[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
[ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the transition period from ___________ to ____________
Georgia 58-2311557
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
102 West Roanoke Drive, Fitzgerald, Georgia 31750
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(Address of Principal Executive Offices) (Zip Code)
(912) 423-4321
----------------------
(Issuer's Telephone Number, Including Area Code)
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Securities registered pursuant to Section 12(b) of the Act: None.
Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X]
APPLICABLE ONLY TO CORPORATE REGISTRANTS
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended December 31, 1999 are incorporated by reference into Part II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders, held on April 19, 2000, are incorporated by reference into Part III.
TABLE OF CONTENTS
Page
----
PART I....................................................................................................................... 3
ITEM 1. DESCRIPTION OF BUSINESS........................................................................................ 3
ITEM 2. DESCRIPTION OF PROPERTIES...................................................................................... 20
ITEM 3. LEGAL PROCEEDINGS.............................................................................................. 21
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS............................................................ 21
PART II...................................................................................................................... 21
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.......................................... 21
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................... 21
ITEM 7. FINANCIAL STATEMENTS........................................................................................... 21
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE........................... 22
PART III..................................................................................................................... 22
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF
THE EXCHANGE ACT.............................................................................................. 22
ITEM 10. EXECUTIVE COMPENSATION......................................................................................... 22
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................................................. 22
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................................................. 22
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K........................................................................ 23
SIGNATURES................................................................................................................... 24
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Company
CBC Holding Company (the "Company") was incorporated as a Georgia corporation on October 15, 1996 for the purpose of acquiring all of the issued and outstanding shares of Common Stock of Community Banking Company of Fitzgerald (the "Bank"). The Company became the holding company of the Bank pursuant the Plan of Reorganization, dated October 25, 1996, by and among the Company, the Bank and Interim Fitzgerald Company, a wholly-owned subsidiary of the Company ("Interim"). Pursuant to the terms of the Plan of Reorganization, Interim merged with and into the Bank and the shareholders of the Bank received one share of Company Common Stock for each share of Bank Common Stock. The merger became effective on March 31, 1997.
The Company's principal business is the ownership and management of the Bank. The Company was organized to facilitate the Bank's ability to serve its customers' requirements for financial services. The holding company structure also provides flexibility for expansion of the Company's banking business through the possible acquisition of other financial institutions and the provision of additional capital to the Bank.
Except for two officers of the Bank who serve as officers of the Company, the Company does not have any employees.
The Company's main office is located at 102 West Roanoke Drive, Fitzgerald, Georgia. The Company opened a drive-through facility on Main Street in Fitzgerald, Georgia in January 1998. The Company does not have any immediate plans to establish additional offices.
The Bank
General
The Bank was incorporated on January 19, 1996 and began operations on April 19, 1996. The Bank purchased certain loans and assumed certain deposits from Bank South N.A. (now known as Bank of America) ("Bank South") pursuant to a Purchase and Assumption Agreement, dated October 18, 1995. The Bank also purchased its current facilities and property from Bank South pursuant to the Purchase and Assumption Agreement.
The Bank is located in Fitzgerald, Georgia and its trade area includes all of Ben Hill County, Georgia. Fitzgerald serves as the county seat of Ben Hill County and is the center of banking in Ben Hill County.
The Bank was established in the Bank South branch located at 102 West Roanoke Drive in Fitzgerald. Additionally, the Bank operates a two-lane drive through located on Main Street in downtown Fitzgerald.
Market Area
In 1999, Ben Hill County had a population of 17,590. The five-year population projection for Ben Hill County is 18,584, an estimated growth of 1.13% per year. The median household income in Ben Hill County for 1999 was reported in a market and demographic study of the area (County Rezide 1999, Claritas) to be $26,787. The number of households in Ben Hill County was 6,409 in 1999; the number of households projected at 2004 is 6,767. The number of persons employed in Ben Hill County in 1999, including the private, public and home sector, was 8,462. As a regional commercial center, Fitzgerald, Georgia has over 100 retail shops and an 80-bed full service medical center. There are over 40 manufacturing businesses in Ben Hill County with concentration in apparel and timberwood products, 33 wholesale trade locations, and more than 150 retail locations. Additionally, agriculture is a major industry segment in Ben Hill County.
Lending Activities
The Bank supports Ben Hill County and portions of immediately surrounding counties. The Bank's primary lending function is to provide short and intermediate term credit to individuals, local businesses, and agricultural enterprises. The Bank mitigates credit risks by maintaining conservative underwriting standards, continuing training of lenders and support personnel, and constant management of its loan and collateral portfolio. Interest rate risk is actively managed through variable-rate pricing and/or utilizing short amortizing terms (3-5 years) or balloon maturities to facilitate loan rate adjustment. Occasionally, the Bank may allow longer term (over 5 years) loans at fixed interest rates. These loans are approved only when the interest rate is clearly advantageous to the Bank or when the overall customer relationship indicates that it is in the Bank's best economic interest to accommodate the customer.
Real Estate Loans. The Bank makes and holds real estate loans, including construction loans, both residential and commercial, permanent financing of residential, commercial and agricultural real estate, equity line consumer loans and occasional closed and junior mortgages. These loans constitute approximately 39% of total loan portfolio, 79.8% of these dollars outstanding have a fixed interest rate and 20.2% have a variable rate. The weighted average rate for fixed rate real estate loans having a final maturity over 60 months, is 8.60%. Presently longer term fixed rate residential loans outstanding are slightly higher, as a percentage of total, than might be considered optimal; however, virtually all of these loans originated from the portfolio purchased from Bank South and long-term financing is no longer considered a desirable product of the Bank. The rate impact of these loans will continue to diminish as the bank expands it's overall portfolio and as these loans amortize and/or pay out through other means. Meanwhile they provide a quality source of income and an asset that may be leveraged through borrowing from FHLB should it become advantageous to do so. Current real estate lending is generally provided on a 3 to 5 year balloon basis.
Real estate loans are normally provided to customers with acceptable credit and ability to repay the debt at 80% loan to value as determined by outside evaluation. Commercial real estate may require higher margins depending on the type and quality of property under consideration. Construction loans are based on "as built" evaluations and funds are disbursed upon officer inspection. Due to local market characteristics, requests for speculative construction are rare.
The Bank generally underwrites equity line credits to the same criteria as other residential real estate loans. Due to the nature of these credits as consumer products a loan/value ratio at 90% is
often acceptable. Over 99% of equity line credits bear a rate that is variable at some function of prime.
Real estate loans approved under reasonable underwriting standards present a relatively low level of risk, especially in the absence of speculative lending. The most prominent risks in this market are those associated with declining economic conditions resulting in loss of industrial employment. Such conditions may diminish the ability of individuals and commercial enterprises to service real estate debt.
Consumer Loans. The Bank makes consumer loans consisting primarily of installment loans to individuals for personal, family and household purposes, including loans for automobiles, home improvement, education loans and investments. Approximately 99% of the consumer loans are fixed rate loans generally with maturity of 3 to 5 years. The Bank currently offers home equity lines of credit (7.0% of total loans), which have a variable rate consumer product. The Bank expects that most of its consumer loans will remain fixed rate loans with maturities of 3 to 5 years. Risks associated with consumer loans include, but are not limited to, fraud, deteriorated or non-existing collateral, general economic downturn and customer financial problems.
Commercial Loans. Commercial lending is directed principally toward small businesses whose demand for funds fall within the legal lending limits of the Bank. This category of loans includes loans to individual, partnership or corporate borrowers, for a variety of business purposes. Currently, commercial loans equal 41.6% of total loans. Of the Bank's commercial loans, 60.6% are adjustable rate loans or mature within one year. Fixed rate loans with maturities of 60 months or less equal 51% of commercial loans and loans with fixed rate maturities of over 60 months equal less than .08% of commercial loans. Risks associated with these loans can be significant and include, but are not limited to, fraud, bankruptcy, economic downturn, deteriorated or non- existing collateral and changes in interest rates.
The Bank also makes loans to businesses under programs administered by the Small Business Administration ("SBA"). Generally SBA guarantees repayment of up to 90% of the loan amount subject to certain limitations. Normally these loans have a variable interest rate. The guaranteed portion of these loans may be sold to investors in the secondary market or held by the Bank depending upon income and liquidity needs. Risks associated with the loans include, but are not limited to, credit risk, e.g., fraud, bankruptcy, economic downturn, deteriorated or non-existing collateral and operational risk, e.g., failure to adhere to SBA funding and servicing requirements in order to maintain the SBA guarantees and servicing rights.
Agricultural Loans. The Bank makes loans to agricultural producers and to agriculture-related businesses. Virtually all of the production agriculture-related loans are fixed rate, terms are generally 12 months or less for operating lines. Most other loans to agricultural producers are 3 to 5 year fixed rate loans. The Bank expects that it will continue to have a majority of its agricultural loans with fixed rates and maturities of 12 months or less for operating lines and 3 to 5 years for other agricultural loans. Risks associated with such loans include, but are not limited to, inclement weather, general economic downturn, changes in market prices of the underlying commodities produced, fraud, bankruptcy, deteriorated and non-existing collateral and adverse fluctuations in interest.
Investments
In addition to loans, the Bank makes other investments primarily in obligations of the United States or obligations guaranteed as to principal and interest by the United States and other taxable securities. No investment in any of those instruments exceeds any applicable limitation imposed by law or regulation.
Deposits
The Bank offers core deposits, including checking accounts, money market accounts, a variety of certificates of deposit, and IRA accounts. The Bank uses an aggressive marketing plan in the overall service area, a broad product line, and competitive services to attract deposits. The primary sources of deposits are residents of, and businesses and their employees located in Ben Hill County, obtained through personal solicitation by the Bank's employees, officers and directors, direct mail solicitations and advertisements published in the local media. Deposits are generated by offering a broad array of competitively priced deposit services, including demand deposits, regular savings accounts, money market deposits (transaction and investment), certificates of deposit, retirement accounts, and other deposit or funds transfer services which may be permitted by law or regulation and which may be offered to remain competitive in the market.
Asset and Liability Management
The Bank manages its assets and liabilities to provide an optimum and stable net interest margin, a profitable after-tax return on assets and return on equity, and adequate liquidity. These management functions are conducted within the framework of written loan and investment policies. Management's overall philosophy is to support asset growth primarily through growth of core deposits, which includes deposits of all categories made by individuals, partnerships and corporations. The Bank maintains a balanced position between rate sensitive assets and rate sensitive liabilities. Specifically, it charts assets and liabilities on a matrix by maturity, effective duration, and interest adjustment period, and endeavors to manage any gaps in maturity ranges.
Employees
At December 31, 1999 the Bank had 26 full-time employees and 5 part- time employees. The Bank had 28 full-time equivalent employees at December 31, 1999. The Company considers its relationship with its employees to be excellent.
Competition
Ben Hill County has offices of four other commercial banks. The commercial banks include branch offices of Bank of America and SouthTrust, and First State Bank of Ocilla, as well as the locally owned Bank of Fitzgerald.
Supervision and Regulation
Both the Company and the Bank are subject to extensive state and federal banking regulations that impose restrictions on and provide for general regulatory oversight of our operations. These laws are generally intended to protect depositors and not shareholders. The following discussion describes the material elements of the regulatory framework that applies to us.
The Company
Since the Company owns all of the capital stock of the Bank, it is a bank holding company under the federal Bank Holding Company Act of 1956. As a result, the Company is primarily subject to the supervision, examination, and reporting requirements of the Bank Holding Company Act and the regulations of the Federal Reserve.
Acquisitions of Banks. The Bank Holding Company Act requires every bank holding company to obtain the Federal Reserve's prior approval before:
. Acquiring direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the bank's voting shares;
. Acquiring all or substantially all of the assets of any bank; or
. Merging or consolidating with any other bank holding company.
Under the Bank Holding Company Act, an adequately capitalized and adequately managed bank holding company located in Georgia may purchase a bank located outside of Georgia. Conversely, an adequately capitalized and adequately managed bank holding company located outside of Georgia may purchase a bank located inside Georgia. In each case, however, restrictions may be placed on the acquisition of a bank which has only been existence for a limited amount of time or an acquisition which may result in specified concentrations of deposits.
Change in Bank Control. Subject to various exceptions, the Bank Holding Company Act and the Change in Bank Control Act, together with related regulations, require Federal Reserve approval prior to any person or company acquiring "control" of a bank holding company. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is rebuttably presumed to exist if a person or a company acquires 10% or more, but less than 25%, of any class of voting securities and either the bank holding company has registered securities under Section 12 of the Securities Act of 1934, or no other person owns a greater percentage of that class of voting securities immediately after the transaction.
Permitted Activities. Under the Bank Holding Company Act, a bank holding company, which has not qualified or elected to become a financial holding company is generally prohibited from engaging in or acquiring direct or indirect control of more than 5% of the voting shares of any company engaged in nonbanking activities unless prior to the enactment of the Gramm-Leach-Bliley Act the Federal Reserve found those activities to be so closely related to banking as to be a proper
incident to the business of a banking. Activities that the Federal Reserve has found to be so closely related to banking to be a proper incident to the business of banking include:
. factoring accounts receivable,
. acquiring or servicing loans,
. leasing personal property,
. conducting discount securities brokerage activities,
. performing selected data processing services,
. acting as agent or broker in selling credit life insurance and other types
of insurance in connection with credit transactions, and
. performing selected insurance underwriting activities.
Despite prior approval, the Federal Reserve may order a bank holding company or its subsidiaries to terminate any of these activities or to terminate its ownership or control of any subsidiary when it has reasonable cause to believe that the bank holding company's continued ownership, activity or control constitutes a serious risk to the financial safety, soundness, or stability of any of its bank subsidiaries.
On November 12, 1999 President Clinton signed the Gramm-Leach-Bliley Act, which amends the Bank Holding Company Act and greatly expand the activities in which bank holding companies and affiliates of banks are permitted to engage. The Gramm-Leach-Bliley Act eliminates many federal and state law barriers to affiliations among banks and securities firms, insurance companies, and other financial service providers. The provisions of the Gramm-Leach-Bliley Act relating to permitted activities of bank holding companies and affiliates of banks became effective on March 11, 2000.
Generally, if the Company qualifies and elects to become a financial holding company, it may engage in activities that are financial in nature or incidental or complementary to a financial activity. Activities that the Gramm- Leach-Bliley Act expressly lists as financial in nature include insurance activities, providing financial, investment and advisory services, underwriting securities and limited merchant banking activities.
To qualify to become a financial holding company, the Bank and any other depository institution subsidiary of the Company must be well capitalized and well managed and must have a Community Reinvestment Act rating of at least satisfactory. Additionally, the Company must file an election with the Federal Reserve to become a financial holding company and must provide the Federal Reserve with 30 days written notice prior to engaging in a permitted financial activity. Although we are eligible to elect to become a financial holding company, we currently have no plans to make such an election.
Support of Subsidiary Institutions. Under Federal Reserve policy, bank holding companies are expected to act as a source of financial strength for, and to commit resources to support, their depository institution subsidiaries. This support may be required at times when, without this Federal Reserve policy, the bank holding company might not be inclined to provide it. In addition, any capital loans by a bank holding company to a bank will be repaid only after its deposits and other indebtedness are repaid in full. In the event of a bank holding company's bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a banking subsidiary will be assumed by the bankruptcy trustee and entitled to a priority of payment.
The Bank
The Bank is a commercial bank charted under the laws of the State of Georgia. Accordingly, the FDIC and the Georgia Department of Banking and Finance regularly examine the operations of the Bank and have the authority to approve or disapprove mergers, the establishment of branches, and similar corporate actions. Both regulatory agencies also have the power to prevent the continuance or development of unsafe or unsound banking practices or other violations of law. Additionally, the Bank's deposits are insured by the FDIC to the maximum extent provided by law. The Bank is also subject to numerous state and federal statutes and regulations that affect its business, activities and operations, and it is supervised and examined by one or more state or federal bank regulatory agencies.
Prompt Corrective Action. The Federal Deposit Insurance Corporation Improvement Act of 1991 establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions. Under this system, federal banking regulators have established five capital categories, well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized, in which all institutions are placed. The federal banking agencies have also specified by regulation the relevant capital levels for each of the other categories. At December 31, 1999, we qualified for the well-capitalized category.
Federal banking regulators are required to take some mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories. The severity of the action depends upon the capital category in which the institution is placed. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized. An institution in any of the undercapitalized categories is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. A bank holding company must guarantee that a subsidiary depository institution meets its capital restoration plan up to the lesser of 5% of an undercapitalized subsidiary's assets or the amount required to meet regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches or engaging in any new line of business, except under an accepted capital restoration plan or with FDIC approval. The Federal Reserve regulations also establish procedures for downgrading an institution to a lower capital category based on supervisory factors other than capital.
FDIC Insurance Assessments. The FDIC has adopted a risk-based assessment system for determining an insured depository institutions' insurance assessment rate. The system that takes into account the risks attributable to different categories and concentrations of assets and liabilities. An institution is placed into one of three capital categories: (1) well capitalized; (2) adequately capitalized; and (3) undercapitalized. These three categories are substantially similar to the prompt corrective action categories described above, with the "undercapitalized" category including institutions that are undercapitalized, significantly undercapitalized and critically undercapitalized. The FDIC also assigns an institution to one of three supervisory subgroups based on a supervisory evaluation that the institution's primary federal regulator provides to the FDIC and information that the FDIC determines to be relevant to the institution's financial condition and the risk posed to the deposit insurance funds. Assessments range from 0 to 27 cents per $100 of deposits, depending on the institution's capital group and supervisory subgroup. In addition, the FDIC imposes assessments to help pay off the $780 million in annual interest payments on the $8 billion Financing Corporation
bonds issued in the late 1980s as part of the government rescue of the thrift industry. This assessment rate is adjusted quarterly and ranged from 1.16 cents to 1.22 cents per $100 of deposits in 1999.
The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC.
Community Reinvestment Act. The Community Reinvestment Act requires the appropriate federal regulator, in connection with their examinations of financial institutions within their jurisdiction, to evaluate the record of each financial institution in meeting the credit needs of its local community, including low and moderate-income neighborhoods. The appropriate federal regulator considers these factors in evaluating mergers, acquisitions, and applications to open a branch or facility. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Under the Gramm-Leach-Bliley Act, banks with aggregate assets of not more than $250 million are subject to a Community Reinvestment Act examination only once every 60 months if the bank receives an outstanding rating, once every 48 months if it receives a satisfactory rating and as needed if the rating is less than satisfactory. Additionally, under the Gramm-Leach-Bliley Act, banks are required to publicly disclose the terms of various Community Reinvestment Act- related agreements.
Other Regulations. Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank's loan operations are also subject to federal laws applicable to credit transactions, such as:
. The federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;
. The Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves;
. The Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;
. The Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies;
. The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and
. The rules and regulations of the various federal agencies charged with the responsibility of implementing these federal laws.
The deposit operations of the Bank are subject to:
. The Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and
. The Electronic Funds Transfer Act and Regulation E issued by the Federal Reserve to implement that act, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services.
Capital Adequacy
The Company and the Bank are required to comply with the capital adequacy standards established by the Federal Reserve, in the case of the Company, and FDIC and Georgia Department of Banking and Finance, in the case of the Bank. The Federal Reserve has established a risk-based and a leverage measure of capital adequacy for bank holding companies that is substantially similar to that adopted by the FDIC for banks under its jurisdiction.
The risk-based capital standards are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies, to account for off-balance-sheet exposure, and to minimize disincentives for holding liquid assets. Assets and off-balance-sheet items, such as letters of credit and unfunded loan commitments, are assigned to broad risk categories, each with appropriate risk weights. The resulting capital ratios represent capital as a percentage of total risk-weighted assets and off- balance-sheet items.
The minimum guideline for the ratio of total capital to risk-weighted assets is 8%. Total capital consists of two components, Tier 1 Capital and Tier 2 Capital. Tier 1 Capital generally consist of common shareholders' equity, minority interests in the equity accounts of consolidated subsidiaries, qualifying noncumulative perpetual preferred stock, and a limited amount of qualifying cumulative perpetual preferred stock, less goodwill and other specified intangible assets. Tier 1 Capital must equal at least 4% of risk- weighted assets. Tier 2 Capital generally consist of subordinated debt, other preferred stock and hybrid capital and a limited amount of loan loss reserves. The total amount of Tier 2 Capital is limited to 100% of Tier 1 Capital. At December 31, 1999, our consolidated ratio of total capital to risk-weighted assets was 14.3% and our consolidated ratio of Tier 1 Capital to risk-weighted assets was 13.1%.
In addition, the Federal Reserve has established minimum leverage ratio guidelines for bank holding companies. These guidelines provide for a minimum ratio of Tier 1 Capital to average assets, less goodwill and other specified intangible assets, of 3% for bank holding companies that meet certain specified criteria, including having the highest regulatory rating and implementing the Federal Reserve's risk-based capital measure for market risk. All other bank holding companies generally are required to maintain a leverage ratio of at least 4%. At December 31, 1999, our consolidated leverage ratio was 8.7%. The guidelines also provide that bank holding companies experiencing internal growth or making acquisitions will be expected to maintain strong capital positions substantially above the minimum supervisory levels without significant reliance on intangible assets. The Federal Reserve considers the leverage ratio and other indicators of capital strength in evaluating proposals for expansion or new activities.
The Bank and the Company are also both subject to other capital guidelines issued by the Georgia Department of Banking and Finance and the Federal Reserve, respectively, which provide for minimum ratios of total capital to total assets.
Failure to meet capital guidelines could subject a bank or bank holding company to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on the taking of brokered deposits, and certain other restrictions on its business. As described below, substantial additional restrictions can be imposed on FDIC- insured depository institutions that fail to meet applicable capital requirements. See "--Prompt Corrective Action."
Payment of Dividends
The Company is a legal entity separate and distinct from the Bank. The principal source of the Company's cash flow, including cash flow to pay dividends to its shareholders, is dividends that the Bank pays to it. Statutory and regulatory limitations apply to the Bank's payment of dividends to the Company as well as to the Company's payment of dividends to its shareholders.
If, in the opinion of the federal banking regulator, the Bank were engaged in or about to engage in an unsafe or unsound practice, the federal banking regulator could require, after notice and a hearing, that it cease and desist from its practice. The federal banking agencies have indicated that paying dividends that deplete a depository institution's capital base to an inadequate level would be an unsafe and unsound banking practice. Under the Federal Deposit Insurance Corporation Improvement Act of 1991, a depository institution may not pay any dividend if payment would cause it to become undercapitalized or if it already is undercapitalized. Moreover, the federal agencies have issued policy statements that provide that bank holding companies and insured banks should generally only pay dividends out of current operating earnings. See "-- Prompt Corrective Action" below.
The Georgia Department of Banking and Finance also regulates the Bank's dividend payments and must approve dividend payments that would exceed 50% of the Bank's net income for the prior year. Our payment of dividends may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines.
At December 31, 1999, the Bank was able to pay approximately $140,009 in dividends to the Company without prior regulatory approval.
Restrictions on Transactions with Affiliates
The Company and the Bank are subject to the provisions of Section 23A of the Federal Reserve Act. Section 23A places limits on the amount of:
. loans or extensions of credit to affiliates;
. investment in affiliates;
. the purchase of assets from affiliates, except for real and personal property exempted by the Federal Reserve;
. loans or extensions of credit to third parties collateralized by the securities or obligations of affiliates; and
. any guarantee, acceptance or letter of credit issued on behalf of an affiliate.
The aggregate of all of the above transactions is limited in amount, as to any one affiliate, to 10% of a bank's capital and surplus and, as to all affiliates combined, to 20% of a bank's capital and surplus. In addition to the limitation on the amount of these transactions, each of the above transactions must also meet specified collateral requirements. The Company must also comply with certain provisions designed to avoid the taking of low-quality assets.
The Company and the Bank are also subject to the provisions of Section 23B of the Federal Reserve Act which, among other things, prohibits an institution from engaging in the above transactions with affiliates unless the transactions are on terms substantially the same, or at least as favorable to the institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies.
The Bank is also subject to restrictions on extensions of credit to its executive officers, directors, certain principal shareholders and their related interests. These extensions of credit (1) must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (2) must not involve more than the normal risk of repayment or present other unfavorable features.
Privacy
The Gramm-Leach-Bliley Act also contains provisions regarding consumer privacy. These provisions require financial institutions to disclose their policy for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing personal financial information with nonaffiliated third parties except for third parties that market the institutions' own products and services. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party for use in telemarketing, direct mail marketing or other marketing through electronic mail to the consumer.
Proposed Legislation and Regulatory Action
New regulations and statutes are regularly proposed that contain wide- ranging proposals for altering the structures, regulations and competitive relationships of the nation's financial institutions. We cannot predict whether or in what form any proposed regulation or statute will be adopted or the extent to which our business may be affected by any new regulation or statute.
Effect of Governmental Monetary Polices
Our earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank's monetary policies have had, and are likely to continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effects upon the levels of bank loans, investments and deposits through its open market operating in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bank deposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.
Selected Statistical Information
The following statistical information is provided for CBC Holding Company for the years ended December 31, 1999 and 1998. The data is presented using daily average balances. This data should be read in conjunction with the financial statements appearing elsewhere in this Annual Report.
Statistical Information
I. Distribution of Assets, Liabilities, and Stockholder's Equity; Interest Rates and Interest Differential
The following table reflects the tax-equivalent yields of interest earning assets and interest bearing liabilities:
1999 1998
--------------------------------- ------------------------------------
Interest Tax Interest Tax
Average Income/ Equivalent Average Income/ Equivalent
Balance Expense Yield Balance Expense Yield
-------- -------- ---------- -------- --------- -----------
(Dollars in Thousands)
Interest-earning assets:
Interest-earning deposits and fed funds sold $ 2,428 $ 121 4.98% $ 2,294 $ 119 5.19%
Investment Securities:
Taxable investment securities 12,205 703 5.76% 12,535 772 6.16%
Tax-exempt investment securities 2,195 92 6.03% 458 19 5.97%
Loans (including loan fees) 34,063 3,134 9.20% 32,552 3,063 9.41%
------- ------ ----- ------- ------ -----
Total interest earning assets 50,891 4,050 7.96% 47,839 3,973 8.30%
------ ----- ------ -----
Allowance for loan losses (448) (410)
Cash & due from banks 2,003 1,562
Premises and equipment 1,991 2,044
Other assets 2,851 3,153
------- -------
Total assets $57,288 $54,188
======= =======
Interest bearing liabilities:
Deposits:
Demand deposits 9,057 173 1.91% 8,964 177 1.97%
Savings and Money Market 7,213 230 3.19% 6,294 202 3.21%
Time deposits 27,074 1,458 5.39% 25,582 1,453 5.68%
Other borrowings 130 12 9.23% 130 12 9.23%
Total interest bearing liabilities ------- ------ ----- ------- ------ -----
43,474 1,873 4.31% 40,970 1,844 4.50%
------ ----- ------ -----
Non-interest bearing deposits 6,864 6,201
Other liabilities 214 313
Stockholders' equity 6,736 6,704
------- -------
Total liabilities and stockholders' equity $57,288 $54,188
======= =======
Net interest income $2,177 $2,129
Net interest spread 3.65% 3.80%
===== =====
Net interest yield on average earnings assets $50,891 $2,177 4.28% $47,839 $2,129 4.45%
======= ====== ===== ======= ====== =====
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Non-accruing loans are included in the average balances. For December 31, 1999 and 1998, average non-accruing loans were $48 thousand and $2 thousand, respectively.
Loan fees are included in the interest income computation and were $120,418 and $96,551 as of December 31, 1999 and 1998, respectively.
Statistical Information, Continued
Rate and Volume Analysis - The following table reflects the change in net interest income resulting from changes in interest rates and from asset and liability volume. Federally tax-exempt interest is presented on a taxable- equivalent basis assuming a 34% Federal tax rate. The change in interest attributable to rate has been determined by applying the change in rate between years to average balances outstanding in the later year. The change in interest due to volume has been determined by applying the rate from the earlier year to the change in average balances outstanding between years. Thus, changes that are not solely due to volume have been consistently attributed to rate.
1998 to 1999 1997 to 1998
Increase(decrease) Increase(decrease)
due to changes in due to changes in
---------------------- -----------------------
Yield/ Yield/
Volume Rate Net Volume Rate Net
------ ---- ---- ------ ----- -----
(Amounts in Thousands)
Interest earned on:
Interest earning deposits and fed funds sold 7 (5) 2 28 (5) 23
Investment securities:
Taxable investment securities (20) (49) (69) (220) (19) (239)
Tax-exempt investment securities 104 (31) 73 19 - 19
Loans 142 (71) 71 397 16 413
---- ----- ---- ----- ---- -----
Total interest income 233 (156) 77 224 (8) 216
---- ----- ---- ----- ---- -----
Interest paid on:
Deposits:
Demand deposits (6) 2 (4) 17 (15) 2
Savings 40 (12) 28 6 (1) 5
Time deposits 165 (160) 5 (46) (61) (107)
Other borrowings - - - (1) 2 1
---- ----- ---- ----- ---- -----
Total interest expense 199 (170) 29 (24) (75) (99)
---- ----- ---- ----- ---- -----
|
II. Investment Portfolio - Carrying Value of Securities
The following tables summarize the investment portfolio by type and maturity:
Available for Sales
---------------------------------------------------
1999 1998
-------- --------
(Amounts in Thousands)
U.S. Treasury $ _ $ 505
U.S. Government Agencies 8,460 9,311
State, county and municipal 2,315 1,677
Mortgage-Backed Securities 2,768 2,795
-------- --------
Total $ 13,543 $ 14,288
======== ========
|
Statistical Information, Continued
Expected Maturities
Available for Sale
----------------------------------------------------------------------------------------
Within After One After Five
One But Within But Within After
Year Yield Five Years Yield Ten Years Yield Ten Years Yield Total
------ ------ ----------- ----- ---------- ----- --------- ----- -------
(Dollars in Thousands)
U.S. Treasury $ - - $ - - $ - - $ - - $ -
U.S. Government Agencies - - 7,980 5.7% 399 6.0% - - 8,379
State, county and municipal - - 719 6.0% 1,677 5.9% - - 2,396
Mortgage-Backed Securities 1,211 5.8% 720 5.7% 837 5.8% - - 2,768
------ ---- -------- ---- ------- ---- ------- ---- -------
Total $1,211 5.8% $ 9,419 5.7% $ 2,913 5.9% $ - - $13,543
====== ==== ======== ==== ======= ==== ======= ==== =======
|
The Company had no securities classified as held to maturity or trading as of December 31, 1999 and 1998.
III. Loan Portfolio
The following tables summarize the breakdown of loans by type and the contractual maturities of selected fixed and variable rate loans:
1999 1998
---- ----
(Dollars in Thousands)
Commercial $ 14,183 41.6% $12,742 39.6%
Real Estate-Construction 306 0.9% 989 3.1%
Real Estate-Mortgage 13,166 38.6% 12,738 39.5%
Installment Loans to Individuals 6,469 19.0% 5,725 17.8%
--------- ------ ------- -----
Total Loans 34,124 100.1% 32,194 100.0%
Less: Allowance for Loan losses (450) (430)
--------- -------
Total $ 33,674 $31,764
========= =======
Rate Structure
Maturity (Greater Than)One Year
------------ -----------------------
Over One Due Fixed Variable
One Year Through After Interest Interest
or Less Five Years Five Years Total Rate Rate
--------- ------------ ----------- ------- --------- ----------
Commercial $ 7,339 $ 4,199 $ 2,645 $14,183 $ 4,352 $ 2,492
Real estate-construction 306 - - 306 - -
-------- --------- --------- ------- -------- --------
Total $ 7,645 $ 4,199 $ 2,645 $14,489 $ 4,352 $ 2,492
======== ========= ========= ======= ======== ========
|
Statistical Information, Continued
IV. Summary of Loan Loss Experience
1999 1998
---- ----
(Amounts in Thousands)
Allowance for possible loan losses,
beginning of period $ 430 $ 387
------- -------
Charge-offs:
Commercial 18 -
Real estate - construction - -
Real estate - mortgage - -
Consumer loans 50 25
------- -------
Total 68 25
------- -------
Recoveries:
Commercial - -
Real estate - construction - -
Real estate - mortgage - -
Consumer loans 28 8
------- -------
Total 28 8
------- -------
Net charge-offs 40 17
------- -------
Additions charged to operations 60 60
Adjustments - -
------- -------
Allowance for possible loan losses,
end of period 450 430
------- -------
Average loans outstanding, net of
unearned income $34,063 $32,552
======= =======
Ratio of net charge-offs during the
period to average loans outstanding
during the period 0.12% 0.05%
======= =======
|
Risk Elements
(Thousands)
1999 1998
---- ----
Loans 90 days past due $ 87 $ 40
Loans on nonaccrual 3 -
Other Real Estate - -
-------- -------
Total Nonperforming assets $ 90 $ 40
-------- -------
Total Nonperforming assets in a
Percentage of loans 0.4% 0.2%
======== =======
|
Statistical Information, Continued
The Bank's policy is to place loans on nonaccrual status when it appears that the collection of principal and interest in accordance with the terms of the loan is doubtful. Any loan which becomes 90 days past due as to principal or interest is automatically placed on nonaccrual. Exceptions are allowed for 90- day past due loans when such loans are well secured and in process of collection.
Management expects to incur losses on loans from time to time when borrowers' financial conditions deteriorate. Where feasible, loans charged down or charged off will continue to be collected. Management considers the current allowance adequate to cover potential losses in the loan portfolio.
The following table summarizes information concerning the allocation of the allowance for loan losses as of December 31, 1999:
Allocated % of Total
Amount Allowance
--------- ----------
Commercial 188 41.7%
Real Estate - Construction - 0.1%
Real Estate - Mortgage 174 38.7%
Installment Loans to Individuals 88 19.5%
Unallocated - -
--------- ----------
Total 450 100.00%
========= ==========
|
Management takes a number of factors into consideration when determining the additions to be made to the loan loss allowance. As a new institution, the Bank does not have a sufficient history of portfolio performance on which to base additions. Accordingly, additions to the reserve are primarily based on maintaining a ratio of the allowance for loan losses to total loans in a range of 1.00% to 1.50%. This is based on national peer group ratios and Georgia ratios which reflect average ratios of .99% (national peer) and 1.50% (Georgia). Under this methodology, charge-offs will increase the amount of additions to the allowance and recoveries will reduce additions.
In addition, management performs an on-going loan review process. All new loans are risk rated under loan policy guidelines. On a monthly basis, the composite risk ratings are evaluated in a model which assesses the adequacy of the current allowance for loan losses, and this evaluation is presented to the Board of Directors each month. 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 an existing loans credit conditions have improved or worsened. As the Bank matures, the additions to the loan loss allowance will be based more on historical performance, the detailed loan review and allowance adequacy evaluation.
V. Deposits
The following table summarizes the average balances and average rates for deposit accounts:
1999 1998
----------------- -----------------
Average Average Average Average
Balance Rate Balance Rate
-------- ------- ------- -------
(Dollars in Thousands)
Non-interest bearing deposits 6,864 6,201
Interest bearing demand deposits 9,291 1.91% 8,964 1.97%
Savings and money market
deposits 7,528 3.19% 6,294 3.21%
Time deposits 28,488 5.39% 25,582 5.68%
------- ------ ------- ------
Total average deposits $52,171 3.76% $47,041 3.91%
======= ====== ======= ======
|
Statistical Information, Continued
As of December 31, 1999 the amount outstanding of time certificates of deposit of $100,000 or more was $8,682 thousand. Amounts by time remaining until maturity on time deposits of $100,000 or more were:
(Thousands)
3 months or less $3,826
over 3 through 6 months 2,820
over 6 through 12 months 1,556
over 12 months 480
------
Total $8,682
======
|
VI. Selected Financial Data (amounts in thousands, except per share amounts)
The following represents selected financial data for the years ended December 31, 1999 and 1998. This information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and related notes incorporated herein by reference.
1999 1998
------- -------
Interest Income 4,050 3,973
Interest Expense 1,873 1,844
Net Interest Income 2,177 2,129
Provision for Loan Losses 60 60
Net Earnings 242 264
Net Earnings Per Share 0.36 0.40
Total Average Stockholder's Equity 6,736 6,704
Total Average Assets 57,288 54,188
Return on average assets 0.42% 0.49%
Return on average equity 3.59% 3.94%
Dividend payout ratio 0% 0%
Average equity to average asset ratio 11.76% 12.37%
|
VII. Short-term Borrowings
No category of short-term borrowings exceeds 30% of stockholders' equity.
ITEM 2. DESCRIPTION OF PROPERTIES
The Bank owns the property on which its main office is located in Fitzgerald, Georgia, at 102 West Roanoke Drive. The two-story brick building contains approximately 11,152 square feet, with an attached drive-up canopy of approximately 1,400 square feet. The Bank is located on approximately 1,408 acres of land and contains 39 regular parking spaces and two handicap spaces. The building has seven teller stations inside the building, three drive-up teller stations, and one ATM station. The drive-up window is located behind the teller stations. The banking platform, with four personal banker positions, is across the lobby area from the teller stations, and behind this area are six offices for lending functions. The facility contains a training room, operations space, and a board room on the upper level, with significant room for expansion. The Bank opened a two-lane drive-through facility located on South Main Street in Fitzgerald in January 1998.
Other than normal real estate commercial lending activities of the Bank, the Company generally does not invest in real estate, interests in real estate, real estate mortgages, or securities of or interests in persons primarily engaged in real estate activities.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings to which the Company is a party or of which any of its properties are subject; nor are there material proceedings known to the Company to be contemplated by any governmental authority; nor are there material proceedings known to the Company, pending or contemplated, in which any director, officer or affiliate or any principal security holder of the Company or any associate of any of the foregoing, is a party or has an interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The response to this Item is partially included in the Company's Annual Report to shareholders at page 1, and is incorporated herein by reference.
The Company did not issue or sell any unregistered shares of its Common Stock during 1999 and 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The response to this Item is included in the Company's Annual Report to Shareholders under the heading, "Management's Discussion and Analysis of Financial Condition and Results of Operations" at pages 23 through 27, and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS
The following financial statements are included in the Company's Annual Report to Shareholders at pages 1 through 22, and are incorporated herein by reference:
Independent Auditors' Report
Financial Statements
Consolidated Balance Sheets dated as of December 31, 1999 and 1998
Consolidated Statements of Income for the years ended December 31,
1999, 1998, and 1997.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years ended December 31,
1999, 1998 and 1997.
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The responses to this Item are included in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on April 19, 2000, under the heading, "Election of Directors" at pages 3 through 4, "Security Ownership of Certain Beneficial Owners and Management," at pages 6 through 9, and are incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The responses to this Item are included in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on April 19, 2000, under the heading, "Compensation of Executive Officers and Directors," at pages 5 through 6, and are incorporated herein by reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The responses to this Item are included in the Company's Proxy Statement for the Annual Meeting of Shareholders to be held on April 19, 2000, under the heading, "Security Ownership of Certain Beneficial Owners and Management," at pages 6 through 9, and are incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The responses to this Item are included in the Company's Proxy Statement for the Annual Meeting of Shareholders held on April 19, 2000, under the headings, "Certain Relationships and Related Transactions," at page 9, and "Compensation of Executive Officers and Directors," at pages 5 through 6, and are incorporated herein by reference.
ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit Number Exhibit
-------------- -------
3.1 Articles of Incorporation./1/
3.2 Bylaws./1/
4.1 Instruments Defining the Rights of Security Holders.
See Articles of Incorporation at Exhibit 3.1 hereto
and Bylaws at Exhibit 3.2 hereto.
13.1 CBC Holding Company 1999 Annual Report to
Shareholders. Except with respect to those portions
specifically incorporated by reference into this
Report, the Company's 1999 Annual Report to
Shareholders is not deemed to be filed as part of this
Report.
21.1 Subsidiaries of CBC Holding Company/1/
24.1 Power of Attorney (appears on the signature pages to
this Annual Report on 10-KSB).
27.1 Financial Data Schedule.
|
(b) Reports on Form 8-K filed in the fourth quarter of 1999: None.
/1/ Incorporated herein by reference to exhibit of same number in the Company's Registration Statement on Form 10-SB, as amended, registration No. 0-22451.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
CBC HOLDING COMPANY
By: /s/ George M. Ray
-------------------------
George M. Ray
President and Chief
Executive Officer
Date: March 20, 2000
------------------------
|
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on the signature page to this Report constitutes and appoints George M. Ray and Sidney S. (Buck) Anderson, Jr., and each of them, his true and lawful attorneys- in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits hereto, and other documents in connection herewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Sidney S. (Buck) Anderson, Jr. Chairman, Director March 20, 2000
------------------------------------
Sidney S. (Buck) Anderson, Jr.
/s/ James Thomas Casper, III Director March 20, 2000
------------------------------------
James Thomas Casper, III
/s/ Charles A. Clark, Sr. Director March 20, 2000
------------------------------------
Charles A. Clark, Sr.
/s/ John T. Croley, Jr. Secretary, Vice Chairman, March 20, 2000
------------------------------------ Director
John T. Croley, Jr.
/s/ A.B.C. (Chip) Dorminy, III Director March 20, 2000
------------------------------------
A.B.C. (Chip) Dorminy, III
Director
------------------------------------
John S. Dunn
/s/ Lee Phillip Liles Director March 20, 2000
------------------------------------
Lee Phillip Liles
/s/ Steven L. Mitchell Director March 20, 2000
------------------------------------
Steven L. Mitchell
/s/ James A. Parrott, II Director March 20, 2000
------------------------------------
James A. Parrott, II
/s/ Jack F. Paulk Director March 20, 2000
------------------------------------
Jack F. Paulk
/s/ George M. Ray President and Chief March 20, 2000
------------------------------------ Executive Officer, Director
George M. Ray (Principal Executive, Financial
and Accounting Officer)
/s/ Hulin Reeves, Jr. Director March 20, 2000
------------------------------------
Hulin Reeves, Jr.
/s/ Robert E. Sherrell Director March 20, 2000
------------------------------------
Robert E. Sherrell
|
/s/ John Edward Smith, III Director March 20, 2000 ------------------------------------ John Edward Smith, III /s/ Wyndall L. Walters Director March 20, 2000 ------------------------------------ Wyndall L. Walters |
Page Number in
Exhibit Sequentially
Number Exhibit Numbered Copy
------ ------- -------------
3.1 Articles of Incorporation./1/ N/A
3.2 Bylaws./1/ N/A
4.1 Instruments Defining the Rights of Security N/A
Holders. See Articles of Incorporation at
Exhibit 3.1 hereto and Bylaws at Exhibit 3.2
hereto.
13.1 CBC Holding Company 1999 Annual Report to
Shareholders. Except with respect to those
portions specifically incorporated by
reference into this Report, the Company's
1999 Annual Report to Shareholders is not
deemed to be filed as part of this Report.
21.1 Subsidiaries of CBC Holding Company/1/ N/A
24.1 Power of Attorney (appears on the signature
pages to this Annual Report on 10-KSB).
27.1 Financial Data Schedule.
|
/1/ Incorporated herein by reference to exhibit of same number in the Company's Registration Statement on Form 10-SB, as amended,
registration No. 0-22451.
Exhibit 13.1
CBC HOLDING COMPANY
AND SUBSIDIARY
1999 ANNUAL REPORT
CBC HOLDING COMPANY AND SUBSIDIARY
ANNUAL REPORT
YEAR ENDED DECEMBER 31, 1999
Page
----
INDEPENDENT AUDITORS' REPORT....................................... 1
CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets................................. 2
Consolidated Statements of Changes in Shareholders' Equity.. 3
Consolidated Statements of Income........................... 4
Consolidated Statements of Cash Flows....................... 5
Notes to Consolidated Financial Statements.................. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS............................... 23
|
CBC Holding Company, a Georgia corporation (the "Company") is a holding company engaged in commercial banking primarily in Ben Hill County, Georgia. The Company currently has one subsidiary, Community Banking Company of Fitzgerald (the "Bank"), which is active in retail and commercial banking.
The Company's common stock, $1.00 par value (the "Common Stock"), is not traded on an established trading market. As of January 5, 2000 there were 659 holders of record of the Company's Common Stock. The Company has not paid a dividend since its incorporation in 1996. Currently, the Company's sole source of income is dividends from the Bank. The Bank is subject to regulation by the Georgia Department of Banking and Finance (the "DBF"). Statutes and regulations enforced by the DBF include parameters that define when the Bank may or may not pay dividends. The Company's dividend policy depends on the Bank's earnings, capital requirements, financial condition and other factors considered relevant by the Board of Directors of the Company. No assurance can be given that any dividends will be declared by the Company, or if declared, what the amount of the dividends will be. All FDIC insured institutions, regardless of their level of capitalization, are prohibited from paying any dividend or making any other kind of distribution, if following the payment or distribution, the institution would be undercapitalized.
This statement has not been reviewed, or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation.
[LETTERHEAD OF THIGPEN, JONES, SEATON & CO., P.C.]
Board of Directors
CBC Holding Company and Subsidiary
We have audited the accompanying consolidated balance sheets of CBC Holding Company and Subsidiary as of December 31, 1999 and 1998 and the related consolidated statements of income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CBC Holding Company and Subsidiary at December 31, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles.
/s/ Thigpen, Jones, Seaton & Co. P.C.
January 5, 2000
Dublin, Georgia
|
CBC HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of December 31,
-------------------------
1999 1998
----------- ------------
Assets
Cash and due from banks $ 2,377,839 $ 2,430,708
Federal funds sold 5,240,000 4,450,000
----------- -----------
Total cash and cash equivalents 7,617,839 6,880,708
----------- -----------
Securities available for sale, at market value 13,542,975 14,287,599
Federal Home Loan Bank stock, at cost 174,100 -
Loans, net of unearned income 34,124,389 32,194,281
Less - allowance for loan losses (450,349) (430,078)
----------- -----------
Loans, net 33,674,040 31,764,203
----------- -----------
Bank premises and equipment, less accumulated
depreciation 1,972,909 2,102,186
Intangible assets, net of amortization 2,027,185 2,316,564
Accrued interest receivable 518,175 624,225
Other assets and accrued income 202,222 51,962
----------- -----------
Total Assets $59,729,445 $58,027,447
=========== ===========
Liabilities and Shareholders' Equity
Deposits:
Non-interest bearing $ 6,982,725 $ 7,274,269
Interest-bearing 45,637,578 43,378,990
----------- -----------
Total deposits 52,620,303 50,653,259
Short-term borrowings - 111,500
Accrued interest payable 209,496 206,481
Other liabilities and accrued expenses 95,165 144,203
----------- -----------
Total liabilities 52,924,964 51,115,443
----------- -----------
Commitments and contingencies
Shareholders' Equity
Common stock, $1 par value, authorized
10,000,000 shares, issued and outstanding
664,097 shares 664,097 664,097
Paid-in capital surplus 5,976,873 5,976,873
Retained earnings 504,306 261,911
Accumulated other comprehensive income (340,795) 9,123
----------- -----------
Total shareholders' equity 6,804,481 6,912,004
----------- -----------
Total Liabilities and Shareholders' Equity $59,729,445 $58,027,447
=========== ===========
|
See Accompanying Notes to Consolidated Financial Statements
CBC HOLDING COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Retained Accumulated
Paid-in Earnings Other
Common Capital (Accumulated Comprehensive
Stock Surplus Deficit) Income Total
-------- ---------- ------------ ------------- ----------
Balance, December 31, 1996, as restated $664,097 $5,976,873 $(110,439) $ 24,511 $6,555,042
----------
Comprehensive income:
Net loss - - 108,262 - 108,262
Valuation allowance adjustment on securities available for sale - - - 13,143 13,143
----------
Total comprehensive income 121,405
-------- ---------- --------- --------- ----------
Balance, December 31, 1997 664,097 5,976,873 (2,177) 37,654 6,676,447
----------
Comprehensive income:
Net income - - 264,088 - 264,088
Valuation allowance adjustment on securities available for sale - - - (28,531) (28,531)
----------
Total comprehensive income 235,557
-------- ---------- --------- --------- ----------
Balance, December 31, 1998 664,097 5,976,873 261,911 9,123 6,912,004
----------
Comprehensive income:
Net income - - 242,395 - 242,395
Valuation allowance adjustment on securities available for sale - - - (349,918) (349,918)
----------
Total comprehensive income (107,523)
-------- ---------- --------- --------- ----------
Balance, December 31, 1999 $664,097 $5,976,873 $ 504,306 $(340,795) $6,804,481
======== ========== ========= ========= ==========
|
See Accompanying Notes to Consolidated Financial Statements
Years Ended December 31,
--------------------------------------------------
1999 1998 1997
---------- ---------- ----------
Interest Income:
Interest and fees on loans $3,134,115 $3,062,504 $2,650,129
Interest on securities
Taxable income 702,897 771,906 1,010,852
Non-taxable income 91,835 19,174 -
Income on federal funds sold 121,094 119,219 96,080
---------- ---------- ----------
Total interest income 4,049,941 3,972,803 3,757,061
---------- ---------- ----------
Interest Expense:
Deposits 1,861,224 1,832,087 1,931,953
Other interest expense 11,852 12,030 11,419
---------- ---------- ----------
Total interest expense 1,873,076 1,844,117 1,943,372
---------- ---------- ----------
Net interest income before loan losses 2,176,865 2,128,686 1,813,689
Less - provision for loan losses 60,000 60,000 42,000
---------- ---------- ----------
Net interest income after provision for loan losses 2,116,865 2,068,686 1,771,689
---------- ---------- ----------
Other Operating Income:
Service charges on deposit accounts 297,940 280,839 247,388
Other service charges, commissions and fees 57,229 35,325 24,150
Gain on sales of investment securities available for sale - 61,752 24,501
Other income 39,138 19,195 86,873
---------- ---------- ----------
Total other operating income 394,307 397,111 382,912
---------- ---------- ----------
Other Operating Expense:
Salaries 737,072 664,927 698,663
Employee benefits 199,941 173,771 174,956
Net occupancy expenses 176,619 168,226 147,162
Equipment rental and depreciation of equipment 161,405 158,612 143,017
Amortization 289,379 226,480 225,000
Other expenses 629,286 688,191 598,869
---------- ---------- ----------
Total other operating expenses 2,193,702 2,080,207 1,987,667
---------- ---------- ----------
Income Before Income Taxes 317,470 385,590 166,934
Income tax provision 75,075 121,502 58,672
---------- ---------- ----------
Net Income $ 242,395 $ 264,088 $ 108,262
========== ========== ==========
Earnings per share:
Basic $ 0.36 $ 0.40 $ 0.16
========== ========== ==========
Diluted $ 0.36 $ 0.40 $ 0.16
========== ========== ==========
|
See Accompanying Notes to Consolidated Financial Statements
Years Ended December 31,
-------------------------------------------------------------
1999 1998 1997
----------- ----------- -----------
Cash Flows from Operating Activities:
Net income $ 242,395 $ 264,088 $ 108,262
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 60,000 60,000 42,000
Depreciation 153,417 139,475 123,364
Amortization 289,379 226,480 225,001
Gain on sale of securities - (61,752) (24,501)
Gain on sale of property and equipment - 141 -
Changes in accrued income and other assets 108,474 (146,944) (47,033)
Changes in accrued expenses and other liabilities (18,446) 46,810 19,334
----------- ------------ -----------
Net cash provided by operating activities 835,219 528,298 446,427
----------- ------------ -----------
Cash Flows from Investing Activities:
Net changes in loans made to customers (1,969,837) (1,843,394) (6,841,865)
Purchases of securities available for sale (4,786,438) (10,502,903) (5,021,645)
Proceeds from sales of available for sale securities - 2,500,000 6,951,715
Proceeds from maturities of securities available for sale 5,000,883 7,242,556 2,521,016
Purchase of Federal Home Loan Bank stock (174,100) - -
Property and equipment expenditures (24,140) (118,204) (91,579)
Proceeds from sales of property and other assets - 1,271 -
----------- ------------ -----------
Net cash used in investing activities (1,953,632) (2,720,674) (2,482,358)
----------- ------------ -----------
Cash Flows from Financing Activities:
Net change in deposits 1,967,044 5,850,688 (1,858,532)
Proceeds from short-term borrowings - 38,500 117,500
Payments on short-term borrowings (111,500) - (44,500)
----------- ------------ -----------
Net cash provided by (used in) financing activities 1,855,544 5,889,188 (1,785,532)
----------- ------------ -----------
Net Increase (Decrease) in Cash and Cash Equivalents 737,131 3,696,812 (3,821,463)
Cash and Cash Equivalents, Beginning of Year 6,880,708 3,183,896 7,005,359
----------- ------------ -----------
Cash and Cash Equivalents, End of Year $ 7,617,839 $ 6,880,708 $ 3,183,896
=========== ============ ===========
|
See Accompanying Notes to Consolidated Financial Statements
CBC HOLDING COMPANY AND SUBSIDIARY
Pursuant to the Plan of Reorganization, the merger of Interim with and into the Bank was accounted for as a pooling of interests. The Bank, which engages in banking, became a wholly owned subsidiary of the Company on March 31, 1997 through the exchange of 664,097 shares of the Company's common stock for all of the outstanding stock of the Bank. The financial statements of prior years have been restated to give effect to the reorganization. The Bank provides a variety of financial services to individuals and small businesses through its offices in South Georgia. The Bank offers a full range of commercial and personal loans. The Bank makes loans to individuals for purposes such as home mortgage financing, personal vehicles and various consumer purchases, and other personal and family needs. The Bank makes commercial loans to businesses for purposes such as providing equipment and machinery purchases, commercial real estate purchases and working capital. The Bank offers a full range of deposit services that are typically available from financial institutions, including NOW accounts, demand, savings and other time deposits. In addition, retirement accounts such as Individual Retirement Accounts are available. All deposit accounts are insured by the FDIC up to the maximum amount currently permitted by law.
The consolidated financial statements include the accounts of the Company and the Bank. All material intercompany accounts and transactions have been eliminated in consolidation.
Securities available for sale, primarily debt securities, are recorded at fair value with unrealized gains or losses (net of tax effect) excluded from earnings and reported as a component of shareholders' equity. Securities available for sale will be used as a part of the Company's interest rate risk management strategy and may be sold in response to changes in interest rates, changes in prepayment risk, and other factors.
Mortgage-backed securities represent participating interests in pools of long-term first mortgage loans originated and serviced by issuers of the securities. Mortgage-backed securities are carried at unpaid principal balances, adjusted for unamortized premiums and unearned discounts.
The market value of securities is generally based on quoted market prices. If a quoted market price is not available, market value is estimated using quoted market prices for similar securities. Premiums and discounts are recognized in interest income using the interest method over the period to maturity.
The allowance for loan losses is maintained at a level which, in management's judgment, is adequate to absorb credit losses inherent in the loan portfolio. The amount of the allowance is based on management's evaluation of the collectibility of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific impaired loans, economic conditions, and other risks inherent in the portfolio. Allowances for impaired loans are generally determined based on collateral values or the present value of estimated cash flows. Although management uses available information to recognize losses on loans, because of uncertainties associated with local economic conditions, collateral values, and future cash flows on impaired loans, it is reasonably possible that a material change could occur in the allowance for loan losses in the near term. However, the amount of the change that is reasonably possible cannot be estimated.
A loan is considered impaired when, based on current information and events, it is probable that a creditor will not be able to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower's prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's obtainable market price, or the fair value of the collateral if the loan is collateral dependent. Substantially all of the Bank's loans that have been identified as impaired have been measured by the fair value of existing collateral.
Large groups of smaller balance homogenous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer loans for impairment disclosures.
The Company and the Bank file a consolidated income tax return. The Bank computes its income tax expense as if it filed an individual return except that it does not get any portion of the surtax allocation. Any benefits or disadvantages of the consolidation are absorbed by the Company. The Bank pays its allocation of federal income taxes to the parent company or receives payment from the Company to the extent that tax benefits are realized.
The determination of the adequacy of the allowance for loan losses is based on estimates that are particularly susceptible to significant changes in the economic environment and market conditions. In connection with the determination of the estimated losses on loans, management obtains independent appraisals for significant collateral.
The Bank's loans are generally secured by specific items of collateral including real property, consumer assets, and business assets. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent on local economic conditions.
While management uses available information to recognize losses on loans, further reductions in the carrying amounts of loans may be necessary based on changes in local economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the estimated losses on loans. Such agencies may require the Bank to recognize additional losses based on their judgments about information available to them at the time of their examination. Because of these factors, it is reasonably possible that the estimated losses on loans may change materially in the near term. However, the amount of the change that is reasonably possible cannot be estimated.
Earnings per common share have been computed based on the following:
Years Ended December 31,
----------------------------------------
1999 1998 1997
-------- -------- --------
Net income $242,395 $264,088 $108,262
Less: Preferred stock dividends - - -
-------- -------- --------
Net income applicable to common stock $242,395 $264,088 $108,262
======== ======== ========
Average number of common shares outstanding 664,097 664,097 664,097
Effect of dilutive options, warrants, etc. - - -
-------- -------- --------
Average number of common shares outstanding
used to calculate diluted earnings per common
share 664,097 664,097 664,097
======== ======== ========
|
The components of other comprehensive income and related tax effects are as follows:
Years Ended December 31,
----------------------------------------
1999 1998 1997
--------- -------- --------
Unrealized holding gains (losses) on
available-for-sale securities $(530,179) $ 18,523 $ 44,415
Less: Reclassification adjustment for
gains realized in income - (61,752) (24,501)
--------- -------- --------
Net unrealized gains (losses) (530,179) (43,229) 19,914
Tax effect (180,261) (14,698) 6,771
--------- -------- --------
Net-of-tax amount $(349,918) $(28,531) $ 13,143
========= ======== ========
|
Debt and equity securities have been classified in the balance sheet according to management's intent. The following table reflects the amortized cost and estimated market values of investments in debt securities held at December 31, 1999 and 1998. In addition, gross unrealized gains and gross unrealized losses are disclosed as of December 31, 1999 and 1998, in accordance with Statement of Position 90-11 of the American Institute of Certified Public Accountants, which is effective for financial statements covering fiscal years ending after December 15, 1990.
The book and market values of securities available for sale were:
Amortized Unrealized Unrealized Estimated
Cost Gains Losses Market Value
----------- ------- -------- ------------
December 31, 1999:
Non-mortgage backed debt securities of:
U.S. Treasury $ - $ - $ - $ -
U.S. government agencies 8,797,628 - 338,023 8,459,605
State and Political Subdivisions 2,417,887 - 102,954 2,314,933
----------- ------- -------- -----------
Total non-mortgage backed securities 11,215,515 - 440,977 10,774,538
Mortgage backed securities 2,843,816 - 75,379 2,768,437
----------- ------- -------- -----------
Total $14,059,331 $ - $516,356 $13,542,975
=========== ======= ======== ===========
December 31, 1998:
Non-mortgage backed debt securities of:
U.S. Treasury $ 501,875 $ 3,440 $ - $ 505,315
U.S. government agencies 9,309,671 1,303 - 9,310,974
State and Political Subdivisions 1,663,208 13,354 - 1,676,562
----------- ------- -------- -----------
Total non-mortgage backed securities 11,474,754 18,097 - 11,492,851
Mortgage backed securities 2,799,023 - 4,275 2,794,748
----------- ------- -------- -----------
Total $14,273,777 $18,097 $ 4,275 $14,287,599
=========== ======= ======== ===========
|
The book and market values of pledged securities were $7,502,204 and $7,206,819 respectively, at December 31, 1999 and $3,701,653 and $3,710,330 at December 31, 1998. The amortized cost and estimated market value of debt securities available for sale at December 31, 1999 and 1998, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or repay obligations with or without call prepayment or penalties.
Available for Sale
----------------------------
Estimated
December 31, 1999 Amortized Cost Market Value
-------------- ------------
Non-mortgage backed securities:
Due in one year or less $ 1,002,537 $ 968,900
Due after one year through five years 8,014,450 7,729,805
Due after five years through ten years 2,198,528 2,075,833
Due after ten years - -
----------- -----------
Total non-mortgage backed securities 11,215,515 10,774,538
Mortgage backed securities 2,843,816 2,768,437
----------- -----------
Total $14,059,331 $13,542,975
=========== ===========
December 31, 1998
Non-mortgage backed securities:
Due in one year or less $ 2,501,169 $ 2,508,920
Due after one year through five years 6,810,377 6,800,649
Due after five years through ten years 2,163,208 2,183,282
Due after ten years - -
----------- -----------
Total non-mortgage backed securities 11,474,754 11,492,851
Mortgage backed securities 2,799,023 2,794,748
----------- -----------
Total $14,273,777 $14,287,599
=========== ===========
|
The market value is established by an independent pricing service as of the approximate dates indicated. The differences between the book value and market value reflect current interest rates and represent the potential loss (or gain) had the portfolio been liquidated on that date. Security losses (or gains) are realized only in the event of dispositions prior to maturity.
At December 31, 1999 and 1998, the Company did not hold investment securities of any single issuer, other than obligations of the U.S. Treasury and other U.S. Government agencies, whose aggregate book value exceeded ten percent of shareholders' equity.
The following is a summary of the loan portfolio by principal categories at December 31, 1999 and 1998:
1999 1998
----------- -----------
Commercial $14,182,947 $12,741,691
Real estate--Construction 306,483 989,070
Real estate--Mortgage 13,166,213 12,737,935
Installment loans to individuals 6,468,746 5,725,585
----------- -----------
Total loans 34,124,389 32,194,281
Less:
Allowance for loan losses (450,349) (430,078)
----------- -----------
Loans, net $33,674,040 $31,764,203
=========== ===========
|
Overdrafts included in loans were $17,568 and $20,341 at December 31, 1999 and 1998.
A summary of changes in allowance for loan losses of the Company for the years ended December 31, 1999, 1998, and 1997 is as follows:
1999 1998 1997
-------- -------- --------
Beginning Balance $430,078 $386,717 $359,146
Add-Provision for possible loan losses 60,000 60,000 42,000
-------- -------- --------
Subtotal 490,078 446,717 401,146
-------- -------- --------
Less:
Loans charged off 68,512 25,519 20,719
Recoveries on loans previously charged off (28,783) (8,880) (6,290)
-------- -------- --------
Net loans charged off 39,729 16,639 14,429
-------- -------- --------
Balance, end of year $450,349 $430,078 $386,717
======== ======== ========
|
Loans on which the accrual of interest has been discontinued or reduced amounted to $3,092 and $0 at December 31, 1999 and 1998, respectively. If interest on these loans had been accrued, such income would have approximated $3,838 and $0 for 1999 and 1998, respectively.
The following is a summary of asset classifications and depreciable lives for
the Bank:
Useful Lives (Years) 1999 1998
-------------------- ---------- ----------
Land $ 565,000 $ 565,000
Banking house and improvements 8-40 1,222,012 1,222,012
Equipment, furniture, and fixtures 5-10 540,108 518,142
Software and capitalized conversion costs 3 148,004 145,832
---------- ----------
Total 2,475,124 2,450,986
Less--accumulated depreciation (502,215) (348,800)
---------- ----------
Bank premises and equipment, net $1,972,909 $2,102,186
========== ==========
|
Depreciation included in operating expenses amounted to $153,417 and $139,475 in 1999 and 1998, respectively.
The aggregate amount of time deposits exceeding $100,000 at December 31, 1999 and 1998 was $8,682,074 and $7,115,070, respectively, and the Bank had deposit liabilities in NOW accounts of $9,266,637 and $9,455,325 at December 31, 1999 and 1998, respectively.
At December 31, 1999, the scheduled maturities of time deposits are as follows:
2000 $22,543,395
2001 3,107,526
2002 1,395,991
2003 1,120,918
2004 and thereafter 448,176
-----------
Total time deposits $28,616,006
===========
|
The Bank had a line of credit for federal funds purchased of $2,000,000 and $1,500,000 with correspondent institutions as of December 31, 1999. At various times during the year the Bank was advanced funds against these lines, however, at December 31, 1999, there was no outstanding balance.
The provision for income taxes was computed as follows:
1999 1998 1997
-------- -------- -------
Current tax expense $100,483 $ 85,092 $ -
Deferred tax expense (benefit) (25,408) 36,410 58,672
-------- -------- -------
Net income tax expense $ 75,075 $121,502 $58,672
======== ======== =======
|
Deferred income taxes are reflected for certain timing differences between book and taxable income and will be reduced in future years as these timing differences reverse. The reasons for the difference between the actual tax expense (benefit) and tax expense (benefit) computed at the federal income tax rate are as follows:
1999 1998 1997
-------- -------- -------
Tax on pretax income at statutory rate,
including effect of loss carryforwards $107,940 $131,101 $56,757
Benefit of realized net operating loss
carryovers - (33,085) -
Benefit of graduated tax rates (876) - -
Tax-exempt income (34,733) (7,902) -
Non-deductible interest expense related to
tax-exempt income 5,781 3,635 9
Non-deductible business entertainment 250 112 178
Other differences (3,287) 27,641 1,728
-------- -------- -------
Total $ 75,075 $121,502 $58,672
======== ======== =======
Net effective tax rate 23.6% 32.0% 35.1%
======== ======== =======
|
The sources and tax effects of temporary differences that give rise to significant portions of deferred income tax assets (liabilities) are as follows:
1999 1998
-------- --------
Deferred Income Tax Assets:
Net operating loss $ - $ -
Provision for loan losses, net 22,202 15,327
Unrealized loss on available for sale securities 175,561 -
Organizational costs 17,263 -
-------- --------
Total deferred tax asset 215,026 15,327
-------- --------
Deferred Income Tax Liabilities:
Unrealized gain on available for sale securities - (4,700)
Depreciation (55,898) (52,639)
-------- --------
Total deferred tax liability (55,898) (57,339)
-------- --------
Net deferred tax asset (liability) $159,128 $(42,012)
======== ========
|
The Company has a 401(k)-plan covering substantially all of its employees meeting age and length-of-service requirements. Matching contributions to the plan are at the discretion of the Board of Directors. Retirement plan expenses for administrative fees charged to operations amounted to $2,579 and $1,824 for 1999 and 1998, respectively. The Company made matching contributions of $12,452 and 14,396 for the years ended December 31, 1999 and 1998, respectively.
The Board of Directors of any state-chartered bank in Georgia may declare and pay cash dividends on its outstanding capital stock without any request for approval of the Bank's regulatory agency if the following conditions are met:
1) Total classified assets at the most recent examination of the bank do not exceed eighty (80) percent of equity capital.
2) The aggregate amount of dividends declared in the calendar year does not exceed fifty (50) percent of the prior year's net income.
3) The ratio of equity capital to adjusted total assets shall not be less than six (6) percent.
As of January 1, 2000, the Bank could pay dividends of $140,009 to the Company without regulatory consent pursuant to the foregoing conditions. Dividends paid by the Bank are the primary source of funds available to the Company.
The Bank is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Bank has in those particular financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The Bank does require collateral or other security to support financial instruments with credit risk.
Contract or Notional Amount
---------------------------
1999 1998
---------- ----------
Financial instruments whose contract amounts
represent credit risk:
Commitments to extend credit $8,789,325 $8,728,325
Standby letters of credit 152,000 150,000
---------- ----------
Total $8,941,325 $8,878,325
========== ==========
|
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Bank upon extension of credit is based on management's credit evaluation. Collateral held varies but may include accounts receivable, inventory, property, plant, and equipment, and income- producing commercial properties.
Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. All letters of credit are due within one year of the original commitment date. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.
In the ordinary course of business, the Company has various outstanding commitments and contingent liabilities that are not reflected in the accompanying consolidated financial statements.
The Bank leases an IBM AS400, which processes the Bank's daily transactions. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the lower of their related lease terms or their estimated productive lives. Depreciation of assets under capital leases is included in depreciation expense for 1999 and 1998. The minimum future lease payments under capital leases as of December 31, 1999, for each of the next two years and in the aggregate are:
2000 $20,808
2001 1,858
-------
Total minimum lease payments $22,666
=======
|
In the ordinary course of business, the Company, through the Bank, has direct and indirect loans outstanding to or for the benefit of certain executive officers and directors. These loans were made on substantially the same terms as those prevailing, at the time made, for comparable loans to other persons and did not involve more than the normal risk of collectibility or present other unfavorable features. The following is a summary of activity during 1999 with respect to such loans to these individuals:
Balances at December 31, 1998 $ 1,336,485
New loans 946,783
Repayments (1,223,270)
-----------
Balances at December 31, 1999 $ 1,059,998
===========
|
In addition to the above outstanding balances, there are loan commitments of $1,074,832 available to certain executive officers and directors that were unused as of December 31, 1999.
The Bank also had deposits from these related parties of approximately $1,459,191 at December 31, 1999.
1999 1998 1997
---------- ---------- -----------
Interest on deposits and short-term
borrowings $1,870,061 $1,890,395 $ 1,900,500
========== ========== ===========
Income taxes, net $ 111,500 $ 80,000 $ -
========== ========== ===========
|
1999 1998 1997
---------- ---------- -----------
Increase (Decrease) in unrealized gain
on available for sale securities $ (530,178) $ (43,229) $ 19,916
========== ========== ===========
Issuance of 664,097 shares of CBC
Holding Company common stock in
exchange for Community Banking
Company of Fitzgerald common stock $ - $ - $ 6,640,970
========== ========== ===========
Cancellation of 664,097 shares of
Community Banking Company of
Fitzgerald common stock pursuant
to merger effective March 31, 1997 $ - $ - $(6,640,970)
========== ========== ===========
Transfer of loans to Other Assets $ - $ 2,630 $ -
========== ========== ===========
|
The Bank grants agribusiness, commercial, and residential loans to its customers. Although the Bank has a diversified loan portfolio, a substantial portion of its debtors' ability to honor their contracts is dependent on the area's economic stability. The primary trade area for the Bank is generally that area within fifty miles in each direction.
The distribution of commitments to extend credit approximates the distribution of loans outstanding. Commercial and standby letters of credit were granted primarily to commercial borrowers. The Bank does not extend credit in excess of the legal lending limit to any single borrower or group of related borrowers.
The Company's bank subsidiary maintains its cash balances in three financial institutions. Accounts at each institution are secured by the Federal Deposit Insurance Corporation up to $100,000. Uninsured balances totaled $-0- at December 31, 1999.
Fair value estimates are based on existing on and off-balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial instruments include the mortgage banking operation, brokerage network, deferred income taxes, premises and equipment and goodwill. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates.
The carrying amount and estimated fair values of the Bank's financial instruments at December 31, 1999 and 1998 are as follows:
1999 1998
-------------------------- ----------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
----------- ----------- ----------- ------------
Assets:
Cash and short-term investments $ 7,617,839 $ 7,617,839 $ 6,880,708 $ 6,880,708
Securities available for sale 13,542,975 13,542,975 14,287,599 14,287,599
Loans 34,124,389 33,828,550 32,194,281 31,073,023
Liabilities:
Deposits 52,620,303 52,859,841 50,653,259 50,815,429
Other borrowings - - 111,500 111,500
Unrecognized financial instruments:
Commitments to extend credit 8,789,325 8,789,325 8,728,325 8,728,325
Standby letters of credit and financial
guarantees written 152,000 152,000 150,000 150,000
|
Components of other operating expenses greater than 1% of total interest income and other income for the periods ended December 31, 1999, 1998 and 1997 are:
1999 1998 1997
------- ------- -------
Supplies $40,426 $49,142 $44,253
Courier service 37,611 41,642 47,269
NCR processing 86,160 91,167 80,615
Promotional 34,934 43,977 31,302
|
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank's capital amounts and classification are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the table below) of total risk-based and Tier I capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 1999, the Bank meets all capital adequacy requirements to which it is subject. As of December 31, 1999, the most recent notification from the FDIC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized the Bank must maintain minimum total risk-based, and Tier I leverage ratios as set forth in the table. There are no conditions or events since that notification that management believes have changed the institution's category.
The Bank's actual capital amounts and ratios are also presented in the following table:
Requirement To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
---------------- ------------------------------- ------------------------------
Amount Ratio Amount Ratio Amount Ratio
--------- ----- --------- ----- --------- -----
As of December 31, 1999
Total Risk-Based Capital To
(Risk Weighted Assets) 5,461,000 14.3% 3,055,000 (greater than) 8.0% 3,819,000 (greater than) 10.0%
Tier I Capital To
(Risk Weighted Assets) 5,011,000 13.1% 1,530,000 (greater than) 4.0% 2,295,000 (greater than) 6.0%
Tier I Capital To
(Average Assets) 5,011,000 8.7% 2,304,000 (greater than) 4.0% 2,880,000 (greater than) 5.0%
As of December 31, 1998
Total Risk-Based Capital To
(Risk Weighted Assets) 4,923,000 13.5% 2,917,000 (greater than) 8.0% 3,647,000 (greater than) 10.0%
Tier I Capital To
(Risk Weighted Assets) 4,505,000 12.4% 1,453,000 (greater than) 4.0% 2,180,000 (greater than) 6.0%
Tier I Capital To
(Average Assets) 4,505,000 8.8% 2,048,000 (greater than) 4.0% 2,260,000 (greater than) 5.0%
|
Condensed parent company financial information on CBC Holding Company at December 31, 1999 and 1998 is as follows:
BALANCE SHEETS As of December 31,
--------------------------
1999 1998
---------- ----------
Assets
Cash in subsidiary $ 98,831 $ 100,403
Investment in subsidiary, at equity in underlying net assets 6,697,674 6,907,575
Accrued income and other assets 10,970 25,129
---------- ----------
Total Assets $6,807,475 $7,033,107
========== ==========
Liabilities
Other borrowed funds $ - $ 111,500
Accrued expenses and other liabilities 2,994 9,603
---------- ----------
Total Liabilities 2,994 121,103
---------- ----------
Shareholders' Equity
Common stock, $1 par value; authorized 10,000,000 shares,
outstanding 664,097 shares 664,097 664,097
Additional paid-in surplus 5,976,873 5,976,873
Retained earnings 504,306 261,911
Accumulated other comprehensive income (340,795) 9,123
---------- ----------
Total shareholders' equity 6,804,481 6,912,004
---------- ----------
Total Liabilities and Shareholders' Equity $6,807,475 $7,033,107
========== ==========
STATEMENTS OF INCOME AND RETAINED EARNINGS Years Ended December 31,
--------------------------
1999 1998
---------- ----------
Revenues:
Dividend from subsidiary $ 140,000 $ 70,000
---------- ----------
Expenses:
Interest 7,750 6,714
Amortization 19,234 5,918
Other 32,625 46,849
---------- ----------
Total expenses 59,609 59,481
---------- ----------
Income Before Taxes and Equity Income of Subsidiary 80,391 10,519
Add - Benefit of income taxes 21,987 30,765
---------- ----------
Income Before Equity Income of Subsidiary 102,378 41,284
Equity in undistributed income of subsidiary 140,017 222,804
---------- ----------
Net Income 242,395 264,088
Retained Earnings, (Accumulated Deficit) Beginning 261,911 (2,177)
---------- ----------
Retained Earnings, Ending $ 504,306 $ 261,911
========== ==========
|
STATEMENTS OF CASH FLOWS For The Years Ended December 31,
------------------------------------
1999 1998
----------- -----------
Cash flows from operating activities:
Net income $ 242,395 $ 264,088
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization 19,234 5,918
Equity in undistributed income of subsidiary (140,017) (222,804)
Net change in operating assets and liabilities:
Accrued income and other assets (5,075) 3,263
Accrued expenses and other liabilities (6,609) 9,229
--------- ---------
Net cash provided by operating activities 109,928 59,694
--------- ---------
Cash flows from investing activities:
Proceeds from short-term notes - 38,500
Payments on short-term debt (111,500) -
--------- ---------
Net cash provided by (used in) investing activities (111,500) 38,500
--------- ---------
Net increase (decrease) in cash and cash equivalents (1,572) 98,194
Cash and cash equivalents at beginning of year 100,403 2,209
--------- ---------
Cash and cash equivalents at end of year $ 98,831 $ 100,403
========= =========
|
MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
On April 18, 1996, the Bank completed the offering of its shares of the Bank's common stock by receiving subscriber deposits for 664,097 shares at $10.00 per share. The Bank was capitalized with $3,320,485 of common stock, par value $5.00 per share and $3,154,461 of paid-in capital and a reserve for initial operating losses of $166,024, as required by the DBF. The Bank purchased certain loans and assumed certain deposits from Bank South, N.A. (now known as Bank of America) pursuant to a Purchase and Assumption Agreement dated October 18, 1995. The Bank also purchased its current facilities and property from Bank South pursuant to the Purchase and Assumption Agreement.
On April 19, 1996, the Bank commenced operations after receiving all regulatory approvals and insurance on its deposits from the FDIC.
On October 25, 1996, the Bank entered into a Plan of Reorganization with the Company and Interim Fitzgerald Company, a wholly owned subsidiary of the Company ("Interim"). Pursuant to the terms of the Plan of Reorganization, Interim merged with and into the Bank (the "Merger") and the shareholders of the Bank exchanged their shares of Bank common stock for Company common stock. As a result of the Merger, the Company became the sole shareholder of the Bank, effective March 31, 1997.
The Company's total assets of $59,729,445 at December 31, 1999 are an increase of 3.0% from $58,027,447 at December 31, 1998. At December 31, 1999, total deposits had increased 3.9% to $52,620,303 from $50,653,259 at December 31, 1998. Total loans had grown 6.0% to $34,124,389 from $32,194,281 at December 31, 1998. This represented a loan to deposit ratio at December 31, 1999 of 64.9% compared to 63.6% at December 31, 1998. Based on average loans of $34,063,230 and average deposits of $50,207,713 for the year ended December 31, 1999, the average loan to deposit ratio was 67.8%. Based on average loans of $32,552,207 and average deposits of $47,041,238 for the year ended December 31, 1998, the average loan to deposit ratio was 69.2%. Earning assets represented approximately 88.9% and 87.8% of total assets at December 31, 1999 and 1998, respectively.
Capital
At December 31, 1999 and 1998, the Bank's capital position was well in excess of FDIC guidelines to meet the definition of "well-capitalized". Based on the level of the Bank's risk-weighted assets at December 31, 1999 and 1998, the Bank had $1.6 million and $1.2 million more capital than necessary to satisfy the "well-capitalized" criteria. The Bank's capital adequacy is monitored quarterly by the Bank's Asset/Liability Committee, as asset and liability growth, mix and pricing strategies are developed.
Liquidity
The Bank's internal and external liquidity resources are considered by management to be adequate to handle expected growth and normal cash flow demands from existing deposits and loans. At December 31, 1999, the securities available for sale, exclusive of unrealized gains and losses, had decreased from $14,273,777 at December 31, 1998 to $14,059,331, a decrease of $214,446 or 1.5%. The Bank had no securities classified as held to maturity as of December 31, 1999 and 1998. Federal funds sold had increased 17.8% to $5,240,000 at December 31, 1999, up from $4,450,000 at December 31, 1998. This increase is primarily due to growth in deposits and the Bank's decision to maintain cash in more liquid investments as part of its contingency planning for the Year 2000.
Current deposits provide the primary liquidity resource for loan disbursements and Bank working capital. The Bank expects earnings from loans and investments and other banking services as well as the current loan to deposit position to provide sufficient liquidity for both the short and long term. The Bank intends to manage its loan growth such that deposit flows will provide the primary funding for all loans as well as cash reserves for working capital and short to intermediate term marketable investments.
General
The Company's results of operations are determined by its ability to effectively manage interest income and expense, to minimize loan and investment losses, to generate noninterest income and to control noninterest expense. Since interest rates are determined by market forces and economic conditions beyond the control of the Company, the ability to generate interest income is dependent upon the Bank's ability to obtain an adequate spread between the rate earned on earning assets and the rate paid on interest-bearing liabilities. Thus, a key performance measure for net interest income is the interest margin or net yield, which is taxable-equivalent net interest income divided by average earning assets.
Net Income
For the years ended December 31, 1999 and 1998, the Company had net income of $242,395 ($0.36 per share) and $264,088 ($0.40 per share), respectively. This decrease was primarily attributable to the Company's gains on sales of investment securities of $0 and $61,752 for the years ended December 31, 1999 and 1998, respectively. Also, an additional $62,899 of amortization of organizational expenses was incurred for the year ended December 31, 1999 over the amount recorded for the year ended December 31, 1998 in order to comply with new accounting guidelines.
The following table shows the related results of operations ratios for Assets and Equity for the years ended December 31, 1999 and 1998:
1999 1998
------------ ------------
Interest Income 4,050 3,973
Interest Expense 1,873 1,844
Net Interest Income 2,177 2,129
Provision for Loan Losses 60 60
Net Earnings 242 264
Net Earnings Per Share 0.36 0.40
Total Average Stockholder's Equity 6,736 6,704
Total Average Assets 57,288 54,188
Return on average assets 0.42% 0.49%
Return on average equity 3.59% 3.94%
Dividend payout ratio 0% 0%
Average equity to average asset ratio 11.76% 12.37%
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Interest Income / Interest Expense
For the period ended December 31, 1999, interest income from loans and investments, including loan fees of $120,418, was $4,049,941, representing a yield of 7.96% on average earning assets of $50,891,930. Interest expense was $1,873,076, representing a cost of 4.31% on average interest bearing liabilities of $43,374,093. Net interest income was $2,176,865, producing a net yield of 4.28% on average earning assets.
For the year ended December 31, 1998, interest income from loans and investments, including loan fees of $96,551, was $3,972,803, representing a yield of 8.30% on average earning assets of $47,839,335. Interest expense was $1,844,117, representing a cost of 4.50% on average interest bearing liabilities of $40,970,278. Net interest income was $2,128,686, producing a net yield of 4.45% on average earning assets.
Asset Quality
The provision for loan losses for the years ended December 31, 1999 and 1998 was $60,000 and $60,000, respectively. Total loan charge-offs were $68,512 and $25,285 for the years ended December 31, 1999 and 1998, respectively, and were related to the Bank's consumer loan portfolio. At December 31, 1999 and 1998, the Bank had loans past due 90 days or more of $86,536 and $40,743, respectively. At December 31, 1999 and 1998, the Bank had non-accrual loans of $3,092 and $0, respectively. The allowance for loan losses at December 31, 1999 and 1998 was $450,349 and $430,078, respectively. This represents 1.32% and 1.34% of total loans at December 31, 1999 and 1998, respectively.
Management takes a number of factors into consideration when determining the additions to be made to the loan loss allowance. As a new institution, the Bank does not yet have a sufficient history of portfolio performance on which to base additions. Accordingly, additions to the reserve are primarily based on maintaining a ratio of the allowance for loan losses to total loans in a range of 1.00% to 1.50%. This is based on national peer group ratios and Georgia ratios that reflect average ratios of 0.99% (national peer) and 1.50% (Georgia). Under this methodology, charge-offs will increase the amount of additions to the allowance and recoveries will reduce additions.
In addition, management performs an on-going loan review process. All new loans are risk rated under loan policy guidelines. On a monthly basis, the composite risk ratings are evaluated in a model that assesses the adequacy of the current allowance for loan losses, and this evaluation is presented to the Board of Directors each month. 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.
As the Bank matures, the additions to the loan loss allowance will be based more on historical performance, the detailed loan review and allowance adequacy evaluation.
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 which becomes 90 days past due as to principal or interest is automatically placed on non-accrual. Exceptions are allowed for 90- day past due loans when such loans are well secured and in process of collection.
Non-Interest Income
Non-interest income excluding gains on sales of investments for the years ended December 31, 1999 and 1998 was $394,307 and $335,359, respectively. This consisted primarily of service charges on deposit accounts which were $297,940 and $280,839 for the years ended December 31, 1999 and 1998, respectively. Service charges on deposit accounts are evaluated against service charges from other banks in the local market and against the Bank's own cost structure in providing the deposit services. This income should grow with the growth in the Bank's demand deposit account base.
Gains on sales of investment securities was $0 and $61,752 for the years ended December 31, 1999 and 1998, respectively.
Non-Interest Expense
Non-interest expense for the years ended December 31, 1999 and 1998 was $2,193,702 and $2,080,207, respectively. This consisted primarily of salaries and benefits, which were $937,013 and $838,698 for the years ended December 31, 1999 and 1998, respectively. Other major expenses included in non-interest expense for the year ended December 31, 1999 included amortization of $289,379, supplies of $40,426, and data processing of $86,160. Other major expenses included in non-interest expense for the year ended December 31, 1998 included amortization of $226,480, supplies of $49,142, and data processing of $91,167.
The objective of interest rate sensitivity management is to minimize the effect of interest rate changes on net interest margin while maintaining net interest income at acceptable levels. The Company attempts to accomplish this objective by structuring the balance sheet so that repricing opportunities exist for both assets and liabilities in roughly equivalent amounts at approximately the same time intervals. Imbalances in these repricing opportunities at any time constitute interest rate sensitivity. An indicator of interest rate sensitivity is the difference between interest rate sensitive assets and interest rate sensitive liabilities; this difference is known as the interest rate sensitivity gap.
The Bank's interest rate sensitivity position at December 31, 1999 is set forth in the table below:
Days Days Days thru 5 Years 5 Years
----------- ----------- ----------- ----------- -----------
Interest Rate Sensitive Assets:
Loans $11,123,815 $ 2,678,709 $ 3,799,005 $13,764,109 $ 2,755,658
Securities - - - 9,770,315 4,289,016
FHLB Stock 174,100 - - - -
Federal Funds Sold 5,240,000 - - - -
----------- ----------- ----------- ----------- -----------
Total Interest Rate Sensitive Assets $16,537,915 $ 2,678,709 $ 3,799,005 $23,534,424 $ 7,044,674
----------- ----------- ----------- ----------- -----------
Interest Rate Sensitive Liabilities:
Interest Bearing Demand Deposits $ - $ - $ - $ - $ 9,266,635
Savings and Money Market Deposits 3,972,095 - - - 3,782,842
Time Deposits 8,945,513 5,517,790 7,940,442 6,212,260 -
----------- ----------- ----------- ----------- -----------
Total Interest Rate Sensitive Liabilities $12,917,608 $ 5,517,790 $ 7,940,442 $ 6,212,260 $13,049,477
----------- ----------- ----------- ----------- -----------
Interest Rate Sensitivity GAP $ 3,620,307 $(2,839,081) $(4,141,437) $17,322,164 $(6,004,803)
----------- ----------- ----------- ----------- -----------
Cumulative Interest Rate Sensitivity GAP $ 3,620,307 $ 781,226 $(3,360,211) $13,961,953 $ 7,957,150
----------- ----------- ----------- ----------- -----------
Cumulative GAP as a % of total assets
at December 31, 1999 6.08% 1.31% -5.64% 23.44% 13.36%
---- ---- ---- ----- -----
Cumulative GAP as a % of total assets
at December 31, 1998 9.71% 6.83% -0.77% 25.16% 14.52%
---- ---- ---- ----- -----
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Distribution of maturities for available for sale securities is based on amortized cost. Additionally, distribution of maturities for mortgage-backed securities is based on expected final maturities that may be different from the contractual terms.
The interest rate sensitivity table presumes that all loans and securities will perform according to their contractual maturities when, in many cases, actual loan terms are much shorter than the original terms and securities are subject to early redemption. In addition, the table does not necessarily indicate the impact of general interest rate movements on net interest margin since the repricing of various categories of assets and liabilities is subject to competitive pressures and customer needs. The Bank monitors and adjusts its exposure to interest rate risks within specific policy guidelines based on its view of current and expected market conditions.
The Bank has established an asset/liability committee which monitors the Bank's interest rate sensitivity and makes recommendations to the board of directors for actions that need to be taken to maintain a targeted gap range of plus or minus 10%. An analysis is made of the Bank's current cumulative gap each month and presented to the board for review.
It is the policy of the Bank to include savings and NOW accounts in the over five year repricing period in calculating cumulative gap. This methodology is based on the Bank's experience that these deposits represent "core" deposits of the Bank and the repricing of these deposits does not move with the same magnitude as general market rates. The Bank's rates for these deposits are consistently in the mid-range for the market area and this has not had an adverse effect on the Bank's ability to maintain these deposit accounts. The Bank believes that placing these deposits in an earlier repricing period would force the Bank to inappropriately shorten its asset maturities to obtain the targeted gap range. This would leave the Bank exposed to falling interest rates, and unnecessarily reduce its net interest margin.
At December 31, 1999, the above gap analysis indicates a negative cumulative gap position thru the one-year time interval of $3,360,211. A negative gap position indicates that the Company's rate sensitive liabilities will reprice faster than its rate sensitive assets, with 58% of rate sensitive liabilities and 43% of rate sensitive assets repricing within one year. The Bank is asset sensitive, meaning that rising rates tend to be beneficial, in the near and long term and is liability sensitive at the three-month and one-year time horizons, meaning that falling rates tend to be beneficial to the Bank's net interest margin. If interest rates were to rise in excess of 200 basis points, the Bank could experience improved earnings in the near term, but such a rate increase might significantly reduce the demand for loans in the Bank's local market, thus diminishing the prospects for improved earnings. If interest rates were to fall in excess of 200 basis points, the Bank could experience a short- term decline in net interest margin and may even have difficulty retaining maturing certificates of deposit without having to pay above market rates.
Shareholders may obtain, without charge, a copy of CBC Holding Company 1999 Annual Report to the Securities and Exchange Commission on Form 10-KSB. Written requests should be addressed to George M. Ray, President, CBC Holding Company, 102 West Roanoke Drive, Fitzgerald, Georgia 31750.
| ARTICLE 9 |
| PERIOD TYPE | YEAR |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD START | JAN 01 1999 |
| PERIOD END | DEC 31 1999 |
| CASH | 2,377,839 |
| INT BEARING DEPOSITS | 0 |
| FED FUNDS SOLD | 5,240,000 |
| TRADING ASSETS | 0 |
| INVESTMENTS HELD FOR SALE | 13,542,975 |
| INVESTMENTS CARRYING | 174,100 |
| INVESTMENTS MARKET | 0 |
| LOANS | 34,124,389 |
| ALLOWANCE | 450,349 |
| TOTAL ASSETS | 59,729,445 |
| DEPOSITS | 52,620,303 |
| SHORT TERM | 0 |
| LIABILITIES OTHER | 304,661 |
| LONG TERM | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 0 |
| COMMON | 664,097 |
| OTHER SE | 6,140,384 |
| TOTAL LIABILITIES AND EQUITY | 57,729,445 |
| INTEREST LOAN | 3,134,115 |
| INTEREST INVEST | 794,732 |
| INTEREST OTHER | 121,094 |
| INTEREST TOTAL | 4,049,941 |
| INTEREST DEPOSIT | 1,861,224 |
| INTEREST EXPENSE | 1,873,076 |
| INTEREST INCOME NET | 2,176,865 |
| LOAN LOSSES | 60,000 |
| SECURITIES GAINS | 0 |
| EXPENSE OTHER | 2,193,702 |
| INCOME PRETAX | 317,470 |
| INCOME PRE EXTRAORDINARY | 242,395 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | 242,395 |
| EPS BASIC | .36 |
| EPS DILUTED | .36 |
| YIELD ACTUAL | 4.30 |
| LOANS NON | 3,092 |
| LOANS PAST | 82,000 |
| LOANS TROUBLED | 1,149,123 |
| LOANS PROBLEM | 430,078 |
| ALLOWANCE OPEN | 430,078 |
| CHARGE OFFS | 68,512 |
| RECOVERIES | 28,783 |
| ALLOWANCE CLOSE | 450,349 |
| ALLOWANCE DOMESTIC | 450,349 |
| ALLOWANCE FOREIGN | 0 |
| ALLOWANCE UNALLOCATED | 0 |