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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 2-90200
FIRST MCMINNVILLE CORPORATION
(Exact name of registrant as specified in its charter)
Tennessee 62-1198119
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 East Main Street
McMinnville, Tennessee 37110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (931) 473-4402
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: Name of each exchange on which
registered:
None None
Securities registered pursuant to Section 12(g) of the Exchange Act:
None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and
will not 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-K or any amendment to this Form 10-K. [ ]
The aggregate market value based upon the last privately negotiated transaction
in the shares known to management (in that there exists no established public
trading market for registrant's shares and no bid or asked prices of such stock
are available) of the Registrant's common equity held by non-affiliates as of
March 1, 2001, is approximately $35,301,412. The market value calculation
assumes that all shares beneficially owned by members of the Board of Directors
and executive officers of the registrant are owned by "affiliates," a status
that each of such Directors and executive officers individually disclaims. This
is based on an estimated 468,437 shares held by non-affiliates at March 1,
2001. Such determination of affiliate status is not necessarily a conclusive
determination for other purposes.
As of March 1, 2001, 522,458 shares of the Registrant's common voting stock were
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE: Specified portions (1) of the Annual Report
to Security Holders for fiscal year ended December 31, 2000, as set forth in the
Exhibit Index and (2) of the definitive proxy materials filed with the
Commission under Regulation 14A.
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FIRST MCMINNVILLE CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2000
TABLE OF CONTENTS
PART I.......................................................................................................................1
Item 1. Business........................................................................................................1
Item 2. Description of Property........................................................................................42
Item 3. Legal Proceedings..............................................................................................42
Item 4. Submission of Matters to a Vote of Security Holders............................................................42
PART II.....................................................................................................................42
Item 5. Market for Common Equity and Related Stockholder Matters.......................................................42
Item 6. Selected Financial Data........................................................................................46
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation...........................47
Item 7a. Quantitative and Qualitative Disclosures about Market Risk.....................................................47
Item 8. Financial Statements and Supplementary Data....................................................................47
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...........................47
PART III....................................................................................................................48
Item 10. Directors And, Executive Officers of the Registrant............................................................48
Item 11. Executive Compensation.........................................................................................48
Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................48
Item 13. Certain Relationships and Related Transactions.................................................................48
PART IV.....................................................................................................................48
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...............................................48
SIGNATURES..................................................................................................................51
EXHIBIT INDEX...............................................................................................................52
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PART I
Discussions of certain matters contained in this Annual Report on Form 10-K may
constitute "forward-looking statements" within the meaning of the Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, as such, may involve
risks and uncertainties. These forward-looking statements relate to, among other
things, expectations of the business environment in which First McMinnville
Corporation (the "Company") and First National Bank of McMinnville operate,
projections of future performance, perceived opportunities in the market and any
statements regarding the Company's goals, business plans, and/or areas of
concern. The Company's actual results, performance and achievements may differ
materially from the results, performance and achievements expressed or implied
in such forward-looking statements. For a discussion of some of the factors that
might cause such a difference, see "Item 1. Business - Factors That May Affect
Future Results of Operation."
ITEM 1. BUSINESS
DESCRIPTION OF BUSINESS
THE COMPANY
First McMinnville Corporation (the "Company") is a bank holding company that, at
March 1, 2001, owned all of the stock of the First National Bank of McMinnville
(the "Bank" or "First National Bank"). The Company is a financial services
corporation incorporated under the laws of the State of Tennessee. It was formed
in 1984 for the purpose of acquiring all of the issued and outstanding common
stock of the First National Bank and it is a bank holding company within the
meaning of the Bank Holding Company Act of 1956, as amended (the "Bank Holding
Company Act").
The Company's principal business is its ownership of the Bank, which engages in
the commercial banking business. At December 31, 2000, the Company had total
assets of approximately $269,160,000 and total Shareholders' equity of
$37,707,000. The Company reported net earnings of approximately $3,896,000 for
fiscal 2000. At December 31, 2000, the Bank's total loans (net of allowance for
possible loan losses of $1,711,000) were $134,335,000 and its total deposits
were $210,852,000. As of that date, the Bank's Tier 1 capital ratio was 26.66%,
its total risk-based capital ratio was 27.84%, and its leverage ratio was
14.73%. Please refer to the company's Consolidated Financial Statements
contained in its 2000 Annual Report to Stockholders for additional information.
The principal executive offices of the Company and the First National Bank are
located at 200 East Main Street, McMinnville, Warren County, Tennessee 37110,
telephone (931) 473-4402.
(a) Business Development.
During 2000 the Company and the Bank have continued to focus on developing the
financial services of the Bank in Warren County, Tennessee and in other areas
(generally, in those counties contiguous to Warren County). The Company and the
Bank provide a wide range of commercial banking services to small and
medium-sized businesses, including those engaged in the nursery business,
business executives, professionals and other individuals. The Company, through
First National Bank, operates throughout Warren County, Tennessee, with a total
of five offices located in McMinnville, Morrison, and Viola. Additional
information concerning the general development of the Company's business since
the beginning of the last fiscal year for which this Annual Report on Form 10-K
(this "Report") is filed is set forth in Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operation" ("Management's
Discussion"), and in Item 8, "Financial Statements and Supplementary Data" (the
"Consolidated Financial Statements"), in this Report as well as in "Business of
the Company" below in this Item. CERTAIN OF THE STATEMENTS IN THIS REPORT AND IN
THE CONSOLIDATED FINANCIAL STATEMENTS ARE "FORWARD LOOKING," AND THE COMPANY'S
ACTUAL COSTS, EXPERIENCE, AND RESULTS MAY DIFFER DUE TO, AMONG OTHER THINGS,
ACTUAL EXPERIENCE, GOVERNMENTAL REGULATIONS, OVERALL ECONOMIC CONDITIONS, AND
OTHER FACTORS THAT, AS TO OCCURRENCE OR IMPACT, CANNOT BE RELIABLY PREDICTED.
SEE "FORWARD-LOOKING STATEMENTS" BELOW.
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(b) Business of the Company.
The Company's principal business is the ownership of First National Bank. The
Company currently conducts all of its material operations through the Bank, its
wholly owned subsidiary. The Company and the Bank concentrate on developing the
financial service business of the Bank in Warren County, Tennessee and in other
trade areas (generally, in those counties contiguous to Warren County).
The Company's primary source of income in 2000 was the earnings of First
National Bank, which earnings are principally derived from interest income from
loans and returns from its investment portfolio. The availability of funds to
the Bank is primarily dependent upon the economic policies of the government,
the economy in general and the general credit market for loans. The Company may
in the future engage in various business activities permitted to bank holding
companies, either directly, through newly formed subsidiaries, or through
acquisitions. The Company intends to provide banking and financial services in
Tennessee, primarily in the Warren County trade area, through the Bank's
operations.
The Company and the Bank are subject to extensive supervision and regulation by
federal banking agencies. Their respective operations are subject to a wide
array of federal and state laws applicable to banking and to bank holding
companies. Certain of the laws and regulations that affect these operations are
outlined briefly below in this Item and in other portions of this Report.
Please refer also to the Consolidated Financial Statements for additional,
important information concerning the Company and First National Bank.
FINANCIAL SUMMARY OF THE COMPANY
A financial summary of the Company and its consolidated subsidiary, the First
National Bank, is set forth below (amounts are rounded). Please refer to the
Consolidated Financial Statements for a more detailed presentation.
DECEMBER 31
(DOLLARS IN THOUSANDS EXCEPT PER SHARE)
2000 1999 1998 1997 1996
-------- -------- -------- -------- --------
TOTAL ASSETS $269,160 $263,707 $243,027 $212,765 $195,732
TOTAL EARNING ASSETS 258,600 251,844 233,130 203,272 186,849
DEPOSITS 210,852 195,924 185,305 172,891 159,746
STOCKHOLDERS' EQUITY 37,707 33,600 34,886 32,557 30,025
GROSS REVENUES 20,121 19,239 18,078 16,309 15,329
NET EARNINGS 3,896 4,216 3,870 3,581 3,444
BASIC EARNINGS PER SHARE $ 7.43 $ 7.91 $ 7.24 $ 6.68 $ 6.34
DILUTED EARNINGS PER $ 7.37 $ 7.88 $ 7.23 $ 6.67 $ 6.34
SHARE
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THE BANK'S COMMERCIAL BANKING BUSINESS
The First National Bank operates five full-service banking offices located in
Warren County, Tennessee. Its main office is located in McMinnville, Tennessee
and it has additional branches in McMinnville, Morrison, and Viola, Tennessee.
The Bank provides banking, trust and other financial services throughout the
Tennessee markets of Warren County and other contiguous counties, as well as, to
a lesser extent, other areas. The First National Bank, a national banking
association, was originally established in 1874. The Bank operates four
automated teller machines ("ATMs").
For retail customers, the First National Bank offers a full range of depository
products including regular and money market checking accounts; regular, special,
and money market savings accounts; various types of certificates of deposit and
Individual Retirement Accounts, as well as safe deposit facilities. The Bank
also offers its retail customers consumer and other installment loans and credit
services. The Bank makes available to local businesses and institutions
traditional lending services, such as lines of credit, real estate loans and
real estate construction loans, as well as standard depository services and
certain other special services. Its principal source of income is from interest
earned on personal, commercial, agricultural, and real estate loans of various
types. The Bank is a correspondent bank of First Tennessee Bank National
Association, Chattanooga, Tennessee, and National Bank of Commerce, Birmingham,
Alabama. The Bank operates a trust department. The Company and the Bank intend
for the foreseeable future to concentrate their efforts in their existing
markets.
The Company and First National Bank are subject to extensive supervision and
regulation by federal banking agencies. Their respective operations are subject
to a wide array of federal and state laws applicable to financial services, to
banks, and to bank holding companies. Certain of the laws and regulations that
affect these operations are outlined briefly below in this Item and in other
portions of this Report.
There also have been a number of recent legislative and regulatory proposals
designed to overhaul or otherwise "strengthen" the federal deposit insurance
system and to improve the overall financial stability of the banking system in
the United States. Some of these proposals provide for other changes in the bank
regulatory structure, including proposals to reduce regulatory burdens on
banking organizations and to expand (or to limit) the nature of products and
services banks and bank holding companies may offer. It is not possible to
predict whether or in what form these proposals may be adopted in the future,
and, if adopted, their impact upon either the Company or the financial services
industries in which the Company and the Bank compete. The enactment of the
"Gramm-Leach-Bliley Act of 1999" in late 1999, which became effective in 2000,
was an important development. See "Financial Services Modernization Act," below.
Issues and proposed legislation concerning privacy have gotten increased
attention in recent years.
SUBSIDIARY
The First National Bank is the Company's sole subsidiary.
SERVICES TO AND TRANSACTIONS WITH SUBSIDIARY
Intercompany transactions between the Company and its subsidiary, the First
National Bank, are subject to restrictions of existing banking laws (such as
Sections 23A and 23B of the Federal Reserve Act) and accepted principles of fair
dealing. The Company can provide the Bank with advice and specialized services
in the areas of accounting and taxation, budgeting and strategic planning,
employee benefits and human resources, auditing, trust, and banking and
corporate law. The Company may elect to charge a fee for these services from
time to time. The responsibility for the management of the Bank, however,
remains with its Board of Directors and with the officers elected by the Bank's
Board.
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FORWARD-LOOKING STATEMENTS
In this report and in documents incorporated herein by reference, the Company
may communicate statements relating to the future results of the Company that
may be considered "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. The Company's actual results may
differ materially from those included in the forward-looking statements.
Forward-looking statements are typically identified by the words "believe,
expect, anticipate, intend, estimate" and similar expressions. These statements
may relate to, among other things, loan loss reserve adequacy, simulation of
changes in interest rates and litigation results. Actual results may differ
materially from those expressed or implied as a result of certain risks and
uncertainties, including, but not limited to, social, political and economic
conditions, interest rate fluctuations, competition for loans, mortgages, and
other financial services and products, changes in interest rates, unforeseen
changes in liquidity, results of operations, and financial conditions affecting
the Company's customers, as well as other risks that cannot be accurately
quantified or definitively identified. Many factors affecting the Company's
financial condition and profitability, including changes in economic conditions,
the volatility of interest rates, political events, equity and fixed income
market fluctuations, personal and corporate customers' bankruptcies, inflation,
technological change, changes in law, changes in fiscal, monetary, regulatory
and tax policies, monetary fluctuations, success in gaining regulatory approvals
when required as well as other risks and uncertainties and competition from
other providers of financial services simply cannot be predicted. Because these
factors are unpredictable and beyond the Company's control, earnings may
fluctuate from period to period. The purpose of this type of information (such
as in Item 6 and Item 7, as well as other portions of this Report) is to provide
readers of this Report with information relevant to understanding and assessing
the financial condition and results of operations of the Company and not to
predict the future or to guarantee results. The Company undertakes no obligation
to publish revised forward-looking statements to reflect the occurrence of
changes, new developments, or of unanticipated events, circumstances, or
results.
SUPERVISION AND REGULATION
General
The commercial banking business is highly regulated. Both the Company and the
First National Bank are subject to the supervision, examination, and regulation
of various federal and state agencies, including the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") and the Office of the
Comptroller of the Currency (the "OCC"). The requirements and restrictions
imposed by the laws of the United States and the State of Tennessee on the Bank
and/or on the Company include requirements to maintain reserves against
deposits, limitations on the interest rates that may be charged on various types
of loans, and restrictions on the nature and amount of loans that may be granted
and on the types of investments which may be made. The operations of bank
holding companies and banks are also affected by various consumer laws and
regulations, including those relating to equal credit opportunity, truth in
savings disclosures, debt collection laws, privacy regulations, and regulation
of consumer lending practices.
Congress and state legislatures periodically propose new legislation affecting
the operations of bank holding companies and banks, so no assurance can be given
that the statutes and regulations described below will remain in effect or that
the Company and its subsidiary, the First National Bank, will remain at all
times in complete compliance with applicable laws and regulations. The Company
and the Bank are subject also to extensive regulation, supervision, and
examination under state and federal statutes and regulations. Although the
Company is extensively regulated under both federal and state law, this
regulation is intended primarily for the protection of depositors and the
deposit insurance fund and not for the benefit of shareholders or customers of
the Company or First National Bank. The discussion in this section, which
briefly summarizes certain of such statutes, does not purport to be complete,
and it is qualified in its entirety by reference to such statutes and
regulations.
Major new legislation was enacted by Congress in November of 1999, which became
effective in 2000. See "Financial Services Modernization Act," below.
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First McMinnville Corporation
As a registered bank holding company, the Company is subject to regulation under
the Bank Holding Company Act. Thus it is required to file quarterly and annual
reports, and such additional information as may be requested, with the Federal
Reserve Board. The Federal Reserve Board may conduct examinations of the Company
and all of its subsidiaries, including First National Bank.
The Federal Reserve Board may require that the Company terminate an activity or
terminate control of or liquidate or divest certain subsidiaries or affiliates
when the Federal Reserve Board believes the activity or the control of the
subsidiary or affiliate constitutes a significant risk to the financial safety,
soundness or stability of any of its banking subsidiaries. The Federal Reserve
Board also has the authority to regulate provisions of certain bank holding
company debt, including authority to impose interest ceilings and reserve
requirements on such debt. Under certain circumstances, the Company must file
written notice and obtain approval from the Federal Reserve Board prior to
purchasing or redeeming its equity securities.
Under the Bank Holding Company Act and regulations adopted by the Federal
Reserve Board, a bank holding company and its non-banking subsidiaries are
prohibited from requiring certain tie-in arrangements in connection with any
extension of credit, lease or sale of property, or furnishing of services.
Further, the Company is required by the Federal Reserve Board to maintain
certain levels of capital. See "Capital Adequacy," below.
The Company is required to obtain the prior approval of the Federal Reserve
Board for the acquisition of more than 5% of the outstanding shares of any class
of voting securities or substantially all of the assets of any bank or bank
holding company. Prior approval of the Federal Reserve Board is also required
for the merger or consolidation of the Company and another bank holding company.
The Company is prohibited by the Bank Holding Company Act, except in certain
statutorily prescribed instances, from acquiring direct or indirect ownership or
control of more than 5% of the outstanding voting shares of any company that is
not a bank or bank holding company and from engaging directly or indirectly in
activities other than those of banking, managing or controlling banks, or
furnishing services to its subsidiaries. However, the Company, subject to the
prior approval of the Federal Reserve Board, may engage in any, or acquire
shares of companies engaged in, activities that are deemed by the Federal
Reserve Board to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto.
Under Federal Reserve Board regulations, a bank holding company is required to
serve as a source of financial and managerial strength to its subsidiary banks
and may not conduct its operations in an unsafe or unsound manner. In addition,
it is the Federal Reserve Board's policy that in serving as a source of strength
to its subsidiary banks, a bank holding company should stand ready to use
available resources to provide adequate capital funds to its subsidiary banks
during periods of financial stress or adversity and should maintain the
financial flexibility and capital-raising capacity to obtain additional
resources for assisting its subsidiary banks. A bank holding company's failure
to meet its obligations to serve as a source of strength to its subsidiary banks
will generally be considered by the Federal Reserve Board to be an unsafe and
unsound banking practice or a violation of the Federal Reserve Board's
regulations or both.
The Company is also a bank holding company within the meaning of T.C.A.
ss. 45-2-1401 of the Tennessee Banking Act. As such, the Company and its
subsidiaries could be subject to examination by, and could be required to file
reports with, the Tennessee Department of Financial Institutions under specified
circumstances.
The Company's common stock is registered under Section 12 of the Exchange Act.
As a result, the Company is required to file quarterly, annual and other types
of reports with the Securities and Exchange Commission under the Exchange Act.
The Company is subject to the information, proxy solicitation, and other
requirements and restrictions of the Exchange Act.
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First National Bank
The First National Bank of McMinnville, as a national banking association, is
subject to primary supervision, examination, and regulation by the OCC. To a
lesser extent, the Bank is also subject to certain regulations promulgated by
the Federal Reserve Board. If, as a result of an examination of the Bank, the
examining regulator should determine that the financial condition, capital
resources, asset quality, earnings prospects, management, liquidity, or other
aspects of the bank's operations are unsatisfactory or that the bank or its
management is violating or has violated any law or regulation, various remedies
are available to the regulatory agencies. Such remedies include the power to
enjoin "unsafe or unsound" practices, to require affirmative action to correct
any conditions resulting from any violation or practice, to issue an
administrative order that can be judicially enforced, to direct an increase in
capital, to restrict the growth of the bank, to assess civil monetary penalties,
to remove officers and directors, and ultimately to terminate the bank's deposit
insurance. The Bank has not been subject to any such actions by its regulatory
authorities.
Various requirements and restrictions under the laws of the State of Tennessee
and the United States affect the operations of the Bank. State and federal
statutes and regulations relate to many aspects of the Banks' operations,
including reserves against deposits, ownership of deposit accounts, interest
rates payable on deposits, loans, investments, mergers and acquisitions,
borrowings, dividends, locations of branch offices, and capital requirements.
Further, the Bank is required to maintain certain levels of capital. See
"Capital Adequacy."
Financial Services Modernization Act
On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley
Act of 1999 (the "Financial Services Modernization Act"). The provisions of the
Act became effective in March 2000. The Financial Services Modernization Act
repeals the two affiliation provisions of the Glass-Steagall Act: Section 20,
which restricted the affiliation of Federal Reserve Member Banks with firms
"engaged principally" in specified securities activities; and Section 32, which
restricts officer, director, or employee interlocks between a member bank and
any company or person "primarily engaged" in specified securities activities. In
addition, the Financial Services Modernization Act also contains provisions that
expressly preempt any state law restricting the establishment of financial
affiliations, primarily related to insurance. The general intent of the law is
to establish a comprehensive framework to permit affiliations among commercial
banks, insurance companies, securities firms, and other financial service
providers by revising and expanding the Bank Holding Company Act framework to
permit a holding company system to engage in a full range of financial
activities through a new entity known as a Financial Holding Company. "Financial
activities" is broadly defined to include not only banking, insurance, and
securities activities, but also merchant banking and additional activities that
the Federal Reserve Board, in consultation with the Secretary of the Treasury,
determines to be financial in nature, incidental to such financial activities,
or complementary activities that do not pose a substantial risk to the safety
and soundness of depository institutions or the financial system generally.
Generally, the Financial Services Modernization Act, which is also known as the
"Gramm-Leach-Bliley Act of 1999":
- - Repeals historical restrictions on, and eliminates many federal and
state law barriers to, affiliations among banks, securities firms,
insurance companies, and other financial service providers;
- - Provides a uniform framework for the functional regulation of the
activities of banks, savings institutions, and their holding companies;
- - Broadens the activities that may be conducted by national banks,
banking subsidiaries of bank holding companies, and their financial
subsidiaries;
- - Provides an enhanced framework for protecting the privacy of consumer
information;
- - Adopts a number of provisions related to the capitalization,
membership, corporate governance, and other measures designed to
modernize the Federal Home Loan Bank system;
- - Modifies the laws governing the implementation of the Community
Reinvestment Act ("CRA"); and
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- - Addresses a variety of other legal and regulatory issues affecting both
day-to-day operations and long-term activities of financial
institutions.
Presently, the Company does not plan to become a "Financial Holding Company"
within the meaning of the Financial Services Modernization Act. If the Company
were to decided to utilize the ability to affiliate with other financial
services providers, it would first have to become a "Financial Holding Company"
as permitted under an amendment to the Bank Holding Company Act. To become a
Financial Holding Company, the Company would file a declaration with the Federal
Reserve Board, electing to engage in activities permissible for Financial
Holding Companies and certifying that it is eligible to do so because First
National Bank (its sole financial institution subsidiary) is well-capitalized
and well-managed. In addition, the Federal Reserve Board must also determine
that the Bank, as the Company's only insured depository institution subsidiary,
has at least a "satisfactory" Community Reinvestment Act rating (which it does).
See "The Bank - Community Reinvestment Act and Fair Lending Developments,"
below. The Company believes that it meets the requirements to make an election
to become a Financial Holding Company. However, management has determined at
this time that the Company will not seek an election to become a Financial
Holding Company. The Company expects to continue to re-examine its decision
under the Financial Services Modernization Act from time to time. Presently,
however, given its current strategic business plan, market and financial
conditions, regulatory capital requirements, general economic conditions, and
other factors, the Company does not intent to utilize any of its expanded powers
provided in the Financial Services Modernization Act.
The Financial Services Modernization Act also permits national banks to engage
in expanded activities through the formation of financial subsidiaries. A
national bank may have a subsidiary engaged in any activity authorized for
national banks directly or any financial activity, except for insurance
underwriting, insurance investments, real estate investment or development, or
merchant banking, which may only be conducted through a subsidiary of a
Financial Holding Company. Financial activities include all activities permitted
under new sections of the Bank Holding Company Act or permitted by regulation.
A national bank seeking to have a financial subsidiary, and each of its
depository institution affiliates, must be "well-capitalized" and
"well-managed." The total assets of all financial subsidiaries may not exceed
the lesser of 45% of a bank's total assets, or $50 billion. A national bank must
exclude from its assets and equity all equity investments, including retained
earnings, in a financial subsidiary. The assets of the subsidiary may not be
consolidated with the bank's assets. The bank must also have policies and
procedures to assess financial subsidiary risk and protect the bank from such
risks and potential liabilities.
The Financial Services Modernization Act also includes a new section of the
Federal Deposit Insurance Act governing subsidiaries of state banks that engage
in "activities as principal that would only be permissible" for a national bank
to conduct in a financial subsidiary. It expressly preserves the ability of a
state bank to retain all existing subsidiaries. Because, under the so-called
"wild-card" or "parity" statute (T.C.A. ss. 45-2-601), Tennessee chartered
commercial banks are generally permitted by the State of Tennessee to engage in
any activity permissible for national banks, competitor state banks will also be
permitted to form subsidiaries to engage in the activities authorized by the
Financial Services Modernization Act, to the same extent as a national bank such
as First National Bank. In order to form a financial subsidiary, the bank must
be well-capitalized, and the bank would be subject to the same capital
deduction, risk management and affiliate transaction rules as applicable to
national banks.
The Company and First National Bank do not believe that the Financial Services
Modernization Act will have a material adverse effect on its operations in the
near-term. However, to the extent that it permits banks, securities firms, and
insurance companies to affiliate, the financial services industry may experience
further consolidation. As a result, the Company and the Bank may find that they
are compelled to compete with even larger and more diversified financial
institutions than is currently the case. The Financial Services Modernization
Act is intended to grant to community banks certain powers as a matter of right
that larger institutions have accumulated on an ad hoc basis. Nevertheless, this
new law may have the result of increasing the amount of competition that the
Company and First National Bank encounter from larger institutions and other
types of companies offering financial products, many of which may have
substantially more financial resources than either the Company or the Bank. The
impact of this or any other development under the Financial Services
Modernization Act cannot be predicted.
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Dividends and Other Transfers of Funds
Dividends from First National Bank constitute the principal source of income to
the Company. The Company is a legal entity separate and distinct from First
National Bank. The Bank is subject to various statutory and regulatory
restrictions on its ability to pay dividends to the Company. Under such
restrictions, the amount available for payment of dividends to the Company by
First National Bank is limited by both regulatory and prudent business
considerations. The Company intends to retain most of these funds for internal
capital purposes. In addition, the OCC and the Federal Reserve Board have the
authority to prohibit the Bank from paying dividends, depending upon the Bank's
financial condition, if such payment is deemed to constitute an unsafe or
unsound practice.
The bank regulatory activities also have authority to prohibit the Bank from
engaging in activities that, in their respective opinions, constitute unsafe or
unsound practices in conducting their business. It is possible, depending upon
the financial condition of the bank in question and other factors, that the bank
regulatory activities could assert that the payment of dividends or other
payments might, under some circumstances, be such an unsafe or unsound practice.
Further, the bank regulatory authorities have established guidelines with
respect to the maintenance of appropriate levels of capital by banks or bank
holding companies under their jurisdiction. Compliance with the standards set
forth in such guidelines and the restrictions that are or may be imposed under
the prompt corrective action provisions of federal law could limit the amount of
dividends which the Bank or the Company may pay. An insured depository
institution is prohibited from paying management fees to any controlling persons
or, with certain limited exceptions, making capital distributions if after such
transaction the institution would be undercapitalized. See "Prompt Corrective
Regulatory Action and Other Enforcement Mechanisms," "The Federal Deposit
Insurance Improvement Act," and "Capital Adequacy" in this Item 1 for a
discussion of these additional restrictions on capital distributions.
The Bank is subject to certain restrictions imposed by federal law on any
extensions of credit to, or the issuance of a guarantee or letter of credit on
behalf of, the Company or other affiliates, the purchase of, or investments in,
stock or other securities thereof, the taking of such securities as collateral
for loans, and the purchase of assets of the Company or other affiliates. Such
restrictions prevent the Company and such other affiliates from borrowing from
the Bank unless any such loan(s) is secured by marketable obligations of
designated amounts. Further, such secured loans and investments by First
National Bank to or in the Company or to or in any other affiliate are limited,
individually, to 10.0% of the Bank's capital and surplus (as defined by federal
regulations), and such secured loans and investments are limited, in the
aggregate, to 20.0% of the respective bank's capital and surplus (as defined by
federal regulations). Additional restrictions on transactions with affiliates
may be imposed on the Bank under the prompt corrective action provisions of
federal law. See "Prompt Corrective Action and Other Enforcement Mechanisms,"
"Federal Deposit Insurance Corporation Improvement Act," and "Bank and Bank
Holding Company Regulation; Restrictions on Dividends" in this Item 1.
Prompt Corrective Action and Other Enforcement Mechanisms
Federal banking agencies possess broad powers to take corrective and other
supervisory action to resolve perceived problems of insured depository
institutions, including but not limited to those institutions that fall below
one or more prescribed minimum capital ratios. Each federal banking agency has
promulgated regulations defining the following five categories in which an
insured depository institution will be placed, based on its capital ratios: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized. At December 31, 2000, First
National Bank and the Company exceeded the required ratios for classification as
"well capitalized."
An institution that, based upon its capital levels, is classified as well
capitalized, adequately capitalized, or undercapitalized may be treated as
though it were in the next lower capital category if the appropriate federal
banking agency, after notice and opportunity for hearing, determines that an
unsafe or unsound condition or an unsafe or unsound practice warrants such
treatment. At each successive lower capital category, an insured depository
institution is subject to more restrictions. The federal banking agencies,
however, may not treat a significantly undercapitalized institution as
critically undercapitalized unless its capital ratio actually warrants such
treatment.
In addition to measures taken under the prompt corrective action provisions,
commercial banking organizations may be subject to potential enforcement actions
by the federal regulators for unsafe or unsound practices in conducting their
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businesses or for violations of any law, rule, regulation, or any condition
imposed in writing by the agency or any written agreement with the agency.
The Federal Deposit Insurance Corporation Improvement Act
The Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
substantially revised the depository institution regulatory and funding
provisions of the Federal Deposit Insurance Act ("FDIA") as well as several
other federal banking statutes. Among other things, FDICIA requires the federal
banking regulators to take prompt corrective action in respect of depository
institutions that do not meet minimum capital requirements. FDICIA establishes
five capital tiers: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." A depository institution is well capitalized if it
significantly exceeds the minimum level required by regulation for each relevant
capital measure, adequately capitalized if it meets each such measure,
undercapitalized if it fails to meet any such measure and significantly
undercapitalized if it is significantly below such measure. The critically
undercapitalized level occurs where tangible equity is less than 2% of total
tangible assets or less than 65% of the minimum leverage ratio to be prescribed
by regulation (except to the extent that 2% would be higher than such 65%
level). A depository institution may be deemed to be in a capitalization
category that is lower than is indicated by its actual capital position if it
receives an unsatisfactory examination rating.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of a dividend) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions are also subject to
restrictions on borrowing from the Federal Reserve System. In addition,
undercapitalized depository institutions are subject to growth limitations and
are required to submit capital restoration plans. A depository institution's
holding company must guarantee the capital plan, up to an amount equal to the
lesser of 5% of the depository institution's assets at the time it becomes
undercapitalized or the amount of the capital deficiency when the institution
fails to comply with the plan. The federal banking agencies may not accept a
capital plan without determining, among other things, that the plan is based on
realistic assumptions and is likely to succeed in restoring the depository
institution's capital. If a depository institution fails to submit an acceptable
plan, it is treated as if it is significantly undercapitalized.
Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks. Critically
undercapitalized depository institutions are subject to appointment of a
receiver or conservator.
The five FDICIA capital categories described above will be used by the banking
regulators to determine the severity of corrective action the appropriate
regulator may take in the event an institution reaches a given level of
undercapitalization. For example, an institution which becomes
"undercapitalized" must submit a capital restoration plan to the appropriate
regulator outlining the steps it will take to become adequately capitalized.
Upon approving the plan, the regulator will monitor the institution's
compliance. Before a capital restoration plan will be approved, any entity
controlling a bank (i.e., bank holding companies) must guarantee compliance with
the plan until the institution has been adequately capitalized for four
consecutive calendar quarters. The liability of the holding company is limited
to the lesser of 5% of the institution's total assets or the amount which is
necessary to bring the institution into compliance with all capital standards.
In addition, "undercapitalized" institutions will be restricted from paying
management fees, dividends and other capital distributions. Further, these
institutions will be subject to certain asset growth restrictions and will be
required to obtain prior approval from the appropriate regulator to open new
branches or expand into new lines of business. As an institution drops to lower
capital levels, the extent of action to be taken by the appropriate regulator
increases, restricting the types of transactions in which the institution may
engage and ultimately providing for the appointment of a receiver for certain
institutions deemed to be critically undercapitalized.
In order to comply with the FDICIA, the Federal Reserve Board and the FDIC have
adopted regulations defining operational and managerial standards relating to
internal controls, loan documentation, credit underwriting criteria, interest
rate exposure, asset growth, and compensation, fees and benefits.
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Capital Adequacy
Under the Federal Reserve Board's risk-based capital guidelines applicable to
the Company, the minimum Tier 1 capital ratio is 4% and the minimum total
risk-based capital ratio is 8%. To be considered a "well capitalized" bank under
the guidelines, a bank must have a total risk-based capital ratio in excess of
10%. Under these guidelines, at least half of the total capital is to be
comprised of common equity, retained earnings and a limited amount of perpetual
preferred stock, after subtracting certain intangibles, and certain other
adjustments ("Tier 1 capital"). The remainder may consist of perpetual debt,
mandatory convertible debt securities, a limited amount of subordinated debt,
other preferred stock not qualifying for Tier 1 capital and a limited amount of
loan loss reserves ("Tier 2 capital"). The First National Bank is subject to
similar capital requirements adopted by the OCC.
In addition, the Federal Reserve Board, the OCC and the Federal Deposit
Insurance Corporation ("FDIC") have adopted a minimum leverage ratio (Tier 1
capital to adjusted quarterly average assets) of 4%. Generally, banking
organizations are expected to operate well above the minimum required capital
level of 4% unless they meet certain specified criteria, including that they
have the highest regulatory ratings. Most banking organizations are required to
maintain a leverage ratio of 4% plus an additional cushion of at least 1% to 2%.
(For a banking organization rated in the highest of the five categories used by
regulators to rate banking organizations, the minimum leverage ratio of Tier 1
capital to total assets must be 3%. In addition to these uniform risk-based
capital guidelines and leverage ratios that apply across the industry, the
regulators have the discretion to set individual minimum capital requirements
for specific institutions at rates significantly above the minimum guidelines
and ratios.) The guidelines also provide that banking organizations experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels without
significant reliance upon intangible assets. Failure to meet capital guidelines
could subject a banking institution to a variety of enforcement remedies
available to federal regulatory authorities, including the termination of
deposit insurance by the FDIC, issuance of a capital directive, a prohibition on
the taking of brokered deposits and certain other restrictions.
On December 31, 2000 the Company's subsidiary bank exceeded the "well
capitalized" threshold per the guidelines, with a Tier 1 capital ratio of 26.7%,
a total risk-based capital ratio of 27.8%, and a leverage ratio of 14.7%.
Safety and Soundness Standards
The federal banking agencies have adopted guidelines designed to assist the
federal banking agencies in identifying and addressing potential safety and
soundness concerns before capital becomes impaired. The guidelines set forth
operational and managerial standards relating to: (i) internal controls,
information systems and internal audit systems, (ii) loan documentation, (iii)
credit underwriting, (iv) asset growth, (v) earnings, and (vi) compensation,
fees and benefits. In addition, the federal banking agencies have also adopted
safety and soundness guidelines with respect to asset quality and earnings
standards. These guidelines provide six standards for establishing and
maintaining a system to identify problem assets and prevent those assets from
deteriorating. Under these standards, an insured depository institution should:
(i) conduct periodic asset quality reviews to identify problem assets, (ii)
estimate the inherent losses in problem assets and establish reserves that are
sufficient to absorb estimated losses, (iii) compare problem asset totals to
capital, (iv) take appropriate corrective action to resolve problem assets, (v)
consider the size and potential risks of material asset concentrations, and (vi)
provide periodic asset quality reports with adequate information for management
and the board of directors to assess the level of asset risk. These guidelines
also set forth standards for evaluating and monitoring earnings and for ensuring
that earnings are sufficient for the maintenance of adequate capital and
reserves.
Premiums for Deposit Insurance
The Bank's deposit accounts are insured by the Bank Insurance Fund ("BIF"), as
administered by the FDIC, up to the maximum permitted by law. Insurance of
deposits may be terminated by the FDIC upon a finding that the institution has
engaged in unsafe or 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 or the institution's primary regulator.
The FDIC charges an annual assessment for the insurance of deposits, which as of
December 31, 2000, ranged from 0 to 27 basis points per $100 of insured
deposits, based on the risk a particular institution poses to its deposit
insurance
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fund. The risk classification is based on an institution's capital group and
supervisory subgroup assignment. Pursuant to the Economic Growth and Paperwork
Reduction Act of 1996 (the "Paperwork Reduction Act"), at January 1, 1997, the
Bank began paying, in addition to their normal deposit insurance premium as a
member of the BIF, an amount equal to approximately 1.3 basis points per $100 of
insured deposits toward the retirement of the Financing Corporation bonds ("Fico
Bonds") issued in the 1980s to assist in the recovery of the savings and loan
industry. Members of the Savings Association Insurance Fund ("SAIF"), by
contrast, pay, in addition to their normal deposit insurance premium,
approximately 6.4 basis points. Under the Paperwork Reduction Act, the FDIC is
not permitted to establish SAIF assessment rates that are lower than comparable
BIF assessment rates. Effective January 1, 2000, the rate paid to retire the
Fico Bonds will be equal for members of the BIF and the SAIF.
Interstate Banking and Branching
The Bank Holding Company Act permits bank holding companies from any state to
acquire banks and bank holding companies located in any other state, subject to
certain conditions, including certain nationwide- and state-imposed
concentration limits. The Company has the ability, subject to certain
restrictions, to acquire by acquisition or merger branches outside its home
state. The establishment of new interstate branches is also possible in those
states with laws that expressly permit it. Interstate branches are subject to
certain laws of the states in which they are located. Competition may increase
further as banks branch across state lines and enter new markets.
Federal law provides that, as of September 29, 1995, adequately capitalized and
managed bank holding companies are permitted to acquire banks in any state.
State laws prohibiting interstate banking or discriminating against out-of-state
banks were preempted as of the effective date, although states were permitted to
require that target banks located within the state be in existence for a period
of up to five years before such banks may be subject to the Interstate Banking
Act. The "Interstate Banking Act" established deposit caps which prohibit
acquisitions that would result in the acquirer controlling 30% or more of the
deposits of insured banks and thrifts held in the state in which the acquisition
or merger is occurring or in any state in which the target maintains a branch or
10% or more of the deposits nationwide. State-level deposit caps are not
preempted as long as they do not discriminate against out-of-state acquirers,
and the federal deposit caps apply only to initial entry acquisitions.
In addition, the Interstate Banking Act provided that as of June 1, 1997,
adequately capitalized and managed banks may engage in interstate branching by
merging banks in different states and allowing banks to maintain branches in
states other than the states where they maintain their principal place of
business. Various proposed new laws have been (and will likely be) introduced in
the Tennessee General Assembly in response to the Interstate Banking Act, as
well as in response to other legal, regulatory, interest group, and economic
developments, the form or impact of which cannot be reliably predicted.
Community Reinvestment Act and Fair Lending Developments
The Bank is subject to certain fair lending requirements and reporting
obligations involving home mortgage lending operations and Community
Reinvestment Act ("CRA") activities. The CRA generally requires the federal
banking agencies to evaluate the record of a financial institution in meeting
the credit needs of its local communities, including low- and moderate-income
neighborhoods. A bank may be subject to substantial penalties and corrective
measures for a violation of certain fair lending laws. The federal banking
agencies may take compliance with such laws and CRA obligations into account
when regulating and supervising other activities.
A bank's compliance with its CRA obligations is based on a performance- based
evaluation system which bases CRA ratings on an institution's lending service
and investment performance. When a bank holding company applies for approval to
acquire a bank or other bank holding company, the Federal Reserve Board will
review the assessment of each subsidiary bank of the applicant bank holding
company, and such records may be the basis for denying the application. In
connection with its assessment of CRA performance, the appropriate bank
regulatory agency assigns a rating of "outstanding", "satisfactory", "needs to
improve" or "substantial noncompliance." As of its most recent CRA examination,
conducted in 1998, the Bank was rated at least "satisfactory."
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Bank Holding Company Act
As a registered bank holding company, the financial condition and operations of
the Company as well as those of its subsidiary (the Bank) are subject to
examination and supervision by the Federal Reserve Board. The Bank Holding
Company Act requires prior Federal Reserve Board approval for bank acquisitions
and prohibits a bank holding company from engaging in any business other than
banking or bank-related activities. Specifically, the Bank Holding Company Act
requires that a bank holding company obtain prior approval of the Federal
Reserve Board before (1) acquiring, directly or indirectly (except in certain
limited circumstances), ownership or control of more than 5% of the voting stock
of a bank, (2) acquiring all or substantially all of the assets of a bank, or
(3) merging or consolidating with another bank holding company. The Bank Holding
Company Act also generally limits the business in which a bank holding company
may engage to banking, managing or controlling banks, and furnishing or
performing services for the banks that it controls.
In addition, pursuant to the Bank Holding Company Act, a bank holding company
may engage in nonbanking activities, or may acquire shares in a company engaged
in nonbanking activities provided that the Federal Reserve Board has determined
by regulation or order that the activity is so closely related to banking or
managing or controlling banks as to be a proper incident thereto.
Except in certain circumstances, the Bank Holding Company Act has historically
prohibited a bank holding company from acquiring a bank outside the state where
the bank holding company's banking business is principally conducted, unless the
laws of the state where the bank is located specifically authorize such
acquisitions by out-of-state bank holding companies. Effective September 29,
1995, the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
("Riegle-Neal"), which is discussed above, removed most restrictions to the
expansion of interstate banking. Riegle-Neal has had far-reaching effects on the
historical rules applicable to interstate banking and interstate branching. See
"-Interstate Banking and Branching".
Federal Reserve Act
The Federal Reserve Act imposes strict limitations on investments by subsidiary
banks in the stock or other securities of their parent bank holding company or
any of its other subsidiaries and on the taking of such stock or securities as
collateral for loans to any borrowers. In addition, the Federal Reserve Act
imposes strict limitations on extensions of credit and other transactions by and
between subsidiary banks and their parent bank holding company or any of its
other subsidiaries or corporate affiliates. As a subsidiary of the Company, the
First National Bank will be subject to limitations under Sections 23A and 23B of
the Federal Reserve Act with respect to extensions of credit to, investments in,
and certain other transactions with the Company. Further, any loans and
extensions of credit from the First National Bank to the Company also would be
subject to various loan-to-value collateral requirements. The Bank Holding
Company Act and regulations of the Federal Reserve Board prohibit a bank holding
company and its subsidiaries from engaging in certain (but not all) tie-in
arrangements in connection with any extension of credit, lease, or sale of
property or the furnishing of services.
Capital Adequacy. The Federal Reserve Board has issued standards for measuring
capital adequacy for bank holding companies. These standards are designed to
provide risk-responsive capital guidelines and to incorporate a consistent
framework for use by financial institutions operating in major international
financial markets. The banking regulators have issued standards for banks that
are similar to, but not identical with, the standards for bank holding
companies. In general, the risk-related standards require financial institutions
and financial institution holding companies to maintain certain capital levels
based on "risk-adjusted" assets, so that categories of assets with potentially
higher credit risk will require more capital backing than categories with lower
credit risk. In addition, banks and bank holding companies are required to
maintain capital to support off-balance-sheet activities such as loan
commitments. The Company and its subsidiary financial institution, the First
National Bank, exceed all applicable capital adequacy minimums. Please refer to
the Consolidated Financial Statements (Item 8 of this Report) and to the Section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operation," which appears under Item 7 of this Report, for additional
information.
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Support of Subsidiary Banks. Under Federal Reserve Board policy, the Company is
expected to act as a source of financial strength to its subsidiary (the Bank)
and to commit resources to support the Bank in circumstances where it might not
choose to do so absent such a policy. This support may be required at times when
the Company may not find itself able to provide it. In addition, any capital
loans by the Company to the Bank would also be subordinate in right of payment
to depositors and certain other indebtedness of such subsidiary Bank. Consistent
with this policy regarding bank holding companies serving as a source of
financial strength for their subsidiary banks, the Federal Reserve Board has
stated that, as a matter of prudent banking, a bank holding company generally
should not maintain a rate of cash dividends unless its net income available to
common shareholders has been sufficient to fully fund the dividends, and the
prospective rate of earnings retention appears consistent with the bank holding
company's capital needs, asset quality and over all financial condition.
CHANGES IN LAWS AND REGULATIONS
Proposals to change the laws and regulations governing the banking industry are
frequently introduced in Congress, in the state legislatures and before the
various bank regulatory agencies. The likelihood and timing of any such changes
and the impact such changes might have on the Company and its subsidiaries,
however, cannot be determined at this time.
DEPOSIT INSURANCE
The First National Bank is subject to charges for deposit insurance coverage by
the FDIC. The Bank's deposits are insured under the Bank Insurance Fund, which
is administered by the FDIC. The rates charged to the Bank for deposit insurance
vary from year to year and are not expected to increase for at least the first
part of the year 2001.
BANK AND BANK HOLDING COMPANY REGULATION; RESTRICTIONS ON DIVIDENDS
Subject to certain exceptions and the ultimate impact of the Interstate Banking
Act, both a bank holding company and an out-of-state bank are prohibited under
Tennessee law from acquiring control of, merging, or consolidating with a
Tennessee bank, unless the Tennessee bank has been in operation for at least
five (5) years. Notwithstanding the above-described prohibition(s), a bank
which does not have its home state in Tennessee may establish or acquire a
branch in Tennessee through the acquisition of all or substantially all of the
assets and the assumption of all or substantially all of the liabilities of or
related to a branch located in Tennessee which has been in operation for at
least five (5) years, provided that the laws of the home state of the
out-of-state bank permit Tennessee banks to establish and maintain branches in
that state through the acquisition of a branch under substantially the same
terms and conditions. A bank or bank holding company is prohibited from
acquiring any bank in Tennessee if the bank or bank holding company (including
all insured depository institutions which are affiliates of the bank or bank
holding company), upon consummation of the acquisition, would control thirty
percent (30%) or more of the total amount of the deposits of the insured
depository institutions in Tennessee. Under Tennessee law, any Tennessee bank
that has been in operation for at least five years may be acquired, under
certain circumstances, by banks and bank holding companies from outside
Tennessee. Acquisitions are subject to the approval of the Commissioner of the
Tennessee Department of Financial Institutions, the OCC, and the Federal Reserve
Board based upon a variety of statutory and regulatory criteria. Branching is
regulated generally by the OCC pursuant to certain state and federal law
requirements and the Interstate Banking Act.
A bank chartered under the National Bank Act, such as the First National Bank,
is subject to the applicable provisions of that Act and, to a lesser degree, to
certain of the limitations created by Tennessee law (such as, solely by way of
example and not limitation, in respect of usury and branching). All national
banks, and all subsidiary banks of a bank holding company, must become and
remain insured banks under the FDIA. As a national bank the First National Bank
is required to be a member of the Federal Reserve System. The First National
Bank is subject to the provisions of FDIA and to supervision and regular
examination by the OCC. Such examinations, however, are for the protection of
the bank insurance fund and, indirectly, for depositors, and are not for the
protection of borrowers, investors or shareholders. Certain provisions of
Tennessee law may be preempted by the Interstate Banking Act and no prediction
can be made as to its impact on Tennessee law or the Company's regulation
thereunder.
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The Company is a legal entity separate and distinct from the Bank, its sole
financial institution subsidiary. The Company has derived and expects to
continue to derive most of its funds for operations and substantially all funds
available for the payment of dividends from the First National Bank. Both
federal and state laws impose restrictions on the ability of banks and bank
holding companies to pay dividends. State law restricts the ability of
corporations (such as the Company) to pay dividends, and federal law limits
dividends by the Bank. For example, prior regulatory approval must be obtained
before declaring any dividends if the amount of capital, and surplus is below
certain statutory limits. In addition, the approval of the OCC is required for
any dividend if the total of all dividends declared in any calendar year would
exceed the total of the institution's net profits, as defined by the OCC, for
such year combined with its retained net profits for the preceding two years. In
addition, a national bank may not pay a dividend in an amount greater than its
net profits then on hand. The payment of dividends by any financial institution
subsidiary may also be affected by other factors, such as the maintenance of
adequate capital. Please refer to the Consolidated Financial Statements and to
Item 5 of this Report, "Market for Registrant's Common Equity and Related
Stockholder Matters," for additional information on dividends. See also the
section of this Report entitled "Capital Adequacy."
Failure to meet capital requirements can initiate certain mandatory - and
possibly additional discretionary actions by regulators that could, in that
event, have a direct material effect on the institution's financial statements.
The relevant regulations require First Bank to meet specific capital adequacy
guidelines that involve quantitative measures of the Bank's assets and
liabilities as calculated under regulatory accounting principles. The
regulations also require the regulators to make qualitative judgments about the
Company and the Bank. Those qualitative judgments could also affect the
Company's and the Bank's capital status and the amounts of dividends the
subsidiary bank may distribute. At December 31, 2000, management believes that
the Company and the Bank meet all such capital requirements to which they are,
respectively, subject.
The Company and the Bank are subject to various legal restrictions on the extent
to which a bank holding company (such as the Company) and any nonbank subsidiary
that it might own or form in the future can borrow or otherwise obtain credit
from any bank subsidiary such as the Bank. For example, the First National Bank
is subject to limitations imposed by Section 23A of the Federal Reserve Act with
respect to extensions of credit to, investments in, and certain other
transactions with, the Company. In general, these restrictions require that any
such extensions of credit must be on non-preferential terms and secured by
designated amounts of specified collateral and be limited, as to the holding
company or any one of such nonbank subsidiaries, to 10% of the lending
institution's capital stock and surplus, and as to the holding company and all
such nonbank subsidiaries in the aggregate, to 20% of such capital stock and
surplus. Further, Section 23B of the Federal Reserve Act imposes restrictions on
"non-credit" transactions between the Bank and the Company (and nonbank Company
affiliates).
BUSINESS COMBINATION ACT
The Tennessee Business Combination Act (the "Business Combination Act") limits
the ability of Tennessee corporations to engage in business combinations with
"interested shareholders". The Business Combination Act may significantly
impede, delay or prevent a purchaser's ability to acquire a significant equity
interest in the Company. In general, the Business Combination Act prevents an
"interested shareholder" (generally, a shareholder beneficially owning 10% or
more of a corporation's outstanding voting stock) or an affiliate or associate
thereof from engaging in a "business combination" (defined as a variety of
transactions including a merger as described generally below) with a Tennessee
corporation for a period of five years following the date on which the
shareholder became an interested shareholder. The Company's common stock
("Common Stock") may become registered with the Securities and Exchange
Commission pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Hence, in the future, the Company may become
subject to the provisions of the Business Combination Act. Constitutional
questions may serve to limit the effect of the Business Combinations Act and,
accordingly, the effect of the Business Combination Act on the Company and the
Company's Common Stock (if any) is uncertain.
USURY PROVISIONS
The Constitution of the State of Tennessee requires the state legislature to fix
interest rates in the state, and the legislature has adopted statutes to
accomplish this purpose. The general interest rate statutes currently in effect
establish a maximum "formula rate" of interest at 4% above the average prime
loan rate (or the average short-term business
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average rate, however denominated) for the most recent week for which such
average rate has been published by the Federal Reserve Board, or 24% per annum,
whichever is lower. In the event that the Federal Reserve Board fails to publish
the average rate for four consecutive weeks or the maximum effective rate should
be adjudicated or become inapplicable for any reason whatsoever, the maximum
effective rate is deemed to be 24% per annum until the Tennessee General
Assembly otherwise provides. As of February 21, 2001, the maximum "formula rate"
of interest was 12.5%. Specific usury laws may apply also to particular classes
of lenders (e.g., credit unions and savings and loan associations) and
transactions (e.g., bank installment loans and home mortgages). The maximum
possible nominal rate of interest under these laws generally cannot exceed (and
may be less than) 24% per annum.
The relative importance of the usury laws to the financial operations of the
Company and the First National Bank varies from time to time, depending on a
number of factors, including conditions in the money markets, the cost and the
availability of funds, and prevailing interest rates. The management of the
Company is unable to state whether existing usury laws have had or will have a
material effect on its businesses or earnings.
RECENT DEVELOPMENTS AND FUTURE LEGISLATION
The following discussion contains a summary of recent legislative developments
that can be expected to affect the Company's operations.
As noted previously, new laws and regulations are commonly prescribed by
governmental agencies that affect the Company and First National Bank. The best
known new development was the enactment of the Gramm-Leach-Bliley Act of 1999,
which is expected to have an extensive impact on financial services in the
United States. Additional developments include, for example, a recent change in
Tennessee law removed the prohibition against the acquisition of certain
branches that have been in existence for at least five years by out-of-state
banks and bank holding companies. It has also become possible to have "S
corporation" tax status as a bank under federal income tax laws, with the effect
that the tax attributes of S corporations are available, under federal law, to
certain qualifying financial institutions.
Currently there are various proposals concerning the Accounting for mergers and
acquisitions and the Accounting for goodwill. The outcome of these proposals
could impact the holding company's evaluation of future acquisitions or mergers.
Other legislative and regulatory proposals that affect commercial banks and
their competitors, and regarding changes in banking and the regulation of banks,
thrifts and other financial institutions and bank and bank holding company
powers, are being considered by the executive branch of the Federal government,
Congress and various state governments, including Tennessee. Certain of these
proposals, if adopted, could significantly change the regulation of banks and
the financial services industry. It cannot be predicted whether any of these
proposals will be adopted, and, if adopted, how these proposals will affect
either the Company or the Bank.
The foregoing list is not intended to be exhaustive. Congress and the States
pass laws from time to time which have an impact on the operations and prospects
of banks and bank holding companies, as well as other financial institutions.
The Company cannot predict what other types of legislation Congress or Tennessee
may enact or the effect, if any, such legislation will have on the business,
results of operations or financial condition of the Company or First National
Bank.
COMPETITION
The commercial banking business is highly competitive and the Company and First
National Bank compete actively with national and state banks and bank holding
company organizations for deposits, loans and trust accounts, and with savings
and loan associations and credit unions for deposits and loans. In addition, the
Bank competes with other financial institutions, including securities brokers
and dealers, personal loan companies, insurance companies, finance companies,
leasing companies and certain governmental agencies, all of which actively
engage in marketing various types of loans, deposit accounts and other services.
For example, one of the Company's competitors is a subsidiary of a regional bank
holding company system that may have greater financial and other resources than
the Company. The deregulation of depository institutions, as well as the
increased ability of nonbanking financial institutions to provide services
previously reserved for commercial banks, has intensified competition. Because
nonbanking financial insti-
15
18
tutions are not subject to the same regulatory restrictions as banks and bank
holding companies, in many instances they may operate with greater flexibility
because they may not be subject to the same types of regulatory applications and
processes as are the Company and the First National Bank.
The principal geographic area of the Company's and the First National Bank's
operations encompasses McMinnville, other areas of Warren County, and
surrounding areas of Tennessee. In this area, there are various commercial banks
and other financial institutions operating approximately seventeen offices and
branches (exclusive of free-standing ATM's) and holding an aggregate
(reportedly) of more than $520 million in deposits as of approximately June 30,
2000 (based on data published by the Federal Deposition Insurance Corporation).
The Company competes with some of the largest bank holding companies in
Tennessee, which have or control businesses, banks or branches in the area,
including regional financial institutions such as Union Planters Bank, N.A.,
Firstar Bank, N.A., and AmSouth Bank, as well as with a variety of local and
regional banks and thrifts.
To compete with major financial institutions in its service area, the Company
and the First National Bank rely, in part, on specialized services, local
promotional activity, and personal contacts with customers by its officers,
directors, and employees. For customers whose loan demands exceed the First
National Bank's lending limit, the First National Bank seeks to arrange for
loans on a participation basis with correspondent banks. The First National Bank
also assists customers requiring services not offered by the First National Bank
in obtaining those services from its correspondent banks.
EMPLOYEES
At January 1, 2000, the Registrant and its banking subsidiary (the Bank)
employed sixty-two persons on a full-time, and eleven persons on a part-time,
basis. None of these employees is covered by a collective-bargaining agreement.
Group life, health, and disability insurance are maintained for or made
available to employees by First National Bank, as is a 401(k) profit-sharing
plan adopted by the Bank as are certain benefit plans (described elsewhere
herein) adopted by the Bank. The Company considers its employee relations to be
satisfactory.
ECONOMIC CONDITIONS AND GOVERNMENTAL POLICY; LAWS AND REGULATIONS
The Company's profitability, like most financial institutions, is primarily
dependent on interest rate differentials. In general, the difference between the
interest rates paid by the Bank on interest-bearing liabilities, such as
deposits and other borrowings, and the interest rates received by the Bank on
its interest-earning assets, such as loans extended to its borrowers, together
with securities held in its investment portfolio, comprise the major portion of
the Company's earnings. These rates are highly sensitive to many factors that
are beyond the control of the Company and First National Bank, such as
inflation, recession and unemployment, and the impact which future changes in
domestic and even in foreign economic conditions might have on the Company and
the Bank cannot be predicted.
The Company's business is also influenced by the monetary and fiscal policies of
the federal government and the policies of regulatory agencies, particularly the
Federal Reserve Board. The Federal Reserve Board implements national monetary
policies (with objectives such as curbing inflation and combating recession)
through its open- market operations in U.S. Government securities by adjusting
the required level of reserves for depository institutions subject to its
reserve requirements, and by varying the target federal funds and discount rates
applicable to borrowings by depository institutions. The actions of the Federal
Reserve Board in these areas influence the growth of bank loans, investments,
and deposits and also affect interest rates earned on interest-earning assets
and paid on interest-bearing liabilities. The nature and impact on the Company
and the Bank of any future changes in monetary and fiscal policies cannot be
predicted.
From time to time, legislative acts, as well as regulations, are enacted which
have the effect of increasing the cost of doing business, limiting or expanding
permissible activities, or affecting the competitive balance between banks and
other financial services providers. Proposals to change the laws and regulations
governing the operations and taxation of banks, bank holding companies, and
other financial institutions and financial services providers are frequently
made in the federal Congress, in the state legislatures, and before various
regulatory agencies. Please refer to "Item 1. Business - Supervision and
Regulation."
16
19
The Company's earnings are affected not only by the extensive regulation
described above, but also by general economic conditions. These economic
conditions influence, and are themselves influenced, by the monetary and fiscal
policies of the United States government and its various agencies, particularly
the Federal Reserve Board. The Registrant cannot predict changes in monetary
policies or their impact on its operations and earnings.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local statutes and
ordinances regulating the discharge of materials into the environment. The
Company does not believe that it will be required to expend any material amounts
in order to comply with these laws and regulations by virtue of its and the
First National Bank's activities. However, such laws may from time to time
affect the Company and the Bank in the context of lending activities to
borrowers who may themselves engage in activities or encounter circumstances in
which the environmental laws, rules, and regulations are implicated.
RESEARCH
The Company makes no material expenditures for research and development.
However, the reader is referred to the following section on "Computers and the
Year 2000."
COMPUTERS AND THE YEAR 2000 - THE "Y2K" ISSUE
The Company recognized the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. The term "Year 2000 issue" refers to
the necessity of converting computer information systems so that such systems
recognize more than two digits to identify a year in any given date field, and
are thereby able to differentiate between years in the twentieth and
twenty-first centuries ending with the same two digits (e.g., 1900 and 2000). To
address the Year 2000 issue, the Company adopted a broad-based approach designed
to encompass the Company's total environment. To its best knowledge, neither the
Company nor the Bank experienced any material "Year 2000" issues.
DEPENDENCE UPON A SINGLE CUSTOMER
The Bank's principal customers are generally located in the Middle Tennessee
area with a concentration in Warren County, Tennessee. Neither the Company nor
the First National Bank is dependent upon a single customer or a very few
customers. However, approximately eight percent (8%) of the Bank's total loans
were to customers in the nursery industry.
LINE OF BUSINESS
The Company operates under the Bank Holding Company Act of 1956 in the area of
finance. The Company derived 100% of its consolidated total operating income
from the commercial banking business in 2000.
FACTORS THAT MAY AFFECT FUTURE RESULTS OF OPERATION
In addition to the other information contained in this report, the following
risks may affect the Company. If any of these risks occurs, our business,
financial condition or operating results could be adversely affected.
The Company's financial performance and profitability will depend on its ability
to execute its corporate growth strategy and to manage recent and anticipated
future growth. The Company's success and profitability depend on the Company's
ability to maintain profitable operations through continued implementation of
the Company's community banking philosophy which emphasizes personal service and
customer attention.
Changes in market interest rates may adversely affect the Company's performance.
For instance, the Company's earnings are affected by changing interest rates.
Changes in interest rates affect the demand for new loans, the credit profile of
existing loans, the rates received on loans and securities and rates paid on
deposits and borrowings. The relationship between the rates received on loans
and securities and the rates paid on deposits and borrowings is known
21
20
as interest rate spread. Given the Company's current volume and mix of
interest-bearing liabilities and interest-earning assets, its interest rate
spread could be expected to decrease during times of rising interest rates and,
conversely, to increase during times of falling interest rates. Although
management believes that the current level of interest rate sensitivity is
reasonable, significant fluctuations and/or further increases in interest rates
may have an adverse effect on the Company's business, financial condition and
results of operations.
The Company's Warren County and Southern Middle Tennessee business focus and
economic conditions in these areas could adversely affect our operations. This
is true because our operations are centralized and focused on this narrowly
defined geographic area. As a result of this geographic concentration, the
Company's operating results depend largely upon economic conditions in these
areas. A deterioration in economic conditions in these market areas,
particularly in the nursery and real estate industries on which these areas
depend, could have a material adverse impact on the quality of the Bank's loan
portfolio and on the demand for the Company's products and services, which in
turn can be expected to have a negative, and perhaps material adverse, effect on
results of operations.
As discussed above, the Company is subject to government regulation that could
limit or restrict its activities. In turn, this could adversely impact
operations. The financial services industry is regulated extensively. Federal
and state regulation is designed primarily to protect the deposit insurance
funds and consumers, and not to benefit our shareholders. These regulations can
sometimes impose significant limitations on Company and Bank operations. In
addition, these regulations are constantly evolving and may change significantly
over time. Significant new laws or changes in existing laws or repeal of
existing laws may cause the Company's consolidated results to differ materially.
Further, federal monetary policy, particularly as implemented through the
Federal Reserve System, significantly affects credit conditions for us. The
ultimate impact of financial institution affiliations under the Financial
Services Modernization Act, and other aspects of that law, cannot yet be
predicted but could adversely affect First National Bank and the Company.
Competition may adversely affect the Company's performance. The financial
services business in the Company's market areas is highly competitive. It is
becoming increasingly competitive due to changes in regulation, technological
advances, and the accelerating pace of consolidation among financial services
providers. (For instance, AmSouth's recent acquisition of First American
National Bank is another example of consolidation in the financial services
business in the Company's market areas.) The Company faces competition both in
attracting deposits and in making loans. The Company competes for loans
principally through the interest rates and loan fees charged and the efficiency
and quality of services provided. Increasing levels of competition in the
banking and financial services businesses may reduce the Company's market share
or cause the prices charged by the Company and/or the Bank for services to fall.
Thus results may differ in future periods depending upon the nature or level of
competition.
If a significant number of borrowers, guarantors and related parties fail to
perform as required by the terms of their loans, the Company will sustain
losses. A significant source of risk arises from the possibility that losses
will be sustained if a significant number of the Bank's borrowers, guarantors
and related parties fail to perform in accordance with the terms of their loans.
The Bank has adopted underwriting and credit monitoring procedures and credit
policies, including the establishment and review of the allowance for credit
losses, that management believes are appropriate to minimize this risk by
assessing the likelihood of nonperformance, tracking loan performance and
diversifying the Bank's credit portfolio. These policies and procedures,
however, may not prevent unexpected losses that could materially adversely
affect consolidated results of operations.
SELECTED FINANCIAL DATA AND STATISTICAL INFORMATION
Certain selected financial data and certain statistical data concerning the
Company that should be read in conjunction with Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operation" is set forth in
the following pages.
[Remainder of Page Intentionally Left Blank.]
18
21
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
I. Distribution of Assets, Liabilities and Stockholders' Equity:
Interest Rate and Interest Differential
The Schedule which follows indicates the average balances for each
major balance sheet item, an analysis of net interest income and the
change in interest income and interest expense attributable to changes
in volume and changes in rates.
The difference between interest income on interest-earning assets and
interest expense on interest-bearing liabilities is net interest
income, which is the Company's gross margin. Analysis of net interest
income is more meaningful when income from tax-exempt earning assets is
adjusted to a tax equivalent basis. Accordingly, the following schedule
includes a tax equivalent adjustment of tax-exempt earning assets,
assuming a weighted average Federal income tax rate of 34%.
In this Schedule "change due to volume" is the change in volume
multiplied by the interest rate for the prior year. "Change due to
rate" is the change in interest rate multiplied by the volume for the
current year. Changes in interest income and expense not due solely to
volume or rate changes are included in the "change due to rate"
category.
Non-accrual loans, if any, have been included in their respective loan
category. Loan fees of $43,000, $29,000 and $37,000 for 2000, 1999 and
1998, respectively, are included in consumer loan income and represent
an adjustment of the yield on these loans.
19
22
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
IN THOUSANDS, EXCEPT INTEREST RATES
------------------------------------------------------------------------------------------------
2000 1999 2000/1999 CHANGE
------------------------------ ----------------------------- -----------------------------
Average Interest Income/ Average Interest Income/ Due to Due to
Balance Rate Expense Balance Rate Expense Volume Rate Total
---------- -------- ------- -------- -------- ------- ------- ------- ------
Loans, net of unearned interest $ 134,941 8.53% 11,511 130,190 8.37% 10,892 398 221 619
Investment securities - taxable 89,776 7.29 6,541 86,401 6.99 6,037 236 268 504
---------- ------ ------- -------- ------ ------- ------
Investment securities -
tax exempt 28,005 4.97 1,393 29,779 4.88 1,452 (87) 28 (59)
Taxable equivalent adjustment -- 2.57 718 -- 2.51 748 (44) 14 (30)
---------- ------ -------- -------- ------ ------ ------
Total tax-exempt
investment securities 28,005 7.54 2,111 29,779 7.39 2,200 (131) 42 (89)
---------- ------ -------- -------- ------ ------ ------
Total investment
securities 117,781 7.35 8,652 116,180 7.09 8,237 114 301 415
---------- ------ -------- -------- ------ ------ ------
Federal funds sold 52 5.77 3 188 6.38 12 (9) -- (9)
Interest-bearing deposits in
banks 58 3.45 2 -- -- -- 2 -- 2
---------- ------ -------- -------- ------ ------ ------
Total earning assets 252,832 7.98 20,168 246,558 7.76 19,141 487 540 1,027
---------- ------ -------- -------- ------ ------ ------
Cash and due from banks 4,630 5,019
Allowance for possible loan
losses (1,622) (1,583)
Bank premises and equipment 1,972 1,962
Other assets 5,292 3,947
---------- --------
Total assets $ 263,104 255,903
========== ========
20
23
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
IN THOUSANDS, EXCEPT INTEREST RATES
-----------------------------------------------------------------------------------
2000 1999 2000/1999 CHANGE
--------------------------- --------------------------- ---------------------------
Average Interest Income/ Average Interest Income/ Due to Due to
Balance Rate Expense Balance Rate Expense Volume Rate Total
-------- -------- -------- -------- -------- -------- -------- -------- --------
Deposits:
Negotiable order of
withdrawal accounts $ 27,696 2.79% 774 25,699 2.75% 707 32 35 67
Money market demand
accounts 7,321 3.07 225 8,169 2.89 236 (25) 14 (11)
Other savings accounts 27,175 3.51 955 27,487 3.51 966 (11) -- (11)
Certificates of deposit,
$100,000 and over 42,994 5.94 2,555 39,458 5.24 2,068 185 302 487
Certificates of deposit
under $100,000 67,672 5.91 3,998 62,855 5.21 3,275 251 472 723
Individual retirement accounts 12,009 5.85 702 11,572 5.40 625 24 53 77
-------- -------- -------- -------- -------- -------- --------
Total interest-bearing
deposits 184,867 4.98 9,209 175,240 4.49 7,877 433 899 1,332
Demand 18,678 -- -- 19,002 -- -- --
-------- -------- -------- -------- -------- -------- --------
Total deposits 203,545 4.52 9,209 194,242 4.06 7,877 377 955 1,332
-------- -------- -------- -------- -------- -------- --------
Federal funds purchased,
securities sold under
repurchase agreements
and short-term debt 19,489 4.67 911 18,457 4.35 802 45 64 109
Advances from Federal Home
Loan Bank 2,602 6.00 156 5,175 5.41 280 (139) 15 (124)
-------- -------- -------- -------- -------- -------- --------
Total deposits and
borrowed funds 225,636 4.55 10,276 217,874 4.11 8,959 319 998 1,317
-------- -------- -------- -------- -------- -------- --------
Other liabilities 2,461 2,359
Stockholders' equity 35,007 35,670
-------- --------
Total liabilities and
stockholders' equity $263,104 255,903
======== ========
Net interest income 9,892 10,182 (290)
======== ======== ========
Net yield on earning assets 3.91% 4.13%
======== ========
Net interest spread 3.43% 3.65%
======== ========
21
24
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
IN THOUSANDS, EXCEPT INTEREST RATES
-----------------------------------------------------------------------------------
1999 1998 1999/1998 CHANGE
--------------------------- --------------------------- ---------------------------
Average Interest Income/ Average Interest Income/ Due to Due to
Balance Rate Expense Balance Rate Expense Volume Rate Total
-------- -------- -------- -------- -------- -------- -------- -------- --------
Loans, net of unearned interest $130,190 8.37% 10,892 115,394 8.74% 10,087 1,293 (488) 805
Investment securities - taxable 86,401 6.99 6,037 83,366 6.92 5,773 210 54 264
-------- -------- -------- -------- -------- -------- --------
Investment securities -
tax exempt 29,779 4.88 1,452 26,378 5.19 1,369 177 (94) 83
Taxable equivalent adjustment -- 2.51 748 -- 2.67 705 91 (48) 43
-------- -------- -------- -------- -------- -------- --------
Total tax-exempt
investment securities 29,779 7.39 2,200 26,378 7.86 2,074 267 (141) 126
-------- -------- -------- -------- -------- -------- --------
Total investment
securities 116,180 7.09 8,237 109,744 7.15 7,847 460 (70) 390
-------- -------- -------- -------- -------- -------- --------
Federal funds sold 188 6.38 12 3,330 5.17 172 162 (2) (160)
Interest-bearing deposits in
banks -- -- -- 82 6.10 5 (5) -- (5)
-------- -------- -------- -------- -------- -------- --------
Total earning assets 246,558 7.76 19,141 228,550 7.92 18,111 1,426 (396) 1,030
-------- -------- -------- -------- -------- -------- --------
Cash and due from banks 5,019 4,642
Allowance for possible loan
losses (1,583) (1,417)
Bank premises and equipment 1,962 2,150
Other assets 3,947 3,005
-------- -------
Total assets $255,903 236,930
======== =======
22
25
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
IN THOUSANDS, EXCEPT INTEREST RATES
-----------------------------------------------------------------------------------
1999 1998 1999/1998 CHANGE
--------------------------- --------------------------- ---------------------------
Average Interest Income/ Average Interest Income/ Due to Due to
Balance Rate Expense Balance Rate Expense Volume Rate Total
-------- -------- -------- -------- -------- -------- -------- -------- --------
Deposits:
Negotiable order of
withdrawal accounts $ 25,699 2.75% 707 20,705 2.57% 533 128 46 174
Money market demand
accounts 8,169 2.89 236 8,988 2.95 265 (24) (5) (29)
Other savings accounts 27,487 3.51 966 24,688 3.53 872 99 (5) 94
Certificates of deposit
$100,000 and over 39,458 5.24 2,068 43,163 5.58 2,408 (207) (133) (340)
Certificates of deposit
under $100,000 62,855 5.21 3,275 58,329 5.53 3,223 250 (198) 52
Individual retirement accounts 11,572 5.40 625 11,025 5.67 625 31 (31) --
-------- -------- -------- -------- -------- -------- --------
Total interest-bearing
deposits 175,240 4.49 7,877 166,898 4.75 7,926 396 (445) (49)
Demand 19,002 -- -- 20,580 -- -- --
-------- -------- -------- -------- -------- -------- --------
Total deposits 194,242 4.06 7,877 187,478 4.23 7,926 286 (335) (49)
-------- -------- -------- -------- -------- -------- --------
Federal funds purchased,
securities under repurchase
agreements and short-term
debt 18,457 4.35 802 9,542 3.99 381 356 65 421
Advances from Federal Home
Loan Bank 5,175 5.41 280 2,811 5.23 147 124 9 133
-------- -------- -------- -------- -------- -------- --------
Total deposits and
borrowed funds 217,874 4.11 8,959 199,831 4.23 8,454 763 (258) 505
-------- -------- -------- -------- -------- -------- --------
Other liabilities 2,359 2,631
Stockholders' equity 35,670 34,468
-------- --------
Total liabilities and
stockholders' equity $255,903 236,930
======== ========
Net interest income 10,182 9,657 525
======== ======== ========
Net yield on earning assets 4.13% 4.23%
======== ========
Net interest spread 3.65% 3.69%
======== ========
23
26
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
II. Investment Portfolio:
A. Investment securities at December 31, 2000 consist of the
following:
SECURITIES HELD-TO-MATURITY
-------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury and other
U.S. government agencies
and corporations $ 8,469 26 202 8,293
Obligations of state and
political subdivisions 27,049 398 125 27,322
Corporate and other securities 1,992 -- -- 1,992
Mortgage-backed securities 1,900 -- 32 1,868
--------- --------- --------- --------
$ 39,410 424 359 39,475
========= ========= ========= ========
SECURITIES AVAILABLE-FOR-SALE
-------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury and other
U.S. government agencies
and corporations $ 82,119 38 1,884 80,273
Obligations of state and
political subdivisions 868 21 -- 889
Corporate and other securities 2,082 -- 67 2,015
Mortgage-backed securities 1,679 -- 64 1,615
--------- --------- --------- --------
$ 86,748 59 2,015 84,792
========= ========= ========= ========
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27
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
II. Investment Portfolio, Continued:
A. Continued
Investment securities at December 31, 1999 consist of the
following:
SECURITIES HELD-TO-MATURITY
-------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury and other
government agencies and
corporations $ 4,776 -- 339 4,437
Obligations of state and
political subdivisions 28,549 180 997 27,732
Mortgage-backed securities 2,244 -- 52 2,192
--------- --------- --------- --------
$ 35,569 180 1,388 34,361
========= ========= ========= ========
SECURITIES AVAILABLE-FOR-SALE
-------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury and other
U.S. government agencies
and corporations $ 83,525 -- 5,587 77,938
Obligations of state and
political subdivisions 1,139 11 2 1,148
Corporate and other securities 1,864 -- 160 1,704
Mortgage-backed securities 1,709 -- 97 1,612
--------- --------- --------- ---------
$ 88,237 11 5,846 82,402
========= ========= ========= =========
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28
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
II. Investment Portfolio, Continued:
A. Continued
Investment securities at December 31, 1998 consist of the
following:
SECURITIES HELD-TO-MATURITY
-------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury and other
government agencies and
corporations $ 16,451 218 8 16,661
Obligations of state and
political subdivisions 26,761 995 26 27,730
Corporate and other securities 763 24 -- 787
Mortgage-backed securities 2,242 2 29 2,215
--------- --------- --------- ---------
$ 46,217 1,239 63 47,393
========= ========= ========= =========
SECURITIES AVAILABLE-FOR-SALE
-------------------------------------------------------------
(In Thousands)
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------- ---------- ---------- ---------
U.S. Treasury and other
U.S. government agencies
and corporations $ 57,056 626 197 57,485
Obligations of state and
political subdivisions 1,528 69 -- 1,597
Corporate and other securities 812 -- -- 812
Mortgage-backed securities 1,922 -- 73 1,849
--------- --------- --------- ---------
$ 61,318 695 270 61,743
========= ========= ========= =========
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29
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
II. Investment Portfolio, Continued:
B. The following schedule details the estimated maturities and
weighted average yields of securities of the Company at
December 31, 2000.
Estimated Weighted
Amortized Market Average
Held-To-Maturity Securities Cost Value Yields
--------------------------- ---------- ---------- ----------
(In Thousands, Except Yields)
Obligations of U.S. Treasury and other
U.S. Government agencies and
corporations, including mortgage-
backed securities:
Less than one year $ -- -- --%
One to five years 649 642 5.50
Five to ten years 6,065 6,066 6.91
More than ten years 3,655 3,453 7.21
---------- ---------- ----------
Total securities of U.S. Treasury
and other U.S. Government
agencies and corporations 10,369 10,161 6.93%
---------- ---------- ----------
Obligations of states and political
subdivisions*:
Less than one year 1,630 1,633 7.72
One to five years 5,191 5,276 8.07
Five to ten years 9,165 9,384 8.90
More than ten years 11,063 11,029 9.01
---------- ---------- ----------
Total obligations of states and
political subdivisions 27,049 27,322 8.73
Corporate and other securities 1,992 1,992 --
---------- ---------- ----------
Total held-to-maturity securities $ 39,410 39,475 8.23%
========== ========== ==========
* Weighted average yield is stated on a tax-equivalent basis, assuming a
weighted average Federal income tax rate of 34%.
27
30
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
II. Investment Portfolio, Continued:
B. Continued
Estimated Weighted
Amortized Market Average
Available-For-Sale Securities Cost Value Yields
----------------------------- ---------- ---------- ----------
(In Thousands, Except Yields)
Obligations of U.S. Treasury and other
U.S. Government agencies and
corporations, including mortgage-
backed securities:
Less than one year $ -- -- --%
One to five years 2,005 1,988 6.31
Five to ten years 38,534 38,170 6.59
More than ten years 43,259 41,663 7.06
---------- ---------- ----------
Total securities of U.S. Treasury
and other U.S. Government
agencies and corporations 83,798 81,821 6.83%
---------- ---------- ----------
Obligations of states and political
subdivisions*:
Less than one year -- -- --
One to five years 868 889 7.73
Five to ten years -- -- --
More than ten years -- -- --
---------- ---------- ----------
Total obligations of states and
political subdivisions 868 889 7.73
---------- ---------- ----------
Other:
Corporate and other 1,000 1,000 6.63
Federal Home Loan Bank stock 991 991 --
Federal Reserve Bank stock 91 91 --
---------- ---------- ----------
Total available-for-sale securities $ 86,748 84,792 6.81%
========== ========== ==========
* Weighted average yield is stated on a tax-equivalent basis, assuming a
weighted average Federal income tax rate of 34%.
28
31
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
III. Loan Portfolio:
A. Loan Types
The following schedule details the loans of the Company at
December 31, 2000, 1999, 1998, 1997 and 1996.
In Thousands
-------------------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
Commercial, financial and
agricultural $ 37,814 38,013 37,011 28,833 30,232
Real estate - construction 3,134 1,802 2,339 2,405 2,224
Real estate - mortgage 92,172 92,515 84,136 77,393 74,290
Consumer 2,932 3,071 3,235 2,842 2,918
----------- ----------- ----------- ----------- -----------
Total loans 136,052 135,401 126,721 111,473 109,664
Less unearned interest (6) (26) (56) -- --
----------- ----------- ----------- ----------- -----------
Total loans, net of
unearned interest 136,046 135,375 126,665 111,473 109,664
Less allowance for
possible loan losses (1,711) (1,502) (1,495) (1,314) (1,724)
----------- ----------- ----------- ----------- -----------
Net loans $ 134,335 133,873 125,170 110,159 107,940
=========== =========== =========== =========== ===========
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32
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
III. Loan Portfolio, Continued:
B. Maturities and Sensitivities of Loans to Changes in Interest
Rates
The following schedule details maturities and sensitivity to
interest rates changes for commercial loans of the Company at
December 31, 2000.
In Thousands
------------------------------------------------------------------
1 Year to
Less Than Less Than After 5
1 Year * 5 Years Years Total
------------- ------------- ------------- -------------
Maturity Distribution:
Commercial, financial
and agricultural $21,538 15,945 331 37,814
Real estate - construction 3,134 -- -- 3,134
------- ------ ------ ------
$24,672 15,945 331 40,948
======= ====== ====== ======
Interest-Rate Sensitivity:
Fixed interest rates $18,829 14,571 331 33,731
Floating or adjustable
interest rates 5,843 1,374 -- 7,217
------- ------ ------ ------
Total commercial,
financial and
agricultural loans
and real estate -
construction loans $24,672 15,945 331 40,948
======= ====== ====== ======
*Includes demand loans, bankers acceptances, commercial paper and deposit notes.
30
33
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
III. Loan Portfolio, Continued:
C. Risk Elements
The following schedule details selected information as to
non-performing loans of the Company at December 31, 2000,
1999, 1998, 1997 and 1996.
In Thousands, Except Percentages
-----------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
Non-accrual loans:
Commercial, financial and
agricultural $ -- -- -- -- --
Real estate - construction -- -- -- -- --
Real estate - mortgage -- -- -- -- --
Consumer -- -- -- -- --
Lease financing receivable -- -- -- -- --
--------- --------- --------- --------- ---------
Total non-accrual $ -- -- -- -- --
========= ========= ========= ========= =========
Loans 90 days past due:
Commercial, financial and
agricultural $ 2 -- -- 101 1
Real estate - construction -- -- -- -- --
Real estate - mortgage 490 148 224 152 --
Consumer 4 34 49 2 --
Lease financing receivable -- -- -- -- --
--------- --------- --------- --------- ---------
Total loans 90 days past
due $ 496 182 273 255 1
========= ========= ========= ========= =========
Renegotiated loans:
Commercial, financial and
agricultural $ -- -- -- -- --
Real estate - construction -- -- -- -- --
Real estate - mortgage -- -- -- -- --
Consumer -- -- -- -- --
Lease financing receivable -- -- -- -- --
--------- --------- --------- --------- ---------
Total renegotiated
loans past due $ -- -- -- -- --
========= ========= ========= ========= =========
Loans current - considered
uncollectible $ -- -- -- -- --
========= ========= ========= ========= =========
Total non-performing
loans $ 496 182 273 255 1
========= ========= ========= ========= =========
Total loans, net of
unearned interest $ 136,046 135,375 126,665 111,473 109,664
========= ========= ========= ========= =========
Percent of total loans
outstanding, net of
unearned interest 0.36% 0.13% 0.22% 0.23% --
========= ========= ========= ========= =========
Other real estate $ 70 74 11 11 69
========= ========= ========= ========= =========
31
34
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
III. Loan Portfolio, Continued:
C. Risk Elements, Continued
The accrual of interest income is discontinued when it is
determined that collection of interest is less than probable or
the collection of any amount of principal is doubtful. The
decision to place a loan on a non-accrual status is based on an
evaluation of the borrower's financial condition, collateral
liquidation value, economic and business conditions and other
factors that affect the borrower's ability to pay. At the time a
loan is placed on a non-accrual status, the accrued but unpaid
interest is also evaluated as to collectibility. If
collectibility is doubtful, the unpaid interest is charged off.
Thereafter, interest on non-accrual loans is recognized only as
received. There were no loans on non-accrual status at December
31, 2000, 1999, 1998, 1997 and 1996.
At December 31, 2000, loans totaling $3,930,000 were included in
the Company's internal classified loan list. Of these loans,
$1,538,000 are real estate, $2,284,000 are commercial and
$108,000 are consumer. The collateral valuations received by
management securing these loans total approximately $5,534,000,
($2,351,000 related to real estate, $3,183,000 related to
commercial and the consumer loans are unsecured). Such loans are
listed as classified when information obtained about possible
credit problems of the borrower has prompted management to
question the ability of the borrower to comply with the
repayment terms of the loan agreement. The loan classifications
do not represent or result from trends or uncertainties which
management expects will materially impact future operating
results, liquidity or capital resources.
At December 31, 2000 and 1999, there were loans to customers in
the nursery industry totaling approximately $10,426,000 and
$11,399,000, respectively, which represents an industry
concentration of approximately 7.66% and 8.42%, respectively, of
total loans. Loan concentrations are amounts loaned to a
multiple number of borrowers engaged in similar activities which
would cause them to be similarly impacted by economic or other
conditions.
At December 31, 2000 and 1999, other real estate totaled $70,000
and $74,000, respectively. The balance at December 31, 2000
consists of one residential property that was foreclosed during
2000. The balance at December 31, 1999 consisted of two
residential properties with carrying values of approximately
$38,000 and $36,000 that had loans foreclosed during 1999.
Management is attempting to sell the property included in other
real estate at December 31, 2000 and no material loss is
anticipated thereon.
32
35
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
III. Loan Portfolio, Continued:
D. Other Interest-Bearing Assets
There were no material amounts of other interest-bearing assets
(interest-bearing deposits with other banks, municipal bonds,
etc.) at December 31, 2000 which would be required to be
disclosed as past due, non-accrual, restructured or potential
problem loans, if such interest-bearing assets were loans.
33
36
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
IV. Summary of Loan Loss Experience:
The following schedule details selected information related to the
allowance for possible loan loss account of the Company at December 31,
2000, 1999, 1998, 1997 and 1996 and the years then ended.
In Thousands, Except Percentages
-----------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
Allowance for loan losses
at beginning of period $ 1,502 1,495 1,314 1,724 1,562
--------- --------- --------- --------- ---------
Charge-offs:
Commercial, financial and
agricultural (15) (174) -- (600) --
Real estate construction -- -- -- -- --
Real estate - mortgage (48) -- -- -- (55)
Consumer (23) (35) (37) (60) (43)
Lease financing -- -- -- -- --
--------- --------- --------- --------- ---------
(86) (209) (37) (660) (98)
--------- --------- --------- --------- ---------
Recoveries:
Commercial, financial and
agricultural 91 1 2 -- 15
Real estate construction -- -- -- -- --
Real estate - mortgage 4 -- -- -- 25
Consumer 20 35 36 -- 70
Lease financing -- -- -- 30 --
--------- --------- --------- --------- ---------
115 36 38 30 110
--------- --------- --------- --------- ---------
Net loan recoveries
(charge-offs) 29 (173) 1 (630) 12
--------- --------- --------- --------- ---------
Provision for loan losses
charged to expense 180 180 180 220 150
--------- --------- --------- --------- ---------
Allowance for loan losses at
end of period $ 1,711 1,502 1,495 1,314 1,724
========= ========= ========= ========= =========
Total loans, net of unearned
interest, at end of year $ 136,046 135,375 126,665 111,473 109,664
========= ========= ========= ========= =========
Average total loans out-
standing, net of unearned
interest, during year $ 134,941 130,190 115,394 111,177 103,919
========= ========= ========= ========= =========
Net charge-offs (recoveries)
as a percentage of average
total loans outstanding,
net of unearned interest,
during year (0.02)% 0.13% -- 0.57% (0.01)%
========= ========= ========= ========= =========
Ending allowance for possible
loan losses as a percentage
of total loans outstanding net
of unearned interest, at
end of year 1.26% 1.11% 1.18 1.18 1.57
========= ========= ========= ========= =========
34
37
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
IV. Summary of Loan Loss Experience, Continued:
The allowance for possible loan losses is an amount that management
believes will be adequate to absorb possible losses on existing loans
that may become uncollectible. The provision for possible loan losses
charged to operating expense is based on past loan loss experience and
other factors which, in management's judgment, deserve current
recognition in estimating possible loan losses. Such other factors
considered by management include growth and composition of the loan
portfolio, review of specific loan problems, the relationship of the
allowance for possible loan losses to outstanding loans, adverse
situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral and current economic
conditions that may affect the borrower's ability to pay.
Management conducts a continuous review of all loans that are
delinquent, previously charged down or loans which are determined to be
potentially uncollectible. Loan classifications are reviewed
periodically by a person independent of the lending function. The Board
of Directors periodically reviews the adequacy of the allowance for
possible loan losses.
The breakdown of the allowance by loan category is based in part on
evaluations of specific loans, past history and economic conditions
within specific industries or geographic areas. Accordingly, since all
of these conditions are subject to change, the allocation is not
necessarily indicative of the breakdown of the future losses.
The following detail provides a breakdown of the allocation of the
allowance for possible loan losses:
December 31, 2000 December 31, 1999
------------------------------ ------------------------------
Percent of Percent of
Loans In Loans In
In Each Category In Each Category
Thousands To Total Loans Thousands To Total Loans
----------- -------------- ----------- --------------
Commercial, financial and
agricultural $ 1,280 28% $ 1,057 28%
Real estate construction 8 2 5 1
Real estate mortgage 381 68 389 69
Consumer 42 2 51 2
--------- --------- --------- ---------
$ 1,711 100% $ 1,502 100%
========= ========= ========= =========
December 31, 1998 December 31, 1997
------------------------------ ------------------------------
Percent of Percent of
Loans In Loans In
In Each Category In Each Category
Thousands To Total Loans Thousands To Total Loans
---------- -------------- ---------- --------------
Commercial, financial and
agricultural $ 1,120 29% $ 1,033 26%
Real estate construction 6 2 -- 2
Real estate mortgage 313 66 223 69
Consumer 56 3 58 3
--------- --------- --------- ---------
$ 1,495 100% $ 1,314 100%
========= ========= ========= =========
December 31, 1996
------------------------------
Percent of
Loans In
In Each Category
Thousands To Total Loans
---------- --------------
Commercial, financial and
agricultural $ 1,410 28%
Real estate construction 1 2
Real estate mortgage 250 68
Consumer 63 2
--------- ---------
$ 1,724 100%
========= =========
35
38
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
V. Deposits:
The average amounts and average interest rates for deposits for 2000,
1999 and 1998 are detailed in the following schedule:
2000 1999 1998
-------------------------- --------------------------- ----------------------------
Average Average Average
Balance Balance Balance
In Average In Average In Average
Thousands Rate Thousands Rate Thousands Rate
------------ ---------- ------------ ---------- ------------ ------------
Non-interest bearing
deposits $ 18,678 --% 19,002 --% 20,580% --%
Negotiable order of
withdrawal accounts 27,696 2.79% 25,699 2.75% 20,705 2.57%
Money market demand
accounts 7,321 3.07% 8,169 2.89% 8,988 2.95%
Other savings 27,175 3.51% 27,487 3.51% 24,688 3.53%
Certificates of deposit
$100,000 and over 42,994 5.94% 39,458 5.24% 43,163 5.58%
Certificates of deposit
under $100,000 67,672 5.91% 62,855 5.21% 58,329 5.53%
Individual retirement
savings accounts 12,009 5.85% 11,572 5.40% 11,025 5.67%
---------- -------- ---------- -------- ---------- --------
$ 203,545 4.52% 194,242 4.06% 187,478 4.23%
========== ======== ========== ======== ========== ========
The following schedule details the maturities of certificates of
deposit and individual retirement accounts of $100,000 and over at
December 31, 2000.
In Thousands
----------------------------------------------------
Certificates Individual
of Retirement
Deposit Accounts Total
--------------- --------------- -------------
Less than three months $ 20,931 337 21,268
Three to six months 7,826 539 8,365
Six to twelve months 15,408 1,136 16,544
More than twelve months 3,287 1,746 5,033
----------- ------------- -----------
$ 47,452 3,758 51,210
=========== ============= ===========
In addition, approximately $761,130 of other time deposits of $100,000
and over are included in "other savings deposits," which are passbook
accounts with a 90-day maturity.
36
39
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
VI. Return on Equity and Assets:
The following schedule details selected key ratios of the Company at
December 31, 2000, 1999 and 1998.
2000 1999 1998
-------- -------- --------
Return on assets 1.48% 1.65% 1.63%
(Net income divided by average total assets)
Return on equity 11.13% 11.82% 11.23%
(Net income divided by average equity)
Dividend payout ratio 39.03% 35.40% 36.50%
(Dividends declared per share divided by
net income per share)
Equity to asset ratio 13.31% 13.94% 14.55%
(Average equity divided by average total
assets)
Leverage capital ratio 14.73% 14.17% 14.07%
(Equity divided by fourth quarter average
total assets, excluding the net unrealized
gain or loss on available-for-sale-
securities)
The minimum leverage capital ratio required by the regulatory agencies
is 4%.
Beginning January 1, 1991, new risk-based capital guidelines were
adopted by regulatory agencies. Under these guidelines, a credit risk
is assigned to various categories of assets and commitments ranging
from 0% to 100% based on the risk associated with the asset.
37
40
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
VI. Return on Equity and Assets, Continued:
The following schedule details the Company's risk-based capital at
December 31, 2000, excluding the net unrealized gain on
available-for-sale securities which is shown as an addition in
stockholders' equity in the consolidated financial statements:
In Thousands,
Except
Percentages
-------------
Tier I capital:
Stockholders' equity, excluding the net unrealized
loss on available-for-sale securities $ 38,920
Tier II capital:
Allowable allowance for loan losses (limited to 1.25%
of risk-weighted assets) 1,711
--------
Total risk-based capital $ 40,631
========
Risk-weighted assets $145,970
========
Risk-based capital ratios:
Tier I capital ratio 26.66%
========
Total risk-based capital ratio 27.84%
========
The Company is required to maintain a total risk-based capital to risk
weighted asset rate of 8% and a Tier I capital to risk weighted asset
ratio of 4%. At December 31, 2000, the Company and its subsidiary bank
were in compliance with these requirements.
38
41
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
VI. Return on Equity and Assets, Continued:
The following schedule details the Company's interest rate sensitivity
at December 31, 2000:
Repricing Within
-------------------------------------------------------------------------------
(In Thousands) Total 0-30 Days 31-90 Days 91-180 Days 181-365 Days Over 1 Year
--------- --------- ---------- ----------- ------------ -----------
Earning assets:
Loans, net of
unearned interest $136,046 16,081 7,166 10,668 14,048 88,083
Securities 124,202 13,938 21,048 13,153 3,028 73,035
Interest bearing deposits 63 63 -- -- -- --
-------- ------- ------- ------- ------- -------
Total earning
assets 260,311 30,082 28,214 23,821 17,076 161,118
-------- ------- ------- ------- ------- -------
Interest-bearing
liabilities:
Negotiable order
of withdrawal
accounts 27,597 27,597 -- -- -- --
Money market demand
accounts 8,001 8,001 -- -- -- --
Savings deposits 26,011 26,011 -- -- -- --
Certificates of
deposit, $100,000
and over 47,452 6,629 14,302 7,826 15,408 3,287
Certificates of
deposit, under $100,000 70,747 8,090 11,196 17,470 26,515 7,476
Individual retirement
accounts 12,936 1,085 1,268 1,984 4,581 4,018
Securities sold
under repurchase
agreements 13,981 13,981 -- -- -- --
Advances from FHLB 1,000 -- -- -- -- 1,000
Federal funds
purchased 2,000 2,000 -- -- -- --
-------- ------- ------- ------- ------- -------
Total interest
bearing
liabilities 209,725 93,394 26,766 27,280 46,504 15,781
-------- ------- ------- ------- ------- -------
Interest-sensitivity gap $ 50,586 (63,312) 1,448 (3,459) (29,428) 145,337
======== ======= ======= ======= ======= =======
Cumulative gap (63,312) (61,864) (65,323) (94,751) 50,586
======= ======= ======= ======= =======
Interest-sensitivity gap
as % of total assets (23.52) .54 (1.29) (10.93) 53.99
======= ======= ======= ======= =======
Cumulative gap as %
of total assets (23.52) (22.98) (24.27) (35.20) 18.79
======= ======= ======= ======= =======
The Company presently maintains a liability sensitive position over the
next twelve months. However, management expects that liabilities of a
demand nature will renew and that it will not be necessary to replace
them with significantly higher cost funds.
39
42
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
VI. Return on Equity and Assets, Continued:
The Company's primary component of market risk is interest rate
volatility. Fluctuations in interest rates will ultimately impact both
the level of income and expense recorded on a large portion of the
Company's assets and liabilities, and the market value of all
interest-earning assets and interest-bearing liabilities, other than
those which possess a short term to maturity. Based upon the nature of
the Company's operations, the Company is not subject to foreign
currency exchange or commodity price risk.
Interest rate risk (sensitivity) management focuses on the earnings
risk associated with changing interest rates. Management seeks to
maintain profitability in both immediate and long term earnings through
funds management/interest rate risk management. The Company's rate
sensitivity position has an important impact on earnings. Senior
management of the Company meets monthly to analyze the rate sensitivity
position. These meetings focus on the spread between the cost of funds
and interest yields generated primarily through loans and investments.
40
43
FIRST MCMINNVILLE CORPORATION
Form 10-K
December 31, 2000
VII. Short-Term Borrowings
Information related to securities sold under repurchase agreements
which are due upon demand is as follows:
Average Maximum
Amounts Weighted Year End Borrowing
Outstanding Average Amount Weighted Outstanding
During Interest Rate Outstanding Average At Any
Year Ended The Year For The Year At Year End Interest Rate Month End
----------------- ------------- ------------ ----------- ------------- -----------
December 31, 2000 $ 14,128 4.05 13,981 4.47 17,634
December 31, 1999 $ 15,044 3.95 15,869 4.25 18,238
41
44
ITEM 2. DESCRIPTION OF PROPERTY.
The First National Bank owns four parcels of property on which it has
established banking offices. The Bank leases the land (but owns the building)
for one of its branches at commercial leasing rates pursuant to a long-term
lease and owns one other parcel of property for future expansion. The Main
Office is located at 200 East Main Street, McMinnville. The Bank utilizes four
ATM's for the convenience of its customers. In the judgment of management, the
facilities of the Company and the First National Bank are generally suitable
and adequate for the current and reasonably foreseeable needs of the Company
and the Bank. However, new office sites are considered from time to time.
ITEM 3. LEGAL PROCEEDINGS.
There were no material legal proceedings pending at December 31, 2000, against
the Company or the Bank other than ordinary routine litigation incidental to
their respective businesses, to which the Company or its subsidiary Bank is a
party or of which any of their property is the subject. It is to be expected
that various actions and proceedings may be anticipated to be pending or
threatened against, or to involve, the Company and/or the First National Bank
from time to time in the ordinary course of business. Some of these may from
time to time involve large demands for compensatory and/or punitive damages. At
the present time, management knows of no pending or threatened litigation the
ultimate resolution of which would have a material adverse effect on the
Company's or the First National Bank's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders in the fourth quarter
of 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(A) MARKET INFORMATION
There is no established public trading market for the Company's Common Stock.
Management, however, believes that Middle Tennessee is the principal market
area for the Common Stock. The following table sets forth the high and low
sales prices per share of the Common Stock for the first quarter of 2001
(through February 28, 2001) and for each quarter of fiscal 2000 and 1999.
During 2000 the Company redeemed 9,547 shares of its Common Stock with a view
toward providing some liquidity in the stock. Certain of the other information
included below has been reported to the Company by certain selling or
purchasing Shareholders in privately negotiated transactions during the periods
indicated. Although management believes that the information supplied by
purchasers and sellers concerning their respective transactions is generally
reliable, it has not been verified. Such information may not include all
transactions in the Company's Common Stock for the respective periods shown,
and it is possible that transactions occurred during the periods reflected or
discussed at prices higher or lower than the prices set forth below. Certain of
the transactions involved, or may have involved, the Company or its principals.
CALENDAR QUARTER COMMON STOCK
2001 High Low
---- ---- ---
First Quarter $75.36 $74.90
2000
----
Fourth Quarter $71.59 70.32
42
45
CALENDAR QUARTER COMMON STOCK
Third Quarter 72.92 72.85
Second Quarter 74.80 73.59
First Quarter 76.61 74.36
1999
----
Fourth Quarter $72.05 $70.62
Third Quarter 69.92 68.24
Second Quarter 68.34 67.00
First Quarter 66.2 64.89
The last trade known to management prior to March 1, 2001, involved a
redemption by the Company of thirty-eight shares at an estimated $74.36 per
share in December of 2000. Because there is no established public trading
market for the Company's Common Stock, and because the Company and those
closely affiliated with the Company may be involved in particular transactions,
the prices shown above may not necessarily be indicative of the fair market
value of the Common Stock or of the prices at which the Company's Common Stock
would trade if there were an established public trading market. Accordingly,
there can be no assurance that the Common Stock will subsequently be purchased
or sold at prices comparable to the prices set forth above.
THE COMPANY'S COMMON STOCK
The Company is authorized by its Charter to issue 5,000,000 shares of Common
Stock, par value of $2.50 per share. At March 1, 2001, the Company had 522,458
shares outstanding. No shares are reserved for issuance except up to 57,500
shares reserved in connection with the 1997 First McMinnville Corporation Stock
Option Plan (the "Stock Option Plan") and the number of shares needed to
fulfill Rights Agreement described elsewhere herein.
Holders of the Company's Common Stock are entitled to (a) cumulate the votes of
each share held of record in connection with the election of directors and (b)
to cast one vote for each share held of record on all other matters submitted
to a vote of the shareholders. Holders of the Common Stock have no preemptive
rights to subscribe for or to purchase any additional shares of the Company's
Common Stock. In the event of liquidation, holders of the Company's Common
Stock are entitled to share in the distribution of assets remaining after
payment of debts and expenses. Holders of the Common Stock are entitled to
receive dividends when declared by the Company's Board of Directors out of
funds legally available therefor. Under its Charter, the Company is required to
indemnify its directors and officers for acts on behalf of the Company to the
fullest extent permitted under applicable law. Certain of the statutes and
regulations described in Item 1 and in other places in this Report may further
affect the matters described in this Item.
Stock Option Plan
Certain shares are reserved for issuance as set forth in the description of the
Stock Option Plan appearing elsewhere in this Report.
Shareholders Rights Agreement
Effective as of June 10, 1997, the Board of Directors of the Company adopted a
Shareholders Rights Agreement (the "Rights Agreement") and authorized and
declared a dividend of one common share purchase right (a "Right") for each
43
46
outstanding share of the Company's Common Stock (the "Common Shares"). The
dividend was payable on June 10, 1997, to the shareholders of record on that
date (the "Record Date"), and with respect to Common Shares issued thereafter
until the Distribution Date (as hereinafter defined) or the expiration or
earlier redemption or exchange of the Rights. Except as set forth below, each
Right entitles the registered holder to purchase from the Company, at any time
after the Distribution Date one Common Share at a price per share of $120,
subject to adjustment (the "Purchase Price"). The description and terms of the
Rights are as set forth in the Rights Agreement. The following description of
the Rights is qualified by reference to the Rights Agreement, which is an
Exhibit to this Report.
Initially the Rights will be attached to all certificates representing Common
Shares then outstanding, and no separate Right Certificates will be
distributed. The Rights will separate from the Common Shares upon the earliest
to occur of (i) ten (10) days after the public announcement of a person's or
group of affiliated or associated persons' having acquired beneficial ownership
of ten percent (10%) or more of the outstanding Common Shares (such person or
group being hereinafter referred to as an "Acquiring Person"); or (ii) ten (10)
days (or such later date as the Board may determine) following the commencement
of, or announcement of an intention to make, a tender offer or exchange offer
the consummation of which would result in a person or group's becoming an
Acquiring Person (the earlier of such dates being called the "Distribution
Date").
The Rights Agreement provides that, until the Distribution Date, the Rights
will be transferred with, and only with, the Common Shares. Until the
Distribution Date (or earlier redemption or expiration of the Rights) new
Common Share certificates issued after the Record Date upon transfer or new
issuance of Common Shares will contain a notation incorporating the Rights
Agreement by reference. Until the Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
Common Shares outstanding as of the Record Date, even without such notation or
a copy of this Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the Common Shares represented by
such certificate.
As soon as practicable following the Distribution Date, separate certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of
record of the Common Shares as of the close of business on the Distribution
Date (and to each initial record holder of certain Common Shares issued after
the Distribution Date), and such separate Right Certificates alone will
evidence the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on June 4, 2007 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
In the event that any person becomes an Acquiring Person (except pursuant to a
tender or exchange offer which is for all outstanding Common Shares at a price
and on terms which a majority of certain members of the Board of Directors
determines to be adequate and in the best interests of the Company, its
stockholders and other relevant constituencies, other than such Acquiring
Person, its affiliates and associates (a "Permitted Offer")), each holder of a
Right will thereafter have the right (the "Flip-In Right") to acquire a Common
Share for a purchase price equal to fifteen percent (15%) of the then current
market price, or at such greater price as the Rights Committee shall determine
(not to exceed thirty-three percent (33 1/3%) of such current market price).
Notwithstanding the foregoing, all Rights that are, or were, beneficially owned
by any Acquiring Person or any affiliate or associate thereof will be null and
void and not exercisable.
In the event that, at any time following the Distribution Date, (i) the Company
is acquired in a merger or other business combination transaction in which the
holders of all of the outstanding Common Shares immediately prior to the
consummation of the transaction are not the holders of all of the surviving
corporation's voting power, or (ii) more than fifty percent (50%) of the
Company's assets or earning power is sold or transferred, then each holder of a
Right (except Rights which have previously been voided as set forth above)
shall thereafter have the right (the "Flip-Over Right") to receive, upon
exercise and payment of the Purchase Price, common shares of the acquiring
company having a value equal to two times the Purchase Price. If a transaction
would otherwise result in a holder's having a Flip-In as well as a Flip-Over
Right, then only the Flip-Over Right will be exercisable; if a transaction
results in a holders having a Flip-Over Right subsequent to a transaction
resulting in a holders having a Flip-In Right, a holder will have Flip-Over
Rights only to the extent such holders Flip-In Rights have not been exercised.
44
47
The Purchase Price payable, and the number of Common Shares or other securities
or property issuable, upon exercise of Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of Common Shares, (ii) upon the
grant to holders of Common Shares of certain rights or warrants to subscribe
for or purchase Common Shares at a price, or securities convertible into Common
Shares with a conversion price, less than the then current market price of
Common Shares, or (iii) upon the distribution to holders of Common Shares of
evidences of indebtedness or assets (excluding regular periodic cash dividends
paid out of earnings or retained earnings or dividends payable in Common
Shares) or of subscription rights or warrants (other than those referred to
above). However, no adjustment in the Purchase Price will be required until
cumulative adjustments require an adjustment of at least one percent (1%). No
fractional Common Shares will be issued and in lieu thereof, an adjustment in
cash will be made based on the market price of Common Shares on the last
trading day prior to the date of exercise.
At any time prior to the time a person becomes an Acquiring Person, the Board
of Directors of the Company may redeem the Rights in whole, but not in part, at
a price of $.001 per Right, subject to adjustment by the Rights Committee at a
price between $.001 and $.01 per Right (the "Redemption Price"). The redemption
of the Rights may be made effective at such time on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
Immediately upon any redemption of the Rights, the right to exercise the Rights
will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.
At any time after any person becomes an Acquiring Person and prior to the
acquisition by such person or group of Common Shares representing 50% or more
of the then outstanding Common Shares, the Board of Directors of the Company
may exchange the Rights (other than Rights which have become null and void), in
whole or in part, at an exchange ratio of one Common Share per Right (subject
to adjustment).
All of the provisions of the Rights Agreement may be amended prior to the
Distribution Date by the Board of Directors of the Company for any reason it
deems appropriate. Prior to the Distribution Date, the Board is also
authorized, as it deems appropriate, to lower the thresholds for distribution
and Flip-In Rights to not less than the greater of (i) any percentage greater
than the largest percentage then held by any shareholder, or (ii) 10%. After
the Distribution Date, the provisions of the Rights Agreement may be amended by
the Board in order to cure any ambiguity, defect or inconsistency, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of any Acquiring Person), or, subject to certain
limitations, to shorten or lengthen any time period under the Rights Agreement.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a shareholder of the Company, including, without limitation, the right to vote
or to receive dividends. While the distribution of the Rights will not be
taxable to shareholders of the Company, shareholders may, depending upon the
circumstances, recognize taxable income should the Rights become exercisable or
upon the occurrence of certain events thereafter.
(B) HOLDERS
The approximate number of record holders, including those shares held in
"nominee" or "street name," of the Company's Common Stock at January 31, 2001
was approximately 547.
(C) DIVIDENDS
The Company declared semi-annual cash dividends on its Common Stock in the
aggregate amount of $2.90 per share in 2000, $2.80 per share in 1999, and $2.65
per share in 1998. Future dividends may be paid as determined by the Company's
Board of Directors from time to time in accordance with federal and state law.
To the extent practicable, but in all event subject to a wide variety of
considerations and to the discretion of the Board of Directors, the Company
expects to pay dividends semi-annually in accordance with past practices.
However, any dividends that may be declared and paid by the Company will depend
upon earnings, financial condition, regulatory and prudential considerations,
and or other factors affecting the Company that cannot be reliably predicted.
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48
The Company, as a corporation governed in part by the Tennessee Business
Corporation Act ("TBCA"), as amended, is subject to the limitations on
dividends and other distributions set forth in the TBCA. The TBCA contains
certain statutory restrictions on the ability to make distributions, including
the payment of dividends. Tennessee law allows a for-profit corporation to pay
dividends under certain circumstances that might preclude payments of dividends
by a national bank. Under Tennessee law, a corporation, including a bank
holding company, may declare and pay dividends provided that (1) the payment of
dividends would not render the corporation unable to pay its debts as they
become due in the usual course of business; (2) the corporation's total assets
are less than the sum of its total liabilities plus (unless the charter permits
otherwise) the amount that would be needed, if the corporation were to be
dissolved at the time of the distribution, to satisfy upon dissolution the
preferential rights of shareholders whose preferential rights are superior to
those receiving the distribution; or (3) the payment of dividends would not be
contrary to any restriction contained in the corporation's charter. At present,
the Company's charter does not expressly permit distributions described in (2)
above, nor does the Company have any shareholders with rights preferential to
holders of the Company's common equity. The Company has no restriction in its
charter concerning the payment of dividends.
The Company expects that funds for the payment of dividends and expenses of the
Company will come from dividends paid to the Company by the Bank. If the
Company requires additional funds for acquisitions or investments, it may be
able to obtain those funds from additional dividends paid by the Bank or from
external financing.
The National Bank Act and Related Regulations. The First National Bank's
ability to pay dividends is limited by the National Bank Act and related
regulations. Essentially, the Bank may pay dividends from its earnings for the
preceding period after deducting all loan losses, bad debts, current operating
expenses, actual losses, required transfers to surplus, accrued dividends on
any preferred stock then outstanding, and all federal and state taxes. Prior
OCC approval is required as to certain dividends. It is unlikely that the Bank
will pay out the maximum amount that it is permitted to pay in dividends as
most of the Bank's earnings are reinvested in its operations or added to
capital to support future growth.
The payment of dividends by any bank is, of course, dependent upon its earnings
and financial condition and, in addition to the limitations discussed above, is
subject to the statutory power of certain federal regulatory agencies to act to
prevent unsafe or unsound banking practices. Please refer also to the
discussion of "Restrictions on Dividends Paid by Subsidiary Bank" set forth in
Item 1 of this Report, to Item 7 of this Report ("Management's Discussion and
Analysis of Financial Condition and Results of Operation"), and to the
Consolidated Financial Statements.
(D) SALES OF UNREGISTERED SECURITIES
The Company has not sold any unregistered securities that were not previously
reported in a quarterly report on its quarterly Report on Form 10-Q except as
set forth in this paragraph. In 2000, the Company issued 105 shares to certain
of the participants in the Stock Option Plan at a weighted average exercise
price of $58.15 per share. Please refer to Note 18 of the Consolidated
Financial Statements for additional information on the Stock Option Plan and to
Note 17 thereof with respect to earnings per share. The Company believes that
an exemption from registration of these shares was available to the Company in
that the issuance thereof did not constitute a general distribution of
securities within the meaning of the Securities Act of 1933, as amended.
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data required by this part of this Annual Report on Form
10-K are incorporated into this Report by reference to pages 6-7 of the
Company's 2000 Annual Report to Stockholders. Only the information set forth in
the said 2000 Annual Report to Stockholders on pages 6-7 under the caption
"SUMMARY OF SELECTED FINANCIAL DATA (Unaudited)" is incorporated in response to
this Part of the Company's Annual Report on Form 10-K for the year ended
December 31, 2000. No portion of the 2000 Annual Report to Stockholders is
incorporated by reference, however, except (as here) by express reference. The
selected financial data and certain statistical data concerning the Company
that should be read in conjunction with Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operation" that is set forth as
a part of Item 7 and is also presented in certain of the Notes to the
Consolidated Financial Statements included in Item 8 of this Report.
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49
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
The "Management's Discussion and Analysis of Financial Condition and Results of
Operation" called for by this part is expressly incorporated herein by
reference to the section of the Company's 2000 Annual Report to Stockholders
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operation" which starts on page 14 of that document. Only those
portions of the said 2000 Annual Report to Stockholders expressly specified as
being incorporated by reference are so incorporated as part of the Company's
Annual Report on Form 10-K for the year ended December 31, 2000.
The purpose of this discussion is to provide insight into the financial
condition and results of operations of the Company and the Bank, its
subsidiary. This discussion should be read in conjunction with the Company's
Consolidated Financial Statements.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Please refer to the Consolidated Financial Statements, the Statistical Data,
Item 6, Item 7, and Item 8 for the information called for by this part of the
Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements of the Company and subsidiary
(commencing at page 20 of the Company's 2000 Annual Report to Stockholders) are
included in this Report:
- Independent Auditors' Report;
- Consolidated Balance Sheets - December 31, 2000 and 1999;
- Consolidated Statements of Earnings - Three years ended
December 31, 2000;
- Consolidated Statements of Comprehensive Earnings - Three
years ended December 31, 2000;
- Consolidated Statements of Changes in Stockholders' Equity -
Three years ended December 31, 2000;
- Consolidated Statements of Cash Flows - Three years ended
December 31, 2000; and all
- Notes to Consolidated Financial Statements.
The Consolidated Financial Statements called for by this Item are incorporated
by reference to the Consolidated Financial Statements section of the Company's
2000 Annual Report to Stockholders, pages 20-47. No portion of the 2000 Annual
Report to Stockholders is incorporated by reference, however, except (as here)
by express reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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PART III
ITEM 10. DIRECTORS AND, EXECUTIVE OFFICERS OF THE REGISTRANT.
This information is incorporated by reference to the Registrant's 2001 proxy
materials filed March 17, 2001, under Regulation 14A ("2001 Proxy Statement").
However, the information set forth in the 2001 Proxy Statement under the
subheadings "Compensation Committee Report on Executive Compensation" and
"Stock Performance Graph" (i) shall not be deemed to be "soliciting material"
or to be "filed" with the Commission or subject to Regulation 14A or the
liabilities of Section 18 of the Exchange Act, and (ii) notwithstanding
anything to the contrary that may be contained in any filing by the Company
under such Act or the Securities Act of 1933, as amended ("Securities Act"),
shall not be deemed to be incorporated by reference in this or any other
filing.
ITEM 11. EXECUTIVE COMPENSATION.
This information is incorporated by reference to the Registrant's 2001 Proxy
Statement. However, the information set forth in the 2001 Proxy Statement under
the subheadings "Compensation Committee Report on Executive Compensation" and
"Stock Performance Graph" (i) shall not be deemed to be "soliciting material"
or to be "filed" with the Commission or subject to Regulation 14A or the
liabilities of Section 18 of the Exchange Act, and (ii) notwithstanding
anything to the contrary that may be contained in any filing by the Company
under such Act or the Securities Act, shall not be deemed to be incorporated by
reference in this or any other filing.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
This information is incorporated by reference to the Registrant's 2001 Proxy
Statement. However, the information set forth in the 2001 Proxy Statement under
the subheadings "Compensation Committee Report on Executive Compensation" and
"Stock Performance Graph" (i) shall not be deemed to be "soliciting material"
or to be "filed" with the Commission or subject to Regulation 14A or the
liabilities of Section 18 of the Exchange Act, and (ii) notwithstanding
anything to the contrary that may be contained in any filing by the Company
under such Act or the Securities Act, shall not be deemed to be incorporated by
reference in this or any other filing.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This information is incorporated by reference to the Registrant's 2001 Proxy
Statement. However, the information set forth in the 2001 Proxy Statement under
the subheadings "Compensation Committee Report on Executive Compensation" and
"Stock Performance Graph" (i) shall not be deemed to be "soliciting material"
or to be "filed" with the Commission or subject to Regulation 14A or the
liabilities of Section 18 of the Exchange Act, and (ii) notwithstanding
anything to the contrary that may be contained in any filing by the Company
under such Act or the Securities Act, shall not be deemed to be incorporated by
reference in this or any other filing.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this report:
- The following statements and the Report of Maggart &
Associates, P.C., Independent Certified Public Accountants,
appear on pages 20-47 of the 2000 Annual Report to
Stockholders, which is Exhibit 13 to this Annual Report on
Form 10-K, which portion of the 2000 Annual Report to
Stockholders is hereby incorporated herein by reference:
- Consolidated Balance Sheets as of December 31, 2000 and 1999;
- Consolidated Statements of Earnings for the three years ended
December 31, 2000;
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51
- Consolidated Statements of Comprehensive Earnings for the
three years ended December 31, 2000;
- Consolidated Statements of Changes in Stockholders' Equity
for the three years ended December 31, 2000;
- Consolidated Statements of Cash Flows for the three years
ended December 31, 2000; and
- All Notes to the foregoing Consolidated Financial Statements.
- -- Listing of Exhibits:
- 3(i) Charter as amended.(1)
- 3(ii) Bylaws.(1)
- 4.1 Charter as amended.(1)
- 4.2 Bylaws.(1)
- 4.3 1997 First McMinnville Corporation Stock Option
Plan.(2)
- 4.4 Shareholders Rights Agreement dated June 10,
1997.(2)
- 10.1 First National Bank of McMinnville 401(k) Retirement
Plan.(3)
- 10.2 Consulting Agreement dated February 9, 1996, between
First National Bank of McMinnville and Robert W.
Jones, replacing prior agreement dated December 14,
1993, as amended. [Terminated January 2000](4)
- 10.3 Employment Agreement dated the 11th day of June,
1999, between First McMinnville Corporation and
Charles C. Jacob.(5)
- 11 Statement re: computation of per share earnings
(Incorporated by reference to Note 17 of the
Consolidated Financial Statements).
- 12 Statements re computation of ratios.
- 13 Portions of the Annual Report to Security Holders,
as set forth in the Exhibit Index. Omitted in paper
copies.
- 21 Subsidiaries of the Registrant for the year ended
December 31, 2000.
(b) No reports on Form 8-K were filed for the quarter ended December 31,
2000.
(c) Exhibits - The exhibits required to be filed with this Annual Report
are attached hereto as a separate section of this report.
49
52
(d) Financial Statement Schedules - All schedules have been omitted since
the required information is either not applicable, is disclosed in
Item 1 of this Report, or is disclosed in the consolidated financial
statements or related notes to such financial statements.
- ---------
(1) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-KSB under the Exchange Act for the fiscal
year ended December 31, 1994.
(2) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K under the Exchange Act for the fiscal year
ended December 31, 1997.
(3) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K under the Exchange Act for the fiscal year
ended December 31, 1988.
(4) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-KSB under the Exchange Act for the fiscal
year ended December 31, 1996.
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53
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.
FIRST MCMINNVILLE CORPORATION
(REGISTRANT)
By: /s/ Charles C. Jacobs
---------------------------------------------------
Charles C. Jacobs
Chairman, President and Chief Executive Officer
March 14, 2001
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/ Paul O. Barnes Director March 21, 2001
- ---------------------------------
Paul O. Barnes
/s/ J. G. Brock Director March 21, 2001
- ---------------------------------
J. G. Brock
/s/ Arthur J. Dyer Director March 21, 2000
- ---------------------------------
Arthur J. Dyer
/s/ Dean I. Gillespie Director March 21, 2001
- ---------------------------------
Dean I. Gillespie
/s/ Rufus W. Gonder Director March 21, 2001
- ---------------------------------
Rufus W. Gonder
/s/ G. B. Greene Director March 21, 2001
- ---------------------------------
G. B. Greene
/s/ Charles C. Jacobs Chairman, President, March 21, 2001
- --------------------------------- CEO, and Director
Charles C. Jacobs
/s/ Robert W. Jones Director March 21, 2001
- ---------------------------------
Robert W. Jones
/s/ C. Levoy Knowles Director March 21, 2001
- ---------------------------------
C. Levoy Knowles
/s/ J. Douglas Milner Director March 21, 2001
- ---------------------------------
J. Douglas Milner
/s/ John J. Savage, Jr. Director March 21, 2001
- ---------------------------------
John J. Savage, Jr.
/s/ Carl M. Stanley Director March 21, 2001
- ---------------------------------
Carl M. Stanley
/s/ Kenny D. Neal Treasurer/Chief March 21, 2001
- --------------------------------- Financial and
Kenny D. Neal Accounting Officer
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EXHIBIT INDEX
EXHIBIT DESCRIPTION OF EXHIBIT LOCATION
NUMBER
3(i) Charter as amended. (1)
3(ii) Bylaws. (1)
4.1 Charter as amended. (1)
4.2 Bylaws. (1)
4.3 1997 First McMinnville Corporation Stock Option Plan. (2)
4.4 Shareholders Rights Agreement dated June 10, 1997. (2)
10.1 First National Bank of McMinnville 401(k) Retirement Plan. (3)
10.2 Consulting Agreement dated February 9, 1996, between First National (4)
Bank of McMinnville and Robert W. Jones, replacing prior agreement
dated December 14, 1993, as amended. (Terminated January 2000)
10.3 Employment Agreement dated the 11th day of June, 1999, between First (5)
McMinnville Corporation and Charles C. Jacobs.
11 Statement re: computation of per share earnings. (6)
12 Statements re computation of ratios. (7)
13 Annual Report to Security Holders. (8)
[Omitted in Paper
Copies]
21 Subsidiaries of the Registrant for the year ended December 31, 2000. After Exhibit
Index
(1) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-KSB under the Exchange Act for the fiscal
year ended December 31, 1994.
(2) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K under the Exchange Act for the fiscal year
ended December 31, 1997.
(3) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K under the Exchange Act for the fiscal year
ended December 31, 1988.
(4) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-KSB under the Exchange Act for the fiscal
year ended December 31, 1996.
(5) Incorporated herein by reference to exhibits filed with the Company's
Annual Report on Form 10-K under the Exchange Act for the fiscal year
ended December 31, 1997.
(6) Incorporated by reference to Note 17 of the Consolidated Financial
Statements.
(7) Incorporated by reference to the "Selected Financial Data and
Statistical Information" that appears in Item 1 of this Annual Report
on Form 10-K.
(8) Portions of the Annual Report to Security Holders are incorporated by
reference into the Form 10-K. These portions are "Selected Financial
Data," "Management's Discussion and Analysis of Financial Condition
and Results of Operation," and the Company's Consolidated Financial
Statements for the year ended December 31, 2000 (Part I, Part II and
Part IV). This Exhibit is omitted in the paper copy pursuant to
Instruction G(2) of the Instructions to Form 10-K.
55
EXHIBIT 13
ANNUAL REPORT TO SECURITY HOLDERS
Portions of the Annual Report to Security Holders are incorporated herein by
reference. These portions are "Selected Financial Data," the Management's
Discussion and Analysis of Financial Condition and Results of Operation," and
the Company's Consolidated Financial Statements for the year ended December 31,
2000. This Exhibit is omitted in the paper copy pursuant to Instruction G(2) of
the Instructions to Form 10-K.