U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-KSB

(Mark One)
[ X ] **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 	 	 (FEE REQUIRED)**
For the fiscal year ended September 30, 2000
 
[ ] **TRANSITION REPORT PURSUANT TO SECTION****13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)**
For the transition period _____________ to _____________
Commission file number: 0-16657
FIRST GEORGIA HOLDING, INC.

(Name of Small Business Issuer)
Georgia
 
58-17811773
(State or other jurisdiction of incorporation or organization)
 
	(IRS Employer Identification Number)
 
 
 
1703 Gloucester Street, Brunswick, GA 31521

(Address of principal executive offices)
 
 
 

Registrants telephone number, including area code: (912) 267-7283
Securities registered pursuant to Section 12(b) of the Act:	 None
Securities registered pursuant to Section 12(g) of the Act:	 Common Stock, par value $1.00
Check whether the issuer (1) has filed all reports required to be filed by section 12 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 60 days. Yes [ X ] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrants knowledge, in definitive proxy or information statement incorporatedby reference in Part III of this Form 10-KSB or any amendment to this Form 10-K. [ X ]

State issuers revenues for its most recent fiscal year $19,043,200
State the aggregate market value of the voting stock held by non-affiliates of the registrant as of December 1, 2000:

7,713,723 Shares of Common Stock, $1.00 par value -- $30,854,892 based upon approximate market value of $4.00 per share at December 1, 2000.

State the number of shares outstanding of each of the issuers classes of common stock, as of December 1, 2000:	

Common Stock, $1.00 par value - 7,713,723 shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Companys Proxy Statement (the "Proxy Statement") for the Annual Meeting of Shareholders scheduled to be held January 18, 2000 are incorporated by reference into Part I and Part III.

Portions of the Companys Annual Report (the "Annual Report") to Shareholders for the year ended September 30, 1999 are incorporated by reference into Part I, Part II and Part III.

 

 
**FIRST GEORGIA HOLDING, INC.

FORM 10-KSB

INDEX

Part I
 
 
PAGE
 
Item 1.
Business
3
 
Item 2.
Description of Properties
32
 
Item 3.
Legal Proceedings
33
 
Item 4.
Submission of Matters to a Vote of Security Holders
33
Part II
 
 
 
 
Item 5.
Market for Common Equity and Related Stockholder Matters
33
 
Item 6.
Management's Discussion and Analysis or Plan
33
 
Item 7.
Financial Statements
33
 
Item 8.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
33
Part III
Item 9.
Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act
33
 
Item 10.
Executive Compensation
34
 
Item 11.
Security Ownership of Certain Beneficial Owners and Management
34
 
Item 12.
Certain Relationships and Related Transactions
34
Part IV
 
 
 
 
Item 13.
Exhibits and Reports on Form 8-K
34
 
 
 
 
Signatures
36
 
Exhibit Index
37
 
 
 
 

 

 

PART I

**Item 1. DESCRIPTION OF BUSINESS**
**Business of the Company

First Georgia Holding, Inc. (the Company), was incorporated as a Georgia corporation on December 16, 1987, for the purpose of acquiring all of the issued and outstanding shares of First Georgia Bank, F.S.B. (formerly known as First Georgia SavingsBank, F.S.B.)(the Bank) pursuant to a plan of reorganization. The reorganization of the Bank into a holding company structure became effective on April 30, 1988, and the Bank is now a wholly-owned subsidiary of the Company.

Other than its ownership of the Bank, the Company has not engaged in any material operations to date and management of the Company has no immediate plans to engage in any non-banking activities.

The holding company structure provides the Company with the ability to expand and diversify its financial services beyond those currently offered through the Bank. As a holding company, the Company has greater flexibility than the Bank to diversify itsbusiness activities, through existing or newly-formed subsidiaries, or through an acquisition or merger. Commencement of non-banking operations by subsidiaries, if they are organized, will be contingent upon approval by the Board of Directors of theCompany and by regulatory authorities as appropriate. While the Company has no plans, arrangements, agreements or understandings regarding diversification through acquisition or development of other businesses, the Board of Directors believes that theholding company structure offers significant advantages.

The Company may, in the future, enter into a management agreement for the purpose of rendering certain services to the Bank. No proposal and no terms of such agreement, however, have been considered as yet and it has not been decided that such anagreement will be made. Certain restrictions on the total compensation under management and similar agreements are imposed by federal regulation and, under certain circumstances, regulatory approval may be required.

Except for the officers of the Bank who presently serve as officers of the Company, the Company does not have any employees.

The Company's executive office is located at 1703 Gloucester Street, Brunswick, Georgia 31520. At the present time the Company does not have any plans to establish additional offices.
**Business of the Bank

The Bank is a federal stock savings bank headquartered in Brunswick, Georgia. It was chartered in 1983 and opened for business on January 31, 1984 with approximately $8.6 million of acquired deposits.

The Bank's business consists primarily of residential and consumer lending and retail banking. To a lesser extent the Bank engages in commercial real estate lending and construction lending.

The Bank's retail banking operation consists of attracting deposits and making commercial and consumer loans. It attracts deposits by offering a wide array of banking services, including checking accounts, overdraft protection, various savingsprograms, IRAs, and four automated teller machines. Similarly, the Bank offers a full range of commercial loans, including short-term loans for working capital purposes, seasonal loans, lines of credit, accounts receivable loans and inventory loans, aswell as a full range of consumer loans, including automobile, boat, home improvement and other similar loans.

Commercial real estate and construction lending includes construction and permanent loans on multi-family apartment buildings, shopping centers, office buildings and other income producing properties located mainly in the Bank's primary market area.

The principal executive offices of the Bank are located at 1703 Gloucester Street, Brunswick, Georgia 31520 and the telephone number at that address is (912) 267-7283.

 

Summary of Financial Results

First Georgia Holding, Inc. reported net income of $1,431,655 in 2000, a decrease of $788,399 over 1999. Net interest income after provision for loan losses increased a total of $23,012. Other income decreased by a total of $187,551, and otherexpenses increased $1,136,898 over 1999. 

Return on Average Assets and Equity

Return on average assets for the year ended September 30, 2000 was .61% as compared to 1.11 % for the year ended September 30, 1999. Return on average equity for the year ended September 30, 2000 was 7.79% compared to 13.59% for the year endedSeptember 30, 1999. These decreases were due primarily to a decrease in the net yield and an increase in the provision for loan losses.

SELECTED STATISTICAL INFORMATION

The following tables set forth certain statistical information and should be read in conjunction with the consolidated financial statements of the Company and Bank.

 

Years Ended September 30,
2000
1999
Return on Average Assets
0.61%
1.11%
Return on Average Equity
7.79%
13.59%
Average Equity to Average Assets
7.88%
8.15%
Dividend Payout Ratio
41.66%
25.94%
 

 

 

 

**SELECTED STATISTICAL INFORMATION
AVERAGE BALANCE SHEETS
September 30,
2000
1999
Cash and due from banks
$ 7,489,826
$ 1,659,244
Federal funds sold
7,063,256
8,022,335
Interest-bearing deposits in other banks
128,385
133,297
Investment securities held to maturity
15,475,183
15,784,630
Loans receivable, net
193,018,305
162,037,526
Real estate owned
214,331
480,993
Federal Home Loan Bank stock
898.600
1,019,324
Premises and equipment, net
5,372,002
4,774,696
Intangible assets, net
633,514
818,685
Accrued interest receivable
1,399,704
1,118,902
Other assets
1,557,480
4,468,330
$233,250,586
$200,317,962
LIABILITIES AND STOCKHOLDERS EQUITY
Liabilities:
Deposits
$204,835,129
$169,000,004
Federal Home Loan Bank advances
5,550,000
8,026,567
Other borrowed money
1,960,000
226,110
Accrued expenses and other liabilities
2,512,144
6,730,721
214,857,273
183,983,402
Stockholders equity
18,373,311
16,334,560
Total liabilities and stockholders equity
$233,230,584
$200,317,962
 

Years Ended September 30,
1999
1998
Interest earned on:
Loans
$
18,489,668 
$
14,796,821 
Investment securities
1,045,580 
966,451 
Other
396,951 
384,496 
Total interest income
19,932,199 
16,147,768 
Interest paid on:
Deposits
9,036,423 
7,397,718 
Federal Home Loan Bank advances 
and other borrowings
498,612 
506,831 
Total Interest expense
9,535,035 
7,904,549 
NET INTEREST EARNED
$
10,397,164 
$
8,243,219 
Average percentage earned on:
Loans
9.58%
9.13%
Taxable investment securities
6.76%
6.55%
Other
5.52%
4.71%
Total interest earning assets
9.24%
8.73%
Average percentage paid on:
Deposits
5.73%
4.38%
Federal Home Loan Bank advances 
and other borrowings
6.64%
6.14%
Total interest bearing liabilities
4.49%
4.46%
NET YIELD ON INTEREST EARNING ASSETS
4.75%
4.18%
 

"Managements Discussion and Analysis of Financial Condition and Results of Operations - Yields Earned and Rates Paid" in the Companys Annual Report is incorporated by reference herein.

 

Lending Activities

General

Thrift institutions are permitted to invest up to 400% of their capital in commercial real estate loans. Thrift institutions are also permitted to invest up to 10% of their assets in secured or unsecured loans for commercial, corporate, business oragricultural purposes. Institutions may also invest up to 35% of their assets in consumer loans and up to 10% of their assets in tangible personal property in order to engage in personal property leasing.

Loan Portfolio Analysis

The Bank's net loan portfolio totaled approximately $193,644,000 at September 30, 2000, representing approximately 81% of its total assets. On that date, approximately 65% of its total outstanding loans were secured by mortgages on residentialproperty. The balance of the Bank's outstanding loans at that date consisted of commercial real estate loans, construction loans, consumer loans and commercial loans.

The Bank extends credit to customers throughout its market area with a concentration in real estate mortgage loans. The real estate loan portfolio is substantially secured by properties located throughout Southeast Georgia. Although the Bank has adiversified loan portfolio, a substantial portion of its borrowers' ability to repay such loans is dependent upon the economy in the Bank's market area.

Set forth on the next page is selected data relating to the composition of the Bank's loan portfolio by type of loan and type of security on the dates indicated.
**LOAN ANALYSIS

September 30, 
2000
1999**Loans by Type of Security:
(In Thousands) 
Real Estate Loans:
Residential:
One-four family:
Conventional
$
$117,612 
60.74%
$92,969 
58.18%
FHA-VA
-
0.00%
245 
0.29% 
Multi-family conventional
402 
0.21%
3,003 
1.73%
Total residential
118,014 
60.94%
96,466 
55.70%
Commercial property
37,736 
19.49%
26,402 
15.24%
Land development and other
14,758 
7.62%
19,546 
11.29%
Total real estate loans
170,508 
88.05%
142,414 
82.23%
Non-real estate loans
25,776 
13.31%
32,282 
18.64%
Unearned interest income
(63)
-0.03%
(61)
-0.04%
Allowances for loan losses
(2,365)
-1.22%
(1,236)
-0.71%
Deferred loan (fees) cost
(212)
-0.11%
(203)
-0.12%
Total
$
193,644 
100.00%
173,196 
100.00%** 

LOAN ANALYSIS (Continued)

September 30, 
2000
1999
Loans by Type of Loan:
(In Thousands)
Real Estate Loans:
Loans on existing property:
Fixed rate 
$ 32,182 
19.08%
$ 33,049 
19.08%
One year ARM and variable rate(1)
94,794 
47.36%
75,057 
43.34%
Three year ARM
1,063 
0.38%
664 
0.38%
Construction loans
35,871 
15.41%
33,644 
19.43%
Total real estate loans
163,910 
82.23%
142,414 
82.23%
Consumer loans
17,089 
8.55%
14,801 
8.55%
Commercial and other loans
15,285 
10.09%
17,481 
10.09%
Unearned interest income
(63)
-0.04%
(61)
-0.04%
Allowance for loan losses
(2,365)
-0.71%
(1,236)
-0.71%
Deferred loan (fees) cost
(212)
-0.12%
(203)
-0.12%
Total 
$ 193,644 
100.00%
$ 173,196 
100.00%
 

(1) An ARM is an adjustable rate mortgage

 

**LOAN MATURITY SCHEDULE**
The following table sets forth certain information at September 30, 2000 regarding the dollar amounts of loans maturing in the Bank's portfolio based on their contractual terms to maturity. Demand loans, loans having no stated schedule ofrepayments and no stated maturity, and overdrafts, are reported as due in one year or less. This table does not consider the repricing of loans to be maturities. Interest rate sensitivity is incorprated herein by reference from the Management's Discussionand Analysis of Financial Condition and Results of Operations - Asset/Liability Management in the Annual Report to Shareholders for 2000.

 

Real Estate

Mortgage
Real Estate

Construction
Commercial

and other
Maturities
Consumer
Total
(In Thousands)
Within 1 year
$ 40,744 
$ 30,121 
$ 4,812 
$ 5,956 
$ 81,633 
After 1 year through 5 years
26,613 
4,878 
7,221 
6,256
44,968
After 5 years through 10 years
13,107 
- 
230 
1,146
14,483
After 10 years
55,045 
- 
127 
28
55,200
Total
$ 135,509 
$ 34,999 
$12,390 
$ 13,386 
$ 196,284 
Less: 
Unearned interest income 
(63)
Allowance for Loan losses 
(2,365)
Deferred Loan Fees 
(212)
$ 
193,644 
 

The next table sets forth the dollar amount of all loans due more than one year after September 30, 2000 which have predetermined interest rates and which have floating or adjustable interest rates.

Real Estate

Mortgage
Real Estate

Construction
Commercial

and other
Consumer
Total
(In Thousands)
Predetermined Rates
$    21,553 
$        - 
$    6,581
$    3,826
$   31,960
Floating or adjustable rates
73,212
4,878
997
3,604
82,691
$    94,765 
$   4,878
$    7,578
$    7,430
$ 114,651
 

Lending Policies

Federal regulations limit the amount which federally chartered thrift institutions may lend in relation to the appraised value of the real estate securing the loan, as determined by an appraisal at the time of loan origination. Thoseregulations permit a maximum loan-to-value ratio of 100% for real estate loans. The Bank's lending policies generally limit the maximum loan-to-value ratio on residential mortgage loans to 95% of the lesser of the appraised value or purchase price.Multi-family residential and commercial real estate loans and unimproved real estate loans generally do not exceed 90% of value. The loan-to-value ratio, maturity and other provisions of the loans made by the Bank generally reflect the policy of makingless than the maximum loan permissible under applicable regulations in accordance with sound lending practices, market conditions and underwriting standards established by the Bank.

In an effort to keep the yields on its loan portfolio and investments more interest rate sensitive, the Bank has implemented a number of measures including: (a) generally originating long-term fixed rate mortgage loans for brokerage to other financialinstitutions; (b) emphasizing origination of ARMs on residential and commercial properties when market conditions permit; (c) originating construction loans secured by residential properties generally for a 12-month period at interest rates determined byreference to the Bank's prime rate; and (d) originating consumer and commercial loans having either adjustable rates or relatively short maturities.

Single Family Residential Loans

One of the lending activities of the Bank has been the origination of single family residential loans through its mortgage lending operation. Through an arrangement with another financial institution, the Bank brokers substantially all of its fixedrate single family residential loans. This allows the Bank to offer a broader base of financing alternatives than would be possible if the Bank were structuring all of its loans to sell to the Federal Home Loan Mortgage Corporation (FHLMC) or the FederalNational Mortgage Association (FNMA). 

Federally chartered thrift institutions are authorized to make home loans on which the interest rate, loan balance or maturity may be adjusted, provided that the adjustments are tied to specified indices. The rate adjustments are determined byreference to cost of funds and Treasury securities indices and are limited generally to 1.5-2.0% per adjustment period and 5-6% over the life of the loan.

Commercial Real Estate Loans

Current regulations permit federal institutions to invest up to 400% of their capital in commercial real estate loans. At September 30, 2000, the Bank had 193% of its capital invested in commercial real estate loans. The commercial real estateloans originated by the Bank are primarily secured by multi-family apartment buildings, shopping centers, office buildings and other income-producing properties. The interest rates on commercial real estate loans presently offered by the Bank generallyadjust every one to three years. The rate is generally determined by reference to money center banks' prime rates. The Bank's commercial real estate loans have various terms, with the payments based on a 15 to 25 year amortization schedule, and haveballoon maturities of 5 to 7 years. The Bank generally requires that such loans have a minimum debt service coverage of 1.15 and a loan-to-value ratio of not more than 90%.

Commercial real estate lending entails significant additional risks compared to residential lending. Commercial real estate loans typically involve large loan balances to single borrowers or groups of related borrowers. The payment experience of suchloans typically depends upon the successful operation of the real estate project. These risks can be significantly affected by supply and demand conditions in the market for office and retail space and for apartments, and as such may be subject, to agreater extent than residential real estate loans, to adverse conditions in the economy. In dealing with these risk factors, the Bank generally limits itself to a real estate market or to borrowers with which it is familiar and participates portions ofits commercial real estate loans when necessary. The Bank concentrates on originating commercial real estate loans secured by properties generally located within its primary market area, although the Bank will continue, on a limited basis, to originatecommercial real estate loans secured by properties located in other parts of Georgia and in other states.

Construction Loans

The Bank originates construction loans on single family residences. Such construction loans generally have a term of 12 months or less. The interest rates charged by the Bank on construction loans are determined by reference to the prime ratecharged by money center banks and vary depending upon the type of property, the loan amount and the credit worthiness of the borrower. The Bank generally requires personal guarantees of payment from the principals of the borrowing entities for the fullamount of the loan, and it is the policy of the Bank to enforce guarantees in the event of non-payment of the loan.

The Bank also originates construction loans on multi-family and commercial real estate. The interest rates on such loans presently offered by the Bank are also determined by reference to the prime rate charged by money center banks. Multi-family andcommercial real estate construction financing generally exposes the lender to a greater risk of loss than long-term financing on improved, occupied real estate, due in part to the fact that the loans are underwritten on projected rather than historicalincome and rental results. The Bank's risk of loss on such loans depends largely upon the accuracy of the initial appraisal of the property's value at completion of construction and the estimated cost (including interest) of completion. If either estimateproves to have been inadequate and the borrower is unable to provide additional funds pursuant to his or her guarantee, the Bank either may be required to advance funds beyond the amount originally committed to permit completion of the development or beconfronted at the maturity of the loan with a project whose value is insufficient to assure full repayment.

The Bank's underwriting criteria are designed to evaluate and to minimize the risks of each commercial real estate construction loan. The Bank considers evidence of the financial stability and reputation of both the borrower and the contractor, theamount of the borrower's cash equity in the project, independent evaluation and review of the building costs, local market conditions, pre-construction sales and leasing information based upon evaluation of similar projects, the use of independentengineers to examine plans and monitor construction and the borrower's cash flow projections upon completion. The Bank may require a performance bond in the amount of the construction contract based on management's evaluation of the project and thefinancial strength of the contractor and also requires personal guaranties of payment by the principals of any borrowing entity. At September 30, 2000, approximately $35,871,000 of the Bank's loan portfolio consisted of construction loans.

Consumer Loans

Current regulations permit federal savings institutions to invest up to 35% of their assets in consumer loans. The Bank currently offers a wide variety of consumer loans including secured and unsecured personal loans (such as home improvement loansand loans secured by savings accounts), automobile, boat and other loans. Total consumer loans amounted to approximately $17,089,000 at September 30, 2000.

The Bank markets consumer loans in order to provide a full range of retail banking services to its customers and because of the shorter term and normally higher interest rates on such loans. The Bank's underwriting standards for consumer loans includea determination of the applicant's payment history on other debts and an assessment of his or her ability to meet existing obligations and to make payments on the proposed loan. Loan-to-value, cash equity and debt service-to-income ratios are alsogenerally considered. Risks associated with consumer loans include, but are not limited to, fraud, deteriorated or non-existing collateral, general economic downturn, and customer financial problems.

Commercial Loans

Current regulations authorize federal thrift institutions to make secured and unsecured loans for commercial, corporate, business and agricultural purposes, including issuing letters of credit. The aggregate amount of such loans outstandinggenerally may not exceed 10% of the institution's assets.

The Bank makes commercial loans primarily on a secured basis. Substantially all of such loans to date have interest rates which adjust with changes in the prime rate charged by money center banks. The Bank's commercial loans primarily consist ofshort-term loans for working capital purposes, seasonal loans, lines of credit, accounts receivable loans and inventory loans. The Bank customarily requires personal guaranties of payment by the principals of any borrowing entity and reviews the financialstatements and income tax returns of the guarantors generally on an annual basis. At September 30, 2000, the Bank had approximately $13,386,000 outstanding in commercial loans. Risks associated with these loans can be significant. Risks include, but arenot limited to, fraud, bankruptcy, deteriorated or non-existing collateral, general economic downturn, and changes in interest rates.

Loan Solicitation and Processing

The Bank actively solicits mortgage loan applications from existing customers, walk-ins, referrals, builders and real estate brokers. Commercial real estate loan applications are also obtained through direct solicitation.

Detailed loan applications are obtained to determine the borrower's ability to repay, and the more significant items on these applications are verified through the use of credit reports, financial statements and confirmations. After analysis of theloan applications and property or collateral involved, including an appraisal of the property by independent appraisers approved by the Bank's management, the lending decision is made in accordance with the underwriting guidelines of the Bank. Withrespect to commercial loans, the Bank also reviews the capital adequacy of the business, the ability of the borrower to repay the loan and honor its other obligations, and general economic and industry conditions. All applications for loans greater than$250,000 but less than $500,000 require the approval of the Bank's Loan Committee, which consists of the Bank's president and three outside directors. All loan applications in excess of $500,000 must be approved by the full Board of Directors.

Loan applicants are promptly notified of the decision of the Bank, together with the terms and conditions of the decision. In this regard, the Bank seeks to handle loan processing and origination faster than its competition. If approved, these termsand conditions include the amount of the loan, interest rate basis, amortization term, a brief description of the real estate to be mortgaged to the Bank, notification that insurance coverage must be maintained to protect the Bank's interest and any otherspecial conditions.

It is the Bank's policy to obtain a title insurance policy insuring that the Bank has a valid first lien on the mortgaged real estate and that the property is free of encumbrances. Borrowers are also to obtain paid hazard insurance policies prior toclosing and, when the property is in a flood plain as designated by the Department of Housing and Urban Development, paid flood insurance policies. It is the Bank's policy to require flood insurance for the full insurable value of the improvements for anysuch loan located in a designated flood hazard area. In certain coastal areas, however, there are limits on the amount of insurance available. Substantially all borrowers are also required to advance funds on a monthly basis, together with each payment ofprincipal and interest, to a mortgage escrow account from which the Bank makes disbursements for items such as real estate taxes, hazard insurance premiums and private mortgage insurance premiums. 

Loan Originations, Sales and Purchases

It is a policy of the Bank not to originate for its own portfolio any fixed rate residential mortgage loans that exceed 15 years. The Bank instead originates long term fixed rate mortgages to be brokered out to various mortgage lenders. The Bankmay sell its commercial real estate and construction loans, generally retaining a percentage of the loans in its own portfolio. Loan sales provide additional funds for lending, generate income for the Bank and generally reduce exposure to interest raterisk. The Bank generally continues to collect payments on the loans and otherwise to service the loans sold. The Bank retains a portion of the interest paid by the borrower on these loans as consideration for its servicing loans sold to others. AtSeptember 30, 2000, the Bank was servicing loans for others of approximately $11,652,000.

The Bank has purchased a number of loans in the past, and intends to consider future purchases of residential mortgage loans as market conditions warrant. The Bank has also sold loans as discussed above and, similarly, intends to consider future salesas conditions warrant.

It is the current intention of management to continue offering residential fixed rate mortgage loans through the Bank's brokerage lending arrangement and to continue offering adjustable rate instruments to be held in the Bank's portfolio.

Loan Commitments

Upon loan approval, short-term commitments of 45 days are issued to the applicant and in most cases provide for the loan to be closed at the prevailing rate of interest as of the date of approval. 

Loan Origination Fees

The Bank defers and amortizes loan origination fees, net of certain direct origination costs incurred, and recognizes such fees over the life of the related loan as a yield adjustment.

The Bank also receives other fees and charges relating to existing loans along with late charges and fees collected in connection with a change in borrower or other loan modifications.

Delinquencies and Asset Classifications

The Bank's collection procedures provide that when a loan is 15 days past due, the borrower will be contacted by mail and payment requested. If the delinquency continues, subsequent efforts will be made to contact the delinquent borrower. Incertain instances, the Bank may modify the loan or grant a limited moratorium on loan payments to enable the borrower to reorganize his or her financial affairs. If the loan continues in a delinquent status for 90 days or more, the Bank generally willinitiate foreclosure proceedings, but there is no requirement that the Bank defer foreclosure proceedings or other enforcement action. Any property acquired as the result of foreclosure is classified as real estate acquired in settlement of loans untilsuch time as it is sold or otherwise disposed of by the Bank to recover its investment.

As a measure of the soundness of a thrift institution's loans, federal regulatory authorities have developed the concept of asset classification and have established four categories of problem assets: "Special Mention," "Substandard," "Doubtful" and"Loss". Assets designated Special Mention do not require that a bank take any specific action. For assets classified Substandard or Doubtful, a bank's examiner is authorized to direct the establishment of a general allowance for loan losses based on theassets classified and the overall quality of the bank's asset portfolio. This valuation allowance must be established in accordance with generally accepted accounting principles. For assets or portions of assets classified Loss, a bank is required eitherto establish specific allowances of 100% of the amount so classified, or to charge off such amount. These specific allowances or charge offs must also be established in accordance with generally accepted accounting principles.

The Bank is responsible for determining the valuation and classification of its assets, subject to review by regulatory authorities. Portions of an asset may be classified in more than one category.

An asset will be designated Special Mention if it does not justify a classification of Substandard but does constitute undue and unwarranted credit risk to the Bank. An asset will be classified Substandard if it is determined to involve a distinctpossibility that the Bank may sustain some loss if deficiencies associated with the loan, such as inadequate documentation, are not corrected. An asset will be classified as Doubtful if full collection is highly questionable or improbable. An asset willbe classified as Loss if it is considered uncollectible, even if a partial recovery may be expected in the future.

The Bank closely monitors its classified loans and actively attempts to dispose of real estate acquired in settlement of loans. Real estate acquired through foreclosure is appraised when acquired and is recorded at the lower of cost or fair market value.

At September 30, 2000, the following amounts of loans were classified as follows:

 

Special Mention
$ 16,986,000
Substandard
8,498,000
Doubtful
-
Loss
-
 
25,484,000
Non-accrual, Past Due and Restructured Loans

The Bank has approximately $3,720,000 of loans in non-accrual status at September 30, 2000. The Bank had approximately $2,009,000 of loans in non-accrual status at September 30, 1999. The Bank has had no restructured loans. ("Management'sDiscussion and Analysis of Financial Condition and Results of Operations - Provision for Loan Losses" in the Company's Annual Report is incorporated by reference herein.) Had all non-accrual loans at September 30, 2000 actually accrued interest for thefull fiscal year, approximately $136,000 of additional interest income would have been added to fiscal earnings. 

Accrual of interest is discontinued when either principal or interest become 90 days past due unless, in management's opinion, the loan is well secured and in the process of collection.

Allowance for Loan Losses

For a detailed analysis of the allowance for loan losses, Management's Discussion and Analysis of Financial Condition and Results of Operations - Provision for Loan Losses is incorporated by reference from the Annual Report to Shareholders herein.

The Company has allocated the allowance for possible loan losses according to the amount deemed to be reasonably necessary to provide for the possibility of losses being incurred within the categories of loans set forth in the table below. Thisallocation is based on management's evaluation of the loan portfolio under current economic conditions, past loan loss experience, adequacy and nature of collateral, and such factors which, in the judgment of management, deserve recognition in estimatingloan losses. Regulatory agencies, as an integral part of their examination process, periodically review the Company's allowances for possible losses on loans and real estate acquired through foreclosure and other non-performing assets. Such agencies mayrequire the Company to make additions to the allowance based on their judgments about information available to them at the time of their examination. Because the allocation is based on estimates and subjective judgment, it is not necessarily indicative ofthe specific amounts or loan categories in which charge-offs may occur.

The allocation of the allowance for possible loan losses to the various loan categories and the ratio of each loan category to total loans outstanding at September 30, 2000 and 1999 are presented in the following table. 

September 30, 2000
September 30, 1999
(In Thousands)
Amount
Percent of loans in each category to total loans
Amount
Percent of loans in each category to total loans
Balance at the end of the year applicable to:
Commercial, financial, and agricultural
$ 171 
8.71%
$ 196 
10.01%
Real estate-construction
390 
18.26%
203 
19.26%
Real estate-mortgage
1,600 
65.24%
714 
62.26%
Consumer
134
7.79%
61 
8.47%
Unallocated
70 
N/A
62 
N/A
$ 2,365 
100.00%
$ 1,236 
100.00%
 

Loan Repayments

In addition to regularly scheduled repayments, loans are prepaid in full as properties are sold, or are refinanced by the Bank or other lenders, or are satisfied in full by the borrower. Loan repayments constitute a major source of funding for the Bank.

Other

The Company has no foreign operations and, accordingly, there are no assets or liabilities attributed to foreign operations.

At September 30, 2000, the Company had no concentration of loans exceeding 10% of total loans to borrowers engaged in any single industry.

Investment Activities

The Bank is required under federal regulations to maintain a minimum amount of liquid assets and is also permitted to make certain other securities investments. It is the intention of management to hold securities with short maturities in theBank's investment portfolio in order to enable the Bank to match more closely the interest rate sensitivities of its assets and liabilities. All of the Bank's investments are subject to interest rate risk. Since some securities have fixed interest rates,as interest rates rise the value of the securities falls and as rates decline the value increases. In addition, mortgage-backed securities are subject to prepayment risk. As rates fall, prepayments increase and the amount of the security earning thecoupon rate declines.

Investment decisions are made by senior officers of the Bank. The actions of the officers are within policies established by the Board of Directors. At September 30, 2000 the investment portfolio totaled approximately $17,878,000.

The following table sets forth the amortized cost, approximate fair value, and weighted average yield of the investment portfolio. The weighted average yield with respect to maturities is also presented.

INVESTMENT SECURITIES ANALYSIS

Amortized Cost
Weighted Average Yield
Fair Value
September 30, 2000:
Investment securities:
Mortgage-backed securities and SBA'
$ 16,692,276 
6.46%
$16,291,054 
State and municipal bonds
1,185,845 
6.82%
1,184,626 
$ 17,878,121 
6.88%
$17,475,680 
Amortized Cost
Weighted Average Yield
Fair Value
September 30, 1999:
Investment securities:
Mortgage-backed securities and SBAs
$ 13,597,058 
6.29%
$13,120,618 
State and municipal bonds
845,000 
6.95%
845,389 
$ 14,442,058 
6.22%
$13,966,007 
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A summary of investment and mortgage-backed securities by maturities as of September 30, 2000 follows:

Amortized Cost
Weighted Average Yield
Fair Value
Investment Securities:
Within 1 year
$       200,000 
6.04%
$       199,462 
After 1 year through 5 years
939,942 
6.56%
936,725 
After 5 years through 10 years
1,791,361 
7.11%
1,776,432 
After 10 years
14,946,818 
6.87%
14,563,061 
$  17,878,121 
6.88%
$ 17,475,680 Yields on tax-exempt securities are computed on tax equivalent basis.

INTEREST DIFFERENTIAL

The following table describes the extent to which changes in volume of interest-earning assets and interest-bearing liabilities and changes in interest rates have affected the Bank's interest income and expense during the periods indicated. Foreach category of interest-earning asset and interest-bearing liability, information is provided on changes attributable to (a) change in volume (change in volume multiplied by old rate) and (b) change in rate (change in rate multiplied by old volume). Thenet change attributable to the combined impact of volume and rate has been allocated to both components in proportion to the relationship of the absolute dollar amounts of the change in each.

Year Ended September 30, 2000 vs. Year Ended September 30, 1999
(In Thousands)
Total
Rate
Volume
Interest income:
Loans
$ 3,693 
$ 770
$ 2,923 
Investment securities
79 
186
(107) 
Interest-bearing deposits in other banks
12 
18
(6) 
Total interest-earning assets
3,784 
974
2,810 
Interest expense:
Deposits
1,639 
687
952
Federal Home Loan Bank advances and other borrowings
(9)
(2)
(7)
Total interest-bearing liabilities
1,630 
685
945 
Net interest income
$ 2,154 
$ 289 
$ 1,865 
(In Thousands)
Year Ended September 30, 1999 vs. Year Ended September 30, 1998
(In Thousands)
Total
Rate
Volume
Interest income:
Loans
$ 562 
$ (591)
$ 1,153 
Investment securities
267 
(36)
303 
Interest-bearing deposits in other banks
241 
(16)
257 
Total interest-earning assets
1,070 
(643)
1,713 
Interest expense:
Deposits
376 
(1,542)
1,918 
Federal Home Loan Bank advances and other borrowings
(304)
5 
(309)
Total interest-bearing liabilities
72 
(1,537)
1,609 
Net interest income
$ 998 
$ 894 
$ 104 
 

Retail Banking Activities and Sources of Funds

General

The Bank's retail banking activities consist of attracting deposits and making consumer and commercial loans. A principal objective of the Bank is to establish a total banking relationship, including a deposit relationship as well as a lendingrelationship, between the Bank and the customer.

Savings accounts and other types of deposits generated by the Bank's retail banking division are the primary source of the Bank's funds for use in lending and for other general business purposes. In addition to savings accounts, the Bank derives fundsfrom loan repayments, FHLB advances, other borrowings and operations. Loan repayments are a relatively stable source of funds while deposit inflows and outflows vary widely and are influenced by prevailing interest rates and money market conditions.Borrowings may be used on a short-term basis to compensate for reductions in normal sources of funds such as deposit inflows at less than projected levels and may be used on a longer-term basis to support expanded lending activities. The Bank's sources ofborrowings have been advances from the FHLB of Atlanta, obligations under repurchase agreements, and Federal funds purchased.

 

Deposits

Savings deposits in the Bank at September 30, 2000 and 1999 were represented by the various types of programs described as follows:

**DEPOSITS AT SEPTEMBER 30, 2000
Type of Account
Term
Minimum Amount 
Weighted Average Rate
Balance (Dollars in Thousands) 
Percentage of Total Deposits
Easy Checking
$ - 
- 
$    9,412 
4.40%
Commercial Checking
- 
- 
13,640
6.37%
NOW Accounts
750 
1.00%
20,326
9.50%
Super NOW and MMDA
1,000 
2.35%
17,177
8.02%
Statement Savings
100 
2.30%
9,925
4.64%
Certificate of deposit accounts:
Jumbo certificates:
30 days to 5 years
100,000 
6.36%
14,659
6.85%
Other time deposits:
3 months
3-5 months
1,000 
4.01%
821
0.38%
6 months
6-11 months
1,000 
4.98%
3,643
1.70%
1 year
12-17 months
500 
6.28%
84,635
39.54%
11/2 years
18-23 months
500 
6.16%
1,663
0.78%
2 years
24--29 months
500 
6.03%
10,672
4.99%
21/2 years
30-35 months
500 
6.18%
2,556
1.19%
3 years
36-41 months
500 
6.93%
4,556
2.13%
31/2 years
42-47 months
500 
6.24%
50
0.02%
4 years
48-59 months
500 
6.09%
1,789
0.84%
5 years,
60 months
500 
6.44%
13,066
6.10%
18 month IRA
18 months
500 
5.78%
5,126
2.39%
Other
30 days
500 
2.75%
331
0.15%
5.73%
$  214,047 
100.00%
Deposits at September 30, 1999 are represented on the next page.

 

**DEPOSITS AT SEPTEMBER 30, 1999
Type of Account
Term
Minimum Amount 
Weighted Average Rate
Balance (Dollars in Thousands) 
Percentage of Total Deposits
Easy Checking
$ - 
- 
$ 6,688 
3.86%
Commercial Checking
- 
- 
13,268 
7.66%
NOW Accounts
750 
1.25%
18,529
10.70%
Super NOW and MMDA
1,000 
2.30%
14,823
8.56%
Statement Savings
100 
2.35%
9,197
5.31%
Certificate of deposit accounts:
Jumbo certificates:
30 days to 5 years
100,000 
5.76%
16,297
9.41%
Other time deposits:
3 months
3-5 months
1,000 
4.79%
2,252
1.30%
6 months
6-11 months
1,000 
5.28%
8,776
5.07%
1 year
12-17 months
500 
5.85%
35,397
20.44%
11/2 years
18-23 months
500 
5.85%
1,240
0.72%
2 years
24--29 months
500 
6.02%
16,947
9.79%
21/2 years
30-35 months
500 
6.02%
4,141
2.39%
3 years
36-41 months
500 
6.23%
4,250
2.45%
31/2 years
42-47 months
500 
6.23%
72
0.04%
4 years
48-59 months
500 
6.23%
1,839
1.06%
5 years
60 months
500 
6.23%
13,155
7.60%
18 month IRA
18 months
500 
5.82%
6,199
3.58%
Other
30 days
500 
2.91%
104
0.06%
5.69%
$ 173,174 
100.00%
The Bank has a number of different programs designed to attract both short-term and long-term savings of the general public. The programs include commercial demand deposits (checking), NOW accounts, money market depositsaccounts (MMDA), traditional passbook savings, time deposits in a minimum amount of $100,000 (Jumbo Certificates), other certificates of deposits and individual retirement accounts (IRAs).

The minimum amount required to open a certificate of deposit for other than retirement accounts ranges from $500 to $100,000, depending on the type of deposit. Rates on certificates of deposit are determined weekly by the Bank, based upon local marketrates, national money market rates and yields on assets of the same maturity.

The variety of deposit accounts offered by the Bank allows it to be competitive in obtaining new funds, although the threat of disintermediation (the flow of funds away from the Bank into direct investment vehicles, such as mutual funds and governmentand corporate securities) still exists. The ability of the Bank to attract and retain deposits and the Bank's cost of funds have been, and will continue to be, significantly affected by capital and money market conditions.

The Bank attempts to control the flow of deposits by pricing its accounts to remain generally competitive with other financial institutions in its market area.

The Bank has generated Jumbo Certificates from both local individuals and businesses and from out-of-town individuals and businesses who have ties to its market area. In addition, the Bank accepts public deposits. The Bank responds to requests for rateinformation but does not accept deposits for which a broker's commission must be paid. As with other deposits, rates on Jumbo Certificates are set in a manner to be competitive in the Bank's market area.

The following table sets forth the composition of deposits, excluding accrued interest payable, by type and interest rate at the dates indicated.

September 30,
2000
1999
1998
Access accounts:
Commercial checking - 0.00%
   $     23,052
$     19,956
$     13,011
NOW accounts - 1.25%
20,326
18,529
16,732
Money Market deposit account - var5able rate
17,177
14,823
8,895
Statement savings - 2.30% 
9,925
9,190
6,972
Certificates of deposits:
2.75% - 5.00%
5,608
10,370
1,975
5.01% - 7.00%
130,210
98,846
109,912
7.01% - 9.00%
7,749
1,460
5,393
Subtotal
214,047
173,174
162,890
Accrued interest
719
518
573
Total
$    214,766
$   173,692
$   163,463
 

Balances at September 30, 
Interest Rates
2000
2001
2002
2003
Thereafter
Total
(In Thousands) 
2.75% - 5.00%
$ 3,769 
1,839
- 
- 
1 
5,609
5.01% - 7.00%
24,634
77,637
11,924
7,014
8,601
129,810
7.01% - 9.00%
10
3,820
1,991
277
2,050
8,148
9.01% - 11.00%
- 
- 
- 
- 
- 
- 
$ 28,413 
83,296
13,915
7,291
10,652
143,567
 

 

 

 

 

 

 

 

 

 

 

**JUMBO CD MATURITIES
Maturity
September 30, 2000
(In Thousands) 
Three months or less
$ 1,597 
Three to six months
3,506 
Six to twelve months
4,406 
Over twelve months
5,150 
Total
$ 14,659 
**AVERAGE DEPOSITS BY TYPE
September 30, 2000
September 30, 1999
Average Balance
Weighted Average Rate
Average Balance
Weighted Average Rate
(In Thousands) 
(In Thousands) 
Non-interest bearing deposits
$ 23,073 
- 
$ 19,042 
- 
NOWs
19,770 
1.00%
18,480 
1.00%
MMDAs
15,531 
2.35%
12,023 
2.35%
Savings
9,368 
2.30%
7,983 
2.30%
Time Deposits
137,093 
6.00%
111,471 
6.00%
Total average deposits
$ 204,835 
5.73%
169,000
5.69%
Borrowings

Savings deposits are the primary source of funds for the Bank's lending and investment activities and for its general business purposes. The Bank has, however, used advances from the FHLB of Atlanta and other borrowings to supplement its supply offunds available for lending. Advances from the FHLB are typically secured by a portion of the Bank's first mortgage loans. A summary of the Bank's borrowings from the FHLB is set forth below:

2000
1999
Due During Year Ending September 30,
Amount
Weighted Average Rate
Amount
Weighted Average Rate
2000
-
-
6,100,000 
6.19%
2002
500,000 
7.90%
500,000 
7.90%
2008
2,000,000 
5.51%
2,000,000 
5.51 
$ 2,500,000 
5.99%
$ 8,600,000 
6.13%
The FHLB System functions as a central reserve bank providing credit for savings institutions. As a member of the FHLB of Atlanta, the Bank is required to own capital stock in the FHLB of Atlanta and is authorized to apply foradvances on the security of its home mortgage loans and other assets (primarily, securities which are obligations of, or are guaranteed by, the United States) provided certain standards related to creditworthiness have been met.

The FHLB offers several different credit programs each with its own interest rate and term. It prescribes the acceptable uses for advances as well as size limitations. The FHLB periodically reviews its credit limitations and standards. Under itscurrent policies, the FHLB limits its advances based on a member institution's net worth or the FHLB's assessment of the institution's creditworthiness. The following table sets forth certain information regarding borrowings by the Bank at the end of andduring the periods indicated:

 
**FEDERAL HOME LOAN BANK ADVANCES

At September 30,
2000
1999
1998
Balance outstanding
2,500,000
8,600,000
8,600,000
Weighted average rate
5.99%
6.15%
6.27%
Maximum amount of short-term borrowings at any month end
$ 8,100,000 
6,100,000
11,600,000
Approximate average short-term borrowings outstanding
$ 3,896,995 
1,859,170
7,688,427
Approximate weighted average paid on short-term borrowings(1)
5.50%
5.24%
4.98%
(1) The average method used is the average end of month totals

First Georgia Holding, Inc. obtained a line of credit for up to $3,000,000 from the Bankers Bank in March 2000. The interest is payable quarterly at Prime minus 50 basis points (9% at September 30, 2000). All of the issued and outstanding shares ofcapital stock of First Georgia Bank is pledged as collateral for this line of credit. As of September 30, 2000, the Company had borrowed $2,000,000 against this line of credit which matures on March 31, 2002 with an option to extend until March 31, 2012.

Employees

At September 30, 2000, the Bank employed 127 full-time equivalent employees. Management considers relations with its employees to be excellent. The Bank currently maintains a comprehensive employee benefits program including, among other benefits,hospitalization and major medical insurance, life insurance, dental insurance, long term disability, a 401(k) plan and educational assistance. Management considers these benefits to be generally competitive with those offered by competing financialinstitutions in its market area. The Bank's employees are not represented by any collective bargaining group.

Competition

The Bank's primary market area is southeastern Georgia. The Bank competes for loans primarily through referrals and quality of the services it provides to borrowers and home builders. It competes for savings by offering depositors a wide variety ofsavings accounts, checking accounts, NOW accounts, convenient office locations, tax-deferred retirement programs and other services.

Federal deregulation of financial institutions has contributed to the dramatic increase in competition for savings dollars between savings institutions and other types of investment vehicles, such as money market mutual funds, U.S. Treasury securitiesand municipal bonds, as well as an increase in competition with commercial banks for loans, checking accounts and other types of financial services. In addition, large conglomerates and investment banking firms have entered the market for financialservices. Accordingly, the Bank, like other institutions, faces increased competition in the future in attracting and retaining customers for the services it offers.

Forward Looking Statements

This Annual Report on Form 10-KSB, other periodic reports filed by the Company under the Securities Exchange Act of 1934, as amended, and any other written or oral statements made by or behalf of the Company may include forward looking statementswhich reflect the Company's current views with respect to future events and financial performance. Such forward looking statements are based on general assumptions and are subject to various risks, uncertainties and other factors that may cause actualresults to differ materially from the views, beliefs and projections expressed in such statements. These risks, uncertainties and other factors include, but are not limited to:

(a)	Possible changes in economic and business conditions that may affect the prevailing interest rates, the prevailing rates of inflation or the amount of growth, stagnation or recession in the global, U.S. and southeastern U.S. economies, the valueof investments, collectibility of loans, and the profitability of business entities;

(b)	Possible changes in monetary and fiscal policies, laws and regulations, and other activities of governments, agencies and similar organizations;

(c)	The effects of easing of restrictions on participants in the financial services industry, such as banks, securities brokers and dealers, investment companies and finance companies, and attendant changes in patterns and effects of competition inthe financial services industry. 

(d)	The cost and other effects of legal and administrative cases and proceedings, claims, settlements and judgments;

(e)	The ability of the Company to achieve the earnings expectations related to the continued growth of the markets in which the Company operates consistent with recent historical experience, and the Company's ability to expand into new markets andto maintain profit margins in the fact of pricing pressures.

The words "believe," "expect," "anticipate," "project" and similar expressions signify forward looking statements. Readers are cautioned not to place undue reliance on any forward looking statements made by or on behalf of the Company. Any suchstatements speak only as of the date the statement was made. The Company undertakes no obligation to update or revise any forward looking statements. 
**SUPERVISION AND REGULATION**
	Savings and loan holding companies and federal savings banks are extensively regulated under both Federal and state law. The following is a brief summary of certain statutes and rules and regulations that affect or may affectthe Company and the Bank. This summary is qualified in its entirety by reference to the particular statute and regulatory provision referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to thebusiness of the Company and the Bank. Supervision, regulation and examination of the Company and the Bank by the regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company. The terms savingsassociation, federal savings bank and thrift are used interchangeably in this section.

Savings and Loan Holding Company Regulation

	The Company is a registered holding company under both the Savings and Loan Holding Company Act (the "SLHCA") set forth in Section 10 of the Home Owners Loan Act ("HOLA") and the Financial Institutions Code of Georgia("FICG"). The Company is regulated under such acts by the Office of Thrift Supervision (the "OTS") and by the Department of Banking and Finance (the "Georgia Department"), respectively. As a savings and loan holding company, the Company is required tofile with the OTS an annual report and such additional information as the OTS may require pursuant to the SLHCA. The OTS also conducts examinations of the Company and each of its subsidiaries.

	Savings and loan holding companies and their subsidiaries are prohibited from engaging in any activity or rendering any services for or on behalf of their savings institution subsidiaries for the purpose or with the effect ofevading any law or regulation applicable to the institution. This restriction is designed to prevent the use of holding company affiliates to evade requirements of the SLHCA that are designed to protect the holding company's savings institutionsubsidiaries. A unitary holding company, that is, a holding company that owns only one insured institution whose subsidiary institution satisfies the qualified thrift lender test (discussed below) and which was in existence prior to May 4, 1999, isnot restricted to any statutorily prescribed list of permissible activities, and the SLHCA and the FICG impose no limits on direct or indirect non-savings institution subsidiary operations. However, the Financial Services Modernization Act of 1999provides that, while existing unitary holding companies retain these unrestricted powers, if the unitary is then acquired by another party, its powers are restricted to those permitted for financial holding companies under the Act. 

	The SLHCA and the FICG makes it unlawful for any savings and loan holding company, directly or indirectly, or through one or more subsidiaries or one or more transactions, to acquire control of another savings association or anothersavings and loan holding company without prior approval from the OTS and the Georgia Department, respectively. An acquisition by merger, consolidation or purchase of assets of such an institution or holding company or of substantially all of the assets ofsuch an institution or holding company is also prohibited without prior OTS or Georgia Department approval. When considering an application for such an acquisition, the OTS and the Georgia Department take into consideration the financial and managerialresources and future prospects of the prospective acquiring company and the institution involved. This includes consideration of the competence, experience and integrity of the officers, directors and principal shareholders of the acquiring company andsavings institution. In addition, the OTS and the Georgia Department consider the effect of the acquisition on the institution, the insurance risk to the Savings Association Insurance Fund ("SAIF") and the convenience and needs of the community to be served .

	The OTS may not approve an acquisition that would result in the formation of certain types of interstate holding company networks. The OTS is precluded from approving an acquisition that would result in the formation of a multipleholding company controlling institutions in more than one state unless the acquiring company or one of its savings institution subsidiaries is authorized to acquire control of an institution or to operate an office in the additional state pursuant to asupervisory acquisition authorized under Section 13(k) of the Federal Deposit Insurance Act or unless the statutes of the state in which the institution to be acquired is located permits such an acquisition. 

	Savings and loan holding companies are allowed to acquire or to retain as much as 5% of the voting shares of an unaffiliated savings institution or savings and loan holding company without regulatory approval.

Bank Regulation
**	General. The Bank is a federal savings bank organized under the laws of the United States subject to examination by the OTS. The OTS regulates all areas of the Bank's banking operations including reserves, loans, mergers,payment of dividends, interest rates, establishment of branches, and other aspects of operations. OTS regulations generally provide that federal savings banks must be examined no less frequently than every 12 months, unless the federal savings bank (i)has assets of less than $250 million; (ii) is well capitalized; (iii) was found to be well managed and its composite condition was found to be outstanding (or good, if the bank had total assets of not more than $100 million) during its lastexamination; (iv) is not subject to a formal enforcement proceeding or an order from the Federal Deposit Insurance Corporation ("FDIC") or another banking agency; and (v) has not undergone a change of control during the previous 12-month period. Federalsavings banks must be examined no less frequently than every 18 months. The Bank also is subject to assessments by the OTS to cover the costs of such examinations.

	The Bank is also insured and regulated by the FDIC. The major functions of the FDIC with respect to insured federal savings banks include paying depositors to the extent provided by law in the event an insured bank is closed withoutadequately providing for payment of the claims of depositors and preventing the continuance or development of unsound and unsafe banking practices.

	Subsidiary institutions of a savings and loan holding company, such as the Bank, are subject to certain restrictions imposed by the Federal Reserve Act on any extension of credit to the holding company or any of its subsidiaries, oninvestment in the stock or other securities thereof, and on the taking of such stock or securities as collateral for loans to any borrower. In addition, a holding company and its subsidiaries are prohibited from engaging in certain tying arrangements inconnection with any extension of credit or provision of any property or services.
**	Capital Requirements. OTS regulations require that federal savings banks maintain (i) "tangible capital" in an amount of not less than 1.5% of total assets, (ii) "core capital" in an amount not less than 4.0% of totalassets, and (iii) a level of risk-based capital equal to 8% of risk-weighted assets. Under OTS regulations, the term "core capital" generally includes common stockholders' equity, non-cumulative perpetual preferred stock and related surplus, and minorityinterests in the equity accounts of consolidated subsidiaries less unidentifiable intangible assets (other than certain amounts of supervisory goodwill) and certain investments in certain subsidiaries plus 90% of the fair market value of readilymarketable purchased mortgage servicing rights ("PMSRs") and purchased credit card relationships (subject to certain conditions). "Tangible capital" generally is defined as core capital minus intangible assets and investments in certain subsidiaries,except PMSRs.

	In determining total risk-weighted assets for purposes of the risk-based requirement, (i) each off-balance sheet asset must be converted to its on-balance sheet credit equivalent amount by multiplying the face amount of each suchitem by a credit conversion factor ranging from 0% to 100% (depending upon the nature of the asset), (ii) the credit equivalent amount of each off-balance sheet asset and each on-balance sheet asset must be multiplied by a risk factor ranging from 0% to200% (again depending upon the nature of the asset) and (iii) the resulting amounts are added together and constitute total risk-weighted assets. "Total capital," for purposes of the risk-based capital requirement equals the sum of core capital plussupplementary capital (which, as defined, includes the sum of, among other items, perpetual preferred stock not counted as core capital, limited life preferred stock, subordinated debt, and general loan and lease loss allowances up to 1.25% ofrisk-weighted assets) less certain deductions. The amount of supplementary capital that may be counted towards satisfaction of the total capital requirement may not exceed 100% of core capital, and OTS regulations require the maintenance of a minimumratio of core capital to total risk-weighted assets of 4%.

	OTS regulations also include an interest-rate risk in the risk-based capital requirement. Under this regulation, an institution is considered to have excess interest rate-risk if, based upon a 200-basis point change in marketinterest rates, the market value of an institution's capital changes by more than 2%. This requirement does not have any material effect on the ability of the Bank to meet the risk-based capital requirement. The OTS also revised its risk-based capitalstandards to ensure that its standards provide adequately for concentration of credit risk, risk from nontraditional activities and actual performance and expected risk of loss on multi-family mortgages.

	Capital requirements higher than the generally applicable minimum requirement may be established for a particular savings association if the OTS determines that the institution's capital was or may become inadequate in view of itsparticular circumstances.

	Additionally, the Georgia Department requires that savings and loan holding companies, such as the Company, must maintain a 5% Tier 1 leverage ratio on a consolidated basis.
***	Prompt Corrective Action*.*The Federal Deposit Insurance Corporation Improvement Act of 1991 establishes a system of prompt corrective action to resolve the problems of undercapitalized financial institutions.Under this system, the federal banking regulators have established five capital categories (well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized and critically undercapitalized) in which all institutions are placed.Federal banking regulators are required to take some mandatory supervisory actions and are authorized to take other discretionary actions, with respect to institutions in the three undercapitalized categories. The severity of the action depends upon thecapital category in which the institution is placed. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized. The federal banking agencies have specifiedby regulation the relevant capital level for each category.

	An institution that is categorized as undercapitalized, significantly undercapitalized, or critically undercapitalized is required to submit an acceptable capital restoration plan to its appropriate federal banking agency. A holdingcompany must guarantee that a subsidiary depository institution meets its capital restoration plan, subject to certain limitations. The controlling holding company's obligation to fund a capital restoration plan is limited to the lesser of 5% of anundercapitalized subsidiary's assets or the amount required to meet regulatory capital requirements. An undercapitalized institution is also generally prohibited from increasing its average total assets, making acquisitions, establishing any branches orengaging in any new line of business, except under an accepted capital restoration plan or with regulatory approval. An institution may be owngraded to a lower capital category based on supervisory factors other than capital. 
***	FDIC Insurance Assessments. The FDIC has adopted a risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assetsand liabilities. The system assigns an institution to one of three capital categories: (1) well capitalized; (2) adequately capitalized; and (3) undercapitalized. These three categories are substantially similar to the prompt corrective action categoriesdescribed above, with the "undercapitalized" category including institutions that are undercapitalized, significantly undercapitalized, and critically undercapitalized for prompt corrective action purposes. The FDIC also assigns an institution to one ofthree supervisory subgroups within each capital group. The supervisory subgroup to which an institution is assigned is based on a supervisory evaluation that the institution's primary federal regulator provides to the FDIC and information that the FDICdetermines to be relevant to the institution's financial condition and the risk posed to the deposit insurance funds. The FDIC then determines an institution's insurance assessment rate based on the institution's capital category and supervisory category.Under the risk-based assessment system, there are nine combinations of capital groups and supervisory subgroups to which different assessment rates are applied. Assessments range from 0 to 27 cents per $100 of deposits, depending on the institution'scapital group and supervisory subgroup.

	In addition, effective January 1, 1997, the FDIC imposed assessments to help pay off the $780 million in annual interest payments on the $8 billion Financing Corporation bonds issued in the late 1980s as part of the governmentrescue of the thrift industry. The FDIC has assessed savings banks at a rate of 6.4 cents per $100 deposits until December 31, 1999. As of January 1, 2000, the assessment will be decreased to a rate of 3.7 cents per $100 (the same assessment ratethat is imposed on commercial banks). 

	The FDIC may terminate its insurance of deposits if it finds that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law,regulation, rule, order, or condition imposed by the FDIC.
***	Community Reinvestment Act. The Community Reinvestment Act requires that, in connection with examinations of financial institutions within their respective jurisdictions, the federal banking regulators shall evaluatethe record of each financial institution in meeting the credit needs of its local community, including low and moderate income neighborhoods. These facts are also considered in evaluating mergers, acquisitions, and applications to open a branch orfacility. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. The CRA requires that board of directors of financial institutions, such as the Bank, to adopt a CRA statement for each assessment areathat, among other things, describes its efforts to help meet community credit needs and the specific types of credit that the institution is willing to extend. The Bank's CRA performance will be assessed pursuant to the following criteria: (1) the Bank'sloan to deposit ratio, adjusted for seasonal variation and, as appropriate, other related lending activities such as loan originations for sale to the secondary markets, community development loans and qualified investments; (2) the percentage of loansand, as appropriate, other lending related activities located in the Bank's assessment area; (3) the Bank's record of lending to and, as appropriate, engaging in other lending related activities for borrowers of different income levels and businesses andfarms of different sizes; (4) the geographic distribution of the Bank's loans; and (5) the Bank's record of taking action if warranted in response to written complaints about its performance in helping to meet credit needs in its assessment area. 

	**Capital Distributions**. An OTS rule imposes limitations on all capital distributions by savings associations (including dividends, stock repurchases and cash-out mergers). Under the current rule, a savings association isclassified based on its level of regulatory capital both before and after giving effect to a proposed capital distribution. Well capitalized institutions may make capital distributions without prior regulatory approval in specified amounts in any calendarquarter.

	An institution that both before and after a proposed capital distribution has net capital equal to or in excess of its capital requirements may, subject to any otherwise applicable statutory or regulatory requirements or agreementsentered into with the regulators, make capital distributions in any calendar year up to (i) 100% of its net income to date during the calendar year plus the amount that would reduce by one-half its "surplus capital ratio" *(i.e.,* the percentage by which the association's capital-to-assets ratio exceeds the ratio of its fully phased-in capital requirement to its assets) at the beginning of the calendar year or (ii) 75% of its net income over the most recentfour-quarter period. No regulatory approval of the capital distribution is required, but prior notice must be given to the OTS.

	An institution that either before or after a proposed capital distribution fails to meet its then applicable minimum capital requirement or that has been notified that it needs more than normal supervision may not make any capitaldistributions without the prior written approval of the OTS. In addition, the OTS may prohibit a proposed capital distribution, which would otherwise be permitted by the regulation, if the OTS determines that such distribution would constitute an unsafeor unsound practice.

	**Liquidity**. Under applicable federal regulations, savings associations are required to maintain an average daily balance of liquid assets (including cash, certain time deposits, certain bankers' acceptances, certain corporatedebt securities and highly rated commercial paper, securities of certain mutual funds and specified United States government, state or federal agency obligations) equal to a monthly average of not less than a specified percentage of the average dailybalance of the savings association's net withdrawable deposits plus short-term borrowings. Under HOLA, this liquidity requirement may be changed from time to time by the OTS to any amount within the range of 4% to 10% depending upon economic conditionsand the deposit flows of member institutions, and currently is 4%. Savings institutions also are required to maintain an average daily balance of short-term liquid assets at a specified percentage (currently 1%) of the total of the average daily balanceof its net withdrawable deposits and short-term borrowings. 
**	Equity Investments. The OTS has revised its risk-based capital regulation to modify the treatment of certain equity investments and to clarify the treatment of other equity investments. Equity investments that are permissiblefor both savings banks and national banks will no longer be deducted from savings associations' calculations of total capital over a five-year period. Instead, permissible equity investments will be placed in the 100% risk-weight category, mirroring thecapital treatment prescribed for those investments when made by national banks under the regulations of the OCC. Equity investments held by savings associations that are not permissible for national banks must still be deducted from assets and total capital .
**	Qualified Thrift Lender Requirement. A federal savings bank is deemed to be a "qualified thrift lender" ("QTL") as long as its "qualified thrift investments" equal or exceed 65% of its "portfolio assets" on a monthly averagebasis in nine out of every 12 months. Qualified thrift investments generally consist of (i) various housing related loans and investments (such as residential construction and mortgage loans, home improvement loans, mobile home loans, home equity loansand mortgage-backed securities), (ii) certain obligations of the FDIC and (iii) shares of stock issued by any FHLB, the FHLMC or the FNMA. In addition, the following assets may be categorized as qualified thrift investments in an amount not to exceed 20%in the aggregate of portfolio assets: (i) 50% of the dollar amount of residential mortgage loans originated and sold within 90 days of origination; (ii) investments in securities of a service corporation that derives at least 80% of its income fromresidential housing finance; (iii) 200% of loans and investments made to acquire, develop or construct starter homes or homes in credit needy areas (subject to certain conditions); (iv) loans for the purchase or construction of churches, schools,nursing homes and hospitals; and (v) consumer loans (in an amount up to 20% of portfolio assets). For purposes of the QTL test, the term "portfolio assets" means the savings institution's total assets minus goodwill and other intangible assets, thevalue of property used by the savings institution to conduct its business, and liquid assets held by the savings institution in an amount up to 20% of its total assets.

	OTS regulations provide that any savings association that fails to meet the definition of a QTL must either convert to a national bank charter or limit its future investments and activities (including branching and payments ofdividends) to those permitted for both savings associations and national banks. Further, within one year of the loss of QTL status, a holding company of a savings association that does not convert to a bank charter must register as a bank holding companyand will be subject to all statutes applicable to bank holding companies. In order for the Bank to exercise the powers granted to federally chartered savings associations and for the Company to retain the power of a unitary holding company, the Bank mustmeet the definition of a QTL.
**	Loans to One Borrower Limitations. HOLA generally requires savings associations to comply with the loans to one borrower limitations applicable to national banks. National banks generally may make loans to a single borrowerin amounts up to 15% of their unimpaired capital and surplus, plus an additional 10% of capital and surplus for loans secured by readily marketable collateral. HOLA provides exceptions under which a savings association may make loans to one borrower inexcess of the generally applicable national bank limits. A savings association may make loans to one borrower in excess of such limits under one of the following circumstances: (i) for any purpose, in any amount not to exceed $500,000; or (ii) to developdomestic residential housing units, in an amount not to exceed the lesser of $30 million or 30% of the savings association's unimpaired capital and unimpaired surplus, provided other conditions are satisfied. The Federal Institutions Reform, Recovery, andEnforcement Act of 1989 provided that a savings association could make loans to one borrower to finance the sale of real property acquired in satisfaction of debts previously contracted in good faith in amounts up to 50% of the savings association'sunimpaired capital and unimpaired surplus. The OTS, however, has modified this standard by limiting loans to one borrower to finance the sale of real property acquired in satisfaction of debts to 15% of unimpaired capital and surplus. That rule provides,however, that purchase money mortgages received by a savings association to finance the sale of such real property do not constitute "loans" (provided no new funds are advanced and the savings association is not placed in a more detrimental positionholding the note than holding the real estate) and, therefore, are not subject to the loans to one borrower limitations.
**	Commercial Real Property Loans. HOLA limits the aggregate amount of commercial real estate loans that a federal savings association may make to an amount not in excess of 400% of the savings association's capital.
**	Federal Home Loan Bank System. The FHLB System consists of 12 regional FHLBs, each subject to supervision and regulation by the Federal Housing Finance Board (the "FHFB"). The FHLBs provide a central credit facility formember savings associations. The maximum amount that the FHLB of Atlanta will advance fluctuates from time to time in accordance with changes in policies of the FHFB and the FHLB of Atlanta, and the maximum amount generally is reduced by borrowings fromany other source. The Financial Services Modernization Act has enabled the FHLB to expand the credit window for members by expanding the purposes for which FHLB's may make secured advances and the types of collateral eligible to secure these advances, aswell as eliminating restrictions on advances to thrifts not meeting the QTL test. 
**	Federal Reserve System. The Federal Reserve Board has adopted regulations that require savings associations to maintain non-earning reserves against their transaction accounts (primarily NOW and regular checking accounts).These reserves may be used to satisfy liquidity requirements imposed by the OTS. Because required reserves must be maintained in the form of cash or a non-interest-bearing account at a Federal Reserve Bank, the effect of this reserve requirement is toreduce the amount of the Bank's interest-earning assets.

	Savings institutions also have the authority to borrow from the Federal Reserve "discount window." Federal Reserve Board regulations, however, require savings associations to exhaust all FHLB sources before borrowing from a FederalReserve bank.
**	Other Regulations. Interest and other charges collected or contracted for by the Bank are subject to various laws concerning interest rates and the Bank's loan operations are also subject to various laws applicable to credittransactions, such as:
- The federal Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; 
- The Home Mortgage Disclosure Act of 1975, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of thecommunity it serves; 
- The Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; 
- The Fair Credit Reporting Act of 1978, governing the use and provision of information to credit reporting agencies; 
- The Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and 
- The rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.

	The deposit operations of the Bank are subject to:
- The Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures for complying with administrative subpoenas of financial records; and 
- The Electronic Funds transfer Act and Regulation E issued by the Federal Reserve to implement that act, which governs automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automatedteller machines and other electronic banking services.
**Effect of Governmental Monetary Polices 

	The Company's earnings are affected by domestic economic conditions and the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve Bank's monetary policies have had, and are likely to continue tohave, an important impact on the operating results of financial institutions through its power to implement national monetary policy in order to curb inflation or combat a recession. The monetary policies of the Federal Reserve Board have major effectsupon the levels of bank loans, investments and deposits through its open market operating in United States government securities and through its regulation of the discount rate on borrowings of member banks and the reserve requirements against member bankdeposits. It is not possible to predict the nature or impact of future changes in monetary and fiscal policies.

Transactions with Affiliates Restrictions 

	The Company and the Bank are subject to the provisions of Section 23A of the Federal Reserve Act. Section 23A places limits on:
The amount of loans or extensions of credit to affiliates;

- The amount of investment in affiliates; 
- The amount of the purchase of assets from affiliates, except for real and personal property exempted by the Federal Reserve; 
- The amount of loans or extensions of credit to third parties collateralized by the securities or obligations of affiliates; and 
- The amount of any guarantee, acceptance or letter of credit issued on behalf of an affiliate.

	The aggregate of all of the above transactions is limited in amount, as to any one affiliate, to 10% of a bank's capital and surplus and, as to all affiliates combined, to 20% of a bank's capital and surplus. In addition to the limitation on theamount of these transactions, each of the above transactions must also meet specified collateral requirements. The Company must also comply with certain provisions designed to avoid the taking of low-quality assets.

	The Company and the Bank are also subject to the provisions of Section 23B of the Federal Reserve Act which, among other things, prohibits an institution from engaging in the above transactions with affiliates unless the transactions are on termssubstantially the same, or at least as favorable to the institution or its subsidiaries, as those prevailing at the time for comparable transactions with nonaffiliated companies. 

	The Bank is also subject to restrictions on extensions of credit to its executive officers, directors, certain principal shareholders and their related interests. These extensions of credit (1) must be made on substantially the same terms,including interest rates and collateral, as those prevailing at the time for comparable transactions with third parties, and (2) must not involve more than the normal risk of repayment or present other unfavorable features.

Recent Legislation

	On November 12, 1999, President Clinton signed the Gramm-Leach-Bliley Act, or the Financial Services Modernization Act of 1999, which is intended to modernize the financial services industry. In addition to the repeal of the anti-affiliationprovisions of the 1933 Glass-Steagall Act to allow affiliations among banks and securities firms, insurance companies and other financial services providers, and to the restrictions placed on powers of unitary savings and loan holding companies (theCompany is grandfathered), the Act contains, among others, provisions regarding Community Reinvestment Act requirements, consumer privacy and ATM fee disclosures. The following is a brief summary of these provisions:
*Community Reinvestment Act. 
Small banks will receive some regulatory examination relief. Banks with aggregate assets of not more than $250 million will be subject to a Community Reinvestment Act examination only onceevery 60 months if the bank receives an outstanding rating, once every 48 months if it receives a satisfactory rating and as needed if the rating is less than satisfactory. Additionally, banks will be required to publicly disclose the terms of variousCommunity Reinvestment Act-related agreements.

***Privacy. 
Financial institutions are required to disclose their policy for collecting and protecting confidential information. Customers generally may prevent financial institutions from sharing personal financialinformation with nonaffiliated third parties except for third parties that market the institutions' own products and services. Additionally, financial institutions generally may not disclose consumer account numbers to any nonaffiliated third party foruse in telemarketing, direct mail marketing or other marketing through electronic mail to the consumer.

***ATM Fees. 
ATM operators must place a conspicuous notice on the ATM machine that a fee will be imposed. Additionally, a second notice must appear on the ATM screen or on a paper notice that a fee will be imposed and theamount of the fee before the customer is irrevocably committed to the transaction. The requirement for the second notice will not apply until December 31, 2004 to any ATM that lacks the technical ability to disclose this notice.

Proposed Legislation and Regulatory Action

New regulations and statutes are regularly proposed that contain wide-ranging proposals for altering the structures, regulations and competitive relationships of the nation's financial institutions. The Company cannot predictwhether or in what form any proposed regulation or statute will be adopted or the extent to which its business may be affected by any new regulation or statute. Legislation that would eliminate the federal savings bank charter is under discussion. If suchlegislation is enacted, the Bank would be required to convert its federal savings bank charter to either a national bank charter or to a state depository institution charter. Various legislative proposals also may result in the restructuring of federalregulatory oversight, including, for example, consolidation of the OTS into another agency, or creation of a new Federal banking agency to replace the various such agencies which presently exist. The Bank is unable to predict whether such legislation willbe enacted or, if enacted, whether it will contain relief as to bad debt deductions previously taken.

Item 2.	DESCRIPTION OF PROPERTIES

The executive office of the Company and Bank is located at 1703 Gloucester Street, Brunswick, Georgia 31520, and its telephone number at that office is (912) 267-7283. The Bank also has six full-service branch offices. The following table sets forththe addresses of the aforementioned offices, their net book value and the expiration dates of the leases applicable to the offices not owned by the Bank.

 

 

Office
Lease Expiration Date
Net Book Value
Executive Office
 
 
1703 Gloucester Street Brunswick, GA 31520
owned
$767,892
Full Service Offices
 
 
Altama Avenue Office

4510 Altama Avenue Brunswick, GA 31520
7/28/08
--
Demere Village

2461 Demere Road St. Simons Island, GA 31522
owned
$288,573
North Brunswick Office

2001 Commercial Drive South Brunswick, GA 31525
owned
$476,472
Colonial Mall Office

109 Scranton Connector

Brunswick, GA 
owned
$859,307
Waycross

1010 Plant Avenue

Waycross, GA31501
owned
$171,332
 

Item 3.	LEGAL PROCEEDINGS

Neither the Company nor the Bank is a party to, nor is any of their property the subject of, any material pending legal proceedings, other than ordinary routine litigation incidental to their business, and no such proceedings are known to becontemplated by governmental authorities.

Item 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable

PART II

Item 5.	MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Information concerning common stock, shareholders and dividends appears in the Annual Report under the heading "Shareholder Information" and is incorporated by reference herein.
Item 6.	MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Management's discussion and analysis of the Company's financial condition and its results of operations appears in the Annual Report under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and isincorporated by reference herein.

 

Item 7.	FINANCIAL STATEMENTS

The consolidated financial statements of the Company and the Bank as of September 30, 2000 and 1999 and for each of the years in the three year periods ended September 30, 2000, 1999, and 1998, and the report issued thereon by the Company's independentcertified public accountant, appear in the Annual Report and are incorporated herein by reference.
Item 8.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING

	 AND FINANCIAL DISCLOSURE

	None

PART III

Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; Compliance with Section 16(a) of the Exchange Act

Information concerning the Company's and the Bank's Directors and Executive Officers appears in the Proxy Statement under the heading "Election of Directors", "Executive Officers", "Ownership of Stock", and "Compliance with Section 16(a) of theSecurities Exchange Act of 1934" and is incorporated by reference herein.

Item 10. EXECUTIVE COMPENSATION

Information concerning the compensation of the Company's and the Bank's Management appears in the Proxy Statement under the heading "Executive Compensation" and is incorporated by reference herein.

Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information concerning beneficial owners of more than 5% of the Company's common stock appears in the Proxy Statement under the heading "Ownership of Stock - Principal Holders of Stock" and is incorporated by reference herein.

Information concerning the common stock owned by the Company's management appears in the Proxy Statement under the heading "Ownership of Stock - Stock Owned by Management" and is incorporated by reference herein.

Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information concerning certain relationships and related transactions appears in the Proxy Statement under the heading "Executive Compensation - Certain Other Transactions" and is incorporated by reference herein. 

 

PART IV

Item 14. EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits

The list of documents set forth on the Exhibit Index that immediately follows the last signature page hereof is incorporated herein by reference, and such documents are filed as exhibits to this report on Form 10-KSB.

(b)	Reports on Form 8-K:

No reports on Form 8-K were filed during the year ended September 30, 2000.

 

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

FIRST GEORGIA HOLDING, INC.

(Registrant)

 

BY: /s/ Henry S. Bishop
      Henry S. Bishop

      President

 

 

Date:  ___________________, 2000

 

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Henry S. Bishop and G.F. Coolidge III, and each of them, the person's attorneys-in-fact, each with full power of substitution, for the person in hisor her name, place and stead, in any and all capacities, to sign any amendment to this Report on form 10-KSB, and to file the same, with exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission and herebyratifies and confirms all that each of said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

 

In accordance with the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

 

Signatures
Title
Date
HENRY S. BISHOP
President and Director (principal executive officer)
December 20, 2000
B.W. BOWIE
Director
December 20, 2000
M. FRANK DELOACH III
Director
December 20, 2000
TERRY DRIGGERS
Director
December 20, 2000
ROY K. HODNETT
Director
December 20, 2000
E. RAYMOND MOCK
Director
December 20, 2000
JAMES D. MOORE
Director
December 20, 2000
D. LAMONT SHELL
Director
December 20, 2000
G.F. COOLIDGE
Chief Financial Officer (principal financial and accounting officer)
December 20, 2000
 

 

 **EXHIBIT INDEX
 **Exhibit #**Document**Page
3.(1)
Articles of Incorporation of First Georgia Holding, Inc. incorporated by reference herein By reference to Appendix B to the Proxy Statement and Prospectus included in the Registration statement on Form S-4 (SEC No. 33-19150),filed December 18, 1987 ("Form S-4"), as amended on December 31, 1987 ("Amendment No. 1") First Georgia Savings Bank, F.S.B. is now known as First Georgia Bank, F.S.B.
 

 

 

 N/A
3.(ii)
Amended By-Laws of First Georgia Holding, Inc. 	incorporated by reference to Exhibit 3(ii) of the Form 10-KSB for the year ended September 30, 1994 (the "1994 10-KSB")
 

 N/A
*10.1
First Georgia Holding, Inc. 1995 Stock Incentive Plan incorporated by reference to Exhibit 10.1 of the Form 10-KSB for the year ended September 30, 1995 (the "1995 10-KSB")
N/A
*10.2
First Georgia Holding, Inc. Employee Stock Purchase Plan incorporated by reference to Exhibit 10.2 of the 1995 10-KSB
N/A
*10.3
Qualified 401 (k) Standardized Profit Sharing Plan, Adoption Agreement, First Georgia Savings Bank, F.S.B., incorporated herein by reference to Exhibit 10.3 of the Form 10-K for the year ended September 30, 1992 (the "1992 10-K")
N/A
*10.4
Qualified Retirement Plan, Basic Plan Document, First Georgia Savings Bank, F.S.B., incorporated herein by reference to Exhibit 10.4 of the 1992 10-K
N/A
*10.5
Amendment to the First Georgia Holding, Inc. 1995 Stock Incentive Plan, incorporated herin by reference to Exhibit 10.5 of the Form 10-KSB for the year ended September 30, 1999 
N/A
*10.6
First Georgia Holding, Inc. 2000 Stock Incentive Plan
45
13
First Georgia Holding, Inc. 2000 Annual Report
46
21
Subsidiaries of First Georgia Holding, Inc. incorporated by reference to Exhibit 21.6 of the Form 10-KSB for the year ended September 30, 1993 (the "1993 10-KSB)
N/A
23
Consent of Deloitte & Touche LLP
39
24
A power of attorney is set forth on the signature pages to this Form 10-KSB
35
 
**EXHIBIT 10.6

FIRST GEORGIA HOLDING,INC

2000 STOCK INCENTIVE PLAN

TABLE OF CONTENTS

 **PAGE**SECTION 1 DEFINITIONS**20
1.1 DEFINITIONS
20**SECTION 2 THE STOCK INCENTIVE PLAN**22
     2.1 PURPOSE OF THE PLAN
22
     2.2 STOCK SUBJECT TO THE PLAN
23
     2.3 ADMINISTRATION OF THE PLAN
23
     2.4 ELIGIBILITY AND LIMITS
24**SECTION 3 TERMS OF STOCK INCENTIVES**24
     3.1 GENERAL TERMS AND CONDITIONS
24
     3.2 TERMS AND CONDITIONS OF OPTIONS
25*        (a) Option Price
25*        (b) Option Term
25*        (c) Payment
25*        (d) Conditions tot he exercise of an Option
26*        (e) Termination of Incentive Stock Option
26*        (f) Special Provisions for Certain Substitute Options
26
     3.3 TREATMENT OF AWARDS UPON TERMINATION OF SERVICE
26**SECTION 4 RESTRICTIONS ON TRANSFERS OF STOCK**27
     4.1 ESCROW OF SHARES
27**SECTION 5 GENERAL PROVISIONS**27
     5.1 WITHHOLDING
27
     5.2 CHANGES IN CAPITALIZATION; MERGER; LIQUIDATION
28
     5.3 CASH AWARDS
28
     5.4 COMPLIANCE WITH CODE
28
     5.5 RIGHT TO TERMINATE SERVICE
28
     5.6 RESTRICTIONS OF DELIVERY AND SALE OF SHARES; LEGENDS
29
     5.7 NON-ALIENATION OF BENEFITS
29
     5.8 TERMINATION AND AMENDMENT OF THE PLAN
29
     5.9 STOCKHOLDER APPROVAL
29
     5.10 CHOICE OF LAW
29

 
**FIRST GEORGIA HOLDING, INC.

2000 STOCK INCENTIVE PLAN**
 
**SECTION 1 DEFINITIONS**
	1.1	Definitions. Whenever used herein, the masculine pronoun shall be deemed to include the feminine, and the singular to include the plural, unless the context clearly indicates otherwise, and the following capitalized wordsand phrases are used herein with the meaning thereafter ascribed:

		(a)	"Board of Directors" means the board of directors of the Company.

		(b)	"Cause" has the same meaning as provided in the employment agreement between the Participant and the Company or an affiliate on the date of Termination of Service, or if no such definition or employment agreementexists, "Cause" means conduct amounting to (1) fraud or dishonesty against the Company or an affiliate, (2) Participant's willful misconduct, repeated refusal to follow the reasonable directions of the Board of Directors or knowing violation oflaw in the course of performance of the duties of Participant's service with the Company or an affiliate, (3) repeated absences from work without a reasonable excuse, (4) repeated intoxication with alcohol or drugs while on the premises of theCompany or an affiliate during regular business hours, (5) a conviction or plea of guilty or *nolo contendere* to a felony or a crime involving dishonesty, or (6) a breach or violation of the terms of any agreement to which Participant and the Company or an affiliate are party. 

		(c)	"Change in Control" means any one of the following events which may occur after the date the Stock Incentive is granted:

(1)	the acquisition, directly or indirectly, by any individual, entity or "group" within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (a "Person"), together with anyaffiliates or related parties of such Person, within any twelve (12) month period of securities of the Company or its bank affiliate which represent an aggregate of twenty percent (20%) or more of the combined voting power of the Company's or its bankaffiliates' outstanding securities; 

(2)	within any twelve-month period the persons who were directors of the Company immediately before the beginning of such twelve-month period (the "Incumbent Directors") shall cease to constitute at least a majority of the Board ofDirectors; provided that any director who was not a director as of the beginning of such twelve-month period shall be deemed to be an Incumbent Director if that director were elected to the Board of Directors by, or on the recommendation of or with theapproval of, at least two-thirds of the directors who then qualified as Incumbent Directors; and provided further that no director whose initial assumption of office is in connection with an actual or threatened election contest (as such terms are used inRule 14a-11 of Regulation 14A promulgated under the Securities Exchange Act of 1934) relating to the election of directors shall be deemed to be an Incumbent Director; 

(3)	a reorganization, merger or consolidation, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more thanfifty percent (50%) of the combined voting power entitled to vote in the election of directors of the reorganized, merged or consolidated company's then outstanding voting securities; or

(4)	the sale, transfer or assignment of all or substantially all of the assets of the Company to any third party.

(d)	"Company" means First Georgia Holding, Inc., a corporation organized under the laws of the State of Georgia as a bank holding company.

		(e)	"Code" means the Internal Revenue Code of 1986, as amended.

		(f)	"Committee" means the committee appointed by the Board of Directors to administer the Plan pursuant to Plan Section 2.3.

		(g)	"Disability" has the same meaning as provided in the long-term disability plan or policy maintained or, if applicable, most recently maintained, by the Company or an affiliate for the Participant. If no long-termdisability plan or policy was ever maintained on behalf of the Participant or, if the determination of Disability relates to an Incentive Stock Option, Disability shall mean that condition described in Code Section 22(e)(3), as amended from time to time.In the event of a dispute, the determination of Disability shall be made by the Board of Directors and shall be supported by advice of a physician competent in the area to which such Disability relates.

		(h)	"Disposition" means any conveyance, sale, transfer, assignment, pledge or hypothecation, whether outright or as security, inter vivos or testamentary, with or without consideration, voluntary or involuntary.

		(i)	"Fair Market Value" refers to the determination of value of a share of Stock. If the Stock is actively traded on any national securities exchange or any Nasdaq quotation or market system, Fair Market Value shallmean the closing price at which sales of Stock shall have been sold on the most recent trading date immediately prior to the date of determination, as reported by any such exchange or system selected by the Committee on which the shares of Stock are thentraded. If the shares of Stock are not actively traded on any such exchange or system, Fair Market Value shall mean the arithmetic mean of the bid and asked prices for the shares of Stock on the most recent trading date within a reasonable period prior tothe determination date as reported by such exchange or system. If there are no bid and asked prices within a reasonable period or if the shares of Stock are not traded on any exchange or system as of the determination date, Fair Market Value shall meanthe fair maket value of a share of Stock as determined by the Committee taking into account such facts and circumstances deemed to be material by the Committee to the value of the Stock in the hands of the Participant; provided that, for purposes ofgranting awards other than Incentive Stock Options, Fair Market Value of a share of Stock may be determined by the Committee by reference to the average market value determined over a period certain or as of specified dates, to a tender offer price forthe shares of Stock (if settlement of an award is triggered by such an event) or to any other reasonable measure of fair market value and provided further that, for purposes of granting Incentive Stock Options, Fair Market Value of a share of Stock shallbe determined in accordance with the valuation principles described in the regulations promulgated under Code Section 422.

		(j)	"Incentive Stock Option" means an incentive stock option, as defined in Code Section 422, described in Plan Section 3.2.

		(k)	"Non-Qualified Stock Option" means a stock option, other than an option qualifying as an Incentive Stock Option, described in Plan Section 3.2.

		(l)	"Option" means a Non-Qualified Stock Option or an Incentive Stock Option.

		(m)	"Over 10% Owner" means an individual who at the time an Incentive Stock Option is granted owns Stock possessing more than ten percent (10%) of the total combined voting power of the Company or one of its Parents orSubsidiaries, determined by applying the attribution rules of Code Section 424(d).

		(n)	"Parent" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, with respect to Incentive Stock Options, at the time of granting of the Incentive StockOption, each of the corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.

		(o)	"Participant" means an individual who receives a Stock Incentive hereunder.

		(p)	"Plan" means the First Georgia Holding, Inc. 2000 Stock Incentive Plan. 

		(q)	"Stock" means the Company's common stock, $1.00 par value per share.

		(r)	"Stock Incentive Agreement" means an agreement between the Company and a Participant or other documentation evidencing an award of a Stock Incentive.

	

		(s)	"Stock Incentives" means, collectively, Incentive Stock Options and Non-Qualified Stock Options.

		(t)	"Subsidiary" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, with respect to Incentive Stock Options, at the time of the granting of the IncentiveStock Option, each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
"
Termination of Service
" means the termination of the service relationship, whether employment or otherwise, between a Participant and the Company and any affiliates, regardless of the fact that severance or similar paymentsare made to the Participant for any reason, including, but not by way of limitation, a termination by resignation, discharge, death, Disability or retirement. The Committee shall, in its absolute discretion, determine the effect of all matters andquestions relating to Termination of Service, including, but not by way of limitation, the question of whether a leave of absence constitutes a Termination of Service, or whether a Termination of Service is for Cause.

**SECTION 2 THE STOCK INCENTIVE PLAN**
2.1	 Purpose of the Plan.  The Plan is intended to (a) provide incentives to officers and employees of the Company and its affiliates to stimulate their efforts toward the continued success of the Company and itsaffiliates and to operate and manage the business in a manner that will provide for the long-term growth and profitability of the Company and its affiliates; (b) encourage stock ownership by officers and employees by providing them with a means to acquirea proprietary interest in the Company by acquiring shares of Stock; and (c) provide a means of obtaining and rewarding key personnel.

	2.2	Stock Subject to the Plan.  Subject to adjustment in accordance with Section 5.2, 825,000 shares of Stock (the "Maximum Plan Shares") are hereby reserved exclusively for issuance pursuant to Stock Incentives.At no time shall the Company have outstanding Stock Incentives and shares of Stock issued in respect of Stock Incentives in excess of the Maximum Plan Shares. The shares of Stock attributable to the nonvested, unpaid, unexercised, unconverted or otherwiseunsettled portion of any Stock Incentive that is forfeited or cancelled or expires or terminates for any reason without becoming vested, paid, exercised, converted or otherwise settled in full shall again be available for purposes of the Plan. If, aftergrant, the exercise price of an Option is reduced, the transaction shall be treated as the cancellation of the Option and the grant of a new Option.

	2.3	Administration of the Plan.  The Plan shall be administered by the Committee. The members of the Committee shall consist solely of at least two (2) members of the Board of Directors. During those periods that theCompany is subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Board of Directors shall consider the advisability of whether each Committee member shall qualify as an "outside director" asdefined in Treasury Regulation Section 1.162-27(e) as promulgated by the Internal Revenue Service and a "non-employee director" as defined in Rule 16(b)-3(b)(3) as promulgated under the Exchange Act. The Committee shall have full authority in itsdiscretion to determine the officers and employees of the Company to whom Stock Incentives shall be granted and the terms and provisions of Stock Incentives subject to the Plan. Subject to the provisions of the Plan, the Committee shall have full andconclusive authority to interpret the Plan; to prescribe, amend and rescind rules and regulations relating to the Plan; to determine the terms and provisions of the respective Stock Incentive Agreements and to make all other determinations necessary oradvisable for the proper administration of the Plan.  The Committee's determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, awards under the Plan (whether or notsuch persons are similarly situated).  The Committee's decisions shall be final and binding on all Participants. Each member of the Committee shall serve at the discretion of the Board of Directors and the Board of Directors may from time to timeremove members from or add members to the Committee. Vacancies on the Committee shall be filled by the Board of Directors.

	The Committee shall select one of its members as Chairman and shall hold meetings at the times and in the places as it may deem advisable. Acts approved by a majority of the Committee in a meeting at which a quorum is present, oracts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee.

	In addition to such other rights of indemnification that they may have as directors of the Company and as members of the Committee, the members of the Committee shall be indemnified by the Company against the reasonable expenses(including attorneys' fees) actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failureto act under or in connection with the Plan or any Option granted thereunder, and against all amounts paid by them in settlement thereof (provided the settlement is approved by independent legal counsel selected by the Company) or paid by them insatisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in the action, suit or proceeding that the Committee member is liable for negligence or misconduct in the performance of hisor her duties; provided that within sixty (60) days after institution of the action, suit or proceeding a Committee member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the action, suit or proceeding.

	2.4	Eligibility and Limits.  Stock Incentives may be granted only to officers and employees of the Company and its affiliates; provided, however, that an Incentive Stock Option may only be granted to an employee ofthe Company or a Subsidiary.  In the case of Incentive Stock Options, the aggregate Fair Market Value (determined as of the date an Incentive Stock Option is granted) of Stock with respect to which Options intended to meet the requirements of CodeSection 422 become exercisable for the first time by an individual during any calendar year under all plans of the Company and its Parents and Subsidiaries shall not exceed $100,000; provided further, that if the limitation is exceeded, the IncentiveStock Option(s) which cause the limitation to be exceeded shall be treated as Non-Qualified Stock Option(s), except as the terms of the Stock Incentive Agreement may expressly provide otherwise. To the extent required under Code Section 162(m) of the Codeand the regulations thereunder, for compensation to be treated as qualified performance-based compensation, the maximum number of shares of Stock with respect to which Options may be granted during any calendar year to any individual may not exceed500,000, subject to adjustment in accordance with Section 5.2. In applying this limitation, if an Option, or any portion thereof, granted to an employee is cancelled or repriced for any reason, then the shares of Stock attributable to such cancellation orrepricing either shall continue to be counted as an outstanding grant or shall be counted as a new grant, as the case may be, against the affected employee's 500,000 limit for the appropriate calendar year.
**SECTION 3 TERMS OF STOCK INCENTIVES**
	3.1	General Terms and Conditions.

		(a)	The number of shares of Stock as to which a Stock Incentive shall be granted shall be determined by the Committee in its sole discretion, subject to the provisions of Section 2.2 as to the total number of sharesavailable for grants under the Plan. If a Stock Incentive Agreement so provides, a Participant may be granted a new Option to purchase a number of shares of Stock equal to the number of previously owned shares of Stock tendered in payment of the ExercisePrice (as defined below) for each share of Stock purchased pursuant to the terms of the Stock Incentive Agreement.

		(b)	Each Stock Incentive shall be evidenced by a Stock Incentive Agreement in such form and containing such terms, conditions and restrictions as the Committee may determine is appropriate. Each Stock Incentive Agreementshall be subject to the terms of the Plan and any provision in a Stock Incentive Agreement that is inconsistent with the Plan shall be null and void.

(c)	The date a Stock Incentive is granted shall be the date on which the Committee has approved the terms of, and satisfaction of any conditions applicable to, the grant of the Stock Incentive and has determined the recipient of theStock Incentive and the number of shares covered by the Stock Incentive and has taken all such other action necessary to complete the grant of the Stock Incentive.

(d)	The Committee may provide in any Stock Incentive Agreement (or subsequent to the award of a Stock Incentive but prior to its expiration or cancellation, as the case may be) that, in the event of a Change in Control, the StockIncentive shall or may be cashed out on the basis of any price not greater than the highest price paid for a share of Stock in any transaction during a specified period immediately preceding or including the date of the Change in Control or offered for ashare of Stock in any tender offer occurring during a specified period immediately preceding or including the date the tender offer commences; provided that, in no case shall any such specified period exceed three (3) months (the "Change in ControlPrice"). For purposes of this Subsection, Options shall be cashed out on the basis of the excess, if any, of the Change in Control Price (but not more than the Fair Market Value of the Stock on the date of the cash-out in the case of Incentive StockOptions) over the Exercise Price to the extent the Option is exercisable in accordance with the terms of the Option and the Plan.

		(e)	Unless otherwise permitted by the Committee with respect to Non-Qualified Stock Options, Stock Incentives shall not be transferable or assignable except by will or by the laws of descent and distribution and shall beexercisable, during the Participant's lifetime, only by the Participant; in the event of the Disability of the Participant, by the legal representative of the Participant; or in the event of the death of the Participant, by the personal representative ofthe Participant's estate or if no personal representative has been appointed, by the successor in interest determined under the Participant's will.

		(f)	No Stock Incentive shall have a term that extends beyond the tenth anniversary of the date the Stock Incentive was granted.

	3.2	Terms and Conditions of Options.  Each Option granted under the Plan shall be evidenced by a Stock Incentive Agreement. At the time any Option is granted, the Committee shall determine whether the Option is to bean Incentive Stock Option or a Non-Qualified Stock Option, and the Option shall be clearly identified as to its status as an Incentive Stock Option or a Non-Qualified Stock Option.  At the time any Incentive Stock Option is exercised, the Companyshall be entitled to place a legend on the certificates representing the shares of Stock purchased pursuant to the Option to clearly identify them as shares of Stock purchased upon exercise of an Incentive Stock Option. An Incentive Stock Option may onlybe granted within ten (10) years from the earlier of the date the Plan is adopted by the Board of Directors or approved by the Company's stockholders. 

		(a)	Option Price.  Subject to adjustment in accordance with Section 5.2 and the other provisions of this Section 3.2, the exercise price (the "Exercise Price") per share of Stock purchasable under anyOption shall be as set forth in the applicable Stock Incentive Agreement.  With respect to each grant of an Incentive Stock Option to a Participant who is not an Over 10% Owner, the Exercise Price per share shall not be less than the Fair MarketValue on the date the Option is granted. With respect to each grant of an Incentive Stock Option to a Participant who is an Over 10% Owner, the Exercise Price shall not be less than 110% of the Fair Market Value on the date the Option is granted. Withrespect to each grant of a Non-Qualified Stock Option, the Exercise Price per share shall be no less than Fair Market Value.

		(b)	Option Term.  The term of an Option shall be as specified in the applicable Stock Incentive Agreement; provided, however that any Incentive Stock Option granted to a Participant who is not an Over 10% Ownershall not be exercisable after the expiration of ten (10) years after the date the Option is granted and any Incentive Stock Option granted to an Over 10% Owner shall not be exercisable after the expiration of five (5) years after the date the Option isgranted.

		(c)	Payment.  Payment for all shares of Stock purchased pursuant to the exercise of an Option shall be made in any form or manner authorized by the Committee in the Stock Incentive Agreement or by amendmentthereto, including, but not limited to, cash or, if the Stock Incentive Agreement provides, (1) by delivery to the Company of a number of shares of Stock which have been owned by the holder for at least six (6) months prior to the date of exercisehaving an aggregate Fair Market Value of not less than the product of the Exercise Price multiplied by the number of shares the Participant intends to purchase upon exercise of the Option on the date of delivery; (2) in a cashless exercise through abroker; or (3) by having a number of shares of Stock withheld, the Fair Market Value of which as of the date of exercise is sufficient to satisfy the Exercise Price. In its discretion, the Committee also may authorize (at the time an Option isgranted or thereafter) Company financing to assist the Participant as to payment of the Exercise Price on such terms as may be offered by the Committee in its discretion. Payment shall be made at the time that the Option or any part thereof is exercised,and no shares shall be issued or delivered upon exercise of an Option until full payment has been made by the Participant.  The holder of an Option, as such, shall have none of the rights of a stockholder.

		(d)	Conditions to the Exercise of an Option.  Each Option granted under the Plan shall be exercisable by whom, at such time or times, or upon the occurrence of such event or events, and in such amounts, as theCommittee shall specify in the Stock Incentive Agreement; provided, however, that subsequent to the grant of an Option, the Committee, at any time before complete termination of such Option, may accelerate the time or times at which such Option may beexercised in whole or in part, including, without limitation, upon a Change in Control and may permit the Participant or any other designated person to exercise the Option, or any portion thereof, for all or part of the remaining Option termnotwithstanding any provision of the Stock Incentive Agreement to the contrary.

		(e)	Termination of Incentive Stock Option.  With respect to an Incentive Stock Option, in the event of the Termination of Service of a Participant, the Option or portion thereof held by the Participant which isunexercised shall expire, terminate, and become unexercisable no later than the expiration of three (3) months after the date of Termination of Service; provided, however, that in the case of a holder whose Termination of Service is due to death orDisability, up to one (1) year may be substituted for such three (3) month period. For purposes of this Subsection (e), Termination of Service of the Participant shall not be deemed to have occurred if the Participant is employed by another corporation(or a parent or subsidiary corporation of such other corporation) which has assumed the Incentive Stock Option of the Participant in a transaction to which Code Section 424(a) is applicable.

		(f)	Special Provisions for Certain Substitute Options.  Notwithstanding anything to the contrary in this Section 3.2, any Option issued in substitution for an option previously issued by another entity, whichsubstitution occurs in connection with a transaction to which Code Section 424(a) is applicable, may provide for an exercise price computed in accordance with such Code Section and the regulations thereunder and may contain such other terms andconditions as the Committee may prescribe to cause such substitute Option to contain as nearly as possible the same terms and conditions (including the applicable vesting and termination provisions) as those contained in the previously issued option beingreplaced thereby.

	3.3	Treatment of Awards Upon Termination of Service. Except as otherwise provided by Plan Section 3.2(e), any award under this Plan to a Participant who suffers a Termination of Service may be cancelled, accelerated, paidor continued, as provided in the Stock Incentive Agreement or, in the absence of such provision, as the Committee may determine. The portion of any award exercisable in the event of continuation or the amount of any payment due under a continued award maybe adjusted by the Committee to reflect the Participant's period of service from the date of grant through the date of the Participant's Termination of Service or such other factors as the Committee determines are relevant to its decision to continue theaward.
**SECTION 4 RESTRICTIONS ON TRANSFERS OF STOCK**
4.1	Escrow of Shares. Any certificates representing the shares of Stock issued under the Plan shall be issued in the Participant's name, but, if the Stock Incentive Agreement so provides, the shares of Stock shall be heldby a custodian designated by the Committee (the "Custodian"). Each applicable Stock Incentive Agreement providing for transfer of shares of Stock to the Custodian shall appoint the Custodian as the attorney-in-fact for the Participant for the termspecified in the applicable Stock Incentive Agreement, with full power and authority in the Participant's name, place and stead to transfer, assign and convey to the Company any shares of Stock held by the Custodian for such Participant, if theParticipant forfeits the shares under the terms of the applicable Stock Incentive Agreement.  During the period that the Custodian holds the shares subject to this Section, the Participant shall be entitled to all rights, except as provided in theapplicable Stock Incentive Agreement, applicable to shares of Stock not so held. Any dividends declared on shares of Stock held by the Custodian shall, as the Committee may provide in the applicable Stock Incentive Agreement, be paid directly to theParticipant or, in the alternative, be retained by the Custodian until the expiration of the term specified in the applicable Stock Incentive Agreement and shall then be delivered, together with any proceeds, with the shares of Stock to the Participant orto the Company, as applicable.

4.2	The Participant shall not have the right to make or permit to exist any Disposition of the shares of Stock issued pursuant to the Plan except as provided in the Plan or the applicable Stock Incentive Agreement. Any Disposition ofthe shares of Stock issued under the Plan by the Participant not made in accordance with the Plan or the applicable Stock Incentive Agreement shall be void. The Company shall not recognize, or have the duty to recognize, any Disposition not made inaccordance with the Plan and the applicable Stock Incentive Agreement, and the shares so transferred shall continue to be bound by the Plan and the applicable Stock Incentive Agreement.
**SECTION 5 GENERAL PROVISIONS**
	5.1	Withholding.  The Company shall deduct from all cash distributions under the Plan any taxes required to be withheld by federal, state or local government. Whenever the Company proposes or is required to issueor transfer shares of Stock under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy any federal, state and local withholding tax requirements prior to the delivery of anycertificate or certificates for such shares. A Participant may pay the withholding tax in cash, by tendering shares of Stock which have been owned by the holder for at least six (6) months prior to the date of exercise or, if the applicable StockIncentive Agreement provides, a Participant may elect to have the number of shares of Stock he is to receive reduced by the smallest number of whole shares of Stock which, when multiplied by the Fair Market Value of the shares of Stock determined as ofthe Tax Date (defined below), is sufficient to satisfy the minimum required federal, state and local, if any, withholding taxes arising from exercise or payment of a Stock Incentive (a "Withholding Election"). A Participant may make a Withholding Electiononly if both of the following conditions are met:

		(a)	The Withholding Election must be made on or prior to the date on which the amount of tax required to be withheld is determined (the "Tax Date") by executing and delivering to the Company a properly completed notice ofWithholding Election as prescribed by the Committee; and

		(b)	Any Withholding Election made will be irrevocable; however, the Committee may, in its sole discretion, disapprove and give no effect to the Withholding Election.

	5.2	Changes in Capitalization; Merger; Liquidation.

		(a)	 The number of shares of Stock reserved for the grant of Options, the number of shares of Stock reserved for issuance upon the exercise or payment, as applicable, of each outstanding Option and the number of sharesof Stock subject to the annual limit in Section 2.4, and the Exercise Price of each outstanding Option shall be proportionately adjusted for any increase or decrease in the number of issued shares of Stock resulting from a subdivision or combination ofshares or the payment of an ordinary stock dividend in shares of Stock to holders of outstanding shares of Stock or any other increase or decrease in the number of shares of Stock outstanding effected without receipt of consideration by the Company.

		(b)	In the event of any merger, consolidation, extraordinary dividend (including a spin-off), reorganization or other change in the corporate structure of the Company or its Stock or tender offer for shares of Stock, theCommittee, in its sole discretion, may make such adjustments with respect to awards and take such other action as it deems necessary or appropriate to reflect or in anticipation of such merger, consolidation, extraordinary dividend (including a spin-off),reorganization, other change in corporate structure or tender offer, including, without limitation, the assumption of other awards, the substitution of new awards, the termination (with or without a cash-out payment) or adjustment of outstanding awards,the acceleration of awards or the removal of restrictions on outstanding awards, all as may be provided in the applicable Stock Incentive Agreement or, if not expressly addressed therein, as the Committee subsequently may determine in the event of anysuch merger, consolidation, extraordinary dividend (including a spin-off), reorganization or other change in the corporate structure of the Company or its Stock or tender offer for shares of Stock. Any adjustment pursuant to this Section 5.2 mayprovide, in the Committee's discretion, for the elimination without payment therefor of any fractional shares that might otherwise become subject to any Stock Incentive.****
		(c)	The existence of the Plan and the Stock Incentives granted pursuant to the Plan shall not affect in any way the right or power of the Company to make or authorize any adjustment, reclassification, reorganization orother change in its capital or business structure, any merger or consolidation of the Company, any issue of debt or equity securities having preferences or priorities as to the Stock or the rights thereof, the dissolution or liquidation of the Company,any sale or transfer of all or any part of its business or assets, or any other corporate act or proceeding.

	5.3	Cash Awards.  The Committee may, at any time and in its discretion, grant to any holder of a Stock Incentive the right to receive, at such times and in such amounts as determined by the Committee in itsdiscretion, a cash amount which is intended to reimburse such person for all or a portion of the federal, state and local income taxes imposed upon such person as a consequence of the receipt of the Stock Incentive or the exercise of rights thereunder.

	5.4	Compliance with Code.  All Incentive Stock Options to be granted hereunder are intended to comply with Code Section 422, and all provisions of the Plan and all Incentive Stock Options granted hereunder shallbe construed in such manner as to effectuate that intent.

	5.5	Right to Terminate Service.  Nothing in the Plan or in any Stock Incentive Agreement shall confer upon any Participant the right to continue as an officer, employee or director of the Company or affect the rightof the Company to terminate the Participant's service at any time.

	5.6	Restrictions on Delivery and Sale of Shares; Legends.  Each Stock Incentive is subject to the condition that if at any time the Committee, in its discretion, shall determine that the listing, registration orqualification of the shares covered by such Stock Incentive upon any securities exchange or under any state or federal law is necessary or desirable as a condition of or in connection with the granting of such Stock Incentive or the purchase or deliveryof shares thereunder, the delivery of any or all shares pursuant to such Stock Incentive may be withheld unless and until such listing, registration or qualification shall have been effected.  If a registration statement is not in effect under theSecurities Act of 1933 or any applicable state securities laws with respect to the shares of Stock purchasable or otherwise deliverable under Stock Incentives then outstanding, the Committee may require, as a condition of exercise of any Option or as acondition to any other delivery of Stock pursuant to a Stock Incentive, that the Participant or other recipient of a Stock Incentive represent, in writing, that the shares received pursuant to the Stock Incentive are being acquired for investment and notwith a view to distribution and agree that the shares will not be disposed of except pursuant to an effective registration statement, unless the Company shall have received an opinion of counsel that such disposition is exempt from such requirement underthe Securities Act of 1933 and any applicable state securities laws.  The Company may include on certificates representing shares delivered pursuant to a Stock Incentive such legends referring to the foregoing representations or restrictions or anyother applicable restrictions on resale as the Company, in its discretion, shall deem appropriate.

	5.7	Non-alienation of Benefits. Other than as specifically provided with regard to the death of a Participant, no benefit under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer,assignment, pledge, encumbrance or charge; and any attempt to do so shall be void. No such benefit shall, prior to receipt by the Participant, be in any manner liable for or subject to the debts, contracts, liabilities, engagements or torts of theParticipant.

	5.8	Termination and Amendment of the Plan. The Board of Directors may not amend the Plan in a manner that materially changes the provisions of the Plan or terminate the Plan without obtaining stockholder approval; providedhowever, that the Board of Directors may condition any amendment on the approval of stockholders of the Company if such approval is necessary or advisable with respect to tax, securities or other applicable laws. No such amendment or termination withoutthe consent of the holder of a Stock Incentive shall adversely affect the rights of the holder of such Stock Incentive.

	5.9	Stockholder Approval.  The Plan must be submitted to the stockholders of the Company within twelve (12) months before or after the adoption of the Plan by the Board of Directors. If such approval is not obtained,any Incentive Stock Option granted hereunder will be void.

	5.10	Choice of Law.  The laws of the State of Georgia shall govern the Plan, to the extent not preempted by federal law.

 

	IN WITNESS WHEREOF, the Company has caused this Plan to be executed as of this ___ day of ___________________, 2000.

 

 

						FIRST GEORGIA HOLDING, INC.

						By: 							
						Title: 							
ATTEST:

					

Secretary

	[CORPORATE SEAL]

 

 

 
** Exhibit 13

ANNUAL REPORT

First Georgia:

Its Mission and Markets

First Georgia Holding, Inc. owns 100% of the stock of First Georgia Bank, F.S.B. The Bank is federally chartered and began operations in January 1984. First Georgia develops and provides a full range of financial services encompassing retail banking,real estate, commercial and consumer lending, and a host of related financial products. The Bank currently operates eight full service offices in three Georgia counties.

First Georgia's PRIMARY MISSION is to maximize stockholder value in a prudent manner. We will concentrate on the following principles.

We will maintain high levels of asset quality through conservative lending policies, a vigorous comprehensive credit administration system and a diversified portfolio of earning assets. Interest rate risk will be thoroughly evaluated and controlled.

Our long-term goals for return on equity and assets will be set at the upper levels of peer bank comparisons. We will strive to maintain a strong capital base supported by adequate loan loss reserves.

We will continue to attract and retain exceptional people. We will deliver the best quality customer service available in the banking industry. This high level of personal service is what separates us from our competitors.

Our officers and employees will be encouraged to provide leadership and support in civic and economic development activities. We will also strive to assess and serve the credit needs of each community in which we are located.

We are committed to the overall success of First Georgia. The proper implementation of these principles will continue to maximize the value of the Company.

 

 
**TABLE OF CONTENTS**

PRESIDENT'S MESSAGE
1
INDEPENDENT AUDITORS' REPORT
3
CONSOLIDATED FINANCIAL STATEMENTS
4
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS
28
DIRECTORS AND OFFICERS
42

 

PRESIDENT'S MESSAGE

Dear Stockholders:

This past year has been a year of growth and change in our Company. The Bank reported ***Net Earnings*of $1,432,000, or *Basic **Net Income*** per share of $.20, for the twelve-month period ended September 30, 2000. While thisrepresented a decrease of approximately 36% over the previous year's Net Earnings, we feel the steps we have taken have positioned the Company for future profitable growth.
The ***Provision for Loan Loss* increased $2,131,000 over the same period for the previous year. At September 30, 2000, our reserve for possible loan losses stood at $2,365,000. This increase in our ***Loan Loss Reserve*hasstrengthened our Holding Company's balance sheet at a time when unprecedented growth is occurring in our Bank's lending portfolio.
We also enjoyed substantial growth during the year with ***Total Deposits* increasing over $40,000,000, or 23.6%. ***Total Loans* increased $21,588,000 over the previous year, or 12.4%. Because of increases in both of these areas, ***Total Assets* were $239,185,000 at September 30, 2000.
During the past year we opened our Branch Office adjacent to the Colonial Mall. It has been received extremely well by both the businesses and consumers in this area of Glynn County. Our ***Internet Banking* service continues to attract manycustomers, as it is one of the 'premier' internet banking services in our market place.
As we approach 2001, we are doing so with a mixture of caution and optimism. At a time when the economy appears to be slowing, your Company's Management is taking steps that will ensure that your investment in our Company remains strong and stable. 

We look forward to the next year and the challenges it will bring. As always, we extend our sincere gratitude and appreciation of your support.

Sincerely,

 

/s/Henry S. Bishop

Chairman, President and CEO

 

 

 

The Board of Directors and Stockholders

First Georgia Holding, Inc.

Brunswick, Georgia

 

We have audited the accompanying consolidated balance sheets of First Georgia Holding, Inc. and subsidiary (the "Company") as of September 30, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity, and cash flowsfor each of the three years in the period ended September 30, 2000. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based onour audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are freeof material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company at September 30, 2000 and 1999, and the results of its operations and its cash flows for the years then ended inconformity with accounting principles generally accepted in the United States of America.

 

 

 

Deloitte & Touche LLP

Certified Public Accountants

Jacksonville, Florida

November 10, 2000

 

 

**CONSOLIDATED BALANCE SHEETS
First Georgia Holding, Inc. and subsidiary**Assets**September 30,**2000**1999
Cash and cash equivalents:
Cash and due from banks
$ 6,380,375 
$ 4,433,585 
Federal funds sold
9,840,000 
12,180,000 
Interest bearing deposits in other banks
366,385 
1,096,581 
Cash and cash equivalents
16,586,760 
17,710,166 
Investment securities held to maturity, fair value $17,475,680 and $13,966,007 at September 30, 2000 and 1999, respectively (note 2)
17,878,121 
14,442,058 
Loans receivable, net of allowance for loan loss of $2,364,704 and $1,235,566 at September 30, 2000 and 1999, respectively (note 3)
193,644,376
173,196,591 
Real estate owned
314,338
225,000 
Federal Home Loan Bank stock, at cost
892,300
837,500 
Premises and equipment, net (note 4)
5,569,758
4,900,601 
Accrued interest receivable (note 5)
1,507,692
1,205,599 
Intangible assets, net
597,653
693,281 
Deferred income taxes (note 9)
796,041
412,010 
Other assets
1,398,164
1,180,375 **Total Assets
$ 239,185,203 
$ 204,295,581 **Liabilities and Stockholders' Equity**Liabilities:
Deposits (note 6)
$ 214,046,716 
$ 173,174,361 
Federal Home Loan Bank advances (note 7)
2,500,000 
8,600,000 
Other borrowed funds (note 7)
2,000,000
-
Federal funds purchased
-
2,860,000 
Accrued interest payable
719,202 
517,739 
Obligations under capital lease (note 10)
193,795
212,220 
Accrued expenses and other liabilities 
1,369,884
1,606,750 
Total liabilities
220,829,597
186,971,070 
Commitments and contingencies (notes 10 and 16)**Stockholders' equity (note 8):
Common stock, $1.00 par value; 10,000,000 shares authorized; 7,713,733 and 7,198,371 shares issued and outstanding at September 30, 2000 and 1999, respectively
7,713,733
7,198,371
Additional paid-in capital
396,297
715,740
Retained earnings
10,245,576
9,410,400
Total stockholders' equity
18,355,606
17,324,511**Total Liabilities and Stockholders' Equity
$ 239,185,203
$ 204,295,581 
TAB3
See accompanying notes to consolidated financial statements.
**CONSOLIDATED STATEMENTS OF OPERATIONS
First Georgia Holding, Inc. and subsidiary**2000**1999**1998**Interest Income:
Loans
$  18,489,668
$ 14,796,821 
$ 14,234,483 
Mortgage-backed securities
947,405
851,723 
537,219 
Investment securities
98,175
114,728 
162,397 
Other
        396,951
384,496 
143,615 
Total interest income
19,932,199
16,147,768 
15,077,714 **Interest Expense:
Deposits (note 6)
9,036,423
7,397,718 
7,021,354 
Advances and other borrowings
498,612
506,831 
810,335 
Total interest expenses
9,535,035
7,904,549 
7,831,689 
Net interest income
10,397,164
8,243,219 
7,246,025 **Provision for Loan Losses (note 3)
2,640,000
509,067 
6,163 
Net interest income after provision 
for loan losses
7,757,164
7,734,152 
7,239,862 **Other Income:
Loan fees
562,736
689,792 
940,526 
Deposit service charges
1,937,686
1,432,190 
961,006 
Gain on sale of branch (note 11)
-
766,511 
- 
Other operating income
206,274
5,754 
95,602 
Total other income
2,706,696
2,894,247 
1,997,134 **Other Expenses:
Salaries and employee benefits
3,959,488
3,296,024 
2,940,466 
Net occupancy expense
1,691,623
1,389,860 
1,234,569 
Data processing expenses
89,613
128,481 
172,184 
Postage
239,813
135,324
105,134
Office supplies
260,355
353,600 
176,128 
Amortization of intangibles
95,628
101,322 
111,720 
Federal insurance premiums
54,019
130,727 
82,971 
Other operating expenses
1,732,515
1,450,818
1,181,583
Total other expenses
8,123,054
6,986,156 
6,004,755 
Income before income taxes
2,340,806
3,642,243 
3,232,241 **Income Tax Expense (note 9)
909,151
1,422,189 
1,217,839 **Net Income
$     1,431,655
$ 2,220,054 
$ 2,014,402 **Net Income Per Share:
Basic
 $            0.20
$             0.31
$               0.28 
Diluted
$            0.19
$             0.29
$               0.27 
See accompanying notes to consolidated financial statements.
 

 

**CONSOLIDATED STATEMENTS OF OPERATIONS
First Georgia Holding, Inc. and subsidiary
 
 
 
 
 
 
 
Common Stock
Additional

Paid-in Capital
Treasury

Stock
Retained

Earning
Total**Balance, September 30, 1997
$  6,867,717 
$ 407,799 
-
$ 6,071,754 
$13,347,270 
Exercise of stock options
330,824 
(91,160)
-
- 
239,664 
Income tax benefit resulting from exercise of stock options
- 
400,762 
-
- 
400,762 
Net income
- 
- 
-
2,014,402 
2,014,402 
Cash dividends, $0.0444 per share
- 
- 
-
(319,937)
(319,937)
Fractional shares related to stock split paid in cash
(83)
(866)
-
- 
(949)
 
 
 
 
 
 **Balance, September 30, 1998
7,198,458
716,535 
-
7,766,219 
15,681,212 
 
 
 
 
 
 
Net income
- 
- 
-
2,220,054 
2,220,054 
Cash dividends, $0.08 per share
- 
- 
 
(575,873) 
(575,873) 
Fractional shares related to stock split paid in cash
(87) 
(795) 
 
- 
(882) 
 
 
 
 
 
 **Balance, September 30, 1999
$ 7,198,371 
$ 715,740 
 
$ 9,410,400 
$ 17,324,511 
Purchase of treasury stock
-
-
$ (713,813)
 
 
Purchase of treasury stock and 

Simultaneous exercise of stock

Options
363,487
(363,487)
713,813
-
713,813
Exercise of stock options
151,875
44,044
-
-
195,919
Net Income
 
 
 
1,431,655
1,431,655
Cash Dividends, $0.08 per share
 
 
 
(596,479)
(596,479)
 
 
 
 
 
 
Balance, September 30, 2000
$7,713,733
$396,297
$             -
$10,245,576
$18,355,606
See accompanying notes to consolidated financial statements.

 

 

**CONSOLIDATED STATEMENTS OF CASH FLOWS
First Georgia Holding, Inc. and subsidiary**Years Ended September 30,**2000**1999**1998**Operating Activities
Net income
$ 1,431,655 
$ 2,220,054 
$ 2,014,402 
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses
2,640,000 
509,067  
6,163 
Depreciation and amortization, net of accretion
746,065 
678,709  
571,186 
Amortization of intangibles
95,628 
101,322  
111,720 
Amortization of net deferred loan fees 
(249,286)
(169,382)
(96,007)
Gain on sale of branch
- 
(766,511)
- 
Gain on sale of real estate owned
(16,315)
(18,514)
(30,310)
Loss on sale of premises and equipment
7,205 
- 
- 
Loss on sale of securities
-  
-  
3,125 
Deferred income tax (benefit) expense
( 384,031 )
(220,325)
(34,682)
Increase in accrued interest receivable
(302,093)
(152,769)
(92,670)
Increase in other assets
(251,582)
(72,269)
(283,126)
Decrease in advance payments by borrowers for
property taxes and insurance
(11,006)
(7,273)
(8,706)
(Decrease) increase in accrued expenses
and other liabilities
(42,822)
(517,663)
1,185,639 
Net cash provided by operating activities
3,663,418 
1,584,446 
3,346,734 **Investing Activities
Principal payments received on mortgage-backed
securities
1,754,133 
3,792,002  
2,148,379 
Maturities of investment securities
325,000 
-  
1,600,000 
Proceeds from sale of investment securities
-  
-  
246,875 
Purchase of investment securities
(5,497,496)
(6,673,361)
(5,956,881)
Loan originations, net of principal repayments
(22,955,322)
(22,588,447)
(14,143,152)
Purchase of premises and equipment
(1,450,877)
(1,146,090)
(1,953,859)
Proceeds from sale of real estate owned
5,000 
745,267  
654,219 
Proceeds from sale of repossessed assets
29,100 
- 
- 
Proceeds from sale of premises and equipment
10,750 
16,778 
89,777 
Purchase of FHLB stock
(54,800)
- 
- 
Proceeds from redemption of FHLB stock
- 
322,800 
- 
Net cash used in investing activities
(27,834,512)
(25,531,051)
(17,314,642)
 

**CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
First Georgia Holding, Inc. and subsidiary**Years Ended September 30,**2000**1999**1998**Financing Activities
Net increase in deposits
$ 40,872,355 
$ 19,108,653  
$ 33,000,169 
Net liabilities of branch assumed by purchaser,
net of gain
- 
(7,909,400)
-  
Proceeds from FHLB advances
- 
7,500,000  
16,350,000  
Repayment of FHLB advances
(6,100,000)
(7,500,000)
(22,100,000)
Net (decrease) increase in federal funds purchased
(2,860,000)
2,860,000  
-  
Net proceeds from exercise of stock options
195,919 
-  
239,664  
Dividends and fractional shares
(596,479)
(576,755)
(320,886)
Net cash provided by financing activities
33,511,795 
13,482,498  
27,168,947  
Increase (decrease) in cash and cash equivalents
9,340,701 
(10,464,107)
13,201,039  
Cash and cash equivalents at beginning of year
7,246,059 
17,710,166  
4,509,127  
Cash and cash equivalents at end of year
$  16,586,760 
$   7,246,049 
$   17,710,166  
Supplemental disclosure of cash paid during year for:
Interest
$    9,334,000 
$   7,959,000  
$    7,755,000 
Income taxes
$    1,649,000 
$   1,193,000  
$    1,784,000  
Supplemental disclosure of non-cash activities:

Loans receivable of approximately $758,000, $302,000 and $782,000 were transferred to real estate owned during the years ended September 30, 2000, 1999, and 1998, respectively.

Sales of real estate owned totaling approximately $757,000, $538,000 and $12,500 for the years ended September 30, 2000, 1999 and 1998, respectively, were financed by the Bank.

See accompanying notes to consolidated financial statements.
** **
 

 
**(1) Summary of Significant Accounting Policies

First Georgia Holding, Inc. (the Company) was incorporated on December 16, 1987 for the purpose of acquiring all of the issued and outstanding stock of First Georgia Bank, F.S.B. (the Bank). The accounting and reporting policies of First GeorgiaHolding, Inc. and subsidiary conform to generally accepted accounting principles. The following is a description of the more significant of those policies which the Company follows in preparing and presenting its consolidated financial statements.
**(a) Basis of Financial Statement Presentation**
The financial statements have been prepared in conformity with generally accepted accounting principles. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and the valuation of real estate acquired in connection with foreclosures or in satisfaction ofloans. In connection with the determination of the allowances for losses on loans and real estate acquired through foreclosure, management obtains independent appraisals and reviews available market data such as comparable sales and recent market trendsthrough discussions with local real estate professionals.

The consolidated financial statements include the accounts of the Company and the Bank. All significant intercompany balances and transactions have been eliminated in consolidation.
**(b) Cash and Cash Equivalents**
Cash and cash equivalents include cash and due from banks, interest-bearing deposits in other banks and Federal funds sold. Generally, Federal funds sold are held for one day.
**(c) Investment Securities Held to Maturity**
The Company has classified all its investments in securities as held to maturity based upon positive intent and ability to hold those securities until maturity.

Held to maturity securities are recorded at cost adjusted for the amortization or accretion of premiums and discounts. Premiums and discounts are amortized or accreted over the life of the related investment security using a method which approximateslevel yield. Purchase premiums and discounts on mortgage-backed securities are amortized and accreted to interest income using a method which approximates the interest method, over the remaining lives of the securities taking into consideration assumedprepayment patterns.
**(d) Loans and the Allowance for Loan Losses**
Loans are reported at principal amounts outstanding, less unearned income and the allowance for loan losses. Interest income on loans is recognized on a level-yield basis.

Loans are placed on a nonaccrual basis when reasonable doubt exists as to the full, timely collection of interest and principal or they become contractually in default for 90 days or more as to either interest or principal unless they are both wellsecured and in the process of collection.

Additions to the allowance for loan losses are charged to operations based upon management's evaluation of the potential losses in its loan portfolio. This evaluation considers the estimated value of the underlying collateral and such other factors as,in management's judgment, deserve recognition under existing economic conditions. While management uses the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from theassumptions used in making the evaluations. In addition, various regulatory agencies, as an integral 
Summary of Significant Accounting Policies (Cont'd)

part of their examination process, periodically review the Bank's allowances for losses on loans and real estate owned. Such agencies may require the Bank to recognize additions to the allowances based on their judgments of information available tothem at the time of their examination. 
A loan is considered impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. The Bank's impaired loans include nonaccrual loans, troubled debt restructurings, andlarge loans more than 90 days delinquent in which full payment of principal and interest is not expected. Cash receipts on impaired loans are used to reduce principal balances. Impairment losses are included in the allowance for loan losses through acharge to the provision for loan losses. Impairment losses are measured by the present value of expected future cash flows discounted at the loan's effective interest rate, or at either the loan's observable market price or the fair value of thecollateral. Adjustment to impairment losses due to changes in the fair value of an impaired loan's underlying collateral are included in the provision for losses. Upon disposition of an impaired loan, any related valuation allowance is reversed through acharge-off to the allowance for loan losses.
Large groups of smaller balance homogeneous loans (consumer loans) are collectively evaluated for impairment. Commercial loans and larger balance real estate and other loans are individually evaluated for impairment.
The Bank extends credit to customers throughout its market area with a concentration in real estate mortgage loans. The real estate loan portfolio is substantially secured by properties located throughout Southeast Georgia. Although the Bank has adiversified loan portfolio, a substantial portion of its borrowers' ability to repay such loans is dependent upon the economy in the Bank's market area.

(e) Loan Origination and Commitment Fees

Loan origination fees, net of certain direct origination costs, are deferred and amortized on a basis that approximates level yield over the contractual lives of the underlying loans. In addition, fees for a commitment to originate or purchaseloans are offset against direct loan origination costs incurred to make such commitments. The net amounts are deferred and, if the commitment is exercised, recognized over the life of the related loan as a yield adjustment or, if the commitment expiresunexercised, recognized as income upon expiration of the commitment.

(f) Real Estate Owned

Real estate owned represents real estate acquired through foreclosure or deed in lieu of foreclosure and is reported at lower of cost or fair value, adjusted for estimated selling costs. Fair value is determined on the basis of current appraisals,comparable sales, and other estimates of value obtained principally from independent sources. Any excess of the loan balance at the time of foreclosure over the fair value of the real estate held as collateral is recorded as a loan loss. Gain or loss onsale and any subsequent permanent decline in fair value is recorded to operations.

(g) Federal Home Loan Bank Stock

Investment in stock of the Federal Home Loan Bank is carried at cost and is required of those institutions who utilize its services. No ready market exists for the stock, and it has no quoted value.**(h) Premises and Equipment**
Premises and equipment are carried at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful lives of the related assets.
Summary of Significant Accounting Policies (Cont'd)

(i) Intangible Assets

Intangible assets consist of core deposit premiums and cost in excess of net assets acquired resulting from the Company's branch acquisitions in 1987. Such amounts are amortized using the straight-line method over the estimated life (19 years) ofthe customer deposit base. The Company writes off the unamortized balance of the intangible assets upon the disposition of the related branches. Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that thecarrying amount of any such asset may not be recoverable. In the event that facts and circumstances indicate that the carrying value of the intangible asset may be impaired, an evaluation of their recoverability would be performed and any resultingimpairment loss recorded.

(j) Income Taxes

The Company files consolidated income tax returns with its subsidiary. 
Deferred tax assets and liabilities are recognized for temporary differences between the financial reporting basis of assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax ratesexpected 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 includesthe enactment date. 

(k) Net Income Per Share

The Company accounts for net income per share in accordance with Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share". Basic net income per share excludes dilution and is computed by dividing earnings available to commonstockholders by the weighted-average number of common shares outstanding for the period. Diluted net income per share includes the potential dilutive securities that could share in the earnings.

(l) Stock Options

The Company has elected to account for its stock options under the intrinsic value based method with pro forma disclosures of net earnings and net earnings per share, as if the fair value based method of accounting defined in SFAS No. 123,"Accounting for Stock Based Compensation" had been applied. Under the intrinsic value based method, compensation cost is the excess, if any, of the quoted market price of the stock at the grant date or other measurement date over the amount an employeemust pay to acquire the stock. Under the fair value based method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.

(m) Reclassifications

Certain reclassifications have been made to the 1999 and 1998 consolidated financial statements to conform with the presentation adopted in 2000.
**Summary of Significant Accounting Policies (Cont'd)
- Recent Accounting Pronouncements**
In June 1998, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 133, "*Accounting for Derivative Instruments and Hedging Activities"*. In June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS133 to clarify four areas causing difficulties in implementation. The amendment included expanding the normal purchase and sale exemption for supply contracts, permitting the offsetting of certain intercompany foreign currency derivatives and thusreducing the number of third party derivatives, permitting hedge accounting for foreign-currency denominated assets and liabilities, and redefining interest rate risk to reduce sources of ineffectiveness. The Company completed its evaluation of thevarious issues related to SFAS 133, including performing an inventory of derivative and embedded derivative instruments and has determined that, for the year ended September 30, 2000, the Company has no derivative instruments as defined by SFAS 133. As aresult, when the Company adopts SFAS 133, as amended by SFAS 138, on October 1, 2000, there will be no impact on the consolidated balance sheet, statement of operations or statement of cash flows of the Company.
**(2) Investment Securities Held to Maturity**
Investment securities held to maturity consist of the following:

**Amortized Cost**Unrealized Gains**Unrealized Losses**Fair Value
September 30, 2000:
Mortgage-backed securities and SBA's
$ 16,692,276
$ 101,089
$ 502,311 
$ 16,291,054 
State and municipal
1,185,845
4,202
5,421
1,184,626
$ 17,878,121 
$ 105,291
$ 507,732
$ 17,475,680
September 30, 1999:
Mortgage-backed securities and SBA's
$ 13,597,058
$ 41,831
$ 518,271
$ 13,120,618 
State and municipal
845,000 
2,886
2,497
845,389
$ 14,442,058
$ 44,717
$ 520,768
$ 13,966,007
A summary of investment and mortgage-backed securities by maturity as of September 30, 2000 is shown below. The entire principal amount of mortgage-backed securities is shown in the year of contractual maturity. Expectedmaturities will differ from the maturities shown because borrowers have the right to prepay obligations without prepayment penalties, and principal is paid down over the contractual life of the mortgage-backed securities.

**Amortized Cost**Fair Value
Due within 1 year
$ 200,000 
$ 199,462 
Due after 1 year through 5 years
939,942
936,725
Due after 5 years through 10 years
1,791,361
1,776,432
Due after 10 years
14,946,818
14,563,061
$ 17,878,121
$ 17,475,680
At September 30, 2000 and 1999, the Company had pledged approximately $11,540,000 and $11,642,000, respectively, of its securities to government and municipal depositors.
Loans Receivable

Loans receivable at September 30, are summarized as follows:

**2000**1999
Real estate mortgage loans
$ 128,039,030  
$ 108,769,659 
Real estate construction loans
35,871,217 
33,644,439  
Consumer loans
17,089,161 
14,801,585  
Commercial and other loans
15,285,001 
17,480,590  
196,284,409 
174,696,273  
Less:
Deferred loan fees and 
costs, net
(212,055)
(202,866)
Unearned interest income
(63,274)
(61,250)
Allowance for loan losses
(2,364,704)
(1,235,566)
$ 193,644,376 
$ 173,196,591  
An analysis of the activity in the allowance for loan losses is as follows:

**2000**1999**1998
Balance at beginning of year
$ 1,235,566  
$ 968,632  
$ 1,012,322 
Provision for loan losses
2,640,000  
509,067 
6,163 
Recoveries
142,448 
57,016 
193,904 
Charge-offs
(1,653,310)
(299,149)
(243,757)
Balance at end of year
$ 2,364,704 
$ 1,235,566 
$968,632  
At September 30, 2000 and 1999, the Bank had nonaccrual loans aggregating approximately $3,720,000 and $2,009,000, respectively. The effects of carrying nonaccrual loans during 2000, 1999 and 1998 resulted in a reduction ofinterest income of approximately $136,000, $56,000, and $50,000, respectively.

The following is a summary of information pertaining to impaired loans:

 
September 30,
 
2000
1999
Impaired loans with a valuation allowance
$     600,313
$            -
Impaired loans without a valuation allowance
-
-
Total impaired loans
$     600,313
$            -
 
 
 
Valuation allowance related to impaired loans
$     445,000
$            -
 

 
Years ended September 30,
 
2000
1999
1998
Average Investment in impaired loans
$ 1,668
$       -
$     -
Interest income recognized on impaired loans
$        -
$       -
$     -
Interest income recognized on a cash basis on impaired loans
$        -
$       -
$     -
No additional funds are committed to be advanced in connection with impaired loans.
Loans Receivable (Cont'd)

At September 30, 2000 and 1999, the Bank had no loans held for sale.
The Bank has direct and indirect loans outstanding to certain directors and executive officers. All of these loans were made in the ordinary course of business on substantially the same terms, including interest rate and collateral, as those prevailingat the time for comparable transactions with other persons, and did not involve more than the normal credit risk or present other unfavorable features. The following is a summary of such loans outstanding and the activity in these loans for 2000 and 1999:

**2000**1999
Balance at beginning of year
$ 5,558,158  
$ 4,105,252  
New borrowings
8,740,703 
7,841,767 
Repayments
(9,496,073)
(6,388,861)
Balance at end of year
$ 4,802,788  
$ 5,558,158  
As of September 30, 2000, 1999, and 1998, the Bank was servicing loans for others under a participation agreement, aggregating approximately $11,652,000, $10,339,000, and $9,050,000, respectively. 
**(4) Premises and Equipment**
Premises and equipment at September 30 are summarized as follows:

2000
1999
Land
$        893,410 
$        541,681  
Buildings and improvements
3,504,509 
2,594,571  
Buildings under capital lease
403,466 
403,466  
Leasehold improvements
197,674  
197,674  
Construction in progress
- 
455,672  
Furniture, equipment, and automobiles
5,157,595 
4,562,927  
10,156,654 
8,755,991  
Less accumulated depreciation
and amortization
(4,586,896)
(3,855,390)
Premises and equipment, net
$     5,569,758 
$ 4,900,601  
 
Accrued Interest Receivable

Accrued interest receivable at September 30 is summarized as follows:
 

**2000**1999
Loans
$      1,348,324 
$      1,103,938 
Investment securities
25,917
10,378
Mortgage-backed securities
133,451
91,283
$      1,507,692 
$      1,205,599 
 
** 

(6) Deposits**
Deposits are summarized at September 30 as follows:

**2000**1999
Weighted
Weighted
Average
Average
Balance
Rate
Balance
Rate
Non-interest demand deposits
$ 23,051,347 
$ 19,956,065 
- 
Negotiable orders of withdrawal
20,326,455
1.00%
18,529,250 
1.25%
Money market deposit accounts
17,177,354
2.35%
14,822,775 
2.35%
Savings deposits
9,924,586
2.30%
9,190,323 
2.30%
Certificates of deposits:
Certificates less than $100,000
128,908,300
6.21%
94,377,112 
5.64%
Jumbo certificates
14,658,674
6.52%
16,298,836 
5.76%
$ 214,046,716 
5.16%
$ 173,174,361 
4.37%
Interest expense on deposits is summarized below:

**2000**1999**1998
Negotiable orders of withdrawal
$ 189,363  
$ 201,890
$ 164,909  
Money market deposit accounts
543,966 
341,899 
173,482  
Savings deposits
190,971 
167,003 
118,948  
Certificates of deposit:
Certificates less than $100,000
7,195,245 
5,656,830 
5,276,408 
Jumbo certificates
949,261 
1,063,907 
1,317,845  
Less:
Early withdrawal penalties
(32,383)
(33,811)
(30,238)
$ 9,036,423  
$    7,397,718  
$ 7,021,354  
 

At September 30, 2000, the rates on deposits were as follows:

Negotiable orders of withdrawal			1.00%

Money market deposit accounts			2.35%

Savings deposits				2.30%

Certificates of deposits			 2.30-7.52%

As of September 30, 2000, and 1999, the Bank had no brokered deposits.

The amount and maturities of certificates of deposits at September 30, 2000 are as follows:

**Year Ending September 30,**Amount
2001
$ 111,709,044 
2002
13,914,695
2003
7,290,321
2004
8,025,815
2005
2,410,972
After 2005
216,127
$ 143,566,974 Federal Home Loan Bank Advances And Other Borrowed Funds

Advances from the Federal Home Loan Bank at September 30 are summarized as follows:

**2000**1999
Due During Year Ending
Weighted
Weighted
September 30,
Amount
Average Rate
Amount
Average Rate
2000
$ - 
- 
$ 6,100,000 
6.19%
2002
500,000 
7.90%
500,000
7.90%
2008
2,000,000 
5.51%
2,000,000 
5.51%
$ 2,500,000 
5.99%
$ 8,600,000 
6.13%
The Bank has the ability to borrow additional funds from the Federal Home Loan Bank. The advances and any future borrowings are collateralized by certain qualifying real estate loans under a security agreement with the FederalHome Loan Bank. Additionally, all stock of the Federal Home Loan Bank is pledged as collateral for the advances.

First Georgia Holding, Inc. obtained a line of credit for up to $3,000,000 from the Bankers Bank in March 2000. Interest is payable quarterly at the Prime rate minus 50 basis points (9% at September 30, 2000). All of the issued and outstanding sharesof capital stock of First Georgia Bank is pledged as collateral for this line of credit. As of September 30, 2000, the Company had borrowed $2,000,000 against this line of credit. The line of credit matures on March 31, 2002 with an option to extend untilMarch 31, 2012.
**(8) Stockholders' Equity and Regulatory Matters**
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory, and possible additional discretionary, actions by regulatorsthat, if undertaken, could have a direct material effect on the Bank's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involvequantitative measures of the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practice. The Bank's capital amounts and classification are also subject to qualitative judgements by the regulatorsabout components, risk weightings, and other factors.****
Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum capital amounts and ratios (set forth in the table below). The Bank's primary regulatory agency,the OTS, requires the Bank to maintain minimum ratios of tangible capital (as defined in the regulations) of 1.5%, core capital (as defined) of 4%, and total capital (as defined) of 8%. The Bank is also subject to prompt corrective action requirementsset forth by the Federal Deposit Insurance Corporation ("FDIC"). The FDIC requires the Bank to maintain minimum total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and core capital (as defined). Managementbelieves, as of September 30, 2000, that the Bank meets all capital adequacy requirements to which it is subject.**Stockholders' Equity and Regulatory Matters (Cont'd)**
As of September 30, 2000, the most recent notification date from the OTS, the Bank was categorized as "Well Capitalized" under the regulatory framework for prompt corrective action. To be categorized as "Well Capitalized," the Bank must maintainminimum core, and total capital and tier 1 capital ratios of at least 5%, 10%, and 6%, respectively. There are no conditions or events since that notification that management believes have changed the institution's category.

Actual
For Capital Adequacy Purposes

(For OTS Purposes)
To Be Categorized as "Well Capitalized" Under Prompt Corrective Action Provisions
As of September 30, 2000
Amount
Ratio
Amount
Ratio
Amount
Ratio
Tangible Capital

(to tangible assets)
$ 19,665,000 
8.24%
$ 3,579,000 
1.50%
N/A
N/A
Core Capital

(to adjusted tangible assets)
20,263,000
8.47%
9,567,000
4.00%
$ 11,959,000
5.00%
Total capital

(to risk-weighted assets)
21,994,000
10.61%
16,578,000
8.00%
20,722,000
10.00%
Tier 1 capital

(to risk-weighted assets)
20,263,000
9.78%
N/A
N/A
12,428,000
6.00%
Actual
For Capital Adequacy Purposes

(For OTS Purposes)
To Be Categorized as "Well Capitalized" Under Prompt Corrective Action Provisions
As of September 30, 1999
Amount
Ratio
Amount
Ratio
Amount
Ratio
Tangible Capital

(to tangible assets)
$ 16,601,000 
8.17%
$ 3,048,000 
1.50%
N/A 
N/A 
Core Capital

(to adjusted tangible assets)
17,294,000
8.48%
8,155,000
4.00%
$ 10,194,000 
5.00%
Total capital

(to risk-weighted assets)
18,530,000
10.13%
14,639,000
8.00%
18,298,000
10.00%
Tier 1 capital

(to risk-weighted assets)
17,294,000
9.45%
N/A 
N/A 
10,979,000
6.00%
 
Income Taxes

The components of income tax expense are as follows:

**2000**1999**1998
Federal: Current
$ 1,143,255 
$ 1,445,959  
$ 1,119,135 
Deferred
(323,395)
(185,500)
(29,200)
819,860 
1,260,459  
1,089,935  
State: Current
149,927 
196,554  
133,386  
Deferred
(60,636)
(34,825)
(5,482)
89,291 
161,729  
127,904  
$ 909,151 
$ 1,422,188  
$ 1,217,839  
	
Income Taxes (Cont'd)

The difference between the actual provision for income taxes and income taxes computed at the Federal statutory rate of 34% is as follows:

**2000**1999**1998
Federal taxes at statutory rate
$ 795,874  
$ 1,238,364  
$ 1,098,962 
Increase (decrease) resulting from:
State income taxes, net
52,217 
146,840  
88,035 
Amortization of intangibles
8686 
(6,289)
9,079 
Tax exempt income
(6,828)
(10,425)
(8,471)
Other, net
59,202 
53,698  
30,234 
$ 909,151 
$ 1,422,188  
$ 1,217,839 
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of September 30, 2000 and 1999 are presented below:

**2000**1999
Deferred tax assets:
Allowance for loan losses
$ 889,089
$ 459,728 
Deferred loan costs
80,496
77,008 
Property cost basis differences
-
4,458 
Accrued liability
-
32,657 
Total gross deferred tax assets
969,585 
573,851 
Less valuation allowance
- 
- 
Net deferred tax assets
969,585
573,851 
Deferred tax liabilities:
FHLB stock dividends
127,763 
127,763 
Depreciation
45,781 
34,078 
        Total deferred tax liabilities
173,544
161,841
      Net deferred tax assets
796,041
412,010
Prior to January 1, 1996, under the Internal Revenue Code ("Code"), the Company was allowed a special bad debt deduction related to additions to tax bad debt reserves established for the purpose of absorbing losses. Theprovisions of the Code permitted the Company to deduct from taxable income an allowance for bad debts based on the greater of a percentage of taxable income before such deductions or actual loss experience. Retained earnings at September 30, 2000 includeapproximately $248,000 for which no deferred Federal income tax liability has been recognized. The amounts represent an allocation of income for bad debt deductions for tax purposes only. Reduction of amounts so allocated for purposes other than tax baddebt losses or adjustments arising from carry back of net operating losses would create income for tax purposes only, which would be subject to the then current corporate income tax rate.
** 

(10) Leases**
On September 28, 1987, the Bank entered into a sale-leaseback of one of its branches. The facility has been capitalized and the related obligation is recorded as a liability in the accompanying financial statements based on the present value offuture minimum lease payments. The lease term expires August 28, 2007. Premises and equipment includes buildings under capital leases of $403,466 at September 30, 2000 and 1999 and accumulated amortization of $246,243 and $222,243 at September 30, 2000and 1999, respectively.

The present value of future minimum capital lease payments as of September 30, 2000, are:

Year ending September 30,
2001
$ 39,348 
2002
39,348 
2003
39,348 
2004
39,348 
2005
39,348 
2006 and later years
78,696 
Total minimum lease payments
275,436 
Less amount representing interest at 10%
(81,641)
  Present value of future minimum capital lease payments 
$    193,795 
During the year ended September 30, 2000, the Bank terminated its operating lease for an operating facility that was replaced by a new, permanent branch facility. The balance of the lease was paid off based on the net presentvalue of the future lease payments and no further liability exists.

Total rent expense was approximately $89,000, $48,000, and $94,000 for the years ended September 30, 2000, 1999, and 1998, respectively.
**(11) Sale of Branch**
Effective April 30, 1999, the Bank completed the sale of its Blackshear branch, which had deposits of approximately $9,000,000 and net premises and equipment of $52,037. This transaction resulted in a gain of $766,511 which is reported separatelyin the accompanying consolidated statements of operations.
**(12) Employee Benefit Plans**
The Company has a 401(k) Profit Sharing Plan (the Plan) which covers substantially all of its employees. The Company matches 50% of employee contributions to the Plan, up to 3% of an employee's salary. The Company contributed $68,849, $45,747, and$39,712 to the Plan in 2000, 1999, and 1998, respectively.

Also, the Company has an Employee Stock Purchase Plan which covers substantially all of its employees. Employees pay 85% of the price at which the Company buys its stock in the open market. During 2000 and 1999, approximately 16,000 shares and 8,000shares, respectively, were purchased by employees. As a result of such employee stock purchases, the Company incurred employee benefits expense of approximately $15,000, $12,000 and $12,000 for the years ended September 30, 2000, 1999 and 1998, respectively .
** 

(13) Stock Option Plan**
During 1995, the Company adopted a nonqualified Stock Option Plan (the 1995 Option Plan). The Company has reserved 1,033,125 shares of common stock for issuance under the 1995 Option Plan. The Company also has a nonqualified Stock Option Plan (theOption Plan) adopted prior to 1995. The Company has 37,970 options outstanding under this plan.

If compensation cost for stock option grants had been determined based on the fair value at the grant dates for 2000, 1999 and 1998 consistent with the method prescribed by SFAS No. 123, the Company's net earnings and earnings per share would have beenadjusted to the pro forma amounts indicated below:

**September 30,**2000**1999**1998
Net Income
As Reported
$ 1,431,655
$ 2,200,540 
$ 2,014,402 
Proforma
1,376,494
2,164,893 
2,014,402 
Net Income Per Share - Basic
As Reported
0.20
0.31 
0.28 
Proforma
0.19
0.30 
0.28 
Net Income Per Share - Diluted
As Reported
0.19 
0.29 
0.27 
Proforma
0.18
0.29 
0.27 
 

Outstanding options, consisting of five-year incentive stock options, vest and become exercisable over a five-year period from date of grant. The outstanding options expire five years from the date of grant or upon retirement from the Company, and arecontingent upon continued employment during the applicable five-year period.

Options for a total of 360,000 shares were granted on September 23, 1998. Under SFAS No. 123, for pro forma disclosure purposes, the fair value of such options of $663,722 is to be expensed over the vesting period of five years. As such options wereissued at the end of fiscal 1998, the amount of compensation expense for the year ended September 30, 1998 for pro forma purposes was insignificant. There were no stock options granted in 2000 or 1999.

Under SFAS No. 123, the fair value of each option grant is estimated on the date of grant using the Binomial option-pricing model with the following weighted-average assumptions used for grants in 1998: dividend yield of 1.50%, expected volatility of33%, risk-free interest rate of 4.67%, and an expected life of 5 years.

A summary of the status of fixed stock option grants under the Company's stock-based compensation plans as of September 30, 2000, 1999 and 1998, and changes during the years ending on those dates is presented below:
** 

(13) Stock Option Plan (Cont'd)**
Such amounts have been adjusted to reflect 50% stock dividends accounted for as 3-for-2 stock splits in each of the years ended September 30, 1999 and 1998.

 **2000**1999**1998
 
Options
Weighted Average

Exercise Price
Options
Weighted Average

Exercise Price
Options
Weighted Average

Exercise Price
 
 
 
 
 
 
 
Outstanding - October 1
1,056,095  
$ 3.00 
1,056,095
$     3.00
1,026,918 
$    1.14
Granted
- 
-
-
-
360,000 
6.21
Exercised
(658,125) 
1.38
-
-
(330,823)
0.72
Cancelled
-  
- 
-
-
- 
-
Outstanding - September 30
397,970 
$         5.68
1,056,095
$    3.00
1,056,095 
$    3.00
 
 
 
 
 
 
 
Options exercisable at year end
127,970 
$         4.36
741,095
$    1.62
696,095 
$    1.34
Fair value of options granted 

During the year
- 
 
-
 
$     1.84 
 
 

The following table summarizes information about fixed stock options outstanding at September 30, 2000:

Exercise Price
Options Outstanding
Options Exercisable
Weighted Average

Remaining Life
$ 0.66 
37,970 
37,970 
1.63 
5.92 
180,000 
90,000 
2.98 
6.51 
180,000 
- 
2.98 
397,970
127,970
Remaining non-exercisable options as of September 30, 2000 become exercisable as follows:

2001
105,000 
2002
105,000 
2003
60,000 
270,000 
 
**(14) Net Income Per Share**
Following is a reconciliation of the denominator used in the computation of basic and diluted earnings per common share.

**Years Ended September 30,**2000**1999**1998
Weighted average number of common shares outstanding - Basic
7,315,984
7,198,426
7,113,319
Incremental shares from the assumed conversion of stock options
267,196
333,113
374,610
Total - Diluted
7,583,180
7,531,539
7,487,929
 
**(14) Net Income Per Share (Cont'd)**
The incremental shares from the assumed conversion of stock options were determined using the treasury stock method under which the assumed proceeds were equal to the amount that the Company would receive upon the exercise of the options. Theassumed proceeds are used to purchase outstanding common shares at the average market price during the period.
**(15) Condensed Financial Information of First Georgia Holding, Inc. (Parent Only)**
First Georgia Holding, Inc., was organized December 16, 1987. The following represents parent company only condensed financial information.

**September 30, **Condensed Balance Sheets**2000**1999
Assets
Cash
$ 93,316 
$ 30,591 
Other assets
- 
- 
Investment in subsidiary
20,262,276
17,293,920 
Total assets
$ 20,355,592
$ 17,324,511 
Liabilities and Stockholders' Equity
Other borrowed funds
$   2,000,000
-
Stockholders' Equity
Common stock
$ 7,713,733 
$ 7,198,371 
Additional paid-in capital
396,297
715,740 
Retained earnings
10,245,576
9,410,400 
Total liabilities and stockholders' equity
$ 20,355,606
$ 17,324,511 
 

**Years Ended September 30, **Condensed Statements of Operations**2000**1999**1998
Dividends from Bank
$ 555,000  
$ 584,000  
$ 85,000  
Expenses
(91,715)
(4,040)
(1,015)
Income before equity in undistributed income of Bank
463,285 
579,960  
83,985  
Equity in undistributed income of Bank
968,370 
1,640,094  
2,007,300  
Income tax expense
-  
-  
76,883  
Net Income
$ 1,431,655 
$ 2,220,054  
$ 2,014,402  Condensed Financial Information of First Georgia Holding, Inc. (Parent Only) (Cont'd)

**Years Ended September 30, **Condensed Statements of Cash Flows**1999**1998**1997
Operating Activities:
Net income
$ 1,431,655  
$ 2,220,054  
$ 2,014,402  
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed income of Bank
(968,370)
(1,640,094)
(2,007,300)
Decrease in other assets
-  
-  
76,889  
Net cash provided by operating activities
463,285 
579,960  
83,991  
Investing Activities:
    Distribution of Capital to subsidiary
(2,000,000)
- 
- 
Financing Activities:
Dividends paid on common stock
(596,479)
(575,873)
(319,937)
Fractional shares related to stock split paid in cash
- 
(882)
(949)
Net proceeds from exercise of stock options
195,919 
-  
239,664 
   Proceeds from other borrowed funds
2,000,000 
-  
-  
Net cash provided by (used in) financing activities
1,599,440 
(576,755)
(81,222)
Increase (decrease) in cash and cash equivalents
62,725 
3,205  
2,769 
Cash and cash equivalents at beginning of year
30,591 
27,386  
24,617  
Cash and cash equivalents at end of year
$ 93,316  
$ 30,591  
$ 27,386  
The primary source of funds available to the Company to pay stockholder dividends and other expenses is dividends from its Bank. Regulatory agencies impose restrictions on the amount of dividends that may be declared by theBank and require maintenance of minimum capital amounts. For the year ended September 30, 2000, all dividends declared by the Bank were approved by the OTS.
**(16) Commitments and Contingencies**
The Bank is involved in a claim arising in the ordinary course of business. In the opinion of management, the ultimate disposition of this matter will not have a material adverse effect on the Bank's or the Company's financial position or resultsof operations.
**(17) Fair Value of Financial Instruments**
SFAS No. 107, "Disclosures About Fair Value of Financial Instruments", requires disclosure of fair value of financial instruments, whether or not recognized on the face of the balance sheet, for which it is practicable to estimate that value. Incases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates offuture cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. These estimates are subjective in natureand involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions would significantly affect the estimates. SFAS No. 107 excludes certain financial instruments and all nonfinancialinstruments from its disclosure requirements. 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 thatare not considered financial instruments. 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 any of the estimates.Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company.

 
**(17) Fair Value of Financial Instruments (Cont'd)**
The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments.
*Cash and due from banks, interest-bearing deposits in other banks, Federal funds sold and accrued interest receivable: The carrying amounts approximate those assets' fair values because of their short-terms to maturity.
*Investment securities: Fair values for investment securities are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments.
*Loans Receivable: For variable-rate loans that reprice frequently and are of normal credit risk, fair values are considered to approximate carrying values. The fair values for all other loans are estimated using discounted cash flow analyses,using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality.
*Off-balance sheet instruments: Fair values for the Company's off-balance sheet instruments are based on a comparison with terms, including interest rate and commitment periods currently being offered in similar agreements, taking into accountcredit worthiness of the counter parties. The carrying and fair values of off-balance-sheet instruments at September 30, 2000, are the same based on the fact that the Company generally does not offer lending commitments to its customers for long periodsand, therefore, the underlying rates of the commitments approximate market rates.
*Deposits: Fair values for fixed-rate certificates of deposits are estimated using a discounted cash flow calculation that considers interest rates currently being offered on certificates of similar terms to maturity. The carrying amounts of allother deposits, due to their nature, approximate their fair value.
*Federal Home Loan Bank advances: Fair values for fixed-rate borrowings from the Federal Home Loan Bank are estimated using a discounted cash flow calculation that considers interest rates currently being offered on advances of similar terms tomaturity. 
*Other Borrowed Funds: For variable rate borrowings that reprice frequently, fair values approximate carrying values.

 
**(17) Fair Value of Financial Instruments (Cont'd)**
The following is a summary of the Company's Financial instruments at September 30, 2000 and 1999:

**2000**1999**Carrying 

Value**Estimated Value**Carrying Value**Estimated Value
Assets 
Cash and due from banks 
$ 6,380,000 
$ 6,380,000 
$ 6,785,000 
$ 6,785,000 
Interest bearing deposits in other financial institutions 
366,000 
366,000 
461,000 
461,000 
Federal funds sold 
9,840,000
9,840,000
-
-
Investment securities 
17,878,000
17,476,000
14,442,000
13,966,000
Loans 
193,644,000
194,485,000
173,197,000
173,161,000
Liabilities 
Deposits: 
Non-interest bearing 
23,051,000
23,051,000
19,956,000
19,956,000
Interest-bearing demand and savings 
47,428,000
47,428,000
42,542,000
42,542,000
Certificates of deposit 
143,567,000
143,735,000
110,677,000
111,060,000
Federal Home Loan Bank advances 
2,500,000
2,393,000
8,600,000 
8,542,000
Other borrowed funds
2,000,000 
2,000,000
-
- 
Federal Funds Purchased
-
-
2,860,000
2,860,000
 
**(18) Off-Balance Sheet Activities**
The Company is a party to credit related 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, standbyletters of credit and commercial letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.

The Company's exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance-sheet instruments.

As of September 30, 2000 and 1999, the following financial instruments were outstanding whose contract amounts represent credit risk:

 **Contract Amount
 **2000**1999
 **(approximately)
Commitments to grant loans
$                  -
$     100,000
Unfunded commitments under lines of credit
27,922,000
30,377,000
Commercial and standby letters of credit
2,371,000
466,000
Credit cards
2,071,000
1,696,000
 

 
** 

(18) Off-Balance Sheet Activities (Cont'd)**
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require paymentof a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by theBank, is based on management's credit evaluation of the customer.

Unfunded commitments under commercial lines-of-credit, revolving credit lines and overdraft protection agreements, are commitments for possible future extensions of credit to existing customers. These lines-of-credit are uncollateralized and usually donot contain a specified maturity date and may not be drawn upon to the total extent to which the Bank is committed.

Commercial and standby letters-of-credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those letters-of-credit are primarily issued to support public and private borrowing arrangements.Essentially all letters of credit issued have expiration dates within one year. The credit risk involved in issuing letters-of-credit is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateralsupporting those commitments if deemed necessary.
Fourth Quarter Transactions

In the fourth fiscal quarter of 2000, management determined that, based on a review of its loan portfolio, an increase of $1,160,000 to the allowance for loan losses, including a specific allowance of $445,000 on two impaired loans was necessary.Management believes there is a potential for partial or full collection of the impaired loans. However, because the future cash flows from the borrowers could not be determined, a specific valuation allowance equal to 100% of the non-collateralizedportion of the credit was established. Additionally, approximately $1,363,000 of loans were charged-off in the fourth quarter. The combined effect of the increase to the general and specific allowances resulted in a provision for loan losses of $2,375,000for the fourth quarter. Management also reviewed all outstanding credits of similar nature and determined that none of these other credits possessed the weakness identified with the impaired loans.
 
Selected consolidated financial data is presented below as of and for each of the years in the five-year period ended September 30, 2000

(Dollars in thousands, except per share data) **September 30, **2000**1999**1998**1997**1996**Balance Sheet Data: 
Total assets 
$ 
239,185
204,296 
190,463 
159,701 
146,915 
Loans receivable, net 
$ 
193,645
173,197 
151,253 
137,865 
122,431 
Total investments 
$ 
17,878
14,442 
11,565 
9,634 
10,326 
Deposits 
$ 
214,047
173,174 
162,890 
129,890 
121,554 
Borrowings 
$ 
4,500
11,460 
8,600 
14,350 
11,192 
Stockholders' equity 
$ 
18,356
17,325 
15,681 
13,347 
11,916 
Book value per share 
$ 
2.38
2.41 
2.18 
1.94 
1.74 
Number of shares outstanding 
7,713,733
7,198,371 
7,198,458 
6,867,717 
6,867,717 **Year Ended **September 30, **2000**1999**1998**1997**1996**Income Statement Data: 
Interest income 
$ 
19,932
16,148 
15,078 
12,784 
11,794 
Interest expense 
9,535
7,905 
7,832 
6,939 
6,549 
Net interest income 
10,397
8,243 
7,246 
5,845 
5,245 
Provision for loan losses 
2,640
509 
6 
310 
48 
Other income 
2,707
2,894 
1,997 
1,643 
1,004 
Other expense 
8,123
6,986 
6,005 
4,746 
4,347 
SAIF special assessment 
- 
- 
- 
- 
727 
Income before income taxes
2,341
3,642 
3,232 
2,432 
1,127 
Income tax expense 
909
1,422 
1,218 
838 
364 
Net income 
$ 
1,432 
2,220 
2,014 
1,594 
763 
  Income per share
     Basic
$
0.20
0.31
0.28
0.23
0.23
     Fully diluted
0.19
0.29
0.27
0.21
0.21**At or For Year Ended September 30, **2000**1999**1998**1997**1996**Other Data: 
Net income to average assets 
0.61%
1.11%
1.21%
1.04%
0.87%
Net income to average equity 
7.79%
13.59%
14.60%
12.55%
10.32%
Average equity to average assets 
7.87%
8.15%
8.29%
8.28%
8.40%
Number of full-service offices 
6 
6
7 
7
8
 
**General**
First Georgia Holding, Inc. (the Company) was organized in 1987 to acquire the outstanding common stock of First Georgia Bank, F.S.B. (the Bank or First Georgia). On April 30, 1988, the Company became the sole shareholder of the Bank and issued itsstock to the former Bank shareholders. Management's Discussion and Analysis which follows, relates primarily to the Bank since the Company has not had material operations since it was organized.

First Georgia's net income depends on (a) its net interest income, which is the difference between its interest income from loans and investments and its interest expense on deposits and borrowings, (b) its non-interest income, which consistsprincipally of fee income generated by First Georgia's retail banking operations, and (c) its non-interest expenses, such as employee salaries and benefits. Interest income on loans and investments (yield) is a function of the average balances outstandingduring the period and the average rates earned. Interest expense (cost of funds) is a function of the average amount of deposits and borrowings outstanding during the period and average rates paid on such deposits and borrowings. Retail banking feeincome, consisting mainly of recurring fees collected for deposit-related services rendered by the Bank, varies with the volume of the Bank's retail banking business. Non-interest expenses vary primarily with the number of employees, expansion offacilities and inflation.
**Capital Resources**
The following is reconciliation at September 30, 2000 of the Bank's capital under generally accepted accounting principles to regulatory capital.

**MD& A CAPITAL SPREADSHEETS
First Georgia Bank
Stockholder's equity
$ 20,263,000
Less:
Intangible assets
598,000**Tangible Capital
19,665,000
Plus:
Qualifying intangible assets
598,000**Core capital
20,263,000
Plus:
General allowance for loan losses
2,365,000
Less:
Deduction for loans greater than 80% LTV
(634,000)**Risk-based capital
$ 21,994,000 
Current regulations require financial institutions to have minimum regulatory tangible capital equal to 1.5% of adjusted assets, minimum core capital to adjusted assets of 4% (the leverage ratio), and risk-based capital torisk-adjusted assets of 8.0%. The minimum core capital or leverage ratio also may be increased by the Office of Thrift Supervision (the OTS) based on its assessment of the institution's risk management systems and the level of overall risk in theindividual institution. At September 30, 2000 the Bank was in compliance with its minimum capital requirements.

The Bank's regulatory capital and the required minimum amounts, at September 30, 2000, are summarized in the following table.

**Bank Capital**Required Minimum Amount**Excess (Deficiency)
%
$
%
$
%
$**Tangible capital
8.24 
19,665,000
1.50
3,579,000
6.74
16,086,000**Core capital
8.47
20,263,000
4.00 
9,567,000
4.47
10,696,000**Risk-based capital
10.61
21,994,000
8.00 
16,578,000
2.61
5,416,000
As of September 30, 2000, the Bank exceeded all the required minimum capital amounts as demonstrated by the chart above. The Bank had strong earnings during the year which helped to strengthen its capital position.

The Federal Deposit Insurance Corporation Improvement Act (FDICIA) requires Federal banking agencies to take "prompt corrective action" with respect to institutions that do not meet minimum capital requirements. In addition to the ratios describedabove, FDICIA introduced an additional capital measurement, the Tier 1 risk-based capital ratio. The Tier 1 ratio is the ratio of Tier 1 or core capital to total risk-adjusted assets. FDICIA establishes five capital tiers: "well capitalized," "adequatelycapitalized," "undercapitalized," "significantly undercapitalized," and "critically undercapitalized." The five capital tiers established by FDICIA and the regulator's minimum requirements for each are summarized below.

Total

Risk-Based Capital Ratio
Tier 1

Risk-Based

Capital Ratio
Leverage Ratio
Well capitalized
10% or above
6% or above
5% or above
Adequately capitalized
8% or above
4% or above
4% or above
Undercapitalized
Less than 8%
Less than 4%
Less than 4%
Significantly undercapitalized
Less than 6%
Less than 3%
Less than 3%
Critically undercapitalized
-
-
2% or less
An institution may be deemed to be in a capitalization category lower than is indicated by its capital position based on safety and soundness considerations other than capital levels. 

At September 30, 2000, the Bank's total risk-based ratio, tier 1 risk-based ratio, and leverage ratio were 10.61%, 9.78%, and 8.47%, respectively, placing the Bank in the well-capitalized category under FDICIA for each ratio. 
**Liquidity**
First Georgia has traditionally maintained levels of liquidity in excess of levels required by regulatory authorities. As a member of the Federal Home Loan Bank system, the Bank is required to maintain a daily average balance of cash and eligibleliquidity investments in an amount equal to a monthly average of 5% of withdrawable savings and short-term borrowings. The Bank's liquidity level was 8.55% and 5.88% at September 30, 2000 and 1999, respectively. 

The Bank's operational needs, demand for loan disbursements, and savings withdrawals can be met by loan principal and interest payments, new deposits and excess liquid assets. While significant loan demand, deposit withdrawal, increased delinquenciesand increased foreclosed properties could alter this condition, the Bank has sufficient borrowing capacity through Federal Home Loan Bank advances and other short-term borrowings to manage such an occurrence. Management does not foresee any liquidityproblems for fiscal 2001.
**Asset/Liability Management**
First Georgia has implemented a program of asset/liability management to limit the Bank's vulnerability to material and prolonged increases in interest rates (interest rate risk). The principal determinant of the exposure of the Bank's earnings tointerest rate risk is the difference in the time between interest rate adjustments or maturities on interest-earning assets and interest rate adjustments or maturities of interest-bearing liabilities. If the maturities of the Bank's assets and liabilitieswere perfectly matched and if the interest rates earned on its assets and paid on its liabilities moved concurrently, which is not the case, the impact on net interest income of rapid increases or decreases in interest rates would be minimized. The Bank'sasset/liability management policy seeks to increase the adjustability of the interest rates earned on its assets and paid on its liabilities and to match the maturities of its interest-earning assets and interest-bearing liabilities so that the Bank willbe able to restructure and reprice its asset portfolio in a relatively short period to correspond to changes in its cost and flow of funds. The Bank's policy also seeks to encourage the flow of deposits into longer-term certificates during periods oflower interest rates and to emphasize shorter-term accounts during periods of high rates. During fiscal 2000, the Bank actively managed its interest rate risk by limiting its lending to short-term fixed rate balloon notes or adjustable rate loans andshortening the maturity on its deposits.

It is a policy of First Georgia not to originate for its own portfolio any fixed-rate residential mortgage loans that exceed 15 years. This allows First Georgia to better match the maturities of its assets and liabilities, thereby limiting interestrate risk. Similarly, the Bank emphasizes the origination of commercial real estate loans, construction loans, consumer loans and commercial loans with either adjustable rates or short maturities.

The interest rate sensitivity of the Bank's assets and liabilities provides an indication of the extent to which the Bank's net interest income may be affected by interest rate movements. The concept of interest rate sensitivity recognizes that certainassets and liabilities have interest rates that are subject to change prior to maturity. One method of measuring the impact of interest rate changes on net interest income is to measure, in a number of time frames, the interest sensitivity gap bysubtracting interest rate sensitive liabilities from interest rate sensitive assets. A gap is considered positive when the amount of interest rate sensitive assets exceeds the amount of interest rate sensitive liabilities, and is considered negative whenthe amount of interest rate sensitive liabilities exceeds the amount of interest rate sensitive assets. Generally, during a period of rising interest rates, a negative gap would adversely affect net interest income while a positive gap would result in anincrease in net interest income, while conversely during a period of falling interest rates, a negative gap would result in an increase in net interest income and a positive gap would negatively affect net interest income. To the extent that the gaps areclose to zero, net interest income can be considered to be relatively immune from interest rate movements. The following table sets forth the Bank's interest-earning assets and interest-bearing liabilities at September 30, 2000. The information presented,however, may not be indicative of actual future trends of net interest income in rising or declining interest rate environments.

 

**Over One **Over Five **Over **One Year **Through **Through **Ten **or Less **Five Years **Ten Years **Years 
(in thousands) **Interest-earning assets (IEA's):
Investments
$ 200  
940 
1,792 
14,946 
Interest earning deposits and
federal funds sold
9,840 
- 
-  
-  
Loans
81,633 
44,968 
14,483 
55,200 
Total
91,673 
45,908 
16,275 
70,146 **Interest-bearing liabilities (IBL's):
Demand deposits
$ 326 
- 
- 
-  
Savings an money market deposits
27,102 
-  
-  
-  
Other time deposits
111,709 
31,642 
209 
7 
Debt
- 
2,500 
2,000  
- 
Total
139,137 
34,142 
2,209 
7 
Interest sensitivity gap
$ (47,464)
11,766 
14,066 
70,139 
Cumulative gap
$ (47,464)
(35,698)
(21,632)
48,507 
Ratio of IEA's to IBL's
0.66 
1.34 
7.37 
10,020.86 
Cumulative ratio of IEA's to IBL's
0.58 
0.79 
0.88 
1.28 **COMPARISON OF YEARS ENDED SEPTEMBER 30, 2000 AND 1999

Results of Operations
**General**
First Georgia Holding, Inc. reported net income of $1,431,655, a decrease of $788,399. This decrease is due primarily to the increase in provision for loan losses of $2,130,933. Net interest income after provision for loan losses increased $23,012.Other income decreased $187,551 and other expenses increased $1,136,898. Several factors discussed below contributed to the increases and decreases in these areas.
**Interest Income**
Total interest income increased $3,784,431 for the year, or 23.44%. Interest income on loans increased $3,692,847, or 24.96%, which was the major factor for this increase in interest income. Average loans for the year increased by more than$30,000,000 during the year ended September 30, 2000, resulting in higher interest income. The Bank increased its position in mortgage-backed securities, resulting in a $95,682, or 11.23% increase. Investment income decreased by $16,553 or 14.43% for theyear ended September 30, 2000 as compared to the same period last year. Because of increased deposit growth, the average balance of federal funds sold increased more than $9,000,000. These higher balances account for a $12,455, or 3.24% increase in otherinterest income.
** 

Interest Expense**
Total interest expense increased $1,630,486, or 20.63% for the year. This is attributable to an increase in average deposits of approximately $40,000,000. The Bank experienced substantial deposit growth over the year, which is attributable to theintroduction of more competitive deposit products. While most of this growth was in interest-free checking accounts, the Bank concentrated on obtaining customers' total banking business, resulting in increased growth in interest-bearing time deposits.Interest expense on deposits increased $1,638,705, or 22.15%. Due to the increased deposit balances, the Bank was able to decrease its position in both Federal Home Loan Bank advances and federal funds purchased. These funding sources generally carry ahigher cost than customer deposits. Interest expense on advances and other borrowings decreased $8,219, or 1.62% in year ended September 30, 2000 as compared to the year ended September 30, 1999. 
**Yields Earned and Rates Paid**
Net interest income is affected by (a) the difference between rates of interest earned on interest-earning assets and rates of interest paid on interest-bearing liabilities (interest rate spread) and (b) the relative amounts of interest-earningassets and interest-bearing liabilities. When interest-earning assets approximate or exceed interest-bearing liabilities, any positive interest rate spread will generate net interest income. Financial institutions have traditionally used interest ratespreads as a measure of net interest income. Another indication of an institution's net interest income is its "net yield on interest-earning assets" which is net interest income divided by average interest- earning assets. The following table sets forthinformation with respect to weighted average contractual yields on loans, yields on investments and the cost of funds on deposits and borrowings for and as of the end of the periods indicated.

Year Ended September 30,
At September 30,
(in percentages)
2000
1999
1998
2000
Weighted average yield on:
Loans
9.58
9.13
9.57
9.10 
Investment securities
6.76
6.55
6.84
6.33 
Interest earning deposits in other banks
5.52
4.71
5.39
5.14
Total weighted average yield on all interest earning assets
9.24
8.73
9.33
9.08
Weighted average rate paid on:
Deposits
5.73
4.38
5.04
4.01
Other borrowings
5.57
5.40
5.98
5.39
Federal Home Loan Bank advances
Short term advances
7.90
6.21
4.98
6.25
Long term advances
5.51
5.69
7.86
6.18
Total weighted average rate paid on all interest-bearing liabilities
4.49
4.46
5.13
4.15
Weighted average interest rate spread (spread between weighted average yield on all interest-earning assets and rate paid on all interest-earning liabilities)
4.75
4.27
4.2
4.93 
Net yield on average interest-earning assets (net interest income as a percentage of average interest-earning assets)
4.41
4.18
4.48
N/A 
 
**Provision for Loan Losses**
The provision for loan losses for the fiscal year ended September 30, 2000 totaled $2,640,000, increasing $2,130,933 over the fiscal year 1999. The Bank had net charge-offs of $1,510,862 for the year and significant loan growth, which required anincrease in the provision (see Allowance for Loan Losses). Net interest income after the provision for loan losses at September 30, 2000 increased $23,012, or .30% from the same period last year. 
**Other Income**
Other income decreased $187,551, or 6.48% for the year. The largest component of this decrease is the sale of the Blackshear office during the year ended September 30, 1999, which netted $766,511. Deposit service charges increased $505,496, or35.30% for the year ended September 30, 2000. This increase is attributable to the significant increase in deposit balances for the year. The increase in the number of deposits creates an increase in service charges and non-sufficient funds fees. Loanfees decreased $127,056, or 18.42% as the bank spent a full year on its new loan fee structure. Other operating income increased $200,520, which is primarily due to a $145,326 increase in ATM fees charged.
**Other Expenses**
Other expenses increased $1,136,898, or 16.27% for the year. Personnel related expenses had the largest increase, growing by $663,464, or 20.13%, for the year ended September 30, 2000. The Bank added more employees to maintain a superior level ofcustomer service in response to the Bank's rapid growth. Occupancy expense also increased by $301,763, or 21.71%, for the year. The increase in occupancy expense is due to increased repairs and maintenance expenses of approximately $123,000 and anincrease in depreciation expense of approximately $85,000 related to the new mall branch, which opened in April of fiscal year 2000. Office supplies decreased $93,245 or 26.37% during the year. This decrease is attributable to the expense incurred duringfiscal 1999 related to changing forms to be processed by a new system purchased during the year. Data processing expense decreased $38,868, or 30.25% for the year. Most of the Bank's computer systems were in place by the beginning of the year, whichhelped control data processing expense. Federal Insurance premiums decreased 76,708 or 58.68% because of increased capital balances. 
**Income Tax Expense**
The Company incurred $909,151 in income tax expense for the year based on applicable income tax rates at September 30, 2000.

Financial Condition
**Assets**
Total assets of the Company increased $34,889,662 from September 30, 2000 to September 30, 1999. Loans were the driving force behind this increase, as the net balances grew $20,447,785, or 11.81%. Loan demand remained strong throughout fiscal 2000,and management took advantage of this demand by offering competitive loan products and exceptional service. The increased deposit balances primarily funded the loan growth. The Bank did not have to extensively borrow on its existing federal funds line tomeet the loan demand. Accordingly, federal funds sold increased $9,840,000. During the year, the Bank purchased more investments to hedge against any adverse rate conditions, which resulted in an increase in investment balances of $3,436,063, or 23.79%.Premises and equipment increased $669,157, or 13.65%, primarily due to the acquisition of land and materials for the new office located near the Colonial Mall of Brunswick, which opened in April of fiscal 2000 and the construction of a new location forthe Information Technology department set to be complete by January 2001.
**Allowance for Loan Losses**
The allowance for loan losses increased $1,129,138 or 91.39% to $2,364,704 at September 30, 2000. The ratio of the allowance for loan losses to total loans was 1.21% at September 30, 2000 compared to 0.71% at September 30, 1999. This increase inthe allowance resulted from Management's continuing review of the estimated inherent losses in the Bank's loan portfolio. Management examined the adequacy of the allowance in light of the following factors.

The Bank has sustained substantial charge-offs during 2000. Actual net charge-offs for this period were $1,510,862, an increase of $1,268,729 over last year. In addition, the Bank enjoyed a substantial increase in loans during the fiscal year ended2000. This increase was due in part to extensive marketing efforts. Management felt it necessary to increase the provision for loan losses in light of the increase of charge-offs and loans. Management believes the reserve is adequate.

The following tables illustrate the Bank's allowance for loan losses and its problem loans. When a loan has been past due ninety days or more, Management reevaluates the loan and its underlying risk elements to determine if it should be placed onnon-accrual status. These loans are loans for which unpaid interest is not recognized into income. Past due loans are loans which are ninety days or more delinquent and still accruing interest.
**ANALYSIS OF NON-ACCRUING AND PAST DUE LOANS**
**Table 1**As of September 30,**2000**1999**1998
Non-accruing Loans (1)
Real estate
Construction
 $     211,769 
$              - 
$              - 
First mortgage
3,204,748
1,907,612 
2,225,603 
Second mortgage
182,759
79,781 
117,619 
Consumer
121,057
21,672 
21,214 
Total non-accruing loans
3,720,333
2,009,065 
2,364,436 
Past due loans (2)
Real estate
Construction
- 
- 
- 
First mortgage
- 
- 
- 
Second mortgage
- 
- 
- 
Consumer
- 
- 
- 
Total past due loans
- 
- 
- 
Total non-accruing and past due loans
$ 3,720,333 
$ 2,009,065 
2,364,436 
Percentage of total loans
1.90%
1.16%
1.56%
Real estate acquired through foreclosure
$   314,338
$ 225,000 
644,084 
Total non-accruing and past due loans and non-performing assets.
$   4,034,671
$ 2,234,065 
$ 3,008,520 
(1) Non-accruing loans are loans for which unpaid interest is not recognized into income.
(2) Past due loans are 90 days or more delinquent for which interest is still accruing.
 

 
**ANALYSIS OF ALLOWANCE FOR LOAN LOSSES**
**Table 2**Year Ended September 30,**2000**1999**1998
Beginning balance
$ 1,235,566 
968,632 
1,012,322 
Loans charged-off:
Real estate construction
- 
- 
- 
Real estate mortgage
540,371
56,589 
179,995 
Consumer and other
1,112,939
242,560 
63,762 
1,653,310
299,149
243,757 
Recoveries:
Real estate construction
- 
- 
- 
Real estate mortgage
11,344
860 
78,084 
Consumer and other
131,104
56,156 
115,820 
142,448
57,016 
193,904 
Net charge-offs
1,510,862
242,133 
49,853 
Provision charged to operations
2,640,000
509,067 
6,163 
Balance at end of period
$ 2,364,704
$ 1,235,566 
968,632 
Ratio of net charge-offs to average loans outstanding
0.78%
0.15%
0.03%
Ratio of allowance to total loans
1.21%
0.71%
0.64%**Liabilities

As mentioned previously, total deposits increased $40,872,355, or 23.60%. Much of this increase was in non-interest bearing deposits, as the Bank offers free checking to its customers. The Bank is well positioned to take advantage of the growinglocal market. With the increase in deposits, the Bank was able to decrease its position in FHLB advances. The balance of FHLB advances decreased $6,100,000 during the year ended September 30, 2000 as compared with the year ended September 30, 1999. Thefederal funds purchased account also decreased $2,860,000. Due to the increased deposit levels the Bank was able to sell federal funds on a regular basis during the year.

Other borrowed funds increased $2,000,000 during the year ended Spetember 30, 2000. This increase is due to the line of credit obtained by First Georgia Holding Company, Inc. from the Bankers Bank for up to $3,000,000. As of September 30, 2000, theCompany had borrowed $2,000,000 against this line of credit. The interest is payable quarterly and all of the shares of issued and outstanding stock of First Georgia Bank are pledged as collateral for this line of credit.
** 

COMPARISON OF YEARS ENDED SEPTEMBER 30, 1999 AND 1998**
Results of Operations
**General**
First Georgia Holding, Inc. reported net income of $2,220,054, an increase of $205,652. This increase is due primarily to the increase in interest income of $1,070,054 and a gain on sale of branch of $766,511, which was partially offset by anincrease in the provision for loan losses of $502,904. Net interest income after provision for loan losses increased a total of $494,920. Other income increased and other expenses increased by $897,113 and $981,401, respectively. Several factors asdiscussed below contributed the increases and decreases in these areas.
**Interest Income**
Total interest income increased $1,070,054 for the year, or 7.10%. Interest income on loans increased $562,338, or 3.95%, which was the major factor for this increase in interest income. Average loans for the year increased by more than $13,000,000during the year ended September 30, 1999, resulting in higher interest income that was partially offset by a 4.5% decrease in average yield on loans. The Bank increased its position in mortgage-backed securities, resulting in a $314,504 or 58.54%increase. Investment income decreased by $47,669 or 29.35% for the year ended September 30, 1999 as compared to the same time last year. As investments matured, much of that money was shifted into either the increased loan demand or mortgage backedsecurities, which had higher yields. Because of increased deposit growth, the average balance of interest bearing deposits and federal funds sold increased more than $5,000,000. These higher balances account for a $240,881, or 167.73% increase in otherinterest income.
**Interest Expense**
Total interest expense increased $72,860, or 0.93% for the year. This is attributable to an increase in average deposits of over $24,000,000 that was partially offset by the effects of a 13.1% decrease in the average rates on deposits. The Bankexperienced substantial deposit growth over the year, which is attributable to the introduction of more competitive deposit products. While most of this growth was in interest free checking accounts, the Bank concentrated on obtaining customers' totalbanking business, resulting in increased growth in interest bearing time deposits. Interest expense on deposits increased $376,364, or 5.36%. With the deposit balances increasing steadily, the Bank was able to decrease its position in both Federal HomeLoan Bank advances and Federal funds purchased. These funding sources generally carry a higher cost than customer deposits. Interest expenses on advances and other borrowings decreased $303,504, or 37.45% in the year ended September 30, 1999 as comparedto the year ended September 30, 1998.

 
**Other Income**
Other income increased $897,113, or 44.92% for the year. The largest component of this increase is the sale of the Blackshear office, which netted $766,511. Deposit service charges increased $471,184 or 49.03%, for the year ended September 30,1999. This increase is attributable to the immense increase in deposit balances for the year. The increase in the number of deposits creates an increase in service charges and non-sufficient funds fees. Loan fees decreased $250,734, or 26.66% as the bankspent a full year on its loan fee structure.

 
**Other Expenses**
Other expenses increased $981,401, or 16.34% for the year. Personnel related expenses had the largest increase, growing by $355,558, or 12.09%, for the year ended September 30, 1999. The Bank added more employees to maintain a superior level ofcustomer service in response to the Bank's rapid growth. Occupancy expense also increased by $155,291, or 12.58%, for the year as the new main frame system was online the entire year. Fiscal 1999 was the year we experienced the depreciation of the newsystem. Office supplies increased $177,472 or 100.76% also because of the new system. The forms used with the new system are slightly more expensive than that used with the old system. This, combined with the fact that more forms were sent out because ofdeposit growth, is the reason for the increase. Because most of the Bank's computer systems were in place at the beginning of the year data processing expense decreased $43,703 or 25.38%.
**Income Tax Expense**
The Company incurred $1,422,189 in income tax expense for the year based on applicable income tax rates at September 30, 1999.

Financial Condition

Total assets of the Company increased $13,833,042 from September 30, 1999 to September 30, 1998. Loans were the driving force behind this increase, as the net balances grew $21,943,955 or 14.51%. Loan demand remained strong throughout fiscal 1999,and management took advantage of this demand by offering competitive loan products and exceptional service. The loan growth was primarily funded by the increased deposit balances. However, the Bank did have to borrow on its existing federal fund lines tomeet the loan demand. Accordingly, Bank's Federal funds sold decreased $12,180,000. At the beginning of the year, the Bank purchased more investments to hedge against any adverse rate conditions, which resulted in an increase in investment balances of$2,876,828. Premises and equipment increased $398,362, or 8.85% primarily due to the acquisition of land and materials for the new office being constructed near the Colonial Mall of Brunswick. The Bank completed the sale of its Blackshear office, andwrote off the intangible asset associated with it, which decreased the intangible assets $224,714, or 24.48%.

As mentioned previously, total deposits increased $10,284,256, or 6.31%. This is in excess of the deposits it sold with the Blackshear branch, which was over $8,000,000. Much of this increase was in non-interest bearing deposits, as the bank now offersfree checking to its customers. With the increase in deposits, the Bank did not increase its position in FHLB advances.
**Effect of Inflation and Changing Prices**
First Georgia's consolidated financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and operating results in termsof historical dollars, without considering changes in the relative purchasing power of money over time due to inflation. Unlike industrial companies, virtually all of the assets and liabilities of a financial institution are monetary in nature. As aresult, interest rates have a more significant impact on a financial institution's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goodsand services. Non-interest expenses, however, do reflect general levels of inflation.

 
**Shareholder Information**
A limited trading market has developed in the Company's common stock which is quoted on the NASDAQ (National Association of Securities Dealers Automated Quotation) National Market System under the symbol "FGHC." Set forth below are the high and lowsales prices of the Company's common stock for each full quarterly period since October 1992. Such prices reflect inter-dealer prices, without retail mark-up, mark-down, or commission, and may not represent actual transactions.

 

 

Quarterly Period
High
Low
October 1 - December 31, 1998
6.33
5.50
January 1 - March 31, 1999
6.00
4.92
April 1 - June 30, 1999*
7.63
4.83
July 1 - September 30, 1999
6.50
5.13
October 1 - December 31, 2000
6.00
4.50
January 1 - March 31, 2000
5.13
3.50
April 1 - June 30, 2000
5.31
4.00
July 1 - September 30, 2000
5.00
3.69
*On May 20, 1999, the Company effected a 50% stock dividend in the form of a 3 for 2 stock split.

At November 1, 2000, the Company had 314 shareholders of record. The Company paid cash dividends of $0.04 per share in February 2000 and September 2000. The primary source of funds available to the Company is the payment of dividends by the Bank.Banking regulations limit the amount of dividends that may be paid without prior approval of the Bank's regulators. Approximately $1,935,000 was available to be paid as dividends by the Bank to the Company at September 30, 2000 upon regulatory approval.

 

 

**OFFICES
1703 Gloucester Street

Brunswick, GA 31520

(912) 267-7283
 
4510 Altama Avenue

Brunswick, GA 31520

(912) 267-0010
2461 Demere Road

St. Simons Island, GA 31522

(912) 638-7118
 
109 Scranton Connector

Brunswick, Georgia 31523

912-267-2265
2001 Commercial Drive South

Brunswick, GA 31525

(912) 262-1500
 
1010 Plant Avenue

Waycross, GA 31501

(912) 287-2265
 

**OTHER INFORMATION**Transfer Agent:

First Georgia Bank, F.S.B.

1703 Gloucester Street

Brunswick, GA 31520

(912) 267-7283
 **Independent Auditors:

Deloitte & Touche, LLP

Suite 2801, Independent Square

One Independent Drive

Jacksonville, FL 32202**Legal Counsel:

James A. Bishop

Suite 40

Bank of America Plaza

Brunswick, GA 31520
 **Special Counsel:

Powell, Goldstein, Frazer & Murphy

Sixteenth Floor

191 Peachtree Street, N.E.

Atlanta, GA 30303
 

 

**DIRECTORS AND OFFICERS**FIRST GEORGIA HOLDING, INC.**OFFICERS
HENRY S. BISHOP

Chairman and President, Chief Executive Officer
 
G. FRED COOLIDGE III

Secretary and Treasurer
 
WENDI RINGLE

Assistant Secretary and Treasurer
 

 **DIRECTORS
HENRY S. BISHOP

Chairman of the Board, President, First Georgia Bank
B.W. BOWIE

Retired Senior Vice President, General Manager, and Director Federal Paper Board Co
M. FRANK DELOACH, III

President, Culver & Deloach
TERRY DRIGGERS

President, Driggers Construction Company
ROY K. HODNETT

President, T.H.E. Island Group, T.H.E. Hotel Group, and T.H.E. Island Inn
E. RAYMOND MOCK

Owner, Piggly Wiggly food stores in St. Simons and Nahunta
JAMES D. MOORE

President, J.D. Moore, Inc.
 
D. LAMONT SHELL

President, Glynn Electric**FIRST GEORGIA BANK, BRUNSWICK
HENRY S. BISHOP

Chairman, President and CEO
 
G. FRED COOLIDGE III

Executive Vice President, Chief Operating Officer
JUDY DIXON

Vice President
ROBERT STRANGE

Senior Vice President
WENDI RINGLE

Assistant Vice President
LAURA D. FRIEND

Vice President
MARK WESTBERRY

Senior Vice President
CATHERINE BOYNE

Assistant Vice President
DIANE SHARP

Vice President
GEORGE MCMANUS

Assistant Vice President
JODI TODD

Assistant Vice President
JON TAHLIER

Vice President
TAMMY FLOWERS

Assistant Vice President
MEME HULSEY

Assistant Vice President
LAURA LEE

Assistant Vice President
ANGIE FERRA

Assistant Vice President
JAN WILDSMITH

Assistant Vice President
RITA BOATRIGHT

Assistant Vice President
 
ANN GARLAND

Assistant Vice President

**FIRST GEORGIA BANK, ALTAMA
ELZIE JACOBS

Vice President
 
APRIL BECK

Assistant Vice President

**FIRST GEORGIA BANK, ST. SIMONS ISLAND
MEL BAXTER

Senior Vice President
SUSAN USSERY

Vice President
FELICIA SALTER

Assistant Vice President

**FIRST GEORGIA BANK, COLONIAL MALL
MERLENE BURGESS

Vice President
 
DONNA GIBBS

Assistant Vice President

**FIRST GEORGIA BANK, NORTH BRUNSWICK
FRED ALEXANDER

Vice President
 
CHINITA DAVIS

Assistant Vice President

**FIRST GEORGIA BANK, WAYCROSS
PAM TAYLOR

Vice President
 
LINDA WALKER

Assistant Vice President

 

 
**EXHIBIT 23**
Consent of Deloitte & Touche LLP

Certified Public Accountants

INDEPENDENT AUDITORS' CONSENT

 

The Board of Directors

First Georgia Holding, Inc.

We consent to the incorporation by reference in REGISTRATION STATEMENTS (N0.33-62245 and No. 33-62249) of First Georgia Holding, Inc. on Form S-8 of our report dated November 10, 2000, appearing in this Annual Report on Form 10-KSB of First GeorgiaHolding, Inc. for the year ended September 30, 2000.

/s/ Deloitte & Touche LLP

Certified Public Accountants

Jacksonville, Florida

December 29, 2000

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