U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C 20549
FORM 10-KSB
ANNUAL REPORT
Annual Report Under Section 13 Or 15(D) Of The
Securities Exchange Act Of 1934
For the fiscal year ended 1999
Commission File Number 33-64520
BANK BUILDING CORPORATION
9112 Virginia Avenue
Bassett, Virginia 24055
(540) 629-3331
IRS Employer Number 54-1714800
Securities registered pursuant to Section 12-(b) of the Act:
None
Securities registered pursuant to Section 12-(g) of the Act:
400,000 Shares of Common Stock with no par value
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past 12 months, and (2) has been subject to such filing
requirements for the last 90 days. Yes X No _
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this
form, and no disclosure will be contained, to the best of the
registrants knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this form 10-KSB. [X]
Bank Building Corporation revenue for 1999 equaled $1,873,872.
There are 398,244 shares of stock outstanding as of April 13,
2000. These shares are not believed too have any current market
value.
Part 1
Item 1. Description of Business
The primary purpose of the Corporation is to acquire and develop
property for lease as bank offices to the Participating Banks.
These banks are as follows:
Blue Ridge Bank, National Association, Floyd, Virginia
Central National Bank, Lynchburg, Virginia
Community National Bank, South Boston, Virginia
First National Bank, Rocky Mount, Virginia
First National Exchange Bank, Roanoke, Virginia
Mountain National Bank, Galax, Virginia
Patrick Henry National Bank, Bassett, Virginia
Patriot Bank, National Association, Fredericksburg, Virginia
Peoples National Bank, Danville, Virginia
Shenandoah National Bank, Staunton, Virginia
The selection of sites and construction of the offices is done by
the Participating Banks that will lease the site to insure the
needs of the bank are met. Should the Corporation decide to
participate in the particular project, the site is titled in the
name of the Corporation and all loans in connection with the site
are to the Corporation. There are, however, no commitments on the
part of any Participating Bank to present prospective office
properties to the Corporation nor are there any commitments on the
part of the Corporation to accept any prospective office properties
offered by any of the Participating Banks.
The acquisition and development of property are presently financed
through loans from various sources. While such financing sources
cannot be specifically identified, from time to time other
Participating Banks make loans in connection with the acquisition
of a site for another Participating Bank; however, a bank leasing a
particular office will not provide any acquisition or development
loans for that office. Funds for purchase and development may be
acquired from banks outside the group of Participating Banks. It
is anticipated the Corporation will be able to finance the
acquisition of branch sites internally at some point in the future.
Following construction of a bank branch, the property is leased to
the bank under a triple net operating lease. The leasing bank is
responsible for all property taxes, insurance and maintenance costs
on that office. It is anticipated that the lease payments and
other costs approximate the cost which would have been experienced
by the bank had the office been developed by the bank or leased
from a third party. In any event, the lease payments cover all
acquisition and loan costs and other costs associated with the site
(just as though the Bank had acquired the site itself) plus a small
additional fee to cover the accounting and processing costs.
In order to obtain the most desirable branch locations it is often
necessary to acquire more property than will be required for an
individual office. Currently, banking regulations restrict the
ability of banks to acquire such property if it is not used for
banking purposes. The Corporation will not be subject to such
restrictions and can acquire the most desirable property and either
sell any excess property or develop it for subsequent sale or lease
to other parties.
Regardless of the amount of property purchased by the Corporation,
the lease with the Participating Bank includes only the portion of
the property utilized for the branch. The allocation of costs
between the branch site and other property is based on the relative
size and market value of each segment. Any property other than
that used for the branch will be developed, leased or sold by the
Corporation. Any buildings or other developments on this property
will be compatible with the design of the bank office and
consistent with the conduct of the business of banking.
Both interest and depreciation expenses are incurred on each office
as well as other, minimal operating costs. These expenses will
result in net operating losses during the initial years of each
project although adequate cash flow from rental payments will be
available to meet all cash needs. During the initial lease term,
all leases will be structured for the adjustments to the monthly
lease payments to track adjustments in the payments required by the
underlying mortgage. After the initial period of the lease, terms
will be renegotiated. Such terms could provide for lease payments
in excess of or less than payments required by the underlying
mortgage and operating expenses. Additionally, a lessee
Participating Bank may determine not to renew its lease on a
particular branch. Under these circumstances, such branch could be
sold or leased to another tenant. Such sale or lease could be
profitable, although there can be no assurance that this will
occur.
While it is anticipated that renewed leases with a particular
Participating Bank will produce sufficient rental payments to cover
mortgage payments and other costs, there can be no assurance that
this can, in fact, be accomplished. Failure to obtain renewal
lease payments sufficient to cover these costs may result in a
forced sale or foreclosure of the particular branch at a loss.
The Corporation does not have any paid employees. All of its
accounting, other professional services, record keeping and other
operational needs will be met by other organizations on a fee-for-
service basis. It is contemplated that such fees will be based on
time expended plus reimbursable expenses. It is anticipated that
such costs and expenses will be covered by the lease payments from
the lease of the bank branches. At the present time, Management
intends that Bank Services of Virginia, Inc., will provide these
services. Bank Services currently provides various bookkeeping
and related services for the Participating Banks.
Item 2. Description of Property
As of December 31, 1999, the Corporation owned and leased the
following offices::
Bank Address
Blue Ridge Bank, N. A. 105 King Street, Blacksburg, VA
24060
Blue Ridge Bank, N. A. 325 Spring Street, Wytheville,
VA 24382
Central National Bank 3008 Waterlick Road, Lynchburg,
VA 24502
Central National Bank 2018 Tate Springs Road,
Lynchburg, VA 24501
Central National Bank 1728 Graves Mill Road,
Lynchburg, VA 24502
Community National 1002 Virginia Avenue,
Bank Clarksville, VA 23927
Community National 749 East 2nd Street, Chase City,
Bank VA 23924
Community National 222 Main Street, South Boston,
Bank VA 24592
Community National 300 Dabney Drive Ext.,
Bank Henderson, NC 27536
Community National 205 South Bickett Street,
Bank Louisburg, NC 27549
Community National 823 North Main Street, Roxboro,
Bank NC 27573
First National Bank 550 Blue Ridge Avenue, Bedford,
VA 24523
First National Bank 135 Scruggs Road, Moneta, VA
24121
First National Bank 9440 Franklin Street, Ferrum, VA
24088
First National 3132 Electric Road, Roanoke, VA
Exchange Bank 24018
First National 721 Blue Ridge Boulevard,
Exchange Bank Roanoke, VA 24523
Patrick Henry National 900 Washington Street, Eden, NC
Bank 27288
Patrick Henry National 630 Fagg Drive, Eden, NC 27288
Bank
Patrick Henry National 100 Turner Drive, Reidsville, NC
Bank 27320
Patrick Henry National 305 South Main Street,
Bank Reidsville, NC 27320
Peoples National Bank 903 South Main Street, Danville,
VA 24541
Peoples National Bank 5406 U. S. Highway 29 North,
Danville, VA 24527
Shenandoah National 75 North Mason Street,
Bank Harrisonburg, VA 22802
In addition to these bank offices, the Corporation also owned the
following other properties
Description Location
Golden Corral Restaurant Raleigh, NC
West Lake Corner Shopping Center Moneta, VA
Blackstone Shopping Center Blackstone, VA
27 Acres of Vacant land at the Martinsville, VA
intersection of U. S. 58 and
Horsepasture-Price Road west of
Martinsville, VA
Item 3. Legal Proceedings
There were no legal proceedings as of December 31, 1999 or 1998.
Item 4. Submission of Matters to a Vote of Security Holders.
The regular Annual Meeting of Shareholders was held on July 22,1999
for the purposes of electing directors. A total of 231,513 shares,
or 58.1% of the total outstanding shares, were voted at the
meeting. The following were elected to serve as directors until
the next Annual Meeting:
Shares
Voted
Director For Against
Worth Harris
Carter, Jr. 231,339 174
Robert W.
Conner 231,339 174
William G.
Davis 231,136 377
Charles E. Hall
231,339 174
Haller G.
Prillaman 231,339 174
R. E. Williams
231,339 174
There was no other business transacted at the meeting.
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
On February 28, 1995 398,244 shares of common stock were
distributed to approximately 3,000 shareholders. To date, no
public trading market for the stock has developed. There are no
known brokerage firms making any market in the stock and management
is not aware of the consideration for any shares of stock which may
have been sold.
No dividends have been paid to date and none are anticipated for
the foreseeable future.
Item 6. Management's Discussion and Analysis or Plan of Operation
As described under "Description of Business", the purpose of the
Corporation is to acquire, develop and lease bank offices to the
Participating Banks. This process will be coordinated with the
management of each bank.
It is anticipated that each bank will establish at least one office
each year through the Corporation although there is no requirement
for any bank to do so. Several cities, towns and/or counties have
been identified as potential branch sites by the management of the
Participating Banks; however, specific sites have not been
identified in any of these locations.
It has been the experience of the Participating Banks that the cost
of acquiring and constructing branch offices varies considerably
from area to area and from individual location to individual
location. It is therefore impossible to project the cost of
acquiring any parcels of property or constructing any offices. It
is also impossible to determine the cash or financing needs to
acquire and construct offices in the future.
The Corporation now owns and leases the properties listed under
Item 2 above. The Corporation is also a 50% limited partner in
Waterlick, L.L.C which owns and leases certain commercial
properties in Lynchburg, Virginia. Central National Bank opened an
office on a portion of this property in 1998. The Corporation
acquired West Lake Corner Shopping Center near Smith Mountain Lake
in 1998. This center consists of 50,000 square feet of space on 29
acres. The anchor tenants for the center are Food Lion, Revco, and
Family Dollar Store. First National Bank opened an office on a
portion of this property in 1999.
During 1999, the Corporation acquired five bank offices. In
addition, the Corporation agreed with several of the Participating
Banks to acquired six additional bank sites. The Participating
Banks are continuing to expand and additional offices are expected.
As a result of the acquisitions during the year, total income
increased significantly from $1,103,554 in 1998 to $1,873,842 in
1999. Income continues to consist almost entirely of lease
payments on the various properties. Operating expenses also
increased significantly from $1,080,158 in 1998 to !1,846,502 in
1999. Interest and depreciation costs continue to account for
nearly all of the operating costs. Net income increased to $27,340
for 1999 compared to $23,396 in 1998 and a loss of $27,791 in 1997.
There was no income tax liability due to the recognition of tax
loss carryforwards from pervious years.
Item 7. Financial Statements And Supplementary Data
The following financial statements and supplementary data are
supplied in the 1999 Financial Statement and Independent Auditors
report by Manning, Perkinson, Floyd & Corporation filed herewith.
1. Comparative Balance Sheets as of December 31, 1999 and 1998;
2. Comparative Statements of Income and Retained Earnings for the
years ended December 31, 1999, 1998 and 1997;
3. Statements of Cash Flow for the years ended December 31, 1999,
1998 and 1997
4. Notes to the Financial Statements
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There have been no changes in or disagreements with any
accountants on accounting and financial disclosures.
Item 9. Directors, Executive Officers, Promoters and Control
Persons
Benefic Percent
ial of
Principal Occupation for Stock Shares Direc
tor
Directors Age the Past Five Years Ownersh OutstandSince
ip ing
Carter, Worth 62 47,718 11.98% 1994
Harris, Jr. (1)
Chairman of the
Board
and President
Worth Harris
Carter, Jr. is a
director and
officer of the
following
companies:
Chairman of
the Board of
First National
Bank since 1976,
President since
1986
Chairman of
the Board and
President of
Patrick Henry
National Bank
since 1977
Chairman of
the Board and
President of
Peoples National
Bank since 1976
Chairman of
the Board of Blue
Ridge Bank since
1982
Chairman of
the Board and
President of
Community
National Bank
since 1985
Chairman of
the Board and
President of
Mountain National
Bank since 1996
Chairman of
the Board and
President of
Shenandoah
National Bank
since 1996
Chairman of
the Board and
President of
Central National
Bank since 1996
Chairman of
the Board and
President of
Patriot Bank
since 1996
Chairman of
the Board and
President of
First National
Exchange Bank
since 1999
Chairman of
the Board and
President of
Mortgage Company
of Virginia since
1984
Chairman of
the Board and
President of Bank
Services of
Virginia since
1984
Chairman of
the Board and
President of Bank
Building
Corporation since
1994
Conner, Robert W. 59 1,119 0.28% 1995
(2)
Robert W. Conner
is Clerk, Circuit
Court of Halifax
County and a
farmer. He has
been a Director
of
Community
National Bank
since 1985. He
has served on the
Boards of
Directors of both
Bank Services
of Virginia and
Mortgage Company
of Virginia.
Benefic Percent
ial of
Principal Occupation for Stock Shares Direc
tor
Directors Age the Past Five Years Ownersh OutstandSince
ip ing
Davis, William G. 57 2,271 0.57% 1995
(2)
William G. Davis
is and has been
an Attorney at
law in the firm
of Davis, Davis,
Davis & Rice,
Rocky
Mount, Virginia
for more than
five years. He
has been a
Director of First
National Bank,
Rocky Mount,
Virginia 1974.
He has served on
the Boards of
Directors of both
Bank Services of
Virginia and
Mortgage
Company of
Virginia.
Hall, Charles E. 57 135 0.03% 1995
Charles E. Hall
is and has been a
Dairy Farmer in
Floyd County,
Virginia more
than five years.
He
has served on the
Board of
Directors for
Blue Ridge Bank,
Floyd, Virginia
since 1978 and
has served
on the Boards of
Directors of Bank
Services of
Virginia and
Mortgage Company
of Virginia.
Prillaman, Haller 66 3,470 0.87% 1995
G.
Haller G.
Prillaman is and
has been
President of
Prillaman
Brothers, Inc.,
Martinsville, Va.
for more than
five years. He
has been a
director of
Patrick Henry
National Bank,
Bassett, Virginia
since 1976 and
has been a
director of
Mountain National
Bank, Galax,
Virginia since
1996. He has
also served on
the Boards of
Directors of both
Bank Services of
Virginia and
Mortgage Company
of Virginia
Williams, R. E. 65 1,156 0.29% 1995
R. E. Williams is
and has been
President of Dry
Fork Milling
Company, Inc.,
Danville,
Virginia for
more than five
years. He been a
Director of
Peoples National
Bank, Danville,
Virginia since
1977.
He has also
served on the
Boards of
Directors of both
Mortgage Company
of Virginia and
Bank
Services of
Virginia.
Notes:
(1) Includes
4,110 shares held
by Mr. Carter as
custodian and
2,519 shares held
by family members
over which Mr.
Carter is deemed
to have
investment powers
and 538 shares
owned by C & C
Realty, Inc. over
which Mr. Carter
is deemed to have
investment
powers.
(2) Includes 219
shares held by
family members
over which Mr.
Conner is deemed
to have
investment
powers.
(3) There are no
family
relationships
between any
officers and
directors of the
bank.
(4) Unless
otherwise
indicated, the
shares listed in
the table
represent sole
voting and
investment powers
of the
directors
Item 10. Executive Compensation
No compensation has been paid or is due and payable to any director
of the Corporation. As of December 31, 1999 the Corporation had no
paid officers or employees. Further, the Corporation does not
intend to have any salaried directors, officers or employees in the
foreseeable future. (See "Description of Business").
Item 11. Security Ownership of Certain Owners and Management
As of December 31, 1999 the following individual controlled more
than 5% of the Corporations outstanding shares:
Title Name and Address of Amount Percent of
of and
Nature
of
Class Beneficial Owner Benefic Class
ial
Ownersh
ip
Common Carter, Worth Harris, 40,551 Direct
Jr.
805 Hazelwood Lane 6,945 Benefic
ial
Martinsville, VA 24112 47,496 11.93%
Item 12. Certain Relationships and Related Transactions
The Corporation does not propose to engage in any transaction
in which any director or executive officer of the Corporation, or
immediate family members thereof had or is to have a direct or
indirect material interest.
Item 13. Exhibits and Reports on Form 8-K.
None.
Signatures
In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Registrant: Bank Building Corporation
Date April 14, 2000
By Worth Harris Carter, Jr.
(Signature)
President and Chief Financial Officer
Name Capacity Date
/s/ Worth Harris Chairman of the April 14, 2000
Carter, Jr. Board, President
Worth Harris Carter, And Chief Financial
Jr. Officer
/s/Robert W. Conner Director April 14, 2000
Robert W. Conner
/s/William G. Davis Director April 14, 2000
William G. Davis
/s/Charles E. Hall Director April 14, 2000
Charles E. Hall
/s/Haller G. Director April 14, 2000
Prillaman
Haller G. Prillaman
/s/R. E. Williams Director April 14, 2000
R. E. Williams
AUDITORS LETTER
Independent Auditor's Report
To the Board of Directors
Bank Building Corporation
Bassett, Virginia
We have audited the accompanying consolidated balance sheets
of Bank Building Corporation and subsidiary as of December 31, 1999
and 1998, and the related consolidated statements of income,
retained earnings and cash flows for each of the three years in the
period ended December 31, 1999. These financial statements are the
responsibility of the Corporation'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 audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Bank Building Corporation as of December 31,
1999 and 1998, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1999,
in conformity with generally accepted accounting principles.
Manning, Perkinson, Floyd & Corporation
Certified Public Accountants
Danville, Virginia
April 14, 2000
BANK BUILDING CORPORATION
Consolidated Balance Sheets
December 31, 1999 and 1998
1999 1998
AS
SE
TS
Cu
rr
en
t
As
se
ts
Ca $ $
sh 24,484 19,793
Re -
ce 7,135
iv
ab
le
s
In -
co
me
ta
x
re
fu
nd
re
ce
iv
ab
le
Pr 7,466 8,466
ep
ai
d
ex
pe
ns
es
Total current assets 31,950 35,394
Pr
op
er
ty
(n
ot
e
2)
La 5,073,68 3,971,37
nd 9 4
Bu 15,309,110 13,575,1
il 02
di
ng
20,382,7 17,546,4
99 76
Less accumulated (768,212 (405,643
depreciation ) )
19,614,5 17,140,8
87 33
Ot
he
r
as
se
ts
Or 4,221 12,665
ga
ni
za
ti
on
co
st
s,
ne
t
Lo 108,315 83,686
an
as
su
mp
ti
on
fe
e,
ne
t
112,536 96,351
$ $
19,759,0 17,272,5
73 78
LI
AB
IL
IT
IE
S
AN
D
SH
AR
EH
OL
DE
RS
'
EQ
UI
TY
Cu
rr
en
t
li
ab
il
it
ie
s
Ac $ - $
co 2,763
un
ts
pa
ya
bl
e
Ac 106,465 117,700
cr
ue
d
in
te
re
st
Cu 610,265 370,440
rr
en
t
po
rt
io
n
of
lo
ng-
te
rm
de
bt
No 1,088,500 1,113,50
te 0
Pa
ya
bl
e
(n
ot
e
4)
De -
po
si
t
on
pr
op
er
ty
(n
ot
e
2)
Total current 1,805,23 1,604,40
liabilities 0 3
Lo 17,941,568 15,683,2
ng- 40
te
rm
de
bt
(n
ot
es
4
an
d
6)
Sh
ar
eh
ol
de
rs
eq
ui
ty
Ca
pi
ta
l
st
oc
k,
co
mm
on
,
au
th
or
iz
ed
40
0,
00
0
sh
ar
es
,
no
pa
r
va
lu
e
39 - -
8,
24
4
is
su
ed
an
d
ou
ts
ta
nd
in
g
-
Re 12,275
ta (15,065)
in
ed
ea
rn
in
gs
(d
ef
ic
it
)
Total shareholders
equity 12,275 (15,065)
$ $
19,759,0 17,272,5
73 78
The accompanying notes are an integral part of this statement.
BANK BUILDING CORPORATION
Consolidated Statements of Income and Retained Earnings
Years ended December 31, 1999, 1998 and 1996
1999 1998 1997
IN
CO
ME
Le $ 1,843,248 $ $
as 1,072,5 523,73
e 15 7
in
co
me
(n
ot
e
6)
Ot 30,594
he 31,039 -
r
in
co
me
1,873,8 1,103,5 523,73
42 54 7
EX
PE
NS
ES
In 1,356,278 803,378 413,25
te 4
re
st
De 362,570 207,710 95,460
pr
ec
ia
ti
on
Am 12,475 10,693 9,009
or
ti
za
ti
on
Ta 43,624 25,159 12,767
xe
s
an
d
in
su
ra
nc
e
Re 27,180 3,313 3,897
pa
ir
s
Pr 10,117 14,520 11,442
of
es
si
on
al
fe
es
Ot 34,258 15,385 5,699
he
r
1,846,5 1,080,1 551,52
02 58 8
In 27,340
co 23,396 (27,79
me 1)
(l
os
s)
be
fo
re
in
co
me
ta
xe
s
In -
co - -
me
ta
x
be
ne
fi
t
(e
xp
en
se
)
(n
ot
e
5)
Ne 27,340 23,396 -
t 27,791
in
co
me
Re (15,065)
ta (38,461 (10,67
in ) 0)
ed
ea
rn
in
gs
(d
ef
ic
it
),
be
gi
nn
in
g
of
ye
ar
Re $12,275 ($15,06 ($38,4
ta 5) 61)
in
ed
ea
rn
in
gs
(d
ef
ic
it
),
en
d
of
ye
ar
Ea $ 0.06 $ $
rn 0.06 (0.07)
in
gs
(l
os
s)
pe
r
sh
ar
e
The accompanying notes are an integral part of this statement.
BANK BUILDING CORPORATION
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1996
1999 1998 1997
C
a
s
h
f
l
o
w
s
f
r
o
m
o
p
e
r
a
t
i
n
g
a
c
t
i
v
i
t
i
e
s
:
N $27,340 $23,396 ($27,79
e 1)
t
I
n
c
o
m
e
(
l
o
s
s
)
A
d
j
u
s
t
m
e
n
t
s
t
o
r
e
c
o
n
c
i
l
e
n
e
t
i
n
c
o
m
e
t
o
n
e
t
c
a
s
h
p
r
o
v
i
d
e
d
b
y
o
p
e
r
a
t
i
n
g
a
c
t
i
v
i
t
i
e
s
:
Depreciation
362,570 207,710 95,460
Amortization
12,475 10,693 9,009
( 1,000
I (2,881) (5,585)
n
c
r
e
a
s
e
)
d
e
c
r
e
a
s
e
i
n
p
r
e
p
a
i
d
e
x
p
e
n
s
e
s
I (2,763)
n 2,763 (7,418)
c
r
e
a
s
e
(
d
e
c
r
e
a
s
e
)
i
n
a
c
c
o
u
n
t
s
p
a
y
a
b
l
e
I (11,235)
n 73,064 18,715
c
r
e
a
s
e
(
d
e
c
r
e
a
s
e
)
i
n
a
c
c
r
u
e
d
i
n
t
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The accompanying notes are an integral part of this statement.
BANK BUILDING CORPORATION
Notes to Consolidated Financial Statements
December 31, 1999
1. Summary of Significant Accounting Policies
The Corporation conducts its business in Virginia with its main
office located in Bassett, Virginia. The principal business
activity of the Corporation is to acquire, build, finance and lease
branch buildings to commercial banks in Virginia and North
Carolina. The Corporation and its subsidiary also own and lease
two shopping center and a restaurant.
In 1999, the Corporation formed a wholly-owned subsidiary -
Blackstone Properties, LLC. All intercompany transactions between
the Corporation and Blackstone have been eliminated in these
consolidated financial statements. In October 1999, Blackstone
purchased a shopping center in southside Virginia and is leasing
space to a number of retail tenants.
The Corporation leases its properties under operating leases.
Other income represents fees charged to tenants for maintenance,
insurance and taxes.
Organization costs are being amortized on the straight-line method
over 60 months.
Loan origination fees are amortized over the life of each loan.
Property is stated at cost and is depreciated over the estimated
useful lives of the assets.
Receivables represent amounts due from tenants for reimbursement of
maintenance, taxes and insurance. In management's opinion, no
allowance for uncollectible accounts is needed at year-end.
Earnings per share are calculated based on the average number of
shares outstanding during the year.
The preparation of financial statements is conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax basis. Deferred
tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred
tax assets and liabilities are adjusted for the effects of changes
in tax laws and rates on the date of enactment. The only
significant timing difference consist of loan origination fees
which are expensed for income tax purposes when incurred.
2. Leases
The Corporation leases substantially all of its property under long
term operating leases. Future minimum payments, for the next five
years, due under existing leases at December 31, 1999 were as
follows:
2000 $
2,136,0
00
2001
2,136,0
00
2002
2,136,0
00
2003
2,136,0
00
2004
2,136,0
00
3. Investment in Waterlick, L.L.C.
The Corporation is a 50% limited partner in Waterlick, L.L.C.
Waterlick owns and leases certain commercial properties in
Lynchburg, Virginia. This investment is accounted for by the
equity method. No funds were invested in Waterlick; therefore,
Waterlick's 1999 loss of $3,033, 1998 loss of $6,418 and 1997 loss
of $5,965 are not reflected in the financial statements.
4. Long-term Debt
Long-term debt consisted of the following at December 31, 1999 and
1998:
1999 1998
Mortgage loan secured by real
estate (shopping
center) and related leases.
Monthly payments are
$19,403 including principal, $ $
interest at 8.25% 1,784,30 1,859,65
8 8
Mortgage loan secured by real
estate (shopping
center) and related leases.
Monthly payments are
$20,394 including principal, 2,323,20
interest at 8.50% 2,274,06 0
0
Mortgage loan secured by real
estate and lease
for a Golden Corral Restaurant.
Monthly payments
are $16,299 including principal, 1,951,19
interest at 6.0% 1,870,45 2
8
Mortgage loans secured by real
estate (branch bank
facilities) and related leases.
Monthly payments at
December 31, 1999 are $104,695
including principal
and interest. Interest rates
were 7.75% to 8.25% at
December 31, 1999 and are
subject to adjustment at
various times. 12
,623,007 9,919,63
0
18,551,8 16,053,6
33 80
Less current portion
(610,265 (370,440
) )
$ $
17,941,5 15,683,2
68 40
Maturities of long-term debt at December 31, 1999 are as follows:
2000 $
610,265
2001
646,010
2002
684,570
2003
722,586
2004
767,199
Thereaf
ter 15,121,2
03
$
18,551,8
33
At December 31, 1999, the Corporation had unsecured demand notes
payable of $1,088,500 (8 1/2% interest) with two of the banks
addressed in note 6.
5. Income Taxes
The income tax benefit (expense) consists of the following:
1999 1998 1997
Current $ $ $
(5,495) (4,626) 5,269
Deferred
5,495 4,626 (5,269)
$ $ $
- - -
At December 31, 1999, the Corporation had net operating loss (NOL)
carryforwards of approximately $75,000 expiring from 2016 through
2019. A deferred tax asset has not been recorded since it is not
known when the NOL will be utilized.
Income tax benefit (expense) differs from the amount of income tax
determined by applying the U.S. federal income tax rate to pretax
income due to the following:
1999 1998 1996
Tax benefit (expense)
computed by applying
federal rate to income $ $ $
before income taxes (9,295) (7 9,449
,955)
State income taxes (1,082) (926) 1,100
Effect of surtax exemption 4,882 (5,280)
4,255
Deferred taxes 5,495 4,626 (5,269)
$ $ $
- - -
6. Related Party Transactions
The Chairman of the Board and president of the Corporation serves
in a similar capacity for ten commercial banks throughout Virginia.
The Corporation had outstanding loans with certain of these banks
at December 31, 1999 totaling $19,640,333 and $14,194,022 at
December 31, 1998. The Corporation also leases branch banking
locations to certain of these banks. Lease income received from
these banks was $1,154,412 in 1999, $577,588 in 1 998, and $365,344
in 1997.
7. Fair Value Of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" requires the Corporation
to disclose the estimated fair values of its financial assets and
liabilities. The estimated fair values of these were estimated
using the following assumptions
a. The book value of cash is believed to approximate its fair
value.
b. The fair value of long-term debt and notes payable is
estimated by discounting the anticipated cash flows
using estimated market rates for similar loans available in
the Corporation market area.
1999 1998
Book Fair Book Fair
Value Value Value Value
Financial
Assets
Cash $24,484 $24,484 $19,793 $19,793
Financial
Liabilities
Note 1,088,5 1,088,5 1,113,5 1,113,5
Payable 00 00 00 00
Long-term 18,551, 17,929, 16,053, 16,
debt 833 125 680 053,680
$19,640 $19,017 $17,167 $17,167
,333 ,625 ,180 ,180
8. Commitments
The Corporation currently has ongoing discussions in process
regarding future bank locations to be acquired and leased to
commercial banks in Virginia and North Carolina. At December 31,
1999, the Corporation had commitments to the Participating Banks
for the purchase of five offices with a total amount outstanding as
of that date of $2,572.387.
