<PAGE>
U. S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______to ______
Commission file number 0-19030
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
(Name of small business issuer 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)(Zip Code)
(770) 445-1014
(Issuer's telephone number including area code)
Securities registered pursuant to Section 12(b)of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $2.50 par value
(Title of Class)
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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
Revenues for the Registrant's fiscal year ended December 31, 1999, total
$12,367,018.
The aggregate market value of the Registrant's outstanding Common Stock held by
nonaffiliates of the Registrant on March 17, 2000 was $18,781,681 There were
2,391,076 shares of Common Stock outstanding as of March 17, 2000.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Company's 1999 Annual Report to Stockholders are incorporated by
reference in Part II hereof, and portions of the Company's Proxy Statement for
the 2000 Annual Meeting of Stockholders to be held on April 18, 2000 are
incorporated by reference in Part III hereof.
Transitional Small Business Disclosure Format (check one): Yes ; No X
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<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Annual Report on Form 10-KSB
For the Fiscal Year Ended December 31, 1999
Table of Contents
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Item Page
Number Number
- -------- ------
Part I
1. Description of Business......................... 2
2. Description of Property......................... 33
3. Legal Proceedings............................... 34
4. Submission of Matters to a Vote of
Security Holders................................ 34
Part II
5. Market for Common Equity and
Related Stockholder Matters..................... 34
6. Management's Discussion and Analysis
or Plan of Operation............................ 34
7. Financial Statements............................ 35
8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............. 35
Part III
9. Directors, Executive Officers, Promoters
and Control Persons; Compliance with
Section 16(a) of the Exchange Act............... 35
10. Executive Compensation.......................... 36
11. Security Ownership of Certain Beneficial Owners
and Management.................................. 36
12. Certain Relationships and Related Transactions.. 36
13. Exhibits and Reports on Form 8-K................ 37
Signatures...................................... 40
Index of Exhibits............................... 42
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PART I
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ITEM 1. DESCRIPTION OF BUSINESS
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Forward-Looking Statements
- --------------------------
This report contains certain forward-looking statements including
statements relating to present or future trends or factors generally affecting
the banking industry and specifically affecting operations, markets and
products. Without limiting the foregoing, the words "believes", "anticipates",
"intends", "expects" or similar expressions are intended to identify forward-
looking statements. These forward-looking statements involve certain risks and
uncertainties. Actual results could differ materially from those projected for
many reasons including, without limitation, changing events and trends that have
influenced assumptions. These trends and events include (i) changes in the
interest rate environment which may reduce margins, (ii) non-achievement of
expected growth (iii) less favorable than anticipated changes in national and
local business environment and securities markets (iv) adverse changes in the
regulatory requirements affecting (v) greater competitive pressures among
financial institutions in the market and (vi) greater than expected loan losses.
Additional information and other factors that could affect future financial
results are included in filings with the Securities and Exchange Commission,
including this Annual Report on Form 10-KSB for 1999.
Overview
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The Company
Community Trust Financial Services Corporation (the Company) was
incorporated under the laws of the State of Georgia at the direction of
Community Trust Bank (the Bank) for the purpose of becoming a bank holding
company for the Bank. On February 22, 1991, following the receipt of all
requisite corporate and regulatory approvals, the Bank became a wholly-owned
subsidiary of the Company, and the shareholders of the Bank became shareholders
of the Company, with the same proportional interests in the Company as they
previously held in the Bank (the Reorganization). Following the Reorganization,
the Bank has continued its business operations as a Georgia-chartered commercial
bank under the same name, articles of incorporation and bylaws.
The primary activity of the Company currently is, and is expected to remain
for the foreseeable future, the ownership and operation of the Bank. As a bank
holding company, the Company is intended to facilitate the Bank's ability to
serve its customers' requirements for financial services. The holding company
structure also provides flexibility for expansion through the possible
acquisition of other financial institutions and the provision of additional
banking-related services, as well as certain non-banking services, which a
traditional commercial bank may not provide under present laws. The holding
company structure also affords additional flexibility in terms of capital
formation and financing opportunities.
While the Company may seek in the future to acquire additional banks or
bank holding companies or to engage in other activities appropriate for bank
holding companies under appropriate circumstances as permitted by law, the
Company currently has no plans, understandings or agreements concerning any
other activities other than as described below. The results of operations and
financial condition of the Company for the foreseeable future, therefore, will
be determined primarily by the results of operations and financial condition of
the Bank.
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<PAGE>
The Bank
The Bank's business consists primarily of attracting deposits from the
general public and, with these and other funds, originating real estate loans,
consumer loans, business loans, and residential and commercial construction
loans. Funds not invested in the loan portfolio are invested by the Bank
primarily in U.S. Government and agency obligations and obligations of various
states and their political subdivisions. In addition to deposits, sources of
funds for the Bank's loans and other investments include borrowings from the
Federal Home Loan Bank of Atlanta (the Federal Home Loan Bank), amortization and
prepayment of loans, sales of loans or participations in loans, sales of its
investment securities, and repurchase agreements. The principal sources of
income for the Bank are interest and fees collected on loans, fees collected on
deposit accounts and interest and dividends collected on other investments. The
principal expenses of the Bank are interest paid on deposits, employee
compensation and benefits, office expenses and other overhead expenses.
Management of the Bank currently anticipates that the Bank will open a full
service office in Douglas County, Georgia in the fourth quarter of 2000, in
addition to the full service branch in Cobb County called Battle Ridge, which
opened January 2000.
Other Subsidiaries
In addition to the Bank, the Company has invested in three non-bank
subsidiaries: Community Loan Company (CLC); Cash Transactions, LLC (CashTrans);
and Metroplex Appraisals, Inc. (Metroplex). These subsidiaries historically
have not had, and, during 2000, are not expected to have, a significant effect
on the financial condition or results of operations of the Company.
In 1995, the Company established CLC as a non-bank subsidiary for the
purpose of engaging in the consumer finance business. CLC presently operates
from ten offices located in northwest Georgia. The offices are presently
located in Woodstock, Rockmart, Rossville, Gainesville, Dalton, Oakwood, Rome,
Dahlonega, with two in Cartersville. During 1999, CLC expanded operations
through the acquisition of two offices. Additionally, the Company purchased
assets related to five consumer finance offices which were owned by Drummond
Association, Inc. These assets primarily consisted of $1,130,152 in loans,
which were then contributed to CLC's portfolio.
In 1997, the Company participated in the establishment of CashTrans.
CashTrans is a limited liability company that is owned 49% by the Company and
51% by an individual who serves as Chairman of CashTrans. CashTrans is engaged
in the business of providing retail establishments (primarily convenience
stores) with automated teller machines that are owned by CashTrans and that
dispense cash or cash equivalents. As of February 1999, CashTrans diversified
its business into selling the same types of machines to retail establishments,
if the retailer so desires. While CashTrans remains focused on placing its
machines in space which is strategically located to encourage transactions,
CashTrans will sell machines, thereby earning income on the sales and on future
maintenance of the machines. CashTrans engages in this business in Georgia,
Florida, South Carolina, North Carolina, Alabama, and Tennessee.
In 1992, the Company established Metroplex as a non-bank subsidiary for the
purpose of performing appraisals of residential and commercial properties for
the Bank as well as other entities, such as financial institutions, mortgage
companies and insurance companies. Metroplex is located in Dallas, Georgia.
Since Metroplex represents less than 5% of the Company's consolidated assets and
consolidated net earnings, the financial condition and results of operations of
the Company are not significantly affected by the operations of Metroplex.
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Business of the Company
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The Company's earnings depend primarily on the Bank's net interest income,
which is the difference between the interest income it receives from its assets
(primarily its loans and other investments) and the interest expense (or "cost
of funds") which it pays on its liabilities (primarily its deposits). Net
interest income is a function of (i) the difference between rates of interest
earned on interest-earning assets and rates of interest paid on interest-bearing
liabilities (the "interest rate spread" or "net interest spread") and (ii) the
relative amounts of its interest-earning assets and interest-bearing
liabilities. When interest-earning assets approximate or exceed interest-
bearing liabilities, any positive interest rate spread will generate net
interest income. The Bank adheres to an asset and liability management strategy
which is intended to control the impact of interest rate fluctuations upon the
Company's earnings and to make the yields on the Bank's loan portfolio and other
investments more responsive to its cost of funds, in part by more closely
matching the maturities of its interest-earning assets and its interest-bearing
liabilities, while still maximizing net interest income. Nevertheless, the Bank
is and will continue to be affected by changes in the levels of interest rates
and other factors beyond its control.
Unless specifically noted below, the following information is presented on
a consolidated basis reflecting the Company's performance as a whole. The
Company's results of operations are dependent primarily upon the results of
operations of the Bank, but also are affected by the operations of CLC,
CashTrans, and Metroplex. The information hereinafter set forth as it relates
generally to the Company's interest-earning assets, loans and interest income
includes CLC's loans, or interest income attributable to such loans. However,
where such information specifically refers to the Bank or refers to specific
categories of the Company's interest-earning assets other than consumer loans,
it does not include loans held by CLC. Similarly, references generally to the
Company's interest-bearing liabilities, interest expense, non-interest income
and non-interest expense include CLC and Metroplex unless such references are
specifically to the Bank.
For the fiscal years ended December 31, 1999 and 1998, the Company's
weighted average rate earned on all interest-earning assets was 9.57% and 9.59%,
respectively, and the Company's weighted average rate paid on all interest-
bearing liabilities for the same years was 4.21% and 4.41%, respectively. The
Company's interest rate spread for the years ended December 31, 1999 and 1998
was 5.36% and 5.18%, respectively, and its net interest income for such years
was $6,808,173 and $5,508,099, respectively. For the year ended December 31,
1999, the Company's comprehensive income consisted of $862,538 in net earnings
and a $491,871 loss in other comprehensive income, which is composed of changes
in the unrealized gain or loss on securities available for sale, net of tax.
For the year ended December 31, 1998, the Company's comprehensive income
consisted of $1,259,896 in net earnings and $162,140 in other comprehensive
income, which is composed of changes in the unrealized gain on securities
available for sale, net of tax. The Company's net earnings per share (based on
the weighted average number of shares outstanding during the year) decreased
from $.65 for 1998 to $.37 for 1999, and its net earnings per share, assuming
dilution (which assumes the effects of potential common shares outstanding
during the period), decreased from $.63 for 1998 to $.35 for 1999.
Net Interest Income
- -------------------
The following table shows information concerning interest income from
average interest-earning assets, expressed both in dollars and yields, and
interest expense on average interest-bearing liabilities, expressed both in
dollars and rates, for the periods indicated. The table includes loan yields
which reflect the amortization of deferred loan origination and commitment fees.
Interest income from investment securities includes the accretion of discounts
and amortization of premiums. All dollar amounts are expressed in thousands.
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<PAGE>
<TABLE>
<CAPTION>
TABLE 1 - Average Consolidated Balance Sheets and Net Interest Analysis
(Dollar amounts in thousands)
Years Ended December 31,
-------------------------------------------------------------------------------------------
1999 1998 1997
---------- ---------- ----------
Interest Average Interest Average Interest Average
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense(1) Rate Balance Expense(1) Rate Balance Expense(1) Rate
-------- ---------- ------- -------- ---------- ------- -------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans(1)(2)......................... $ 83,226 $ 9,008 10.82% $64,255 $7,267 11.31% $52,395 $6,075 11.60%
Investment securities
Taxable.......................... 15,166 953 6.28% 16,254 976 6.00% 18,771 1,114 5.94%
Tax-exempt(3).................... 7,759 359 4.63% 6,736 311 4.62% 4,052 198 4.88%
Federal funds sold.................. 3,721 191 5.14% 4,492 243 5.42% 4,396 243 5.53%
-------- ------- ----- ------- ------ ----- ------- ------ -----
Total interest-earning assets......... $109,872 $10,511 9.57% $91,737 $8,797 9.59% $79,614 $7,630 9.58%
Cash and other assets................. 7,962 6,728 7,360
-------- ------- -------
Total assets..................... $117,834 $98,465 $86,974
======== ======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Deposits
NOW accounts....................... $ 12,968 $ 173 1.33% $10,979 $ 183 1.67% $ 9,059 $ 165 1.82%
Money market accounts.............. 7,839 218 2.78% 8,128 225 2.77% 8,170 233 2.85%
Savings deposits................... 13,265 347 2.62% 12,909 372 2.88% 13,017 391 3.00%
Time deposits, $100,000 and over... 18,186 1,036 5.69% 15,381 933 6.06% 13,584 817 6.01%
Time deposits, other............... 27,811 1,514 5.45% 22,804 1,312 5.75% 21,880 1,276 5.83%
-------- ------- ----- ------- ------ ----- ------- ------ -----
Total interest-bearing deposits... $ 80,069 $ 3,288 4.11% $70,201 $3,025 4.31% $65,710 $2,882 4.39%
Federal funds purchased............... 147 8 5.04% 58 3 4.84% 17 1 3.96%
Federal Home Loan Bank advances....... 5,500 308 5.60% 3,503 195 5.58% -0- -0- -0-
Other borrowings...................... 2,291 99 4.32% 808 66 8.13% 370 28 7.63%
-------- ------- ----- ------- ------ ----- ------- ------ -----
Total interest-bearing liabilities.. $ 88,007 $ 3,703 4.21% $74,570 $3,289 4.41% $66,097 $2,911 4.40%
Other liabilities:
Demand deposits..................... $ 14,842 $11,919 $11,627
Accrued interest payable and
other liabilities.................. 665 1,900 2,059
-------- ------- -------
Total other liabilities.......... 15,507 13,819 13,686
Total liabilities............. $103,414 $88,389 $79,782
Stockholders' equity.................. 14,321 10,076 7,192
Total liabilities
and stockholders' equity.......... $117,834 $98,465 $86,974
======== ======= =======
Net interest income................... $6,808 $5,508 $4,719
======= ====== ======
Net interest spread (difference
between rate earned on interest-
earning assets and rate paid on
interest-bearing liabilities). 5.36% 5.18% 5.18%
Net interest margin (Net interest
income divided by average
interest-earning assets).............. 6.20% 6.00% 5.93%
- --------------------
</TABLE>
(1) Interest income on loans includes amortization of deferred loan fees and
other discounts of $1,200,474, $920,413, and $811,805 for the fiscal years ended
December 31, 1999, 1998, and 1997, respectively.
(2) Nonperforming loans are included in the computation of average loan
balances, and interest income on such loans is recognized on a cash basis.
(3) The average yield computed on tax-exempt securities is computed using
actual yields rather than tax-equivalent yields.
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<PAGE>
Changes in interest income and interest expense are attributable to three
factors: (i) a change in volume or amount of an asset or liability; (ii) a
change in interest rates; or (iii) a change caused by the combination of changes
in volume and interest rates. The following table describes the extent to which
changes in interest rates and changes in volume of interest-earning assets and
interest-bearing liabilities have affected the Company's interest income and
expense during the periods indicated. For each category of interest-earning
assets and interest-bearing liabilities, information is provided as to changes
attributable to change in volume (change in volume multiplied by old rate) and
change in rates (change in rate multiplied by old volume). The net change
attributable to changes in both volume and rate has been allocated
proportionately to the change due to volume and the change due to rate. All
dollar amounts are expressed in thousands.
TABLE 2 - Changes in Interest Income and Expense
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
1999 Compared to 1998 1998 Compared to 1997
---------------------------- -----------------------
Rate/ Net Rate/ Net
Volume Yield Change Volume Yield Change
------ ----- ------ ------ ----- ------
<S> <C> <C> <C> <C> <C> <C>
Interest income:
Loans (1)(2).......................... $2,065 (323) 1,742 $1,345 ($153) $1,192
Investment securities (3)............. (4) 28 24 10 (35) (25)
Federal funds sold.................... (40) (12) (52) 5 (5) -0-
------ ---- ----- ------ ----- ------
Total interest income................ 2,021 (307) 1,714 1,360 (193) 1,167
Interest expense:
NOW accounts.......................... 30 (40) (10) 33 (15) 18
Money market accounts................. (8) 1 (7) (1) (6) (7)
Savings deposits...................... 10 (35) (25) (3) (16) (19)
Time deposits, $100,000 and over...... 162 (59) 103 109 7 116
Time deposits, other.................. 275 (73) 202 53 (17) 36
------ ---- ----- ------ ----- ------
Total deposits........................ 469 (206) 263 191 (47) 144
Other borrowings...................... 187 (36) 151 223 12 235
------ ---- ----- ------ ----- ------
Total interest expense................ 656 (242) 414 414 (35) 379
------ ---- ----- ------ ----- ------
Net interest income................... 1,365 (65) 1,300 $ 946 ($158) $ 788
====== ==== ===== ====== ===== ======
</TABLE>
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(1) Loan amounts include nonaccruing loans.
(2) Interest income includes the portion of loan fees recognized in the
respective periods.
(3) Changes due to rate and volume on investment securities have been computed
using actual yields on tax-exempt securities rather than tax-equivalent yields.
Yields are computed on the carrying value of the securities.
The level and volatility of interest rates can have a significant impact on
the Company's profitability. Management attempts through interest rate risk
management to identify and manage the sensitivity of the Company's net interest
income to changing interest rates. The Company uses income simulation modeling
as a primary tool in measuring interest rate risk and managing interest rate
sensitivity of its assets and liabilities. Simulation modeling considers not
only the impact of changing market rates of interest on future net interest
income, but also such other potential causes of variability as earning asset
volume, mix, yield curve relationships, customer preferences and general market
conditions.
Interest rate sensitivity management focuses on the maturity structure of
assets and liabilities and their repricing characteristics during periods of
changes in market interest rates. Effective interest rate
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<PAGE>
sensitivity management seeks to ensure that both assets and liabilities respond
to changes in interest rates within an acceptable time frame, thereby minimizing
the impact of interest rate changes on net interest income. The following table
sets forth the repricing of the Company's interest-earning assets and interest-
bearing liabilities as of December 31, 1999. The time periods in the table
represent the period, following December 31, 1999, during which an asset or
liability matures or can be repriced. This interest sensitivity gap table is
designed to monitor the Company's interest rate risk exposure within the
designated time horizons. In order to control interest rate risk, management
regularly monitors the volume of interest sensitive assets relative to interest
sensitive liabilities over specific time intervals. The Company's interest rate
management policy is to attempt to maintain a relatively stable net interest
margin in periods of interest rate fluctuations. The Company's policy is to
attempt to maintain a ratio of cumulative gap to total assets of negative 10.00%
to positive 10.00% in the time periods of six months, one year, and five years.
The following table reflects that the Company's interest-earning assets and
interest-bearing liabilities are within the Company's policy guidelines.
TABLE 3 - Interest Rate Gap Sensitivity
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
0 to 3 4 to 6 7 to 12 1 to 5 Over 5
Months Months Months Years Years Total
--------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Interest Sensitive Assets
- -------------------------
Fed Funds Sold........................ $ 4,590 -0- -0- -0- -0- $ 4,590
Investment Securities
Taxable (1)........................ 5,749 97 179 5,243 7,219 18,487
Tax-exempt (1)..................... 454 -0- 155 2,675 5,457 8,741
Loans
Fixed rate......................... 4,434 2,952 2,534 1,098 -0- 11,018
Adjustable rate.................... 34,500 673 2,130 2,884 -0- 40,187
Scheduled payments................. 2,646 2,314 4,969 27,779 623 38,331
------- ------- ------- ------- ------- --------
Total Interest-Sensitive Assets....... $52,373 $ 6,036 $ 9,967 $39,679 $13,299 $121,354
======= ======= ======= ======= ======= ========
Interest Sensitive Liabilities
- --------------------------------------
NOW................................... $12,457 -0- -0- -0- -0- $ 12,457
Money Market.......................... 6,376 -0- -0- -0- -0- 6,376
Savings............................... 14,907 -0- -0- -0- -0- 14,907
Time Deposits......................... 7,037 6,993 9,981 13,038 -0- 37,049
Time, in excess of $100,000........... 6,084 3,745 4,978 5,211 -0- 20,018
Other interest-bearing liabilities.... 5,671 -0- -0- 5,500 -0- 11,171
------- ------- ------- ------- ------- --------
Total Interest Sensitive Liabilities.. $52,532 $10,738 $14,959 $23,749 $ -0- $101,978
======= ======= ======= ======= ======= ========
Interest Sensitivity Gap.............. (159) (4,702) (4,992) 15,930 13,299 19,376
Cumulative Gap........................ (159) (4,861) (9,853) 6,077 19,376
Ratio of cumulative gap to
total assets....................... (0.12%) (3.69%) (7.48%) 4.61% 14.71%
- -----------
</TABLE>
(1) All investment securities are shown at the carrying value.
Changes in the mix of earning assets or supporting liabilities can
either increase or decrease the net interest margin without affecting interest
rate gap sensitivity. Additionally, the interest rate spread between an asset
and its supporting liability can vary significantly while the timing of
repricing for both the asset and the liability remains the same, and this
characteristic is known as basis risk. Also, varying
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<PAGE>
interest rate environments may create unexpected changes in prepayment levels of
assets and liabilities that are not reflected in the interest rate sensitivity
analysis. Due to reasons such as these, management considers the gap analysis in
Table 3 to be one tool in studying interest rate sensitivity, just as simulation
modeling is another tool. Current simulation results indicate minimal
sensitivity to parallel shifts in the yield curve; however, no assurances can be
given that the Company is not at risk from changes in interest rates.
Lending Activities
- ------------------
General
At December 31, 1999, the Company's net loan portfolio constituted
approximately 66.99% of the Company's total assets. The following table sets
forth the composition of the Company's loan portfolio at the indicated dates.
<TABLE>
<CAPTION>
TABLE 4 - Loans Outstanding
(Dollar amounts in thousands)
At December 31,
----------------------------------
1999 1998
---------------- ----------------
Amount Percent Amount Percent
------- ------- ------- -------
<S> <C> <C> <C> <C>
Commercial, financial,
and agricultural................. $11,167 12.46% $10,157 13.64%
Real estate - construction....... 16,576 18.50% 12,631 16.97%
Real estate - mortgage........... 49,359 55.08% 40,379 54.24%
Consumer loans................... 12,512 13.96% 11,273 15.15%
------- ------ ------- ------
Total loans...................... 89,614 100.00% 74,440 100.00%
Less: Allowance for loan losses.. 1,357 935
------- -------
Total loans, net................. $88,257 $73,505
======= =======
</TABLE>
The following table sets forth the scheduled maturities of the loans for
selected categories in the Company's loan portfolio as of December 31, 1999
based on their contractual terms to maturity. Loans unpaid at maturity are
renegotiated based on current market rates and terms.
<TABLE>
<CAPTION>
TABLE 5 - Loan Portfolio Maturity
(Dollar amounts in thousands)
Rate Structure for Loans
Loans Maturing Maturing Over One Year
------------------------------------ ----------------------------
Less One to More Floating or
than One Five than Five Predetermined Adjustable
Year Years Years Total Interest Rate Rate
-------- ------ --------- ------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural............ $ 4,881 $4,958 $1,328 $11,167 $4,538 $1,748
Real estate -
construction................ 12,895 3,544 137 16,576 1,108 2,573
-------- ------ --------- ------- ------------- -------------
Total $17,776 $8,502 $1,465 $27,743 $5,646 $4,321
======= ====== ====== ======= ====== ======
</TABLE>
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<PAGE>
Types of Loans
Commercial, Financial, and Agricultural Loans
Commercial, financial, and agricultural loans, hereinafter referred to as
commercial loans (including non-real estate loans for agricultural purposes but
excluding commercial construction loans), totaled $11,166,660 or 12.46% of the
Company's gross loan portfolio at December 31, 1999. All commercial loans are
held in the Bank's loan portfolio. These loans consist of loans and lines of
credit to individuals, partnerships and corporations for a variety of business
purposes, such as accounts receivable and inventory financing, equipment
financing, business expansion and working capital. The terms of the Bank's
commercial loans generally range from three months to seven years, and some of
the loans carry interest rates which adjust in accordance with changes in the
prime rate. Substantially all of the Bank's commercial loans are secured and
guaranteed by the principals of the business.
Real Estate - Construction Loans
$16,576,411 or 18.50% of the Company's gross loans outstanding at December
31, 1999 were construction loans and acquisition and development loans. All
construction and acquisition and development loans are held in the Bank's loan
portfolio. The Bank makes residential construction loans to owner-occupants and
to persons building residential properties for resale. The majority of the
Bank's construction loans are made to residential real estate developers for
single-family residential properties. Construction loans are usually variable
rate loans made for terms of six months, but extensions are permitted if
construction has continued satisfactorily and if the loan is current and other
circumstances warrant the extension. Construction loans are limited to 85% of
the appraised value of the lot and the completed value of the proposed
structure. In response to competitive conditions, the Bank permits a portion of
its single family residential construction loans extended to builders to be made
without commitments for "take-out" or permanent financing from third parties.
Construction financing generally is considered to involve a higher degree
of credit risk than permanent mortgage financing of residential properties, and
this additional risk usually is reflected in higher interest rates. The higher
risk of loss on construction loans is attributable in large part to the fact
that loan funds are estimated and advanced upon the security of the project
under construction, which is of uncertain value prior to the completion of
construction. Moreover, because of the uncertainties inherent in estimating
construction costs, delays arising from labor problems, material shortages and
other unpredictable contingencies, it is relatively difficult to accurately
evaluate the total loan funds required to complete a project and to accurately
evaluate the related loan-to-value ratios. If the estimates of construction
costs and the salability of the property upon completion of the project prove to
be inaccurate, the Bank may be required to advance funds beyond the amount
originally committed to
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<PAGE>
permit completion of the project. If the estimate of value proves to be
inaccurate, the Bank may be confronted, at or prior to the maturity of the loan,
with a project with a value which is insufficient to assure full repayment.
The Bank's underwriting criteria are designed to evaluate and minimize the
risk of each construction loan. Among other items, the Bank considers evidence
of the availability of permanent financing or a take-out commitment to the
borrower, the financial strength and reputation of the borrower, an independent
appraisal and review of cost estimates, market conditions, and, if applicable,
the amount of the borrower's equity in the project, pre-construction sale or
leasing information and cash flow projections of the borrower.
Real Estate - Mortgage Loans
At December 31, 1999, real estate - mortgage loans totaled $49,358,441 or
55.08% of the Company's gross loan portfolio. Real estate - mortgage loans
include all loans secured by real estate for purposes other than construction or
acquisition and development and are hereinafter referred to as real estate
loans. All real estate loans are held in the Bank's loan portfolio. Of this
amount, $14,040,263 or 15.67% of the Company's gross loan portfolio was
comprised of loans secured by one to four family residential properties,
including home equity loans (loans secured by the equity in the borrower's
residence but not necessarily for the purpose of home improvement). Most of
these home equity loans are made at fixed interest rates for terms of one to
three years with balloon payment provisions and amortized over a 10-15 year
period. The Bank also offers a product which allows consumers to borrow with low
closing costs on the equity in their homes. This product is a variable rate
revolving line of credit, having an outside maturity of 5 years with 1.5% of the
average daily balance due monthly. The Bank's experience indicates that real
estate loans normally remain outstanding for much shorter periods (seven years
on average) than their stated maturity because the borrowers repay the loans in
full either upon the sale of the secured property or upon the refinancing of the
original loan.
The real estate loans originated by the Bank contain a "due-on-sale"
clause, which provides that the Bank may declare the unpaid balance of the loan
immediately due and payable upon the sale of the mortgaged property. Such
clauses are an important means of reducing the average loan life and increasing
the yield on existing fixed-rate real estate loans, and it is the Bank's policy
to enforce due-on-sale clauses.
At December 31, 1999, the remainder of the Company's real estate loans
totaled $35,318,178 or 39.41% of the Company's gross loan portfolio. These
loans were comprised of non-farm nonresidential real estate loans (including
commercial real estate loans and loans secured by raw land).
Consumer Loans
At December 31, 1999, consumer loans totaled $12,512,136 or 13.96% of the
Company's gross loan portfolio. $8,647,329 or 69.11% of these loans are held in
the Bank's loan portfolio, with the remainder held in CLC's loan portfolio.
The Bank makes both secured and unsecured consumer loans for a variety of
personal and household purposes. Most of the Bank's consumer loans are
automobile loans, boat loans, property
-11-
<PAGE>
improvement loans and loans to depositors on the security of their certificates
of deposit. These loans are generally made for terms of up to five years at
fixed interest rates. The Bank considers consumer loans to involve a relatively
high credit risk compared to real estate loans. Consumer loans, therefore,
generally yield a relatively high return to the Bank and provide a relatively
short maturity. The Bank believes that the generally higher yields and the
shorter terms available on various types of consumer loans tend to offset the
relatively higher risk associated with such loans, and contribute to a
profitable spread between the Bank's average yield on earning assets and the
Bank's cost of funds.
At December 31, 1999, consumer loans held in CLC's loan portfolio totaled
$3,864,807 or 4.31% of the Company's gross loan portfolio. CLC, a consumer
finance company, makes loans for up to $3,000 with original maturities of up to
three years under the Georgia Industrial Loan Act (GILA). Additionally, CLC may
choose to make consumer loans, which are typically called deregulated loans,
such as sales finance loans. The Company considers CLC's loans to involve a
relatively high credit risk compared to other loans in the Company's portfolio.
These consumer loans generally yield a higher return to the Company than
consumer loans originated by the Bank. The Company believes that the generally
higher yields on CLC's loan portfolio offset the higher risk associated with
such loans and contribute to a profitable spread between the Company's yield on
earning assets and the Company's cost of funds.
In 1996, the Bank began to issue MasterCard and VISA credit cards to
applicants who met the Bank's credit standards. The credit approval policy was
similar to that which the Bank used for any consumer loan customer. As of
December 31, 1999, credit card loans totaled $1,1,42,458, or 1.27% of the
Company's gross loan portfolio. The Bank considers credit card loans to involve
a relatively high credit risk compared to other types of loans offered by the
Bank, even though management considered its credit approval policy to be
conservative. As of March 1, 2000, the Bank sold its credit card portfolio to
the Bankers Bank in Atlanta, Georgia. For one year from the time of this sale,
the Bank will be responsible to Bankers Bank for any debt in this portfolio
which proves to be uncollectable after 90 days.
Origination, Purchase and Sale of Loans
The Bank originates loans primarily in Paulding County, Georgia. The Bank
also originates loans in Cobb, Douglas, and Bartow Counties, each of which is
contiguous to Paulding. Loans are originated by loan officers who operate from
the Bank's offices in Paulding and Cobb Counties. These loan officers actively
solicit loan applications from existing customers, local manufacturers and
retailers, builders, real estate developers, real estate agents and others. The
Bank also receives numerous loan applications as a result of customer referrals
and walk-ins to its offices. Management of the Bank currently anticipates that
the Bank will open an additional office in Douglas County in 2000. Management
expects to have lenders who will originate loans from the Douglas location.
Upon receipt of a loan application and all required supporting information
from a prospective borrower, the Bank obtains a credit report and verifies
specific information relating to the loan applicant's employment, income and
creditworthiness. For significant extensions of credit, a certified appraisal
of the real estate intended to secure the proposed loan is undertaken by an
independent appraiser approved by the Bank. The Bank's loan officers then
analyze the credit worthiness of the borrower and the value of any collateral
involved.
-12-
<PAGE>
The Bank's loan approval process is intended to be conservative but also
responsive to customer needs. Loans are approved in accordance with the Bank's
written loan policy, which provides for several tiers of approval authority,
based on a borrower's aggregate debt with the Bank. There is a Loan Committee
comprised of the senior officers of the Bank which must approve any loan that
increases the borrower's aggregate indebtedness above an individual officer's
limit, but that is not more than $250,000. The Loan Committee of the Board of
Directors, comprised of the President and five non-employee Directors, must
approve all loans over $250,000, and all lending relationships where a
borrower's aggregate indebtedness to the Bank exceeds $250,000.
From time to time, the Bank may participate in loans with other financial
institutions by either buying or selling part of a loan. The purchase of a loan
participation allows the Bank to expand its loan portfolio and increase
profitability while still maintaining the high credit standards which are
applied to all extensions of credit made by the Bank. The sale of loan
participations allows the Bank to make larger loans which it otherwise would be
unable to make due to capital or other funding considerations.
CLC's loans are originated by lenders who operate from CLC's offices in
northwest Georgia. These lenders actively solicit loan applications from
existing customers. CLC also originates loans through a conditional sales
contract program with retailers. CLC may expand the program with similar
arrangements through other retailers. All loans made through this program must
meet CLC's ordinary credit standards. CLC receives numerous loan applications
as a result of customer referrals and walk-ins to its offices.
Loan Fee Income
In addition to interest earned on loans, the Bank receives origination fees
for making loans, commitment fees for making certain loans, and other fees for
miscellaneous loan-related services. Such fee income varies with the volume of
loans made, prepaid or sold, and the rates of fees vary from time to time
depending on the supply of funds and competitive conditions.
Commitment fees are charged by the Bank to the borrower for certain loans
and are calculated as a percentage of the principal amount of the loan. These
fees normally are deducted from the proceeds of the loan and generally range
from 1/2% to 1% of the principal amount, depending on the type and volume of
loans made and market conditions such as the demand for loans, the availability
of money and general economic conditions.
The Bank also receives miscellaneous fee income from late payment charges,
overdraft fees, property inspection fees, and miscellaneous services related to
its existing loans. For the year ended December 31, 1999, the Bank recognized
origination, commitment and other loan fees totaling $752,107, which equaled
11.05% of the Company's net interest income for such year. For the years ended
December 31, 1998 and 1997, the Bank recognized origination, commitment and
other loan fees totaling $628,683 and $575,498, respectively, which equaled
11.41% and 12.19%, respectively, of the Company's net interest income for such
years.
-13-
<PAGE>
CLC receives miscellaneous fee income from late payment charges, loan fees,
maintenance fees, and miscellaneous services related to its existing loans. For
the year ended December 31, 1999, CLC recognized loan fees totaling $448,367,
which equaled 6.59% of the Company's net interest income for such year. For the
year ended December 31, 1998, CLC recognized loan fees totaling $291,730, which
equaled 5.30% of the Company's net interest income for such year.
Problem Loans and Allowance for Loan Losses
Problem Loans
In originating loans, the Company recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the creditworthiness of the borrower over the term of
the loan and, in the case of a secured loan, the guaranty of the security for
the loan. The Company has instituted measures at both the Bank and CLC which
are designed to reduce the risk of, and monitor exposure to, credit losses.
The Bank's loan portfolio is periodically reviewed by the Bank's management
to identify deficiencies and to take corrective actions as necessary. As
discussed below, each of the Bank's loans is assigned a rating in accordance
with the Bank's internal loan rating system and is reviewed monthly to update
its rating in accordance with the performance of the loan. All past due loans
are reviewed monthly by the Bank's senior lending officers and by the Loan
Committee of the Board of Directors, and all loans classified as substandard or
doubtful, as well as any "special mention" loans, are reviewed at least monthly
by the Loan Committee. In addition, all loans to a particular borrower are
reviewed, regardless of classification, each time such borrower requests a
renewal or extension of any loan or requests an additional loan. All lines of
credit are reviewed annually prior to renewal. Such reviews include, but are
not limited to, the ability of the borrower to repay the loan, a re-assessment
of the borrower's financial condition, the value of any collateral and the
estimated potential loss to the Bank, if any.
The Bank's internal problem loan rating system establishes three
classifications for problem assets: substandard, doubtful and loss.
Additionally, in connection with regulatory examinations of the Bank, federal
and state examiners have authority to identify problem assets and, if
appropriate, require the Bank to classify them. Substandard assets have one or
more defined weaknesses and are characterized by the distinct possibility that
the Bank will sustain some loss if the deficiencies are not corrected. Doubtful
assets have the weaknesses of substandard assets with the additional
characteristic that the weaknesses make collection or liquidation in full, on
the basis of currently existing facts, conditions and values, highly
questionable and improbable. An asset classified as loss is considered
uncollectible. Federal regulations also designate a "special mention" category,
described as assets which do not currently expose the Bank to a sufficient
degree of risk to warrant classification but do possess credit deficiencies or
potential weaknesses deserving management's close attention.
The Bank's collection procedures provide that when a loan becomes 10 days
delinquent, the borrower is contacted by mail and payment is requested. If the
delinquency continues, subsequent efforts are made to contact and request
payment from the delinquent borrower. Most loan delinquencies are cured within
60 days and no legal action is required. In certain circumstances, the Bank,
for a fee, may modify the loan, grant a limited moratorium on loan payments or
revise the payment schedule to enable the borrower to restructure his or her
financial affairs. The Bank has restructured loans as of
-14-
<PAGE>
December 31, 1999, which totaled approximately $103,000. Generally, the Bank
stops accruing interest on delinquent loans when payment is in arrears for 90
days (unless the obligation is both well secured and in the process of
collection) or when collection otherwise becomes doubtful. If the delinquency
exceeds 120 days and is not cured through the Bank's normal collection
procedures or through a restructuring, the Bank will institute measures to
enforce its remedies resulting from the default, including commencing a
foreclosure, repossession or collection action. In certain cases, the Bank will
consider accepting a voluntary conveyance of collateral in lieu of foreclosure
or repossession. Real property acquired by the Bank as a result of foreclosure
or by deed in lieu of foreclosure is classified as "real estate owned" until it
is sold and is carried at the lower of cost (defined as fair value at
foreclosure) or fair value less estimated costs to dispose. Accounting standards
define fair value as the amount that is expected to be received in a current
sale between a willing buyer and seller other than in a forced or liquidation
sale. Fair values at foreclosure are based on appraisals. Losses arising from
the acquisition of foreclosed properties are charged against the allowance for
loan losses. Subsequent write-downs are provided by a charge to income through
losses on other real estate in the period in which the need arises.
The Bank attempts to sell real estate owned promptly after foreclosure, and
it sold $83,030 of real estate owned due to loan foreclosures during the year
ended December 31, 1999. The book value of real estate owned that was sold by
the Bank during the year ended December 31, 1999 totaled $79,258. As of
December 31, 1999, there was $191,986 in real estate owned as a result of
foreclosure.
CLC's loan portfolio is periodically reviewed by CLC's management to
identify deficiencies and to take corrective actions as necessary. All past due
loans are reviewed daily by each CLC Office Manager and monthly by CLC's senior
management. CLC's Board of Directors reviews the total loans considered over 90
days delinquent in their bi-monthly meetings. The Board compares delinquency
rates on an office-by-office basis. CLC's collection procedures provide that
when a loan becomes 5 days delinquent, the borrower is contacted by mail and
payment is requested. If the delinquency continues, subsequent efforts are made
to contact and request payment from the delinquent borrower. Most loan
delinquencies are cured within 90 days and no legal action is required.
Generally, when an account reaches 90 to 120 days with no payment collected in
that time frame, notice will be mailed to the customer stating that CLC is
taking legal action against them unless the account is brought to a current
status within 10 days. If the customer does not respond within that time frame,
CLC typically will file suit against the parties involved in the local
Magistrate Court. Generally, CLC's policy is to charge off any loan on which
CLC has not received a payment in 6 months. Management may determine that a
loan is in the process of collection and, therefore, the past due loan does not
have to be charged off. CLC's loans which are past due 90 days or more total
$440,064 as of December 31, 1999, as compared to $104,132 as of December 31,
1998. Management attributes some of the growth in past due loans to the fact
that CLC experienced a 99.49% growth in its loan portfolio during 1999.
-15-
<PAGE>
The following table sets forth information regarding the Company's
delinquent and non-performing assets as of the dates indicated.
TABLE 6 - Non-performing Assets
(Dollar amounts in thousands)
At December 31,
---------------
1999 1998
------- ------
Non-performing assets:
Accruing loans which are contractually
past due 90 days or more................ $ 440 $ 177
Nonaccruing loans......................... 525 555
Real estate acquired through foreclosure.. 192 48
Property acquired through repossession.... -0- 10
------ -----
Total............................... $1,157 $ 790
====== =====
Ratio of non-performing assets to:
Total loans and real estate acquired
through foreclosure and repossessions.. 1.29% 1.06%
Total assets.............................. 0.88% 0.73%
The Bank recorded interest income on the nonaccruing loans listed above for
the fiscal year ended December 31, 1999 of $22,037. The gross interest income
that would have been recorded during the fiscal year ended December 31, 1999 if
the nonaccruing loans listed above had been current in accordance with their
original terms would have been $46,563.
Allowance for Loan Losses
The allowance for loan losses is a means of absorbing future losses which
could be incurred from the current loan portfolio. Both the Bank and CLC
maintain an allowance for loan losses, and management adjusts the general
allowances monthly by charges to income in response to changes to outstanding
loan balances.
The Bank maintains a general allowance in the range of 1.00% to 1.50% of
the total principal amount of loans outstanding (less the total principal amount
of loans outstanding that are secured by certificates of deposit), and
management adjusts the general allowance monthly by charges to income in
response to changes in the outstanding loan balance and changes in the asset
quality ratings. Management also may establish specific loan loss allowances
for specific loans after considering such factors as past delinquencies on the
loan, the value of the underlying collateral and the size of the loan. The Bank
began a special allowance in 1996 equal to 4% of the outstanding balances in its
credit card portfolio, in acknowledgment of the risk related with this type of
credit product. This portfolio was sold in February 2000, therefore the special
allowance for the Bank's credit card portfolio will not be necessary after one
year from the date of the sale. Additionally, in 1998 the Bank began a special
allowance based on risks associated with Year 2000. As of this time, management
is not aware of any specific loan problems which require the loan loss allowance
due to Y2K issues. The special allowance related to Year 2000 risks will be
absorbed into the general allowance as soon as management deems appropriate. A
loan or portion thereof is charged off against the general allowance when
management has determined that losses on such loans are probable. Recoveries on
any loans charged off in prior
-16-
<PAGE>
fiscal periods are credited to the allowance. It is the opinion of the Bank's
management that the balance in the general allowance for loan losses as of
December 31, 1999 is adequate to absorb possible losses from loans currently in
the portfolio.
CLC maintains a general allowance for possible loan losses, in addition to
the fact that a majority of the loans in CLC's portfolio are insured in case of
default by the borrower. CLC may be reimbursed for any covered loan balance
which goes into default. CLC's Board of Directors reviews the general allowance
for loan loss on a bimonthly basis to review its adequacy in covering any future
losses that may be sustained by CLC.
The following table summarizes the Company's loan loss experience for the
periods indicated.
TABLE 7 - Analysis of the Allowance for Loan Losses
(Dollar amounts in thousands)
Years Ended December 31,
------------------------
1999 1998
------ ------
Allowance for possible loan losses,
beginning of the period............................. $ 935 $ 829
Charge-offs for the period:
Commercial, financial, and agricultural........... 9 14
Real estate - construction........................ 0 0
Real estate - mortgage............................ 20 0
Consumer.......................................... 384 254
------ -----
Total charge-offs.................................. 413 268
------ -----
Recoveries for the period:
Commercial, financial, and agricultural........... $ 13 $ 5
Real estate - construction........................ 0 0
Real estate - mortgage............................ 0 0
Consumer.......................................... 50 33
------ -----
Total recoveries................................... 63 38
------ -----
Net charge-offs for the period....................... 350 230
------ -----
Allowance for loan losses acquired................... 77 0
------ -----
Provision for loan losses charged to earnings........ 695 336
------ -----
Allowance for possible loan losses,
end of the period.................................. $1,357 $ 935
====== =====
Ratio of allowance for loan losses to
total average loans outstanding.................... 1.64% 1.46%
Ratio of net charge-offs during
the period to average loans
outstanding during the period...................... 0.42% 0.36%
-17-
<PAGE>
In addition to the Bank's loan rating system for problem assets described
above (see Problem Loans, above), the Bank has established a loan rating system
for all categories of loans which assists management and the Board of Directors
in determining the adequacy of the Bank's allowance for loan losses. Each loan
in the Bank's portfolio is assigned a rating which is reviewed by management
periodically to ensure its continued suitability. An exception is made in the
case of (i) monthly installment loans which are grouped together by delinquency
status such as over 10, 30, 60, or 90 days past due and (ii) problem assets
which are rated as substandard, doubtful, or loss as discussed above. All other
loans are assigned a rating that consists of five categories ranging from
excellent to "special mention". Loans rated in each of these five loan rating
categories are weighted by factors ranging from of 0.50% to 5.00% that
management believes reasonably reflects losses that can be anticipated with
respect to loans in each of these categories. Loans in the substandard,
doubtful, or loss categories are weighted by factors of 15%, 50% and 100%,
respectively. Based on these weightings, the Bank's management establishes an
allowance for loan losses that is reviewed by its Board of Directors each month.
Additionally, management takes into consideration other factors such as the
amount of loans committed but unfunded, changes in the economy, and other
issues, in order to establish an allowance for loan losses.
The following table sets forth the Company's allocation of the allowance
for loan losses as of December 31, 1999, and 1998.
TABLE 8 - Allocation of the Allowance for Loan Losses
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
At December 31, 1999 At December 31, 1998
-------------------------- ------------------------
Percent of loans Percent of loans
in each category in each category
Balance at end of period applicable to Amount to total loans Amount to total loans
- -------------------------------------- --------- --------------- ------ ----------------
<S> <C> <C> <C> <C>
Commercial, financial, and agricultural..... $ 73 12.46% $ 89 13.64%
Real estate - construction.................. 84 18.50% 103 16.97%
Real estate - mortgage...................... 603 55.08% 416 54.24%
Consumer.................................... 350 13.96% 127 15.15%
Unallocated................................. 247 N/A 200 N/A
------ ------ ---- ------
Total.................................. $1,357 100.00% $935 100.00%
====== ====== ==== ======
</TABLE>
Investment Activities
- ---------------------
Interest earned on securities and other investments provides the second
largest source of revenues for the Company after interest on loans, constituting
$1,311,294 or 10.60% of total interest and other income for the year ended
December 31, 1999, as compared to $1,286,839, or 12.40%, respectively, as
-18-
<PAGE>
of December 31, 1998. The Company's investment portfolio totaled $27,226,422 or
20.66% of total assets at December 31, 1999, as compared to $22,368,036, or
20.80%, respectively, as of December 31, 1998. The entire investment portfolio
is held by the Bank. The portfolio is designed to enhance liquidity while
providing acceptable rates of return.
The following table sets forth the carrying value of the Bank's investments
at the dates indicated. All securities held are available for sale and are
carried at fair market value.
TABLE 9 - Investment Securities
(Dollar amounts in thousands)
At December 31,
-------------------------
1999 1998
------- -------
U.S. Government and agency
obligations................................. $18,486 $14,246
Other bonds, notes, debentures
and securities.............................. 1,115 919
States & political subdivisions - tax-exempt.. 7,625 7,203
------- -------
Total...................................... $27,226 $22,368
======= =======
The following table sets forth the carrying value of the Bank's investments
at December 31, 1999, the weighted average yields on the Bank's investments at
December 31, 1999 and the periods to maturity of the Bank's investments from
December 31, 1999.
TABLE 10 - Expected Maturities of Investment Securities
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
Periods to Maturity from December 31, 1999
------------------------------------------------------------
1 year or less 1 - 5 years 5 - 10 years Over 10 years
--------------- ------------ ------------- --------------
Amount Amount Amount Amount
--------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
U. S. Government and
agency Obligations........ $5,483 $6,733 $3,668 $ 136
U. S. Government agencies -
mortgage-backed........... -0- 270 585 1,611
Tax-exempt
municipal bonds........... 406 2,675 2,412 2,132
Other bonds, notes, de-
bentures, and securities.. 1,115 -0- -0- -0-
------ ------ ------ ------
Total..................... $7,004 $9,678 $6,665 $3,879
====== ====== ====== ======
Weighted average yield....... 6.17% 7.59% 6.71% 7.27%
</TABLE>
(1) The weighted average yields on tax-exempt securities have been computed on
a tax-equivalent basis.
-19-
<PAGE>
Sources of Funds
- ----------------
General
Time, money market, savings and demand deposits are the major source of the
Company's funds for lending and other investment purposes. All deposits are
held by the Bank. 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.
Deposits
The Bank offers several types of deposit accounts, with the principal
differences relating to the minimum balances required, the time period the funds
must remain on deposit and the interest rate. Deposits are obtained primarily
from the Bank's Paulding and Cobb Counties market area. The Bank has an
Internet branch via its website, where new customers may open a deposit account
with little concern about geographic location. The Bank has partnered with a
vendor which provides customers with a bill paying service and the ability to
conduct funds transfers via a secure Internet connection. 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 for the first
time in 1999, with $6,055,045 outstanding in these time deposits for the year
ended December 31, 1999. Additionally, a new product offered by the Bank allows
certain commercial customers the flexibility of employing funds that might
otherwise remain in deposit balances to invest in repurchase agreements so that
the customer may earn interest overnight. Securities sold under repurchase
agreements totaled $4,880,864 at December 31, 1999.
A principal source of deposits for the Bank consists of short-term money
market and other accounts which are highly responsive to changes in market
interest rates. Accordingly, the Bank, like all financial institutions, is
subject to short-term fluctuations in deposits in response to customer actions
due to changing short-term market interest rates. The ability of the Bank to
attract and maintain deposits
-20-
<PAGE>
and the Bank's cost of funds have been and will continue to be significantly
affected by money market conditions.
The following table sets forth the maturity distribution of time deposits
of $100,000 or more at December 31, 1999.
TABLE 11 - Maturities of Time Deposits of $100,000 and greater
(Dollar amounts in thousands)
Time Deposits
$100,000 or more
----------------
3 months or less................. $ 6,052
Over 3 months through 6 months... 3,744
Over 6 months through 12 months.. 5,077
Over 12 months................... 5,211
-------
Total outstanding............... $20,084
=======
Borrowings
The Bank maintains two lines of credit to borrow fed funds that total
$5,300,000 in order to enhance liquidity. At December 31, 1999, 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 December
31, 1999, the Bank had $5,500,000 in borrowings outstanding under this facility.
No additional borrowings were available to the Bank as of December 31, 1999
based on the Bank's loan portfolio.
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 December 31, 1999, the Company had no funds 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 December 31, 1999, CLC had
$790,000 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 December 31, 1999, 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. CashTrans' loan is personally guaranteed by James R.
Henderson, the principal of JRH Diversified, Inc.
-21-
<PAGE>
Competition
- -----------
Based on total assets of $126,661,817 as of December 31, 1999, the Bank is
presently one of the smaller financial institutions with offices in Paulding and
Cobb Counties. The Bank faces strong competition for deposits and loans from
numerous other financial institutions, some of which are community banks that
expanded their services from adjacent counties into Paulding County. Larger
financial institutions have greater resources and lending limits than the Bank,
and typically have more branch offices. A federal credit union owned by the
employees of a local public utility company also has a branch in Paulding
County. Since credit unions are not subject to income taxes in the way that
commercial banks are taxed, credit unions have an advantage in offering
competitive rates to potential customers. The Bank also competes for deposits
and loans with commercial banks and thrift institutions in metropolitan Atlanta,
some of which are affiliated with large regional financial institutions. The
Bank also faces competition in certain areas of its business from mortgage
banking companies, consumer finance companies, insurance companies, money market
mutual funds and investment banking firms, some of which are not subject to the
same degree of regulation as the Bank.
The Bank competes for deposits principally by offering depositors a variety
of deposit programs with competitive interest rates, quality service and
convenient locations and hours. The Bank competes for loans by offering
competitive interest rates and loan fees, timely processing and quality service.
The Bank believes that its relatively small size permits it to offer more
personalized services than many of its competitors.
The competitive pressures among commercial banks, thrift institutions and
other financial services entities have increased significantly in recent years
and are expected to continue to do so. The establishment of money market
accounts and the elimination of rate controls for interest rates paid on
deposits in the early 1980s, for example, have increased the competition for
deposits and tend to increase the Bank's cost of funds, especially during
periods of high interest rates.
Within Georgia, competition among financial institutions is increasing due
to a number of factors including, but not limited to, the acquisition of
Georgia-based financial institutions by out-of-state financial institutions. In
addition to facing increased competition from out-of-state financial
institutions, Georgia-based financial institutions are now likely to face
increased competition from other Georgia-based banks since effective July 1,
1998, Georgia now permits unrestricted state-wide branching.
Employees
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As of December 31, 1999, the Bank had 78 full-time and 19 part-time
employees, Metroplex had 2 full-time employees and 2 part-time employees, CLC
had 27 full-time and 1 part-time employees, CashTrans had 4 full-time employees
and 9 part-time employees, and the Company had 6 full-time employees and 1 part-
time employee. No employees are covered by collective bargaining agreements,
and the Company considers its relationship with its employees to be excellent.
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Supervision and Regulation
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General
As a bank holding company, the Company is subject to regulation by the
Board of Governors of the Federal Reserve System (the Federal Reserve) pursuant
to the Bank Holding Company Act of 1956, as amended (BHCA) and by the Georgia
Department pursuant to the Financial Institutions Code of Georgia (FICG). The
Company also is required to file certain reports with, and otherwise comply with
the rules and regulations of, the Securities and Exchange Commission (the
Commission) under federal securities laws.
The Bank is a state bank and is subject to the supervision of, and is
regularly examined by, the Georgia Department. In addition, the Bank's deposit
accounts are insured up to applicable limits by the bank insurance fund of the
Federal Deposit Insurance Corporation (the FDIC) and the Bank, therefore, is
subject to regulation by the FDIC.
To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to the
particular statutory and regulatory provisions. Any change in applicable laws
or regulations may have a material effect on the business and prospects of the
Company and the Bank.
Regulation of the Company
General. As the bank holding company for the Bank, the Company is subject
to the supervision and regulation by the Federal Reserve and the Georgia
Department. As a bank holding company, the Company is required to file with the
Federal Reserve an annual report and such additional information as the Federal
Reserve may require pursuant to the BHCA. The Company also files an annual
registration with the Georgia Department pursuant to FICG. The Federal Reserve
and the Georgia Department also may make examinations of the Company and each of
its subsidiaries.
Regulatory Capital Requirements. The Federal Reserve and the FDIC have
issued substantially similar risk-based and leverage capital guidelines
applicable to United States banking organizations. In addition, those
regulatory agencies may from time to time require that a banking organization
maintain capital above the minimum levels, whether because of its financial
condition or actual or anticipated growth. The Federal Reserve's risk-based
guidelines define a two-tier capital framework. Tier 1 capital consists of
common and qualifying preferred shareholders' equity, less certain intangibles
and other adjustments. Tier 2 capital consists of subordinated and other
qualifying debt, and the allowance for credit losses up to 1.25% of risk-
weighted assets. The sum of Tier 1 and Tier 2 capital less investments in
unconsolidated subsidiaries represents qualifying total capital, at least 50% of
which must consist of Tier 1 capital. Risk-based capital ratios are calculated
by dividing Tier 1 and total capital by risk-weighted assets. Assets and off-
balance sheet exposures are assigned to one of four categories of risk-weights,
based primarily on relative credit risk. The minimum Tier 1 capital ratio is 4%
and the minimum total capital ratio is 8%. The Company's Tier 1 and total risk-
based capital ratios under these guidelines at December 31, 1999 were 14.16% and
15.41% respectively.
The leverage ratio is determined by dividing Tier 1 capital by adjusted
average total assets. Although the stated minimum ratio is 3%, all but the most
highly rated bank holding companies are
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required by the Federal Reserve to maintain a minimum leverage ratio of 4% to
5%. The Georgia Department requires a minimum Tier 1 capital to adjusted total
assets ratio of 4%. The Company's leverage ratio at December 31, 1999 was
11.00%.
If the capital of a bank holding company falls below minimum required
levels, the bank holding company may be denied approval to acquire or establish
additional banks or non-bank businesses. According to Federal Reserve policy,
bank holding companies are expected to act as a source of financial strength to
a subsidiary bank and to commit resources to support such subsidiary. This
support may be required at times when a bank holding company may not be able to
provide such support.
Change of Control and Permissible Activities. Bank holding companies are
required by the BHCA to obtain approval from the Federal Reserve prior to
acquiring, directly or indirectly, ownership or control of more than 5% of the
outstanding shares of any class of voting stock of any bank or bank holding
company.
The BHCA also prohibits bank holding companies, with certain exceptions,
from acquiring more than 5% of the voting shares of any company that is not a
bank, and from engaging in any business other than banking or managing or
controlling banks or other permissible subsidiaries. The Federal Reserve is
authorized to approve, among other things, the ownership of shares by a bank
holding company in any company the activities of which the Federal Reserve has
determined to be so closely related to banking or to managing or controlling
banks as to be a proper incident thereto. Additionally, the Federal Reserve, by
regulation, has deemed certain nonbanking activities to be permissible
activities and has exempted such activities from the prior approval
requirements, although notice to and review by the Federal Reserve of such
activities would be necessary before the Company could engage de novo in such
activities. The Federal Reserve is empowered to differentiate between
activities that are initiated de novo by a bank holding company or a subsidiary
and activities commenced by acquisition of a going concern.
However, the activities permissible to bank holding companies and their
affiliates were substantially expanded by the Gramm-Leach-Bliley Act, which the
President signed on November 12, 1999. Gramm-Leach-Bliley repeals the anti-
affiliation provisions of the Glass-Steagall Act to permit the common ownership
of commercial banks, investment banks and insurance companies. The BHCA was
amended to permit a financial holding company to engage in any activity and
acquire and retain any company that the Federal Reserve determines to be (a)
financial in nature or incidental to such financial activity or (b)
complementary to a financial activity and does not pose a substantial risk to
the safety and soundness of depository institutions or the financial system
generally. The Federal Reserve must consult with the Secretary of the Treasury
in determining whether an activity is financial in nature or incidental to a
financial activity. Holding companies may continue to own companies conducting
activities which had been approved by Federal order or regulation on the day
before Gramm-Leach-Bliley was enacted.
Additionally, the Federal Change in Bank Control Act requires 60 days'
prior written notice to the appropriate federal bank regulatory agency before
any person may acquire "control" of a bank or bank holding company. The
appropriate federal bank regulatory agency with respect to acquisitions of
control of a state non-member bank, such as the Bank, is the FDIC, and the
appropriate federal bank regulatory agency with respect to acquisitions of
control of a bank holding company, such as the Company, is the Federal Reserve.
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Under existing Federal Reserve regulations, "control" is presumed to exist
where the acquiring party (which includes a group "acting in concert") (a) owns,
controls, or holds with power to vote 25% or more of any class of voting
securities of the institution, or (b) owns, controls, or holds with power to
vote 10% or more of any class of voting securities of the institution, if (i)
the institution has registered securities under Section 12 of the Securities
Exchange Act of 1934, or (ii) no other person will own a greater percentage of
that class of voting securities immediately following the transaction.
Supervisory and Enforcement Powers. The Federal Reserve has been granted
enforcement powers over bank holding companies and non-banking subsidiaries to
forestall activities that represent unsafe or unsound practices or constitute
violations of law. These powers may be exercised through the issuance of cease-
and-desist orders or other actions. The Federal Reserve also is empowered to
assess civil money penalties against companies or individuals who violate the
BHCA or orders or regulations thereunder, to order termination of non-banking
activities of non-banking subsidiaries of bank holding companies and to order
termination of ownership and control of a non-banking subsidiary by a bank
holding company. Certain violations may also result in criminal penalties.
Restrictions on Transactions with Affiliates. The Company, Metroplex,
CashTrans and CLC are "affiliates" of the Bank under the Federal Reserve Act,
which imposes certain restrictions on (i) loans by the Bank to the Company, (ii)
investments in the stock or securities of the Company by the Bank, (iii) the
Bank's accepting the stock or securities of one of its affiliates from a
borrower as collateral for loans and (iv) the purchase of assets from the
Company by Bank. Further, under the BHCA, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any grant of credit, lease or sale of property or furnishing of
services.
Miscellaneous. Most bank holding companies are required to give the
Federal Reserve prior written notice of any purchase or redemption of their
outstanding equity securities if the gross consideration for the purchase or
redemption, when combined with the net consideration paid for all such purchases
or redemptions during the preceding 12 months, is equal to 10% or more of the
bank holding company's consolidated net worth. The Federal Reserve may
disapprove such a purchase or redemption if it determines that the proposal
constitutes an unsafe or unsound practice, would violate any law, regulation,
Federal Reserve order or directive or any condition imposed by, or written
agreement with, the Federal Reserve. The prior notice requirement does not
apply to certain "well-capitalized" bank holding companies that meet specified
criteria.
In November 1985, the Federal Reserve adopted its Policy Statement on Cash
Dividends Not Fully Covered by Earnings. The Policy Statement sets forth
various guidelines that the Federal Reserve believes that a bank holding company
should follow in establishing its dividend policy. In general, the Federal
Reserve stated that bank holding companies should not pay dividends except out
of current earnings and unless the prospective rate of earnings retention by the
holding company appears consistent with its capital needs, asset quality and
overall financial condition.
The Community Reinvestment Act requires federal bank regulatory agencies
to encourage financial institutions to meet the credit needs of low-and-
moderate-income borrowers in their local communities. An institution's size and
business strategy determines the type of examination that it will receive.
Large, retail-oriented institutions will be examined using a performance-based
lending, investment and service test. Small institutions will be examined using
a streamlined approach. All
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institutions may opt to be evaluated under a strategic plan formulated with
community input and pre-approved by the bank regulatory agency.
Community Reinvestment Act regulations provide for certain disclosure
obligations. Each institution must post a notice advising the public of its
right to comment to the institution and its regulator on the institution's
Community Reinvestment Act performance and to review the institution's Community
Reinvestment Act public file. Each lending institution must maintain for public
inspection a public file that includes a listing of branch locations and
services, a summary of lending activity, a map of its communities and any
written comments from the public on its performance in meeting community credit
needs. The Community Reinvestment Act requires public disclosure of a financial
institution's written Community Reinvestment Act evaluations. This promotes
enforcement of Community Reinvestment Act requirements by providing the public
with the status of a particular institution's community reinvestment record.
The recently enacted Gramm-Leach-Bliley Act makes various changes to CRA.
Among other changes, CRA agreements with private parties must be disclosed and
annual CRA reports must be made to a bank's primary federal regulator. A bank
holding company will not be permitted to become a financial holding company and
no new activities authorized under this Act may be commenced by a holding
company or by a bank financial subsidiary if any of its bank subsidiaries
received less than a "satisfactory" CRA rating in its latest CRA examination.
On November 12, 1999, the President signed the Gramm-Leach-Bliley Act into
law. The Act:
. allows bank holding companies meeting management, capital and CRA
standards to engage in a substantially broader range of nonbanking
activities than currently is permissible, including insurance
underwriting and making merchant banking investments in commercial and
financial companies;
. allows insurers and other financial services companies to acquire banks;
. removes various restrictions that currently apply to bank holding
company ownership of securities firms and mutual fund advisory
companies; and
. establishes the overall regulatory structure applicable to bank holding
companies that also engage in insurance and securities operations.
This part of the Act became effective on March 11, 2000.
The Act also modifies current law related to financial privacy and
community reinvestment. The new financial privacy provisions will generally
prohibit financial institutions from disclosing nonpublic personal financial
information to third parties unless customers have the opportunity to "opt out"
of the disclosure.
Georgia Law. The Company also is a bank holding company within the meaning
of the FICG, which provides without limitation that, without the prior approval
of the Georgia Department, it is
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unlawful (i) for any action to be taken that causes a company to become a bank
holding company, (ii) for any bank holding company to acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank, (iii) for
any bank holding company or subsidiary thereof, other than a bank, to acquire
all or substantially all of the assets of a bank, (iv) for any action to be
taken that causes a bank to become a subsidiary of a bank holding company or (v)
for any bank holding company to merge or consolidate with any other bank holding
company. It also is unlawful for any company to acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank in Georgia
unless 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 Georgia
Department for approval of such acquisition. One bank holding companies, such as
the Company, are prohibited from acquiring another bank until their initial bank
subsidiary has been incorporated for a period of at least two years.
Regulation of the Bank
General. The Bank is a commercial bank chartered under the laws of the
State of Georgia and its deposit accounts are insured up to applicable limits by
the Bank Insurance Fund (BIF) of the FDIC. The Bank is subject to the
regulation, examination and supervision of the Georgia Department and the FDIC.
Both the Georgia Department and the FDIC issue regulations and require the
filing of reports describing the activities and financial condition of the banks
under their jurisdiction. Each agency conducts periodic examinations to test
compliance with various regulatory requirements and generally supervises the
operation of such banks. This supervision and regulation are intended primarily
for the protection of depositors. As an FDIC-insured, state-chartered bank, the
Bank may not enter into certain transactions unless applicable regulatory tests
are met or it obtains the prior approval of the regulatory agencies. For
instance, the approval of the Georgia Department and the FDIC are required prior
to any merger or consolidation or the establishment of an office at which
banking business is conducted. The Bank also is regulated in certain respects
by the Federal Reserve.
Georgia Law. The Bank derives its lending and investment authority
primarily from the applicable provisions of the FICG and the rules and
regulations promulgated thereunder by the Georgia Department. Under these laws
and regulations, commercial banks, including the Bank, may invest in real estate
mortgages, commercial and consumer loans, certain types of securities, including
certain corporate debt and equity securities, asset backed securities, and
obligations of federal, state and local governments and agencies, and certain
other assets. A Georgia chartered bank's lending powers generally are subject
to certain restrictions, including limits on amounts loaned to one borrower.
Additionally, the exercise by an FDIC insured commercial bank of the lending and
investment powers of a commercial bank under the FICG may be limited by FDIC
regulations.
Georgia commercial banks may, with the approval of the Georgia Department,
merge or consolidate with another bank, trust company or other corporation as
long as the resulting institution is a bank or trust company engaged only in the
business of a bank or trust company. Additionally, a bank may sell, lease,
exchange or otherwise dispose of all or substantially all of its property and
assets with the approval of the Georgia Department.
The FICG prohibits the payment of dividends by a state chartered bank if
such bank is insolvent or would thereby be rendered insolvent, if such dividend
is contrary to restrictions contained in the bank's articles of incorporation,
if the dividend would be paid from other than retained earnings or if the bank
does not have the required amount of paid-in capital and appropriated retained
earnings. In
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addition, pursuant to regulations adopted by the Georgia Department, a Georgia-
chartered bank must have the approval of the Georgia Department to pay cash
dividends, unless at the time of such payment (i) the total classified assets at
the most recent examination of the bank do not exceed 80% of the bank's equity
capital and reserves as reflected by such examination; (ii) the aggregate amount
of dividends declared or anticipated to be declared in the calendar year does
not exceed 50% of the net profits, after taxes but before dividends, of the bank
for the previous calendar year; and (iii) the ratio of the bank's equity
capital, as defined, to adjusted total assets, as defined, is not less than 6%.
Under FICG, the Georgia Department may issue orders to a Georgia chartered
bank to submit to an investigation by the Georgia Department, to discontinue
unauthorized or unsafe practices or to keep prescribed books and accounts. If
the Georgia Department finds that any director or officer of any banking
organization has violated any law or duly enacted regulation, or has continued
unauthorized or unsafe practices in conducting the business of the banking
organization after being notified by the Georgia Department to discontinue such
practices, or has been indicted for any crime involving moral turpitude or
breach of trust, or has filed for bankruptcy protection from creditors, the
Georgia Department may remove such director or officer from office. No director
or officer of the Bank has been found by the Georgia Department to have engaged
in, or has been investigated by the Georgia Department with respect to, any of
such activities.
Insurance of Accounts
Deposits of the Bank are insured by the FDIC to a maximum of $100,000 for
each insured depositor through the Bank Insurance Fund. As an insurer, the FDIC
issues regulations, conducts examinations and generally supervises the
operations of its insured institutions (institutions insured by the FDIC
hereinafter are referred to as "insured institutions"). Any insured institution
which does not operate in accordance with or conform to FDIC regulations,
policies and directives may be sanctioned for non-compliance. For example,
proceedings may be instituted against an insured institution if the institution
or any director, officer or employee thereof engages in unsafe and unsound
practices, is operating in an unsafe or unsound condition, or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC. If
insurance of accounts is terminated by the FDIC, the deposits in the institution
will continue to be insured by the FDIC for a period of two years following the
date of termination. The FDIC requires an annual audit by independent
accountants and also periodically makes its own examinations of insured
institutions. The FDIC may revalue assets of an institution, based upon
appraisals, and require establishment of specific reserves in amounts equal to
the difference between such reevaluation and the book value of the assets.
The FDIC has adopted a risk-related deposit insurance system. Under the
risk-related insurance regulations, each insured depository institution is
assigned to one of three risk classifications: "well capitalized," "adequately
capitalized," or "under capitalized." Within each risk classification, there
are three subgroups. Each insured depository institution is assigned to one of
these subgroups within its risk classification based upon supervisory
evaluations submitted to the FDIC by the institution's primary federal
regulator. Depending upon a BIF member's risk classification and subgroup,
applicable regulations provide that its deposit insurance premium may be as low
as .04% of insured deposits or as high as .31% of insured deposits. The Bank
has been notified that, based on its risk classification and supervisory
subgroup, its BIF assessment rate is zero percent of insured deposits for the
period from January 1, to June 30, 2000. This is the most favorable assessment
rate applicable to any insured institution. However, the Deposit Insurance
Funds Act of 1996 (DIFA) requires that a Financing
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Corporation (FICO) assessment be paid by the Bank in 2000. The annual FICO
assessment rate for banks is presently .0212% of deposits. The Bank paid $10,248
in assessments, which was the minimum set by the FDIC for that period, during
the year ended December 31, 1999.
The FDIC has issued risk-based and leverage capital guidelines similar to
that issued by the Federal Reserve and discussed above. At December 31, 1999,
the Bank had Tier 1 capital of $10,388,000, or 8.13% of total average assets.
Certain provisions of the Federal Reserve Act, made applicable to the Bank
by Section 18(j) of the Federal Deposit Insurance Act (12 U.S.C. (S)1828(j)) and
administered with respect to the Bank by the FDIC, establish standards for the
terms of, limit the amount of and establish collateral requirements with respect
to any loans or extensions of credit to, and investments in, affiliates by the
Bank as well as set arms-length criteria for such transactions and for certain
other transactions (including payment by the Bank for services) between the Bank
and its affiliates. In addition, related provisions of the Federal Reserve Act
and the Federal Reserve regulations (also administered with respect to the Bank
by the FDIC) limit the amounts of, and establish required procedures and credit
standards with respect to, loans and other extensions of credit to officers,
directors and principal shareholders of the Bank and to related interests of
such persons.
The FDIC may impose sanctions on any insured bank that does not operate in
accordance with FDIC regulations, policies and directives. Proceedings may be
instituted against any insured bank or any director, officer or employee of the
bank that is believed by the FDIC to be engaged in unsafe or unsound practices,
including violation of applicable laws and regulations. The FDIC may revalue
assets of an institution, based upon appraisals, and may require the
establishment of specific reserves in amounts equal to the difference between
such revaluation and the book value of the assets. The FDIC also is empowered
to assess civil penalties against companies or individuals who violate certain
federal statutes, orders or regulations. In addition, the FDIC has the
authority to terminate insurance of accounts, after notice and hearing, upon a
finding by the FDIC that the insured institution is or has engaged in any unsafe
or unsound practice that has not been corrected, or is in an unsafe or unsound
condition to continue operations or has violated any applicable law, regulation,
rule or order of, or condition imposed by, the FDIC. The Bank does not know of
any past or current practice, condition or violation that might lead to
termination of its deposit insurance or to any proceeding by the FDIC against
the Bank or any of its directors, officers or employees.
Federal Reserve. Although the Bank is not a member of the Federal Reserve
System, it is subject to Federal Reserve regulations that require it to maintain
reserves against its transaction accounts (primarily checking accounts).
Because reserves generally must be maintained in cash or in non-interest bearing
accounts, the effect of the reserve requirements is to increase the Bank's cost
of funds. The Federal Reserve regulations currently require that average daily
reserves be maintained against transaction accounts in the amount of 3% of the
aggregate of such net transaction accounts up to $46.5 million, plus 10% of the
total in excess of $46.5 million.
Prompt Corrective Action. The Federal Deposit Insurance Act (FDIA), among
other things, requires the federal regulatory agencies to take "prompt
corrective action" if a depository institution does not meet minimum capital
requirements. The FDIA establishes five capital tiers: "well capitalized;"
"adequately capitalized;" "undercapitalized;" "significantly undercapitalized;"
and "critically undercapitalized." A depository institution's capital tier will
depend upon how its capital
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levels compare to various relevant capital measures and certain other factors,
as established by regulation.
The federal bank regulatory agencies have adopted regulations establishing
relevant capital measures and relevant capital levels applicable to FDIC-insured
banks. The relevant capital measures are the total capital ratio, tier 1
capital ratio and the leverage ratio. Under the regulations, a FDIC-insured
bank will be:
"well capitalized" if it has a total capital ratio of 10% or greater,
a tier 1 capital ratio of 6% or greater and a leverage ratio of 5% or
greater and is not subject to any order or written directive by the
appropriate regulatory authority to meet and maintain a specific
capital level for any capital measure;
"adequately capitalized" if it has a total capital ratio of 8% or
greater, a tier 1 capital ratio of 4% or greater and a leverage ratio
of 4% or greater (3% in certain circumstances) and is not "well
capitalized;"
"under capitalized" if it has a total capital ratio of less than 8%, a
tier 1 capital ratio of less than 4% or a leverage ratio of less than
4% (3% in certain circumstances);
"significantly undercapitalized" if it has a total capital ratio of
less than 6%, a tier 1 capital ratio of less than 3% or a leverage
ratio of less than 3%; and
"critically undercapitalized" if its tangible equity is equal to or
less than 2% of average quarterly tangible assets.
An institution may be downgraded to, or deemed to be in, a capital category
that is lower than is indicated by its capital ratios if it is determined to be
in an unsafe or unsound condition or if it receives an unsatisfactory
examination rating with respect to certain matters. As of December 31, 1999,
the Company and the Bank each had capital levels that qualify each as being
"well capitalized" under such regulations.
The FDIA generally prohibits a FDIC-insured bank from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the bank would thereafter be "undercapitalized."
"Undercapitalized" banks are subject to growth limitations and are required to
submit a capital restoration plan. The federal regulators may not accept a
capital plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the bank's capital.
In addition, for a capital restoration plan to be acceptable, the bank's parent
holding company must guarantee that the institution will comply with such
capital restoration plan. The aggregate liability of the parent holding company
is limited to the lesser of: (i) an amount equal to 5% of the bank's total
assets at the time it became "undercapitalized;" and (ii) the amount which is
necessary (or would have been necessary) to bring the institution into
compliance with all capital standards applicable with respect to such
institution as of the time it fails to comply with the plan. If a bank fails to
submit an acceptable plan, it is treated as if it is "significantly
undercapitalized."
"Significantly undercapitalized" insured banks may be subject to a number
of requirements and restrictions, including orders to sell sufficient voting
stock to become "adequately capitalized,"
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requirements to reduce total assets, and cessation of receipt of deposits from
correspondent banks. "Critically undercapitalized" institutions are subject to
the appointment of a receiver or conservator. A bank that is not "well
capitalized" is subject to certain limitations relating to so-called "brokered"
deposits.
Other Legislation
In September 1994, the federal Riegle-Neal Interstate Banking and Branching
Efficiency Act was enacted. The Act allows bank holding companies, beginning
one year following enactment of the legislation, to acquire existing banks
across state lines, regardless of state statutes. Beginning in June 1997, banks
were permitted to consolidate interstate subsidiaries into branches and merge
with a bank across state lines to the extent that the applicable states had not
"opted out of interstate branching" prior to the effectiveness of the branching
provisions. The Act also permits de novo branching to the extent that a
particular state opts into the de novo branching provisions. The Act provides a
concentration limitation with a nationwide limitation of 10% of total deposits
of insured depository institutions in the United States and 30% of total
deposits of insured depository institutions in a specific state.
The Riegle Community Development and Regulatory Improvement Act of 1994
also was enacted in September 1994, and provides for the creation of a community
development financial institutions fund to promote economic revitalization in
community development. Banks and savings institutions are allowed to
participate in such community development banks. The Act also contains
provisions designed to enhance small business capital formation and to enhance
disclosure with regard to high cost mortgages for the protection of consumers.
The Act also contains more than 50 regulatory relief provisions that apply to
banks and savings institutions including the coordination of examinations by
various federal agencies, coordination of frequency and types of reports
financial institutions are required to file and reduction of examinations for
well-capitalized institutions.
The Georgia legislature enacted legislation which, effective July 1, 1996,
allowed Georgia-based banks to branch into up to three counties in addition to
the county in which their main office is located. This same legislation
eliminated all branching restrictions, thereby permitting unrestricted state-
wide branching, effective July 1, 1998.
Regulation of CLC
As a consumer finance company, CLC is subject to regulation by the
Commissioner of Insurance of the State of Georgia, also known as the Georgia
Industrial Loan Commissioner (the Commissioner), pursuant to the Georgia
Industrial Loan Act (the GILA). CLC is required to file certain reports and
such additional information as the Commissioner may require pursuant to the
GILA, and is subject to periodic examinations of its books, accounts, and
records by the Commissioner's duly authorized representatives. Each office of
CLC is licensed by the Commissioner separately, and, if CLC wishes to move an
office within a county, written notice must be given to the Commissioner
supplying facts and circumstances showing how the removal to a new location will
promote the convenience and advantage of that community. Licenses must be
renewed on an annual basis. CLC may loan any sum of money not to exceed $3,000
for a period not to exceed 36 months and 15 days and may charge, contract for,
collect, and receive interest and fees on said loans, pursuant to the GILA.
As a subsidiary of the Company, CLC also is subject to examination by the
Federal Reserve
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pursuant to the BHCA and by the Georgia Department pursuant to the FICG. The
Federal Reserve and the Georgia Department also may make examinations of CLC.
ITEM 2. DESCRIPTION OF PROPERTY
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The Company and the Bank operate from a main office and five branch offices
in Paulding and Cobb Counties in Georgia. The main office, built in 1988 and
located at 3844 Atlanta Highway in Hiram, Georgia, contains approximately 16,000
square feet. The Bank owns the land and the building at this location. The
Company pays rent for the use the premises, equipment and furniture of the Bank.
Metroplex and CashTrans lease office space in Dallas, Georgia. CLC leases
office space in the Georgia cities of Woodstock, Rockmart, Rossville,
Gainesville, Dalton, Oakwood, Rome, Dahlonega, and two in Cartersville.
The Bank opened a full service branch office at 100 Hardee Street, Dallas,
Paulding County, Georgia in June 1991. The Bank leases the land and owns the
building at this location, which contains approximately 1,150 square feet and
includes three teller stations and two drive-in window teller stations. The
lease on this property has been extended until June 2002. In December 1991, the
Bank also opened a full service office located in the Kroger grocery store of
the Paulding Commons Shopping Center, 4215 Jimmy Lee Smith Parkway in Hiram,
Georgia. The Bank leases its office space in the grocery store and owns the
furniture, fixtures and equipment used in the Bank office. In April 1998, the
Company entered into a lease for the Bank's limited services facility at Barrett
Court in Kennesaw, Georgia which is located in the Town Center area of Cobb
County. In January 1999, the Bank opened a full service office at 3161 Cobb
Parkway, Suite 100, Kennesaw, Georgia which is located in the Butler Crossing
Shopping Center. The Bank leases its office space in the shopping center and
owns the furniture, fixtures, and equipment used in the Bank office. In January
2000, the Bank opened a full service office at 1690 Powder Springs Road SW,
Building 300 Suite A, Marietta, Georgia which is located in the Battle Ridge
Shopping Center. The Bank leases its office space in the shopping center and
owns the furniture, fixtures, and equipment used in the Bank office.
At December 31, 1999, the cost of office properties and equipment (less
allowances for depreciation and amortization) owned by the Company was
$3,994,220. Data processing services are provided by an outside service bureau.
The Company believes that its facilities are adequate and suitable for the
Company's current business and its anticipated business for the foreseeable
future.
The Company is unaware of any potential environmental liability that it may
incur in connection with any properties or other assets owned by it.
None of the properties owned by the Company or the Bank is subject to
encumbrances.
-32-
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
- --------------------------
There are no material legal proceedings to which the Company or the Bank is
a party or to which any of their properties is subject. The Bank and CLC are
periodically involved as a plaintiff or defendant in various legal actions in
the ordinary course of its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
No matters were submitted to a vote of shareholders of the Company during
the fourth quarter of the Company's fiscal year ended December 31, 1999.
PART II
-------
ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- --------------------------------------------------------------------
Information relating to the market for, holders of and dividends paid on
the Company's Common Stock is set forth under the caption "Selected Annual
Consolidated Financial Data" in the Company's 1999 Annual Report to
Stockholders. Such information is incorporated herein by reference.
The Company's ability to pay dividends is dependent on dividends paid by
the Bank, if any. Additionally, Georgia law imposes certain restrictions on the
payment of cash dividends by the Bank. See "Item 1. Business - Supervision and
Regulation."
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ------------------------------------------------------------------
Selected consolidated financial data for the Company for each of the five
fiscal years ending December 31, 1999, 1998, 1997, 1996, and 1995 are set forth
under the caption "Selected Annual Consolidated Financial Data" in the Company's
1999 Annual Report to Stockholders. Such information is incorporated herein by
reference. A discussion of the Company's financial condition and results of
operations at and for the dates and periods covered by the consolidated
financial statements of the Company is set forth in the Company's 1999 Annual
Report to Stockholders under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations." Such discussion is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
- -----------------------------
The following consolidated financial statements of the Company, together
with the Report of Independent Certified Public Accountants thereon, which are
set forth in the Company's 1999 Annual Report to Stockholders, are incorporated
herein by reference:
-33-
<PAGE>
Consolidated Balance Sheets as of December 31, 1999 and 1998
Consolidated Statements of Earnings for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Comprehensive Income for the years ended
December 31, 1999, 1998 and 1997
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------------------------------------------------------------------------
FINANCIAL DISCLOSURE
- --------------------
Neither the Company nor the Bank had any change in accountants or
disagreements with accountants on accounting and financial disclosure during the
two most recent fiscal years or subsequently.
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
- ----------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- -------------------------------------------------
Information relating to the Directors of the Company is set forth under the
caption "Proposal 1 - Election of Directors" on pages 4 through 8 of the Proxy
Statement for the Company's 2000 Annual Meeting of Shareholders (2000 Proxy
Statement). Such information is incorporated herein by reference. Information
relating to the executive officers of the Company is set forth under the caption
"Proposal 1 - Election of Directors - Officers" on page 9 of the 2000 Proxy
Statement. One Director of the Company failed to file on a timely basis a
report required by Section 16(a) of the Securities Exchange Act of 1934 during
the most recent fiscal year. Mr. Drummond failed to file in a timely manner the
report relating to his commencement as a Director of the Company. Other than as
described here, to the Company's knowledge, based solely on review of the copies
of such reports furnished to the Company or written representations that no
other reports were required, each person who, at any time during the year ended
December 31, 1999, was a Director, Executive Officer, or beneficial owner of
more than ten percent of the Company's Common Stock filed, on a timely basis,
all reports required to be filed by them, during such year, pursuant to Section
16(a) of the Securities Exchange Act of 1934.
-34-
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------
Information relating to executive compensation is set forth under the
caption "Proposal 1 - Election of Directors - Compensation of Directors" on page
9 of the 2000 Proxy Statement and under the caption "Proposal 1 - Election of
Directors - Executive Compensation" on pages 10 through 13 of the 2000 Proxy
Statement and under the caption "Proposal 1 - Election of Directors -
Transactions with Management" on page 12 of the 2000 Proxy Statement. Such
information is incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------
Information regarding ownership of the Company's $2.50 par value Common
Stock by certain persons is set forth under the captions "Voting - Principal
Stockholders" on page 2 of the 2000 Proxy Statement and "Proposal 1 - Election
of Directors - Nominees" on pages 4 through 8 of the 2000 Proxy Statement. Such
information is incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------
Information regarding certain transactions between the Company and
Directors, executive officers and certain shareholders, and their affiliates, is
set forth under the caption "Proposal 1 - Election of Directors - Transactions
with Management" on page 12 of the 2000 Proxy Statement. Such information is
incorporated herein by reference.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------
(a) Exhibits
The following exhibits are filed as a part of or incorporated by reference
in this report:
Exhibit No. Description
----------- -----------
2.1 Purchase Agreement dated May 1, 1999 between the Company and
Drummond Association Inc.
3.1* + Articles of Incorporation of the Company
-35-
<PAGE>
(Amendment to Articles of Incorporation filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999)
3.2 Bylaws of the Company
(filed as Exhibit 3.2 to the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1998)
4. The rights of security holders are defined in the Articles of
Incorporation and Bylaws provided in exhibit 3.1 and 3.2,
respectively.
10.1* 1988 Stock Option Plan and related specimen copy of option
10.2 + 1993 Employee Stock Option Plan
(Amended Plan filed as Exhibit 10.2 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999)
10.3 + 1993 Directors Stock Option Plan
(Amended Plan filed as Exhibit 10.3 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999)
10.5 Lease dated June 9, 1989 by and between First Baptist Church of
Dallas, Georgia and the Bank relating to lease of real property
(Filed as Exhibit 10.5 to the Company's Annual Report on Form 10-
k for the year ended December 31, 1992, as amended by lease
extension agreement dated and filed as Exhibit 10.8 to the
Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996)
10.6 License and Equipment Purchase Agreement dated as of July 27,
1991 by and between Bank South, National Association and
Community Trust Bank relating to branch in Paulding Commons
Kroger store
(Filed as Exhibit 10.6 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1992)
10.7 Lease dated May 25, 1995 by and between Brock Investments, Inc.,
of Hiram, Georgia and the Bank relating to lease of real property
(Filed as Exhibit 10.7 to the Company's Annual Report on Form 10-
K for the year ended December 31, 1995)
10.9 Loan and Stock Pledge Agreement dated November 14, 1998, between
the Company and The Bankers Bank
(Filed as Exhibit 2 to the Company's Current Report on Form 8-K
dated November 14, 1997)
10.10 + Employment Agreement dated January 1, 1998, between the Company
and Ronnie Austin
(Amended Agreement filed as Exhibit 10.10 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999)
-36-
<PAGE>
10.11 Employment Agreement dated July 1, 1999, between CLC and Danny
Drummond
(Filed as Exhibit 10.11 to the Company's Quarterly Report on Form
10-QSB for the quarter ended September 30, 1999)
10.12 + Executive Supplemental Retirement Plan - Executive Agreement
dated January 13, 2000 between the Bank and Ronnie Austin
(Filed as Exhibit 10.12 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.13 + Life Insurance Endorsement Method Split Dollar Plan Agreement
dated January 13, 2000 between the Bank and Ronnie Austin
(Filed as Exhibit 10.13 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.14 + Deferred Compensation Plan for Key Employees and Directors
(Filed as Exhibit 10.14 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.15 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and R. Alan Bullock
(Filed as Exhibit 10.15 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.16 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and Bobbie P. Cooper
(Filed as Exhibit 10.16 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.17 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and J. Calvin Earwood
(Filed as Exhibit 10.17 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.18 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and William A. Foster III
(Filed as Exhibit 10.18 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.19 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and Tommie R. Graham Jr.
(Filed as Exhibit 10.19 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.20 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and John C. Helms
-37-
<PAGE>
(Filed as Exhibit 10.20 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
13.+ 1999 Annual Report**
21.+ Subsidiaries
27.+ Financial Data Schedule (electronic filing only)
- ----------
*Incorporated herein by reference to the exhibit of the same number in the
Company's Registration Statement on Form S-4, as amended (No. 33-37601).
** Certain sections of the Company's 1999 Annual Report, as indicated in this
report, are incorporated herein by reference. Other than as noted herein, the
Company's 1999 Annual Report is furnished to the Commission solely for its
information and is not deemed to be "filed" with the Commission or subject to
the liabilities of Section 18 of the Securities Exchange Act of 1934.
+ Filed herewith.
(b) Reports on Form 8-K
One report on Form 8-K was filed by the Company with the Commission during
the quarter ended December 31, 1999 concerning a two-for-one stock dividend
which was paid on January 28, 2000 to shareholders of record on January 18,
2000.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
(Registrant)
Date: March 28, 2000 By: /s/Ronnie L. Austin
--------------------
Ronnie L. Austin
President and Chief Executive Officer
By: /s/Angel J. Byrd
----------------
Angel J. Byrd
Comptroller
(principal accounting officer)
-38-
<PAGE>
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities indicated on March 28, 2000.
Signature Title
--------- -----
/s/W. A. Foster III Chairman of the Board
- -------------------
W. A. Foster III
/s/Ronnie L. Austin President, Chief Executive Officer and
- ------------------- Director (principal executive officer)
Ronnie L. Austin
/s/George Berry Director
- ---------------
George Berry
/s/R. Alan Bullock Director
- ------------------
R. Alan Bullock
/s/Bobbie P. Cooper Director
- -------------------
Bobbie P. Cooper
/s/Danny Drummond Director
- -----------------
Danny Drummond
/s/J. Calvin Earwood Director
- --------------------
J. Calvin Earwood
/s/Tommie R. Graham Director
- -------------------
Tommie R. Graham
-39-
<PAGE>
INDEX OF EXHIBITS
-----------------
Exhibit No. Description
----------- -----------
3.1* + Articles of Incorporation of the Company
(Amendment to Articles of Incorporation filed as Exhibit 3.1 to
the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999)
10.2 + 1993 Employee Stock Option Plan
(Amended Plan filed as Exhibit 10.2 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999)
10.3 + 1993 Directors Stock Option Plan
(Amended Plan filed as Exhibit 10.3 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999)
10.10 + Employment Agreement dated January 1, 1998, between the Company
and Ronnie Austin
(Amended Agreement filed as Exhibit 10.10 to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999)
10.12 + Executive Supplemental Retirement Plan - Executive Agreement
dated January 13, 2000 between the Bank and Ronnie Austin
(Filed as Exhibit 10.12 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.13 + Life Insurance Endorsement Method Split Dollar Plan Agreement
dated January 13, 2000 between the Bank and Ronnie Austin
(Filed as Exhibit 10.13 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.14 + Deferred Compensation Plan for Key Employees and Directors
(Filed as Exhibit 10.14 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.15 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and R. Alan Bullock
(Filed as Exhibit 10.15 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.16 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and Bobbie P. Cooper
(Filed as Exhibit 10.16 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
-40-
<PAGE>
10.17 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and J. Calvin Earwood
(Filed as Exhibit 10.17 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.18 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and William A. Foster III
(Filed as Exhibit 10.18 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.19 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and Tommie R. Graham Jr.
(Filed as Exhibit 10.19 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
10.20 + Director's Delayed Compensation Plan Agreement dated October 26,
1999 between the Bank and John C. Helms
(Filed as Exhibit 10.20 to the Company's Annual Report on Form
10-KSB for the year ended December 31, 1999)
13.+ 1999 Annual Report**
21.+ Subsidiaries
27.+ Financial Data Schedule (electronic filing only)
- ----------
*Incorporated herein by reference to the exhibit of the same number in the
Company's Registration Statement on Form S-4, as amended (No. 33-37601).
** Certain sections of the Company's 1999 Annual Report, as indicated in this
report, are incorporated herein by reference. Other than as noted herein, the
Company's 1999 Annual Report is furnished to the Commission solely for its
information and is not deemed to be "filed" with the Commission or subject to
the liabilities of Section 18 of the Securities Exchange Act of 1934.
+ Filed herewith.
-41-
<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION OF
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Pursuant to O.C.G.A. (S)14-2-1006 of the Georgia Business Corporation Code,
Community Trust Financial Services Corporation, a Georgia corporation, hereby
submits the following Articles of Amendment:
I.
The name of the corporation is Community Trust Financial Services
Corporation.
II.
Article V of the Articles of Incorporation of Community Trust Financial
Services Corporation is amended to read as follows:
"The corporation shall have the authority to issue 10,000,000 shares
of common stock, having a par value of $2.50 per share."
All other provisions of the Articles of Incorporation shall remain in full
force and effect.
III.
This amendment was duly approved and adopted by the Board of Directors of
Community Trust Financial Services Corporation at a meeting duly called and
constituted on December 14, 1999. The amendment was adopted without shareholder
action because shareholder action is not required in accordance with the
provisions of (S)14-2-1002 of the Georgia Business Corporation Code.
IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
to be executed by its duly authorized officers as of the 14/th/ date of
December, 1999.
COMMUNITY TRUST FINANCIAL SERVICES
CORPORATION
(SEAL)
By: /s/ Ronnie L. Austin
-------------------------------
Ronnie L. Austin, President
Attest:
By: /s/ Angel J. Byrd
-----------------------------
Angel J. Byrd
Secretary
<PAGE>
EXHIBIT 10.2
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
1993 STOCK OPTION PLAN
Amended 6/15/99
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
1993 STOCK OPTION PLAN
<PAGE>
1. Purpose.
-------
(a) General Purpose. The purpose of this COMMUNITY TRUST FINANCIAL
---------------
SERVICES CORPORATION 1993 STOCK OPTION PLAN (the "Plan") is to further the
growth and development of Community Trust Financial Services Corporation, a
Georgia corporation (the "Company"), by encouraging key employees to obtain a
proprietary interest in the Company by owning its stock. The Company intends
that the Plan will provide such persons with an added incentive to continue in
the employ of the Company and its subsidiaries and will stimulate their efforts
in promoting the growth, efficiency and profitability of the Company. The
Company also intends that the Plan will afford the Company and its subsidiaries
a means of attracting to its service persons of outstanding quality.
(b) Tax Effects of Options. It is further intended that part of the
----------------------
Plan qualify as an incentive stock option plan, and that any option granted in
accordance with such portion of the Plan qualify as an incentive stock option
("ISO"), all within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"). The tax effects of any other stock option (a
"Non-ISO") granted hereunder should be determined under Section 83 of the Code.
Unless otherwise specified, the term "Options" shall refer to ISO's, Non-ISO's
and Reload Options (as described in Section 5(m) hereof) granted in connection
therewith.
2. Administration.
--------------
(a) General Administration. The Plan shall be administered and
----------------------
interpreted by the committee appointed by the Company's Board of Directors (the
"Committee"). Subject to the provisions of the Plan, the Committee shall have
the authority and sole discretion to determine and designate, from time to time,
those persons eligible for a grant of Options under the Plan, those persons to
whom Options are to be granted, and the purchase price (if any) of the shares
covered by any Options granted, the time or times at which Options shall be
granted, the manner in and conditions under which Options are exercisable
(including, without limitation, any limitations or restrictions thereon). In
making such determinations, the Committee may take into account the nature of
the services rendered by the respective persons to whom Options may be granted,
their present and potential contributions to the Company's success and such
other factors as the Committee, in its sole discretion, shall deem relevant.
Subject to the express provisions of the Plan, the Committee also shall have
authority to interpret the Plan, to prescribe, amend and rescind rules and
regulations relating to it, to determine the terms and provisions of the
instruments by which Options shall be evidenced (which shall not be inconsistent
with the terms of the Plan), and to make all other determinations necessary or
advisable for the administration of the Plan, all of which determinations shall
be final, binding and conclusive.
(b) Appointments. The Board of Directors shall appoint the Committee
------------
from among its members to serve at the pleasure of the Board. The Committee may
consist of the full Board or of two or more members of the Board. The Board may
remove members from, or add members to, the Committee and shall fill all
vacancies thereon.
(c) Organization. The Committee may select one of its members as its
------------
chairman and shall hold its meetings at such times and at such places as it
shall deem advisable. A majority of the Committee shall constitute a quorum, and
such majority shall determine its actions. The Committee shall keep minutes of
its proceedings and shall report the same to the Board of Directors at the
meeting next succeeding.
<PAGE>
(d) Indemnification. In addition to such other rights of
---------------
indemnification as they have as directors or as members of the Committee, the
members of the Committee shall be indemnified by the Company against reasonable
expenses (including, without limitation, attorneys' fees) actually and
necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal, to which they or any of them may
be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Options granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
to the extent required by and in the manner provided by the Bylaws of the
Company relating to indemnification of directors) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member or members did not act in good faith and
in a manner he or they reasonably believed to be in or not opposed to the best
interest of the Company.
3. Stock.
-----
The stock subject to the Options and other provisions of the Plan
shall be authorized but unissued or reacquired shares of the $2.50 par value
common stock of the Company (the "Common Stock"). Subject to readjustment in
accordance with the provisions of Section 6, the total number of shares of
Common Stock for which Options may be granted to persons participating in the
Plan shall not exceed in the aggregate 150,000 shares of Common Stock.
Notwithstanding the foregoing, shares of Common Stock allocable to the
unexercised portion of any expired or terminated Option again may become subject
to Options under the Plan.
4. Eligibility to Receive Options; Type of Options.
-----------------------------------------------
(a) Key Employees. The persons eligible to receive Options hereunder
-------------
shall be key employees of the Company and its parent or subsidiary corporations
(and non-corporate entities). ("Parent" and "Subsidiaries" or "Subsidiary"). The
Committee from time to time may select such employees to whom Options are to be
offered and granted hereunder; such selected persons hereinafter are referred to
individually as "Key Employee" and collectively as "Key Employees," and any Key
Employees to whom Options are offered and granted hereunder hereinafter are
referred to individually as "Optionee" and collectively as "Optionees."
(b) Grants. The Committee may grant, at any time, new Options to a
------
Key Employee who previously has received Options, whether such Options include
prior Options that still are outstanding, previously have been exercised in
whole or in part, have expired or are canceled in connection with the issuance
of new Options.
(c) Limitation on Exercisability. Notwithstanding anything herein to
----------------------------
the contrary, the aggregate fair market value of ISO's and any other incentive
stock options which are granted to any employee under the Plan or any other
stock option plan adopted by the Company, and its Parent or Subsidiaries, that
are first exercisable in any one calendar year shall not exceed $100,000. As of
the date any ISO or other incentive stock option is granted, the
-2-
<PAGE>
Committee shall determine its fair market value (for purposes of this paragraph)
in accordance with the terms of Section 5 of the Plan. The Committee shall
interpret and administer the limitations set forth in this paragraph in
accordance with Section 422(d) of the Code.
5. Terms and Conditions of Options.
-------------------------------
Options may be granted to Optionees from time to time and at such
times as may be authorized by the Committee. Subject to the provisions
hereinafter set forth, each Option granted under the Plan shall be designated
either as an ISO or a Non-ISO. In its authorization of the granting of an Option
hereunder, the Committee shall specify the name of the Optionee, the number of
shares of stock subject to such Option and whether such Option is an ISO or a
Non-ISO. The Committee then shall prepare a written agreement, executed and
dated by the Company, evidencing such Option (the "Option Agreement") and
setting forth the terms and conditions of such Option; provided, an Option
Agreement evidencing both an ISO and a Non-ISO shall identify clearly the status
and terms of each Option. The Committee shall present such Option Agreement to
the Optionee. Upon execution of such Option Agreement by the Optionee, such
Option shall be deemed to have been granted effective as of the date of grant
specified in subsection (c)(i) hereof. The failure of the Optionee to execute
the Option Agreement within 30 days after the date of the receipt of same shall
render the Option Agreement and the underlying Option null and void ab initio.
-- ------
Option Agreements and the Options granted thereby shall comply with and be
subject to the following terms and conditions:
(a) Optionee and Number of Shares. Each Option Agreement shall state
-----------------------------
the name of the Optionee and the total number of shares of the Common Stock to
which it pertains.
(b) Vesting.
-------
(i) Each Option shall first become exercisable (that is, vested)
with respect to such portions of the shares subject to such Option as are
specified in the schedule set forth hereinbelow; provided, if an Optionee
ceases to be an employee of the Company and its Subsidiaries, his right to
all future vesting shall cease immediately.
(A) Commencing as of the first anniversary of the date the
Option is granted, the Optionee shall have the right to exercise the
Option with respect to, and to hereby purchase, 33 percent of the
shares subject to such Option. Prior to said date, the Option shall be
unexercisable in its entirety.
(B) Commencing as of the second anniversary of the date the
Option is granted, the Optionee shall have the right to exercise the
Option with respect to, and to thereby purchase, an additional 33
percent of the shares subject to the Option.
(C) Commencing as of the third anniversary of the date the
Option is granted, the Optionee shall have the right to exercise the
Option with respect to, and to thereby purchase, the remainder of the
shares subject to such Option.
-3-
<PAGE>
(ii) The Option Agreement and the Optionee's right as to vested
stock options shall not impose upon the Company and its Subsidiaries any
obligation to retain the Optionee as an employee for any period."
(iii) Notwithstanding the above, all Options shall become
immediately exercisable for 100 percent of the number of shares subject to
the Options upon a Change in Control (as defined in Section 7 hereof).
(c) Option Price.
------------
(i) The purchase price of the shares of Common Stock underlying
each Option (the "Option Price") shall be determined by the Committee,
which determination shall be final, binding and conclusive; provided, in no
event shall the Option Price of any ISO be less than 100 percent (110
percent in the case of ISO's of Optionees who own more than 10 percent of
the voting power of all classes of stock of the Company, a parent
corporation (within the meaning of Section 424(e) of the Code) of the
Company (a "Parent"), or a Subsidiary) of the fair market value of the
Common Stock on the date the Option is granted. Upon execution of an Option
Agreement by both the Company and Optionee, the date as of which the
Committee granted the Option shall be considered the date on which such
Option is granted. Notwithstanding the foregoing, for purposes of
calculating the holding period described in Sections 5(h) and (k), the
effective date of the grant of any Option granted prior to the approval of
the Plan by the shareholders of the Company in accordance with Section 9 of
the Plan shall be the date of such approval.
(ii) If the Common Stock subject to the Plan is registered on a
national securities exchange (as such term is defined by the 1934 Act or is
regularly traded in the over-the-counter market on the date of
determination, the fair market value per share shall be the closing price
of a share of the Common Stock on said national securities exchange or
over-the-counter market on the date of grant of the Option. If shares are
publicly traded on a national securities exchange or the over-the-counter
market but no shares of the Stock are traded on that date (or if records of
such sales are unavailable or burdensome to obtain) but there were shares
traded on dates within a reasonable period both before and after such date,
the fair market value shall be the average of the closing prices of the
Common Stock on the nearest date before and the nearest date after the date
of determination. If the Common Stock is traded both on a national
securities exchange and in the over-the-counter market, the closing price
shall be determined by the closing price on the national securities
exchange, unless transactions on such exchange and in the over-the-counter
market are jointly reported on a consolidated reporting system in which
case the closing price shall be determined by reference to such
consolidated reporting system. If the Common Stock is not listed for
trading on a national securities exchange and is not regularly traded in
the over-the-counter market, then the Committee shall determine the fair
market value of the Common Stock from all relevant available facts which
may include opinions of independent experts as to value and may take into
account any recent sales and purchases of such Common Stock to the extent
they are
-4-
<PAGE>
representative.
(d) Terms of Options. Terms of Options granted under the Plan shall
----------------
commence on the date of grant and shall expire on such date as the Committee may
determine for each Option; provided, in no event shall any Option be exercisable
after 10 years (5 years in the case of Options granted to Optionees who own more
than 10 percent of the voting power of all classes of stock of the Company, a
Parent or a Subsidiary) from the date the Option is granted. No Option shall be
granted hereunder after 10 years from the earlier of the date the Plan is
approved by the shareholders or is adopted by the Board of Directors.
(e) ISO's Converted to Non-ISO's. In the event any part or all of an
----------------------------
ISO of an incentive stock option, then such ISO shall be split into an ISO and
Non-ISO so that the portion of the Option, if any, that still qualifies as an
incentive stock option shall remain an ISO, and the portion that does not
qualify as an incentive stock option shall become a Non-ISO. Such split of an
ISO into an ISO portion and a Non-ISO portion shall be evidenced by one or more
Option Agreements, as long as each Option is identified clearly as to its status
as an ISO or Non-ISO.
(f) Terms of Exercise. The exercise of an Option may be for less than
-----------------
the full number of shares of Common Stock subject to such Option, but such
exercise shall not be made for less than the greater of (A) 100 shares or (B)
the total remaining shares subject to the Option. Subject to the other
restrictions on exercise set forth herein, the unexercised portion of an Option
may be exercised at a later date by the Optionee.
(g) Method of Exercise. All Options granted hereunder shall be
------------------
exercised by written notice directed to the Secretary of the Company at its
principal place of business or to such other person as the Committee may direct.
Each notice of exercise shall identify the Option which the Optionee is
exercising (in whole or in part) and shall be accompanied by payment of the
Option Price for the number of shares specified in such notice and by any
documents required by Section 8(a). The Company shall make delivery of such
shares within a reasonable period of time; provided, if any law or regulation
requires the Company to take any action (including, but not limited to, the
filing of a registration statement under the 1933 Act and causing such
registration statement to become effective) with respect to the shares specified
in such notice before the issuance thereof, then the date of delivery of such
shares shall be extended for the period necessary to take such action.
(h) Medium and Time of Payment.
--------------------------
(i) The Option Price shall be payable upon the exercise of the
Option in an amount equal to the number of shares then being purchased
times the per share Option Price. Payment, at the election of the Optionee
[or his successors as provided in Section 5(i)(iii)], shall be (A) in cash;
(B) by delivery to the Company of a certificate or certificates for shares
of the Common Stock duly endorsed for transfer to the Company
-5-
<PAGE>
with signature guaranteed by a member firm of a national stock exchange or
by a national or state bank or a federally chartered thrift institution (or
guaranteed or notarized in such other manner as the Committee may require);
or (C) by a combination of (A) and (B).
(ii) If all or part of the Option Price is paid by delivery of
shares of the Common Stock, the following conditions shall apply:
(A) Such shares shall be valued on the basis of the fair
market value of the Common Stock on the date of exercise. Fair market
value shall be determined in the manner provided in Section 5(c)(ii)
(dealing with determining Option Price);
(B) If the shares of Common Stock used to pay the Option
Price were acquired through an exercise of Options, Optionee must have
held such shares of Common Stock for at least 6 months from the date
of acquisition."
(C) The value of such Common Stock shall be less than or
equal to the total Option Price payment. If the Optionee delivers
Common Stock with a value that is less than the total Option Price,
then such Optionee shall pay the balance of the total Option Price in
cash.
(iii) In addition to the payment of the purchase price of the
shares then being purchased, an Optionee also shall pay in cash (or have
withheld from his normal pay) an amount equal to the amount, if any, which
the Company at the time of exercise is required to withhold under the
income tax withholding provisions of the Code and of the income tax laws of
the state of the Optionee's residence.
(i) Effect of Termination of Employment or Death. Except as provided
--------------------------------------------
in parts (i), (ii) and (iii) of this subsection, no Option shall be exercisable
unless the Optionee thereof shall have been an employee of the Company and/or a
Subsidiary from the date of the granting of the Option until the date of
exercise; provided, the Committee, in its sole discretion, may waive the
application of this Section 5(i) with respect to any Non-ISO's granted hereunder
and, instead, may provide a different expiration date or dates in a Non-ISO
Option Agreement.
-6-
<PAGE>
(i) In the event an Optionee ceases to be an employee of the
Company and its Subsidiaries for any reason other than death or disability,
any Option or unexercised portion thereof granted to him shall terminate on
and shall not be exercisable after the earliest to occur of (a) the
expiration date of the Option, (b) 3 months after termination of
employment, or (c) the date on which the Company gives notice to such
Optionee of termination of employment if employment is terminated by the
Company because of an act or acts by an Optionee involving fraud,
dishonesty, theft, embezzlement or similar act (an Optionee's resignation
in anticipation of termination of employment by the Company because of an
act or acts of the type listed in this sentence ("cause") shall constitute
a notice of termination by the Company); provided, the Committee may
provide in the Option Agreement that such Option or any unexercised portion
thereof shall terminate sooner. Notwithstanding the foregoing, in the event
that an Optionee's employment terminates for a reason other than death or
disability (as provided in the preceding sentence) at any time after a
Change in Control (as defined in Section 7 hereof), the term of all Options
of that Optionee shall be extended through the 3-month period immediately
following the date of such termination; provided, this extension shall
apply to ISO's only to the extent it does not cause the term of such ISO's
to exceed the maximum term permitted under Code Section 422 or does not
cause such ISO's to lose their status as incentive stock options. Prior to
the earlier of the dates specified in the first sentence of this Section
(5)(i)(i), the Option shall be exercisable only in accordance with its
terms and only for the number of shares exercisable on the date of
termination of employment. The question of whether an authorized leave of
absence or absence for military or government service or for any other
reason shall constitute a termination of employment for purposes of the
Plan shall be determined by the Committee, which determination shall be
final and conclusive.
(ii) Upon the termination of an Optionee's employment due to
disability, as determined by the Committee in its sole discretion, any
Option or unexercised portion thereof granted to him which is otherwise
exercisable shall terminate on and shall not be exercisable after the
earlier to occur of (a) the expiration date of such Option, or (b) 1 year
after the date on which such Optionee ceases to be an employee of the
Company and its Subsidiaries; provided, the Committee may provide in the
Option Agreement that such Option or any unexercised portion thereof shall
terminate sooner. Prior to the earlier of such date, such Option shall be
exercisable only in accordance with its terms and only for the number of
shares exercisable on the date such Optionee's employment ceases due to
disability.
-7-
<PAGE>
(iii) In the event of the death of the Optionee (A) while he is
an employee of the Company or a Subsidiary, (B) within 3 months after the
date on which such Optionee's employment terminated (for a reason other
than cause) as provided in Section (5)(i)(i), or (C) within 1 year after
the date on which such Optionee's employment terminated due to his
disability as provided in Section 5(i)(ii), any Option or unexercised
portion thereof granted to him may be exercised by his personal
representatives, heirs or legatees at any time prior to the expiration of 1
year from the date of death of such Optionee, but in no event later than
the date of expiration of the option period; provided, the Committee may
provide in the Option Agreement that such Option or any unexercised portion
thereof shall terminate sooner. Such exercise shall be effected pursuant to
the terms of this Section 5 as if such personal representatives, heirs or
legatees are the named Optionee.
(j) Restrictions on Transfer and Exercise of Options. No Option shall
------------------------------------------------
be assignable or transferable by the Optionee except by will or by the laws of
descent and distribution; and, during the lifetime of an Optionee, the Option
shall be exercisable only by him.
(k) Holding Period. No Option granted hereunder may be exercised
--------------
within the 6-month period immediately following the date of grant (as described
in Section 5(c)(i) hereof).
(l) Rights as a Shareholder. An Optionee shall have no rights as a
-----------------------
shareholder with respect to shares covered by his Option until date of the
issuance of the shares to him and only after the Option Price of such shares is
fully paid. Unless specified in Section 6, no adjustment will be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
(m) Reload Options. All Options shall be accompanied by a "Reload
--------------
Option." A Reload Option shall be an Option that is granted (i) to an Optionee
who pays for exercise of all or part of an Option with shares of the Common
Stock pursuant to subsection 5(h) hereof, (ii) for the same number of shares as
is exchanged in payment for the exercise of such Option; (iii) as of the date of
such payment, and (iv) subject to all of the same terms and conditions as such
Option; provided, the Option Price for shares subject to the Reload Option shall
be determined pursuant to Section 5(c) hereof on the basis of the fair market
value of such shares on the date the Reload Option is granted. In addition, an
Optionee who pays for exercise of a Reload Option with shares of the Common
Stock is entitled to a successive Reload Option. In no event shall the term of
any Reload Option extend beyond the original term of the Option with respect to
which such Reload Option was granted.
(n) Miscellaneous Provisions. The Option Agreements authorized under
------------------------
the Plan shall contain such other provisions, including, without limitation,
restrictions upon the exercise of the Option as the Committee shall deem
advisable. In the event of any conflict between the provisions of an Option
Agreement and the Plan, the Plan shall control.
(o) No Obligation to Exercise Option. The granting of an Option shall
--------------------------------
impose no obligation upon the Optionee to exercise such Option.
-8-
<PAGE>
6. Adjustments Upon Changes in Capitalization.
------------------------------------------
(a) Recapitalization. In the event that the outstanding shares of the
----------------
Common Stock of the Company are hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of the Common Stock, the
following rules shall apply:
(i) The Committee shall make an appropriate adjustment in the
number and kind of shares available for the granting of Options under the
Plan.
(ii) The Committee also shall make an appropriate adjustment in
the number and kind of shares (A) as to which outstanding Options, or
portions thereof then unexercised, shall be exercisable; any such
adjustment in any outstanding Options shall be made without change in the
total price applicable to the unexercised portion of such Option and with a
corresponding adjustment in the Option Price per share. No fractional
shares shall be issued or optioned in making the foregoing adjustments, and
the number of shares available under the Plan or the number of shares
subject to any outstanding Options shall be the next lower number of
shares, rounding all fractions downward.
(iii) Any adjustment to or assumption of ISO's under this
subsection (a) shall be made in accordance with Code Section 424(a) and the
regulations promulgated thereunder so as to preserve the status of such
ISO's as incentive stock options under Code Section 422.
(iv) If any rights or warrants to subscribe for additional
shares are given pro rata to holders of outstanding shares of the class or
classes of stock then set aside for the Plan, each Optionee shall be
entitled to the same rights or warrants on the same basis as holders of the
outstanding shares with respect to such portion of his Option as is
exercised on or prior to the record date for determining shareholders
entitled to receive or exercise such rights or warrants.
(b) Reorganization. Subject to any required action by the
--------------
shareholders, if the Company shall be a party to any reorganization involving
merger, consolidation, acquisition of the stock or acquisition of the assets of
the Company which does not constitute a Change in Control (as defined in Section
7 hereof), the Committee, in its discretion, may declare that:
(i) any or all outstanding Options granted hereunder shall
become immediately nonforfeitable and exercisable (to the extent permitted
under federal or state securities laws);
(ii) any Option granted but not yet exercised shall pertain to
and apply, with appropriate adjustment as determined by the Committee, to
the securities of the resulting corporation to which a holder of the number
of shares of the Common Stock subject to such Options would have been
entitled; and/or
-9-
<PAGE>
(iii) any or all Options granted hereunder are to become
immediately nonforfeitable and exercisable (to the extent permitted under
federal or state securities laws) and are to be terminated after giving at
least 30 days' notice to the Key Employees to whom such Options have been
granted.
(c) Dissolution and Liquidation. If the Board adopts a plan of
---------------------------
dissolution and liquidation that is approved by the shareholders of the Company,
the Committee shall give each Optionee notice of such event at least 10 days
prior to its effective date, and the rights of all Optionees shall become
immediately nonforfeitable and exercisable (to the extent permitted under
federal or state securities laws).
(d) Limits on Adjustments. Any issuance by the Company of stock of
---------------------
any class, or securities convertible into shares of stock of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of the Common Stock subject to any Option, except
as specifically provided otherwise in this Section 6. The grant of Options
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, consolidate or dissolve, or to
liquidate, sell or transfer all or any part of its business or assets. All
adjustments the Committee makes under this Section 6 shall be conclusive.
7. Change in Control.
-----------------
(a) Definition of Change in Control. For purposes of the Plan, a
-------------------------------
"Change in Control" shall mean the occurrence of any one of the events
described in this Section 7(a). For purposes of this Section 7, the terms
used in this Section with an initial capital letter shall have the meanings
set forth in Section 7(b) unless otherwise defined in the Plan.
(i) The acquisition by a Person (including Affiliates and
Associates of such Person, but excluding the Company, any Subsidiary of the
Company, or any employee benefit plan of the Company or of any Subsidiary
of the Company) of a sufficient number of shares of the Common Stock, or
securities convertible into the Common Stock, and whether through direct
acquisition of shares or by merger, consolidation, share exchange,
reclassification of securities, or recapitalization of or involving the
Company or any Subsidiary of the Company, to constitute the Person the
actual or beneficial owner of 20 percent or more of the Common Stock, but
only if such acquisition occurs without approval or ratification by a
majority of the members of the Board;
(ii) Any sale, lease, transfer, exchange, mortgage, pledge or
other disposition, in one transaction or a series of transactions, of all
or substantially all of the assets of the Company or of any Subsidiary of
the Company to a Person described in subsection (i) above, but only if such
transaction occurs without approval or ratification by a majority of the
members of the Board; or
-10-
<PAGE>
(iii) During any fiscal year of the Company, individuals who at
the beginning of such year constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period has been
approved in advance by a majority of the directors in office at the
beginning of the fiscal year.
(b) The following definitions shall apply in determining when a
Change in Control has occurred:
(i) "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the 1934 Act as in
effect on the effective date of the Plan.
(ii) "Associate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the 1934 Act.
(iii) "Person" shall mean any individual, organization,
corporation, partnership or other entity.
(iv) "Subsidiary" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the 1934 Act.
8. Employee's Agreement and Securities Registration.
------------------------------------------------
(a) Agreement. If, in the opinion of counsel for the Company, such
---------
action is necessary or desirable, no Options shall be granted to any Key
Employee, unless, at the time of grant, such Key Employee (i) represents and
warrants that he will acquire the stock for investment only and not for purposes
of resale or distribution, and (ii) makes such further representations and
warranties as are deemed necessary or desirable by counsel to the Company with
regard to holding and resale of the stock. If at the time of the exercise of any
Option, it is necessary or desirable, in the opinion of counsel for the Company,
in order to comply with any applicable laws or regulations relating to the sale
of securities, that the Key Employee represent and warrant that he is purchasing
or acquiring the Common Stock for investment and not with any present intention
to resell or distribute the same or make other and further representations and
warranties with regard to the holding and resale of such shares, the Key
Employee shall, upon the request of the Committee, execute and deliver to the
Company an agreement or affidavit to such effect. Should the Committee have
reasonable cause to believe that such Key Employee did not execute such
agreement in good faith, the Company shall not be bound by the exercise of the
Option. All certificates issued pursuant to the Plan shall be marked with the
following restrictive legend or similar legend, if such marking, in the opinion
of counsel to the Company, is necessary or desirable:
-11-
<PAGE>
These shares are held by an "affiliate" of the Company (as such term is
defined in Rule 144 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "1933 Act")).
Accordingly, these shares may not be sold, hypothecated, pledged or
otherwise transferred, except (i) pursuant to an effective registration
statement under the 1933 Act and any applicable securities laws or
regulations of any state (the "State Securities Acts") with respect to such
shares, (ii) in accordance with said Rule 144, or (iii) upon the issuance
to the Company of a favorable opinion of counsel or the submission to the
Company of such other evidence as may be satisfactory to the Company that
such proposed sale, assignment, encumbrance or other transfer will not be
in violation of the 1933 Act or any applicable State Securities Acts or any
rules or regulations thereunder. Any attempted transfer of the certificate
representing these shares which is in violation of the preceding
restrictions will not be recognized by the Company, nor will any transferee
of such shares be recognized as the owner thereof by the Company.
If the Common Stock is held by a Key Employee who is not an affiliate, as that
term is defined in Rule 144 of the 1933 Act, or who ceases to be an affiliate,
the Committee, in its discretion, may dispense with or authorize the removal of
the restrictive legend set forth above.
(b) In the event that the Company in its sole discretion shall deem
it necessary or advisable to register, under the 1933 Act or any state
securities acts, any shares with respect to which Options have been granted
hereunder, then the Company shall take such action at its own expense before
delivery of the certificates representing such shares to a Key Employee. In the
event the shares of Common Stock of the Company shall be listed on any national
securities exchange or on the over-the-counter market at the time of the
exercise of an Option, the Company shall make prompt application for the listing
of the shares of Common Stock to be issued on such stock exchange of such
shares, at the sole expense of the Company.
9. Effective Date; Amendment and Termination of the Plan.
-----------------------------------------------------
(a) Effective Date. The Plan shall be effective as of January 1,
--------------
1993, and no Options shall be granted hereunder prior to said date; provided,
adoption of the Plan shall be approved by the shareholders of the Company at the
earlier of (i) the annual meeting of the shareholders of the Company which
immediately follows the date of the first grant or award of Options hereunder,
or (ii) 12 months after the adoption of the Plan by the Board. Shareholder
approval shall be made by a majority of the votes cast at a duly held meeting at
which a quorum representing a majority of all outstanding voting stock is,
either in person or by proxy, present and voting on the Plan. Failure to obtain
such approval shall render the Plan and any Options granted hereunder null and
void ab initio.
-- ------
-12-
<PAGE>
(b) Amendment and Termination. In the event the Board shall determine
-------------------------
that a portion of the Plan does not qualify as an "Incentive Stock Option Plan"
pursuant to Code Section 422 or that the Plan is not in the best interest of the
Company or its shareholders for any reason, the Board shall have the power to
add to, amend or repeal any of the provisions of the Plan, to suspend the
operation of the entire Plan or any of its provisions for any period or periods
or to terminate the Plan in whole or in part. In the event of any such action,
the Committee shall prepare written procedures which, when approved by the
Board, shall govern the administration of the Plan resulting from such addition,
amendment, repeal, suspension or termination. Notwithstanding the above
provisions, no such addition, amendment, repeal, suspension or termination shall
adversely affect, in any way, the rights of the Key Employees who have
outstanding Options without the consent of such Key Employees, nor may any such
change in the Plan be made without the prior approval of the shareholders of the
Company if (i) such change would cause the applicable portions of the Plan to
fail to qualify as an "incentive stock option plan" pursuant to Code Section
422, or (ii) such shareholder approval is required under Code Section 422, Rule
16b-3, or any other applicable law or regulation. Shareholder approval shall be
made by a majority of the votes cast at a duly held meeting at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting at the meeting.
10. Application of Funds.
--------------------
The proceeds received by the Company from the sale of the Common Stock
subject to the Options granted hereunder will be used for general corporate
purposes.
11. Notices.
-------
All notices or other communications by a Key Employee to the Committee
pursuant to or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Committee at the location, or
by the person, designated by the Committee for the receipt thereof.
12. Term of Plan.
------------
Subject to the terms of Section 9(b), the Plan shall terminate upon
the later of (i) the complete exercise or lapse of the last outstanding Option,
or (ii) the last date upon which Options may be granted hereunder.
-13-
<PAGE>
EXHIBIT 10.3
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
1993 DIRECTORS STOCK OPTION PLAN
Amended 6/15/99
<PAGE>
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
1993 DIRECTORS STOCK OPTION PLAN
1. Purpose.
-------
The purpose of the Community Trust Financial Services Corporation 1993
Directors Stock Option Plan (the "Plan") is to further the growth and
development of Community Trust Financial Services Corporation (the "Company")
and its subsidiaries (collectively the Company and its subsidiaries shall be
referred to as the "Controlled Group"), by encouraging directors who are not
otherwise employees of the Controlled Group to obtain a proprietary interest in
the Company by owning its stock. The Company intends that the Plan provide such
persons with an added incentive to continue to serve as directors of the
Controlled Group and will stimulate their efforts in promoting the growth,
efficiency and profitability of the Controlled Group. The Company also intends
that the Plan will afford the Controlled Group a means of attracting to service
directors of outstanding quality. Unless otherwise specified, the term "Options"
shall refer both to non-qualified stock options and to non-qualified Reload
Options (as described in Section 5(l) hereof) granted in connection therewith."
2. Administration.
--------------
(a) General Administration. The Plan shall be administered and
----------------------
interpreted by a committee appointed by the Company's Board of Directors (the
"Committee"). Subject to the express provisions of the Plan, the Committee also
shall have authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, to determine the terms and provisions of
the instruments by which Options shall be evidenced (which shall not be
inconsistent with the terms of the Plan), and to make all other determinations
necessary or advisable for the administration of the Plan, all of which
determinations shall be final, binding and conclusive.
(b) Appointment. The Board of Directors shall appoint the Committee
-----------
from among its members to serve at the pleasure of the Board. The Board from
time to time may remove members from, or add members to, the Committee and shall
fill all vacancies thereon. The Committee shall be composed of two or more
directors.
(c) Organization. The Committee may select one of its members as its
------------
chairman and shall hold its meetings at such times and at such places as it
shall deem advisable. A majority of the Committee shall constitute a quorum, and
such majority shall determine its actions. The Committee shall keep minutes of
its proceedings and shall report the same to the Board of Directors at the
meeting next succeeding.
(d) Indemnification. In addition to such other rights of
---------------
indemnification as they have as directors or as members of the Committee, the
members of the Committee, to the extent permitted by applicable law, shall be
indemnified by the Company against reasonable expenses (including, without
limitation, attorneys' fees) actually and necessarily incurred in connection
with the defense of any action, suit or proceeding, or in connection with any
appeal, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Options
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved to the extent required by and in the
manner provided by applicable law and/or the Bylaws of the Company relating to
-2-
<PAGE>
indemnification of directors) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such Committee
member or members did not act in good faith and in a manner he or they
reasonably believed to be in or not opposed to the best interest of the Company.
3. Stock.
-----
The stock subject to the Options and other provisions of the Plan
shall be authorized but unissued or reacquired shares of the $2.50 par value
common stock of the Company (the "Common Stock"). Subject to readjustment in
accordance with the provisions of Section 6, the total number of shares of the
Common Stock for which Options may be granted to persons participating in the
Plan shall not exceed in the aggregate 150,000 shares. Notwithstanding the
foregoing, shares of Common Stock allocable to the unexercised portion of any
expired or terminated Option again may become subject to Options under the Plan.
4. Eligibility to Receive Options.
------------------------------
The persons eligible to receive Options hereunder shall be (i) the
directors of the Company who are not otherwise compensated employees of the
Controlled Group and (ii) certain directors of certain subsidiaries of the
Company selected by the Committee, in its sole discretion, and set forth on a
schedule hereto, who are not otherwise compensated employees of the Controlled
Group; provided, however, that a person who is a director of more than one
corporation in the Controlled Group shall be eligible to receive Options
hereunder only in his capacity as a director of one such corporation. The
individuals eligible to receive Options hereunder shall be referred to
individually as "Optionee" and collectively as "Optionees."
5. Terms and Conditions of Options.
-------------------------------
The Committee shall prepare a written agreement, executed and dated by
the Company, evidencing the Option granted to an Optionee (the "Option
Agreement") and setting forth the terms and conditions of such Option. The
Committee shall present such Option Agreement to the Optionee and upon execution
of such Option Agreement by the Optionee, such Option shall be deemed to have
been granted effective as of the date the Option is granted as specified in
subsection (a) hereof. The failure of the Optionee to execute the Option
Agreement within 30 days after the date of the receipt of same shall render the
Option Agreement and the underlying Option null and void ab initio. Option
-- ------
Agreements and the Options granted thereby shall comply with and be subject to
the following terms and conditions:
(a) Optionee and Number of Shares.
-----------------------------
(i) Each of the directors of the Company who are eligible to
participate in the Plan (as described in Section 4) on the date the
shareholders of the Company approve the adoption of the Plan, shall
receive, as of that date, an Option to purchase a total of (A) 1,000 shares
of the Common Stock of the Company, plus (B) 1,000 shares of the Common
Stock of the Company multiplied by the number of full, consecutive 12-month
terms such Optionee has served as a director of the Company as of the
Effective Date.
-3-
<PAGE>
(ii) Each other individual who becomes a director of the Company
eligible to participate in the Plan (as described in Section 4) after the
initial approval of the Plan by the shareholders of the Company, shall
receive an Option to purchase 1,000 shares of the Common Stock of the
Company as of the date such individual is elected a director of the
Company.
(iii) Effective as of each January 1 following the initial
approval of the Plan, each director of the Company who is eligible to
participate in the Plan (as described in Section 4) shall receive an Option
to purchase an additional 1,000 shares of Common Stock of the Company.
(iv) Each other individual who becomes a director of a
subsidiary of the Company eligible to participate in the Plan (as described
in Section 4) shall receive an option to purchase shares of the Common
Stock of the Company at such times and in such amounts as determined by the
Committee.
(v) Notwithstanding anything herein to the contrary, no
Optionee may be granted an option or options under the Plan to purchase
more than a total of 15,000 shares of Common Stock of the Company.
(vi) Each Option Agreement shall state the name of the Optionee
and the total number of shares of the Common Stock to which it pertains.
(vii) Subject to the limitation under Subsection (v) above, the
Committee shall have the right at any time to grant an eligible director of
the Company an Option to purchase additional shares of the Common Stock of
the Company.
(b) Vesting.
-------
(i) Each Option shall first become exercisable (that is,
vested) with respect to such portions of the shares subject to such Option
as are specified in the schedule set forth hereinbelow; provided, if
Optionee ceases to be a director, his right to all future vesting shall
cease immediately.
(A) Commencing as of the first anniversary of the date the
Option is granted, the Optionee shall have the right to exercise the
Option with respect to, and to thereby purchase, 33 percent of the
shares subject to such Option. Prior to said date, the Option shall be
unexercisable in its entirety.
(B) Commencing as of the second anniversary of the date
the Option is granted, the Optionee shall have the right to exercise
the Option with respect to, and to thereby purchase, an additional 33
percent of the shares subject to such Option.
(C) Commencing as of the third anniversary of the date the
Option is granted, the Optionee shall have the right to exercise the
Option with respect to, and to thereby purchase, the remainder of the
shares subject to such Option.
-4-
<PAGE>
(ii) The Option Agreement and the Optionee's right as to vested
stock options shall not impose upon the Company any obligation to retain
the Optionee as a director for any period.
(iii) Notwithstanding the above, all Options shall become
immediately exercisable for 100 percent of the number of shares subject to
the Options upon a Change in Control (as defined in Section 7 hereof).
(c) Option Price.
------------
(i) The purchase price of the shares of Common Stock underlying
each Option (the "Option Price") shall be the fair market value of the
Common Stock on the date the Option is granted.
(ii) If the Common Stock subject to the Plan is registered on a
national securities exchange (as such term is defined by the Securities
Exchange Act of 1934, as amended (the "1934 Act")) or is regularly traded
in the over-the-counter market on the date of determination, the fair
market value per share shall be the closing price of a share of the Common
Stock on said national securities exchange or over-the-counter market on
the date of grant of the option. If shares are publicly traded on a
national securities exchange or the over-the-counter market but no shares
of the Common Stock are traded on that date (or if records of such sales
are unavailable or burdensome to obtain) but there were shares traded on
dates within a reasonable period both before and after such date, the fair
market value shall be the average of the closing prices of the Common Stock
on the nearest date before and the nearest date after the date of
determination. If the Common Stock is traded both on a national securities
exchange and in the over-the-counter market, the closing price shall be
determined by the closing price on the national securities exchange, unless
transactions on such exchange and in the over-the-counter market are
jointly reported on a consolidated reporting system in which case the
closing price shall be determined by reference to such consolidated
reporting system. If the Common Stock is not listed for trading on a
national securities exchange and is not regularly traded in the over-the-
counter market, then the Committee shall determine the fair market value of
the Common Stock from all relevant available facts which may include
opinions of independent experts as to value and may take into account any
recent sales and purchases of such Common Stock to the extent they are
representative.
(d) Terms of Options. Terms of Options granted under the Plan shall
----------------
commence on the date the Option is granted and shall expire 10 years from the
date the Option is granted. Any Reload Option granted pursuant to Section 5(l)
hereof shall expire as of the date of expiration of the original Option with
respect to which such Reload Option is granted. No Option shall be granted
hereunder after 10 years from the earlier of the date the Plan is approved by
the shareholders or is adopted by the Board of Directors.
(e) Terms of Exercise. The exercise of an Option may be for less than
-----------------
the full number of shares of Common Stock subject to such Option, but such
exercise shall not be made for less than the greater of (i) 100 shares or (ii)
the total remaining shares of Common Stock subject to such Option. Subject to
the other restrictions on exercise set forth herein, the unexercised portion of
an Option may be exercised at a later date by the Optionee.
-5-
<PAGE>
(f) Method of Exercise. All Options granted hereunder shall be
------------------
exercised by written notice directed to the Secretary of the Company at its
principal place of business or to such other person as the Committee may direct.
Each notice of exercise shall be accompanied by payment of the Option Price for
the number of shares specified in such notice and by any documents required by
Section 8(a). The Company shall make delivery of such shares within a reasonable
period of time; provided, if any law or regulation requires the Company to take
any action (including, but not limited to, the filing of a registration
statement under the Securities Act of 1933, as amended (the "1933 Act"), and
causing such registration statement to become effective) with respect to the
shares specified in such notice before the issuance thereof, then the date of
delivery of such shares shall be extended for the period necessary to take such
action.
(g) Medium and Time of Payment.
--------------------------
(i) The Option Price shall be payable upon the exercise of the
Option in an amount equal to the number of shares then being purchased
times the per share Option Price. Payment, at the election of the Optionee
[or his successors as provided in Section 5(h)(iii)], shall be (A) in cash;
(B) by delivery to the Company of a certificate or certificates for shares
of the Common Stock duly endorsed for transfer to the Company with
signature guaranteed by a member firm of a national stock exchange or by a
national or state bank (or guaranteed or notarized in such other manner as
the Committee may require); or (C) by a combination of (A) and (B).
(ii) If all or part of the Option Price is paid by delivery of
shares of the Common Stock, the following conditions shall apply:
(A) Such shares shall be valued on the basis of the fair
market value of the Common Stock on the date of exercise. Fair
market value shall be determined in the manner provided in
Section 5(c)(ii) (dealing with determining Option Price);
(B) If the shares of Common Stock used to pay the Option
Price were acquired through an exercise of Options, Optionee must
have held such shares of Common Stock for at least 6 months from
the date of acquisition .
(C) The value of such Common Stock shall be less than or
equal to the total Option Price payment. If the Optionee delivers
Common Stock with a value that is less than the total Option
Price, then such Optionee shall pay the balance of the total
Option Price in cash.
(iii) In addition to the payment of the purchase price of the
shares then being purchased, an Optionee also shall pay in cash (or have
withheld from his normal pay) an amount equal to the amount, if any, which
the Company at the time of exercise is required to withhold under the
income tax withholding provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), and of the income tax laws of the state of the
Optionee's residence.
(h) Effect of Termination or Death. Except as provided in parts (i),
------------------------------
(ii) and (iii) of this subsection, no Option shall be exercisable unless the
Optionee thereof shall have been
-6-
<PAGE>
a director of the Controlled Group from the date the Option was granted until
the date of exercise.
(i) In the event an Optionee ceases to be a director for any
reason other than death or disability, any Option or unexercised portion
thereof granted to him which is otherwise exercisable shall terminate on
and shall not be exercisable after the earlier to occur of (a) the
expiration date of the Option, (b) 3 months after the date the director
ceases to be a director. Prior to the earlier of the dates specified in the
first sentence of this subsection (5)(h)(i), the Option shall be
exercisable only in accordance with its terms and only for the number of
shares exercisable on the date of termination.
(ii) In the event that an Optionee ceases to be a director due
to a disability, as determined by the Committee in its sole discretion, any
Option or unexercised portion thereof granted to him which is otherwise
exercisable shall terminate on and shall not be exercisable after the
earlier to occur of (a) the expiration date of the Option, or (b) the
expiration of 1 year from the date such Optionee ceases to be a director
due to disability.
(iii) In the event of the death of the Optionee while he is a
director, or within 3 months (1 year in the case of termination due to
disability) after the date on which such Optionee ceases to be a director,
any Option or unexercised portion thereof granted to him which is otherwise
exercisable may be exercised by his personal representatives, heirs or
legatees at any time prior to the expiration of 1 year from the date of
death of such Optionee. Such exercise shall be effected pursuant to the
terms of this Section 5 as if such personal representatives, heirs or
legatees are named Optionee.
(i) Restrictions on Transfer and Exercise of Options. No Option shall
------------------------------------------------
be assignable or transferable by the Optionee except by will or by the laws of
descent and distribution; and, during the lifetime of an Optionee, the Option
shall be exercisable only by him.
(j) Holding Period. No Option granted hereunder may be exercised
--------------
within the 6-month period immediately following the date of grant (as described
in Section 5(a) hereof).
(k) Rights as a Shareholder. An Optionee shall have no rights as a
-----------------------
shareholder with respect to shares covered by his Option until the date of
issuance of the shares to him and only after the Option Price of such shares is
fully paid. Unless specified in Section 6, no adjustment will be made for
dividends or other rights for which the record date is prior to the date of such
issuance.
(l) Reload Options. All Options shall be accompanied by a "Reload
--------------
Option". A Reload Option shall be an Option that is granted (i) to an Optionee
who pays for exercise of all or part of an Option with shares of the Common
Stock pursuant to subsection 5(g) hereof, (ii) for the same number of shares as
is exchanged in payment for the exercise of such Option; (iii) as of the date of
such payment, and (iv) subject to all of the same terms and conditions as such
Option; provided, the Option Price for shares subject to the Reload Option shall
be determined pursuant to Section 5(c) hereof on the basis of the fair market
value of such shares on the date the Reload Option is granted. In addition, an
Optionee who pays for exercise of a Reload Option with shares of the Common
Stock is entitled to a successive Reload Option. In no event shall the term of
any Reload Option extend beyond the original term of the Option with respect to
which such Reload Option was granted.
-7-
<PAGE>
(m) Miscellaneous Provisions. In the event of any conflict between
------------------------
the provisions of an Option Agreement and the Plan, the Plan shall control.
(n) No Obligation to Exercise Option. The granting of an Option shall
--------------------------------
impose no obligation upon the Optionee to exercise such Option.
6. Adjustments Upon Changes in Capitalization.
------------------------------------------
(a) Recapitalization. In the event that the outstanding shares of the
----------------
Common Stock of the Company are hereafter increased or decreased or changed into
or exchanged for a different number or kind of shares or other securities of the
Company by reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of the Common Stock, the
following rules shall apply:
(i) The Committee shall make an appropriate adjustment in the
number and kind of shares available for the granting of Options under the
Plan.
(ii) The Committee also shall make an appropriate adjustment in
the number and kind of shares as to which outstanding Options, or portions
thereof then unexercised, shall be exercisable, to the end that the
Optionee's proportionate interest shall be maintained as before the
occurrence of such event; any such adjustment in any outstanding Options
shall be made without change in the total price applicable to the
unexercised portion of such Option and with a corresponding adjustment in
the Option Price per share. No fractional shares shall be issued or
optioned in making the foregoing adjustments, and the number of shares
available under the Plan or the number of shares subject to any outstanding
Options shall be the next lower number of shares, rounding all fractions
downward.
(iii) If any rights or warrants to subscribe for additional
shares are given pro rata to holders of outstanding shares of the class or
classes of stock then set aside for the Plan, each Optionee shall be
entitled to the same rights or warrants on the same basis as holders of the
outstanding shares with respect to such portion of his Option as is
exercised on or prior to the record date for determining shareholders
entitled to receive or exercise such rights or warrants.
(b) Reorganization. Subject to any required action by the
--------------
shareholders, if the Company shall be a party to any reorganization
involving merger, consolidation, acquisition of the stock which does not
result in a Change in Control (as defined in Section 7 hereof) of the
Company or acquisition of the assets of the Company, and if the agreement
memorializing such reorganization so provides, any Option granted but not
yet exercised shall pertain to and apply, with appropriate adjustment as
determined by the Committee, to the securities of the resulting corporation
to which a holder of the number of shares of the Common Stock subject to
such Options would have been entitled. If such agreement does not so
provide, then any or all Options granted hereunder shall terminate after
giving at least 30 days' prior written notice to the Optionees to whom such
Options have been granted.
(c) Dissolution and Liquidation. If the Board adopts a plan of
---------------------------
dissolution and liquidation that is approved by the shareholders of the
Company, the Committee shall give each Optionee written notice of such
event at least 10 days prior to its effective date.
-8-
<PAGE>
(d) Limits on Adjustments. Any issuance by the Company of stock of
---------------------
any class, or securities convertible into shares of stock of any class,
shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of the Common Stock subject to
any Option, except as specifically provided otherwise in this Section 6.
The grant of Options pursuant to the Plan shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to
merge, consolidate or dissolve, or to liquidate, sell or transfer all or
any part of its business or assets. All adjustments the Committee makes
under this Section 6 shall be conclusive.
7. Change in Control.
-----------------
(a) Definition of Change in Control. For purposes of the Plan, a
-------------------------------
"Change in Control" shall mean the occurrence of any one of the events described
in this Section 7(a). For purposes of this Section 7, the terms used in this
Section with an initial capital letter shall have the meanings set forth in
Section 7(b) unless otherwise defined in the Plan.
(i) The acquisition by a Person (including Affiliates and
Associates of such Person, but excluding the Company, any Subsidiary of the
Company, or any employee benefit plan of the Company or of any Subsidiary
of the Company) of a sufficient number of shares of the Common Stock, or
securities convertible into the Common Stock, and whether through direct
acquisition of shares or by merger, consolidation, share exchange,
reclassification of securities, or recapitalization of or involving the
Company or any Subsidiary of the Company, to constitute the Person the
actual or beneficial owner of 20 percent or more of the Common Stock, but
only if such acquisition occurs without approval or ratification by a
majority of the members of the Board;
(ii) Any sale, lease, transfer, exchange, mortgage, pledge or
other disposition, in one transaction or a series of transactions, of all
or substantially all of the assets of the Company or of any Subsidiary of
the Company to a Person described in subsection (i) above, but only if such
transaction occurs without approval or ratification by a majority of the
members of the Board; or
(iii) During any fiscal year of the Company, individuals who at
the beginning of such year constitute the Board cease for any reason to
constitute at least a majority thereof, unless the election of each
director who was not a director at the beginning of such period has been
approved in advance by a majority of the directors in office at the
beginning of the fiscal year.
(b) The following definitions shall apply in determining when a
Change in Control has occurred:
(i) "Affiliate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the 1934 Act as in
effect on the effective date of the Plan.
(ii) "Associate" shall have the meaning ascribed to such term in
Rule 12b-2 of the General Rules and Regulations under the 1934 Act.
-9-
<PAGE>
(iii) "Person" shall mean any individual, organization,
corporation, partnership or other entity.
(iv) "Subsidiary" shall have the meaning ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the 1934 Act.
8. Employee's Agreement and Securities Registration.
------------------------------------------------
(a) Agreement. If such action is necessary or desirable, no Options
---------
shall be granted to any Optionee, unless, at the time of grant, such Optionee
(i) represents and warrants that he will acquire the stock for investment only
and not for purposes of resale or distribution, and (ii) makes such further
representations and warranties as are deemed necessary or desirable by counsel
to the Company with regard to holding and resale of the stock. If, at the time
of the exercise of any Option paid in whole or in part in shares of Common
Stock, it is necessary or desirable, in the opinion of counsel for the Company,
in order to comply with any applicable laws or regulations relating to the sale
of securities, that the Optionee represent and warrant that he is purchasing or
acquiring the Common Stock for investment and not with any present intention to
resell or distribute the same or make other and further representations and
warranties with regard to the holding and resale of such shares, the Optionee
shall, upon the request of the Committee, execute and deliver to the Company an
agreement to such effect. Should the Committee have reasonable cause to believe
that such Optionee did not execute such agreement in good faith, the Company
shall not be bound by the exercise of the Option. All certificates issued
pursuant to the Plan shall be marked with the following restrictive legend or
similar legend, if such marking, in the opinion of counsel to the Company, is
necessary or desirable:
These shares are held by an "affiliate" of the Company (as such term is
defined in Rule 144 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "1933 Act")).
Accordingly, these shares may not be sold, hypothecated, pledged or
otherwise transferred, except (i) pursuant to an effective registration
statement under the 1933 Act and any applicable securities laws or
regulations of any state (the "State Securities Acts") with respect to such
shares, (ii) in accordance with said Rule 144, or (iii) upon the issuance
to the Company of a favorable opinion of counsel or the submission to the
Company of such other evidence as may be satisfactory to the Company that
such proposed sale, assignment, encumbrance or other transfer will not be
in violation of the 1933 Act or any applicable State Securities Acts or any
rules or regulations thereunder. Any attempted transfer of the certificate
representing these shares which is in violation of the preceding
restrictions will not be recognized by the Company, nor will any transferee
of such shares be recognized as the owner thereof by the Company.
If the Common Stock is held by an Optionee who is not an affiliate, as that term
is defined in Rule 144 of the 1933 Act, or who ceases to be an affiliate, the
Committee, in its discretion, may dispense with or authorize the removal of the
restrictive legend set forth above.
-10-
<PAGE>
(b) Registration. In the event that the Company in its sole
------------
discretion shall deem it necessary or advisable to register, under the 1933 Act
or any state securities acts, any shares with respect to which Options have been
granted hereunder, then the Company shall take such action at its own expense
before delivery of the certificates representing such shares to an Optionee. In
the event the shares of Common Stock of the Company shall be listed on any
national stock exchange at the time of the exercise of any Option, the Company
shall make prompt application for the listing of the shares of Common Stock to
be issued on such stock exchange of such shares, at the sole expense of the
Company.
9. Effective Date; Amendment and Termination of the Plan.
-----------------------------------------------------
(a) Effective Date. The Plan shall be effective as of January 1,
--------------
1993, and no Options shall be granted hereunder prior to said date; provided,
adoption of the Plan shall be approved by the holders of a majority of the
voting power of the outstanding shares of the Common Stock not later than the
earlier of (i) the annual meeting of the shareholders of the Company which
immediately follows the date of the first grant of an Option hereunder, or (ii)
12 months after the adoption of the Plan by the Board. Shareholder approval
shall be made by a majority of the votes cast at a duly held meeting at which a
quorum representing a majority of all outstanding voting stock is, either in
person or by proxy, present and voting on the Plan. Failure to obtain such
approval shall render the Plan and any Options granted hereunder null and void
ab initio.
- -- ------
(b) Amendment and Termination. In the event the Board shall determine
-------------------------
that the Plan is not in the best interest of the Company or its shareholders for
any reason, the Board shall have the power to add to, amend or repeal any of the
provisions of the Plan, to suspend the operation of the entire Plan or any of
its provisions for any period or periods or to terminate the Plan in whole or in
part. In the event of any such action, the Committee shall prepare written
procedures that, when approved by the Board, shall govern the administration of
the Plan resulting from such addition, amendment, repeal, suspension or
termination. Notwithstanding the above provisions, no such addition, amendment,
repeal, suspension or termination shall affect, in any way, the rights of the
Optionees who have outstanding Options without the consent of such Optionees,
nor may any such change in the Plan be made without the prior approval of the
holders of a majority of the outstanding Common Stock if such shareholder
approval is required under Rule 16b-3 promulgated under Section 16 of the 1934
Act or any other applicable law or regulation. Shareholder approval shall be
made by a majority of the votes cast at a duly held meeting at which a quorum
representing a majority of all outstanding voting stock is, either in person or
by proxy, present and voting at the meeting. In any event, amendments to the
Plan may not be made more than once every six months, unless necessary to comply
with changes in the Internal Revenue Code, the Employee Retirement Income
Security Act or any rules or regulations issued thereunder.
10. Application of Funds.
--------------------
The proceeds received by the Company from the sale of the Common Stock
subject to the Options granted hereunder will be used for general corporate
purposes.
11. Notices.
-------
-11-
<PAGE>
All notices or other communications by an Optionee to the Committee
pursuant to or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Committee at the location, or
by the person, designated by the Committee for the receipt thereof.
12. Term of Plan.
------------
Subject to the terms of Section 9(b), the Plan shall terminate upon
the later of (i) the complete exercise or lapse of the last outstanding Option,
or (ii) the last date upon which Options may be granted hereunder.
-12-
<PAGE>
EXHIBIT 10.10
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as
of January 1, 2000 and amended effective January 1, 2000, by and between RONNIE
AUSTIN, a resident of the State of Georgia ("Employee"), and COMMUNITY TRUST
FINANCIAL SERVICES CORPORATION, a Georgia bank holding company ("CTFS").
W I T N E S S E T H:
-------------------
WHEREAS, CTFS wishes to obtain assurances from Employee that CTFS will have
the benefit of Employee's services on the terms and subject to the conditions
set forth herein; and
WHEREAS, Employee wishes to obtain assurances from CTFS on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, CTFS and Employee agree as follows:
1. Employment. CTFS hereby employs Employee, and Employee hereby accepts
----------
such employment and agrees to perform services for CTFS , for the period and
upon the other terms and conditions set forth in this Agreement.
2. Term. The term (the "Term") of Employee's employment hereunder shall
----
be for a period of five (5) years, commencing as of the date of this Agreement
and ending on December 31, 2002, subject to earlier termination as hereinafter
specified.
3. Position and Duties.
-------------------
3.01 Service with CTFS. During the term of this Agreement, Employee
-----------------
shall serve as, and his title shall be, President and Chief Executive Officer of
CTFS. In such position, Employee agrees to perform such employment duties
consistent with such position as the Board of Directors of CTFS shall assign to
him from time to time. Employee also agrees to serve, during the Term hereof, as
requested by the Board of Directors of CTFS, and without any additional
compensation, as a Director of CTFS and as an executive officer and/or director
of any corporations or other entities affiliated with CTFS.
3.02 Performance of Duties. Employee agrees to serve CTFS faithfully
---------------------
and to the best of his ability and to devote all of his time, energy and skill
during regular and assigned business hours to such employment. During the Term
hereof, Employee shall not serve as an officer, director or employee of any
other entity not affiliated with CTFS without the prior written consent of CTFS'
Board of Directors. Notwithstanding the foregoing, (i) Employee may pursue such
personal investment and financial matters as do not conflict with his
obligations and commitments to CTFS, (ii) Employee may participate in
charitable,
-1-
<PAGE>
religious or civic activities such as serving on a school board, church board or
community fund committee and (iii) Employee may participate in such other
activities as the Board of Directors of CTFS may from time to time approve in
writing. Employee hereby confirms that he is under no contractual commitments
inconsistent with his obligations set forth in this Agreement.
4. Compensation.
------------
Section 4.01 Base Salary. As compensation for all services to be rendered
-----------
by Employee under this Agreement, CTFS shall pay to Employee an initial annual
base salary for the period from January 1, 1998 through and including December
31, 1998, of $119,025.00. The base salary shall be subject to an annual cost of
living increase, or, at the discretion of CTFS, an increase which exceeds the
scheduled cost of living increase. The cost of living increase shall be an
amount equal to the product of (i) the "CPI Adjustment" (hereinafter defined)
multiplied by (ii) the base salary in effect immediately prior to such increase.
The effective date of all such increases shall be retroactive to January 1 of
the year in which the adjustment takes effect notwithstanding the fact that the
CPI Adjustment generally will not be capable of being calculated until some time
in February or March of such year. The base salary described in this Section
4.01, as it may be increased from time to time, is referred to herein as the
"Base Salary." The Base Salary shall be paid in bi-weekly installments in
accordance with CTFS' normal payroll procedures and policies.
For purposes of this Section 4.01, "CPI Adjustment" shall mean the lesser
of (i) 7.5% or (ii) the percentage increase, if any, in the "CPI-U Index"
(hereinafter defined) between (a) the average CPI-U Index for the year
immediately preceding the year in which the Base Salary adjustment in question
is to take effect and (b) the average CPI-U Index for the immediately preceding
year. "CPI-U Index" shall mean the "Consumer Price Index For All Urban
Consumers, Atlanta, Georgia (1982-84=100) as published by the Bureau of Labor
Statistics of the United States Department of Labor. If the CPI Adjustment is
zero or a negative number, the amount of the CPI Adjustment shall, for purposes
of this Section 4.01, be deemed to be zero.
By way of example, if: (i) Employee's Base Salary in effect on December 31,
1998 is $119,025; (ii) the average CPI-U Index for 1998 (as published by the
Bureau of Labor Statistics in February, 1999) is 158.4; and (iii) the average
CPI-U Index for 1997 (as published by the Bureau of Labor Statistics in
February, 1998) is 156.0, then, effective January 1, 1999, the Base Salary
increase would be calculated as follows:
CPI Adjustment = 1.54% (158.4 - 156.0 = 2.4; 2.4/156.0 = 1.54%)
Base Salary Increase = $1,833 ($119,025 x 1.54%)
New Base Salary = $120,858 ($119,025 + 1,833)
-2-
<PAGE>
4.02 Incentive Compensation; Stock Option Programs.
---------------------------------------------
(a) For each full fiscal year of CTFS that this agreement remains in
effect, Employee shall receive, subject to meeting performance goals set
annually by CTFS for CTFS and its subsidiaries, in addition to the Base Salary
described in Section 4.01, annual incentive compensation. The maximum amount of
annual incentive compensation shall be fifteen (15) percent of the Base Salary
in effect on the last day of the fiscal year for which CTFS is paying incentive
compensation.
In the event this Agreement is terminated pursuant to Section 10.01(d) or
10.01(e) hereof and such termination occurs during, as opposed to at the end of,
a fiscal year of CTFS, Employee shall be entitled to a pro rata portion of the
incentive compensation that Employee would have received had this Agreement
remained in effect through the end of such fiscal year. The pro rata portion to
which Employee is entitled shall be determined by multiplying such incentive
compensation by a fraction, the numerator of which is the number of days during
the fiscal year in question that this Agreement was in effect and the
denominator of which is the total number of days in such fiscal year.
(b) On each January 1 during the term of this Agreement, CTFS shall cause
to be granted to Employee an option to acquire 1,000 shares of CTFS common
stock, provided that there are a sufficient number of shares available to
support such a grant under CTFS' 1993 Stock Option Plan (or a successor plan).
Each such option shall be granted pursuant to, and shall be subject to all of
the terms and conditions of, CTFS' 1993 Stock Option Plan (or a successor plan).
4.03 Automobile. CTFS shall provide Employee with use of a late model
----------
automobile which shall be used by Employee for business purposes and which also
may be used by Employee for personal use. CTFS shall also reimburse Employee for
all fuel and maintenance expenses associated with such automobile. Employee
shall be solely responsible for payment of any and all federal, state and local
taxes (including, but not limited to, income taxes) associated with or
attributable to personal use of such automobile.
4.04 Participation in Benefit Plans. Employee shall also be entitled
------------------------------
to participate, on a comparable basis with other senior executives of CTFS, in
all employee benefit plans or programs of CTFS in effect from time to time
including, but not limited to, medical, dental, life and disability insurance
programs. Employee's participation in any such plan or program shall be subject
to all provisions, rules and regulations applicable thereto. Notwithstanding
anything in this Section 4.04 to the contrary, Employee's participation in
-3-
<PAGE>
bonus or incentive compensation programs and stock option programs shall be
governed by the specific provisions of Section 4.02 hereof and not by this
Section 4.04.
4.05 Expenses. In accordance with CTFS' policies established from
--------
time to time, CTFS shall pay or reimburse Employee for all reasonable and
necessary out-of-pocket expenses incurred by him in the performance of his
duties under this Agreement, subject to the presentment of appropriate vouchers
and receipts.
5. Confidentiality.
---------------
5.01 General. In Employee's position as an employee of CTFS, Employee
-------
has had and will have access to confidential information, trade secrets and
other proprietary information of vital importance to CTFS, to Community Trust
Bank, CTFS' wholly-owned subsidiary (the Bank) and to subsidiaries and
affiliates of CTFS and the Bank, and Employee has and will also develop
relationships with customers, employees and others who deal with CTFS and the
Bank (and their subsidiaries and affiliates) which are of value to CTFS and the
Bank. CTFS requires as a condition to Employee's employment with CTFS that
Employee agree to certain restrictions on Employee's use of the proprietary
information and valuable relationships developed during Employee's employment
with CTFS. In consideration of the terms and conditions contained herein, the
parties hereby agree as follows:
5.02 Fiduciary Responsibility. CTFS and Employee mutually agree and
------------------------
acknowledge that CTFS and the Bank (and their subsidiaries and affiliates) may
entrust Employee with highly sensitive confidential, restricted and proprietary
information concerning various "Business Opportunities" (hereinafter defined),
customer lists, and personnel matters. Employee acknowledges that, as an
essential incident of Employee's employment with CTFS, Employee shall bear a
fiduciary responsibility to CTFS to protect such information from use or
disclosure that is not necessary for the performance of Employee's duties
hereunder.
5.03 Definitions. For the purposes of this Agreement, the following
-----------
definitions shall apply:
(a) "Trade Secret" means information, without regard to form, including,
but not limited to, technical or non-technical data, formulas, patterns,
compilations, programs, devices, methods, techniques, drawings, processes,
financial data, financial plans, product plans, or lists of actual or potential
customers or suppliers, which (i) are not commonly known by or available to the
public, (ii) derives economic value, actual or potential, from not being
generally known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use and (iii)
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy. Trade Secret also shall include any other information
defined as a "trade secret" under the Georgia Trade Secrets Act of 1990,
O.C.G.A. 10-1-760 through 10-1-767.
-4-
<PAGE>
(b) "Confidential Information" shall mean any data or information, other
than Trade Secrets, which is material to CTFS or to the Bank or to Community
Loan Company, an industrial loan company subsidiary of CTFS ("CLC"), and which
is not generally known by the public. Confidential Information shall include,
but not be limited to, data or information related to (i) the taking of
deposits, making loans and extensions of credit, cashing checks, and other
operations incident to the business of banking ("Business of Bank"), (ii) the
loaning of money in amounts of $3,000 or less pursuant to the Georgia Industrial
Loan Act (O.C.G.A. 7-3-1 et seq.) ("Business of CLC"), (iii) any information
-- ---
pertaining to the identity of the customers, depositors or borrowers served by,
or Business Opportunities (hereinafter defined) of, the Bank or CLC, (iv) the
details of this Agreement, CTFS', the Bank's and CLC's respective business,
marketing and acquisition plans and (v) financial statements and projections,
and the costs of the services the Bank or CLC may offer or provide to the
customers, depositors or borrowers they serve, to the extent such information is
material to CTFS, the Bank or CLC and not generally known by the public.
(c) "Business Opportunities" shall mean any specialized information or
plans of CTFS, the Bank or CLC concerning the business of CTFS, the Bank or CLC,
including, but not limited to, the financing of or investment in, by CTFS, the
Bank or CLC, any target person, business or project, together with all related
information concerning the specifics of any contemplated financing, investment,
acquisition or purchase (including pricing, terms, and the identity of such
person, business or project) regardless of whether CTFS, the Bank or CLC has
entered any agreement, made any commitment, or issued any bid or offer to such
person, business or project.
(d) Notwithstanding the definitions of Trade Secrets, Confidential
Information and Business Opportunities set forth above, Trade Secrets,
Confidential Information and Business Opportunities shall not include any
information:
(i) that is or becomes generally known to the public (other than as
a result of a breach of this Agreement by Employee);
(ii) that is developed by Employee after termination of employment
through entirely independent efforts;
(iii) that Employee obtains from an independent source having a bona
fide right to use and disclose such information;
(iv) that is required to be disclosed by law, except to the extent
eligible for special treatment under an appropriate protective
order; or
(v) that the respective Boards of Directors of CTFS, the Bank or CLC
approve for unrestricted release by express written
authorization.
5.04 Trade Secrets. Employee shall not, without the prior written
-------------
consent of the Board of Directors of CTFS, during his employment with CTFS and
for so long thereafter as the information or data remain Trade Secrets, use or
disclose, or negligently permit any unauthorized person who is not an employee
of CTFS, the Bank or CLC to use, disclose, or gain access to, any Trade Secrets
of CTFS or the Bank or CLC, or of any of their subsidiaries
-5-
<PAGE>
or affiliates, or of any other person or entity making Trade Secrets available
for CTFS' or the Bank's or CLC's (or any of their subsidiaries' or affiliates')
use.
5.05 Confidential Information. Employee shall not, without the prior
------------------------
written consent of the Board of Directors of CTFS , during his employment with
CTFS and for a period of two (2) years after termination of his employment for
any reason, as long as the information or data remain competitively sensitive,
use or disclose, or negligently permit any unauthorized person who is not
employed by CTFS, the Bank or CLC to use, disclose, or gain access to, any
Confidential Information to which the employee obtained access by virtue of his
employment with CTFS.
5.06 Observance of Security Measures. During Employee's employment
-------------------------------
with CTFS, Employee is required to observe all security measures adopted to
protect Trade Secrets, Confidential Information and Business Opportunities of
CTFS or the Bank or CLC.
6. Solicitation of Customers, Borrowers or Depositors
--------------------------------------------------
6.01 After Termination of Employment. Upon termination of this
-------------------------------
Agreement for any reason, Employee shall not, directly or indirectly, as
principal, agent, trustee or consultant or through the agency of any
corporation, partnership, association, trust or other entity or person, on
Employee's own behalf or for others, within two (2) years after such termination
actively solicit, divert, or take away, or attempt to actively solicit, divert,
or take away any customers, depositors or borrowers of CTFS, the Bank or CLC
whom Employee had served during his term of employment for the purpose of
providing services which constitute the Business of Bank or Business of CLC (in
each case as defined above).
6.02 During Employment. During Employee's employment with CTFS,
-----------------
Employee shall not, except on behalf of CTFS, the Bank or CLC, solicit, divert,
take away or accept the business of, or attempt to solicit, divert or take away
the business of, any of the customers, depositors or borrowers of CTFS, the Bank
or CLC for the purpose of performing the Business of Bank or Business of CLC for
such customers, depositors or borrowers.
7. Non-Interference with Personnel Relations.
-----------------------------------------
Employee shall not, during his employment with CTFS and for a period of two
(2) years after the termination of his employment with CTFS for any reason,
knowingly solicit, entice or persuade any other employees or agents of CTFS, the
Bank or CLC (or of any of their subsidiaries or affiliates) to leave the
services of CTFS, the Bank or CLC (or such subsidiary or affiliate).
-6-
<PAGE>
8. Notification of Subsequent Employment.
-------------------------------------
During a period of two (2) years after the termination of Employee's
employment with CTFS, Employee shall notify CTFS in writing, within thirty (30)
days after accepting employment with any other corporation, partnership,
association, person, organization or other entity, of the name and address of
Employee's new employer and Employee's functions with his new employer.
9. Covenant Not to Compete.
-----------------------
9.01 General. For purposes of this Section 9, CTFS, the Bank, CLC and
-------
Employee conduct the following business in the following territories:
(a) CTFS is engaged in the business of transacting business as a holding
company with (i) the Bank as its subsidiary bank which accepts deposits, makes
loans, cashes checks and otherwise engages in the business of banking and (ii)
CLC as its subsidiary industrial loan company which loans money in amounts of
$3,000 or less pursuant to the Georgia Industrial Loan Act (O.C.G.A. 7-3-1- et
--
seq. (collectively, the "Business of CTFS").
- ---
(b) CTFS (through the Bank and CLC) actively conducts the Business of CTFS
in the geographic areas of Georgia at the business locations of the Bank's and
CLC's offices set forth on Exhibit "A" to this Agreement, which Exhibit "A" is
----------- -----------
incorporated herein by this reference.
(c) Employee has established business relationships and performs the
duties required of Employee under this Agreement in the geographic area covered
by a circle having a radius of twenty (20) miles from the main office location
of the Bank and a circle having a radius of fifteen (15) miles from the location
of each branch office of the Bank and each office of CLC, all as set forth on
Exhibit "A" to this Agreement, and will work exclusively in such areas while in
- -----------
the employ of CTFS.
9.02 Non-Competition. Employee covenants and agrees that for a period
---------------
of one (1) year after the termination of his employment with CTFS for any
reason, Employee shall not directly or indirectly, as principal, agent, trustee,
consultant or through the agency of any corporation, partnership, association,
trust or other entity or person, on Employee's own behalf or for others, provide
services that are the same as or similar to the services provided by Employee
under this Agreement to or for the benefit of any entity or person conducting
the Business of CTFS or the Business of Bank or the Business of CLC within the
geographic area covered by a circle having a radius of twenty (20) miles from
the location of the main office of the Bank and a circle having a radius of
fifteen (15) miles from the location of each branch office of the Bank and each
office of CLC, all as set forth on Exhibit "A" to this Agreement.
-----------
9.03 Amendment of Exhibit "A". Employee and CTFS shall periodically
------------------------
amend this Agreement by updating and initialing Exhibit "A" attached hereto so
-----------
that it at all
-7-
<PAGE>
times lists the then current location of (i) the Bank's main office, (ii) each
branch office of the Bank and (iii) each office of CLC.
10. Termination.
-----------
10.01 Grounds for Termination. This Agreement shall terminate prior
-----------------------
to the expiration of the initial Term set forth in Section 2 or any extension
thereof in the event that at any time during such initial Term or any extension
thereof:
(a) CTFS shall give notice to Employee that CTFS is terminating
this Agreement without cause, which notice shall specify the effective date of
Employee's termination;
(b) Employee shall die or the Board of Directors of CTFS shall
determine that Employee has become disabled (as defined in Section 10.02); or
(c) The Board of Directors of CTFS shall determine that Cause
exists. "Cause" means (i) having been convicted under the laws of any
governmental jurisdiction of (A) a felony or (B) a criminal offense which is not
a felony but which has a material adverse effect on CTFS (or any of its
subsidiaries or affiliates) or on the ability of Employee to carry out his
duties hereunder (provided, however, that in no event shall minor traffic
violations constitute "Cause"), (ii) having committed any action constituting
theft or fraud against CTFS (or any of its subsidiaries or affiliates), (iii)
the breach of any of the Employee's covenants or obligations hereunder, (iv) the
knowing failure of the Employee to follow specific directives of the Board of
Directors of CTFS consistent with Employee's duties or (v) the termination by
Employee of his employment hereunder prior to the expiration of the term of this
Agreement, unless such termination is pursuant to Section 10.01(d) or 10.01(e)
hereof.
(d) Employee shall determine that CTFS has breached this Agreement
in any material respect (including, but not limited to, CTFS' failure to make
any payment required under this Agreement), which breach is not cured by CTFS
within thirty (30) days after written notice of such breach is delivered to CTFS
by the Employee.
(e) Employee, within thirty (30) days following the occurrence of a
"Change in Control" (as defined in Section 10.03), notifies CTFS, in writing,
that he is electing to terminate this Agreement pursuant to this Section
10.01(e).
Notwithstanding any termination of this Agreement, in consideration of his
employment hereunder to the date of such termination, to the extent specifically
provided for herein, the Employee shall remain bound by the provisions of this
Agreement which specifically relate to periods subsequent to the termination of
Employee's employment hereunder.
-8-
<PAGE>
10.02 "Disability" Defined. The Board of Directors of CTFS may, in
--------------------
its discretion reasonably exercised, determine that Employee has become
disabled, for the purpose of Section 10.01(b) of this Agreement, in the event
that Employee shall fail, in one or more material respects, because of illness
or other physical or mental incapacity, to render services of the character
contemplated by this Agreement for an aggregate of more than ninety (90)
calendar days during any period of twelve (12) consecutive months.
10.03 "Change in Control" Defined. For purposes of this Agreement, a
----------------------------
"Change in Control" shall be deemed to have occurred if more than fifty percent
(50%) of CTFS' outstanding common stock or equivalent in voting power of any
class or classes of outstanding securities of CTFS entitled to vote in elections
of its Directors, shall be acquired by any person or group of persons acting in
concert. Additionally, a Change in Control shall be deemed to have occurred if
(i) more than fifty percent (50%) of the Bank's outstanding common stock or
equivalent in voting power of any class or classes of outstanding securities of
the Bank entitled to vote in elections of its Directors, shall be acquired by
any person or group of persons acting in concert or (ii) substantially all of
--
the assets of the Bank shall be sold to another person and (iii) at the time of
---
the occurrence of (i) or (ii), Employee is serving as Chief Executive Officer of
the Bank.
10.04 Surrender of Records and Property. Upon the request of CTFS
---------------------------------
and, in any event, upon termination of his employment with CTFS , Employee shall
deliver promptly to CTFS all records, manuals, books, blank forms, documents,
letters, memoranda, notes, notebooks, reports, data, tables, calculations or
copies thereof, which are the property of CTFS, the Bank or CLC (or any of their
subsidiaries of affiliates) and which relate in any way to the business,
products, practices or techniques of CTFS, the Bank or CLC (or any of their
subsidiaries or affiliates), and all other property, Trade Secrets and
Confidential Information of CTFS, the Bank or CLC (or any of their subsidiaries
or affiliates), including, but not limited to, all documents which in whole or
in part contain any Trade Secrets or Confidential Information of CTFS, the Bank
or CLC (or any of their subsidiaries or affiliates), which in any of these cases
are in his possession or under his control.
11. Compensation Upon Termination.
-----------------------------
(a) In the event this Agreement is terminated pursuant to Section
10.01(a), 10.01(d) or 10.01(e) hereof, Employee will receive a lump sum payment
equal to the "Severance Amount" (hereinafter defined), in addition to (i)
payment to Employee of semi-monthly installments of his then current Base Salary
through the effective date of termination and (ii) reimbursement of expenses
incurred by Employee in accordance with Section 4.05 hereof. Additionally, in
the event this Agreement is terminated pursuant to Section 10.01(d) or 10.01(e)
hereof, Employee shall be entitled to receive any bonus, or pro rata portion
thereof, to which Employee may be entitled pursuant to Section 4.02 hereof,
provided that any such bonus shall be paid in accordance with Section 4.02, and
not upon Employee's termination, and provided, further, that Employee
acknowledges and agrees that Employee is not entitled
-9-
<PAGE>
to any such bonus, or pro rata portion thereof, for the fiscal year in which
this Agreement is terminated if this Agreement is terminated pursuant to Section
10.01(a). For purposes of this Section 11(a) "Severance Amount" shall mean an
amount equal to the annual Base Salary in effect on the date of termination.
(b) In the event this Agreement is terminated pursuant to any provision
hereof other than Sections 10.01(a), 10.01(d) or 10.01(e), Employee shall not be
entitled to any compensation other than (i) semi-monthly installments of his
then current Base Salary accrued through the effective date of termination and
(ii) reimbursement of expenses incurred by Employee in accordance with Section
4.05 hereof, and all rights of Employee to further compensation shall thereupon
cease and be terminated.
12. Assignment and Inurement. This Agreement shall enure to the benefit
------------------------
of and be binding upon the parties hereto and their respective heirs,
successors, administrators, and permitted assigns. This is a personal service
contract and, except to the extent specifically contemplated hereby, may not be
assigned by Employee without the prior written consent of CTFS.
13. Injunctive Relief. Employee agrees that it would be difficult to
-----------------
compensate CTFS fully for damages for any violation of the provisions of this
Agreement, including without limitation the provisions of Sections 5, 6, 7, 8, 9
and 10.04. Accordingly, Employee specifically agrees that CTFS shall be entitled
to temporary and permanent injunctive relief to enforce the provisions of this
Agreement. This provision with respect to injunctive relief shall not, however,
diminish the right of CTFS to claim and recover damages in addition to
injunctive relief.
Notwithstanding anything in Section 15 hereof to the contrary, any party to
this Agreement may petition the Superior Court of Paulding County, Georgia for
temporary injunctive relief. All disputes, controversies or claims arising out
of or related to this Agreement, other than a request for temporary injunctive
relief, shall be resolved in accordance with the provisions of Section 15
hereof. The parties hereby agree that jurisdiction and venue for any action
seeking temporary injunctive relief pursuant to this Section 13 shall lie in the
Superior Court of Paulding County, Georgia. The parties hereby agree, further,
that any temporary restraining order entered pursuant to this Section 13 shall
remain in effect until the dispute giving rise thereto is resolved pursuant to
the provisions of Section 15 and the parties agree to enter into any and all
consent orders required to maintain such temporary restraining order in effect
until such time.
14. Miscellaneous.
-------------
14.01 Governing Law. This Agreement is made under and shall be
-------------
governed by and construed in accordance with the laws of Georgia.
-10-
<PAGE>
14.02 Prior Agreements. This Agreement contains the entire agreement
----------------
of the parties relating to the subject matter hereof and supersedes all prior
agreements and understandings with respect to such subject matter, and the
parties hereto have made no agreements, representations or warranties relating
to the subject matter of this Agreement which are not set forth herein.
"Notwithstanding the foregoing, the parties expressly agree that they are
parties to an Executive Supplemental Retirement Plan Executive Agreement dated
----------------------------------------------------------
the 1st day of January, 2000 and a Life Insurance Endorsement Split Dollar Plan
--------------------------------------------
Agreement dated the 1st day of January, 2000. To the extent that any provisions
- ---------
of this Employment Agreement shall conflict with the provisions of the
aforestated agreements, the provision of the aforestated agreements shall
supercede and replace the provisions of the Employment Agreement.
14.03 Withholding Taxes. CTFS may withhold from any benefits payable
-----------------
under this Agreement all federal, state, city and other taxes as shall be
required pursuant to any law or governmental regulation or ruling.
14.04 Amendments. No amendment, modification or waiver of this
----------
Agreement or any provision hereof shall be deemed effective unless made in
writing signed by the party against whom enforcement of the amendment,
modification or waiver is sought. Any written waiver shall not be deemed a
continuing waiver unless specifically stated and shall operate only as to the
specific term or condition waived.
14.05 Notices. Any notice, request, demand or other document to be
-------
given hereunder shall be in writing, and shall be delivered personally or sent
by registered, certified or express mail or facsimile followed by mail as
follows:
If to CTFS:
3844 Atlanta Highway
Hiram, Georgia 30141
Attention: Chairman
If to Employee:
34 Ponderosa Drive
Dallas, Georgia 30157
or to such other address as either party hereto may hereafter duly give to the
other.
14.06 Severability. To the extent any provision of this Agreement
------------
shall be invalid or unenforceable, it shall be considered deleted herefrom and
the remainder of such provision and of this Agreement shall be unaffected and
shall continue in full force and effect.
-11-
<PAGE>
In furtherance and not in limitation of the foregoing, should the duration or
geographical extent of, or business activities covered by any provision of this
Agreement be in excess of that which is valid or enforceable under applicable
law, then such provision shall be construed to cover only that duration, extent
or activities which may validly and enforceably be covered. Employee
acknowledges the uncertainty of the law in this respect and expressly stipulates
that this Agreement be given the construction which renders its provisions valid
and enforceable to the maximum extent (not exceeding its express terms) possible
under applicable law.
15. Arbitration. Any and all disputes, controversies or claims arising out
------------
of or related to this Agreement (other than a request for a temporary order
pursuant to Section 13 hereof), shall be resolved by binding arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). Judgement upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. In the event of any
inconsistency between the provisions of this Section 15 and AAA's Commercial
Arbitration Rules, the provisions of this Section 15 shall govern. Any party may
initiate arbitration by serving written notice of its intention to arbitrate on
the other parties. The venue of any such arbitration shall be Atlanta, Georgia.
The arbitration panel shall consist of three arbitrators selected as follows.
Within thirty (30) days following the date on which the arbitration provision of
this Section 15 is invoked by a party, Employee, on the one hand, and CTFS, on
the other, shall each select an arbitrator from a list of arbitrators provided
by AAA. The lists from which Employee and CTFS select their respective
arbitrators shall be identical. If either Employee or CTFS fails to select its
arbitrator within the time required, the other shall be entitled to select its
arbitrator for it. Within fifteen (15) days following the selection of the last
to be selected of the two (2) arbitrators, the two (2) arbitrators so selected
shall select a third arbitrator. A preliminary arbitration hearing shall be held
within thirty (30) days following the selection of the third arbitrator for the
purpose of scheduling discovery and the evidentiary hearing(s). The first
evidentiary hearing shall be held within thirty (30) days following the
preliminary hearing. The arbitration panel shall deliver its award in writing,
including findings of facts, to the parties within thirty (30) days following
the final arbitration hearing. Evidence and testimony shall be admitted in
accordance with the Federal Rules of Evidence. The arbitration panel shall have
authority to grant temporary or permanent injunctive relief or other equitable
remedies. Each party shall bear its own costs and expenses of the arbitration
proceeding.
/s/ WAF /s/ RA
- ---------- -------------
CTFS Employee
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first set forth above.
RONNIE AUSTIN
/s/ Ronnie Austin
--------------------------------------
-12-
<PAGE>
COMMUNITY TRUST FINANCIAL
SERVICES CORPORATION
By /s/ W.A. Foster III
-----------------------------------
Title: Chairman
-13-
<PAGE>
EXHIBIT "A"
Main Office Location of Bank
3844 Atlanta Highway
Hiram, Georgia 30141
Location of Bank Branch Offices
Dallas Office
100 Hardee Street
Dallas, Georgia 30132
Kroger Office
4215 Jimmy Lee Smith Parkway, Suite 4
Hiram, Georgia 30141
Butler Crossing
3161 Cobb Parkway
Suite 100
Kennesaw, Georgia 30152
Battle Ridge
6190 Powder Springs Road SW
Building 300, Suite A
Marietta, Georgia 30064
Location of CLC Offices
Rockmart Office
1101A North Piedmont Avenue
Rockmart, Georgia 30153
Rossville Office
203 Chickamauga Avenue
Rossville, Georgia 30741
Dahlonega Office
989 Grove Street, North B
Dahlonega, GA 30533
Cartersville Office
108 West Main Street
Cartersville, GA 30120
-14-
<PAGE>
Cartersville Office
102 Merchants Square
Cartersville, GA 30121
Rome Office
7 West 4/th/ Avenue
Rome, GA 30161
Dalton Office
336 South Hamilton Street
Dalton, GA 30720
Gainesville Office
565D Shallowford Road
Gainesville, GA 30504
Oakwood Office
Post Office Box 176
Oakwood, GA 30566
Woodstock Office
9740 Main Street, Suite 110
Woodstock, GA 30188
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<PAGE>
EXHIBIT 10.12
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 Ronnie L.
Austin, 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 Year" shall mean the period from the Effective Date to
December 31st of the year of the Effective Date.
<PAGE>
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, divided by a factor equal to
1.03 minus the marginal tax rate.
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: Southland Life Insurance Company
Policy Form: Flexible Premium Adjustable Life Policy
Policy Name: Max UL
Insured's Age and Sex: 51/Male
Riders: None
Ratings: According to the health of the proposed
insured
Option: Level
Face Amount: $1,616,025
Premiums Paid: $600,000
Number of Premium Payments: Single
Assumed Purchase Date: January 3, 2000
2
<PAGE>
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)].
I. Change of Control:
-----------------
Change of Control shall be as defined in paragraph 10.03, ""Change in
---------
Control" Defined", of the Employment Agreement between Ronnie Austin
---------------- --------------------
and Community Trust Financial Services Corporation dated January 1,
1998 (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).
3
<PAGE>
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 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.
4
<PAGE>
Vest Percentage (to a
Age of Executive maximum of 100%)
---------------- ----------------
Age 56 or younger 0%
57 14%
58 28%
59 42%
60 56%
61 70%
62 84%
63 90%
64 95%
65 or older 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 age fifty-seven (57), 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".
-----------------------
5
<PAGE>
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 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
6
<PAGE>
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.
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.
7
<PAGE>
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 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:
--------------------
Ronnie Austin and Community Trust Financial Services Corporation are
parties to an Employment Agreement dated January 1, 1998. 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
8
<PAGE>
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 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.
9
<PAGE>
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/ Angel Byrd By: /s/ William A. Foster, III
- ---------------------------------- ----------------------------------
Witness Title
/s/ T. E. Durham, Jr. /s/ Ronnie L. Austin
- ---------------------------------- ----------------------------------
Witness Ronnie L. Austin
10
<PAGE>
EXHIBIT 10.13
LIFE INSURANCE
ENDORSEMENT METHOD SPLIT DOLLAR PLAN
AGREEMENT
Insurer: Southland Life
Policy Number: 0660000015
Bank: Community Trust Bank
Insured: Ronnie L. Austin
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.
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.
<PAGE>
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 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:
2
<PAGE>
Vested Percentage
Age of Executive (to a maximum of 100%)
---------------- ----------------------
Age 56 or younger 0%
57 14%
58 28%
59 42%
60 56%
61 70%
62 84%
63 90%
64 95%
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.
IX. TERMINATION OF AGREEMENT
This Agreement shall terminate upon the occurrence of any one of the
following:
3
<PAGE>
1. The Insured shall terminate service with the Bank prior to attaining
age fifty-seven (57); or
2. The Insured shall breach any provision of the Employment Agreement
--------------------
between Ronnie Austin and Community Trust Financial Services
Corporation dated January 1, 1998 (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.
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.
4
<PAGE>
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.
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.
5
<PAGE>
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)].
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
6
<PAGE>
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/ Angel Byrd By: /s/ William A. Foster, III
- ------------------------------ -----------------------------------------
Witness - Angel Byrd William A. Foster, III - Chairman
/s/ T. E. Durham, Jr. /s/ Ronnie L. Austin
- ------------------------------ -----------------------------------------
Witness - T. E. Durham, Jr. Ronnie L. Austin
7
<PAGE>
EXHIBIT 10.14
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
DEFERRED COMPENSATION PLAN FOR KEY EMPLOYEES AND DIRECTORS
Community Trust Financial Services Corporation ("Company") hereby
establishes a Deferred Compensation Plan ("Plan") for Key Employees [as defined
by the Administrative Committee of the Deferred Compensation Plan] and members
of the Board of Directors ("Board") of the Company and any wholly-owned
subsidiaries of the Company, as set forth below:
1. Participants. Any Key Employee of the Company or any organization of
------------
which the Company owns a 100% controlling interest, and any member (a
"Director") of the Board of the Company or any organization of which the Company
owns a 100% controlling interest, may elect (the "Election") to become a
participant ("Participant") under the Plan by written notice to the Company.
2. Deferred Amounts. As specified in the Election, any Participant may
----------------
defer all or any portion of his or her salary, bonus, or incentive compensation
as a Key Employee or fees as a Director which are earned for the calendar year
commencing after the date of such Election, except that Key Employees or
Directors first becoming eligible for the Plan may make an election within 30
days after the effective date of initial eligibility, but only with respect to
compensation for services rendered after the date of election. Amounts so
deferred shall be held and paid only as hereinafter provided. Any Participant
may suspend deferral by written notice to the Company. Following any such
suspension, a Key Employee or Director may make a new election first effective
with the next calendar year. Any participant may request a transfer of funds
between investment options as specified in the Funds Transfer Form. Transfers
may not be initiated more than two times in each calendar year.
3. Method of Deferral and Distribution.
-----------------------------------
1. For each Participant electing to participate in the Plan, the
Company shall maintain a deferred money account ("Deferred Money Account") which
may periodically be converted into a stock unit account ("Stock Unit Account")
and/or a mutual fund account ("Reliance Trust Company Lifestyles Investment
Portfolios Account") for each such Participant. Each Participant will be
furnished annually with a statement of these accounts.
2. Deferred Amounts of each Participant shall be credited as a
dollar amount to the Participant's Deferred Money Account on the date they
otherwise would be payable. The Company shall establish a trust under the
provisions of Revenue Procedures 92-64 and 92-65 (the "Trust"), to which amounts
credited to the Participants' Deferred Money Accounts shall be contributed. The
trustee ("Trustee") of the Trust may, in its discretion from time to time,
invest amounts contributed to the Trust in Reliance Trust Company Lifestyles
Investment Portfolios mutual funds and/or in shares of the Company's common
stock by purchasing such shares through an independent broker in the market
where the shares trade. Any shares, including fractional shares, so purchased
with funds from a Participant's Deferred Money Account shall be credited to the
<PAGE>
Participant's Reliance Trust Company Lifestyles Investment Portfolios Account or
Stock Unit Account, and the purchase price plus any broker's commissions shall
be charged to the Participant's Deferred Money Account. Any cash balance
remaining in the Participant's Deferred Money Account after such charge shall be
held and invested by the Trustee of the Trust.
3. Additional credits will be made to each Participant's Deferred
Money Account in dollar amounts equal to the cash dividends (or the fair market
value of dividends paid in property) the Participant would have received from
time to time had he or she been the owner on the record dates with respect
thereto of the number of shares of the Company's common stock equal to the
number of shares in his or her Stock Unit Account on such dates. In the case of
a stock dividend or stock split, additional credits will be made to each
Participant's Stock Unit Account of the number of shares equal to the number of
shares of the Company's common stock which that Participant would have received
had he or she been the owner on the record dates with respect thereto of the
number of shares of the Company's common stock equal to the number of shares in
his or her Stock Unit Account on such dates. The Company shall also credit to
the Participant's Deferred Money Account interest, dividends, capital gains, or
other earnings on investment of amounts in a Participant's Deferred Money
Account to the extent such amounts are invested other than in shares of the
Company's common stock.
4. Distribution.
------------
1. Upon the termination of a Participant's services as an employee
or Director:
1. Payment of the balance in his or her Deferred Money Account
and Reliance Trust Company Lifestyles Investment Portfolios Account, if any,
shall be made to the Participant in cash either as a lump sum or in five annual
payments, such election to be made in writing prior to termination of services,
and
2. Payment of the balance in his Stock Unit Account shall be
made to the Participant in full shares of common stock of the Company with any
fractional shares to be paid in cash based on the market value of the Company's
stock at that time. Distribution of stock likewise must be in either a lump sum
or in five annual payments, such election to be make in writing prior to
termination of services. The election to receive a lump sum or annual payments
must be the same for payments made under sections 4.1.1 and 4.1.2.
2. If a Participant shall cease to be an employee or Director by
reason of his or her death or if he or she shall die after becoming entitled to
distributions hereunder but prior to receipt of all distributions hereunder, all
cash or common stock then distributable hereunder shall be distributed to such
beneficiary as such Participant shall designate by an instrument in writing
filed with the Company, or in the absence of such designation, to his or her
personal representative, or if none is appointed within six months of his or her
death, to his or her spouse or, if not then living, to his or her then living
descendants, per stirpes.
3. If a Participant shall incur an Unforeseeable Emergency as
determined by the Trustee, Participant may request, and Trustee may make, a
distribution of the balance in the Participant's Deferred Money Account and
Reliance Trust Company Lifestyles Investment Portfolios Account, if any, and
payment of the balance in the Participant's Stock Unit Account, as described in
Section D. 1. above. Unforeseeable Emergency shall be defined herein as severe
<PAGE>
financial hardship to the Participant resulting from a sudden and unexpected
illness or accident of the Participant or of a dependent [as defined in Internal
Revenue Code (S) 152(a)] of the Participant, loss of the Participant's property
due to casualty, or other similar extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant. Payment may
not be made to the extent that such hardship is or may be relieved through
reimbursement or compensation by insurance or otherwise; by liquidation of the
Participant's assets, to the extent the liquidation of assets would not itself
cause severe financial hardship; or by cessation of deferrals under the Plan.
Further, withdrawals of amounts because of an Unforeseeable Emergency are
permitted only to the extent reasonably needed to satisfy the emergency need
5. Participant's Rights Unsecured. The right of any Participant to
------------------------------
receive a distribution hereunder in common stock of the Company or in cash shall
be an unsecured claim against the general assets of the Company. The Deferred
Amounts may not be encumbered or assigned by the Participant. Except as
otherwise provided in the Trust established in connection herewith, all common
stock, mutual funds, and cash held by the Trust shall constitute general assets
of the Company and shall be subject to the claims of the Company's creditors in
the event of the Company's insolvency as defined in the Trust.
6. Amendments to the Plan. The Board of Directors of the Company may
----------------------
amend the Plan at any time, without the consent of the Participants or their
beneficiaries, provided, however, that no amendment shall divest any Participant
or beneficiary of rights to which he or she would have been entitled if the Plan
had been terminated on the effective date of such amendment.
7. Termination of Plan. The Board of Directors of the Company may
-------------------
terminate the Plan at any time. Upon termination of the Plan, distributions in
respect of credits to a Participant's Accounts as of the date of termination
shall be made in the manner and at the time heretofore prescribed.
8. Expenses. Costs of administration of the Plan will be paid by the
--------
Company.
9. Effective Date. The effective date of this Plan shall be January 1,
--------------
2000.
IN WITNESS WHEREOF, the Plan has been executed on behalf of the
Company on this 14th day of December, 1999.
COMMUNITY TRUST FINANCIAL SERVICES
CORPORATION
(SEAL) By: /s/ Ronnie Austin
-------------------------------
Name/Title: Ronnie Austin/ President and CEO
Attest: /s/ Angel Byrd
--------------------
Name/Title: Angel Byrd, Secretary
<PAGE>
EXHIBIT 10.15
DIRECTORS DELAYED COMPENSATION PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 26th day of October, 1999 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 R. Alan
Bullock a former member of the Board of Directors of the Bank (hereinafter
referred to as the, "Director") and a present member of the Board of Directors
of Community Trust Financial Services Corporation (hereinafter referred to as,
"CTFSC"), the Bank's parent company..
WITNESSETH:
WHEREAS, it is the consensus of the Board of Directors of the Bank
(hereinafter referred to as the, "Board") that the Director's services to the
Bank in the past have been of exceptional merit and have constituted an
invaluable contribution to the general welfare of the Bank and in bringing it to
its present status of operating efficiency, and its present position in its
field of activity;
WHEREAS, the Director continues to provide service to the Bank by the
Director's service on the Board of Directors of CTFSC;
WHEREAS, it is the desire of the Bank that the Director's past services be
rewarded as herein provided;
ACCORDINGLY, it is the desire of the Bank and the Director to enter into
this agreement under which the Bank will agree to make certain payments to the
Director at retirement or the Director's beneficiary(ies) in the event of the
Director's death pursuant to this Agreement;
FURTHERMORE, it is the intent of the parties hereto that this Directors
Delayed Compensation Plan Agreement be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits for the
Director, and to be considered a non-qualified benefit plan for purposes of the
Employee Retirement Security Act of 1974, as amended ("ERISA"). The Director 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 performed in the past as well
as of the mutual promises and covenants herein contained it is agreed as
follows:
<PAGE>
I. SERVICE
The Director has served the Bank in such capacity and with such duties and
responsibilities as were assigned, and with such compensation as were
determined from time to time by the Board of Directors of the Bank and
continues to serve the Bank by the Director's membership on the CTFSC
Board.
II. FRINGE BENEFITS
The fee continuation benefits provided by this agreement are granted by the
Bank as a fringe benefit to the Director and are not part of any fee
reduction plan or an arrangement deferring a bonus or a fee increase. The
Director has no option to take any current payment or bonus in lieu of
these fee continuation benefits except as set forth hereinafter.
III. RETIREMENT DATE
If the Director continuously serves the Bank through the Director's
membership on the CTFSC Board, the Director begin receiving the benefits
set forth herein thirty (30) days following the Director's sixty-fifth
(65th) birthday, or thirty (30) days following the Director's actual
retirement date, whichever event shall last occur. Notwithstanding the
foregoing, the Director shall retire on or before attaining age seventy
(70).
IV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT
Upon said retirement, commencing thirty (30) days following the Director's
sixty-fifth (65/th/) birthday or commencing thirty (30) days following the
Director's actual retirement date, whichever event shall last occur, the
Bank shall pay the Director an annual benefit equal to eighteen thousand
nine hundred sixty-two dollars and No/00ths ($ 18,962.00) for a period of
five (5) years, provided that if less than five (5) such annual payments
have been made prior to the death of the Director, the Bank shall either,
at the discretion of the Bank, continue such annual payments to the
individual or individuals the Director may have designated in writing and
filed with the Bank until the full number of five (5) annual payments have
been made, or make the total amount of said payment due in a lump sum
discounted to present value as set forth in Subparagraph XI (K) to said
beneficiary(ies). In the absence of any effective designation of
beneficiary, any such amounts becoming due and payable upon the death of
the Director shall be payable to the duly qualified executor or
administrator of the Director's estate. Said payments due hereunder shall
begin the first day of the second month following the decease of the
Director. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder if the
Director commits suicide on or before the 26/th/ day of October, 2001.
2
<PAGE>
V. DEATH BENEFIT PRIOR TO RETIREMENT
In the event the Director should die while actively serving the Bank or
CTFSC at any time after the date of this Agreement but prior to the
Director attaining the age of sixty-five (65) years, the Bank will pay an
annual benefit as set forth in Paragraph IV in either, at the discretion
of the Bank, a lump sum discounted to present value as set forth in
Subparagraph XI (K) or annual payments for a period of five (5) years to
such individual or individuals as the Director may have designated in
writing and filed with the Bank. In the absence of any effective
designation of beneficiary, any such amounts becoming due and payable upon
the death of the Director shall be payable to the duly qualified executor
or administrator of the Director's estate. Said payments due hereunder
shall begin the first day of the second month following the decease of the
Director. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder if the
Director commits suicide on or before the 26/th/ day of October, 2001.
VI. BENEFIT ACCOUNTING
The Bank shall account for this benefit using the regulatory accounting
principles of the Bank's primary federal regulator. The Bank shall
establish an accrued liability retirement account for the Director into
which appropriate reserves shall be accrued.
VII. VESTING
The Director shall be one hundred percent vested in the benefits that are
the subject of this Agreement.
VIII. OTHER TERMINATION OF SERVICE
Subject to Subparagraph VIII (i) hereinbelow, in the event that the
service of the Director with CTFSC shall terminate prior to retirement
from active service, as provided in Paragraph III, by the Director's
voluntary action, or by the Director's discharge by CTFSC without cause,
then the Bank shall pay to the Director an annual benefit as set forth in
Paragraph IV. This annual benefit shall commence the first day of the
month following the month in which the Director attains age sixty-five
(65).
In the event the Director's death should occur prior to the Director
receiving the full benefit as set forth in this Paragraph VIII, an benefit
due, or a lump sum discounted to present value as set forth in
Subparagraph XI (K), at the discretion of the Bank, shall be paid to such
individual or individuals as the Director may have designated in writing
and filed with the Bank. In the absence of any effective designation of
beneficiary, any such amounts shall be payable to the duly
3
<PAGE>
qualified executor or administrator of the Director's estate. Said payments
due hereunder shall begin the first day of the second month following the
decease of the Director. Provided, however, that anything hereinabove to
the contrary notwithstanding, no death benefit shall be payable hereunder
if the Director commits suicide on or before the 26/th/ day of October,
2001.
(i) Discharge for Cause: In the event the Director shall be
-------------------
discharged from service with CTFSC for cause at any time, all benefits
provided herein shall be forfeited. The term for "cause" shall mean
any of the following that result in an adverse effect on CTFSC or the
Bank: (i) gross negligence or gross neglect; (ii) the commission of a
felony or gross misdemeanor involving moral turpitude, fraud, or
dishonesty; (iii) the willful violation of any law, rule, or
regulation (other than a traffic violation or similar offense); (iv)
an intentional failure to perform stated duties; or (v) a breach of
fiduciary duty involving personal profit. If a dispute arises as to
discharge for "cause", such dispute shall be resolved by arbitration
as set forth in this Directors Delayed Compensation Plan Agreement.
IX. CHANGE OF CONTROL
Change of Control shall be deemed to be the cumulative transfer of more
than fifty percent (50%) of the voting stock of CTFSC from the date of this
Agreement. For the purposes of this Agreement, transfers on account of
deaths or gifts, transfers between family members or transfers to a
qualified retirement plan maintained by CTFSC shall not be considered in
determining whether there has been a change in control. Upon a Change of
Control, if the Director subsequently suffers a Termination of Service
(voluntary or involuntary), except for cause, then the Director shall
receive the benefits as set forth in Paragraph VIII herein.
X. RESTRICTIONS ON 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 Directors Delayed
Compensation Plan Agreement. The Directors, 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 Directors Delayed Compensation Plan
Agreement 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
Directors Delayed Compensation Plan Agreement, 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 Director be deemed to have any lien nor
4
<PAGE>
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 Director, then the Director shall assist the
Bank by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
XI. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
---------------------------------------
Neither the Director, nor the Director's surviving spouse, nor any
other beneficiary(ies) under this Directors Delayed Compensation Plan
Agreement 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 Director
or the Director's beneficiary(ies), nor be transferable by operation
of law in the event of bankruptcy, insolvency or otherwise. In the
event the Director 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
Directors Delayed Compensation Plan Agreement. This Directors Delayed
Compensation Plan Agreement 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 Director, this Directors Delayed Compensation Plan
Agreement may be amended or revoked at any time or times, in whole or
in part, by the mutual written consent of the Director and the Bank.
D. Gender:
------
Whenever in this Directors Delayed Compensation Plan Agreement words
are used in the masculine or neuter gender, they shall be read and
5
<PAGE>
construed as in the masculine, feminine or neuter gender, whenever
they should so apply.
E. Effect on Other Benefit Plans of the Bank or CTFSC:
--------------------------------------------------
Nothing contained in this Directors Delayed Compensation Plan
Agreement shall affect the right of the Director 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 or CTFSC's existing or future
compensation structure.
F. Headings:
--------
Headings and subheadings in this Directors Delayed Compensation Plan
Agreement are inserted for reference and convenience only and shall
not be deemed a part of this Directors Delayed Compensation Plan
Agreement.
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 Director pursuant to this Directors Delayed
Compensation Plan Agreement, 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 Directors
Delayed Compensation Plan Agreement 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
Directors Delayed Compensation Plan Agreement shall remain in full
force and effect notwithstanding such partial invalidity.
J. Continuation as Director:
------------------------
Neither this Agreement nor the payments of any benefits thereunder
shall be construed as giving to the Director any right to be retained
as a member of the Board of Directors of CTFSC.
6
<PAGE>
K. Present Value:
-------------
All present value calculations under this Agreement shall be based on
the following interest rate:
Interest Rate: The interest rate of 30-year Treasury securities
published by the Board of Directors of the Federal
Reserve System for the month immediately preceding the
month in which the present value is determined.
XII. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
--------------------------------------
The "Named Fiduciary and Plan Administrator" of this Directors Delayed
Compensation Plan Agreement 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 Directors Delayed Compensation Plan
Agreement. The Named Fiduciary may delegate to others certain aspects
of the management and operation responsibilities of the Directors
Delayed Compensation Plan Agreement 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 Directors
Delayed Compensation Plan Agreement and benefits are not paid to the
Director (or to the Director's beneficiary(ies) in the case of the
Director'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 Directors Delayed
Compensation Plan Agreement 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 fails 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
7
<PAGE>
denial. Claimants may review this Directors Delayed Compensation Plan
Agreement or any documents relating thereto and submit any written
issues and comments it may feel appropriate. In its 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 Directors Delayed Compensation Plan
Agreement or the meaning and effect of the terms and conditions
thereof, then claimants may submit the dispute to an Arbitrator for
final arbitration. The Arbitrator shall be selected by mutual
agreement of the Bank and the claimants. The Arbitrator shall operate
under any generally recognized set of arbitration rules. The parties
hereto agree that they and their heirs, personal representatives,
successors and assigns shall be bound by the decision of such
Arbitrator with respect to any controversy properly submitted to it
for determination.
Where a dispute arises as to CTFSC's discharge of the Director for
"cause", such dispute shall likewise be submitted to arbitration as
above-described and the parties hereto agree to be bound by the
decision thereunder.
XIII. 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 Directors Delayed Compensation Plan Agreement,
then the Bank reserves the right to terminate or modify this Agreement
accordingly. Upon a Change of Control (Paragraph IX), 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 26/th/ day of
October, 1999 and that, upon execution, each has received a conforming copy.
8
<PAGE>
COMMUNITY TRUST BANK
Hiram, Georgia
/s/ Amanda Sweatman By: /s/ J. E. Durham, Jr. SVP
- --------------------- ---------------------------
Witness Title
/s/ Amanda Sweatman /s/ R. Alan Bullock
- --------------------- -------------------------------
Witness R. Alan Bullock
9
<PAGE>
EXHIBIT 10.16
DIRECTORS DELAYED COMPENSATION PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 26/th/ day of October, 1999 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 Bobbie P.
Cooper, a member of the Board of Directors of the Bank (hereinafter referred to
as the, "Director").
WITNESSETH:
WHEREAS, it is the consensus of the Board of Directors (hereinafter
referred to as the, "Board") that the Director's services to the Bank in the
past have been of exceptional merit and have constituted an invaluable
contribution to the general welfare of the Bank and in bringing it to its
present status of operating efficiency, and its present position in its field of
activity;
WHEREAS, the Director's experience, knowledge of the affairs of the Bank,
reputation, and contacts in the industry are so valuable that assurance of the
Director's continued services is essential for the future growth and profits of
the Bank and it is in the best interests of the Bank to arrange terms of
continued employment for the Director so as to reasonably assure the Director's
remaining in the Bank's employment or in the employment of the Bank's parent
company, Community Trust Financial Services Corporation (hereinafter referred
to as "CTFSC") during the Director's lifetime or until the age of retirement;
WHEREAS, it is the desire of the Bank that the Director's services be
retained as herein provided;
WHEREAS, the Director is willing to continue in the employ of the Bank or
CTFSC provided the Bank agrees to pay the Director's or the Director's
beneficiary(ies) certain benefits in accordance with the terms and conditions
hereinafter set forth;
ACCORDINGLY, it is the desire of the Bank and the Director to enter into
this agreement under which the Bank will agree to make certain payments to the
Director at retirement or the Director's beneficiary(ies) in the event of the
Director's death pursuant to this Agreement;
FURTHERMORE, it is the intent of the parties hereto that this Directors
Delayed Compensation Plan Agreement be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits for the
Director, and to be considered a non-qualified benefit plan for purposes of the
Employee Retirement Security Act of 1974, as amended ("ERISA"). The Director is
fully advised of the Bank's financial status and has had substantial input in
the design and operation of this benefit plan; and
<PAGE>
NOW, THEREFORE, in consideration of services performed in the past and to
be performed in the future as well as of the mutual promises and covenants
herein contained it is agreed as follows:
I. SERVICE
The Director will continue to serve the Bank in such capacity and with such
duties and responsibilities as may be assigned, and with such compensation
as may be determined from time to time by the Board of Directors of the
Bank.
II. FRINGE BENEFITS
The fee continuation benefits provided by this agreement are granted by the
Bank as a fringe benefit to the Director and are not part of any fee
reduction plan or an arrangement deferring a bonus or a fee increase. The
Director has no option to take any current payment or bonus in lieu of
these fee continuation benefits except as set forth hereinafter.
III. RETIREMENT DATE
If the Director continuously serves the Bank or CTFSC, the Director shall
begin receiving the benefits set forth herein thirty (30) days following
the Director's sixty-fifth (65th) birthday, or thirty (30) days following
the Director's actual retirement date, whichever event shall last occur.
Notwithstanding the foregoing, the Director shall retire on or before
attaining age seventy (70).
IV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT
Upon said retirement and commencing thirty (30) days following the
Director's sixty-fifth (65/th/) birthday or commencing thirty (30) days
following the Director's actual retirement date, whichever event shall last
occur, the Bank shall pay the Director an annual benefit equal to ten
thousand one hundred twenty-four dollars and No/00ths ($ 10,124.00) for a
period of five (5) years, provided that if less than five (5) such annual
payments have been made prior to the death of the Director, the Bank shall
either, at the discretion of the Bank, continue such annual payments to the
individual or individuals the Director may have designated in writing and
filed with the Bank until the full number of five (5) annual payments have
been made, or make the total amount of said payment due in a lump sum
discounted to present value as set forth in Subparagraph XI (K) to said
beneficiary(ies). In the absence of any effective designation of
beneficiary, any such amounts becoming due and payable upon the death of
the Director shall be payable to the duly qualified executor or
administrator of the Director's estate. Said payments due hereunder shall
begin the first day of the second month following the decease of the
Director. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder if the
Director commits suicide on or before the 26/th/ day of October, 2001.
2
<PAGE>
V. DEATH BENEFIT PRIOR TO RETIREMENT
In the event the Director should die while actively serving the Bank or
CTFSC at any time after the date of this Agreement but prior to the
Director attaining the age of sixty-five (65) years, the Bank will pay an
annual benefit as set forth in Paragraph IV herein in either, at the
discretion of the Bank, a lump sum discounted to present value as set
forth in Subparagraph XI (K) or annual payments for a period of five (5)
years to such individual or individuals as the Director may have
designated in writing and filed with the Bank. In the absence of any
effective designation of beneficiary, any such amounts becoming due and
payable upon the death of the Director shall be payable to the duly
qualified executor or administrator of the Director's estate. Said
payments due hereunder shall begin the first day of the second month
following the decease of the Director. Provided, however, that anything
hereinabove to the contrary notwithstanding, no death benefit shall be
payable hereunder if the Director commits suicide on or before the 26th
day of October, 2001.
VI. BENEFIT ACCOUNTING
The Bank shall account for this benefit using the regulatory accounting
principles of the Bank's primary federal regulator. The Bank shall
establish an accrued liability retirement account for the Director into
which appropriate reserves shall be accrued.
VII. VESTING
The Director shall be one hundred percent vested in the benefits that are
the subject of this Agreement.
VIII. OTHER TERMINATION OF SERVICE
Subject to Subparagraph VIII (i) hereinbelow, in the event that the
service of the Director shall terminate prior to retirement from active
service, as provided in Paragraph III, by the Director's voluntary action,
or by the Director's discharge by the Bank or CTFSC without cause, then
the Bank shall pay to the Director an annual benefit as set forth in
Paragraph IV. This annual benefit shall commence the first day of the
month following the month in which the Director attains age sixty-five
(65).
In the event the Director's death should occur prior to the Director
receiving the full benefit as set forth in this Paragraph VIII, any
benefit due, or a lump sum discounted to present value as set forth in
Subparagraph XI (K), at the discretion of the Bank, shall be paid to such
individual or individuals as the Director may have designated in writing
and filed with the Bank. In the absence of any effective designation of
beneficiary, any such amounts shall be payable to the duly qualified
executor or administrator of the Director's estate. Said payments due
3
<PAGE>
hereunder shall begin the first day of the second month following the
decease of the Director. Provided, however, that anything hereinabove to
the contrary notwithstanding, no death benefit shall be payable hereunder
if the Director commits suicide on or before the 26th day of October,
2001.
(i) Discharge for Cause: In the event the Director shall be
-------------------
discharged from service with the Bank or CTFSC for cause at any time,
all benefits provided herein shall be forfeited. The term for "cause"
shall mean any of the following that result in an adverse effect on
the Bank or CTFSC: (i) gross negligence or gross neglect; (ii) the
commission of a felony or gross misdemeanor involving moral turpitude,
fraud, or dishonesty; (iii) the willful violation of any law, rule, or
regulation (other than a traffic violation or similar offense); (iv)
an intentional failure to perform stated duties; or (v) a breach of
fiduciary duty involving personal profit. If a dispute arises as to
discharge for "cause", such dispute shall be resolved by arbitration
as set forth in this Directors Delayed Compensation Plan Agreement.
IX. CHANGE OF CONTROL
Change of Control shall be deemed to be the cumulative transfer of more
than fifty percent (50%) of the voting stock of the Bank or CTFSC from the
date of this Agreement. For the purposes of this Agreement, transfers on
account of deaths or gifts, transfers between family members or transfers
to a qualified retirement plan maintained by the Bank or CTFSC shall not be
considered in determining whether there has been a change in control. Upon
a Change of Control, if the Director subsequently suffers a Termination of
Service (voluntary or involuntary), except for cause, then the Director
shall receive the benefits as set forth in Paragraph IV herein.
X. RESTRICTIONS ON 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 Directors Delayed
Compensation Plan Agreement. The Directors, 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 Directors Delayed Compensation Plan
Agreement 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
Directors Delayed Compensation Plan Agreement, 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 Director be deemed to have any lien nor
4
<PAGE>
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 Director, then the Director shall assist the
Bank by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
XI. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
---------------------------------------
Neither the Director, nor the Director's surviving spouse, nor any
other beneficiary(ies) under this Directors Delayed Compensation Plan
Agreement 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 Director
or the Director's beneficiary(ies), nor be transferable by operation
of law in the event of bankruptcy, insolvency or otherwise. In the
event the Director 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
Directors Delayed Compensation Plan Agreement. This Directors Delayed
Compensation Plan Agreement 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 Director, this Directors Delayed Compensation Plan
Agreement may be amended or revoked at any time or times, in whole or
in part, by the mutual written consent of the Director and the Bank.
5
<PAGE>
D. Gender:
------
Whenever in this Directors Delayed Compensation Plan 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.
E. Effect on Other Benefit Plans of the Bank or CTFSC:
--------------------------------------------------
Nothing contained in this Directors Delayed Compensation Plan
Agreement shall affect the right of the Director 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 or CTFSC's existing or future
compensation structure.
F. Headings:
--------
Headings and subheadings in this Directors Delayed Compensation Plan
Agreement are inserted for reference and convenience only and shall
not be deemed a part of this Directors Delayed Compensation Plan
Agreement.
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 Director pursuant to this Directors Delayed
Compensation Plan Agreement, 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 Directors
Delayed Compensation Plan Agreement 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
Directors Delayed Compensation Plan Agreement shall remain in full
force and effect notwithstanding such partial invalidity.
6
<PAGE>
J. Continuation as Director:
------------------------
Neither this Agreement nor the payments of any benefits thereunder
shall be construed as giving to the Director any right to be retained
as a member of the Board of Directors of the Bank or CTFSC.
K. Present Value:
-------------
All present value calculations under this Agreement shall be based on
the following interest rate:
Interest Rate: The interest rate of 30-year Treasury securities
published by the Board of Directors of the Federal
Reserve System for the month immediately preceding the
month in which the present value is determined.
XII. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
--------------------------------------
The "Named Fiduciary and Plan Administrator" of this Directors Delayed
Compensation Plan Agreement 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 Directors Delayed Compensation Plan
Agreement. The Named Fiduciary may delegate to others certain aspects
of the management and operation responsibilities of the Directors
Delayed Compensation Plan Agreement 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 Directors
Delayed Compensation Plan Agreement and benefits are not paid to the
Director (or to the Director's beneficiary(ies) in the case of the
Director'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, it 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 Directors Delayed
Compensation Plan Agreement upon which the denial is based and any
additional material or information necessary to perfect the claim.
Such
7
<PAGE>
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 fails 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 Directors Delayed
Compensation Plan Agreement or any documents relating thereto and
submit any written issues and comments it may feel appropriate. In
its 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 Directors Delayed Compensation Plan
Agreement or the meaning and effect of the terms and conditions
thereof, then claimants may submit the dispute to an Arbitrator for
final arbitration. The Arbitrator shall be selected by mutual
agreement of the Bank and the claimants. The Arbitrator shall operate
under any generally recognized set of arbitration rules. The parties
hereto agree that they and their heirs, personal representatives,
successors and assigns shall be bound by the decision of such
Arbitrator with respect to any controversy properly submitted to it
for determination.
Where a dispute arises as to the Bank's or CTFSC's discharge of the
Director for "cause", such dispute shall likewise be submitted to
arbitration as above-described and the parties hereto agree to be
bound by the decision thereunder.
XIII. 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 Directors Delayed Compensation Plan Agreement,
then the Bank reserves the right to terminate or modify this Agreement
accordingly. Upon a Change of Control (Paragraph IX), 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 26th day of
October, 1999 and that, upon execution, each has received a conforming copy.
8
<PAGE>
COMMUNITY TRUST BANK
Hiram, Georgia
/s/ Valerie F. Pace By: /s/ J. E. Durham, Jr. SVP
- --------------------- ----------------------------
Witness Title
/s/ Valerie F. Pace /s/ Bobbie P. Cooper
- --------------------- --------------------------------
Witness Bobbie P. Cooper
9
<PAGE>
EXHIBIT 10.17
DIRECTORS DELAYED COMPENSATION PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 26/th/ day of October, 1999 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 J. Calvin
Earwood, a member of the Board of Directors of the Bank (hereinafter referred to
as the, "Director").
WITNESSETH:
-----------
WHEREAS, it is the consensus of the Board of Directors (hereinafter
referred to as the, "Board") that the Director's services to the Bank in the
past have been of exceptional merit and have constituted an invaluable
contribution to the general welfare of the Bank and in bringing it to its
present status of operating efficiency, and its present position in its field of
activity;
WHEREAS, the Director's experience, knowledge of the affairs of the Bank,
reputation, and contacts in the industry are so valuable that assurance of the
Director's continued services is essential for the future growth and profits of
the Bank and it is in the best interests of the Bank to arrange terms of
continued employment for the Director so as to reasonably assure the Director's
remaining in the Bank's employment or in the employment of the Bank's parent
company, Community Trust Financial Services Corporation (hereinafter referred
to as "CTFSC") during the Director's lifetime or until the age of retirement;
WHEREAS, it is the desire of the Bank that the Director's services be
retained as herein provided;
WHEREAS, the Director is willing to continue in the employ of the Bank or
CTFSC provided the Bank agrees to pay the Director's or the Director's
beneficiary(ies) certain benefits in accordance with the terms and conditions
hereinafter set forth;
ACCORDINGLY, it is the desire of the Bank and the Director to enter into
this agreement under which the Bank will agree to make certain payments to the
Director at retirement or the Director's beneficiary(ies) in the event of the
Director's death pursuant to this Agreement;
FURTHERMORE, it is the intent of the parties hereto that this Directors
Delayed Compensation Plan Agreement be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits for the
Director, and to be considered a non-qualified benefit plan for purposes of the
Employee Retirement Security Act of 1974, as amended ("ERISA"). The Director is
fully advised of the Bank's financial status and has had substantial input in
the design and operation of this benefit plan; and
<PAGE>
NOW, THEREFORE, in consideration of services performed in the past and to
be performed in the future as well as of the mutual promises and covenants
herein contained it is agreed as follows:
I. SERVICE
The Director will continue to serve the Bank in such capacity and with such
duties and responsibilities as may be assigned, and with such compensation
as may be determined from time to time by the Board of Directors of the
Bank.
II. FRINGE BENEFITS
The fee continuation benefits provided by this agreement are granted by the
Bank as a fringe benefit to the Director and are not part of any fee
reduction plan or an arrangement deferring a bonus or a fee increase. The
Director has no option to take any current payment or bonus in lieu of
these fee continuation benefits except as set forth hereinafter.
III. RETIREMENT DATE
If the Director continuously serves the Bank or CTFSC, the Director shall
begin receiving the benefits set forth herein thirty (30) days following
the Director's sixty-fifth (65th) birthday, or thirty (30) days following
the Director's actual retirement date, whichever event shall last occur.
Notwithstanding the foregoing, the Director shall retire on or before
attaining age seventy (70).
IV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT
Upon said retirement and commencing thirty (30) days following the
Director's sixty-fifth (65th) birthday or commencing thirty (30) days
following the Director's actual retirement date, whichever event shall last
occur, the Bank shall pay the Director an annual benefit equal to eleven
thousand eight hundred forty-three dollars and No/00ths ($ 11,843.00) for a
period of five (5) years, provided that if less than five (5) such annual
payments have been made prior to the death of the Director, the Bank shall
either, at the discretion of the Bank, continue such annual payments to the
individual or individuals the Director may have designated in writing and
filed with the Bank until the full number of five (5) annual payments have
been made, or make the total amount of said payment due in a lump sum
discounted to present value as set forth in Subparagraph XI (K) to said
beneficiary(ies). In the absence of any effective designation of
beneficiary, any such amounts becoming due and payable upon the death of
the Director shall be payable to the duly qualified executor or
administrator of the Director's estate. Said payments due hereunder shall
begin the first day of the second month following the decease of the
Director. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable
2
<PAGE>
hereunder if the Director commits suicide on or before the 26/th/ day of
October, 2001.
V. DEATH BENEFIT PRIOR TO RETIREMENT
In the event the Director should die while actively serving the Bank or
CTFSC at any time after the date of this Agreement but prior to the
Director attaining the age of sixty-five (65) years, the Bank will pay an
annual benefit as set forth in Paragraph IV herein in either, at the
discretion of the Bank, a lump sum discounted to present value as set
forth in Subparagraph XI (K) or annual payments for a period of five (5)
years to such individual or individuals as the Director may have
designated in writing and filed with the Bank. In the absence of any
effective designation of beneficiary, any such amounts becoming due and
payable upon the death of the Director shall be payable to the duly
qualified executor or administrator of the Director's estate. Said
payments due hereunder shall begin the first day of the second month
following the decease of the Director. Provided, however, that anything
hereinabove to the contrary notwithstanding, no death benefit shall be
payable hereunder if the Director commits suicide on or before the 26/th/
day of October, 2001.
VI. BENEFIT ACCOUNTING
The Bank shall account for this benefit using the regulatory accounting
principles of the Bank's primary federal regulator. The Bank shall
establish an accrued liability retirement account for the Director into
which appropriate reserves shall be accrued.
VII. VESTING
The Director shall be one hundred percent vested in the benefits that are
the subject of this Agreement.
VIII. OTHER TERMINATION OF SERVICE
Subject to Subparagraph VIII (i) hereinbelow, in the event that the
service of the Director shall terminate prior to retirement from active
service, as provided in Paragraph III, by the Director's voluntary action,
or by the Director's discharge by the Bank or CTFSC without cause, then
the Bank shall pay to the Director an annual benefit as set forth in
Paragraph IV. This annual benefit shall commence the first day of the
month following the month in which the Director attains age sixty-five
(65).
In the event the Director's death should occur prior to the Director
receiving the full benefit as set forth in this Paragraph VIII, any
benefit due, or a lump sum discounted to present value as set forth in
Subparagraph XI (K), at the discretion of the Bank, shall be paid to such
individual or individuals as the Director may have designated in writing
and filed with the Bank. In the absence of any
3
<PAGE>
effective designation of beneficiary, any such amounts shall be payable to
the duly qualified executor or administrator of the Director's estate. Said
payments due hereunder shall begin the first day of the second month
following the decease of the Director. Provided, however, that anything
hereinabove to the contrary notwithstanding, no death benefit shall be
payable hereunder if the Director commits suicide on or before the 26/th/
day of October, 2001.
(i) Discharge for Cause: In the event the Director shall be
-------------------
discharged from service with the Bank or CTFSC for cause at any time,
all benefits provided herein shall be forfeited. The term for "cause"
shall mean any of the following that result in an adverse effect on
the Bank or CTFSC: (i) gross negligence or gross neglect; (ii) the
commission of a felony or gross misdemeanor involving moral turpitude,
fraud, or dishonesty; (iii) the willful violation of any law, rule, or
regulation (other than a traffic violation or similar offense); (iv)
an intentional failure to perform stated duties; or (v) a breach of
fiduciary duty involving personal profit. If a dispute arises as to
discharge for "cause", such dispute shall be resolved by arbitration
as set forth in this Directors Delayed Compensation Plan Agreement.
IX. CHANGE OF CONTROL
Change of Control shall be deemed to be the cumulative transfer of more
than fifty percent (50%) of the voting stock of the Bank or CTFSC from the
date of this Agreement. For the purposes of this Agreement, transfers on
account of deaths or gifts, transfers between family members or transfers
to a qualified retirement plan maintained by the Bank or CTFSC shall not be
considered in determining whether there has been a change in control. Upon
a Change of Control, if the Director subsequently suffers a Termination of
Service (voluntary or involuntary), except for cause, then the Director
shall receive the benefits as set forth in Paragraph IV herein.
X. RESTRICTIONS ON 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 Directors Delayed
Compensation Plan Agreement. The Directors, 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 Directors Delayed Compensation Plan
Agreement 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
Directors Delayed Compensation Plan Agreement, in whole or in part, through
the purchase of life insurance, mutual funds, disability policies or
annuities, the Bank reserves the
4
<PAGE>
absolute right, in its sole discretion, to terminate such funding at any
time, in whole or in part. At no time shall any Director 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 Director, then the Director shall assist the
Bank by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
XI. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
---------------------------------------
Neither the Director, nor the Director's surviving spouse, nor any
other beneficiary(ies) under this Directors Delayed Compensation Plan
Agreement 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 Director
or the Director's beneficiary(ies), nor be transferable by operation
of law in the event of bankruptcy, insolvency or otherwise. In the
event the Director 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
Directors Delayed Compensation Plan Agreement. This Directors Delayed
Compensation Plan Agreement 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 Director, this Directors Delayed Compensation Plan
Agreement may be amended or revoked at any time or times, in whole or
in part, by the mutual written consent of the Director and the Bank.
5
<PAGE>
D. Gender:
------
Whenever in this Directors Delayed Compensation Plan 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.
E. Effect on Other Benefit Plans of the Bank or CTFSC:
--------------------------------------------------
Nothing contained in this Directors Delayed Compensation Plan
Agreement shall affect the right of the Director 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 or CTFSC's existing or future
compensation structure.
F. Headings:
--------
Headings and subheadings in this Directors Delayed Compensation Plan
Agreement are inserted for reference and convenience only and shall
not be deemed a part of this Directors Delayed Compensation Plan
Agreement.
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 Director pursuant to this Directors Delayed
Compensation Plan Agreement, 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 Directors
Delayed Compensation Plan Agreement 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
Directors Delayed Compensation Plan Agreement shall remain in full
force and effect notwithstanding such partial invalidity.
6
<PAGE>
J. Continuation as Director:
------------------------
Neither this Agreement nor the payments of any benefits thereunder
shall be construed as giving to the Director any right to be retained
as a member of the Board of Directors of the Bank or CTFSC.
K. Present Value:
-------------
All present value calculations under this Agreement shall be based on
the following interest rate:
Interest Rate: The interest rate of 30-year Treasury securities
published by the Board of Directors of the Federal
Reserve System for the month immediately preceding the
month in which the present value is determined.
XII. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
--------------------------------------
The "Named Fiduciary and Plan Administrator" of this Directors Delayed
Compensation Plan Agreement 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 Directors Delayed Compensation Plan
Agreement. The Named Fiduciary may delegate to others certain aspects
of the management and operation responsibilities of the Directors
Delayed Compensation Plan Agreement 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 Directors
Delayed Compensation Plan Agreement and benefits are not paid to the
Director (or to the Director's beneficiary(ies) in the case of the
Director'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, it 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 Directors Delayed
Compensation Plan Agreement upon which the denial is based and any
additional material or information necessary to perfect the claim.
Such
7
<PAGE>
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 fails 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 Directors Delayed
Compensation Plan Agreement or any documents relating thereto and
submit any written issues and comments it may feel appropriate. In
its 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 Directors Delayed Compensation Plan
Agreement or the meaning and effect of the terms and conditions
thereof, then claimants may submit the dispute to an Arbitrator for
final arbitration. The Arbitrator shall be selected by mutual
agreement of the Bank and the claimants. The Arbitrator shall operate
under any generally recognized set of arbitration rules. The parties
hereto agree that they and their heirs, personal representatives,
successors and assigns shall be bound by the decision of such
Arbitrator with respect to any controversy properly submitted to it
for determination.
Where a dispute arises as to the Bank's or CTFSC's discharge of the
Director for "cause", such dispute shall likewise be submitted to
arbitration as above-described and the parties hereto agree to be
bound by the decision thereunder.
XIII. 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 Directors Delayed Compensation Plan Agreement,
then the Bank reserves the right to terminate or modify this Agreement
accordingly. Upon a Change of Control (Paragraph IX), 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 26/th/ day of
October, 1999 and that, upon execution, each has received a conforming copy.
8
<PAGE>
COMMUNITY TRUST BANK
Hiram, Georgia
/s/ Amanda Sweatman By: /s/ T. E. Durham, Jr. SVP
- --------------------- -----------------------------
Witness Title
/s/ Amanda Sweatman /s/ J. Calvin Earwood
- --------------------- ---------------------------------
Witness J. Calvin Earwood
9
<PAGE>
EXHIBIT 10.18
DIRECTORS DELAYED COMPENSATION PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 26/th/ day of October, 1999 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 William
A. Foster, III, a member of the Board of Directors of the Bank (hereinafter
referred to as the, "Director").
WITNESSETH:
-----------
WHEREAS, it is the consensus of the Board of Directors (hereinafter
referred to as the, "Board") that the Director's services to the Bank in the
past have been of exceptional merit and have constituted an invaluable
contribution to the general welfare of the Bank and in bringing it to its
present status of operating efficiency, and its present position in its field of
activity;
WHEREAS, the Director's experience, knowledge of the affairs of the Bank,
reputation, and contacts in the industry are so valuable that assurance of the
Director's continued services is essential for the future growth and profits of
the Bank and it is in the best interests of the Bank to arrange terms of
continued employment for the Director so as to reasonably assure the Director's
remaining in the Bank's employment or in the employment of the Bank's parent
company, Community Trust Financial Services Corporation (hereinafter referred
to as "CTFSC") during the Director's lifetime or until the age of retirement;
WHEREAS, it is the desire of the Bank that the Director's services be
retained as herein provided;
WHEREAS, the Director is willing to continue in the employ of the Bank or
CTFSC provided the Bank agrees to pay the Director's or the Director's
beneficiary(ies) certain benefits in accordance with the terms and conditions
hereinafter set forth;
ACCORDINGLY, it is the desire of the Bank and the Director to enter into
this agreement under which the Bank will agree to make certain payments to the
Director at retirement or the Director's beneficiary(ies) in the event of the
Director's death pursuant to this Agreement;
FURTHERMORE, it is the intent of the parties hereto that this Directors
Delayed Compensation Plan Agreement be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits for the
Director, and to be considered a non-qualified benefit plan for purposes of the
Employee Retirement Security Act of 1974, as amended ("ERISA"). The Director is
fully advised of the Bank's financial status and has had substantial input in
the design and operation of this benefit plan; and
<PAGE>
NOW, THEREFORE, in consideration of services performed in the past and to
be performed in the future as well as of the mutual promises and covenants
herein contained it is agreed as follows:
I. SERVICE
The Director will continue to serve the Bank in such capacity and with such
duties and responsibilities as may be assigned, and with such compensation
as may be determined from time to time by the Board of Directors of the
Bank.
II. FRINGE BENEFITS
The fee continuation benefits provided by this agreement are granted by the
Bank as a fringe benefit to the Director and are not part of any fee
reduction plan or an arrangement deferring a bonus or a fee increase. The
Director has no option to take any current payment or bonus in lieu of
these fee continuation benefits except as set forth hereinafter.
III. RETIREMENT DATE
If the Director continuously serves the Bank or CTFSC, the Director shall
begin receiving the benefits set forth herein thirty (30) days following
the Director's sixty-fifth (65th) birthday, or thirty (30) days following
the Director's actual retirement date, whichever event shall last occur.
Notwithstanding the foregoing, the Director shall retire on or before
attaining age seventy (70).
IV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT
Upon said retirement and commencing thirty (30) days following the
Director's sixty-fifth (65th) birthday or commencing thirty (30) days
following the Director's actual retirement date, whichever event shall last
occur, the Bank shall pay the Director an annual benefit equal to thirteen
thousand three hundred twenty-two dollars and No/00ths ($ 13,322.00) for a
period of five (5) years, provided that if less than five (5) such annual
payments have been made prior to the death of the Director, the Bank shall
either, at the discretion of the Bank, continue such annual payments to the
individual or individuals the Director may have designated in writing and
filed with the Bank until the full number of five (5) annual payments have
been made, or make the total amount of said payment due in a lump sum
discounted to present value as set forth in Subparagraph XI (K) to said
beneficiary(ies). In the absence of any effective designation of
beneficiary, any such amounts becoming due and payable upon the death of
the Director shall be payable to the duly qualified executor or
administrator of the Director's estate. Said payments due hereunder shall
begin the first day of the second month following the decease of the
Director. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable
2
<PAGE>
hereunder if the Director commits suicide on or before the 26/th/ day of
October, 2001.
V. DEATH BENEFIT PRIOR TO RETIREMENT
In the event the Director should die while actively serving the Bank or
CTFSC at any time after the date of this Agreement but prior to the
Director attaining the age of sixty-five (65) years, the Bank will pay an
annual benefit as set forth in Paragraph IV herein in either, at the
discretion of the Bank, a lump sum discounted to present value as set
forth in Subparagraph XI (K) or annual payments for a period of five (5)
years to such individual or individuals as the Director may have
designated in writing and filed with the Bank. In the absence of any
effective designation of beneficiary, any such amounts becoming due and
payable upon the death of the Director shall be payable to the duly
qualified executor or administrator of the Director's estate. Said
payments due hereunder shall begin the first day of the second month
following the decease of the Director. Provided, however, that anything
hereinabove to the contrary notwithstanding, no death benefit shall be
payable hereunder if the Director commits suicide on or before the 26/th/
day of October, 2001.
VI. BENEFIT ACCOUNTING
The Bank shall account for this benefit using the regulatory accounting
principles of the Bank's primary federal regulator. The Bank shall
establish an accrued liability retirement account for the Director into
which appropriate reserves shall be accrued.
VII. VESTING
The Director shall be one hundred percent vested in the benefits that are
the subject of this Agreement.
VIII. OTHER TERMINATION OF SERVICE
Subject to Subparagraph VIII (i) hereinbelow, in the event that the
service of the Director shall terminate prior to retirement from active
service, as provided in Paragraph III, by the Director's voluntary action,
or by the Director's discharge by the Bank or CTFSC without cause, then
the Bank shall pay to the Director an annual benefit as set forth in
Paragraph IV. This annual benefit shall commence the first day of the
month following the month in which the Director attains age sixty-five
(65).
In the event the Director's death should occur prior to the Director
receiving the full benefit as set forth in this Paragraph VIII, any
benefit due, or a lump sum discounted to present value as set forth in
Subparagraph XI (K), at the discretion of the Bank, shall be paid to such
individual or individuals as the Director may have designated in writing
and filed with the Bank. In the absence of any
3
<PAGE>
effective designation of beneficiary, any such amounts shall be payable to
the duly qualified executor or administrator of the Director's estate.
Said payments due hereunder shall begin the first day of the second month
following the decease of the Director. Provided, however, that anything
hereinabove to the contrary notwithstanding, no death benefit shall be
payable hereunder if the Director commits suicide on or before the 26/th/
day of October, 2001.
(i) Discharge for Cause: In the event the Director shall be
-------------------
discharged from service with the Bank or CTFSC for cause at any time,
all benefits provided herein shall be forfeited. The term for "cause"
shall mean any of the following that result in an adverse effect on
the Bank or CTFSC: (i) gross negligence or gross neglect; (ii) the
commission of a felony or gross misdemeanor involving moral turpitude,
fraud, or dishonesty; (iii) the willful violation of any law, rule, or
regulation (other than a traffic violation or similar offense); (iv)
an intentional failure to perform stated duties; or (v) a breach of
fiduciary duty involving personal profit. If a dispute arises as to
discharge for "cause", such dispute shall be resolved by arbitration
as set forth in this Directors Delayed Compensation Plan Agreement.
IX. CHANGE OF CONTROL
Change of Control shall be deemed to be the cumulative transfer of more
than fifty percent (50%) of the voting stock of the Bank or CTFSC from the
date of this Agreement. For the purposes of this Agreement, transfers on
account of deaths or gifts, transfers between family members or transfers
to a qualified retirement plan maintained by the Bank or CTFSC shall not be
considered in determining whether there has been a change in control. Upon
a Change of Control, if the Director subsequently suffers a Termination of
Service (voluntary or involuntary), except for cause, then the Director
shall receive the benefits as set forth in Paragraph IV herein.
X. RESTRICTIONS ON 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 Directors Delayed
Compensation Plan Agreement. The Directors, 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 Directors Delayed Compensation Plan
Agreement 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
Directors Delayed Compensation Plan Agreement, in whole or in part, through
the purchase of life insurance, mutual funds, disability policies or
annuities, the Bank reserves the
4
<PAGE>
absolute right, in its sole discretion, to terminate such funding at any
time, in whole or in part. At no time shall any Director 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 Director, then the Director shall assist the
Bank by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
XI. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
---------------------------------------
Neither the Director, nor the Director's surviving spouse, nor any
other beneficiary(ies) under this Directors Delayed Compensation Plan
Agreement 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 Director
or the Director's beneficiary(ies), nor be transferable by operation
of law in the event of bankruptcy, insolvency or otherwise. In the
event the Director 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
Directors Delayed Compensation Plan Agreement. This Directors Delayed
Compensation Plan Agreement 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 Director, this Directors Delayed Compensation Plan
Agreement may be amended or revoked at any time or times, in whole or
in part, by the mutual written consent of the Director and the Bank.
5
<PAGE>
D. Gender:
------
Whenever in this Directors Delayed Compensation Plan 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.
E. Effect on Other Benefit Plans of the Bank or CTFSC:
--------------------------------------------------
Nothing contained in this Directors Delayed Compensation Plan
Agreement shall affect the right of the Director 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 or CTFSC's existing or future
compensation structure.
F. Headings:
--------
Headings and subheadings in this Directors Delayed Compensation Plan
Agreement are inserted for reference and convenience only and shall
not be deemed a part of this Directors Delayed Compensation Plan
Agreement.
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 Director pursuant to this Directors Delayed
Compensation Plan Agreement, 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 Directors
Delayed Compensation Plan Agreement 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
Directors Delayed Compensation Plan Agreement shall remain in full
force and effect notwithstanding such partial invalidity.
6
<PAGE>
J. Continuation as Director:
------------------------
Neither this Agreement nor the payments of any benefits thereunder
shall be construed as giving to the Director any right to be retained
as a member of the Board of Directors of the Bank or CTFSC.
K. Present Value:
-------------
All present value calculations under this Agreement shall be based on
the following interest rate:
Interest Rate: The interest rate of 30-year Treasury securities
published by the Board of Directors of the Federal
Reserve System for the month immediately preceding
the month in which the present value is determined.
XII. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
--------------------------------------
The "Named Fiduciary and Plan Administrator" of this Directors Delayed
Compensation Plan Agreement 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 Directors Delayed Compensation Plan
Agreement. The Named Fiduciary may delegate to others certain aspects
of the management and operation responsibilities of the Directors
Delayed Compensation Plan Agreement 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 Directors
Delayed Compensation Plan Agreement and benefits are not paid to the
Director (or to the Director's beneficiary(ies) in the case of the
Director'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, it 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 Directors Delayed Compensation Plan Agreement upon
which the denial is based and any additional material or information
necessary to perfect the claim. Such
7
<PAGE>
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 fails 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 Directors Delayed
Compensation Plan Agreement or any documents relating thereto and
submit any written issues and comments it may feel appropriate. In its
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 Directors Delayed Compensation Plan
Agreement or the meaning and effect of the terms and conditions
thereof, then claimants may submit the dispute to an Arbitrator for
final arbitration. The Arbitrator shall be selected by mutual agreement
of the Bank and the claimants. The Arbitrator shall operate under any
generally recognized set of arbitration rules. The parties hereto agree
that they and their heirs, personal representatives, successors and
assigns shall be bound by the decision of such Arbitrator with respect
to any controversy properly submitted to it for determination.
Where a dispute arises as to the Bank's or CTFSC's discharge of the
Director for "cause", such dispute shall likewise be submitted to
arbitration as above-described and the parties hereto agree to be bound
by the decision thereunder.
XIII. 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 Directors Delayed Compensation Plan Agreement,
then the Bank reserves the right to terminate or modify this Agreement
accordingly. Upon a Change of Control (Paragraph IX), 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 26/th/
day of October, 1999 and that, upon execution, each has received a conforming
copy.
8
<PAGE>
COMMUNITY TRUST BANK
Hiram, Georgia
/s/ Eileen G. Bentley By: /s/ J. E. Durham, Jr. SVP
- --------------------------------- -----------------------------------
Witness Title
/s/ Eileen G. Bentley /s/ William A. Foster, III
- --------------------------------- ----------------------------
Witness William A. Foster, III
9
<PAGE>
EXHIBIT 10.19
DIRECTORS DELAYED COMPENSATION PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 26/th/ day of October, 1999 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 Tommie R.
Graham, Jr. a former member of the Board of Directors of the Bank (hereinafter
referred to as the, "Director") and a present member of the Board of Directors
of Community Trust Financial Services Corporation (hereinafter referred to as,
"CTFSC"), the Bank's parent company.
WITNESSETH:
WHEREAS, it is the consensus of the Board of Directors of the Bank
(hereinafter referred to as the, "Board") that the Director's services to the
Bank in the past have been of exceptional merit and have constituted an
invaluable contribution to the general welfare of the Bank and in bringing it to
its present status of operating efficiency, and its present position in its
field of activity;
WHEREAS, the Director continues to provide service to the Bank by the
Director's service on the Board of Directors of CTFSC;
WHEREAS, it is the desire of the Bank that the Director's past services be
rewarded as herein provided;
ACCORDINGLY, it is the desire of the Bank and the Director to enter into
this agreement under which the Bank will agree to make certain payments to the
Director at retirement or the Director's beneficiary(ies) in the event of the
Director's death pursuant to this Agreement;
FURTHERMORE, it is the intent of the parties hereto that this Directors
Delayed Compensation Plan Agreement be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits for the
Director, and to be considered a non-qualified benefit plan for purposes of the
Employee Retirement Security Act of 1974, as amended ("ERISA"). The Director 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 performed in the past as well
as of the mutual promises and covenants herein contained it is agreed as
follows:
<PAGE>
I. SERVICE
The Director has served the Bank in such capacity and with such duties and
responsibilities as were assigned, and with such compensation as were
determined from time to time by the Board of Directors of the Bank and
continues to serve the Bank by the Director's membership on the CTFSC
Board.
II. FRINGE BENEFITS
The fee continuation benefits provided by this agreement are granted by the
Bank as a fringe benefit to the Director and are not part of any fee
reduction plan or an arrangement deferring a bonus or a fee increase. The
Director has no option to take any current payment or bonus in lieu of
these fee continuation benefits except as set forth hereinafter.
III. RETIREMENT DATE
If the Director continuously serves the Bank through the Director's
membership on the CTFSC Board, the Director begin receiving the benefits
set forth herein thirty (30) days following the Director's sixty-fifth
(65th) birthday, or thirty (30) days following the Director's actual
retirement date, whichever event shall last occur. Notwithstanding the
foregoing, the Director shall retire on or before attaining age seventy
(70).
IV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT
Upon said retirement, commencing thirty (30) days following the Director's
sixty-fifth (65/th/) birthday or commencing thirty (30) days following the
Director's actual retirement date, whichever event shall last occur, the
Bank shall pay the Director an annual benefit equal to twenty-two thousand
one hundred and eighty-two dollars and No/00ths ($ 22,182.00) for a period
of five (5) years, provided that if less than five (5) such annual payments
have been made prior to the death of the Director, the Bank shall either,
at the discretion of the Bank, continue such annual payments to the
individual or individuals the Director may have designated in writing and
filed with the Bank until the full number of five (5) annual payments have
been made, or make the total amount of said payment due in a lump sum
discounted to present value as set forth in Subparagraph XI (K) to said
beneficiary(ies). In the absence of any effective designation of
beneficiary, any such amounts becoming due and payable upon the death of
the Director shall be payable to the duly qualified executor or
administrator of the Director's estate. Said payments due hereunder shall
begin the first day of the second month following the decease of the
Director. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder if the
Director commits suicide on or before the 26/th/ day of October, 2001.
2
<PAGE>
V. DEATH BENEFIT PRIOR TO RETIREMENT
In the event the Director should die while actively serving the Bank or
CTFSC at any time after the date of this Agreement but prior to the
Director attaining the age of sixty-five (65) years, the Bank will pay an
annual benefit as set forth in Paragraph IV in either, at the discretion
of the Bank, a lump sum discounted to present value as set forth in
Subparagraph XI (K) or annual payments for a period of five (5) years to
such individual or individuals as the Director may have designated in
writing and filed with the Bank. In the absence of any effective
designation of beneficiary, any such amounts becoming due and payable upon
the death of the Director shall be payable to the duly qualified executor
or administrator of the Director's estate. Said payments due hereunder
shall begin the first day of the second month following the decease of the
Director. Provided, however, that anything hereinabove to the contrary
notwithstanding, no death benefit shall be payable hereunder if the
Director commits suicide on or before the 26/th/ day of October, 2001.
VI. BENEFIT ACCOUNTING
The Bank shall account for this benefit using the regulatory accounting
principles of the Bank's primary federal regulator. The Bank shall
establish an accrued liability retirement account for the Director into
which appropriate reserves shall be accrued.
VII. VESTING
The Director shall be one hundred percent vested in the benefits that are
the subject of this Agreement.
VIII. OTHER TERMINATION OF SERVICE
Subject to Subparagraph VIII (i) hereinbelow, in the event that the
service of the Director with CTFSC shall terminate prior to retirement
from active service, as provided in Paragraph III, by the Director's
voluntary action, or by the Director's discharge by CTFSC without cause,
then the Bank shall pay to the Director an annual benefit as set forth in
Paragraph IV. This annual benefit shall commence the first day of the
month following the month in which the Director attains age sixty-five
(65).
In the event the Director's death should occur prior to the Director
receiving the full benefit as set forth in this Paragraph VIII, an benefit
due, or a lump sum discounted to present value as set forth in
Subparagraph XI (K), at the discretion of the Bank, shall be paid to such
individual or individuals as the Director may have designated in writing
and filed with the Bank. In the absence of any effective designation of
beneficiary, any such amounts shall be payable to the duly
3
<PAGE>
qualified executor or administrator of the Director's estate. Said
payments due hereunder shall begin the first day of the second month
following the decease of the Director. Provided, however, that anything
hereinabove to the contrary notwithstanding, no death benefit shall be
payable hereunder if the Director commits suicide on or before the 26/th/
day of October, 2001.
(i) Discharge for Cause: In the event the Director shall be
-------------------
discharged from service with CTFSC for cause at any time, all benefits
provided herein shall be forfeited. The term for "cause" shall mean
any of the following that result in an adverse effect on CTFSC or the
Bank: (i) gross negligence or gross neglect; (ii) the commission of a
felony or gross misdemeanor involving moral turpitude, fraud, or
dishonesty; (iii) the willful violation of any law, rule, or
regulation (other than a traffic violation or similar offense); (iv)
an intentional failure to perform stated duties; or (v) a breach of
fiduciary duty involving personal profit. If a dispute arises as to
discharge for "cause", such dispute shall be resolved by arbitration
as set forth in this Directors Delayed Compensation Plan Agreement.
IX. CHANGE OF CONTROL
Change of Control shall be deemed to be the cumulative transfer of more
than fifty percent (50%) of the voting stock of CTFSC from the date of this
Agreement. For the purposes of this Agreement, transfers on account of
deaths or gifts, transfers between family members or transfers to a
qualified retirement plan maintained by CTFSC shall not be considered in
determining whether there has been a change in control. Upon a Change of
Control, if the Director subsequently suffers a Termination of Service
(voluntary or involuntary), except for cause, then the Director shall
receive the benefits as set forth in Paragraph VIII herein.
X. RESTRICTIONS ON 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 Directors Delayed
Compensation Plan Agreement. The Directors, 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 Directors Delayed Compensation Plan
Agreement 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
Directors Delayed Compensation Plan Agreement, 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 Director be deemed to have any lien nor
4
<PAGE>
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 Director, then the Director shall assist the
Bank by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
XI. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
---------------------------------------
Neither the Director, nor the Director's surviving spouse, nor any
other beneficiary(ies) under this Directors Delayed Compensation Plan
Agreement 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 Director
or the Director's beneficiary(ies), nor be transferable by operation
of law in the event of bankruptcy, insolvency or otherwise. In the
event the Director 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
Directors Delayed Compensation Plan Agreement. This Directors Delayed
Compensation Plan Agreement 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 Director, this Directors Delayed Compensation Plan
Agreement may be amended or revoked at any time or times, in whole or
in part, by the mutual written consent of the Director and the Bank.
D. Gender:
------
Whenever in this Directors Delayed Compensation Plan Agreement words
are used in the masculine or neuter gender, they shall be read and
5
<PAGE>
construed as in the masculine, feminine or neuter gender, whenever
they should so apply.
E. Effect on Other Benefit Plans of the Bank or CTFSC:
--------------------------------------------------
Nothing contained in this Directors Delayed Compensation Plan
Agreement shall affect the right of the Director 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 or CTFSC's existing or future
compensation structure.
F. Headings:
--------
Headings and subheadings in this Directors Delayed Compensation Plan
Agreement are inserted for reference and convenience only and shall
not be deemed a part of this Directors Delayed Compensation Plan
Agreement.
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 Director pursuant to this Directors Delayed
Compensation Plan Agreement, 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 Directors
Delayed Compensation Plan Agreement 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
Directors Delayed Compensation Plan Agreement shall remain in full
force and effect notwithstanding such partial invalidity.
J. Continuation as Director:
------------------------
Neither this Agreement nor the payments of any benefits thereunder
shall be construed as giving to the Director any right to be retained
as a member of the Board of Directors of CTFSC.
6
<PAGE>
K. Present Value:
-------------
All present value calculations under this Agreement shall be based on
the following interest rate:
Interest Rate: The interest rate of 30-year Treasury securities
published by the Board of Directors of the Federal
Reserve System for the month immediately preceding the
month in which the present value is determined.
XII. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
--------------------------------------
The "Named Fiduciary and Plan Administrator" of this Directors Delayed
Compensation Plan Agreement 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 Directors Delayed Compensation Plan
Agreement. The Named Fiduciary may delegate to others certain aspects
of the management and operation responsibilities of the Directors
Delayed Compensation Plan Agreement 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 Directors
Delayed Compensation Plan Agreement and benefits are not paid to the
Director (or to the Director's beneficiary(ies) in the case of the
Director'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 Directors Delayed
Compensation Plan Agreement 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 fails 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
7
<PAGE>
denial. Claimants may review this Directors Delayed Compensation Plan
Agreement or any documents relating thereto and submit any written
issues and comments it may feel appropriate. In its 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 Directors Delayed Compensation Plan
Agreement or the meaning and effect of the terms and conditions
thereof, then claimants may submit the dispute to an Arbitrator for
final arbitration. The Arbitrator shall be selected by mutual
agreement of the Bank and the claimants. The Arbitrator shall operate
under any generally recognized set of arbitration rules. The parties
hereto agree that they and their heirs, personal representatives,
successors and assigns shall be bound by the decision of such
Arbitrator with respect to any controversy properly submitted to it
for determination.
Where a dispute arises as to CTFSC's discharge of the Director for
"cause", such dispute shall likewise be submitted to arbitration as
above-described and the parties hereto agree to be bound by the
decision thereunder.
XIII. 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 Directors Delayed Compensation Plan Agreement,
then the Bank reserves the right to terminate or modify this Agreement
accordingly. Upon a Change of Control (Paragraph IX), 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 26/th/
day of October, 1999 and that, upon execution, each has received a conforming
copy.
8
<PAGE>
COMMUNITY TRUST BANK
Hiram, Georgia
/s/ Valerie F.Pace By: /s/ T. E. Durham, Jr. SVP
- ---------------------------------- --------------------------------
Witness Title
/s/ Valerie F. Pace /s/ Tommie R. Graham, Jr.
- ---------------------------------- --------------------------------
Witness Tommie R. Graham, Jr.
9
<PAGE>
EXHIBIT 10.20
DIRECTORS DELAYED COMPENSATION PLAN AGREEMENT
THIS AGREEMENT, made and entered into this 26/th/ day of October, 1999 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 John C.
Helms, a member of the Board of Directors of the Bank (hereinafter referred to
as the, "Director").
WITNESSETH:
WHEREAS, it is the consensus of the Board of Directors (hereinafter
referred to as the, "Board") that the Director's services to the Bank in the
past have been of exceptional merit and have constituted an invaluable
contribution to the general welfare of the Bank and in bringing it to its
present status of operating efficiency, and its present position in its field of
activity;
WHEREAS, the Director's experience, knowledge of the affairs of the Bank,
reputation, and contacts in the industry are so valuable that assurance of the
Director's continued services is essential for the future growth and profits of
the Bank and it is in the best interests of the Bank to arrange terms of
continued employment for the Director so as to reasonably assure the Director's
remaining in the Bank's employment or in the employment of the Bank's parent
company, Community Trust Financial Services Corporation (hereinafter referred
to as "CTFSC") during the Director's lifetime or until the age of retirement;
WHEREAS, it is the desire of the Bank that the Director's services be
retained as herein provided;
WHEREAS, the Director is willing to continue in the employ of the Bank or
CTFSC provided the Bank agrees to pay the Director's or the Director's
beneficiary(ies) certain benefits in accordance with the terms and conditions
hereinafter set forth;
ACCORDINGLY, it is the desire of the Bank and the Director to enter into
this agreement under which the Bank will agree to make certain payments to the
Director at retirement or the Director's beneficiary(ies) in the event of the
Director's death pursuant to this Agreement;
FURTHERMORE, it is the intent of the parties hereto that this Directors
Delayed Compensation Plan Agreement be considered an unfunded arrangement
maintained primarily to provide supplemental retirement benefits for the
Director, and to be considered a non-qualified benefit plan for purposes of the
Employee Retirement Security Act of 1974, as amended ("ERISA"). The Director is
fully advised of the Bank's financial status and has had substantial input in
the design and operation of this benefit plan; and
<PAGE>
NOW, THEREFORE, in consideration of services performed in the past and to
be performed in the future as well as of the mutual promises and covenants
herein contained it is agreed as follows:
I. SERVICE
The Director will continue to serve the Bank in such capacity and with such
duties and responsibilities as may be assigned, and with such compensation
as may be determined from time to time by the Board of Directors of the
Bank.
II. FRINGE BENEFITS
The fee continuation benefits provided by this agreement are granted by the
Bank as a fringe benefit to the Director and are not part of any fee
reduction plan or an arrangement deferring a bonus or a fee increase. The
Director has no option to take any current payment or bonus in lieu of
these fee continuation benefits except as set forth hereinafter.
III. RETIREMENT DATE
If the Director continuously serves the Bank or CTFSC, the Director shall
begin receiving the benefits set forth herein thirty (30) days following
the Director's sixty-fifth (65th) birthday, or thirty (30) days following
the Director's actual retirement date, whichever event shall last occur.
Notwithstanding the foregoing, the Director shall retire on or before
attaining age seventy (70).
IV. RETIREMENT BENEFIT AND POST-RETIREMENT DEATH BENEFIT
Upon said retirement and commencing thirty (30) days following the
Director's sixty-fifth (65/th/) birthday or commencing thirty (30) days
following the Director's actual retirement date, whichever event shall last
occur, the Bank shall pay the Director an annual benefit equal to nine
thousand dollars and No/00ths ($ 9,000.00) for a period of five (5) years,
provided that if less than five (5) such annual payments have been made
prior to the death of the Director, the Bank shall either, at the
discretion of the Bank, continue such annual payments to the individual or
individuals the Director may have designated in writing and filed with the
Bank until the full number of five (5) annual payments have been made, or
make the total amount of said payment due in a lump sum discounted to
present value as set forth in Subparagraph XI (K) to said beneficiary(ies).
In the absence of any effective designation of beneficiary, any such
amounts becoming due and payable upon the death of the Director shall be
payable to the duly qualified executor or administrator of the Director's
estate. Said payments due hereunder shall begin the first day of the
second month following the decease of the Director. Provided, however,
that anything hereinabove to the contrary notwithstanding, no death benefit
shall be payable hereunder if the Director commits suicide on or before the
26/th/ day of October, 2001.
2
<PAGE>
V. DEATH BENEFIT PRIOR TO RETIREMENT
In the event the Director should die while actively serving the Bank or
CTFSC at any time after the date of this Agreement but prior to the
Director attaining the age of sixty-five (65) years, the Bank will pay an
annual benefit as set forth in Paragraph IV herein in either, at the
discretion of the Bank, a lump sum discounted to present value as set
forth in Subparagraph XI (K) or annual payments for a period of five (5)
years to such individual or individuals as the Director may have
designated in writing and filed with the Bank. In the absence of any
effective designation of beneficiary, any such amounts becoming due and
payable upon the death of the Director shall be payable to the duly
qualified executor or administrator of the Director's estate. Said
payments due hereunder shall begin the first day of the second month
following the decease of the Director. Provided, however, that anything
hereinabove to the contrary notwithstanding, no death benefit shall be
payable hereunder if the Director commits suicide on or before the 26/th/
day of October, 2001.
VI. BENEFIT ACCOUNTING
The Bank shall account for this benefit using the regulatory accounting
principles of the Bank's primary federal regulator. The Bank shall
establish an accrued liability retirement account for the Director into
which appropriate reserves shall be accrued.
VII. VESTING
The Director shall be one hundred percent vested in the benefits that are
the subject of this Agreement.
VIII. OTHER TERMINATION OF SERVICE
Subject to Subparagraph VIII (i) hereinbelow, in the event that the
service of the Director shall terminate prior to retirement from active
service, as provided in Paragraph III, by the Director's voluntary action,
or by the Director's discharge by the Bank or CTFSC without cause, then
the Bank shall pay to the Director an annual benefit as set forth in
Paragraph IV. This annual benefit shall commence the first day of the
month following the month in which the Director attains age sixty-five
(65).
In the event the Director's death should occur prior to the Director
receiving the full benefit as set forth in this Paragraph VIII, any
benefit due, or a lump sum discounted to present value as set forth in
Subparagraph XI (K), at the discretion of the Bank, shall be paid to such
individual or individuals as the Director may have designated in writing
and filed with the Bank. In the absence of any effective designation of
beneficiary, any such amounts shall be payable to the duly qualified
executor or administrator of the Director's estate. Said payments due
3
<PAGE>
hereunder shall begin the first day of the second month following the
decease of the Director. Provided, however, that anything hereinabove to
the contrary notwithstanding, no death benefit shall be payable hereunder
if the Director commits suicide on or before the 26th day of October, 2001.
(i) Discharge for Cause: In the event the Director shall be
-------------------
discharged from service with the Bank or CTFSC for cause at any time,
all benefits provided herein shall be forfeited. The term for "cause"
shall mean any of the following that result in an adverse effect on
the Bank or CTFSC: (i) gross negligence or gross neglect; (ii) the
commission of a felony or gross misdemeanor involving moral turpitude,
fraud, or dishonesty; (iii) the willful violation of any law, rule, or
regulation (other than a traffic violation or similar offense); (iv)
an intentional failure to perform stated duties; or (v) a breach of
fiduciary duty involving personal profit. If a dispute arises as to
discharge for "cause", such dispute shall be resolved by arbitration
as set forth in this Directors Delayed Compensation Plan Agreement.
IX. CHANGE OF CONTROL
Change of Control shall be deemed to be the cumulative transfer of more
than fifty percent (50%) of the voting stock of the Bank or CTFSC from the
date of this Agreement. For the purposes of this Agreement, transfers on
account of deaths or gifts, transfers between family members or transfers
to a qualified retirement plan maintained by the Bank or CTFSC shall not be
considered in determining whether there has been a change in control. Upon
a Change of Control, if the Director subsequently suffers a Termination of
Service (voluntary or involuntary), except for cause, then the Director
shall receive the benefits as set forth in Paragraph IV herein.
X. RESTRICTIONS ON 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 Directors Delayed
Compensation Plan Agreement. The Directors, 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 Directors Delayed Compensation Plan
Agreement 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
Directors Delayed Compensation Plan Agreement, 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 Director be deemed to have any lien nor
4
<PAGE>
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 Director, then the Director shall assist the
Bank by freely submitting to a physical exam and supplying such additional
information necessary to obtain such insurance or annuities.
XI. MISCELLANEOUS
A. Alienability and Assignment Prohibition:
---------------------------------------
Neither the Director, nor the Director's surviving spouse, nor any
other beneficiary(ies) under this Directors Delayed Compensation Plan
Agreement 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 Director
or the Director's beneficiary(ies), nor be transferable by operation
of law in the event of bankruptcy, insolvency or otherwise. In the
event the Director 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
Directors Delayed Compensation Plan Agreement. This Directors Delayed
Compensation Plan Agreement 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 Director, this Directors Delayed Compensation Plan
Agreement may be amended or revoked at any time or times, in whole or
in part, by the mutual written consent of the Director and the Bank.
5
<PAGE>
D. Gender:
------
Whenever in this Directors Delayed Compensation Plan 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.
E. Effect on Other Benefit Plans of the Bank or CTFSC:
--------------------------------------------------
Nothing contained in this Directors Delayed Compensation Plan
Agreement shall affect the right of the Director 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 or CTFSC's existing or future
compensation structure.
F. Headings:
--------
Headings and subheadings in this Directors Delayed Compensation Plan
Agreement are inserted for reference and convenience only and shall
not be deemed a part of this Directors Delayed Compensation Plan
Agreement.
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 Director pursuant to this Directors Delayed
Compensation Plan Agreement, 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 Directors
Delayed Compensation Plan Agreement 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
Directors Delayed Compensation Plan Agreement shall remain in full
force and effect notwithstanding such partial invalidity.
6
<PAGE>
J. Continuation as Director:
------------------------
Neither this Agreement nor the payments of any benefits thereunder
shall be construed as giving to the Director any right to be retained
as a member of the Board of Directors of the Bank or CTFSC.
K. Present Value:
-------------
All present value calculations under this Agreement shall be based on
the following interest rate:
Interest Rate: The interest rate of 30-year Treasury securities
published by the Board of Directors of the Federal
Reserve System for the month immediately preceding the
month in which the present value is determined.
XII. ERISA PROVISION
A. Named Fiduciary and Plan Administrator:
--------------------------------------
The "Named Fiduciary and Plan Administrator" of this Directors Delayed
Compensation Plan Agreement 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 Directors Delayed Compensation Plan
Agreement. The Named Fiduciary may delegate to others certain aspects
of the management and operation responsibilities of the Directors
Delayed Compensation Plan Agreement 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 Directors
Delayed Compensation Plan Agreement and benefits are not paid to the
Director (or to the Director's beneficiary(ies) in the case of the
Director'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, it 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 Directors Delayed
Compensation Plan Agreement upon which the denial is based and any
additional material or information necessary to perfect the claim.
Such
7
<PAGE>
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 fails 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 Directors Delayed
Compensation Plan Agreement or any documents relating thereto and
submit any written issues and comments it may feel appropriate. In
its 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 Directors Delayed Compensation Plan
Agreement or the meaning and effect of the terms and conditions
thereof, then claimants may submit the dispute to an Arbitrator for
final arbitration. The Arbitrator shall be selected by mutual
agreement of the Bank and the claimants. The Arbitrator shall operate
under any generally recognized set of arbitration rules. The parties
hereto agree that they and their heirs, personal representatives,
successors and assigns shall be bound by the decision of such
Arbitrator with respect to any controversy properly submitted to it
for determination.
Where a dispute arises as to the Bank's or CTFSC's discharge of the
Director for "cause", such dispute shall likewise be submitted to
arbitration as above-described and the parties hereto agree to be
bound by the decision thereunder.
XIII. 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 Directors Delayed Compensation Plan Agreement,
then the Bank reserves the right to terminate or modify this Agreement
accordingly. Upon a Change of Control (Paragraph IX), 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 26/th/ day of
October, 1999 and that, upon execution, each has received a conforming copy.
8
<PAGE>
COMMUNITY TRUST BANK
Hiram, Georgia
/s/ Marie Parson By: /s/ J. E. Durham, Jr. SVP
- ------------------ ----------------------------
Witness Title
/s/ Marie Parson /s/ John C. Helms
- ------------------ --------------------------------
Witness John C. Helms
9
<PAGE>
EXHIBIT 13
Selected Annual Consolidated
Financial Data
- ------------------------------------------------------------------------------
The selected annual consolidated financial data set forth below under the
headings "Balance Sheet Data" and "Statement of Earnings Data" are derived from
the audited consolidated financial statements of the Company and its
subsidiaries. The information below should be read in conjunction with the
audited financial statements and related notes and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" set forth elsewhere
herein.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Total assets 131,742,794 107,528,272 91,904,781 85,203,618 68,230,620
Loans, net 88,256,999 73,504,927 56,359,625 48,712,195 38,314,857
Deposits 104,412,264 86,906,529 81,981,103 76,897,761 61,235,289
Stockholders' equity 14,763,404 13,971,203 7,869,832 6,877,876 6,031,906
STATEMENT OF EARNINGS DATA
Net interest income 6,808,173 5,508,099 4,719,701 4,187,352 3,395,024
Provision for loan losses 695,062 336,243 204,270 197,841 186,645
Noninterest income 1,856,200 1,578,958 1,203,961 1,151,183 838,882
Noninterest expense 6,866,150 4,985,623 4,236,313 3,575,171 2,764,321
Net earnings 862,538 1,259,896 1,038,807 1,057,884 885,407
Basic earnings per share/(1)/ 0.37 0.65 0.62 0.63 0.53
Diluted earnings per share/(1)/ 0.35 0.63 0.59 0.62 0.52
ASSET QUALITY RATIOS
Nonperforming assets to total assets 0.54% 0.57% 0.43% 0.04% 0.40%
Net chargeoffs to average loans 0.42% 0.35% 0.17% 0.15% 0.13%
Allowance for loan losses to total loans 1.51% 1.26% 1.45% 1.44% 1.50%
Allowance for loan losses to
nonperforming assets 190.28% 152.61% 210.55 2146.76% 213.12
KEY PERFORMANCE RATIOS
Return on average assets 0.73% 1.28% 1.19% 1.39% 1.37%
Return on average equity 6.02% 12.50% 14.44% 16.65% 17.01%
Net interest margin 6.20% 6.00% 5.93% 5.89% 5.66%
Net interest spread 5.36% 5.18% 5.17% 5.23% 4.98%
Average equity to average assets 12.15% 10.23% 8.27% 8.32% 8.06%
Noninterest expense to average assets 5.83% 5.06% 4.88% 4.67% 4.28%
Efficiency ratio/(2)/ 79.25% 70.35% 71.52% 66.97% 65.29%
Dividends per share/(1)/ 0.12 0.12 0.12 0.12 0.12
Dividend payout ratio 33.28% 16.71% 20.20% 19.77% 23.58%
</TABLE>
(1) In December 1999, the Board of Directors declared a 2 for 1 stock split in
the form of a stock dividend to stockholders of record on January 18, 2000.
All per share amounts have been changed to reflect the stock split as if it
had occurred December 31, 1994.
(2) The efficiency ratio is calculated by dividing noninterest expense by the
sum of net interest income and noninterest income.
Common Stock Information
The Company's Common Stock is listed on the over the counter bulletin board
with the symbol CTFV. Morgan Keegan & Company, Inc. (Morgan Keegan) acts as a
market maker for the Company's Common Stock. There was no established trading
market for the Company's Common Stock in 1999. During the year ended December
31, 1999, the Company believes that the trading prices of the Company's Common
Stock have ranged between $9.75/(1)/ and $9.00/(1)/ per share.
The Company paid cash dividends on its Common Stock of $.12/(1)/ per
share to stockholders of record as of March 19, 1999, and the Company has
declared a quarterly dividend of $.04 per share payable to stockholders of
record as of March 10, 2000. The payment of dividends by the Company, however,
is at the discretion of the Board of Directors and is effectively limited by the
Company's regulators.
The Company had 834 shareholders of record as of March 3, 2000.
(1) In December 1999, the Board of Directors declared a 2 for 1 stock split in
the form of a stock dividend to stockholders of record on January 18,
2000. All per share amounts have been changed to reflect the stock split
as if it had occurred prior to 1999.
Community Trust Financial Services Corporation 9
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
- -------------------------------------------------------------------------------
Overview
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 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),
Metroplex Appraisals, Inc. (Metroplex), and Community Loan Company (CLC). The
Company owns a 49% interest in Cash Transactions, L.L.C. (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.
At December 31, 1999, the Company had consolidated total assets of
$131,742,794 as compared to $107,528,272 at December 31, 1998. Stockholders'
equity increased approximately 5.67% to $14,763,404 or $6.19 per share at
December 31, 1999, as compared to stockholders' equity of $13,971,203 or $6.08
per share at December 31, 1998. Stockholders' equity increased primarily as a
result of the Company's issuance of 81,660 shares of common stock to acquire
certain assets of Drummond Association, Inc. in June 1999. These assets
primarily consisted of $1,130,152 in loans, which were then contributed to CLC's
portfolio. Additionally, stockholders' equity increased in 1999 due to
comprehensive income of $370,667. For the year ended December 31, 1999, the
Company's comprehensive income consisted of $862,538 in net earnings and a
$491,871 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 year ended December 31, 1999 increased
approximately 23.60% or $1,300,074 from its net interest income for the year
ended December 31, 1998. The Company's net earnings decreased 31.54% from
$1,259,896 for the year ended December 31, 1998 to $862,538 for the year ended
December 31, 1999, while its basic earnings per share (based on the weighted
average number of shares outstanding during the year) decreased from $0.65 to
$0.37. This decrease in earnings growth compared to growth in net interest
income was attributable primarily to a 37.72% increase in noninterest expense
that resulted largely from (i) the Bank's increased overhead expenses of
$1,119,221 which are primarily related to salary expenses incurred due to the
growth in locations and assets of the Bank, (ii) an increase of $508,230 in
noninterest expenses of CLC due to the addition of seven offices in 1999, and
(iii) an increase of $358,819 in the provision for loan losses made by CLC and
the Bank in order to adequately allow for losses related to the increased size
of each company's loan portfolio.
For the year ended December 31, 1999, the Bank recorded net earnings of
$1,205,921, a decrease of 12.66% or $174,842 from the year ended December 31,
1998. For the year ended December 31, 1999, CLC recorded a net loss of $66,590.
For the year ended December 31, 1999, CashTrans experienced a loss of
approximately $30,304. Under the equity method of accounting, 49% of this loss,
or $14,849, is reflected in the Company's noninterest income for the year ended
December 31, 1999.
Management generally is pleased with the Company's results for 1999. While
it is true that the Company's results of operations for 1999 were adversely
affected by CLC's losses and CashTrans' losses, these losses were consistent
with management's expectations due to those subsidiaries' swift growth during
1999. Meanwhile, the Bank has experienced a relatively small decrease in
earnings as compared to their asset growth of 21.12% in 1999. Management
believes that while it may be typical for companies to experience some temporary
loss in earnings during times of very concentrated growth, this same growth is
necessary for the long-term success of the Company.
The Company's results of operations are primarily dependent upon the Bank's
results of operations. The Bank represents 96.14% and 86.50%, respectively, of
the Company's total assets and total revenues at December 31, 1999. The Bank's
business consists primarily of attracting deposits from the general public and,
with these and other
10 Community Trust Financial Services Corporation
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
- --------------------------------------------------------------------------------
(continued)
funds, originating real estate loans, consumer loans, business loans, and
residential and commercial construction loans. Funds not invested in the loan
portfolio are invested by the Company primarily in U.S. Government and agency
obligations and obligations of various states and their political subdivisions.
The Company's earnings are dependent primarily upon the Bank's net interest
income, which is the difference between the interest income received from its
assets (primarily loans and investment securities) and the interest expense (or
"cost of funds") which it pays on its liabilities (primarily deposits). The
Bank's profitability also is affected by such factors as noninterest income and
expenses, the provision for loan losses and income tax expense. Noninterest
income consists primarily of service charges on deposits and insurance
commissions. Noninterest expenses consist of salaries and employee benefits,
occupancy expenses, FDIC deposit insurance premiums and other operating expenses
such as data processing costs, printing, postage and supplies, and professional
fees.
CLC began operations in September 1995 for the purpose of acquiring and
operating consumer finance offices under the direction of the Company. In 1998,
CLC conducted its operations from four offices located in Gainesville, Rockmart,
Rossville and Woodstock, Georgia. During 1999, CLC expanded operations through
the acquisitions of two offices located in Dalton and Oakwood, Georgia. Also,
the Company purchased assets related to five consumer finance offices in north
Georgia which were owned by Drummond Association, Inc. These assets primarily
consisted of $1,130,152 in loans, which were then contributed to CLC's
portfolio. CLC presently operates ten offices, as one office was sold in
February 2000 due to the fact that the office was outside CLC's target
geographic market. CLC represents 3.67% and 11.16%, respectively, of the
Company's total assets and total revenues at December 31, 1999, as compared to
2.08% and 6.60%, respectively, of the Company's total assets and total revenues
at December 31, 1998. CLC experienced a loss of $66,590 for 1999, however, CLC
increased its loans approximately 99.49%, or $1,927,501. CLC has expanded
operations quickly since its establishment in 1995, and such expansion has
caused what management believes to be a short term adverse effect on
profitability. When CLC makes an asset acquisition it is required to record on
its books an intangible asset equal to the difference between the book value of
the assets acquired and the purchase price of the asset. It is then required to
amortize this asset. CLC experienced a charge of $56,666 for the year due to
amortization of goodwill associated with the eleven offices purchased prior to
December 31, 1999. Goodwill is typically paid in the consumer finance industry
when purchasing the assets of an existing office, if the office's license issued
by the Commissioner of Insurance of the State of Georgia pursuant to the Georgia
Industrial Loan Act is also acquired with those assets. A loan license has been
acquired in connection with each of CLC's purchases of existing offices.
Management believes that CLC represents a prudent and, ultimately, profitable
means of diversifying the Company's business lines and that CLC represents a
significant long-term growth opportunity for the Company.
CashTrans was formed in 1997 as a joint venture between the Company and JRH
Diversified, Inc. to engage in the business of providing retail establishments
(primarily convenience stores) with automated teller machines that are owned by
CashTrans and that dispense cash or cash equivalents. As of February 1999,
CashTrans diversified its business into selling the same types of machines to
retail establishments, if the retailer so desires. While CashTrans remains
focused on placing its machines in space which is strategically located to
encourage transactions, CashTrans will sell machines, thereby earning income on
the sales and on future maintenance of the machines. CashTrans represents 0.50%
and 6.13%, respectively, of the Company's total assets and total revenues at
December 31, 1999, as compared to 0.51% and 4.46%, respectively, of the
Company's total assets and total revenues at December 31, 1998. CashTrans' loss
for 1999 was attributable primarily to costs associated with the placement of
automated teller machines in service during the years 1998 and 1999. Management
expects that CashTrans will require anywhere from twelve to eighteen months to
recover its investment in an individual machine from service charges generated
by transactions processed. Management believes that the costs incurred by
CashTrans in 1999 are not unusual for start-
Community Trust Financial Services Corporation 11
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
- --------------------------------------------------------------------------------
(continued)
up ventures. Management believes that the losses generated by CashTrans' initial
investment in automated teller machines are short-term in nature and that, in
the longer term, this investment will contribute to CashTrans' profitability.
Because CashTrans was initially capitalized with only $100,000, $49,000 of which
represented the Company's investment, the cumulative loss of $388,997
experienced by CashTrans made it insolvent at the end of 1999. The relatively
small initial capitalization of CashTrans reflects the desire of the Company and
JRH Diversified, Inc. to fund CashTrans' operations with debt financing rather
than equity contributions. Management believes that CashTrans' cash flow is more
than adequate to service the borrowings of CashTrans. Management believes that
CashTrans represents a prudent and, ultimately, profitable investment for the
Company as well as a significant long-term growth opportunity for the Company.
Metroplex, a wholly-owned subsidiary of the Company, was formed in 1992 as
an appraisal service company. Metroplex performs appraisals of residential and
commercial properties located in Paulding, Bartow, Polk, Harralson, Floyd, Cobb,
Douglas, and Cherokee counties, Georgia. Metroplex represents 0.03% and 1.83%,
respectively, of the Company's total assets and total revenues at December 31,
1999. Net earnings of Metroplex for the year ended December 31, 1999, were
$14,153. Metroplex does not have a significant impact on the consolidated
results of operations of the Company and management does not anticipate that its
impact will be significant in future periods. Management believes that Metroplex
represents a desirable activity for the Company to be engaged in because, among
other things, Metroplex requires the commitment by the Company of relatively
modest resources and enables the Bank to receive reliable appraisals in
connection with residential real estate loans originated by the Bank.
Results of Operation
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Net Interest Income
Net interest income is a function of (1) the difference between rates of
interest earned on interest-earning assets and rates of interest paid on
interest-bearing liabilities (the "interest rate spread") and (2) the relative
amounts of interest-earning assets and interest-bearing liabilities. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income.
The Company's net interest income increased approximately 23.60% to
$6,808,173 for the year ended December 31, 1999, as compared to $5,508,099 for
the year ended December 31, 1998. Interest income increased approximately 19.48%
to $10,510,818 for 1999, as compared to $8,797,172 for 1998, due primarily to an
approximate 29.52% increase in the average loan portfolio for 1999 as compared
to 1998. Interest expense increased approximately 12.57% to $3,702,645 for 1999,
as compared to $3,289,073 for 1998, due primarily to an approximate 18.02%
increase in the average amount of interest-bearing deposits and liabilities of
the Company.
The Company's average earning assets for the year ended December 31, 1999
were $109,872,183, having a weighted average yield of 9.57%, resulting in a net
interest margin of 6.20% for 1999. This compares to average earning assets for
the year ended December 31, 1998 of $91,737,570, having a weighted average yield
of 9.59%, resulting in a net interest margin of 6.00% for 1998. The increase in
net interest margin is attributable primarily to the decrease in the Company's
cost of funds from 4.41% for the year ended December 31, 1998 to 4.21% for the
year ended December 31, 1999.
Provision for Loan Losses
The Company loses 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,
12 Community Trust Financial Services Corporation
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
- -------------------------------------------------------------------------------
(continued)
and property acquired through repossession. Prior to 1999, accruing loans which
are contractually past due ninety days or more were not included by management
as a component of non-performing assets. Therefore, totals of non-performing
assets for periods prior to 1999 have been restated to include accruing loans
which are contractually past due over ninety days. Management considers the
Company's level of non-performing assets to be at an acceptable level. The
Company's non-performing assets totaled $1,156,627, or 0.88% of total assets as
of December 31, 1999, as compared to $789,841, or 0.73% of total assets as of
December 31, 1998. The increase in non-performing assets from 1998 to 1999 was
attributable primarily to an increase in CLC's loans that are contractually past
due ninety days or more. Typically, consumer finance companies may experience a
higher ratio of past due loans than a banking institution. CLC's loan portfolio
has grown from 2.60% of the Company's entire loan portfolio at December 31, 1998
to 4.31% at December 31, 1999, therefore management considers this increase in
non-performing assets as a percentage of total assets to be reasonable. CLC's
non-performing assets increased by 124.25% as compared to a 99.49% increase in
its loan portfolio during 1999.
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. During 1999, the Company sustained $349,898
in net loan losses as compared to $230,241 in net losses in 1998. Although CLC's
net loan losses increased to $243,199 as of December 31, 1999, as compared to
$77,757 as of December 31, 1998, management considers the level of loan losses
to be acceptable due to the 99.49% increase in CLC's loan portfolio during 1999
and management's strengthened policy regarding treatment of past due loans. The
Company's provision for loan losses was $695,062 for the year ended December 31,
1999, as compared to $336,243 for the year ended December 31, 1998. The
Company's loan loss allowance was $1,356,649, or 1.51% of outstanding loans, as
of December 31, 1999. No material loss is anticipated on non-accrual or
restructured loans, therefore no specific reserves or write-downs were
considered necessary by management as of December 31, 1999.
Noninterest Income
Total noninterest income, consisting of service charges on deposits,
appraisal fees, credit life insurance commissions, securities gains, loss in
CashTrans and other miscellaneous income, increased approximately 17.56% to
$1,856,200 for the year ended December 31, 1999, as compared to total
noninterest income of $1,578,958 for the year ended December 31, 1998. The
increase in noninterest income resulted primarily from (i) an increase of
$83,476 in insurance commissions collected which is primarily due to the growth
of CLC's customer base, (ii) an increase of $69,423 in the Bank's income derived
from service charges and fees which is primarily due to the growth of the Bank's
customer base, (iii) an increase of $65,847 in the Bank's collection of mortgage
origination fees related to its mortgage division which was formed in 1998, and
(iv) a $49,765 decrease in the Company's equity in the loss of its
unconsolidated subsidiary, CashTrans.
Noninterest Expenses
Noninterest expenses, consisting of salaries and employee benefits,
occupancy and other miscellaneous expenses, increased approximately 37.72% to
$6,866,150 for 1999, as compared to $4,985,623 for 1998. This increase is
attributable primarily to a 39.96% increase in salaries and employee benefits
caused by the Company's need for additional human resources due to the growing
customer base of the Bank and CLC, as well as routine salary increases.
Additionally, pressures on employment costs in the Company's primary market
areas have caused some increase in salaries and benefits in order to attract and
retain key employees. Occupancy expense increased by approximately $309,687, or
43.22%, for the year ended December 31, 1999, as compared to the same period in
1998, primarily due to increases in depreciation and rent expense associated
with the Bank's addition of
Community Trust Financial Services Corporation 13
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
- --------------------------------------------------------------------------------
(continued)
a full service branch in Cobb County and CLC's addition of seven offices. Other
operating expense increased by approximately $493,251, or 31.37%, for the year
ended December 31, 1999, as compared to the same period in 1998, primarily due
to increased expenses related to the expansion in the Bank and CLC such as
advertising, software costs, telephone expense, and consulting fees.
Income Tax Expense
Total income tax expense for the year ended December 31, 1999 was $240,623
as compared to $505,295 for the year ended December 31, 1998. The effective tax
rate decreased from 28.63% to 21.81% at December 31, 1999 as compared to
December 31, 1998. This decrease was due primarily to the 21.45% increase in
tax-exempt interest income earned by the Bank while there was a 37.50% decrease
in the Company's earnings before income taxes.
Results of Operation
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Net Earnings
The Company's net earnings for 1998 were $1,259,896, an approximate 21.28%
increase from net earnings of $1,038,807 for 1997. The increase in earnings is
attributable to the Company's 16.70% growth in net interest income and a 31.15%
increase in noninterest income that resulted largely from the Bank's mortgage
division which was formed in 1998, an increase in appraisal fees collected by
Metroplex, gains on sales of securities, and improved performance of CashTrans.
Net Interest Income
The Company's net interest income increased approximately 16.70% to
$5,508,099 for the year ended December 31, 1998, as compared to $4,719,701 for
the year ended December 31, 1997. Interest income increased approximately 15.29%
to $8,797,172 for 1998, as compared to $7,630,414 for 1997, due primarily to an
approximate 22.64% increase in the average loan portfolio for 1998 as compared
to 1997. Interest expense increased approximately 13.00% to $3,289,073 for 1998,
as compared to $2,910,713 for 1997, due primarily to an approximate 12.82%
increase in the average amount of interest-bearing deposits and liabilities of
the Company.
The Company's average earning assets for the year ended December 31, 1998
were $91,737,570, having a weighted average yield of 9.59%, resulting in a net
interest margin of 6.00% for 1998. This compared to average earning assets for
the year ended December 31, 1997 of $79,613,629, having a weighted average yield
of 9.58%, resulting in a net interest margin of 5.93% for 1997. The slight
increase in net interest margin was attributable primarily to the 15.23%
increase in the Company's average earning assets, as compared to the 12.82%
increase in the Company's average interest-bearing liabilities. The larger
increase in the amount of the Company's interest-earning assets as compared to
its interest-bearing liabilities caused a positive effect on the Company's net
interest margin in 1998.
Provision for Loan Losses
The Company's non-performing assets totaled $789,841, or 0.73% of total
assets as of December 31, 1998, as compared to $571,622, or 0.62% of total
assets as of December 31, 1997. The increase in non-performing assets from 1997
to 1998 was attributable primarily to an increase in the Bank's loans placed on
non-accrual status. The Bank's loans place on non-accrual status included two
loans to one borrower which were secured by real estate. Subsequently, the loans
were collected with no loss to the Bank other than collection costs.
14 Community Trust Financial Services Corporation
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
- --------------------------------------------------------------------------------
(continued)
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. During
1998, the Company sustained $230,241 in net loan losses as compared to $88,556
in net losses in 1997. The increase in net loan losses from 1997 to 1998 was
attributable to an increase in the Bank's net loan losses to $152,484 as of
December 31, 1998, as compared to $79,601 as of December 31, 1997 and an
increase in CLC's net loan losses to $77,757 as of December 31, 1998, as
compared to $8,955 as of December 31, 1997. The Company's provision for loan
losses was $336,243 for the year ended December 31, 1998, as compared to
$204,270 for the year ended December 31, 1997. The Company's loan loss allowance
was $935,234, or 1.26% of outstanding loans, as of December 31, 1998.
Noninterest Income
Total noninterest income, consisting of service charges on deposits,
appraisal fees, credit life insurance commissions, securities gains, loss in
CashTrans, an unconsolidated subsidiary, and other miscellaneous income,
increased approximately 31.15% to $1,578,958 for the year ended December 31,
1998, as compared to total non-interest income of $1,203,961 for the year ended
December 31, 1997. The increase in noninterest income resulted primarily from
(i) the Bank's collection of $78,361 in mortgage origination fees related to its
mortgage division which was formed in 1998, (ii) an increase of $60,785 in
appraisal fees collected by Metroplex, (iii) $46,499 in gains collected by the
Bank in 1998 on sales of securities, as compared to $3,219 in losses incurred by
the Bank in 1997 on sales of securities, (iv) a $46,531 decrease in the
Company's equity in the loss of its unconsolidated subsidiary, CashTrans, and
(v) an increase of $44,444 in insurance commissions collected.
Noninterest Expenses
Noninterest expenses, consisting of salaries and employee benefits,
occupancy and other miscellaneous expenses, increased approximately 17.69% to
$4,985,623 for 1998, as compared to $4,236,313 for 1997. This increase was
attributable primarily to an increase in salaries and employee benefits caused
by the Company's need for additional human resources due to the growing customer
base of the Bank and CLC, as well as routine salary increases. Occupancy expense
increased by approximately $65,405, or 10.05%, for the year ended December 31,
1998, as compared to the same period in 1997, primarily due to increases in rent
expense and telephone expense associated with the Bank's addition of a loan
production office and its first full service branch in Cobb County. Other
operating expense increased by approximately $236,539, or 17.71%, for the year
ended December 31, 1998, as compared to the same period in 1997, primarily due
to increased loan and collection expense, consulting fees, and data processing
fees incurred by the Bank.
Income Tax Expenses
Total income tax expense for the year ended December 31, 1998 was $505,295
as compared to $444,272 for the year ended December 31, 1997. The effective tax
rate also decreased from 30.0% to 28.6% at December 31, 1998 as compared to
December 31, 1997. This decrease was due primarily to a 47.5% increase in tax-
exempt interest income earned by the Bank and to lower state income tax.
Capital Resources and Liquidity
Historically, the principal sources of funds for the Company have been
deposits, repayments of loans, other borrowings, and cash received from
maturities and sales of securities. In 1999, the Company received $17,505,735 in
net increases of demand, savings, and time deposits and $5,585,083 from
maturities and sales of securities.
Community Trust Financial Services Corporation 15
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
- --------------------------------------------------------------------------------
(continued)
Uses of funds in 1999 included: $287,069 paid in dividends to Company
shareholders of record as of March 19, 1999, $500,000 in the purchase of cash
value life insurance policies, $821,919 in the acquisition of assets from
Drummond Association, Inc., and $1,951,648 in additions to premises and
equipment. The net change in the Company's loans was an increase of $14,712,242
for 1999, and $11,024,640 in securities were purchased in 1999.
Increases in the Bank's core deposits are expected to be the major source
of funds provided during 2000. Management believes that deposit growth will
continue at a moderate pace due to the Bank's expansion of its branch network
into Cobb and Douglas Counties, which are adjacent to Paulding County. The Bank
opened its second full-service branch in Cobb County at Battle Ridge and plans
are underway to open a full-service branch in Douglas County during the latter
part of 2000 or early 2001. Additionally, the Bank has an Internet branch via
its website, where new customers may open a deposit account with little concern
about geographic location. The Bank has partnered with a vendor which provides
customers with a bill paying service and the ability to conduct funds transfers
via a secure Internet connection. 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 for the first time
in 1999, with $6,055,045 outstanding in these time deposits for the year ended
December 31, 1999. Additionally, a new product offered by the Bank allows
certain commercial customers the flexibility of employing funds that might
otherwise remain in deposit balances to invest in repurchase agreements so that
the customer may earn interest overnight. Securities sold under repurchase
agreements totaled $4,880,864 at December 31, 1999. Management is monitoring
core deposits and customer relationships in an effort to maintain overall
deposit growth.
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 December 31, 1999, was 12.09%, and its ratio of Tier 1 capital to risk
weighted assets was 10.89%. Under applicable federal regulations and
interpretations thereof, the Company's ratio of total capital to risk weighted
assets at December 31, 1999, was 15.41%, and its ratio of Tier 1 capital to risk
weighted assets was 14.16%. 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 substantially exceeds its
Tier 1 leverage ratio requirement with a Tier 1 leverage ratio of 8.13% as of
December 31, 1999. The Company also substantially exceeds its Tier 1 leverage
ratio requirement with a Tier 1 leverage ratio of 11.00% as of December 31,
1999. Through its policy of controlled growth, the Company intends to maintain
capital in excess of the required minimum in order to support future growth.
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
16 Community Trust Financial Services Corporation
<PAGE>
Management's Discussion and
Analysis of Financial Condition
and Results of Operations
- -------------------------------------------------------------------------------
(continued)
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 December 31, 1999, 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 December
31, 1999, the Bank had $5,500,000 in borrowings outstanding under this facility.
No additional borrowings were available to the Bank as of December 31, 1999
based on the Bank's loan portfolio.
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 December 31, 1999, the Company had no funds 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 December 31, 1999, CLC had
$790,000 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 December 31, 1999, 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. 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
Community Trust Financial Services Corporation 17
<PAGE>
Report of Independent Certified
Public Accountants
- -------------------------------------------------------------------------------
To the Board of Directors and Stockholders
Community Trust Financial Services Corporation
We have audited the accompanying consolidated balance sheets of Community Trust
Financial Services Corporation and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of earnings, comprehensive income,
changes in stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Community Trust
Financial Services Corporation and subsidiaries as of December 31, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ Porter Keadle Moore, LLP
Atlanta, Georgia
February 11, 2000
18 Community Trust Financial Services Corporation
<PAGE>
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks, including reserve
requirements of $678,000 and $668,000 $ 4,206,134 4,578,071
Federal funds sold 4,590,000 2,990,000
- --------------------------------------------------------------------------------------------------------------
Cash and cash equivalents 8,796,134 7,568,071
Securities available for sale 26,111,751 21,448,636
Other investments 1,114,671 919,400
Loans, net 88,256,999 73,504,927
Premises and equipment 3,994,220 2,237,830
Intangible assets, net 851,518 242,339
Accrued interest receivable and other assets 2,617,501 1,607,069
- --------------------------------------------------------------------------------------------------------------
$ 131,742,794 107,528,272
- --------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand $ 13,604,854 11,433,411
Interest-bearing demand 18,832,836 21,197,354
Savings 14,906,486 15,324,527
Time 36,983,824 23,238,422
Time, in excess of $100,000 20,084,264 15,712,815
- --------------------------------------------------------------------------------------------------------------
Total deposits 104,412,264 86,906,529
Securities sold under repurchase agreements 4,880,864 --
Accrued interest payable and other liabilities 1,396,262 1,150,540
Other borrowings 6,290,000 5,500,000
- --------------------------------------------------------------------------------------------------------------
Total liabilities 116,979,390 93,557,069
- --------------------------------------------------------------------------------------------------------------
Commitments
Stockholders' equity:
Common stock, par value $2.50, authorized 10,000,000
shares, issued and outstanding 2,383,550 and 2,296,156 shares 5,958,875 5,740,390
Additional paid-in capital 3,852,477 3,362,359
Retained earnings 5,136,852 4,561,383
Accumulated other comprehensive income (loss), net of tax (184,800) 307,071
- --------------------------------------------------------------------------------------------------------------
Total stockholders' equity 14,763,404 13,971,203
- --------------------------------------------------------------------------------------------------------------
$ 131,742,794 107,528,272
- --------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
Community Trust Financial Services Corporation 19
<PAGE>
Consolidated Statements
of Earnings
- -------------------------------------------------------------------------------
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 9,008,346 7,266,861 6,075,240
Interest on federal funds sold 191,178 243,472 243,198
Interest and dividends on investment securities:
U.S. Treasuries 103,512 266,019 448,588
U.S. Government agencies and mortgage-backed 775,169 671,141 642,578
State, county and municipal 359,484 311,313 197,710
Other 73,129 38,366 23,100
- ---------------------------------------------------------------------------------------------------------------------------
Total interest income 10,510,818 8,797,172 7,630,414
- ---------------------------------------------------------------------------------------------------------------------------
Interest expense:
Interest on deposits:
Demand 391,107 408,200 397,555
Savings 346,946 371,969 391,036
Time 1,514,435 1,312,184 1,276,222
Time in excess of $100,000 1,035,576 932,577 817,029
Other interest 414,581 264,143 28,871
- ---------------------------------------------------------------------------------------------------------------------------
Total interest expense 3,702,645 3,289,073 2,910,713
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income 6,808,173 5,508,099 4,719,701
Provision for loan losses 695,062 336,243 204,270
- ---------------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 6,113,111 5,171,856 4,515,431
- ---------------------------------------------------------------------------------------------------------------------------
Non-interest income:
Service charges on deposit accounts 1,009,684 940,261 932,593
Appraisal fees 179,087 157,737 96,952
Insurance commissions 375,315 291,839 247,395
Gain (loss) on sales of securities available for sale -- 46,499 (3,219)
Equity in loss of unconsolidated subsidiary (14,849) (64,614) (111,145)
Miscellaneous 306,963 207,236 41,385
- ---------------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,856,200 1,578,958 1,203,961
- ---------------------------------------------------------------------------------------------------------------------------
Non-interest expense:
Salaries and employee benefits 3,774,337 2,696,748 2,249,382
Occupancy 1,026,180 716,493 651,088
Other operating 2,065,633 1,572,382 1,335,843
- ---------------------------------------------------------------------------------------------------------------------------
Total noninterest expense 6,866,150 4,985,623 4,236,313
- ---------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 1,103,161 1,765,191 1,483,079
Income taxes 240,623 505,295 444,272
- ---------------------------------------------------------------------------------------------------------------------------
Net earnings $ 862,538 1,259,896 1,038,807
- ---------------------------------------------------------------------------------------------------------------------------
Basic earnings per share $ 0.37 0.65 0.62
- ---------------------------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 0.35 0.63 0.59
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
20 Community Trust Financial Services Corporation
<PAGE>
Consolidated Statements
of Comprehensive Income
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net earnings $ 862,538 1,259,896 1,038,807
- ----------------------------------------------------------------------------------------------------------------------------
Other comprehensive income, net of tax:
Unrealized gain (loss) on securities available for sale (792,829) 308,015 237,692
Income tax effect on gain (loss) (300,958) 117,046 90,323
- ----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) arising during the year, net of tax (491,871) 190,969 147,369
- ----------------------------------------------------------------------------------------------------------------------------
Less: Reclassification adjustment for gain (loss)
included in net earnings -- 46,499 (3,219)
Income tax effect on reclassification adjustments -- 17,670 (1,223)
- ----------------------------------------------------------------------------------------------------------------------------
Reclassification adjustment for gain (loss)
included in net earnings, net of tax -- 28,829 (1,996)
- ----------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (491,871) 162,140 149,365
- ----------------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 370,667 1,422,036 1,188,172
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
Community Trust Financial Services Corporation 21
<PAGE>
Consolidated Statements
of Changes in Stockholders' Equity
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Accumulated
Other
Additional Comprehensive
Common Stock Paid-In Retained Income (Loss)
------------------------
Shares Amount Capital Earnings Net of Tax Total
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1996 1,678,328 $ 4,195,820 3,491 2,682,999 (4,434) 6,877,876
Net earnings -- -- -- 1,038,807 -- 1,038,807
Cash dividends declared
($.12 per share) -- -- -- (209,817) -- (209,817)
Exercise of stock options 4,320 10,800 2,801 -- -- 13,601
Change in accumulated other
comprehensive income (loss), --
net of tax -- -- -- -- 149,365 149,365
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 1,682,648 4,206,620 6,292 3,511,989 144,931 7,869,832
Net earnings -- -- -- 1,259,896 -- 1,259,896
Cash dividends declared
($.12 per share) -- -- -- (210,502) -- (210,502)
Net proceeds from issuance of
common stock 588,236 1,470,590 3,351,072 -- -- 4,821,662
Exercise of stock options,
net of repurchases 25,272 63,180 4,995 -- -- 68,175
Change in accumulated other
comprehensive income (loss),
net of tax -- -- -- -- 162,140 162,140
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 2,296,156 5,740,390 3,362,359 4,561,383 307,071 13,971,203
Net earnings -- -- -- 862,538 -- 862,538
Cash dividends declared
($.12 per share) -- -- -- (287,069) -- (287,069)
Issuance of common stock to
acquire assets 81,660 204,150 489,960 -- -- 694,110
Exercise of stock options,
net of repurchases 5,734 14,335 (7,227) -- -- 7,108
Tax benefit of nonqualified stock
options -- -- 7,385 -- -- 7,385
Change in accumulated other
comprehensive income (loss),
net of tax -- -- -- -- (491,871) (491,871)
- --------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 2,383,550 $ 5,958,875 3,852,477 5,136,852 (184,800) 14,763,404
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
22 Community Trust Financial Services Corporation
<PAGE>
Consolidated Statements
of Cash Flows
- --------------------------------------------------------------------------------
For the Years Ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 862,538 1,259,896 1,038,807
Adjustments to reconcile net earnings to net cash provided
by operating activities, net of effect of acquisitions:
Depreciation, amortization and accretion 540,838 413,461 359,789
Provision for loan losses 695,062 336,243 204,270
Provision for deferred income taxes (192,413) (19,182) (67,537)
Equity in loss of unconsolidated subsidiary 14,849 64,614 111,145
Loss (gain) on sales of securities available for sale -- (46,499) 3,219
Gain on sale of other real estate (8,772) (22,797) --
Loss on sale of fixed assets 6,579 -- --
Change in:
Interest receivable 1,598 (188,792) (144,020)
Other assets (91,187) (324,119) (111,493)
Cash surrender value of life insurance (3,682) -- --
Interest payable 102,850 83,321 64,397
Other liabilities 150,255 (186,627) (238,532)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 2,078,515 1,369,519 1,220,045
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities, net of effect of acquisitions:
Proceeds from sales of securities available for sale -- 5,451,852 1,990,000
Proceeds from calls and maturities of securities
available for sale 5,585,083 6,025,432 4,197,038
Purchases of securities available for sale (11,024,640) (9,609,839) (6,538,282)
Net change in other investments (195,271) (618,300) (46,100)
Purchase of cash value life insurance policies (500,000) -- --
Acquisition of assets (821,919) -- --
Net increase in loans (14,712,242) (17,702,926) (7,851,700)
Purchases of premises and equipment (1,951,648) (381,161) (107,987)
Construction in process (211,728) -- --
Improvements to other real estate -- (54,101) --
Proceeds from sale of other real estate 83,030 250,530 --
Proceeds from sales of premises and equipment 2,245 -- --
Investment in unconsolidated subsidiary -- -- (49,000)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (23,747,090) (16,638,513) (8,406,031)
- -------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net change in deposits 17,505,735 4,925,426 5,083,342
Net change in securities sold under repurchase agreements 4,880,864 -- --
Proceeds from FHLB advances -- 5,500,000 --
Net change in other borrowings 790,000 (800,000) 800,000
Net proceeds from issuance of common stock -- 4,821,662 --
Proceeds from exercise of stock options, net of repurchases 7,108 68,175 13,601
Cash dividends paid (287,069) (210,502) (209,817)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 22,896,638 14,304,761 5,687,126
- -------------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 1,228,063 (964,233) (1,498,860)
Cash and cash equivalents at beginning of year 7,568,071 8,532,304 10,031,164
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 8,796,134 7,568,071 8,532,304
- -------------------------------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 3,599,795 3,205,752 2,846,316
Income taxes $ 430,000 542,000 500,000
Noncash investing and financing activities:
Change in accumulated other comprehensive income
(loss), net of tax $ (491,871) 162,140 149,365
Transfers of loans to other real estate $ 238,495 221,381 --
Stock issued to acquire assets $ 694,110 -- --
Tax benefit of nonqualified stock options $ 7,385 -- --
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements
Community Trust Financial Services Corporation 23
<PAGE>
Notes to Consolidated
Financial Statements
- -------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies
Basis of Presentation and Reclassification
The consolidated financial statements include the accounts of Community
Trust Financial Services Corporation (the "Company"), its wholly owned
subsidiaries, Community Trust Bank (the "Bank"), Metroplex Appraisals, Inc.
("Metroplex"), and Community Loan Company ("CLC"). On December 31, 1998, the
Company purchased the 25% minority interest in CLC for $8,574. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Certain 1998 and 1997 amounts have been reclassified to conform to the 1999
presentation.
The Company's business is primarily conducted by its subsidiaries. The
Company is subject to regulation under the Bank Holding Company Act of 1956.
The Bank commenced business in 1988 upon receipt of its banking charter
from the State of Georgia Department of Banking and Finance (the "DBF"). The
Bank is primarily regulated by the DBF and the Federal Deposit Insurance
Corporation and undergoes periodic examinations by these regulatory agencies.
The Bank provides a full range of commercial and consumer banking services in
Paulding and Cobb counties in Georgia.
Metroplex was formed in 1992 as an appraisal service company. CLC was
incorporated in 1995 for the purpose of acquiring and operating existing
consumer finance companies under the direction of the Company. The operations of
CLC, located in the Georgia cities of Rockmart, Rossville, Gainesville,
Woodstock, Cartersville, Dahlonega, Dalton, Oakwood and Rome, are funded
principally through a line of credit arrangement with another financial
institution.
In May 1997, the Company entered into a joint venture to establish a
nonbank subsidiary, Cash Transactions, LLC ("CashTrans"), that sells, leases,
and services automated teller machines. The Company owns 49% of the equity of
CashTrans through an initial capital contribution of $49,000. Additionally the
Company and the Bank have loans to CashTrans totaling approximately $635,000 and
$1,128,000 at December 31, 1999 and 1998, respectively. The joint venture is
accounted for using the equity method of accounting.
The accounting principles followed by the Company and its subsidiaries, and
the methods of applying these principles, conform with generally accepted
accounting principles ("GAAP") and with general practices within the banking
industry. In preparing financial statements in accordance with GAAP, management
is required to make estimates and assumptions that affect the reported amounts
in the financial statements. Actual results could differ significantly from
those estimates. Material estimates common to the banking industry that are
particularly susceptible to significant change in an operating cycle of one year
include, but are not limited to, the determination of the allowance for loan
losses, the valuation of any real estate acquired in connection with
foreclosures or in satisfaction of loans, and valuation allowances associated
with the realization of deferred tax assets which are based on future taxable
income.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash and due from banks and federal funds sold.
Investment Securities
The Company classifies its securities in one of three categories: trading,
available for sale, or held to maturity. At December 31, 1999 and 1998, the
Company has classified all securities as available for sale.
Securities available for sale consist of all investment securities not
classified as trading securities or securities held to maturity and are recorded
at fair value. Unrealized holding gains and losses, net of the related tax
effect, on securities available for sale are excluded from earnings and are
reported as a separate component of stockholders' equity until realized.
24 Community Trust Financial Services Corporation
<PAGE>
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
(continued)
A decline in the market value of any available for sale investment below
cost that is deemed other than temporary is charged to earnings and establishes
a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield. Realized gains and losses for
securities classified as available for sale are included in earnings and are
derived using the specific identification method for determining the cost of
securities sold.
Other Investments
Other investments include FHLB stock and other equity securities with no
readily determinable fair value. These investment securities are carried at
cost.
Loans, Loan Fees and Allowance for Loan Losses
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity are reported at the principal amount
outstanding, net of unearned interest and the allowance for loan losses.
Interest on substantially all loans is calculated by using the simple interest
method on the daily balance of the principal amount outstanding. Loan fees, net
of certain origination costs, are deferred and are being amortized over the
lives of the respective loans.
A loan is considered impaired when, based on current information and
events, it is probable that all amounts due according to the contractual terms
of the loan agreement will not be collected. Impaired loans are measured based
on the present value of expected future cash flows, discounted at the loan's
effective interest rate, or at the loan's observable market price, or at the
fair value of the collateral of the loan if the loan is collateral dependent.
Interest income from impaired loans is recognized using the cash basis method of
accounting.
As a result of management's ongoing review of the loan portfolio, loans are
placed on nonaccrual status generally when they are greater than 90 days past
due. Exceptions are allowed for loans greater than 90 days past due when such
loans are well collateralized and in process of collection.
The Bank's provision for loan losses is based upon management's continuing
review and evaluation of the loan portfolio and is intended to create an
allowance adequate to absorb losses on loans outstanding as of the end of each
reporting period. For individually significant loans, management's review
consists of evaluations of the financial strength of the borrowers and the
related collateral. The review of groups of loans, which are individually
insignificant, is based upon delinquency status of the group, lending policies
and collection experience. This review is supplemented by an independent
external loan review performed on an annual basis.
Management believes that the allowance for loan losses is adequate. While
management uses available information to recognize losses on loans, future
additions to the allowance may be necessary based on changes in economic
conditions. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the allowance for loan losses.
Such agencies may require the Bank and CLC to recognize additions to the
allowance based on their judgments of information available to them at the time
of their examination.
Premises and Equipment
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets. When assets are retired or otherwise disposed of,
the cost and related accumulated depreciation are removed from the accounts, and
any gain or loss is reflected in income for the period. The cost of maintenance
and repairs is charged to expense as incurred, whereas significant renewals and
improvements are capitalized. The range of estimated useful lives for premises
and equipment are:
Buildings and improvements 20 - 31 years
Furniture and equipment 3 - 10 years (1)
Community Trust Financial Services Corporation 25
<PAGE>
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
(continued)
(1) Summary of Significant Accounting Policies (continued)
Intangible Assets
Intangible assets, arising from the excess of cost over the fair value of
net assets acquired, is amortized on a straight-line basis over periods not
exceeding 15 years. On an ongoing basis, management reviews the valuation and
amortization periods of goodwill to determine if events and circumstances
require the remaining lives to be reduced.
Securities Sold Under Repurchase Agreements
Repurchase agreements are treated as financing activities, and are carried
at the amounts at which the securities will be repurchased as specified in the
respective agreements.
Income Taxes
Deferred tax assets and liabilities are recorded for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which the assets and
liabilities are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income tax
expense in the period that includes the enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities results in deferred tax assets, an evaluation of the probability of
being able to realize the future benefits indicated by such asset is required. A
valuation allowance is provided for a portion of the deferred tax asset when it
is more likely than not that some portion or all of the deferred tax asset will
not be realized. In assessing the realizability of the deferred tax assets,
management considers the scheduled reversals of deferred tax liabilities,
projected future taxable income and tax planning strategies.
Net Earnings Per Share
Net earnings per share is based on the weighted average number of common
shares outstanding during the period while the effects of potential common
shares outstanding during the period are included in diluted earnings per share.
The reconciliation of the amounts used in the computation of both "basic
earnings per share" and "diluted earnings per share" for the years ended
December 31, 1999, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Net Common Per Share
For the Year Ended December 31, 1999 Earnings Shares Amount
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic earnings per share $ 862,538 2,345,338 $0.37
-----
Effect of dilutive securities:
Stock options -- 91,630
- -----------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 862,538 2,436,968 $0.35
- -----------------------------------------------------------------------------------------------------------
Net Common Per Share
For the Year Ended December 31, 1998 Earnings Shares Amount
- -----------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1,259,896 1,926,696 $0.65
-----
Effect of dilutive securities:
Stock options -- 79,912
- -----------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 1,259,896 2,006,608 $0.63
- -----------------------------------------------------------------------------------------------------------
Net Common Per Share
For the Year Ended December 31, 1997 Earnings Shares Amount
- -----------------------------------------------------------------------------------------------------------
Basic earnings per share $ 1,038,807 1,679,266 $0.62
-----
Effect of dilutive securities:
Stock options -- 80,362
- -----------------------------------------------------------------------------------------------------------
Diluted earnings per share $ 1,038,807 1,759,628 $0.59
- -----------------------------------------------------------------------------------------------------------
</TABLE>
26 Community Trust Financial Services Corporation
<PAGE>
Notes to Consolidated
Financial Statements
- -------------------------------------------------------------------------------
(continued)
In December 1999, the Company declared a 2 for 1 stock split. All
previously reported per share amounts have been restated to reflect the stock
split.
Recent Accounting Pronouncements
In 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting and
reporting standards for hedging derivatives and for derivative instruments
including 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. The Company believes the adoption of
SFAS No. 133 will not have a material impact on its financial position, results
of operations or liquidity.
(2) Acquisitions
In June, 1999, the Company acquired the assets of five existing consumer
finance companies. The purchase price of approximately $1,516,000 was settled
with 81,660 restricted shares of the Company's common stock and approximately
$822,000 in cash. The original purchase price was allocated to the assets based
on their fair values at the date of acquisition with approximately $544,000
recorded as goodwill, to be amortized over 15 years.
(3) Investment Securities
Securities available for sale at December 31, 1999 and 1998 are summarized
as follows:
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasuries $ 500,040 1,678 -- 501,718
U.S. Government agencies 15,702,594 1,030 184,771 15,518,853
Mortgage-backed securities 2,536,514 1,502 71,927 2,466,089
State, county and municipal 7,670,527 53,037 98,473 7,625,091
- -------------------------------------------------------------------------------------------------------------
Total $26,409,675 57,247 355,171 26,111,751
- -------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
--------------------------------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasuries $ 3,005,299 32,982 -- 3,038,281
U.S. Government agencies 7,704,090 172,553 -- 7,876,643
Mortgage-backed securities 3,323,605 15,497 8,139 3,330,963
State, county and municipal 6,920,736 282,013 -- 7,202,749
- ----------------------------------------------------------------------------------------------------------------------
Total $20,953,730 503,045 8,139 21,448,636
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Community Trust Financial Services Corporation 27
<PAGE>
Notes to Consolidated
Financial Statements
- -------------------------------------------------------------------------------
(continued)
(3) Investment Securities (continued)
The amortized cost and estimated fair value of securities available for
sale at December 31, 1999, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers have the
right to call or prepay certain obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Amortized Estimated
Cost Fair Value
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Due within one year $ 5,887,524 5,889,086
Due from one to five years 9,488,992 9,408,497
Due from five to ten years 6,240,000 6,079,988
Due after ten years 2,256,645 2,268,091
Mortgage-backed securities 2,536,514 2,466,089
- -----------------------------------------------------------------------------------------------
$ 26,409,675 26,111,751
- -----------------------------------------------------------------------------------------------
</TABLE>
Proceeds from sales of securities available for sale during 1998 and 1997
were $5,451,852 and $1,990,000. Gross gains of $46,499 were realized on 1998
sales. Gross losses of $3,219 were realized on 1997 sales. There were no sales
of securities available for sale during 1999.
Investment securities with a carrying value of approximately $19,028,000
and $13,305,000 as of December 31, 1999 and 1998, respectively, were pledged to
secure public deposits as required by law or for other purposes.
(4) Loans
Major classifications of loans at December 31, 1999 and 1998 are summarized
as follows:
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural $ 11,166,660 10,156,937
Real estate-- construction 16,576,411 12,631,488
Real estate-- mortgage 49,358,441 40,378,680
Consumer 12,512,136 11,273,056
- --------------------------------------------------------------------------------------------
Total loans 89,613,648 74,440,161
Less allowance for loan losses 1,356,649 935,234
- --------------------------------------------------------------------------------------------
Loans, net $ 88,256,999 73,504,927
- --------------------------------------------------------------------------------------------
</TABLE>
The Bank grants loans and extensions of credit to individuals and a variety
of firms and corporations located in its trade area, primarily Paulding County,
Georgia. Although the Bank has a diversified loan portfolio, a substantial
portion of the loan portfolio is collateralized by improved and unimproved real
estate and is dependent upon the real estate market.
Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $ 935,234 829,232 713,518
Amounts charged off (413,312) (268,151) (145,825)
Recoveries on amounts previously charged off 63,414 37,910 57,269
Provision charged to operating expenses 695,062 336,243 204,270
Allowance for loan losses acquired 76,251 -- --
- --------------------------------------------------------------------------------------------------
Balance at end of year $ 1,356,649 935,234 829,232
- --------------------------------------------------------------------------------------------------
</TABLE>
28 Community Trust Financial Services Corporation
<PAGE>
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
(continued)
(5) Premises and Equipment
Premises and equipment at December 31, 1999 and 1998 are summarized as
follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Land $ 1,133,537 375,403
Land improvements 96,360 67,254
Buildings and improvements 2,161,102 1,749,374
Furniture and equipment 2,649,111 2,037,384
- -------------------------------------------------------------------------------------------
6,040,110 4,229,415
Less accumulated depreciation 2,257,618 1,991,585
- -------------------------------------------------------------------------------------------
3,782,492 2,237,830
Construction in progress 211,728 --
- -------------------------------------------------------------------------------------------
$ 3,994,220 2,237,830
- -------------------------------------------------------------------------------------------
</TABLE>
Depreciation expense was approximately $416,000, $283,000 and $257,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
(6) Time Deposits
At December 31, 1999, the scheduled maturities of time deposits are as
follows:
2000 $ 38,819,902
2001 13,574,359
2002 1,960,072
2003 1,203,477
2004 and thereafter 1,510,278
- -----------------------------------------------------------------------
$ 57,068,088
- -----------------------------------------------------------------------
(7) Other Borrowings
In June 1999, the Company obtained a $3,500,000 line of credit with another
financial institution. The debt was collateralized by 100% of the stock of the
Bank and calls for interest to be paid quarterly at the prime rate less 100
basis points. The loan agreement contained covenants relating to the level of
the allowance for loan losses, payments of dividends, regulatory capital
adequacy and return on average assets. The Company has no amounts outstanding
under this line of credit at December 31, 1999.
The Bank has an agreement with the Federal Home Loan Bank ("FHLB") to
provide the Bank with credit facilities. FHLB advances are collateralized by
FHLB stock and first mortgage loans. The Bank may draw advances up to 75% of the
outstanding balance of these loans based on the agreement with the FHLB. The
Bank has two advances outstanding at December 31, 1999 and December 31, 1998
amounting to $2,500,000 and $3,000,000. Interest is payable quarterly at fixed
interest rates of 5.55% and 5.51%, respectively. The advances mature in March
2008 and June 2008, respectively.
In June 1999, CLC obtained a $1,500,000 one year revolving line of credit
with another financial institution. The loan agreement calls for interest to be
paid quarterly at the prime rate less 75 basis points. The debt is
collateralized by a first lien on its loans receivable. The line of credit is
guaranteed by the Company and is further collateralized by 100% of the stock of
the Bank. CLC has $790,000 outstanding at December 31, 1999 under this line of
credit.
Community Trust Financial Services Corporation 29
<PAGE>
Notes to Consolidated
Financial Statements (continued)
- --------------------------------------------------------------------------------
(8) Commitments
In June 1999, CashTrans obtained a $1,000,000 one year revolving line of
credit with another financial institution which is guaranteed by the Company. At
December 31, 1999, CashTrans has $775,000 outstanding under this line of credit.
The Company leases certain facilities under noncancellable operating lease
arrangements. Future minimum lease payments required for all operating leases
having a remaining term in excess of one year at December 31, 1999 are as
follows:
2000 $ 186,000
2001 140,000
2002 130,000
2003 117,000
2004 95,000
Thereafter 339,000
- -----------------------------------------------------------------
$ 1,007,000
- -----------------------------------------------------------------
Rental expense for each of the three years in the period ended December 31,
1999 totaled approximately $164,000, $116,000 and $83,000, respectively.
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the balance sheet. The contract amounts of those instruments reflect the extent
of involvement the Bank has in particular classes of financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by
other party for commitments to extend credit, standby letters of credit and
financial guarantees written is represented by the contractual amount of those
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.
In most cases, the Bank requires collateral to support financial
instruments with credit risk.
<TABLE>
<CAPTION>
Approximate
Contract Amount
-------------------------------------------
1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Financial instruments whose contract
amounts represent credit risk:
Commitments to extend credit $ 21,905,000 17,827,000
Standby letters of credit and
financial guarantees written $ 844,000
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments may expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Bank, upon extension of credit is based on management's
credit evaluation. Collateral held varies but may include unimproved and
improved real estate, certificates of deposit or personal property.
30 Community Trust Financial Services Corporation
<PAGE>
Notes to Consolidated
Financial Statements (continued)
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to customers.
The Bank holds real estate and assignments of deposit accounts as collateral
supporting those commitments for which collateral is deemed necessary.
(9) Stockholders' Equity
In August 1998, the Company completed a public offering of 588,236 shares
of common stock at a price of $8.50 per share. The net proceeds of this offering
of $4,821,662 (after deducting issuance costs of $178,344) were used to repay
indebtedness of the Company, contribute capital to the Bank, and fund loans to
the non-bank subsidiaries.
On December 14, 1999, the Board of Directors of the Company declared a 2-
for-1 stock split to be effected in the form of a 100% stock dividend to be
distributed on January 28, 2000 to holders of record on January 18, 2000. All
share and per share amounts have been changed to reflect the stock split as if
it had occurred on December 31, 1996.
(10) Regulatory Matters
Dividends paid by the Bank are the primary source of funds available to the
Company. Banking regulations limit the amount of dividends that may be paid
without prior approval of the regulatory authorities. These restrictions for the
Bank are based on the level of regulatory classified assets, prior year's
earnings, and the ratio of equity capital to total assets. The Bank may declare
dividends of approximately $603,000 during 2000 without prior regulatory
approval.
The Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could have
a direct material effect on the financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, specific
capital guidelines that involve quantitative measures of the assets, liabilities
and certain off-balance-sheet items as calculated under regulatory accounting
practices must be met. The capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk weightings and
other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and the Bank to maintain minimum amounts and ratios of total
and Tier 1 capital to risk weighted assets and of Tier 1 capital to average
assets (all as defined). Management believes, as of December 31, 1999, the
Company and the Bank meet all capital adequacy requirements to which they are
subject.
Community Trust Financial Services Corporation 31
<PAGE>
Notes to Consolidated
Financial Statements
- -------------------------------------------------------------------------------
(continued)
(10) Regulatory Matters (continued)
As of December 31, 1999, the most recent notification from Federal Deposit
Insurance Corporation categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized the Bank must maintain minimum total risk-based, Tier 1 risk-based
and Tier 1 leverage ratios as set forth in the table. The Company's and the
Bank's actual capital amounts and ratios are also presented below.
<TABLE>
<CAPTION>
To Be Well
Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
----------------------------------------------------------------------------
Amount Ratio Amount Ratio Amount Ratio
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1999:
Total Capital
(to Risk-Weighted Assets)
Consolidated $15,343,000 15.4% $ 7,966,000 8.0% N/A N/A
Bank $11,538,000 12.1% $ 7,633,000 8.0% $ 9,541,000 10.0%
Tier 1 Capital
(to Risk-Weighted Assets)
Consolidated $14,097,000 14.2% $ 3,983,000 4.0% N/A N/A
Bank $10,388,000 10.9% $ 3,816,000 4.0% $ 5,725,000 6.0%
Tier 1 Capital
(to Average Assets)
Consolidated $14,097,000 11.0% $ 5,125,000 4.0% N/A N/A
Bank $10,388,000 8.1% $ 5,109,000 4.0% $ 6,386,000 5.0%
- --------------------------------------------------------------------------------------------------------------------
As of December 31, 1998:
Total Capital
(to Risk-Weighted Assets)
Consolidated $14,361,000 18.6% $ 6,194,000 8.0% N/A N/A
Bank $10,780,000 14.4% $ 5,978,000 8.0% $ 7,472,000 10.0%
Tier 1 Capital
(to Risk-Weighted Assets)
Consolidated $13,422,000 17.3% $ 3,097,000 4.0% N/A N/A
Bank $ 9,872,000 13.2% $ 2,989,000 4.0% $ 4,483,000 6.0%
Tier 1 Capital
(to Average Assets)
Consolidated $13,422,000 12.7% $ 4,222,000 4.0% N/A N/A
Bank $ 9,872,000 9.6% $ 4,098,000 4.0% $ 5,123,000 5.0%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(11) Employee and Director Benefit Programs
The Company has an employee stock option plan and a director stock option
plan. The plans were adopted for the benefit of directors and key officers and
employees in order that they may purchase Company stock at a price equal to the
fair market value on the date of grant. A total of 600,000 shares were reserved
for possible issuance under these plans. The options vest over a three year
period and expire after ten years.
32 Community Trust Financial Services Corporation
<PAGE>
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
(continued)
Both plans are accounted for under Accounting Principles Board Opinion No.
25 and related interpretations. No compensation expense has been recognized
related to these plans. Had compensation cost been determined based upon the
fair value of the options at the grant dates, the Company's net earnings and net
earnings per share would have been reduced to the proforma amounts indicated
below.
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net earnings As reported 862,538 1,259,896 1,038,807
Proforma 697,066 1,098,626 997,794
Basic earnings per share As reported 0.37 0.65 0.62
Proforma 0.30 0.57 0.59
Diluted earnings per share As reported 0.35 0.63 0.59
Proforma 0.29 0.55 0.57
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The fair value of each option is estimated on the date of grant using the
minimum value options-pricing model with the following weighted average
assumptions used for grants in 1999, 1998 and 1997, respectively: dividend yield
of 1%, 2% and 2%, respectively, risk free interest rate of 7%, 5% and 6%,
respectively, and an expected life of 10 years. For disclosure purposes, the
Company immediately recognized the expense associated with the option grants
assuming that all awards will vest.
A summary of activity in these stock option plans is presented below:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Averaged Average
Option Option Option
Option Price Option Price Option Price
Shares Per Share Shares Per Share Shares Per Share
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of year 294,340 $ 6.15 206,888 $ 4.43 181,208 $ 3.84
Granted during the year 81,040 $ 9.25 122,000 $ 8.48 30,000 $ 7.77
Cancelled during the year (5,020) $ 7.97 (6,668) $ 6.23 --
Exercised during the year (9,426) $ 4.43 (27,880) $ 3.54 (4,320) $ 3.15
------- -------- -------
Outstanding, end of year 360,934 $ 6.87 294,340 $ 6.15 206,888 $ 4.43
======= ======= =======
Number of shares exercisable 201,674 149,582 153,862
</TABLE>
The weighted average grant-date fair value of options granted in 1999, 1998
and 1997 was $3.56, $4.45 and $4.41, respectively. For the employee and director
stock options, options outstanding at December 31, 1999 are exercisable at
option prices ranging from $2.89 to $9.37 as presented in the table above. The
options have a weighted average remaining contractual life of approximately 7
years.
The Company also had an incentive stock option plan which expired on April
18, 1998. The remaining 696 shares outstanding under this plan were exercised at
$5.00 per share during 1998. No shares were granted or exercised during 1997.
The Company has a 401(k) profit sharing plan which is available to
substantially all employees subject to certain service requirements. The
Company's contribution is at the discretion of the Board of Directors and cannot
exceed 6% of the employee's compensation. The contribution by the Company for
1999, 1998 and 1997 was approximately $58,000, $41,000 and $27,000,
respectively.
Community Trust Financial Services Corporation 33
<PAGE>
Notes to Consolidated
Financial Statements
- -------------------------------------------------------------------------------
(continued)
(11) Employee and Director Benefit Programs (continued)
During 1999, the Company initiated a postretirement benefit plan to provide
retirement benefits to its Board of Directors or their designated beneficiaries.
Under the plan, the Company agrees to pay annual benefits for a period of five
years commencing upon the director's retirement or the attainment of age 65,
whichever event is the last to occur. Also under the plan, the Company purchased
life insurance contracts on the lives of certain directors. At December 31,
1999, the cash surrender value of the insurance contracts was approximately
$504,000, and is included in the consolidated balance sheet as a component of
other assets.
Effective January 1, 2000, the Company implemented a deferred compensation
plan for key management employees and directors. Under such plan, employees
designated by the Board of Directors as well as participating directors may
defer compensation and receive the deferred amounts upon termination of
employment. All contributions to the plan will be held in a trust established by
the Company and invested in mutual funds and/or shares of Company's common
stock. All assets held by the trust are considered assets of the Company until
paid to the participants. There were no contributions made to the plan by
employees, directors, or the Company during 1999.
(12) Income Taxes
The components of income tax expense for the years ended December 31, 1999,
1998 and 1997 are as follows:
1999 1998 1997
- ----------------------------------------------------------------------
Current $ 433,036 524,477 511,809
Deferred (192,413) (19,182) (67,537)
- ----------------------------------------------------------------------
$ 240,623 505,295 444,272
- ----------------------------------------------------------------------
The differences between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to earnings before
income taxes is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pretax income at statutory rates $ 375,075 600,165 504,247
Add (deduct):
Tax-exempt interest income (136,751) (112,657) (76,374)
Non-deductible interest expense 18,807 13,528 9,760
State taxes, net of federal effect 1,102 4,517 12,737
Other (17,610) (258) (6,098)
- ------------------------------------------------------------------------------------
$ 240,623 505,295 444,272
- ------------------------------------------------------------------------------------
</TABLE>
34 Community Trust Financial Services Corporation
<PAGE>
Notes to Consolidated
Financial Statements
- -------------------------------------------------------------------------------
(continued)
The following summarizes the sources and expected tax consequences of
future taxable deductions (income) which comprise the net deferred tax asset
which is included as a component of other assets.
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $380,131 283,131
Unrealized loss on securities available for sale 113,124 --
Other 105,877 4,064
- ------------------------------------------------------------------------------------------------
Gross deferred tax assets 599,132 287,195
- ------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Basis difference of investment in unconsolidated subsidiary 24,749 27,390
Premises and equipment 50,062 46,144
Unrealized gain on securities available for sale -- 187,835
Other 5,123 --
- ------------------------------------------------------------------------------------------------
Gross deferred tax liabilities 79,934 261,369
- ------------------------------------------------------------------------------------------------
Net deferred tax asset $519,198 25,826
- ------------------------------------------------------------------------------------------------
</TABLE>
(13) Related Party Transactions
The Company conducts transactions with directors, executive officers
(including companies in which they have beneficial interest) as well as its
unconsolidated subsidiary in the normal course of business. It is the policy of
the Company that loan transactions with directors, executive officers and
subsidiaries be made on substantially the same terms as those prevailing at the
time for comparable loans to other persons. The following is a summary of
activity for related party loans for 1999:
Beginning balance $ 1,534,000
Loans advanced 2,805,000
Repayments (2,157,000)
- -------------------------------------------------------------
Ending balance $ 2,182,000
- -------------------------------------------------------------
The aggregate amount of deposits of directors and executive officers and
their affiliates amounted to approximately $2,589,000 and $2,637,000 at December
31, 1999 and 1998.
(14) Supplemental Financial Data
Components of other operating expenses in excess of 1% of total interest
income and noninterest income for the years ended December 31, 1999, 1998 and
1997 are as follows:
1999 1998 1997
- --------------------------------------------------------------
Printing and supplies $ 123,851 112,554 108,040
Data processing $ 206,428 154,021 126,087
Directors fees $ 92,580 104,300 98,250
Advertising $ 232,421 107,283 125,702
Telephone $ 128,816 73,323 57,981
Community Trust Financial Services Corporation 35
<PAGE>
Notes to Consolidated
Financial Statements
- ------------------------------------------------------------------------------
(continued)
(15) Community Trust Financial Services Corporation (Parent Company Only)
Financial Information
Balance Sheets
- -------------------------------
December 31, 1999 and 1998
1999 1998
- -----------------------------------------------------------------------
ASSETS
Cash $ 201,913
752,612
Investment in subsidiaries 14,117,441 10,145,026
Loans to subsidiaries -- 2,743,850
Fixed assets 342,368 16,273
Other assets 203,600 351,626
- -----------------------------------------------------------------------
$14,865,322 14,009,387
- -----------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities $ 101,918 38,184
Stockholders' equity 14,763,404 13,971,203
- -----------------------------------------------------------------------
$14,865,322 14,009,387
- -----------------------------------------------------------------------
<TABLE>
<CAPTION>
Statements of Earnings
- -----------------------------------------------------
For the Years Ended December 31, 1999, 1998 and 1997
1999 1998 1997
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest income $ 59,074 222,042 104,672
Dividends from Bank 690,380 250,000 250,000
Management fees 252,830 193,673 --
Other operating expenses (775,642) (588,169) (202,099)
- ---------------------------------------------------------------------------------------------------
Earnings before income tax benefit and equity
in undistributed earnings of subsidiaries 226,642 77,546 152,573
Income tax benefit 187,641 56,104 89,510
- ---------------------------------------------------------------------------------------------------
Earnings before equity in undistributed
earnings of subsidiaries 414,283 133,650 242,083
Equity in undistributed earnings of subsidiaries 448,255 1,126,246 796,724
- ---------------------------------------------------------------------------------------------------
Net earnings $ 862,538 1,259,896 1,038,807
- ---------------------------------------------------------------------------------------------------
</TABLE>
36 Community Trust Financial Services Corporation
<PAGE>
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
(continued)
Statements of Cash Flows
--------------------------------
For the Years Ended December 31,
1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities
Net earnings $ 862,538 1,259,896 1,038,807
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Equity in undistributed earnings of subsidiaries (448,255) (1,126,246) (796,724)
Depreciation 14,323 994 --
Other 219,752 (121,504) (74,668)
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 648,358 13,140 167,415
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of premises and equipment (129,299) (16,268) --
Construction in process (211,728) -- --
Investment in CashTrans -- -- (49,000)
Capital contribution to the Bank -- (2,468,536) --
Capital contribution to CLC (2,500,000) -- --
Investment in CLC -- (8,574) --
Acquisition of assets on behalf of CLC (821,919) -- --
Change in loans to subsidiaries 2,743,850 (672,502) (981,584)
- --------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities (919,096) (3,165,880) (1,030,584)
- --------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Change in note payable -- (800,000) 800,000
Cash dividends paid (287,069) (210,502) (209,817)
Net proceeds from issuance of common stock -- 4,821,662 --
Proceeds from exercise of stock options, net of repurchases 7,108 68,175 13,601
- --------------------------------------------------------------------------------------------------------------------------
Net cash provided (used) by financing activities (279,961) 3,879,335 603,784
- --------------------------------------------------------------------------------------------------------------------------
Net change in cash (550,699) 726,595 (259,385)
Cash at beginning of the year 752,612 26,017 285,402
Cash at end of the year $ 201,913 752,612 26,017
- --------------------------------------------------------------------------------------------------------------------------
Non-cash investing and financing activities:
Change in accumulated other comprehensive
income (loss), net of tax (491,871) 162,140 149,365
Tax benefit of nonqualified stock options, net of tax 7,385 -- --
Stock issued to acquire assets on behalf of CLC 694,110 -- --
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Community Trust Financial Services Corporation 37
<PAGE>
Notes to Consolidated
Financial Statements (continued)
- -------------------------------------------------------------------------------
(16) Fair Value of Financial Instruments
The Company is required to disclose fair value information about financial
instruments, whether or not recognized on the face of the balance sheet, for
which it is practicable to estimate that value. The assumptions used in the
estimation of the fair value of the Company's financial instruments are detailed
below. Where quoted prices are not available, fair values are based on estimates
using discounted cash flows and other valuation techniques. The use of
discounted cash flows can be significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. The following
disclosures should not be considered a surrogate of the liquidation value of the
Company, but rather a good-faith estimate of the increase or decrease in the
value of financial instruments held by the Company since purchase, origination
or issuance.
Cash and Cash Equivalents
For cash, due from banks and federal funds sold, the carrying amount is a
reasonable estimate of fair value.
Securities Available for Sale
Fair values for securities available for sale are based on quoted market
prices.
Other Investments
The carrying amount of other investments approximates fair value.
Loans
The fair value of fixed rate loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings. For variable rate loans, the carrying
amount is a reasonable estimate of fair value.
Cash Surrender Value of Life Insurance
Cash values of life insurance policies are carried at the value for which
such policies may be redeemed for cash.
Deposits and Securities Sold Under Repurchase Agreements
The fair value of demand deposits, interest-bearing demand deposits,
savings accounts and securities sold under repurchase agreements is the amount
payable on demand at the reporting date. The fair value of fixed maturity
certificates of deposit is estimated by discounting the future cash flows using
the rates currently offered for deposits of similar remaining maturities.
Other Borrowings
The fair value of fixed rate borrowings are estimated using discounted cash
flows, based on the current incremental borrowing rates for similar types of
borrowing arrangements.
Commitments to Extend Credit and Standby Letters of Credit
Because commitments to extend credit and standby letters of credit are made
using variable rates and/or for relatively short commitment periods, the
contract value is a reasonable estimate of fair value.
38 Community Trust Financial Services Corporation
<PAGE>
Notes to Consolidated
Financial Statements
- --------------------------------------------------------------------------------
(continued)
Limitations
Fair value estimates are made at a specific point in time, based on
relevant market information and information about the financial instrument.
These estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of the
Company's financial instruments, fair value estimates are based on many
judgments. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial instruments include deferred income taxes and premises and
equipment. In addition, the tax ramifications related to the realization of the
unrealized gains and losses can have a significant effect on fair value
estimates and have not been considered in the estimates.
The carrying amount and estimated fair values of the Company's financial
instruments as of December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------------------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 8,796,134 8,796,134 7,568,071 7,568,071
Securities available for sale $ 26,111,751 26,111,751 21,448,636 21,448,636
Other investments $ 1,114,571 1,114,571 919,400 919,400
Loans, net $ 88,256,999 87,881,349 73,504,927 73,942,734
Cash surrender value $ 503,682 503,682 -- --
LIABILITIES:
Deposits and securities sold under
repurchase agreements $109,293,128 109,584,926 86,906,529 87,468,795
Other borrowings $ 6,290,000 5,946,286 5,500,000 5,501,784
Unrecognized financial instruments:
Commitments to extend credit $ 21,905,000 21,905,000 17,827,000 17,827,000
Standby letters of credit $ 1,110,000 1,110,000 844,000 844,000
- ---------------------------------------------------------------------------------------------------
</TABLE>
Community Trust Financial Services Corporation 39
<PAGE>
EXHIBIT 21 - SUBSIDIARIES
COMMUNITY TRUST FINANCIAL SERVICES CORPORATION
Name* Jurisdiction of Incorporation
- ----- -----------------------------
Community Trust Bank Georgia
Metroplex Appraisals, Inc. Georgia
Community Loan Company Georgia
Cash Transactions, L.L.C. Georgia
- ---------------
* The legal name of the subsidiary is the name under which the subsidiary does
business.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 4,206,134 4,578,071
<INT-BEARING-DEPOSITS> 0 0
<FED-FUNDS-SOLD> 4,590,000 2,990,000
<TRADING-ASSETS> 0 0
<INVESTMENTS-HELD-FOR-SALE> 26,111,751 21,448,636
<INVESTMENTS-CARRYING> 26,111,751 21,448,636
<INVESTMENTS-MARKET> 26,111,751 21,448,636
<LOANS> 89,613,648 74,440,161
<ALLOWANCE> 1,356,649 935,234
<TOTAL-ASSETS> 131,742,794 107,528,272
<DEPOSITS> 104,412,264 86,906,529
<SHORT-TERM> 0 0
<LIABILITIES-OTHER> 6,277,126 1,150,540
<LONG-TERM> 6,290,000 5,500,000
0 0
0 0
<COMMON> 5,958,875 5,740,390
<OTHER-SE> 8,804,529 8,230,813
<TOTAL-LIABILITIES-AND-EQUITY> 131,742,794 107,528,272
<INTEREST-LOAN> 9,008,346 7,266,861
<INTEREST-INVEST> 1,311,294 1,286,839
<INTEREST-OTHER> 191,178 243,272
<INTEREST-TOTAL> 10,510,818 8,797,172
<INTEREST-DEPOSIT> 3,288,064 3,024,930
<INTEREST-EXPENSE> 3,702,645 3,289,073
<INTEREST-INCOME-NET> 6,808,173 5,508,099
<LOAN-LOSSES> 695,062 336,243
<SECURITIES-GAINS> 0 46,499
<EXPENSE-OTHER> 6,866,150 4,985,623
<INCOME-PRETAX> 1,103,161 1,765,191
<INCOME-PRE-EXTRAORDINARY> 862,538 1,259,896
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 862,538 1,259,896
<EPS-BASIC> .37 .65
<EPS-DILUTED> .35 .63
<YIELD-ACTUAL> 6.20 6.00
<LOANS-NON> 524,576 555,429
<LOANS-PAST> 440,064 176,997
<LOANS-TROUBLED> 0 0
<LOANS-PROBLEM> 2,211,889 2,052,469
<ALLOWANCE-OPEN> 935,234 829,232
<CHARGE-OFFS> 413,312 268,151
<RECOVERIES> 63,414 37,910
<ALLOWANCE-CLOSE> 1,356,649 935,234
<ALLOWANCE-DOMESTIC> 1,356,649 935,234
<ALLOWANCE-FOREIGN> 0 0
<ALLOWANCE-UNALLOCATED> 246,836 199,946
</TABLE>
