-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SQpqNQRGQNkLSdUu95CsI7w7zORhitsp7v2PrNm3h+wQe6metIWbXAlLX4R9NsDd BPczgxsC4kYARos7NQZRwg== /in/edgar/work/20000811/0000950144-00-009952/0000950144-00-009952.txt : 20000921 0000950144-00-009952.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950144-00-009952 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNITY FINANCIAL GROUP INC CENTRAL INDEX KEY: 0000852677 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 621626938 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-28496 FILM NUMBER: 693899 BUSINESS ADDRESS: STREET 1: 401 CHURCH ST STREET 2: PO BOX 198986 CITY: NASHVILLE STATE: TN ZIP: 37219 BUSINESS PHONE: 6152712025 MAIL ADDRESS: STREET 1: PO BOX 198986 CITY: NASHVILLE STATE: TN ZIP: 37219-8986 10-Q 1 e10-q.txt COMMUNITY FINANCIAL GROUP, INC. 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2000 ------------- Commission File Number: 0-28496 ------- Community Financial Group, Inc. - -------------------------------------------------------------------------------- (Exact name of Registrant as specified in its charter) Tennessee 62-1626938 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 401 Church Street, Nashville, Tennessee 37219-2213 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (615) 271-2000 (Registrant's telephone number, including area code) --------------- Check whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date. Common shares outstanding 3,537,102 as of August 4, 2000. 2 PART I FINANCIAL INFORMATION
Page(s) ------- ITEM 1. FINANCIAL STATEMENTS - Consolidated Balance Sheets - June 30, 2000 and December 31, 1999.. 1 - Consolidated Statements of Shareholders' Equity and Other Comprehensive Income - Six Months Ended June 30, 2000 and 1999.. 2 - Consolidated Statements of Income - Three and Six Months Ended June 30, 2000 and 1999.......................................... 3 - Consolidated Statements of Cash Flows - Six Months Ended June 30, 2000 and 1999....................... 4-5 - Notes to Consolidated Financial Statements......................... 6-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................ 10-17 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ....................................................... 14-15 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................ 18 ITEM 5. OTHER INFORMATION ................................................. 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................... 19 Signatures ................................................................... 19 Exhibit 10.24 ................................................................... 20 Exhibit 11 ................................................................... 41
3 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
June 30, December 31, 2000 1999 --------- --------- ASSETS Cash and due from banks $ 12,498 $ 11,483 Federal funds sold 1,300 14,300 Securities available for sale (amortized cost of $81,181 and $76,467, respectively) 79,469 74,877 Loans (net of unearned income of $2,570 and $2,171, respectively): Commercial 72,781 70,166 Real estate - mortgage loans 127,666 102,476 Real estate - construction loans 13,400 19,688 Consumer 9,600 5,870 Leases financing 8,743 7,311 --------- --------- Loans, net of unearned income 232,190 205,511 Less allowance for loan losses (4,412) (4,062) --------- --------- Total Net Loans 227,778 201,449 --------- --------- Premises and equipment, net 3,451 3,529 Accrued interest and other assets 3,098 2,468 --------- --------- Total Assets $ 327,594 $ 308,106 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest bearing demand deposits $ 24,118 $ 18,480 Interest-bearing deposits: NOW accounts 17,223 16,019 Money market accounts 90,153 91,892 Time certificates less than $100,000 54,630 54,383 Time certificates $100,000 and greater 80,103 48,367 --------- --------- Total Deposits 266,227 229,141 --------- --------- Federal Home Loan Bank and other borrowings 16,319 24,500 Federal funds purchased -- 5,000 Accounts payable and accrued liabilities 2,756 2,150 --------- --------- Total Liabilities 285,302 260,791 --------- --------- Commitments and contingencies (Note G) -- -- Shareholders' equity: Common stock, $6 par value; authorized 50,000,000 shares; issued and outstanding shares, 3,551,243 in 2000 and 3,923,640 in 1999 21,307 23,542 Additional paid-in capital 14,296 17,381 Retained earnings 7,751 7,379 Accumulated other comprehensive loss, net of tax (1,062) (987) --------- --------- Total Shareholders' Equity 42,292 47,315 --------- --------- Total Liabilities and Shareholders' Equity $ 327,594 $ 308,106 ========= =========
See notes to consolidated financial statements. -1- 4 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND OTHER COMPREHENSIVE INCOME SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (IN THOUSANDS, EXCEPT SHARE DATA) (UNAUDITED)
Accumulated Other Additional Comprehensive Common Paid-In Retained Income(Loss), Stock Capital Earnings Net of Tax Total -------- -------- ------- ------- -------- Balance, January 1, 1999 $ 25,299 $ 19,773 $ 5,759 $ 340 $ 51,171 Comprehensive income: Net income -- -- 1,615 -- -- Other comprehensive loss -- -- -- (785) -- Total comprehensive income -- -- -- -- 830 Issuance of Common Stock (5,867 shares) 35 38 -- -- 73 Repurchase of Common Stock (175,500 shares) (1,053) (1,358) -- -- (2,411) Cash dividends - $.20 per share -- -- (844) -- (844) -------- -------- ------- ------- -------- Balance, June 30, 1999 $ 24,281 $ 18,453 $ 6,530 $ (445) $ 48,819 ======== ======== ======= ======= ======== Balance, January 1, 2000 $ 23,542 $ 17,381 $ 7,379 $ (987) $ 47,315 Comprehensive income: Net income -- -- 1,683 -- -- Other comprehensive loss -- -- -- (75) -- Total comprehensive income -- -- -- -- 1,608 Issuance of Common Stock (73,603 shares) 441 272 -- -- 713 Repurchase of Common Stock (446,000 shares) (2,676) (3,357) -- -- (6,033) Cash dividends - $.34 per share -- -- (1,311) -- (1,311) -------- -------- ------- ------- -------- Balance, June 30, 2000 $ 21,307 $ 14,296 $ 7,751 $(1,062) $ 42,292 ======== ======== ======= ======= ========
-2- 5 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (IN THOUSANDS , EXCEPT SHARE DATA) (UNAUDITED)
Three Months Six Months Ended June 30, Ended June 30, ------------------------ -------------------------- 2000 1999 2000 1999 ---------- ----------- ----------- ----------- Interest income: Interest and fees on loans $ 5,421 $ 3,706 $ 10,389 $ 6,957 Interest on federal funds sold 70 8 122 127 Interest on balances in banks 2 1 4 12 Interest on securities: U.S. government agency obligations 1,176 1,008 2,349 1,965 States and political subdivisions, nontaxable 29 15 58 31 Other securities 82 65 120 103 ---------- ----------- ----------- ----------- Total interest income 6,780 4,803 13,042 9,195 ---------- ----------- ----------- ----------- Interest expense: Interest bearing demand deposits 1,178 885 2,199 1,818 Savings and time deposits less than $100,000 859 348 1,621 694 Time deposits $100,000 and over 1,032 344 1,870 735 Federal Home Loan Bank and other borrowings 243 191 516 366 Federal funds purchased 52 145 68 156 ---------- ----------- ----------- ----------- Total interest expense 3,364 1,913 6,274 3,769 ---------- ----------- ----------- ----------- Net interest income 3,416 2,890 6,768 5,426 Provision for loan losses 237 3 447 48 ---------- ----------- ----------- ----------- Net interest income after provision for loan losses 3,179 2,887 6,321 5,378 Non-interest income: Service fee income 228 205 433 410 Trust income -- 1 -- 13 Investment Center income 351 321 716 642 Loss on sale of securities -- (5) (34) (5) Other 81 87 162 170 ---------- ----------- ----------- ----------- Total non-interest income 660 609 1,277 1,230 ---------- ----------- ----------- ----------- Non-interest expense: Salaries and employee benefits 1,356 1,105 2,661 2,122 Occupancy expense 335 331 717 607 Advertising expense 141 121 183 149 Audit, tax and accounting 58 70 113 134 Data processing expense 46 41 96 86 Other operating expenses 530 494 1,113 900 ---------- ----------- ----------- ----------- Total non-interest expense 2,466 2,162 4,883 3,998 ---------- ----------- ----------- ----------- Income before income taxes 1,373 1,334 2,715 2,610 Provision for income taxes 522 524 1,032 995 ---------- ----------- ----------- ----------- Net income $ 851 $ 810 $ 1,683 $ 1,615 ========== =========== =========== =========== Net income per share Basic $ .23 $ 0.20 $ .45 $ .39 ========== =========== =========== =========== Diluted $ .23 $ 0.19 $ .44 $ .38 ========== =========== =========== =========== Weighted average common shares outstanding Basic 3,632,421 4,126,769 3,753,737 4,172,282 ========== =========== =========== =========== Diluted 3,649,111 4,178,208 3,784,693 4,214,723 ========== =========== =========== ===========
See accompanying notes to consolidated financial statements. -3- 6 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
Six Months Ended June 30, -------------------- 2000 1999 -------- -------- Cash flows from operating activities: Interest received $ 12,922 $ 9,138 Fees received 1,277 1,230 Interest paid (5,854) (4,017) Cash paid to suppliers and associates (6,325) (4,882) -------- -------- Net cash provided by operating activities 2,020 1,469 -------- -------- Cash flows from investing activities: Maturities of securities available for sale 6,074 43,650 Sales of securities available for sale 1,397 8,203 Purchases of securities available for sale (12,129) (40,028) Net cash paid for BON leasing -- (1,250) Loans originated by customers, net (26,404) (21,944) Capital expenditures (217) (1,065) -------- -------- Net cash used by investing activities (31,279) (12,434) -------- -------- Cash flows from financing activities: Net increase in demand deposits, NOW, and money market accounts 5,103 42,724 Net increase in certificates of deposit 31,983 10,016 Repayment of advance from Federal Home Loan Bank (10,000) (4,720) Advance of other borrowings 1,819 -- Proceeds from issuance of common stock 713 73 Repurchase of common stock (6,033) (2,411) Cash dividends paid (1,311) (844) -------- -------- Net cash provided by financing activities 22,274 44,838 -------- -------- Net (decrease) increase in cash and cash equivalents (6,985) 33,873 Cash and cash equivalents - beginning of period 20,783 5,243 -------- -------- Cash and cash equivalents - end of period $ 13,798 $ 39,116 ======== ========
See accompanying notes to consolidated financial statements. -4- 7 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED (IN THOUSANDS) (UNAUDITED)
Six Months Ended June 30, ------------------ 2000 1999 ------- ------- Reconciliation of net income to net cash provided by operating activities: Net income $ 1,683 $ 1,615 Adjustments to reconcile net income to net cash provided by operating activities: Loss on sale securities 34 5 Depreciation and amortization 325 292 Provision for loan losses 447 48 Provision for deferred taxes (198) (107) Gain on sale of foreclosed assets -- (7) Stock dividend income (61) (86) Changes in assets and liabilities: Increase in accrued interest and other assets (840) (536) Increase in accounts payable and accrued liabilities 630 245 ------- ------- Net cash provided by operating activities $ 2,020 $ 1,469 ======= ======= Supplemental Disclosure: Non Cash Transactions: Change in unrealized loss on securities available for sale, net of tax $ (75) $ (785) ======= ======= Cash paid for: Income taxes $ 1,333 $ 1,136 ======= =======
See accompanying notes to consolidated financial statements. -5- 8 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. HOLDING COMPANY INFORMATION AND PRINCIPLES OF CONSOLIDATION Community Financial Group, Inc. (CFGI), a Tennessee corporation, is a bank holding company operating according to federal bank holding company law. It owns The Bank of Nashville (The Bank), TBON-Mooreland Joint Venture, LLC and a majority interest in The Bank's subsidiary Machinery Leasing Company of North America, Inc., (BON Leasing). The accompanying unaudited consolidated financial statements include the accounts of CFGI, The Bank and its subsidiaries Mooreland Title and BON Leasing, the operations of which are collectively referred herein as the Company. All significant intercompany balances and transactions have been eliminated in the accompanying consolidated financial statements. The accompanying unaudited consolidated financial statements have been prepared in accordance with general practices within the banking industry and generally accepted accounting principles for interim financial information. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments consisting of normal recurring accruals considered necessary for a fair presentation of interim results have been included. Certain prior year amounts have been reclassified to conform with the current year presentation. The interim consolidated financial statements should be read in conjunction with the Summary of Significant Accounting Policies and the Notes to the Financial Statements presented in the Company's 1999 Annual Report to Shareholders. The results for the interim period are not necessarily indicative of results to be expected for the complete calendar year. B. JOINT VENTURE AND BUSINESS COMBINATIONS In April, 1999, The Bank formed TBON-Mooreland Joint Venture, LLC. The new company, a joint venture of The Bank and Mooreland Title Company, LLC, will provide title services within the office of Mooreland Title. This new title agency has the ability to underwrite title insurance on most real estate loan transactions. The Bank owns 100% of the title agency and consolidates all of its operations, and participates in a revenue sharing agreement with Mooreland for 50% of the revenue. On June 18, 1999 The Bank of Nashville acquired 80% ownership in Machinery Leasing Company of North America, Inc. for $1.3 million in cash. The transaction has been accounted for using the purchase method of accounting and closed in June 1999. The leasing company is included in the consolidated financial statements of The Bank. The primary asset acquired was the equipment lease portfolio of approximately $6.0 million. The total premium and goodwill recorded in the transaction was $676,000. During the three and six month periods ended June 30, 2000 approximately $41,000 and $82,000 of amortization expense was recorded. Minority interest expense of $13,000 and $23,000 is included in other operating expenses for the three and six months ended June 30, 2000, respectively. C. SECURITIES Securities with an aggregate fair market value of $39.9 million at June 30, 2000, were pledged to secure public deposits, Federal Home Loan Bank borrowings and for other purposes as required or permitted by law. -6- 9 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) D. ALLOWANCE FOR LOAN LOSSES An analysis of the changes in the allowance for loan losses follows (in thousands):
Three Months Six Months Ended Ended June 30, June 30, 2000 2000 ------- ------- Balance, beginning of period $ 4,260 $ 4,062 Provision charged to operations 237 447 Loans charged off (117) (176) Recoveries 32 79 ------- ------- Balance, end of period $ 4,412 $ 4,412 ======= ======= Allowance ratios are as follows: Balance, to loans outstanding end of period 1.90% 1.90% Net charge-offs to average loans .04% .05%
E. INCOME TAXES Actual income tax expense for the three and six months ended June 30, 2000 differed from "expected" tax expense (computed by applying the U.S. Federal corporate tax rate of 34% to income before income taxes) as follows (in thousands):
Three Months Six Months Ended June 30, Ended June 30, --------------- ----------------- 2000 1999 2000 1999 ---- ---- ------ ---- Computed "expected" tax expense $467 $454 $ 923 $887 State tax expense, net of federal benefit 55 53 109 104 Other -- 17 -- 4 ---- ---- ------ ---- Total Income Tax Expense $522 $524 $1,032 $995 ==== ==== ====== ====
-7- 10 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) E. INCOME TAXES - Continued The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at June 30, 2000 and December 31, 1999, are presented below (in thousands):
June 30, December 31, 2000 1999 ------- ------- Deferred tax assets: Unrealized loss on securities available for sale $ 669 $ 604 Deferred fees, principally due to timing differences in the recognition of income 224 207 Net operating loss carryforwards 241 195 Premises and equipment, principally due to differences in depreciation methods 28 22 Other 102 12 ------- ------- Total gross deferred tax assets 1,264 1,040 ------- ------- Deferred tax liabilities: Discount on securities deferred for tax purposes (76) (57) Loans, principally due to provision for loan losses -- (57) Leases, principally due to difference in basis acquired and the recognition of income (219) (234) Other (121) (104) ------- ------- Total gross deferred tax liabilities (416) (452) ------- ------- Net deferred tax asset $ 848 $ 588 ======= =======
-8- 11 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) F. SHAREHOLDERS' EQUITY The Company had outstanding stock options totaling 428,177 and 248,177 shares at June 30, 2000 and December 31, 1999, respectively. The following table is a reconciliation of net income and average shares outstanding used in calculating basic and diluted earnings per share.
Three Months Ended Six Months Ended ------------------------- ------------------------- June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net income available to common shareholders: $ 851,000 $ 810,000 $1,683,000 $1,615,000 ========== ========== ========== ========== Weighted average basic common shares outstanding 3,632,421 4,126,769 3,753,737 4,172,282 Dilutive effect of Options 16,690 51,439 30,956 42,441 ---------- ---------- ---------- ---------- Weighted average diluted common shares outstanding 3,649,111 4,178,208 3,784,693 4,214,723 ========== ========== ========== ========== Antidilutive options 175,377 44,377 175,377 44,377 ========== ========== ========== ========== Net income per share: Basic $ .23 $ .20 $ .45 $ .39 Diluted $ .23 $ .19 $ .44 $ .38
Accumulated other comprehensive income consists solely of the unrealized gain or loss on securities available for sale net of the income tax effect. G. COMMITMENTS AND CONTINGENCIES In the normal course of business, there are various commitments outstanding to extend credit, such as the funding of undrawn lines of credit or standby letters of credit, which generally accepted accounting principles do not require to be recognized in the financial statements. The Company, through regular reviews of these arrangements, does not anticipate any material losses as a result of these transactions. At June 30, 2000 and December 31, 1999, the Company had unfunded commitments to extend credit totaling $69.8 million and $66.3 million, respectively. Additionally, the Company had standby letters of credit of $4.3 million and $3.5 million as of June 30, 2000 and December 31, 1999, respectively. The Bank is required to maintain average balances with the Federal Reserve Bank and in vault cash to meet its reserve requirements. The average amount of these balances at the Federal Reserve Bank and vault cash for the three and six months period ended June 30, 2000, totaled approximately $4,079,000 and $4,100,000, respectively. The required balance at June 30, 2000 was $3,904,000. -9- 12 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Community Financial Group, Inc. (CFGI), is a registered bank holding company under the Federal Reserve Holding Company Act of 1956, as amended. CFGI owns The Bank of Nashville (The Bank) and its subsidiaries, all of which are collectively referred to as the Company. The Bank owns TBON-Mooreland Joint Venture, LLC and a majority interest in Machinery Leasing Company of North America, Inc. (Bon Leasing). The following discussion compares the Company's financial condition at June 30, 2000 and December 31, 1999, and results of operations for the three month and six month periods ended June 30, 2000, compared with the same periods in 1999. The purpose of the discussion is to focus on important factors affecting the Company's financial condition and results of operations. Reference should be made to the consolidated financial statements (including the notes thereto), presented elsewhere in this report for an understanding of the following discussion and analysis. The consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary for fair presentation of results of interim periods. The results for interim periods are not necessarily indicative of results to be expected for the complete calendar year. References should also be made to the Company's 1999 Annual Report for a more complete discussion of factors that impact the results of operations, liquidity and capital. To the extent that statements in this discussion relate to the plans, objectives, or future performance of the Company, these statements may be deemed to be forward looking statements within the meaning of the Private Security Litigation Reform Act of 1995. Such statements are based on management's current expectations and the current economic environment. Actual strategies and results of future periods may differ materially from those currently expected due to various risks and uncertainties. During the second quarter of 2000, the Company announced the election of J. Hunter Atkins as President and Chief Executive Officer of both the Company and The Bank. Mr. Atkins' election followed an announcement during first quarter of 2000 that the Company planned to pursue a management succession plan and expand its management team. The Board of Directors then formed a search committee to seek a highly qualified individual to assume the responsibilities of President and Chief Executive Officer stating that Mack S. Linebaugh, Jr. would remain as Chairman of the Board of Directors of both the Company and The Bank. Mr. Atkins joined the Company on June 19, 2000. He has over 27 years of banking experience in the Nashville community and most recently served as City President for AmSouth Bank from 1994 through 1999 until his appointment as Consumer Banking Manager for Amsouth Bank in Middle Tennessee. The addition of Mr. Atkins strengthens the Company's management team and positions it to take advantage of market opportunities to further expand existing lines of business while adding appropriate new lines of business. During the remainder of 2000, there are plans to expand or establish new lines of business including private banking, consumer banking and residential lending. The Company has executed a lease to establish a new branch office in the Cool Springs area at the corner of Baker Bridge Road and Carothers Road which is expected to open in early 2001. The Company has entered into a lease agreement to install an ATM cash dispenser in the new downtown Hilton Suites Hotel scheduled for opening in September, 2000. Additionally, the Company has executed a lease to expand its presence in downtown Nashville through the addition of 11,123 square feet of contiguous space in the building adjacent to L&C Tower which formerly housed the Nashville Area Chamber of Commerce. During the first half of 2000, the Company continued the expansion of its leasing business through Bon Leasing and of its investment services through its relationship with LMFP, Inc. The Bank operates from its Main Office at 401 Church Street in Nashville as well as three full-service traditional branches, one located at the Glendale Center in Green Hills, one at Maryland Farms in Brentwood and the other on Gallatin Road in Hendersonville. The addition of a Cool Springs Office will bring the total number of traditional banking locations to five. Management plans to continue to seek attractive branch locations to further expand its delivery systems and increase its market share. Additional branch services are provided through full-service mobile branches, "Bank-on-Call", which was established in 1996 and which has expanded in each subsequent year. Bank-on-Call provides the convenience of "at your door" banking service to customers. Additionally, The Bank has expanded its delivery systems through full-service ATMs, cash dispensers, cash management services and "Bank-on-Line" Internet banking service. The Company has offered Internet banking services to its consumer clients since early 1999 and recently introduced a complete array of Internet banking services for commercial customers that includes basic Internet banking, bill payment services as well as full cash management services including ACH origination. During 1999 and 2000, the Company approved and implemented two separate stock repurchase plans. As of June 30, 2000, the Company had repurchased 350,500 shares pursuant to the second repurchase agreement approved by the Board of Directors on March 15, 2000. This brings the total number of shares repurchased as of June 30, 2000 to 750,500 shares with an additional 149,500 shares remaining as approved for repurchase under the second agreement which expires December 31, 2000. -10- 13 PERFORMANCE OVERVIEW For the quarter ended June 30, 2000, net income totaled $851,000, a $41,000 or 5.1% increase over the $810,000 of net income reported the second quarter of 1999. Earnings in the second quarter of 2000 were positively impacted by income from BON Leasing, earnings on investments and increased income from investment services offered in conjunction with LMFP, Inc. Earnings were further impacted by increased expenses resulting from a $234,000 increase in provision expense for loan losses, $20,000 additional advertising expense and $251,000 in additional salaries and employee benefit expense resulting from increased number of personnel. Basic earnings per share were $.23 in the second quarter of 2000, compared to $.20 for the same period in 1999. Diluted earnings per share were $.23 in the second quarter 2000, compared to $.19 for the same period in 1999. The increase in earnings per share resulted from an increase in net income and a reduction in the number of shares outstanding due to the Company's stock repurchase plans. Reference should be made to Note F regarding computation of earnings per common share. During the second quarter of 2000, the Company recorded $237,000 in provision for loan losses, compared to $3,000 during the second quarter of 1999. This increased provision was appropriate considering the Company's overall growth in loans outstanding. The Company recorded net charge-offs of $85,000 in the second quarter of 2000, compared to net recoveries of $155,000 for same period in 1999. The allowance for loan losses was 1.90% of loans at June 30, 2000, compared with 2.13% for the same period in 1999. The Company's annualized return on average assets was 1.08% for the second quarter of 2000, compared to 1.30% for the second quarter of 1999. The decline in return on average assets was the result of a $66.4 million increase in average assets during the second quarter of 2000 compared to the same period in 1999. Annualized return on average equity was 7.79% for the second quarter of 2000 and 6.48% for the same period in 1999. The increase in return on average equity resulted from a $7.5 million decrease in average equity resulting from the Company's stock repurchase plans, an increase of $.04 per share in the dividend paid and a increase of $41,000 in net income for the second quarter of 2000 compared with the same period in 1999. The Company's non-performing assets were $1,122,000 at June 30, 2000, compared to $464,000 at June 30, 1999 and $291,000 December 31, 1999. Total loans, net of unearned income, were $232.2 million at June 30, 2000, an increase of $51.3 million or 28.4% from June 30, 1999, and an increase of $26.7 million, or 13.0%, from December 31, 1999. Net income for the six months ended June 30, 2000, was $1,683,000 compared with net income of $1,615,000 during the first six months of 1999. Basic earnings per share were $.45 for the six months ended June 30, 2000, up $.06 or 15.4%, from $.39 for the same period in 1999. Diluted earnings per share were $.44 for the six month period ended June 30, 2000, compared to $.38 for the same period in 1999. Net interest income increased $1,342,000, or 24.7%, during the first six months of 2000 compared with the same period in 1999. The increase in net interest income reflected the Company's loan growth and increased yields on investment securities and loans. The increase was partially offset by an increased reliance on interest bearing liabilities as capital declined due to the Company's stock repurchase plans as well as an increased cost of funds that resulted from a rising rate environment. Non-interest income increased $47,000, or 3.8%, during the first six months of 2000, compared with the same period in 1999. The increase in non-interest income resulted primarily from increases in investment center income and service fee income. These increases in non-interest income were partially offset by decreases in trust income and losses on sales of securities compared to 1999. Non-interest expense increased $885,000 during the first six months of 2000, compared to the same period in 1999. Increases in non-interest expense occurred in salaries and employee benefits, occupancy expense, advertising expense, data processing and other operating expense. These increases were partially offset by a slight decline in audit tax and accounting expense which were higher during 1999 due to Year 2000 related audit expense. It is expected that non-interest expense will continue to increase in future periods as the Company implements its strategic plan which includes the expansion of its banking services through additional locations, new products and services as well as continuing to consider entering additional related lines of business, as appropriate. The Company's annualized return on average assets was 1.09% for the six months ended June 30, 2000, and 1.32% for the same period in 1999. Annualized return on average equity was 7.39% for the six months ended June 30, 2000, compared with 6.42% for the same period in 1999. The increase in annualized return on average equity reflected the Company's increased net income and a reduction in average equity that resulted from the Company's stock repurchase plans. -11- 14 NET INTEREST INCOME Net interest income is the principal component of the Company's income stream and represents the difference or spread between interest generated from earning assets and interest paid on interest bearing liabilities. Fluctuations in interest rates, as well as volume and mix changes in earning assets and interest bearing liabilities, materially impact net interest income. Net interest income before provision for loan losses for the second quarter of 2000 was $3.4 million, an increase of $.5 million or 18.2% compared to the second quarter in 1999. The increase in net interest income resulted from a change in the mix of earning assets, a 27.0% increase in the volume of average earning assets and an increase of 89 basis points in the average rate on average earning assets. These changes were somewhat offset by a 38.2% increase in average interest bearing liabilities and an increase of 116 basis points in the average rate paid on these liabilities. The increase in the volume of average earning assets may be attributed to a $55.3 million increase in average loans outstanding, an increase of $6.0 million in average investments and an increase of $3.2 million in the average volume of federal funds sold. The mix of assets changed during the second quarter of 2000, compared to the same period in 1999, as the percentage of average loans (the Company's highest yielding asset) to average earning assets increased from 70.8% to 74.0%. Average investments represented 24.6% of average earning assets in the second quarter of 2000 compared to 28.7% for the same period in 1999. Net interest income was also impacted by a shift in the mix of interest bearing liabilities during the second quarter of 2000 compared to the same period in 1999. The average volume of NOW accounts increased $4.5 million, or 34.7%, certificates of deposit less than $100,000 increased $30.5 million, or 113.7%, certificates of deposit $100,000 or greater increased $41.2 million, or 153.5 %, while federal funds purchased decreased $8.3 million, or 73.0%. The increase in average certificates of deposit was a result of the Company's successful advertising campaign during the summer of 1999 as well as customers increasing their investments in certificates of deposit due to higher yields available in a rising rate environment. During the second quarter of 2000, compared with the same period in 1999, the average rate on certificates of deposit $100,000 or greater increased 93 basis points, average rate on certificates of deposit less than $100,000 increased 80 basis points, average rate on money market accounts increased 116 basis points, average rate on NOW accounts increased 39 basis points, average rate on Federal Home Loan Bank and other borrowings increased 111 basis points and the average rate on federal funds purchased increased 171 basis points. The increases in rates paid on interest bearing liabilities as well as the increases in the average yield on average earnings assets reflect actions taken by the Federal Reserve Bank to increase interest rates and slow the growth of the economy. The net interest margin (net interest income expressed as a percentage of average earning assets) was 4.52% and 4.86% for the quarters ended June 30, 2000 and 1999, respectively. The decline in net interest margin resulted primarily from the Company increasing its reliance on interest-bearing liabilities as a source of funding subsequent to lowering its capital as a result of the Company's stock repurchase plans. Fluctuations in net interest margin were also affected by the differences in the interest rate sensitivity of the Company's earning assets and interest bearing liabilities. Net interest income for the first six months of 2000 was $6.8 million, an increase of 24.7%, compared to $5.4 million during the first six months of 1999. The increase in net interest income during the first six months of 2000 resulted from an increase of 26.4% in the volume of average earning assets, a change in the mix of earning assets and an increase of 96 basis points in the average rate earned on average earning assets. Net interest income was also impacted by an increase of 36.9% in the average volume of interest bearing liabilities and an increase of 93 basis points on the average rate paid on interest bearing liabilities. The change in the mix of earning assets reflected loans increasing by 35.5%, investments increasing by 9.6% while federal funds sold declined 29.1%. Further impacting net interest income was a shift in the mix of average interest bearing liabilities which reflected an increase of 119.1% in higher rate certificates of deposit $100,000 or greater, 109.8% in certificates of deposit less than $100,000, 25.7% in NOW accounts, 17.1% in Federal Home Loan Bank and other borrowings while federal funds purchased declined 65.9%. The shift in the mix of the Company's deposit products from lower rate money market and NOW accounts to higher rate certificates of deposit reflected results of a certificate of deposit advertising campaign conducted during the summer of 1999, increased interest by consumers in investing in certificates of deposit in a rising rate environment and a reduction in the Company's equity capital as a result of the stock repurchase plans. -12- 15 The net interest margin (net interest income expressed as percentage of average earning assets) was 4.59% for the six month period ended June, 2000, compared to 4.65% for the same period in 1999. The decline in net interest margin resulted primarily from the need to utilize interest bearing liabilities for funding sources as capital decreased while The Bank implemented its stock repurchase plans. The Asset Liability Committee (ALCO) of the Board of Directors and management of the Company continued to review various strategies to improve net interest income including the implementation of future leveraging strategies, if deemed appropriate. Average borrowings remained relatively level during the first 6 months of 2000 compared to the same period in 1999; however, it is anticipated that there will be increased levels of borrowed funds in the future to support the Company's loan growth. Liquidity and asset liability strategies include the utilization of borrowings from the Federal Home Loan Bank or drawing on lines of credit established with correspondent banks to satisfy liquidity or funding needs. At June 30, 2000, the Company had borrowings from the Federal Home Loan Bank which totaled $14.5 million. NON-INTEREST INCOME Non-interest income was $660,000 for the second quarter of 2000, compared with $609,000 for the same period in 1999. Non-interest income, excluding losses on sale of securities, increased $46,000 during the second quarter of 2000 compared with the same period of 1999. There were no gains or losses on sale of securities during the second quarter of 2000, compared to losses on sale of securities of $5,000 for the same period in 1999. During the second quarter of 2000, compared to the same period in 1999, service charge income increased $23,000 and investment center income increased $30,000. These increases were slightly offset by a decline in other income. Total non-interest income was $1,277,000 for the first 6 months of 2000, compared with $1,230,000 for the same period in 1999. Non-interest income, excluding losses on sale of securities of ($34,000) in 2000 and ($5,000) in 1999, increased $76,000 for the first six months of 2000, compared with the same period in 1999. This increase resulted from an increase of $74,000 in investment center income and $23,000 in service fee income. These increases were partially offset by declines of $13,000 in trust income and $8,000 in other income. The increase in investment center income reflects the Company's continued efforts to expand its investment services. It is anticipated that additional emphasis will be placed in this area in future periods and further expansions may be anticipated. Additionally, the Company has plans to establish a new branch office in the Cool Springs area in late 2000 or early 2001 and additional branch offices maybe opened in future periods. NON-INTEREST EXPENSE Total non-interest expense increased $304,000, or 14.1%, during the second quarter of 2000, compared with the second quarter of 1999. This increase was the result of increases of $251,000 in salaries and employee benefits, $4,000 occupancy expense, $20,000 in advertising expense, $5,000 in data processing expense and $36,000 in other operating expense. These increases were partially offset by a decline of $12,000 in audit tax and accounting expense primarily related to 1999 expenses for Year 2000. The increases in salaries and employee benefits and occupancy expense resulted from the Company's expansion of its number of employees, primarily in the loan area. Increased advertising expenses resulted from an advertising campaign conducted during the second quarter of 2000. As the Company continues its expansion and growth plans within The Bank, additional expenses are anticipated in these and other areas. Total non-interest expense increased $885,000, or 22.1%, during the first six months of 2000, compared with the same period of 1999. This increase in non-interest expense consisted of an increase of $539,000 in salaries and employee benefits, $110,000 in occupancy expense, $34,000 in advertising expense, $10,000 in data processing expense and $213,000 in other operating expense. There was a reduction of $21,000 in audit tax and accounting expense during the first six months of 2000, compared to the same period in 1999. The increase in other operating expenses resulted primarily from an increase of $112,000 in expenses related to expansion of the Company's business accounts receivable financing and home equity loan programs. At June 30, 2000, the Company had 90 employee's (one employee per $3.6 million in assets), compared with 71 employees (one employee per $4 million in assets) at June 30, 1999. Plans for the remainder of year 2000 include continued expansion in lending and support areas of the Company's commercial banking activities, expansion of consumer banking services, and further expansion of the Company's investment center services. It is expected that the Company's non-interest expense will also increase during the remainder of 2000 due to technology investments. It should be noted that economic conditions and other factors in the market could further impact non-interest expense. -13- 16 INCOME TAXES During the second quarter of 2000, the Company recorded provision for income taxes of $522,000, compared to $524,000 during the same period in 1999. During the first six months of 2000, the Company recorded provisions for income taxes of $1,032,000, an increase of $37,000, or 3.7%, compared to $995,000 recorded for the same period of 1999. The effective tax rate for each period was 38%. NON-PERFORMING ASSETS AND RISK ELEMENTS Non-performing assets, which include non-accrual loans, restructured loans and other real-estate owned, were $1,122,000 at June 30, 2000, compared with $291,000 at December 31, 1999 and $464,000 at June 30, 1999. The increase in non-performing assets includes two loans placed on non-accrual in the first six months of 2000. The Company maintains an allowance for loan losses at a level which, in management's evaluation, is adequate to cover estimated losses on loans based on available information at the end of each reporting period. Consideration in establishing the allowance includes historical net charge-offs, changes in the credit risk, mix and volume of the loan portfolio, and other relevant factors, such as the risk of loss on particular loans or leases, the level of non-performing assets and current and forecasted economic conditions. The Company recorded expense for provision for loan losses during the second quarter of 2000 in the amount of $237,000 compared to $3,000 during the same period of 1999. Due to significant growth in the loan portfolio and an increase in the level of non-performing assets, it was deemed appropriate to make an increased provision for loan losses during the second quarter of 2000. Net charge-offs during the second quarter of 2000 were $85,000 compared with net recoveries of $155,000 during the same period in 1999. During the second quarter of 1999 there was one recovery of $450,000 from a loan charged-off in a prior period that resulted in the Company experiencing net recoveries for the period. There were no loans 90 days or more past due and still accruing interest at June 30, 2000 or June 30, 1999. Other potential problem loans at June 30, 2000 totaled approximately $392,000 compared with $513,000 at June 30, 1999, and $349,000 at December 31, 1999. Other potential problem loans consist of loans that are currently not considered non-performing, but where information about possible credit problems has caused the Company to have concerns as to the ability of the borrower to fully comply with present repayment terms. Depending on economic changes and future events, these loans and others, which may not be presently identified, could become future non-performing assets. The composition of non-performing assets at June 30, 2000, was 100% in non-accrual loans compared to 100% in non-accrual loans at December 31, 1999 and 88.8% in non-accrual loans and 11.2% in other real estate owned at June 30, 1999. The allowance for loan losses was $4.4 million at June 30, 2000, compared with $3.9 million at June 30, 1999, and $4.1 million at December 31, 1999. The level of this allowance and the amount of the provision are determined on a quarter by quarter basis, and, given the inherent uncertainties in the estimation process, no assurance can be given as to the amount of the allowance at any future date. As of June 30, 2000, the allocated and unallocated portions of the allowance were $3.4 million and $1.0 million, respectively. The unallocated portion of the reserve represented 22% at June 30, 2000 compared to 24% at March 31, 2000 and is deemed appropriate considering the current level of loans and overall asset quality reflected in the portfolio. MARKET RISK MANAGEMENT Market risk is the risk of loss from adverse changes in market prices and rates. The Company's market risk results primarily from interest rate risk inherent in its lending and deposit taking activities. To that end, management actively monitors and manages its interest rate risk exposure. The Company's profitability is affected by fluctuations in interest rates. A sudden and substantial movement in interest rates may adversely impact the Company's earnings to the extent that the interest rates borne by assets and liabilities do not change at the same speed, to the same extent, or on the same basis. The Company monitors the impact of changes on interest rates on its net interest income using several tools. At least quarterly, the Asset Liability Committee (ALCO) of the Board of Directors reviews interest rate risk considering results compared to policy, current rate and economic outlook, loan and deposit demand levels, pricing and maturity of assets and liabilities, impact on net interest income under varying rate scenarios, regulatory developments, comparison of modified duration of both assets and liabilities as well as any -14- 17 appropriate strategies to counteract adverse interest rate projections. The Company's imbalance between the duration of assets and liabilities is limited to under one year and generally should not exceed one-half year. One measure of the Company's exposure to changes in interest rates between assets and liabilities is shown in the Company's June 30, 2000 gap table below:
Expected Repricing or Maturity Date ----------------------------------------------------------------- Within One Three After One to Three to Five Five (Dollars In Thousands) Year Years Years Year Total - ---------------------------------------------------------------------------------------------------- Assets Securities $ 19,764 $ 17,411 $15,088 $27,206 $ 79,469 Average rate 6.80% 6.76% 6.76% 6.71% 6.75% Loans 137,561 34,059 45,309 15,261 232,190 Average rate 9.66% 8.78% 8.33% 8.36% 9.19% Federal funds sold and cash 1,442 -- -- -- 1,442 Average rate 6.30% -- -- -- 6.30% - ---------------------------------------------------------------------------------------------------- Total interest-earning assets 158,767 51,470 60,397 42,467 313,101 Liabilities Deposits 228,015 14,094 -- -- 242,109 Average rate 5.54% 6.20% -- -- 5.58% Federal Home Loan Bank and other borrowings 16,319 -- -- -- 16,319 Average rate 6.38% -- -- -- 6.38% - ---------------------------------------------------------------------------------------------------- Total interest-bearing liabilities 244,334 14,094 -- -- 258,428 - ---------------------------------------------------------------------------------------------------- Interest rate sensitivity gap $ (85,567) $ 37,376 $60,397 $42,467 ==================================================================================================== Cumulative interest rate sensitivity gap $ (85,567) $(48,191) $12,206 $54,673 ====================================================================================================
In the table shown above the carrying amount of interest rate sensitive assets and liabilities is presented in the periods in which they next reprice to market or mature and is summed to show the interest rate sensitivity gap. To reflect anticipated prepayments, certain investments are included in the table based on estimated rather than contractual maturity dates. Management recommends appropriate levels of interest rate risk to be assumed within limits approved by the Board of Directors regarding the maximum fluctuations acceptable in the market value of equity and in earnings, assuming sudden rate movements (rising or falling) up to 200 basis points. The Company's policy establishes a maximum change in annual pre-tax net interest income with a 200 basis point change in rates to 15% while establishing a maximum change allowable in pre-tax market value of equity to 16% in the same assumed rate environment. The Company's primary objective in managing interest rate risk is to minimize the adverse impact of changes in interest rates on the Company's net interest income and capital while structuring the Company's assets and liabilities to obtain the maximum yield-cost spread. The Company relies primarily on its asset liability structure to control interest rate risk. Based on June 30, 2000, financial statements, a 200 basis point change in rates would produce net interest income variations of a 2.3% increase assuming rising rates and a 1.2% increase assuming falling rates. Additionally, the 200 basis point rate shock would produce changes in the market value of equity reflecting a decrease of 8.1% assuming rising rates and 8.8% increase assuming falling rates. -15- 18 BALANCE SHEET The Company's total assets at June 30, 2000, were $327.6 million, an increase of $19.5 million, or 6.3%, from December 31, 1999. This increase was due to a $26.7 million increase in total loans outstanding, a $4.6 million increase in securities, and a $.6 million increase in accrued interest and other assets. These increases were partially offset by decreases of $13.0 million in federal funds sold and $.1 million in premises and equipment. Total deposits at June 30, 2000, were $266.2 million, an increase of $37.1 million, or 16.2%, from $229.1 million at December 31, 1999. The increase in deposits was comprised of a $31.7 million increase in time certificates $100,000 or greater, a $5.6 million increase in non-interest bearing demand deposits, a $1.2 million increase in NOW accounts, and a $.2 million increase in time certificates less than $100,000. These increases were slightly offset by a decline in money market accounts of $1.7 million. Borrowed funds decreased $13.2 million at June 30, 2000 from December 31, 1999. This decrease was comprised primarily of Federal Home Loan Bank borrowings. Shareholder's equity decreased $5.0 million to $42.3 at June 30, 2000, from $47.3 at December 31, 1999. This decrease is discussed further in the section entitled Capital Adequacy and Liquidity. Unrealized losses on securities available for sale, net of income taxes, were $1.1 million dollars at June 30, 2000, compared to unrealized losses on securities available for sale, net of income taxes, of $1.0 million at December 31, 1999. Changes in unrealized gains/losses on securities available for sale are the result of adjustments for SFAS No. 115 reflecting current fair value on investment securities classified as available for sale. CAPITAL ADEQUACY AND LIQUIDITY The Company's capital position continued to remain strong during the first six months of 2000. Shareholders equity (excluding other comprehensive income) at June 30, 2000, was $43.4 million, or 13.2% of total assets, which compares with $48.3 million, or 15.7% of total assets at December 31, 1999. This calculation, when conducted after the effect of the Company's adoption of Statement of Financial Accounting Standards (SFAS) No. 115, was $42.3 million, or 12.9%, at June 30, 2000, which compares with $47.3 million, or 15.4% of total assets at December 31, 1999. The decrease in total equity during 2000 primarily resulted from the Company having repurchased shares of its stock under stock repurchase plans authorized by the Board of Directors. The decline in capital as a percentage of total assets resulted from this repurchase of stock, dividends paid, and a growth of 6.3% in total assets during the first 6 months of 2000. These factors were partially offset by increased earnings. Certain capital statistics are shown in the following chart:
June 30, December 31, (Dollars in Thousands) 2000 1999 --------------------- -------- -------- Total assets $327,594 $308,106 ======== ======== Total shareholders' equity $ 42,292 $ 47,315 ======= ======= Total shareholders' equity to total assets 12.9% 15.4% ==== ====
The additional capital generated in 1998 from the exercise of warrants continues to provide opportunities for the Company during 2000. During the past 2 years the Company has experienced several changes in its capital structure as in December 1998, 2.0 million warrants, each representing the right to acquire a common share of stock at a price of $12.50, were exercised resulting in the addition of $25.0 million in new equity capital and the implementation of Stock Repurchase Plans in 1999 and 2000. At June 30, 2000, the Company has repurchased 750,500 shares under these plans. Additional capital was utilized in 1999 to purchase the majority interest in Bon Leasing. Also, the Company continues to expand internally as indicated by the expansion of loan area through the addition of loan officers and support personnel, the addition of a Private Banking area in June 2000, and current plans to establish additional branch locations. The Company plans to continue the deployment of capital through further expansion of its existing lines of businesses and by making investments in other appropriate long term business opportunities. -16- 19 The Company's capital ratios continued to exceed all regulatory requirements reflecting a significant amount of excess capital based on industry standards and Federal Deposit Insurance Corporation Improvement Act ("FDICIA") minimum ratios. The Company reported dividend payments of $1,311,000 during the first six months of 2000 compared with $844,000 for the same period in 1999. The quarterly dividend payments during the first and second quarters of 1999 were $.07 and $.13 per share, respectively, which compares with quarterly dividend payments of $.17 per share in each of the first two quarters of 2000. It should be noted that increases in dividend payment amounts per share combined with the reduction in shares outstanding as a result of the stock repurchase plan affect the total amount of dividends paid. At June 30, 2000, the Company's Tier I and total capital ratios to adjusted assets were 16.80% and 14.90%, respectively, while its total risk based capital ratio was 18.05%. These ratios compare to Tier I and total capital ratios to adjusted assets of 21.12% and 16.13%, respectively, at December 31, 1999 and a risk based capital ratio at December 31, 1999 of 22.37%. Federal Deposit Insurance Corporation Improvement Act minimum, primary and total capital ratios for "Well Capitalized" banks are 4% and 8%, respectively. The Company's principal sources of asset liquidity are marketable securities available for sale and federal funds sold, as well as maturities of securities. The estimated average maturity of securities was 5.45 years at June 30, 2000, compared to 8.28 years at December 31, 1999. At June 30, 2000 and December 31, 1999, all securities were classified as available for sale. Securities available for sale were $79.4 million at June 30, 2000, compared to $74.9 million at December 31, 1999. Federal funds sold at June 30, 2000 were $3.9 million compared to $14.3 million at December 31, 1999. Core deposits, a relatively stable funding base, comprised 69.9% of total deposits at June 30, 2000, and 78.9% at December 31, 1999. The change in this percentage reflects significant growth in non-core deposits resulting from a single large transaction that occurred in June 2000 with one of the company's commercial customers. It is expected that the balances maintained in Certificates of Deposit $100,000 or greater (non-core deposits) by this business customers will be reduced in future periods. Core deposits represent total deposits excluding time certificates of $100,000 or greater. -17- 20 PART II OTHER INFORMATION ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the Company's annual meeting of shareholders held on Tuesday, May 6, 2000 the following items were voted on are herein incorporated by reference to the Proxy Statement for the annual meeting of shareholders previously filed with the Commission. 1. Election of Directors - Election of Class II Directors: Jo D. Federspiel, Richard H. Fulton; Perry W. Moskovitz 2. To transact such other business as may properly be brought the Annual meeting or any adjournments thereof. The following reflects the vote of the shareholders of the items noted above:
Item # Affirmative Negative Abstain ------ ----------- -------- ------- 1. 3,390,227
* Included in the affirmative votes are negative votes against specific Directors disclosed as follows: Jo D. Federspiel 125,262 Richard H. Fulton 79,280 Perry W. Moskovitz 135,054 ------- 339,596 =======
Affirmative Negative Abstain Non-Voting ----------- -------- ------- ---------- 2. Transact other business 3,282,471 171,096 15,940 439,184
ITEM 5. - OTHER INFORMATION Management Changes - Attilio Galli to become Senior Vice President and Chief Financial Officer of both The Company and The Bank effective August 21, 2000. - Mack S. Linebaugh, Jr. resigns as an officer of both The Company and The Bank effective September 13, 2000. - Anne J. Cheatham resigns as Senior Vice President Bank Administration of both The Company and The Bank effective September 13, 2000. - T. Wayne Hood resigns as Senior Vice President and General Counsel of both The Company and The Bank effective September 13, 2000. -18- 21 ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K (A) Exhibits Exhibit No. Description - ----------- ----------- 10.24 Second Amendment to the Lease Agreement dated June 20, 2000 between The Bank of Nashville and LC Tower, LLC. 11 Statement regarding computation of earnings per share. 27 Financial Data Schedule (for SEC use only) (B) The following reports on Form 8-K were filed during the quarter ended June 30, 2000. June 5, 2000 announcing J. Hunter Atkins as the new President and Chief Executive Officer of The Bank of Nashville and Community Financial Group, Inc. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. COMMUNITY FINANCIAL GROUP, INC. ------------------------------- Registrant August 11, 2000 /s/ J. Hunter Atkins - --------------- ------------------------------------------- Date J. Hunter Atkins President, Chief Executive Officer and Chief Financial Officer -19- EX-10.24 2 ex10-24.txt 2ND AMENDMENT TO LEASE AGREEMENT 1 EXHIBIT 10.24 SECOND AMENDMENT TO LEASE AGREEMENT THE BANK OF NASHVILLE L & C TOWER NASHVILLE, TENNESSEE JUNE 20, 2000 This Second Amendment to the Lease Agreement ("Second Amendment") dated and effective this 20th day of June, 2000 by and between The Bank of Nashville ("Tenant") and LC Tower, LLC, successor in interest to Metropolitan Life Insurance Company ("Landlord") is hereby made a part thereof of the Lease Agreement dated July 19, 1989 as amended by the Letter Agreement dated March 29, 1993 ("Lease") as amended by the First Amendment to Lease dated April 13, 1999 ("First Amendment") by and between Landlord and Tenant. WHEREAS, Landlord and Tenant entered into the Lease and First Amendment for certain premises located on the second, third, and twenty-third floor and basement consisting of approximately 21,536 Square Feet Net Rentable Areas ("Premises") in the building commonly known as the L&C Tower located at 401 Church Street, Nashville, Tennessee 37219 ("Building"); and WHEREAS, Tenant desires to expand its Premises by an additional 11,143 Square Feet Net Rentable Area on the second floor ("Annex Premises") of the L&C Tower Annex located at 159 Fourth Avenue North ("Annex") for a period of ten (10) years commencing September 1, 2000 through August 31, 2010; and WHEREAS, Tenant desires to amend and extend its existing Lease Term for the period on its Premises for a period of one (1) year from September 1, 2009 through August 31, 2010; and WHEREAS, Landlord is willing to amend and extend the Lease under certain terms and conditions. Unless specifically defined herein, the terms used in the Second Amendment to Lease will have the meanings defined in the Lease. NOW, THEREFORE, in consideration of the foregoing and the mutual promises and covenants contained herein, and for other mutual benefits as noted herein, the receipt and sufficiency of which are hereby acknowledged, LC Tower, LLC, as Landlord and The Bank of Nashville, as Tenant wish to amend said Lease as follows: 2 The Bank of Nashville Second Amendment to Lease Page 2 of 11 - ------------------------- 1. The second paragraph of Article 1. LEASED PREMISES of the Lease and Paragraph 1 of the First Amendment is amended effective September 1, 2000 by deleting the existing language in its entirety and replacing with the following: Space on the Lower, Second, Third, and Twenty-third floor levels of the Building indicated as being part of the Leased Premises on the Floor Plans attached hereto as Exhibit A, which shall be deemed to contain a total of 21,536 square feet of Net Rentable Area (SF NRA) consisting of 6,865 SF NRA on the Second Floor ("Second Floor Premises"), 6,768 SF NRA on the Third Floor ("Third Floor Premises"), 3,713 SF NRA on the Lower Level / Basement ("Basement Premises") and effective November 1, 1999 on the twenty-third floor 4,190 SF NRA ("Twenty-third Floor Premises"). The Second Floor Premises, Third Floor Premises and Twenty-third Floor Premises shall collectively be referred to as "Tower Premises". Space on the Second floor of the Annex indicated as being part of the Leased Premises on the Floor Plans attached hereto as Exhibit A, which shall be deemed to contain a total of 11,143 square feet of Net Rentable Area (SF NRA). The Second Floor Annex Premises shall be referred to as "Annex Premises". The Tower Premises, Basement Premises and Annex Premises shall collectively be referred to as "Premises" or "Leased Premises". 2. Article 2. TERM. of the Lease and Paragraph 2. TERM. of the First Amendment is amended and extended as follows: EXTENDED TERM FOR TOWER PREMISES AND BASEMENT PREMISES. The extension on the existing Lease Term shall be for one (1) year, commencing on the 1st day of September, 2009 and ending on the 31st day of August, 2010 for the Tower Premises and Basement Premises unless sooner terminated or extended as provided herein. TERM FOR ANNEX PREMISES. The Annex Premises shall be for the term of ten (10) years, commencing on the 1st day of September, 2000 and ending on the 31st day of August, 2010, unless sooner terminated or extended as provided herein. The extended term for Tower Premises and Basement Premises and the term for Annex Premises are hereinafter collectively referred to as the "Leased Term" or "Term". No part of the "leased term" or "term" may be separated or be treated separately from any other part thereof. 3. Article 45. BROKERAGE. of the Lease and Paragraph 4 of the First Amendment is deleted in its entirety and replaced with the following: 3 The Bank of Nashville Second Amendment to Lease Page 3 of 11 - ------------------------- Tenant represents and warrants that is has not entered into any agreement with nor otherwise had any dealings with any broker, agent or other person in connection with the negotiation or execution of this transaction and that no broker, agent or other person brought about this transaction which could form the basis of any claim for a brokerage fee, commission or other form of compensation of any kind or nature, other than First Management Services, Inc. and Tenant agrees to indemnify and hold Landlord harmless from and against any claims (including attorneys fees, court costs and expenses) by any other broker, agent or other person claiming a commission or other form of compensation by virtue of having dealt with Tenant with regard to this leasing transaction. The provision of this paragraph shall survive the termination of this Lease. 4. Appendix A THE PREMISES of the Lease and Paragraph 6 of the First Amendment is amended effective September 1, 2000 by deleting the existing language and replacing with the following (see attached floor plans): Basement Floor Premises of the L&C Tower 3,713 SF NRA 3% common area factor included Second Floor Premises of the L&C Tower 6,865 SF NRA 3% common area factor included Third Floor Premises of the L&C Tower 6,768 SF NRA 3% common area factor included Twenty-third Floor Premises of the L&C Tower 4,190 SF NRA 12.5% common area factor included Second Floor Annex Premises of the L&C Tower Annex 11,143 SF NRA 3% common area factor included 4 The Bank of Nashville Second Amendment to Lease Page 4 of 11 - ------------------------- 5. Appendix B-1 RATE SCHEDULE of the Lease and Paragraph 7 of the First Amendment is amended to provide for the base rent beginning September 1, 1999 on the Tower and Basement Premises and September 1, 2000 for the Annex Premises:
2nd Floor 3rd Floor 23rd Floor Basement Annex Premises Premises Premises Premises Premises ---------- ---------- ---------- --------- ------------ 09/01/99 - 08/31/00 $17.40/RSF $15.00/RSF $13.50/RSF* $7.00/RSF 09/01/00 - 08/31/01 $17.75/RSF $15.30/RSF $13.77/RSF $7.00/RSF $15.30/RSF** 09/01/01 - 08/31/02 $18.10/RSF $15.61/RSF $14.05/RSF $7.00/RSF $15.61/RSF 09/01/02 - 08/31/03 $18.47/RSF $15.92/RSF $14.33/RSF $7.00/RSF $15.92/RSF 09/01/03 - 08/31/04 $18.83/RSF $16.24/RSF $14.61/RSF $7.00/RSF $16.24/RSF 09/01/04 - 08/31/05 $19.21/RSF $16.56/RSF $14.91/RSF $7.00/RSF $16.56/RSF 09/01/05 - 08/31/06 $19.60/RSF $16.89/RSF $15.20/RSF $7.00/RSF $16.89/RSF 09/01/06 - 08/31/07 $19.99/RSF $17.23/RSF $15.51/RSF $7.00/RSF $17.23/RSF 09/01/07 - 08/31/08 $20.39/RSF $17.57/RSF $15.82/RSF $7.00/RSF $17.57/RSF 09/01/08 - 08/31/09 $20.79/RSF $17.93/RSF $16.13/RSF $7.00/RSF $17.93/RSF 09/01/09 - 08/31/10 $21.21/RSF $18.29/RSF $16.45/RSF $7.00/RSF $18.29/RSF
*The Twenty-third Floor Premises' rent commencing November 1, 1999 shall increase to the next Lease Year's rate on September 1 of each subsequent Lease Year. ** Rent for the Annex Premises shall be abated for the period September 1-30, 2000. 6. Appendix C OPTIONS of the Lease and Paragraph 9 OPTION TO RENEW of the First Amendment is amended effective September 1, 2000 by deleting the existing language for Option to Extend, Option to Expand, Right of First Refusal, and Basement Vault and Anteroom in its entirety and replacing with the following OPTION TO RENEW: Provided Tenant is not in default on the date notice is given and at expiration of the term, Tenant shall have the right to extend the term for three (3) five-year renewal options for the Premises at a rate which shall be mutually determined by Landlord and Tenant as follows: If Tenant desires to exercise its Option to Renew, it shall notify Landlord no later than twelve (12) months prior to the expiration of the then current Term. Within one (1) month after such notification, Landlord shall notify Tenant of its determination of the current rate, which will include the Base Rent. If Tenant agrees with such determination, it shall so notify Landlord. If Tenant does not agree, then during the thirty (30) day period following Landlord's notice to Tenant of the rate, Landlord and Tenant shall negotiate to determine a mutually acceptable rate. If such parties are unable to reach agreement as to such rate within said thirty (30) day period, this renewal option will be of no force or effect and the Lease will 5 The Bank of Nashville Second Amendment to Lease Page 5 of 11 - -------------------------- terminate. If the parties do reach agreement as to such rate within said period, then the Term shall be extended for the appropriate period, upon the same terms and conditions set forth in the Lease, except that the Base Rent shall be as mutually determined and except that there shall be no Tenant Improvement Allowance (unless such items are agreed to by Landlord and Tenant). 7. RELOCATION OPTION FOR ANNEX PREMISES. Landlord shall have the right to substitute for the Annex Premises other premises (herein referred to as the "new premises") at the Property provided: (i) the new premises shall be contiguous to the Tower Premises, (ii) Landlord shall give Tenant at least thirty (30) days' written notice before making such substitution, and the parties shall execute an amendment to the Lease confirming the substitution within thirty (30) days after either party shall request the same: and (iii) if Tenant is already occupying the Annex Premises, then upon completion of the Relocation (as hereinafter defined), Landlord shall pay the direct, out-of-pocket, reasonable expenses of Tenant in moving from the Annex Premises to the new premises and improving the new premises so that they are substantially similar to the Annex Premises, and, (b) such move shall be made during evenings, weekends, or otherwise so as to incur the least inconvenience to Tenant. As used herein, "Relocation" means that Tenant has vacated the Annex Premises and has taken possession of the new premises. In the event Tenant refuses to effectuate the Relocation in accordance with this Paragraph 7, then, in that event, in addition to other remedies available to Landlord in law or equity or under the terms of this Lease, Landlord shall have the right to cancel and terminate this Lease effective thirty (30) days after the date of the original notification by Landlord. Upon Relocation, the term "Annex Premises" as used in this Lease, shall mean the new premises. The parties, within thirty (30) days after the Relocation, shall execute an amendment of this Lease confirming the substitution and any other changes to the terms of this Lease occasioned by this Paragraph 7. 8. Exhibit A of the Lease and Paragraph 17 of the First Amendment is amended by adding the floor plan for the Second Floor Annex Premises. 9. Exhibit B of the Lease and referenced meeting notes from the original construction and Paragraph 19 of the First Amendment are amended effective September 1, 2000 by deleting the existing language in its entirety and replacing with the following Work Letter: WORK LETTER. A. Initial Plan. Tenant will perform certain leasehold improvement work in the Annex Premises in substantial accordance with the plans to be prepared by Infrastructure, Inc. (collectively "Initial Plan"), a copy of which shall be attached as Schedule 1. Such work, as shown in the Initial Plan and as more fully detailed in the Working Drawings (as defined and described in Paragraph B 6 The Bank of Nashville Second Amendment to Lease Page 6 of 11 - -------------------------- below), shall be hereinafter referred to as the "Work". All plans, drawings, specifications and other details describing the Work which have been or are hereafter furnished by or on behalf of Tenant shall be subject to Landlord's approval, which Landlord agrees shall not be unreasonably withheld, delayed or conditioned. Landlord shall not be deemed to have acted unreasonably if it withholds its approval of any plans, specifications, drawings, or other details or of any Additional Work (as defined in Paragraph E below) because, in Landlord's reasonable opinion, the Work, as described in any such item, or the Additional Work, as the case may be: (a) is likely to adversely affect the Building systems, the structure of the Building or the safety of the Building and/or its occupants; (b) might impair Landlord's ability to furnish services to Tenant or other tenants in the building; (c) would increase the cost of operating the building; (d) would violate any governmental laws, rules or ordinances (or interpretations thereof); (e) contains or uses hazardous or toxic materials or substances; (f) would adversely affect the appearance of the building; (g) might adversely affect another tenant's premises; (h) is prohibited by any ground lease affecting the Building or any mortgage, trust deed or other instrument encumbering the Building; or (i) is likely to be substantially delayed because of unavailability of shortage of labor or materials necessary to perform such work or the difficulties or unusual nature of such work. The foregoing reasons, however, shall not be the only reasons for which Landlord may withhold its approval, whether or not such other reasons are similar or dissimilar to the foregoing. Neither the approval by Landlord of the Work or the Initial Plan or any other plans, drawings, specifications or other items associated with the Work nor Landlord's monitoring of the Work shall constitute any warranty by Landlord to Tenant of the adequacy of the design for Tenant's intended use of the Premises. B. Working Drawings; performance of the Work. (1) If not included as part of the Initial Plan attached hereto, Tenant shall prepare or cause to be prepared final working drawings and specifications for the Work (the "Working Drawings") based on and consistent with the Initial Plan and the other plans, drawings, specifications, finish details and other information furnished by Tenant to Landlord and approved by Landlord pursuant to Paragraph A above. The Working Drawings shall incorporate final mechanical, electrical and plumbing plans, and shall include a final telephone layout and special electrical connections, if any. So long as the Working Drawings are consistent with the Initial Plan, Landlord shall approve the Working Drawings within five (5) days after receipt of same from Tenant by initialing and returning to Tenant each sheet of the Working Drawings or by executing Landlord's approval form then in use, whichever method of approval Landlord may designate. (2) The parties acknowledge that Landlord is not an architect or engineer, and that the Work will be designed and performed by independent 7 The Bank of Nashville Second Amendment to Lease Page 7 of 11 - -------------------------- architects, engineers and contractors, selected by Tenant, subject to Landlord's prior written approval. Accordingly, Landlord shall have no liability to Tenant under the Lease for any errors or omissions in the Initial Plan and the Working Drawings and for any defects in the Work. In the event of such errors, omissions, or defects, Landlord shall cooperate in any action Tenant desires to bring any architects, engineers or contractors. (3) Upon Landlord's approval, Tenant shall promptly commence with the construction of the Work and thereafter diligently prosecute the same to completion. All Work shall be in full compliance with the Americans with Disabilities Act and with any and all applicable local building codes and regulations. Except as may be otherwise provided in the Initial Plan or Working Drawings, the Work will be performed using materials, quantities and procedures which are then generally in use by Landlord as building standards, or better. (4) Notwithstanding any other provision of this Work Letter, Landlord and Tenant agree as follows: (a) Tenant's contractors must perform in such a manner as to not cause or permit to be caused a material default or breach of any term, condition, rule or regulation of the Lease or this Work Letter by Tenant. (b) Tenant and Tenant's contractors shall maintain at all times during the construction for the Work and for the benefit of Landlord, its officers and employees, such insurance as Landlord may reasonably require, including, without limitation, such hazard, builder's risk, worker's compensation and other similar insurance as is required under the laws of the State of Tennessee or any political subdivision thereof. (c) Tenant shall deliver or cause to be delivered to Landlord prior to the commencement of construction of any of the Work, (i) certificates of such insurance as is required hereunder and such certificates shall name Landlord as an additional insured and contain provisions that the policies shall not be cancelled without thirty (30) days prior written notice to Landlord: (ii) evidence that any and all governmental permits and licenses required for the construction of the Work have been duly secured and remain in full force and effect; and (iii) such other similar assurances which Landlord may reasonably require from time to time. (d) To the extent that Tenant pays directly, or causes to be paid, any contractors, supplier or materialmen, Landlord may from time to time require from evidence of payment to all such parties during the course of construction of the Work and at the 8 The Bank of Nashville Second Amendment to Lease Page 8 of 11 - -------------------------- completion, Tenant shall deliver to Landlord a waiver of or release of liens signed by all contractors, suppliers, or materialmen. (5) During the construction period, Landlord shall have the right, but not the obligation to inspect the Premises, and all improvements made to the Premises comprising the Work to reasonably determine whether the Work is satisfactory. If any Work does not comply with the Working Drawings, Landlord shall, within twenty-four (24) hours of Landlord's inspection, notify Tenant in writing of such noncompliance, including the specifics thereof, whereupon Landlord may require non-complying portions of the Work to be removed and reconstructed to so comply. No such inspection by Landlord, or failure to inspect by Landlord, shall make Landlord liable in any manner to Tenant under the Lease for any defects, errors or omissions in connection with the Work or any errors or omissions in the Initial Plan or Working Drawings. C. Landlord's Contribution. "Cost of the Work" means all costs and expenses of the Work, including, without limitation, (i) the cost of the Initial Plan and Working Drawings, (ii) the cost of all labor (including overtime) and materials constituting the Work, (iii) general conditions (including rubbish removal, hoisting permits, temporary facilities, safety and protection, cleaning, tools, blueprints and reproduction, telephone, temporary power, filed supervision and the like); (iv) the cost of premiums for worker's compensation, public liability, casualty and other insurance charged by contractors; (v) contractors' charges for overhead and fees; and (vi) architectural and engineering fees. (1) Provided that Tenant has satisfied the requirements set forth above and below and is not in default under the Lease or the Workletter, Landlord shall make a contribution, on the terms hereinafter set forth, equal to One Hundred Twenty-nine Thousand Eight Hundred Forty and 60/100 Dollars ($129,840.60) (based upon $11.65 per square foot of rentable area of the Annex Premises (the "Landlord's Contribution")) toward the Cost of the Work under the Workletter. Subject to the limitations hereinafter set forth, Landlord's contribution shall also be applied towards Tenant's cost for architectural design and mechanical drawings. Landlord shall not be liable for more than the Landlord's Contribution. Any amount of the tenant allowance not utilized by the Tenant in the improvement of the Annex Premises shall be applied to base rent. (2) Landlord shall make periodic progress payments (usually monthly) of the Landlord's Contribution toward the Cost of the Work as work progresses under the Workletter, within thirty (30) days after presentation by Tenant to Landlord of invoices for the Cost of the Work and 9 The Bank of Nashville Second Amendment to Lease Page 9 of 11 - -------------------------- duly executed waivers of liens from all contractors, subcontractors and materialmen furnishing labor, equipment or materials for the performance of the Work. (3) After payment of any amounts toward the Cost of the Work under the Workletter, Landlord may pay the Landlord's Contribution to Tenant, or Landlord may, in its discretion, make or cause to be made (through the construction escrow or otherwise) payment directly to Tenant's contractors or vendors or jointly with Tenant, in progress payments as described above. Landlord may use the Landlord's Contribution to reimburse or pay itself amounts owed by Tenant pursuant to the provisions of the Workletter. (4) Notwithstanding any other provision of this Lease, the payment of the Landlord's Contribution shall be subject to Landlord's right to set-off. D. Lease Provisions. The terms and provisions of the Lease, insofar as they are applicable to this Workletter, are hereby incorporated herein by reference. E. Miscellaneous. (1) Except as herein expressly set forth in the Work Letter or in the Lease, Landlord has no agreement with Tenant and has no obligation to do any other work with respect to the Premises except that Landlord shall at its cost: (a) rekey four locks to the Banks' master key in the Annex Premises, (b) provide up to ten (10) lines on the Annex Lobby Directory, (c) make the following improvements to the Annex Premises unisex ADA restroom: (i) mirror to be compliant, bottom edge to be maximum of 40", (ii) install faucet paddles in lieu of handles, (iii) install lever-type door hardware, (iv) adjust existing closure to acceptable standards, (v) rim of lavatory to be maximum height of 34", and (vi) top of toilet seat to be between 17" and 19", (d) Construct a 4'8" opening between the existing Bank mezzanine area and the Annex Premises, and (e) Remove circular stair between the first and second floor of the Annex Building. Any additional work or alterations to the Premises desired by Tenant after the Commencement Date shall be subject to the provisions of 10 The Bank of Nashville Second Amendment to Lease Page 10 of 11 - -------------------------- the Lease. This Work Letter sets forth the entire agreement of Tenant and Landlord regarding the Work. (2) If final working drawings and specifications are included as part of the Initial Plan attached hereto, then whenever the term "Working Drawings" is used in this Agreement such term shall be deemed to refer to the Initial Plan and all supplemental plans and specifications approved by Landlord. (3) If the Initial Plan or Working Drawings for the Work require the construction and installation of more fire hose cabinets, telephone closets, or electrical closets than the number regularly provided Landlord in the core of the Building, then Tenant will pay to Landlord all costs and expenses incurred by Landlord for the construction and installation of such additional fire hose cabinets, telephone closets, or electrical closets. (4) Landlord or Landlord's beneficiary is entitled to all available investment tax credits, if any, for Work paid for and property acquired by Landlord pursuant to the Lease and this Work Letter. Nothing in the Lease or this Work Letter shall be construed as agreement by Landlord to pass any investment tax credits through to Tenant. (5) Time is of the essence of this Work Letter. (6) Tenant's failure to pay when due any amounts owed by Tenant under this Work Letter, or Tenant's failure to perform any other obligation of Tenant under this Work Letter, will constitute a default by Tenant under the Lease, and Landlord will have all the rights and remedies granted to Landlord under the Lease for failure by Tenant to perform its obligations under the Lease. Landlord's failure to pay when due any amounts owed by Landlord under this Work Letter, or Landlord's failure to perform any other obligation of Landlord under this Work Letter, will constitute a default by Landlord under the Lease, and Tenant will have all the rights and remedies granted to Tenant under the Lease for failure by Landlord to perform its obligations under the Lease. (7) All words and phrases in this Work Letter have the same meanings given to them in the Lease, unless otherwise specifically stated in this Work Letter. (8) All representations, warranties, covenants, and conditions contained in this Work Letter shall survive the completion of the Work 11 The Bank of Nashville Second Amendment to Lease Page 11 of 11 - -------------------------- and the payment by Landlord of the Cost of Work and Landlord's Contribution. All other terms and conditions in the Lease dated July 19, 1989 and the Letter Agreement dated March 29, 1993 and the First Amendment dated April 13, 1999 not amended by this Second Amendment shall remain in full force and effect and shall apply to the Premises. IN WITNESS WHEREOF, the parties hereto, have executed this Agreement in triplicate on the date and year first above written. WITNESS: LANDLORD: LC TOWER, L.L.C. a Delaware limited liability company By: PERIDOT, INC. MANAGER /s/ Marija Tater By: /s/ Craig Caferelli - ------------------------------- ---------------------------------------- VP WITNESS: TENANT: THE BANK OF NASHVILLE /s/ Joan B. Marshall By: Mack S. Linebaugh, Jr. - ------------------------------- ---------------------------------------- Joan B. Marshall Mack S. Linebaugh, Jr. Senior Vice President Chairman 12 EXHIBIT "A-1" Design Collective Incorporated - -------------------------------------------------------------------------------- consultants for architecture, interiors and graphic design. A National Design Alliance Nashville, TN Columbus, OH Cleveland, OH BANK OF NASHVILLE 3605 USF FLOOR PLAN BASEMENT LEVEL L & C TOWER First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 13 EXHIBIT "A-2" Design Collective Incorporated - -------------------------------------------------------------------------------- consultants for architecture, interiors and graphic design. A National Design Alliance Nashville, TN Columbus, OH Cleveland, OH BANK OF NASHVILLE 6665 USF FLOOR PLAN 2nd FLOOR L & C TOWER First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 14 EXHIBIT "A-3" Design Collective Incorporated - -------------------------------------------------------------------------------- consultants for architecture, interiors and graphic design. A National Design Alliance Nashville, TN Columbus, OH Cleveland, OH BANK OF NASHVILLE EXPANSION 4643 USF 1928 USF FLOOR PLAN 3rd FLOOR L & C TOWER First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 15 EXHIBIT "A-4" Design Collective Interiors - -------------------------------------------------------------------------------- L & C TOWER consultants for space Nashville, TN planning and interior DCI NO. 93508.00 design. FLOOR PLAN 23rd FLOOR PLAN Building Stacking Plan First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 16 EXHIBIT "A-5" Design Collective Incorporated - -------------------------------------------------------------------------------- consultants for architecture, interiors and graphic design. A National Design Alliance Nashville, TN Columbus, OH Cleveland, OH FLOOR PLAN 2nd FLOOR Chamber of Commerce Building First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 17 APPENDIX "A-1" Design Collective Incorporated - -------------------------------------------------------------------------------- consultants for architecture, interiors and graphic design. A National Design Alliance Nashville, TN Columbus, OH Cleveland, OH BANK OF NASHVILLE 3605 USF BASEMENT LEVEL L & C TOWER First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 18 APPENDIX "A-2" Design Collective Incorporated - -------------------------------------------------------------------------------- consultants for architecture, interiors and graphic design. A National Design Alliance Nashville, TN Columbus, OH Cleveland, OH BANK OF NASHVILLE 6665 USF FLOOR PLAN 2nd FLOOR L & C TOWER First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 19 APPENDIX "A-3" Design Collective Incorporated - -------------------------------------------------------------------------------- consultants for architecture, interiors and graphic design. A National Design Alliance Nashville, TN Columbus, OH Cleveland, OH BANK OF NASHVILLE EXPANSION 4643 USF 1928 USF FLOOR PLAN 3rd FLOOR L & C TOWER First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 20 APPENDIX "A-4" Design Collective Interiors - -------------------------------------------------------------------------------- L & C TOWER consultants for space Nashville, TN planning and interior DCI NO. 93508.00 design. FLOOR PLAN 23rd FLOOR PLAN Building Stacking Plan First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE 21 APPENDIX "A-5" Design Collective Incorporated - -------------------------------------------------------------------------------- consultants for architecture, interiors and graphic design. A National Design Alliance Nashville, TN Columbus, OH Cleveland, OH FLOOR PLAN 2nd FLOOR Chamber of Commerce Building First Management Services - -------------------------------------------------------------------------------- 1 March 1993 NOT TO SCALE EX-11 3 ex11.txt COMPUTAITON OF EARNINGS PER SHARE 1 EXHIBIT 11 COMMUNITY FINANCIAL GROUP, INC. AND SUBSIDIARIES STATEMENT REGARDING: COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended June 30, June 30, --------------------- ---------------------- 2000 1999 2000 1999 --------- --------- --------- ---------- Basic Income Per Common Share (1) Net income (in thousands) $ 851 $ 810 $ 1,683 $ 1,615 ========= ========= ========= ========== Net income per share $ .23 $ .20 $ .45 $ .39 ========= ========= ========= ========== Weighted average common shares outstanding 3,632,421 4,126,769 3,753,737 4,172,282 ========= ========= ========= ========== Diluted Income Per Common Share (2) Net income (in thousands) $ 851 810 $ 1,683 $ 1,615 ========= ========= ========= ========== Net income per share $ .23 $ .19 $ .44 $ .38 ========= ========= ========= ========== Weighted average common shares outstanding 3,649,111 4,178,208 3,784,693 4,214,723 ========= ========= ========= ==========
(1) Basic net income per share has been computed using the weighted average number of common shares outstanding during each period presented. (2) Diluted net income per share has been computed using the weighted average number of common shares outstanding and the dilutive effect of stock options outstanding during the periods presented. EX-27 4 ex27.txt FINANCIAL DATA SCHEDULE
9 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 12,498 142 1,300 0 79,469 0 0 232,190 4,412 327,594 266,227 1,819 2,756 14,500 0 0 21,307 20,985 327,594 10,389 2,527 126 13,042 5,690 6,274 6,768 447 (34) 4,883 2,715 2,715 0 0 1,683 .45 .44 4.52 1,122 0 0 392 4,062 176 79 4,412 3,426 0 986
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