker 64 Mr. Walker has been a director of the Company
since August 1989 and of the Bank since August
1990. Mr. Walker is a minority owner of M & W
Sportswear, Inc., a local garment contracting
company which has been in business since 1966.
Mr. Walker is also a fifty percent owner of SWS
Garment, Inc., a uniform manufacturing operation
in Fitzgerald, Georgia. Mr. Walker is the former
Chairman of the Board of Citizens Bank of
Ashburn.
Jimmie Ann Ward 58 Mrs. Ward has been a director of the Company
since August 1989 and of the Bank since August
1990. Mrs. Ward is a homemaker and community
volunteer in Turner County.
Freddie J.
Weston, Jr. 58 Mr. Weston has been a director of the Company
since August 1989 and of the Bank since August
1990. Mr. Weston served in the U.S. Army for
more than twenty-five years, retiring in October
1981. Since 1983, he has been the coordinator of
Vocational Academic Education at Turner County
High School where he teaches business and
financial management.
B. Set forth below is the name, age, title and description of prior
business experience of the executive officers of the Registrant and the Bank.
Executive officers are elected by the Board of Directors for one-year terms
in March of each year and serve until their successors are elected and
qualified.
Theron G. Reed - Age 53. Mr. Reed has been President, Chief Executive
Officer and Treasurer since November 1989 and a director since August 1989 of
the Company and President, Chief Executive Officer and a director of the Bank
since August 1990. Mr. Reed was employed by the Ashburn Bank from 1965 until
his resignation in April 1989. He served as President and CEO of that
institution from March 1980 until April 1989 and prior to that he served in
various other capacities ranging from Assistant Vice President to Vice
President - Lending.
T. Brinson Brock, Sr. - Age 39. Mr. Brock has been Vice President and
Secretary since November 1989 and a director since August 1989 of the Company
and Executive Vice President, Secretary and a director of the Bank since
August 1990. Mr. Brock began his banking career in 1978 with Cordele Banking
Company in Cordele, Georgia. At Cordele Banking Company his major lending
responsibilities were in the areas of consumer, commercial and agricultural
lending. He also handled the "packaging" of SBA loans. In 1984 he joined
Ashburn Bank as Vice President and served primarily as a commercial and
agricultural loan officer. Promoted to Senior Vice President in charge of
lending in 1987, he supervised a staff of four consumer, mortgage,
agricultural, and commercial loan officers.
Ava Lovett - Age 51. Ms. Lovett has been Vice President and Cashier of
the Bank since May 1990. From 1989 through 1990, she was Vice President,
Cashier, corporate secretary and operations compliance officer for Coffee
County Bank, Douglas, Georgia. She supervised all activities of the bank
policies and objectives and was responsible for the bank's daily reserve and
money position. Ms. Lovett prepared management and regulatory reports to the
Board, the annual budget, budget variance analysis and all regulatory
reports. From 1987 through 1989, Ms. Lovett was Vice President, Cashier and
Secretary for Ashburn Bank, Ashburn, Georgia. She supervised all activities
of the operations area and established operating procedures in accordance
with bank policies and objectives. She was responsible for the bank's daily
reserve and money position. From 1986 through 1987, Ms. Lovett was an
Internal Auditor for Alma Exchange Bank, Alma, Georgia. She established and
implemented an internal audit program for four banks in the bank holding
company. In addition, she performed periodic examinations of all accounting
records of the banks, performed continuous evaluation of operating procedures
and prepared and presented reports to the Board. From 1982 through 1986 Ms.
Lovett was a financial examiner with the Georgia Department of Banking and
Finance, Atlanta, Georgia (District Office, Douglas, Georgia). She performed
safety and soundness examinations of state chartered banks, credit unions and
bank holding companies. Her responsibilities included examiner-in-charge
duties, credit analysis and detail (audit) functions.
Item 10.Executive Compensation.
A. Named Executive Officers.
The following table sets forth the compensation paid to the named
executive officers of the Registrant for each of the Registrant's last three
completed fiscal years:
SUMMARY COMPENSATION TABLE
ANNUAL LONG TERM COMPENSATION
COMPENSATION AWARDS PAYOUTS
Securities All Other
Name and Othe Restricted Underlying Com-
Principal Annual Stock Options/ LTIP pensa-
Position Year Salary Bonus Compensation Awards SARs Payouts tion
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Theron G. Reed, 1995 $100,404 $18,000 $22,408(1) $0 0 $0 $0
President and CEO 1994 $93,630 $15,000 $32,307(2) $0 3,520(4) $0 $0
of the Company 1993 $93,630 $12,750 $15,667(3) $0 3,520(4) $0 $0
T. Brinson Brock, 1995 $81,200 $17,000 $21,984(6) $0 1,760(7) $0 $0
Sr.(5)
Vice President and
Secretary of the
Company
<PAGE>
(1) Includes directors fees of $3,400; automobile allowance of $3,300;
Christmasbonus of $1,500; and contribution to the Company's profit
sharing plan in the amount of $14,208.
(2) Includes directors fees, Christmas bonus and contribution to the
Company's profit sharing plan on behalf of Mr. Reed.
(3) Represents amount contributed to the Company's profit sharing plan on
behalf of Mr. Reed.
(4) When the Bank opened for business in 1990, Mr. Reed was granted an
option to acquire 1% of the Registrant's original stock issue (i.e.,
3,520 shares). Thereafter, at the end of each of fiscal year 1992,
1993 and 1994, Mr. Reed, based upon the Bank's having achieved a specified
return on assets in each such year, was granted additional options to
acquire 1% per year of the Registrant's original stock issue (i.e.,
3,520 additional shares per year). The return on assets which the Bank
had to achieve in years 1992-1994 for Mr. Reed to earn the options
granted to him in such years was: calendar year 1992, .3%; calendar
year 1993, .5%; and calendar year 1994, .75%. All options are
exercisable at a price of $10.00 per share and are exercisable at any
time for seven years after the year in which such options were awarded.
(5) No information is provided with respect to Mr. Brock for fiscal years
1993 and 1994, because, during such fiscal years, Mr. Brock did not
fall within the definition of "named executive officers" provided in
Item 402(a)(2) of Regulation S-B. Includes directors fees of $4,500;
automobile allowance of $4,200; Christmas bonus of $1,500; and
contribution to the Companys profit sharing plan in the amount of $11,784.
(7) When the Bank opened for business in 1990, Mr. Brock was granted an
option to acquire 1% of the Registrant's original stock issue (i.e.,
3,520 shares). Thereafter, at the end of each of fiscal year 1992,
1993, 1994 and 1995, Mr. Brock, based upon the Bank's having achieved a
specified return on assets in each such year, was granted additional
options to acquire .5% per year of the Registrant's original stock
issue (i.e., 1,760 additional shares per year). The return on assets
which the Bank had to achieve in years 1992-1995 for Mr. Brock to earn
the options granted to him in such years was: calendar year 1992, .3%;
calendar year 1993, .5%; calendar year 1994, .75%; and calendar year
1995, 1.0%. All options are exercisable at a price of $10.00 per
share and are exercisable at any time for seven years after the year in
which such options were awarded.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(Individual Grants)
Number of Percent of
Securities Total Options/
Underlying Granted to
Options/SARs Employees in Exercise or Base Expiration
Name Granted Fiscal Year Price Date
(a) (b) (c) (d) (e)
Theron G.
Reed 0 0.00% -- --
T. Brinson
Brock, Sr. 1,760 100% $10.00/Share 12/31/02
<PAGE>
No stock options or warrants were exercised and there were no SARs
outstanding during fiscal year 1995. The following table presents information
regarding the value of unexercised options and warrants held at December 31,
1995.
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Value of
Securities Unexercised
Underlying in-the-Money
Unexercised Options/SARs
Options/SARs at at FY-End
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise Realized Unexercisable Unexercisable
(a) (b) (c) (d) (e)
Theron G.
Reed -- -- 14,080/0 $91,520/$0
T. Brinson
Brock, Sr. -- -- 10,560/0 $68,640/$0
The Registrant does not have any Long Term Incentive Plans in effect.
B. Directors
Each director of the Registrant receives $300 for each monthly meeting
attended by him/her. In addition, directors who are members of the Loan
Committee of the Board receive $100 for each meeting of such committee
attended by them. In December of 1995 each director of the Bank received a
$1,500 Christmas bonus.
(1) Dollar values calculated by determining the difference between the
estimated fair market value of the Company's Common Stock at December
31, 1995 (i.e., $16.50 per share) and the exercise price of such options
(i.e., $10.00).
Item 11. Security Ownership of Certain Beneficial Owners and Management.
On March 1, 1996, the Company had 475 shareholders of record.
The following table sets forth share ownership information as of March
1, 1996, with respect to any person known to the Registrant to be a
beneficial owner of more than 5% of the Registrant's common stock:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS*
Title of Name and Address of Percent of
Class Beneficial Owner Number of Shares Class (1)
Common Stock T. Brinson Brock, Sr. 25,854(2) 6.97%
1252 Brock Road
Arabi, Georgia 31712
Common Stock Willis R. Collins 30,500(3) 8.43%
9655 Georgia Highway 112 East
Rebecca, Georgia 31783
Common Stock Gene Stallings Crawford 35,193(4) 9.68%
56 South Academy Street
Rebecca, Georgia 31783
Common Stock Grady Elmer Moore 25,350(5) 6.93%
Rural Route 1, Box 875
Arabi, Georgia 31712
Common Stock Sara Ruth Raines 23,600(6) 6.49%
130 Lamont Street
Ashburn, Georgia 31714
Common Stock Theron G. Reed 24,121(7) 6.48%
2945 Georgia Highway 90 West
Rebecca, Georgia 31783
Common Stock Benjamin E. Walker 25,600(8) 7.04%
P.O. Box 185
Ashburn, Georgia 31714
Common Stock Jimmie Ann Ward 25,000(9) 6.88%
1330 Warwick Highway
Ashburn, Georgia 31714
* Information relating to beneficial ownership of common stock is based upon
"beneficial ownership" concepts set forth in rules of the SEC under Section
13(d) of the Securities Exchange Act of 1934, as amended. Under such rules, a
person is deemed to be a "beneficial owner" of a security if that person has or
shares "voting power", which includes the power to vote or direct the voting of
such security, or "investment power", which includes the power to dispose of or
to direct the disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the right to acquire
beneficial ownership within sixty (60) days. Under the rules, more than one
person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he has
no beneficial interest. For instance, beneficial ownership includes spouses,
minor children and other relatives residing in the same household, and trusts,
partnerships, corporations or deferred compensation plans which are affiliated
with the principal.
(1) The percentages are based on 353,417 shares of Common Stock outstanding,
plus shares of common stock which may be acquired by the beneficial owner
within 60 days of March 1, 1996, by exercise of options and/or warrants.
(2) Includes 250 shares held as custodian for Brent Brock, 280 shares held as
custodian for Kristen Brock, 100 shares held as custodian for Hunter
Chess Brock, and 326 shares owned by Mr. Brock's wife, as to all of which
Mr. Brock disclaims beneficial ownership. Does not include 1,000 shares
owned by Mr. Brock's father, and 1,050 shares owned by his mother. Also
includes the right to acquire 7,000 shares pursuant to currently
exercisable warrants and the right to acquire 10,560 shares pursuant to
currently exercisable options.
(3) Includes 13,355 shares owned by Mr. Collins' wife as to which he disclaims
beneficial ownership. Also includes the right to acquire 8,584 shares
pursuant to currently exercisable warrants.
(4) Includes 6,250 shares owned by Mr. Crawford's wife as to which he
disclaims beneficial ownership, 2,705 shares held as custodian for his son
Gene Scott Crawford and 2,705 shares held as custodian for his son Phillip
Andrew Crawford. Also includes the right to acquire 10,000 shares
pursuant to currently exercisable warrants.
(5) Includes the right to acquire 12,250 shares pursuant to currently
exercisable warrants.
(6) Includes 500 shares owned by Ruth's of Ashburn, Inc., and 8,000 shares
owned by Mrs. Raines' husband. Does not include 400 shares owned by Mrs.
Raines' son John D. Raines, III and 200 shares owned by her son Mitchell
Davis Raines. Also includes the right to acquire 10,000 shares pursuant
to currently exercisable warrants.
(7) Includes 400 shares held as custodian for Mr. Reed's son, Jeff Reed, as
to which Mr. Reed disclaims beneficial ownership. Also includes the right
to acquire 14,080 shares pursuant to currently exercisable options and the
right to acquire 5,000 shares pursuant to currently exercisable warrants.
(8) Includes 4,100 shares owned by Mr. Walker's wife as to which he disclaims
beneficial ownership. Also includes the right to acquire 10,000 shares
pursuant to currently exercisable warrants.
(9) Includes 5,000 shares owned by Mrs. Ward's son as to which she disclaims
beneficial ownership. Also includes the right to acquire 10,000 shares
pursuant to currently exercisable warrants.
The following table sets forth share ownership information as of
March 1, 1996 with respect to (i) each director and named executive officer of
the Registrant who beneficially owns common stock of the Registrant; and (ii)
all directors and named executive officers of the Registrant as a group:
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT*
Title of Name of Number of Percent of
Class Beneficial Owner Shares Class**
Common Stock T. Brinson Brock, Sr.(1) 25,854 shares 6.97%
Common Stock Willis R. Collins(2) 30,500 shares 8.43
Common Stock Gene Stallings Crawford(3) 35,193 shares 9.68
Common Stock Benny Warren Denham(4) 12,900 shares 3.59
Common Stock Lloyd Greer Ewing(5) 13,000 shares 3.63
Common Stock Ronald Craig Huckaby(6) 11,681 shares 3.21
Common Stock Grady Elmer Moore (7) 25,350 shares 6.93
Common Stock Sara Ruth Raines(8) 23,600 shares 6.49
Common Stock Theron G. Reed(9) 24,121 shares 6.48
Common Stock Benjamin E. Walker(10) 25,600 shares 7.04
Common Stock Jimmie Ann Ward(11) 25,000 shares 6.88
Common Stock Freddie J. Weston,
Jr.(12) 5,000 shares 1.41
All directors and named executive officers
as a group(13) 257,799 shares 54.34%
(12 persons)
* Information relating to beneficial ownership of common stock is based upon
"beneficial ownership" concepts set forth in rules of the SEC under Section
13(d) of the Securities Exchange Act of 1934, as amended. Under such rules, a
person is deemed to be a "beneficial owner" of a security if that person has or
shares "voting power", which includes the power to vote or direct the voting of
such security, or "investment power", which includes the power to dispose of or
to direct the disposition of such security. A person is also deemed to be a
beneficial owner of any security of which that person has the right to acquire
beneficial ownership within sixty (60) days. Under the rules, more than one
person may be deemed to be a beneficial owner of the same securities, and a
person may be deemed to be a beneficial owner of securities as to which he has
no beneficial interest. For instance, beneficial ownership includes spouses,
minor children and other relatives residing in the same household, and trusts,
partnerships, corporations or deferred compensation plans which are affiliated
with the principal.
** The percentages are based on 353,417 shares of common stock outstanding,
plus shares of common stock which may be acquired by the beneficial owner, or
group of beneficial owners, within 60 days of March 1, 1996, by exercise of
options and/or warrants. The percentage total differs from the sums of the
individual percentages due to the differing denominators with respect to each
calculation.
(1) Includes 250 shares held as custodian for Brent Brock, 280 shares held as
custodian for Kristen Brock, 100 shares held as custodian for Hunter
Chess Brock, and 326 shares owned by Mr. Brock's wife, as to all of which
Mr. Brock disclaims beneficial ownership. Does not include 1,000 shares
owned by Mr. Brock's father, and 1,050 shares owned by his mother. Also
includes the right to acquire 7,000 shares pursuant to currently
exercisable warrants and the right to acquire 10,560 shares pursuant to
currently exercisable options.
(2) Includes 13,355 shares owned by Mr. Collins' wife as to which he disclaims
beneficial ownership. Also includes the right to acquire 8,584 shares
pursuant to currently exercisable warrants.
(3) Includes 6,250 shares owned by Mr. Crawford's wife as to which he
disclaims beneficial ownership, 2,705 shares held as custodian for his son
Gene Scott Crawford and 2,705 shares held as custodian for his son Phillip
Andrew Crawford. Also includes the right to acquire 10,000 shares
pursuant to currently exercisable warrants.
(4) Includes 1,596 shares owned by Mr. Denham's wife as to which he disclaims
beneficial ownership. Also includes the right to acquire 6,000 shares
pursuant to currently exercisable warrants.
(5) Includes 1,000 shares owned by his daughter, Mary Margaret Ewing, 1,000
shares owned by his son, Lloyd Scott Ewing, and 1,000 shares owned by his
daughter, Jennifer L. Ewing, as to all of which Mr. Ewing disclaims
beneficial ownership. Also includes the right to acquire 5,000 shares
pursuant to currently exercisable warrants.
(6) Includes the right to acquire 10,000 shares pursuant to currently
exercisable warrants.
(7) Includes the right to acquire 12,250 shares pursuant to currently
exercisable warrants.
(8) Includes 500 shares owned by Ruth's of Ashburn, Inc., and 8,000 shares
owned by Mrs. Raines' husband. Does not include 400 shares owned by Mrs.
Raines' son John D. Raines, III and 200 shares owned by her son Mitchell
Davis Raines. Also includes the right to acquire 10,000 shares pursuant
to currently exercisable warrants.
(9) Includes 400 shares held as custodian for his son, Jeff Reed, as to which
Mr. Reed disclaims beneficial ownership. Also includes the right to
acquire 14,080 shares pursuant to currently exercisable options and the
right to acquire 5,000 shares pursuant to currently exercisable warrants.
(10) Includes 4,100 shares owned by Mr. Walker's wife as to which he disclaims
beneficial ownership. Also includes the right to acquire
10,000 shares pursuant to currently exercisable warrants.
(11) Includes 5,000 shares owned by Mrs. Ward's son as to which she disclaims
beneficial ownership. Also includes the right to acquire 10,000 shares
pursuant to currently exercisable warrants.
(12) Includes the right to acquire 2500 shares pursuant to currently
exercisable warrants.
(13) Warrants to purchase common stock of the Company at the original offering
price were issued to each director of the Company and the Bank on the
basis of one warrant for each share of common stock that they purchased
in the initial offering. The stock purchase warrants entitle the holder
of the warrants to purchase Company stock at $10.00 per share at any time
during the term of the warrant. None of the warrants were exercisable
until December 14, 1991 (which date is one year from the date the offering
was completed). The warrants have a term of ten years from August 6, 1990
(the date the bank opened for business). One-third of each director's
warrants became vested on December 14, 1991; an additional one-third
became vested on December 14, 1992, and the final one-third became vested
on December 14, 1993. The warrants exercisable on or after December 14,
1993, are reflected in the beneficial ownership table.
Item 12.Certain Relationships and Related Transactions.
During 1995 the Bank loaned funds to certain of the Company's executive
officers and directors in the ordinary course of business, on substantially the
same terms as those prevailing at the time for comparable transactions with
other customers, and which did not involve more than the normal risk of
collectibility or present other unfavorable features.
Item 13.Exhibits List and Reports on Form 8-K.
A.Exhibits.
3(a) Articles of Incorporation of Registrant (incorporated by reference to
Exhibit 3(a) of Registration Statement on Form S-18, File No. 33-31013-A)
3(b) By-laws of Registrant (incorporated by reference to Exhibit 3(b) of
Registration Statement on Form S-18, File No. 33-31013-A)
21 Subsidiaries of Registrant
27 Financial Data Schedule
B. Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of the year
ended December 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
COMMUNITY NATIONAL BANCORPORATION
(Registrant)
BY: /s/ Theron G. Reed
Theron G. Reed
President, Principal
Executive Officer, Principal Financial Officer
Date: March 30, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
Signature Title Date
/s/ T. Brinson Brock, Sr. Executive Vice President March 30, 1996
T. Brinson Brock, Sr. and a Director
/s/ Willis R. Collins Director March 30, 1996
Willis R. Collins
/s/ Gene Stallings Crawford Director March 30, 1996
Gene Stallings Crawford
/s/ Benny Warren Denham Director March 30, 1996
Benny Warren Denham
/s/ Lloyd Greer Ewing Director March 30, 1996
Lloyd Greer Ewing
/s/ Grady Elmer Moore Director March 30, 1996
Grady Elmer Moore
/s/ Sara Ruth Raines Director March 30, 1996
Sara Ruth Raines
/s/ Theron G. Reed President, Principal Executive
Theron G. Reed Executive March 30, 1996
Officer, Principal
Financial Officer
And a Director
/s/ Jimmie Ann Ward Director March 30, 1996
Jimmie Ann Ward
/s/ Benjamin E. Walker Director March 30, 1996
Benjamin E. Walker
/s/ Freddie J. Weston, Jr. Director March 30, 1996
Freddie J. Weston, Jr.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT:
The Company's annual report and proxy material will be furnished to the
Company's security holders subsequent to the filing of the Company's annual
report in Form 10-KSB. When the annual report and proxy material are sent to
the Company's security holders, the Company shall furnish copies of such
material to the Commission.
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page Number
21 Subsidiaries of Registrant ___
27 Financial Data Schedule ___
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
COMMUNITY NATIONAL BANK
561 East Washington Avenue
Ashburn, Georgia 31714
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,054,059
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 1,250,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 7,123,951
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 52,196,481
<ALLOWANCE> 922,613
<TOTAL-ASSETS> 64,493,322
<DEPOSITS> 58,419,961
<SHORT-TERM> 0
<LIABILITIES-OTHER> 664,273
<LONG-TERM> 0
<COMMON> 1,767,085
0
0
<OTHER-SE> 3,642,003
<TOTAL-LIABILITIES-AND-EQUITY> 64,493,322
<INTEREST-LOAN> 5,590,840
<INTEREST-INVEST> 610,362
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 6,201,202
<INTEREST-DEPOSIT> 2,948,762
<INTEREST-EXPENSE> 2,977,197
<INTEREST-INCOME-NET> 3,224,005
<LOAN-LOSSES> 378,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,942,408
<INCOME-PRETAX> 1,293,094
<INCOME-PRE-EXTRAORDINARY> 886,545
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 786,545
<EPS-PRIMARY> 1.96
<EPS-DILUTED> 1.96
<YIELD-ACTUAL> 5.39
<LOANS-NON> 80,178
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 66,000
<ALLOWANCE-OPEN> 709,721
<CHARGE-OFFS> 187,676
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 922,613
<ALLOWANCE-DOMESTIC> 908,500
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 14,113
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