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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Wgnb (MM) | NASDAQ:WGNA | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 8.00 | 0 | 01:00:00 |
(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,
2008
|
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
|
SECURITIES EXCHANGE ACT OF 1934: For the transition period from ____________ to ____________ |
Georgia
|
58-1640130
|
||
(State
of incorporation)
|
(I.R.S.
Employer Identification No.)
|
201
Maple Street
|
|||
P.O.
Box 280
|
(770)
832-3557
|
||
Carrollton, Georgia
30117
|
(Registrant’s
telephone number,
|
||
(Address
of principal executive offices)
|
Including
area code)
|
||
Securities registered pursuant to Section 12(b) of the Act: | |||
|
|||
Title
of Class
|
Name
of Exchange on Which Listed
|
||
Common
Stock, no par value
|
The
NASDAQ Stock Market, LLC
|
||
Series
A Convertible Preferred Stock, no par value
|
The
NASDAQ Stock Market, LLC (pending)
|
Large Accelerated Filer ¨ | Accelerated Filer ¨ | Non-Accelerated Filer ¨ | Smaller Reporting Company x |
Item
Number
in
Form 10-K
|
Description
|
Page
or
Location
|
||
|
||||
PART I | ||||
Item
1.
|
Business
|
1 | ||
Item
1A.
|
Risk
Factors
|
19 | ||
Item
1B.
|
Unresolved
Staff Comments
|
19 | ||
Item
2.
|
Properties
|
20 | ||
Item
3.
|
Legal
Proceedings
|
21 | ||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
21 | ||
PART II | ||||
Item
5.
|
Market
for the Common Equity, Related Shareholder Matters and Issuer Purchases of
Equity Securities
|
21 | ||
Item
6.
|
Selected
Financial Data
|
23 | ||
Item
7.
|
Management’s
Discussion and Analysis of Financial
Condition
and Results of Operations
|
24 | ||
Item
7A.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
48 | ||
Item
8.
|
Financial
Statements and Supplementary Data
|
48 | ||
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
48 | ||
Item
9A(T).
|
Controls
and Procedures
|
48 | ||
Item
9B.
|
Other
Information
|
49 | ||
PART III | ||||
Item
10.
|
Directors,
Executive Officers and Corporate Governance
|
49 | ||
Item
11.
|
Executive
Compensation
|
49 | ||
Item
12.
|
Security
Ownership of Certain Beneficial Owners
and
Management and Related Shareholder Matters
|
49 | ||
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
50 | ||
Item
14.
|
Principal
Accountant Fees and Services
|
50 | ||
PART IV | ||||
Item
15.
|
Exhibits
and Financial Statement Schedules
|
50 | ||
Signatures
|
54 |
Deposit
Mix
|
||||
At
December 31, 2008
|
||||
Non-interest
bearing demand
|
9 | % | ||
NOW
accounts and money market
|
26 | % | ||
Savings
|
2 | % | ||
Time
Deposits
|
||||
Under
$100,000
|
29 | % | ||
$100,000 and
over
|
34 | % | ||
100 | % |
Unsecured
loans
|
30 | % | ||
Loans
secured by:
|
||||
Residential
real estate
|
300 | % | ||
Total
commercial real estate
|
300 | % | ||
Convenience
stores
|
20 | % | ||
Hotels/motels
|
10 | % | ||
Apartments
|
50 | % | ||
Construction
acquisition & development loans
|
100 | % | ||
Commercial
and industrial purpose loans
|
150 | % | ||
Participations
purchased
|
75 | % | ||
Single
payment notes
|
300 | % |
●
|
the
amounts exceeding the limit are sold on a non-recourse
basis;
|
|
●
|
the
amounts exceeding the limit are secured by readily marketable securities,
up to a limit of 25% of capital and
reserves.
|
●
|
to
acquire the ownership or control of more than 5% of any class of voting
stock of any bank not already controlled by it;
|
|
●
|
for
it or any subsidiary (other than a bank) to acquire all or substantially
all of the assets of a bank; and
|
|
●
|
to merge or consolidate with any other bank holding company. |
●
|
making
or servicing loans and certain leases;
|
|
●
|
providing
certain data processing services;
|
|
●
|
acting as a fiduciary or investment or financial advisor; |
●
|
providing discount brokerage services; | |
●
|
underwriting bank eligible securities; and | |
●
|
making investments designed to promote community welfare. |
●
|
lending,
exchanging, transferring, investing for others or safeguarding money or
securities;
|
|
●
|
insuring,
guaranteeing, or indemnifying against loss, harm, damage, illness,
disability, or death, or providing and issuing annuities, and acting as
principal, agent, or broker with respect thereto;
|
|
●
|
providing financial, investment, or economic advisory services, including advising an investment company; | |
●
|
issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly; and | |
●
|
underwriting, dealing in or making a market in securities. |
●
|
make
regulatory capital requirements more sensitive to differences in risk
profiles among banks and bank holding companies;
|
|
●
|
account
for off-balance sheet exposure; and
|
|
●
|
minimize
disincentives for holding liquid
assets.
|
Classification
|
Total
Risk-
Based
Capital
|
Tier
I
Risk-
Based
Capital
|
Tier
I
Leverage
|
|||
Well
Capitalized (1)
|
10
%
|
6
%
|
5
%
|
|||
Adequately
Capitalized (1)
|
8
%
|
4
%
|
4
%
(2)
|
|||
Undercapitalized
(3)
|
<8
%
|
<4
%
|
<4
%
|
|||
Significantly
Undercapitalized (3)
|
<6
%
|
<3
%
|
<3
%
|
|||
Critically
Undercapitalized (3)
|
—
|
—
|
<2
%
|
(1) |
An
institution must meet all three minimums.
|
||
(2) | 3% for composite 1-rated institutions, subject to appropriate federal banking agency guidelines. | ||
(3) | An institution is classified as undercapitalized if it is below the specified capital level for any of the three capital measures. |
●
|
to
conduct enhanced scrutiny of account relationships to guard against money
laundering and report any suspicious transaction;
|
|
●
|
to
ascertain the identity of the nominal and beneficial owners of, and the
source of funds deposited into, each account as needed to guard against
money laundering and report any suspicious
transactions;
|
●
|
to ascertain for any foreign bank, the shares of which are not publicly traded, the identity of the owners of the foreign bank, and the nature and extent of the ownership interest of each such owner; and | |
●
|
to
ascertain whether any foreign bank provides correspondent accounts to
other foreign banks and, if so, the identity of those foreign banks and
related due diligence
information.
|
●
|
the
development of internal policies, procedures, and
controls;
|
|
●
|
the
designation of a compliance officer;
|
|
●
|
an
ongoing employee training program; and
|
|
●
|
an
independent audit function to test the
programs.
|
●
|
to
an amount equal to 10% of the bank’s capital and surplus, in the case of
covered transactions with any one affiliate; and
|
|
●
|
to
an amount equal to 20% of the bank’s capital and surplus, in the case of
covered transactions with all
affiliates.
|
●
|
a
loan or extension of credit to an affiliate;
|
|
●
|
a
purchase of, or an investment in, securities issued by an
affiliate;
|
|
●
|
a
purchase of assets from an affiliate, with some
exceptions;
|
|
●
|
the
acceptance of securities issued by an affiliate as collateral for a loan
or extension of credit to any party; and
|
|
●
|
the
issuance of a guarantee, acceptance or letter of credit on behalf of an
affiliate.
|
●
|
a
bank and its subsidiaries may not purchase a low-quality asset from an
affiliate;
|
|
●
|
covered
transactions and other specified transactions between a bank or its
subsidiaries and an affiliate must be on terms and conditions that are
consistent with safe and sound banking practices; and
|
|
●
|
with
some exceptions, each loan or extension of credit by a bank to an
affiliate must be secured by collateral with a market value ranging from
100% to 130%, depending on the type of collateral, of the amount of the
loan or extension of credit.
|
●
|
new
requirements for financial institutions to develop policies and procedures
to identify potential identity theft and, upon the request of a consumer,
place a fraud alert in the consumer’s credit file stating that the
consumer may be the victim of identity theft or other
fraud;
|
|
●
|
new
consumer notice requirements for lenders that use consumer report
information in connection with risk-based credit pricing
programs;
|
|
●
|
for
entities that furnish information to consumer reporting agencies(which
would include the Bank), new requirements to implement procedures and
policies regarding the accuracy and integrity of the furnished
information, and regarding the correction of previously furnished
information that is later determined to be inaccurate;
and
|
|
●
|
a
new requirement for mortgage lenders to disclose credit scores to
consumers.
|
●
|
Limits
on compensation incentives for risk taking by senior executive
officers.
|
|
●
|
Requirement
of recovery of any compensation paid based on inaccurate financial
information.
|
|
●
|
Prohibition
on “Golden Parachute Payments”.
|
|
●
|
Prohibition
on compensation plans that would encourage manipulation of reported
earnings to enhance the compensation of
employees.
|
●
|
Publicly
registered TARP recipients must establish a board compensation committee
comprised entirely of independent directors, for the purpose of reviewing
employee compensation plans.
|
|
●
|
Prohibition
on bonus, retention award, or incentive compensation, except for payments
of long term restricted stock.
|
|
●
|
Limitation
on luxury expenditures.
|
|
●
|
TARP
recipients are required to permit a separate shareholder vote to approve
the compensation of executives, as disclosed pursuant to the SEC’s
compensation disclosure rules.
|
|
●
|
The
chief executive officer and chief financial officer of each TARP recipient
will be required to provide a written certification of compliance with
these standards to the
SEC.
|
●
|
Provide
access to low-cost refinancing for responsible homeowners suffering from
falling home prices.
|
|
●
|
A
$75 billion homeowner stability initiative to prevent foreclosure and help
responsible families stay in their homes.
|
|
●
|
Support
low mortgage rates by strengthening confidence in Fannie Mae and Freddie
Mac.
|
●
|
assigning
of additional asset recovery staff including management whose sole
responsibility is to manage and reduce non-performing assets as quickly as
possible;
|
|
●
|
continuing
review and revision, as appropriate, of loan portfolio management
procedures and processes including loan diversification, increased
underwriting standards, intensified loan review and aggressive problem
asset identification;
|
●
|
maintaining
a valuation process which we believe balances rapid collection of
non-performing loans and reduction of foreclosed property with maximizing
the net realizable value of these assets for the shareholders;
and
|
|
●
|
taking
necessary steps, including raising capital through a public offering of
our Series A Preferred stock, in order to be considered well capitalized
as determined by regulatory standards applicable to the Bank and
us.
|
Facility
|
Location
|
Ownership
|
|
WGNB
and First National Bank
Corporate
Offices
|
201
Maple Street
Carrollton,
Carroll County, Georgia
|
Owned
|
|
First
National Bank
Main
Branch Office
|
201
Maple Street
Carrollton,
Carroll County, Georgia
|
Owned
|
|
First
National Bank
First
Tuesday Mall Office
|
1004
Bankhead Highway
Carrollton,
Carroll County, Georgia
|
Owned
|
|
First
National Bank
Motor
Office
|
314
Newnan Street
Carrollton,
Carroll County, Georgia
|
Leased
|
|
First
National Bank
Villa
Rica Office
|
725
Bankhead Highway
Villa
Rica, Carroll County, Georgia
|
Owned
|
|
First
National Bank
Bowdon
Office
|
205
East College Street
Bowdon,
Carroll County, Georgia
|
Owned
|
|
First
National Bank
Temple
Office
|
184
Carrollton Street
Temple,
Carroll County,
Georgia
|
Owned
|
|
First
National Bank
Bremen
Financial Center
(former
First Haralson headquarters)
|
900
Atlantic Avenue
Bremen,
Haralson County, Georgia
|
Owned
|
|
First
National Bank
Bremen
Office
|
501
Pacific Avenue
Bremen,
Haralson County, Georgia
|
Owned
|
|
First
National Bank
Buchanan
Office
|
3559
Business 27
Buchanan,
Haralson County, Georgia
|
Owned
|
|
First
National Bank
Tallapoosa
Office
|
3408
Georgia Hwy 100
Tallapoosa,
Haralson County, Georgia
|
Owned
|
|
First
National Bank
Tallapoosa
Office
|
39
Bowden Street
Tallapoosa,
Haralson County, Georgia
|
Owned
|
|
First
National Bank
Mirror
Lake Office
|
Village
at Mirror Lake Shopping Center
Douglasville,
Douglas County, Georgia
|
Owned
|
|
First
National Bank
Highway
5 Office
|
9557
Georgia Hwy 5
Douglasville,
Douglas County, Georgia
|
Leased
|
|
First
National Bank
Chapel
Hill Office
|
9360
The Landing Drive
(adjacent
to Arbor Place Mall)
Douglasville,
Douglas County, Georgia
|
Owned
|
Price
Range Per Share
|
|||||||||||||
Low
|
High
|
Dividends
Paid
Per Share
|
|||||||||||
2007:
|
|||||||||||||
First
Quarter
|
$ | 27.50 | $ | 33.00 | $ | 0.197 | |||||||
Second
Quarter
|
28.32 | 31.60 | 0.203 | ||||||||||
Third
Quarter
|
24.79 | 28.08 | 0.210 | ||||||||||
Fourth
Quarter
|
19.79 | 24.24 | 0.210 | ||||||||||
2008:
|
|||||||||||||
First
Quarter
|
$ | 15.00 | $ | 21.55 | $ | 0.210 | |||||||
Second
Quarter
|
8.16 | 16.89 | 0.105 | ||||||||||
Third
Quarter
|
4.28 | 9.37 | 0.000 | ||||||||||
Fourth
Quarter
|
2.27 | 6.99 | 0.000 |
Year
Ended December 31,
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
(In
thousands, except share and per share data)
|
||||||||||||||||||||
For
the Year:
|
||||||||||||||||||||
Total
interest income
|
$ | 48,113 | $ | 55,828 | $ | 42,093 | $ | 32,546 | $ | 25,268 | ||||||||||
Total
interest expense
|
25,611 | 27,181 | 18,727 | 12,583 | 7,570 | |||||||||||||||
Net
interest income
|
22,502 | 28,647 | 23,366 | 19,963 | 17,698 | |||||||||||||||
Provision
for loan losses
|
14,900 | 10,206 | 1,465 | 1,550 | 925 | |||||||||||||||
Net
interest income after provision for loan losses
|
7,602 | 18,441 | 21,901 | 18,413 | 16,773 | |||||||||||||||
Other
income
|
7,617 | 8,068 | 6,404 | 6,008 | 5,637 | |||||||||||||||
Other
expense
|
28,234 | 23,341 | 16,519 | 14,464 | 13,664 | |||||||||||||||
Goodwill
impairment
|
24,128 | — | — | — | — | |||||||||||||||
Earnings
(loss) before income taxes
|
(37,143 | ) | 3,168 | 11,786 | 9,957 | 8,746 | ||||||||||||||
Income
(benefit) taxes
|
(6,393 | ) | 134 | 3,458 | 2,889 | 2,682 | ||||||||||||||
Net
(loss) earnings
|
(30,750 | ) | 3,034 | 8,327 | 7,067 | 6,064 | ||||||||||||||
Per
Share Data:
|
||||||||||||||||||||
Net
(loss) earnings
|
(5.12 | ) | .55 | 1.67 | 1.42 | 1.22 | ||||||||||||||
Diluted
(loss) earnings
|
(5.12 | ) | .55 | 1.66 | 1.41 | 1.21 | ||||||||||||||
Diluted
(loss) exclusive of goodwill impairment
|
(1.14 | ) | — | — | — | — | ||||||||||||||
Cash
dividends declared
|
0.32 | .82 | .72 | .61 | .52 | |||||||||||||||
Book
value
|
7.43 | 13.23 | 10.50 | 9.61 | 9.01 | |||||||||||||||
Tangible
book value
|
6.62 | 8.37 | 10.50 | 9.61 | 9.01 | |||||||||||||||
At
Year End:
|
||||||||||||||||||||
Total
loans
|
631,500 | 659,963 | 474,319 | 423,720 | 356,909 | |||||||||||||||
Earning
assets
|
727,316 | 739,334 | 550,466 | 503,275 | 425,062 | |||||||||||||||
Assets
|
892,219 | 883,665 | 575,329 | 523,643 | 441,929 | |||||||||||||||
Total
deposits
|
761,693 | 706,377 | 462,813 | 429,049 | 338,398 | |||||||||||||||
Shareholders’
equity
|
56,929 | 80,151 | 52,496 | 47,952 | 44,962 | |||||||||||||||
Tangible
shareholders’ equity
|
52,052 | 50,718 | 52,496 | 47,952 | 44,962 | |||||||||||||||
Common
shares outstanding
|
6,058,007 | 6,057,594 | 5,000,613 | 4,987,794 | 4,988,661 | |||||||||||||||
Average
Balances:
|
||||||||||||||||||||
Total
loans
|
652,597 | 580,387 | 441,883 | 395,943 | 330,159 | |||||||||||||||
Earning
assets
|
803,578 | 683,998 | 522,703 | 473,480 | 404,121 | |||||||||||||||
Assets
|
897,715 | 740,862 | 549,691 | 501,191 | 428,637 | |||||||||||||||
Deposits
|
729,451 | 594,564 | 440,560 | 393,851 | 325,991 | |||||||||||||||
Shareholders’
equity
|
77,745 | 69,412 | 50,358 | 46,857 | 43,742 | |||||||||||||||
Tangible
shareholders’ equity
|
48,580 | 54,695 | 50,358 | 46,857 | 43,742 | |||||||||||||||
Weighted
average shares outstanding
|
6,057,613 | 5,534,851 | 4,998,103 | 4,986,930 | 4,958,604 | |||||||||||||||
Weighted
average diluted shares outstanding
|
6,057,613 | 5,560,038 | 5,024,668 | 5,024,429 | 5,034,495 | |||||||||||||||
Key
Performance Ratios:
|
||||||||||||||||||||
Return
on average assets
|
(3.43 | )% | 0.41 | % | 1.51 | % | 1.41 | % | 1.41 | % | ||||||||||
ROAA
exclusive of goodwill impairment
|
(0.74 | )% | — | — | — | — | ||||||||||||||
Return
on average equity
|
(39.55 | )% | 4.37 | % | 16.54 | % | 15.08 | % | 13.86 | % | ||||||||||
ROAE
exclusive of goodwill impairment
|
(8.52 | )% | — | — | — | — | ||||||||||||||
Return
on average tangible equity
|
(63.30 | )% | 5.55 | % | 16.54 | % | 15.08 | % | 13.86 | % | ||||||||||
ROATE
exclusive of goodwill impairment
|
(13.63 | )% | — | — | — | — | ||||||||||||||
Net
interest margin, taxable equivalent
|
2.97 | % | 4.33 | % | 4.60 | % | 4.37 | % | 4.55 | % | ||||||||||
Dividend
payout ratio
|
NM
|
149.09 | % | 43.11 | % | 43.19 | % | 42.62 | % | |||||||||||
Average
equity to average assets
|
8.66 | % | 9.37 | % | 9.16 | % | 9.35 | % | 10.20 | % | ||||||||||
Average
loans to average deposits
|
89.46 | % | 97.62 | % | 100.30 | % | 100.53 | % | 101.28 | % | ||||||||||
Overhead
ratio exclusive of goodwill impairment
|
93.74 | % | 63.57 | % | 55.49 | % | 55.69 | % | 58.56 | % |
●
|
the
effect of changes in laws and regulations, including federal and state
banking laws and regulations, with which we must comply, and the
associated costs of compliance with such laws and regulations either
currently or in the future as applicable;
|
|
●
|
the
effect of changes in accounting policies, standards, guidelines or
principles, as may be adopted by the regulatory agencies as well as by the
Financial Accounting Standards Board;
|
|
●
|
the
effect of changes in our organization, compensation and benefit
plans;
|
|
●
|
the
effect on our competitive position within our 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;
|
|
●
|
the
effect of changes in interest rates;
|
|
●
|
the
effect of compliance, or failure to comply within stated deadlines, of the
provisions of our formal agreement with our primary
regulators;
|
|
●
|
the
effect of changes in the business cycle and downturns in local, regional
or national economies;
|
|
●
|
the
effect of the continuing deterioration of the local economies in which we
conduct operations which results in, among other things, a deterioration
in credit quality or a reduced demand for credit, including a resultant
adverse effect on our loan portfolio and allowance for loan and lease
losses;
|
|
●
|
the
possibility that our allowance for loan and lease losses proves to be
inappropriate or that federal and state regulators who periodically review
our loan portfolio require us to increase the provision for loan losses or
recognize loan charge-offs;
|
|
●
|
the
effect of the current and anticipated deterioration in the housing market
and the residential construction industry which may lead to increased loss
severities and further worsening of delinquencies and non-performing
assets in our loan portfolios;
|
|
●
|
the
effect of the significant number of construction loans we have in our loan
portfolios, which may pose more credit risk than other types of mortgage
loans typically made by banking institutions due to the disruptions in
credit and housing markets.
|
●
|
the
effect of troubled institutions in our market area continuing to dispose
of problem assets which, given the already excess inventory of residential
homes and lots will continue to negatively impact home values and increase
the time it takes us or our borrowers to sell existing
inventory;
|
|
●
|
the
effect of public perception that banking institutions are risky
institutions for purposes of regulatory compliance or safeguarding
deposits which may cause depositors nonetheless to move their funds to
larger institutions; and
|
|
●
|
the
possibility that we could be held responsible for environmental
liabilities of properties acquired through
foreclosure.
|
Table
1
|
||||||||||||||||||||||||||||||||||||
Average
Consolidated Balance Sheets and Net Interest Analysis
|
||||||||||||||||||||||||||||||||||||
(in
thousands)
|
||||||||||||||||||||||||||||||||||||
For
the Years Ended December 31,
|
||||||||||||||||||||||||||||||||||||
2008
|
2007
|
2006
|
||||||||||||||||||||||||||||||||||
Average
Balance
|
Interest
|
Yield/
Rate
|
Average
Balance
|
Interest
|
Yield/
Rate
|
Average
Balance
|
Interest
|
Yield/
Rate
|
||||||||||||||||||||||||||||
Assets:
|
||||||||||||||||||||||||||||||||||||
Interest
earnings assets:
|
||||||||||||||||||||||||||||||||||||
Federal
funds sold
|
$ | 24,877 | 366 | 1.47 | % | $ | 11,691 | 614 | 5.25 | % | $ | 12,133 | 641 | 5.28 | % | |||||||||||||||||||||
Investments:
|
||||||||||||||||||||||||||||||||||||
Taxable
|
62,565 | 3,671 | 5.87 | % | 49,907 | 3,295 | 6.60 | % | 40,528 | 2,491 | 6.15 | % | ||||||||||||||||||||||||
Tax
exempt
|
63,539 | 3,996 | 6.29 | % | 42,013 | 2,699 | 6.42 | % | 28,159 | 1,825 | 6.48 | % | ||||||||||||||||||||||||
Total Investments and Federal Funds Sold
|
150,981 | 8,033 | 5.32 | % | 103,611 | 6,608 | 6.38 | % | 80,820 | 4,957 | 6.13 | % | ||||||||||||||||||||||||
Loans
(including loan fees):
|
||||||||||||||||||||||||||||||||||||
Taxable
|
650,850 | 41,307 | 6.35 | % | 579,126 | 50,057 | 8.64 | % | 440,939 | 37,695 | 8.55 | % | ||||||||||||||||||||||||
Tax
Exempt
|
1,747 | 147 | 8.41 | % | 1,261 | 123 | 9.74 | % | 944 | 94 | 9.96 | % | ||||||||||||||||||||||||
Total
Loans
|
652,597 | 41,454 | 6.35 | % | 580,387 | 50,180 | 8.65 | % | 441,883 | 37,789 | 8.55 | % | ||||||||||||||||||||||||
Total
interest earning assets
|
803,578 | 49,487 | 6.16 | % | 683,998 | 56,788 | 8.30 | % | 522,703 | 42,746 | 8.18 | % | ||||||||||||||||||||||||
Other
non-interest earnings assets
|
94,137 | 56,864 | 26,988 | |||||||||||||||||||||||||||||||||
Total
assets
|
$ | 897,715 | $ | 740,862 | $ | 549,691 | ||||||||||||||||||||||||||||||
Liabilities
and shareholders’ equity:
|
||||||||||||||||||||||||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||||||||||||||||||
Deposits:
|
||||||||||||||||||||||||||||||||||||
Demand
|
$ | 207,231 | 3,530 | 1.70 | % | $ | 172,706 | 6,259 | 3.62 | % | $ | 137,747 | 4,995 | 3.63 | % | |||||||||||||||||||||
Savings
|
25,329 | 96 | 0.38 | % | 20,631 | 242 | 1.17 | % | 16,908 | 185 | 1.09 | % | ||||||||||||||||||||||||
Time
|
424,315 | 19,088 | 4.50 | % | 337,058 | 17,373 | 5.15 | % | 232,143 | 10,776 | 4.64 | % | ||||||||||||||||||||||||
FHLB
advances
& other borrowings
|
76,972 | 2,897 | 3.76 | % | 63,966 | 3,307 | 5.16 | % | 51,985 | 2,771 | 5.33 | % | ||||||||||||||||||||||||
Total
interest-bearing liabilities
|
733,847 | 25,611 | 3.49 | % | 594,361 | 27,181 | 4.57 | % | 438,783 | 18,727 | 4.27 | % | ||||||||||||||||||||||||
Non-interest
bearing deposits
|
72,576 | 64,170 | 53,762 | |||||||||||||||||||||||||||||||||
Other
liabilities
|
13,547 | 12,919 | 6,787 | |||||||||||||||||||||||||||||||||
Shareholders’
equity
|
77,745 | 69,412 | 50,359 | |||||||||||||||||||||||||||||||||
Total
liabilities and
Shareholders’
equity
|
$ | 897,715 | $ | 740,862 | $ | 549,691 | ||||||||||||||||||||||||||||||
Excess
of interest-earning assets
over interest-bearing
liabilities
|
$ | 89,637 | $ | 89,637 | $ | 83,920 | ||||||||||||||||||||||||||||||
Ratio
of interest-earning assets to
interest-bearing
liabilities
|
109.50 | % | 115.08 | % | 119.13 | % | ||||||||||||||||||||||||||||||
Net
interest income tax equivalent
|
23,876 | 29,607 | 24,019 | |||||||||||||||||||||||||||||||||
Net
interest spread
|
2.67 | % | 3.73 | % | 3.91 | % | ||||||||||||||||||||||||||||||
Net
interest margin on interest earning assets
|
2.97 | % | 4.33 | % | 4.60 | % | ||||||||||||||||||||||||||||||
Tax
Equivalent Adjustments:
|
||||||||||||||||||||||||||||||||||||
Investments
|
(1,325 | ) | (919 | ) | (621 | ) | ||||||||||||||||||||||||||||||
Loans
|
(49 | ) | (42 | ) | (32 | ) | ||||||||||||||||||||||||||||||
Net
interest income
|
$ | 22,502 | $ | 28,647 | $ | 23,366 |
Increase (decrease) due to changes
in:
|
||||||||||||||||||||||||
2008 over 2007
|
2007 over 2006
|
|||||||||||||||||||||||
Volume
|
Rate | Total | Volume | Rate | Total | |||||||||||||||||||
Interest
income on:
|
||||||||||||||||||||||||
Federal
funds sold
|
$ | 194 | (442 | ) | (248 | ) | $ | (23 | ) | (4 | ) | (27 | ) | |||||||||||
Taxable
investments
|
743 | (367 | ) | 376 | 619 | 186 | 805 | |||||||||||||||||
Non-taxable
investments
|
1,354 | (56 | ) | 1,298 | 890 | (16 | ) | 874 | ||||||||||||||||
Taxable
loans
|
4,552 | (13,303 | ) | (8,751 | ) | 11,983 | 379 | 12,362 | ||||||||||||||||
Non-taxable
loans
|
40 | (17 | ) | 23 | 31 | (2 | ) | 29 | ||||||||||||||||
Total
Interest Income
|
6,883 | ( 14,185 | ) | ( 7,302 | ) | 13,500 | 543 | 14,043 | ||||||||||||||||
Interest
expense on:
|
||||||||||||||||||||||||
Deposits:
|
||||||||||||||||||||||||
Demand
|
588 | (3,318 | ) | (2,730 | ) | 1,267 | (2 | ) | 1,265 | |||||||||||||||
Savings
|
18 | (164 | ) | (146 | ) | 44 | 13 | 57 | ||||||||||||||||
Time
|
3,925 | (2,210 | ) | 1,715 | 5,408 | 1,189 | 6,597 | |||||||||||||||||
FHLB
advances & other borrowings
|
581 | (990 | ) | (409 | ) | 704 | (168 | ) | 536 | |||||||||||||||
Total
Interest Expense
|
5,112 | ( 6,682 | ) | ( 1,570 | ) | 7,423 | 1,032 | 8,455 | ||||||||||||||||
Increase
(decrease) in net interest income
|
$ | 1,771 | ( 7,503 | ) | ( 5,732 | ) | $ | 6,077 | (489 | ) | 5,588 |
(in
thousands)
|
||||||||||||
Available for Sale
|
2008
|
2007
|
2006
|
|||||||||
US
Government sponsored enterprises
|
$ | — | $ | 2,030 | $ | 9,937 | ||||||
State,
county and municipal
|
57,279 | 70,466 | 33,459 | |||||||||
Mortgage-backed
securities
|
33,175 | 45,573 | 15,818 | |||||||||
Corporate
bonds
|
3,916 | 4,624 | 5,037 | |||||||||
Total available for
sale
|
$ | 94,370 | $ | 122,693 | $ | 64,251 | ||||||
Held to Maturity
|
||||||||||||
Trust
Preferred Securities
|
$ | 7,622 | $ | 7,902 | $ | 7,837 |
Maturities
at December
31,
2008
|
State,
County
& Municipals
|
Wtd.
Avg.
Yld.
|
Mortgage
Backed
Securities
|
Wtd.
Avg.
Yld.
|
Corporate
Bonds
|
Wtd.
Avg.
Yld.
|
Trust
Preferred
|
Wtd.
Avg.
Yld.
|
||||||||||||||||||||||||
Within
1 year
|
$ | 350 | 4.15 | % | $ | 2,924 | 4.68 | % | $ | — | — | % | $ | — | — | % | ||||||||||||||||
After
1 through 5 years
|
2,599 | 6.01 | % | 11,603 | 4.90 | % | 3,786 | 5.54 | % | — | — | % | ||||||||||||||||||||
After
5 through 10 years
|
12,040 | 6.64 | % | 13,993 | 5.82 | % | — | — | % | — | — | % | ||||||||||||||||||||
After
10 years
|
44,342 | 6.40 | % | 4,068 | 5.58 | % | 557 | — | % | 7,622 | 5.42 | % | ||||||||||||||||||||
Total
|
$ | 59,331 | 6.42 | % | $ | 32,588 | 5.36 | % | $ | 4,343 | 4.83 | % | $ | 7,622 | 5.42 | % | ||||||||||||||||
Fair
Value
|
$ | 57,279 | $ | 33,175 | $ | 3,916 | $ | 2,853 |
Table
5
|
||||||||||||||||||||
Loan
Portfolio
|
||||||||||||||||||||
(in
thousands)
|
December 31,
|
|||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Commercial,
financial & agricultural
|
$ | 64,434 | $ | 61,540 | $ | 52,334 | $ | 51,555 | $ | 50,528 | ||||||||||
Real
estate – construction
|
182,878 | 242,216 | 175,024 | 153,511 | 114,657 | |||||||||||||||
Real
estate – mortgage
|
349,612 | 315,335 | 219,563 | 196,383 | 173,110 | |||||||||||||||
Consumer
|
34,576 | 40,873 | 27,398 | 22,271 | 18,614 | |||||||||||||||
631,500 | 659,964 | 474,319 | 423,720 | 356,909 | ||||||||||||||||
Less: Unearned
interest and fees
|
(1,338 | ) | (1,803 | ) | (818 | ) | (841 | ) | (581 | ) | ||||||||||
Allowance for
loan losses
|
(11,240 | ) | (12,422 | ) | (5,748 | ) | (5,327 | ) | (4,080 | ) | ||||||||||
Loans, net
|
$ | 618,922 | $ | 645,739 | $ | 467,753 | $ | 417,552 | $ | 352,248 |
One
Year
Or Less
|
Wtd.
Avg.
Yld.
|
Over
One
to
Five
Years
|
Wtd.
Avg.
Yld.
|
Over
Five
Years
|
Wtd.
Avg.
Yld.
|
Total
|
Wtd.
Avg.
Yld.
|
|||||||||||||||||||||||||
Commercial,
financial & agricultural
|
$ | 44,448 | 5.20 | % | $ | 16,215 | 5.69 | % | $ | 3,771 | 6.41 | % | $ | 64,434 | 5.39 | % | ||||||||||||||||
Real
estate – construction
|
169,165 | 2.54 | % | 12,988 | 5.90 | % | 725 | 7.32 | % | 182,878 | 2.80 | % | ||||||||||||||||||||
Real
estate – mortgage
|
81,237 | 5.77 | % | 215,188 | 6.66 | % | 53,187 | 6.10 | % | 349,612 | 6.37 | % | ||||||||||||||||||||
Consumer
|
16,943 | 8.97 | % | 17,412 | 8.63 | % | 221 | 6.88 | % | 34,576 | 8.79 | % | ||||||||||||||||||||
Total
|
$ | 311,793 | 4.11 | % | $ | 261,803 | 6.69 | % | $ | 57,904 | 6.14 | % | $ | 631,500 | 5.37 | % |
Variable
Interest
Rates
|
Wtd
Avg
Yld
|
Fixed
Interest
Rates
|
Wtd
Avg
Yld
|
|||||||||||||
Commercial,
financial and agricultural
|
$ | 23,747 | 3.65 | % | $ | 40,686 | 6.41 | % | ||||||||
Real
estate – construction
|
109,518 | 2.26 | % | 73,360 | 3.59 | % | ||||||||||
Real
estate – mortgage
|
132,506 | 4.75 | % | 217,107 | 7.35 | % | ||||||||||
Consumer
|
1,558 | 6.29 | % | 33,018 | 8.90 | % | ||||||||||
Total
|
$ | 267,329 | 3.64 | % | $ | 364,171 | 7.83 | % |
Table
7
|
Allowance
for Loan Losses
|
(in
thousands)
|
December
31,
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Balance
at beginning of year
|
$ | 12,422 | $ | 5,748 | $ | 5,327 | $ | 4,080 | $ | 3,479 | ||||||||||
Charge-offs:
|
||||||||||||||||||||
Commercial, financial and
agricultural
|
440 | 146 | 47 | 24 | 59 | |||||||||||||||
Real estate –
construction
|
14,453 | 3,930 | — | — | — | |||||||||||||||
Real estate –
mortgage
|
1,035 | 772 | 910 | 235 | 215 | |||||||||||||||
Consumer loans
|
502 | 395 | 155 | 129 | 123 | |||||||||||||||
Total charge-offs
|
16,430 | 5,243 | 1,112 | 388 | 397 | |||||||||||||||
Recoveries:
|
||||||||||||||||||||
Commercial, financial and
agricultural
|
3 | 7 | 11 | 16 | 16 | |||||||||||||||
Real estate –
construction
|
203 | 25 | — | — | — | |||||||||||||||
Real estate –
mortgage
|
12 | 74 | — | 18 | 13 | |||||||||||||||
Consumer loans
|
130 | 78 | 57 | 51 | 44 | |||||||||||||||
Total recoveries
|
348 | 184 | 68 | 85 | 73 | |||||||||||||||
Net
(charge-offs) recoveries
|
(16,082 | ) | (5,059 | ) | (1,044 | ) | (303 | ) | (324 | ) | ||||||||||
Allowance
attributable to First Haralson loans
|
— | 1,527 | — | — | — | |||||||||||||||
Provision
for loan losses
|
14,900 | 10,206 | 1,465 | 1,550 | 925 | |||||||||||||||
Balance
at end of year
|
$ | 11,240 | $ | 12,422 | $ | 5,748 | $ | 5,327 | $ | 4,080 | ||||||||||
Ratio
of net charge-offs during the
|
||||||||||||||||||||
Period to average loans
outstanding
|
2.46 | % | .87 | % | .24 | % | .08 | % | .10 | % | ||||||||||
Ratio
of allowance to total loans
|
1.78 | % | 1.88 | % | 1.21 | % | 1.26 | % | 1.14 | % |
Table
8
Non-Performing
Assets
(in
thousands)
|
|
|||||||||||||||||||
December
31,
|
||||||||||||||||||||
2008
|
2007
|
2006
|
2005
|
2004
|
||||||||||||||||
Foreclosed
property
|
$ | 45,798 | $ | 10,313 | $ | 1,318 | $ | 567 | $ | 686 | ||||||||||
Non-accrual
loans
|
71,600 | 46,352 | 1,212 | 2,382 | 536 | |||||||||||||||
Loans
90 days past due still accruing
|
4,597 | 1,204 | 1,781 | 673 | 567 | |||||||||||||||
Total
|
$ | 121,995 | $ | 57,869 | $ | 4,311 | $ | 3,622 | $ | 1,789 | ||||||||||
Non-performing
assets as % of total loans
|
19.32 | % | 8.77 | % | .91 | % | .85 | % | .50 | % |
Within
3 months
|
$ | 30,347 | ||
After
3 through 6 months
|
52,180 | |||
After
6 through 12 months
|
48,273 | |||
After
12 months
|
129,244 | |||
Total
|
$ | 260,044 |
Table
10
Capital
Ratio
|
|||||
Actual
as of December 31, 2008
|
|||||
Tier
1 Capital (to risk weighted assets)
|
9 | % | |||
Tier
1 Capital minimum requirement
|
4 | % | |||
Excess
|
5 | % | |||
Total
Capital (to risk weighted assets)
|
11 | % | |||
Total
Capital minimum requirement
|
8 | % | |||
Excess
|
3 | % | |||
Leverage
Ratio
|
|||||
Actual
as of December 31, 2008
|
|||||
Tier
1 Capital to average assets
|
|||||
(“Leverage
Ratio”)
|
7 | % | |||
Minimum
leverage requirement
|
4 | % | |||
Excess
|
3 | % |
Obligation
|
Total
|
Less
than 1
year
|
1-3 years
|
3-5 years
|
More
than 5
years
|
|||||||||||||||
Deposits
without stated maturity
|
$ | 279,192 | $ | 279,192 | $ | — | $ | — | $ | — | ||||||||||
Certificates
of deposit
|
482,502 | 270,391 | 177,513 | 33,588 | 1,010 | |||||||||||||||
FHLB
advances
|
52,000 | — | 12,000 | 30,000 | 10,000 | |||||||||||||||
Junior
subordinated debentures
|
10,825 | — | — | — | 10,825 | |||||||||||||||
Total
|
$ | 824,519 | $ | 549,583 | $ | 189,513 | $ | 63,588 | $ | 21,835 |
At
December 31, 2008
Maturing or Repricing in
|
||||||||||||||||||||
One
Year
or Less
|
Over
1
Year
Thru
2 Years
|
Over
2
Years
Thru
5 Years
|
Over
5
Years
|
Total
|
||||||||||||||||
Interest-earning
assets:
|
||||||||||||||||||||
Interest-bearing
deposits with
|
||||||||||||||||||||
Other
banks
|
$ | 12,575 | $ | — | $ | — | $ | — | $ | 12,575 | ||||||||||
Federal
funds sold
|
45,839 | — | — | — | 45,839 | |||||||||||||||
Securities
(at cost)
|
3,274 | 3,531 | 14,456 | 82,623 | 103,884 | |||||||||||||||
Loans
|
311,792 | 185,474 | 76,330 | 57,904 | 631,500 | |||||||||||||||
Total
interest-earning assets
|
373,480 | 189,005 | 90,786 | 140,527 | 793,798 | |||||||||||||||
Interest-bearing
liabilities:
|
||||||||||||||||||||
Deposits:
|
||||||||||||||||||||
Demand
|
194,241 | — | — | — | 194,241 | |||||||||||||||
Savings
|
18,654 | — | — | — | 18,654 | |||||||||||||||
Time
deposits
|
270,391 | 177,513 | 33,588 | 1,010 | 482,502 | |||||||||||||||
FHLB
advances
|
— | 12,000 | 30,000 | 10,000 | 52,000 | |||||||||||||||
Junior
subordinated debenture
|
— | — | — | 10,825 | 10,825 | |||||||||||||||
Total
interest-bearing liabilities
|
483,286 | 189,513 | 63,588 | 21,835 | 758,222 | |||||||||||||||
Excess
(deficiency) of interest-earning assets over interest-bearing
liabilities
|
( 109,806 | ) | (508 | ) | 27,198 | 118,692 | $ | 3 5,576 | ||||||||||||
Cumulative
interest sensitivity
|
||||||||||||||||||||
Difference
|
$ | ( 109,806 | ) | $ | ( 110,314 | ) | $ | ( 83,116 | ) | $ | 35,576 | |||||||||
Cumulative
difference to total
|
||||||||||||||||||||
interest
earning assets
|
( 13.83 | )% | ( 13.90 | )% | ( 10.47 | )% | 4.48 | % |
2008
|
Quarters
|
2007
|
Quarters
|
|||||||||||||||||||||||||||||
First
|
Second
|
Third
|
Fourth
|
First
|
Second
|
Third
|
Fourth
|
|||||||||||||||||||||||||
Interest
income
|
$ | 14,131 | 11,633 | 11,802 | 10,547 | $ | 11,892 | 12,324 | 16,388 | 15,224 | ||||||||||||||||||||||
Net
interest income
|
7,312 | 5,352 | 5,476 | 4,362 | 6,272 | 6,598 | 8,546 | 7,231 | ||||||||||||||||||||||||
Provision
for loan losses
|
750 | 8,100 | 1,400 | 4,650 | 375 | 375 | 750 | 8,706 | ||||||||||||||||||||||||
Earnings
(loss) before income taxes
|
2,416 | (7,160 | ) | (1,797 | ) | (30,602 | ) | 2,934 | 3,304 | 3,445 | (6,515 | ) | ||||||||||||||||||||
Net
(loss) earnings
|
1,831 | (4,294 | ) | (855 | ) | (27,432 | ) | 1,980 | 2,254 | 2,330 | (3,530 | ) | ||||||||||||||||||||
Earnings
per share – basic
|
0.30 | (0.71 | ) | (0.14 | ) | (4.57 | ) | 0.40 | 0.45 | 0.38 | (0.68 | ) | ||||||||||||||||||||
Earnings
per share – diluted
|
0.30 | (0.71 | ) | (0.14 | ) | (4.57 | ) | 0.39 | 0.45 | 0.38 | (0.68 | ) | ||||||||||||||||||||
Weighted
average common shares outstanding – basic
|
6,057,594 | 6,057,594 | 6,057,594 | 6.057,670 | 5,001,286 | 5,003,790 | 6,058,939 | 6.057,594 | ||||||||||||||||||||||||
Weighted
average common shares outstanding – diluted
|
6,061,161 | 6,057,594 | 6,057,594 | 6,057,670 | 5,041,575 | 5,045,067 | 6,077,268 | 6,057,594 |
Plan
Category
|
Number
of securities to
be
issued upon exercise
of
outstanding options,
warrants
and rights
(a)
|
Weighted-average
exercise
price
of outstanding
options,
warrants and
rights
(b)
|
Number
of securities remaining
available
for future issuance
under
equity compensation plans
(excluding
securities reflected in
column
(a))
(c)
|
Equity
compensation plans approved by security holders
|
238,916
|
$21.08
|
812,317*
|
Equity
compensation plans not approved by security holders
|
N/A
|
N/A
|
N/A
|
Total
|
238,916
|
$21.08
|
812,317*
|
(a)(1)
|
Financial
Statements
|
|
The
following financial statements are filed with this
Report:
|
||
Report
of Independent Registered Public Accounting Firm
|
||
Consolidated
Balance Sheets as of December 31, 2008 and 2007
|
||
Consolidated
Statements of Operations for the Years Ended December 31, 2008, 2007 and
2006
|
||
Consolidated
Statements of Comprehensive Income (Loss) for the Years Ended December 31,
2008, 2007 and 2006
|
||
Consolidated
Statements of Changes in Shareholders’ Equity for the Years Ended December
31, 2008, 2007 and 2006
|
||
Consolidated
Statements of Cash Flows for the Years Ended December 31, 2008, 2007 and
2006
|
||
Notes
to Consolidated Financial Statements
|
||
(2)
|
Financial
Statement Schedules
|
|
Financial
statement schedules have been omitted because they are not applicable or
the required information has been incorporated in the consolidated
financial statements and related notes.
|
||
(3)
|
The
following exhibits are filed with 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
|
Articles
of Amendment to Amended and Restated Articles of Incorporation
(Incorporated by reference to Exhibit 3.1 to Current Report on Form 8-K
filed June 19, 2008)
|
|
3.3
|
Second
Articles of Amendment to Amended and Restated Articles of Incorporation
(Regarding Designations, Preferences and Rights of Series A Convertible
Preferred Stock) (Incorporated by reference to Exhibit 3.1 to Current
Report on Form 8-K filed June 26, 2008)
|
|
3.4
|
Third
Articles of Amendment to Amended and Restated Articles of Incorporation
(Regarding restatement of Designations, Preferences and Rights of Series A
Convertible Preferred Stock) (Incorporated by reference to Exhibit 3.1 to
Current Report on Form 8-K filed July 22, 2008)
|
|
3.5
|
Amended
and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to the Form
10-SB)
|
|
4.1
|
See
exhibits 3.1 through 3.5 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
|
Specimen
certificate representing shares of Series A Convertible Preferred Stock
(Incoprorated by reference to Exhibit 4.3 to Registration Statement on
Form S-1 (Registration No. 333-151820) filed June 20,
2008)
|
|
4.4
|
Amended
and Restated Trust Agreement dated July 2, 2007 (Incorporated by reference
to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed July 6,
2007 (the “July 2007 Form 8-K”)
|
|
4.5
|
Indenture,
dated July 2, 2007, by and between WGNB Corp. and Wilmington Trust Company
(Incorporated by reference to Exhibit 4.2 to the July 2007 Form
8-K)
|
|
4.6
|
Guarantee
Agreement, dated July 2, 2007, by and between WGNB Corp. and Wilmington
Trust Company (Incorporated by reference to Exhibit 4.3 to the July 2007
Form 8-K)
|
|
4.7
|
WGNB
Corp. Direct Stock Purchase and Dividend Reinvestment Plan (Incorporated
by reference to Form S-3 filed May 20, 2008 as amended November 6,
2008)
|
|
10.1*
|
Employment
Agreement dated as of July 11, 2006 between H.B. Lipham, III, WGNB Corp.
and West Georgia National Bank (Incorporated by reference to Exhibit 10.1
to the Company’s Current Report on Form 8-K dated July 11,
2006)
|
|
10.2*
|
Bonus
and Stock Option Agreement dated as of September 23, 1998 between the
Company and H.B. Lipham, III (Incorporated by reference to Exhibit 10.6 to
the Form 10-SB)
|
|
10.3*
|
Bonus
and Stock Option Agreement dated as of September 23, 1998 between the
Company and W. Galen Hobbs, Jr. (Incorporated by reference to Exhibit
10.7 to the Form 10-SB)
|
|
10.4*
|
Bonus
and Stock Option Agreement dated as of September 23, 1998 between the
Company and Steven J. Haack (Incorporated by reference to Exhibit 10.8 to
the Form 10-SB)
|
|
10.5*
|
Form
of Election for Payment of Director Meeting Fees (Incorporated by
reference to Exhibit 10.10 to the Form 10-SB)
|
|
10.6*
|
Employment
Agreement dated August 8, 2005 among WGNB Corp., West Georgia National
Bank and Steven J. Haack (Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated August 8,
2005)
|
|
10.7*
|
Employment
Agreement dated July 11, 2005 between West Georgia National Bank and W.
Galen Hobbs, Jr. (Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated July 11,
2005)
|
10.8*
|
Second
Amendment to Bonus and Stock Option Agreement dated June 17, 2002 between
the Company and H.B. Lipham, III (Incorporated by reference to Exhibit
10.7 to the Company’s Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002 (the “6/30/02 Form 10-Q)
|
|
10.9*
|
Incentive
Stock Option Agreement dated March 12, 2002 between the Company and H.B.
Lipham, III (Incorporated by reference to Exhibit 10.8 to the 6/30/02 Form
10-Q)
|
|
10.10*
|
Amendment
to Bonus and Stock Option Agreement dated May 30, 2002 between the Company
and W. Galen Hobbs, Jr. (Incorporated by reference to Exhibit 10.10 to the
6/30/02 Form 10-Q)
|
|
10.11*
|
Incentive
Stock Option Agreement dated March 12, 2002 between the Company and W.
Galen Hobbs, Jr. (Incorporated by reference to Exhibit 10.11 to the
6/30/02 Form 10-Q)
|
|
10.12*
|
Amendment
to Bonus and Stock Option Agreement dated April 26, 2002 between the
Company and Steven J. Haack (Incorporated by reference to Exhibit 10.13 to
the 6/30/02 Form 10-Q)
|
|
10.13*
|
Incentive
Stock Option Agreement dated March 12, 2002 between the Company and Steven
J. Haack (Incorporated by reference to Exhibit 10.14 to the 6/30/02 Form
10-Q)
|
|
10.14*
|
2003
Stock Incentive Plan (Incorporated by reference to Appendix A to the
Company’s Definitive Proxy Statement for its 2004 Annual
Meeting)
|
|
10.15*
|
Employment
Agreement dated December 31, 2002 between the Company and William R.
Whitaker (Incorporated by reference to Exhibit 10.31 to the Company Annual
Report on Form 10-K for year ended December 31, 2004 (the “2004 Form
10-K”))
|
|
10.16*
|
Bonus
and Stock Option Agreement dated December 27, 2004 between the Company and
William R. Whitaker (Incorporated by reference to Exhibit 10.32 to the
2004 Form 10-K)
|
|
10.17*
|
Separations
Agreement and Release dated February 14, 2006 between the Company, the
Bank and L. Leighton Alston (Incorporated by reference to Exhibit 10.23 to
the Company’s Annual Report on Form 10-K for the year ended December 31,
2005)
|
|
10.18*
|
Employment
Agreement, dated July 1, 2007 among WGNB Corp. West Georgia National Bank
and Randall F. Eaves (Incorporated by reference to Exhibit 10.1 to the
July 2007 Form 8-K)
|
|
10.19*
|
Employment
Agreement, dated July 1, 2007 among WGNB Corp. West Georgia National Bank
and Mary Covington (Incorporated by reference to Exhibit 10.2 to the July
2007 Form 8-K)
|
|
10.20*
|
Employment
Agreement dated January 2, 2007 between Robert M. Gordy, Jr. and West
Georgia National Bank (Incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2007)
|
|
10.21*
|
First
Amendment to Employment Agreement among H.B. Lipham, WGNB Corp. and First
National Bank of Georgia dated December 31, 2008 (Incorporated by
reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K
dated December 31, 2008 (the “12/31/08 8-K”))
|
|
10.22*
|
First
Amendment to Employment Agreement among Randall F. Eaves, WGNB Corp. and
First National Bank of Georgia dated December 30, 2008 (Incorporated by
reference to Exhibit 10.2 to the 12/31/08 8-K)
|
|
10.23*
|
First
Amendment to Employment Agreement among Steven J. Haack, WGNB Corp. and
First National Bank of Georgia dated December 31, 2008 (Incorporated by
reference to Exhibit 10.3 to the 12/31/08 8-K)
|
|
10.24*
|
First
Amendment to Employment Agreement among Mary M. Covington, WGNB Corp. and
First National Bank of Georgia dated December 31, 2008 (Incorporated by
reference to Exhibit 10.4 to the 12/31/08
8-K)
|
10.25*
|
First
Amendment to Employment Agreement between W. Galen Hobbs, Jr., and First
National Bank of Georgia dated December 31, 2008 (Incorporated by
reference to Exhibit 10.5 to the 12/31/08 8-K)
|
|
10.26*
|
First
Amendment to Employment Agreement between Robert M. Gordy, Jr. and First
National Bank of Georgia dated December 31, 2008 (Incorporated by
reference to Exhibit 10.6 to the 12/31/08 8-K)
|
|
10.27
|
Agreement
between First National Bank of Georgia and The Comptroller of the Currency
dated November 12, 2008 (Incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended September
30, 2008)
|
|
21
|
Subsidiary
of WGNB Corp.
|
|
23
|
Consent
of Porter, Keadle, Moore LLP
|
|
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes Oxley
Act of 2002
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
|
|
32.2
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes Oxley
Act of 2002
|
*
|
Indicates
management contract or compensatory plan or
arrangement.
|
WGNB
CORP.
|
|||
By:
|
/s/ H.B. Lipham, III | ||
H.B. Lipham, III, Chief Executive Officer |
/s/ H.B. Lipham, III |
Date:
March 10, 2009
|
|
H.B.
Lipham, III, Chief Executive Officer and Director
|
||
[Principal
Executive Officer]
|
||
/s/ Steven J. Haack |
Date:
March 10, 2009
|
|
Steven
J. Haack, Secretary and Treasurer
|
||
[Principal
Financial and Accounting Officer]
|
||
/s/ W.T. Green |
Date:
March 10, 2009
|
|
W.
T. Green, Chairman of the Board
|
||
/s/ Wanda W. Calhoun |
Date:
March 10, 2009
|
|
Wanda
W. Calhoun, Director
|
||
/s/ Grady W. Cole |
Date:
March 10, 2009
|
|
Grady
W. Cole, Director
|
||
/s/ Mary C. Covington |
Date:
March 10, 2009
|
|
Mary
C. Covington, Executive Vice President and Director
|
||
/s/ Randall F. Easves |
Date:
March 10, 2009
|
|
Randall
F. Eaves, President and Director
|
||
/s/ Loy M. Howard |
Date:
March 10, 2009
|
|
Loy
M. Howard, Director
|
||
/s/ R. David Perry |
Date:
March 10, 2009
|
|
R.
David Perry, Director
|
||
/s/ L. Richard Plunkett |
Date:
March 10, 2009
|
|
L.
Richard Plunkett, Director
|
||
/s/ Donald C. Rhodes |
Date:
March 10, 2009
|
|
Donald
C. Rhodes, Director
|
||
/s/ Thomas T. Richards |
Date:
March 10, 2009
|
|
Thomas
T. Richards, Director
|
||
Date:
March __, 2009
|
||
William
W. Stone, Director
|
||
/s/ J. Thomas Vance |
Date:
March 10, 2009
|
|
J.
Thomas Vance, Director
|
||
/s/ Gelon E. Wasdin |
Date:
March 10, 2009
|
|
Gelon
E. Wasdin, Director
|
2008
|
2007
|
|||||||
Cash
and due from banks, including reserve requirements
|
||||||||
of
$148,000 and $405,000, respectively
|
$ | 16,936,965 | 6,004,621 | |||||
Interest-bearing
funds in other banks
|
12,574,624 | 1,463,719 | ||||||
Federal
funds sold
|
45,839,396 | 18,377,000 | ||||||
Cash
and cash equivalents
|
75,350,985 | 25,845,340 | ||||||
Securities
available-for-sale
|
94,369,622 | 122,693,244 | ||||||
Securities
held-to-maturity, estimated fair values of $2,853,170 and
$7,901,839
|
7,622,340 | 7,901,839 | ||||||
Loans,
net
|
618,922,150 | 645,738,663 | ||||||
Premises
and equipment, net
|
17,016,363 | 18,356,970 | ||||||
Accrued
interest receivable
|
3,573,092 | 5,927,168 | ||||||
Cash
surrender value of life insurance
|
3,803,010 | 3,639,550 | ||||||
Intangible
assets
|
4,877,300 | 29,433,841 | ||||||
Foreclosed
property
|
45,797,654 | 10,313,331 | ||||||
Other
assets
|
20,886,934 | 13,814,577 | ||||||
$ | 892,219,450 | 883,664,523 | ||||||
Liabilities and
Stockholders’ Equity
|
||||||||
Deposits:
|
||||||||
Demand
|
$ | 66,296,298 | 67,614,983 | |||||
Interest-bearing
demand
|
194,241,342 | 220,137,199 | ||||||
Savings
|
18,653,924 | 19,122,668 | ||||||
Time
|
222,457,656 | 170,112,285 | ||||||
Time,
over $100,000
|
260,043,855 | 229,390,354 | ||||||
Total
deposits
|
761,693,075 | 706,377,489 | ||||||
Federal
Home Loan Bank advances
|
52,000,000 | 54,500,000 | ||||||
Securities
sold under repurchase agreements
|
- | 20,000,000 | ||||||
Junior
subordinated debentures
|
10,825,000 | 10,825,000 | ||||||
Accrued
interest payable
|
2,847,758 | 3,990,807 | ||||||
Other
liabilities
|
7,924,350 | 7,820,335 | ||||||
Total
liabilities
|
835,290,183 | 803,513,631 | ||||||
Commitments
|
||||||||
Stockholders’
equity:
|
||||||||
Series
A convertible perpetual preferred stock, 9% non-cumulative, no par
value,
|
||||||||
$8
liquidation value, 10,000,000 shares authorized; 1,509,100 shares
issued
|
||||||||
and
outstanding in 2008 and no shares issued or outstanding in
2007
|
11,943,515 | - | ||||||
Common
stock, no par value in 2008 and $1.25 par value in 2007,
|
||||||||
20,000,000
shares authorized; 6,058,007 and 6,057,594 shares
|
||||||||
issued
and outstanding
|
37,917,152 | 7,571,993 | ||||||
Additional
paid-in capital
|
- | 30,199,481 | ||||||
Retained
earnings
|
8,874,438 | 41,786,537 | ||||||
Accumulated
other comprehensive income (loss)
|
(1,805,838 | ) | 592,881 | |||||
Total
stockholders’ equity
|
56,929,267 | 80,150,892 | ||||||
$ | 892,219,450 | 883,664,523 |
2008
|
2007
|
2006
|
||||||||||
Interest
income:
|
||||||||||||
Interest
and fees on loans
|
$ | 41,404,844 | 50,138,669 | 37,757,482 | ||||||||
Interest
on federal funds sold and funds in other banks
|
365,614 | 614,087 | 640,956 | |||||||||
Interest
on investment securities:
|
||||||||||||
U.S.
Government sponsored enterprises
|
2,311,178 | 1,693,538 | 1,032,728 | |||||||||
State,
county and municipal
|
2,885,699 | 1,998,925 | 1,455,708 | |||||||||
Other
|
1,145,788 | 1,383,038 | 1,205,881 | |||||||||
Total
interest income
|
48,113,123 | 55,828,257 | 42,092,755 | |||||||||
Interest
expense:
|
||||||||||||
Interest
on deposits:
|
||||||||||||
Demand
|
3,530,045 | 6,259,620 | 4,994,332 | |||||||||
Savings
|
95,629 | 242,037 | 185,168 | |||||||||
Time
|
19,088,444 | 17,372,796 | 10,776,290 | |||||||||
Interest
on FHLB and other borrowings
|
2,897,090 | 3,307,029 | 2,771,190 | |||||||||
Total
interest expense
|
25,611,208 | 27,181,482 | 18,726,980 | |||||||||
Net
interest income
|
22,501,915 | 28,646,775 | 23,365,775 | |||||||||
Provision
for loan losses
|
14,900,000 | 10,206,263 | 1,465,000 | |||||||||
Net
interest income after provision for loan losses
|
7,601,915 | 18,440,512 | 21,900,775 | |||||||||
Other
income:
|
||||||||||||
Service
charges on deposit accounts
|
6,255,501 | 5,364,019 | 4,061,892 | |||||||||
Mortgage
origination fees
|
275,723 | 392,199 | 393,375 | |||||||||
Brokerage
fees
|
443,479 | 637,036 | 129,730 | |||||||||
ATM
network fees
|
1,469,439 | 1,047,054 | 777,299 | |||||||||
Loss
on sale or disposal of premises and equipment
|
(303,453 | ) | (774 | ) | (4,327 | ) | ||||||
Loss
on settlement of securities sold under repurchase
agreements
|
(683,361 | ) | - | - | ||||||||
Gain
on sale of securities available-for-sale
|
435,067 | - | - | |||||||||
(Loss)
gain on sale and write-down of foreclosed property
|
(1,185,854 | ) | (729,261 | ) | 243,153 | |||||||
Miscellaneous
|
910,744 | 1,358,212 | 803,182 | |||||||||
Total
other income
|
7,617,285 | 8,068,485 | 6,404,304 | |||||||||
Other
expenses:
|
||||||||||||
Salaries
and employee benefits
|
14,649,620 | 13,906,002 | 9,924,742 | |||||||||
Occupancy
|
3,961,522 | 3,300,139 | 2,402,303 | |||||||||
Goodwill
impairment
|
24,127,865 | - | - | |||||||||
Expense
on loans and foreclosed property
|
2,387,978 | 423,167 | 175,412 | |||||||||
Other
operating
|
7,236,062 | 5,711,678 | 4,016,662 | |||||||||
Total
other expenses
|
52,363,047 | 23,340,986 | 16,519,119 | |||||||||
(Loss)
earnings before income taxes
|
(37,143,847 | ) | 3,168,011 | 11,785,960 | ||||||||
Income
tax benefit (expense)
|
6,393,418 | (133,738 | ) | (3,458,524 | ) | |||||||
Net
(loss) earnings
|
$ | ( 30,750,429 | ) | 3,034,273 | 8,327,436 | |||||||
Basic
(loss) earnings per share
|
$ | (5.12 | ) | 0.55 | 1.67 | |||||||
Diluted
(loss) earnings per share
|
$ | (5.12 | ) | 0.55 | 1.66 | |||||||
Dividends
per share
|
$ | 0.315 | 0.82 | 0.72 |
2008
|
2007
|
2006
|
||||||||||
Net
(loss) earnings
|
$ | ( 30,750,429 | ) | 3,034,273 | 8,327,436 | |||||||
Other
comprehensive income (loss), net of tax:
|
||||||||||||
Unrealized
gains (losses) on investment
|
||||||||||||
securities
available-for-sale:
|
||||||||||||
Unrealized
gains (losses) arising during the period
|
(2,385,123 | ) | 821,801 | (84,938 | ) | |||||||
Associated
(taxes) benefit
|
810,942 | (279,412 | ) | 28,879 | ||||||||
Reclassification
adjustment for gain realized
|
(435,067 | ) | - | - | ||||||||
Associated
taxes
|
147,923 | - | - | |||||||||
Change
in fair value of derivatives for cash flow hedges:
|
||||||||||||
Decrease
in fair value of derivatives for cash flow hedges
|
||||||||||||
arising
during the period
|
(814,233 | ) | (29,636 | ) | - | |||||||
Associated
tax benefit
|
276,839 | 10,076 | - | |||||||||
Other
comprehensive income (loss)
|
(2,398,719 | ) | 522,829 | (56,059 | ) | |||||||
Comprehensive
income (loss)
|
$ | ( 33,149,148 | ) | 3,557,102 | 8,271,377 |
Accumulated
|
||||||||||||||||||||||||||||||||
Additional
|
Other
|
|||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-in
|
Retained
|
Comprehensive
|
||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Earnings
|
Income (Loss)
|
Total
|
|||||||||||||||||||||||||
Balance,
December 31, 2005
|
- | $ | - | 4,987,794 | $ | 6,234,743 | 2,803,480 | 38,787,699 | 126,111 | 47,952,033 | ||||||||||||||||||||||
Cash
dividends on common stock ($.72 per share)
|
- | - | - | - | - | (3,601,765 | ) | - | (3,601,765 | ) | ||||||||||||||||||||||
Retirement
of common stock
|
- | - | (38,202 | ) | (47,753 | ) | (916,895 | ) | - | - | (964,648 | ) | ||||||||||||||||||||
Exercise
of stock options
|
- | - | 51,021 | 63,776 | 647,471 | - | - | 711,247 | ||||||||||||||||||||||||
Stock
option expense
|
- | - | - | - | 128,250 | - | - | 128,250 | ||||||||||||||||||||||||
Change in unrealized holding gain | ||||||||||||||||||||||||||||||||
on
securities available-for-sale,
|
||||||||||||||||||||||||||||||||
net of tax
|
- | - | - | - | - | - | (56,059 | ) | (56,059 | ) | ||||||||||||||||||||||
Net
earnings
|
- | - | - | - | - | 8,327,436 | - | 8,327,436 | ||||||||||||||||||||||||
Balance,
December 31, 2006
|
- | - | 5,000,613 | 6,250,766 | 2,662,306 | 43,513,370 | 70,052 | 52,496,494 | ||||||||||||||||||||||||
Cash
dividends on common stock ($.82 per share)
|
- | - | - | - | - | (4,761,106 | ) | - | (4,761,106 | ) | ||||||||||||||||||||||
Retirement
of common stock
|
- | - | (1,345 | ) | (1,681 | ) | (29,254 | ) | - | - | (30,935 | ) | ||||||||||||||||||||
Issuance
of shares in acquisition of First Haralson
|
||||||||||||||||||||||||||||||||
Corporation,
net of issuance costs of $102,292
|
- | - | 1,055,149 | 1,318,937 | 27,331,583 | - | - | 28,650,520 | ||||||||||||||||||||||||
Exercise
of stock options
|
- | - | 3,177 | 3,971 | 57,346 | - | - | 61,317 | ||||||||||||||||||||||||
Stock
option expense
|
- | - | - | - | 177,500 | - | - | 177,500 | ||||||||||||||||||||||||
Change
in unrealized holding gain
|
||||||||||||||||||||||||||||||||
on
securities available-for-sale,
|
||||||||||||||||||||||||||||||||
net
of tax
|
- | - | - | - | - | - | 542,389 | 542,389 | ||||||||||||||||||||||||
Change
in fair value of derivatives
|
||||||||||||||||||||||||||||||||
for
cash
flow
hedges, net of tax
|
- | - | - | - | - | - | (19,560 | ) | (19,560 | ) | ||||||||||||||||||||||
Net
earnings
|
- | - | - | - | - | 3,034,273 | - | 3,034,273 | ||||||||||||||||||||||||
Balance,
December 31, 2007
|
- | - | 6,057,594 | 7,571,993 | 30,199,481 | 41,786,537 | 592,881 | 80,150,892 | ||||||||||||||||||||||||
Cash
dividends on common stock ($.315 per share)
|
- | - | - | - | - | (1,908,142 | ) | - | (1,908,142 | ) | ||||||||||||||||||||||
Cash
dividends on Series A preferred stock
|
- | - | - | - | - | (253,528 | ) | - | (253,528 | ) | ||||||||||||||||||||||
Stock
issued in dividend reinvestment plan
|
- | - | 413 | 1,461 | - | - | - | 1,461 | ||||||||||||||||||||||||
Issuance
cost of dividend reinvestment plan
|
- | - | - | (30,283 | ) | - | - | - | (30,283 | ) | ||||||||||||||||||||||
Issuance
of Series A preferred
|
||||||||||||||||||||||||||||||||
shares,
net of issuance costs
|
||||||||||||||||||||||||||||||||
of
$129,285
|
1,509,100 | 11,943,515 | - | - | - | - | - | 11,943,515 | ||||||||||||||||||||||||
Reclassification
change to no par common stock
|
- | - | - | 30,199,481 | (30,199,481 | ) | - | - | - | |||||||||||||||||||||||
Stock
option expense
|
- | - | - | 174,500 | - | 174,500 | ||||||||||||||||||||||||||
Change
in unrealized holding
|
||||||||||||||||||||||||||||||||
gain
on securities
|
||||||||||||||||||||||||||||||||
available-for-sale,
net of tax
|
- | - | - | - | - | - | (1,861,325 | ) | (1,861,325 | ) | ||||||||||||||||||||||
Change
in fair value of
|
||||||||||||||||||||||||||||||||
derivatives
for cash flow
|
||||||||||||||||||||||||||||||||
hedges,
net of tax
|
- | - | - | - | - | - | (537,394 | ) | (537,394 | ) | ||||||||||||||||||||||
Net
loss
|
- | - | - | - | - | ( 30,750,429 | ) | - | ( 30,750,429 | ) | ||||||||||||||||||||||
Balance,
December 31, 2008
|
1,509,100 | $ | 11,943,515 | 6,058,007 | $ | 37,917,152 | - | 8,874,438 | ( 1,805,838 | ) | 56,929,267 |
2008
|
2007
|
2006
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
(loss) earnings
|
$ | (30,750,429 | ) | 3,034,273 | 8,327,436 | |||||||
Adjustments
to reconcile net (loss) earnings to net cash provided by
|
||||||||||||
operating
activities:
|
||||||||||||
Depreciation,
amortization and accretion
|
1,880,394 | 1,362,866 | 1,099,739 | |||||||||
Provision
for loan losses
|
14,900,000 | 10,206,263 | 1,465,000 | |||||||||
Goodwill
impairment
|
24,127,865 | - | - | |||||||||
Stock-based
employee compensation expense
|
174,500 | 177,500 | 128,250 | |||||||||
Deferred
income tax benefit
|
(3,877,569 | ) | (2,510,403 | ) | (188,645 | ) | ||||||
Income
from bank owned life insurance
|
(163,460 | ) | (78,262 | ) | - | |||||||
Gain
on sale of securities available-for-sale
|
(435,067 | ) | - | - | ||||||||
Loss
on sale or disposal of premises and equipment
|
303,453 | 774 | 4,327 | |||||||||
Net
loss (gain) on sales and write-downs of foreclosed
property
|
1,185,854 | 729,261 | (243,153 | ) | ||||||||
Change
in, net of effects of purchase acquisition in 2007:
|
||||||||||||
Other
assets
|
(564,365 | ) | (2,664,963 | ) | (1,283,102 | ) | ||||||
Other
liabilities
|
241,292 | (826,957 | ) | 795,470 | ||||||||
Net
cash provided by operating activities
|
7,022,468 | 9,430,352 | 10,105,322 | |||||||||
Cash
flows from investing activities, net of effects of purchase acquisition in
2007:
|
||||||||||||
Proceeds
from sales of securities available-for-sale
|
28,966,259 | 5,993,155 | - | |||||||||
Proceeds
from maturities, calls and pay-downs of securities
available-for-sale
|
10,914,065 | 52,974,394 | 21,321,435 | |||||||||
Proceeds
from maturities, calls and pay-downs of securities
held-to-maturity
|
274,451 | 1,436,551 | 1,403,882 | |||||||||
Purchases
of securities available-for-sale
|
(13,875,959 | ) | (74,099,579 | ) | (21,263,737 | ) | ||||||
Purchases
of securities held-to-maturity
|
- | (1,500,000 | ) | (2,503,750 | ) | |||||||
Purchase
of other securities
|
- | - | (1,534,019 | ) | ||||||||
Net
change in loans
|
(29,299,489 | ) | (60,280,600 | ) | (52,893,590 | ) | ||||||
Cash
paid in purchase acquisition, net of cash received of
$17,437,208
|
- | (615,472 | ) | - | ||||||||
Proceeds
from sales of premises and equipment
|
6,289 | - | - | |||||||||
Purchases
of premises and equipment
|
(604,168 | ) | (1,484,338 | ) | (994,417 | ) | ||||||
Proceeds
from the redemption of cash surrender value of life
insurance
|
- | 293,101 | - | |||||||||
Capital
expenditures for other real estate
|
(690,122 | ) | (1,676,548 | ) | - | |||||||
Proceeds
from sales of other real estate
|
5,503,568 | 546,968 | 851,446 | |||||||||
Net
cash provided (used) by investing activities
|
1,194,894 | ( 78,412,368 | ) | ( 55,612,750 | ) | |||||||
Cash
flows from financing activities, net of effects of purchase acquisition in
2007:
|
||||||||||||
Net
change in deposits
|
55,315,586 | 62,754,411 | 33,763,991 | |||||||||
Proceeds
from Federal Home Loan Bank advances
|
5,000,000 | 10,000,000 | 10,000,000 | |||||||||
Repayment
of Federal Home Loan Bank advances
|
(7,500,000 | ) | (15,000,000 | ) | - | |||||||
Proceeds
from junior subordinated debentures
|
- | 10,825,000 | - | |||||||||
Proceeds
from securities sold under repurchase agreements
|
- | 20,000,000 | - | |||||||||
Repayment
of securities sold under repurchase agreements
|
(20,000,000 | ) | - | - | ||||||||
Net
change in federal funds purchased
|
- | (2,475,000 | ) | 2,475,000 | ||||||||
Proceeds
from Series A preferred stock offering
|
12,072,800 | - | - | |||||||||
Dividends
paid on common stock
|
(3,188,468 | ) | (4,438,593 | ) | (3,466,603 | ) | ||||||
Dividends
paid on preferred stock
|
(253,528 | ) | - | - | ||||||||
Proceeds
from dividend reinvestment plan
|
1,461 | - | - | |||||||||
Proceeds
from exercise of stock options
|
- | 61,317 | 711,247 | |||||||||
Stock
issuance costs
|
(159,568 | ) | (102,292 | ) | - | |||||||
Retirement
of common stock
|
- | (30,935 | ) | (964,648 | ) | |||||||
Net
cash provided by financing activities
|
41,288,283 | 81,593,908 | 42,518,987 | |||||||||
Change
in cash and cash equivalents
|
49,505,645 | 12,611,892 | (2,988,441 | ) | ||||||||
Cash
and cash equivalents at beginning of year
|
25,845,340 | 13,233,448 | 16,221,889 | |||||||||
Cash
and cash equivalents at end of year
|
$ | 75,350,985 | 25,845,340 | 13,233,448 |
2008
|
2007
|
2006
|
||||||||||
Supplemental
disclosure of cash flow information:
|
||||||||||||
Cash
paid during the year for:
|
||||||||||||
Interest
|
$ | 26,754,257 | 27,014,520 | 17,978,895 | ||||||||
Income
taxes (received) paid
|
$ | (1,091,632 | ) | 4,263,000 | 3,688,500 | |||||||
Non-cash
investing and financing activities:
|
||||||||||||
Transfer
of loans to other real estate
|
$ | 52,877,940 | 8,680,003 | 1,227,319 | ||||||||
Loans
to facilitate sales of other real estate
|
$ | 11,394,317 | - | - | ||||||||
Change
in unrealized (losses) gains on
|
||||||||||||
securities
available-for-sale, net of tax
|
$ | (1,861,325 | ) | 542,389 | (56,059 | ) | ||||||
Change
in fair value of derivatives for cash flow hedges, net of
tax
|
$ | (537,394 | ) | (19,560 | ) | - | ||||||
Change
in dividends payable
|
$ | (1,280,326 | ) | 322,513 | 135,162 | |||||||
The
non-cash investing activities associated with the acquisition of
First
|
||||||||||||
Haralson
Corporation in 2007 are presented in Note 2 to the
financial
|
||||||||||||
statements.
|
(1)
|
Summary of Significant
Accounting Policies
|
Basis of
Presentation
|
|
The
consolidated financial statements of WGNB Corp. (the “Company”) include
the financial statements of its wholly owned subsidiary, First National
Bank of Georgia (the “Bank”). All significant intercompany accounts and
transactions have been eliminated in consolidation.
|
|
The
Bank commenced business in 1946 upon receipt of its banking charter from
the Office of the Comptroller of the Currency (the “OCC”). The Bank is
primarily regulated by the OCC and undergoes periodic examinations by this
regulatory agency. The Company is regulated by the Federal Reserve and is
also subject to periodic examinations. The Bank provides a full range of
commercial and consumer banking services principally in Carroll, Haralson,
Douglas, Coweta and Paulding Counties, Georgia.
|
|
The
accounting and reporting policies of the Company, and the methods of
applying these principles, conform with accounting principles generally
accepted in the United States of America (GAAP) and with general practices
within the banking industry. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance
sheet and income and expenses for the year. Actual results could differ
significantly from those estimates. Material estimates common to the
banking industry that are particularly susceptible to significant change
in an operating cycle of one year include, but are not limited to, the
determination of the allowance for loan losses, the valuation of any real
estate acquired in connection with foreclosures or in satisfaction of
loans and valuation allowances associated with the realization of deferred
tax assets which are based on future taxable income.
|
|
Cash and Cash
Equivalents
|
|
For
purposes of reporting cash flows, cash and cash equivalents include cash
and due from banks, interest-bearing funds in other banks and federal
funds sold.
|
|
Securities
|
|
The
Company classifies its securities in one of three categories: trading,
available-for-sale, or held-to-maturity. Trading securities are bought and
held principally for the purpose of selling them in the near term.
Held-to-maturity securities are those securities for which the Company has
the ability and intent to hold the security until maturity. All other
securities not included in trading or held-to-maturity are classified as
available-for-sale.
|
|
Trading
and available-for-sale securities are recorded at fair value.
Held-to-maturity securities are recorded at amortized cost, adjusted for
the amortization of premiums and accretion of discounts. Unrealized
holding gains and losses, net of the related tax effect, on securities
available-for-sale are excluded from earnings and are reported as a
separate component of accumulated other comprehensive income in
stockholders’ equity until realized. Transfers of securities between
categories are recorded at fair value at the date of
transfer.
|
|
A
decline in the market value of any available-for-sale or held-to-maturity
investment below cost that is deemed other than temporary is charged to
earnings and establishes a new cost basis for the
security.
|
|
Premiums
and discounts are amortized or accreted over the life of the related
security as an adjustment to the yield. Realized gains and losses for
securities classified as available-for-sale are included in earnings and
are derived using the specific identification method for determining the
cost of securities sold.
|
|
Loans
|
|
Loans
are stated at the principal amount outstanding, net of unearned interest
and the allowance for loan losses. Interest income on loans is recognized
in a manner that results in a level yield on the principal amount
outstanding. Nonrefundable loan fees are deferred, net of certain direct
origination costs, and amortized into income over the life of the related
loan. Other loan fees consisting of delinquent payment charges
and other common loan servicing fees are recognized as
earned.
|
|
Impaired
and Non-accrual
Loans
|
|
The
Company evaluates certain loans, particularly residential construction and
development credits, for impairment on an individual
basis. Loans are considered to be impaired when it is probable
that collection of all amounts due according to the contractual terms of
the loan agreement become doubtful. In the instance of a
restructured loan, the contractual terms of the loan agreement refer to
the original loan agreement. For collateral dependent loans, impairment is
measured based on the fair value of the collateral. Impairment is measured
based on the present value of the expected future cash flows discounted at
the loan’s effective interest rate, except for collateral dependent
loans.
|
(1)
|
Summary of Significant
Accounting Policies
, continued
|
Impaired
and Non-accrual
Loans
|
|
Not
all impaired loans are necessarily placed on non-accrual
status. It is possible that an impaired loan may be
collateralized by assets with fair values in excess of the recorded value
of the loan. In such a case, the loan would continue to accrue
interest up to the point that fair value is achieved or the collateral is
sold in settlement of the loan. A loan will normally be placed
on non-accrual when management believes that collection of principal or
interest has become doubtful or when the loan becomes 90 days past due as
to principal and interest, unless the loan is well secured and in the
process of collection.
|
|
When
a loan is placed on non-accrual status, the previously accrued and
uncollected interest that is considered uncollectible is reversed against
interest income of the current period. If a payment is received
on a loan in non-accrual status, it is generally applied to reduce the
carrying value of the loan. Non-accrual loans are returned to
accrual status when they become current as to principal and interest or
become both well secured and in the process of collection and
collectibility is no longer doubtful.
|
|
Allowance for Loan
Losses
|
|
The
allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for
loan losses when management believes that the collectibility of the
principal is unlikely. The allowance represents an amount which, in
management’s judgment based on historical losses and on current economic
environment, will be adequate to absorb probable losses on existing
loans. Amounts deemed uncollectible are charged-off and
deducted from the allowance and recoveries on loans previously charged-off
are added back to the allowance.
|
|
Management’s
judgment in determining the adequacy of the allowance is based on
evaluations of the collectibility of loans. These evaluations take into
consideration such factors as the nature and changes in the composition of
the loan portfolio, current economic conditions that may affect the
borrower’s ability to pay, overall portfolio quality, and review of
specific problem loans. In determining the adequacy of the
allowance for loan losses, management uses a loan grading system that
rates loans in nine different categories. Grades are assigned
allocations of allowance based on the Company’s loss experience, peer loss
experience, migration analysis and internal and external economic
factors. The combination of these results is compared monthly
to the recorded allowance for loan losses and material differences are
adjusted by increasing or decreasing the provision for loan
losses.
|
|
Management
uses devoted internal loan reviewers who are independent of the lending
function to challenge and corroborate the loan grading system and provide
additional analysis in determining the adequacy of the allowance for loan
losses and the future provisions for estimated loan
losses. From time to time the Company utilizes independent
external loan reviewers to supplement and challenge the internal loan
reviewers.
|
|
Management
believes that the allowance for loan losses is adequate. While management
uses available information to provide reserves and recognize losses on
loans, future additions to the allowance may be necessary based on changes
in economic conditions. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the
Company’s allowance for loan losses. Such agencies may require the Company
to recognize additions to the allowance based on their judgment of
information available to them at the time of their
examination.
|
|
Premises and
Equipment
|
|
Premises
and equipment are carried at cost less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the related
assets. When assets are retired or otherwise disposed, the cost
and related accumulated depreciation are removed from the accounts, and
any resulting gain or loss is reflected in earnings for the
period. The cost of maintenance and repairs that do not improve
or extend the useful life of the respective asset is charged to income as
incurred, whereas significant renewals and improvements are
capitalized. The range of estimated useful lives for premises
and equipment are:
|
Buildings
and improvements
|
15
– 39 years
|
Furniture
and equipment
|
3
– 10 years
|
(1)
|
Summary of Significant
Accounting Policies
, continued
|
Cash Surrender Value
of Life Insurance
|
|
The
cash surrender value of life insurance is carried at its cash value based
upon accrued earnings of the underlying contract added to the balance of
the asset.
|
|
Core Deposit
Intangible
|
|
The
core deposit intangible is amortized on a straight-line method over the
period of benefit, generally 10 years. The core deposit
intangible is reviewed for impairment whenever events or changes in
circumstances indicate that the recovery of the value in the underlying
asset which gave rise to the core deposit intangible becomes permanently
impaired.
|
|
Goodwill
|
|
Goodwill
represents the cost of an acquired company in excess of the fair value of
the net assets acquired. Goodwill is not amortized over a
useful life. Instead, it is subject to a two step impairment
test in accordance with Statement of Financial Accounting Standards
(“SFAS”) No. 142,
Goodwill and Other Intangible
Assets.
The first step compares the fair value of the
reporting unit, the Company, to the carrying amount of the
goodwill. If the carrying amount of the goodwill exceeds the
fair value of the reporting unit, then a second step is conducted whereby
the implied fair value of the goodwill is compared to the carrying value
of the goodwill. If the implied fair value is less than the
carrying amount of the goodwill, an impairment loss is
recognized.
|
|
Other
Investments
|
|
Other
investments include Federal Home Loan Bank (“FHLB”) stock, Federal Reserve
Bank stock, investments in federal and state income tax credit
partnerships and other equity securities. The investments have
no readily determinable fair value, are carried at cost, and
are included in other assets in the accompanying consolidated balance
sheets.
|
|
Foreclosed
Property
|
|
Properties
acquired through foreclosure are carried at the lower of cost or fair
value less estimated costs to dispose. Fair value is defined as the amount
that is expected to be received in a current sale between a willing buyer
and seller other than in a forced or liquidation sale. Fair values at
foreclosure are based on appraisals. Losses arising from the acquisition
of foreclosed properties are charged against the allowance for loan
losses. Subsequent write-downs are charged to earnings in the period in
which the need arises.
|
|
Securities Sold Under
Repurchase Agreements
|
|
The
Company sells securities under agreements to repurchase. These
repurchase agreements are treated as borrowings. The
obligations to repurchase securities sold are reflected as a liability and
the securities underlying the agreements are reflected as assets in the
consolidated balance sheets.
|
|
Income
Taxes
|
|
The
Company accounts for income taxes under the liability method. Accordingly,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
|
|
In
the event the future tax consequences of differences between the financial
reporting bases and the tax bases of the assets and liabilities results in
deferred tax assets, an evaluation of the probability of being able to
realize the future benefits indicated by such asset is required. A
valuation allowance is provided for a portion of the deferred tax asset
when it is more likely than not that some portion or all of the deferred
tax asset will not be realized. In assessing the realizability of the
deferred tax assets, management considers the scheduled reversals of
deferred tax liabilities, projected future taxable income, and tax
planning strategies.
|
(1)
|
Summary of Significant
Accounting Policies
, continued
|
Income Taxes
,
continued
|
|
The
Company adopted Financial Accounting Standards Board (“FASB”)
Interpretation No. 48,
Accounting for Uncertainty in
Income Taxes, an Interpretation of FASB Statement 109
(“FIN 48”) as
of January 1, 2007. A tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be
sustained in a tax examination, with a tax examination being presumed to
occur. The amount recognized is the largest amount of tax
benefit that is greater than 50 percent likely of being realized in
examination. For tax positions not meeting the “more likely
than not” test, no tax benefit is recorded. The adoption of FIN
48 had no effect on the Company’s financial statements.
|
|
Derivative Instruments
and Hedging Activities
|
|
The
Company recognizes the fair value of derivatives as assets or liabilities
in the financial statements. Accounting for the changes in the
fair value of a derivative depends on the intended use of the derivative
instrument at inception. The change in fair value of
instruments used as fair value hedges is accounted for in the earnings of
the period simultaneous with accounting for the fair value change of the
item being hedged. The change in fair value of the effective
portion of cash flow hedges is accounted for in comprehensive income
rather than earnings. The change in fair value of derivative instruments
that are not intended as a hedge is accounted for in the earnings of the
period of the change. When a swap contract is terminated, the cumulative
change in the fair value is amortized into income over the original hedge
period. If the underlying hedged instrument is sold or settled,
the Company immediately recognizes the cumulative change in the
derivative’s value in the component of earnings.
|
|
Stock Compensation
Plans
|
|
SFAS
No. 123 (revised 2004) (SFAS No. 123 (R))
Share-Based Payment
was
adopted by the Company on the required date, January 1, 2006, using the
modified prospective transition method provided for under the
standard. SFAS No. 123 (R) addresses the accounting for
share-based payment transactions in which the Company receives employee
services in exchange for equity instruments of the Company. SFAS No. 123
(R) requires the Company to recognize as compensation expense the “grant
date fair value” of stock options granted to employees in the statement of
earnings using the fair-value-based method.
|
|
The
Company recognized $174,500, $177,500 and $128,250 of stock based
compensation during the years ended December 31, 2008, 2007 and 2006,
respectively, associated with its stock option grants. The
Company is recognizing the compensation expense for stock option grants
with graded vesting schedules on a straight-line basis over the requisite
service period of the award as permitted by SFAS No. 123
(R). As of December 31, 2008, there was $467,307 of
unrecognized compensation cost related to stock option
grants. The cost is expected to be recognized over the
remaining vesting period of approximately five years.
|
|
The
grant-date fair value of each option granted during 2008, 2007 and 2006
was $3.37, $6.39 and $4.47, respectively. The
fair value of each option is estimated on the date of grant using the
Black-Scholes Model. The following weighted average assumptions
were used for grants in 2008, 2007 and
2006:
|
2008
|
2007
|
2006
|
||||||||||
Dividend
yield
|
3.09 | % | 2.72 | % | 2.85 | % | ||||||
Expected
volatility
|
22 | % | 20 | % | 13 | % | ||||||
Risk-free
interest rate
|
3.50 | % | 4.83 | % | 4.54 | % | ||||||
Expected
term
|
6.5
years
|
6.6
years
|
10
years
|
Earnings Per
Share
|
|
Basic
earnings per share are based on the weighted average number of common
shares outstanding during the period. The effects of potential common
shares outstanding during the period are included in diluted earnings per
share. Stock options, which are described in note 14, are granted to key
management personnel.
|
|
SFAS
No. 128,
Earnings Per
Share,
requires that employee equity share options, non-vested
shares and similar equity instruments granted to employees be treated as
potential common shares in computing diluted earnings per share. Diluted
earnings per share should be based on the actual number of options or
shares granted and not yet forfeited, unless doing so would be
anti-dilutive. The Company uses the “treasury stock” method for equity
instruments granted in share-based payment transactions provided in SFAS
No. 128 to determine diluted earnings per
share.
|
(1)
|
Summary of Significant
Accounting Policies
, continued
|
Earnings
per share
, continued
|
|
Set
forth below is a table showing a reconciliation of the amounts used in the
computation of basic and diluted earnings per share. Only a
reconciliation of amounts for the periods ended December 31, 2007 and 2006
are presented. No presentation for the period ended December
31, 2008 is set forth below because inclusion of potential common shares
in the diluted loss per share calculation for these periods would be
anti-dilutive. Basic earnings per share for 2008 is computed by
dividing the net loss for 2008 less dividends paid to preferred
shareholders by the weighted average common shares outstanding in 2008 as
follows: $(30,750,429) less $253,528 divided by 6,057,613 shares.
Reconciliation of the amounts used in the computation of both “basic
earnings per share” and “diluted earnings per share” for the years ended
December 31, 2007 and 2006 are as
follows:
|
Common
|
Per
Share
|
|||||||||||
For
the Year Ended December 31, 2007
|
Net Earnings
|
Shares
|
Amount
|
|||||||||
Basic
earnings per share
|
$ | 3,034,273 | 5,534,851 | $ | .55 | |||||||
Effect
of dilutive stock options
|
- | 25,187 | - | |||||||||
Diluted
earnings per share
|
$ | 3,034,273 | 5,560,038 | $ | .55 | |||||||
|
Common
|
Per
Share
|
||||||||||
For
the Year Ended December 31, 2006
|
Net Earnings
|
Shares
|
Amount
|
|||||||||
Basic
earnings per share
|
$ | 8,327,436 | 4,998,103 | $ | 1.67 | |||||||
Effect
of dilutive stock options
|
- | 26,565 | (.01 | ) | ||||||||
Diluted
earnings per share
|
$ | 8,327,436 | 5,024,668 | $ | 1.66 |
Recent Accounting
Pronouncements
|
|
Business
Combinations
|
|
In
December 2007, the FASB issued SFAS No. 141(R),
Business
Combinations
. SFAS No. 141 (R) will significantly change
how entities apply the acquisition method to business
combinations. The most significant changes affecting how the
Company will account for business combinations under this Statement
include: the acquisition date is the date the acquirer obtains control;
(and only) identifiable assets acquired, liabilities assumed, and
noncontrolling interests in the acquiree are stated at fair value on the
acquisition date; assets or liabilities arising from noncontractual
contingencies are measured at their acquisition date fair value only if it
is more likely than not that they meet the definition of an asset or
liability on the acquisition date; adjustments subsequently made to the
provisional amounts recorded on the acquisition date are made
retroactively during a measurement period not to exceed one year;
acquisition related restructuring costs that do not meet the criteria of
SFAS No. 146,
Accounting
for Cost Associated with Exit or Disposal Activities
, are expensed
as incurred; transaction costs are expensed as incurred; reversals of
deferred income tax valuation allowances and income tax contingencies are
recognized in the earnings subsequent to the measurement period; and the
allowance for loan losses of an acquiree is not permitted to be recognized
by the acquirer. Additionally, SFAS No. 141(R) requires new and
modified disclosures surrounding subsequent changes to acquisition–related
contingencies, contingent consideration, noncontrolling interest
interests, acquisition-related transaction costs, fair values and cash
flows not expected to be collected for acquired loans and an enhanced
goodwill rollforward. The Company is required to apply SFAS No.
141(R) prospectively to all business combinations completed after January
1, 2009.
|
|
Accounting for
Transfers of Financial Assets and Repurchase Financing
Transactions
|
|
In
February 2008, the FASB issued FASB Staff Position (“FSP”) FAS 140-3
Accounting for Transfers of
Financial Assets and Repurchase Financing
Transactions
. This statement provides guidance
regarding the accounting for a transfer of a financial asset and
repurchase financing where the counterparties for both transactions are
the same. In these circumstances, certain criteria must be met
in order to not account for the transactions as a linked
transaction.
|
(1)
|
Summary of Significant
Accounting Policies
, continued
|
Recent Accounting
Pronouncements
|
|
Accounting for
Transfers of Financial Assets and Repurchase Financing
Transactions
|
|
This
FSP becomes effective for the fiscal years and interim periods beginning
on or after November 15, 2008. The Company does not anticipate
that this FSP will have a material effect on the Company’s financial
position, results of operations, or disclosures.
|
|
Disclosures about
Derivative Instruments and Hedging Activities
|
|
In
March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative
Instruments and Hedging Activities
. SFAS No. 161 is an amendment to
SFAS No. 133,
Accounting
for Derivative Instruments and Hedging Activities
. The objective of
SFAS No. 161 is to expand the disclosure requirements of SFAS No. 133 with
the intent to improve the financial reporting of how and why an entity
uses derivative instruments; how derivative instruments and related hedged
items are accounted for under SFAS No. 133 and its related
interpretations; and how derivative instruments and related hedged items
affect an entity's financial position, financial performance and cash
flows. The statement is effective for financial statements
issued for fiscal years beginning after November 15, 2008. The
Company does not anticipate the new accounting pronouncement to
have a material effect on its financial position or results of
operations.
|
|
Hierarchy of Generally
Accepted Accounting Principles
|
|
In
May 2008, the FASB issued SFAS No. 162,
The Hierarchy of Generally
Accepted Accounting Principles
. SFAS No. 162 identifies
the sources of accounting principles and the framework for selecting the
principles to be used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally
accepted accounting principles (GAAP) in the United States (the GAAP
hierarchy). The current GAAP hierarchy, as set forth in the American
Institute of Certified Public Accountants (AICPA) Statement on Auditing
Standards No. 69,
The
Meaning of Present Fairly in Conformity With Generally Accepted Accounting
Principles
, has been criticized because (1) it is directed to the
auditor rather than the entity, (2) it is complex, and (3) it ranks FASB
Statements of Financial Accounting Concepts, which are subject to the same
level of due process as FASB Statements of Financial Accounting Standards,
below industry practices that are widely recognized as generally accepted
but that are not subject to due process. The FASB believes that the
GAAP hierarchy should be directed to entities because it is the entity
(not its auditor) that is responsible for selecting accounting principles
for financial statements that are presented in conformity with GAAP.
Accordingly, the FASB concluded that the GAAP hierarchy should
reside in the accounting literature established by the FASB and is issuing
this Statement to achieve that result. The Company does not
anticipate the new accounting pronouncement to have a material
effect on its financial position or results of
operations.
|
|
Determining the Fair
Value of a Financial Asset When the Market for that Asset is Not
Active
|
|
In
October 2008, the FASB issued FSP FAS 157-3,
Determining the Fair Value of
a Financial Asset When the Market for That Asset is Not Active
.
This FSP clarifies the application of SFAS No. 157,
Fair Value
Measurements
, in a market that is not active and provides an
example to illustrate key considerations in determining the fair value of
a financial asset when the market for that financial asset is not active.
FSP FAS 157-3 provides guidance on (1) how an entity's own
assumption should be considered when measuring fair value when relevant
observable inputs do not exist, (2) how available observable inputs in a
market that is not active should be considered when measuring fair value
and (3) how the use of market quotes should be considered when assessing
the relevance of observable and unobservable inputs available to measure
fair value. This FSP Staff Position is effective immediately.
The Company does not anticipate the new accounting
pronouncement to have a material effect on its financial
position or results of operations.
|
|
Other
accounting standards that have been issued or proposed by the FASB and
other standard setting entities that do not require adoption until a
future date are not expected to have a material impact on the Company’s
consolidated financial statements upon adoption.
|
|
Reclassifications
|
|
Certain
reclassifications have been made in the prior years’ consolidated
statements to conform to the presentation used in
2008.
|
(2)
|
Material Business
Combination
|
On
January 22, 2007, WGNB Corp. entered into an agreement and plan of
reorganization by and among WGNB Corp., West Georgia National Bank, First
Haralson Corporation, and First National Bank of Georgia whereby First
Haralson Corporation will be merged with and into WGNB Corp. by
acquisition of 100 percent of the outstanding common shares of First
Haralson Corporation and, concurrently, First National Bank of Georgia
will be merged into West Georgia National Bank. Upon the closing of the
transaction, West Georgia National Bank changed its name to First National
Bank of Georgia. The transaction was approved by both
companies’ shareholders and it closed on June 29, 2007 with an effective
date of July 1, 2007. First Haralson Corporation was headquartered in
Buchanan, Georgia and operated five branches in Haralson County and two
branches in Carroll County. The results of operations from the
acquisition have been included in the Company’s consolidated financial
statements from the date of acquisition, July 1, 2007.
|
|
Under
the terms of the merger agreement, First Haralson Corporation’s
shareholders elected to receive cash, WGNB Corp. common stock, or a
combination of the two. The shareholders made their elections
and, in the aggregate, chose: cash consideration in the amount of
$16,315,423; shares of WGNB Corp. stock in the amount of 1,055,149 valued
at $27.25 per share; which, together with total acquisition costs of
$1,746,463, resulted in a total consideration of $46,814,696 at the date
of the closing. In addition, the terms of the merger agreement
allowed First Haralson Corporation to pay a one-time, special dividend not
to exceed $7,250,000 in the aggregate, or approximately $35.67 per share,
for each First Haralson Corporation share to First Haralson Corporation
shareholders prior to the closing of the transaction.
|
|
One
of the primary business objectives for the transaction was to strengthen
the Company’s presence along the Interstate 20 corridor in western
Georgia. The combined entity has retained the number one market
share ranking in both Carroll and Haralson
counties. Additionally, the transaction has enhanced the
Company’s core deposits and has diversified its loan portfolio. The
combination also created a top 20 financial institution in Georgia in
terms of total deposits.
|
|
The
following table summarizes the estimated fair values of assets acquired
and liabilities assumed on the closing date, July 1,
2007.
|
First
Haralson
|
||||
Corporation
|
||||
(In
thousands)
|
||||
Assets
acquired:
|
||||
Cash
and cash equivalents
|
$ | 8,196 | ||
Federal
Funds sold
|
9,241 | |||
Securities
available for sale
|
42,282 | |||
Loans,
net
|
136,459 | |||
Premises
and equipment
|
9,333 | |||
Core
deposit intangible
|
5,738 | |||
Goodwill
|
23,991 | |||
Other
assets
|
6,793 | |||
Total
assets acquired
|
242,033 | |||
Liabilities
assumed:
|
||||
Deposits
|
180,843 | |||
Other
borrowed funds
|
7,500 | |||
Other
liabilities
|
6,875 | |||
Total
liabilities assumed
|
195,218 | |||
Net
assets acquired
|
$ | 46,815 |
(2)
|
Material Business
Combination
, continued
|
The
financial information below presents the proforma earnings of WGNB Corp.
assuming the operations of First Haralson Corporation were included in
consolidated earnings as of the beginning of the earliest reporting
period:
|
Years
Ended December 31,
|
||||||||
(In thousands)
|
||||||||
2007
|
2006
|
|||||||
Total
revenue
|
$ | 73,508 | 64,289 | |||||
Net
earnings
|
$ | 3,992 | 10,708 | |||||
Diluted
earnings per share
|
$ | .66 | 1.76 |
(3)
|
Securities
|
Securities
available-for-sale and held-to-maturity at December 31, 2008 and 2007 are
summarized as follows:
|
Available-for-Sale
|
December 31, 2008
|
|||||||||||||||
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Value
|
|||||||||||||
Mortgage-backed
securities
|
$ | 32,587,849 | 617,678 | 30,265 | 33,175,262 | |||||||||||
State,
county and municipals
|
59,330,698 | 352,558 | 2,404,613 | 57,278,643 | ||||||||||||
Corporate
bonds
|
4,343,324 | - | 427,607 | 3,915,717 | ||||||||||||
$ | 96,261,871 | 970,236 | 2,862,485 | 94,369,622 |
December 31, 2007
|
||||||||||||||||
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Value
|
|||||||||||||
U.S.
Government sponsored enterprises
|
$ | 1,989,757 | 40,761 | 1,018 | 2,029,500 | |||||||||||
Mortgage-backed
securities
|
45,194,946 | 547,002 | 168,685 | 45,573,263 | ||||||||||||
State,
county and municipals
|
69,938,633 | 812,974 | 285,138 | 70,466,469 | ||||||||||||
Corporate
bonds
|
4,641,969 | 1,811 | 19,768 | 4,624,012 | ||||||||||||
$ | 121,765,305 | 1,402,548 | 474,609 | 122,693,244 |
Held-to-Maturity
|
December 31, 2008
|
|||||||||||||||
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Value
|
|||||||||||||
Trust
preferred securities
|
$ | 7,622,340 | - | 4,769,170 | 2,853,170 | |||||||||||
December 31, 2007
|
||||||||||||||||
Gross
|
Gross
|
Estimated
|
||||||||||||||
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
|||||||||||||
Cost
|
Gains
|
Losses
|
Value
|
|||||||||||||
Trust
preferred securities
|
$ | 7,901,839 | - | - | 7,901,839 |
(3)
|
Securities
,
continued
|
The
amortized cost and estimated fair value of investment securities
available-for-sale and held-to-maturity at December 31, 2008, by
contractual maturity are shown below. Expected maturities will differ from
contractual maturities because borrowers have the right to call or prepay
certain obligations with or without call or prepayment
penalties.
|
Available-for-Sale
|
Amortized
|
Estimated
|
||||||
Cost
|
Fair Value
|
|||||||
State,
county and municipals and corporate bonds:
|
||||||||
Within
1 year
|
$ | 350,000 | 350,000 | |||||
1
to 5 years
|
6,381,488 | 6,003,168 | ||||||
5
to 10 years
|
12,043,040 | 12,196,443 | ||||||
After
10 years
|
44,899,494 | 42,644,749 | ||||||
Mortgage-backed
securities
|
32,587,849 | 33,175,262 | ||||||
$ | 96,261,871 | 94,369,622 | ||||||
Held-to-Maturity
|
||||||||
Trust
preferred securities:
|
||||||||
After
10 years
|
$ | 7,622,340 | 2,853,170 |
The
following is a summary of the fair values of securities that have
unrealized losses as of December 31, 2008 and
2007:
|
December
31, 2008
|
||||||||||||||||
Less Than 12 Months
|
12 Months or More
|
|||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||
Value
|
Losses
|
Value
|
Losses
|
|||||||||||||
Mortgage-backed
securities
|
$ | 2,218,159 | 30,265 | - | - | |||||||||||
State,
county and municipals
|
33,952,227 | 1,951,073 | 3,834,658 | 453,540 | ||||||||||||
Corporate
bonds
|
3,915,717 | 427,607 | - | - | ||||||||||||
$ | 40,086,103 | 2,408,945 | 3,834,658 | 453,540 |
December
31, 2007
|
||||||||||||||||
Less Than 12 Months
|
12 Months or More
|
|||||||||||||||
Fair
|
Unrealized
|
Fair
|
Unrealized
|
|||||||||||||
Value
|
Losses
|
Value
|
Losses
|
|||||||||||||
U.S.
Government sponsored enterprises
|
$ | 998,800 | 1,018 | - | - | |||||||||||
Mortgage-backed
securities
|
2,898,436 | 3,691 | 8,049,219 | 164,994 | ||||||||||||
State,
county and municipals
|
18,168,890 | 256,215 | 3,458,929 | 28,923 | ||||||||||||
Corporate
bonds
|
2,352,811 | 10,997 | 697,089 | 8,771 | ||||||||||||
$ | 24,418,937 | 271,921 | 12,205,237 | 202,688 |
At
December 31, 2008, all unrealized losses in the investment securities
portfolio related to debt securities. The unrealized losses on these debt
securities arose due to changing interest rates and are considered to be
temporary. From the December 31, 2008 tables above, 18 securities out of
88 securities issued by mortgage backed securities contained unrealized
losses, 85 out of 149 securities issued by state and political
subdivisions contained unrealized losses and three out of three securities
issued by corporations contained unrealized losses. These unrealized
losses are considered temporary because of acceptable investment grades on
each security and the repayment sources of principal and interest are
largely government backed.
|
(3)
|
Securities
,
continued
|
Proceeds
from sales of securities available-for-sale during 2008 and 2007 were
$28,966,259 and $5,993,155, respectively, with a gross gain of $435,067 in
2008. There were no gains or losses recognized upon sales in 2007 due to
investment securities acquired in the First Haralson acquisition being
sold shortly after the merger date to reposition the investment
portfolio. All investment securities acquired in the
acquisition were acquired at their fair market value. There were no sales
of securities available-for-sale during 2006.
|
|
Investment
securities with a fair value of approximately $92,431,000 and $91,679,000
as of December 31, 2008 and 2007, respectively, were pledged to secure
public deposits, as required by law, and for other purposes. In addition,
certificates of deposit at other banks in the amount of $12,000,000, were
pledged to secure public deposits at December 31, 2008.
|
|
(4)
|
Loans
|
Major
classifications of loans at December 31, 2008 and 2007 are summarized as
follows:
|
2008
|
2007
|
|||||||
Commercial,
financial and agricultural
|
$ | 64,433,643 | 63,038,467 | |||||
Real
estate – mortgage
|
349,612,461 | 313,836,443 | ||||||
Real
estate – construction
|
182,877,720 | 242,216,730 | ||||||
Consumer
|
34,575,962 | 40,872,282 | ||||||
631,499,786 | 659,963,922 | |||||||
Less:
Unearned interest and fees
|
1,337,869 | 1,802,831 | ||||||
Allowance
for loan losses
|
11,239,767 | 12,422,428 | ||||||
$ | 618,922,150 | 645,738,663 |
The
Bank grants loans and extensions of credit to individuals and a variety of
businesses and corporations primarily located in its general trade area of
Carroll, Paulding, Haralson, Coweta and Douglas Counties, Georgia.
Although the Bank has a diversified loan portfolio, a substantial portion
of the loan portfolio is collateralized by improved and unimproved real
estate and is dependent upon the real estate market.
|
|
Under
the line of credit agreements with the Federal Home Loan Bank and the
Federal Reserve Bank (see Note 8), the Bank pledges acceptable loans under
a blanket lien as collateral for its borrowings. As
of December 31, 2008, loans totaling $106,200,000, were pledged to the
Federal Home Loan Bank and $20,849,000 were pledged to secure an open line
of credit with the Federal Reserve Bank. As of December 31,
2007, loans totaling $111,378,000 were pledged to the Federal Home Loan
Bank.
|
|
Changes
in the allowance for loan losses for the years ended December 31, 2008,
2007 and 2006 are as follows:
|
2008
|
2007
|
2006
|
||||||||||
Balance,
beginning of year
|
$ | 12,422,428 | 5,748,355 | 5,327,406 | ||||||||
Provision
for loan losses
|
14,900,000 | 10,206,263 | 1,465,000 | |||||||||
Allowance
attributable to First Haralson acquisition
|
- | 1,527,225 | - | |||||||||
Loans
charged off
|
(16,430,695 | ) | (5,243,428 | ) | (1,112,201 | ) | ||||||
Recoveries
|
348,034 | 184,013 | 68,150 | |||||||||
Balance,
end of year
|
$ | 11,239,767 | 12,422,428 | 5,748,355 |
The
Company considers a loan to be impaired when it is probable that it will
be unable to collect all amounts due according to the original terms of
the loan agreement. Impaired loans include loans which are not accruing
interest and restructured loans which are accruing interest. The Company
measures impairment of a loan on a loan-by-loan
basis. Non-accrual loans are loans which collection of interest
is not probable and all cash flows received are recorded as reduction in
principal. Restructured loans have modified terms from the
original contract that give the debtor a more practical arrangement for
meeting financial obligations. Amounts of impaired
loans that are not probable of collection are charged off
immediately. Impaired loans and related amounts included in the
allowance for loan losses at December 31, 2008 and 2007 are as
follows:
|
(4)
|
Loans,
continued
|
2008
|
2007
|
|||||||||||||||
Allowance
|
Allowance
|
|||||||||||||||
Balance
|
Amount
|
Balance
|
Amount
|
|||||||||||||
Impaired
loans with related allowance
|
$ | 31,481,508 | 3,708,874 | 11,544,090 | 1,504,955 | |||||||||||
Impaired
loans without related allowance
|
52,910,575 | - | 34,807,780 | - |
The
average amount of impaired loans during 2008 and 2007 was $53,794,000 and
$5,807,000, respectively. Interest income recognized on impaired loans was
$119,985 in 2008 and $642,057 in 2007. No interest income was
recognized on impaired loans in 2006.
|
|
(5)
|
Premises and
Equipment
|
Major
classifications of premises and equipment at December 31, 2008 and 2007
are summarized as follows:
|
2008
|
2007
|
|||||||
Land
|
$ | 3,296,109 | 2,793,363 | |||||
Buildings
and improvements
|
15,017,660 | 15,878,764 | ||||||
Furniture
and equipment
|
10,609,050 | 10,052,282 | ||||||
28,922,819 | 28,724,409 | |||||||
Less:
Accumulated depreciation
|
11,906,456 | 10,367,439 | ||||||
$ | 17,016,363 | 18,356,970 |
Depreciation
expense amounted to $1,635,033, $1,449,463 and $1,134,746 in 2008, 2007
and 2006, respectively.
|
|
(6)
|
Intangible
Assets
|
Intangible
assets include goodwill and core deposit intangible, both of which were
generated as a result of the merger with First Haralson Corporation as of
July 1, 2007. The changes in goodwill for 2008 and 2007 are as
follows:
|
2008
|
2007
|
|||||||
Balance,
beginning of year
|
$ | 23,982,743 | - | |||||
Acquired
goodwill
|
- | 23,982,743 | ||||||
Adjustments
|
145,122 | - | ||||||
Impairment
of goodwill
|
( 24,127,865 | ) | - | |||||
Balance,
end of year
|
$ | - | 23,982,743 |
During
our annual assessment of goodwill as of September 30, 2008, we concluded
that goodwill was impaired. SFAS No. 142
Goodwill and Other Intangible
Assets
requires that goodwill be reviewed for impairment at least
annually. Impairment is a condition that exists when the
carrying amount of the goodwill exceeds its fair value. SFAS
No. 142 identifies a two step impairment test that should be
used to test for impairment and measure the amount of the impairment loss
to be recognized. The two tests were performed by a third party using
three valuation approaches: the market approach, income approach and the
cost approach. Based on the testing, it was determined that the
entire amount of goodwill recorded at September 30, 2008 was
impaired. The loss on impairment of goodwill in the amount of
$24,127,865 was recorded as an other expense in the statement of
operations for the year ended December 31, 2008.
|
|
The
core deposit intangible is being amortized over its estimated useful life
of 10 years using the straight-line method. A summary of core
deposit intangible asset as of December 31, 2008 and 2007 is as
follows
|
2008
|
2007
|
|||||||
Gross
amount
|
$ | 5,738,000 | 5,738,000 | |||||
Less
– accumulated amortization
|
860,700 | 286,902 | ||||||
Carrying
amount, end of year
|
$ | 4,877,300 | 5,451,098 |
(6)
|
Intangible Assets,
continued
|
Amortization
expense for core deposit intangible was $573,798 and $286,902 in 2008 and
2007, respectively. The Company recorded no amortization of
core deposit intangible in 2006 prior to the
merger. Amortization expense is estimated to be $573,798 per
year for each of the years, 2009 through 2013.
|
|
(7)
|
Deposits
|
At
December 31, 2008 the scheduled maturities of time deposits are as
follows:
|
Maturing
in:
|
||||
2009
|
$ | 270,390,914 | ||
2010
|
124,021,430 | |||
2011
|
53,491,703 | |||
2012
|
25,076,488 | |||
2013
|
8,510,899 | |||
Thereafter
|
1,010,077 | |||
$ | 482,501,511 |
The
Bank held $137,662,153 and $91,127,044 in certificates of deposit obtained
through the efforts of third party brokers at December 31, 2008 and 2007,
respectively. The weighted average interest rate on the deposits at
December 31, 2008 and 2007 was 4.31% and 4.77%, respectively. The deposits
outstanding at December 31, 2008 mature as
follows:
|
Maturing
in:
|
||||
2009
|
$ | 64,707,082 | ||
2010
|
47,720,071 | |||
2011
|
19,940,000 | |||
2012
|
5,295,000 | |||
$ | 137,662,153 |
(8)
|
Lines of
Credit
|
As
of December 31, 2008, the Bank has a collateralized line of credit for
overnight borrowings of $15,800,000 with a correspondent bank of which,
none was outstanding. The line of credit is collateralized by
investment securities at their market values. On December 31,
2007, the Bank had an uncollateralized line of credit for overnight
borrowings of $24,800,000 with a correspondent bank of which, none was
outstanding.
|
|
The
Bank has a collateralized line of credit for overnight borrowings with the
Federal Reserve Bank of Atlanta with credit availability of $8,256,000 of
which, none was outstanding as of December 31, 2008. The line
is collateralized by certain qualifying real estate and commercial loans
in the portfolio that are physically held by the Federal Reserve
Bank. The Bank did not have a line of credit with the Federal
Reserve Bank of Atlanta in 2007.
|
|
The
Bank has a line of credit with the FHLB in the amount of 20 percent of
assets,which was approximately $126,440,000 subject to available
qualifying collateral at December 31, 2008. The FHLB advances
are secured by the Bank’s stock in the FHLB, it’s qualifying 1-4 family
first mortgage loans and qualified commercial loans.
In addition, the
FHLB accepts federal funds sold to FHLB and certain investment securities
as collateral.
Advances on the
FHLB line of credit are subject to available collateral of the
Bank. At December 31, 2008 and 2007, the Bank had advances
outstanding from the FHLB amounting to $52,000,000 and $54,500,000,
respectively. The Bank pledged sufficient collateral at
December 31, 2008 and 2007 for these borrowings. An early
conversion option allows the FHLB to convert certain advances to a
variable interest rate upon notification to the Bank. The
following advances require quarterly interest
payments:
|
(8)
|
Lines of Credit,
continued
|
Advance
|
Interest Basis
|
Current Rate
|
Maturity
|
Call Date
|
Early Conversion Option
|
|||||||||||
$ | 10,000,000 |
Fixed
Hybrid
|
5.49 | % |
May
2011
|
- | - | |||||||||
$ | 7,000,000 |
Fixed
Hybrid
|
4.24 | % |
June
2010
|
- | - | |||||||||
$ | 5,000,000 |
Fixed
|
2.69 | % |
February
2010
|
- | - | |||||||||
$ | 10,000,000 |
Fixed
|
4.08 | % |
September
2012
|
- | - | |||||||||
$ | 10,000,000 |
Fixed
|
3.23 | % |
February
2014
|
February
2009
|
February
2009,
3
month LIBOR
|
|||||||||
$ | 10,000,000 |
Fixed
|
4.39 | % |
January
2016
|
January
2011
|
January
2011,
|
Advance
|
Interest Basis
|
Current Rate
|
Maturity
|
Call Date
|
Early Conversion Option
|
||||||||||||
$ | 10,000,000 |
Fixed
Hybrid
|
5.49 | % |
May
2011
|
- | - | ||||||||||
$ | 7,000,000 |
Fixed
Hybrid
|
4.24 | % |
June
2010
|
- | - | ||||||||||
$ | 5,000,000 |
Fixed
|
5.44 | % |
February
2008
|
- | - | ||||||||||
$ | 10,000,000 |
Fixed
|
4.08 | % |
September
2012
|
September
2008
|
September
2008,
3
month LIBOR
|
||||||||||
$ | 10,000,000 |
Fixed
|
3.23 | % |
February
2014
|
February
2009
|
February
2009,
3
month LIBOR
|
||||||||||
$ | 10,000,000 |
Fixed
|
4.39 | % |
January
2016
|
January
2011
|
January
2011
|
||||||||||
3
month LIBOR
|
|||||||||||||||||
$ | 2,500,000 |
Fixed
|
5.39 | % |
March
2008
|
- | - |
(9)
|
Securities Sold Under
Repurchase Agreements
|
The
Company had no securities sold under repurchase agreements as of December
31, 2008. The Company had securities sold under repurchase
agreements of $20,000,000 at December 31, 2007. The Company
entered into the transaction on November 23, 2007 and the agreement had a
maturity date of November 23, 2012 and it became callable by the issuer or
the Company on November 23, 2009. The interest was paid
quarterly at a rate of 3.90%. The Company was required by the issuer to
pay off the securities sold under repurchase in June
2008.
|
|
(10)
|
Junior Subordinated
Debentures
|
The
Company entered into a junior subordinated debenture in connection with
the acquisition of First Haralson. The debenture qualifies as
Tier I capital under risk based capital guidelines subject to certain
limitations. The debentures were issued June 15, 2007 in the
amount of $10,825,000 at a floating rate of 90 day LIBOR plus 1.55%
payable quarterly. The debenture is redeemable on a mandatory
basis upon maturity in June 2037, but is callable without premium in June
2012. The interest rate at December 31, 2008 was 3.55%.
|
|
(11)
|
Commitments
|
Off Balance Sheet
Commitments
|
|
The
Company is a party to financial instruments with off balance sheet risk in
the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit and standby letters of credit. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheet. The contractual amounts of those
instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
|
|
The
Company’s exposure to credit loss in the event of non-performance by the
other party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual amount of
those instruments. The Company uses the same credit policies in making
commitments and conditional obligations as it does for on balance sheet
instruments. In most cases, the Company requires collateral to
support financial instruments with credit risk. The following table
summarizes the off balance sheet financial instruments as of December 31,
2008 and 2007:
|
Approximate
|
||||||||
Contractual Amount
|
||||||||
2008
|
2007
|
|||||||
Financial
instruments whose contract amounts represent credit risk:
|
||||||||
Commitments
to extend credit
|
$ | 64,340,000 | 99,882,000 | |||||
Standby
letters of credit
|
$ | 7,383,000 | 9,943,000 |
(11)
|
Commitments
,
continued
|
Off Balance Sheet
Commitments, continued
|
|
Commitments
to extend credit are agreements to lend to a customer as long as there is
no violation of any condition established in the contract. Standby letters
of credit are conditional commitments issued by the Company to guarantee
the performance of a customer to a third party. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since many of the commitments may expire without
being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. 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 a
commitment is based on management’s credit evaluation. Collateral held
varies, but may include unimproved and improved real estate, certificates
of deposit or personal property. The credit risk involved in issuing
letters of credit is essentially the same as that involved in extending
loans.
|
|
Derivative Instruments
and Hedging Activities
|
|
The
Company had one and fifteen interest rate swap position(s) at December 31,
2008 and 2007, respectively.
|
|
In
2006, the Company entered into a series of fourteen interest rate swap
agreements with a total notional amount of $41,156,509 related to its
issuance of brokered certificates of deposit. The interest rate swap
contracts had various notional amounts, maturity dates, receive fixed
rates and pay floating rates. The Company designated the
fourteen swap from fixed to variable rate contracts as fair value hedges
and, accordingly, was recording the fair value of the derivatives as well
as the fair value of the items being hedged on the balance sheet. Changes
in the fair value of the swap contracts and the items being hedged were
recorded in current period earnings. The Company terminated its fair value
interest rate swap positions in April 2008 for a gain in the amount of
$626,070. The Company is recognizing the gain on the transaction over
the original term of the swaps. The Company recognized $482,809
of the gain during 2008. The fair value of the swap contracts
accounted for as fair value hedges was $263,474 at December 31, 2007 and
were recorded in other assets on the balance sheet.
|
|
The
objective of the fourteen swap agreements was to decrease the Company’s
interest rate risk exposure. Being asset sensitive, the Company was (and
remains) susceptible to interest rate risk in a downward rate environment.
This was, in part, attributable to the fixed rate nature of the Company’s
brokered certificates of deposit. The Company was using the swap
agreements to convert the fixed rate brokered certificates of deposit and
borrowings into floating rate instruments. Consequently, the interest rate
swap contracts allowed the Company to hedge changes in the fair value of
its brokered certificates of deposit and borrowings that resulted from
changes in benchmark interest rates.
|
|
The
Company entered into an interest rate swap on December 4, 2007 that has a
maturity date of June 15, 2012. The objective of the swap was
to lock in a fixed rate as opposed to the contractual variable interest
rate on the junior subordinated debentures. The interest rate
swap contract has a notional amount of $10,825,000 and is hedging the
variable rate on the junior subordinated debentures described in Note 10
of the consolidated financial statements. The Company receives
a variable rate of the 90 day LIBOR rate plus 1.55% and pays a fixed rate
of 5.77%.
|
|
The
Company has designated the swap on the junior subordinated debentures as a
cash flow hedge and, accordingly is recording the fair value of the
derivative on the balance sheet. Changes in the fair value of
the swap contract are recorded as a current period component of other
comprehensive income, net of tax. The fair value of the swap
contract accounted for as a cash flow hedge was a loss of $843,869 and
$29,636 at December 31, 2008 and 2007, respectively. The value
of the swap is recorded in other liabilities on the balance sheet as of
December 31, 2008 and 2007.
|
(11)
|
Commitments
,
continued
|
Derivative Instruments
and Hedging Activities, continued
|
|
The
Company uses the long haul method afforded under SFAS No. 133 to assess
the effectiveness of its hedging activity. The Company assesses
the effectiveness of the cash flow hedge by comparing the cumulative
change in anticipated cash flows from the hedged exposure over the hedging
period to the cumulative change in anticipated cash flows from the hedging
derivative. The Company utilizes the “Hypothetical Derivative
Method” to compute the cumulative change in anticipated interest cash
flows from the hedged exposure. To the extent that the
cumulative change in anticipated cash flows from the hedging derivative
offsets from 80% to 120% of the cumulative change in anticipated interest
cash flows from the hedged exposure, the hedge is deemed to be effective.
The Company assessed the effectiveness of the fair value hedge contracts
by regressing the market price, including any premium paid, of the
brokered certificates of deposit (the dependent variables) with the market
price of the interest rate swap (the independent variable) on a quarterly
basis until all the contracts have matured. Each regression
analysis will include in its data set values from a retrospective
(realized historical prices) and prospective (shocked scenario analysis)
basis. The hedge is considered effective if the correlation
coefficient is within 80% to 120%, where the R square is highly
correlative to the value of 1 and the F-stat is large signifying high
explanatory power. The Company’s cash flow hedge has remained
effective since inception
|
|
(12)
|
Stockholders’
Equity
|
Common
Stock
|
|
On
June 10, 2008 the Company’s shareholders voted to amend the Company’s
Amended and Restated Articles of Incorporation in order to increase the
number of authorized common stock shares from 10,000,000 shares having a
$1.25 par value per share to 20,000,000 shares having no par
value.
|
|
Preferred
Stock
|
|
On
June 10, 2008 the Company’s shareholders voted to amend the Company’s
Amended and Restated Articles of Incorporation in order to authorize the
creation of 10,000,000 shares of preferred stock having no par
value. The issuance terms can be designated by the Board in one
or more series in the future.
|
|
On
June 20, 2008, the Company filed a Form S-1 with the Securities and
Exchange Commission to register 3,750,000 shares of its Series A
Convertible Preferred Stock (“Series A Preferred”) for sale to the
Company’s shareholders under a rights offering that was completed
September 22, 2008. A total of 1,153,508 shares of the Series A
Preferred were sold to shareholders in the rights offering. The
remaining registered shares are subject to an ongoing public offering
which has been extended to April 15, 2009. As of December 31,
2008, a total of 1,509,100 shares of Series A Preferred have been sold
(including those sold in the rights offering).
|
|
Holders
of the Series A Preferred will be entitled to receive, if, as and when
declared by the Board of Directors out of legally available assets,
non-cumulative cash dividends on the Liquidation Preference, which is
$8.00 per share of Series A Preferred. These dividends will be payable at
a rate
per annum
equal to 9%, quarterly in arrears on each March 15, June 15, September 15
and December 15, commencing December 15, 2008. The Company is
prohibited from paying any dividends on its common stock unless and until
all dividends for a particular quarterly dividend period have been
declared and paid on the Series A Preferred.
|
|
The
Series A Preferred is perpetual and will not mature on a specified
date. The Series A Preferred is not subject to any mandatory
redemption provisions. The shares become convertible into
shares of common stock at the option of a holder from and after September
22, 2011. On or after September 15, 2013, the Company may, at
its option, at any time or from time to time cause some or all of the
Series A Preferred to be converted into shares of common
stock. In the event of a dissolution or liquidation, the Series
A Preferred shareholders receive a preference of $8.00 per share over the
claims of common shareholders. Holders of the Series A
preferred shares have no voting rights, except as required by
law.
|
|
Direct Stock Purchase
and Dividend Reinvestment Plan
|
|
On
May 22, 2008, the Company filed a Form S-3 with the Securities and
Exchange Commission to register 500,000 shares of its common stock for its
Direct Stock Purchase and Dividend Reinvestment Plan. The plan
offers holders of the Company’s common stock and new investors the
opportunity to reinvest their dividends into the Company’s common stock or
purchase common stock with optional cash payments of $250 to $10,000 per
month without the payment of brokerage commissions or service
charges. The plan was amended by the Company’s board of
directors in October 2008 in order to permit holders of the Series A
Preferred to reinvest dividends paid on the Series A Preferred into shares
of the Company’s common stock. As of December 31, 2008, 413
shares at an average price of $3.54 per share have been issued by the
Company in the Direct Stock Purchase and Dividend Reinvestment
Plan.
|
Stock Repurchase
Plan
|
|
Beginning
in 1996, the Board of Directors approved a Stock Repurchase Plan of up to
$2,000,000 of the Company’s common stock currently
outstanding. During 2001, the Board of Directors approved an
additional $1,000,000, to be used for the Stock Repurchase Plan. The
Company retired no shares in 2008, 1,345 and 38,202 shares of common stock
during 2007 and 2006, respectively. At December 31, 2008, the Company had
$557,547 remaining to reacquire shares under the Stock Repurchase
Plan.
|
|
(13)
|
Regulatory
Matters
|
On
November 12, 2008, the Bank, entered into a formal written agreement (the
“Agreement”) with the OCC. The Agreement requires the Bank to
undertake certain actions within designated time frames, and to operate in
compliance with the provisions thereof during its term. The
Board of Directors and management of the Bank have implemented many of
these provisions and continue to support compliance with the
Agreement. The actions that are to be undertaken are as
follows: implement an asset recovery staff, continue to enhance loan
portfolio management procedures and processes, continue to diversify the
loan portfolio, maintain a valuation process on foreclosed property
maximizing net realizable value for shareholders, continue to raise
capital, provide written plans of action to reduce non-performing assets
and provide a three year budget and capital plan. Compliance
with the Agreement is to be monitored by a committee made up of seven
Directors of the Company. As of December 31, 2008, the
Bank is in the process of complying with the Agreement.
|
|
On
October 3, 2008, Congress passed the Emergency Economic Stabilization
Act of 2008 ("EESA"), which creates the Troubled Asset Relief Program
("TARP") and provides the U.S. Secretary of the Treasury with broad
authority to implement certain actions to help restore stability and
liquidity to U.S. markets. The Capital Purchase Program (the "CPP") was
announced by the U.S. Treasury on October 14, 2008 as part of
TARP. Pursuant to the CPP, the U.S. Treasury will purchase up to
$250 billion of senior preferred shares on standardized terms from
qualifying financial institutions. The purpose of the CPP is to encourage
U.S. financial institutions to build capital to increase the flow of
financing to U.S. businesses and consumers and to support the U.S.
economy. The CPP is voluntary and requires a participating
institution to comply with a number of restrictions and provisions,
including standards for executive compensation and corporate governance
and limitations on share repurchases and the declaration and payment of
dividends on common shares. The CPP allows qualifying financial
institutions to issue senior preferred shares to the U.S. Treasury in
aggregate amounts between 1 percent and 3 percent of the institution's
risk weighted assets ("Senior Preferred Shares"). The Senior
Preferred Shares will qualify as Tier 1 capital and rank senior to common
stock. The Senior Preferred Shares will pay a cumulative dividend
rate of 5 percent per annum for the first five years and will reset to a
rate of 9 percent per annum after year five. The Senior Preferred
Shares will be non-voting, other than class voting rights on matters that
could adversely affect the shares. The Senior Preferred Shares will
be callable at par after three years. Prior to the end of three
years, the Senior Preferred Shares may be redeemed with the proceeds from
a qualifying equity offering of any Tier 1 perpetual preferred or common
stock. U.S. Treasury may also transfer the Senior Preferred Shares to a
third party at any time. In conjunction with the purchase of Senior
Preferred Shares, Treasury will receive warrants to purchase common stock
with an aggregate market price equal to 15 percent of the Senior Preferred
Shares. The exercise price on the warrants will be the market price
of the participating institution's common stock at the time of issuance,
calculated on a 20-trading day trailing average. Companies
participating in the CPP must adopt the U.S. Treasury's standards for
executive compensation and corporate governance. The Company is
currently evaluating its participation in the CPP.
|
|
The
Company and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Company’s and the Bank’s financial
statements. Under certain adequacy guidelines and the
regulatory framework for prompt corrective action, the Company and the
Bank must meet minimum capital guidelines that involve quantitative
measures of the assets, liabilities, and certain off-balance-sheet items
as calculated under regulatory accounting practices. The capital amounts
and classification are also subject to qualitative judgments by the
regulators about components, risk weightings, and other
factors. Quantitative measures established by regulation to
ensure capital adequacy require the Company and the Bank to maintain
minimum amounts and ratios of total and Tier I capital to risk-weighted
assets and of Tier I capital to average assets. Under certain
circumstances, the regulators may impose higher minimum capital levels or
otherwise adjust an institution’s capital category based on market
conditions.
|
(13)
|
Regulatory
Matters
, continued
|
The
Bank received certain requests relating to capital from its primary
regulator, the OCC, the terms of which are confidential. Management is in
the process of complying with certain of these requests. If the regulatory
capital requirements are not met and/or maintained, additional regulatory
actions may be taken against the Bank.
|
|
As
of December 31, 2008 and 2007, the most recent notification from the
Federal Deposit Insurance Corporation categorized the Bank as well
capitalized and adequately capitalized, respectively, under the regulatory
framework for prompt corrective action. To be categorized as
well and adequately capitalized the Bank must maintain minimum total
risk-based, Tier I risk-based and Tier I leverage ratios as set forth in
the table. Presented below are the Company’s and the Bank’s actual capital
amounts and ratios:
|
To
Be Well Capitalized
|
||||||||||||||||||||||
For
Capital
|
Under
Prompt Corrective
|
|||||||||||||||||||||
Actual
|
Adequacy Purposes
|
Action Provisions
|
||||||||||||||||||||
Amount
|
Ratio
|
Amount
|
Ratio
|
Amount
|
Ratio
|
|||||||||||||||||
(in
000’s)
|
(in
000’s)
|
(in
000’s)
|
||||||||||||||||||||
As
of December 31, 2008
:
|
||||||||||||||||||||||
Total
Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||
Consolidated
|
$ | 72,254 | 10.65 | % |
>
$
54,308
|
>
8%
|
N/A | N/A | ||||||||||||||
Bank
|
$ | 70,612 | 10.42 | % |
>
$
54,193
|
>
8%
|
>
$
67,713
|
>
10%
|
||||||||||||||
Tier
I Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||
Consolidated
|
$ | 63,773 | 9.40 | % |
>
$
27,153
|
>
4%
|
N/A | N/A | ||||||||||||||
Bank
|
$ | 62,144 | 9.17 | % |
>
$
27,097
|
>
4%
|
>
$
40,645
|
>
6%
|
||||||||||||||
Tier
I Capital (to Average Assets)
|
||||||||||||||||||||||
Consolidated
|
$ | 63,773 | 7.20 | % |
>
$
35,407
|
>
4%
|
N/A | N/A | ||||||||||||||
Bank
|
$ | 62,144 | 7.05 | % |
>
$
35,254
|
>
4%
|
>
$
44,068
|
>
5%
|
||||||||||||||
As of December 31,
2007
:
|
||||||||||||||||||||||
Total
Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||
Consolidated
|
$ | 69,072 | 10.22 | % |
>
$
54,072
|
>
8%
|
N/A | N/A | ||||||||||||||
Bank
|
$ | 66,177 | 9.83 | % |
>
$
53,844
|
>
8%
|
>
$
67,305
|
>
10%
|
||||||||||||||
Tier
I Capital (to Risk Weighted Assets)
|
||||||||||||||||||||||
Consolidated
|
$ | 60,624 | 8.97 | % |
>
$
27,036
|
>
4%
|
N/A | N/A | ||||||||||||||
Bank
|
$ | 57,764 | 8.58 | % |
>
$
26,922
|
>
4%
|
>
$
40,383
|
>
6%
|
||||||||||||||
Tier
I Capital (to Average Assets)
|
||||||||||||||||||||||
Consolidated
|
$ | 60,624 | 6.99 | % |
>
$
34,699
|
>
4%
|
N/A | N/A | ||||||||||||||
Bank
|
$ | 57,764 | 6.68 | % |
>
$
34,587
|
>
4%
|
>
$
43,234
|
>
5%
|
Dividends
paid by the Bank are the primary source of funds available to the Company.
Banking regulations limit the amount of dividends that may be paid without
prior approval of the regulatory authorities. These restrictions are based
on the level of regulatory classified assets, the prior years’ net
earnings, and the ratio of equity capital to total assets. At December 31,
2008, the Bank cannot pay dividends without obtaining prior regulatory
approval.
|
|
(14)
|
Incentive Stock Option
Plan
|
Under
the January 11, 1994 Incentive Stock Option Plan (the “1994 Plan”), the
Company may grant options to certain key officers to acquire shares of
common stock of the Company at the then fair value, with the number of
shares to be determined annually by agreed upon formulas. A total of
240,000 shares of common stock were reserved for possible issuance under
the 1994 plan. At December 31, 2003, the Company had distributed all the
options available for awards under the 1994 Plan. The options
may not be exercised prior to five years from the date of grant and are
exercisable no later than ten years from that date.
|
|
On
April 8, 2003, the shareholders approved the WGNB Corp. 2003 Stock
Incentive Plan (the “2003 Plan”). Under the 2003 Plan, the
Company may grant options to certain key officers to acquire shares of
common stock of the Company at the then fair value for incentive stock
options and no less than 85% of the fair value for nonqualified stock
options, with the number of shares to be determined annually by agreed
upon formulas. A total
of
990,000 shares of common stock were reserved for possible issuance under
the 2003 Plan with a maximum of 525,000 shares to be issued under
nonqualified stock option grants. During 2008, the Company
granted 66,515 of the options available for awards under the 2003 Plan.
The options under the 2003 Plan were to be distributed commencing in the
2004 fiscal year and will terminate February 14, 2015 unless previously
terminated by the Board of Directors or when the options approved under
the plan have been distributed. The options may be exercised by
the participants under a vesting period of five years ratably at 20% per
year. The options are exercisable no later than ten years after
the date of grant. Compensation cost in the amount of $174,500,
$177,500 and $128,250 has been recognized for the stock options for the
years end December 31, 2008, 2007 and 2006, respectively. Under
the 1994 and 2003 plans, 59,930 and 178,986 options, respectively, were
unexercised as of December 31, 2008. No options were exercised in
2008. The total intrinsic value of options exercised in 2007
and 2006 was $2,128 and $578,435,
respectively.
|
(14)
|
Incentive Stock Option
Plan, continued
|
A
summary status of the Company’s stock option plans as of December 31,
2008, 2007 and 2006, and changes during the years ending on those dates,
is presented below:
|
2008
|
2007
|
2006
|
||||||||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||||||||
Average
|
Average
|
Average
|
||||||||||||||||||||||
Exercise
|
Exercise
|
Exercise
|
||||||||||||||||||||||
Shares
|
Price
|
Shares
|
Price
|
Shares
|
Price
|
|||||||||||||||||||
Outstanding,
beginning of year
|
176,457 | $ | 22.41 | 130,236 | $ | 19.44 | 184,676 | $ | 16.53 | |||||||||||||||
Awarded
during the year
|
66,515 | $ | 17.90 | 49,398 | $ | 30.06 | 33,470 | $ | 24.99 | |||||||||||||||
Exercised
during the year
|
- | $ | - | (3,177 | ) | $ | 19.30 | (51,022 | ) | $ | 13.94 | |||||||||||||
Forfeited
during year
|
(4,056 | ) | $ | 26.88 | - | $ | - | (36,888 | ) | $ | 17.50 | |||||||||||||
Outstanding,
end of year
|
238,916 | $ | 21.08 | 176,457 | $ | 22.41 | 130,236 | $ | 19.44 | |||||||||||||||
Options
exercisable at year end
|
102,485 | $ | 19.26 | 33,803 | $ | 18.77 | 13,374 | $ | 17.48 | |||||||||||||||
Options Outstanding
|
Options Exercisable
|
|||||||||||||||||||||||||
Shares
|
Range
|
Wtd.
Avg.
Exercise
Price
|
Wtd.
Avg.
Remaining
Life (Years
)
|
Shares
|
Wtd.
Avg.
Exercise
Price
|
Intrinsic
Value
|
||||||||||||||||||||
59,930 | $ | 13.33 - 16.66 | $ | 16.38 | 3.48 | 59,930 | $ | 16.38 | $ | - | ||||||||||||||||
66,515 | $ | 17.90 | $ | 17.90 | 9.12 | - | $ | - | $ | - | ||||||||||||||||
65,368 | $ | 19.25 - 24.99 | $ | 22.16 | 4.97 | 33,135 | $ | 21.40 | $ | - | ||||||||||||||||
47,103 | $ | 29.91 - 30.63 | $ | 30.06 | 7.91 | 9,420 | $ | 30.06 | $ | - | ||||||||||||||||
238,916 | $ | 13.33 - 30.63 | $ | 21.08 | 6.33 | 102,485 | $ | 19.26 | $ | - |
(15)
|
Supplemental
Employee Retirement Plan
|
The
Company assumed a post-retirement benefit plan to provide retirement
benefits to First Haralson key officers. Under the plan, the
Company assumed whole life insurance contracts on the lives of each
officer. The increase in the cash surrender value of the
contracts, less the Company’s cost of funds, constitutes the Bank’s
contribution to the plan each year going forward. In the event
the insurance contracts fail to produce positive returns, the Bank has no
obligation to contribute to the plan. The Company recognized
$200,730 and $90,725 in compensation expense related to this plan in 2008
and 2007, respectively.
|
|
(16)
|
Stock
Split
|
On
September 12, 2006, the Company’s board of directors declared a
three-for-two stock split for shareholders of record as of October 16,
2006 payable on November 15, 2006. All share and per share
amounts have been restated to reflect the stock split as if it had
occurred on January 1, 2005.
|
(17)
|
Defined Contribution
Plan
|
The
Company began a qualified retirement plan pursuant to Internal Revenue
Code Section 401(k) in 1996 covering substantially all employees subject
to certain minimum age and service requirements. Contribution to the plan
by employees is voluntary. During 2008, 2007 and 2006, the Company matched
100% of the participants’ contributions up to 6% of the participants’
salaries, subject to the annual 401(k) contribution limits. The Company
also made discretionary contributions to the plan in 2007 and 2006 of 5%
of participants’ salaries. Contributions to the plan charged to expense
during 2008, 2007 and 2006 were $503,708, $658,767 and $547,255,
respectively.
|
|
(18)
|
Income
Taxes
|
The
components of the provision for income tax expense (benefit) in the
consolidated statements of operations for the years ended December 31,
2008, 2007 and 2006 are as follows:
|
2008
|
2007
|
2006
|
||||||||||
Current:
|
||||||||||||
Federal
|
$ | (2,251,023 | ) | 2,365,810 | 3,353,207 | |||||||
State
|
(264,826 | ) | 278,331 | 293,962 | ||||||||
Deferred:
|
||||||||||||
Federal
|
(3,469,404 | ) | (2,246,149 | ) | (169,031 | ) | ||||||
State
|
(408,165 | ) | (264,254 | ) | (19,614 | ) | ||||||
Total
|
$ | (6,393,418 | ) | 133,738 | 3,458,524 |
2008
|
2007
|
2006
|
||||||||||
Pretax
(loss) income at statutory rates
|
$ | (12,628,908 | ) | 1,077,124 | 4,007,226 | |||||||
Add
(deduct):
|
||||||||||||
Goodwill
impairment
|
8,203,474 | - | - | |||||||||
Tax-exempt
interest income
|
(941,518 | ) | (632,777 | ) | (430,180 | ) | ||||||
State
taxes, net of federal effect
|
(974,980 | ) | (208,930 | ) | 174,612 | |||||||
Non-deductible
interest expense
|
40,495 | 31,378 | 70,448 | |||||||||
Other
|
(91,981 | ) | (133,057 | ) | (363,582 | ) | ||||||
$ | (6,393,418 | ) | 133,738 | 3,458,524 |
The
following summarizes the net deferred tax asset, which is included as a
component of other assets, at December 31, 2008 and
2007.
|
2008
|
2007
|
|||||||
Deferred
income tax assets:
|
||||||||
Allowance
for loan losses
|
$ | 4,214,537 | 4,590,089 | |||||
Other
real estate owned
|
3,997,262 | 469,385 | ||||||
Deferred
compensation
|
1,378,421 | 1,307,090 | ||||||
Net
unrealized loss on securities available-for-sale
and
cash flow hedges
|
479,769 | - | ||||||
Income
tax credits and net operating loss carryforward
|
420,799 | - | ||||||
Deferred
income
|
206,552 | - | ||||||
Other
|
- | 22,493 | ||||||
Total
gross deferred income tax assets
|
10,697,340 | 6,389,057 | ||||||
Deferred
income tax liabilities:
|
||||||||
Low
income housing credits
|
(247,672 | ) | (251,671 | ) | ||||
Premises
and equipment
|
(1,364,101 | ) | (396,121 | ) | ||||
Net
unrealized gain on securities available-for-sale
and
cash flow hedges
|
- | (102,992 | ) | |||||
Purchase
accounting intangibles
|
(1,508,892 | ) | (2,521,928 | ) | ||||
Other
|
(1,742 | ) | (1,742 | ) | ||||
Total
gross deferred income tax liabilities
|
(3,122,407 | ) | (3,274,454 | ) | ||||
Net
deferred income tax asset
|
$ | 7,574,933 | 3,114,603 |
(19)
|
Related Party
Transactions
|
The
Bank conducts transactions with directors and executive officers,
including companies in which they have beneficial interests, in the normal
course of business. It is the Bank’s policy to comply with federal
regulations that require that loan transactions with directors and
executive officers be made on substantially the same terms as those
prevailing at the time made for comparable loans to other persons. The
following summary reflects activity for related party loans for
2008:
|
Beginning
balance
|
$ | 12,292,538 | ||
New
loans
|
11,859,707 | |||
Repayments
|
(8,966,080 | ) | ||
Change
in related parties
|
(5,334,540 | ) | ||
Ending
balance
|
$ | 9,851,625 |
At
December 31, 2008 and 2007, deposits from directors, executive officers,
and their related interests totaled approximately
$8,360,000 and $10,251,000, respectively.
|
|
(20)
|
Other Operating
Expenses
|
Components
of other operating expenses which exceed 1% of total interest income and
other income are as follows:
|
2008
|
2007
|
2006
|
||||||||||
Professional
fees
|
$ | 935,320 | 714,686 | 662,967 | ||||||||
Printing
and supplies
|
$ | 556,865 | 557,964 | 365,189 |
(21)
|
Fair
Value
|
Effective
January 1, 2008, the Company adopted SFAS No. 157,
Fair Value Measurements
,which provides a framework for measuring fair value under generally
accepted accounting principles. SFAS No. 157 applies to all
financial instruments that are being measured and reported on a fair value
basis.
|
|
The
Company utilizes fair value measurements to record fair value adjustments
to certain assets and liabilities and to determine fair value
disclosures. Securities available-for-sale, derivatives and
certain deposits are recorded at fair value on a recurring
basis. Additionally, from time to time, the Company may be
required to record at fair value other assets on a non-recurring basis,
such as impaired loans and foreclosed property. These
non-recurring fair value adjustments typically involve the application of
lower of cost or market accounting or write-downs of individual
assets.
|
|
Fair Value
Hierarchy
|
|
Under
SFAS No. 157, the Company groups assets and liabilities at fair value in
three levels, based on the markets in which the assets and liabilities are
traded and the reliability of the assumptions used to determine fair
value. These levels are:
|
Level
1 –
|
Valuation
is based upon quoted prices for identical instruments traded in active
markets.
|
|
Level
2 –
|
Valuation
is based upon quoted market prices for similar instruments in active
markets, quoted prices for identical or similar instruments in markets
that are not active, and model-based valuation techniques for which all
significant assumptions are observable in the market.
|
|
Level
3 –
|
Valuation
is generated from model-based techniques that use at least one significant
assumption not observable in the
market. These unobservable assumptions reflect estimates of
assumptions that market participants would use in pricing the asset or
liability. Valuation techniques include use of option pricing
models, discounted cash flow models and similar
techniques.
|
Following
is a description of valuation methodologies used for assets and
liabilities recorded at fair value:
|
(21)
|
Fair Value
,
continued
|
Securities
Available-for-Sale
|
|
Securities
available-for-sale are recorded at fair value on a recurring
basis. Fair value measurement is based upon quoted prices, if
available. If quoted prices are not available, fair values are
measured using independent pricing models or other model-based valuation
techniques such as the present value of future cash flows, adjusted for
the security’s credit rating, prepayment assumptions and other factors
such as credit loss assumptions. Level 1 securities include
those traded on active exchanges such as U.S. Treasury securities that are
traded by dealers or brokers in active over-the-counter
markets. Level 2 securities include mortgage-backed securities
issued by government sponsored enterprises, corporate debt securities and
municipal bonds. Securities classified as Level 3 include
asset-backed securities in less liquid markets.
|
|
Loans
|
|
The
Company does not record loans at fair value on a recurring
basis. However, from time to time, a loan is considered
impaired and an allowance for loan losses is established. Loans
for which it is probable that payment of interest and principal will not
be made in accordance with the contractual terms of the loan agreement are
considered impaired. Once a loan is identified as individually
impaired, management measures impairment in accordance with SFAS No. 114,
Accounting by Creditors
for Impairment of a Loan
. The fair value of impaired
loans is estimated using one of several methods, including collateral
value, market value of similar debt, enterprise value, liquidation value
and discounted cash flows. Those impaired loans not requiring
an allowance represent loans for which the fair value of the expected
repayments or collateral exceed the recorded investments in such
loans. At December 31, 2008, substantially all of the impaired
loans were evaluated based on the fair value of the
collateral. In accordance with SFAS No. 157, impaired loans
where an allowance is established based on the fair value of collateral
require classification in the fair value hierarchy. When the
fair value of the collateral is based on an observable market price or a
current appraised value, the Company records the impaired loan as
non-recurring Level 2. When an appraised value is not available
or management determines the fair value of the collateral is further
impaired below the appraised value and there is no observable market
price, the Company records the impaired loan as non-recurring Level
3.
|
|
Foreclosed
Assets
|
|
Foreclosed
assets are adjusted to fair value upon transfer of the loans to foreclosed
assets. Subsequently, foreclosed assets are carried at the
lower of carrying value or fair value. Fair value is based upon
independent market prices, appraised values of the collateral or
management’s estimation of the value of the collateral. When
the fair value of the collateral is based on an observable market price or
a current appraised value, the Company records the foreclosed asset as
non-recurring Level 2. When an appraised value is not available
or management determines the fair value of the collateral is further
impaired below the appraised value and there is no observable market
price, the Company records the foreclosed asset as non-recurring Level
3.
|
|
Intangible
Assets
|
|
Identified
intangible assets are subject to impairment testing. A
projected cash flow valuation method is used in the completion of
impairment testing. This valuation method requires a
significant degree of management judgment. In the event the
projected undiscounted net operating cash flows are less than the carrying
value, the asset is recorded at fair value as determined by the valuation
model. As such, the Company classifies intangible assets
subjected to nonrecurring fair value adjustments as Level
3.
|
(21)
|
Fair Value
,
continued
|
Derivative Financial
Instruments
|
|
The
Company uses interest rate swaps to manage interest rate
risk. The valuation of these instruments is determined using
widely accepted valuation techniques including discounted cash flow
analysis on the expected cash flows of each derivative. This
analysis reflects the contractual terms of the derivatives, including the
period to maturity, and uses observable market-based inputs, including
interest rate curves and implied volatilities. The fair values
of interest rate swaps are determined using the market standard
methodology of netting the discounted future fixed cash receipts and the
discounted expected variable cash payments. The variable cash
payments are based on an expectation of future interest rates (forward
curves derived from observable market interest rate
curves).
|
|
To
comply with the provisions of SFAS No. 157, the Company incorporates
credit valuation adjustments to appropriately reflect both its own
nonperformance risk and the respective counterparty’s nonperformance risk
in the fair value measurements. In adjusting the fair value of
its derivative contracts for the effect of nonperformance risk, the
Company has considered the impact of netting any applicable credit
enhancements such as collateral postings, thresholds,
mutual puts and guarantees.
|
|
Although
the Company has determined that the majority of the inputs used to value
its derivatives fall within Level 2 of the fair value hierarchy, the
credit valuation adjustments associated with its derivatives utilize Level
3 inputs, such as estimates of current credit spreads to evaluate the
likelihood of default by itself or the counterparties. However,
as of December 31, 2008, the Company has assessed the significance of the
impact of the credit valuation adjustments on the overall valuation of its
derivative positions and has determined that the credit valuation
adjustments are not significant to the overall valuation of its
derivatives. As a result, the Company has determined that its
derivative valuations in their entirety are classified in Level 2 of the
fair value hierarchy.
|
|
Assets and Liabilities
Recorded at Fair Value on a Recurring Basis
|
|
The
table below presents the recorded amount of the Company’s assets and
liabilities measured at fair value on a recurring basis as of December 31,
2008 aggregated by the level in the fair value hierarchy within which
those measurements fall:
|
December
31, 2008
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Investment
securities available-for-sale
|
$ | - | 94,369,622 | - | 94,369,622 | |||||||||||
Derivative
financial instruments
|
||||||||||||||||
cash
flow hedge
|
$ | - | 843,869 | - | 843,869 |
Assets Recorded at
Fair Value on a Non-recurring Basis
|
|
The
Company may be required, from time to time, to measure certain assets at
fair value on a non-recurring basis in accordance with U.S. Generally
Accepted Accounting Principles. These include assets that are
measured at the lower of cost or market that were recognized at fair value
below cost at the end of the period. The table below presents
the Company’s assets measured at fair value on a non-recurring basis as of
December 31, 2008 by the level in the fair value hierarchy within which
those measurements fall:
|
December
31, 2008
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
Total
|
|||||||||||||
Loans
|
$ | - | 80,683,209 | - | 68,161,156 | |||||||||||
Foreclosed
property
|
$ | - | 45,797,654 | - | 45,797,654 |
(21)
|
Fair Value
,
continued
|
Fair Value of
Financial Instruments
|
|
The
Company is required to disclose fair value information about financial
instruments, whether or not recognized on the face of the balance sheet,
for which it is practicable to estimate that value. The assumptions used
in the estimation of the fair value of the Company’s financial instruments
are detailed below. Where quoted prices are not available, fair values are
based on estimates using discounted cash flows and other valuation
techniques. The use of discounted cash flows can be significantly affected
by the assumptions used, including the discount rate and
estimates
of future cash
flows. The following disclosures should not be considered a surrogate of
the liquidation value of the Company or its subsidiary, but rather a
good-faith estimate of the increase or decrease in value of financial
instruments held by the Company since purchase, origination, or
issuance.
|
|
Cash and Cash
Equivalents
|
|
For
cash, due from banks, interest-bearing funds in other banks and federal
funds sold, the carrying amount is a reasonable estimate of fair
value.
|
|
Securities
|
|
The
fair values for investment securities are based on quoted market
prices.
|
|
Loans
|
|
The
fair value of fixed rate loans is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings. For variable rate loans, the
carrying amount is a reasonable estimate of fair value.
|
|
Cash Surrender Value
of Life Insurance
|
|
The
fair value of cash surrender value of life insurance is based on the net
surrender value of the insurance contract.
|
|
Deposits
|
|
The
fair value of demand deposits, savings accounts, NOW and certain money
market deposits is the amount payable on demand at the reporting date. The
fair value of fixed maturity certificates of deposit is estimated by
discounting the future cash flows using the rates currently offered for
deposits of similar remaining maturities.
|
|
Federal Home Loan Bank
Advances
|
|
The
fair value of advances outstanding is based on the quoted value provided
by the FHLB.
|
|
Junior Subordinated
Debentures
|
|
For
the floating rate junior subordinated debentures, the carrying amount is a
reasonable estimate of fair value.
|
|
Securities Sold Under
Repurchase Agreements
|
|
The
fair value of the securities sold under repurchase agreements is estimated
as the amount that the Company would receive or pay to terminate the
contracts at the reporting date.
|
|
Derivative
Instruments
|
|
For
derivative instruments, fair value is estimated as the amount that the
Company would receive or pay to terminate the contracts at the reporting
date, taking into account the current unrealized gains or losses on open
contracts.
|
|
Commitments to Extend
Credit, Standby Letters of Credit
|
|
Off
balance sheet instruments (commitments to extend credit and standby
letters of credit) are generally short-term and at variable interest
rates. Therefore, both the carrying value and estimated fair
value associated with these instruments are
immaterial.
|
(21)
|
Fair Value
,
continued
|
Limitations
|
|
Fair
value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company’s entire holdings of a
particular financial instrument. Because no market exists for a
significant portion of the Company’s financial instruments, fair value
estimates are based on many judgments. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions
could significantly affect the estimates.
|
|
Fair
value estimates are based on existing on and off balance sheet financial
instruments without attempting to estimate the value of anticipated future
business and the value of assets and liabilities that are not considered
financial instruments. Significant assets and liabilities that are not
considered financial instruments include deferred income taxes and
premises and equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant
effect on fair value estimates and have not been considered in the
estimates. The carrying amount and estimated fair values of the Company’s
financial instruments at December 31, 2008 and 2007 are as
follows:
|
2008
|
2007
|
|||||||||||||||
Carrying
|
Estimated
|
Carrying
|
Estimated
|
|||||||||||||
Amount
|
Fair Value
|
Amount
|
Fair Value
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash
and cash equivalents
|
$ | 75,350,985 | 75,350,985 | 25,845,340 | 25,845,340 | |||||||||||
Securities
available-for-sale
|
$ | 94,369,622 | 94,369,622 | 122,693,244 | 122,693,244 | |||||||||||
Securities
held-to-maturity
|
$ | 7,622,340 | 2,853,170 | 7,901,839 | 7,901,839 | |||||||||||
Derivative
instruments-fair value hedge
|
$ | - | - | 263,474 | 263,474 | |||||||||||
Loans,
net
|
$ | 618,922,150 | 626,375,582 | 645,738,663 | 650,318,190 | |||||||||||
Cash
surrender value of life insurance
|
$ | 3,803,010 | 3,803,010 | 3,639,550 | 3,639,550 | |||||||||||
Liabilities:
|
||||||||||||||||
Deposits
|
$ | 761,693,075 | 770,356,279 | 706,377,489 | 707,629,177 | |||||||||||
Federal
Home Loan Bank advances
|
$ | 52,000,000 | 55,640,862 | 54,500,000 | 55,492,641 | |||||||||||
Securities
sold under repurchase
|
||||||||||||||||
agreements
|
$ | - | - | 20,000,000 | 20,218,036 | |||||||||||
Junior
subordinated debentures
|
$ | 10,825,000 | 10,825,000 | 10,825,000 | 10,825,000 | |||||||||||
Derivative
instruments-cash flow hedge
|
$ | 843,869 | 843,869 | 29,636 | 29,636 |
(22)
|
WGNB Corp. (Parent
Company Only) Financial
Information
|
2008
|
2007
|
|||||||
Cash
|
$ | 1,265,606 | 1,734,744 | |||||
Investment
in Bank
|
66,357,203 | 87,810,281 | ||||||
Securities
held-to-maturity
|
- | 1,996,736 | ||||||
Other
assets
|
1,004,899 | 763,684 | ||||||
$ | 68,627,708 | 92,305,445 | ||||||
Liabilities and
Stockholders’ Equity
|
||||||||
Dividends
payable
|
$ | 2,132 | 1,282,458 | |||||
Junior
subordinated debentures
|
10,825,000 | 10,825,000 | ||||||
Other
liabilities
|
871,309 | 47,095 | ||||||
Total
liabilities
|
11,698,441 | 12,154,553 | ||||||
Stockholders’
equity
|
56,929,267 | 80,150,892 | ||||||
$ | 68,627,708 | 92,305,445 |
2008
|
2007
|
2006
|
||||||||||
Dividends
from Bank
|
$ | 2,108,142 | 4,961,106 | 3,601,555 | ||||||||
Other
income
|
72,562 | 230,183 | 234,458 | |||||||||
Total
income
|
2,180,704 | 5,191,289 | 3,836,013 | |||||||||
Interest
expense
|
631,522 | 385,754 | - | |||||||||
Other
expense
|
57,402 | 33,013 | 36,085 | |||||||||
Total
expense
|
688,924 | 418,767 | 36,085 | |||||||||
Earnings
before (dividends received in excess of earnings
|
||||||||||||
of
Bank)/equity in undistributed earnings of Bank
|
1,491,780 | 4,772,522 | 3,799,928 | |||||||||
Dividends
received in excess of earnings of Bank
|
(32,242,209 | ) | (1,738,249 | ) | - | |||||||
Equity
in undistributed earnings of Bank
|
- | - | 4,527,508 | |||||||||
Net
(loss) earnings
|
$ | (30,750,429 | ) | 3,034,273 | 8,327,436 |
(22)
|
WGNB Corp. (Parent
Company Only) Financial Information
,
continued
|
2008
|
2007
|
2006
|
||||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
(loss) earnings
|
$ | (30,750,429 | ) | 3,034,273 | 8,327,436 | |||||||
Adjustments
to reconcile net (loss) earnings to net
|
||||||||||||
cash
provided by operating activities:
|
||||||||||||
Amortization
and accretion
|
- | 827 | 5,019 | |||||||||
Stock
option expense
|
174,500 | 177,500 | 128,250 | |||||||||
Equity
in undistributed earnings of Bank
|
- | - | (4,527,508 | ) | ||||||||
Dividends
received in excess of earnings of Bank
|
32,242,209 | 1,738,249 | - | |||||||||
Change
in other assets
|
(778,609 | ) | (583,499 | ) | (74,354 | ) | ||||||
Change
in other liabilities
|
824,214 | 27,535 | (128,525 | ) | ||||||||
Net
cash provided by operating activities
|
1,711,885 | 4,394,885 | 3,730,318 | |||||||||
Cash
flows from investing activities:
|
||||||||||||
Capital
infusion to Bank
|
(10,653,720 | ) | - | - | ||||||||
Cash
paid to First Haralson shareholders
|
- | (12,628,189 | ) | - | ||||||||
Proceeds
from pay-downs of securities available-for-sale
|
- | - | 599,887 | |||||||||
Proceeds
from pay-downs of securities held-to-maturity
|
- | 277,680 | 192,331 | |||||||||
Net
cash (used) provided by investing activities
|
( 10,653,720 | ) | ( 12,350,509 | ) | 792,218 | |||||||
Cash
flows from financing activities:
|
||||||||||||
Proceeds
from preferred stock offering
|
12,072,800 | - | - | |||||||||
Dividends
paid on common stock
|
(3,188,468 | ) | (4,438,593 | ) | (3,466,603 | ) | ||||||
Dividends
paid on preferred stock
|
(253,528 | ) | - | - | ||||||||
Proceeds
from dividend reinvestment plan
|
1,461 | - | - | |||||||||
Proceeds
from junior subordinated debentures
|
- | 10,825,000 | - | |||||||||
Exercise
of stock options
|
- | 61,317 | 711,247 | |||||||||
Stock
issuance cost
|
(159,568 | ) | (102,292 | ) | - | |||||||
Retirement
of common stock
|
- | (30,935 | ) | (964,648 | ) | |||||||
Net
cash provided (used) by financing activities
|
8,472,697 | 6,314,497 | ( 3,720,004 | ) | ||||||||
Increase
(decrease) in cash
|
(469,138 | ) | (1,641,127 | ) | 802,532 | |||||||
Cash
at beginning of year
|
1,734,744 | 3,375,871 | 2,573,339 | |||||||||
Cash
at end of year
|
$ | 1,265,606 | 1,734,744 | 3,375,871 | ||||||||
Supplemental
disclosure of non-cash investing and financing activities:
|
||||||||||||
Securities
held-to-maturity contributed to the Bank
|
$ | (1,996,736 | ) | - | - | |||||||
Change
in dividends payable
|
$ | (1,280,326 | ) | 322,513 | 135,162 | |||||||
Change
in unrealized gains (losses) on securities
|
||||||||||||
available-for-sale,
net of tax
|
$ | (1,861,325 | ) | 542,389 | (56,059 | ) | ||||||
Change
in fair value of derivatives
|
||||||||||||
for
cash flow hedges, net of tax
|
$ | (537,394 | ) | (19,560 | ) | - |
1 Year Wgnb (MM) Chart |
1 Month Wgnb (MM) Chart |
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