| Item 1. Financial Statements (continued) | | | | | | |
| | | | | | | |
| MCINTOSH BANCSHARES, INC. AND SUBSIDIARIES | | | | | | |
| Consolidated Statements of Cash Flows | | | | | | |
| | | | | | | |
| For the Three Months Ended March 31, 2009 and 2008 | | | | | | |
| (Unaudited) | | | | | | |
| | | 2009 | | | 2008 | |
| Cash flows from operating activities: | | | | | | |
| Net earnings (loss) | | $ | (1,411,434 | ) | | $ | 383,930 | |
| Adjustments to reconcile net earnings to net cash provided by operating activities: | | | | | | | | |
| Depreciation, accretion and amortization | | | 214,004 | | | | 192,279 | |
| Gain on sale of other investments | | | - | | | | (717,415 | ) |
| Loss on write-off of other investments | | | 1,706,679 | | | | | |
| Provision for loan losses | | | 555,665 | | | | 886,804 | |
| Stock-based compensation | | | 19,795 | | | | 23,270 | |
| Provision for deferred income tax benefit | | | 376,476 | | | | - | |
| Loss on sale of other real estate | | | 71,129 | | | | 72,278 | |
| (Gain) loss on fixed and repossessed asset disposal | | | (485 | ) | | | 1,870 | |
| Change in: | | | | | | | | |
| Accrued interest receivable and other assets | | | (271,425 | ) | | | 158,225 | |
| Accrued interest payable and other liabilities | | | (678,318 | ) | | | (65,468 | ) |
| Net cash provided by operating activities | | | 582,086 | | | | 935,773 | |
| | | | | | | | | |
| Cash flows from investing activities: | | | | | | | | |
| Proceeds from maturities and paydowns of securities available for sale | | | 6,869,051 | | | | 9,777,887 | |
| Proceeds from sales of other real estate | | | 517,493 | | | | 1,232,858 | |
| Purchases of securities available for sale | | | (1,483,531 | ) | | | (8,204,503 | ) |
| Purchases of other investments | | | - | | | | (2,000 | ) |
| Proceed from sales of other investments | | | 199,600 | | | | 843,400 | |
| Additions to other real estate | | | (140,554 | ) | | | (938,054 | ) |
| Net change in loans | | | 5,868,862 | | | | (4,782,433 | ) |
| Purchases of premises and equipment | | | (7,167 | ) | | | (70,485 | ) |
| Net cash provided (used) by investing activities | | | 11,823,754 | | | | (2,143,330 | ) |
| | | | | | | | | |
| Cash flows from financing activities: | | | | | | | | |
| Net change in deposits | | | (2,813,612 | ) | | | (2,271,943 | ) |
| Proceeds from borrowed funds | | | 572,737 | | | | - | |
| Repayment of borrowed funds | | | (2,000,000 | ) | | | - | |
| Dividends paid | | | - | | | | (252,988 | ) |
| Net cash used by financing activities | | | (4,240,875 | ) | | | (2,524,931 | ) |
| Net change in cash and cash equivalents | | | 8,164,965 | | | | (3,732,488 | ) |
| Cash and cash equivalents at beginning of period | | | 20,885,224 | | | | 21,343,108 | |
| Cash and cash equivalents at end of period | | $ | 29,050,189 | | | $ | 17,610,620 | |
| | | | | | | | | |
| Supplemental schedule of noncash investing and financing activities: | | | | | | | | |
| Change in net unrealized gain/loss on investment securities available-for-sale, net of tax | | $ | 119,281 | | | $ | 580,660 | |
| Change in unfunded pension liability | | $ | - | | | $ | 4,966 | |
| Transfer of loans to other real estate | | $ | 5,811,130 | | | $ | 3,662,320 | |
| Supplemental disclosures of cash flow information: | | | | | | | | |
| Cash paid during the period for: | | | | | | | | |
| Interest | | $ | 2,480,391 | | | $ | 3,819,147 | |
| Income taxes | | $ | - | | | $ | - | |
| | | | | | | | | |
| See accompanying notes to consolidated financial statements. | | | | | | | | |
Item 1. Financial Statements (continued)
Notes to Consolidated Financial Statements (Unaudited)
| (1) | Basis of Presentation |
The financial statements include the accounts of McIntosh Bancshares, Inc. (the “Company”) and its wholly-owned subsidiaries, McIntosh State Bank (the “Bank”) and McIntosh Financial Services, Inc. All significant intercompany accounts and transactions have been eliminated in the consolidation.
The Company’s accounting policies are fundamental to management’s discussion and analysis of financial condition and results of operations. Some of the Company’s accounting policies require significant judgment regarding valuation of assets and liabilities and/or significant interpretation of the specific accounting guidance. A description of the Company’s significant accounting policies can be found in Note 1 of the Notes to Consolidated Financial Statements in the Company’s 2008 Annual Report to Shareholders.
Many of the Company’s assets and liabilities are recorded using various valuation techniques that require significant judgment as to recoverability. The collectibility of loans is reflected through the Company’s estimate of the allowance for loan losses. The Company performs periodic detailed reviews of its loan portfolio in order to assess the adequacy of the allowance for loan losses in light of anticipated risks and loan losses. In addition, investment securities available for sale are reflected at their estimated fair value in the consolidated financial statements. Such amounts are based on either quoted market prices or estimated values derived by the Company using dealer quotes or market comparisons.
The consolidated financial information furnished herein reflects all adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations and financial position for the periods covered herein. All such adjustments are of a normal, recurring nature.
| (2) | Cash and Cash Equivalents |
For the presentation in the financial statements, cash and cash equivalents include cash on hand, amounts due from banks, and Federal Funds sold.
| (3) | Basic and Dilutive Earnings Per Common Share |
Basic earnings per common share are based on the weighted average number of common shares outstanding during the period while the effects of potential common shares outstanding during the period are included in diluted earnings per share.
Item 1. Financial Statements (continued)
Earnings per common share has been computed based on the weighted average number of shares outstanding during the period. The basic earnings per share calculation for 2008 has been adjusted to reflect the impact of dilutive securities in the form of stock options. Only a reconciliation for the period ending March 31, 2008 is presented. Inclusion of potential common shares for the period ending March 31, 2009 would be anti-dilutive; therefore these amounts are not presented. The basic and diluted earnings per share for March 31, 2008 are as follows:
| | | Net Earnings | | | Common Shares | | | Per Share Amount | |
| For the three months ended March 31, 2008 | | | | | | | | | |
| Basic earnings per share | | $ | 383,930 | | | | 2,810,976 | | | $ | 0.14 | |
| Effect of dilutive securities | | | - | | | | 36,531 | | | | (0.01 | ) |
| Diluted earnings per share | | $ | 383,930 | | | | 2,847,507 | | | $ | 0.13 | |
| | | | | | | | | | | | | |
| (4) | Financial Accounting Standards Board Statement 123 Revised |
The Company accounts for its stock compensation plans using Statement of Financial Accounting Standards (SFAS) No. 123 (resised 2004), Share-Based Payments, which requires a fair value based method of accounting for employee stock compensation plans whereby compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.
The Company recorded $19,794 and $23,270 in compensation expense during each of the quarters ended March 31, 2009, and March 31, 2008, respectively.
As of March 31, 2009 and March 31, 2008, there was approximately $215,000 and $285,000, respectively, of unrecognized compensation cost related to the unvested stock options. That cost is expected to be recognized as expense over the future vesting period of four remaining years.
| (5) | Financial Accounting Standards Board Statement 157 |
Statement of Financial Accounting Standards No. 157, Fair Value Measurements, (SFAS 157) expands disclosures about fair value measurements and applies under other accounting Statements that the Company has previously adopted. The effective date of SFAS 157 is for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Under SFAS 157, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. These levels are:
Level 1 – Valuation is based upon quoted prices for identical instruments traded in active markets.
Level 2 – Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market.
Item 1. Financial Statements (continued)
Level 3 – Valuation is generated from model-based techniques that use at least one significant assumption not observable in the market. These unobservable assumptions reflect estimates of assumptions that market participants would use in pricing the asset or liability. Valuation techniques include use of option pricing models, discounted cash flow models and similar techniques.
The Company utilizes fair value measures to record fair value adjustments on certain assets and liabilities. Securities available-for-sale are recorded at fair value on a recurring basis. Other asset categories that are affected by periodic adjustments to fair value include: goodwill; impaired loans; and other real estate. The Company, as allowed under SFAS 157, elects to disclose on a prospective basis. Following is a description of valuation methodologies used by the Company for assets recorded at fair value:
Investment Securities Available-for-Sale
Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions, and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, that are traded by dealers and brokers in active over-the-counter markets, and money market funds. Level 2 securities include U. S. Treasury and Agency securities, mortgage-backed securities issued by government sponsored entities, municipals bonds, and corporate debt securities. Level 3 securities include asset-backed securities in less liquid markets.
Loans
The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are judged for impairment. Once a loan is identified as individually impaired, management measures impairment in accordance with Statement of Financial Accounting Standards No. 114, Accounting by Creditors for Impairment of a Loan, (SFAS 114). The fair value of impaired loans is estimated using one of three methods, including collateral value, market value of similar debt, and discounted cash flow. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. At March 31, 2009, substantially all of the Company’s impaired loans were evaluated based on the fair value of the collateral. In accordance with SFAS 157, impaired loans where an allowance is established based on the fair value of collateral require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3.
Item 1. Financial Statements (continued)
Other Real Estate
Foreclosed assets are adjusted to fair value upon transfer of the loans to foreclosed assets. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the foreclosed asset as nonrecurring Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the foreclosed asset as nonrecurring Level 3.
Assets Recorded At Fair Value on a Recurring Basis as of March 31, 2009
| (Amounts in thousands) | | Total | | | Level 1 | | | Level 2 | | | Level 3 | |
| Investment Securities AFS | | $ | 65,429 | | | $ | - | | | $ | 65,429 | | | $ | - | |
| Total Recurring | | $ | 65,429 | | | $ | - | | | $ | 65,429 | | | $ | - | |
Assets Recorded At Fair Value on a Nonrecurring Basis as of March 31, 2009
| (Amounts in thousands) | | Total | | | Level 1 | | | Level 2 | | | Level 3 | |
| Impaired Loans | | $ | 56,697 | | | $ | - | | | $ | 31,474 | | | $ | 25,223 | |
| Other Real Estate | | | 20,192 | | | | - | | | | 20,192 | | | | - | |
| Total Nonrecurring | | $ | 76,889 | | | $ | - | | | $ | 51,666 | | | $ | 25,223 | |
| Total Fair Value of Assets | | $ | 142,318 | | | $ | - | | | $ | 117,095 | | | $ | 25,223 | |
The Company has no known material commitments outside of those incurred by its banking subsidiary in the ordinary course of business including property leases, unfunded loan commitments, and letters of credit.
Item 1. Financial Statements (continued)
| (7) | Recent Accounting Pronouncements |
On April 9, 2009 the Financial Accounting Standards Board (FASB) provided additional guidance on FASB Statement 157, Fair Value Measurements, in staff position FAS 157-4. FAS 157-4 addresses when the volume and level of trading activity for the asset or liability have significantly decreased and the circumstances indicate a transaction is not orderly. In management’s view FAS 157-4 applies narrowly where quoted prices are not determinative of fair value when market disorder exists. Management does not believe FAS 157-4 has a material impact on the Company’s financial statements or disclosures.
On April 9, 2009 the Financial Accounting Standards Board (FASB) provided additional guidance on FASB Statement 115, Accounting for Certain Investments in Debt and Equity Securities, in staff position FAS 115-2. FAS 115-2 addresses other-than-temporary impairment (OTTI) for debt securities and the entity's ability and intent to hold the debt to allow for its anticipated recovery. Management does not presently believe FAS 115-2 will have a material impact on the Company’s financial statements or disclosures.
On April 9, 2009 the Financial Accounting Standards Board (FASB) provided additional guidance on FASB Statement 107, Disclosures about Fair Value of Financial Instruments, in staff position FAS 107-1. FAS 107-1 requires publicly traded companies (to include companies registered with the Securities and Exchange Commission) to disclose in the notes of interim financial statements the fair value and carrying value of assets and liabilities as of the statement date. An entity also shall disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments and any changes in the method(s) and significant assumptions during the period. FAS 107-1 is effective for interim reporting periods ending after June 15, 2009. Management intends on applying provisions of FAS 107-1 for the reporting period ending June 30, 2009.
The Company is unaware of other recent accounting pronouncements that would materially impact the financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward Looking Statement Disclosure
Statements in this report regarding future events or performance are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”) and are made pursuant to the safe harbors of the PSLRA. Actual results of the Company could be quite different from those expressed or implied by the forward-looking statements. Any statements containing the words “could,” “may,” “will,” “should,” “plan,” “believes,” “anticipates,” “estimates,” “predicts,” “expects,” “projections,” “potential,” “continue,” or words of similar import, constitute “forward-looking statements,” as do any other statements that expressly or implicitly predict future events, results, or performance. Factors that could cause results to differ from results expressed or implied by our forward-looking statements include, among others, risks discussed in the text of this report as well as the following specific items:
| · | General economic conditions, whether national or regional, that could affect the demand for loans or lead to increased loan losses; |
| · | Competitive factors, including increased competition with community, regional, and national financial institutions, that may lead to pricing pressures that reduce yields the Company achieves on loans and increase rates the Company pays on deposits, loss of the Company’s most valued customers, defection of key employees or groups of employees, or other losses; |
| · | Increasing or decreasing interest rate environments, including the shape and level of the yield curve, that could lead to decreases in net interest margin, lower net interest and fee income, including lower gains on sales of loans, and changes in the value of the Company’s investment securities; |
| · | Changing business or regulatory conditions or new legislation, affecting the financial services industry that could lead to increased costs, changes in the competitive balance among financial institutions, or revisions to our strategic focus; |
| · | Changes or failures in technology or third party vendor relationships in important revenue production or service areas, or increases in required investments in technology that could reduce our revenues, increase our costs or lead to disruptions in our business. |
Readers are cautioned not to place undue reliance on our forward-looking statements, which reflect management’s analysis only as of the date of the statements. The Company does not intend to publicly revise or update forward-looking statements to reflect events or circumstances that arise after the date of this report. Readers should carefully review all disclosures we file from time to time with the Securities and Exchange Commission (the “SEC”).
Financial Condition
The financial condition of the Company as of March 31, 2009 shows assets declined $6.2 million or 1.4% and $15.9 million or 3.5% from year-end and the year-ago periods, respectively. Liquid assets (cash, federal funds sold, interest bearing depository balances, and investment securities), rose $2.9 million or 3.2% and $1.5 million or 1.6% from year-end and year-ago periods, respectively. The rise in liquid assets is due to declining loans from prior periods.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Loans
Gross loans fell $13.3 million or 4.1% and $29.9 million or 8.8% from the year-end and year-ago periods, respectively. Declining loan balances are due to the following: (1) efforts by management to exit certain borrowing relationships that have become outside the bank’s acceptable risk profile and lowering the level of commercial real estate exposure; (2) foreclosure activity; and (3) loan charge-offs. For the three months ending March 31, 2009, the bank foreclosed $5.8 million in other real estate and charged-off $1.6 million in loans. With the ongoing deterioration of the economy combined with persistent residential real estate market weakness, management expects loan balances to fall further in coming quarters.
The allowance for loan losses (ALL) declined $1.0 million or 12.1% and increased $1.6 or 28.3% from the year-end and year-ago periods, respectively. The change in ALL from year-end results from provision expense totaling $0.6 million and $1.6 million in net charge-offs. The change in ALL from the year-ago period results from $15.6 million in provision expense and $14 million in net charge-offs. As of March 31, 2009, the ALL as a percentage of gross loans (reserve ratio) is 2.41% versus 2.63% and 1.71% as of the year-end and year-ago periods, respectively. The overall decline in ALL from year-end is due to management writing down and thus charging off amounts reserved against impaired loans that became collateral dependent.
The following table outlines impaired loans:
| | | | |
In (000s) Impaired loans by loan type: | | | | | | | | | |
| Commercial, financial & agricultural | | $ | 7,819 | | | $ | 3,664 | | | $ | 312 | |
| Real estate-mortgage | | | 18,095 | | | | 6,463 | | | | 374 | |
| Real estate-construction | | | 30,157 | | | | 27,567 | | | | 21,931 | |
| Consumer loans | | | 626 | | | | 576 | | | | 14 | |
| Total impaired loans | | $ | 56,697 | | | $ | 38,270 | | | $ | 22,631 | |
| | | | | | | | | | | | | |
| Impaired loans in total with no allowance | | $ | 44,266 | | | $ | 22,334 | | | $ | 5,535 | |
| Allowance for impaired loans | | $ | (3,136 | ) | | $ | (4,163 | ) | | $ | (1,939 | ) |
The Bank’s delinquency ratio (loans past due 30 days or more and loans on nonaccrual as a percentage of gross loans) is 13.85% at March 31, 2009 versus 11.43% and 8.59% as of the year-end and year-ago periods, respectively. The higher delinquency ratio from the year-end period is principally due to $6.4 million more loans delinquent 30 days or more and not on nonaccrual. Higher delinquency ratios are reflective of the difficulty Bank borrowers face making timely payments and renewing loans in the current economic environment.
As of March 31, 2009 37 relationships were on nonaccrual. The following table outlines nonaccrual loans:
| | | | | | | | | |
| Total Nonaccrual Loans | | $ | 29,409 | | | $ | 29,755 | | | $ | 22,630 | |
| Nonaccrual Loans to Gross Loans | | | 9.4 | % | | | 9.2 | % | | | 6.6 | % |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
In accordance with Statement of Financial Accounting Standards No. 15, Accounting by Creditors for Trouble Debt Restructurings, (SFAS 15), management has identified $2.4 million in loans restructured from their original terms. The result of these trouble debt restructurings is the Bank agreed to forbear on collecting $127,959 in accrued but unpaid interest when the notes matured and were renewed. These credits are currently on nonaccrual and have been reviewed for impairment.
The Bank historically attempts to meet the housing needs of its markets. Following is a table outlining the Bank’s loans on 1-4 family properties:
| In (000s) | 3/31/09 | | 12/31/08 | | 3/31/08 |
| 1-4 family construction loans | $54,339 | | $61,395 | | $97,185 |
| 1-4 family mortgages - first lien | 62,557 | | 64,677 | | 50,132 |
| 1-4 family mortgages - junior lien | 29,262 | | 28,485 | | 24,342 |
| Total | $146,158 | | $154,557 | | $171,659 |
| Percentage of total loans | 46% | | 48% | | 50% |
As of March 31, 2009, the Company continued to have a concentration in acquisition, development, and construction (AD&C) loans. Management has established a maximum limit where total AD&C loans may not exceed 37% of the Company’s loan portfolio including unfunded commitments. As of March 31, 2009, AD&C loans represented 20% of gross loans and commitments versus 24% and 37% as of the prior year-end and the year-ago periods, respectively.
The primary risks of AD&C lending are:
(a) Loans are dependent upon continued strength in demand for residential real estate. Demand for residential real estate is dependent on favorable real estate mortgage rates and population growth from expanding industry and services in the metropolitan Atlanta area;
(b) Loans are concentrated to a limited number of borrowers; and
(c) Loans may be less predictable and more difficult to evaluate and monitor.
On December 12, 2006, the Federal Bank Regulatory Agencies released guidance on Concentration in Commercial Real Estate Lending. This guidance defines commercial real estate (CRE) loans as loans secured by raw land, land development and construction (including 1-4 family residential construction), multi-family property, and non-farm nonresidential property where the primary or a significant source of repayment is derived from rental income associated with the property (that is, loans for which 50% or more of the source of repayment comes from third party, non-affiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Loans for owner occupied CRE are generally excluded from the CRE guidance.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The CRE guidance is triggered where either:
(a) Total loans for construction, land development, and other land represent 100% or more of a Bank’s total risked based capital; or
(b) Total loans secured by multifamily and nonfarm nonresidential properties and loans for construction, land development, and other land represent 300% or more of a Bank’s total risked based capital.
Banks that are subject to the CRE guidance’s triggers will need to implement enhanced strategic planning, CRE underwriting policies, risk management and internal controls, portfolio stress testing, risk exposure limits, and other policies, including management compensation and incentives, to address the CRE risks. Higher allowances for loan losses and capital levels may also be appropriate.
The following table outlines the Bank’s CRE loans by category and CRE loans as percent of total risked based capital as of March 31, 2009 and December 31, 2008.
| | | March 31, 2009 | | | December 31, 2008 | |
| | | Aggregate | | | Percent | | | Aggregate | | | Percent | |
| Loan Types: | | Balance | | | of Total | | | Balance | | | of Total | |
| Construction & development | | $ | 59,234 | | | | 42 | % | | $ | 69,359 | | | | 47 | % |
| Land | | | 34,258 | | | | 25 | % | | | 33,854 | | | | 23 | % |
| Sub total | | | 93,492 | | | | 67 | % | | | 103,213 | | | | 70 | % |
| Multi-family | | | 4,329 | | | | 3 | % | | | 3,602 | | | | 3 | % |
| Non-farm non-residential | | | 42,017 | | | | 30 | % | | | 39,566 | | | | 27 | % |
| Total | | $ | 139,838 | | | | 100 | % | | $ | 146,381 | | | | 100 | % |
| | | | | | | | | | | | | | | | | |
| Percent of Total Risk Based Capital: | | Bank Limit | | Actual | | Bank Limit | | Actual |
| Construction, development & land | | | 290 | % | | | 269 | % | | | 415 | % | | | 276 | % |
| Construction, development & land, multi-family and non-farm non-residential | | | 415 | % | | | 402 | % | | | 685 | % | | | 392 | % |
| | | | | | | | | | | | | | | | | |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a recap of other real estate activity from December 31, 2008 to March 31, 2009:
| Balance as of December 31, 2008 | | | | | $ | 14,829,144 | |
| Additions to base amount | | | | | | 140,554 | |
| Write-down | | | | | | ( | 78,384 | ) |
| Sale of 10 acres unimproved land | | | | | | ( | 36,024 | ) |
| Sale of 4 residential construction properties | | | | | | ( | 474,214 | ) |
| Foreclosure on 6 residential lots and unimproved acreage | | | | | | | 464,146 | |
| Foreclosure on 41 residential construction properties | | | | | | | 5,346,984 | |
| Balance as of March 31, 2009 | | | | | | $ | 20,192,206 | |
The following is an inventory of other real estate as of March 31, 2009:
| | | | | | Carrying | |
| | | Number | | | Amount | |
| 1-4 Family Residences | | | 69 | | | $ | 12,652,520 | |
| Residential Lots | | | 181 | | | | 4,613,175 | |
| Unimproved Acres of Land | | | 389 | | | | 2,364,011 | |
| Commercial Property | | | 1 | | | | 562,500 | |
| Total Other Real Estate | | | | | | $ | 20,192,206 | |
The Bank foreclosed 47 properties with carrying balances totaling $5.8 million and sold 5 properties with carrying balances totaling $0.5 million from year-end 2008 to March 31, 2009. The Bank devotes a seasoned construction lender to marketing its other real estate holdings. Despite these efforts, management believes liquidation of unimproved real estate and residential lot inventory will be protracted until the residential real estate market improves. Additions to the base amount reflect improvements made to finish foreclosed residences.
Deposits
Total deposits declined $2.8 million or 0.7% and $12.2 million or 3.0% from the year-end and year-ago periods, respectively. The decline in deposits is principally attributable to the decline in NOW and money market balances totaling $2.5 million or 2.8% and $26.9 million or 23.6% versus year-end and the year-ago periods, respectively. The decline from year-end and year ago is attributable to lower public deposits and depositors shifting to time deposits in order to achieve higher rates of return. The increase in savings deposits represents the popularity of Prime Savings. The Prime Savings interest rate for balances $5,000 and over is tied to 50% of the prime lending rate.
As of March 31, 2009, brokered deposits totaled $46.2 million and decreased $3.8 million and $8.5 million from the year-end and year-ago periods, respectively. Management will continue to reduce the level of brokered deposits and thus total assets over the next several quarters. See Liquidity comments for further discussion.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Capital
As of March 31, 2009, the Company’s equity capital declined $1.3 million or 1.4% and declined $7.5 million or 19.6% from the year-end and year-ago periods, respectively. The change in equity capital from year-end results from $1.4 mllion in net loss, an increase of $0.1 million in unrealized gains on securities available-for-sale, and $20,000 in noncash compensatory stock option expense.
The change in equity capital from the year-ago period results from $10.0 million in net loss, an increase of $0.3 million in net unrealized gains on securities available-for-sale, $0.9 million decline in the after-tax effect of the Company’s current unfunded pension liability, $90,000 in noncash compensatory stock option expense, and stock issuance with net proceeds totaling $3 million.
The Federal Reserve and the FDIC have implemented substantially identical rules for assessing bank and bank holding company capital adequacy. These regulations establish minimum capital standards in relation to assets and off-balance sheet exposures for credit risk. Bank and bank holding companies are required to have (i) a minimum ratio of Total Capital (as defined) to risk-weighted assets of 8%; (ii) a minimum ratio of Tier One Capital (as defined) to risk-weighted assets of 4%; and (iii) a minimum ratio of stockholder’s equity to risk-weighted assets of 4%. The Federal Reserve and the FDIC also require a minimum leverage capital ratio of Tier One Capital to total assets of 3% for the most highly rated banks and bank holding companies. Tier One Capital generally consists of common equity, minority interests in equity accounts of consolidated subsidiaries, and noncumulative perpetual preferred stock and generally excludes unrealized gains or losses on investment securities, certain intangible assets, and certain deferred tax assets. The Federal Reserve or the FDIC will require a bank or bank holding company to maintain a leverage ratio greater than 3% if either is experiencing or anticipating significant growth, is operating with less than well-diversified risks, or is experiencing financial, operational, or managerial weaknesses.
In addition, the FDIC Improvement Act of 1991 provides for prompt corrective action (PCA) if a bank’s leverage capital ratio reaches 2%. PCA may call for the bank to be placed in receivership or sold to another depository institution. The FDIC has adopted regulations implementing PCA which place financial institutions in the following four categories based on capitalization ratios: (i) a well capitalized institution has a total risked-based capital ratio of at least 10%, a Tier One risked-based ratio of at least 6%, and leverage capital ratio of at least 5%; (ii) an adequately capitalized institution has a total risked-based capital ratio of at least 8%, a Tier One risked-based ratio of at least 4%, and leverage capital ratio of at least 4%; (iii) an undercapitalized institution has a total risked-based capital ratio under 8%, a Tier One risked-based ratio under 4%, and leverage capital ratio under 4%; and (iv) a critically undercapitalized institution has a leverage capital ratio under 2%. Institutions deemed adequately capitalized are not permitted to accept brokered deposits (unless waived by the FDIC) and have limitations on the interest rates paid on deposit accounts. Institutions in any of the three undercapitalized categories would be prohibited from declaring and paying dividends or making capital distributions. The FDIC regulations also establish procedures for downgrading an institution to a lower capital category based on supervisory factors other than capital.
Due to its current condition and results of operation, the Directors of the Company and Bank entered into informal agreements with the Federal Reserve, FDIC, and Georgia Department of Banking and Finance in the third quarter of 2008. These regulatory agreements are designed to help the Company and Bank return to profitability and capital adequacy by improving asset quality. Specifically, the agreements provide for reducing troubled assets; limiting credit to troubled borrowers; maintaining an adequate allowance for loans losses; revising policies to more comprehensively address commercial real estate lending; maintaining a Tier One leverage capital ratio of 8% or more, a Tier One risked-based capital ratio of 6% or more, and a Total risked-based capital ratio of 10% or more; prohibiting the Bank from paying dividends to the Company without prior approval; prohibiting the Company from paying dividends to shareholders without prior approval; prohibiting the Company from incurring debt without prior approval; and prohibiting the Company from repurchasing stock without prior approval. Failure to adequately address the provisions contained in these agreements may result in the issuance of a cease and desist order pursuant to Section 8 of the FDI Act. The Bank is presently unable to achieve the Tier One leverage and Total risked-based capital provisions of the agreements but is negotiating for added capital. See Item 5 for further information.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
As of March 31, 2009, the Bank is considered Adequately Capitalized under the regulatory framework for prompt corrective action. As of March 31, 2009 the capital ratios for the Company and the Bank are as follows:
| | | | | |
| Leverage Capital | | | 6.21 | % | | | 6.46 | % |
| Tier 1 Risk-Based | | | 8.04 | % | | | 8.38 | % |
| Total Risk-Based | | | 9.30 | % | | | 9.65 | % |
Payment of Dividends
The Company is a legal entity separate and distinct from the Bank. Most of the revenues of the Company result from dividends paid to it by the Bank. There are statutory and regulatory requirements applicable to the payment of dividends by the Bank to the Company, its shareholder. Under Department of Banking and Finance (DBF) regulations, the Bank may not declare and pay dividends out of retained earnings without first obtaining the written permission of the DBF unless it meets the following requirements: (i) total classified assets as of the most recent examination of the bank does not exceed 80% of equity capital (as defined by the regulation); (ii) the aggregate amount of dividends declared or anticipated to be declared in the calendar year does not exceed 50% of the net profits after taxes but before dividends for the previous calendar year; and (iii) the ratio of equity capital to adjusted assets is not less than 6%.
The payment of dividends by the Company and the Bank may also be affected or limited by other factors, such as the requirement to maintain adequate capital above regulatory guidelines. The Federal Reserve maintains that a bank holding company must serve as source of financial strength to its subsidiary banks. As a result, the Company may be required to provide financial support to the Bank at a time when, absent such Federal Reserve requirement, the Company may not deem it advisable to provide such assistance. Similarly, the FDIC maintains that insured banks should generally only pay dividends out of current operating earnings and dividends should only be declared and paid after consideration of the bank’s capital adequacy in relation to its assets, deposits, and such other items. For 2009, dividends paid to the Company from the Bank are not permissible as the Bank made no profit in 2008.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Liquidity
The Bank must maintain, on a daily basis, sufficient funds to cover depositor withdrawals and to supply new borrowers with funds. To meet these obligations, the Bank keeps cash on hand, maintains account balances with its correspondent banks, and purchases and sells Federal funds and other short-term investments. Asset and liability maturities are monitored in order to avoid significant mismatches which could adversely impact liquidity. It is the policy of the Bank to monitor its liquidity to achieve earnings enhancements and meet regulatory requirements while funding its obligations.
Liquidity is monitored daily and formally measured on a monthly basis. As of March 31, 2009, the Bank’s liquidity ratio was 13.9% versus 11.4% and 11.2% as of the year-end and the year-ago periods, respectively. Management continues to build liquidity as loans repay and in anticipation of certificate of deposit maturities.
The Bank has a $2 million FHLB advance that may convert to 3 month LIBOR within the next 12 months and a $3 million in FHLB advance that matures within the next 12 months. Management believes unless rates change materially, the FHLB will not exercise its right to convert this advance and the advance will extend to its maturity in 2015. Management anticipates the $3 million FHLB advance maturing within the next twelve months will be renewed for another term.
FHLB advances are drawn under a $25.9 million line of credit with FHLB. Management repaid a $2 million advance that matured January 2009. As of March 31, 2009, the weighted average rate and weighted average maturity of the Bank’s $14 million in outstanding FHLB advances is 3.47% and 60 months, respectively.
The Bank has pledged $40 million in eligible commercial real estate mortgages to the Federal Reserve Bank of Atlanta (FRB). The FRB announced effective April 27, 2009 it would lower the loan-to-value limits on commercial real estate from 75% to 65%. This change lowers the availability on pledge collateral by $4 million to $26 million. No advances on this line occurred in 2009.
In October 2008, the FDIC approved a program to strengthen market stability for financial institutions called the Temporary Liquidity Guaranty Program (TLGP). Provision one of the TLGP allows the FDIC to guaranty the debit issued by financial institutions for liabilities outstanding as of September 30, 2008. The debt guaranty amount for the Bank is $8.4 million. Management is still assessing the benefits of this provision of the program and did not opt out of the program in case further developments prove to benefit the Bank. Provision two of the TLGP raises the FDIC insurance level for all deposit accounts to $250,000 through December 31, 2009. Management has determined this provision would be beneficial to the Bank and its customers and has opted to take part. The FDIC is not permitted to charge assessments for this added coverage until after December 31, 2009. Management at this time is not aware of the assessment amounts for this coverage beyond December 31, 2009 as the FDIC has not announced such. Provision three of the TLGP allows the FDIC to insure all the Bank’s noninterest bearing and interest bearing deposits paying less than 0.50% through December 31, 2009. Management has determined this provision would be beneficial to the Bank and its customers and has opted to take part. The Bank will pay 10 basis points per annum for this deposit coverage above the $250,000 temporary limit outlined in provision two. Management believes that participation in the program will result in additional expenses of less than $15,000 per year. The FDIC has yet to announce an extension of TLGP beyond December 31, 2009. Given the continued overall instability of the banking industry, management believes failure to extend TLGP could be materially adverse to the liquidity of the industry as well as the Bank.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Critical Accounting Policies
Critical accounting policies are dependent on estimates that are particularly susceptible to significant change. Determination of the Bank’s ALL and income taxes have been identified as critical accounting policies.
The ALL is maintained at a level believed to be appropriate by management to provide for probable loan losses inherent in the portfolio as of each quarter-end. Management’s judgment as to the amount of the ALL, including the allocated and unallocated elements, is a result of ongoing review of lending relationships, the overall risk characteristics of the portfolio segments, changes in the character or size of the portfolio segments, the level of impaired or nonperforming loans, historical net charge-off experience, prevailing economic conditions and other relevant factors. Loans are charged off to the extent they are deemed to be uncollectible. The ALL level is highly dependent upon management’s estimates of variables affecting valuation, appraisals of collateral, evaluations of performance and status, and the timing of collecting nonperforming loans. Such estimates may be subject to frequent adjustments by management and reflected in the provision for loan losses in the periods in which they become known.
Income taxes are accounted for using the asset and liability method. Under this method, deferred tax assets or liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The determination of current and deferred taxes is based on complex analyses of many factors including interpretation of Federal and state income tax laws, the difference between tax and financial reporting basis assets and liabilities (temporary differences), estimates of amounts due or owed such as the reversals of temporary differences, and current financial accounting standards. Actual results could differ significantly from the estimates and interpretations used in determining current and deferred taxes.
Results of Operations – Three months ended March 31, 2009
Net interest income for the three months declined $0.9 million or 24.7% from the year-ago period. The Company’s March 31, 2009 tax equivalent net interest margin of 2.89% declined 67 basis points from the year-ago period. Lower net interest income and thus compressed net interest margin results from carrying average nonearning assets including $28.5 million in nonaccrual loans and $16.7 million in other real estate and repricing loan rates faster than deposit rates as the prime lending rate fell.
Total interest income for the three months declined $1.8 million or 24.8% from the year-ago period. The yield on earning assets as of March 31, 2009 was 5.59% and fell 135 basis points from the year-ago period. The decline in the yield on earning assets from the year-ago period results from a 146 basis point decline in loan yield, a 34 basis point decline in investment portfolio yield, and a 300 basis point decline in yield on federal funds sold and interest bearing deposits. The overall decline in yield on earning assets from the year-ago period versus the three months ended March 31, 2009 principally results from: repricing renewing loans and originating new loans at generally lower interest rates as the prime lending rate has fallen 200 basis points over the past 12 months; $154,000 or 45% less loan fee income versus the year-ago period due to declining loan volume; and the reversal of $126,000 in loan interest income during the period as a result of placing loans on nonaccrual.
Interest expense for the three months declined $0.9 million or 25.0% from the year-ago period. The cost of funds as of March 31, 2009 was 2.92% and fell 93 basis points from the year-ago period. The decline in the cost of funds from the year-ago period results from a 94 basis point decline in the cost of funds on interest bearing deposits and a 24 basis point decline in borrowed money cost. The overall decline in the cost of funds from the year-ago period versus the three months ended March 31, 2009 results from the Bank repricing its nonmaturing and time deposits and borrowed funds at lower interest rates as the prime lending rate has fallen 200 basis points over the past 12 months.
The provision for loan losses for the three months declined $331,000 or 37.3% from the year-ago period. Refer to comments on ALL adequacy regarding management’s assessment for provision expense.
Other income for the three months declined $2.5 million or 152.3% from the year-ago period. This decline was principally the result of recognizing a $1,707,000 write-off in stock of Silverton Bank, N.A. due to its May 2009 failure and $108,000 or 60.0% less secondary market income.
Other noninterest expense for the three months decreased $1.3 million or 33.3% from the year-ago period. Expense control instituted by management has resulted in lowering noninterest expenses. However, higher legal, collection, and other real estate expense continue to partially overshadow expense control gains. Legal, collection, and other real estate expenses rose $130,000 or 59.0% versus the year-ago period. Salary and employee benefit expense declined $1.5 million or 59.3% from the year-ago period. The decline was principally due to the effects of fewer employees and the reversal of accrued deferred compensation totaling $1.0 million in the current period. The reversal for deferred compensation reflects the election of directors and select executive officers to forego future and accrued benefits of deferred compensation under plans originated in years past. Full-time equivalent employees for the Company have fallen from 143 to 123 or 14.0% from the year-ago period.
Income tax expense for the three months increased $34,000 or 28.0% from the year-ago period. While the Company reported a loss before tax in the current period, it is unable to recognize a tax benefit for this cpaital loss as all income and expense for the period is ordinary. The increase in tax expense from the year-ago period is principally attributable to 11.0% more income before income tax and a rise in the effective tax rate from 24.0% to 34.0%. The lower effective tax rate in the year-ago period was due to a projected lower State income tax liability as the liability was expected to be satisfied by the Company's payments for business, occupation, and license (BOL) taxes due to the State. Lower revenue base for BOL projected for 2009 leads to a greater expected State income tax liability in the current period.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As of March 31, 2009, there were no substantial changes in the composition of the Company’s market-sensitive assets and liabilities or their related market values from that reported as of December 31, 2008. The foregoing disclosures related to market risk of the Company should be read in conjunction with the Company’s audited consolidated financial statements, related notes, and management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2008 included in the Company’s 2008 Form 10-K.
Item 4T. Controls and Procedures
The management of McIntosh Bancshares, Inc. and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting. This internal control system has been designed to provide reasonable assurance to the Company’s management and board of directors regarding the preparation and fair presentation of the Company’s published financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Management of the Company and subsidiaries has assessed the effectiveness of the Company’s internal control over financial reporting as of March 31, 2009. To make this assessment, we used the criteria for effective internal control over financial reporting described in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. There were no significant changes in the internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. Based on our assessment, we believe that, as of March 31, 2009, the Company’s internal control over financial reporting met those criteria and is effective.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Bank is from time to time involved in various legal actions arising from normal business activities. Management believes that the liability, if any, arising from such actions will not have a material adverse effect on the Company’s financial condition. Neither the Bank nor the Company is a party to any proceeding to which any director, officer or affiliate of the issuer, any owner of more than five percent (5%) of its voting securities is a party adverse to the Bank or the Company.
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
The Company and Redemptus Group LLC (“Redemptus”) have executed Amendment No. 1, dated as of March 31, 2009 (the “Amendment”), to the Debenture Purchase Agreement between the Company and Redemptus dated December 23, 2008 (the “Agreement”). The Company previously disclosed the terms of the Agreement on Form 8-K filed with the Securities and Exchange Commission on December 31, 2008. An 8-K dated April 7, 2009, covering Amendent No. 1 was filed with the Securities and Exhange Commission.
The Amendment, (i) extends the deadlines for the closing of the purchase and sale of the debentures from March 31, 2009 to June 30, 2009; (ii) extends the deadline for the completion of the $3.0 million follow-on private placement of the Company’s common stock required as a closing condition for the purchase and sale of the debentures from March 31, 2009 to June 30, 2009; and (iii) extends the deadline for completion of the sale of certain troubled assets required under the Agreement from December 31, 2009 to March 31, 2010. The Amendment also addresses certain financial obligations of the Company to Redemptus as more fully described below.
Under the Agreement, the Company is required to pay up to $250,000 of Redemptus’s legal and due diligence expenses incurred in connection with the transactions contemplated by the Agreement. In the Amendment, the parties agree that the Company currently owes Redemptus an amount specified in a separate invoice for such expenses and that such amount (approximately $206,000) will be due and payable upon the earliest to occur of: (i) the closing of the sale of the debentures under the Agreement, as amended; (ii) the completion of the follow-on private placement described in clause (ii) of Item 1.01 above; (iii) the Company’s completion of any sale, merger, financing or other strategic transaction outside its ordinary course of business; and (D) June 30, 2009. The Amendment also restates the prior provision in the Agreement that the Company will not be liable to Redemptus in any event for due diligence and legal costs exceeding $250,000.
Item 6. Exhibits
EXHIBIT INDEX
| | |
Exhibit No. | Description |
| 2.1 | Articles of Incorporation of McIntosh Bancshares, Inc. (incorporated by reference to Exhibit 2(a) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 2.2 | Amendment to Articles of Incorporation of McIntosh Bancshares, Inc.-April 23, 1998 (incorporated by reference to Exhibit 2(b) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 2.3 | Bylaws of McIntosh Bancshares, Inc. (incorporated by reference to Exhibit 2(c) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 2.4 | Amendment to bylaws of McIntosh Bancshares, Inc. dated April 23, 1998 (incorporated by reference to Exhibit 2(d) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No.0-49766). |
| | |
| 2.5 | Amendment to the Articles of Incorporation of McIntosh Bancshares, Inc. – January 29, 2009 (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8K, filed by the Registrant on January 30, 2009, File No. 0-049766). |
| | |
| 4.1 | Debenture Agreement between the Registrant and Redemptus, dated December 23, 2008 (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8K, filed by the Registrant on December 31, 2008, File No. 0-049766). |
| | |
| 10.1 | Stock Option Agreement with William K. Malone (incorporated by reference to Exhibit 6(a) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 10.2 | Stock Option Agreement with Thurman L. Willis (incorporated by reference to Exhibit 6(b) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 10.3 | Stock Option Agreement with Bruce E. Bartholomew (incorporated by reference to Exhibit 6(c) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 10.4 | Stock Option Agreement with James P. Doyle (incorporated by reference to Exhibit 6(d) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 10.5 | Change in Control Agreement with William K. Malone (incorporated by reference to Exhibit 6(e) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 10.6 | Change in Control Agreement with Thurman L. Willis (incorporated by reference to Exhibit 6(f) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 10.7 | Change in Control Agreement with Bruce E. Bartholomew (incorporated by reference to Exhibit 6(g) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 10.8 | Change in Control Agreement with James P. Doyle (incorporated by reference to Exhibit 6(h) to the Registrant’s Form 10-KSB, filed by the Registrant on April 29, 2002, File No. 0-49766). |
| | |
| 10.9 | Stock Option Agreement with Jason Patrick dated September 18, 2003 (incorporated by reference to Exhibit 6.9 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 30, 2004, File No. 000-49766). |
| | |
| 10.10 | Stock Option Agreement with Rob Beall dated September 18, 2003 (incorporated by reference to Exhibit 6.10 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 30, 2004, File No. 000-49766). |
| | |
| 10.11 | Stock Option Agreement with Bruce Bartholomew dated September 18, 2003 (incorporated by reference to Exhibit 6.11 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 30, 2004, File No. 000-49766). |
| | |
| 10.12 | Stock Option Agreement with James P. Doyle dated September 18, 2003 (incorporated by reference to Exhibit 6.12 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 30, 2004, File No. 000-49766). |
| | |
| 10.13 | Stock Option Agreement with William K. Malone dated September 18, 2003 (incorporated by reference to Exhibit 6.13 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 30, 2004, File No. 000-49766). |
| | |
| 10.14 | Stock Option Agreement with Thurman Willis dated September 18, 2003 (incorporated by reference to Exhibit 6.14 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 30, 2004, File No. 000-49766). |
| | |
| 10.15 | Salary Continuation Agreement with Thurman L. Willis dated August 10, 2004 (incorporated by reference to Exhibit 6.15 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 31, 2005, File No. 000-49766). |
| | |
| 10.16 | Stock Option Agreement with Rob Beall dated October 20, 2005 (incorporated by reference to Exhibit 10.16 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 28, 2006, File No. 000-49776). |
| | |
| 10.17 | Stock Option Agreement with Jason Patrick dated October 20, 2005 (incorporated by reference to Exhibit 10.17 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 28, 2006, File No. 000-49776). |
| | |
Exhibit No. | Description |
| 10.18 | Stock Option Agreement with Charles Harper dated October 20, 2005 (incorporated by reference to Exhibit 10.18 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 28, 2006, File No. 000-49776). |
| | |
| 10.19 | 2006 Stock Compensation Plan (incorporated by reference to Appendix A of the Registrant’s Schedule 14A Proxy Statement, filed with the Commission on April 25, 2006, File No. 000-49766). |
| | |
| 10.20 | Stock Option Agreement with William K. Malone dated July 18, 2006 (2006 Stock Compensation Plan Example) (incorporated by reference to Exhibit 10.20 to Registrant’s Annual Report on Form 10-KSB, filed with the Commission on March 29, 2007, File No. 000-49776). |
| | |
| 10.21-.25 | Amendments to Salary Continuation Agreements filed on December 1, 2008 (incorporated by reference to Exhibits 10.21-.25 to the Registrant’s Form 8K, filed by the Registrant on December 1, 2008, File No. 0-049766). |
| | |
| 10.26 | Cancellation of Salary Continuation Agreements filed on May 4, 2009, (incorporated by reference to Exhibits 10.1-10.11 to Registrant's Form 8-K, filed by the Registrant on May 4, 2009, File No. 0-049766). |
| | |
| 31.1 | Certifications of the Registrant’s Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| 31.2 | Certifications of the Registrant’s Chief Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
| | |
| 32.1 | 18 U.S.C. Section 1350 Certifications of the Registrant’s Chief Executive Officer and Chief Financial and Accounting Officer |
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
McIntosh Bancshares, Inc.
Date: May 8, 2009
By /s/ William K. Malone
William K. Malone, Chairman and C.E.O.
(Principal Executive Officer)
Date: May 8, 2009
By /s/ James P. Doyle
James P. Doyle, Chief Financial Officer,
Secretary and Treasurer
(Principal Accounting Officer)
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