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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
|X| Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 2003
| | Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _____ to _____
Commission file number: 000-30805
WGNB CORP.
(Exact name of registrant as specified in its charter)
Georgia 58-1640130
(State of Incorporation) (I.R.S. Employer Identification No.)
201 Maple Street
P.O. Box 280
Carrollton, Georgia 30112
(Address of principal executive offices)
(770) 832-3557
(Registrant's telephone number, including area code)
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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes | | No |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at May 10, 2003
----- ---------------------------
Common Stock, $1.25 par value 3,310,577
WGNB CORP.
INDEX TO FORM 10-Q
ITEM NUMBER
IN FORM 10-Q DESCRIPTION PAGE
- ------------ ----------- ----
PART ONE FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 2003 and
December 31, 2002......................................... 2
Consolidated Statements of Earnings for Three Months
ended March 31, 2003 and March 31, 2002 .................. 3
Consolidated Statements of Comprehensive Income for
Three Months ended March 31, 2003 and March 31, 2002 ..... 4
Consolidated Statements of Cash Flows for Three Months
ended March 31, 2003 and March 31, 2002................... 5
Notes to Consolidated Financial Statements................ 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations....................... 9
Item 3. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 12
Item 4. Controls and Procedures................................... 12
PART TWO OTHER INFORMATION
Item 1. Legal Proceedings......................................... 13
Item 2. Changes in Securities and Use of Proceeds................. 13
Item 3. Defaults Upon Senior Securities........................... 13
Item 4. Submission of Matters to a Vote of Security Holders....... 13
Item 5. Other Information......................................... 13
Item 6. Exhibits and Reports on Form 8-K.......................... 14
Signatures and Certifications............................. 15
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The unaudited financial statements of WGNB Corp. (the "Company") are set
forth on the following pages. All adjustments have been made which, in the
opinion of management, are necessary in order to make the financial statements
not misleading.
1
WGNB CORP.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2003 AND DECEMBER 31, 2002
(UNAUDITED)
March 31, December 31,
Assets 2003 2002
---- ----
Cash and cash due from banks, including reserve requirements
of $100,000 $ 7,970,900 $ 16,963,822
Federal funds sold 28,976,399 30,703,388
------------ ------------
Cash and cash equivalents 36,947,299 47,667,210
Securities available for sale 53,759,894 52,131,793
Securities held to maturity 4,000,000 3,500,000
Loans, net 281,299,450 269,212,860
Premises and equipment, net 6,405,806 5,959,767
Accrued interest receivable 2,090,660 2,027,228
Other assets 4,623,175 4,622,304
------------ ------------
$389,126,284 $385,121,162
============ ============
Liabilities and Stockholders' Equity
Deposits:
Demand $ 43,917,367 $ 38,039,880
Interest bearing demand 119,293,572 123,831,459
Savings 10,031,312 9,031,153
Time 87,952,097 86,680,351
Time, over $100,000 39,638,413 41,143,025
------------ ------------
Total deposits 300,832,761 298,725,868
Federal Home Loan Bank advances 45,000,000 45,000,000
Accrued interest payable 1,302,760 1,210,424
Other liabilities 2,505,678 1,664,919
------------ ------------
Total liabilities 349,641,199 346,601,211
------------ ------------
Commitments
Stockholders' equity:
Common stock, $1.25 par value, 10,000,000 shares authorized;
3,309,662 and 3,306,733 shares issued and outstanding 4,137,078 4,133,416
Additional paid-in capital 5,363,511 5,367,172
Retained earnings 28,534,701 27,709,213
Accumulated comprehensive income 1,449,795 1,310,150
------------ ------------
Total stockholders' equity 39,485,085 38,519,951
------------ ------------
$389,126,284 $385,121,162
============ ============
See accompanying notes to consolidated financial statements.
2
WGNB CORP.
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
For the Three Months
Ended March 31,
2003 2002
---- ----
Interest income:
Interest and fees on loans $ 5,047,958 $ 5,174,801
Interest on federal funds sold 79,214 89,294
Interest on investment securities:
U.S. Government agencies 307,199 429,152
State, county and municipal 325,710 300,887
Other 147,883 101,796
------------ ------------
Total interest income 5,907,964 6,095,930
------------ ------------
Interest expense:
Interest on deposits:
Demand 268,334 390,712
Savings 18,312 23,383
Time 1,110,362 1,506,736
Interest on FHLB and other borrowings 608,875 458,749
------------ ------------
Total interest expense 2,005,883 2,379,580
------------ ------------
Net interest income 3,902,081 3,716,350
Provision for loan losses 75,000 75,000
------------ ------------
Net interest income after provision
for loan losses 3,827,081 3,641,350
------------ ------------
Other income:
Service charges on deposit accounts 838,447 724,720
Mortgage origination fees 241,913 223,400
Gain on sale of investments available for sale -- 3,335
Miscellaneous 244,251 199,642
------------ ------------
Total other income 1,324,611 1,151,097
------------ ------------
Other expenses:
Salaries and employee benefits 1,843,005 1,776,927
Occupancy 409,589 420,518
Other operating 940,203 756,427
------------ ------------
Total other expenses 3,192,797 2,953,872
------------ ------------
Earnings before income taxes 1,958,895 1,838,575
Income taxes 603,861 617,731
------------ ------------
Net earnings $ 1,355,034 $ 1,220,844
============ ============
Basic earnings per share $ .41 $ .39
============ ============
Diluted earnings per share $ .40 $ .39
============ ============
Dividends declared per share $ .16 $ .15
============ ============
See accompanying notes to consolidated financial statements.
3
WGNB CORP.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
For the Three Months
Ended March 31,
2003 2002
---- ----
Net earnings $ 1,355,034 $ 1,220,844
Other comprehensive income, net of tax:
Unrealized gains on investment
securities available for sale:
Unrealized gains (losses) arising during
the period 211,583 (142,628)
Associated (taxes) benefit (71,938) 49,920
Reclassification adjustment for gains -- (3,335)
Associated taxes -- 1,167
------------ ------------
Other comprehensive income 139,645 (94,876)
------------ ------------
Comprehensive income $ 1,494,679 $ 1,125,968
============ ============
See accompanying notes to consolidated financial statements.
4
WGNB CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
For the Three Months
Ended March 31,
2003 2002
---- ----
Cash flows from operating activities:
Net earnings $ 1,355,034 $ 1,220,844
Adjustments to reconcile net earnings to net cash
Provided by operating activities:
Depreciation, amortization and accretion 247,270 253,139
Provision for loan losses 75,000 75,000
Gain on sale of securities available for sale -- (3,335)
Change in:
Other assets (64,303) (256,140)
Other liabilities 845,329 (3,692)
------------ ------------
Net cash provided by operating activities 2,458,330 1,285,816
------------ ------------
Cash flows from investing activities:
Proceeds from sales of securities available for sale -- 4,521,376
Proceeds from maturities of securities available for sale 3,454,080 2,787,165
Purchases of securities available for sale (4,923,868) (8,882,256)
Purchases of securities held to maturity (500,000) (1,000,000)
Net change in loans (12,161,590) (1,775,909)
Purchases of premises and equipment (640,039) (155,773)
Cash expenditures for other real estate owned -- (11,843)
------------ ------------
Net cash used by investing activities (14,771,417) (4,517,240)
------------ ------------
Cash flows from financing activities:
Net change in deposits 2,106,893 (2,276,791)
Repayment of other borrowings -- (140,000)
Dividends paid (513,717) (419,770)
Exercise of stock options 46,045 65,282
Retirement of common stock (46,045) (65,282)
------------ ------------
Net cash provided (used) by financing activities 1,593,176 (2,836,561)
------------ ------------
Change in cash and cash equivalents (10,719,911) (6,067,985)
Cash and cash equivalents at beginning of period 47,667,210 30,998,895
------------ ------------
Cash and cash equivalents at end of period $ 36,947,299 $ 24,930,910
============ ============
See accompanying notes to consolidated financial statements.
5
WGNB CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
For the Three Months
Ended March 31,
2003 2002
---- ----
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 1,913,547 $ 2,772,684
Income taxes 60,000 1,269,800
Non-cash investing and financing activities:
Change in unrealized gains (losses) on securities
available for sale, net of tax 139,645 (94,876)
Change in dividends payable 15,829 30,708
Satisfaction of other liability with issuance
of common stock -- 29,367
See accompanying notes to consolidated financial statements.
6
WGNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE (1) - BASIS OF PRESENTATION
The consolidated financial statements include the accounts of WGNB Corp.
(the "Company") and its wholly-owned subsidiary, West Georgia National Bank (the
"Bank"). All significant inter-company accounts have been eliminated in
consolidation. In some cases, certain prior period amounts have been
reclassified to conform with current year presentation.
The accompanying unaudited interim consolidated financial statements
reflect all adjustments which, in the opinion of management, are necessary to
present fairly the Company's financial position as of March 31, 2003, and the
results of its operations and its cash flows for the three-month period then
ended. All such adjustments are normal and recurring in nature. The financial
statements included herein should be read in conjunction with consolidated
financial statements and the related notes and the report of independent
accountants included in the Company's filing on Form 10-K which included the
results of operations for the years ended December 31, 2002, 2001 and 2000.
NOTE (2) - NET EARNINGS PER SHARE
Basic earnings per share is based on the weighted average number of common
shares outstanding during the period while the effects of potential common
shares outstanding during the period are included in diluted earnings per share.
The average market price during the year is used to compute equivalent shares.
Reconciliation of the amounts used in the computation of both "basic
earnings per share" and "diluted earnings per share" for the quarter ended March
31, 2003 and March 31, 2002 are as follows:
For the three months ended March 31, 2003
Earnings
Net Earnings Common Shares per Share
------------ ------------- ---------
Basic earnings per share $ 1,355,034 3,307,296 $ .41
Effect of dilutive securities - Stock Options -- 44,237 .01
------------ ------------ ------
Diluted earnings per share $ 1,355,034 3,351,533 $ .40
============ ============ ======
For the three months ended March 31, 2002
Earnings
Net Earnings Common Shares per Share
------------ ------------- ---------
Basic earnings per share $ 1,220,844 3,103,096 $ .39
Effect of dilutive securities - Stock Options -- 27,280 .00
------------ ------------ ------
Diluted earnings per share $ 1,220,844 3,130,376 $ .39
============ ============ ======
7
WGNB CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE (3) - STOCK COMPENSATION PLANS
SFAS No. 123, "Accounting for Stock-Based Compensation", encourages all
entities to adopt a fair value based method of accounting for employee stock
compensation plans, whereby compensation cost is measured at the grant date
based on the value of the award and is recognized over the service period, which
is usually the vesting period. However, it also allows an entity to continue to
measure compensation cost for those plans using the intrinsic value based method
of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", whereby compensation cost is the
excess, if any, of the quoted market price of the stock at the grant date (or
other measurement date) over the amount an employee must pay to acquire the
stock. Stock options issued under the Company's stock option plan have no
intrinsic value at the grant date, and under Opinion No. 25 no compensation cost
is recognized for them. The Company has elected to continue with the accounting
methodology in Opinion No. 25 and, as a result, has provided proforma
disclosures of net income and earnings per share and other disclosures, as if
the fair value based method of accounting had been applied. Had compensation
cost for the plan been determined based upon the fair value of the options at
the grant dates, the Company's net earnings per share for the quarters ended
March 31, 2003 and 2002 would have been reduced to the proforma amounts
indicated below:
2003 2002
---- ----
Net earnings As reported $ 1,355,034 1,220,844
Proforma $ 1,205,320 1,142,073
Net earnings per share As reported $ .41 .39
Proforma $ .36 .37
Diluted earnings per share As reported $ .40 .39
Proforma $ .36 .36
The fair value of each option is estimated on the date of the grant using
the Black-Scholes Model. The following weighted average assumptions were used
for grants in 2003 and 2002, respectively: dividend yield of 2.41% and 2.40%,
risk free interest rates of 3.90% and 4.14%, respectively, and an expected life
of 10 years. For disclosure purposes, the Company immediately recognized the
expense associated with the option grants assuming that all awards will vest.
The compensation expense included in the proforma results was determined based
on the fair value of the option at the time of grant multiplied by the number of
options granted net of tax effect.
8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following analysis compares WGNB Corp.'s results of operations for the
three month periods ended March 31, 2003 and 2002 and reviews important factors
affecting WGNB Corp.'s financial condition at March 31, 2003, compared to
December 31, 2002. These comments should be read in conjunction with the
Company's consolidated financial statements and accompanying notes appearing in
this report.
FORWARD LOOKING STATEMENTS
This report may contain certain "forward-looking statements" including
statements concerning plans, objectives, future events or performance and
assumptions and other statements that are not statements of historical fact. The
Company cautions readers that the following important factors, among others,
could cause the Company's actual results to differ materially from the
forward-looking statements contained in this report: (i) the effect of changes
in laws and regulations, including federal and state banking laws and
regulations, with which the Company and its subsidiaries must comply, and the
associated costs of compliance with such laws and regulations either currently
or in the future as applicable; (ii) the effect of changes in accounting
policies and practices, as may be adopted by the regulatory agencies as well as
by the Financial Accounting Standards Board, or of changes in the Company's
organization, compensation and benefit plans; (iii) the effect on the Company's
competitive position within its market area of the increasing consolidation
within the banking and financial services industries, including the increased
competition from larger regional and out-of-state banking organizations as well
as non-bank providers of various financial services; (iv) the effect of changes
in interest rates; and (v) the effect of changes in the business cycle and
downturns in local, regional or national economies. The Company cautions that
the foregoing list of important factors is not exclusive.
RESULTS OF OPERATIONS
Overview
Net earnings for the three months ended March 31, 2003 was $1,355,034,
which represented an increase of $134,000, or 11.0 percent, when compared to the
three months ended March 31, 2002. The first quarter of 2003 earnings
established another record first quarter net income for the Company. When
comparing the first quarter of 2003 to the first quarter of 2002, the improved
results are primarily attributable to increased net interest income, deposit
account fee income and mortgage origination revenue. Total revenue, including
net interest income and other income, increased approximately $360,000, or 7.5
percent, comparing the first quarter ended March 31, 2003 with the first quarter
ended March 31, 2002. Comparing the same two quarters, other operating expenses
have increased $239,000, or 8.1 percent. With respect to expenses, salaries and
employee benefits have increased $66,000, or 3.7 percent, and all other
operating expense increased by $173,000, or 14.7 percent.
Net Interest Income
The net interest margin for the Company has stabilized after a twenty four
month decline. The net interest margin for the first quarter of 2003 was 4.53
percent, compared to 4.48 percent for the first quarter of 2002. Despite
continued low interest rates, the Bank's interest margin has actually increased.
Management recognized the potential impact of low rates and actively managed the
balance sheet to minimize interest rate risk including the use of interest rate
swaps in 2002. As mentioned in the overview, the dollar amount of net interest
income increased by $134,000 from the first quarter ended March 31, 2002 to that
period for 2003. This is primarily attributable to an increase in average
outstanding loans comparing the two periods of over $28 million. During that
same time period, the average yield on loans decreased 82 basis points, from
7.59 percent in the first quarter of 2002 to 6.77 percent in the first quarter
of 2003. The overall yield on earning assets has decreased by 67 basis points
during the same time period. This decrease in the yield on earning assets was
offset by a decrease in the cost of interest-bearing liabilities of 74 basis
points. The Bank's balance sheet is positioned to benefit from an increase in
interest rates. A prolonged low rate environment will have a slight detrimental
impact on the net interest margin as loan and investment yields decline and the
cost of funds reaches an economic floor.
9
Non-Interest Income and Expense
Non-interest income increased by $174,000, or 15.1 percent, when comparing
the first quarter of 2003 to first quarter of 2002. The increase in service
charges on deposit accounts constituted $114,000 of the difference, the increase
in mortgage origination fees was $19,000 and miscellaneous income which includes
other loan and network fees increased $45,000 when comparing the two first
quarter periods. Mortgage origination volume remains good, but is expected to
flatten out or decline for the remainder of 2003.
When comparing non-interest expense for the periods ended March 31, 2003
and 2002, there was a $239,000, or 8.1 percent, increase. That increase was made
up of a $66,000, or 3.7 percent, increase in salaries and benefits which was
attributable to increases in salaries for existing employees. The Bank's
employee count has not materially changed since March, 2002. Occupancy expense
in the first quarter of 2003 actually decreased $11,000 when compared to the
first quarter of 2002. Other operating expense increased approximately $184,000
from the first quarter of 2002 to the first quarter of 2003. This increase was
primarily attributable to increased legal fees associated with a suit brought
against the Bank for which it is not likely the Bank will incur significant
loss.
Income Taxes
Income tax expense for the first three months of each year was $603,000 in
2003, and $618,000 in 2002. The effective tax rates for each of the periods
ended March 31, 2003 and 2002 were 30.8 percent and 33.5 percent, respectively.
The decreasing marginal rate is primarily attributable to the purchase of tax
credits and the formation of an investment subsidiary of the Bank which is not
subject to state tax.
Provision and Allowance for Loan Losses
The adequacy of the allowance for loan losses is determined through
management's informed judgment concerning the amount of risk inherent in the
Bank's loan and lease portfolios. This judgment is based on such factors as the
change in levels of non-performing and past due loans and leases, historical
loan loss experience, borrowers' financial condition, concentration of loans to
specific borrowers and industries, estimated values of underlying collateral,
and current and prospective economic conditions. The allowance for loan losses
at March 31, 2003 was $3.5 million, or 1.22 percent, of total loans compared to
$3.7 million, or 1.46 percent, of total loans at December 31, 2002. Management
believes that the allowance for loan losses is adequate to absorb possible loss
in the loan portfolio. During the first quarter of 2003, as result of a work out
on nine loans, the Bank recognized a charge-off of $337,000 for which the Bank
had recorded a specific reserve.
Non-Performing Assets and Past Due Loans
Non-performing assets, comprised of real estate owned, non-accrual loans
and loans for which payments are more than 90 days past due, totaled $1.9
million at March 31, 2003, compared to $2.8 million at December 31, 2002.
Non-performing assets as a percentage of total loans and real estate owned at
March 31, 2003 and December 31, 2002 were .65 percent and 1.03 percent,
respectively.
The Company has a loan review function that continually monitors selected
loans for which general economic conditions or changes within a particular
industry could cause the borrowers financial difficulties. The loan review
function also identifies loans with higher degrees of credit or other risks. The
focus of loan review as well as management is to maintain a low level of
non-performing assets and return current non-performing assets to earning
status. Management is unaware of any known trends, events or uncertainties that
will have or that are reasonably likely to have a material effect on liquidity,
capital resources or operations.
FINANCIAL CONDITION
Overview
Total assets were $389.1 million at March 31, 2003 representing an
increase of $4.0 million, or 1.0 percent, from December 31, 2002.
10
Assets and Funding
At March 31, 2003, earning assets totaled $370 million, an increase of $12
million from December 31, 2002. The mix of interest earning assets has changed
slightly since the end of 2002. Loans comprised 77 percent of earning assets,
investment securities increased to 15 percent, and federal funds decreased to 8
percent of earning assets at March 31, 2003. Total loans expressed as a
percentage of earning assets was 76 percent, investments constituted 15 percent,
and federal funds were 9 percent of earning assets at December 31, 2002.
At March 31, 2003, interest-bearing deposit accounts decreased $3.8
million when compared to December 31, 2002. Non-interest-bearing demand accounts
increased $5.9 million while interest-bearing demand accounts, such as public
funds, money markets and now accounts, increased $500,000 in the first three
months of 2003. The growth in non-interest bearing demand accounts has resulted
in a lower cost of funds for the Bank than would have otherwise been achieved if
the growth would have been by certificates of deposit or some other interest
bearing deposit product. Federal Home Loan Bank advances remained static at $45
million comparing the first quarter of 2003 to the year ended 2002. At March 31,
2003 and December 31, 2002, deposits represented 85 percent of interest-bearing
liabilities while Federal Home Bank advances and other borrowings represented 15
percent of interest-bearing liabilities.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities totaled $2.5 million for the
three months ended March 31, 2003. Net cash used by investing activities
totaling $14.6 million consisted primarily of a $12 million increase in loans
and a $4.9 million increase in securities available for sale. The increase in
loans and securities were funded by deposits on hand. The decrease in cash and
cash equivalents for the year to date at March 31, 2003 was $10.7 million.
Total stockholders' equity at March 31, 2003 was 10.1 percent of total
assets unchanged from December 31, 2002. Total stockholders' equity increased by
$965 thousand due to current year retained earnings.
At March 31, 2003 WGNB Corp. was in compliance with various regulatory
capital requirements administered by federal and state banking agencies. The
following is a table representing WGNB Corp.'s consolidated Tier-1, tangible
capital, and risk-based capital:
MARCH 31, 2003
-----------------------------------------------------------------------------
ACTUAL REQUIRED EXCESS
AMOUNT % AMOUNT % AMOUNT %
------ - ------ - ------ -
Total capital (to risk-
weighted assets) $ 41,519 14.19% $ 23,404 8.00% $ 18,115 6.19%
Tier 1 capital (to risk-
weighted assets) 38,035 13.00% 11,702 4.00% 26,333 9.00%
Tier 1 capital (to
average assets) 38,035 9.82% 15,488 4.00% 22,547 5.82%
Off Balance Sheet Risk
Through the operations of the Bank, the Company has made contractual
commitments to extend credit in the ordinary course of its business activities.
These commitments are legally binding agreements to lend money to the Bank's
customers at predetermined interest rates for a specified period of time. At
March 31, 2003, the Bank had issued commitments to extend credit of $47,460,000
through various types of commercial lending arrangements and additional
commitments through standby letters of credit of $1,374,000. The Company
evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on its credit evaluation of the borrower. Collateral varies but
may include accounts receivable, inventory, property, plant and equipment,
commercial and residential real estate. The Company manages the credit risk on
these commitments by subjecting them to normal underwriting and risk management
processes.
11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss from adverse changes in market prices and
interest rates. The Company's market risk arises primarily from interest rate
risk inherent in its lending and deposit-taking activities. The Company has
little or no risk related to trading accounts, commodities or foreign exchanges.
Interest rate risk, which encompasses price risk, is the exposure of a
banking organization's financial condition and earnings ability to adverse
movements in interest rates. The measurement of market risk associated with
financial instruments is meaningful only when all related and offsetting on-and
off-balance sheet transactions are aggregated, and the resulting net positions
are identified. Disclosures about the fair value of financial instruments as of
December 31, 2002, which reflected changes in market prices and rates, can be
found in the Company's Annual Report to Stockholders on Form 10-K for the year
ended December 31, 2002 under the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operation - Asset/Liability
Management."
Management actively monitors and manages the Company's interest rate risk
exposure. The primary objective in managing interest rate risk is to limit,
within established guidelines, the adverse impact of changes in interest rates
on the Company's net interest income and capital, while adjusting the Company's
asset-liability structure to obtain the maximum yield versus cost spread on that
structure. Management relies primarily on its asset-liability structure to
control interest rate risk. However, a sudden and substantial increase in
interest rates borne by assets and liabilities do not change at the same speed,
to the same extent, or on the same basis. Management believes that there have
been no significant changes in the Company's market risk exposure since December
31, 2002.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures.
The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, the chief executive and chief financial officers of the Company
concluded that the Company's disclosure controls and procedures were adequate.
Changes in internal controls.
The Company made no significant changes in its internal controls or in
other factors that could significantly affect these controls subsequent to the
date of the evaluation of those controls by the chief executive and chief
financial officers.
12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There are no material, pending legal proceedings to which the Company or
any of its subsidiaries is a party or of which any of their property is the
subject.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(a) Not applicable.
(b) Not applicable.
(c) The Company issued the following securities during the quarter ended
March 31, 2003 without registering the securities under the Securities Act,
pursuant to the exemption provided in Section 4(2) thereof, as a transaction not
involving a public offering:
Options to purchase 39,735 shares of Common Stock were granted during the
quarter to individuals pursuant to the Company's Incentive Stock Option Plan
having a weighted average exercise price of $24.99. These options may be
exercised anytime beginning five years from the date of grant and ending ten
years from the date of grant at which point they expire. A total of 4,651
options were exercised in the first quarter of 2003, at a weighted average
exercise price of $9.90.
(d) On March 28, 2002, the Company's Registration Statement on Form S-1,
pursuant to which the Company registered 200,000 shares of its Common Stock for
sale to the public, was declared effective by the Securities and Exchange
Commission under Registration No. 333-84140. On April 10, 2002, the Company
commenced the public offering of these 200,000 shares, at a purchase price of
$24.00 per share, or an aggregate amount of $4,800,000. The offering was
conducted through the Company's officers and directors on a best-efforts basis
without compensation. The entire 200,000 shares subject to the registration
statement was sold, and the offering was terminated on April 23, 2002. Gross
proceeds received from the offering totaled $4,800,000. The Company received net
proceeds from the offering of $4,765,654 after deducting offering expenses of
$34,346. The proceeds were invested in a corporate bond with a book value of
$646,586 as of June 30, 2002 and the remainder remains invested in federal
funds.
During the first quarter of 2003, the Company declared and paid quarterly
cash dividends amounting to 16.00 cents per share. The declaration of future
dividends is within the discretion of the Board of Directors and will depend,
among other things, upon business conditions, earnings, the financial condition
of the Bank and the Company, and regulatory requirements
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
None.
13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as part of this Report:
3.1 Amended and Restated Articles of Incorporation (Incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement on
Form 10-SB filed June 14, 2000 (the "Form 10-SB").
3.2 Amended and Restated Bylaws (Incorporated by reference to Exhibit
3.2 to the Form 10-SB).
4.1 See exhibits 3.1 and 3.2 for provisions of Company's Articles of
Incorporation and Bylaws Defining the Rights of Shareholders.
4.2 Specimen certificate representing shares of Common Stock
(Incorporated by reference to Exhibit 4.2 to the Form 10-SB).
4.3 Rights Agreement dated as of February 12, 1997 between the Company
and SunTrust Bank, Atlanta (Incorporated by reference to Exhibit 4.3
to the Form 10-SB).
99.1 Certification of Chief Executive Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
99.2 Certification of Chief Financial Officer pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 2003.
14
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 13, 2003
WGNB CORP.
By: /s/ L. Leighton Alson
-----------------------------------
L. Leighton Alston
President and CEO
By: /s/ Steven J. Haack
-----------------------------------
Steven J. Haack
Treasurer
Principal Financial Officer
CERTIFICATIONS
PURSUANT TO 17 CFR 240.13a-14
PROMULGATED UNDER
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, L. Leighton Alston, Chief Executive Officer of WGNB Corp., certify that:
1. I have reviewed this quarterly report on Form 10-Q of WGNB Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
15
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/ L. Leighton Alston
- -------------------------
L. Leighton Alston
Chief Executive Officer
16
I, Steven J. Haack, Principal Financial Officer of WGNB Corp., certify that:
1. I have reviewed this quarterly report on Form 10-Q of WGNB Corp.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officer and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 13, 2003
/s/ Steven J. Haack
- -----------------------------
Steven J. Haack
Treasurer
(Principal Financial Officer)
17