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, 1999
___ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to ________________
Commission File No. 0-28280
GREATER ROME BANCSHARES, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Georgia 58-2117940
------- ----------
(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
--------------
(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:
701,600 shares of common stock, $.01 par value per share, were issued
and outstanding as of October 29, 1999.
Transitional Small Business Disclosure Format (check one): Yes___ No X
<PAGE>
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
<PAGE>
GREATER ROME BANCSHARES, INC.
Consolidated Balance Sheets
(Unaudited)
September 30, 1999 and December 31, 1998
Assets
------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash and due from banks, including reserve
requirements of $144,000 in 1999 and $108,000 in 1998 $ 1,207,900 1,240,284
Federal funds sold 3,444,669 2,132,000
Interest bearing deposits 466,737 1,137,526
--------- ---------
Cash and cash equivalents 5,119,306 4,509,810
Securities available for sale 11,769,020 4,834,617
Securities held to maturity 1,878,718 6,307,534
Loans, net 50,054,444 41,352,500
Premises and equipment, net 2,841,103 2,726,188
Accrued interest receivable 500,199 462,949
Federal Home Loan Bank Stock 300,000 509,200
Other assets 1,264,247 739,044
---------- ----------
$ 73,727,037 61,441,842
========== ==========
Liabilities and Stockholders' Equity
Deposits:
Demand $ 8,047,133 6,009,623
Interest bearing demand 4,552,455 3,579,780
Savings 9,675,953 7,733,706
Time 28,305,094 24,830,666
Time, over $100,000 8,166,524 6,704,185
---------- ----------
Total deposits 58,747,159 48,857,960
Federal Home Loan Bank borrowings 6,000,000 5,000,000
Federal funds purchased 1,500,000 500,000
Accrued interest payable 131,528 101,204
Other liabilities 225,020 170,725
---------- ---------
Total liabilities 66,603,707 54,629,889
Commitments
Stockholders' equity:
Preferred stock, par value $1.00 per share; 100,000 shares
authorized; no shares issued or outstanding - -
shares authorized; 701,600 shares issued and outstanding 7,016 7,016
Additional paid-in capital 6,946,101 6,946,101
Accumulated earnings (deficit) 287,482 (144,640)
Accumulated other comprehensive (loss) income (117,269) 3,476
---------- ----------
Total stockholders' equity 7,123,330 6,811,953
---------- ----------
$ 73,727,037 61,441,842
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
GREATER ROME BANCSHARES, INC.
Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
For each of the Nine and Three Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
Nine Months Nine Months Three Months Three Months
Ended Ended Ended Ended
Sept 30, 1999 Sept 30, 1998 Sept 30, 1999 Sept 30, 1998
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $ 3,259,783 2,648,297 1,173,870 974,692
Interest and dividends on investments 496,948 464,684 179,604 161,927
Interest on federal funds sold and deposits with other banks 151,077 118,442 60,026 39,030
------- ------- ------ ------
Total interest income 3,907,808 3,231,423 1,413,500 1,175,649
--------- ---------- --------- ---------
Interest expense:
Time deposits 1,345,431 1,144,882 467,309 416,636
Savings deposits 217,652 187,091 80,000 71,931
Interest bearing demand deposits 66,109 46,933 24,867 17,240
Other 247,980 175,941 88,717 59,913
------- ------- ------ ------
Total interest expense 1,877,172 1,554,847 660,893 565,720
--------- --------- ------- -------
Net interest income 2,030,636 1,676,576 752,607 609,929
Provision for loan losses 129,483 176,640 14,283 56,300
------- ------- ------ ------
Net interest income after provision for loans losses 1,901,153 1,499,936 738,324 553,629
--------- --------- ------- -------
Other income:
Service charges 146,931 110,205 53,855 37,452
Other 159,351 85,379 52,894 42,626
------- ------- ------ ------
Total other income 306,282 195,584 106,749 80,078
------- ------- ------- ------
Other expenses:
Salaries and employee benefits 808,567 756,833 274,965 275,275
Occupancy 252,354 218,900 82,746 85,884
Other operating 507,715 439,680 180,371 170,617
------- ------- ------- -------
Total other expenses 1,568,636 1,415,413 538,082 531,776
--------- --------- ------- -------
Income before income taxes 638,799 280,107 306,991 101,931
Income tax expense 206,677 89,739 104,995 39,320
------- ------- ------- ------
Net earnings $ 432,122 190,368 201,996 62,611
======= ======= ======= ======
Other comprehensive income, before tax:
Unrealized gains (losses) on securities available
for sale arising during period (194,623) 16,208 (41,480) 17,495
comprehensive income (73,878) 7,969 (15,745) 6,641
------- ----- ------- -----
(120,745) 8,239 (25,735) 10,854
-------- ----- ------- ------
Comprehensive income $ 311,377 198,607 176,261 73,465
======= ======= ======= ======
Net earnings per share $ 0.62 0.27 0.29 0.09
===== ===== ===== ====
Diluted net earnings per share $ 0.60 0.27 0.28 0.09
===== ===== ===== ====
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
GREATER ROME BANCSHARES, INC.
Consolidated Statements of Cash Flows
(Unaudited)
For each of the Nine Months Ended September 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 432,122 190,368
Adjustments to reconcile net earnings to net cash used by operating
activities:
Depreciation, amortization and accretion 156,818 139,166
Provision for loan losses 129,483 176,640
Change in:
Interest receivable (37,250) 47,151
Other assets (101,325) (65,222)
Interest payable 30,325 28,015
Other liabilities 54,294 111,133
------- -------
Net cash provided by operating activities 664,467 627,251
-------- -------
Cash flows from investing activities:
Purchases of securities available for sale (5,308,392) (2,966,482)
Purchases of securities held to maturity (494,219) (4,799,563)
Proceeds from maturities and calls of securities available for sale 2,559,735 796,198
Proceeds from maturities and calls of securities held to maturity 531,687 4,266,826
Redemption of FHLB stock 209,200 -
Purchase of bank owned life insurance (350,000) -
Net increase in loans (8,831,427) (9,935,390)
Purchases of premises and equipment (260,754) (601,102)
--------- ---------
Net cash used by investing activities (11,944,170) (13,239,513)
----------- -----------
Cash flows from financing activities:
Net change in demand and savings deposits 4,952,432 4,477,290
Net change in time deposits 4,936,767 8,040,859
Net change in securities sold under repurchase agreements - 500,000
Net change in federal funds purchased 1,000,000 -
Net change in FHLB borrowings 1,000,000 -
Proceeds from stock options exercised - 4,000
------ -----
Net cash provided by financing activities 11,889,199 13,022,149
---------- ----------
Net change in cash and cash equivalents 609,496 409,887
Cash and cash equivalents at beginning of period 4,509,810 2,964,424
---------- ---------
Cash and cash equivalents at end of period $ 5,119,306 3,374,311
========== =========
Supplemental disclosures of cash flow information:
Interest paid $ 1,907,497 1,526,925
Income taxes paid $ 161,174 55,000
Transfer of held to maturity securities to available for sale $ 4,387,335 -
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GREATER ROME BANCSHARES, INC.
Notes to Consolidated Financial Statements
(Unaudited)
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, commercial bank subsidiary,
Greater Rome Bank (the "Bank"). The Company is subject to regulation under the
Bank Holding Company Act of 1956.
The Bank primarily serves Floyd County, which includes the community of
Rome, Georgia; the county seat located approximately 50 miles north of
metropolitan Atlanta. 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.
Basis of Presentation and Reclassification
- ------------------------------------------
The consolidated financial statements include the accounts of the Company
and the Bank. All intercompany accounts and transactions have been eliminated in
consolidation. Certain 1998 amounts have been reclassified to conform to the
1999 presentation.
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 that the Company has the ability and intent to hold 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.
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.
6
<PAGE>
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.
In June of 1999, management made the one-time election under FAS 133 (Accounting
for Derivative Instruments and Hedging Activities) to reclassify $4,387,335 in
held-to-maturity securities to available-for-sale. While the Company has no
derivative instruments or hedging activity, this pronouncement permits the
reclassification made by management, which is expected to improve the
flexibility for managing the interest rate risk and cash flow of the Bank's
investment portfolio.
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.
A loan is considered impaired when, based on current information and
events, it is probable that all amounts due according to the contractual terms
of the loan agreement will not be collected. Impaired loans are measured based
on the present value of expected future cash flows discounted at the loan's
effective interest rate, or at the loan's observable market price, or at the
fair value of the collateral of the loan if the loan is collateral dependent.
Interest income from impaired loans is recognized using 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 2 - 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 Earnings Per Share
- ----------------------
Earnings per share are based on the weighted average number of common shares
outstanding during the period while the effects of potential shares outstanding
during the period are included in diluted earnings per share. The reconciliation
of the amounts used in the computation of both "earnings per share" and "diluted
earnings per share" for the periods presented in the financial statements were
calculated as follows:
<TABLE>
<CAPTION>
Nine months ended Sept. 30, 1999 Three months ended Sept. 30, 1999
Net Common Per Share Net Common Per Share
Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Earnings per share $432,122 701,600 $0.62 $201,996 701,600 $0.29
Effect of stock options 16,674 16,674
------ ------
Diluted earnings per share $432,122 718,274 $0.60 $201,996 718,274 $0.28
======== ======= ====== ======== ======= =====
</TABLE>
<TABLE>
<CAPTION>
Nine months ended Sept. 30, 1998 Three months ended Sept. 30, 1998
Net Common Per Share Net Common Per Share
Earnings Shares Amount Earnings Shares Amount
-------- ------ ------ -------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Earnings per share $190,368 700,200 $0.27 $62,611 700,400 $0.09
Effect of stock options 9,414 10,799
----- ------
Diluted earnings per share $190,368 709,614 $0.27 $62,611 711,199 $0.09
======== ======= ====== ======== ======= =====
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FORWARD LOOKING STATEMENTS
Certain statements contained in this report, which are not statements of
historical fact, constitute forward-looking statements. Examples of
forward-looking statements include, but are not limited to:
(1) projections of revenues, income or loss, earnings or loss per share, the
payment or non-payment of dividends, capital structure and other financial
items;
(2) statements of plans and objectives of the Company or its management or
Board of Directors, including those relating to products or services;
(3) statements of future economic performance; and (4) statements of
assumptions underlying such statements.
Words such as "believes," "anticipates," "expects," "intends," "targeted," and
similar expressions are intended to identify forward-looking statements but are
not the exclusive means of identifying such statements.
Forward-looking statements involve risks and uncertainties, which may cause
actual results to differ materially from those in such statements. Facts that
could cause actual results to differ from those discussed in the forward-looking
statements include, but are not limited to:
(1) the strength of the U.S. economy in general and the strength of the local
economies in which operations are conducted;
(2) the effects of and changes in trade, monetary and fiscal policies and laws,
including interest rate policies of the Board of Governors of the Federal
Reserve System;
(3) inflation, interest rate, market and monetary fluctuations;
(4) the timely development of and acceptance of new products and services and
perceived overall value of these products and services by users;
(5) changes in consumer spending, borrowing and saving habits;
(6) Y2k issues and technological changes;
(7) acquisitions;
(8) the ability to increase market share and control expenses;
(9) the effect of changes in laws and regulations (including laws and
regulations concerning taxes, banking, securities and insurance) with which
the Company and its subsidiary must comply;
(10) the effect of changes in accounting policies and practices, as may be
adopted by the regulatory agencies as well as the Financial Accounting
Standards Board;
(11) changes in the Company's organization, compensation and benefit plans;
(12) the costs and effects of litigation and of unexpected or adverse outcomes
in such litigation; and
(13) the success of the Company at managing the risks involved in the foregoing.
Such forward-looking statements speak only as of the date on which such
statements are made, and the Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made to reflect the occurrence of unanticipated events.
FINANCIAL CONDITION
As of September 30, 1999, the Company had $73.7 million in total assets, up
$12.3 million (20.0%) over year-end 1998. Total deposits increased $9.9 million
(20.2%) over year-end 1998 to $58.7 million. Net loans outstanding increased
$8.7 million (21.0%) over year-end 1998 to $50.1 million. All of the Bank's
growth in deposits and loans has come from the local market. Management
attributes this growth to a
9
<PAGE>
relatively stable local economy combined with
competitive banking services that are offered by a locally owned and operated
community bank. The Bank is the only locally owned and operated community bank
in its market, which has been dominated by regional banks and fragmented by
credit unions over the past several years.
The banking industry continues to experience stiff competition from non-banks
for deposit and investment type products. Competition for local deposit dollars
continues to put upward pressure on the cost of deposits. In the current market
environment, management has found that the Bank can borrow term funds from
wholesale resources at rates that are less than the cost of local certificates
of deposit. The Bank's Asset/Liability Management Committee has adopted policies
designed to diversify funding sources in the event that local market deposits
become even less available and more costly. Within limits, the Bank may obtain
funding from brokered certificates of deposit and other forms of wholesale
borrowing, such as the Federal Home Loan Bank and term repurchase agreements.
These policies 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 provides greater funding
flexibility, in the long run the Bank will continue to place primary funding
emphasis on local deposit growth. As of September 30, 1999, the Bank had no
brokered deposits.
Capital
At September 30, 1999, 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 $2.0 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. At
these quarterly meetings, strategies are developed for the Bank's asset and
liability growth, mix and pricing.
Assuming the Bank continues to grow with a risk-weighted asset mix consistent
with its historical experience, and that it has reasonable earnings and
maintains asset quality, the Bank's capital will approach the minimum limits to
be well-capitalized when its assets are approximately $100 million. While there
are no assurances that the Bank will continue to experience rapid growth,
management must anticipate such growth and make plans for sufficient capital to
support it. Management and the Board are currently developing capital growth
strategies.
Liquidity
Management monitors its liquidity position daily and the Asset Review Committee
reviews a liquidity management report on a weekly basis. The liquidity
management report 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
30,1999, the Bank had unfunded loan commitments totaling $4.7 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. These funding sources may include institutional certificates of deposit
(CD's), local market CD's and brokered CD's.
Management considers the Bank's internal and external liquidity resources to be
adequate to handle expected growth and normal cash flow demands from existing
deposits and loans. For the nine months ended September 30, 1999, deposit growth
exceeded loan growth by $1.2 million.
10
<PAGE>
Securities held-to-maturity decreased $4.4 million from year-end to $1.9
million. Securities available-for-sale increased $6.9 million from year-end to
$11.8 million. In June of 1999, management made the one-time election under FAS
133 to reclassify $4.4 million in held-to-maturity securities to
available-for-sale. While the Company has no derivative instruments or hedging
activity, this pronouncement permits the reclassification made by management,
which is expected to improve the flexibility for managing the interest rate risk
and cash flow of the Bank's investment portfolio.
At September 30, 1999, the average weighted life of the Bank's securities
portfolio was 5.4 years with an average weighted tax equivalent yield of 6.13%.
All of the Bank's investment securities are available as collateral for
borrowings under either repurchase agreements with its correspondent banks or
borrowings from the Federal Home Loan Bank ("FHLB").
The FHLB has call options on $5.0 million of its loans to the Bank. If call
options are exercised on any of the advances, they will be converted into
three-month LIBOR-based floating rate advances at the three-month LIBOR rate.
The most likely reason for the advances to be called would be if interest rates
rose sufficiently to present better investment alternatives for the FHLB. In the
event of a call, management will evaluate its funding alternatives, given its
interest rate risk profile at the time.
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 $13.6 million in marketable securities (eligible for sale under
repurchase agreements), plus Federal funds sold and other short-term bank
deposits of $3.9 million, for a total of $17.5 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 $4.5 million, $3.0
million of which were available at quarter end. The correspondent banks may
revoke these lines at any time.
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 this financing. The Bank has $8.1 million in eligible
residential first mortgage loans that have been assigned to the FHLB. These
loans provide approximately $6.2 million in lendable value, of which $6 million
has been borrowed. The Bank also has $12.6 million in commercial mortgage loans
that may qualify as collateral for advances with the FHLB.
In April 1999, the Bank borrowed an additional $1.0 million from the FHLB
bringing its total borrowings from the FHLB to $6.0 million. The additional $1.0
million carries a fixed rate of interest at 5.01% for five years with a
one-time, two-year call option. In September 1999, a $2.0 million FHLB advance
with a rate of 5.66% was called by the FHLB. It was replaced with another 5-year
maturity, 2-year one-time call option advance with a fixed rate of 5.71%. These
advances improve the Bank's cost of funds relative to the cost of local market
certificates of deposit and improve the Bank's interest rate risk exposure. They
are secured by the Bank's investment in first mortgage real estate loans and
FHLB stock.
In connection with the contingency planning for year 2000 ("Y2k") risks, the
Bank has purchased a special Y2k Advance commitment from the Federal Home Loan
Bank in the amount of $5.0 million. A commitment fee of $12,500 was paid. Under
the commitment the Bank may take down any part or all of the commitment on each
of three dates in the fourth quarter of 1999. These advances have maturities up
to 12 months and rates that adjust quarterly at the 3-month LIBOR rate, minus 5
basis points. In addition to this, the Bank has
11
<PAGE>
been approved to borrow money from the Federal Reserve Bank of Atlanta.
Borrowings from the FHLB and the FRB must be collateralized with earning assets
of the Bank.
RESULTS OF OPERATIONS
Net Earnings
The Company had net earnings of $432,122 ($0.62 per share) for the nine months
ended September 30, 1999 and $201,996 ($0.29 per share) for the three months
ended September 30, 1999. This compares to net earnings of $190,368 ($0.27 per
share) for the nine months ended September 30, 1998 and net earnings of $62,611
($0.09 per share) for the three months ended September 30, 1998. The following
discussions of the major components of the results of operations explain this
growth in earnings.
Net Interest Income
Net interest income increased 21% to $2,030,636 for the nine months ended
September 30, 1999 and increased 23% to $752,607 for the three months ended
September 30, 1999, as compared to the same periods in the prior year. Average
earning assets increased 28% to $61.3 million for the nine months ended
September 30, 1999 as compared to the same period in the prior year. For the
nine months ended September 30, 1999, the net yield on average earning assets,
before the provision for loan losses, was 4.43%. This compares to 4.63% for the
same period in 1998.
The lower net yield for 1999 was primarily due to the higher funding cost
associated with 86.7% of average earning assets being funded by interest bearing
deposits. For 1998, 83.2% of average earning assets were funded by interest
bearing deposits. In 1999 average time deposits and other borrowings, the most
expensive components of the Bank's funding, were 65.7% of average earning
assets. This compares to 63.1% for the same period in 1998. For the nine months
ended September 30, 1999, average loans comprised 74.4% of average earning
assets. For the same period in 1998, average loans were 73.0% of average earning
assets.
Summary of Loan Loss Experience
<TABLE>
<CAPTION>
Nine months Nine months Three months Three months
ended ended ended ended
Allowance for possible loan losses 9/30/99 9/30/98 9/30/99 9/30/98
---------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance at the beginning of the period $ 569,185 480,544 675,772 574,510
Charge-offs:
Real estate - mortgage - 2,924 -
Consumer loans 49,464 60,894 19,630 28,175
------ ------ ------ ------
Total 49,464 63,818 19,630 28,175
------ ------ ------ ------
Recoveries:
Real estate - mortgage - - - -
Consumer loans 30,404 16,611 9,183 7,342
------ ------ ----- -----
Total 30,404 16,611 9,183 7,342
------ ------ ----- -----
Net charge-offs (recoveries): 19,060 47,207 10,447 20,833
Additions charged to operations 129,483 176,640 14,283 56,300
------- ------- ------ ------
Balance at end of period $ 679,608 609,977 679,608 609,977
======= ======= ======= =======
Average loans outstanding $ 45,627,731 35,063,082 48,444,763 38,363,568
Ratio of net charge-offs to average loans 0.04% 0.13% 0.02% 0.05%
</TABLE>
12
<PAGE>
Until the fourth quarter of 1998, the provision for loan losses was primarily
determined by reference to a target ratio. Management had used this method, by
reference to peer information, in order to build the loss reserve for the Bank's
loan portfolio. More traditional methods of determining loan loss provisions are
based on historical loan portfolio performance, including analysis of historical
charge-offs and recoveries, detailed loan reviews and portfolio reviews, loan
growth and changing economic conditions. Until the fourth quarter of 1998, the
Bank did not have sufficient history in its portfolio performance on which to
base additions.
In the fourth quarter of 1998, management evaluated the history of the Bank's
loan charge-offs and reviewed the credit risk in the Bank's loan portfolio.
Furthermore, an independent credit review was conducted in early January 1999,
to validate the credit risk classifications as of December 31, 1998. Based on
the results of these reviews, management and the board modified the loan loss
reserve policy to eliminate the target balance ratio method. Under the revised
policy, management and the board evaluate the adequacy of the loan loss reserve
on a quarterly basis. This evaluation considers historical loan losses by risk
grade under each major category of loans, i.e., commercial, real estate and
consumer. It also considers current portfolio risk, industry concentrations and
the uncertainty associated with changing economic conditions.
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 weekly Asset Review Committee meeting. Past due loans are
also reviewed weekly. 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 amounts charged to operations in the provision for loan losses are based on
an annual budget that is developed from the most recent monthly and quarterly
reviews. These amounts may be adjusted in any period based on the results of
more current evaluations that indicate that the allowance might be inadequate or
excessive.
In the third quarter of 1999, management reduced the monthly provision for loan
losses from a budgeted amount to a calculation method based on the prior month's
net charge offs. This decision was based on the results of the historical charge
off analysis and the loss reserve adequacy evaluation model. Given the
relatively low ratio of net charge-offs to provision expense and no indication
of unusual or significant credit risks in the portfolio the provision was
reduced to prevent the loss reserve from becoming excessive.
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 allowance adequate
to cover potential losses in the loan portfolio.
Allocation of the Allowance for Loan Losses
- -------------------------------------------
Under the Bank's credit risk Loan Grading Policy, each loan in the portfolio is
assigned one of the following risk grades:
<TABLE>
<CAPTION>
Grade Short Definition Grade Short Definition
----- ---------------- ----- ----------------
<S> <C> <C> <C>
1 Negligible credit risk 5 Greater than normal credit risk
2 Minimal credit risk 6 Excessive credit risk
3 Average credit risk 7 Potential loss
4 Acceptable, but more than average credit risk 8 Uncollectable
</TABLE>
The policy provides more explicit guidance on the application of risk grades. On
a monthly basis, loan balances are aggregated for each grade and a loan loss
allowance is calculated using factors that represent
13
<PAGE>
management's estimate of the allowance applicable to each grade. These factors
are compared to historical charge-offs for reasonableness and adjusted, as
necessary.
The approximate anticipated amount of charge-offs for the next twelve months by
risk grade assigned at the time the loans were originated is:
Projected
Grade Charge-offs
----- -----------
1 -
2 -
3 18,806
4 59,463
5 21,027
6 -
7 -
8 -
------
Total 99,296
======
Risk Elements
September 30, September 30,
1999 1998
---- ----
Nonaccrual, Past Due and Restructured Loans
- -------------------------------------------
Nonaccrual loans $ 38,202 31,951
Accruing loans contractually past due 90
days or more $ - -
Troubled debt restructurings $ 165,583 -
The amount of interest that would have been included in income on the above
non-accrual loans if they had been current in accordance with their original
terms was $3,542 in 1999. The amount of interest that was included in interest
income on the above loans was $336 in 1999.
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, unless corrective action is
certain and imminent.
Non-interest Income and Expenses
Non-interest income increased 57% to $306,282 for the nine months ended
September 30, 1999 and increased 33% to $106,749 for the three months ended
September 30, 1999, as compared to the same periods in the prior year. Service
charges on deposit accounts increased 33% to $146,931 for the nine months ended
September 30, 1999 and increased 44% to $53,855 for the three months ended
September 30, 1999, as compared to the same periods in the prior year. This
increase is primarily due to the increased volume of services used on the Bank's
transaction accounts, on which average balances increased by 24% in 1999 from
the first nine months of 1998. Other income increased 87% to $159,351 for the
nine months ended September 30, 1999 and increased 24% to $52,894 for the three
months ended September 30, 1999, as compared to the same periods in the prior
year. Other income consists primarily of mortgage origination fee income, credit
life premium income and income on bank owned life insurance. Mortgage
origination fee income increased $33,631 from 1998 to 1999 due to higher loan
volume. Income accrued on bank owned life
14
<PAGE>
insurance that was purchased in late December 1998 and January 1999 was $26,271
for the first nine months of 1999.
Non-interest expenses increased 11% to $1,568,636 for the nine months ended
September 30, 1999 and increased 1% to $538,082 for the three months ended
September 30, 1999, as compared to the same periods in the prior year. Average
earning assets increased 28% for the nine months ended September 30, 1999, as
compared to the same period in the prior year. The lower growth rate of
non-interest expenses relative to the earning asset growth rate indicates that
the Bank's operating efficiencies continue to improve. Improving efficiencies
are due to stable earning asset growth, which continues to absorb excess
operating capacity, as well as management's focus on containing operating costs.
Salaries and benefits increased 7% to $808,567 for the nine months ended
September 30, 1999 and reflected no growth for the three months ended September
30, 1999, as compared to the same periods in the prior year. The number of
full-time equivalent employees grew from 30 at September 30, 1998 to 33 at
September 30, 1999. Deferred loan origination costs associated with salaries and
benefits were $117,523 in the nine months ended September 30, 1999. Deferred
loan origination costs are deducted from personnel expenses and amortized over
the life of the related loans as a component of interest income. Such costs were
not deducted in 1998, because they were not material.
Occupancy costs increased 15% to $252,354 for the nine months ended September
30, 1999 and decreased 4% to $82,746 for the three months ended September 30,
1999, as compared to the same periods in the prior year. The nine-month increase
is primarily attributable to opening the new office in East Rome in June 1998.
The three-month decrease is primarily attributable to start up expenses in the
third quarter of 1998 associated with the East Rome office.
Other operating expenses increased 15% to $507,715 for the nine months ended
September 30, 1999 and increased 6% to $180,371 for the three months ended
September 30, 1999, as compared to the same periods in the prior year. Most of
this increase is due to the higher volume of business associated with business
development and marketing costs, collection expenses and data processing costs.
Management continues to focus on improving operating expense efficiencies
through the use of current banking technologies, outsourcing solutions and human
resource training and development. In the first quarter of 1998, the Bank
implemented its telephone banking service, which provides customers with access
to their account information 24 hours a day, seven days a week, and allows the
customers to initiate certain transactions such as funds transfers. A drive-up
ATM was installed at the East Rome office in the third quarter of 1998. In the
third quarter of 1999, changes were made in the way customer statements are
processed that will significantly reduce the costs associated with that function
in the future, as well as improve the delivery times.
Interest Rate Sensitivity
Improvement in the Company's earnings 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 uses a third party risk analysis product, which quantifies the amount
of risk to the net interest margin and to the current market value of equity. It
produces a composite analysis of several approaches including GAP analysis, rate
shocks in 100 point increments, up and down 400 basis points and simulation
modeling.
As with any model, many assumptions have to be made about the repricing
attributes of the Bank's assets and liabilities. Where industry experience seems
appropriate, such assumptions are used. Given the extremely competitive market
for the public's investing and savings dollars, the "basis risk", or lack of
correlation between changes in the yields on U.S. Treasury securities and
customer deposit rates, seems to be getting
15
<PAGE>
greater. In simpler terms, if the one-year T-bill falls in yield by 100 basis
points, it is unlikely that one-year time deposits will roll down by 100 basis
points at maturity. Such uncertainty increases the uncertainty about the
conclusiveness of the interest rate risk models.
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 a change in
interest rates, either up or down by 200 basis points, on the Bank's net
interest income and on its economic value of equity was calculated to be within
policy limits. The net interest income policy limit specifies that the amount of
adverse impact to net interest income due to interest rate risk is limited to no
more than 10% of projected net interest income for the following 12 months,
assuming a 200 basis point change in interest rates. The economic value of
equity policy limit specifies that the adverse effect of a similar rate change
on the economic value of equity is limited to no more than 25% of the Bank's
current capital.
YEAR 2000 RISK
The Board and management consider the Year 2000 ("Y2k") computer processing risk
to be a serious risk for all businesses that depend on computer hardware and
software to perform the critical functions of their businesses. Y2k computer
processing risk is defined as the risk associated with computer hardware or
software that fails to process data or operate in the manner for which it was
designed as a result of century date changes. This risk encompasses hardware and
software owned, leased, licensed or otherwise used (1) by the Company or (2) by
vendors upon which the Company depends for its mission critical functions or (3)
by customers with which the Company has a material relationship. In the third
quarter of 1997, the Board established a Y2k Policy and Y2k Compliance Committee
to address this risk. The Committee is headed by senior management, which meets
monthly and reports monthly to the full Board.
The Company's State of Readiness
The Company and Bank do not use proprietary computer hardware or software. (The
Company has no hardware or software dependencies other than through the Bank;
hence, all further corporate references in this section will be to the Bank.)
The Bank depends upon outsourced data processing services, third party software
and PC hardware technology. Management has identified all mission critical
hardware and software applications and is following the general guidelines
promulgated by the Federal Financial Institutions Examination Council ("FFIEC")
to assure that such applications have been renovated and that business
resumption contingency plans have been adopted and validated before prescribed
deadlines.
The Bank has replaced all non-compliant hardware and software associated with
the operation of its local area networks, wide area network and workstations and
has completed testing and documentation of compliance for these systems.
Additionally, the Bank's phone system has been tested and documented to be Y2k
ready.
Various software is licensed to the Bank and maintained at its offices. It is
used for new account platforms, teller transactions, network administration,
office administration, ACH settlement reporting, cash letter settlement
reporting, wire transfers, accounts receivable financing, accounts payable and
telephone banking. Ten vendors provide this software and periodic updates. To
date, all versions of this software currently used at the Bank have been
reported by the vendors as Y2k compliant. All software has been validated
through tests performed by the Bank, or performed by other (proxy test) banks
with operating environments similar to the Bank. The Bank has completed testing
and documenting compliance on its licensed software maintained at the Bank's
offices.
The Bank's core processing, which maintains all customer record keeping, general
ledger accounting and financial management information systems, is handled by
Fiserv, Inc., an international data processing company, which specializes in
financial institution data processing and serves 15% of all of the banks, credit
16
<PAGE>
unions and savings institutions in the U.S. Thousands of financial institutions
with over fifty million customer accounts are processed on its systems.
Accordingly, the Bank expects Fiserv to satisfy all regulatory requirements
imposed upon bank data processors.
The Bank's Fiserv service center has reported that it has concluded its
renovations and has implemented Y2k compliant software. Proxy tests, as defined
by the FFIEC, have been concluded by representative client banks, and Fiserv
delivered independently reviewed reports to the Bank in the fourth quarter of
1998. These reports were used to limit the scope, extent and cost of integrated
testing that was performed by the Bank. Members of the Y2k Committee attended
training conducted by Fiserv for the purpose of designing integrated test plans
and test scripts with Fiserv. Integrated tests have been completed, with all
issues satisfactorily resolved.
Based on the results of tests performed to date by the Bank and representations
from the servicing vendors, all of the Bank's mission critical hardware and
software applications are Y2k ready.
Management has completed its assessment of the Bank's significant commercial
loan relationships to determine how much Y2k risk may exist in the Bank's
customer base. To the extent that such risk has been identified, management is
requiring those customers to keep the Bank informed of their progress.
Management's current plans are to help the Bank's customers understand the risks
involved, to share the Bank's strategies and to encourage those customers to
satisfy their compliance requirements on time lines that are consistent with
those of the Bank. The Bank's loan agreements and credit review processes have
been modified to address this risk. The Bank's contingency plans for customers
who fail to adequately address this risk may include, but will not be limited
to, requiring such customers to pay off their loans.
Other third parties with which the Bank has material relationships that may be
adversely impacted by Y2k risks are its correspondent banks and the utility
companies.
The Bank's primary correspondent bank provides numerous services, including cash
letter settlements, federal funds sold and purchase lines, securities
safekeeping services, securities settlements, wire settlements, ACH settlements,
and ATM/debit card settlements. The Federal Home Loan Bank of Atlanta provides
overnight investments and secured term financing. Two other correspondent banks
provide federal funds sold and purchase lines. Written communications from these
banks indicate that they have substantially completed the testing and
implementation of all mission critical systems and their current efforts appear
to be focus on customer awareness and contingency planning.
Y2k readiness disclosures from the Bank's major utility companies indicate that
their internal systems are substantially ready. The status of their testing and
contingency planning appears to be on schedule. Their disclosures recognize the
significant interdependencies on business relationships over which they have no
direct control, but indicate efforts to mitigate these risks through integrated
testing and contingency planning.
The Costs to Address the Company's Year 2000 Issues
The resource commitments and costs of implementing Y2k solutions on mission
critical systems are currently estimated to be approximately $138,000.
Approximately $94,000 of this was incurred in 1998, and the balance has been
incurred in 1999. These costs include the cost of an independent consultant, who
was engaged to review the Bank's test plans, test results and contingency plans.
At this time, the costs of implementing Y2k solutions on mission critical
hardware and software are not expected to have a material impact on the results
of operations.
17
<PAGE>
The Risks of the Company's Year 2000 Issues
The Bank cannot assure that all hardware and software that it will use, or that
the Bank's customers, other vendors and utility companies will use, will be Y2k
compliant. The Bank's customers, other vendors and utility companies may be
negatively affected by the Y2k issue, and any difficulties incurred by them in
solving Y2k issues could negatively affect their ability to perform their
agreements with the Bank.
Currently, the most reasonably likely worst case Y2k scenario for the Bank
appears to be one in which electrical service or phone service were disrupted to
the community for an extended period. As noted above, the management of the
risks associated with the Bank's computer hardware and software, its commercial
customer risk and its correspondent bank risk has progressed as planned.
Electrical and phone services are the most critical of the utilities. While the
Bank cannot operate its systems without a continuous supply of electricity,
short-term disruptions, such as occur with electrical storms, can be managed in
the ordinary course of business. Much of the Bank's business is conducted over
data communication and voice communication lines provided by the phone
companies. Short-term disruptions in phone services can be managed in the
ordinary course of business.
Even if the Bank does not incur significant direct costs in connection with
responding to the Y2k issue, the Bank cannot assure that the failure or delay of
its customers, vendors or other third parties in addressing the Y2k issue or the
costs involved in such process will not have a material adverse effect on the
Bank's business, financial condition and results of operations.
The Company's Contingency Plans
The Board of Directors has approved the Bank's Y2k Business Resumption
Contingency Plan ("BRCP"). It was framed within the context of the Bank's Board
approved Disaster Recovery Policy (collectively, the "Plans"). The Disaster
Recovery Policy is designed to achieve a level of emergency preparedness that is
broad in its scope, encompassing the risk of loss or business disruption
resulting from unexpected events ranging from equipment failure to natural
disasters. It is designed to provide for management continuity; designate
alternative facilities; provide for alternative administrative, communication
and data processing support; establish policies for data backup, record
retention and retrieval; reinforce security policies; require reasonable levels
of insurance; reinforce financial risk management policies; and establish
organizational responsibility. The BRCP is specifically focused on risks
associated with the most reasonably likely worst case scenarios resulting from
Y2k events. Management believes that the Plans provide adequate guidance for
most emergency circumstances that might be reasonably expected for the Bank's
geographic location.
The BCRP addresses the evaluation of most reasonably likely worst case scenarios
and the action plans required to limit the adverse consequences on the Bank's
services. The BRCP also addresses liquidity contingency planning. Validation
plans have been included to test the BRCP's effectiveness and viability. These
tests were conducted during the third quarter of 1999 and resulted in no
substantive changes to the overall plan. This testing helped management further
refine certain processing forms and procedures. The Bank's independent Y2k
consultant has reviewed the BRCP and has provided a detailed report with an
overall rating of "Satisfactory ".
18
<PAGE>
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.
(c) Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
Pursuant to Rule 14a-4(c)(1) promulgated under the Securities Exchange Act of
1934, as amended, shareholders desiring to present a proposal for consideration
at the Company's 2000 Annual Meeting of Shareholders must notify the Company in
writing at its principal office at 1490 Martha Berry Blvd., Rome, Georgia 30165,
of the contents of such proposal no later than February 26, 2000. Failure to
timely submit such a proposal will enable the proxies appointed by management to
exercise their discretionary voting authority when the proposal is raised at the
Annual Meeting of Shareholders without any discussion of the matter in the proxy
statement.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following documents filed with the Securities and Exchange Commission
are incorporated by reference and made a 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).
19
<PAGE>
10.1 *Employment Agreement between the Company and Thomas D. Caldwell, III dated
September 1, 1997. (Incorporated by reference to Exhibit 10.1 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended September
30, 1997).
10.2 *Greater Rome Bancshares, Inc. 1996 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.12 of 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
Exhibit 10.13 of 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. (Incorporated by reference to Exhibit 10.5 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended September
30, 1997).
10.6 *Executive Supplemental Retirement Plan Agreement between the Bank and
Thomas D. Caldwell, III dated December 28, 1998. (Incorporated by reference
to Exhibit 10.6 of the Company's Quarterly Report on Form 10-QSB for the
quarter ended March 31, 1999).
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,
1999.
20
<PAGE>
SIGNATURES
In accordance with 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 9, 1999 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
21
<PAGE>
GREATER ROME BANCSHARES, INC.
Form 10-QSB for the quarterly period ended September 30, 1999
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page
------ ----------- ----
<S> <C> <C>
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. (Incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1997). N/A
10.2 *Greater Rome Bancshares, Inc. 1996 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.12 of 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 Exhibit 10.13 of 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. (Incorporated by reference to Exhibit 10.5 of the Company's Quarterly Report on
Form 10-QSB for the quarter ended September 30, 1997). N/A
10.6 *Executive Supplemental Retirement Plan Agreement between the Bank and Thomas D.
Caldwell, III dated December 28, 1998. (Incorporated by reference to Exhibit 10.6 of the
Company's Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999). N/A
27.1 Financial Data Schedule (for S.E.C. use only).
</TABLE>
- ---------------------------------------
* Indicates a management contract or compensatory arrangement.
22
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000928484
<NAME> Greater Rome Bancshares, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 1,207,900
<INT-BEARING-DEPOSITS> 466,737
<FED-FUNDS-SOLD> 3,444,669
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 11,769,020
<INVESTMENTS-CARRYING> 1,878,718
<INVESTMENTS-MARKET> 0
<LOANS> 50,054,444
<ALLOWANCE> 679,608
<TOTAL-ASSETS> 73,727,037
<DEPOSITS> 58,747,159
<SHORT-TERM> 1,500,000
<LIABILITIES-OTHER> 225,020
<LONG-TERM> 6,000,000
0
0
<COMMON> 7,016
<OTHER-SE> 7,116,314
<TOTAL-LIABILITIES-AND-EQUITY> 73,727,037
<INTEREST-LOAN> 3,259,783
<INTEREST-INVEST> 496,948
<INTEREST-OTHER> 151,077
<INTEREST-TOTAL> 3,907,808
<INTEREST-DEPOSIT> 1,629,192
<INTEREST-EXPENSE> 1,877,172
<INTEREST-INCOME-NET> 2,030,636
<LOAN-LOSSES> 129,483
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,568,636
<INCOME-PRETAX> 638,799
<INCOME-PRE-EXTRAORDINARY> 638,799
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 432,122
<EPS-BASIC> 00.62
<EPS-DILUTED> 00.60
<YIELD-ACTUAL> 04.43
<LOANS-NON> 38,202
<LOANS-PAST> 0
<LOANS-TROUBLED> 165,583
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 569,185
<CHARGE-OFFS> 49,464
<RECOVERIES> 30,404
<ALLOWANCE-CLOSE> 679,608
<ALLOWANCE-DOMESTIC> 679,608
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
