<PAGE>
U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
Commission file number 0-19030
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
(Exact name of small business issuer as specified in its charter)
Georgia 58-1856582
(State of incorporation) (I.R.S. Employer Identification No.)
3844 Atlanta Highway, Hiram, Georgia 30141
(Address of principal executive offices)
(770) 445-1014
(Issuer's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: There were 2,391,076 shares of
Common Stock outstanding as of May 9, 2000.
Transitional Small Business Disclosure Format (check one): Yes ; No X
--- ---
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Quarterly Report on Form 10-QSB
For the Quarter Ended March 31, 2000
Table of Contents
-----------------
<TABLE>
<CAPTION>
Item Page
Number Number
- ------ ------
Part I - Financial Information
Item 1. Financial Statements
<S> <C> <C>
1. Consolidated Balance Sheets at March 31, 2000 (unaudited)
and December 31, 1999 (audited)..................................... 1
2. Consolidated Statements of Earnings for the three months
ended March 31, 2000 and March 31, 1999 (unaudited)................. 2
3. Consolidated Statements of Comprehensive Income for the three months
ended March 31, 2000 and March 31, 1999 (unaudited)................. 3
4. Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 and March 31, 1999 (unaudited)................. 4
5. Notes to Consolidated Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis or Plan
of Operation........................................................ 8
Part II - Other Information................................................. 15
Item 1. Legal Proceedings................................................... 15
Item 2. Changes in Securities and Use of Proceeds........................... 15
Item 3. Defaults upon Senior Securities..................................... 15
Item 4. Submission of Matters to a Vote of Security Holders................. 15
Item 5. Other Information................................................... 15
Item 6. Exhibits and Reports on Form 8-K.................................... 15
Signatures.......................................................... 16
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Balance Sheets
March 31, 2000 and December 31, 1999
Assets
<S> <C> <C>
March 31, December 31,
2000 1999
--------------- --------------
(Unaudited) (Audited)
Cash and due from banks 4,292,389 4,206,134
Federal funds sold and securities purchased under resell agreements 3,250,000 4,590,000
--------------- -------------
Cash and cash equivalents 7,542,389 8,796,134
U.S. Treasury and other U.S. Government agency securities 19,041,068 18,486,660
available for sale
State, county, and municipal securities available for sale 7,271,963 7,625,091
Other investments 2,125,171 1,114,671
Loans 97,234,759 89,613,648
Less: Allowance for loan losses (1,487,741) (1,356,649)
--------------- -------------
Loans, net 95,747,018 88,256,999
Premises and equipment 4,611,046 3,994,220
Accrued interest receivable 1,164,313 1,088,490
Other real estate and repossessions 0 191,986
Other assets 3,908,462 2,188,543
--------------- -------------
141,411,430 131,742,794
=============== ===========
Liabilities and Stockholders' Equity
Deposits:
Demand 14,908,195 13,604,854
Interest-bearing demand 21,331,808 18,832,836
Savings 12,624,353 14,906,486
Time 39,360,007 36,983,824
Time, in excess of $100,000 21,921,507 20,084,264
--------------- -------------
Total deposits 110,145,870 104,412,264
Securities sold under repurchase agreements 3,925,096 4,880,864
Accrued interest payable 983,883 1,056,261
Accrued expenses and other liabilities 316,659 340,001
Federal Home Loan Bank advances and notes payable 11,435,000 6,290,000
--------------- -------------
Total liabilities 126,806,508 116,979,390
Stockholders' equity:
Common stock, $2.50 par value; 10,000,000 shares 5,977,690 5,958,875
authorized; 2,391,076 and 2,383,550 issued and outstanding
Additional paid-in capital 3,834,757 3,852,477
Retained earnings 5,091,192 5,136,852
Accumulated other comprehensive income (298,717) (184,800)
--------------- -------------
Total stockholders' equity 14,604,922 14,763,404
--------------- -------------
141,411,430 131,742,794
=============== ============
</TABLE>
The consolidated balance sheet at December 31, 1999 has been taken from the
audited financial statements. See accompanying notes to consolidated financial
statements.
3
<PAGE>
<TABLE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Statements of Earnings
(Unaudited)
Three months ended
March 31,
2000 1999
-------------- -----------
<S> <C> <C>
Interest income:
Interest and fees on loans $2,555,282 $1,991,785
Interest on federal funds sold 12,457 27,208
Interest on investment securities:
U.S. Treasury and U.S. Government agencies 294,759 208,861
Other 109,328 102,051
-------------- -----------
Total interest income 2,971,826 2,329,905
Interest expense:
Interest on deposits
Demand 95,296 96,498
Savings 88,137 87,564
Time 538,742 313,329
Time, in excess of $100,000 299,713 233,838
Interest expense - other 202,095 76,040
-------------- -----------
Total interest expense 1,223,983 807,269
-------------- -----------
Net interest income 1,747,843 1,522,636
Provision for loan losses 174,465 169,509
-------------- -----------
Net interest income after
provision for loan losses 1,573,378 1,353,127
-------------- -----------
Other income:
Service charges and fees 225,965 242,979
Insurance commissions 129,898 81,586
Appraisal fees 36,013 55,547
Mortgage banking income 48,047 27,760
Equity in earnings of CashTrans (14,608) (3,254)
Miscellaneous 80,346 33,050
-------------- -----------
Total other income 505,661 437,668
Other expenses:
Salaries and employee benefits 1,186,938 782,023
Occupancy 324,568 200,849
Other operating 530,995 453,992
-------------- -----------
Total other expenses 2,042,501 1,436,864
-------------- -----------
Earnings before income taxes 36,538 353,931
Income taxes (13,445) 92,419
-------------- -----------
Net earnings $ 49,983 $ 261,512
============== ==========
Net earnings per common share $ 0.02 $ 0.12
============== ==========
Net earnings per common share - assuming dilution $ 0.02 $ 0.11
============== ==========
Dividends per common share $ 0.00 $ 0.12
============== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Statements of Comprehensive Income
(Unaudited)
Three months ended
March 31,
2000 1999
<S> <C> <C>
Net Earnings $ 49,983 $ 261,512
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities available for sale (183,618) (234,157)
Income tax effect on gain (loss) (69,701) (88,886)
--------- ---------
Unrealized gain (loss) arising during the year, net of tax (113,917) (145,271)
Other comprehensive income (113,917) (145,271)
--------- ---------
Comprehensive income ($63,934) $ 116,241
========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
5
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
2000 1999
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 49,983 $ 261,512
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation, amortization, and accretion 144,424 109,415
Provision for loan losses 174,465 169,509
Equity in loss (gain) of unconsolidated subsidiary 14,608 3,254
Net loss (gain) on sale of other real estate 7,633 (2,750)
Net loss (gain) on sale of fixed asset (18,505) 0
Net change in:
Interest receivable (75,823) 65,521
Interest payable (72,378) (123,307)
Other assets (92,998) (202,121)
Cash surrender value of life insurance (20,544) 0
Accrued expenses and other liabilities (118,985) 4,161
------------ -----------
Net cash provided (used) by operating activities (8,120) 285,194
------------ -----------
Cash flows from investing activities:
Proceeds from maturities of securities available for sale 5,750,000 228,261
Proceeds from sales, calls, and paydowns
of securities available for sale 131,995 1,001,614
Purchase of securities available for sale (6,246,081) (1,050,906)
Purchase of other investments (1,010,500) 0
Purchase of cash value life insurance (1,650,000) 0
Proceeds from sale of other assets 167,843 0
Net increase in loans (7,777,847) (1,291,776)
Purchase of premises and equipment (808,577) (390,775)
Proceeds from sale of other real estate 184,353 45,500
Proceeds from sale of fixed asset 89,256 0
------------ -----------
Net cash used in investing activities (11,169,558) (1,458,082)
------------ -----------
Cash flows from financing activities:
Net change in demand and savings deposits 1,520,180 (2,150,173)
Net change in time deposits 4,213,426 1,015,034
Net change in securities sold under repurchase agreements (955,768) 0
Net proceeds from Federal Home Loan Bank advances 5,000,000 0
Net proceeds from notes payable 145,000 0
Cash dividends paid 0 (287,070)
Proceeds from exercise of stock options 1,095 1,576
------------ -----------
Net cash provided (used) by financing activities 9,923,933 (1,420,633)
------------ -----------
Net change in cash and cash equivalents (1,253,745) (2,593,521)
Cash and cash equivalents at beginning of period 8,796,134 7,568,071
------------ -----------
Cash and cash equivalents at end of period $ 7,542,389 $ 4,974,550
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Consolidated Statement of Cash Flows, continued
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
2000 1999
--------- ---------
<S> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest 1,296,361 930,576
Income taxes 27,500 0
Noncash investing and financing activities:
Change in dividends payable 95,643 0
Change in other comprehensive income, net of tax (113,917) (145,271)
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Notes to Consolidated Financial Statements
1. Basis of Presentation
---------------------
The consolidated financial statements include the accounts of Community Trust
Financial Services Corporation (the Company) and its wholly-owned subsidiaries,
Community Trust Bank (the Bank), Metroplex Appraisals, Inc. (Metroplex), and
Community Loan Company (CLC). All significant intercompany accounts and
transactions have been eliminated in consolidation. Effective May 16, 1997, the
Company entered into a joint venture with JRH Diversified, Inc. to establish a
non-bank subsidiary that engages in the business of providing retail
establishments with automated teller machines that dispense cash or cash
equivalents. The Company owns 49% of the equity in Cash Transactions, LLC
(CashTrans) which is treated as an unconsolidated subsidiary for financial
reporting purposes, and, accordingly, the Company's interest is reflected in the
consolidated financial statements at its proportionate share. The financial
data of the Company is not significantly affected by the operations of
CashTrans.
The consolidated financial information furnished herein reflects all adjustments
which are, in the opinion of management, necessary to present a fair statement
of the Company's financial position as of March 31, 2000 and the results of its
operations and cash flows for the periods covered herein. All such adjustments
are of a normal recurring nature.
2. Recent Accounting Pronouncements
--------------------------------
In 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This statement
establishes accounting and reporting standards for hedging derivatives and
derivative instruments embedded in other contracts. It requires the fair value
recognition of derivatives as assets or liabilities in the financial statements.
SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 2000, and initial application of the statement must be made as of
the beginning of the quarter. Management believes the adoption of SFAS No. 133
will not have a material impact on the Company's financial position, results of
operation or liquidity.
8
<PAGE>
3. Earnings Per Share
------------------
Net earnings per share is based on the weighted average number of shares
outstanding during the period while the effects of potential common shares
outstanding during the period are included in diluted earnings per share. The
average market price during the year is used to compute equivalent shares. The
reconciliation of the amounts used in the computation of both "net earnings per
share" and "net earnings per share - assuming dilution" for the three months
ended March 31, 2000 and March 31, 1999 are as follows:
<TABLE>
<CAPTION>
Net Earnings Common Shares Per Share
For the three months ended March 31, 2000 (Numerator) (Denominator) Amount
- ----------------------------------------- -------------- ------------- ---------
<S> <C> <C> <C>
Net earnings per share $49,983 2,390,349 $.02
Effect of dilutive securities:
Stock options - 93,724
------- ---------
Net earnings per share - assuming dilution $49,983 2,484,073 $.02
======= =========
</TABLE>
<TABLE>
<CAPTION>
Net Earnings Common Shares Per Share
For the three months ended March 31, 1999 (Numerator) (Denominator) Amount
- -------------------------------------------- -------------- ------------- ---------
<S> <C> <C> <C>
Net earnings per share $261,512 2,296,370 $.12
Effect of dilutive securities:
Stock options - 88,606
-------- ---------
Net earnings per share - assuming dilution $261,512 2,384,976 $.11
======== =========
</TABLE>
9
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
For the Three Month Period Ended March 31, 2000
Management's discussion and analysis of financial condition and results of
operations analyzes the material changes in the consolidated balance sheets and
statements of earnings presented herein for Community Trust Financial Services
Corporation (the Company). The consolidated financial information herein
includes the financial condition and results of operations, for all periods
presented, of the Company and its wholly-owned subsidiaries, Community Trust
Bank (the Bank), and Metroplex Appraisals, Inc. (Metroplex), and Community Loan
Company (CLC). In May 1997, the Company entered into a joint venture with JRH
Diversified, Inc. to establish Cash Transactions, LLC (CashTrans) as another
non-bank subsidiary. The Company's 49% interest in CashTrans is treated as an
unconsolidated subsidiary for financial reporting purposes, and, accordingly,
the Company's interest is reflected in the consolidated financial statements at
its proportionate share.
Financial Condition
- -------------------
At March 31, 2000, the Company had consolidated total assets of $141,411,430 as
compared to $131,742,794 at December 31, 1999. Stockholders' equity decreased
approximately 1.07% to $14,604,922 or $6.11 per share at March 31, 2000, as
compared to stockholders' equity of $14,763,404 or $6.19 per share at December
31, 1999. Stockholders' equity decreased primarily as a result of the Company's
payment of $95,643 declared by the Company to be paid on April 7, 2000.
Additionally, stockholders' equity decreased in 2000 due to a loss in
comprehensive income of $63,934. For the quarter ended March 31, 2000, the
Company's comprehensive income consisted of $49,983 in net earnings and a
$113,917 loss in other comprehensive income, which is composed of changes in the
unrealized gain or loss on securities available for sale, net of tax. The
Company's net interest income for the quarter ended March 31, 2000, increased
14.79% to $1,747,843 for the period ended March 31, 2000, as compared to
$1,522,636 for the period ended March 31, 1999. The Company's net earnings
decreased 80.89% from $261,512 for the quarter ended March 31, 1999 to $49,983
for the quarter ended March 31, 2000, while its basic earnings per share (based
on the weighted average number of shares outstanding during the year) decreased
from $0.12 to $0.02. This decrease in earnings as compared to the growth in net
interest income was attributable primarily to a 42.15% increase in noninterest
expense that resulted largely from an increase of $380,209 in the Bank's which
is primarily related to salary expenses incurred due to the growth in locations
and assets of the Bank, and an increase of $199,761 in noninterest expenses of
CLC due to the addition of seven offices in 1999. Management is actively
seeking opportunities to decrease these overhead expenses while increasing
sources of noninterest income in order to increase net earnings of the Company.
10
<PAGE>
Gross loans during the first three months of 2000 increased $7,621,111 or 8.50%
over the total gross loans at December 31, 1999, as compared to an increase of
$1,220,285, or 1.64%, for the same three month period ended March 31, 1999.
Management believes that the increase in loan growth for 2000 as compared to the
same period in 1999 was due primarily to an increase in the Bank's lending
personnel, and to the Bank's continued expansion of its lending market into Cobb
County, Georgia. In 1998, the Bank established a loan production office in Cobb
County for the purpose of generating commercial and real estate loans. The Bank
has since increased its marketing efforts in Cobb County by opening one full-
service branch in early 1999 and another branch in January 2000. The Bank has
experienced success in penetrating the Cobb market, attracting new borrowers who
often bring full-service relationships with their business. Management
anticipates continued loan growth at the Bank for the remainder of 2000
primarily due to its increased marketing efforts in adjacent counties such as
Cobb and Douglas. Management continues to strive for increased loan volume
while meeting the criteria set by its loan policy.
During the first three months of 2000, CLC sold assets related to its consumer
finance office in Griffin, Georgia, due to the fact that Griffin is located
outside CLC's target geographic market area. These assets primarily consisted
of $113,363 in loans. CLC presently operates from ten relatively small offices.
Consequently, its gross loans, totaling approximately $3,778,199 at March 31,
2000, or 3.89% of the Company's gross loans, do not significantly affect the
financial data analyzed. Although management anticipates growth in CLC's total
loans, management anticipates that CLC will have only a minimal impact on the
Company's balance sheet.
The Bank's increase in gross loans for the first three months of 2000 was funded
primarily through an increase in deposits. Total deposits during the first
three months of 2000 increased approximately $5,733,606 or 5.49%, to
$110,145,870 at March 31, 2000 as compared to $104,412,264 at December 31, 1999.
This increase in total deposits was due primarily to the Bank's penetration into
the Cobb County market area through its facilities in that county.
Additionally, the Bank has begun an Internet branch where new customers may open
a deposit account with little concern about geographic location. The Bank has
implemented stringent security measures in order to provide the ease of Internet
banking while maintaining safety measures deemed necessary by management. The
Bank also subscribes to a service called QwickRate, which allows the Bank to
publish its rates on certificates of deposits over an electronic billboard that
may attract interested depositors throughout the U. S. The Bank may choose to
seek deposits through this alternative source of funds if management determines
that the choice meets the Company's asset and liability strategies. Management
of the Bank sets the rates to be offered, which have been slightly higher than
the rates paid on core deposits. The Bank utilized this service, selling
$1,092,000 in these time deposits during the quarter ended March 31, 2000.
Management is monitoring core deposits and customer relationships in an effort
to maintain overall deposit growth. The Bank also borrowed $5,000,000 from the
Federal Home Loan Bank, which is collateralized by securities held in the Bank's
investment portfolio.
11
<PAGE>
Management has chosen to employ this investment growth strategy in order to
maximize the Bank's earnings opportunities over the next five years, while
maintaining a conservative risk position.
The Company holds $26,313,031, or 18.61% of its total assets, in securities
consisting of bonds issued by the U. S. Treasury, U. S. Government agencies, or
state and county municipalities. Typically, the securities are held as
available for sale so that they may be a source of liquidity while producing
income for the Company. In accordance with Statement of Financial Accounting
Standard No. 115, securities that will be held for indefinite periods of time
are accounted for at market value, thereby creating a component of stockholders'
equity for the unrealized gains or losses on securities, net of deferred taxes.
The aggregate unrealized gain or loss, net of tax, appears as accumulated other
comprehensive income on the Company's balance sheet. Unrealized loss on
securities, net of tax, was $298,717 as of March 31, 2000, as compared to an
unrealized loss, net of tax, of $184,800 as of December 31, 1999, which created
a net loss of $113,917 in other comprehensive income for the three months ended
March 31, 2000. Changes in these unrealized gains or losses are due to market
value fluctuations, which may be caused by changes in market rates, changes in
the slope of the yield curve, or other changes in the bond market. Management
reviews market risk in the securities portfolio on a monthly basis to ensure
that risk is maintained at acceptable levels.
Results of Operations
- ---------------------
Net Interest Income
The Company's net interest income increased approximately 14.79% to $1,747,843
for the period ended March 31, 2000, as compared to $1,522,636 for the period
ended March 31, 1999. Interest income for the first three months of 2000 was
$2,971,826, representing an increase of $641,921, or 27.55%, over the same
period in 1999. This increase in interest income occurred primarily due to a
$22,322,608, or 22.23%, increase in average earning assets for the three months
ended March 31, 2000 as compared to the same period in 1999. Interest expense
for the first three months of 2000 increased $416,714, or 51.62% as compared to
the same period in 1999. This increase in interest expense occurred primarily
due to a $26,507,700, or 33.38%, increase in average interest-bearing deposits
and other interest-bearing liabilities for the three months ended March 31, 2000
as compared to the same period in 1999.
The Company continues to seek opportunities to maintain its net interest margin
(net interest income divided by average interest-earning assets). Average
earning assets for the period ended March 31, 2000 were $122,722,216, having a
weighted average yield of 9.71%, resulting in a net interest margin of 5.71%.
This compares to average earning assets for the period ended March 31, 1999 of
$100,399,608, having a weighted average yield of 9.41%, resulting in a net
interest margin of 6.15%. The decrease in net interest margin is attributable
primarily to an increase in the Company's cost of funds from 4.12% in 1999 to
4.63% in 2000.
12
<PAGE>
Provision for Loan Losses
The Company does lose some interest income due to non-performing assets, defined
as loans placed on non-accrual status, accruing loans which are contractually
past due ninety days or more, real estate acquired through foreclosure, and
property acquired through repossession. Management considers the Company's
level of non-performing assets to be at an acceptable level. The Company's non-
performing assets totaled approximately $903,301, or 0.64% of the Company's
total assets as of March 31, 2000, as compared to $1,694,766, or 1.60% of the
Company's total assets as of March 31, 1999. The decrease in non-performing
assets from 1999 to 2000 was attributable primarily to a decrease in the Bank's
non-performing assets. At March 31, 1999, the Bank had four loans to one
borrower totaling $905,743 on non-accrual status, which were subsequently
collected with no loss to the Bank other than collection costs. The Bank had
two restructured loans totaling $102,874 as of March 31, 2000, as compared to
one loan totaling $81,897 as of March 31, 1999. Management considers the totals
of delinquent and non-performing assets at the Bank and CLC to be at acceptable
levels at this time; however, factors such as a downturn in the local economy
could cause levels of such assets to rise.
The Georgia Department of Banking and Finance (the Department), the Bank's
primary regulatory authority, requires the Bank to maintain a loan loss
allowance of not less than one percent of all outstanding loans. This allowance
is used to cover future loan losses. The Company's provision for loan losses
was $174,465 for the period ended March 31, 2000, as compared to $169,509 for
the period ended March 31, 1999. The Company's loan loss allowance was
$1,487,741, or 1.53% of outstanding loans, as of March 31, 2000. No material
loss is anticipated on non-accrual or restructured loans, therefore no specific
reserves or writedowns were considered necessary by management as of March 31,
2000.
Non-interest Income
Non-interest income, consisting of service charges on deposits, appraisal fees,
credit life insurance commissions, securities gains, loss in CashTrans and other
miscellaneous income, increased $67,993, or 15.54%, during the first three
months of 2000 as compared to the same period in 1999. The increase in non-
interest income resulted primarily from (i) an increase of $48,312 in insurance
commissions collected which is primarily due to the growth of CLC's customer
base, (ii) an increase of $47,296 in miscellaneous income primarily due to the
Bank's sale of an ATM, and other cash dispensing machines and scrip machines,
and (iii) an increase of $20,287 in mortgage origination fees related to the
Bank's mortgage division.
13
<PAGE>
Non-interest Expense
Non-interest expenses, consisting of salaries and employee benefits, occupancy
and other miscellaneous expenses, increased $605,637, or 42.15%, during the
first three months of 2000 as compared to the same period in 1999. The increase
in non-interest expense is attributable primarily to an increase in salaries and
employee benefits caused by the Company's need for additional human resources
due to the growing number of locations to be staffed for the Bank and CLC, as
well as routine salary increases. Salaries and employee benefits increased
$404,915, or 51.78%, for the period ended March 31, 2000, as compared to the
same period in 1999. Occupancy expense increased by approximately $123,719, or
61.60%, for the period ended March 31, 2000, as compared to the same period in
1999, primarily due to increases in expenses associated with the Bank's addition
of a full service branch in Cobb County, and to CLC's addition of five offices
in June 1999. Other operating expense increased by approximately $77,003, or
16.96%, for the period ended March 31, 2000, as compared to the same period in
1999, primarily due to general cost increases and the asset growth experienced
by the Company. Management continues to seek opportunities to reduce expenses
related to salaries and benefits and occupancy in order to improve net earnings
of the Company throughout the remainder of fiscal year 2000.
Capital
The Company is subject to regulatory capital requirements imposed by the
Department and by the Board of Governors of the Federal Reserve System. Under
federal law, the Company and the Bank are required to maintain a ratio of total
capital to risk weighted assets of at least 8.0%, of which at least one-half
must be so-called Tier 1 capital. Under applicable federal regulations and
interpretations thereof, the Bank's ratio of total capital to risk weighted
assets at March 31, 2000, was 10.62%, and its ratio of Tier 1 capital to risk
weighted assets was 9.46%. Under applicable federal regulations and
interpretations thereof, the Company's ratio of total capital to risk weighted
assets at March 31, 2000, was 14.06%, and its ratio of Tier 1 capital to risk
weighted assets was 12.81%. Additionally, under federal law, all but the most
highly rated banks and bank holding companies are required to maintain a minimum
ratio of Tier 1 capital to total average assets (Tier 1 leverage ratio) of 4.0%
to 5.0%, including the most highly rated banks and bank holding companies that
are anticipating or experiencing significant growth. Three percent is the
minimum Tier 1 leverage ratio required for the most highly rated banks and bank
holding companies with no plans to expand. The Bank exceeds its Tier 1 leverage
ratio requirement with a Tier 1 leverage ratio of 7.66% as of March 31, 2000.
The Company also exceeds its Tier 1 leverage ratio requirement with a Tier 1
leverage ratio of 10.34% as of March 31, 2000. Through its policy of controlled
growth, the Company intends to maintain capital in excess of the required
minimum in order to support future growth.
14
<PAGE>
Liquidity
- ---------
Liquidity represents the Company's ability to meet both loan commitments and
deposit withdrawals. Liquidity is monitored monthly by management in order to
ensure compliance with the Bank's policy of maintaining adequate liquidity. The
Bank relies primarily on deposit gathering in order to fund its lending and
investing activities. In addition, the Company obtains funds from loan
principal repayments, proceeds from sales of loan participations and investment
securities, and other borrowings. Loan repayments are a relatively stable
source of funds, while deposit inflows and outflows and sales of loan
participations and investment securities are significantly influenced by
prevailing interest rates, economic conditions and the Company's asset and
liability management strategies. Borrowings may be used on a short-term basis
to compensate for reductions in the availability of other sources of funds or on
a longer term basis to support expanded lending activities and for other general
business purposes.
The Bank maintains two lines of credit to borrow fed funds that total $5,300,000
in order to enhance liquidity. At March 31, 2000, the Bank had no funds
borrowed on either of these lines of credit. The Bank is a member of the
Federal Home Loan Bank of Atlanta and borrowings are also available through that
relationship. The amount of credit available from the Federal Home Loan Bank
fluctuates based on criteria set by that institution concerning the Bank's
portfolio of loans secured by housing for one to four families. As of March 31,
2000, the Bank had $5,500,000 in borrowings outstanding under this facility, and
no additional borrowings are available based on the Bank's loan portfolio. At
March 31, 2000, the Bank had also borrowed $5,000,000 from the Federal Home Loan
Bank, which is collateralized by securities held in the Bank's investment
portfolio. Management has chosen to employ this investment growth strategy in
order to maximize the Bank's earnings opportunities over the next five years,
while maintaining a conservative risk position.
The Company has a $3,500,000 revolving credit facility with The Bankers Bank,
Atlanta, Georgia, which is intended to enhance the Company's liquidity. As of
March 31, 2000, the Company had $300,000 borrowed under this facility.
Additionally, CLC established a $1,500,000 revolving credit facility with The
Bankers Bank in July 1999, which is intended to provide a source of funds for
the lending activities of that subsidiary. As of March 31, 2000, CLC had
$635,000 in borrowed funds outstanding under this facility. As of July 1999,
the operations of CashTrans are funded principally through a $1,000,000 credit
facility with The Bankers Bank. As of March 31, 2000, CashTrans had $775,000 in
borrowed funds outstanding under this facility. Under these revolving credit
facilities with The Bankers Bank, interest only is due and payable on the first
business day of each calendar quarter. The Company's credit facility (i)
accrues interest at a floating rate equal to the "prime" rate of interest as
published from time to time in The Wall Street Journal minus 1%, and (ii) the
-----------------------
principal shall be paid in eight annual installments beginning July 2001. CLC's
and CashTrans' credit facilities (i) accrue interest at a floating rate equal to
the prime rate minus 0.75%, and (ii) are due in full on July 1, 2000. Amounts
outstanding under the three credit facilities are guaranteed by the Company and
collateralized by the stock in the Bank. CLC's loan is also collateralized by
its loan receivables.
15
<PAGE>
CashTrans' loan is personally guaranteed by James R. Henderson, the principal of
JRH Diversified, Inc.
Forward-Looking Statement
Some of the foregoing statements are forward-looking statements which reflect
significant assumptions and subjective judgements believed by management to be
reasonable as of the date of this report. They do not constitute a forecast or
prediction of actual results, and actual performance and financial results may
differ materially from those anticipated due to a variety of factors, including
but not limited to (i) increased competition with other financial institutions,
(ii) lack of sustained growth in the local economy, (iii) rapid fluctuations in
interest rates, and (iv) changes in the legislative and regulatory environment.
The foregoing statements should not be construed as exhaustive and the Company
disclaims any obligation to subsequently update or revise any forward-looking
statements after the date of this report.
16
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-------------------------
Not applicable
Item 2. Changes in Securities and Use of Proceeds
-------------------------------------------------
Not applicable
Item 3. Defaults upon Senior Securities
---------------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
Not applicable
Item 5. Other Information
-------------------------
Not applicable
Item 6.a Exhibits
-----------------
Exhibit
Number Description
------ -----------
10.21 Life Insurance Endorsement Method Split Dollar Plan Agreement
dated January 13, 2000 between the Bank and Angel J. Byrd
10.22 Executive Supplemental Retirement Plan - Executive Agreement
dated January 13, 2000 between the Bank and Angel J. Byrd
27 Financial Data Schedule, which is submitted electronically to
the Securities and Exchange Commission for information only and
not filed.
Item 6.b Reports on Form 8-K
----------------------------
One report on Form 8-K was filed by the Company with the Commission during
the quarter ended March 31, 2000 concerning the declaration on February 15,
2000 of a cash dividend of four cents per share to shareholders on record
as of March 10, payable on April 7, 2000.
17
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Community Trust Financial Services Corporation
----------------------------------------------
(Registrant)
DATE: May 10, 2000 /s/ Ronnie L. Austin
----------------------------------------------
Ronnie L. Austin, President
and Chief Executive Officer
(Duly Authorized Officer)
DATE: May 10, 2000 /s/ Angel J. Byrd
----------------------------------------------
Angel J. Byrd
(Principal Accounting Officer)
18
<PAGE>
Exhibit 10.21
-------------
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer: Alexander Hamilton
Southland Life
Policy Number: AH5098129
0660001610
Bank: Community Trust Bank
Insured: Angel J. Byrd
Relationship of Insured to Bank: Executive
The respective rights and duties of the Bank and the Insured in the above-
referenced policy shall be pursuant to the terms set forth below:
I. DEFINITIONS
Refer to the policy contract for the definition of all terms in this
Agreement.
II. POLICY TITLE AND OWNERSHIP
Title and ownership shall reside in the Bank for its use and for the use of
the Insured all in accordance with this Agreement. The Bank alone may, to
the extent of its interest, exercise the right to borrow or withdraw on the
policy cash values. Where the Bank and the Insured (or assignee, with the
consent of the Insured) mutually agree to exercise the right to increase
the coverage under the subject Split Dollar policy, then, in such event,
the rights, duties and benefits of the parties to such increased coverage
shall continue to be subject to the terms of this Agreement.
<PAGE>
III. BENEFICIARY DESIGNATION RIGHTS
The Insured (or assignee) shall have the right and power to designate a
beneficiary or beneficiaries to receive the Insured's share of the proceeds
payable upon the death of the Insured, and to elect and change a payment
option for such beneficiary, subject to any right or interest the Bank may
have in such proceeds, as provided in this Agreement.
IV. PREMIUM PAYMENT METHOD
The Bank shall pay an amount equal to the planned premiums and any other
premium payments that might become necessary to keep the policy in force.
V. TAXABLE BENEFIT
Annually the Insured will receive a taxable benefit equal to the assumed
cost of insurance as required by the Internal Revenue Service. The Bank
(or its administrator) will report to the Insured the amount of imputed
income each year on Form W-2 or its equivalent.
VI. DIVISION OF DEATH PROCEEDS
Subject to Paragraphs VII and IX herein, the division of the death proceeds
of the policy is as follows:
A. Should the Insured be employed by the Bank and die on or before the
3rd day of January, 2002, the Insured's beneficiary(ies), designated
in accordance with Paragraph III, shall be entitled to an amount equal
to one hundred percent (100%) of the net at risk insurance portion of
the proceeds. The net at risk insurance portion is the total proceeds
less the cash value of the policy.
B. Should the Insured be employed by the Bank and die subsequent to the
3rd day of January, 2002, the Insured's beneficiary(ies), designated
in accordance with Paragraph III, shall be entitled to an amount equal
to eighty percent (80%) of the net at risk insurance portion of the
proceeds. The net at risk insurance portion is the total proceeds
less the cash value of the policy.
C. Should the Insured not be employed by the Bank at the time of his or
her death and die on or before the 3rd day of January, 2002, the
Insured's beneficiary(ies), designated in accordance with Paragraph
III, shall be entitled to the percentage as set forth hereinbelow of
the proceeds described in Subparagraph VI (A) above that corresponds
to the age of the Insured at the time that he terminated service with
the Bank. Should the
2
<PAGE>
Insured not be employed by the Bank at the time of his or her death
and die subsequent to the 3rd day of January, 2002, the Insured's
beneficiary(ies) shall be entitled to the following percentage of the
proceeds described in Subparagraph VI (B) hereinabove:
Vested Percentage
Age of Executive (to a maximum of 100%)
---------------- ----------------------
Age 55 or younger 0%
56 10%
57 20%
58 30%
59 40%
60 50%
61 60%
62 70%
63 80%
64 90%
65 or older 100%
D. The Bank shall be entitled to the remainder of such proceeds.
E. The Bank and the Insured (or assignees) shall share in any interest
due on the death proceeds on a pro rata basis as the proceeds due each
respectively bears to the total proceeds, excluding any such interest.
VII. DIVISION OF THE CASH SURRENDER VALUE OF THE POLICY
The Bank shall at all times be entitled to an amount equal to the policy's
cash value, as that term is defined in the policy contract, less any
policy loans and unpaid interest or cash withdrawals previously incurred
by the Bank and any applicable surrender charges. Such cash value shall be
determined as of the date of surrender or death as the case may be.
VIII. RIGHTS OF PARTIES WHERE POLICY ENDOWMENT OR ANNUITY ELECTION EXISTS
In the event the policy involves an endowment or annuity element, the
Bank's right and interest in any endowment proceeds or annuity benefits,
on expiration of the deferment period, shall be determined under the
provisions of this Agreement by regarding such endowment proceeds or the
commuted value of such annuity benefits as the policy's cash value. Such
endowment proceeds or annuity benefits shall be considered to be like
death proceeds for the purposes of division under this Agreement.
3
<PAGE>
IX. TERMINATION OF AGREEMENT
This Agreement shall terminate upon the occurrence of any one of the
following:
1. The Insured shall terminate service with the Bank prior to attaining
age fifty-six (56); or
2. The Insured shall breach any provision of the Employment Agreement
--------------------
between Angel J. Byrd and Community Trust Financial Services
Corporation dated January 3, 2000 (hereinafter referred to as the,
"Executive's Employment Agreement"); or
3. The Insured shall be discharged from employment with the Bank for
cause. The term for "cause" shall be as defined in subparagraph 10.01
(c), "Grounds for Termination", of the Executive's Employment
-----------------------
Agreement; or
4. Surrender, lapse, or other termination of the Policy by the Bank.
Upon such termination, the Insured (or assignee) shall have a fifteen (15)
day option to receive from the Bank an absolute assignment of the policy in
consideration of a cash payment to the Bank, whereupon this Agreement shall
terminate. Such cash payment referred to hereinabove shall be the greater
of:
1. The Bank's share of the cash value of the policy on the date of such
assignment, as defined in this Agreement; or
2. The amount of the premiums which have been paid by the Bank prior to
the date of such assignment.
If, within said fifteen (15) day period, the Insured fails to exercise said
option, fails to procure the entire aforestated cash payment, or dies, then
the option shall terminate, and the Insured (or assignee) agrees that all
of the Insured's rights, interest and claims in the policy shall terminate
as of the date of the termination of this Agreement.
The Insured expressly agrees that this Agreement shall constitute
sufficient written notice to the Insured of the Insured's option to receive
an absolute assignment of the policy as set forth herein.
4
<PAGE>
Except as provided above, this Agreement shall terminate upon distribution
of the death benefit proceeds in accordance with Paragraph VI above.
X. INSURED'S OR ASSIGNEE'S ASSIGNMENT RIGHTS
The Insured may not, without the written consent of the Bank, assign to any
individual, trust or other organization, any right, title or interest in
the subject policy nor any rights, options, privileges or duties created
under this Agreement.
XI. AGREEMENT BINDING UPON THE PARTIES
This Agreement shall bind the Insured and the Bank, their heirs,
successors, personal representatives and assigns.
XII. ERISA PROVISIONS
The following provisions are part of this Agreement and are intended to
meet the requirements of the Employee Retirement Income Security Act of
1974 ("ERISA"):
A. Named Fiduciary and Plan Administrator.
---------------------------------------
The "Named Fiduciary and Plan Administrator" of this Endorsement Method
Split Dollar Agreement shall be Community Trust Bank until resignation or
removal by the Board of Directors. As Named Fiduciary and Plan
Administrator, the Bank shall be responsible for the management, control,
and administration of this Split Dollar Plan as established herein. The
Named Fiduciary may delegate to others certain aspects of the management
and operation responsibilities of the Plan, including the employment of
advisors and the delegation of any ministerial duties to qualified
individuals.
B. Funding Policy.
--------------
The funding policy for this Split Dollar Plan shall be to maintain the
subject policy in force by paying, when due, all premiums required.
C. Basis of Payment of Benefits.
----------------------------
Direct payment by the Insurer is the basis of payment of benefits under
this Agreement, with those benefits in turn being based on the payment of
premiums as provided in this Agreement.
5
<PAGE>
D. Claim Procedures.
----------------
Claim forms or claim information as to the subject policy can be obtained
by contacting The Benefit Marketing Group, Inc. (770-952-1529). When the
Named Fiduciary has a claim which may be covered under the provisions
described in the insurance policy, they should contact the office named
above, and they will either complete a claim form and forward it to an
authorized representative of the Insurer or advise the named Fiduciary
what further requirements are necessary. The Insurer will evaluate and
make a decision as to payment. If the claim is payable, a benefit check
will be issued in accordance with the terms of this Agreement.
In the event that a claim is not eligible under the policy, the Insurer
will notify the Named Fiduciary of the denial pursuant to the requirements
under the terms of the policy. If the Named Fiduciary is dissatisfied with
the denial of the claim and wishes to contest such claim denial, they
should contact the office named above and they will assist in making
inquiry to the Insurer. All objections to the Insurer's actions should be
in writing and submitted to the office named above for transmittal to the
Insurer.
XIII. GENDER
Whenever in this Agreement words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine or
neuter gender, whenever they should so apply.
XIV. INSURANCE COMPANY NOT A PARTY TO THIS AGREEMENT
The Insurer shall not be deemed a party to this Agreement, but will
respect the rights of the parties as herein developed upon receiving an
executed copy of this Agreement. Payment or other performance in
accordance with the policy provisions shall fully discharge the Insurer
for any and all liability.
XV. CHANGE OF CONTROL
Change of Control shall be as defined in paragraph 10.03, ""Change in
----------
Control" Defined", of the Executive's Employment Agreement. Upon a Change
----------------
of Control, if the Insured's employment is subsequently terminated, except
for cause, then the Insured shall be one hundred percent (100%) vested in
the benefits promised in this Agreement and, therefore, upon the death of
the Insured, the Insured's beneficiary(ies) (designated in accordance with
Paragraph III) shall receive the death benefit provided herein as if the
Insured had died while employed by the Bank [See Subparagraphs VI (A) &
(B)].
6
<PAGE>
XVI. AMENDMENT OR REVOCATION
It is agreed by and between the parties hereto that, during the lifetime
of the Insured, this Agreement may be amended or revoked at any time or
times, in whole or in part, by the mutual written consent of the Insured
and the Bank.
XVII. EFFECTIVE DATE
The Effective Date of this Agreement shall be January 3, 2000.
XVIII. SEVERABILITY AND INTERPRETATION
If a provision of this Agreement is held to be invalid or unenforceable,
the remaining provisions shall nonetheless be enforceable according to
their terms. Further, in the event that any provision is held to be over
broad as written, such provision shall be deemed amended to narrow its
application to the extent necessary to make the provision enforceable
according to law and enforced as amended.
XIX. APPLICABLE LAW
The validity and interpretation of this Agreement shall be governed by
the laws of the State of Georgia.
Executed at Hiram, Georgia this 13th day of January, 2000.
COMMUNITY TRUST BANK
Hiram, Georgia
/s/ Elizabeth Staples By: /s/ Ronnie Austin
- ----------------------------- ------------------------
Witness - Elizabeth Staples Ronnie Austin - CEO
/s/ T. E. Durham, Jr. /s/ Angel Byrd
- ----------------------------- -------------------------
Witness - T. E. Durham, Jr. Angel Byrd
7
<PAGE>
EXHIBIT 10.22
-------------
EXECUTIVE SUPPLEMENTAL RETIREMENT PLAN
EXECUTIVE AGREEMENT
THIS AGREEMENT is made and entered into this 13th day of January, 2000, by
and between Community Trust Bank, a Bank organized and existing under the laws
of the State of Georgia, (hereinafter referred to as the, "Bank"), and Angel J.
Byrd, an Executive of the Bank (hereinafter referred to as the, "Executive").
WHEREAS, the Board believes that the Executive's experience, knowledge of
corporate affairs, reputation and industry contacts are of such value, and the
Executive's continued services so essential to the Bank's future growth and
profits, that it would suffer severe financial loss should the Executive
terminate their service with the Bank;
ACCORDINGLY, the Board has adopted the Community Trust Bank Executive
Supplemental Retirement Plan (hereinafter referred to as the, "Executive Plan")
and it is the desire of the Bank and the Executive to enter into this agreement
which the Bank will agree to make certain payments to the Executive upon the
Executive's retirement and to the Executive's beneficiary(ies) in the event of
the Executive's death pursuant to the Executive Plan;
FURTHERMORE, it is the intent of the parties hereto that this Executive
Plan be considered an unfunded arrangement maintained primarily to provide
supplemental retirement benefits for the Executive, and to be considered a non-
qualified benefit plan for purposes of the Employee Retirement Security Act of
1974, as amended ("ERISA"). The Executive is fully advised of the Bank's
financial status and has had substantial input in the design and operation of
this benefit plan; and
NOW THEREFORE, in consideration of services the Executive has performed in
the past and those to be performed in the future, and based upon the mutual
promises and covenants herein contained, the Bank and the Executive agree as
follows:
I. DEFINITIONS
A. Effective Date:
--------------
The Effective Date of the Plan shall be January 3, 2000.
B. Plan Year:
---------
Any reference to the "Plan Year" shall mean a calendar year from
January 1st to December 31st. In the year of implementation, the term
the "Plan
<PAGE>
Year" shall mean the period from the Effective Date to December 31st of
the year of the Effective Date.
C. Retirement Date:
---------------
Retirement Date shall mean retirement from service with the Bank, which
becomes effective on the first day of the calendar month following the
month in which the Executive reaches age sixty-five (65) or such later
date as the Executive may actually retire.
D. Termination of Service:
----------------------
Termination of Service shall mean the Executive's voluntary resignation
of service by the Executive or the Bank's discharge of the Executive
without cause, prior to the Normal Retirement Age [Subparagraph I (J)].
E. Pre-Retirement Account:
----------------------
A Pre-Retirement Account shall be established as a liability reserve
account on the books of the Bank for the benefit of the Executive.
Prior to the Executive's Retirement Date [Subparagraph I (C)], such
liability reserve account shall be increased or decreased each Plan
Year, until the aforestated event occurs, by the Index Retirement
Benefit [Subparagraph I (F)].
F. Index Retirement Benefit:
------------------------
The Index Retirement Benefit for each Executive in the Executive Plan
for each Plan Year shall be equal to the excess (if any) of the Index
[Subparagraph I (G)] for that Plan Year over the Cost of Funds Expense
[Subparagraph I (H)] for that Plan Year.
G. Index:
-----
The Index for any Plan Year shall be the aggregate annual after-tax
income from the life insurance contract(s) described hereinafter as
defined by FASB Technical Bulletin 85-4. This Index shall be applied as
if such insurance contract(s) were purchased on the Effective Date of
the Executive Plan.
Insurance Company: Alexander Hamilton Life Insurance Company
Policy Form: Flexible Premium Adjustable Life Policy
Policy Name: Executive Security Plan IV
Insured's Age and Sex: 44/Female
2
<PAGE>
Riders: None
Ratings: According to the health of the proposed insured
Option: Level
Face Amount: $349,000
Premiums Paid: $100,000
Number of Premium Payments: Single
Assumed Purchase Date: January 3, 2000
Insurance Company: Southland Life Insurance Company
Policy Form: Flexible Premium Adjustable Life Policy
Policy Name: Max UL
Insured's Age and Sex: 44/Female
Riders: None
Ratings: According to the health of the proposed insured
Option: Level
Face Amount: $378,941
Premiums Paid: $100,000
Number of Premium Payments: Single
Assumed Purchase Date: January 3, 2000
If such contracts of life insurance are actually purchased by the
Bank, then the actual policies as of the dates they were actually
purchased shall be used in calculations under this Executive Plan. If
such contracts of life insurance are not purchased or are subsequently
surrendered or lapsed, then the Bank shall receive annual policy
illustrations that assume the above-described policies were purchased
or had not subsequently surrendered or lapsed, which illustration will
be received from the respective insurance companies and will indicate
the increase in policy values for purposes of calculating the amount
of the Index.
In either case, references to the life insurance contracts are merely
for purposes of calculating a benefit. The Bank has no obligation to
purchase such life insurance and, if purchased, the Executives and
their beneficiary(ies) shall have no ownership interest in such policy
and shall always have no greater interest in the benefits under this
Executive Plan than that of an unsecured creditor of the Bank.
H. Cost of Funds Expense:
---------------------
The Cost of Funds Expense for any Plan Year shall be calculated by
taking the sum of the amount of premiums for the life insurance
policies described in the definition of "Index" plus the amount of any
after-tax benefits paid to any Executive pursuant to the Executive
Plan (Paragraph II hereinafter) plus the amount of all previous years
after-tax Costs of Funds Expense, and multiplying that sum by the
Average After-Tax Cost of Funds [Subparagraph I (K)].
3
<PAGE>
I. Change of Control:
-----------------
Change of Control shall be as defined in paragraph 10.03, "Change in
---------
Control" Defined, of the Employment Agreement Angel J. Byrd and
---------------- --------------------
Community Trust Financial Services Corporation dated January 3, 2000
(hereinafter referred to as the, "Executive's Employment Agreement"),
attached hereto, marked as Exhibit "A", and fully incorporated herein
by reference.
J. Normal Retirement Age:
----------------------
Normal Retirement Age shall mean the date on which the Executive
attains age sixty-five (65).
K. Average After-Tax Cost of Funds:
-------------------------------
Average After-Tax Cost of Funds means, at any particular time, a
ratio, the numerator of which is the total interest expense as set
forth on Schedule RI-Income Statement on the Bank's most recently
filed Consolidated Report of Condition and Income (the "Call Report")
and the denominator of which is an amount equal to: (i) the amount of
deposits in domestic offices (sum of total of columns A and C from
Schedule RC-E of the Call Report), plus (ii) the amount of Federal
funds purchased and securities sold under agreements to repurchase, as
set forth on Schedule RC-Balance Sheet of the Call Report.
II. INDEX BENEFITS
A. Retirement Benefits:
-------------------
Subject to Subparagraph II (D) hereinafter, an Executive who remains in
the employ of the Bank until the Normal Retirement Age [Subparagraph I
(J)] shall be entitled to receive the balance in the Pre-Retirement
Account in ten (10) equal annual installments commencing thirty (30)
days following the Executive's retirement. In addition to these
payments and commencing in conjunction therewith, the Index Retirement
Benefit [Subparagraph I (F)] for each Plan Year subsequent to the
Executive's retirement, and including the remaining portion of the Plan
Year following said retirement, shall be paid to the Executive until
the Executive's death.
B. Termination of Service:
----------------------
Subject to Subparagraph II (D), should an Executive suffer a
Termination of Service the Executive shall be entitled to receive the
following percentage of the balance in the Pre-Retirement Account that
corresponds
4
<PAGE>
to the age of the Executive upon the date of said termination of
service, said amount payable to the Executive in ten (10) equal annual
installments commencing thirty (30) days following the Executive's
Normal Retirement Age [Subparagraph I (J)]. In addition to these
payments and commencing in conjunction therewith, the following
percentage of the Index Retirement Benefit for each Plan Year
subsequent to the year in which the Executive attains Normal Retirement
Age (including the remaining portion of the Plan Year in which the
Executive attains Normal Retirement Age) that corresponds to the age of
the Executive at the time of the Executive's termination of service,
shall be paid to the Executive until the Executive's death.
Vested Percentage
Age of Executive (to a maximum of 100%)
---------------- ----------------------
Age 55 or younger 0%
56 10%
57 20%
58 30%
59 40%
60 50%
61 60%
62 70%
63 80%
64 90%
65 or more 100%
C. Death:
-----
Should the Executive die prior to having received the balance of the
Pre-Retirement Account the Executive may be entitled to under the terms
of this Executive Plan, the entire unpaid balance of the Executive's
Pre-Retirement Account shall be paid in a lump sum to the individual or
individuals the Executive may have designated in writing and filed with
the Bank. In the absence of any effective designation of
beneficiary(ies), the unpaid balance shall be paid as set forth herein
to the duly qualified executor or administrator of the Executive's
estate. Said payment due hereunder shall be made the first day of the
second month following the decease of the Executive. Provided, however,
that anything hereinabove to the contrary notwithstanding, no death
benefit shall be payable hereunder if the Executive dies on or before
the 3rd day of January, 2002.
D. Discharge for Cause and Other Termination of this Agreement:
-----------------------------------------------------------
Notwithstanding anything herein to the contrary, should the Executive
be Discharged for Cause at any time, suffer a termination of service
prior to
5
<PAGE>
age fifty-six (56), or breach any of the provisions of the Executive's
Employment Agreement, all benefits under this Executive Plan shall be
forfeited. The term for "cause" shall be as defined in subparagraph
10.01 (c) of the Executive's Employment Agreement.
The provisions of the Executive's Employment Agreement specifically
referred to in this Subparagraph II (D) shall be, but are not limited
to: (i) Paragraph 5, "Confidentiality"; (ii) Paragraph 6, "Solicitation
of Customers, Borrowers or Depositors"; (iii) Paragraph 7, "Non-
Interference with Personnel Relations"; (iv) Paragraph 8, "Notification
of Subsequent Employment"; and (v) Paragraph 9, "Covenant Not to
Compete".
E. Death Benefit:
-------------
Except as set forth above, there is no death benefit provided under
this Agreement.
III. RESTRICTIONS UPON FUNDING
The Bank shall have no obligation to set aside, earmark or entrust any fund
or money with which to pay its obligations under this Executive Plan. The
Executive, their beneficiary(ies), or any successor in interest shall be
and remain simply a general creditor of the Bank in the same manner as any
other creditor having a general claim for matured and unpaid compensation.
The Bank reserves the absolute right, at its sole discretion, to either
fund the obligations undertaken by this Executive Plan or to refrain from
funding the same and to determine the extent, nature and method of such
funding. Should the Bank elect to fund this Executive Plan, in whole or in
part, through the purchase of life insurance, mutual funds, disability
policies or annuities, the Bank reserves the absolute right, in its sole
discretion, to terminate such funding at any time, in whole or in part. At
no time shall any Executive be deemed to have any lien nor right, title or
interest in or to any specific funding investment or to any assets of the
Bank.
If the Bank elects to invest in a life insurance, disability or annuity
policy upon the life of the Executive, then the Executive shall assist the
Bank by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
IV. CHANGE OF CONTROL
Upon a Change of Control [Subparagraph I (I)], if the Executive
subsequently suffers a Termination of Service [Subparagraph I (D)], then
the Executive shall
6
<PAGE>
receive the benefits promised in this Executive Plan upon attaining Normal
Retirement Age, as if the Executive had been continuously employed by the
Bank until the Executive's Normal Retirement Age. The Executive will also
remain eligible for all promised death benefits in this Executive Plan. In
addition, no sale, merger, or consolidation of the Bank shall take place
unless the new or surviving entity expressly acknowledges the obligations
under this Executive Plan and agrees to abide by its terms.
V. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
---------------------------------------
Neither the Executive, nor the Executive's surviving spouse, nor any
other beneficiary(ies) under this Executive Plan shall have any power
or right to transfer, assign, anticipate, hypothecate, mortgage,
commute, modify or otherwise encumber in advance any of the benefits
payable hereunder nor shall any of said benefits be subject to seizure
for the payment of any debts, judgments, alimony or separate
maintenance owed by the Executive or the Executive's beneficiary(ies),
nor be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. In the event the Executive or any
beneficiary attempts assignment, commutation, hypothecation, transfer
or disposal of the benefits hereunder, the Bank's liabilities shall
forthwith cease and terminate.
B. Binding Obligation of the Bank and any Successor in Interest:
------------------------------------------------------------
The Bank shall not merge or consolidate into or with another bank or
sell substantially all of its assets to another bank, firm or person
until such bank, firm or person expressly agrees, in writing, to
assume and discharge the duties and obligations of the Bank under this
Executive Plan. This Executive Plan shall be binding upon the parties
hereto, their successors, beneficiaries, heirs and personal
representatives.
C. Amendment or Revocation:
-----------------------
It is agreed by and between the parties hereto that, during the
lifetime of the Executive, this Executive Plan may be amended or
revoked at any time or times, in whole or in part, by the mutual
written consent of the Executive and the Bank.
7
<PAGE>
D. Gender:
------
Whenever in this Executive Plan words are used in the masculine or
neuter gender, they shall be read and construed as in the masculine,
feminine or neuter gender, whenever they should so apply.
E. Effect on Other Bank Benefit Plans:
----------------------------------
Nothing contained in this Executive Plan shall affect the right of the
Executive to participate in or be covered by any qualified or non-
qualified pension, profit-sharing, group, bonus or other supplemental
compensation or fringe benefit plan constituting a part of the Bank's
existing or future compensation structure.
F. Headings:
--------
Headings and subheadings in this Executive Plan are inserted for
reference and convenience only and shall not be deemed a part of this
Executive Plan.
G. Applicable Law:
--------------
The validity and interpretation of this Agreement shall be governed by
the laws of the State of Georgia.
H. 12 U.S.C. (S) 1828(k):
---------------------
Any payments made to the Executive pursuant to this Executive Plan, or
otherwise, are subject to and conditioned upon their compliance with
12 U.S.C. (S) 1828(k) or any regulations promulgated thereunder.
I. Partial Invalidity:
------------------
If any term, provision, covenant, or condition of this Executive Plan
is determined by an arbitrator or a court, as the case may be, to be
invalid, void, or unenforceable, such determination shall not render
any other term, provision, covenant, or condition invalid, void, or
unenforceable, and the Executive Plan shall remain in full force and
effect notwithstanding such partial invalidity.
J. Employment:
----------
No provision of this Executive Plan shall be deemed to restrict or
limit any existing employment agreement by and between the Bank and
the Executive, nor shall any conditions herein create specific
employment rights to the Executive nor limit the right of the Employer
to discharge the
8
<PAGE>
Executive with or without cause. In a similar fashion, no provision
shall limit the Executive's rights to voluntarily sever the
Executive's employment at any time.
K. Employment Agreement:
--------------------
Angel J. Byrd and Community Trust Financial Services Corporation are
parties to an Employment Agreement dated January 3, 2000. Said
Employment Agreement is attached hereto, marked as Exhibit "A", and
fully incorporated herein by reference.
VI. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
--------------------------------------
The "Named Fiduciary and Plan Administrator" of this Executive Plan
shall be Community Trust Bank until its resignation or removal by the
Board. As Named Fiduciary and Plan Administrator, the Bank shall be
responsible for the management, control and administration of the
Executive Plan. The Named Fiduciary may delegate to others certain
aspects of the management and operation responsibilities of the
Executive Plan including the employment of advisors and the delegation
of ministerial duties to qualified individuals.
B. Claims Procedure and Arbitration:
--------------------------------
In the event a dispute arises over benefits under this Executive Plan
and benefits are not paid to the Executive (or to the Executive's
beneficiary(ies) in the case of the Executive's death) and such
claimants feel they are entitled to receive such benefits, then a
written claim must be made to the Named Fiduciary and Plan
Administrator named above within sixty (60) days from the date
payments are refused. The Named Fiduciary and Plan Administrator
shall review the written claim and if the claim is denied, in whole or
in part, they shall provide in writing within sixty (60) days of
receipt of such claim its specific reasons for such denial, reference
to the provisions of this Executive Plan upon which the denial is
based and any additional material or information necessary to perfect
the claim. Such written notice shall further indicate the additional
steps to be taken by claimants if a further review of the claim denial
is desired. A claim shall be deemed denied if the Named Fiduciary and
Plan Administrator fail to take any action within the aforesaid sixty-
day period.
If claimants desire a second review they shall notify the Named
Fiduciary and Plan Administrator in writing within sixty (60) days of
the first claim denial. Claimants may review this Executive Plan or
any documents relating thereto and submit any written issues and
comments it may feel
9
<PAGE>
appropriate. In their sole discretion, the Named Fiduciary and Plan
Administrator shall then review the second claim and provide a written
decision within sixty (60) days of receipt of such claim. This
decision shall likewise state the specific reasons for the decision
and shall include reference to specific provisions of the Plan
Agreement upon which the decision is based.
If claimants continue to dispute the benefit denial based upon
completed performance of this Executive Plan or the meaning and effect
of the terms and conditions thereof, then claimants may submit the
dispute to an Arbitrator for final arbitration as more fully set forth
in paragraph 15, "Arbitration", of the Executive's Employment
-----------
Agreement.
VII. TERMINATION OR MODIFICATION OF AGREEMENT BY REASON OF CHANGES IN THE LAW,
RULES OR REGULATIONS
The Bank is entering into this Agreement upon the assumption that certain
existing tax laws, rules and regulations will continue in effect in their
current form. If any said assumptions should change and said change has a
detrimental effect on this Executive Plan, then the Bank reserves the right
to terminate or modify this Agreement accordingly. Upon a Change of
Control [Subparagraph I (I)], this paragraph shall become null and void
effective immediately upon said Change of Control.
IN witness whereof, the parties hereto acknowledge that each has carefully
read this Agreement and executed the original thereof on the 13th day of
January, 2000, and that, upon execution, each has received a conforming copy.
COMMUNITY TRUST BANK
Hiram, Georgia
/s/ Elizabeth Staples By: /s/ Ronnie Austin
- ---------------------------- -------------------
Witness - Elizabeth Staples Ronnie Austin - CEO
/s/ T. E. Durham, Jr. /s/ Angel Byrd
- ---------------------------- -------------------
Witness - T. E. Durham, Jr. Angel Byrd
10
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<PAGE>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-START> JAN-01-2000 JAN-01-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 4,292,389 3,704,550
<INT-BEARING-DEPOSITS> 0 0
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<INVESTMENTS-HELD-FOR-SALE> 26,313,031 21,950,492
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<LOANS> 97,234,759 75,660,446
<ALLOWANCE> 1,487,741 1,028,252
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5,977,690 5,741,390
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<INTEREST-INVEST> 404,087 310,912
<INTEREST-OTHER> 12,457 27,208
<INTEREST-TOTAL> 2,971,826 2,329,905
<INTEREST-DEPOSIT> 1,021,888 731,229
<INTEREST-EXPENSE> 1,223,983 807,269
<INTEREST-INCOME-NET> 1,747,843 1,522,636
<LOAN-LOSSES> 174,465 169,509
<SECURITIES-GAINS> 0 0
<EXPENSE-OTHER> 2,042,501 1,436,864
<INCOME-PRETAX> 36,538 353,931
<INCOME-PRE-EXTRAORDINARY> 36,538 261,512
<EXTRAORDINARY> 0 0
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