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 March 31, 2000
___ 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.)
1490 Martha Berry Blvd.
Rome, Georgia 30162-5271
----------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(706) 295-9300
--------------
(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 April 30, 2000.
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. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
March 31, 2000 and December 31, 1999
Assets
------
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash and due from banks, including reserve
requirements of $245,000 in 2000 and $194,000 in 1999 $ 1,576,578 1,882,436
Federal funds sold 1,133,000 2,889,000
Interest bearing deposits 2,199,285 258,216
---------- ----------
Cash and cash equivalents 4,908,863 5,029,652
Securities available for sale 14,230,578 12,863,973
Securities held to maturity 1,879,108 1,878,932
Loans, net 56,160,058 55,090,512
Premises and equipment, net 2,813,989 2,811,150
Bank owned life insurance 1,223,472 1,208,251
Federal Home Loan Bank Stock 500,000 450,000
Accrued interest receivable and other assets 1,202,237 1,079,661
---------- ----------
$ 82,918,305 80,412,131
========== ==========
Liabilities and Stockholder's Equity
------------------------------------
Deposits:
Demand $ 7,260,346 8,244,704
Interest bearing demand 6,034,716 5,396,309
Savings 10,453,059 9,560,218
Time 29,716,844 28,624,343
Time, over $100,000 11,580,907 11,397,949
---------- ----------
Total deposits 65,045,872 63,223,523
Federal Home Loan Bank borrowings 10,000,000 8,000,000
Securities sold under repurchase agreement - 1,500,000
Accrued interest payable and other liabilities 449,515 388,875
---------- ----------
Total liabilities 75,495,387 73,112,398
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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; 701,600 shares issued and
outstanding 7,016 7,016
Additional paid-in capital 6,946,101 6,946,101
Accumulated earnings 669,161 507,432
Accumulated other comprehensive income (loss) (199,360) (160,816)
----------- ----------
Total stockholders' equity 7,422,918 7,299,733
----------- ----------
$ 82,918,305 80,412,131
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
GREATER ROME BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Earnings and Comprehensive Income
(Unaudited)
For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
Mar 31, 2000 Mar 31, 1999
<S> <C> <C>
Interest income:
Interest and fees on loans $ 1,324,668 1,011,253
Interest and dividends on investments 236,655 167,524
Interest on federal funds sold and deposits with other banks 60,130 28,005
--------- ---------
Total interest income 1,621,453 1,206,782
--------- ---------
Interest expense:
Time deposits 563,524 432,064
Savings deposits 88,766 65,716
Interest bearing demand deposits 29,942 19,009
Other 141,583 69,530
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Total interest expense 823,815 586,319
--------- ---------
Net interest income 797,638 620,463
Provision for loan losses 31,610 57,600
--------- ---------
Net interest income after provision for loans losses 766,028 562,863
--------- ---------
Other income:
Service charges 50,787 43,213
Other 40,149 57,326
--------- ---------
Total other income 90,936 100,539
Other expenses:
Salaries and employee benefits 330,393 268,719
Occupancy 87,780 87,988
Other operating 205,930 157,969
--------- ---------
Total other expenses 624,103 514,676
--------- ---------
Income before income taxes 232,861 148,726
Income tax expense 71,132 48,538
--------- ---------
Net earnings $ 161,729 100,188
========= =========
Other comprehensive income (loss):
Unrealized losses on securities available for sale arising
during period, net of tax benefit of $23,583 and $7,691 (38,544) (12,570)
--------- ---------
Comprehensive income $ 123,184 87,618
========= =========
Net earnings per share $ 0.23 0.14
========= =========
Diluted net earnings per share $ 0.22 0.14
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
GREATER ROME BANCSHARES, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended March 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 161,729 100,188
Adjustments to reconcile net earnings to net cash
used by operating activities:
Depreciation, amortization and accretion 43,266 55,981
Provision for loan losses 31,610 57,600
Change in:
Interest receivable and other assets (114,214) (70,276)
Interest payable and other liabilities 60,639 17,662
--------- ---------
Net cash provided by operating activities 183,030 161,155
--------- ---------
Cash flows from investing activities:
Proceeds from maturities and calls of securities available for sale 172,967 1,453,211
Proceeds from maturities and calls of securities held to maturity - 515,877
Purchases of securities available for sale (1,595,762) (1,423,746)
Purchase of FHLB stock (50,000) -
Purchase of bank owned life insurance - (350,000)
Net increase in loans (1,101,157) (1,901,606)
Purchases of premises and equipment (52,216) (7,297)
--------- ---------
Net cash used by investing activities (2,626,168) (1,713,561)
--------- ---------
Cash flows from financing activities:
Net change in demand and savings deposits 546,890 (99,697)
Net change in time deposits 1,275,459 2,618,956
Net change in FHLB borrowings 2,000,000 -
Net change in securities sold under repurchase agreements (1,500,000) 1,000,000
Net change in federal funds purchased - (500,000)
--------- ---------
Net cash provided by financing activities 2,322,349 3,019,259
--------- ---------
Net change in cash and cash equivalents (120,789) 1,466,853
Cash and cash equivalents at beginning of period 5,029,652 4,509,810
--------- ---------
Cash and cash equivalents at end of period $ 4,908,863 5,976,663
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 808,667 538,059
Income taxes $ 1,400 22,256
Non cash investing and financing activities:
Change in unrealized gain/(loss) on sale of securities available for sale $ (62,126) (20,261)
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
GREATER ROME BANCSHARES, INC. AND SUBSIDIARY
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 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.
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.
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 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 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.
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.
We believe that the allowance for loan losses is adequate. While we use
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 us
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:
Building 40 years
Land improvements 20 years
Furniture, fixtures and equipment 2-12 years
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
7
<PAGE>
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:
Net Common Per Share
For the quarter ended March 31, 2000: Earnings Share Amount
-------- ----- ------
Earnings per share $ 161,729 701,600 0.23
Effect of stock options - 27,845 -
Diluted earnings per share $ 161,729 729,445 0.22
Net Common Per Share
For the quarter ended March 31, 1999: Earnings Share Amount
-------- ----- ------
Earnings per share $ 101,188 701,600 0.14
Effect of stock options - 16,674 -
Diluted earnings per share $ 101,188 718,274 0.14
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
FORWARD LOOKING STATEMENTS
Various 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 these 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 the results in the forward-looking
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) 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 Company's success at managing the risks involved in the foregoing.
Forward-looking statements speak only as of the date on which they are made. We
undertake no obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is made to reflect
the occurrence of unanticipated events.
9
<PAGE>
FINANCIAL CONDITION
As of March 31, 2000, the Company had $82.9 million in total assets, up $2.5
million over year-end 1999. Total deposits increased $1.8 million over year-end
1999 to $65.0 million. Net loans outstanding increased $1.1 million over
year-end 1999 to $56.2 million. All of the Bank's growth in deposits and loans
has come from the local market. We attribute this growth to a relatively stable
local economy combined with competitive banking services delivered 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.
In the third quarter of 1999, the Bank acquired a site in West Rome to begin
construction of a second branch banking facility. It will be a full service
branch office of approximately 1,600 square feet with two drive-up banking lanes
and a drive-up ATM. The site is located approximately four miles west of our
main office. Construction on the new facility began in the first quarter of
2000.
The West Rome site was acquired for $185 thousand. The total cost of the
facility, including land, site work, furniture, fixtures and equipment is
expected to be approximately $576 thousand. We project that the new office
should be making a contribution to earnings after twenty-four months of
operations and should position the Bank to more fully service the greater Rome
market.
In addition to the West Rome branch facility, we also plan to begin construction
on a 4,265 square foot main office expansion in the fourth quarter of 2000. The
cost of the expansion, including furniture, fixtures and equipment and
modification of existing facilities is expected to be approximately $600
thousand. As of first quarter 2000, the board had not solicited any bids for
construction of the main office expansion.
The banking industry continues to experience 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 competitive with the cost of local
certificates of deposit. Our asset/liability management committee has adopted
policies designed to diversify funding sources if local market deposits become
less available and even 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 us to continue to meet the local market's credit demands
while providing the flexibility to obtain funding from various sources at
optimum rates. While this policy provides greater funding flexibility, we
continue to place primary funding emphasis on local deposit growth. As of March
31, 2000, the Bank had no brokered deposits.
Capital
At March 31, 2000, 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, we had $1.9 million more capital than necessary to
satisfy the "well-capitalized" criteria. The Bank's capital adequacy is
monitored quarterly by the asset/liability committee. At these quarterly
meetings, the committee develops strategies for the Bank's asset and liability
growth, mix and pricing.
We continue to evaluate opportunities to deploy this excess capital in order to
improve shareholder returns. As a routine part of our business, we evaluate
opportunites with other financial institutions. Thus, at any time, discussions,
negotiations and due diligence activities concerning potential transactions may
occur.
From time to time, the Company may also purchase stock from shareholders who
have indicated a desire to sell their stock. Given the Company's excess capital
levels, such transactions not only provide liquidity for the Company's stock,
but improve the returns for all remaining shareholders.
10
<PAGE>
Assuming that 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, our capital will approach the minimum limits to be
well-capitalized when our assets are approximately $108 million. While there are
no assurances that we will continue to experience rapid growth, we must
anticipate such growth and make plans for sufficient capital to support it. We
have developed capital growth plans that anticipate establishing a $3.5 million
credit facility in 2000. As capital is required at the bank level to support
asset growth, the Company will borrow sufficient funds against the credit
facility and contribute them to the Bank to maintain its "well-capitalized"
status for at least the next 12 months. Applications have been submitted to
three correspondent banks that have expressed an interest in providing this
credit facility, however terms have not been negotiated.
Liquidity
We monitor the Bank's 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 March 31,
2000, we had unfunded loan commitments totaling $4.3 million.
We intend to manage loan growth so that deposit flows will provide the primary
funding for all loans as well as cash reserves for working capital. We will
continue to seek cost effective alternative funding sources for both the short
and long term, if local deposit growth does not keep pace with local loan
demand. These funding sources may include institutional certificates of deposit.
We consider 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 quarter ended March 31, 2000, deposit growth exceeded loan
growth by $800 thousand. Securities held-to-maturity remained unchanged at $1.9
million. Securities available-for-sale increased by $1.4 million to $14.2
million. At March 31, 2000, the weighted average life of our securities
portfolio was 6.3 years with a weighted average tax equivalent yield of 6.24%.
All of the Bank's investment securities are eligible as collateral for
borrowings under either repurchase agreements with our correspondent banks or
advances from the Federal Home Loan Bank ("FHLB"). At March 31, 2000, securities
totaling $2.5 million were pledged as collateral for FHLB advances.
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 correspondent
banks. At quarter end, the funds available for liquidity purposes consisted of
$14.0 million in securities (eligible for sale under repurchase agreements),
plus Federal funds sold and other short-term bank deposits of $3.3 million, for
a total of $17.3 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 us to raise
funds out of the 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, all of which were available at quarter end. Our
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 qualified
programs, up to 20 years. On February 11, 2000, the Bank borrowed an additional
$2.0 million from the FHLB. The additional $2.0 million is a two-year advance
that carries a floating interest rate equal to one month LIBOR minus .12% and
reprices monthly. The initial rate was 5.77%. At March 31, 2000, the Bank had a
11
<PAGE>
total of $10.0 million in advances outstanding with the FHLB. We have assigned
$14.1 million in eligible residential first mortgage and commercial real estate
loans and $2.1 million in marketable securities to the FHLB as collateral for
this financing.
The FHLB has call options on $7.0 million of its advances to the Bank. If call
options are exercised on any of the advances, they will be converted into a
three-month LIBOR-based floating rate advance at the three-month LIBOR rate. The
most likely reason that the FHLB would call the advances would be if interest
rates rose sufficiently to present better investment alternatives for the FHLB.
In the event of a call, we will evaluate funding alternatives, in light of the
Bank's interest rate risk profile at the time.
RESULTS OF OPERATIONS
Net Earnings
The Company had net earnings of $161,729 ($0.23 per share) for the three months
ended March 31, 2000. This compares to net earnings of $100,188 ($0.14 per
share) for the three months ended March 31, 1999. Income before income taxes in
the first quarter of 2000 improved over the same period in 1999 by $84,135 (57%)
to $232,861.
Net Interest Income
Net interest income increased $177,175 (29%) to $797,638 for the three months
ended March 31, 2000. This was primarily due to the 33% increase in average
earning assets from $56.8 million in first quarter 1999 to $75.5 million for the
first quarter of 2000. The net yield on average earning assets, before the
provision for loan losses, was 4.24% for 2000. This compares to 4.43% for 1999.
The Bank's cost of funds has risen 19 basis points, while its yield on earning
assets has remained constant. The percentage of average earning assets funded by
interest bearing liabilities remained at 87%, while loans as a percent of
earning assets declined 1.6% to 73.5%.
Summary of Loan Loss Experience
<TABLE>
<CAPTION>
Three months Three months
ended ended
3/31/00 3/31/99
------- -------
<S> <C> <C>
Allowance for possible loan losses at the beginning of the quarter $ 684,131 569,185
Charge-offs:
Real estate - mortgage - -
Consumer loans 22,590 20,193
---------- ----------
Total 22,590 20,193
---------- ----------
Recoveries:
Real estate - mortgage - -
Consumer loans 4,502 10,138
---------- ----------
Total 4,502 10,138
---------- ----------
Net charge-offs: 18,088 10,055
Additions charged to operations 31,610 57,600
---------- ----------
Balance at end of quarter 697,653 616,730
Average loans outstanding, net of unearned income $ 55,626,012 42,784,599
Ratio of net charge-offs to average loans 0.03% 0.02%
</TABLE>
The provision for loan losses was $31,610 in the first quarter of 2000,
representing a $25,990 decrease from the provision for the same period in 1999.
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<PAGE>
On a quarterly basis, we evaluate the history of the Bank's loan charge-offs and
review the credit risk in the Bank's loan portfolio. Based on the results of
these reviews, we evaluate the adequacy of the allowance for possible loan
losses. 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, we evaluate the
composite risk ratings in a model that assesses the adequacy of the current
allowance for loan losses. This evaluation is presented to the board of
directors each month. Management performs loan reviews for compliance with
underwriting policy on new loans and presents the review results in the weekly
asset review committee meeting. Past due loans are reviewed weekly, and 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.
We expect 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. We consider the quarter end 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 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 2000 by risk grade
assigned at the time of loan origination is:
Projected
Grade Charge-offs
----- -----------
1 -
2 92
3 32,007
4 31,661
5 8,622
6 8,637
7 -
8 -
------
Total 81,019
======
13
<PAGE>
Risk Elements
<TABLE>
<CAPTION>
March 31, 2000 March 31, 1999
-------------- --------------
Nonaccrual, Past Due and Restructured Loans
- -------------------------------------------
<S> <C> <C>
Nonaccrual loans $ 158,525 86,733
Accruing loans contractually past due 90 days or more $ - -
Troubled debt restructurings $ 245,252 96,806
</TABLE>
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 $4,373 in 2000 and $5,159 in 1999. The amount of interest that was
included in interest income on the above loans was $0 in 2000 and $2,282 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 placed on non-accrual, unless corrective action is certain and
imminent.
Non-interest Income and Expenses
Non-interest income decreased $9,603 (10%) for the three months ended March 31,
2000 from the same period of 1999. This was due primarily to the lack of demand
for mortgage loans, which caused an 85% decrease in mortgage origination fees
from $33,654 in 1999 to $4,915 in 2000. Service charges on deposit accounts
increased $7,574 (18%) to $50,787.
Non-interest expenses increased $109,428 (21%) to $624,103 for the three months
ended March 31, 2000 from the same period for 1999. The lower growth rate of
non-interest expenses relative to the earning asset growth rate of 33% indicates
that our operating efficiencies continue to improve.
Salaries and benefits for the three months ended March 31, 2000 increased
$61,674 (23%) to $330,393 from the same period in 1999. This is due to the
growth in the number of full-time-equivalent employees and increases in the
costs of employee benefits. The number of employees grew from 31 at the end of
the first quarter of 1999 to 38 at the end of the first quarter of 2000.
Occupancy costs remained stable at $87,781 in 2000 versus $87,988. However,
occupancy costs are expected to increase over the remainder of the year with the
opening of the West Rome office and the main office expansion.
Other operating expenses increased $47,961 (30%) to $205,930. One of the more
significant items of other operating expenses was the expense associated with
the monthly accrual of board fees under the terms of the directors stock
incentive plan approved in October 1999. The remainder of the increase is
attributable to the higher volume of business associated with advertising and
marketing costs, data processing costs, and supplies. We continue to focus on
improving operating expense efficiencies, through the use of current banking
technologies, outsourcing solutions and human resource training and development.
Interest Rate Sensitivity
Improvement in the Company's earnings depends upon continued earning asset
growth, good asset quality and a relatively stable economic environment. We feel
it is reasonable for the Bank to continue to experience steady earning asset
growth as long as interest rates remain relatively stable.
We use a third party interest rate 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.
14
<PAGE>
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 increasing. In other words, 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. This 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 an immediate
and simultaneous change in interest rates, either up or down by 200 basis
points, on our net interest income and on our 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 our current capital.
15
<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
(d) 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).
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).
16
<PAGE>
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 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).
10.7 *Greater Rome Bancshares, Inc. Board of Directors Compensation Program,
dated October 14, 1999.(Incorporated by reference to Exhibit 10.13 of the
Company's Annual Report on Form 10-KSB for the year-ended December 31,
1999).
10.8 *Executive Supplemental Retirement Plan Agreement between the Bank and E.
Grey Winstead, III dated January 13, 2000.
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 first quarter of the year-
ended December 31, 2000.
17
<PAGE>
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: May 5, 2000 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
18
<PAGE>
GREATER ROME BANCSHARES, INC.
Form 10-QSB for the quarterly period ended March 31, 2000
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description Sequential Page
------ ----------- ---------------
<S> <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
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 3, 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
10.7 *Greater Rome Bancshares, Inc. Board of Directors Compensation Program, dated October 14,
1999 (Incorporated by reference to Exhibit 10.7 of the Company's Annual Report on Form 10-KSB
for the year-ended December 31, 1999). N/A
10.8 *Executive Supplemental Retirement Plan Agreement between the Bank and E.Grey Winstead, III
dated January 13, 2000. 1
27.1 Financial Data Schedule (for S.E.C. use only).
</TABLE>
- ---------------------------------
* Indicates a management contract or compensatory arrangement.
19
<PAGE>
GREATER ROME BANK
EXECUTIVE INDEXED RETIREMENT AGREEMENT
THIS AGREEMENT is made this 13th day of January 2000, by and between Greater
Rome Bank, a state-chartered commercial bank located in Rome, Georgia (the
"Company"), and E. GREY WINSTEAD, III (the "Executive").
INTRODUCTION
To attract, retain and reward quality Executives and to provide a potentially
higher level of retirement income, the Company is willing to provide the
Executive with this Executive Indexed Retirement Agreement. The Company will pay
the benefits from its general assets.
AGREEMENT
The Executive and the Company agree as follows:
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall have the
meanings specified:
1.1 "Area" shall mean the geographic area in the boundaries of Floyd County,
Georgia. It is the express intent of the parties that the Area is defined herein
as the area where the Executive performs or performs services on behalf of the
Bank as of, or within a reasonable time prior to, the termination of the
Executive employment hereunder.
1.2 "Adjustment Rate" shall mean the figure equal to one minus the Company's
highest marginal tax rate for the current calendar year.
1.3 "Change of Control" means any consummated transaction wherein twenty-
five percent (25%) of the shares of 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 Company are replaced
within any twelve month period.
1
<PAGE>
1.4 "Disability" means a physical or mental condition that prevents the
performance of substantially all of the Executive's duties, as defined
hereinafter, for a period of ninety (90) consecutive days. Disability shall be
determined according to the provisions and determination of disability under the
Bank's Long Term Disability insurance covering the Executive. If no coverage
exists, then whether the Executive is disabled shall be resolved by a physician
selected by the Bank and such resolution shall be binding upon all parties to
this Agreement. Duties under this paragraph are defined as those duties set
forth in that certain Employment Agreement dated September 1, 1997, between
Greater Rome Bank, Greater Rome Bancshares, Inc. and Executive and contained in
both paragraph 2 and Exhibit "A" to said Agreement.
1.5 "Effective Date" means November 12, 1999.
1.6 "Normal Retirement Age" means the Executive's 65th birthday.
1.7 "Normal Retirement Date" means the later of the Normal Retirement Age or
Termination of Employment without cause.
1.8 "Plan Year" means each calendar year from January 1 through December 31.
In the year of implementation, it shall commence with the Effective Date of this
Agreement and end on December 31, 1999.
1.9 "Retirement Account" means the account maintained on the books of the
Company as described in Section 2.2.
1.10 "Simulated Investments" mean actual or hypothetical investments
specified by the Company for use in measuring the Retirement Benefit. Subject to
Article 2, the Company can change the Simulated Investments only with the
Executive's written agreement. The Simulated Investments shall be of equal
initial amounts.
1.11 "Simulated Investment Earnings" means the after-tax rate of return on a
Simulated Investment. If the Simulated Investment is a life insurance policy,
the Simulated Investment Earnings shall track cash surrender value and not
include receipt of the policy's death benefit.
1.12 "Termination of Employment" means the Executive ceases to be employed
by the Company for any reason whatsoever other than death.
1.13 "Vesting Percentage" means the percentages from the following table.
The Vesting Percentage shall not exceed 100% under any circumstances.
2
<PAGE>
Completed Plan Year Percentage
------------------- ----------
1 20%
2 40%
3 60%
4 80%
5 100%
Article 2
Retirement Account
2.1 Simulated Investments. The Company shall establish two Simulated
Investments in the total amount of $ 470,000 as of the Effective Date, as
follows:
2.1.1 Simulated Investment Number One shall track the illustrated
cash surrender value of one or more specified life insurance policy(s)
as described in Appendix A. The policies may or may not actually be
purchased by the Company. The illustrated values shall be obtained from
the appropriate specified insurance carrier for the specified policy
based on the policy performance assuming a policy issue date of the
Effective Date as specified in Appendix A. No policy loans, surrenders,
partial surrenders, lapses or policy cancellations shall be factored
into the illustrated policy values so long as this Agreement is in
force.
2.1.2 Simulated Investment Number Two shall track the value of a
simulated investment account comprised of both principal and accumulated
net after-tax interest earnings. Pre-tax interest earnings shall be
based on the Banks Cost of Funds Rate as calculated from the Banks 3rd
Quarter Call Report for the plan year. The principal amount of the
Simulated Investment Number Two shall be increased by the amount of each
after-tax benefit payment under this Agreement effective the first day
of the Plan Year following such benefit payment. Calculations for
Simulated Investment Number Two assume the income tax rate to be the
Company's highest marginal tax rate for the prior calendar year, and
assumes that interest (net of tax) shall be compounded on an annual
basis at the end of each Plan Year.
2.2 Retirement Account. The Company shall establish a Retirement Account on
its books for the Executive. The Retirement Account balance during the
pre-termination period is determined by subtracting the value of Simulated
Investment Number Two from the value of Simulated Investment Number One and
dividing the difference by the Adjustment Rate. The Retirement Account
subsequent to the Termination Date is reduced by payments of the Primary Normal
Retirement Benefit under Section 3.1.1.
3
<PAGE>
2.3 Statement of Accounts. The Company shall provide to the Executive,
within 60 days after each Plan Year, a statement setting forth the Retirement
Account balance.
2.4 Accounting Device Only. The Retirement Account and Simulated Investments
are solely devices for measuring amounts to be paid under this Agreement. They
are not a trust fund of any kind. The Executive is a general unsecured creditor
of the Company for the payment of benefits. The benefits represent the mere
Company promise to pay such benefits. The Executive's rights are not subject in
any manner to anticipation, alienation, transfer, assignment, pledge,
encumbrance, attachment, or garnishment by the Executive's creditors.
Article 3
Normal Retirement
3.1 Normal Retirement Benefit. Subject to the general limitations of Article
9, upon reaching the Normal Retirement Date while in the full-time employment
with the Company, the Executive shall be entitled to both the primary and
secondary benefits described in Sections 3.1.1 and 3.1.2.
3.1.1 Primary Normal Retirement Benefit. Commencing on the
Executive's Normal Retirement Date, the Company shall pay a Primary
Normal Retirement Benefit to the Executive which is equal to the
Executive's Retirement Account balance as of the Plan Year ending
immediately preceding the Executive's Normal Retirement Date. The
Primary Normal Retirement Benefit shall be paid over fifteen (15) years
in one hundred eighty (180) equal monthly installments (without
adjustment for interest earnings during the payment period), commencing
on the first day of the month following the Executive's Termination of
Employment.
3.1.2 Secondary Normal Retirement Benefit. Within 60 days following
the end of the Plan Year following the Executive's Normal Retirement
Date, and continuing until the Executive's death, the Company shall pay
a Secondary Normal Retirement Benefit to the Executive. The Secondary
Normal Retirement Benefit shall be paid annually in an amount calculated
as follows:
Earnings for the Plan Year on Simulated Investment Number One
Minus the
After-Tax Interest Earnings for the Plan Year on Simulated Investment Number Two
Divided by the
Adjustment Rate.
Earnings on Simulated Investment Number One will be equal to the
increase in the cash surrender value of the life insurance policy(s)
described in Appendix A. Interest earnings on Simulated Investment
4
<PAGE>
Number Two shall be determined pursuant to the method set forth in
Section 2.1 hereof.
Article 4
Early Termination of Employment
4.1 Upon Termination of Employment without cause or voluntarily by the
Executive prior to the Normal Retirement Age, other than for reasons of
disability, death, following a change of control, or termination for cause, the
Executive shall be entitled to both the primary and secondary benefits described
in Sections 4.1.1 and 4.1.2.
4.1.1 Primary Normal Retirement Benefit. Commencing on the
Executive's Normal Retirement Date, the Company shall pay a Primary
Normal Retirement Benefit to the Executive which is equal to the
Executive's Retirement Account balance as of the Plan Year ending
immediately preceding the Executive's Termination of Employment
multiplied by the Vesting Percentage. The Primary Normal Retirement
Benefit shall be paid over fifteen (15) years in one hundred eighty
(180) equal monthly installments (without adjustment for interest
earnings during the payment period), commencing on the first day of the
month following the Executive's Normal Retirement Age.
4.1.2 Secondary Normal Retirement Benefit. Within 60 days following
the end of the Plan Year following the Executive's Normal Retirement
Age, and continuing until the Executive's death, the Company shall pay a
Secondary Normal Retirement Benefit to the Executive. The Secondary
Normal Retirement Benefit shall be paid annually in an amount calculated
as follows:
Earnings for the Plan Year on Simulated Investment Number One
Minus the
After-Tax Interest Earnings for the Plan Year on Simulated Investment Number Two
Divided by the
Adjustment Rate
Multiplied by the
Vesting Percentage.
Earnings on Simulated Investment Number One will be equal to the increase
in the cash surrender value of the life insurance policy(s) described in
Appendix A. Interest earnings on Simulated Investment Number Two shall be
determined pursuant to the method set forth in Section 2.1 hereof.
5
<PAGE>
Article 5
Change of Control
If the Executive is in full-time Employment with the Company at the date
of a Change of Control, and if the Executive's employment is subsequently
terminated, either voluntarily or involuntarily except for cause, then the
Executive shall receive the benefits promised in this Agreement as described in
Sections 3.1.1 and 3.1.2 upon attaining Normal Retirement Age, as if the
Executive had been continuously employed by the Bank or its successor until the
Executive's Normal Retirement Age. The Executive will also remain eligible for
all promised Death Benefits in this agreement. In addition, no sale, merger or
consolidation of the Bank shall take place unless the new or surviving entity
expressly acknowledges and assumes the obligations under this agreement and
agrees to abide by its terms.
Article 6
Death Benefits
Upon the Executive's death prior to termination of this Agreement, or subsequent
to his disability as defined herein, the Company shall pay to the Executive's
beneficiary a benefit equal to the Retirement Account balance as of the Plan
Year immediately preceding the Executive's death. The Company shall pay the
benefit to the beneficiary in a lump sum within 60 days following the
Executive's death.
Article 7
Disability
Subject to the general limitations of Article 9, upon the disability of the
Executive and defined in Section 1.3 and while in full time employment with the
Company, the Executive shall be entitled to both the primary and secondary
benefits described in Sections 7.1.1 and 7.1.2.
7.1.1 Primary Benefit. Commencing on the Executive's Normal
Retirement Date, the Company shall pay a primary normal retirement
benefit to the Executive which is equal to the Executive's Retirement
Accounts balance as of the planned year ending immediately preceding the
Executive's Normal Retirement Date. The primary Normal Retirement
Benefits shall be paid over fifteen (15) years in one hundred eighty
(180) equal monthly installments (without adjustment for interest
earnings during the payment period), commencing on the first day of the
month following the Executive's 65th birthday.
7.1.2 Secondary Benefits. Within sixty (60) days of the end for the
planned year following the Executive's 65th birthday, and continuing
until the Executive's death, the Company shall pay a secondary benefit
to the Executive. The secondary benefit shall be paid annually in an
amount calculated as follows:
6
<PAGE>
Earnings for the Planned Year on Simulated Investment Number One
Minus the
After Tax Interest Earnings for the Planned Year on
Simulated Investment Number Two
Divided by the
Adjustment Rate.
Earnings on Simulated Investment Number One will be equal to the increase in
cash surrender value of the life insurance Policy(s) described in Appendix A.
Interest earnings on Simulated Investment Number Two shall be determined
pursuant to the method set forth in Section 2.1 hereof.
Article 8
Beneficiaries
8.1 Beneficiary Designations. The Executive shall designate a beneficiary by
filing a written designation with the Company. The Executive may revoke or
modify the designation at any time by filing a new designation. However,
designations will only be effective if signed by the Executive and accepted by
the Company during the Executive's lifetime. The Executive's beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the Executive or if the Executive names a spouse as beneficiary and the marriage
is subsequently dissolved. If the Executive dies without a valid beneficiary
designation, all payments shall be made to the Executive's estate.
8.2 Facility of Payment. If a benefit is payable to a minor, to a person
declared incompetent, or to a person incapable of handling the disposition of
his or her property, the Company may pay such benefit to the guardian, legal
representative or person having the care or custody of such minor, incompetent
person or incapable person. The Company may require proof of incompetence,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit. Such distribution shall completely discharge the Company from all
liability with respect to such benefit.
Article 9
General Limitations
9.1 Termination for Cause. Notwithstanding any provision of this Agreement
to the contrary, the Company shall not pay any benefit under this Agreement if
the Company terminates the Executive's Employment for:
(a) Gross negligence or gross neglect of duties;
(b) Commission of a felony or of a gross misdemeanor involving moral
turpitude; or
7
<PAGE>
(c) Fraud, dishonesty or willful violation of any law or significant
Company policy resulting in an adverse effect on the Company.
9.2 Suicide. Notwithstanding any provision of this Agreement to the
contrary, the Company shall not pay any benefit under this Agreement if the
Executive commits suicide within two years after the date of this Agreement, or
if the Executive has made any material misstatement of fact on any application
for life insurance purchased by the Company.
9.3 Competition After Termination of Employment. The Executive agrees that
during his employment by the Bank hereunder and, in the event of his termination
other than by the Bank without cause, for a period of six (6) months thereafter,
he will not (except on behalf of or with the prior written consent of the Bank),
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 Bank, engage in any business which is the same as or
essentially the same as the Business of the Bank.
9.4 Non Solicitation of Customers. The Executive agrees that during his
employment by the Bank hereunder, and, in the event of his termination other
than by the Bank without cause or by the Executive for cause, for a period of
six (6) months thereafter, he will not (except on behalf of or with the written
prior consent of the Bank) within the Area, on his own behalf or in the service
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 Bank's customers, including actively sought prospective costumers with
whom the Executive has or had material contact during any of the last two (2)
years of his employment, for purposes of providing product or services that are
competitive with those provided by the Bank.
9.5 Non Solicitation of Employees. The Executive agrees that during his
employment by the Bank hereunder and, in the event of his termination other than
by the Bank without cause or by the employee for cause, 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 or recruit or hire away or attempt to solicit or recruit or
hire away, directly or by assisting others, any employee of the Bank or its
affiliates, whether or not such employee is a full time employee or a temporary
employee of the Bank or its affiliates and whether or not such employment is
pursuant to written agreement or whether or not such employment is for a
determined period or is at will.
Article 10
Claims and Review Procedures
Claims Procedure and Arbitration. In the event a dispute arises over benefits
under this Agreement and benefits are not paid to the Executive (or to his
beneficiary in the case of the Executive's death) and such claimants feel they
are entitled to receive such benefits, then a written claim must be made to the
Plan Administrator named above within ninety (90) days from the date payments
8
<PAGE>
are refused. The Plan Administrator shall review the written claim and if the
claim is denied, in whole or in part, they shall provide in writing within
ninety (90) days of receipt of such claim their specific reasons for such
denial, reference to the provisions of this Agreement upon which the denial is
based and any additional material or information necessary to perfect the claim.
Such written notice shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired. A claim shall be
deemed denied if the Plan Administrator fails to take any action within the
aforesaid ninety-day period.
If claimants desire a second review they shall notify the Plan Administrator in
writing within ninety (90) days of the first claim denial. Claimants may review
this Agreement or any documents relating thereto and submit any written issues
and comments they may feel appropriate. In its sole discretion, the Plan
Administrator shall then review the second claim and provide a written decision
within ninety (90) days of receipt of such claim. This decision shall likewise
state the specific reasons for the decision and shall include reference to
specific provisions of this Agreement upon which the decision is based.
If claimants continue to dispute the benefit denial based upon completed
performance of this Agreement or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to a Board of
Arbitration for final arbitration. Said Board shall consist of one member
selected by the claimant, one member selected by the Bank, and the third member
selected by the first two members. The Board shall operate under any generally
recognized set of arbitration rules. The parties hereto agree that they and
their heirs, personal representatives, successors and assigns shall be bound by
the decision of such Board with respect to any controversy properly submitted to
it for determination.
Where a dispute arises as to the Bank's discharge of the Executive "for cause",
such dispute shall likewise be submitted to arbitration as above described and
the parties hereto agree to be bound by the decision thereunder.
Article 11
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
Article 12
Miscellaneous
12.1 Binding Effect. The Bank expressly agrees that it shall not merge or
consolidate into or with another bank or sells substantially all of its assets
to another bank, firm, person, until such bank, firm, or person expressly
agrees, in writing, to assume and discharge the duties and obligations of the
Bank under this Agreement. This Agreement shall be binding upon the parties
hereto, their successors, beneficiaries, heirs, and personal representatives.
9
<PAGE>
12.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
12.3 Applicable Law. The Agreement and all rights hereunder shall be
governed by the laws of the State of Georgia except to the extent preempted by
the laws of the United States of America.
12.4 Reorganization. The Company shall not merge or consolidate into or with
another company, or reorganize, or sell substantially all of its assets to
another company, firm or person unless such succeeding or continuing company,
firm or person agrees to assume and discharge the obligations of the Company
under this agreement.
12.5 Non-Transferability. Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.
12.6 Tax Withholding. The Company shall withhold any taxes that are required
by taxation authorities to be withheld from the benefits provided under this
Agreement.
12.7 Unfunded Arrangement. The Executive is a general unsecured creditor of
the Company for the payment of benefits under this Agreement. The benefits
represent the mere promise by the Company to pay such benefits. The rights to
benefits are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment, or garnishment by
creditors. Any insurance on the Executive's life or any other asset held in
connection with this Agreement is a general asset of the Company to which the
Executive has no preferred or secured claim.
12.8 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
12.9 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to:
(a) Establishing and revising the method of accounting for the
Agreement;
(b) Maintaining a record of benefit payments; and
(c) Establishing rules and prescribing any forms necessary or desirable
to administer the Agreement.
10
<PAGE>
12.10 Actions of the Company. All determinations, interpretations, rules,
and decisions of the Company shall be conclusive and binding upon all persons
having or claiming to have any interest or right under this Agreement.
12.11 Named Fiduciary. The Company shall be the named fiduciary and plan
administrator under this Agreement. The named fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.
IN WITNESS WHEREOF, the Executive and a duly authorized Company officer have
signed this Agreement.
COMPANY:
GREATER ROME BANK
By /s/ Tom Caldwell
----------------
Title President
--------------
EXECUTIVE:
/s/ E. Grey Winstead, III
-------------------------
E. GREY WINSTEAD, III
11
<PAGE>
Appendix A
Simulated Policy Data
GREATER ROME BANK
EXECUTIVE INDEXED RETIREMENT AGREEMENT
Insured: Male
Insurance Carrier: West Coast Life Insurance Company
Policy Type: Universal Life, No Load
Product Name: BCSII+
Issue Date: November 12, 1999
Classification: Standard, non-tabacco use
Initial Face Amount: $668,830
Annual Premium: $235,000
Number of Premium Payments: 1
Insured: Male
Insurance Carrier: Great West Life & Annuity Insurance Co.
Policy Type: Universal Life, No Load
Product Name: v. 20
Issue Date: November 12, 1999
Classification: Standard, non-tabacco use
Initial Face Amount: $668,780
Annual Premium: $235,000
Number of Premium Payments: 1
12
<PAGE>
GREATER ROME BANK
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into this 13th day of January, 2000, by and
between GREATER ROME BANK, a state-chartered commercial bank located in Rome,
Georgia (the "Company"), and E. GREY WINSTEAD, III (the "Executive"). This
Agreement shall append the Split Dollar Endorsement entered into on January 13,
2000, or as subsequently amended, by and between the aforementioned parties.
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the Company is
willing to divide the death proceeds of a life insurance policy on the
Executive's life. The Company will pay life insurance premiums from its general
assets.
Article 1
General Definitions
The following terms shall have the meanings specified:
1.1 "Insurer"means West Coast Life Insurance Company.
1.2 "Policy" means insurance policy no. ZUA 373036 issued by the Insurer.
1.3 "Insured" means the Executive.
1.4 "Normal Retirement Age" means the Executive's 65th birthday.
1.5 "Change of Control" means any consummated transaction wherein
twenty-five percent (25%) of the shares of 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 Company are replaced within any twelve month period.
Article 2
Policy Ownership/Interests
2.1 Company Ownership. The Company is the sole owner of the Policy and shall
have the right to exercise all incidents of ownership. The Company shall be the
direct beneficiary of an amount of death proceeds equal to the greater of: a)
the cash surrender value of the policy, b) the aggregate premiums paid on the
Policy by the Company less any outstanding indebtedness to the Insurer or, c)
13
<PAGE>
the total policy death proceeds less an amount calculated by multiplying by 60%
the difference between the total policy death proceeds and the cash surrender
value of the policy.
2.2 Executive's Interest. The Executive shall have the right to designate
the beneficiary of any remaining death proceeds of the Policy. The Executive
shall also have the right to elect and change settlement options that may be
permitted. Provided, however, if the Executive voluntarily terminates
employment, other than following a change of control or reorganization, prior to
the Normal Retirement Date, the Executive's interest otherwise provided under
this Section 2.2 shall be multiplied by the following percentages based on the
calendar year in which such voluntary termination occurs:
Calendar Year Percentage
1999 20%
2000 40%
2001 60%
2002 80%
2003 and after 100%
To the extent, if any, that the Executive's interest is reduced, the Company's
proceeds shall be increased. The Executive's interest shall not be reduced
following a change of control or reorganization.
2.3 Option to Purchase. The Company shall not sell, surrender or transfer
ownership of the Policy while this Agreement is in effect without first giving
the Executive or the Executive's transferee the option to purchase the Policy
for a period of sixty (60) days from written notice of such intention. The
purchase price shall be an amount equal to the cash surrender value of the
Policy. This provision shall not impair the right of the Company to terminate
this Agreement.
2.4 Comparable Coverage. The Company shall maintain the Policy in full force
and effect and in no event shall the Company amend, terminate or otherwise
abrogate the Executive's interest in the Policy, unless the Company replaces the
Policy with a comparable insurance policy to cover the benefit provided under
this Agreement. The Policy or any comparable policy shall be subject to the
claims of the Company's creditors.
Article 3
Premiums
3.1 Premium Payment. The Company shall pay any premium due on the Policies.
3.2 Imputed Income. The Company shall impute income to the Executive in an
amount equal to the current term rate for the Executive's age multiplied by the
aggregate death benefit payable to the Executive's beneficiary. The "current
term rate" is the minimum amount required to be imputed under Revenue Rulings
64-328 and 66-110, or any subsequent applicable authority.
14
<PAGE>
Article 4
Assignment
The Executive may assign without consideration all of the Executive's interests
in the Policy and in this Agreement to any person, entity or trust. In the event
the Executive transfers all of the Executive's interest in the Policy, then all
of the Executive's interest in the Policy and in the Agreement shall be vested
in the Executive's transferee, who shall be substituted as a party hereunder and
the Executive shall have no further interest in the Policy or in this Agreement.
Article 5
Insurer
The Insurer shall be bound only by the terms of the Policy. Any payments the
Insurer makes or actions it takes in accordance with the Policy shall fully
discharge it from all claims, suits and demands of all entities or persons. The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Agreement.
Article 6
Claims Procedure
Claims Procedure and Arbitration. In the event a dispute arises over benefits
- ---------------------------------
under this Agreement and benefits are not paid to the Executive (or to his
beneficiary in the case of the Executive's death) and such claimants feel they
are entitled to receive such benefits, then a written claim must be made to the
Plan Administrator named above within ninety (90) days from the date payments
are refused. The Plan Administrator shall review the written claim and if the
claim is denied, in whole or in part, they shall provide in writing within
ninety (90) days of receipt of such claim their specific reasons for such
denial, reference to the provisions of this Agreement upon which the denial is
based and any additional material or information necessary to perfect the claim.
Such written notice shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired. A claim shall be
deemed denied if the Plan Administrator falls to take any action within the
aforesaid ninety-day period.
If claimants desire a second review they shall notify the Plan Administrator in
writing within ninety (90) days of the first claim denial. Claimants may review
this Agreement or any documents relating thereto and submit any written issues
and comments they may feel appropriate. In its sole discretion, the Plan
Administrator shall then review the second claim and provide a written decision
within ninety (90) days of receipt of such claim. This decision shall likewise
state the specific reasons for the decision and shall include reference to
specific provisions of this Agreement upon which the decision is based.
If claimants continue to dispute the benefit denial based upon completed
performance of this Agreement or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to a Board of
15
<PAGE>
Arbitration for final arbitration. Said Board shall consist of one member
selected by the claimant, one member selected by the Bank, and the third member
selected by the first two members. The Board shall operate under any generally
recognized set of arbitration rules. The parties hereto agree that they and
their heirs, personal representatives, successors and assigns shall be bound by
the decision of such Board with respect to any controversy properly submitted to
it for determination.
Where a dispute arises as to the Bank's discharge of the Executive "for cause",
such dispute shall likewise be submitted to arbitration as above described and
the parties hereto agree to be bound by the decision thereunder.
Article 7
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
Article 8
Miscellaneous
8.1 Binding Effect. The Company expressly agrees that it shall not merge or
consolidate into or with another bank or sell substantially all of its assets to
another bank, firm, person; or entity until such bank, firm, person or entity
agrees in writing to assume and discharge the duties and obligations of the Bank
under this Agreement. This Agreement shall bind the Executive and the Company,
their beneficiaries, survivors, successors, executors, administrators, heirs,
and personal representatives and transferees, and any Policy beneficiary.
8.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
8.3 Applicable Law. The Agreement and all rights hereunder shall be governed
by and construed according to the laws of the State of Georgia, except to the
extent preempted by the laws of the United States of America.
8.4 Reorganization. The Company shall not merge or consolidate into or with
another company, or reorganize, or sell substantially all of its assets to
another company, firm or person unless such succeeding or continuing company,
firm or person agrees to assume and discharge the obligations of the Company
under this agreement.
8.5 Notice. Any notice, consent or demand required or permitted to be given
16
<PAGE>
under the provisions of this Split Dollar Agreement by one party to another
shall be in writing, shall be signed by the party giving or making the same, and
may be given either by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage prepaid, to such
party, addressed to his or her last known address as shown on the records of the
Company. The date of such mailing shall be deemed the date of such mailed
notice, consent or demand.
8.6 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
8.7 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to:
(a) Establishing and revising the method of accounting for the
Agreement;
(b) Maintaining a record of benefit payments; and
(c) Establishing rules and prescribing any forms necessary or desirable
to administer the Agreement.
8.8 Named Fiduciary. The Company shall be the named fiduciary and plan
administrator under the Agreement. The named fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
EXECUTIVE: COMPANY: GREATER ROME BANK
/s/ E. Grey Winstead, III BY /s/ Tom Caldwell
- -------------------------- ----------------
E. GREY WINSTEAD, III
Title President
----------
17
<PAGE>
SPLIT DOLLAR POLICY ENDORSEMENT
GREATER ROME BANK SPLIT DOLLAR AGREEMENT
Policy No. ZUA 373036 Insured: E. GREY WINSTEAD, III
Supplementing and amending the application for insurance to West Coast Life
Insurance Company ("Insurer") on October 11, 1999, the applicant requests and
directs that:
BENEFICIARIES
-------------
1. GREATER ROME BANK, a state -chartered commercial bank located in Rome,
Georgia (the "Company"), shall be the direct beneficiary of death proceeds equal
to the greater of (a) the cash surrender value of the policy, (b) the aggregate
premiums paid on the Policy by the Company less any outstanding indebtedness to
the Insurer, or c) the total policy death proceeds less an amount calculated by
multiplying by 60% the difference between the total policy death proceeds and
the cash surrender value of the policy.
2. The beneficiary of any remaining death proceeds shall be designated by
the Insured or the Insured's transferee, subject to the provisions of paragraph
(5) below.
OWNERSHIP
---------
3. The Owner of the policy shall be the Company. The Owner shall have all
ownership rights in the Policy except as may be specifically granted to the
Insured or the Insured's transferee in paragraph (4) of this endorsement.
4. The Insured or the Insured's transferee shall have the right to assign
his or her rights and interests in the Policy with respect to that portion of
the death proceeds designated in paragraph (2) of this endorsement, and to
exercise all settlement options with respect to such death proceeds.
5. Notwithstanding the provisions of paragraph (4) above, if the Executive
voluntarily terminates employment, other than following a change of control or
reorganization, prior to the Normal Retirement Date, the Executive's interest
otherwise provided under this Section 2 shall be multiplied by the following
percentages based on the calendar year in which such voluntary termination
occurs:
Calendar Year Percentage
------------- ----------
1999 20%
2000 40%
2001 60%
2002 80%
2003 and after 100%
18
<PAGE>
To the extent, if any, that the Executive's interest is reduced, the
Company's proceeds shall be increased. The Executive's interest shall not be
reduced following a change of control or reorganization for Termination of
Employment whether voluntary or involuntary.
MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY
---------------------------------------------------
Upon the death of the Insured, the interest of any collateral assignee of
the Owner of the Policy designated in (3) above shall be limited to the portion
of the proceeds described in paragraph (1) above.
OWNERS AUTHORITY
----------------
The Insurer is hereby authorized to recognize the Owner's claim to rights
hereunder without investigating the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the Policy. The
signature of the Owner shall be sufficient for the exercise of any rights under
this Endorsement and the receipt of the Owner for any sums received by it shall
be a full discharge and release therefore to the Insurer.
Any transferee's rights shall be subject to this Endorsement.
The owner accepts and agrees to this split dollar endorsement.
Signed at Rome, Georgia, this 13th day of January, 2000.
GREATER ROME BANK
By /s/ Tom Caldwell
----------------
Its President
----------------
19
<PAGE>
GREATER ROME BANK
SPLIT DOLLAR AGREEMENT
THIS AGREEMENT is made and entered into this 13th day of January, 2000, by and
between GREATER ROME BANK, a state-chartered commercial bank located in Rome,
Georgia (the "Company"), and E. GREY WINSTEAD, III (the "Executive"). This
Agreement shall append the Split Dollar Endorsement entered into on January 13,
2000, or as subsequently amended, by and between the aforementioned parties.
INTRODUCTION
To encourage the Executive to remain an employee of the Company, the Company is
willing to divide the death proceeds of a life insurance policy on the
Executive's life. The Company will pay life insurance premiums from its general
assets.
Article 1
General Definitions
The following terms shall have the meanings specified:
1.1 "Insurer" means Great West Life & Annuity Insurance Company.
1.2 "Policy" means insurance policy no. 86000698 issued by the Insurer.
1.3 "Insured" means the Executive.
1.4 "Normal Retirement Age" means the Executive's 65th birthday.
1.5 "Change of Control" means any consummated transaction wherein
twenty-five percent (25%) of the shares of 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 Company
are replaced within any twelve month period.
Article 2
Policy Ownership/Interests
2.1 Company Ownership. The Company is the sole owner of the Policy and shall
have the right to exercise all incidents of ownership. The Company shall be the
direct beneficiary of an amount of death proceeds equal to the greater of: a)
the cash surrender value of the policy, b) the aggregate premiums paid on the
Policy by the Company less any outstanding indebtedness to the Insurer or, c)
20
<PAGE>
the total policy death proceeds less an amount calculated by multiplying by 60%
the difference between the total policy death proceeds and the cash surrender
value of the policy.
2.2 Executive's Interest. The Executive shall have the right to designate
the beneficiary of any remaining death proceeds of the Policy. The Executive
shall also have the right to elect and change settlement options that may be
permitted. Provided, however, if the Executive voluntarily terminates
employment, other than following a change of control or reorganization, prior to
the Normal Retirement Date, the Executive's interest otherwise provided under
this Section 2.2 shall be multiplied by the following percentages based on the
calendar year in which such voluntary termination occurs:
Calendar Year Percentage
------------- ----------
1999 20%
2000 40%
2001 60%
2002 80%
2003 and after 100%
To the extent, if any, that the Executive's interest is reduced, the Company's
proceeds shall be increased. The Executive's interest shall not be reduced
following a change of control or reorganization.
2.3 Option to Purchase. The Company shall not sell, surrender or transfer
ownership of the Policy while this Agreement is in effect without first giving
the Executive or the Executive's transferee the option to purchase the Policy
for a period of sixty (60) days from written notice of such intention. The
purchase price shall be an amount equal to the cash surrender value of the
Policy. This provision shall not impair the right of the Company to terminate
this Agreement.
2.4 Comparable Coverage. The Company shall maintain the Policy in full force
and effect and in no event shall the Company amend, terminate or otherwise
abrogate the Executive's interest in the Policy, unless the Company replaces the
Policy with a comparable insurance policy to cover the benefit provided under
this Agreement. The Policy or any comparable policy shall be subject to the
claims of the Company's creditors.
Article 3
Premiums
3.1 Premium Payment. The Company shall pay any premium due on the Policies.
3.2 Imputed Income. The Company shall impute income to the Executive in an
amount equal to the current term rate for the Executive's age multiplied by the
aggregate death benefit payable to the Executive's beneficiary. The "current
term rate" is the minimum amount required to be imputed under Revenue Rulings
64-328 and 66-110, or any subsequent applicable authority.
21
<PAGE>
Article 4
Assignment
The Executive may assign without consideration all of the Executive's interests
in the Policy and in this Agreement to any person, entity or trust. In the event
the Executive transfers all of the Executive's interest in the Policy, then all
of the Executive's interest in the Policy and in the Agreement shall be vested
in the Executive's transferee, who shall be substituted as a party hereunder and
the Executive shall have no further interest in the Policy or in this Agreement.
Article 5
Insurer
The Insurer shall be bound only by the terms of the Policy. Any payments the
Insurer makes or actions it takes in accordance with the Policy shall fully
discharge it from all claims, suits and demands of all entities or persons. The
Insurer shall not be bound by or be deemed to have notice of the provisions of
this Agreement.
Article 6
Claims Procedure
Claims Procedure and Arbitration. In the event a dispute arises over benefits
- --------------------------------
under this Agreement and benefits are not paid to the Executive (or to his
beneficiary in the case of the Executive's death) and such claimants feel they
are entitled to receive such benefits, then a written claim must be made to the
Plan Administrator named above within ninety (90) days from the date payments
are refused. The Plan Administrator shall review the written claim and if the
claim is denied, in whole or in part, they shall provide in writing within
ninety (90) days of receipt of such claim their specific reasons for such
denial, reference to the provisions of this Agreement upon which the denial is
based and any additional material or information necessary to perfect the claim.
Such written notice shall further indicate the additional steps to be taken by
claimants if a further review of the claim denial is desired. A claim shall be
deemed denied if the Plan Administrator falls to take any action within the
aforesaid ninety-day period.
If claimants continue to dispute the benefit denial based upon completed
performance of this Agreement or the meaning and effect of the terms and
conditions thereof, then claimants may submit the dispute to a Board of
22
<PAGE>
Arbitration for final arbitration. Said Board shall consist of one member
selected by the claimant, one member selected by the Bank, and the third member
selected by the first two members. The Board shall operate under any generally
recognized set of arbitration rules. The parties hereto agree that they and
their heirs, personal representatives, successors and assigns shall be bound by
the decision of such Board with respect to any controversy properly submitted to
it for determination.
Where a dispute arises as to the Bank's discharge of the Executive "for cause",
such dispute shall likewise be submitted to arbitration as above described and
the parties hereto agree to be bound by the decision thereunder.
Article 7
Amendments and Termination
This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.
Article 8
Miscellaneous
8.1 Binding Effect. The Company expressly agrees that it shall not merge or
consolidate into or with another bank or sell substantially all of its assets to
another bank, firm, person; or entity until such bank, firm, person or entity
agrees in writing to assume and discharge the duties and obligations of the Bank
under this Agreement. This Agreement shall bind the Executive and the Company,
their beneficiaries, survivors, successors, executors, administrators, heirs,
and personal representatives and transferees, and any Policy beneficiary.
8.2 No Guarantee of Employment. This Agreement is not an employment policy
or contract. It does not give the Executive the right to remain an employee of
the Company, nor does it interfere with the Company's right to discharge the
Executive. It also does not require the Executive to remain an employee nor
interfere with the Executive's right to terminate employment at any time.
8.3 Applicable Law. The Agreement and all rights hereunder shall be governed
by and construed according to the laws of the State of Georgia, except to the
extent preempted by the laws of the United States of America
8.4 Reorganization. The Company shall not merge or consolidate into or with
another company, or reorganize, or sell substantially all of its assets to
another company, firm or person unless such succeeding or continuing company,
firm or person agrees to assume and discharge the obligations of the Company
under this agreement.
8.5 Notice. Any notice, consent or demand required or permitted to be given
23
<PAGE>
under the provisions of this Split Dollar Agreement by one party to another
shall be in writing, shall be signed by the party giving or making the same, and
may be given either by delivering the same to such other party personally, or by
mailing the same, by United States certified mail, postage prepaid, to such
party, addressed to his or her last known address as shown on the records of the
Company. The date of such mailing shall be deemed the date of such mailed
notice, consent or demand.
8.6 Entire Agreement. This Agreement constitutes the entire agreement
between the Company and the Executive as to the subject matter hereof. No rights
are granted to the Executive by virtue of this Agreement other than those
specifically set forth herein.
8.7 Administration. The Company shall have powers which are necessary to
administer this Agreement, including but not limited to:
(a) Establishing and revising the method of accounting for the
Agreement;
(b) Maintaining a record of benefit payments; and
(c) Establishing rules and prescribing any forms necessary or desirable
to administer the Agreement.
8.8 Named Fiduciary. The Company shall be the named fiduciary and plan
administrator under the Agreement. The named fiduciary may delegate to others
certain aspects of the management and operation responsibilities of the plan
including the employment of advisors and the delegation of ministerial duties to
qualified individuals.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
EXECUTIVE: COMPANY: GREATER ROME BANK
/s/ E. Grey Winstead, III BY /s/ Tom Caldwell
- ------------------------- ----------------
E. GREY WINSTEAD, III
Title President
-----------
24
<PAGE>
SPLIT DOLLAR POLICY ENDORSEMENT
GREATER ROME BANK SPLIT DOLLAR AGREEMENT
Policy No. 86000698 Insured: E. GREY WINSTEAD, III
Supplementing and amending the application for insurance to Great West Life &
Annuity Insurance Company ("Insurer") on October 11, 1999, the applicant
requests and directs that:
BENEFICIARIES
-------------
1. GREATER ROME BANK, a state -chartered commercial bank located in Rome,
Georgia (the "Company"), shall be the direct beneficiary of death proceeds equal
to the greater of (a) the cash surrender value of the policy, (b) the aggregate
premiums paid on the Policy by the Company less any outstanding indebtedness to
the Insurer, or c) the total policy death proceeds less an amount calculated by
multiplying by 60% the difference between the total policy death proceeds and
the cash surrender value of the policy.
2. The beneficiary of any remaining death proceeds shall be designated by
the Insured or the Insured's transferee, subject to the provisions of paragraph
(5) below.
OWNERSHIP
---------
3. The Owner of the policy shall be the Company. The Owner shall have all
ownership rights in the Policy except as may be specifically granted to the
Insured or the Insured's transferee in paragraph (4) of this endorsement.
4. The Insured or the Insured's transferee shall have the right to assign
his or her rights and interests in the Policy with respect to that portion of
the death proceeds designated in paragraph (2) of this endorsement, and to
exercise all settlement options with respect to such death proceeds.
5. Notwithstanding the provisions of paragraph (4) above, if the Executive
voluntarily terminates employment, other than following a change of control or
reorganization, prior to the Normal Retirement Date, the Executive's interest
otherwise provided under this Section 2 shall be multiplied by the following
percentages based on the calendar year in which such voluntary termination
occurs:
Calendar Year Percentage
------------- ----------
1999 20%
2000 40%
2001 60%
2002 80%
2003 and after 100%
25
<PAGE>
To the extent, if any, that the Executive's interest is reduced, the Company's
proceeds shall be increased. The Executive's interest shall not be reduced
following a change of control or reorganization for Termination of Employment
whether voluntary or involuntary.
MODIFICATION OF ASSIGNMENT PROVISIONS OF THE POLICY
---------------------------------------------------
Upon the death of the Insured, the interest of any collateral assignee of the
Owner of the Policy designated in (3) above shall be limited to the portion of
the proceeds described in paragraph (1) above.
OWNERS AUTHORITY
----------------
The Insurer is hereby authorized to recognize the Owner's claim to rights
hereunder without investigating the reason for any action taken by the Owner,
including its statement of the amount of premiums it has paid on the Policy. The
signature of the Owner shall be sufficient for the exercise of any rights under
this Endorsement and the receipt of the Owner for any sums received by it shall
be a full discharge and release therefore to the Insurer.
Any transferee's rights shall be subject to this Endorsement.
The owner accepts and agrees to this split dollar endorsement.
Signed at Rome, Georgia, this 13th day of January, 2000.
GREATER ROME BANK
By /s/ Tom Caldwell
----------------
Its President
----------------
26
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000928484
<NAME> Greater Rome Bancshares, Inc
<MULTIPLIER> 1
<CURRENCY> U.S. dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
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0
0
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<INTEREST-DEPOSIT> 682,232
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</TABLE>
