<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
- --- of 1934
For the quarterly period ended September 30, 1997
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- --- Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission File No. 0-28280
GREATER ROME BANCSHARES, INC.
-----------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Georgia 58-2117940
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(State of Incorporation) (I.R.S. Employer Identification No.)
P.O. Box 5271, 1490 Martha Berry Blvd., Rome, Georgia 30162-5271
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(Address of Principal Executive Offices)
(706) 295-9300
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(Issuer's Telephone Number, Including Area Code)
Not Applicable
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(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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
----- -----
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
700,000 shares of common stock, $.01 par value per share, were issued and
outstanding as of October 28, 1997.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
Total Pages:
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PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements of Greater Rome Bancshares, Inc. (the
"Company") are set forth on the following pages. All adjustments have been made
which, in the opinion of management, are necessary in order to make the
financial statements not misleading.
2
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GREATER ROME BANCSHARES, INC. and subsidiary
Consolidated Balance Sheets
(Unaudited)
September 30, 1997 and December 31, 1996
<TABLE>
<CAPTION>
Assets
------
1997 1996
----------- -----------
<S> <C> <C>
Cash and due from banks $ 1,256,764 764,891
Federal funds sold 2,293,055 4,058,912
----------- -----------
Cash and cash equivalents 3,549,819 4,823,803
Securities available for sale 2,934,653 1,489,375
(amortized cost of $2,934,451 and $1,487,715)
Securities held to maturity 5,602,475 4,748,925
(market value $5,576,765 and $4,722,155)
Loans 26,810,414 13,228,943
Allowance for loan losses (387,444) (133,342)
----------- -----------
Net loans 26,422,970 13,095,601
Premises and equipment, net 2,310,213 2,099,035
Accrued interest receivable and other assets 348,220 251,902
----------- -----------
$41,168,350 26,508,641
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Deposits:
Demand $ 4,463,315 3,006,709
Interest bearing demand 2,585,654 1,692,466
Savings 4,604,824 3,479,435
Time 20,059,659 11,665,926
----------- -----------
Total deposits 31,713,452 19,844,536
Federal Home Loan Bank advances 3,000,000 -
Accrued interest payable and other liabilities 169,783 286,148
----------- -----------
Total liabilities 34,883,235 20,130,684
Commitments
Stockholders' equity:
Preferred stock, par value $1.00 per share; 100,000 shares
authorized; no shares issued or outstanding
Common stock, par value $.01 per share; 10,000,000
shares authorized; 700,000 shares issued and
outstanding 7,000 7,000
Additional paid-in capital 6,930,117 6,930,117
Accumulated deficit (652,204) (560,820)
Unrealized gain/(loss) on securities available for sale 202 1,660
----------- -----------
Total stockholder's equity 6,285,115 6,377,957
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$41,168,350 26,508,641
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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GREATER ROME BANCSHARES, INC. and subsidiary
Consolidated Statements of Operations
(Unaudited)
For each of the Nine and Three Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
Sep 30, 1997 Sep 30, 1996 Sep 30, 1997 Sep 30, 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest income on:
Federal funds sold and deposits with other banks $ 75,363 135,856 11,451 32,049
Investment securities 349,394 193,125 123,084 82,214
Loans, including loan fees 1,526,258 309,586 637,627 209,669
---------- -------- ------- -------
Total interest income 1,951,015 638,567 772,162 323,932
---------- -------- ------- -------
Interest expense on deposits:
Demand 42,120 16,050 13,196 8,317
Savings 117,062 44,702 44,799 24,870
Time 659,459 91,052 267,543 62,336
Interest expense on other borrowings 30,092 - 17,082 -
---------- -------- ------- -------
Total interest expense 848,733 151,804 342,619 95,523
---------- -------- ------- -------
Net interest income 1,102,282 486,763 429,543 228,409
Provision for loan losses 271,968 77,000 106,900 46,593
---------- -------- ------- -------
Net interest income after provision 830,314 409,763 322,643 181,816
Non-interest income 110,725 23,431 48,904 14,222
Salaries and employee benefits 551,178 380,505 194,523 145,395
Occupancy and equipment expense 175,321 114,957 60,054 46,267
Other operating 305,924 226,117 111,140 86,052
---------- -------- ------- -------
Total non-interest expenses 1,032,423 721,579 365,717 277,714
---------- -------- ------- -------
Net income (loss) $ (91,384) (288,385) 5,830 (81,676)
========== ======== ======= =======
Net income (loss) per common share $ (0.13) (0.41) 0.01 (0.12)
========== ======== ======= =======
Weighted average number of shares outstanding 700,000 700,000 700,000 700,000
========== ======== ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
4
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GREATER ROME BANCSHARES, INC. and subsidiary
Consolidated Statements of Cash Flows
(Unaudited)
For each of the Nine Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (91,384) (288,385)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation, amortization and accretion 101,067 44,321
Provision for loan losses 271,968 77,000
Change in:
Interest receivable and other assets (105,382) (115,090)
Interest payable and other liabilities (116,365) (24,705)
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Net cash (used in) provided by operating activities 59,904 (306,859)
Cash flows from investing activities:
Purchases of securities available for sale (1,442,614) (1,245,853)
Purchases of securities held to maturity (1,377,762) (3,248,014)
Proceeds from maturities and calls of securities held to maturity 524,655 -
Net increase in loans (13,599,337) (10,224,609)
Purchases of premises and equipment (307,745) (1,149,698)
------------ -----------
Net cash used by investing activities (16,202,803) (15,868,174)
Cash flows from financing activities:
Net change in demand and savings deposits 3,475,182 6,692,855
Net change in time deposits 8,393,733 5,461,355
Net change in borrowings 3,000,000 -
------------ -----------
Net cash provided by financing activities 14,868,915 12,154,210
Change in cash and cash equivalents (1,273,984) (4,020,823)
Cash and cash equivalents at beginning of period 4,823,803 5,423,506
------------ -----------
Cash and cash equivalents at end of period $ 3,549,819 1,402,683
============ ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 817,856 133,294
Change in unrealized gain/(loss) on securities available for sale $ (1,458) 241
</TABLE>
See accompanying notes to consolidated financial statements.
5
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GREATER ROME BANCSHARES, INC. and subsidiary
Notes to Consolidated Financial Statements
(Unaudited)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Greater Rome Bancshares, Inc. (the "Company") is a bank holding company whose
business is conducted by its wholly owned bank subsidiary, Greater Rome Bank
(the "Bank"). The Company is subject to regulation under the Bank Holding
Company Act of 1956.
The Bank is a commercial bank that serves Rome, Georgia, a community located
approximately 50 miles north of metropolitan Atlanta, and surrounding Floyd
County. The Bank is chartered and regulated by the State of Georgia
Department of Banking and Finance and is insured and subject to regulation by
the Federal Deposit Insurance Corporation.
Operations of the Company for the period from inception (June 17, 1994) to
February 26, 1996 related primarily to expenditures by the organizers for
incorporating and organizing the Bank including raising capital and securing
banking facilities.
Basis of Presentation and Reclassification
------------------------------------------
The accounting principles followed by Greater Rome Bancshares, Inc. and its
subsidiary, 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 conformity
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
the near term include, but are not limited to, the determination of the
allowance for loan losses and the valuation of real estate acquired in
connection with or in lieu of foreclosure on loans.
Cash and Cash Equivalents
-------------------------
For presentation purposes in the consolidated statements of cash flows, cash
and cash equivalents include cash on hand, amounts due from banks, interest-
bearing deposits with 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. Trading securities are bought and
held principally for sale in the near term. Held to maturity securities are
those securities for which the Company has the ability and intent to hold the
security until maturity. All other securities not included in trading or
held to maturity are classified as available for sale. The Company's current
investment policy prohibits trading activity.
Held to maturity securities are recorded at cost, adjusted for the
amortization or accretion of premiums or discounts. Transfers of securities
between categories are recorded at fair value at the date of transfer.
Unrealized holding gains or losses associated with transfers of securities
from held to maturity to available for sale are recorded as a separate
component of stockholders' equity.
Available for sale securities consist of investment securities not classified
as trading securities or held to maturity securities 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.
6
<PAGE>
A decline in the market value of any available for sale or held to maturity
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 and held to maturity are included
in earnings and are derived using the specific identification method for
determining the cost of securities sold.
Loans, Loan Fees and Interest Income
------------------------------------
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 the allowance for loan losses and any deferred fees or costs on
originated loans. Interest on all loans is calculated principally by using
the simple interest method on the daily balance of the principal amount
outstanding.
The Bank accounts for impaired loans in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 114, "Accounting by Creditors for
Impairment of a Loan" as amended by SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan - Income Recognition and Disclosure." A loan is
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 a cash basis method of accounting
during the time within that period in which the loans were impaired.
Allowance for Loan Losses
-------------------------
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.
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 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.
Major additions and improvements are charged to the asset accounts while
maintenance and repairs that do not improve or extend the useful lives of the
assets are expensed currently. 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 earnings for the period.
Depreciation expense is computed using the straight-line method over the
following estimated useful lives:
Buildings 40 years
Land improvements 20 years
Furniture, fixtures and equipment 3 - 7 years
7
<PAGE>
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. Future tax benefits, such as net operating loss carryforwards, are
recognized to the extent that realization of such benefits is more likely
than not. 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 the 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 Income or Loss Per Share
----------------------------
Net income or loss per share is based on the weighted average number of
shares actually outstanding during each period. Stock options are considered
to be common stock equivalents. These options are not included in the
computation of net income or loss per share as the effect of inclusion is
anti-dilutive or is not material.
Recent Accounting Pronouncements
--------------------------------
During 1997, the Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS 128).
SFAS 128 simplifies current standards by eliminating the presentation of
primary earnings per share and requiring the presentation of basic earnings
per share (EPS), which includes no potential common shares and thus no
dilution. The Statement also requires entities with complex capital
structures to present basic and diluted EPS on the face of the income
statement and also eliminates the modified treasury stock method of computing
potential common shares. The Statement is effective for financial statements
issued for periods ending after December 15, 1997. Early application is not
permitted. Upon adoption, restatement of all prior-period EPS data presented
is required. Based upon the current capital structure of the Company, this
Statement should have no effect on the present EPS calculation.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FINANCIAL CONDITION
As of September 30, 1997, the Company had concluded nineteen months of banking
operations with $41.2 million in total assets, up $14.7 million over year end
1996. Total deposits had increased $11.9 million over year end to $31.7 million.
Total loans outstanding had increased $13.6 million over year end to $26.8
million. The Bank's loan-to-deposit ratio at September 30, 1997 was 84.5%, as
compared to 66.7% at year end 1996 and 84.6% at the end of the prior quarter.
The Bank has continued to benefit from strong loan demand in the local market,
which has produced steady loan growth over the first three quarters of 1997.
Deposit growth, although strong, has not kept pace with loan demand, despite
competitively priced investment products and banking services.
The equity markets continue to be perceived as producing better investment
results than bank products. Local deposit dollars (similar to the national bank
deposit markets) are being diverted from insured bank deposits to mutual funds
and other forms of equity investments. In the current market environment,
management has found that the Bank can borrow term funds from wholesale
resources, such as the Federal Home Loan Bank, at rates which are less than the
cost of local certificates of deposit. As a result, in the second quarter, the
Bank's Asset/Liability Management Committee changed certain of the financial
guidelines in its policies, to make funding sources other than local market
deposits more acceptable. Management will be placing less emphasis on the Bank's
loan-to-deposit ratio, and more emphasis on the Bank's loan-to-asset ratio and
net-non-core-fund-dependence ratio. The net-non-core-fund-dependence ratio
calculates the percentage of long term earning assets that are funded by short
term borrowed funds and certificates greater than one hundred thousand dollars
after deducting the Bank's short-term investments. This shift in emphasis should
allow the Bank to continue to meet the local market's credit demands and provide
the flexibility to obtain funding from various sources at optimum rates. While
this policy shift opens up greater funding flexibility, in the long run the Bank
will continue to place primary funding emphasis on local deposit growth. At
September 30, 1997, the Bank's loan-to-asset ratio was 65.6%, up from 50.5% at
year end 1996 and down from the prior quarter end at 67.8%. The Bank's net-non-
core-fund-dependence ratio was 6.85%, up from 0.3% at year end 1996 and down
from the prior quarter end at 13.7%. The reduction in this ratio from the prior
quarter end was due to the $2.7 million increase in short term investments and
$550,000 reduction in short term borrowings.
CAPITAL
At September 30, 1997, the Bank's capital position was in excess of FDIC
guidelines to qualify as "well capitalized". Based on the level of the Bank's
risk weighted assets at quarter end, the Bank had $3.4 million more capital than
necessary to satisfy the "well-capitalized" criteria. The Bank's capital
adequacy is monitored quarterly by the Bank's Asset/Liability Committee, as
asset and liability growth, mix and pricing strategies are developed.
LIQUIDITY
The Bank's internal and external liquidity resources are considered by
management to be adequate to handle expected growth and normal cash flow demands
from existing deposits and loans. For the nine months ended September 30, 1997,
loan growth exceeded deposit growth by $1.7 million. Securities held to maturity
increased $900 thousand over year end to $5.6 million, and the securities
available for sale increased $1.4 million to $2.9 million. Investment securities
were purchased in order to improve the yield on the Bank's internal liquidity
resources. U.S. Treasury and government agency securities with final maturities
under five years were purchased with yields 75 to 100 basis points greater than
Federal funds sold at the time of purchase. At September 30, 1997, the average
life of the Bank's security portfolio was 2.6 years with an average yield of
6.22%.
9
<PAGE>
During the third quarter of 1997, the Bank borrowed $3 million from the Federal
Home Loan Bank ("FHLB") of Atlanta to improve its cost of funds and to improve
its interest rate risk exposure. One million dollars were borrowed at a fixed
rate of 5.93% for one year maturing in July of 1998. Two million dollars were
borrowed at a fixed rate of 5.66% for five years maturing in September 2002,
with a one-time call option in September 1999. These borrowings are secured by
first mortgage real estate loans, which are assigned to the FHLB. In comparison,
during the third quarter of 1997, the Bank paid more than 6.0% for one year time
deposits in the local market and more than 6.2% for two year time deposits in
the local market. The Bank's interest rate risk is improved with this longer
term, fixed rate funding. The Bank has over $7 million in loans, which reprice
from three to five years beyond September 30, 1997.
Net deposit growth, federal funds sold and marketable securities provide the
primary liquidity resource for loan disbursements and Bank working capital. The
Bank's investment securities portfolio provides liquidity in the form of
financing through master repurchase agreements executed with the Bank's
correspondent banks. At quarter end the funds available for liquidity purposes
consisted of $8.0 million in securities (eligible for sale under repurchase
agreements), plus Federal funds sold of $2.3 million, for a total of $10.3
million. Under these repurchase agreements, margin requirements range from 3% to
10% of the current market value of the underlying security, and the borrowing
rate tends to have a spread of approximately 25 to 40 basis points over the
Federal funds sold rate. The repurchase agreements allow the Bank to raise funds
out of its total securities portfolio without being forced to sell the
securities and recognize gains or losses as a result of the sale. In addition to
these sources of funds, the Bank has unsecured Federal funds purchase lines of
credit totaling $3.0 million, all of which were available at September 30, 1997.
The correspondent banks may revoke these lines at any time.
Given the potential need to use its securities to raise liquidity, the Bank's
current investment practices limit securities to final maturities not exceeding
five years from the date of purchase settlement and to U.S. Treasuries and
triple A rated government agency securities.
The Bank became a member of the Federal Home Loan Bank of Atlanta in June of
1997. FHLB membership provides an additional source of liquidity through credit
programs, which can provide term funding for up to 10 years and, in certain
qualified programs, up to 20 years. The Bank's first mortgage loans are assigned
as collateral for such financing. The Bank has $5.7 million in eligible
residential first mortgage loans that have been assigned to the FHLB. These
loans provide approximately $4.4 million in lendable value, $3 million of which
is already used. The Bank also has $7.0 million in commercial first mortgage
loans that may qualify as collateral for advances with the FHLB.
Management monitors its liquidity position daily and the officers' loan
committee reviews a liquidity management report on a weekly basis, which
reflects the Bank's results against policy guidelines and the Bank's unfunded
commitments and capital position. The reports reflect funding capacity
projections based on capital limits and policy limits assuming no further local
market deposit growth (a worst case scenario). As of September 30, 1997, the
Bank had unfunded loan commitments, primarily on commercial lines of credit,
totaling $3.9 million.
The Bank intends to manage its loan growth such that deposit flows will provide
the primary funding for all loans as well as cash reserves for working capital
and short to intermediate term marketable investments. Management will continue
to seek cost effective alternative funding sources for both the short and long
term, in the event that local deposit growth does not keep pace with local loan
demand. Such funding sources may include institutional certificates of deposit
("CD's"), local market CD's and brokered CD's.
10
<PAGE>
RESULTS OF OPERATIONS
The Company had a net loss of $91,384 ($0.13 per share) for the nine months
ended September 30, 1997 and net income of $5,831 ($0.01 per share) for the
third quarter of 1997. This compares to a net loss of $288,385 ($0.41 per share)
for the nine months ended September 30, 1996 and a net loss of $81,676 ($0.12
per share) for the third quarter of 1996. The third quarter of 1997 is the first
quarter in which the Bank has produced an operating profit since inception.
Net interest income increased from $486,763 for the nine months ended September
30, 1996 to $1,102,282 for the nine months ended September 30, 1997. This was
due to the increase in average earning assets from $11.7 million for 1996 to
$29.7 million for 1997 and the improvement in the earning asset mix. For 1997,
average loans comprised 68% of average earning assets. For 1996, average loans
were only 36% of average earning assets. The high growth rate in earning assets
and the significant improvement in earning asset mix are primarily due to the
fact that the Bank opened for business on February 26, 1996. Prior to that date
the Bank had no loans and no deposits. The net yield on average earning assets,
before the provision for loan losses, was 4.96% for 1997. This compares to 5.55%
for 1996. The higher yield for 1996 was primarily due to the lower funding cost
associated with almost 70% of average earning assets being funded by the Bank's
capital and non-interest bearing deposits. For 1997, 23% of average earning
assets were funded by capital and non-interest bearing deposits.
The provision for loan losses was $271,968 for the nine months ended September
30, 1997, up from $77,000 in the same period last year. Third quarter 1997 was
$106,900, up from $46,593 for the same period last year. This increase was due
to the growth in the Bank's loan portfolio. At September 30, 1997 the allowance
for loan losses was $387,444 representing 1.45% of total loans. At year end
1996, the allowance was $133,342, which was 1.00% of total loans. Total loans
charged off, net of recoveries, for the nine months ended September 30, 1997
were $17,866 (0.09% of average loans outstanding) and were all consumer loans.
At quarter end, the Bank had 15 loans totaling $79,708 in non-accrual status,
all of which were consumer loans. Other than non-accrual loans, no loans were in
a past-due status more than 90 days. The Bank had no troubled debt
restructurings. For the same periods last year, the Bank had no charged off
loans, no non-accrual loans and no loans past-due more than 90 days.
Management takes a number of factors into consideration when determining the
additions to be made to the loan loss allowance. Since the Bank has just
concluded its first nineteen months of operations, it does not have sufficient
history in its portfolio performance on which to base additions. Accordingly,
additions to the reserve are primarily based on achieving a targeted ratio for
the allowance for loan losses to total loans of 1.50% by the end of 1997. This
target is based on national peer group ratios and Georgia banking industry
ratios. Under this methodology, charge-offs will increase the amount of
additions to the allowance and recoveries will reduce additions.
In addition, management performs an on-going loan review process. All new loans
are risk rated under loan policy guidelines. On a monthly basis, the composite
risk ratings are evaluated in a model that assesses the adequacy of the current
allowance for loan losses, and this evaluation is presented to the Board of
Directors each month. On a weekly basis, loan reviews are performed on new loans
and presented in the officers' weekly loan meeting. Large loans are reviewed
periodically. Risk ratings may be changed if it appears that new loans may not
have received the proper initial grading or, if on existing loans, credit
conditions have improved or worsened.
The Bank's policy is to place loans on non-accrual status when it appears that
the collection of principal and interest in accordance with the terms of the
loan is doubtful. Any loan that becomes 90 days past due as to principal or
interest is automatically placed on non-accrual.
11
<PAGE>
As the Bank matures, the additions to the loan loss allowance will be based more
on historical performance, the detailed loan review and allowance adequacy
evaluation. Management expects to incur losses on loans from time to time when
borrowers' financial conditions deteriorate. Where feasible, loans charged down
or charged off will continue to be collected. Management considers the quarter
end allowance adequate to cover potential losses in the loan portfolio.
Non-interest income for the nine months ended September 30, 1997 was $110,725
($48,904 for the third quarter of 1997), up from $23,431 ($14,222 for the third
quarter of 1996) for the same period of 1996. This consists primarily of service
charges on deposit accounts totaling $67,191 ($25,865 for the third quarter) and
credit life and disability insurance income which was $14,826 ($4,950 for the
third quarter). Non-interest income was significantly greater for 1997 over the
same period for 1996 due to the opening of the Bank on February 26,1996. No
deposit or loan accounts were opened prior to that date. Service charges on
deposit accounts are evaluated annually against service charges from other banks
in the local market and against the Bank's own cost structure in providing the
deposit services. This income should grow with the growth in the Bank's demand
deposit account base. The credit life and disability insurance is sold primarily
on consumer installment debt and should grow with the growth in the Bank's
consumer loan portfolio.
Non-interest expenses increased $310,843 or 43% to $1,032,422 for the nine
months ended September 30, 1997 over the same period in 1996. For the third
quarter of 1997 non-interest expenses increased $88,003 or 32% to $365,716 over
the third quarter of 1996. Average earning assets for the nine months ended
September 30, 1997 increased $18.0 million or 154% to $29.7 million over the
same period in 1996. This indicates that the Bank's operating efficiencies
continue to improve. Part of this increase in expenses is due to the fact that
the Bank was operational only seven months out of the first nine months of 1996.
Salaries and benefits for the nine months ended September 30, 1997 increased
170,673 or 45% to $551,178 over the same period in 1996. This is due primarily
to the growth in the number of full-time-equivalent employees from 14 in the
first quarter of 1996 to 23 in the third quarter of 1997. Occupancy costs for
the nine months ended September 30, 1997 increased by $60,364 or 53% to $175,321
over the same period in 1996. In the fourth quarter of 1996, the Bank moved from
modular office units, containing 2,600 square feet of leased office space and
leased furniture, to its newly constructed bank building containing 9,000 square
feet of office space as well as purchased furniture, fixtures and equipment.
Other operating expenses increased $79,806 or 35% to $305,923 over the same
period in 1996. The nine months ended September 30, 1997 included expenses for a
full nine months necessary to the operations of an established bank, such as
data processing services, business development and marketing expenses,
professional fees, postage and communications costs. The same period in 1996
included banking operations for seven months, as the Bank was just becoming
operational. As noted above, the Bank's average earning assets in the nine
months ended September 30, 1997 increased $18.0 million or 154% to $29.7
million, over four times the growth rate of other operating expenses. Management
continues to focus on improving operating expense efficiencies, through the use
of current banking technologies, out-sourcing solutions and human resource
training and development.
INTEREST RATE SENSITIVITY
Improvement in the earnings of the Company depends upon continued earning asset
growth, good asset quality and a relatively stable economic environment.
Management feels it is reasonable for the Bank to continue to experience steady
earning asset growth as long as interest rates remain relatively stable. The
Bank is liability sensitive out to the one year time horizon (meaning that
falling rates tend to be beneficial) and asset sensitive (meaning that rising
rates tend to be beneficial) in the long term. If interest rates were to rise in
excess of 200 basis points, the Bank could experience reduced earnings in the
near term, and such a rate increase might significantly reduce the demand for
loans in the Bank's local market, thus diminishing the prospects for improved
earnings. If interest rates were to fall in excess of 200 basis points, the Bank
could
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experience a short term increase in net interest margin but may have difficulty
retaining maturing certificates of deposit without having to pay above market
rates.
The Asset/Liability Committee monitors the Bank's exposure to interest rate risk
on a quarterly basis. As of its most recent review, the effect of an immediate
and simultaneous change in interest rates, either up or down by 200 basis
points, was estimated to have less than a 10% impact on current net interest
income over the next twelve months. This estimate assumes that all repricing
assets and liabilities will be replaced by similar term instruments.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There are no material, pending legal proceedings to which the Company or any of
its subsidiaries is a party or of which any of their property is the subject.
ITEM 2. CHANGES IN SECURITIES.
(a) Not applicable.
(b) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
3.1 Articles of Incorporation (Incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement No. 33-82858 on Form SB-2).
3.2 Bylaws (Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement No. 33-82858 on Form SB-2).
4.1 Provisions of Company's Articles of Incorporation and Bylaws Defining the
Rights of Shareholders (Incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement No. 33-82858 on Form SB-2).
4.2 Form of Stock Certificate (Incorporated by reference to Exhibit 4.2 to
the Company's Registration Statement No. 33-82858 on Form SB-2).
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10.1 *Employment Agreement between the Company and Thomas D. Caldwell, III
dated September 1, 1997.
10.2 *Greater Rome Bancshares, Inc. 1996 Stock Incentive Plan (Incorporated by
reference to the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1995).
10.3 *Form of Incentive Stock Option Agreement (Incorporated by reference to
the Company's Annual Report on Form 10-KSB for the year ended December
31, 1996).
10.4 *Form of Stock Option Award to Non-employee Directors (Incorporated by
reference to Appendix A to the Company's Proxy Statement for the 1997
Annual Meeting of the Shareholders held May 15, 1997).
10.5 *Employment Agreement between the Company and E. Grey Winstead, III dated
September 1, 1997.
27.1 Financial Data Schedule (for S.E.C. use only).
- ------------
* Indicates a management contract or compensatory arrangement.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended September 30,
1997.
14
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
GREATER ROME BANCSHARES, INC.
Date: November 5, 1997 By: /s/ Thomas D. Caldwell, III
---------------------------
Thomas D. Caldwell, III
President, Chief Executive Officer
By: /s/ E. Grey Winstead, III
-------------------------
E. Grey Winstead, III
Principal Financial and
Accounting Officer
15
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GREATER ROME BANCSHARES, INC.
Form 10-QSB for the quarterly period ended September 30,1997
INDEX TO EXHIBITS
Exhibit Sequential
Number Description Page
- ------- ---------------------------------------------------------- ----------
3.1 Articles of Incorporation (Incorporated by reference to
Exhibit 3.1 to the Company's Registration Statement
No. 33-82858 on Form SB-2). N/A
3.2 Bylaws (Incorporated by reference to Exhibit 3.2 to the
Company's Registration Statement No. 33-82858
on Form SB-2). N/A
4.1 Provisions of Company's Articles of Incorporation and
Bylaws Defining the Rights of Shareholders (Incorporated
by reference to Exhibit 4.1 to the Company's Registration
Statement No. 33-82858 on Form SB-2). N/A
4.2 Form of Stock Certificate (Incorporated by reference to
Exhibit 4.2 to the Company's Registration Statement
No. 33-82858 on Form SB-2). N/A
10.1 *Employment Agreement between the Company and
Thomas D. Caldwell, III dated September 1, 1997.
10.2 *Greater Rome Bancshares, Inc. 1996 Stock Incentive Plan
(Incorporated by reference to the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1995). N/A
10.3 *Form of Incentive Stock Option Agreement (Incorporated
by reference to the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996). N/A
10.4 *Form of Stock Option Award to Non-employee Directors
(Incorporated by reference to Appendix A to the
Company's Proxy Statement for the 1997 Annual
Meeting of the Shareholders held May 15, 1997). N/A
10.5 *Employment Agreement between the Company and
E. Grey Winstead, III dated September 1, 1997.
27.1 Financial Data Schedule (for S.E.C. use only).
- ------------
* Indicates a management contract or compensatory arrangement.
17
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
between
the Company and Thomas D. Caldwell, III
dated September 1, 1997
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of the 1st day of September, 1997, between
Greater Rome Bank (the "Bank"), a commercial bank and trust company chartered by
the State of Georgia, and Greater Rome Bancshares, Inc. (the "Company"), the
parent bank holding company of the Bank (the Bank and the Company collectively,
the "Employer"), and Thomas D. Caldwell, III, a resident of the State of Georgia
(the "Employee").
RECITALS:
The Employer desires to employ the Employee as the President of the
Employer and the Employee desires to accept such employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and
their variant forms shall have the meaning set forth below:
1.1 "AGREEMENT" shall mean this Agreement and any exhibits incorporated
herein together with any amendments hereto made in the manner described in this
Agreement.
1.2 "AFFILIATE" of a person or entity shall mean (a) any other person or
entity directly, or indirectly through one or more intermediaries, controlling,
controlled by, or under common control with such person or entity, and (b) any
officer, director, partner, employer, or direct or indirect beneficial owner of
10% or greater equity of voting interest of such person or entity.
1.3 "AREA" shall mean the geographic area within the boundaries of Floyd
County. It is the express intent of the parties that the Area as defined herein
is the area where the Employee performs or performed services on behalf of the
Employer under this Agreement as of, or within a reasonable time prior to, the
termination of the Employee's employment hereunder.
1.4 "AVERAGE MONTHLY COMPENSATION" shall mean the quotient obtained by
dividing by twelve the highest annual compensation (i.e., salary and bonus) paid
to the Employee by the Employer for any preceding calendar year.
1.5 "BUSINESS OF THE EMPLOYER" shall mean the business conducted by the
Employer, which is commercial banking.
1.6 "CAUSE" shall mean:
1.6.1 With respect to termination by the Employer:
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(a) A material breach of the terms of this Agreement by the Employee,
including, without limitation, failure by the Employee to perform his duties
and responsibilities in the manner and to the extent required under this
Agreement or a breach of any representation or warranty of the Employee set
forth herein which remains uncured after the expiration of thirty (30) days
following the delivery of written notice of such breach to the Employee by
the Employer;
(b) Conduct by the Employee that amounts to fraud, dishonesty or
willful misconduct in the performance of his duties and responsibilities
hereunder;
(c) The conviction of the Employee of a felony;
(d) Conduct by the Employee that amounts to gross and willful
insubordination or inattention to his duties and responsibilities hereunder
which remains uncured after the expiration of thirty (30) days following the
delivery of written notice of such breach to the Employee by the Employer; or
(e) Conduct by the Employee that results in removal from his position
as an officer or employee of the Employer pursuant to a written order by any
regulatory agency with authority or jurisdiction over the Employer.
1.6.2 With respect to termination by the Employee, a material diminution
in the powers, responsibilities or duties of Employee hereunder, or the
failure of the Board of Directors of the Bank and the Company to elect him as
President, or a material breach of the terms of this Agreement by the
Employer which remains uncured after the expiration of thirty (30) days
following the delivery of written notice of such breach to the Employer by
the Employee.
1.7 "CHANGE IN CONTROL" of the Employer shall mean any consummated
transaction wherein twenty-five percent (25%) of the shares of the Bank or the
Company, are directly or indirectly transferred by sale, gift, merger, exchange
or any other means to new owners other than an Affiliate of such person or
entity transferring such shares or if a majority of the members of the Board of
Directors of the Bank or the Company are replaced within any twelve month
period.
1.8 "COMPANY INFORMATION" means Confidential Information and Trade Secrets.
1.9 "CONFIDENTIAL INFORMATION" means data and information relating to the
business of the Employer (which does not rise to the status of a Trade Secret)
which is or has been disclosed to Employee or of which Employee became aware as
a consequence of or through Employee's relationship to the Employer and which
has value to the Employer and is not generally known to its competitors.
Confidential Information shall not include any data or information that has been
voluntarily disclosed to the public by the Employer (except where such public
disclosure has been made by Employee without authorization) or that has been
2
<PAGE>
independently developed and disclosed by others, or that otherwise enters the
public domain through lawful means.
1.10 "INITIAL TERM" shall mean that period of time commencing on the date of
execution of this Agreement by the Employer and the Employee and running until
the earlier of three (3) years thereafter or any termination of employment of
the Employee under this Agreement as provided for in Section 3.
1.11 "PERMANENT DISABILITY" shall mean a physical or mental condition that
prevents the performance of substantially all of the Employee's duties under
this Agreement for a period of ninety (90) consecutive days as certified by a
physician chosen by the Employer and reasonably acceptable to the Employee.
1.12 "TERM" shall mean the Initial Term and all subsequent renewal periods.
1.13 "TRADE SECRETS" means information including , but not limited to,
technical or nontechnical 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 (1) 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 (2) is the subject
of efforts that are reasonable under the circumstances to maintain its secrecy.
2. DUTIES.
2.1 The Employee is employed initially as the Chief Executive Officer of the
Employer and, subject to the direction of the Board or its designee, shall
perform and discharge well and faithfully the duties which may be assigned to
him from time to time by the Employer in connection with the conduct of its
business. The duties and responsibilities of the Employee are set forth on
Exhibit A attached hereto.
2.2 In addition to the duties and responsibilities specifically assigned to
the Employee pursuant to Section 2.1 hereof, the Employee shall: (1) devote
substantially all of his time, energy and skill during regular business hours to
the performance of the duties of his employment (reasonable vacations and
reasonable absences due to illness excepted) and faithfully and industriously
perform such duties; (2) diligently follow and implement all management policies
and decisions communicated to him by the Board; and (3) timely prepare and
forward to the Board all reports and accounting as may be requested of the
Employee.
2.3 The Employee shall devote his entire business time, attention and
energies to the Business of the Employer and shall not during the term of this
Agreement be engaged (whether or not during normal business hours) in any other
3
<PAGE>
business or professional activity, whether or not such activity is pursued for
gain, profit or other pecuniary advantage; but this shall not be construed as
preventing the Employee from (1) investing his personal assets in businesses
which (subject to clause (2) below) are not in competition with the Business of
the Employer and which will not require any services on the part of the Employee
in their operation or affairs and in which his participation is solely that of
an investor, (2) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase shall not result in his
collectively owning beneficially at any time five percent (5%) or more of the
equity securities of any business in competition with the Business of the
Employer and (3) participating in civic and professional affairs and
organizations and conferences, preparing or publishing papers or books or
teaching so long as the Board approves of such activities prior to the
Employee's engaging in them. Prior to commencing any activity described in
clause (3) above, the Employee shall inform the Board, in writing, of any such
activity.
3. TERM AND TERMINATION.
3.1 TERM. This Agreement shall remain in effect for the Initial Term. At
the end of the first twelve-month period hereunder and at the end of each
successive twelve-month period, this Agreement shall automatically be extended
for a successive twelve-month period following the then two-year remaining term
unless either party gives written notice to the other of its intent not to
extend this Agreement with such written notice to be given not less than ninety
(90) days prior to the end of such twelve-month period. In the event such
notice of non-extension is properly given, this Agreement shall terminate at the
end of the remaining term then in effect. However, notwithstanding the
provisions of this Section 3.1, after the last day of the month during which the
Employee attains age 65, the term of this Agreement will be for twelve months
and shall automatically be extended for a successive twelve-month period unless
either party gives written notice to the other of its intent not to extend this
Agreement with such written notice to be given not less than ninety (90) days
prior to the end of such twelve-month period.
3.2 TERMINATION. During the Term, the employment of the Employee under this
Agreement may be terminated only as follows:
3.2.1 BY THE EMPLOYER:
(a) For Cause, upon written notice to the Employee, in which event the
Employer shall have no further obligation to the Employee except for the
payment of any amounts due and owing under Section 4 on the effective date of
termination; or
(b) Without Cause at any time, provided that the Employer shall give
the Employee thirty (30) days prior written notice of its intent to
terminate, in which event the Employer shall be required to pay the Employee
his Average Monthly Compensation on a monthly basis for a period of twelve
(12) months following termination.
(c) Upon the Permanent Disability of the Employee, provided that at
4
<PAGE>
least thirty (30) days prior written notice of the intent to terminate is
provided, in which event the Employer shall pay the Employee an amount equal to
his Average Monthly Compensation (or prorata portion thereof) for each month
(or portion thereof) during the period beginning on the effective date of
termination and continuing until the earlier of (i) the first anniversary of
the effective date of termination; or (ii) the commencement of the period for
which long-term disability benefits become payable to the Employee.
3.2.2 BY THE EMPLOYEE:
(a) For Cause, with no prior notice except as provided in Section 1.6,
in which event the Employer shall be required to pay the Employee his Average
Monthly Compensation on a monthly basis for a period of twelve (12) months
following termination; or
(b) Without Cause, provided that the Employee shall give the Company
sixty (60) days prior written notice of his intent to terminate, in which
event the Employer shall have no further obligation to the Employee except
future payment of any amounts due and owing under Section 4 on the effective
date of the termination.
(c) Upon the Permanent Disability of Employee, provided that at least
thirty (30) days prior written notice of the intent to terminate is provided,
in which event the Employer shall pay the Employee an amount equal to his
Average Monthly Compensation (or prorata portion thereof) for each month (or
portion thereof) during the period beginning on the effective date of
termination and continuing until the earlier of (i) the first anniversary of
the effective date of termination; or (ii) the commencement of the period for
which long-term disability benefits become payable to the Employee.
3.2.3 By the Employee within six (6) months following a Change in Control
of the Employer, provided that the Employee shall give written notice to the
Employer of his intention to terminate this Agreement, in which event the
Employer shall be required to pay the Employee his Average Monthly
Compensation on a monthly basis for a period of twelve (12) months after
termination.
3.2.4 Upon termination as specified under paragraphs 3.2.1 (b), 3.2.2 (a)
and 3.2.3, the Employer agrees to reimburse the Employee on a monthly basis
for the out of pocket cost of an individual employee-only group medical
insurance policy premiums from the date of termination until the earlier of
(i) the Employee obtaining employment with a company providing group medical
coverage, or (ii) the Employee becoming eligible for Medicare. Upon
termination as specified in paragraphs 3.2.1 (c) and 3.2.2 (c), the Employer
agrees to reimburse the Employee for the out of pocket cost of an individual
employee-only group medical insurance policy premiums from the date of
termination until the earlier of (i) the commencement of the period for which
long-term disability benefits become payable to the Employee, or (ii) the
Employee becoming eligible for Medicare. The Employee shall provide the
5
<PAGE>
Employer with satisfactory evidence that he has incurred the cost, and the
amount of any monthly reimbursement will not exceed the monthly cost of The
amount of reimbursement for medical insurance premiums will not exceed the
cost of COBRA premiums then being charged by the Employer for employee-only
coverage under its group health plan in effect for the Employer.
3.2.5 At any time upon mutual, written agreement of the parties, in which
event the Employer shall have no further obligation to the Employee except for
the payment of any amounts due and owing under Section 4 on the effective date
of termination unless otherwise set forth in the written agreement.
3.2.6 Notwithstanding anything in this Agreement to the contrary, the term
of employment shall end automatically upon the Employee's death, in which event
the Employer shall have no further obligation to the Employee except for the
payment of any amounts due and owing under Section 4 on the effective date of
termination.
3.3 EFFECT OF TERMINATION. Termination of the employment of the Employee
pursuant to Section 3.2 shall be without prejudice to any right or claim which
may have previously accrued to either the Employer or the Employee hereunder and
shall not terminate, alter, supersede or otherwise affect the terms and
covenants and the rights and duties prescribed in this Agreement.
4. COMPENSATION. The Employee shall receive the following salary and
benefits:
4.1 BASE SALARY. During the Initial Term, the Employee shall be
compensated at a base rate of $80,000 per annum (the "Base Salary"). The
Employee's salary shall be reviewed by the Board annually, and the Employee
shall be entitled to receive annually an increase in such amount, if any, as may
be determined by the Board. Such salary shall be payable in accordance with the
Employer's normal payroll practices. Once the Bank becomes cumulatively
profitable, as defined in Exhibit B, the Employee's base rate of pay will be
adjusted in accordance with the provisions of Exhibit B.
4.2 INCENTIVE COMPENSATION. The Employee shall be entitled to participate
in such bonus, incentive and other executive compensation programs as are made
available to senior management of the Employer from time to time (the "Incentive
Compensation"). After the Bank is cumulatively profitable, the Employee will
earn Incentive Compensation which shall include the bonus described in
accordance with the terms specified in Exhibit B.
6
<PAGE>
4.3 BENEFITS.
(a) In addition to the Base Salary and Incentive Compensation, the
Employee shall be entitled to such benefits as may be available from time to
time for executives of the Employer similarly situated to the Employee,
including, but not limited to, long-term disability coverage so long as such
coverage can be purchased at commercially reasonable rates, and further, by
way of example only, profit sharing plans, retirement or investment funds,
dental, health, life, and such other benefits as the employer deems
appropriate. All such benefits shall be awarded and administered in
accordance with the Employer's standard policies and practices. Furthermore,
the Employee will be entitled to a Deferred Compensation Arrangement on terms
and conditions mutually agreeable as described in Exhibit C to the Employer
and the Employee.
(b) The Employer specifically agrees to reimburse the Employee for
reasonable business expenses incurred by him in performance of his duties
hereunder, as approved from time to time by the Board or its Designee;
provided that the Employee shall, as a condition of reimbursement, submit
verification of the nature and amount of such expenses in accordance with
reimbursement policies from time to time adopted by the Employer and in
sufficient detail to comply with rules and regulations promulgated by the
Internal Revenue Service.
(c) On a non-cumulative basis the Employee shall be entitled to four
(4) weeks of vacation in each year of this Agreement, during which his
compensation shall be paid in full.
4.4 WITHHOLDING. The Employer may deduct from each payment of
compensation hereunder all amounts required to be deducted and withheld in
accordance with applicable federal and state income, FICA and other withholding
requirements.
5. COMPANY INFORMATION.
5.1 OWNERSHIP OF COMPANY INFORMATION. All Company Information received
or developed by the Employee while employed by the Employer will remain the sole
and exclusive property of the Employer.
5.2 OBLIGATIONS OF EMPLOYEE. Employee agrees (1) to hold Company
Information in strictest confidence, and (2) not to use, duplicate, reproduce,
distribute, disclose or otherwise disseminate Company Information or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret. In the event that Employee is required by law to disclose any
Company Information, Employee will not make such disclosure unless (and then
only to the extent that) Employee has been advised by independent legal counsel
that such disclosure is required by law and then only after prior written notice
is given to the Company when Employee becomes aware that such disclosure has
been requested and is required by law. This Section 5 shall survive for a
7
<PAGE>
period of two (2) years following termination of this Agreement with respect to
Confidential Information, and shall survive termination of this Agreement for so
long as is permitted by the then-current Georgia Trade Secrets Act of 1990,
O.C.G.A. subsection 10-1-760-10-1-767, with respect to Trade Secrets.
5.3 DELIVERY UPON REQUEST OR TERMINATION. Upon request by the Employer,
and in any event upon termination of his employment with the Employer, the
Employee will promptly deliver to the Employer all property belonging to the
Employer, including without limitation all Company Information then in his
possession or control.
6. NON-COMPETITION. The Employee agrees that during his employment by the
Employer hereunder and, in the event of his termination other than by the
Employer without Cause pursuant to Section 3.2.1(b) or by the Employee for Cause
pursuant to Section 3.2.2(a), for a period of one (1) year thereafter, he will
not (except on behalf of or with the prior written consent of the Employer),
within the Area, either directly or indirectly, on his own behalf or in the
service or on behalf of others, as a principal, partner, officer, director,
manager, supervisor, administrator, consultant, executive employee or in any
other capacity which involves duties and responsibilities similar to those
undertaken for the Employer, engage in any business which is the same as or
essentially the same as the Business of the Employer.
7. NON-SOLICITATION OF CUSTOMERS. The Employee agrees that during his
employment by the Employer hereunder and, in the event of his termination other
than by the Employer without Cause pursuant to Section 3.2.1(b) or by the
Employee for Cause pursuant to Section 3.2.2(a), for a period of one (1) year
thereafter, he will not (except on behalf of or with the prior written consent
of the Employer), within the Area, on his own behalf or in the service or on
behalf of others, solicit, divert or appropriate or attempt to solicit, divert
or appropriate, directly or by assisting others, any business from any of the
Employer's customers, including actively sought prospective customers, with whom
the Employee has or had material contact during the last two (2) years of his
employment, for purposes of providing products or services that are competitive
with those provided by the Employer.
8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during his
employment by the Employer hereunder and, in the event of his termination other
than by the Employer without Cause pursuant to Section 3.2.1(b) or by the
Employee for Cause pursuant to Section 3.2.2(a), for a period of one (1) year
thereafter, he will not, on his own behalf or in the service or on behalf of
others, solicit, recruit or hire away or attempt to solicit, recruit or hire
away, directly or by assisting others, any employee of the Employer or its
Affiliates, whether or not such employee is a full-time employee or a temporary
employee of the Employer or its Affiliates and whether or not such employment is
pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
8
<PAGE>
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should he breach any of the covenants. Therefore, the
Employee agrees and consents that, in addition to all the remedies provided by
law or in equity, the Employer shall be entitled to a temporary restraining
order and temporary and permanent injunctions to prevent a breach or
contemplated breach of any of the covenants. The Employer and the Employee
agree that all remedies available to the Employer or the Employee, as
applicable, shall be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in
this Agreement is separate, distinct and severable from the other provisions of
this Agreement and that the invalidity or unenforceability of any Agreement
provision shall not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement is ruled invalid
or unenforceable by a court of competent jurisdiction because of a conflict
between the provision and any applicable law or public policy, the provision
shall be redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.
11. NO SET-OFF BY EMPLOYEE. The existence of any claim, demand, action or
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE. All notices and other communications required or permitted under
this Agreement shall be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
shall be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement shall be given to the parties hereto at the
following addresses:
(i) If to the Employer, to it at:
Greater Rome Bank
1490 Martha Berry Blvd.
Rome, GA 30165
(ii) If to the Employee, to him at:
Thomas D. Caldwell, III
227 East 11th St.
Rome, GA 30161
13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
any of its rights and obligations hereunder without the written consent of the
other party hereto.
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14. WAIVER. A waiver by the Employer of any breach of this Agreement by the
Employee shall not be effective unless in writing, and no waiver shall operate
or be construed as a waiver of the same or another breach on a subsequent
occasion.
15. ATTORNEY'S FEES. In the event of litigation between the parties
concerning this Agreement, the party prevailing in such litigation shall be
entitled to receive from the other party all reasonable costs and expenses,
including without limitation attorney's fees, incurred by the prevailing party
in connection with such litigation, and the other party shall pay such costs and
expenses to the prevailing party promptly upon demand by the prevailing party.
16. APPLICABLE LAW. This Agreement shall be construed and enforced under and
in accordance with the laws of the State of Georgia.
17. INTERPRETATION. Words importing any gender include all genders. Words
importing the singular form shall include the plural and vice versa. The terms
"herein", "hereunder", "hereby", "hereto", "hereof" and any similar terms refer
to this Agreement. Any captions, titles or headings preceding the text of any
article, section or subsection herein are solely for convenience of reference
and shall not constitute part of this Agreement or affect its meaning,
construction or effect.
18. ENTIRE AGREEMENT. This Agreement embodies the entire and final agreement
of the parties on the subject matter stated in the Agreement. No amendment or
modification of this Agreement shall be valid or binding upon the Employer or
the Employee unless made in writing and signed by both parties. All prior
understandings and agreements relating to the subject matter of this Agreement
are hereby expressly terminated.
19. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or shall
be construed to confer upon or give to any person, firm or other entity, other
than the parties hereto and their permitted assigns, any rights or remedies
under or by reason of this Agreement.
20. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
and 9 shall survive the termination of the employment of the Employee hereunder.
21. JOINT AND SEVERAL. The obligations of the Bank and the Company to
Employee hereunder shall be joint and several.
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IN WITNESS WHEREOF, the Employer and the Employee have executed and delivered
this Agreement as of the date first shown above.
THE EMPLOYER:
[CAPTION]
Greater Rome Bank Greater Rome Bancshares, Inc.
By: /s/ Robert L. Berry By: /s/ Bradford L. Riddle
---------------------------- ------------------------------
Name: Robert L. Berry Name: Bradford L. Riddle
Title: Director Title: Vice Chairman
- --------------------------------------------------------------------------------
THE EMPLOYEE: /s/ Thomas D. Caldwell, III
---------------------------
THOMAS D. CALDWELL, III
11
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EXHIBIT A
INITIAL DUTIES OF THE EMPLOYEE
The initial duties of the Employee shall include, in addition to any other
duties assigned the Employee by the Board of Directors of the Bank or the
Company or their respective designees, the following:
. Foster a corporate culture that promotes ethical practices, encourages
individual integrity, fulfills social responsibility, and is conducive
to attracting, retaining and motivating a diverse group of top-quality
employees at all levels.
. Work with the Board of Directors to develop a long-term strategy for
the Company that creates shareholder value.
. Develop and recommend to the Board annual business plans and budgets
that support the Company's long-term strategy.
. Manage the day-to-day business affairs of the Company appropriately.
. Use best efforts to achieve the Company's financial and operating goals
and objectives.
. Improve the quality and value of the products and services provided by
the Company.
. Ensure that the Company maintains a satisfactory competitive position
within its industry.
. Develop an effective management team and an active plan for its
development and succession, and make recommendations to the Board, or
its appointed committee, regarding hiring, firing and compensation.
. Implement major corporate policies.
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EXHIBIT B
COMPENSATION
BASE SALARY. Upon achieving cumulative profitability at the Bank, the Employee's
Base Salary shall be increased above the base rate specified in the Initial Term
of this Agreement by no less than 10%. If such increase has not already
occurred through routine salary review adjustments, it will occur at the
beginning of the first calendar quarter following the calendar quarter in which
retained earnings of the Bank become positive, as reflected in the Bank's
quarterly call reports prepared in accordance with the requirements of the
Federal Financial Institutions Examination Council.
INCENTIVE COMPENSATION. Until the Bank is cumulatively profitable, no
incentive bonuses may be paid. After cumulative profitability has occurred, as
defined above, the employee will receive a one-time bonus of $50,000. This
bonus is payable no later than the time of the base rate adjustment specified
above, only after it is fully accrued in the determination of cumulative
profitability.
At the end of each fiscal year thereafter, an incentive bonus will be paid to
the Employee based upon the following qualitative and quantitative criteria.
The qualitative criteria are measured by the Bank's most recent regulatory
CAMELS rating. The quantitative criteria are measured by the Bank's Return on
Average Assets ("ROAA") until the Company's Tier One Leverage Ratio (as defined
by the FDIC's risk based capital guidelines) is less than eight percent or
January 1, 2001, whichever occurs first. After such time, the quantitative
criteria will be measured by the Company's Return on Beginning of the Year
Equity ("ROE"). The amount of the Employee's bonus will be determined by adding
the percentages associated with the overall CAMELS rating and the percentages
associated with the ROAA (ROE, when appropriate) categories in the following
tables and applying the limits as stated below:
<TABLE>
<CAPTION>
Qualitative Criteria Quantitative Criteria
CAMELS % of % of % of
Rating Base Pay ROAA Base Pay ROE Base Pay
<S> <C> <C> <C> <C> <C>
1 25.0 = greater than 2.0% 30.0 = greater than 20.0% 30.0
2 20.0 = 1.75 - 2.00% 17.0 = 17.5 - 20.0% 17.0
Less than 2 0.0 = 1.50 - 1.75% 10.0 = 15.0 - 17.5% 10.0
= 1.25 - 1.50% 6.0 = 12.5 - 15.0% 6.0
= 1.00 - 1.25% 3.5 = 10.0 - 12.5% 3.5
= 0.75 - 1.00% 2.0 Less than 10.0% 0.0
= 0.50 - 0.75% 1.0
Less than 0.50% 0.0
</TABLE>
ROAA and ROE are calculated using audited financial statements after eliminating
the effect of incentive bonus accruals contemplated under all executive
employment agreements. For ROAA and ROE results which occur within a range
specified above, the Percent of Base Pay will be calculated using straight line
interpolation (e.g., an ROAA of 1.375% produces a Percent of Base Pay
calculation of 8.0%). For net income in excess of the 2.00% ROAA or 20.0% ROE,
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as applicable, the Employee will receive a Premium Incentive Bonus equal to
4.0% of the excess net income. No incentive compensation will be paid if the
Bank's most recent composite CAMELS rating is less than 2, or ROAA is less than
one-half of one (.50%) percent, or ROE, where applicable, is less than ten
(10%) percent. In the event the employee is entitled to incentive compensation
as provided herein, the percentage of base pay paid as incentive compensation
for the bank attaining a composite CAMELS of at least 2, said percentage of base
pay will be reduced by five (5%) percent for each individual rating of 3
contained within the overall composite rating. Incentive compensation is
payable to the Employee no later than March 15th of the year following the year
on which it is calculated.
Notwithstanding the foregoing, the Base Salary adjustments and Incentive
Compensation payments contemplated in this agreement shall not become due and
payable until the Board of Directors of the Bank has determined, according to
reasonable safety and soundness standards, that the overall financial condition
of the Bank, including asset quality, will not be adversely affected by the
payment of said amounts.
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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
BETWEEN
THE COMPANY AND E. GREY WINSTEAD, III
DATED SEPTEMBER 1, 1997
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT is made as of the 1st day of September, 1997, between
Greater Rome Bank (the "Bank"), a commercial bank and trust company chartered by
the State of Georgia, and Greater Rome Bancshares, Inc. (the "Company"), the
parent bank holding company of the Bank (the Bank and the Company collectively,
the "Employer"), and E. Grey Winstead, III, a resident of the State of Georgia
(the "Employee").
RECITALS:
The Employer desires to employ the Employee as the Chief Financial Officer
of the Employer and the Employee desires to accept such employment.
In consideration of the above premises and the mutual agreements
hereinafter set forth, the parties hereby agree as follows:
1. DEFINITIONS. Whenever used in this Agreement, the following terms and
their variant forms shall have the meaning set forth below:
1.1 "AGREEMENT" shall mean this Agreement and any exhibits incorporated
herein together with any amendments hereto made in the manner described in this
Agreement.
1.2 "AFFILIATE" of a person or entity shall mean (a) any other person or
entity directly, or indirectly through one or more intermediaries, controlling,
controlled by, or under common control with such person or entity, and (b) any
officer, director, partner, employer, or direct or indirect beneficial owner of
10% or greater equity of voting interest of such person or entity.
1.3 "AREA" shall mean the geographic area within the boundaries of Floyd
County. It is the express intent of the parties that the Area as defined herein
is the area where the Employee performs or performed services on behalf of the
Employer under this Agreement as of, or within a reasonable time prior to, the
termination of the Employee's employment hereunder.
1.4 "AVERAGE MONTHLY COMPENSATION" shall mean the quotient obtained by
dividing by twelve the highest annual compensation (i.e., salary and bonus) paid
to the Employee by the Employer for any preceding calendar year.
1.5 "BUSINESS OF THE EMPLOYER" shall mean the business conducted by the
Employer, which is commercial banking.
1.6 "CAUSE" shall mean:
1.6.1 With respect to termination by the Employer:
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(a) A material breach of the terms of this Agreement by the Employee,
including, without limitation, failure by the Employee to perform his duties
and responsibilities in the manner and to the extent required under this
Agreement or a breach of any representation or warranty of the Employee set
forth herein which remains uncured after the expiration of thirty (30) days
following the delivery of written notice of such breach to the Employee by
the Employer;
(b) Conduct by the Employee that amounts to fraud, dishonesty or
willful misconduct in the performance of his duties and responsibilities
hereunder;
(c) The conviction of the Employee of a felony;
(d) Conduct by the Employee that amounts to gross and willful
insubordination or inattention to his duties and responsibilities hereunder
which remains uncured after the expiration of thirty (30) days following the
delivery of written notice of such breach to the Employee by the Employer; or
(e) Conduct by the Employee that results in removal from his position
as an officer or employee of the Employer pursuant to a written order by any
regulatory agency with authority or jurisdiction over the Employer.
1.6.2 With respect to termination by the Employee, a material diminution
in the powers, responsibilities or duties of Employee hereunder, or the
failure of the Board of Directors of the Bank and the Company to elect him as
Chief Financial Officer, or a material breach of the terms of this Agreement
by the Employer which remains uncured after the expiration of thirty (30)
days following the delivery of written notice of such breach to the Employer
by the Employee.
1.7 "CHANGE IN CONTROL" of the Employer shall mean any consummated
transaction wherein twenty-five percent (25%) of the shares of the Bank or the
Company, are directly or indirectly transferred by sale, gift, merger, exchange
or any other means to new owners other than an Affiliate of such person or
entity transferring such shares or if a majority of the members of the Board of
Directors of the Bank or the Company are replaced within any twelve month
period.
1.8 "COMPANY INFORMATION" means Confidential Information and Trade Secrets.
1.9 "CONFIDENTIAL INFORMATION" means data and information relating to the
business of the Employer (which does not rise to the status of a Trade Secret)
which is or has been disclosed to Employee or of which Employee became aware as
a consequence of or through Employee's relationship to the Employer and which
has value to the Employer and is not generally known to its competitors.
Confidential Information shall not include any data or information that has been
voluntarily disclosed to the public by the Employer (except where such public
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<PAGE>
disclosure has been made by Employee without authorization) or that has been
independently developed and disclosed by others, or that otherwise enters the
public domain through lawful means.
1.10 "INITIAL TERM" shall mean that period of time commencing on the date of
execution of this Agreement by the Employer and the Employee and running until
the earlier of three (3) years thereafter or any termination of employment of
the Employee under this Agreement as provided for in Section 3.
1.11 "PERMANENT DISABILITY" shall mean a physical or mental condition that
prevents the performance of substantially all of the Employee's duties under
this Agreement for a period of ninety (90) consecutive days as certified by a
physician chosen by the Employer and reasonably acceptable to the Employee.
1.12 "TERM" shall mean the Initial Term and all subsequent renewal periods.
1.13 "TRADE SECRETS" means information including , but not limited to,
technical or nontechnical 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 (1) 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 (2) is the subject
of efforts that are reasonable under the circumstances to maintain its secrecy.
2. DUTIES.
2.1 The Employee is employed initially as the Chief Financial Officer of the
Employer and, subject to the direction of the President of the Employer shall
perform and discharge well and faithfully the duties which may be assigned to
him from time to time by the President in connection with the conduct of its
business. The duties and responsibilities of the Employee are set forth on
Exhibit A attached hereto.
2.2 In addition to the duties and responsibilities specifically assigned to
the Employee pursuant to Section 2.1 hereof, the Employee shall: (1) devote
substantially all of his time, energy and skill during regular business hours to
the performance of the duties of his employment (reasonable vacations and
reasonable absences due to illness excepted) and faithfully and industriously
perform such duties; (2) diligently follow and implement all management policies
and decisions communicated to him by the President; and (3) timely prepare and
forward to the President all reports and accounting as may be requested of the
Employee.
2.3 The Employee shall devote his entire business time, attention and
energies to the Business of the Employer and shall not during the term of this
Agreement be engaged (whether or not during normal business hours) in any other
business or professional activity, whether or not such activity is pursued for
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<PAGE>
gain, profit or other pecuniary advantage; but this shall not be construed as
preventing the Employee from (1) investing his personal assets in businesses
which (subject to clause (2) below) are not in competition with the Business of
the Employer and which will not require any services on the part of the Employee
in their operation or affairs and in which his participation is solely that of
an investor, (2) purchasing securities in any corporation whose securities are
regularly traded provided that such purchase shall not result in his
collectively owning beneficially at any time five percent (5%) or more of the
equity securities of any business in competition with the Business of the
Employer and (3) participating in civic and professional affairs and
organizations and conferences, preparing or publishing papers or books or
teaching so long as the President approves of such activities prior to the
Employee's engaging in them. Prior to commencing any activity described in
clause (3) above, the Employee shall inform the President, in writing, of any
such activity. Furthermore, this paragraph shall not be construed as preventing
the Employee from tending to the affairs of his family farm, from time to time,
provided such activities do not interfere with the performance of the Employee's
duties, as determined by the President.
3. TERM AND TERMINATION.
3.1 TERM. This Agreement shall remain in effect for the Initial Term. At
the end of the first twelve-month period hereunder and at the end of each
successive twelve-month period, this Agreement shall automatically be extended
for a successive twelve-month period following the then two-year remaining term
unless either party gives written notice to the other of its intent not to
extend this Agreement with such written notice to be given not less than ninety
(90) days prior to the end of such twelve-month period. In the event such
notice of non-extension is properly given, this Agreement shall terminate at the
end of the remaining term then in effect. However, notwithstanding the
provisions of this Section 3.1, after the last day of the month during which the
Employee attains age 65, the term of this Agreement will be for twelve months
and shall automatically be extended for a successive twelve-month period unless
either party gives written notice to the other of its intent not to extend this
Agreement with such written notice to be given not less than ninety (90) days
prior to the end of such twelve-month period.
3.2 TERMINATION. During the Term, the employment of the Employee under this
Agreement may be terminated only as follows:
3.2.1 BY THE EMPLOYER:
(a) For Cause, upon written notice to the Employee, in which event the
Employer shall have no further obligation to the Employee except for the
payment of any amounts due and owing under Section 4 on the effective date of
termination; or
(b) Without Cause at any time, provided that the Employer shall give
the Employee thirty (30) days prior written notice of its intent to
terminate, in which event the Employer shall be required to pay the Employee
4
<PAGE>
his Average Monthly Compensation on a monthly basis for a period of twelve
(12) months following termination.
(c) Upon the Permanent Disability of the Employee, provided that at
least thirty (30) days prior written notice of the intent to terminate is
provided, in which event the Employer shall pay the Employee an amount equal
to his Average Monthly Compensation (or prorata portion thereof) for each
month (or portion thereof) during the period beginning on the effective date
of termination and continuing until the earlier of (i) the first anniversary
of the effective date of termination; or (ii) the commencement of the period
for which long-term disability benefits become payable to the Employee.
3.2.2 BY THE EMPLOYEE:
(a) For Cause, with no prior notice except as provided in Section 1.6,
in which event the Employer shall be required to pay the Employee his Average
Monthly Compensation on a monthly basis for a period of twelve (12) months
following termination; or
(b) Without Cause, provided that the Employee shall give the Company
sixty (60) days prior written notice of his intent to terminate, in which
event the Employer shall have no further obligation to the Employee except
future payment of any amounts due and owing under Section 4 on the effective
date of the termination.
(c) Upon the Permanent Disability of Employee, provided that at least
thirty (30) days prior written notice of the intent to terminate is provided,
in which event the Employer shall pay the Employee an amount equal to his
Average Monthly Compensation (or prorata portion thereof) for each month (or
portion thereof) during the period beginning on the effective date of
termination and continuing until the earlier of (i) the first anniversary of
the effective date of termination; or (ii) the commencement of the period for
which long-term disability benefits become payable to the Employee.
3.2.3 By the Employee within six (6) months following a Change in Control
of the Employer, provided that the Employee shall give written notice to the
Employer of his intention to terminate this Agreement, in which event the
Employer shall be required to pay the Employee his Average Monthly
Compensation on a monthly basis for a period of twelve (12) months after
termination.
3.2.4 Upon termination as specified under paragraphs 3.2.1 (b), 3.2.2 (a)
and 3.2.3, the Employer agrees to reimburse the Employee on a monthly basis
for the out of pocket cost of an individual employee-only group medical
insurance policy premiums from the date of termination until the earlier of
(i) the Employee obtaining employment with a company providing group medical
coverage, (ii) the Employee becoming eligible for Medicare, or (iii) twelve
(12) months from the date of termination. Upon termination as specified in
paragraphs 3.2.1 (c) and 3.2.2 (c), the Employer agrees to reimburse the
Employee for the out of pocket cost of an individual employee-only group
5
<PAGE>
medical insurance policy premiums from the date of termination until the
earlier of (i) the commencement of the period for which long-term disability
benefits become payable to the Employee, (ii) the Employee becoming eligible
for Medicare, or (iii) twelve (12) months from the date of termination. The
Employee shall provide the Employer with satisfactory evidence that he has
incurred the cost, and the amount of any monthly reimbursement will not
exceed the monthly cost of COBRA premiums then being charged by the Employer
for employee-only coverage under its group health plan in effect for the
Employer.
3.2.5 At any time upon mutual, written agreement of the parties, in which
event the Employer shall have no further obligation to the Employee except for
the payment of any amounts due and owing under Section 4 on the effective date
of termination unless otherwise set forth in the written agreement.
3.2.6 Notwithstanding anything in this Agreement to the contrary, the term
of employment shall end automatically upon the Employee's death, in which event
the Employer shall have no further obligation to the Employee except for the
payment of any amounts due and owing under Section 4 on the effective date of
termination.
3.3 EFFECT OF TERMINATION. Termination of the employment of the Employee
pursuant to Section 3.2 shall be without prejudice to any right or claim which
may have previously accrued to either the Employer or the Employee hereunder and
shall not terminate, alter, supersede or otherwise affect the terms and
covenants and the rights and duties prescribed in this Agreement.
4. COMPENSATION. The Employee shall receive the following salary and
benefits:
4.1 BASE SALARY. During the Initial Term, the Employee shall be
compensated at a base rate of $75,000 per annum (the "Base Salary"). The
Employee's salary shall be reviewed by the Board annually, and the Employee
shall be considered annually for an increase in such amount, if any, as may be
determined by the Board. Such salary shall be payable in accordance with the
Employer's normal payroll practices. Once the Bank becomes cumulatively
profitable, as defined in Exhibit B, the Employee's base rate of pay will be
adjusted in accordance with the provisions of Exhibit B.
4.2 INCENTIVE COMPENSATION. The Employee shall be entitled to participate
in such bonus, incentive and other executive compensation programs as are made
available to senior management of the Employer from time to time (the "Incentive
Compensation"). After the Bank is cumulatively profitable, the Employee will
earn Incentive Compensation which shall include the bonus described in
accordance with the terms specified in Exhibit B.
6
<PAGE>
4.3 BENEFITS.
(a) In addition to the Base Salary and Incentive Compensation, the
Employee shall be entitled to such benefits as may be available from time to
time for executives of the Employer similarly situated to the Employee,
including, but not limited to, long-term disability coverage so long as such
coverage can be purchased at commercially reasonable rates, and further, by
way of example only, profit sharing plans, retirement or investment funds,
dental, health, life, and such other benefits as the employer deems
appropriate.
(b) The Employer specifically agrees to reimburse the Employee for
reasonable business expenses incurred by him in performance of his duties
hereunder, as approved from time to time by the President; provided that the
Employee shall, as a condition of reimbursement, submit verification of the
nature and amount of such expenses in accordance with reimbursement policies
from time to time adopted by the Employer and in sufficient detail to comply
with rules and regulations promulgated by the Internal Revenue Service.
(c) On a non-cumulative basis the Employee shall be entitled to three
(3) weeks of vacation in each year of this Agreement, during which his
compensation shall be paid in full.
4.4 WITHHOLDING. The Employer may deduct from each payment of
compensation hereunder all amounts required to be deducted and withheld in
accordance with applicable federal and state income, FICA and other withholding
requirements.
5. COMPANY INFORMATION.
5.1 OWNERSHIP OF COMPANY INFORMATION. All Company Information received
or developed by the Employee while employed by the Employer will remain the sole
and exclusive property of the Employer.
5.2 OBLIGATIONS OF EMPLOYEE. Employee agrees (1) to hold Company
Information in strictest confidence, and (2) not to use, duplicate, reproduce,
distribute, disclose or otherwise disseminate Company Information or any
physical embodiments thereof and may in no event take any action causing or fail
to take any action necessary in order to prevent any Company Information from
losing its character or ceasing to qualify as Confidential Information or a
Trade Secret. In the event that Employee is required by law to disclose any
Company Information, Employee will not make such disclosure unless (and then
only to the extent that) Employee has been advised by independent legal counsel
that such disclosure is required by law and then only after prior written notice
is given to the Company when Employee becomes aware that such disclosure has
been requested and is required by law. This Section 5 shall survive for a
period of two (2) years following termination of this Agreement with respect to
Confidential Information, and shall survive termination of this Agreement for so
long as is permitted by the then-current Georgia Trade Secrets Act of 1990,
O.C.G.A. subsection 10-1-760-10-1-767, with respect to Trade Secrets.
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5.3 DELIVERY UPON REQUEST OR TERMINATION. Upon request by the Employer,
and in any event upon termination of his employment with the Employer, the
Employee will promptly deliver to the Employer all property belonging to the
Employer, including without limitation all Company Information then in his
possession or control.
6. NON-COMPETITION. The Employee agrees that during his employment by the
Employer hereunder and, in the event of his termination other than by the
Employer without Cause pursuant to Section 3.2.1(b) or by the Employee for Cause
pursuant to Section 3.2.2(a), for a period of six (6) months thereafter, he will
not (except on behalf of or with the prior written consent of the Employer),
within the Area, either directly or indirectly, on his own behalf or in the
service or on behalf of others, as a principal, partner, officer, director,
manager, supervisor, administrator, consultant, executive employee or in any
other capacity which involves duties and responsibilities similar to those
undertaken for the Employer, engage in any business which is the same as or
essentially the same as the Business of the Employer.
7. NON-SOLICITATION OF CUSTOMERS. The Employee agrees that during his
employment by the Employer hereunder and, in the event of his termination other
than by the Employer without Cause pursuant to Section 3.2.1(b) or by the
Employee for Cause pursuant to Section 3.2.2(a), for a period of six (6) months
thereafter, he will not (except on behalf of or with the prior written consent
of the Employer), within the Area, on his own behalf or in the service or on
behalf of others, solicit, divert or appropriate or attempt to solicit, divert
or appropriate, directly or by assisting others, any business from any of the
Employer's customers, including actively sought prospective customers, with whom
the Employee has or had material contact during the last two (2) years of his
employment, for purposes of providing products or services that are competitive
with those provided by the Employer.
8. NON-SOLICITATION OF EMPLOYEES. The Employee agrees that during his
employment by the Employer hereunder and, in the event of his termination other
than by the Employer without Cause pursuant to Section 3.2.1(b) or by the
Employee for Cause pursuant to Section 3.2.2(a), for a period of six (6) months
thereafter, he will not, on his own behalf or in the service or on behalf of
others, solicit, recruit or hire away or attempt to solicit, recruit or hire
away, directly or by assisting others, any employee of the Employer or its
Affiliates, whether or not such employee is a full-time employee or a temporary
employee of the Employer or its Affiliates and whether or not such employment is
pursuant to written agreement and whether or not such employment is for a
determined period or is at will.
9. REMEDIES. The Employee agrees that the covenants contained in Sections 5
through 8 of this Agreement are of the essence of this Agreement; that each of
the covenants is reasonable and necessary to protect the business, interests and
properties of the Employer; and that irreparable loss and damage will be
suffered by the Employer should he breach any of the covenants. Therefore, the
Employee agrees and consents that, in addition to all the remedies provided by
law or in equity, the Employer shall be entitled to a temporary restraining
order and temporary and permanent injunctions to prevent a breach or
contemplated breach of any of the covenants. The Employer and the Employee
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<PAGE>
agree that all remedies available to the Employer or the Employee, as
applicable, shall be cumulative.
10. SEVERABILITY. The parties agree that each of the provisions included in
this Agreement is separate, distinct and severable from the other provisions of
this Agreement and that the invalidity or unenforceability of any Agreement
provision shall not affect the validity or enforceability of any other provision
of this Agreement. Further, if any provision of this Agreement is ruled invalid
or unenforceable by a court of competent jurisdiction because of a conflict
between the provision and any applicable law or public policy, the provision
shall be redrawn to make the provision consistent with and valid and enforceable
under the law or public policy.
11. NO SET-OFF BY EMPLOYEE. The existence of any claim, demand, action or
cause of action by the Employee against the Employer, or any Affiliate of the
Employer, whether predicated upon this Agreement or otherwise, shall not
constitute a defense to the enforcement by the Employer of any of its rights
hereunder.
12. NOTICE. All notices and other communications required or permitted under
this Agreement shall be in writing and, if mailed by prepaid first-class mail or
certified mail, return receipt requested, shall be deemed to have been received
on the earlier of the date shown on the receipt or three (3) business days after
the postmarked date thereof. In addition, notices hereunder may be delivered by
hand, facsimile transmission or overnight courier, in which event the notice
shall be deemed effective when delivered or transmitted. All notices and other
communications under this Agreement shall be given to the parties hereto at the
following addresses:
(i) If to the Employer, to it at:
Greater Rome Bank
1490 Martha Berry Blvd.
Rome, GA 30165
(ii) If to the Employee, to him at:
E. Grey Winstead, III
Route 3, Box 226
Summerville, GA 30747
13. ASSIGNMENT. Neither party hereto may assign or delegate this Agreement or
any of its rights and obligations hereunder without the written consent of the
other party hereto.
14. WAIVER. A waiver by the Employer of any breach of this Agreement by the
Employee shall not be effective unless in writing, and no waiver shall operate
or be construed as a waiver of the same or another breach on a subsequent
occasion.
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<PAGE>
15. APPLICABLE LAW. This Agreement shall be construed and enforced under and
in accordance with the laws of the State of Georgia.
16. INTERPRETATION. Words importing any gender include all genders. Words
importing the singular form shall include the plural and vice versa. The terms
"herein", "hereunder", "hereby", "hereto", "hereof" and any similar terms refer
to this Agreement. Any captions, titles or headings preceding the text of any
article, section or subsection herein are solely for convenience of reference
and shall not constitute part of this Agreement or affect its meaning,
construction or effect.
17. ENTIRE AGREEMENT. This Agreement embodies the entire and final agreement
of the parties on the subject matter stated in the Agreement. No amendment or
modification of this Agreement shall be valid or binding upon the Employer or
the Employee unless made in writing and signed by both parties. All prior
understandings and agreements relating to the subject matter of this Agreement
are hereby expressly terminated.
18. RIGHTS OF THIRD PARTIES. Nothing herein expressed is intended to or shall
be construed to confer upon or give to any person, firm or other entity, other
than the parties hereto and their permitted assigns, any rights or remedies
under or by reason of this Agreement.
19. SURVIVAL. The obligations of the Employee pursuant to Sections 5, 6, 7, 8
and 9 shall survive the termination of the employment of the Employee hereunder.
20. JOINT AND SEVERAL. The obligations of the Bank and the Company to
Employee hereunder shall be joint and several.
IN WITNESS WHEREOF, the Employer and the Employee have executed and delivered
this Agreement as of the date first shown above.
THE EMPLOYER:
Greater Rome Bank Greater Rome Bancshares, Inc.
By: /s/ Thomas D. Caldwell, III By: /s/ Bradford L. Riddle
---------------------------- ---------------------------
Name: Thomas D. Caldwell, III Name: Bradford L. Riddle
Title: President Title: Vice Chairman
THE EMPLOYEE: /s/ E. Grey Winstead, III
-------------------------
E. GREY WINSTEAD, III
10
<PAGE>
EXHIBIT A
INITIAL DUTIES OF THE EMPLOYEE
The initial duties of the Employee shall include, in addition to any other
duties assigned the Employee by the President of the Bank or the Company or
their respective designees, the following:
. General supervision and management of the Company's and Bank's
financial plans and policies, including asset and liability management,
liquidity and funds management, investment management and capital
planning including the planning, controlling and directing of the
accounting systems and financial and regulatory reporting systems.
. Work with the President to develop a long-term strategy for the Company
that creates shareholder value.
. Develop and recommend to the President annual business plans and
budgets that support the Company's long-term strategy.
. Perform the duties of Corporate Secretary for the Bank and Company and
maintain the minutes of all Board and Asset/Liability Committee,
Investment Committee and Audit Committee Meetings.
. Use best efforts to achieve the Company's financial and operating goals
and objectives.
. Fulfill the duties of the Bank's Internal Audit Officer, including
negotiation, management and coordination of contract internal audit
services, independent audit services and coordination of regulatory
safety and soundness exams.
. Fulfill the duties of the Bank's human resource officer, including
personnel and payroll administration, group insurance benefit
administration, 401K plan administration, and section 125 plan
administration.
. Fulfill the duties of the Bank's senior operations officer including
planning, supervision and management of the data processing function,
item processing function, local area network administration and related
disaster recovery planning and control.
. Oversee deposit operations, deposit product development and pricing,
customer service and teller operations.
. Implement major corporate policies.
<PAGE>
EXHIBIT B
COMPENSATION
BASE SALARY. Upon achieving cumulative profitability at the Bank, the Employee's
Base Salary shall be increased above the base rate specified in the Initial Term
of this Agreement by no less than 10%. If such increase has not already
occurred through routine salary review adjustments, it will occur at the
beginning of the first calendar quarter following the calendar quarter in which
retained earnings of the Bank become positive, as reflected in the Bank's
quarterly call reports prepared in accordance with the requirements of the
Federal Financial Institutions Examination Council.
INCENTIVE COMPENSATION. Until the Bank is cumulatively profitable, no
incentive bonuses may be paid. After cumulative profitability has occurred, as
defined above, the employee will receive a one-time bonus of $37,000. This
bonus is payable no later than the time of the base rate adjustment specified
above, only after it is fully accrued in the determination of cumulative
profitability.
At the end of each fiscal year thereafter, an incentive bonus will be paid to
the Employee based upon the following qualitative and quantitative criteria.
The qualitative criteria are measured by the Bank's most recent regulatory
CAMELS rating. The quantitative criteria are measured by the Bank's Return on
Average Assets ("ROAA") until the Company's Tier One Leverage Ratio (as defined
by the FDIC's risk based capital guidelines) is less than eight percent or
January 1, 2001, whichever occurs first. After such time, the quantitative
criteria will be measured by the Company's Return on Beginning of the Year
Equity ("ROE"). The amount of the Employee's bonus will be determined by adding
the percentages associated with the overall CAMELS rating and the percentages
associated with the ROAA (ROE, when appropriate) categories in the following
tables and applying the limits as stated below:
<TABLE>
<CAPTION>
Qualitative Criteria Quantitative Criteria
CAMELS % of % of % of
Rating Base Pay ROAA Base Pay ROE Base Pay
<S> <C> <C> <C> <C> <C>
1 25.0 = greater than 2.0% 30.0 = greater than 20.0% 30.0
2 20.0 = 1.75 - 2.00% 17.0 = 17.5 - 20.0% 17.0
Less than 2 0.0 = 1.50 - 1.75% 10.0 = 15.0 - 17.5% 10.0
= 1.25 - 1.50% 6.0 = 12.5 - 15.0% 6.0
= 1.00 - 1.25% 3.5 = 10.0 - 12.5% 3.5
= 0.75 - 1.00% 2.0 Less than 10.0% 0.0
= 0.50 - 0.75% 1.0
Less than 0.50% 0.0
</TABLE>
ROAA and ROE are calculated using audited financial statements after eliminating
the effect of incentive bonus accruals contemplated under all executive
employment agreements. For ROAA and ROE results which occur within a range
specified above, the Percent of Base Pay will be calculated using straight line
interpolation (e.g., an ROAA of 1.375% produces a Percent of Base Pay
calculation of 8.0%). For net income in excess of the 2.00% ROAA or 20.0% ROE,
as applicable, the Employee will receive a Premium Incentive Bonus equal to
<PAGE>
4.0% of the excess net income. No incentive compensation will be paid if the
Bank's most recent composite CAMELS rating is less than 2, or ROAA is less than
one-half of one (.50%) percent, or ROE, where applicable, is less than ten
(10%) percent. In the event the employee is entitled to incentive compensation
as provided herein, the percentage of base pay paid as incentive compensation
for the bank attaining a composite CAMELS of at least 2, said percentage of base
pay will be reduced by five (5%) percent for each individual rating of 3
contained within the overall composite rating. Incentive compensation is
payable to the Employee no later than March 15th of the year following the year
on which it is calculated.
Notwithstanding the foregoing, the Base Salary adjustments and Incentive
Compensation payments contemplated in this agreement shall not become due and
payable until the Board of Directors of the Bank has determined, according to
reasonable safety and soundness standards, that the overall financial condition
of the Bank, including asset quality, will not be adversely affected by the
payment of said amounts.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,256,764
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 2,293,055
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 2,934,653
<INVESTMENTS-CARRYING> 5,602,475
<INVESTMENTS-MARKET> 0
<LOANS> 26,810,414
<ALLOWANCE> 387,444
<TOTAL-ASSETS> 41,168,350
<DEPOSITS> 31,713,452
<SHORT-TERM> 1,000,000
<LIABILITIES-OTHER> 169,783
<LONG-TERM> 2,000,000
0
0
<COMMON> 7,000
<OTHER-SE> 6,278,115
<TOTAL-LIABILITIES-AND-EQUITY> 41,168,350
<INTEREST-LOAN> 1,526,258
<INTEREST-INVEST> 349,394
<INTEREST-OTHER> 75,363
<INTEREST-TOTAL> 1,951,015
<INTEREST-DEPOSIT> 818,641
<INTEREST-EXPENSE> 848,733
<INTEREST-INCOME-NET> 1,102,282
<LOAN-LOSSES> 271,968
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,032,423
<INCOME-PRETAX> (91,384)
<INCOME-PRE-EXTRAORDINARY> (91,384)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (91,384)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
<YIELD-ACTUAL> 4.93
<LOANS-NON> 79,708
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 133,342
<CHARGE-OFFS> 18,627
<RECOVERIES> 761
<ALLOWANCE-CLOSE> 387,444
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 387,444
</TABLE>
