<PAGE> 1
Filed pursuant to Rule 424(b)(3)
Registration Statement No. 333-45401
MURDOCK FLORIDA BANK
1777 TAMIAMI TRAIL
MURDOCK, FLORIDA 33948
February 3, 1998
Dear Stockholder:
On behalf of the Board of Directors, we cordially invite you to attend
a Special Meeting of Stockholders (the "Special Meeting") of Murdock Florida
Bank ("Murdock") to be held at Murdock's offices located at 1777 Tamiami Trail,
Murdock, Florida, on Thursday, March 12, 1998, at 5:00 p.m., local time.
As described in the enclosed Joint Proxy Statement-Prospectus, at the
Special Meeting, Murdock stockholders will be asked to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of September 23,
1997, as amended as of October 8, 1997 (the "Merger Agreement") by and among
American Bancshares, Inc. ("ABI"), American Bank of Bradenton, a wholly-owned
subsidiary of ABI (the "Bank"), and Murdock, pursuant to which Murdock will be
merged with and into the Bank. At the effective time of the Merger, each
issued and outstanding share of Murdock common stock ("Murdock Common Stock")
will be converted into the right to receive 2.4 ABI common shares ("ABI Common
Shares"), subject to certain adjustments as described in the Joint Proxy
Statement-Prospectus, with cash to be paid in lieu of fractional shares.
Further information concerning the Merger is contained in the
accompanying Notice of Special Meeting and the Joint Proxy
Statement-Prospectus. The Joint Proxy Statement-Prospectus provides a detailed
description of the Merger Agreement, its terms and conditions, and the
transactions contemplated thereby, and a copy of the Merger Agreement is
attached as Appendix A thereto. PLEASE REVIEW THESE MATERIALS CAREFULLY AND
CONSIDER FULLY THE INFORMATION SET FORTH THEREIN.
THE BOARD OF DIRECTORS OF MURDOCK BELIEVES THAT THE MERGER IS IN THE
BEST INTEREST OF MURDOCK'S STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT, AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT, REGARDLESS OF THE NUMBER OF SHARES YOU OWN!
Murdock's management would greatly appreciate your attendance at the Special
Meeting. However, since the affirmative vote of a majority of the outstanding
shares of Murdock Common Stock is necessary to approve the Merger Agreement and
approve the Merger, it is very important that your shares be represented at the
meeting, whether or not you plan to attend the Special Meeting. Accordingly,
we urge you to sign and date the enclosed proxy card and return it in the
enclosed prepaid envelope as soon as possible, even if you currently plan to
attend the Special Meeting. Submitting a proxy will not prevent you from
voting in person, but will assure that your vote is counted if you are unable
to attend the Special Meeting. If you do attend the Special Meeting and desire
to vote in person, you may do so by withdrawing your proxy at that time.
Sincerely yours,
CHARLES E. TAYLOR, JR. ROBERT L. ANDREASEN
Chairman of the Board President and
Chief Executive Officer
<PAGE> 2
MURDOCK FLORIDA BANK
1777 TAMIAMI TRAIL
MURDOCK, FLORIDA 33948
____________________________
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON MARCH 12, 1998
____________________________
TO THE STOCKHOLDERS OF MURDOCK FLORIDA BANK:
NOTICE IS HEREBY GIVEN that a special meeting of the stockholders
("Special Meeting") of Murdock Florida Bank, a Florida state banking
corporation ("Murdock"), will be held at Murdock's offices located at 1777
Tamiami Trail, Murdock, Florida on Thursday, March 12, 1998, at 5:00 p.m.,
local time, for the following purposes:
1. THE MERGER. To consider and vote upon a proposal to
approve the Agreement and Plan of Merger, dated as of September 23,
1997, as amended on October 8, 1997 (the "Merger Agreement"), by and
among American Bancshares, Inc., a Florida corporation ("ABI"),
American Bank of Bradenton, a Florida state banking corporation and
wholly-owned subsidiary of ABI (the "Bank"), and Murdock, pursuant to
which Murdock will be merged with and into the Bank (the "Merger"),
and each issued and outstanding share of Murdock common stock, $10.00
par value ("Murdock Common Stock"), will be converted into the right
to receive 2.4 (as may be adjusted pursuant to the Merger Agreement
under certain circumstances, the "Exchange Ratio") ABI common shares,
$1.175 par value ("ABI Common Shares"); and
2. OTHER BUSINESS. To transact such other business as
may properly come before the meeting or any adjournments or
postponements thereof.
NOTICE OF RIGHT TO DISSENT. If Proposal 1 above is approved and the
Merger is consummated, each holder of shares of Murdock Common Stock would have
the right to dissent from the approval of the Merger and would be entitled to
the rights and remedies of dissenting shareholders provided in Section 658.44
of the Florida Statutes ("Dissent Provisions"). A copy of the Dissent
Provisions is attached as Appendix C to the Joint Proxy Statement-Prospectus.
The right of any such shareholder to any dissenters' rights and remedies is
contingent upon the consummation of the Merger. In addition, the right of any
such holder to such rights and remedies is contingent upon strict compliance
with the Dissent Provisions which require, among other things, that the
stockholder must give Murdock notice of such stockholder's intention to dissent
at or prior to the Special Meeting or he or she must vote his or her respective
shares against the Merger. FOR A SUMMARY OF THE REQUIREMENTS OF THE DISSENT
PROVISIONS, SEE "THE MERGER -- DISSENTERS' RIGHTS OF MURDOCK STOCKHOLDERS" IN
THE ACCOMPANYING JOINT PROXY STATEMENT-PROSPECTUS.
The Merger Agreement is more completely described in the accompanying
Joint Proxy Statement-Prospectus, and a copy of the Merger Agreement is
attached as Appendix A thereto. PLEASE REVIEW THESE MATERIALS CAREFULLY AND
CONSIDER FULLY THE INFORMATION SET FORTH THEREIN.
Action may be taken on the foregoing proposals at the Special Meeting
on the date specified above or on any date or dates to which the Special
Meeting may be adjourned. Only holders of record of Murdock Common Stock at
the close of business on January 30, 1998 (the "Record Date"), will be entitled
to notice of, and to vote at, the Special Meeting and any adjournments or
postponements thereof. The affirmative vote of a majority of the Murdock Common
Stock outstanding on the Record Date is required for approval of the Merger
Agreement and of the Merger.
THE BOARD OF DIRECTORS OF MURDOCK UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY.
<PAGE> 3
Each stockholder, whether or not he or she plans to attend the Special
Meeting in person, is requested to complete, sign and date the enclosed proxy
card and to return it without delay in the enclosed postage-paid envelope.
This will assure your representation at the Special Meeting and may avoid the
cost of additional communications. This will not prevent a stockholder from
voting in person at the Special Meeting. Your proxy may be revoked at any time
before it is voted by signing and returning a later dated proxy with respect to
the same shares, by filing with the Secretary of Murdock a written revocation
bearing a later date, or by attending and voting at the Special Meeting.
By Order of the Board of Directors
Murdock, Florida H. Martin Light, Jr.,
February 3, 1998 Secretary
_________________________________________________
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING
_________________________________________________
<PAGE> 4
AMERICAN BANCSHARES, INC.
4702 CORTEZ ROAD WEST
BRADENTON, FLORIDA 34210
February 3, 1998
Dear Shareholder:
On behalf of the Board of Directors, I am pleased to invite you to
attend a Special Meeting of the Shareholders of American Bancshares, Inc.
("ABI") to be held at the Oakmont Theatres located at 4801 Cortez Road West,
Bradenton, Florida, on Thursday, March 12, 1998, at 10:00 a.m. local time.
On September 23, 1997, ABI, American Bank of Bradenton, a wholly-owned
subsidiary of ABI (the "Bank"), and Murdock Florida Bank ("Murdock") entered
into an Agreement and Plan of Merger, as amended on October 8, 1997 (the
"Merger Agreement"), pursuant to which Murdock will be merged with and into the
Bank (the "Merger").
ABI's management believes that the Merger is an integral step in ABI's
growth and in improving its market position in a highly competitive Florida
banking market; all of which are designed to enhance shareholder value. The
acquisition of Murdock will give ABI a total of approximately $333 million in
assets and will significantly extend its market presence on the west coast of
Florida. The Board of Directors also believes that it is necessary for ABI to
revise its Articles of Incorporation ("Articles") in order to provide it with
the flexibility to continue its growth strategies and to protect shareholders'
value.
Accordingly, as described in the enclosed Joint Proxy
Statement-Prospectus, at the Special Meeting, ABI shareholders will be asked to
consider and vote upon the approval of the Merger Agreement and the
transactions contemplated thereby, including the issuance of ABI common shares,
$1.175 par value per share ("ABI Common Shares"), to stockholders of Murdock
under the proposed Merger. In addition, ABI shareholders will be asked to
consider and approve the following proposed amendments to ABI's Articles which
are designed to provide the flexibility necessary for ABI's continued growth
(together, the "Amendments"): (i) an increase of the number of authorized ABI
Common Shares to 20,000,000, (ii) authorization of a new class of capital stock
consisting of blank check preferred shares, (iii) inclusion of customary
indemnification provisions, (iv) deletion of Article VII of the ABI Articles
and adoption of a new Article VII which provides that the size of the board of
directors shall be determined by the ABI bylaws and that directors may be
removed only for cause by the shareholders, (v) adoption of provisions
requiring a supermajority vote in order for shareholders to amend the ABI
bylaws, and (vi) adoption of a provision permitting shareholders to call a
special meeting of the shareholders only if requested in writing by at least
50% of the outstanding voting shares.
Approval of the Merger and each of the Amendments referenced in
clauses (i) through (iv) above require that the votes cast in favor of each
proposal being considered exceed the vote cast against that proposal. Approval
of Amendments referenced in clauses (v) and (vi) above require the affirmative
vote of 66 2/3% and 50%, respectively, of the outstanding ABI Common Shares.
THE BOARD OF DIRECTORS OF ABI BELIEVES THAT THE MERGER AND EACH OF THE
AMENDMENTS ARE IN THE BEST INTERESTS OF ABI AND ITS SHAREHOLDERS, HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE ADOPTION OF THE AMENDMENTS,
AND UNANIMOUSLY RECOMMENDS THAT THE ABI SHAREHOLDERS VOTE FOR THEIR APPROVAL.
The enclosed Joint Proxy Statement-Prospectus explains in detail the proposed
Merger, the transactions contemplated thereby, and each of the Amendments.
Please carefully review and consider all of this information.
YOUR VOTE IS IMPORTANT! ABI would appreciate your attendance at the
Special Meeting. However, whether or not you plan to attend the Special
Meeting, it is very important that your shares be represented at the meeting.
Accordingly, I urge you to sign and date the enclosed proxy card and return it
in the enclosed prepaid envelope as soon as possible.
Thank you for your continued support and interest in the affairs of
ABI.
Sincerely yours,
GERALD L. ANTHONY
President and Chief Executive Officer
<PAGE> 5
AMERICAN BANCSHARES, INC.
4702 CORTEZ ROAD WEST
BRADENTON, FLORIDA 34210
____________________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 12, 1998
____________________________
TO THE SHAREHOLDERS OF AMERICAN BANCSHARES, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of the Shareholders
("Special Meeting") of American Bancshares, Inc., a Florida corporation
("ABI"), will be held at the Oakmont Theatres located at 4801 Cortez Road West,
Bradenton, Florida on Thursday, March 12, 1998, at 10:00 a.m., local time, for
the following purposes:
1. To consider and vote upon a proposal to approve the
Agreement and Plan of Merger, dated September 23, 1997, as amended on
October 8, 1997 (the "Merger Agreement"), by and between ABI, American
Bank of Bradenton, a Florida state banking corporation and
wholly-owned subsidiary of ABI (the "Bank"), and Murdock Florida Bank,
a Florida state banking corporation ("Murdock"), pursuant to which
Murdock will be merged with and into the Bank (the "Merger"), and the
transactions contemplated thereby, including the issuance of ABI
common shares, $1.175 par value ("ABI Common Shares"), to stockholders
of Murdock under the Merger;
2. To consider and vote upon a proposal to amend the Articles
of Incorporation of ABI to increase ABI's authorized capital from
10,000,000 to 20,000,000 common shares, par value $1.175 per share;
3. To consider and vote upon a proposal to amend the Articles
of Incorporation of ABI to authorize the issuance of up to 5,000,000
preferred shares with such designations, performance, rights, and
limitations as are approved, from time to time, by the ABI board of
directors;
4. To amend the Articles of Incorporation to indemnify
officers and directors and limit the liabilities of directors to ABI
and its shareholders to the extent permitted under Florida law;
5. To consider and vote on a proposal to delete Article VII
of the Articles of Incorporation of ABI and replace it with a revised
Article VII which provides that the number of directors shall be
determined in accordance with the ABI bylaws and that ABI directors
may be removed only for cause by the ABI shareholders;
6. To consider and vote on a proposal to amend the Articles
of Incorporation of ABI to increase the vote required by shareholders
to amend the ABI Bylaws to 66 2/3% of the outstanding ABI Common
Shares;
7. To consider and vote on a proposal to amend the
Articles of Incorporation of ABI to permit shareholders to call a
special meeting of shareholders only if requested in writing by at
least 50% of the outstanding ABI Common Shares; and
8. To transact such other business as may properly come
before the meeting or any adjournments or postponements thereof.
The Merger Agreement and each of the proposed amendments to ABI's
Articles of Incorporation (the "Amendments") are more completely described in
the accompanying Joint Proxy Statement-Prospectus, and a copy of
<PAGE> 6
the Merger Agreement is attached as Appendix A thereto and a copy of each
Amendment is attached as Appendix D thereto. PLEASE REVIEW THESE MATERIALS
CAREFULLY AND CONSIDER FULLY THE INFORMATION SET FORTH THEREIN.
Only ABI Shareholders of record at the close of business on January
30, 1998 are entitled to notice of, and to vote at, the Special Meeting and any
adjournments or postponements thereof. Approval of Proposals 1 through 5 being
presented to ABI Shareholders at the Special Meeting require that the votes
cast in favor of each proposal being considered exceed the votes cast against
that proposal at a meeting where a quorum is present. Approval of Proposal 6
requires the affirmative vote of 66 2/3% of the outstanding ABI Common Shares
and Proposal 7 requires the affirmative vote of a majority of the outstanding
ABI Common Shares. The proposed Amendments are unrelated to the Merger and
shall be considered independently of the Merger proposal.
Your vote is important. Each shareholder, whether or not he or she
plans to attend the Special Meeting in person, is requested to complete, sign
and date the enclosed proxy card and to return it without delay in the enclosed
postage-paid envelope. Your proxy may be revoked at any time before it is
voted by signing and returning a later dated proxy with respect to the same
shares, by filing with the Secretary of ABI a written revocation bearing a
later date, or by attending and voting at the Special Meeting.
By Order of the Board of Directors
Bradenton, Florida Brian M. Watterson, Secretary
February 3, 1998
_________________________________________________
PLEASE COMPLETE, SIGN, DATE, AND RETURN THE ENCLOSED
PROXY CARD, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING
_________________________________________________
<PAGE> 7
JOINT PROXY STATEMENT
MURDOCK FLORIDA BANK AMERICAN BANCSHARES, INC.
SPECIAL MEETING OF SPECIAL MEETING OF
STOCKHOLDERS TO BE HELD SHAREHOLDERS TO BE HELD
ON MARCH 12, 1998 ON MARCH 12, 1998
___________________________________
PROSPECTUS
AMERICAN BANCSHARES, INC.
___________________________________
This Joint Proxy Statement - Prospectus relates to up to 1,020,290 common
shares, $1.175 par value per share ("ABI Common Shares"), of American
Bancshares, Inc., a Florida corporation ("ABI"), issuable to the stockholders
of Murdock Florida Bank, a Florida state chartered banking corporation
("Murdock"), upon consummation of a proposed merger (the "Merger") of Murdock
with and into the American Bank of Bradenton, a Florida banking corporation and
wholly-owned subsidiary of ABI (the "Bank" or the "Surviving Corporation"),
pursuant to an Agreement and Plan of Merger, dated September 23, 1997, as
amended on October 8, 1997, by and among ABI, the Bank, and Murdock (the
"Merger Agreement"). This Joint Proxy Statement-Prospectus also serves as the
Joint Proxy Statement of Murdock and ABI for use in the solicitation of proxies
by the Board of Directors of Murdock (the "Murdock Board") at a Special Meeting
of the Stockholders of Murdock (the "Murdock Special Meeting") to approve and
adopt the Merger Agreement, and by the Board of Directors of ABI (the "ABI
Board") at a Special Meeting of Shareholders of ABI (the "ABI Special Meeting")
to approve the Merger Agreement and the transactions contemplated thereby,
including the issuance of ABI Common Shares to Murdock stockholders pursuant to
the Merger, and the approval of certain amendments to the Articles of
Incorporation of ABI (the "Amendments"). The Merger Agreement is attached as
Appendix A to this Joint Proxy Statement - Prospectus.
Upon consummation of the Merger, except as described herein, each
outstanding share of Murdock common stock, $10.00 par value per share ("Murdock
Common Stock"), will be converted into the right to receive 2.4 ABI Common
Shares (the "Exchange Ratio") unless the average last daily price of ABI Common
Shares for a specified period prior to closing ("ABI Average Price") is less
than $11.00, the Closing Equity (as defined in the Merger Agreement) of Murdock
is less than $5,000,000, or both. If the ABI Average Price is less than $11.00
and the Closing Equity is at least $5,000,000, then the Exchange Ratio will be
increased to 2.65 ABI Common Shares for each share of Murdock Common Stock. If
the Closing Equity is less than $5,000,000, then the Exchange Ratio shall be
adjusted to equal the Closing Equity per share of Murdock Common Stock
multiplied by 2.25 (the "Adjusted Purchase Price"), divided by either 12.169 if
the ABI Average Price is equal to or greater than $11.00, or divided by 11.00
if the ABI Average Price is less than $11.00. If the ABI Average Price is less
than $10.00 or the Closing Equity is less than $4,875,000, then Murdock or ABI,
respectively, may have the right to terminate the Merger Agreement. See "The
Merger - Modification, Waiver, Termination" and "The Merger - Terms of the
Merger". See "The Merger - Terms of the Merger" for an example of adjustments
to the Exchange Ratio that would result from a Closing Equity of less than
$5,000,000. No fractional shares will be issued in the Merger and Murdock
stockholders who otherwise would be entitled to receive a fractional ABI Common
Share will receive a cash payment in lieu thereof. Each option to acquire
Murdock Common Stock that is outstanding and unexercised at the effective time
will be converted automatically in the Merger into a stock option to purchase
ABI Common Shares at the same Exchange Ratio.
(continued on next page)
___________________________________
THE ABI COMMON SHARES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") OR ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE ABI COMMON SHARES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR BANK
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
("FDIC") OR ANY OTHER GOVERNMENTAL AGENCY.
___________________________________
THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS IS FEBRUARY 3, 1998.
<PAGE> 8
The Merger is subject to the approval of a majority of the outstanding
shares of Murdock Common Stock entitled to vote thereon and the satisfaction of
certain other conditions, including receipt of certain regulatory approvals.
Directors and executive officers of Murdock beneficially holding approximately
29.9% of the outstanding shares of Murdock Common Stock and have agreed to vote
their shares in favor of the Merger Agreement. In addition, although approval
of ABI Shareholders is not required under the terms of the Merger Agreement or
by Florida law, the rules of the Nasdaq Stock Market relating to National
Market Securities ("Nasdaq National Market"), require approval by the ABI
Shareholders of the issuance of ABI Common Shares upon consummation of the
Merger. Such approval requires the affirmative vote of a majority of the votes
cast on the matter at a meeting where a quorum is present. See "The Special
Meetings - Vote Required -- ABI".
ABI Common Shares are traded on the Nasdaq Stock Market as a National
Market Security under the trading symbol "ABAN". The last reported sales price
on the Nasdaq National Market System for ABI Common Shares was $12.25 on
September 22, 1997, the last trading day preceding public announcement of the
proposed Merger, and $12.50 on January 30, 1998. Based on the last reported
sales price as of January 30, 1998, the Exchange Ratio would have resulted in a
per share purchase price for the Murdock Common Stock of $30.00. Murdock Common
Stock is not traded on any exchange, and there currently is no established
public trading market for such stock. See "Price Range of Common Stock and
Dividends".
Assuming no adjustment is made to the Exchange Ratio, ABI will issue
924,036 ABI Common Shares, representing approximately 18.5% of the
then-outstanding ABI Common Shares (assuming 4,070,458 ABI Common Shares
outstanding immediately prior to the effective time of the Merger). Because
the Exchange Ratio is subject to adjustment pursuant to the terms of the Merger
Agreement, a change in the market price of ABI Common Shares or the Closing
Equity before the Merger may affect the number of ABI Common Shares to be
received in the Merger in exchange for the Murdock Common Stock. Accordingly,
at the time of the Murdock Special Meeting, Murdock Stockholders will not be
able to determine the precise number of ABI Common Shares that they will
receive in the Merger. However, if the ABI Average Price is less than $10.00
or the Closing Equity is less than $4,875,000, then Murdock or ABI,
respectively, will have the right to terminate the Merger Agreement. The
parties, however, are required to attempt to negotiate, in good faith, a
mutually acceptable revised merger consideration before exercising their right
to terminate. If the parties are able to successfully renegotiate the merger
consideration and continue with the Merger, under the terms of the Merger
Agreement as described herein, Murdock Stockholders will be resolicited to seek
their approval of the revised merger consideration. THERE CAN BE NO ASSURANCE
AS TO THE MARKET PRICE OF ABI COMMON SHARES AT ANY TIME BEFORE THE DATE THAT
THE MERGER BECOMES EFFECTIVE OR AS TO THE MARKET PRICE OF THE ABI COMMON SHARES
AT ANY TIME THEREAFTER.
As described in greater detail herein, under Florida law Murdock
Stockholders have certain rights to dissent from the Merger. See "The Merger -
Dissenters' Rights of Murdock Stockholders". Under the terms of the Merger
Agreement, ABI will have the right to terminate the Merger if holders of more
than 10% of the outstanding shares of Murdock Common Stock exercise such
dissenters' rights. See "The Merger - Modification, Waiver, and Termination".
Allen C. Ewing & Co. ("Ewing") has rendered its opinion, dated January
23, 1998, confirming and updating its prior oral opinion of September 23, 1997
and written opinion of October 17, 1997, to the Murdock Board that the terms of
the Merger are fair from a financial point of view, to the holders of Murdock
Common Stock. See "The Merger - Opinion of Murdock's Financial Advisor".
In addition to the Merger proposal, ABI Shareholders shall be
presented with several proposals to approve the Amendments. The proposed
Amendments are not related to the Merger and will be considered independently
from the Merger proposal. Approval of the Merger does not require approval of
any or all of the Amendments. See "The Special Meetings - Vote Required --
ABI" and "The ABI Proposed Amendments".
THE BOARD OF DIRECTORS OF ABI AND MURDOCK UNANIMOUSLY RECOMMEND THAT
THEIR RESPECTIVE STOCKHOLDERS VOTE FOR APPROVAL OF THE MERGER AGREEMENT. THE
ABI BOARD ALSO UNANIMOUSLY RECOMMENDS THAT THE ABI SHAREHOLDERS APPROVE EACH OF
THE PROPOSED AMENDMENTS DESCRIBED HEREIN.
This Joint Proxy Statement - Prospectus, Notice of Special Meeting,
and the enclosed form of proxy are first being sent to shareholders of ABI and
Murdock on or about February 5, 1998.
2
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
The Special Meetings and the Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Amendments to ABI Articles of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Recommendation of the Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Opinion of Financial Advisor as to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Share Information and Market Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Certain Differences in the Rights of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Resales by Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
THE SPECIAL MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Record Date and Voting Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Reasons for the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Opinion of Murdock's Financial Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Business Pending the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Modification, Waiver, and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Certain Federal Income Tax Consequences of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Resales of ABI Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Voting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Dissenters' Rights of Murdock Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
PRICE RANGE OF COMMON STOCK AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
THE ABI PROPOSED AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Increase in the Number of Authorized ABI Common Shares (Proposal 2) . . . . . . . . . . . . . . . . . . . . 51
Authorization of a Class of Preferred Shares (Proposal 3) . . . . . . . . . . . . . . . . . . . . . . . . . 52
Indemnification of Officers and Directors (Proposal 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Board of Director Amendments (Proposal 5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Procedural Amendments (Proposals 6 and 7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
</TABLE>
3
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<TABLE>
<S> <C> <C>
INFORMATION ABOUT ABI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Market for Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Lending Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
Investment Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Deposit Activities and Other Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ABI Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Compensation of Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . 81
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SELECTED FINANCIAL AND OTHER DATA OF ABI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS OF ABI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Asset Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Asset/Liability Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Comparative Average Balances, Interest, and Average Yields . . . . . . . . . . . . . . . . . . . . . . . . . 87
Comparison of Nine Months Ended September 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . 90
Comparison of Years Ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
Comparison of Years Ended December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Impact of Inflation and Changing Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Federal and State Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Future Accounting Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
INFORMATION ABOUT MURDOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Market Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Lending Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
Investment Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Source of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Description of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110
Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . . . 111
SELECTED FINANCIAL AND OTHER DATA OF MURDOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS OF MURDOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114
Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
</TABLE>
4
<PAGE> 11
<TABLE>
<S> <C> <C>
Regulatory Capital Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116
Asset and Liability Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118
Comparison of Nine Months Ended September 30, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . 120
Comparison of Years Ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
Impact of Inflation and Changing Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
DESCRIPTION OF ABI CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
ABI Common Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
ABI Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123
COMPARISON OF RIGHTS OF HOLDERS
OF ABI COMMON SHARES AND MURDOCK COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Directors Qualifications and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
Removal of Directors; Filling Vacancies on the Board of Directors . . . . . . . . . . . . . . . . . . . . . 125
Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Dividends and Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127
Amendment of Articles of Incorporation and Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
REGULATORY MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Bank Holding Company Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128
Bank Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Dividend Restrictions and Transfers of Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133
Capital Adequacy Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
FDICIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
FDIC Insurance Premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
Depositor Preference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
Monetary Policy And Economic Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
LEGAL OPINIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137
SHAREHOLDER PROPOSALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Appendix A - Agreement and Plan of Merger
Appendix B - Opinion of Allen C. Ewing & Co.
Appendix C - Provisions on Dissenters' Rights under the Florida Financial Institution Code
Appendix D - Amendments to ABI Articles of Incorporation
</TABLE>
5
<PAGE> 12
AVAILABLE INFORMATION
ABI has filed with the Commission a Registration Statement on Form S-4
(together with any amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), with respect to the ABI Common Shares to be issued in connection with
the Merger. For further information pertaining to the ABI Common Shares to
which this Joint Proxy Statement-Prospectus relates, reference is made to the
Registration Statement, including the exhibits and schedules filed as a part
thereof. This Joint Proxy Statement-Prospectus constitutes the Prospectus of
ABI filed as part of the Registration Statement and does not contain all the
information set forth in the Registration Statement, certain portions of which
have been omitted in accordance with the rules and regulations of the
Commission. In addition, ABI is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files certain reports, proxy statements, and other
information with the Commission. Such reports, proxy statements, and other
information can be inspected and copied at the public reference room of the
Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and
copies of such materials can be obtained by mail from the Public Reference
Section of the Commission, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, at prescribed rates. Such documents also may be obtained at the
Internet Web site maintained by the Commission (http://www.sec.gov). In
addition, copies of such materials are available for inspection and
reproduction at the public reference facilities of the Commission at its New
York Regional Office, 7 World Trade Center, Suite 1300, New York, New York
10048; and at its Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. ABI Common Shares trade on
the Nasdaq Stock Market and, as a result, reports, proxy statements, and other
information concerning ABI also may be inspected at the offices of the Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006-1500.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ABI OR MURDOCK. THIS
JOINT PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO EXCHANGE OR
SELL, OR A SOLICITATION OF AN OFFER TO EXCHANGE OR PURCHASE, THE SECURITIES
OFFERED BY THIS JOINT PROXY STATEMENT-PROSPECTUS, NOR DOES IT CONSTITUTE THE
SOLICITATION OF A PROXY IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
THE INFORMATION CONTAINED IN THIS JOINT PROXY STATEMENT-PROSPECTUS
SPEAKS AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFICALLY INDICATED. NEITHER
THE DELIVERY OF THIS JOINT PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF
THE SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ABI OR MURDOCK
SINCE THE DATE OF THIS JOINT PROXY STATEMENT-PROSPECTUS OR THAT THE INFORMATION
IN THIS JOINT PROXY STATEMENT-PROSPECTUS OR IN THE DOCUMENTS INCORPORATED
HEREIN BY REFERENCE IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR
THE DATES THEREOF.
THIS JOINT PROXY STATEMENT-PROSPECTUS DOES NOT COVER ANY RESALES OF
THE ABI COMMON SHARES OFFERED HEREBY TO BE RECEIVED BY STOCKHOLDERS OF MURDOCK
WHO ARE DEEMED TO BE "AFFILIATES" OF ABI OR MURDOCK UPON THE CONSUMMATION OF
THE MERGER. NO PERSON IS AUTHORIZED TO MAKE USE OF THIS JOINT PROXY
STATEMENT-PROSPECTUS IN CONNECTION WITH ANY SUCH RESALES.
6
<PAGE> 13
SUMMARY
The following is a summary of certain information set forth elsewhere
in this Joint Proxy Statement-Prospectus and is not intended to be complete.
It should be read in conjunction with, and is qualified in its entirety by
reference to, the more detailed information contained elsewhere in this Joint
Proxy Statement-Prospectus and the accompanying Appendices.
This Joint Proxy Statement-Prospectus contains certain "forward
looking statements" within the meaning of Section 21 of the Securities Act and
Section 27A of the Exchange Act, such as statements relating to the financial
condition and prospects, results of operations, plans for future business
development activities, capital spending and financing sources, capital
structure, the effects of regulation and competition, and the business of ABI
following consummation of the Merger, including statements relating to cost
savings, revenues and business advantages, and growth that are expected to be
realized from the Merger, and the expected impact of the Merger on ABI's
financial performance. (See "The Merger -- Reasons for the Merger", " -- ABI
Reasons for Merger and Recommendations of the ABI Board" and " -- Murdock
Reasons for Merger and Recommendation of the Murdock Board"). These
forward-looking statements are not guarantees of future performance and are
subject to risks, uncertainties, and other factors which could cause actual
results to differ materially from those expressed or implied by such
forward-looking statements as a result of various factors. Potential risks and
uncertainties include, but are not limited to: (i) costs or difficulties
related to the integration of the business of the Bank and Murdock which are
greater than expected; (ii) competitive pressure in the banking, broker-dealer,
or financial services industries increasing significantly; (iii) expected cost
savings from the Merger cannot be fully realized; (iv) changes in the interest
rate environment which reduce margins; (v) changes occurring in the regulatory
environment; (vi) general economic conditions, either nationally or regionally,
becoming less favorable than expected resulting in, among other things, a
deterioration in credit quality; (vii) changes occurring in business conditions
and inflation; and (viii) changes occurring in the securities markets.
GENERAL
This Joint Proxy Statement-Prospectus, Notice of the ABI Special
Meeting to be held on March 12, 1998, Notice of the Murdock Special Meeting to
be held on March 12, 1998, and the forms of proxy solicited in connection
therewith are first being mailed to holders of ABI Common Shares ("ABI
Shareholders") and to holders of Murdock Common Stock ("Murdock Stockholders")
on or about February 5, 1998.
At the Murdock Special Meeting, Murdock Stockholders will consider and
vote on whether to approve the Merger Agreement and the transactions
contemplated thereby. A copy of the Merger Agreement is attached as Appendix A
to this Joint Proxy Statement-Prospectus.
At the ABI Special Meeting, ABI Shareholders will consider and vote on
whether to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the issuance of ABI Common Shares to Murdock
Stockholders upon consummation of the Merger (Proposal 1). In addition, ABI
Shareholders will be asked to consider the approval and adoption of the
Amendments to ABI's Articles of Incorporation. The Amendments (Proposals
2 through 7) are not related to the Merger and will be considered by ABI
Shareholders independently from the Merger proposal (Proposal 1). A copy of
the Amendments is attached as Appendix D to this Joint Proxy
Statement-Prospectus.
THE COMPANIES
ABI. American Bancshares, Inc., a Florida corporation organized on
June 30, 1995, is a one bank holding company registered under the Bank Holding
Company Act of 1956, as amended ("BHCA"), whose primary subsidiary and
principal asset is American Bank of Bradenton (the "Bank"). The principal
executive offices of both ABI and the Bank are 4702 Cortez Road West,
Bradenton, Florida, and their telephone number is (941) 795-3050. ABI, through
its ownership of the Bank, is engaged in the general commercial banking
business and its primary source of earnings has been derived from the income
generated by the Bank. As of September 30, 1997, ABI, on a consolidated basis,
had total assets of approximately $270.2 million, total deposits of
approximately $249.8 million,
7
<PAGE> 14
and total shareholders' equity of approximately $20.4 million. For additional
information regarding ABI and the combined company that would result from the
Merger, see "The Merger" and "Information about ABI".
ABI continues to evaluate other financial institutions as additional
potential acquisition candidates, and it may, after the date of this Joint
Proxy Statement-Prospectus, enter into one or more acquisition agreements with
one or more such institutions.
The Bank. The Bank is a state banking corporation chartered under the
laws of the State of Florida on May 8, 1989. The Bank engages in general
commercial banking and related business from its six banking offices located in
Manatee County, Florida. The business of the Bank includes the acceptance of
deposits from the general public and the application of those funds to the
origination of a variety of commercial and residential real estate loans and
installment loans. The primary source of the Bank's income is derived from the
interest and fees earned in connection with lending activities, dividends from
investment securities, and short-term investments. See "Information about
ABI".
Murdock. Murdock is a state banking corporation engaged in commercial
banking business from its office in Charlotte County, Florida. Murdock was
originally chartered on January 10, 1986 as a federal savings and loan
association. In December 1992, Murdock converted its thrift charter into a
commercial banking charter granted under the laws of the state of Florida. The
principal place of business and principal executive offices of Murdock are
located at 1777 Tamiami Trail, Murdock, Florida 33948-1051, and its telephone
number is (941) 625-4444. As of September 30, 1997, Murdock had total assets
of approximately $62.9 million, total deposits of approximately $57.0 million,
and total stockholders' equity of approximately $5.2 million. For additional
information regarding the business of Murdock, see "The Merger -- Background of
the Merger" and " -- Reasons for the Merger" and "Information about Murdock".
THE SPECIAL MEETINGS AND VOTES REQUIRED
Murdock Special Meeting and Vote
The Murdock Special Meeting will be held at the offices of Murdock, on
Thursday, March 12, 1998, at 5:00 p.m., local time, at which time Murdock
Stockholders will be asked to consider and vote upon a proposal to approve and
adopt the Merger Agreement and the transactions contemplated thereby. Only the
record holders of the Murdock Common Stock at the close of business on January
30, 1998 (the "Murdock Record Date") are entitled to notice of, and to vote at,
the Murdock Special Meeting. As of the Murdock Record Date, there were
approximately 355 holders of record of Murdock Common Stock and 385,015 shares
of Murdock Common Stock outstanding. Each share of Murdock Common Stock is
entitled to one vote.
The presence in person or by proxy of a majority of the outstanding
shares of Murdock Common Stock as of the Murdock Record Date will constitute a
quorum at the Murdock Special Meeting. The affirmative vote of a majority of
all the votes entitled to be cast at the Murdock Special Meeting is required in
order to approve and adopt the Merger Agreement and the transactions
contemplated thereby. As of the Murdock Record Date, directors and executive
officers of Murdock beneficially owned approximately 115,072 shares, or 29.9%,
of the Murdock Common Stock entitled to vote at the Murdock Special Meeting.
Pursuant to the terms of the Merger Agreement, these directors and officers
will vote their shares in favor of the Merger Agreement. See "The Special
Meetings".
ABI Special Meeting and Vote
The ABI Special Meeting will be held at the Oakmont Theatres, 4801
Cortez Road West, Bradenton, Florida, on Thursday, March 12, 1998, at 10:00
a.m., local time, at which time ABI Shareholders will be asked to consider and
vote upon a proposal to approve and adopt the Merger Agreement and the
transactions contemplated thereby, including the issuance of ABI Common Shares
upon consummation of the Merger (Proposal 1), and proposals to approve and
adopt the Amendments (Proposals 2 through 7). Only the record holders of the
ABI Common Stock at the close of business on January 30, 1998 (the "ABI Record
Date") are entitled to notice of, and to vote at, the ABI
8
<PAGE> 15
Special Meeting. As of the ABI Record Date, there were approximately 960
holders of record of ABI Common Stock and 4,070,458 shares of ABI Common Stock
outstanding. Each share of ABI Common Stock is entitled to one vote.
The presence in person or by proxy of a majority of the outstanding
ABI Common Shares as of the ABI Record Date will constitute a quorum at the ABI
Special Meeting. Approval of the Merger proposal and those Amendments set
forth in Proposals 2 through 5 being presented to ABI Shareholders at the ABI
Special Meeting require that the votes cast in favor of each proposal being
considered exceed those votes cast against that proposal at meeting at which a
quorum is present. Approval of Proposal 6 requires the affirmative votes of 66
2/3% of the outstanding ABI Common Shares and Proposal 7 requires the
affirmative vote of a majority of the outstanding ABI Common Shares. As of the
ABI Record Date, directors and executive officers of ABI beneficially owned
484,769 ABI Common Shares, or 11.91% of the shares entitled to vote at the ABI
Special Meeting, and it is expected that they will vote their shares in favor
of the Merger Agreement and each Amendment. See "The Special Meetings".
THE MERGER
Terms of the Merger
The Merger Agreement provides for the Merger of Murdock with and into
the Bank, a wholly-owned subsidiary of ABI, whereupon the separate existence of
Murdock shall cease. Pursuant to the Merger, except as described under "The
Merger -- Dissenters' Rights of Murdock Stockholders" at the Effective Time (as
defined below) each outstanding share of Murdock Common Stock will be converted
into and exchanged for 2.4 ABI Common Shares ("Exchange Ratio") unless the
average last daily price of ABI Common Shares for a specified period prior to
closing ("ABI Average Price") is less than $11.00, or Murdock's Closing Equity
(as defined in the Merger Agreement) is less than $5,000,000, or both, in which
case the Exchange Ratio shall be adjusted as follows:
(i) if the ABI Average Price is less than $11.00 and the Closing
Equity is $5,000,000 or more, then the Exchange Ratio shall be increased to
2.65; or
(ii) if the Closing Equity is less than $5,000,000, then the
Exchange Ratio shall be adjusted to equal the Closing Equity per share of
Murdock Common Stock multiplied by 2.25 (the "Adjusted Purchase Price"),
divided by either 12.169 if the ABI Average Price is equal to or greater than
$11.00, or by 11.00 if the ABI Average Price is less than $11.00.
If the ABI Average Price is less than $10.00 or the Closing Equity is
less than $4,875,000, then Murdock or ABI, respectively, may have the right to
terminate the Merger Agreement. See "Summary - The Merger -- Modification,
Waiver, and Termination" and "The Merger - Modification, Waiver, and
Termination -- Termination".
Further, the Merger Agreement also provides that the Exchange Ratio
may be adjusted to prevent dilution in the event ABI changes the number of ABI
Common Shares issued and outstanding prior to the Effective Time as a result of
a stock split, stock dividend, recapitalization, reclassification, or similar
transactions. In lieu of fractional shares, Murdock Shareholders will receive
cash (without interest) for each fractional ABI Common Share into which their
Murdock Common Stock would otherwise be converted. After consummation of the
Merger, each share of capital stock of both ABI and the Bank shall remain
outstanding. See "The Merger - Terms of the Merger".
Assuming no adjustment is made to the Exchange Ratio, ABI will issue
924,036 ABI Common Shares, representing approximately 18.5% of the then
outstanding ABI Common Shares (assuming 4,070,458 ABI Common Shares
outstanding immediately prior to the Effective Time). Because the Exchange
Ratio is subject to adjustment based on certain fluctuations in the value of
ABI Common Shares and Murdock's Closing Equity, the number of ABI Common Shares
that Murdock Stockholders will receive may be greater or less than 924,036.
See "The Merger - Terms of the Merger".
9
<PAGE> 16
At the Effective Time, each option to purchase shares of Murdock
Common Stock ("Murdock Options") which were outstanding at the time of the
Merger Agreement and have not been subsequently exercised will be assumed by
ABI and converted into an option to purchase the number of ABI Common Shares
("ABI Options") that the holder would have received pursuant to the Merger if
such Murdock Options had been exercise immediately prior to the Effective Time.
The per share exercise price for each ABI Option will be the per share exercise
price of the Murdock Option immediately prior to the Effective Time, divided by
the Exchange Ratio. See "The Merger - Terms of the Merger".
Conditions of the Merger
Under the terms of the Merger Agreement, consummation of the Merger is
subject to the satisfaction or waiver of certain conditions, including, among
other things, approval of the Merger Agreement by Murdock Stockholders; receipt
of all necessary approvals and consents, regulatory or otherwise, including the
approval of the Florida Department of Banking and Finance (the "Department")
and the Federal Deposit Insurance Corporation ("FDIC"); receipt of the opinion
of Allen C. Ewing & Co. ("Ewing") as to the fairness of the transaction to the
Murdock Stockholders; the effectiveness under the Securities Act of the
Registration Statement for ABI Common Shares to be issued in the Merger;
receipt of an opinion of Coopers & Lybrand, LLP that the Merger qualifies for
"pooling of interests" accounting treatment; receipt of an opinion of counsel
substantially to the effect that the Merger will constitute a reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"); approval and authorization of the ABI Common Shares to be issued
pursuant to the Merger for quotation on the Nasdaq National Market; and certain
other customary conditions. Under the terms of the Merger Agreement, other
than receipt of the approvals required by Murdock Stockholders and from
regulatory authorities, the conditions to the Merger may be waived by any party
to the Merger. See "The Merger - Conditions to the Merger" and "The Merger -
Modification, Waiver, and Termination".
Effective Time of Merger
Unless otherwise agreed by ABI and Murdock, the Merger will become
effective on the date and at the time on which the certificate of merger
("Certificate of Merger") is issued by the Department (the "Effective Time").
The Certificate of Merger is expected to be issued on the date of closing and
the parties have agreed to use their reasonable best efforts to cause the
closing to occur on or before the fifth day following the last to occur of: (i)
the effective date of the receipt of the last required consent or approval of
any state or federal regulatory authority having authority over the Merger
(including expiration of any applicable waiting periods following such consents
or approvals or the delivery of appropriate notices), or (ii) the date on which
Murdock Stockholders approve the Merger Agreement. See "The Merger --
Effective Time of the Merger" and "- Conditions to the Merger".
Regulatory Approvals
The Merger Agreement provides that consummation of the Merger and the
transactions contemplated thereby is subject to, and conditioned on, receipt of
all required approvals from the Department and the FDIC and the approval or
other action of such other regulatory authorities as may be required by
applicable law. As of the date of this Joint Proxy Statement-Prospectus,
applications or requests for all such regulatory approvals have been filed by
ABI and are currently pending. See "The Merger - Conditions to the Merger" and
"- Regulatory Approvals".
In addition, although approval of the Merger by the ABI Shareholders
is not required under the terms of the Merger Agreement or by Florida law, the
rules of the Nasdaq National Market requires approval by the ABI Shareholders
of the issuance of ABI Common Shares upon consummation of the Merger. See "The
Special Meeting - Vote Required -- ABI".
Modification, Waiver, and Termination
The Merger Agreement provides that, to the extent permitted by law, it
may be amended at any time by a subsequent writing signed by each party upon
approval of each of their respective Boards of Directors. However, no
amendment or modification relating to the manner or basis by which shares of
Murdock Common Stock will be
10
<PAGE> 17
exchanged for ABI Common Shares may be made after the Murdock Special Meeting
without further approval of Murdock Stockholders (e.g., change in amount merger
consideration to be paid, change in form of consideration to be received,
change in the tax free nature of the share exchange, etc.). The Merger
Agreement also provides that prior to the Effective Time, any provision of the
Merger Agreement may be waived, to the extent permitted by law, by the party
entitled to the benefits of such provision. See "The Merger - Modification,
Waiver, and Termination".
The Merger Agreement may be terminated by the mutual consent of the
Boards of Directors of ABI and Murdock. The Merger Agreement also may be
terminated and the Merger abandoned at any time prior to the Effective Time,
whether before or after Murdock Stockholder approval, by either the ABI Board
or the Murdock Board (i) in the event of a breach of the Merger Agreement by
the other party which cannot or has not been cured within 30 days after written
notice of such breach, (ii) if the required approvals of Murdock Stockholders
or any applicable regulatory authority is not obtained, or (iii) if the Merger
is not consummated by April 30, 1998. The Merger Agreement also may be
terminated by ABI if dissenters' rights are perfected by 10% or more of the
outstanding shares of Murdock Common Stock.
In addition, the Merger Agreement may be terminated by the ABI Board
if the Closing Equity of Murdock is less than $4,875,000 and by the Murdock
Board if the ABI Average Price is less than $10.00. In either such event,
neither party may terminate the Merger Agreement without first having
attempted, in good faith, to negotiate a mutually acceptable revised
consideration for the Murdock Common Stock. If the parties are able to
successfully renegotiate the merger consideration and continue with the Merger,
under the terms of the Merger Agreement as described above, Murdock
Stockholders will be resolicited to seek their approval of the revised merger
consideration.
If, however, the Merger Agreement is terminated as the result of
certain events specified therein, the terminating party may be required to pay
specified termination fees to the non-terminating party. See "The Merger -
Modification, Waiver, and Termination of the Merger Agreement -- Termination".
Certain Agreements
Concurrently with the execution of the Merger Agreement, directors and
certain executive officers of Murdock who, as of the Murdock Record Date,
beneficially owned approximately 29.9% of the outstanding shares of Murdock
Common Stock have executed separate agreements with ABI and have agreed to
provide similar agreements from their spouses pursuant to which each such
director or officer and their spouse has agreed, among other things, that all
shares of Murdock Common Stock beneficially owned by them will be voted in
favor of the Merger Agreement. See "The Merger - Voting Agreements".
Interests of Certain Persons in the Merger
Certain members of Murdock's management and its Board of Directors may
be deemed to have interests in the Merger that are in addition to their
interests as Murdock Stockholders generally. These interests include, among
others, (i) the appointment of at least three current members of the Murdock
Board to an advisory board of directors for the Murdock branch of the Bank to
be established following the consummation of the Merger and a preference to
their selection as members of the advisory board's loan committee, (ii)
agreement by ABI to indemnify present and former directors and officers of
Murdock from and after the Merger against certain liabilities arising prior to
the Merger to the fullest extent permitted under Florida law, the Murdock
Articles of Incorporation, and the Murdock Bylaws, as in effect on the date of
the Merger Agreement, (iii) assumption by ABI of the obligations of Murdock
under its employment agreement with Robert L. Andreasen, President of Murdock,
and (iv) conversion of 14,000 outstanding Murdock Options granted to Mr.
Andreasen into ABI Options in accordance with the Exchange Ratio and subject to
any adjustments as provided in the Merger Agreement. Members of the advisory
board which will meet at least quarterly and the loan committee which will meet
weekly or as needed will receive payments of $100 per meeting.
11
<PAGE> 18
Mr. Andreasen's employment agreement with Murdock provides for certain
severance payments upon a "change of control" of Murdock. Although the Merger
may constitute a change of control for such purposes, Mr. Andreasen has waived
the severance payments so long as he is retained by the Surviving Corporation
through the term of the employment agreement (ending in September 1998), his
base compensation of $102,500 is not reduced, and the Surviving Corporation
assumes Murdock's obligations under the employment agreement and it performs in
accordance with its terms. See "The Merger - Interests of Certain Persons in
the Merger".
Certain Federal Income Tax Consequences
Each party's obligation to effect the Merger is conditioned on
delivery of an opinion from Carlton, Fields, Ward, Emmanuel, Smith & Cutler,
P.A., counsel for ABI, based upon certain customary assumptions and
representations set forth therein which are consistent with the facts existing
at the time the opinion is rendered, substantially to the effect that for
federal income tax purposes the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code, and that, accordingly, no gain or
loss will be recognized by the Murdock Stockholders as a result of the Merger
to the extent they receive ABI Common Shares solely in exchange for their
Murdock Common Stock (except with respect to cash received in lieu of a
fractional interest in ABI Common Shares). For a more complete description of
the federal income tax consequences, see "The Merger - Certain Federal Income
Tax Consequences of the Merger".
A Murdock Stockholder who exercises his or her dissenters' rights
under Florida law should be treated as having disposed of his or her shares in
a taxable transaction in exchange for cash representing the fair value of such
shares. The amount of any gain or loss and its character as capital gain or
loss will be determined in accordance with applicable provisions of the Code.
Due to the complexities of the federal income tax laws and the nature
of the tax consequences of the Merger which depend upon a holder's individual
circumstances or tax status, it is recommended that each Murdock Stockholder
consult his or her tax advisor concerning the federal (and any applicable
state, local or other) tax consequences of the Merger.
Accounting Treatment
It is intended that the Merger will be accounted for as a "pooling of
interests" under generally accepted accounting principles ("GAAP"). It is a
condition to the consummation of the Merger that the parties receive a letter
from Coopers & Lybrand L.L.P., independent public accountants, that, in their
opinion, the Merger should be accounted for as a pooling of interests. See
"The Merger - Conditions to the Merger", " - Accounting Treatment", and "Pro
Forma Condensed Consolidated Financial Statements".
AMENDMENTS TO ABI ARTICLES OF INCORPORATION
ABI is seeking shareholder approval of proposals to amend its Articles
of Incorporation to (i) increase the authorized number of ABI Common Shares
from 10,000,000 shares to 20,000,000 shares, (ii) authorize the creation of a
new class of capital stock consisting of 5,000,000 blank check preferred
shares, (iii) provide customary indemnification and limited liability
provisions for ABI's directors, (iv) permit the size of the Board of Directors,
the timing of the annual meeting, and the identification of required corporate
officers to be determined in accordance with the ABI Bylaws and to provide that
directors may be removed only for cause by ABI shareholders, (v) provide
certain supermajority voting provisions in order for shareholders to repeal or
amend the ABI Bylaws; and (vi) to permit shareholders to call a special meeting
only if requested by at least 50% of the outstanding shares (such amendments
together "Amendments").
12
<PAGE> 19
The purpose of the proposed Amendments is to provide ABI with
flexibility to continue its growth strategies by providing it with the means to
take advantage of opportunities as they arise and to provide management with
the ability to protect shareholder values achieved through these efforts. For
a more detailed description of each of the proposed Amendments, see "The ABI
Proposed Amendments".
DISSENTERS' RIGHTS
Under Florida law, each Murdock Stockholder who dissents from the
Merger in strict compliance with the provisions set forth under the Florida
Financial Institutions Code ("FFIC") relating to the rights of dissenting
shareholders, Section 658.44 of the Florida Statutes ("Dissent Provisions"), a
copy of which is attached as Appendix C to this Joint Proxy
Statement-Prospectus, shall be entitled to the rights and remedies of
dissenting shareholders set forth therein. See "The Merger - Dissenters'
Rights of Murdock Stockholders" and "Comparison of Rights of Holders of ABI
Common Shares and Murdock Common Stock - Dissenters' Rights".
Under Florida law, ABI Shareholders do not have any dissenter's rights
in connection with the Amendments or the Merger.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of Murdock has unanimously approved the Merger
Agreement, the Merger, and the transactions contemplated thereby. The Murdock
Board believes that the Merger is fair to, and in the best interests of,
Murdock and its stockholders and recommends that the Murdock Stockholders vote
FOR the approval of the Merger Agreement. For a discussion of the factors
considered by the Murdock Board in reaching its conclusions, see "The Merger -
Background of the Merger" and " - Reasons for the Merger - Murdock Reasons for
Merger and Recommendations of Murdock Board".
Similarly, the ABI Board has unanimously approved the Merger Agreement
and the transactions contemplated thereby, including the issuance of ABI Common
Shares upon consummation of the Merger, and each of the Amendments. The ABI
Board believes that approval and adoption of the Merger Agreement and each of
the Amendments is in the best interests of ABI and its shareholders and
recommends that ABI Shareholders vote FOR approval of the Merger Agreement and
each of the Amendments. See "The Merger - Reasons for the Merger - ABI Reasons
for Merger and Recommendation of ABI Board" and "The ABI Proposed Amendments".
OPINION OF FINANCIAL ADVISOR AS TO THE MERGER
Ewing, in its capacity as financial advisor to Murdock, has rendered
its opinion to the Murdock Board that the terms of the Merger are fair, from a
financial point of view to the Murdock Stockholders. A copy of such opinion
dated January 23, 1998, confirming and updating its prior oral opinion of
September 23, 1997 is attached hereto as Appendix B and should be read in its
entirety with respect to the assumptions made, the matters considered, and the
limitation of the review undertaken by Ewing in rendering its opinion. See
"The Merger - Opinion of Murdock's Financial Advisor".
SHARE INFORMATION AND MARKET PRICES
ABI Common Shares are traded on the Nasdaq National Market as a
National Market Security under the symbol "ABAN". As of the ABI Record Date,
there were approximately 4,070,458 ABI Common Shares outstanding held by
approximately 960 holders of record. The closing sales price reported on the
Nasdaq-National Market for ABI Common Shares was $12.25 on September 22, 1997,
the last trading date preceding public announcement of the Merger, and $12.50
on January 30, 1998. There is currently no market for the Murdock Common
Stock. The Murdock equivalent per share sales price on September 22, 1997 and
January 30, 1998, was $29.40 and $30.00, respectively. The Murdock equivalent
per share price represents the last sales price of an ABI Common Share on such
date multiplied by the Exchange Ratio of 2.4. The Exchange Ratio may be
adjusted as provided herein.
13
<PAGE> 20
Stockholders are advised to obtain current market quotations for ABI Common
Shares. No assurance can be given as to the market price of the ABI Common
Shares at the Effective Time. For additional information regarding the
historical market prices of ABI Common Shares during the previous two years,
see "Price Range of Common Shares and Dividends".
CERTAIN DIFFERENCES IN THE RIGHTS OF SHAREHOLDERS
The rights of ABI Shareholders and other corporate matters relating to
the ABI Common Shares are controlled by the Articles of Incorporation of ABI
("ABI Articles"), the Bylaws of ABI ("ABI Bylaws"), and the Florida Business
Corporation Act ("FBCA"). The rights of Murdock Stockholders and other
corporate matters relating to Murdock Common Stock are controlled by the
Articles of Incorporation of Murdock ("Murdock Articles"), the Bylaws of
Murdock ("Murdock Bylaws"), and the Florida Banking Code. Upon consummation of
the Merger, Murdock Stockholders will become shareholders of ABI whose rights
will be governed by the ABI Articles, the ABI Bylaws, and the provisions of the
FBCA only. Although the provisions of the Florida Banking Code are similar to
and incorporate many of the provisions of the FCBA, there are several
significant differences between the two acts. See "Description of ABI Capital
Stock" and "Comparison of Rights of Holders of ABI Common Shares and Murdock
Common Stock".
RESALES BY AFFILIATES
Murdock has agreed to obtain from each individual identified by it as
an affiliate, an agreement providing that such person will not sell or
otherwise transfer any ABI Common Shares to be received by such person as a
result of the Merger, except in compliance with the Securities Act and as
permitted under the accounting rules governing the pooling of interest method
of accounting. See "The Merger -- Resales of ABI Common Shares".
THE ABI COMMON SHARES TO BE ISSUED IN THE MERGER
ARE NOT DEPOSIT ACCOUNTS AND ARE NOT INSURED BY
THE FDIC OR ANY OTHER GOVERNMENT AGENCY.
14
<PAGE> 21
COMPARATIVE PER SHARE DATA
The following table presents at the dates and for the periods
indicated (i) selected comparative per share data for ABI and Murdock on a
historical basis, and (ii) selected unaudited pro forma comparative per share
data reflecting the consummation of the Merger. The unaudited pro forma data
has been prepared giving effect to the Merger as a pooling of interests. For a
description of the effect of pooling of interest accounting on the Merger and
the historical financial statements of ABI, see "The Merger - Accounting
Treatment". The Murdock pro forma equivalent amounts are presented with
respect to each set of pro forma information. The comparative per share data
presented is based on and derived from, and should be read in conjunction with,
the historical consolidated financial statements and the related notes thereto
of ABI, incorporated by reference herein, and of Murdock, which are included
herein. The following information is not necessarily indicative of the results
of operations or combined financial position that would have resulted had the
Merger been consummated at the beginning of the periods presented, nor is it
necessarily indicative of the results of operations of future periods or of
future commercial financial position. See "Incorporation of Certain
Information by Reference", "Pro Forma Condensed Consolidated Financial
Statements", and "Murdock Financial Statements".
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------ ---------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET INCOME PER COMMON SHARE:
ABI COMMON SHARES:
Historical (primary) $ 0.26 $ 0.18 $ 0.24 $ 0.46 $ 0.26
Pro Forma combined (primary) $ 0.29 $ 0.14 $ 0.17 $ 0.27 $ 0.26
MURDOCK COMMON STOCK:
Historical primary (loss) $ 1.03 $(0.08) $(0.26) $(0.44) $ 0.59
Pro Forma equivalent (1):
Primary $ 0.70 $ 0.34 $ 0.41 $ 0.65 $ 0.62
Fully diluted $ 0.70 $ 0.34 $ 0.41 $ 0.65 $ 0.62
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30,
1997
(UNAUDITED) AT DECEMBER 31, 1996
-------------------- --------------------
<S> <C> <C>
BOOK VALUE PER COMMON SHARE (PERIOD END)
ABI historical $ 5.01 $ 4.70
ABI pro forma combined 4.52 4.77
Murdock historical 13.46 12.18
Murdock pro forma equivalent (1) 10.85 11.45
- -----------------
</TABLE>
(1) Murdock pro forma equivalent amounts are calculated by multiplying the
pro forma combined amounts for ABI by the Exchange Ratio of 2.4 ABI
Common Shares for each share of Murdock Common Stock. The Exchange
Ratio is subject to adjustment in certain circumstances. See "The
Merger - Terms of the Merger" and " - Modification, Waiver, and
Termination".
15
<PAGE> 22
SELECTED FINANCIAL INFORMATION
The following tables set forth certain selected historical financial
information for ABI and Murdock. For a description of the effect of
pooling-of-interests accounting on the Merger and the historical financial
statements of ABI, see "The Merger - Accounting Treatment". The selected
historical financial information is based upon, is derived from, and should be
read in conjunction with, the historical financial statements of ABI and the
related notes therein, included in documents incorporated by reference, and the
historical financial statements of Murdock and the related notes therein,
included elsewhere in this Joint Proxy Statement-Prospectus. See
"Incorporation by Reference" and "Murdock Financial Statements". All of the
following selected financial information should be read in conjunction with the
unaudited pro forma information including the notes thereto, appearing
elsewhere in this Joint Proxy Statement-Prospectus. See "Pro Forma Condensed
Consolidated Financial Statements". The selected historical financial
information for the nine months ended September 30, 1997 and 1996 are derived
from the unaudited interim financial statements of ABI and Murdock. The
unaudited interim financial statements include all adjustments, consisting of
normal recurring accruals, which the respective managements consider necessary
for a fair presentation of the financial condition and results of operations
for these periods. Results for the nine months ended September 30, 1997 are
not necessarily indicative of the results that may be attained for any other
interim period or for the entire year ending December 31, 1997.
<TABLE>
<CAPTION>
AT AND FOR THE
NINE MONTHS ENDED
SEPTEMBER 30 AT OR FOR THE YEAR
(UNAUDITED) ENDED DECEMBER 31
--------------------- --------------------------------
AMERICAN BANCSHARES, INC. 1997 1996 1996 1995 1994
------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
Interest income . . . . . . . . . . . . . . . . . .$ 14,173 $ 10,334 $ 14,548 $ 11,409 $ 7,274
Interest expense . . . . . . . . . . . . . . . . . . 7,469 5,263 7,411 6,011 3,627
--------- -------- -------- -------- --------
Net interest income . . . . . . . . . . . . . . . . 6,704 5,071 7,137 5,398 3,647
Provision for loan losses . . . . . . . . . . . . . 615 207 287 483 221
--------- -------- -------- -------- --------
Net interest income after provision
for loan losses . . . . . . . . . . . . . . . . 6,089 4,864 6,850 4,915 3,426
Non-interest income . . . . . . . . . . . . . . . . 2,514 1,416 1,834 1,473 631
Non-interest expenses . . . . . . . . . . . . . . . 6,899 5,248 7,279 4,797 3,276
Provision for income taxes . . . . . . . . . . . . . 659 382 522 573 279
--------- -------- -------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . . . .$ 1,045 $ 650 $ 883 $ 1,018 $ 502
========= ======== ======== ======== ========
CONSOLIDATED PER SHARE DATA:
Net income:
Primary . . . . . . . . . . . . . . . . . . . .$ 0.26 $ 0.18 $ 0.24 $ 0.46 $ 0.26
Fully diluted . . . . . . . . . . . . . . . . . 0.26 0.17 0.23 0.46 0.26
Book value, end of period . . . . . . . . . . . . . 5.01 4.59 4.70 3.97 3.24
SELECTED BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . . .$ 270,192 201,124 $211,965 $154,948 $127,962
Cash (including interest bearing accounts) . . . . . 17,086 10,792 21,045 6,768 7,223
Loans receivable, net . . . . . . . . . . . . . . . 159,598 130,179 135,109 97,480 74,256
Mortgage loans held for sale . . . . . . . . . . . . 42,064 20,888 20,351 21,011 21,640
Investment securities and other
interest-bearing assets . . . . . . . . . . . . 40,473 30,318 26,111 24,073 20,009
Deposits . . . . . . . . . . . . . . . . . . . . . . 226,097 169,084 177,203 129,861 115,342
Borrowed funds . . . . . . . . . . . . . . . . . . . 22,684 12,888 15,113 14,567 5,377
Shareholders' equity . . . . . . . . . . . . . . . . 20,402 17,931 18,814 9,698 6,807
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Return on average assets (1) . . . . . . . . . . . . 0.58% 0.44% 0.48% 0.71% 0.50%
Return on average equity (1) . . . . . . . . . . . . 7.10 7.12 5.24 12.54 8.80
Average interest earning assets to average
interest bearing liabilities . . . . . . . . . 1.17 1.27 1.18 1.13 1.11
Net yield on average earning assets (2) . . . . . . 3.98 4.18 4.22 4.07 3.97
Asset quality ratio . . . . . . . . . . . . . . . . 0.26 0.44 0.59 0.01 0.01
Average equity to average total assets . . . . . . . 8.06 6.22 9.23 5.69 5.70
Risk-based capital ratios:
Tier I Capital . . . . . . . . . . . . . . . . 10.92 9.45 9.97 8.66 5.90
Total risk based capital . . . . . . . . . . . 11.60 9.91 10.65 9.50 9.12
Leverage ratio (3) . . . . . . . . . . . . . . . . . 7.74 9.45 7.22 6.33 7.15
Efficiency ratio (4) . . . . . . . . . . . . . . . . 74.84 80.90 81.14 69.82 76.58
Allowance for loan losses to total loans . . . . . . 0.65 0.64 0.64 0.80 0.65
Net charge-offs to average loans, net . . . . . . . 0.13 0.10 0.23 0.20 0.14
- -------------------------------
</TABLE>
(1) Information for interim periods ended September 30 have been annualized.
(2) Represents net interest income as a percent of average interest-earning
assets.
(3) Leverage ratio is Tier I Capital to average total assets.
(4) Non-interest expense divided by net interest income plus non-interest
income.
16
<PAGE> 23
<TABLE>
<CAPTION>
AT AND FOR THE
NINE MONTHS ENDED
SEPTEMBER 30 AT OR FOR THE YEAR
(UNAUDITED) ENDED DECEMBER 31
------------------ -------------------------------
MURDOCK FLORIDA BANK 1997 1996 1996 1995 1994
------- ------ ------ ------ ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
Interest income . . . . . . . . . . . . . . . . . . $ 3,676 $ 3,653 $ 4,883 $ 4,417 $ 3,913
Interest expense . . . . . . . . . . . . . . . . . . 1,860 1,922 2,554 2,441 1,931
------- ------- --------- -------- --------
Net interest income . . . . . . . . . . . . . . . . 1,816 1,731 2,329 1,976 1,982
Provision for loan losses . . . . . . . . . . . . . 71 148 228 219 70
------- ------- -------- -------- --------
Net interest income after provision
for loan losses . . . . . . . . . . . . . . . . 1,745 1,583 2,101 1,757 1,912
Non-interest income . . . . . . . . . . . . . . . . 376 482 314 613 493
Non-interest expenses . . . . . . . . . . . . . . . 1,483 2,111 2,577 2,640 2,078
Provision for income taxes (benefits) . . . . . . . 243 (17) (61) (102) 117
------- ------- -------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . $ 395 $ (29) $ (101) $ (168) $ 210
======= ======= ======== ======== ========
PER SHARE DATA:
Net income (loss):
Primary . . . . . . . . . . . . . . . . . . . . $ 1.03 $ (0.08) $ (0.26) $ (0.44) $ 0.65
Fully diluted . . . . . . . . . . . . . . . . . 1.03 (0.08) (0.26) (0.44) 0.65
Book value, end of period . . . . . . . . . . . . . 13.46 11.97 12.18 12.82 12.15
SELECTED BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . . . $ 62,874 $62,461 $ 61,665 $ 64,045 $ 55,939
Cash and due from banks . . . . . . . . . . . . . . 1,147 1,422 1,185 3,240 1,261
Interest-bearing deposits with banks . . . . . . . . 1,378 793 746 633 539
Investment securities . . . . . . . . . . . . . . . 17,573 16,722 16,822 15,774 15,737
Loans receivable, net . . . . . . . . . . . . . . . 39,765 39,824 40,156 40,606 34,139
All other assets . . . . . . . . . . . . . . . . . 3,011 3,700 2,756 3,792 4,263
Deposits . . . . . . . . . . . . . . . . . . . . . . 56,976 56,694 55,230 56,866 50,266
Borrowed funds . . . . . . . . . . . . . . . . . . . -- -- 1,300 1,500 600
All other liabilities . . . . . . . . . . . . . . . 714 1,160 445 745 396
Shareholders' equity . . . . . . . . . . . . . . . . 5,184 4,607 4,690 4,934 4,677
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Return on average assets (1) . . . . . . . . . . . . 0.84% (0.06)% (0.16)% (0.28)% 0.36%
Return on average equity (1) . . . . . . . . . . . . 10.64 (0.83) (2.16) (3.49) 4.58
Average interest earning assets to average
interest bearing liabilities . . . . . . . . . 1.14 1.11 1.11 1.09 1.09
Interest-rate spread during the period (2) . . . . . 3.42 3.37 3.40 3.10 3.29
Net yield on average earning assets (3) . . . . . . 4.01 3.85 3.89 3.49 3.59
Asset quality ratio . . . . . . . . . . . . . . . .
Average equity to average total assets . . . . . . . 7.93 7.43 7.46 8.02 7.94
Non-interest expense to average total assets . . . . 3.17 4.49 4.12 4.40 3.60
Net interest income to non-interest expense . . . .
Risk-based capital ratios:
Tier I Capital . . . . . . . . . . . . . . . . 15.78 14.53 14.76 14.00 16.05
Total risk based capital . . . . . . . . . . . 17.04 15.79 16.02 15.26 17.71
Leverage ratio (4) . . . . . . . . . . . . . . . . . 8.16 7.35 7.63 7.58 8.89
ASSET QUALITY RATIOS:
Allowance for loan losses to total loans . . . . . . 1.94% 1.71% 1.84% 1.61% 2.21%
Allowance for loan losses to nonperforming loans . . 299 255 332 54 68
Total nonperforming loans to total loans (5) . . . . 0.65 0.67 0.55 2.96 3.15
Nonperforming assets to total loans plus
other real estate (5) . . . . . . . . . . . . . 0.77 2.26 0.78 5.84 7.54
Nonperforming assets to total assets . . . . . . . . 0.52 1.49 0.52 3.88 4.93
Net charge-offs to average loans, net . . . . . . . 0.04 0.29 0.32 0.81 0.02
- ------------------
</TABLE>
(1) Information for the interim periods ended September 30, have been
annualized.
(2) Difference between weighted-average yield on all interest-earning assets
and weighted-average rate on all interest-bearing liabilities.
(3) Represents net interest income as a percent of average interest-earning
assets.
(4) Leverage ratio is Tier I capital to average total assets.
(5) Nonperforming loans include non-accruing loans, and loans past due 90 days
or more and still accruing. Nonperforming assets include nonperforming
loans plus other real estate.
17
<PAGE> 24
PRO FORMA COMBINED AMERICAN BANCSHARES, INC.
AND MURDOCK FLORIDA BANK
SELECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED AT OR FOR THE YEAR
SEPTEMBER 30 ENDED DECEMBER 31
-------------------- -------------------------------
1997 1996 1996 1995 1994
------ ------ ------ ------ ------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
Interest income . . . . . . . . . . . . . . . . . . $ 17,849 $ 13,987 $ 19,431 $ 15,826 $ 11,187
Interest expense . . . . . . . . . . . . . . . . . . 9,329 7,185 9,965 8,452 5,558
--------- --------- --------- --------- ---------
Net interest income . . . . . . . . . . . . . . . . 8,520 6,802 9,466 7,374 5,629
Provision for loan losses . . . . . . . . . . . . . 686 355 515 702 291
--------- --------- --------- --------- ---------
Net interest income after provision
for loan losses . . . . . . . . . . . . . . . . 7,834 6,447 8,951 6,672 5,338
Non-interest income . . . . . . . . . . . . . . . . 2,890 1,898 2,148 2,086 1,124
Non-interest expenses . . . . . . . . . . . . . . . 8,382 7,359 9,856 7,437 5,354
Provision for income taxes . . . . . . . . . . . . . 902 365 461 471 396
--------- --------- --------- --------- ---------
Net Income . . . . . . . . . . . . . . . . . . . . . $ 1,440 $ 621 $ 782 $ 850 $ 712
========= ========= ========= ========= =========
CONSOLIDATED PER SHARE DATA:
Net income:
Primary . . . . . . . . . . . . . . . . . . . . $ 0.29 $ 0.14 $ 0.17 $ 0.27 $ 0.26
Fully diluted . . . . . . . . . . . . . . . . . 0.29 0.13 0.16 0.27 0.25
Book value, end of period . . . . . . . . . . . . . 5.15 4.66 4.77 4.40 3.88
SELECTED BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . . . 333,066 263,585 273,630 218,993 183,901
Cash (including interest bearing accounts) . . . . . 19,611 13,007 22,976 10,641 9,023
Loans receivable, net . . . . . . . . . . . . . . . 199,363 170,003 175,265 138,086 108,395
Mortgage loans held for sale . . . . . . . . . . . . 42,064 20,888 20,351 21,011 21,640
Investment securities and other
interest-earning assets . . . . . . . . . . . . 58,046 47,040 42,933 39,847 35,746
Deposits . . . . . . . . . . . . . . . . . . . . . . 283,073 225,778 232,433 186,727 165,608
Borrowed funds . . . . . . . . . . . . . . . . . . . 22,684 12,888 16,413 16,067 5,977
Shareholders' equity . . . . . . . . . . . . . . . . 25,586 22,538 23,504 14,632 11,484
SELECTED FINANCIAL RATIOS AND OTHER DATA:
Return on average assets (1) . . . . . . . . . . . . 0.63% 0.32% 0.33% 0.44% 0.47%
Return on average equity (1) . . . . . . . . . . . . 7.80 4.92 3.63 6.58 6.91
Average interest earning assets to average
interest bearing liabilities . . . . . . . . . 116.73 122.50 116.10 111.52 108.47
Net yield on average earning assets (2) . . . . . . 2.99 3.03 4.14 3.90 3.85
Asset quality ratio . . . . . . . . . . . . . . . . 8.07 9.92 9.17 6.68 6.73
Average equity to average total assets . . . . . . . 101.65 92.43 96.04 99.15 105.14
Net interest income to non-interest expense . . . .
Efficiency ratio . . . . . . . . . . . . . . . . . . 73.46 84.59 84.86 78.62 79.28
Risk-based capital ratios:
Tier I Capital . . . . . . . . . . . . . . . . 11.64 10.17 10.66 12.19 7.93
Total risk-based capital . . . . . . . . . . . 12.61 10.78 11.48 12.84 11.45
Leverage ratio (3) . . . . . . . . . . . . . . . . . 7.85 8.93 7.33 6.72 7.81
ASSET QUALITY RATIOS:
Allowance for loan losses to total loans . . . . . . 1.05% 0.97% 1.00% 1.16% 1.28%
Net charge-offs to average loans, net . . . . . . . 0.19 0.16 0.20 0.32 0.10
- -------------
</TABLE>
(1) Information for interim periods ended September 30 have been annualized.
(2) Represents net interest income as a percent of average interest-earning
assets.
(3) Leverage ratio is Tier 1 Capital to average total assets.
18
<PAGE> 25
THE SPECIAL MEETINGS
GENERAL
This Joint Proxy Statement-Prospectus is being furnished (i) to the
holders of ABI Common Shares in connection with the solicitation of proxies by
the ABI Board for use at the ABI Special Meeting to be held at the Oakmont
Theatres, 4801 Cortez Road West, Bradenton, Florida on March 12, 1998, at 10:00
a.m. to consider and vote upon the approval of the Merger Agreement and the
transactions contemplated thereby, including the issuance of ABI Common Shares
upon consummation of the Merger, and the approval of each of the Amendments, and
to transact such other business as may properly come before the ABI Special
Meeting or any adjournment or postponement thereof, and (ii) to the holders of
Murdock Common Stock in connection with the solicitation of proxies by the
Murdock Board for use at the Murdock Special Meeting to be held at Murdock's
offices located at 1777 Tamiami Trail, Murdock, Florida on March 12, 1998, at
5:00 p.m. to consider and vote upon the approval of the Merger Agreement and to
transact such other business as may properly come before the Murdock Special
Meeting or any adjournment or postponement thereof.
Each copy of this Joint Proxy Statement-Prospectus mailed to the ABI
Shareholders is accompanied by a form of proxy for use at the ABI Special
Meeting and each copy of this Joint Proxy Statement-Prospectus mailed to Murdock
Stockholders is accompanied by a form of proxy for use at the Murdock Special
Meeting.
This Joint Proxy Statement-Prospectus also is furnished by ABI to
Murdock Stockholders as a prospectus in connection with the issuance by ABI of
the ABI Common Shares upon consummation of the Merger.
RECORD DATE AND VOTING RIGHTS
ABI. The ABI Board has fixed the close of business on January 30, 1998,
as the ABI Record Date for the determination of the holders of ABI Common Shares
entitled to notice of, and to vote at the ABI Special Meeting or any adjournment
or postponement thereof. At the close of business on the ABI Record Date, there
were 4,070,458 ABI Common Shares issued and outstanding held by approximately
960 holders of record. Each ABI Common Share outstanding on the ABI Record
Date is entitled to one vote as to each matter as may properly come before the
ABI Special Meeting. The holders of a majority of the outstanding ABI Common
Shares as of the ABI Record Date, present in person or represented by proxy,
will constitute a quorum at the ABI Special Meeting.
Murdock. The Murdock Board has fixed the close of business on January
30, 1998, as the Murdock Record Date for the determination of the holders of
Murdock Common Stock entitled to notice of, and to vote at the Murdock Special
Meeting or any adjournment or postponement thereof. At the close of business on
the Murdock Record Date, there were 385,015 shares of Murdock Common Stock
issued and outstanding held by approximately 355 holders of record. Each share
of Murdock Common Stock outstanding on the Murdock Record Date is entitled to
one vote as to each matter as may properly come before the Murdock Special
Meeting. The holders of a majority of the outstanding Murdock Common Stock as of
the Murdock Record Date, present in person or represented by proxy, will
constitute a quorum at the Murdock Special Meeting.
19
<PAGE> 26
VOTE REQUIRED
ABI. Approval of the Merger Agreement and the transactions contemplated
thereby (Proposal 1), including the issuance of ABI Common Shares upon
consummation of the Merger, and approval of each of the Amendments set forth in
Proposals 2 through 5, requires that the votes cast in favor of the proposal
being considered exceed the votes cast against that proposal at a meeting where
a quorum is present. Under Florida law, amendments to articles of incorporation
which seek to establish greater or lesser voting requirements must be approved
by voting requirements in effect at the time of the vote or by the voting
requirement proposed to be adopted, whichever is greater. Accordingly, Proposal
6 must be approved by 66 2/3% of the outstanding ABI Common Shares and Proposal
7 must be approved by a majority of the outstanding ABI Common Shares. See "The
ABI Proposed Amendments".
Under Florida law, approval of the ABI Shareholders is not required in
order for ABI to consummate the Merger or to issue ABI Common Shares in
connection therewith. Rules of the Nasdaq National Market, however, provide that
the issuance of ABI Common Shares upon the consummation of the Merger must be
approved by the ABI Shareholders because the issuance of ABI Common Shares in
connection with the Merger may constitute more than twenty percent of the total
number of voting shares of ABI outstanding immediately prior to the Merger.
Although the issuance of ABI Common Shares at the 2.4 Exchange Ratio will only
represent 18.5% of the outstanding ABI Common Shares following the Merger, in
the event that the Exchange Ratio is increased to 2.65 upon the occurrence of
certain events set forth in the Merger Agreement, the number of ABI Common
Shares that may be issued upon consummation of the Merger would represent in
excess of 20% of the outstanding ABI Common Shares following the Merger. See
"The Merger - Terms of the Merger". At the ABI Special Meeting, ABI Shareholders
also will be presented with proposals to approve and adopt the Amendments to the
ABI Articles, which Amendments do require shareholder approval under Florida
law. The proposed Amendments are not related to the Merger proposal and will be
considered independently therefrom. Further, each Amendment proposal will be
considered independently from the other Amendment proposals. See "The ABI
Proposed Amendments".
As of the ABI Record Date, the directors and executive officers of ABI
and their affiliates owned a total of approximately 484,769 shares, or 11.91%,
of the outstanding ABI Common Shares, all of which are expected to be voted
in favor of the Merger Agreement and each of the Amendments.
Since action on Proposals 1 through 5 being submitted to ABI
Shareholders at the ABI Special Meeting requires that the votes cast in favor of
such action exceed the votes cast opposing such action at a meeting where a
quorum is present, abstentions and broker non-votes will have no effect under
Florida law. A broker non-vote generally occurs when a broker who holds shares
in street name for a customer does not have the authority to vote on certain
non-routine matters because its customer has not provided any voting
instructions on the matter. All abstentions and broker non-votes will be counted
as present for determining the existence of a quorum; but since they are neither
votes cast in favor of, nor votes cast opposing a proposed action, abstentions
and broker non-votes will have no impact on the outcome of the vote taken at the
ABI Special Meeting with respect to Proposals 1 through 5 and will not be
counted as votes cast on such matters. Since, however, Proposals 6 and 7
requires the affirmative vote of 66 2/3% and 50%, respectively, of the
outstanding ABI Common Shares, the failure to vote the shares in favor of
Proposal 6 or 7 for any reason whatsoever -- whether by withholding their vote,
abstaining or by causing a broker or non-vote -- will have the same effect as a
vote cast opposing such proposals.
Murdock. Approval of the Merger Agreement by the Murdock Stockholders
requires the affirmative vote of a majority of the shares entitled to be voted
on the matter by holders of record of Murdock Common Stock on the Murdock Record
Date. Since approval of the Merger Agreement requires the affirmative vote
20
<PAGE> 27
of a majority of the issued and outstanding shares of Murdock Common Stock as of
the Murdock Record Date, the failure to vote the shares in favor of the Merger
Agreement for any reason whatsoever -- whether by withholding the vote, by
abstaining, or by causing a broker non-vote -- will have the same effect as a
vote cast opposing the Merger Agreement.
SINCE APPROVAL OF THE MERGER AGREEMENT REQUIRES THE AFFIRMATIVE VOTE OF
A MAJORITY OF THE OUTSTANDING SHARES OF MURDOCK COMMON STOCK, THE MURDOCK BOARD
URGES ITS STOCKHOLDERS TO COMPLETE, DATE, AND SIGN THE ACCOMPANYING PROXY AND
RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
As of the Murdock Record Date, the directors and executive officers of
Murdock and their affiliates beneficially owned approximately 115,072 shares, or
29.9%, of the outstanding Murdock Common Stock entitled to vote at the Murdock
Special Meeting. Pursuant to the terms of the Merger Agreement, each of such
directors and executive officers has agreed to vote their shares in favor of the
Merger Agreement and has entered into an agreement with ABI to that effect.
Similar agreements of their spouses also shall be furnished to ABI.
VOTING AND REVOCATION OF PROXIES
ABI Common Shares and shares of Murdock Common Stock represented by
properly executed proxies received prior to or at the appropriate Special
Meeting will be voted in accordance with the instructions indicated on such
proxies, unless revoked as described below. If a proxy is signed and returned
without giving any voting instructions, it will be voted FOR approval of the
Merger Agreement (in the case of proxies for Murdock), or FOR the approval of
the Merger Agreement and the transactions contemplated thereby, including the
issuance of ABI Common Shares upon consummation of the Merger, and FOR the
approval of each Amendment (in the case of proxies for ABI). Neither ABI nor
Murdock is aware of any business to be presented at their respective Special
Meetings other than as described herein. If, however, any other matters are
properly brought before any Special Meeting for consideration, the persons
appointed as proxies will have the discretion to vote or act thereon according
to their best judgment.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at anytime before the proxy is voted by the filing of an
instrument revoking it or of a duly executed proxy bearing a later date with the
Secretary of ABI (for ABI Shareholders) or with the Secretary of Murdock (for
Murdock Stockholders), or by voting in person at the appropriate Special
Meeting. Attendance at a Special Meeting will not in and of itself constitute
revocation of a proxy. All written notices of revocation and other communication
with respect to the revocation of ABI proxies should be addressed to American
Bancshares, Inc., 4702 Cortez Road West, Bradenton, Florida 34210 - Attention:
Secretary. All written notices of revocation and other communication with
respect to the revocation of Murdock proxies should be addressed to Murdock
Florida Bank, 1777 Tamiami Trail, Murdock, FL 33948-1051 - Attention: Secretary.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers, and other
employees of ABI, the Bank, and Murdock, who will not be specially compensated
for such service, may solicit proxies from the shareholders of ABI or Murdock,
as the case may be, personally or by telephone or telegram or other forms of
communication. Brokerage houses, banks, and other custodians, nominees and
fiduciaries will be requested to forward the solicitation materials to the
beneficial owners and to obtain authorization for the execution of
21
<PAGE> 28
proxies. Upon request, those persons and entities will be reimbursed for their
reasonable expenses incurred in forwarding the proxy materials to beneficial
owners.
Each of ABI and Murdock shall bear their own costs and expenses of
soliciting proxies from their respective shareholders, except that ABI has
agreed pursuant to the Merger Agreement to pay one half of Murdock's proxy
soliciting costs and expenses, including those related to the preparation,
printing, and mailing of this Joint Proxy Statement-Prospectus.
No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement-Prospectus and, if
given or made, such information or representation should not be relied upon as
having been authorized by ABI, the Bank, or Murdock, or any other person. The
delivery of this Joint Proxy Statement-Prospectus shall not, under any
circumstances, create any implication that there has been no change in the
affairs of ABI, the Bank, or Murdock since the date of this Joint Proxy
Statement-Prospectus.
MURDOCK STOCKHOLDERS SHOULD NOT SEND ANY
STOCK CERTIFICATES WITH THEIR PROXY CARDS.
22
<PAGE> 29
THE MERGER
The following is a summary of the material terms and provisions of the
Merger Agreement, but it does not purport to be complete and is qualified in its
entirety by reference to the Merger Agreement, which is attached as Appendix A
(except for certain exhibits thereto) to this Joint Proxy Statement-Prospectus
and is incorporated herein by reference. All shareholders are urged to read the
Merger Agreement and the other Appendices hereto in their entirety.
BACKGROUND OF THE MERGER
From time to time in prior years, Murdock had received unsolicited
informal acquisition inquiries from financial institutions and individuals. In a
few instances, Murdock entered into confidentiality letter agreements and
exchanged information with potential acquisition suitors. However, in the two
years preceding August 1997, none of these informal approaches had resulted in a
formal acquisition proposal at a price and on terms deemed worthy of serious
consideration by the Murdock Board.
ABI, which has determined to increase its market presence and expand
its business operations on the west coast of Florida, identified Murdock as an
opportunity to expand its geographic base into one of the fastest growing
regions in the State of Florida. In August 1997, representatives of ABI,
including Gerald L. Anthony, President and Chief Executive Officer of ABI, met
informally with several Murdock directors, including Robert L. Andreasen. At
this meeting, ABI discussed its general business strategy and indicated its
interest in exploring the possible acquisition of Murdock. During the course of
this meeting, ABI discussed a possible range of values and type of consideration
for an acquisition of Murdock. The Murdock Board was informed of the substance
of this first meeting. The Murdock Board authorized the execution of a
confidentiality letter agreement and the exchange of financial and other
information with ABI and its representatives.
At or about this same time, Murdock received an informal inquiry from
another financial institution (the "Other Institution") regarding the Other
Institution's interest in exploring the possibility of acquiring Murdock. The
Murdock Board was advised of this inquiry and authorized the execution of a
confidentiality agreement and the exchange of information with the Other
Institution.
The Murdock Board authorized Mr. Andreasen, and directors Leo Wotitzky
and Charles E. Taylor Jr. (Chairman of the Board), to act on behalf of the
Murdock Board, in dealings with ABI and the Other Institution. The Murdock Board
also authorized the engagement of Ewing to act as financial advisor to the
Murdock Board. Ewing was selected by the Murdock Board because, among other
things, Ewing was a recognized investment banking firm specializing in financial
institutions and had substantial experience in representing Florida based
community banks in acquisition transactions. Ewing was familiar with both the
pricing and terms of other recent acquisitions of Florida based community
banking institutions and with the financial condition, results of operations,
and prospects of ABI and the Other Institution. In addition, because of its
familiarity with financial institutions in the southeast, Ewing was able to
effectively assist Murdock in determining if there were other potential
acquisition suitors with an interest in pursuing acquisition discussions on
acceptable terms and conditions. Subsequent to the initial meeting with ABI,
Murdock also advised its special counsel of developments and such counsel
thereafter provided legal services to Murdock in connection with the acquisition
proposals then under consideration. Such counsel was present in person or by
telephone at all the Murdock Board meetings held in September 1997.
There followed additional contacts and discussions involving
representatives of both ABI and the Other Institution and representatives of
Murdock. In mid-August 1997, ABI made an acquisition proposal to
23
<PAGE> 30
Murdock. On or about September 5, 1997, the Other Institution made an
acquisition proposal to Murdock. Each proposal, among other things, contemplated
an acquisition of Murdock in which Murdock would be merged into a subsidiary of
the acquiring institution and each share of Murdock stock would be exchanged for
shares of stock of the acquiring institution. Each proposal was made subject to
certain other terms and conditions and proposed to set the exchange ratio based
upon the trading price of the acquiror's stock at the time a definitive
agreement was executed by the parties. The proposal from the Other Institution
valued Murdock at approximately $10 million and the ABI proposal valued Murdock
at $10.5 million.
The Murdock Board held formal meetings on September 3, 1997, September
6, 1997, September 16, 1997, September 17, 1997, and September 23, 1997, to
consider the status of and the terms and conditions of the acquisition proposals
from ABI and the Other Institution, and to consider whether there were other
possible acquisition suitors with an interest in pursuing discussions with
Murdock at appropriate price levels. Ewing's President, Benjamin Bishop, was
present either in person or by telephone at the Murdock Board meetings held on
September 3, 1997, September 16, 1997, September 17, 1997, and September 23,
1997. Mr. Bishop made a lengthy general presentation to the Murdock Board at the
September 3, 1997 meeting reviewing recent trends, pricing and other terms in
financial institutions acquisitions and specifically reviewing information
regarding ABI and the Other Institution and the performance of the publicly
traded stock of each such company. Mr. Bishop made additional presentations to
the Murdock Board at its September 16, 1997, September 17, 1997, and September
23, 1997 meetings. These presentations focused on the specific terms and
conditions of the proposals from ABI and the Other Institution. In addition,
Ewing consulted informally with representatives of Murdock during September 1997
as discussions with the acquisition suitors progressed.
In August and early September, representatives of the Other Institution
and of Murdock engaged in serious discussions of the terms and conditions of the
proposed acquisition. Representatives of the Other Institution made a formal
presentation and delivered an acquisition proposal to the Murdock Board at its
meeting on September 6, 1997. This presentation included information about the
current and future business strategy and operating philosophy of the Other
Institution and the structure of the acquisition pursuant to which Murdock would
merge into a subsidiary of the Other Institution and Murdock's stockholders
would receive shares of the Other Institution's stock in exchange for their
Murdock stock (based upon the market price of the Other Institution's stock and
subject to certain terms and conditions in the proposal). This meeting afforded
the Murdock directors an opportunity to ask questions of and receive answers
from the representatives of the Other Institution. The Murdock Board noted that
the Other Institution was substantially larger than ABI, the stock of the Other
Institution was more broadly distributed than was ABI's stock, and the stock of
the Other Institution paid a modest dividend.
ABI's representatives made a formal presentation and delivered an
acquisition proposal to the Murdock Board at its meeting on September 16, 1997.
ABI's presentation included detailed information about ABI's history, current
and future business strategy and operating philosophy and historical stock
prices and market liquidity. The presentation addressed the structure of the
acquisition pursuant to which Murdock would merge into the Bank and Murdock
Stockholders would receive ABI Common Shares in exchange for their Murdock
Common Stock (based upon the market price of ABI Common Shares and subject to
certain terms and conditions in the proposal). The presentation also addressed
ABI's plans for the operation of the successor institution as a community
banking institution, the role of management in the successor institution, and
the manner in which Murdock employees would be treated. This meeting afforded
the Murdock directors an opportunity to ask numerous questions of and receive
answers from the ABI representatives.
Following the September 16, 1997 Murdock Board meeting, the negotiating
committee of Messrs. Andreasen, Taylor, and Wotitzky met with representatives of
ABI. As a result of this meeting, ABI modified its proposal, increasing ABI's
valuation of Murdock from $10.5 million to $11.25 million.
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Ewing had previously provided the Murdock Board with its analysis of
the terms and conditions of the offers from ABI and the Other Institution,
including the recent historical and possible future performance of the stock of
each potential acquisition suitor. Based upon the then current price of the
stock set for both ABI and the Other Institution, and after taking into account
the other terms and conditions of the two proposals, the view of Ewing on the
two proposals and certain other factors deemed relevant, the Murdock Board
concluded that the proposal of the Other Institution was of lower value to the
Murdock Stockholders than the modified ABI proposal. When the Other Institution
was advised that Murdock was considering a competing acquisition proposal
Murdock believes to be of greater value than the proposal of the Other
Institution, the Other Institution withdrew its proposal and no additional
discussions were conducted with the Other Institution.
Thereafter, the Murdock Board, at its September 17, 1997 meeting, was
formally advised of the terms of the improved ABI proposal and of developments
with the Other Institution. Prior to the meeting, the directors had been
provided with copies of draft acquisition agreements submitted by ABI and the
Other Institution. Ewing presented its analysis of the two proposals. The
Murdock Board then authorized its negotiating committee and Mr. Andreasen, in
consultation with counsel and Ewing, to proceed with the negotiation of a
definitive acquisition agreement with ABI. Copies of the draft Merger Agreement,
as the same was modified as a result of negotiations, were distributed to
Murdock's directors.
Upon conclusion of the negotiation of the terms and conditions of the
Merger Agreement, the Murdock Board held a special meeting on September 23,
1997. Prior to this meeting, the directors had been provided with the definitive
form of Merger Agreement. At this meeting, Ewing reported that it had informally
contacted four financial institutions that in Ewing's view would have been the
most likely to have an interest in pursuing an acquisition transaction with
Murdock. None of these institutions, Ewing reported, had an interest in pursuing
acquisition discussions at the price level of the ABI transaction. The Murdock
Board again reviewed the material terms of the Merger Agreement and the Merger,
including the latest changes in the document resulting from the negotiations
with ABI. Ewing delivered an oral opinion that the terms of the Merger were
fair, from a financial point of view, to the Murdock Stockholders. Ewing's oral
opinion was confirmed by its written opinion dated October 17, 1997. After
discussions and deliberation, the Murdock Board approved the Merger and the
Merger Agreement. Thereafter, on September 23, 1997, Mr. Andreasen, at the
direction of the Murdock Board, executed the Merger Agreement.
REASONS FOR THE MERGER
ABI Reasons for Merger and Recommendation of ABI Board. The strategy of
the ABI Board for enhancing long term value for its shareholders is to increase
market share and expand its banking operations on the west coast of Florida. The
ABI Board has adopted a strategic plan to grow and expand its market presence
through acquisitions and the opening of new branches. Pursuant to this strategy,
management of ABI, at the direction of the ABI Board, continually seeks,
explores, and evaluates acquisition opportunities, and makes formal and informal
inquiries of interest with potential acquisition candidates such as the
combination of Murdock with ABI. The ABI Board believes that the proposed Merger
with Murdock provides it with an opportunity to expand its geographic base and
market share into one of the fastest growing regions in the State of Florida.
In reaching its determination to approve the acquisition of Murdock
pursuant to the terms of the Merger Agreement, the ABI Board consulted with its
management, its financial and legal advisors, and considered a number of
factors. The ABI Board did not assign any relative or specific weights to the
factors considered, and individual directors may have given differing weights to
different factors. Among such factors, the ABI Board considered the following,
which it believed to be all the material factors:
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(i) The effect that the Merger would have in expanding ABI's market
share and geographic base on the west coast of Florida.
(ii) ABI Board's familiarity with and review of Murdock's business,
results of operations, prospects, and financial condition.
(iii) The economic conditions and prospects for the markets in which
ABI and Murdock operate, including the opportunities for ABI to increase
commercial lending activities at Murdock.
(iv) Information concerning the business, results of operations, asset
quality, and financial condition of each of ABI and Murdock and on a combined
basis, and the prospects for further growth following the Merger. In this
regard, ABI gave strong consideration to the results of the due diligence review
conducted by its management of Murdock's banking operations, and in particular
its asset quality, the amounts maintained in its loan loss reserves, and the
impact thereof on ABI's reserve ratios.
(v) ABI's belief that the Merger will provide revenue growth
opportunities by increasing the market area in which ABI will be able to
effectively offer its products and services and to utilize its marketing and
technology resources. ABI noted that the expansion into Murdock's market area
would not only allow the Bank to service two rapidly growing areas and provide
all the potential business growth associated therewith, but also provides an
opportunity to reap the benefits of its technology and its marketing efforts
over a broader market area for little additional incremental cost.
(vi) Information with respect to the historical trading ranges and
multiples for ABI Common Shares and the expected trading ranges and multiples
following the Merger.
(vii) The expectation that the Merger will be accounted for under the
"pooling-of-interests" method of accounting.
(viii) The non-financial terms and conditions of the Merger Agreement,
including the structure of the Merger.
(ix) The likelihood of the Merger being approved by the appropriate
regulatory authorities.
Each of the above factors support, directly or indirectly, the
determination of the ABI Board as to the fairness of the Merger. Accordingly,
based on all the foregoing factors, and such other matters as deemed relevant,
the ABI Board unanimously approved and adopted the Merger Agreement, the Merger,
and the issuance of ABI Common Shares in connection therewith.
THE ABI BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, ABI AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT ABI
SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY, INCLUDING THE ISSUANCE OF ABI COMMON SHARES UPON
CONSUMMATION OF THE MERGER.
Murdock Reasons for Merger and Recommendation of Murdock Board. In
evaluating and determining to approve the Merger Agreement, the Murdock Board,
with the assistance of Ewing and outside counsel, considered a variety of
factors and based its opinion as to the fairness of the transactions
contemplated by the Merger Agreement primarily on the following factors:
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(i) The lack of liquidity for Murdock Common Stock, the consideration
to be received by Murdock Stockholders in the Merger in relation to the current
book value of Murdock Common Stock, and the opportunity for Murdock Stockholders
to earn a premium return on their investment.
(ii) The fact that the Merger would afford Murdock Stockholders the
opportunity to exchange their shares for an ownership interest in a combined
enterprise which was larger and had greater financial resources than Murdock on
a stand-alone basis, and whose securities were publicly traded.
(iii) The compatibility of the respective businesses and the management
philosophies of Murdock and ABI, including the desires of Murdock and ABI to
expand their banking operations.
(iv) The fact that if Murdock wanted to increase profitability,
significant capital would have to be raised from outside sources, possibly from
a public offering, and the opinion of the Murdock Board that the ability to
maximize the stockholder value with the current ABI offer was a better choice in
relation to the risks and uncertainties associated with raising additional
capital as a first step to increase Murdock's profitability and thus maximize
stockholder value.
(v) The financial terms of the Merger, including the value of
consideration offered, the premium to book value paid, prices paid in comparable
transactions, relative earnings per share, and shareholders' equity of ABI and
Murdock. In this regard, the Murdock Board considered the lack of liquidity for
Murdock Common Stock and the active trading market for the ABI Common Shares, as
well as the future prospects for appreciation of such stock.
(vi) The future prospects of Murdock and possible alternatives to the
proposed Merger, including the prospects of continuing as an independent
institution. In this regard, the Murdock Board considered the range of values of
such alternatives, and the likelihood of achieving these values. The Murdock
Board also considered the market and credit risks of proceeding independently,
the timing of the Merger, and the prospects of receiving a better financial
offer from another locally based institution having the same commitment to, and
understanding of, its customers.
(vii) The financial presentation by and opinion of Ewing that the terms
of the Merger as provided in the Merger Agreement were fair, from a financial
point of view, to Murdock Stockholders. The opinion of Ewing is set forth in
Appendix B to this Joint Proxy Statement-Prospectus. See "The Merger -- Opinion
of Murdock's Financial Advisor".
(viii) Information with respect to the financial condition, results of
operations, and the prospects of Murdock and the current industry, economic, and
market conditions, as well as the risks associated with achieving those
prospects.
(ix) The non-financial terms and structure of the transaction, in
particular, the fact that the Merger is intended to qualify as a tax-free
reorganization to Murdock Stockholders for federal income tax purposes.
(x) The financial report of Ewing reviewing a comparison of Murdock to
certain peer banking organizations and the consideration paid in comparable
merger transactions.
(xi) The business, financial, and earning prospects of ABI, the
potential for growth in ABI Common Shares, and the competence, integrity, and
experience of ABI and its management.
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(xii) The social and economic effects of the Merger on Murdock and its
employees, depositors, loan and other customers, creditors and other
constituencies of the community in which Murdock operates and is located. The
Murdock Board considered the terms of employee benefits to be received, the
proposed structure and operation of the resultant financial institution as a
branch of a Florida based community bank following the Merger, and the
commitment to customer quality and services that ABI would provide to Murdock's
customers and depositors.
(xiii) The likelihood of the proposed Merger being approved by
appropriate regulatory authorities.
Each of the above factors support, directly or indirectly, the
determination of the Murdock Board as to the fairness of the Merger.
Accordingly, based on all of the foregoing factors, and such other matters as
deemed relevant, the Murdock Board unanimously approved and adopted the Merger
Agreement and the Merger. The Murdock Board did not quantify or attempt to
assign relative weights to the specific factors considered in reaching its
determination; however, the Murdock Board did place special emphasis on the
consideration payable in the proposed Merger and the receipt of a favorable
fairness opinion from its financial advisor. See "The Merger - Opinion of
Murdock's Financial Advisor".
THE MURDOCK BOARD BELIEVES THAT THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, MURDOCK AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
MURDOCK SHAREHOLDERS VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
OPINION OF MURDOCK'S FINANCIAL ADVISOR
General. Murdock retained Ewing in August, 1997 for the purpose of
rendering its opinion to Murdock as to the fairness, from a financial point of
view, to the shareholders of Murdock of the terms of the proposed Merger
Agreement with ABI. On September 23, 1997, Ewing delivered to the Board of
Directors of Murdock its preliminary oral opinion that, based upon the proposed
terms of the proposed offer by ABI and subject to certain assumptions, the offer
to the Murdock Stockholders proposed by ABI was fair from a financial point of
view. Ewing issued its written opinion on October 17, 1997. On January 23, 1998,
Ewing confirmed and updated its opinion by delivering a written opinion that, as
of such date, the terms of the Merger were fair, from a financial point of view,
to the Murdock Stockholders.
No limitations were imposed on the scope of Ewing's analysis or the
procedures followed by Ewing in rendering its opinion. Ewing's opinion is
directed to the Murdock Board only and does not constitute a recommendation to a
Murdock Stockholder as to how such stockholder should vote on the Merger. Ewing
has not been requested to opine as to and the opinion does not address the
underlying business decision by the Murdock Board to enter into the Merger.
In issuing its opinion, Ewing assumed and relied upon the accuracy and
completeness of the financial and other information used by it in arriving at
its opinion as provided by Murdock. Ewing made no independent verification of
the supplied information, nor did Ewing conduct a physical inspection of the
properties and facilities of Murdock, nor did Ewing make or obtain any
evaluation or appraisal of the assets or liabilities of Murdock, nor did Ewing
review any credit or loan files from Murdock's loan portfolio. The opinion is
based upon market and economic conditions as they existed on the date of the
opinion.
The full text of Ewing's opinion is attached as Appendix B to this
Joint Proxy Statement-Prospectus and is incorporated herein by reference. The
description of the opinion set forth herein is qualified in its entirety by
reference to Appendix B. Murdock Stockholders are urged to read the opinion in
its entirety.
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In arriving at its opinion, Ewing reviewed and analyzed: (i) the Merger
Agreement; (ii) financial and operating information with respect to the
business, operations, and prospects of Murdock furnished to it by Murdock; (iii)
a comparison of the historical financial results of Murdock with those of other
banks in Florida which it determined relevant; (iv) a comparison of the
financial terms of the Merger with the terms of selected other recent
transactions in Florida which it determined comparable; (v) a review of the
trading patterns of ABI Common Shares as to how their market value compared with
other comparable regional bank holding companies. Ewing had discussions with the
management of Murdock concerning its historical operations and future prospects
and undertook analyses and investigations as it deemed appropriate. Ewing also
considered the fact that the Murdock Board had authorized a program for holding
discussions with other acquirors who had expressed interest, and Ewing, at the
request of the Murdock Board, contacted other institutions believed to have had
an interest in entering Murdock's market in Sarasota and Charlotte Counties.
None of the parties contacted by Ewing expressed an interest in pursuing a
merger with Murdock. Negotiations were subsequently held with ABI and one other
institution that had previously contacted Murdock, and ABI's offer was selected
by the Murdock Board. In the event that Murdock's termination rights are
triggered and Murdock requests Ewing to opine as to the fairness of the new
merger consideration, Ewing's fairness opinion will be revised.
The following paragraphs summarize the most pertinent portions of the
financial and comparative analysis prepared by Ewing in arriving at its opinion.
The following summary does not purport to be a complete description of the
analysis performed or the matters considered by Ewing in arriving at its
opinion.
Trading History of Murdock Common Stock. In view of the fact that the
shares of Murdock are closely held, Ewing found that there was no meaningful
trading market in the shares of Murdock.
Selection of Valuation Method. In valuing financial institutions, there
are several methods available to determine if a prospective transaction is fair,
from a financial point of view, to the shareholders of the institution to be
acquired. These methods include: (i) Comparison Method: A comparison of the
purchase price of the transaction with prices paid for similar banks based on
ratios commonly used in the industry including price/book, price/earnings, and
price/deposits; (ii) Control Premium Method: This method only applies to selling
companies where there is a public market for their shares, and, as there is not
an active market for the shares of Murdock, this method does not apply; (iii)
Net Asset or Liquidating Value Method: This method does not generally apply to
profitable, growing banks and is only used in periods of severely depressed
markets; (iv) Discounted Cash Flow Method: This method is often used in valuing
banks, but Ewing's experience is that this method has less validity in valuing
small banks. The method is based on the ability to accurately forecast earnings
and dividends for a period of years with an estimate of the value of a projected
sale at the end of the period. The present value of these projected cash flows
representing the value of Murdock is determined by using an array of discount
rates reflecting the credibility of the projections. Earnings for small banks
tend to be volatile for many reasons including normal banking activities such as
the addition of a new branch, a new marketing program, the hiring of new banking
officers, all of which can have an adverse affect on current earnings. For these
reasons, earnings projections for smaller banks tend to have poor reliability
which, in Ewing's opinion, lessens the value of the discounted cash flow method
for smaller banks. Ewing believes that the comparison method provides the
soundest choice for determining the fairness of the proposed transaction.
Selection and Analysis of Comparable Transactions. Using publicly
available information, including information prepared by SNL Securities, Ewing
initially selected 72 transactions involving the acquisition or merger of
Florida banks that had taken place from January 1, 1995, through August 31,
1997, which, in Ewing's opinion, represented a period of economic activity for
the banking industry in Florida comparable to the economic activity existing at
the time of the ABI/Murdock negotiations. From the 72 transactions, Ewing
eliminated those transactions which involved "selling banks" with assets over
$75 million, those transactions in which the operations of the acquired bank
were unprofitable in the year of acquisition, and
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those transactions involving "selling banks" with nonperforming assets in excess
of 3% of total assets. The application of these criteria to the universe of 72
transactions reduced the list to 22 transactions which Ewing believes represent
the best comparable transactions.
In order to determine the comparability of the selling banks in the
selected 22 transactions, which involved banks with average assets of
approximately $51 million versus $63 million for Murdock, Ewing applied four
performance indicators to the averages of the 22 transactions and compared them
with those of Murdock. The performance indicators utilized by Ewing were return
on average equity which was 12.02% for the 22 banks versus 11.07% for Murdock;
nonperforming assets/assets which was 0.95% for the 22 banks versus .01% for
Murdock; and equity/assets which was 8.75% versus 8.40% for Murdock. Ewing
concluded from these comparisons that Murdock was not as profitable as the
average banks were in 1996, but that the asset quality of Murdock was superior.
Analysis of Prices Paid in the Comparable Transactions. Ewing used the
price/book, price/earnings, and price/deposits ratios that were paid for the
banks in the 22 selected comparable transactions. These ratios were selected
because most acquirors of banks give primary weight in valuing banking
institutions to the earnings performance and potential of the bank as well as
the equity of the bank. Less value is given to the level of deposits, but
importance is given to the type of deposits held by the bank.
The comparable transaction group includes the following transactions
(identified by acquiree/acquiror): First Independence/Colonial BancGroup;
Universal National Bancorp/Totalbank Corporation; Seminole National
Bank/BanPonce Corp.; South Hillsborough Commercial Bank/Provident Bancorp; Park
Bankshares/1st United Bancorp; Tomoka Bancorp/Colonial BancGroup; Liberty
Holding Company/Whitney Holding Corp.; American Bank & Trust/Whitney Holding
Corp.; Friendship Community Bank/Fidelity National Corp.; Rinerd Bank HC/CNB,
Inc.; Lake State Bank/SouthTrust Corporation; Tri-County Community Bank/First
Bank-Immokalee; Prime Bank of Central Florida/First Commerce Banks; Citizens
First Bankshares/Citi-Bancshares, Inc.; Banyan Bank/Republic Security; Gateway
American Bank/1st United Bancorp; North Florida Bank Corp./NationsBank
Corporation; Ponte Vedra Banking Corp./SunTrust Banks, Inc.; First Commercial
Financial/SouthTrust Corporation; Bank of Naples/Fifth Third Bancorp; FBC
Holding Company/SouthTrust Corporation; First Seminole Bank/Huntington
Bankshares, Inc.
The three ratios are: price/book as of the quarter ended prior to
announcement which was 1.96x-2.23x for Murdock vs. 2.15x for the 22 banks;
price/trailing twelve-month earnings which was 18.83x-21.45x for Murdock vs.
20.07x for the 22 banks; price as a percentage of deposits as of the quarter
ended prior to announcement which was 17.86%-20.34% for Murdock vs. 21.14% for
the 22 banks. In the comparisons of the three ratios, the ratios for the average
of the 22 transactions was between the minimum price and "expected" price
projected for Murdock.
Analysis of ABI Common Shares. Ewing performed an analysis as to the
profitability, quality, and growth potential for the ABI Common Shares which
included a financial analysis as to the overall financial quality of ABI, an
analysis of the performance ratios of ABI, an analysis of ABI's nonperforming
assets, and a comparison of its price/earnings and price/book ratios with other
comparable regional bank holding companies. Ewing observed that ABI operates in
a nearby banking market in Manatee County and that ABI's corporation objectives
include expansion by acquisition into other west coast Florida counties. Ewing
observed that ABI is capitalized with an equity/assets ratio of 7.78% as of June
30, 1997 and that ABI's ratio of nonperforming assets/assets was less than 0.35%
vs. an industry average in Florida of 0.41%. Ewing further observed that ABI's
profitability has been below peer group averages for the years of 1994 through
1996 and 1997 through June 30 because of ABI's rapid expansion of its branching
system. Notwithstanding ABI's relatively lower profitability, Ewing noted that
ABI Common Shares trade on the Nasdaq system and
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are currently valued by the market at higher ratios of book value and earnings
than the other 8 Florida-based banks. Based on market prices of September 15,
1997. The price book ratio for ABI was approximately 2.40x vs. approximately
2.16x for the 7 other Florida-based banks. Ewing observed that ABI Common Shares
trade at an average daily volume of 10,000-12,000 shares and that the shares are
traded by 10 firms on the Nasdaq system. ABI management has indicated that the
acquisition of Murdock will be accretive to the earnings per share of ABI in
1998.
Marketing of Murdock. Ewing observed that the Murdock Board had held
discussions with a multiple of potential purchasers and that the ABI offer was
selected because its indicated value and growth potential was greater than the
value of the other indicated expressions of interest.
Compensation of Ewing. Ewing acted as a financial advisor to Murdock in
addition to rendering is opinion. As compensation for its services, Ewing will
earn a fee of $14,000.
Qualifications of the Fairness Opinion. The preparation of a fairness
opinion involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances. Therefore, such an opinion is not readily susceptible
to summary description. Furthermore, in arriving at its opinion, Ewing did not
attribute any particular weight to any one factor considered by it, but rather
made qualitative judgements as to the significance and relevance of each
analysis and factor. Ewing believes that its analysis must be considered as a
whole and that considering any portion of such analysis and of the factors
considered, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its opinion. In its
analysis, Ewing made numerous assumptions with respect to industry performance,
general business, economic conditions, and other matters, many of which are
beyond Murdock's control. Any estimates contained in these analyses are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than as set forth
therein. Analyses relating to the value of businesses do not purport to be
appraisals or to reflect the prices at which businesses actually may be sold. In
addition, as described above, Ewing's opinion, along with its presentations to
the Murdock Board, was just one of many factors taken into consideration by the
Murdock Board.
TERMS OF THE MERGER
At the Effective Time of the Merger, Murdock will be merged with and
into the Bank, with the Bank as the surviving entity and a wholly-owned
subsidiary of ABI. The Articles of Incorporation (including any amendments
adopted at the ABI Special Meeting) and Bylaws of ABI and the Bank in effect at
the Effective Time will govern the bank holding company and the surviving
corporation, respectively, until amended and repealed in accordance with
applicable law.
At the Effective Time, except as described herein, each outstanding
share of Murdock Common Stock will be converted automatically into the right to
receive the number of ABI Common Shares equal to the Exchange Ratio (2.40 ABI
Common Shares for each share of Murdock Common Stock), unless the average last
daily price of ABI Common Shares for a specified period prior to closing is less
than $11.00, the Closing Equity (as defined in the Merger Agreement) of Murdock
is less than $5,000,000, or both. If the ABI Average Price is less than $11.00
and the Closing Equity is at least $5,000,000, then the Exchange Ratio will be
increased to 2.65 ABI Common Shares for each share of Murdock Common Stock.
If the Closing Equity is less than $5,000,000, then the Exchange Ratio
shall be adjusted to equal the Closing Equity per share of Murdock Common Stock
multiplied by 2.25 (the "Adjusted Purchase Price"), divided by either 12.169 if
the ABI Average Price is equal to or greater than $11.00, or by 11.00 if the ABI
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Average Price is less than $11.00. For example, if the Closing Equity was
$4,900,000, the per share Closing Equity would be approximately $12.727 (based
on 385,015 shares of Murdock Common Stock), and the Adjusted Purchase Price
would be approximately $28.64 per share of Murdock Common Stock (2.25 times
$12.727 per share Closing Equity). If the ABI Average Price equals at least
$11.00, then the Exchange Ratio would be revised to approximately 2.35 ABI
Common Shares for each share of Murdock Common Stock ($28.64 divided by
$12.169). If the ABI Average Price is less than $11.00, then the Exchange Ratio
would be revised to approximately 2.60 ABI Common Shares for each share of
Murdock Common Stock ($28.64 divided by $11.00).
If the ABI Average Price is less than $10.00 or the Closing Equity is
less than $4,875,000, then Murdock or ABI, respectively, may have the right to
terminate the Merger Agreement. See "The Merger - Modification, Waiver,
Termination". Under the terms of the Merger Agreement, the ABI Average Price
(which is defined in the Merger Agreement as the Designated Price) shall be the
average of the last reported sales price of ABI Common Shares as reported by
Nasdaq for the twenty consecutive full trading days in which such shares are
traded prior to the fifth day preceding the Determination Date (as defined in
the Merger Agreement, which generally relates to the date on which the last of
the following occurs: (i) receipt of Murdock Stockholders approval of the Merger
Agreement and (ii) receipt of all required regulatory approvals (including the
lapse of any required waiting periods)).
Each outstanding share of Murdock Common Stock owned by Murdock in
treasury or otherwise, other than those held in a fiduciary capacity or as a
result of debts previously contracted, will be cancelled, retired, and cease to
exist at the Effective Time of the Merger and no payment will be made with
respect thereto.
In addition, at the Effective Time, all rights to acquire Murdock
Common Stock pursuant to stock options granted by Murdock which are outstanding
at such time, whether or not then exercisable, will be converted into and
exchanged for options to acquire ABI Common Shares in accordance with the
Exchange Ratio, as adjusted. See "The Merger - Interests of Certain Persons in
the Merger -- Murdock Employment Agreements and Stock Options".
The Merger Agreement further provides that the Exchange Ratio may be
adjusted, subject to certain exceptions, to prevent dilution in the event ABI
changes the number of ABI Common Shares issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend, recapitalization,
reclassification, or similar transaction.
No fractional ABI Common Shares will be issued in the Merger. Instead,
the Merger Agreement provides that each holder of Murdock Common Stock who would
otherwise have been entitled to receive a fraction of an ABI Common Share (after
taking into account all certificates delivered to such holders) will receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of an ABI Common Share multiplied by the market price of one ABI Common Share at
the Effective Time. The market price is defined in the Merger Agreement as the
closing price of the ABI Common Share as reported by the Nasdaq National Market
(or, if not reported thereby, by any other authoritative source selected by ABI)
on the last trading day preceding the closing. No such holder will be entitled
to dividends, voting rights, or any other rights as a shareholder in respect of
any fractional shares. See "The Merger -- Exchange of Certificates".
ABI Common Shares outstanding immediately prior to the Effective Time
of the Merger will continue to be outstanding after the Merger.
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EFFECTIVE TIME OF THE MERGER
The Merger will become effective on the date and at the time as the
Certificate of Merger is issued by the Department (the "Effective Time"). Unless
otherwise agreed to by ABI, the Bank, and Murdock, the parties have agreed to
use their best efforts to cause the Effective Time to occur on the date of
closing and to use their reasonable best efforts to cause the closing to take
place on or before the fifth business day following the last to occur of: (i)
the effective date of the last required consent of any state or federal
regulatory agency having authority over the Merger (including the expiration of
any applicable waiting periods following such consents or the delivery of
appropriate notices), or (ii) the date on which Murdock Stockholders approve the
Merger Agreement. There can be no assurance, however, as to whether or when the
Merger will occur. See "The Merger - Conditions to the Merger" and "The Merger -
Regulatory Approvals".
EXCHANGE OF CERTIFICATES
Before or as soon as practicable after the Effective Time, Sun Trust
Bank - Atlanta, as the transfer agent for the ABI Common Shares (the "Exchange
Agent"), will mail to each holder of record of Murdock Common Stock as of the
Effective Time a letter of transmittal, together with instructions (the "Letter
of Transmittal"), for the surrender and exchange of certificates previously
representing Murdock Common Stock for certificates representing ABI Common
Shares. Risk of loss and title to the certificates theretofore representing
shares of Murdock Common Stock shall pass only upon proper delivery of such
stock certificates to the Exchange Agent.
MURDOCK STOCKHOLDERS SHOULD NOT FORWARD THEIR CERTIFICATES UNTIL THEY
RECEIVE THE APPROPRIATE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender to the Exchange Agent of one or more certificates for
Murdock Common Stock, together with a properly completed Letter of Transmittal,
there will be issued and mailed to the holder thereof a certificate or
certificates representing the aggregate number of whole ABI Common Shares to
which such holder is entitled pursuant to the Exchange Ratio, as adjusted,
together with all declared but unpaid dividends or other distributions in
respect of such shares, and, where applicable, a check for the amount (without
interest) representing any fractional share. A certificate for ABI Common
Shares, or any check representing cash in lieu of a fractional share or declared
but unpaid dividends, may be issued in a name other than the name in which the
surrendered certificate is registered only if (i) the certificate surrendered is
properly endorsed, accompanied by a guaranteed signature if required by the
Letter of Transmittal and otherwise in proper form for transfer, and (ii) the
person requesting the issuance of such certificate either pays to the Exchange
Agent any transfer or other taxes required by reason of the issuance of a
certificate for such shares in a name other than the registered holder of the
certificate surrendered or establishes to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. The Exchange Agent will issue
certificates evidencing ABI Common Shares in exchange for lost, stolen,
mutilated, or destroyed certificates of Murdock Common Stock only upon receipt
of a lost stock affidavit and a bond indemnifying ABI against any claims arising
out of the allegedly lost, stolen, mutilated, or destroyed certificate.
After the Effective Time and until surrender of certificates
representing shares of Murdock Common Stock to the Exchange Agent, each
certificate that represented shares of Murdock Common Stock outstanding
immediately prior to the Effective Time will be deemed to represent the right to
receive that number of ABI Common Shares into which the shares represented by
such certificates have been converted and any right to receive cash in lieu of
fractional ABI Common Shares into which such shares would have converted. No
stockholder will, however, receive the dividends or other distributions on ABI
Common Shares, or interest
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or cash payments in lieu of fractional shares, until the certificates
representing Murdock Common Stock are surrendered for exchange. Upon surrender
of certificates for Murdock Common Stock, each such stockholder will receive the
number of ABI Common Shares to which such stockholder is entitled under the
Exchange Ratio, as adjusted, and cash in lieu of any factional share, plus any
dividends or other distributions on ABI Common Shares that are payable to
holders as of any record date following the Effective Time. No interest will be
payable with respect to withheld dividends or other distributions or cash
payments in lieu of fractional shares.
In no event will the Exchange Agent, ABI, the Bank, or Murdock be
liable to any persons for any ABI Common Shares or dividends thereon or cash
delivered in good faith to a public official pursuant to any abandoned property,
escheat, or similar law.
CONDITIONS TO THE MERGER
The Merger will occur only if the Merger Agreement is approved by the
requisite vote of the Murdock Stockholders. In addition, consummation of the
Merger is subject to the satisfaction of certain other conditions, unless
waived, to the extent that such waiver is permitted by law. Conditions
applicable to all parties include, but are not limited to: (i) the receipt of
all required regulatory and governmental consents, approvals, authorizations,
clearances, exemptions, waivers, ratifications, and similar affirmations
(including the expiration of all applicable waiting periods following the
receipt of such items or the delivery of appropriate notices), provided that
such approvals shall not have imposed any condition or restriction that, in the
reasonable judgment of the Board of Directors of either party, would so
materially adversely impact the economic or business benefits of the
transactions contemplated by the Merger Agreement that, had such condition or
requirement been known, such party would not, in its reasonable judgment, have
entered into the Merger Agreement; (ii) the absence of any injunction, order,
decree, ruling, or other legal restraint or prohibition of, or action pending
by, a court or governmental or regulatory authority of competent jurisdiction
that restricts, prohibits, or makes illegal consummation of the Merger or any of
the transactions contemplated thereby; (iii) the effectiveness of the
Registration Statement, including the Joint Proxy Statement-Prospectus under the
Securities Act, the absence of a stop order or threatened stop order suspending
such effectiveness, and the receipt of all necessary approvals under state
securities laws, the Securities Act or the Exchange Act relating to the issuance
or trading of the ABI Common Shares issuable pursuant to the Merger; (iv) the
receipt of a letter dated as of the Effective Time from Coopers & Lybrand LLP to
the effect that the Merger qualifies for pooling-of-interests accounting
treatment under GAAP; and (v) the receipt of the tax opinion referred to in "The
Merger - Certain Federal Income Tax Consequences of the Merger".
In addition, unless waived, each party's obligation to effect the
Merger is subject to: (i) the accuracy of the other party's representations and
warranties as of the closing; (ii) receipt by the other party, with certain
exceptions, of all consents and approvals from third parties required for
consummation of the Merger and for preventing any default under any agreement,
contract, or permit which, if not obtained or made, is reasonably likely to have
a material adverse effect on the surviving corporation; (iii) the performance by
the other party of its obligations under the Merger Agreement; and (iv) receipt
of certain closing certificates and legal opinions from the other party.
The obligation of ABI to effect the Merger also is subject to: (i) the
receipt of agreements from affiliates of Murdock restricting their ability to
sell or otherwise transfer their Murdock Common Stock prior to consummation of
the Merger or their ABI Common Shares received upon consummation of the Merger,
to the extent necessary to assure, in the reasonable judgment of ABI, that the
transactions contemplated by the Merger Agreement will qualify for
pooling-of-interests method of accounting; (ii) execution and delivery of an
agreement from Mr. Andreasen waiving the change of control provisions under his
employment
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agreement and clarifying the number of options held by him to purchase Murdock
Common Stock; and (iii) Murdock having a minimum Closing Equity of $4,875,000.
The obligation of Murdock to effect the Merger is further subject to: (i)
Murdock's receipt from Ewing of a letter, dated not more than five business days
prior to the date of this Joint Proxy Statement-Prospectus, stating that in the
opinion of Ewing, the consideration to be paid in the Merger to Murdock
Stockholders in accordance with the Merger Agreement is fair, from a financial
point of view, to the holders of Murdock Common Stock; (ii) approval and
authorization for quotation on the Nasdaq National Market upon official notice
of issuance of the ABI Common Shares issuable pursuant to the Merger; and (iii)
ABI having delivered to the Exchange Agent the consideration to be paid to
holders of the Murdock Common Stock.
The representations and warranties of each of the parties concern,
among other things, their organization, capitalization, and subsidiaries (or the
lack thereof); the authorization and enforceability of the Merger Agreement;
their financial statements; the absence of undisclosed liabilities; certain tax,
labor, and environmental matters; their properties, assets, and material
contracts, and obligations; the adequacy of Murdock's allowances for credit
losses; compliance with laws; material contract defaults; legal proceedings;
Murdock's employee benefit plans, commitments, and contracts; the absence of
certain changes or events; reports to the regulatory authorities; and insurance.
See "The Merger - Regulatory Approvals", and " - Modification, Waiver, and
Termination".
Either ABI or Murdock may waive certain of the conditions imposed with
respect to its or their respective obligations to consummate the Merger, except
for the requirements that the Merger be approved by Murdock's Stockholders and
that all required regulatory approvals be received. No assurances can be given
as to when or if all the conditions precedent to the Merger can or will be
satisfied or waived by the party permitted to do so.
REGULATORY APPROVALS
The Merger is subject to receipt of prior regulatory approvals of the
Department and the FDIC described below. To the extent that the following
information describes statutes and regulations, it is qualified in its entirety
by reference to the particular statutes and the regulations promulgated under
such statutes.
Pursuant to the terms of the Merger, Murdock will merge with and into
the Bank. As a result of the Merger, the Bank will acquire direct ownership and
control of and ABI will acquire indirect ownership and control of Murdock. Since
the Surviving Corporation, the Bank, is a Florida state chartered bank which is
not a member of the Federal Reserve System, it will be subject to the regulatory
oversight of the FDIC and the Department. Accordingly, under the Federal Deposit
Insurance Act (the "FDIA"), the Merger is subject to prior approval by the FDIC.
The FDIA requires the FDIC, when approving a transaction such as the Merger, to
take into consideration the financial and managerial resources (including the
competence, experience, and integrity of the officers, directors, and principal
shareholders) and future prospects of the existing and proposed institutions and
the convenience and needs of the communities to be served. In considering
financial resources and future prospects, the FDIC will, among other things,
evaluate the adequacy of the capital levels of ABI and the Bank following the
Merger. Depending on the views of the FDIC as to what constitutes adequate
capital levels for a financial institution of the Bank's size and financial
condition, the FDIC could, as a condition to its approval of the Merger, require
the Bank to raise additional capital (in the form of equity, equity-linked
securities, subordinated debt, or a combination thereof). Although there can be
no assurances, ABI does not believe that it is likely that the FDIC will
establish such a condition to its approval of the proposed Merger.
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The FDIA prohibits the FDIC from approving a merger if it would result
in a monopoly or would be in furtherance of any combination or conspiracy to
monopolize or to attempt to monopolize the business of banking in any part of
the United States, or if its effect in any section of the country would be
substantially to lessen competition or to tend to create a monopoly, or if it
would in any other manner result in a restraint of trade, unless the FDIC finds
that the anti-competitive effects of a merger are clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the communities to be served. In addition, under the
Community Reinvestment Act of 1977, as amended (the "CRA"), the FDIC must take
into account the record of performance of the existing institutions in meeting
the credit needs of the entire community, including low- and moderate-income
neighborhoods, served by such institutions. The Bank, ABI's sole banking
subsidiary has an outstanding CRA rating.
Applicable federal law provides for the publication of notice and
public comment on applications filed with the FDIC and authorizes such agency to
permit interested parties to intervene in the proceedings. If an interested
party is permitted to intervene, such intervention could delay the regulatory
approvals required for consummation of the Merger.
Under the FDIA, the Merger generally may not be consummated until
between 15 and 30 days following the date of applicable federal regulatory
approval, during which time the United States Department of Justice may
challenge the Merger on antitrust grounds. The commencement of an antitrust
action would stay the effectiveness of the regulatory agency's approval unless a
court specifically ordered otherwise. ABI and Murdock believe that the Merger
does not raise substantial antitrust or other significant regulatory concerns.
The Merger also is subject to the approval of the Department. The
Department's evaluation takes into account considerations similar to those
applied by the FDIC. In addition, the Department must make a determination that
the valuation set forth in the Merger Agreement and Plan of Merger is fair.
Similar to federal law, Florida law requires publication of notice and holding
of a hearing in order to receive public comment.
Status of Regulatory Approvals and Other Information. ABI and Murdock
have filed all applications and notices and have taken (or will take) other
appropriate action with respect to any requisite approvals or other action of
any governmental authority. ABI has submitted applications seeking approval of
the Merger by the Department and the FDIC.
The Merger Agreement provides that the obligation of each of ABI and
Murdock to consummate the Merger is conditioned upon the receipt of all
requisite regulatory approvals, including the approvals of the Department and
the FDIC. There can be no assurance that any governmental agency will approve or
take any other required action with respect to the Merger, and, if approvals are
received or action is taken, there can be no assurance as to the date of such
approvals or action, that such approvals or action will not be conditioned upon
matters that would cause the parties to abandon the Merger, or that no action
will be brought challenging such approvals or action, including a challenge by
the United States Department of Justice or, if such a challenge is made, the
result thereof.
Neither ABI nor Murdock are aware of any governmental approvals or
actions that may be required for consummation of the Merger other than as
described above. Should any other approval or action be required, ABI and
Murdock currently contemplate that such approval or action would be sought.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCES THAT SUCH REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE DATES OF ANY SUCH APPROVALS.
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THERE CAN ALSO BE NO ASSURANCE THAT SUCH APPROVALS WILL NOT CONTAIN A CONDITION
OR REQUIREMENT WHICH CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET
FORTH IN THE MERGER AGREEMENT. SEE "THE MERGER -- CONDITIONS TO THE MERGER".
THERE LIKEWISE CAN BE NO ASSURANCE THAT THE UNITED STATES DEPARTMENT OF JUSTICE
WILL NOT CHALLENGE THE MERGER, OR, IF SUCH A CHALLENGE IS MADE, AS TO THE RESULT
THEREOF.
See "The Merger -- Effective Time of the Merger" and "- Modification,
Waiver, and Termination".
BUSINESS PENDING THE MERGER
The Merger Agreement provides that during the period from the date of
the Merger Agreement to the Effective Time, unless the prior written consent of
ABI shall have been obtained and except as otherwise expressly contemplated by
the Merger Agreement, Murdock will operate its business only in the usual,
regular, and ordinary course consistent with past practice, use its reasonable
best efforts to maintain and preserve intact its business organization, assets,
and properties and to maintain its rights and franchises, use its reasonable
efforts to maintain its current employees and advantageous business
relationships, retain the services of its officers and key employees, and take
no action which would adversely affect or delay the ability of either ABI or
Murdock to obtain any necessary consents or approvals of any governmental or
regulatory authority or other governmental entity required for the Merger or the
transactions contemplated by the Merger Agreement or to perform its covenants
and agreements under the Merger Agreement.
Furthermore, except as expressly contemplated by the Merger Agreement,
Murdock has agreed that it will not, without the prior written consent of ABI,
take any of the following actions:
(i) amend the Murdock Articles, its bylaws, or any of its other
governing instruments;
(ii) make any loan or other extension of credit to any person in excess
of $100,000 (except for single family residential mortgage loans not in excess
of $200,000);
(iii) incur any additional debt obligation or other obligation for
borrowed money in excess of an aggregate of $50,000 except in the ordinary
course of the business of Murdock consistent with past practices; assume,
guarantee, endorse, or otherwise as an accommodation become responsible for the
obligations of an individual, corporation, or other entity; impose, or suffer
the imposition, with certain exceptions, of a lien on any asset of Murdock
(other than in connection with deposits, repurchase agreements, bankers
acceptances, "treasury tax and loan" accounts established in the ordinary course
of business, and already existing liens); or make any loan or advance which
would be reasonably likely to have a material adverse effect on Murdock;
(iv) repurchase, redeem, or otherwise acquire or exchange, directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of Murdock, or make, declare, or pay any dividend or make any
other distribution in respect of Murdock's capital stock;
(v) issue, sell, pledge, encumber, authorize the issuance of, enter
into any contract, agreement, or other contract, agreement, commitment, or other
instrument to issue, sell, pledge, encumber, or authorize the issuance of, or
otherwise permit to become outstanding any additional shares of Murdock Common
Stock or any other capital stock of Murdock (or permit the exercise of any
option, warrant, or other right requiring the issuance of any securities by
Murdock), or any stock appreciation rights, or any option, warrant, conversion,
or other right to acquire any such stock, or any security convertible into any
such stock;
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(vi) adjust, split, combine, or reclassify any capital stock of Murdock
or authorize the issuance of any other securities in respect of or in
substitution for shares of Murdock Common Stock, or sell, lease, mortgage, or
otherwise dispose of or otherwise encumber any property or asset other than in
the ordinary course of business for reasonable and adequate consideration;
(vii) except for purchases of United States Treasury securities or
United States Government agency securities, which in either case have maturities
of five years or less, purchase any securities or make any material investment,
either by purchase of stock or securities, contributions to capital, assets
transfers, or purchase of any assets or property, in any person, entity,
partnership, or corporation, or otherwise acquire direct or indirect control
over any person, entity, partnership, or corporation, other than in connection
with foreclosures in the ordinary course of business or acquisitions of control
in its fiduciary capacity;
(viii) grant any increase in compensation or benefits to the employees
or officers of Murdock, except in accordance with past practice or as required
by law; pay any severance or termination pay or any bonus other than pursuant to
written policies or written contracts, agreements, or other instruments in
effect on the date of the Merger Agreement; enter into or amend any severance
agreements with officers or employees of Murdock, grant any material increase in
fees or other increases in compensation or other benefits to directors of
Murdock; or voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits;
(ix) enter into or amend any employment agreement, contract, or other
instrument between Murdock and any person (unless such amendment is required by
law) that Murdock does not have the unconditional right to terminate without
liability (other than liability for services already rendered), at any time on
or after the Effective Time;
(x) adopt any new employee benefit plan of Murdock or make any material
change in or to any existing employee benefit plans of Murdock other than any
such change that is required by law or to maintain the tax qualified status of
any such plan;
(xi) make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in tax laws or regulatory accounting requirements, or GAAP;
(xii) commence any litigation or proceeding other than in accordance
with past practice or settle any litigation or proceeding for material money
damages or restrictions upon the operations of Murdock;
(xiii) except in the ordinary course of business consistent with past
practice, modify, amend, or terminate any material contract or agreement, other
than renewals without material adverse change of terms, or waive, release,
compromise, or assign any material rights or claims;
(xiv) except for transactions in the ordinary course of business
consistent with past practice, make any investment in excess of $50,000 either
by purchase of stock or securities, contributions to capital, property
transfers, or purchase of property or assets of any other individual,
corporation, or other entity;
(xv) sell, transfer, mortgage, encumber, or otherwise dispose of any of
its properties or assets to any individual, corporation, or other entity, or
cancel, release, or assign any indebtedness to any such person or any claims
held by any such person, except in the ordinary course of business consistent
with past practice or pursuant to contracts, agreements, or other instruments in
force at the date of the Merger Agreement; or
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(xvi) agree to, or make any commitment to, take any of the actions
prohibited by the above paragraphs.
The Merger Agreement also provides that, except for the transactions
contemplated thereby, neither Murdock nor any of its affiliates or
representatives shall, directly or indirectly, solicit any offer, proposal, or
indication of interest for a merger, consolidation, or other business
combination involving Murdock or any tender offer or exchange offer, or any
offer or proposal to acquire in any manner a substantial equity interest in, or
a substantial portion of the assets and properties of Murdock ("Acquisition
Proposal"). Additionally, neither Murdock nor any of its affiliates or
representatives shall negotiate with or provide any information with respect to
any Acquisition Proposal.
In the Merger Agreement, ABI has agreed to conduct its business and the
business of its subsidiaries in a manner designed, in its reasonable judgment,
to enhance the long-term value of the ABI Common Shares and its business
prospects, and to take no action which would materially adversely affect the
ability of any party to obtain any consents or approvals required by the Merger
Agreement or to perform its covenants and agreements under the Merger Agreement;
provided that ABI and its subsidiaries may discontinue or dispose of any of
their assets or business if ABI determines that such action is desirable in the
conduct of its business.
MODIFICATION, WAIVER, AND TERMINATION
Modification and Waiver. The Merger Agreement provides that, to the
extent permitted by law, it may be amended at any time by written agreement of
the parties, whether before or after the Murdock Special Meeting, provided,
however, that provisions, relating to the manner or basis by which shares of
Murdock Common Stock will be exchanged for ABI Common Shares may not be amended
after the Murdock Special Meeting without the requisite approval of the Murdock
Stockholders entitled to vote thereon (e.g., change in amount of merger
consideration to be paid, revision in the form of consideration to be received,
change in the tax free nature of the share exchange, etc.).
Prior to or at the Effective Time, either party may (i) waive any
default in the performance of any term of the Merger Agreement by the other
party, (ii) waive or extend the time for compliance of fulfillment by the other
party of any of its obligations under the Merger Agreement, and (iii) waive any
and all of the conditions precedent to its obligations to consummate the Merger
to the extent legally permitted, including without limitation, the conditions
and the restrictions described under "The Merger - Business Pending the Merger".
Neither of the parties intends, however to waive any conditions of the Merger if
such waiver would, in the judgment of the waiving party, have a material adverse
effect on its shareholders.
Termination. The Merger Agreement provides that, whether before or
after the Murdock Special Meeting, and notwithstanding approval by the Murdock
Stockholders, the Merger Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Time by mutual agreement of ABI and Murdock. The
Merger Agreement also may be terminated by either ABI or Murdock (i) in the
event of inaccuracies of any representation or warranty of the other party
contained in the Merger Agreement which cannot be or has not been cured within
30 days of written notice of such inaccuracies and which inaccuracy would
provide the terminating party the ability to refuse to consummate the Merger
under the applicable standard set forth in the Merger Agreement; provided that
such terminating party is not then in material breach of any representation or
warranty contained in the Merger Agreement or in material breach of any covenant
or other agreement contained in the Merger Agreement; (ii) in the event of a
material breach of any covenant, agreement, or obligation in the Merger
Agreement by the other party that cannot or has not been cured within 30 days of
written notice of such breach (a "Contract Breach"); (iii) if the required
approval of the Murdock Stockholders or any applicable regulatory authority is
not obtained; or (iv) if the Merger is not consummated
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by April 30, 1998, provided that the failure to consummate the Merger by such
date is not caused by any breach of the Merger Agreement by the terminating
party.
In addition, the Merger Agreement may be terminated by ABI if (i)
persons owning more than 10% of the issued and outstanding shares of Murdock
Common Stock claim their dissenters' rights, (ii) Murdock's Closing Equity is
less than $4,875,000 (provided that the parties have attempted to negotiate in
good faith a mutually acceptable revised merger consideration but have failed to
reach agreement within four days after the determination of the Closing Equity),
or (iii) the Murdock Board withdraws, modifies, or changes its recommendation
that Murdock Stockholders should vote in favor of the Merger Agreement, or shall
have determined to engage in an Acquisition Proposal with another party, or
shall have recommended that Murdock Stockholders vote in favor of an Acquisition
Proposal with another party, or shall have announced a proposal, plan, or
intention to do any of the foregoing, or shall have entered into an agreement,
contract, understanding, or arrangement to engage in any of the foregoing.
The Merger Agreement may also be terminated by Murdock if the ABI
Average Price is less than $10.00 (provided that the parties have attempted to
negotiate in good faith a mutually acceptable revised merger consideration but
have failed to reach agreement within four days after determination of the ABI
Average Price) or, prior to the Effective Time, a corporation, partnership,
person, or other entity or group shall have made a bona fide Acquisition
Proposal that the Murdock Board determines in its good faith judgment and in the
exercise of its fiduciary duties based on, with respect to legal matters, the
written opinion of legal counsel, and with respect to financial matters, the
written opinion of an investment banking firm of national reputation, that the
Acquisition Proposal is more favorable to the Murdock Stockholders and that the
failure to terminate the Merger Agreement and accept such alternative
Acquisition Proposal would be inconsistent with the proper exercise of such
fiduciary duties. Each right to terminate the Merger Agreement shall be referred
to herein as a "Termination Event".
There can be no assurance that either the ABI or Murdock Board would
exercise its right to terminate the Merger Agreement if a Termination Event
exists. In making such decision, both the ABI Board and the Murdock Board would,
consistent with their respective fiduciary duties, take into account all
relevant facts and circumstances that exist at such time, and would consult with
its financial advisors and legal counsel. In the event that the ABI Average
Price is less than $10.00 or the Closing Equity is less than $4,875,000 and the
parties successfully renegotiate the merger consideration and continue with the
Merger rather than exercising their termination rights, under the terms of the
Merger Agreement, Murdock Stockholders will be resolicited to seek their
approval of the revised merger consideration.
Approval of the Merger Agreement by the Murdock Stockholders at the
Murdock Special Meeting will confer on the Murdock Board the power, consistent
with its fiduciary duties, to elect to consummate the Merger in the event of a
Termination Event without any further action by, or resolicitation of, the
stockholders of Murdock.
In the event that the Merger Agreement is terminated and abandoned due
to the occurrence of a Contract Breach, the breaching party is required to
reimburse the nonbreaching party for its reasonable out-of-pocket expenses
relating to the Merger in an amount not to exceed $200,000 in the case of
amounts payable to Murdock or $250,000 in the case of amounts payable to ABI.
If, however, the Merger Agreement is terminated and abandoned by either party as
a result of an Acquisition Proposal made to Murdock, then ABI shall be entitled
to a cash payment from Murdock in the amount of $750,000.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Murdock's management and of the Murdock Board may be
deemed to have interests in the Merger that are in addition to any interests
that they may have as stockholders of Murdock generally. Their interests
include, among others, provisions in the Merger Agreement relating to the
appointment of at least three members of the Murdock Board to the advisory board
of directors to be established for the Murdock branch of the Bank following
consummation of the Merger and a preference to their selection to the advisory
board's loan committee, indemnification of present and former directors and
officers of Murdock, assumption of Murdock's obligations under its employment
agreement with Robert L. Andreasen, and conversion of Murdock Options held by
Mr. Andreasen into ABI Options.
Advisory Board. Following the Merger, ABI intends to operate Murdock as
a branch office of the Bank. ABI will establish or cause to be established an
advisory board of directors for the Murdock branch of the Bank which is expected
to be comprised of 7 to 9 members. The advisory board is expected to meet no
less frequently than on a quarterly basis and its members will receive a payment
of $100 for each meeting attended. At the Effective Time, ABI shall appoint at
least three current members of the Murdock Board to this advisory board
(assuming that at least three such directors are interested in serving in such
capacity) together with such other persons as ABI, in its sole discretion, may
deem advisable or desirable to serve on such board. ABI also intends to
establish a loan committee of the advisory board consisting of 5 to 7 members
which shall meet weekly, or as needed, and whose members will receive a payment
of $100 per meeting. The members of the Murdock Board selected to the advisory
board shall be given preference to serve as members of the loan committee.
Indemnification. Pursuant to the Merger Agreement, ABI will, and will
cause the Bank to, following the Effective Time, indemnify, defend, and hold
harmless the present and former directors, officers, employees, and agents of
Murdock against all losses, expenses, claims, damages, or liabilities arising
out of actions or omissions occurring at or prior to the Effective Time to the
full extent then permitted under Florida law and by the Murdock Articles and
Bylaws as in effect on the date of the Merger Agreement, including provisions
relating to advances of expenses incurred in defense of any action litigation,
or suit.
Murdock Employment Agreements and Stock Options. Murdock has an
employment agreement with Robert L. Andreasen which terminates on September 10,
1998. This employment agreement provides for the payment of certain benefits
upon a "change of control" as defined therein. Pursuant to the employment
agreement, Mr. Andreasen is entitled to a payment equal to two times his base
salary at the time of such change of control in the event that Mr. Andreasen is
not retained by the acquiring institution, is required to accept a mandatory
transfer by the acquiring institution, or is required to accept substantially
reduced responsibilities or compensation. As of the date of the Merger
Agreement, Mr. Andreasen's base compensation was $102,500. ABI has agreed to
assume the obligations of Murdock under the employment agreement and to retain
Mr. Andreasen for the remainder of the term of his employment agreement.
Furthermore, pursuant to the terms of a Stock Option Agreement, dated
December 15, 1992, and the employment agreement, Mr. Andreasen has been granted
certain Murdock Options, which options constitute the only outstanding rights to
purchase shares of Murdock Common Stock. The Merger Agreement provides that all
of such outstanding Murdock Options shall be converted into ABI Options in
accordance with the Exchange Ratio, as adjusted. Mr. Andreasen holds 14,000
Murdock Options, all of which are currently exercisable. The weighted average
price of these options is $12.53 per share of Murdock Common Stock. Based on an
Exchange Ratio of 2.4, the aggregate value of Mr. Andreasen's options as of the
Murdock Record Date is approximately $408,878.
41
<PAGE> 48
In order to clarify the rights and obligations of the parties, prior to
closing Mr. Andreasen shall enter into an agreement which clarifies that (i) so
long as he is retained by ABI or the Bank through the term of the employment
agreement and is paid his base compensation during the remainder of the term of
the agreement, the new position assumed by Mr. Andreasen with the surviving
corporation will not entitle him to receipt of the change of control payment,
and (ii) Mr. Andreasen is entitled to Murdock Options to purchase 14,000 shares
of Murdock Common Stock and that he has no other right or claim to purchase any
additional shares from Murdock.
EMPLOYEE BENEFITS
ABI has agreed in the Merger Agreement, following the Effective Time,
to provide generally to officers and employees of Murdock, certain employee
benefits under employee benefit plans of ABI (other than stock option or other
plans involving the possible issuance of ABI Common Shares), including without
limitation, pension benefits, health and welfare benefits, life insurance,
vacation, and severance arrangements, on terms and conditions provided from time
to time by ABI and its subsidiaries to their similarly situated officers and
employees.
For purposes of participation and vesting (but not benefit accrual
under any employee benefit plans of ABI or its subsidiaries) under any employee
benefit plan of ABI and its subsidiaries, the service of the employees of
Murdock prior to the Effective Time shall be treated as service with ABI or its
subsidiaries participating in such benefit plans.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a
pooling-of-interests under GAAP. ABI and Murdock have agreed to use their
reasonable best efforts to cause the Merger, and to take no action that would
cause the Merger not to qualify for pooling-of-interests treatment.
Under the pooling-of-interests method of accounting, the historical
basis of the assets and liabilities of ABI and Murdock will be combined at the
Effective Time of the Merger and carried forward at their previously recorded
amounts, and the shareholders' equity accounts of ABI and Murdock will be
combined on ABI's consolidated balance sheet and no goodwill or other intangible
assets will be created. Financial statements of ABI issued after the Merger will
be restated retroactively to reflect the consolidated operations of ABI and
Murdock as if the Merger had taken place prior to the periods covered by such
financial statements.
The unaudited pro forma financial information contained in this Joint
Proxy Statement-Prospectus has been prepared using the pooling-of-interests
accounting method to account for the Merger. See "Summary - Comparative
Unaudited Per Share Information" and " - Selected Financial Information", and
"Pro Forma Condensed Consolidated Financial Statements".
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a summary of the material federal income tax
consequences of the Merger to holders of Murdock Common Stock who held such
stock as a capital asset. This summary is not a complete description of all of
the consequences of the Merger and, in particular, may not address federal
income tax considerations that may affect the treatment of a stockholder which,
at the Effective Time, already owns ABI Common Shares, is not a U.S. person, is
a tax-exempt entity, or an individual who acquired Murdock Common Stock as
compensation, or exercises some form of control over Murdock. Accordingly,
Murdock Stockholders are urged
42
<PAGE> 49
to consult with their own tax advisors regarding the federal income tax
consequences of the Merger under their particular circumstances. In addition, no
information is provided herein with respect to the tax consequences of the
Merger under applicable foreign, state, or local laws, and Murdock Stockholders
are therefore urged to consult their tax advisors regarding the tax consequences
of the Merger under such laws. The following discussion is based on the Code,
Treasury Regulations thereunder, and administrative rulings and court decisions,
as in effect on the date of this Joint Proxy Statement-Prospectus, without
consideration of the particular facts or circumstances of any holder of Murdock
Common Stock
Neither ABI nor Murdock has requested an advance ruling from the
Internal Revenue Service as to the federal income tax consequences of the
Merger.
Each party's obligation to effect the Merger is conditioned on delivery
of an opinion from Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., ABI's
counsel, based upon certain facts, representations, and assumptions set forth
therein which are consistent with the state of facts existing at the Effective
Time, substantially to the effect that for federal income tax purposes: (i) the
Merger will constitute a reorganization within the meaning of Section 368(a) of
the Code, and (ii) the exchange in the Merger of the shares of Murdock Common
Stock for ABI Common Shares will not give rise to gain or loss to the Murdock
Stockholders with respect to such exchange (except with respect to cash received
in lieu of a fractional share interest in ABI Common Shares). In rendering such
opinion, counsel may require and rely upon representations contained in
certificates of officers and certain stockholders of ABI and Murdock and others.
In addition, Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A. has delivered
an opinion to ABI and Murdock, dated the date of this Joint Proxy
Statement-Prospectus, to the effect that, except as otherwise indicated, the
discussion set forth under the caption "The Merger - Certain Federal Income Tax
Consequences" represents such firm's opinion as to the material federal income
tax consequences of the Merger under currently applicable law. A copy of such
opinion is included as an exhibit to the Registration Statement.
In the opinion of Carlton, Fields, Ward, Emmanuel, Smith & Cutler,
P.A., based on certain assumptions and representations, under federal law as
currently in effect: (a) the proposed Merger will constitute a reorganization
within the meaning of Section 368(a) of the Code; (b) no gain or loss will be
recognized by Murdock Stockholders who exchange their Murdock Common Stock
solely for ABI Common Shares pursuant to the terms of the Merger (except with
respect to cash received in lieu of a fractional shares interest in ABI Common
Shares); (c) the federal income tax basis of the ABI Common Shares for which
Murdock Common Stock are exchanged pursuant to the Merger will be the same as
the basis of such Murdock Common Stock exchanged therefor (including basis
allocable to any fractional interest in any ABI Common Share); (d) the holding
period of ABI Common Shares for which Murdock Common Stock are exchanged will
include the period that such shares of Murdock Common Stock were held by the
holder, provided that such shares were capital assets of the holder; and (e) the
receipt of cash in lieu of fractional shares will be treated as if the
fractional shares were distributed as part of the exchange and then redeemed by
ABI, and gain or loss will be recognized in an amount equal to the difference
between the cash received and the basis of the fractional share of the ABI
Common Share surrendered, which gain or loss will be capital gain or loss if the
Murdock Common Stock was a capital asset in the hands of the stockholder.
A Murdock Stockholder who exercises dissenter's rights should be
treated as having disposed of his or her shares in a taxable transaction in
exchange for cash representing the fair value of such shares. The amount of any
gain or loss and its character as capital gain or loss will be determined in
accordance with applicable provisions of the Code. In general, if the shares of
Murdock Common Stock are held by a Murdock Stockholder as capital assets at the
Effective Time, and the Murdock Stockholder holds, actually or constructively,
no other shares of Murdock Common Stock, the Murdock Stockholder will recognize
capital
43
<PAGE> 50
gain or loss measured by the difference between the amount of cash received by
such stockholder and the adjusted basis of his or her shares.
Payments in respect of Murdock Common Stock may be subject to
information reporting to the Internal Revenue Service and to a 31% backup
withholding tax. Backup withholding generally will not apply, however, to a
payment to a Murdock Stockholder or other payee if such Murdock Stockholder or
payee completes and signs the substitute Form W-9 that will be included as part
of the transmittal letter or otherwise proves to ABI and the Exchange Agent that
it is exempt from backup withholding.
RESALES OF ABI COMMON SHARES
The ABI Common Shares to be issued to Murdock Stockholders upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely and without restriction by those stockholders not
deemed to be "affiliates" of ABI or Murdock as that term is defined in the rules
under the Securities Act. Any subsequent transfer of such shares, however, by
any person who is an affiliate of Murdock at the time the Merger is submitted
for vote or consent of the Murdock Stockholders will, under existing law,
require either (a) the further registration under the Securities Act of the ABI
Common Shares to be transferred, (b) compliance with Rule 145 promulgated under
the Securities Act (permitting limited sales under certain circumstances), or
(c) the availability of another exemption from registration. This Joint Proxy
Statement-Prospectus does not cover any resales of ABI Common Shares received by
affiliates of Murdock. An "affiliate" of Murdock, as defined by the rules
promulgated pursuant to the Securities Act, is a person who directly, or
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with Murdock. In addition, under requirements for
pooling-of-interests method of accounting, the ABI Common Shares issued to
affiliates are not transferable until such time as financial results covering at
least 30 days of combined operations of ABI and Murdock have been published. It
is anticipated that the directors, executive officers, and the beneficial
holders of 10% or more of the Murdock Common Stock (and to certain relatives or
the spouse of any such person and any trusts, estates, corporations, or other
entities in which any such person has a 10% or greater beneficial or equity
interest) will be deemed to be affiliates of Murdock and thereby be subject to
the foregoing restrictions. Stop transfer instructions will be given by ABI to
the transfer agent with respect to the ABI Common Shares to be received by
persons subject to the restrictions described above. Murdock has agreed that,
not later than 30 days prior to the Effective Time, it will use its best efforts
to obtain from each of those persons identified by Murdock as affiliates
appropriate agreements that each such individual will not make any further sales
of ABI Common Shares received upon consummation of the Merger except in
compliance with the restrictions described in this paragraph.
VOTING AGREEMENTS
Concurrently with the execution of the Merger Agreement, the directors
and certain officers of Murdock have executed separate voting agreements with
ABI pursuant to which each such director and officer agreed, among other things,
that certain of the shares of Murdock Common Stock beneficially owned by such
persons will be voted by such persons to approve the Merger Agreement. In
addition, Murdock also has agreed to furnish to ABI prior to the Murdock Special
Meeting similar agreements from each spouse of those directors and officers.
Each voting agreement terminates upon termination of the Merger Agreement in
accordance with its terms. Upon delivery of the voting agreements from the
spouses, approximately 29.9% of the outstanding shares of Murdock Common Stock
shall be subject to such voting agreements.
44
<PAGE> 51
EXPENSES
The Merger Agreement provides that, except in the case of a termination
of the Merger Agreement pursuant to an Acquisition Proposal or Contract Breach,
each party hereto shall bear and pay its own costs and expenses in connection
with the Merger and one-half of the costs of preparing, printing, and filing the
Registration Statement and this Joint Proxy Statement-Prospectus, and the
solicitation of proxies.
DISSENTERS' RIGHTS OF MURDOCK STOCKHOLDERS
Pursuant to the Florida Banking Code, each Murdock Stockholder entitled
to vote on the Merger who objects to the Merger in strict compliance with the
procedures set forth in Section 658.44 of the Florida Statutes relating to the
rights of dissenting stockholders (the "Dissent Provisions") shall be entitled
to receive in cash the value of his or her shares of Murdock Common Stock. A
MURDOCK STOCKHOLDER MUST COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN THE
DISSENT PROVISIONS. FAILURE TO FOLLOW ANY SUCH PROCEDURES MAY RESULT IN A
TERMINATION OR WAIVER OF HIS OR HER DISSENTERS' RIGHTS.
To perfect dissenters' rights, a holder of Murdock Common Stock must
vote against approval of the Merger Agreement or provide written notice to
Murdock at or prior to the Murdock Special Meeting indicating that such
stockholder dissents from the plan of Merger and the Merger Agreement. Such
written notification should be delivered either in person or by mail (certified
mail, return receipt requested, being the recommended form of transmittal) to
Murdock Florida Bank, 1777 Tamiami Trail, Murdock, Florida 33948, Attention:
Secretary. All such communications should be signed by or on behalf of the
dissenting Murdock Stockholder in the form in which his or her shares are
registered on the books of Murdock.
If the dissenting stockholder properly perfects his or her dissenters'
rights and the Merger Agreement is adopted and approved by the Murdock
Stockholders, then such dissenting Murdock Stockholder shall have the following
rights with respect to those shares. Under the Florida Banking Code, on or
promptly after the effective date of a merger between two Florida state banks,
the surviving state bank may fix an amount which it will pay in cash to
dissenting shareholders of the acquired institution. If the surviving state bank
fixes such an amount (which it is not legally required to do), it shall offer to
pay such amount to the holders of all dissenting shares of the acquired
institution. The owners of dissenting shares who have accepted the offer shall
be entitled to receive the amount so offered upon surrender of their stock
certificates at any time within 30 days after the effective date of the merger.
Those owners who have not accepted such an offer for their shares shall have the
value of their dissenting shares determined as of the effective date of the
merger by three appraisers; one to be selected by the owners of at least
two-thirds of such dissenting shares, one to be selected by the board of
directors for the surviving bank, and the third to be selected by the other two
appraisers so chosen. The value agreed upon by any two of the three appraisers
shall control and be final and binding on all parties. If, within 90 days from
the effective date of the merger, for any reason one or more of the appraisers
is not selected as required under the Florida Banking Code, or the appraisers
fail to determine the value of the dissenting shares, the Department shall cause
an appraisal of the dissenting shares to be made, which appraisal shall be paid
for by the surviving state bank. Upon conclusion of the appraisal process, the
value determined pursuant to the appraisal shall be paid to all dissenting
shareholders in cash upon surrender of the stock certificates representing such
shares within 30 days after the appraisal has been made.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following summaries include (i) unaudited pro forma condensed
consolidated balance sheets as of September 30, 1997, and (ii) the unaudited pro
forma condensed consolidated statements of income for the
45
<PAGE> 52
nine months ended September 30, 1997 and 1996, and the years ended December 31,
1996, 1995, and 1994. The pro forma combined financial position and the results
of operations of ABI and Murdock assumes the Exchange Ratio is 2.4 ABI Common
Shares for each outstanding share of Murdock Common Stock. The pro forma
information is based on historical financial statements of ABI and Murdock
giving effect to the Merger under the pooling-of-interests method of accounting,
and the assumptions and adjustments in the accompanying notes to the pro forma
financial statements. Pro forma adjustments relating to the pro forma condensed
consolidated balance sheet were computed assuming the Merger was consummated on
September 30, 1997. Pro forma adjustments relating to the pro forma condensed
consolidated statements of income were computed assuming the Merger was
consummated as of the beginning of all reported periods.
The pro forma statements are provided for informational purposes only.
The pro forma combined, condensed statements of income are not necessarily
indicative of actual results that would have been achieved had the acquisition
been consummated at the beginning of the periods presented, and is not
indicative of future results. The pro forma financial statements should be read
in conjunction with the accompanying notes and the separate financial statements
of ABI, incorporated herein by reference, and the statements of Murdock,
included elsewhere herein.
AMERICAN BANCSHARES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
--------------------------------------------------
PRO FORMA
ABI MURDOCK FL ADJUSTMENTS/ COMBINED
CONSOLIDATED BANK (DEDUCTIONS) TOTAL
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks ...................... $ 9,176 $ 1,147 $ $ 10,323
Federal funds sold ........................... 6,324 0 6,324
Interest bearing deposits in banks ........... 1,586 2,457 4,043
Mortgage loans held for sale ................. 42,064 0 42,064
Investment securities, available for sale .... 35,789 12,020 47,809
Mortgage-backed securities, available for sale 4,684 6,129 10,813
Loans ........................................ 159,598 39,765 199,363
Premises and equipment, net .................. 8,209 257 8,466
Other real estate owned, net ................. 60 51 111
Goodwill ..................................... 81 0 81
Other assets ................................. 2,621 1,048 3,669
-------- ------- -------- --------
Total assets ............................ $270,192 $62,874 $ 0 $333,066
======== ======= ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits ..................................... $226,097 $56,976 $ $283,073
Securities sold under agreements to repurchase 17,684 0 17,684
Federal funds purchased and FHLB borrowings .. 5,000 0 5,000
Other liabilities ............................ 1,009 714 1,723
-------- ------- -------- --------
Total liabilities ....................... 249,790 57,690 0 307,480
-------- ------- -------- --------
SHAREHOLDERS' EQUITY
Common stock ................................. 4,783 3,850 (2,764)(1) 5,869
Additional paid-in capital ................... 12,033 703 2,764 15,500
Unrealized gain (loss) on securities
available for sale, net ................. 38 88 126
Retained earnings ............................ 3,548 543 4,091
-------- ------- -------- --------
Total shareholders' equity .............. 20,402 5,184 0 25,586
-------- ------- -------- --------
Total liabilities and shareholders'
equity ................................ $270,192 $62,874 $ 0 $333,066
======== ======= ======== ========
</TABLE>
46
<PAGE> 53
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
--------------------------------------------------
PRO FORMA
ABI MURDOCK FL ADJUSTMENTS/ COMBINED
CONSOLIDATED BANK (DEDUCTIONS) TOTAL
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Capital ratios:
Tangible leverage ratio ................. 7.74% 8.16% 7.85%
Tier one capital ratio .................. 10.92% 15.78% 11.64%
Total capital ratio ..................... 11.60% 17.04% 12.61%
Murdock outstanding shares ......................... 385,015
Conversion ratio ................................... 2.4
--------
ABI shares to be issued ............................ 924,036
Par value of 924,036 shares issued
at $1.175 per share .......................... $ 1,086
Shares issued at par value ......................... $ 1,086
Total capital stock of Murdock ..................... 4,553
Excess recorded as an increase in
additional paid-in capital ................... 3,467
--------
To eliminate Murdock capital stock:
Common stock, at par value ................... (3,850)
Additional paid-in capital ................... (703)
--------
Net change in equity ......................... $ 0
=======
</TABLE>
- ----------
(1) To record the issuance of 924,036 ABI Common Shares in exchange for all of
the outstanding shares of Murdock.
AMERICAN BANCSHARES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------------
PRO FORMA
ABI MURDOCK FL ADJUSTMENTS/ COMBINED
CONSOLIDATED BANK (DEDUCTIONS) TOTAL
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Interest income .................................... $ 14,173 $ 3,676 $ $ 17,849
Interest expense ................................... 7,469 1,860 9,329
-------- ------- -------- --------
Net interest income .......................... 6,704 1,816 8,520
Provision for loan losses .......................... 615 71 686
-------- ------- -------- --------
Net interest income after provision
for loan losses ......................... 6,089 1,745 7,834
Noninterest income ................................. 2,514 376 2,890
Noninterest expense ................................ 6,899 1,483 8,382
-------- ------- -------- --------
Income before income taxes ................... 1,704 638 2,342
Provision for income taxes ......................... 659 243 902
-------- ------- -------- --------
Net income ................................... $ 1,045 $ 395 $ $ 1,440
======== ======= ======== ========
Average primary shares outstanding ................. 4,062,396 385,015 (385,015) 4,986,432
924,036
Average fully diluted shares outstanding ........... 4,086,277 385,015 (385,015) 5,010,313
924,036
Earnings per share:
Net income:
Primary ................................. $ 0.26 $ 1.03 $ 0.29
Fully diluted ........................... $ 0.26 $ 1.03 $ 0.29
</TABLE>
47
<PAGE> 54
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------------------
PRO FORMA
ABI MURDOCK FL ADJUSTMENTS/ COMBINED
CONSOLIDATED BANK (DEDUCTIONS) TOTAL
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Interest income .................................... $ 10,334 $ 3,653 $ $ 13,987
Interest expense ................................... 5,263 1,922 7,185
-------- ------- -------- --------
Net interest income .......................... 5,071 1,731 6,802
Provision for loan losses .......................... 207 148 355
-------- ------- -------- --------
Net interest income after provision for
loan losses ............................. 4,864 1,583 6,447
Noninterest income ................................. 1,416 482 1,898
Noninterest expense ................................ 5,248 2,111 7,359
-------- ------- -------- --------
Income before income taxes ................... 1,032 (46) 986
Provision for income taxes ......................... 382 (17) 365
-------- ------- -------- --------
Net income ................................... $ 650 $ (29) $ $621
======== ======= ======== ========
Average primary shares outstanding ................. 3,631,068 385,015 (385,015) 4,555,104
924,036
Average fully diluted shares outstanding ........... 3,854,981 385,015 (385,015) 4,779,017
924,036
Earnings per share:
Net income:
Primary ................................. $ 0.18 $ (0.08) $ 0.14
Fully diluted ........................... $ 0.17 $ (0.08) $ 0.13
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------
PRO FORMA
ABI MURDOCK FL ADJUSTMENTS/ COMBINED
CONSOLIDATED BANK (DEDUCTIONS) TOTAL
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Interest income .................................... $ 14,548 $ 4,883 $ $ 19,431
Interest expense ................................... 7,411 2,554 9,965
-------- ------- -------- --------
Net interest income .......................... 7,137 2,329 9,466
Provision for loan losses .......................... 287 228 515
-------- ------- -------- --------
Net interest income after provision for
loan losses ............................. 6,850 2,101 8,951
Noninterest income ................................. 1,834 314 2,148
Noninterest expense ................................ 7,279 2,577 9,856
-------- ------- -------- --------
Income before income taxes ................... 1,405 (162) 1,243
Provision for income taxes ......................... 522 (61) 461
-------- ------- -------- --------
Net income ................................... $ 883 $ (101) $ $ 782
======== ======= ======== ========
Average primary shares outstanding ................. 3,718,502 385,015 (385,015) 4,642,538
924,036
Average fully diluted shares outstanding ........... 3,912,088 385,015 (385,015) 4,836,124
924,036
Earnings per share:
Net income:
Primary ................................. $ 0.24 $ (0.26) $ 0.17
Fully diluted ........................... $ 0.23 $ (0.26) $ 0.16
</TABLE>
48
<PAGE> 55
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------
PRO FORMA
ABI MURDOCK FL ADJUSTMENTS/ COMBINED
CONSOLIDATED BANK (DEDUCTIONS) TOTAL
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Interest income .................................... $ 11,409 $ 4,417 $ $ 15,826
Interest expense ................................... 6,011 2,441 8,452
-------- ------- -------- --------
Net interest income .......................... 5,398 1,976 7,374
Provision for loan losses .......................... 483 219 702
-------- ------- -------- --------
Net interest income after provision for
loan losses ............................. 4,915 1,757 6,672
Noninterest income ................................. 1,473 613 2,086
Noninterest expense ................................ 4,797 2,640 7,437
-------- ------- -------- --------
Income before income taxes ................... 1,591 (270) 1,321
Provision for income taxes ......................... 573 (102) 471
-------- ------- -------- --------
Net income ................................... $ 1,018 $ (168) $ $ 850
======== ======= ======== ========
Average primary shares outstanding ................. 2,234,070 385,015 (385,015) 3,158,106
924,036
Average fully diluted shares outstanding ........... 2,479,888 385,015 (385,015) 3,403,924
924,036
Earnings per share:
Net income:
Primary ................................. $ 0.46 $ (0.44) $ 0.27
Fully diluted ........................... $ 0.41 $ (0.44) $ 0.25
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------
PRO FORMA
ABI MURDOCK FL ADJUSTMENTS/ COMBINED
CONSOLIDATED BANK (DEDUCTIONS) TOTAL
------------ ---------- ------------ ---------
<S> <C> <C> <C> <C>
Interest income .................................... $ 7,274 $ 3,913 $ $ 11,187
Interest expense ................................... 3,627 1,931 5,558
-------- ------- -------- --------
Net interest income .......................... 3,647 1,982 5,629
Provision for loan losses .......................... 221 70 291
-------- ------- -------- --------
Net interest income after provision for
loan losses ............................. 3,426 1,912 5,338
Noninterest income ................................. 631 493 1,124
Noninterest expense ................................ 3,276 2,078 5,354
-------- ------- -------- --------
Income before income taxes ................... 781 327 1,108
Provision for income taxes ......................... 279 117 396
-------- ------- -------- --------
Net income ................................... $ 502 $ 210 $ $ 712
======== ======= ======== ========
Average primary shares outstanding ................. 1,955,132 358,754 (358,754) 2,816,142
861,010
Average fully diluted shares outstanding ........... 2,254,561 358,754 (358,754) 3,115,571
861,010
Earnings per share:
Net income:
Primary ................................. $ 0.26 $ 0.59 $ 0.25
Fully diluted ........................... $ 0.22 $ 0.59 $ 0.22
</TABLE>
49
<PAGE> 56
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
ABI Common Shares are quoted by the Nasdaq National Market under the
symbol "ABAN". At the close of business on January 30, 1998, there were
outstanding 4,070,458 shares held by 960 shareholders of record.
The following table sets forth the high and low closing sales price for
the ABI Common Shares as quoted on Nasdaq National Market for the periods
indicated:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
First Quarter.......................................... $ 7.25 $ 6.125
Second Quarter......................................... $ 8.375 $ 6.266
Third Quarter ......................................... $ 8.50 $ 7.675
Fourth Quarter......................................... $ 8.50 $ 7.438
YEAR ENDED DECEMBER 31, 1997:
First Quarter.......................................... $ 9.25 $ 7.50
Second Quarter......................................... $ 9.625 $ 8.00
Third Quarter.......................................... $12.75 $ 9.00
Fourth Quarter......................................... $13.25 $11.625
YEAR ENDED DECEMBER 31, 1998:
First Quarter (through January 30, 1998)............... $13.25 $12.375
</TABLE>
On September 22, 1997, the last trading day prior to the public
announcement of the proposed Merger, the closing sales price of Common Shares as
quoted on the Nasdaq National Market was $12.25.
Holders of ABI Common Shares are entitled to share equally in all
dividends when and if declared by the ABI Board out of funds legally available
therefor. ABI, however, has never paid any dividends on its common shares. The
declaration and payment of future dividends, if any, will depend upon business
conditions, operating results, capital and reserve requirements, the Board of
Directors' consideration of other relevant factors.
ABI is a legal entity separate and distinct from its subsidiary, the
Bank, and its revenues are derived principally from the Bank. Both federal and
Florida law place certain legal restrictions on the payment of dividends by a
banking subsidiary to its parent bank holding company. The FRB may restrict the
ability of the Bank to pay dividends if such payments would constitute an unsafe
or unsound banking practice. In addition, Florida law prohibits the payment of
dividends by a state-chartered bank to its holding company if the bank fails to
meet certain net profit or net income and maintenance of capital requirements.
See "Regulatory Matters -- Dividend Restrictions and Transactions of Funds".
There is no established public trading market for Murdock Common Stock.
As of the Murdock Record Date there were 385,015 shares of Murdock Common Stock
outstanding which were held of record by 355 record holders. According to
records kept by management, during the past two fiscal years, there have been
only a limited number of trades. Murdock does not maintain records regarding,
and is frequently not advised of, the prices of transactions on its stock.
Accordingly, Murdock cannot provide accurate information about the range of
trading prices for its stock during the past two years. To the best of
management's knowledge, however, shares of Murdock Common Stock were sold during
this time period at prices ranging between $6.50 to $15.00 per share. The most
recent trade of which Murdock's management has knowledge occurred in August 1997
at $15.00 per share. In view of the extremely limited volume of transactions
involving the Murdock Common Stock, there is no assurance that the prices paid
therefor are a reliable or relevant indication of the value of the Murdock
Common Stock.
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Murdock has never paid any dividends on the Murdock Common Stock and,
even if the Merger is not consummated, Murdock does not anticipate the payment
of dividends in the foreseeable future. As is the case for the Bank, the payment
of dividends by Murdock is subject to certain regulatory restrictions and
limitations.
THE ABI PROPOSED AMENDMENTS
(ABI PROPOSALS 2 THROUGH 7)
At the ABI Special Meeting, in addition to the Merger Agreement
(Proposal 1), holders of ABI Common Shares as of the ABI Record Date will be
asked to consider and adopt several proposals to amend the ABI Articles
(proposals 2 through 7). References herein to Proposals 2 through 7 herein
relate only to the solicitation of ABI Shareholders pursuant to this Joint Proxy
Statement-Prospectus. The proposed Amendments are not related to the Merger and
shall be considered independently of the Merger proposal. Neither the Merger nor
any of the Amendments is conditioned upon the approval of any other proposal
being considered at the ABI Special Meeting.
Set forth below is a description of each proposal to amend the ABI
Articles. Approval of each of these proposals requires that the votes cast in
favor of the proposal then-being considered exceed the votes cast against that
proposal at a meeting at which a quorum is present. Each proposal will be
considered independently from the other proposals and none of the proposals are
conditioned upon the shareholder approval of any other proposal. Accordingly, if
some of the proposals are not approved by the ABI Shareholders, those proposals
that are approved will be implemented. It is the intention of the ABI Board to
file as soon as practicable after the ABI Special Meeting, Amended and Restated
Articles of Incorporation which incorporate each of the Amendments adopted by
ABI Shareholders. If any particular proposal is not approved, the numbering of
the Articles shall be revised accordingly.
INCREASE IN THE NUMBER OF AUTHORIZED ABI COMMON SHARES (PROPOSAL 2)
The ABI Board has determined that it is advisable and in ABI's best
interests to amend Article III of the ABI Articles to increase the number of
authorized ABI Common Shares to 20,000,000 shares ("Common Shares Amendment").
The ABI Articles currently authorize 10,000,000 ABI Common Shares, of
which a total of 4,070,458 shares are issued and outstanding as of the ABI
Record Date, 225,000 shares are reserved for employee and director stock options
under the ABI stock option plans, and up to a maximum of 1,044,140 shares
(giving effect to the maximum Exchange Ratio of 2.65) reserved for issuance to
Murdock Stockholders upon consummation of the Merger (including those ABI Common
Shares issuable upon exercise of Mr. Andreasen's options converted in connection
with the Merger).
Additional authorized ABI Common Shares would provide the ABI Board
with flexibility in the management of ABI's capitalization and to engage in
additional acquisitions. The additional ABI Common Stock could be used by ABI in
connection with (i) future acquisitions by ABI, (ii) future capital raising by
ABI, (iii) the establishment of additional employee compensation plans, and (iv)
other corporate purposes. To the extent that ABI does engage in acquisition
transactions, the availability of additional shares to include in future
employee benefit plans may prove critical for retaining officers and employees
of both potential targets and ABI and to provide incentives to achieve certain
operating efficiencies.
Other than the distribution of ABI Common Shares pursuant to the Merger
Agreement, and the issuance of ABI Common Shares upon exercise of options issued
under directors and employee stock option
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plans, ABI has no specific plans to issue ABI Common Shares. Furthermore, there
are no other agreements, understandings or arrangements for the issuance of the
additional ABI Common Shares which would be authorized by the Common Shares
Amendment. ABI Common Shares, including, if approved, the newly authorized
shares, may be issued upon the ABI Board's approval, without any further vote or
action on the part of the ABI Shareholders. The ABI Articles do not provide for
any preemptive rights upon the issuance of any ABI Common Shares.
The ABI Board recommends that ABI Shareholders vote FOR approval of the
Common Shares Amendment.
AUTHORIZATION OF A CLASS OF PREFERRED SHARES (PROPOSAL 3)
The ABI Board has determined that it also is advisable and in the best
interests of ABI to amend Article III of the ABI Articles to make available for
issuance 5,000,000 Preferred Shares with such designations, preferences, rights,
and limitations as are approved, from time to time by the ABI Board (the
"Preferred Share Amendment").
If both the Common Share Amendment and the Preferred Share Amendment
are approved by the ABI Shareholders, the authorized capital of ABI will consist
of 20,000,000 Common Shares and 5,000,000 Preferred Shares. The full text of
Article III as it will be amended if the Common Share Amendment and the
Preferred Share Amendment are approved by ABI Shareholders is set forth in
Appendix D to this Joint Proxy Statement-Prospectus.
As proposed, the Preferred Shares Amendment expressly authorizes the
ABI Board, without any further shareholder action or approval, to issue up to
5,000,000 Preferred Shares. The ABI Board would be empowered to provide for the
issuance of Preferred Shares in one or more classes, or in one or more series
within a class. The ABI Board also would have the authority to establish from
time to time the number of shares to be included in each such class or series,
and to determine and fix the designations, powers, preferences, rights,
qualifications, limitations, and restrictions of each such class or series,
including, among other things, dividend rights (including the amount and nature
thereof), voting rights (in addition to any prescribed by statute) of the
holders of such shares, the existence of any conversion or exchange privilege,
any redemption features, and sinking fund provisions, rights in the event of
liquidation, dissolution, or winding up of ABI or a distribution of
substantially all of its assets, and the conditions or restrictions, if any, on
specified actions of ABI affecting the rights of such shares. Holders of
Preferred Shares would not be entitled to preemptive rights unless specifically
provided therefor.
The ABI Articles currently authorize only Common Shares. The ABI Board
believes that the proposed Preferred Share Amendment will provide ABI with
additional flexibility in the management of its capitalization and to engage in
future acquisitions. Preferred Shares can be used by ABI, instead of ABI Common
Shares, in connection with (i) future acquisitions, (ii) raising new capital,
(iii) planning future financing transactions, and (iv) for other corporate
purposes. The Preferred Shares would be particularly useful for such purposes
since the ABI Board would have the authority to choose the exact terms of the
class or series at the time of issuance to respond to investor preferences,
developments in types of preferred stock, market conditions, and the nature of
the specific transaction. When seeking additional financing or capital, it may
be advantageous to ABI in some cases to structure a transaction which provides
for the payment of dividends on equity rather than the payment of interest on
debt instruments. Furthermore, if an acquisition involves another entity which
has an outstanding class or series of preferred stock, the availability of ABI
Preferred Shares which can be offered in exchange therefor, will provide ABI
with the flexibility to
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appropriately structure the transaction in a manner which may facilitate the
negotiation and the consummation of such transaction.
ABI is not presently considering any transaction involving the issuance
of Preferred Shares nor are there any plans, proposals, negotiations,
agreements, or understandings to issue or to make any acquisition utilizing
Preferred Shares. However, opportunities requiring prompt action may arise, such
as favorable market conditions existing for an acquisition or the sale of a
particular type of preferred share or an opportunity to make an acquisition. The
ABI Board believes that the potential delay and expense of seeking shareholder
approval for a specific issuance of preferred shares could deprive ABI and its
shareholders of the ability to effectively benefit from such an opportunity
and/or cause the loss of attractive acquisitions or financing arrangements.
The Preferred Shares would be available for issuance from time to time
as determined by the ABI Board for any proper corporate purpose. Such purposes
might include issuance in public or private sales for cash as a means of
obtaining capital for use in the business and operations of ABI and the Bank,
and issuance as part or all of the consideration required to be paid by ABI for
acquisitions or other businesses or properties. The timing and terms of the
issuance of Preferred Shares in connection with any such transaction would
depend on a number of factors, including economic and market conditions at the
time of the specific transaction, ABI's and the Bank's business, financial
condition, and strategic goals, the particular circumstances of the transaction
in which the shares are issued, and other factors.
It is not possible to state the actual effect of the authorization of
Preferred Shares upon the rights of holders of ABI Common Shares until the ABI
Board determines the rights of holders of a class or series of the Preferred
Shares. Holders of the ABI Common Shares have no preemptive rights to subscribe
for or purchase any Preferred Shares which may be issued, and the issuance of
Preferred Shares may have a dilutive effect on the equity and the voting rights
of the holders of the ABI Common Shares. The Preferred Shares, if issued, would
have preference over the ABI Common Shares with respect to dividends and other
distributions and could have conversion and redemption features.
Although the ABI Board has no present intention of doing so, the ABI
Board will have the authority to issue Preferred Shares in a manner that could
make it more difficult, or discourage an attempt, to obtain control of ABI by
means of a merger, tender offer, proxy contest, or other method. Such an
occurrence, in the event of a hostile takeover, may have an adverse impact on
shareholders who may wish to participate in such offer. The ABI Board is not
aware of any effort by any person to accumulate ABI's securities or obtain
control of ABI. Although the ABI Board, in furtherance of its fiduciary
obligations, has discussed and evaluated the advisability of adopting a
shareholder rights plan designed to encourage persons seeking to acquire control
of ABI to first negotiate with ABI and, from time to time, has discussed other
measures which might have the effect of deterring or discouraging a possible
takeover of ABI, and may continue to do so, the ABI Board has not presently
determined to adopt or propose any such measure except for those set forth in
these Amendments.
The ABI Board recommends that the ABI Shareholders vote FOR approval of
the proposed Preferred Shares Amendment.
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INDEMNIFICATION OF OFFICERS AND DIRECTORS (PROPOSAL 4)
The ABI Board has determined that it is advisable and in the best
interest of ABI and its shareholders to adopt and approve a new Article X to the
ABI Articles to provide for indemnification of its officers and directors and
limitation of liability of its directors to the extent permitted under Florida
law.
Under Florida law, a corporation may indemnify any of its directors or
officers who is made a party to, or threatened to be made a party to, any
action, suit, or other proceedings, whether civil, criminal, administrative, or
investigative, by reason of fact that such person is or was a director or
officer of such corporation or serves or served any other enterprises at the
request of the corporation. The current ABI Articles do not provide for
indemnification and, accordingly, officers and directors have only those
indemnity provisions which are mandatory under Florida law and the ABI Bylaws.
This proposed amendment to the ABI Articles will implement its power to
indemnify such persons by affirmatively providing for such indemnification.
The changes proposed by this amendment to the ABI Articles includes
provisions which are typically included in the articles of incorporation of
Florida corporations.
The ABI Board of Directors recommends that the ABI Shareholders vote
FOR approval of this Proposal 4.
BOARD OF DIRECTOR AMENDMENTS (PROPOSAL 5)
The ABI Board has determined that it is advisable and in the best
interests of ABI and its shareholders to adopt and approve the following
amendment to the ABI Articles (the "Board Amendments") which will delete Article
VII in its entirety and replace it with a new Article VII which would (i)
provide for the number of directors constituting the whole ABI Board to be
established in accordance with ABI's bylaws (including any increases in the size
of the Board), and (ii) provide that directors may be removed by ABI
Shareholders only for cause. By deleting Article VII in its entirety and
replacing it with the proposed revisions, ABI Shareholders also will be giving
their approval to changes which would provide that: (i) the timing of the annual
meeting of shareholders may be determined and made in accordance with ABI's
bylaws, and (ii) the officers designations, as well as their election or
appointment, shall be determined and made in accordance with the ABI bylaws. The
complete text of the Board Amendments are set forth in Appendix D hereto.
DESCRIPTION OF BOARD AMENDMENTS
Current Provisions. The current provisions contained in Article VII
provide that the ABI Board shall consist of at least five directors who are to
be elected annually at a meeting of shareholders to be held during the first
four months of the year. During the course of the year, the ABI Board may be
increased and the vacancies filled by the directors, but such increase is
limited to two additional directorships. There is no upper limit to the number
of directors that may be elected by ABI Shareholders. Further, Article VII
establishes three required officer positions - chairman of the board, president,
and cashier - which are to be elected by the ABI Board following the annual
meeting.
The ABI Board believes that these provisions unduly restrict its
ability to manage the affairs of the corporation and takes away the flexibility
available to other similar Florida corporations, resulting in a competitive
disadvantage to ABI and creating unnecessary restraints in its operations.
Accordingly, the ABI Board has approved the adoption of the Board Amendments in
order to provide it with the flexibility needed to effectively compete with its
competitors.
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Determination of Board Size; Fill Vacancies. Under Florida law, unless
the articles of incorporation provide otherwise, the number of directors
constituting the full board may consist of the number specified in or fixed in
accordance with the bylaws. The only limitation imposed by Florida law is that
there must always be at least one director. Further, unless the articles of
incorporation or bylaws provide otherwise, vacancies on the board, whether due
to an increase in the size of the board or the resignation or removal of an
existing director, may be filled by the remaining directors to serve until the
next meeting at which directors are elected. The proposed Board Amendments would
permit ABI to set the size of the board at anytime throughout the year, to
increase the number of directorships by more than two, and to fill the vacancies
created thereby. The ABI Board believes that it is critical to its current
business strategy that it have the flexibility to offer appropriate
representation on the ABI Board to potential acquisition candidates. As a
condition to a proposed business combination, certain larger institutions may
seek representation on the ABI Board which would mirror such investors' equity
interest in the combined company. Currently, under the ABI Articles, the ABI
Board can only offer two director positions by creating vacancies on the board
for such purposes. This limitation may not provide adequate flexibility and may
cause ABI to lose the potential acquisition opportunity to a suitor which can
offer greater board representation. ABI is not presently considering any
transaction calling for an increase in the size of the ABI Board for such
purposes, nor are there any plans, proposals, negotiations, agreements, or
understandings with respect thereto.
Annual Meeting. Under Florida law, a corporation is required to hold an
annual meeting of its shareholders for the election of directors and the
transaction of any other proper business at a time stated in or fixed in
accordance with its bylaws. There are no requirements establishing when the
meeting must take place. By permitting the timing of the annual meeting to be
established in the bylaws, Florida law grants the board of directors with the
power to set the annual meeting date, and to amend the bylaws, if necessary,
regarding such date. By setting a specific time frame in the current ABI
Articles, the power of the ABI Board to set the annual meeting has been
substantially restricted. As a public company with reporting obligations with
the Commission, a requirement that the annual meeting be held by April 30 each
year can be unduly burdensome. ABI's annual report on Form 10-KSB or Form 10-K,
as the case may be, is due on or about March 31 each year and planning for an
annual meeting within 30 days thereafter can prove difficult in some years.
Further, if ABI is in the midst of negotiating an acquisition or is preparing a
proposal which requires shareholder action, and such matters will not be ready
for shareholder action until after April 30, then ABI will be required to go
through the time and expense of calling and holding a special meeting rather
than setting the annual meeting for a later date. If such matters could be
combined with the annual meeting, substantial costs savings and efficiencies may
be realized. Accordingly, the Board Amendment, if approved, will eliminate from
the ABI Articles the requirements regarding the timing of the annual meeting and
permit such matters to be determined under the bylaws as specifically permitted
under Florida law.
Officers. Pursuant to Florida law, a corporation shall have the
officers described in its bylaws or appointed by the board of directors in
accordance with the bylaws. Florida law does not specify any particular officers
that the corporation must have, except that some officer must be delegated the
responsibility to prepare the corporate minutes and to authenticate its records.
Accordingly, Florida law provides extreme flexibility in determining the
appropriate number, designations, and responsibilities of officers, and the
manner of their selection through the adoption of bylaw provisions. The current
ABI Articles require the election of three specific officers following the
election of directors; a chairman of the board, president, and cashier. The ABI
Board does not believe that it is appropriate for the articles to establish
specific officers of the corporation. In particular, ABI does not believe that
it is appropriate for a bank holding company to have a cashier or to deem an
independent director serving as a chairman of the board as an officer.
Accordingly, the proposed Board Amendment eliminates references to any required
officers or the timing of their selection.
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Removal for Cause. Under Florida law, the articles of incorporation may
provide that directors may be removed only for cause. Absent a requirement in
the articles of incorporation for a higher percentage vote, a director can be
removed under Florida law if the votes cast for removal exceed the votes cast
against removal at a meeting where a quorum is present. The Board Amendments
provide that a director, or the entire ABI Board, may be removed by ABI
Shareholders only for cause. The ABI Board believes that this provision is
necessary to ensure stability of the board in the event of an unsolicited
attempt to acquire control of ABI. This provision will make more difficult or
discourage a proxy contest or the removal of incumbent directors. The ABI Board
believes that this provision will encourage negotiation with the ABI Board by
third parties rather than to attempt any potentially unfair tactics. See
"Amendments - Procedural Amendments -- Purposes and Effects of the Procedural
Amendments".
The ABI Board recommends that the ABI Shareholders vote FOR approval of
the proposed Board Amendments.
PROCEDURAL AMENDMENTS (PROPOSALS 6 AND 7)
The ABI Board has determined that it is advisable and in the best
interests of ABI and its shareholders to amend the ABI Articles to add a new
Article VIII which would increase the vote required by shareholders to adopt,
repeal, alter, or amend any of the ABI Bylaws to 66 2/3% of the outstanding
voting stock (Proposal 6) and a new Article IX which would increase from 10% to
50% the percentage of voting stock required to call a special meeting of ABI
Shareholders (Proposal 7) (together, the "Procedural Amendments"). The complete
text of the Procedural Amendments are set forth in Appendix D hereto.
DESCRIPTION OF THE PROCEDURAL AMENDMENTS.
Increased Shareholder Vote for Certain Amendments to Articles and
Bylaws (Proposal 6). Under Florida law, amendments to the articles of
incorporation must be approved by the board of directors and then submitted to
the shareholders for their approval. Shareholder approval requires, unless
otherwise required by the articles of incorporation or the board of directors,
that the votes cast in favor of such amendment exceed the votes cast against
such amendment at a meeting where a quorum is present (except for amendments
pursuant to which dissenters' rights are available, in which case approval is
required from a majority of the outstanding voting stock). In addition,
amendments to the articles of incorporation that adds, changes, or deletes a
greater or less quorum or voting requirement must be adopted by the same quorum
and voting requirements then in effect, or proposed to be adopted, whichever is
greater.
Further, under Florida law, bylaws may be amended or repealed by the
board of directors and by the shareholders if the votes cast for approval
thereof exceed votes cast against it at a meeting where a quorum is present
(absent a requirement in the articles of incorporation for a higher vote). The
ABI Articles are silent on this matter.
Proposal 6 provides that shareholders can amend or repeal the ABI
Bylaws only with the approval of 66 2/3% of the voting stock. The ABI Board
would continue to have the power to amend or repeal the ABI Bylaws. However, the
ABI Board has no present intention of amending the ABI Bylaws, except to conform
them to the amendments to the ABI Articles described in this Joint Proxy
Statement-Prospectus (i.e., establishing the size of the ABI Board and the
designation of officers).
Increased Percentage of Voting Stock to Call Special Meeting (Proposal
7). Under Florida law, special meetings of shareholders may be called by the
board of directors, any other person authorized by the articles of incorporation
or bylaws, or by holders of not less than 10% of the voting stock (unless a
higher
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percentage not to exceed 50% is required by the articles of incorporation). The
bylaws currently provide that a special meeting of the shareholders may be
called by the ABI Board, the President or Secretary of ABI, or by holders of not
less than 10% of the voting stock. Under Proposal 7, a special meeting of
shareholders can be called only by the Chairman of the Board, the President, by
resolution of the majority of the ABI Board, or by the holders of 50% or more of
the voting stock.
PURPOSES AND EFFECTS OF THE PROCEDURAL AMENDMENTS.
The Procedural Amendments, together with the proposed limitation in the
Board Amendments restricting the ability to remove directors, are intended to
prevent precipitous changes in the composition of the ABI Board, its powers, the
manner of its selection, and ABI's corporate procedures, and thereby to moderate
changes in policy and direction of ABI's business operations which the ABI Board
does not deem to be in the best interests of ABI and its shareholders. Although
ABI has not experienced any such precipitous changes in the past, in the view of
the ABI Board, the recent increase in the acquisition of financial institutions
also has increased the possibility of potentially disruptive and potentially
unfair tactics and the adoption of the Procedural Amendments and certain of the
Board Amendments at this time is a prudent measure for the protection of ABI
Shareholders. ABI has commenced a growth strategy that it believes will enhance
shareholder value in the long run but, may in the short run not be reflected in
the market price of ABI Common Shares. Accordingly, ABI is desirous of
discouraging any unsolicited and inappropriate attempts to acquire or control
ABI at a price which does not reflect such long term values.
Proposals for the takeover or restructuring or sale of all or part of a
company, or other similar extraordinary actions, are often initiated without
advance notice or consultation with management of the company by third parties
who have accumulated substantial stock positions. In many cases, such parties
seek representation on a company's board of directors in order to increase the
likelihood that their proposal will be implemented by the company. If the
company resists their efforts to obtain representation on the company's board,
they may commence a proxy contest to have their nominees elected to the board in
place of certain directors or the entire board. In some cases, these parties may
not truly be interested in taking over the company but use the threat of a proxy
fight or a bid to take over the company as a means of forcing the company to
repurchase their equity position at a substantial premium over the market price.
The ABI Board believes the Procedural Amendments will help ensure that the ABI
Board, if confronted by an unsolicited proposal from a third party who has
recently acquired a block of ABI's shares, will have sufficient time to review
the proposal and consider appropriate alternatives.
As a result of both the Procedural Amendments and certain of the Board
Amendments, the ability of a shareholder to gain control of the ABI Board by
increasing the size of the ABI Board or by removing directors and filling the
resulting vacancies will be limited. These amendments would not, however, delay
a change in control of ABI if, after a successful tender offer for a majority of
ABI's voting stock, the incumbent directors resigned or reached an accommodation
with the majority shareholder. Moreover, as a result of the amendment concerning
requirements to call a special meeting of shareholders, a shareholder holding
less than 50% of the voting stock could not force shareholder consideration of a
proposal over the opposition of the ABI Board by calling a special meeting of
shareholders prior to such time as the ABI Board or the Chairman of the Board or
the President believes such consideration to be appropriate. This change will
not affect the ability of the Chairman of the Board, or the President of the ABI
Board to call a special meeting if there are matters to be acted upon which are
in the best interests of ABI and its shareholders.
The increase in the shareholder vote required to amend the ABI Bylaws
could make it more difficult for a substantial shareholder to make changes in
the ABI Bylaws, including changes designed to facilitate a business combination
or the exercise of control over ABI.
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Adoption of the Procedural Amendments may affect the ability of
shareholders to change the composition of the ABI Board and to benefit from
transactions which are opposed by the incumbent ABI Board. The 66 2/3% voting
requirement of Proposal 6 could allow holders of 33 1/3% of the voting stock to
veto certain actions that might be supported by the majority of the
shareholders. Although takeovers or changes in management of ABI without prior
consultation with ABI's management may not necessarily be detrimental, and could
be beneficial, to ABI and its shareholders, the ABI Board believes that the
benefits of protecting its ability to negotiate with the proponent of an
unsolicited proposal to takeover ABI outweigh the disadvantages of discouraging
such a proposal.
In addition, since the Procedural Amendments are designed to discourage
accumulations of large blocks of ABI's Common Shares by purchasers whose
objective is to have such stock repurchased by ABI at a premium, their adoption
could tend to reduce the temporary fluctuations in the market price of the ABI
Common Shares that could be caused by accumulations of large blocks of ABI
Common Shares. Accordingly, shareholders could be deprived of certain
opportunities to sell their shares at a temporarily higher market price.
The ABI Board recommends that the ABI Shareholders vote FOR the
approval of each of the Procedural Amendments.
INFORMATION ABOUT ABI
GENERAL
ABI, a Florida corporation organized on June 30, 1995, is a bank
holding company registered under the BHCA, and on December 1, 1995 it became the
bank holding company for American Bank of Bradenton, a Florida state chartered
bank (the "Bank"). The Bank is the largest independent bank in Manatee County,
Florida based on asset size. The Bank, whose capital stock is wholly-owned by
ABI, is ABI's primary subsidiary and principal asset. Through its ownership of
the Bank, ABI is engaged in a general commercial banking business and its
primary source of earnings is derived from income generated by the Bank. ABI
currently engages in no substantial business activities other than activities
related to its ownership of the Bank. As of September 30, 1997, ABI, on a
consolidated basis, had total assets of approximately $270.2 million, net
portfolio loans of approximately $201.7 million, total deposits of approximately
$226.1 million, and shareholders' equity of approximately $20.4 million. Unless
the context otherwise requires, references herein to ABI include ABI and the
Bank on a consolidated basis.
The Bank, which commenced operations in 1989, is a Florida
state-chartered commercial bank and is not a member of the Federal Reserve
System. The Bank is a general commercial bank which provides a variety of
corporate and personal banking services to consumers and small to mid-sized
businesses, from its six banking offices located in Manatee County, Florida.
The business of the Bank consists of attracting deposits from the
general public in areas served by its banking offices and applying those funds,
together with funds derived from other sources, to originate a variety of
commercial, consumer, and residential real estate loans. In addition, the Bank
offers accounts receivable financing and billing services, and credit card
merchant services. The Bank presently does not provide trust or appraisal
services. The Bank, however, has entered into an arrangement with Advest, Inc.
whereby its customers may obtain trust services.
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The Bank also maintains a separate Mortgage Banking Division which
generates, closes, and services single family residential home mortgages. Its
primary function is to originate fixed and adjustable rate construction-to-
permanent residential real estate mortgage loans which fit the needs of
borrowers for the purchase and construction of homes. These loans are
originated, approved, and serviced from the Bank's Mortgage Banking Division
offices located in Bradenton, Florida. Since the establishment of the Mortgage
Banking Division in 1994, the Bank has substantially expanded its mortgage
banking operations by emphasizing the origination of construction-to-permanent
residential real estate mortgage loan for sale in the secondary mortgage market
while retaining or packaging for sale the fee generating mortgage servicing
rights associated with such loans. A majority of the mortgage loans made by the
Bank since 1994 have been sold on the secondary market to the Federal National
Mortgage Association ("FNMA") and other institutional investors.
On January 22, 1997, the Bank acquired DesChamps & Gregory Mortgage
Company, Inc. ("Des Champs"), a Bradenton based retail residential mortgage
brokerage company, which originates residential mortgage loans with business
operations concentrated in Manatee and Sarasota Counties.
The revenues of the Bank are primarily derived from interest on, and
fees received in connection with, real estate and other loans, from the sales of
loans, and from interest and dividends from investment securities and short-term
investments. The principal sources of funds for the Bank's lending activities
are its deposits, amortization and prepayment of loans, sales of loans, and the
sale of investment securities. The principal expenses of the Bank are the
interest paid on deposits and operating and general administrative expenses.
MARKET AREA
The Bank's six banking offices are located in or near the Bradenton
area of Manatee County, which is the Bank's primary market area. According to
published reports, the Bradenton-Sarasota, Florida area has grown faster during
the past fifty years than any other major urban area in the United States except
Las Vegas, Nevada. The area has had a population growth of 1060% over the past
half-century. Bradenton, with its population of approximately 47,679, is the
most populous city in Manatee County. Its average household is 2.3 persons with
21,340 housing units, representing a 33% increase from 1980 to 1990. This
population growth has resulted in the continued construction of residential
housing and related commercial support facilities. While changing conditions
involving the infrastructural requirements of various geographic locations
around the country have limited economic growth and population expansion,
management believes that the Bank's primary market area has continued to grow
because of the area's ability to attract new residents to its favorable year
round climate and its relatively stable economic environment. Although the major
economic base in the primary market area is service, retail, and manufacturing
business, there also has been a growth of tourism. ABI believes that it is
situated to take advantage of the expected economic and demographic growth in
the Bank's primary market area.
MARKET FOR SERVICES
ABI's management believes that the Bank's principal markets are: (i)
the established and expanding commercial and small business market within the
primary market areas; (ii) the real estate mortgage market within the primary
market areas for retail lending and throughout Florida and parts of Georgia for
wholesale lending; and (iii) the growing consumer loan market.
Businesses are solicited through the personal efforts of the Bank's
directors and officers. Management believes a locally-based bank is often
perceived by the local business community as possessing a clearer understanding
of local commerce and its needs. Consequently, ABI expects that the Bank will be
able to make
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<PAGE> 66
prudent lending decisions quickly and more equitably than its competitors
without compromising asset quality or the Bank's profitability.
The Bank focuses on the smaller commercial customer because management
believes that this segment offers the greatest concentration of potential
business. Also, the small to mid-size commercial market segment has historically
shown a willingness to borrow and carry larger balances. Finally, ABI perceives
that this market segment tends to be more loyal in its banking relationships.
LENDING ACTIVITIES
GENERAL. The primary source of income generated by the Bank is from the
interest earned from both the loan and investment portfolios. The Bank maintains
diversification when considering investments and the granting of loan requests.
Lending activities include commercial and consumer loans, and loans for
residential purposes. Commercial loans are originated for commercial
construction, acquisition, remodeling, and general business purposes. In this
regard, the Bank, among other things, also originates loans to small businesses
in association with the Small Business Association. In addition, the Bank offers
customized accounts receivable financing and billing services that enable
customers to convert their receivables into cash on a daily basis and eliminate
the expenses of billing. Consumer loans include those for the purchase of
automobiles, boats, home improvements, and personal investments. The Bank also
offers credit card merchant services which are competitive with credit card
agencies but provide the merchant with the local attention of Bank
representatives. Residential loans include the origination of conventional
mortgages and residential acquisition, development, and construction loans for
the purchase or construction of single-family homes.
The Bank primarily enters into lending arrangements for its portfolio
loans with individuals who are familiar to the Bank and are residents of the
Bank's primary market area. Emphasis is placed on the borrower's ability to
generate cash flow to support its debt obligations and other cash related
expenses. The Bank aggressively pursues quality indirect lending through local
automobile dealerships, small to medium sized commercial business loans, and
direct residential loans. Also, through its Mortgage Banking Division, the Bank
has focused efforts on residential loan originations that can be sold in the
secondary market while it retains or packages for sale the servicing rights. The
Mortgage Banking Division of the Bank maintains relationships with correspondent
lenders throughout the State of Florida, ensuring continued lending efforts
without a concentration in any one area. Management believes this to be a
prudent practice in the mortgage banking area as it minimizes risks associated
with the localized economic downturns. The Mortgage Banking Division originates
primary construction-to-permanent financing loans, which are considered to have
less risk of nonpayment than construction only financings.
LOAN PORTFOLIO COMPOSITION. At September 30, 1997, total loans included
portfolio loans of approximately $160 million and loans held for sale of
approximately $42 million. Total loans represent approximately 75% of the Bank's
total assets. Management's objective is to maintain its one-to-four family
residential and construction loans at 30% of total loans. At September 30, 1997,
approximately 33%, or $66 million, of its total loans were in one-to-four family
residential and construction loans, including approximately $24 million in
mortgage loans held for sale and $18 million of construction loans held for
sale. The remainder of the Bank's loans included in its loan portfolio was
commercial and commercial real estate loans of $93 million and consumer and
other loans of $43 million.
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<PAGE> 67
The following table summarizes the composition of Bank's loan portfolio
(excluding loans held for sale) by type of loan on the dates indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------
1997 1996 1995 1994
----------------- ----------------- ------------------- -------------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
--------- ----- --------- ----- --------- ----- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TYPE OF LOAN:
Residential mortgage(1) .. $ 24,169 15.1% $ 18,695 13.8% $ 14,723 15.0% $ 11,370 15.3%
Commercial(2) ............. 43,104 26.9 74,539 55.0 52,600 53.7 39,505 53.1
Consumer and other loans(3) 93,073 58.0 42,270 31.2 30,650 31.3 23,579 31.6
--------- ----- --------- ----- --------- ----- --------- -----
Total loans ............ $ 160,346 100.0% $ 135,504 100.0% $ 97,973 100.0% $ 74,454 100.0%
===== ===== ===== =====
LESS:
Allowance for loan losses . (1,316) (1,000) (946) (625)
Net deferred costs (losses) 568 604 453 427
--------- --------- --------- ---------
Total loans, net ....... $ 159,598 $ 135,108 $ 97,480 $ 74,256
========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1993 1992
------------------- -------------------
AMOUNT % AMOUNT %
--------- ----- --------- -----
<S> <C> <C> <C> <C>
TYPE OF LOAN:
Residential mortgage(1) .. $ 9,486 18.3% $ 8,657 22.6%
Commercial(2) ............. 28,902 55.7 22,668 59.1
Consumer and other loans(3) 13,463 26.0 7,059 18.3
--------- ----- --------- -----
Total loans ............ $ 51,851 100.0% $ 38,384 100.0%
===== =====
LESS:
Allowance for loan losses . (505) (285)
Net deferred costs (losses) (17) (48)
--------- ---------
Total loans, net ....... $ 51,329 $ 38,051
========= =========
</TABLE>
- ----------
(1) Substantially all single family loans. Real estate construction loans
are included in loans held for sale.
(2) Commercial consists of commercial real estate and other commercial
loans.
(3) Include consumer installment loans.
LOAN MATURITY SCHEDULE. The following table sets forth the maturities
of loans outstanding as of December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
---------------------------------------------------
DUE AFTER 1
DUE IN 1 YEAR BUT DUE AFTER
YEAR OR LESS BEFORE 5 YEARS 5 YEARS TOTAL
------------ -------------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
1-4 Family Residential......................................... $ 5,705 $ 8,762 $11,692 $ 26,159
Other loans collateralized by real estate...................... 4,644 23,711 8,159 36,514
Commercial and consumer loans.................................. 37,117 33,567 2,147 72,831
------- ------- ------ -------
Total loans (1)......................................... $47,466 $66,040 $21,998 $135,504
======= ======= ======= ========
</TABLE>
- ---------------
(1) Excluding deferred fees, allowance for loan losses, and loans held for sale.
SENSITIVITY OF LOANS TO CHANGES IN INTEREST RATES. The following table
sets forth as of September 30, 1997 and December 31, 1996, the dollar amounts of
loans due after one year which had predetermined interest rates and loans due
after one year which had floating or adjustable interest rates.
<TABLE>
<CAPTION>
DOLLAR AMOUNT OF LOANS
--------------------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Type of Interest Rate:
Predetermined rate, maturity greater than one year................. $ 76,585 $ 52,665
Floating or adjustable rate due after one year..................... 41,365 35,373
------- -------
Total.......................................................... $ 117,950 $ 88,038
========= ========
</TABLE>
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<PAGE> 68
COMMERCIAL LENDING. The Bank offers a variety of commercial loan
services including term loans, lines of credit, and equipment receivables
financing. A broad range of short-to-medium term commercial loans, both
collateralized and uncollateralized are made available to businesses for working
capital (including inventory and receivables), business expansion (including
acquisitions of real estate and improvements), and the purchase of equipment and
machinery. The purpose of a particular loan generally determines its structure.
The Bank's commercial loans primarily are underwritten in the Bank's
primary market area on the basis of the borrowers' ability to service such debt
from income. As a general practice, the Bank takes as collateral a security
interest in any available real estate, equipment, or other chattel, although
such loans may be made on an uncollateralized basis. Collateralized working
capital loans are primarily collateralized by short term assets whereas term
loans are primarily collateralized by long term assets.
Unlike residential mortgage loans, which generally are made on the
basis of the borrower's ability to make repayment from his employment and other
income and which are collateralized by real property whose value tends to be
easily ascertainable, commercial loans typically are made on the basis of the
borrower's ability to make repayment from the cash flow of his business and
generally are collateralized by business assets, such as accounts receivable,
equipment, and inventory. As a result, the availability of funds for the
repayment of commercial loans may be substantially dependent on the success of
the business itself. Further, the collateral underlying the loans may depreciate
over time, occasionally cannot be appraised with as much precision as
residential real estate, and may fluctuate in value based on the success of the
business.
RESIDENTIAL LENDING. A large portion of the Bank's lending activities
consist of the origination of single-family residential mortgage loans
collateralized by owner-occupied property located in the Bank's primary service
area. The Bank also offers adjustable rate mortgages ("ARMs") and either retain
these ARMs in its portfolio or sells them in the secondary market. The ability
to retain the ARMs in the Bank's portfolio allows the Bank the opportunity to
originate loans to borrowers who may not meet the underwriting criteria of
strict secondary market standards (but are still quality credits).
The Bank offers one-year ARMs with rate adjustments tied to the weekly
average rate of U.S. Treasury securities adjusted to a constant one-year
maturity with specified minimum and maximum interest rate adjustments. The
interest rates on a majority of these mortgages are adjusted yearly with
limitations on upward adjustments of 2% per adjustment period and 6% over the
life of the loan. The Bank also originates 15-year and 30-year fixed-rate
mortgage loans on single family residential real estate. The Bank generally
charges a higher interest rate if the property is not owner-occupied. Fixed-rate
mortgage loans are generally underwritten according to FNMA or Federal Home Loan
Mortgage Corporation ("FHLMC") guidelines so that the loans qualify for sale in
the secondary market to FNMA or FHLMC. It has been the Bank's experience that
the proportion of fixed-rate and adjustable-rate loan originations depend in
large part on the level of interest rates. As interest rates fall, there is
generally a reduced demand for ARMs and, as interest rates rise, there is
generally an increased demand for ARMs.
Fixed rate and adjustable rate mortgage loans collateralized by single
family residential real estate generally have been originated in amounts of no
more than 80% of appraised value. The Bank may, however, lend up to 95% of the
value of the property collateralizing the loan, but if such loans are required
to be made in excess of 80% of the value of the property, they must be insured
by private or federally guaranteed mortgage insurance. In the case of mortgage
loans, the Bank will procure mortgagees title insurance to protect against
defects in its lien on the property which may collateralize the loan. The Bank
in most cases requires title, fire, and extended casualty insurance to be
obtained by the borrower, and, where required by applicable regulations, flood
insurance. The Bank maintains its own errors and omissions insurance policy to
protect against loss in the event of failure of a mortgagor to pay premiums on
fire and other hazard
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<PAGE> 69
insurance policies. Although the contractual loan payment period for single
family residential real estate loans is generally for a 15 to 30 year period,
such loans often remain outstanding for significantly shorter periods than their
contractual terms. Although the original contractual loan payment terms for
residential loans originated by the Bank presently range up to 30 years, the
Bank charges no penalty for prepayment of mortgage loans. Mortgage loans
originated by the Bank customarily include a "due on sale" clause giving the
Bank the right to declare a loan immediately due and payable in the event, among
other matters, that the borrower sells or otherwise disposes of the real
property subject to a mortgage. In general, the Bank enforces due on sale
clauses. Borrowers are typically permitted to refinance or prepay loans at their
option without penalty.
CONSUMER LOANS. Consumer loans made by the Bank have included
automobiles, recreation vehicles, boats, second mortgages, home improvements,
home equity lines of credit, personal (collateralized and uncollateralized), and
deposit account collateralized loans. The Bank's consumer loan portfolio
consists primarily of loans to individuals for various consumer purposes, but
includes some business purpose loans which are payable on an installment basis.
A majority of these loans are for terms of less than 60 months and although
generally collateralized by liens on various personal assets of the borrower may
be made uncollateralized. Consumer loans are made at fixed and variable interest
rates and may be made based on up to a 10 year amortization schedule but which
become payable in full are generally refinanced in 36 to 60 months.
Consumer loans are attractive to the Bank because they typically have a
shorter term and carry higher interest rates than that charged on other types of
loans. Consumer loans, however, do pose additional risks of collectability when
compared to traditional types of loans granted by commercial banks such as
residential mortgage loans. In many instances, the Bank is required to rely on
the borrower's ability to repay since the collateral may be of reduced value at
the time of collection. Accordingly, the initial determination of the borrower's
ability to repay is of primary importance in the underwriting of consumer loans.
CONSTRUCTION LOANS. The Bank originates residential construction
contractor loans to finance the construction of single-family dwellings. Most of
the residential construction loans are made to individuals who intend to erect
owner-occupied housing on a purchased parcel of real estate. The Bank's
construction loans to individuals typically range in size from $100,000 to
$200,000. Construction loans also are made to contractors to erect single-family
dwellings for resale. At September 30, 1997, approximately 5% of the Bank's
construction loans have been made to contractors. Construction loans are
generally offered on the same basis as other residential real estate loans
except that a larger percentage down payment is typically required.
The Bank may also make residential construction loans to real estate
developers for the acquisition, development, and construction of residential
subdivisions. The Bank has limited involvement with this type of loan. Such
loans may involve additional risk attributable to the fact that funds will be
advanced to fund the project under construction, which is of uncertain value
prior to completion and because it is relatively difficult to evaluate
accurately the total amount of funds required to complete a project.
The Bank finances the construction of individual, owner-occupied houses
on the basis of written underwriting and construction loan management
guidelines. Construction loans are structured either to be converted to
permanent loans with the Bank at the end of the construction phase or to be paid
off upon receiving financing from another financial institution. Construction
loans on residential properties are generally made in amounts up to 80% of
appraised value. Construction loans to developers generally have terms of up to
12 months. Loan proceeds on builders' projects are disbursed in increments as
construction
63
<PAGE> 70
progresses and as inspections warrant. The maximum loan amounts for construction
loans are based on the lesser of the current appraisal value or the purchase
price for the property.
Construction loans are generally considered to involve a higher degree
of risk than long-term financing collateralized by improved, occupied real
estate. A lender's risk of loss on a construction loan is dependent largely upon
the accuracy of the initial estimate of the property's value at the completion
of construction and estimated cost (including interest) of construction. If the
estimate of construction cost proves to be inaccurate, the lender could be
required to advance funds beyond the amount originally committed in order to
permit completion of the project. If the estimate of anticipated value proves to
be inaccurate, the lender may have collateral which has value insufficient to
assure full repayment.
Loans collateralized by subdivisions and multi-family residential real
estate generally are larger than loans collateralized by single family,
owner-occupied housing and also generally involve a greater degree of risk.
Payments on these loans depend to a large degree on the results of operations
and management of the properties, and repayment of such loans may be more
subject to adverse conditions in the real estate market or the economy.
LOAN SOLICITATION AND PROCESSING. Loan originations are derived from a
number of sources. Residential loan originations can be attributed to real
estate broker referrals, mortgage loan brokers, direct solicitation by the
Bank's loan officers, present savers and borrowers, builders, attorneys, walk-in
customers and, in some instances, other lenders. Loan applications, whether
originated through the Bank or through mortgage brokers, are underwritten and
closed based on the same standards, which generally meet FNMA underwriting
guidelines. Consumer and commercial real estate loan originations emanate from
many of the same sources. The legal lending limit of the Bank, as of September
30, 1997, was $4,353,000.
The loan underwriting procedures followed by the Bank conform to
regulatory specifications and are designed to assess the borrower's ability to
make principal and interest payments and the value of any assets or property
serving as collateral for the loan. Generally, as part of the process, a bank
loan officer meets with each applicant to obtain the appropriate employment and
financial information as well as any other required loan information. Upon
receipt of the borrower's completed loan application, the Bank then obtains
reports with respect to the borrowers credit record, and orders and reviews an
appraisal of any collateral for the loan (prepared for the Bank through an
independent appraiser). The loan information supplied by the borrower is
independently verified. Loan officers or other loan production personnel in a
position to directly benefit monetarily through loan solicitation fees from
individual loan transactions do not have approval authority. Once a loan
application has been completed and all information has been obtained and
verified, the loan request is submitted to a final review process. As part of
the loan approval process, all uncollateralized loans of $100,000 or more and
all collateralized loans of $500,000 or more require preapproval by the Bank's
loan committee which is currently comprised of five directors of the Bank and
meets on such basis as is deemed necessary to promptly service loan demand. All
loans of $2,000,000 or more require preapproval by the Bank's Board of
Directors, and borrowers requesting amounts which will result in a loan
relationship of $2,000,000 or more also must be approved by the Board of
Directors of the Bank.
Loan applicants are notified promptly of the decision of the Bank by
telephone and a letter. If the loan is approved, the commitment letter specifies
the terms and conditions of the proposed loan including the amount of the loan,
interest rate, amortization term, a brief description of the required
collateral, and required insurance coverage. Prior to closing any long-term
loan, the borrower must provide proof of fire and casualty insurance on the
property serving as collateral which insurance must be maintained during the
full term of the loan. Title insurance is required on loans collateralized by
real property. Interest rates on committed loans
64
<PAGE> 71
are normally locked in at the time of application for a 30 to 45 day period. The
commitment issued at the time of approval will be for the time remaining, based
on the application date.
MORTGAGE BANKING AND RESIDENTIAL LENDING OPERATIONS. ABI provides
mortgage banking services through the Bank's Mortgage Banking Division which
opened in May 1994 and residential lending services from its Retail Residential
Lending Division. The Retail Residential Lending Division was formed in
connection with the acquisition of DesChamps in January 1997. Both the Mortgage
Banking Division and the Retail Residential Lending Division were established
for the purpose of increasing the Bank's residential loan portfolio and
resulting interest income, and to increase non-interest income through sales of
loans in the secondary market and the retention or sale of the fee generating
mortgage servicing rights. The Bank also established the Mortgage Banking
Division in an effort to pursue the strong residential mortgage loan demand that
management believes exists outside of its primary market area in Florida and
established the Retail Residential Lending Division to pursue the residential
mortgage loan demand that the Bank believes exists in its primary market area.
The Mortgage Banking Division's lending efforts are widely disbursed
throughout Florida and parts of Georgia and are not reliant on a specific
region. Management considers this to be a prudent business practice by reducing
risks inherent in localized economic down turns or adverse weather conditions.
Such loans are originated through a variety of contacts that the staff has in
the mortgage banking industry throughout Florida and parts of Georgia.
Furthermore, the Mortgage Banking Division is not dependent on any single source
for a significant portion of its volume of loan originations. This Division
originates, underwrites, closes, and services a broad line of residential
mortgage loan products, including construction-to-permanent mortgages, both for
the Bank's loan portfolio and for resale in the secondary mortgage market. The
Mortgage Banking Division's primary function is to originate fixed and
adjustable rate construction-to-permanent residential real estate mortgage loans
which fit the needs of borrowers for the purchase and construction of homes.
These loans are originated, approved, and serviced from the Mortgage Banking
Division's offices in Bradenton.
The Mortgage Banking Division has expanded significantly during the
past three years by emphasizing the origination of loans for sale in the
secondary market while retaining or packaging for sale the fee generating
mortgage servicing rights associated with such loans. A majority of the mortgage
loans made by the Bank since 1994 have been sold in the secondary market to FNMA
and other institutional investors. The Bank is an approved lender and seller
servicer for FNMA. Consideration may be given to making sales of such loans to
other governmental agencies in the future.
The construction phase of loans made by the Mortgage Banking Division
have certain risks, including the viability of the contractor, the contractor's
ability to complete the project and changes in interest rates. The goal of the
Mortgage Banking Division is to take a residential mortgage loan from the
construction stage to permanent financing with a fixed interest rate, then to
sell the permanent financing in the secondary market. The sale of the loans in
the secondary market allows the Bank to hedge against the interest rate risks
related to such lending operations. Since the Bank intends to sell these loans
in the secondary market upon conversion to permanent financing, these
construction loans have been included in the classification "loans held for
sale" on the Company's balance sheet.
In addition to the fees collected at closing of a loan, the Bank
attempts to sell the loan for a gain at completion of construction. Such a
brokerage arrangement permits the Bank to accommodate its client's demands while
eliminating the interest rate risk for the fixed 15-to-30 year term of the loan.
By selling the mortgage while retaining the servicing rights, the Bank will
receive servicing fees and ancillary fees associated
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<PAGE> 72
with the servicing rights. The Bank has elected to group the servicing rights of
a selection of loans together and sell those rights for a lump sum periodically
throughout the year.
In addition to interest earned on loans and fees generated from
mortgage servicing activities, the Bank receives loan origination fees or
"points" for originating loans. Origination fees are calculated as a percentage
of the principal amount of the mortgage loan and are charged to the borrower for
creation of the loan. Loan origination fees are volatile sources of income, and
are affected by the volume and types of loans and commitments made, competitive
conditions in the mortgage markets, and the demand for and availability of
money.
All Mortgage Banking Division loans of $250,000 to $500,000 must be
approved by the President or Senior Vice President of Lending for the Bank. Such
loans of $500,000 to $2,000,000 must be approved by the Bank's loan committee,
and such loans over $2,000,000 must be approved by the Bank's Board of
Directors. The Bank does not intend to significantly increase the size of its
Mortgage Banking Division operations, but intends to continue to originate a
significant volume of loans for sale in the secondary market.
CLASSIFICATION OF ASSETS. Generally, interest on loans is accrued and
credited to income based upon the principal balance outstanding. It is
management's policy to discontinue the accrual of interest income and classify a
loan as non-accrual when principal or interest is past due 90 days or more and
the loan is not adequately collateralized, or when in the opinion of management,
principal or interest is not likely to be paid in accordance with the terms of
the obligation. Consumer installment loans will be charged-off after 90 days of
delinquency unless adequately collateralized and in the process of collection.
Loans will not be returned to accrual status until principal and interest
payments are brought current and future payments appear certain. Interest
accrued and unpaid at the time a loan is placed on non-accrual status is charged
against interest income. Subsequent payments received are applied to the
outstanding principal balance.
In this regard, ABI adopted Statement of Financial Accounting Standards
No. 114 "Accounting by Creditors for Impairment of a Loan," (SFAS No. 114) on
January 1, 1995. Under this standard, a loan is considered impaired, based on
current information and events, if it is probable that the Bank will be unable
to collect the scheduled payments of principal or interest when due according to
the contractual terms of the loan agreement. The Bank evaluates individual loans
for impairment from internally generated watch lists and other sources. Loans
meeting the criteria for impairment may or may not be placed on non-accrual
status, based on the loan's current status. The measurement of impaired loans is
generally based on the present value of expected future cash flows discounted at
the historical effective interest rate, except that all collateral-dependent
loans are measured for impairment based on the fair value of the collateral.
Loans, including impaired loans, are generally classified by the Bank
as non-accrual loans if they are past due as to maturity or payment of principal
or interest for a period of more than ninety days, unless such loans are well
collateralized and in the process of collection. If a loan or a portion of a
loan is classified as doubtful or is partially charged off, the loan is
classified as a non-accrual loan. Loans that are on a current payment status or
past due less than ninety days may also be classified as non-accrual if
repayment in full of principal and/or interest is in doubt.
While a loan is classified as non-accrual and the future collectability
of the recorded loan balance is doubtful, collections of interest and principal
are generally applied as a reduction to principal outstanding. when the future
collectability of the recorded loan balance is expected, interest income may be
recognized on a cash basis. In the case where a non-accrual loan had been
partially charged off, recognition of interest on a cash basis is limited to
that which would have been recognized on the recorded loan balance at the
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<PAGE> 73
contractual interest rate. Cash interest receipts in excess of that amount are
recorded as recoveries to the allowance for credit losses until prior
charge-offs have been fully recovered.
As of September 30, 1997, the Bank had nine loans on non-accrual status
totaling $508,790, or 0.32% of total loans, and at December 31, 1996, the Bank
had eleven loans on non-accrual status totaling $905,000, or 0.58% of total
loans. Of the December 31, 1996 amounts, approximately $641,000 was represented
by one loan collateralized by a single family residence. The Bank has not
acquired any other real estate owned by means of foreclosure.
In addition, the Bank performs ongoing reviews of its new and existing
loans to identify, evaluate, and initiate corrective action for substandard
loans. As of September 30, 1997, the Bank has identified approximately 55 loans
to 44 borrowers to be monitored on its watch list and substandard list of loans,
representing aggregate borrowings for approximately $3,420,000. Of this
aggregate amount, management has assessed the maximum risk of loss to be
$737,000 based on management's assessment of the ability of such borrowers to
comply with their present loan repayment terms and assuming that the collateral
for such loans must be liquidated. These loans have been considered by
management in its assessment of the allowance for loan losses and none of these
borrowers have failed to comply with their present loan repayment terms.
The following table sets forth certain information, as of the date
indicated, regarding non-accrual loans, restructured loans and loans 90 days or
more past due.
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------
1997 1996 1995 1994 1993 1992
------------- ---- ----- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
NON-ACCRUAL LOANS:
Residential mortgage ......... $359 $720 $ 0 $18 $ 9 $0
Commercial and commercial
real estate ........... 143 118 0 3 14 0
Consumer ..................... 6 67 19 71 4 0
Total non-accrual loans ... 508 905 19 92 27 0
Total non-performing loans (1) 0 0 0 0 0 0
Restructured loans ........... 22 24 0 0 0 0
</TABLE>
- ----------
(1) Accruing loans which are contractually past due 90 days or more as to
principal or interest.
The Bank has experienced relatively low default rates and low
delinquency as a percent of total loans. As of September 30, 1997, the total
amount of loans over 30 days past due totalled $1,347,000, or 0.66% of total
loans, and as of December 31, 1996, the total amount of loans over 30 days past
due totalled $1,561,000, or 1.00% of total loans. The approximate amount of
interest on non-accrual loans which would have been recorded as income under the
original terms was $43,637 for the nine months ended September 30, 1997, and
$60,720 for the fiscal year ended December 31, 1996. The amount of interest
income not recorded related to non-accrual loans for the year ended December 31,
1995, was immaterial. The amount of interest income collected on non-accrual
loans, that was included in net income for the nine months ended September 30,
1997 and the years ended December 31, 1996 and 1995 was approximately $23,000,
$39,000 and $2,000, respectively. There was no interest income included in net
income on accruing loans contractually past due 90 days or more at September 30,
1997 or at December 31, 1996 and 1995.
ALLOWANCE FOR CREDIT LOSSES. In originating loans, the Bank recognizes
that credit losses will be experienced and that the risk of loss will vary with,
among other things, the type of loan being made, the creditworthiness of the
borrower over the term of the loan and, in the case of a collateralized loan,
the quality
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<PAGE> 74
of the collateral for the loan as well as general economic conditions. It is
management's policy to maintain an adequate allowance for loan losses based on,
among other things, the Bank's historical loan loss experience, evaluation of
economic conditions and regular reviews of delinquencies and loan portfolio
quality.
Management continues to actively monitor the Bank's asset quality and
to charge-off loans against the allowance for credit losses when appropriate or
to provide specific loss allowances when necessary. Although management believes
it uses the best information available to make determinations with respect to
the allowance for credit losses, future adjustments may be necessary if economic
conditions differ from the economic conditions in the assumptions used in making
the initial determinations. The Bank increased its allowance to $1,316,000
during the nine months ended September 30, 1997, reflecting management's intent
to maintain the level of the Bank's allowance for credit losses at a level
management believes to be adequate to cushion it against the reasonably expected
economic conditions. Excluding loans held for sale of $24,044,858 for the period
ended September 30, 1997, the allowance for loan losses represented 0.78% of
portfolio loans held as of such date. Total loan charge-offs for the nine months
ended September 30, 1997 were approximately $357,000 with recoveries on
previously charged-off loans of approximately $58,000.
The Bank's allowance for loan losses at December 31, 1996 and 1995
amounted to $1,000,000 (or 0.74% of total loans), and $946,000 (or 0.97% of
total loans), respectively. Excluding loans held for sale of $20,351,000 and
$21,011,000 for the periods ended December 31, 1996 and December 31, 1995,
respectively, the allowance for loan losses represented 0.74% of portfolio loans
as of December 31, 1996, and 0.97% as of December 31, 1995. Total loan
charge-offs for the year ended December 31, 1996 were $279,140, with recoveries
on previously charged-off loans totalling $46,487.
The Bank increased the allowance to $1,000,000 during the year ended
December 31, 1996, and to $946,000 during the year ended December 31, 1995,
reflecting the growth in the loan portfolio and management's assessment of risks
inherent in the loan portfolio.
The following table sets forth an analysis of the Bank's allowance for
loan losses for the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------- ---------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Total loans at end of period .............. $ 160,346 $ 130,581 $ 135,504 $ 97,973 $ 74,454 $ 51,851 $ 38,384
========= ========= ========= ======== ======== ======== ========
Allowance at beginning of period .......... $ 1,000 $ 946 $ 946 $ 625 $ 505 $ 285 $ 175
--------- --------- --------- -------- -------- -------- --------
Loans charged-off during the period ....... (357) (219) (279) (185) (117) (79) (56)
Recoveries of loans previously charged-off 58 36 46 23 16 3 6
--------- --------- --------- -------- -------- -------- --------
Net loans charged-off during the period ... (299) (183) (233) (162) (101) (76) (50)
--------- --------- --------- -------- -------- -------- --------
Provisions charged to income .............. 615 208 287 483 221 296 160
--------- --------- --------- -------- -------- -------- --------
Allowance at end of period ................ $ 1,316 $ 971 $ 1,000 $ 946 $ 625 $ 505 $ 285
========= ========= ========= ======== ======== ======== ========
Ratio of net charge-offs to
average loans outstanding .............. 0.22%(1) 0.10% 0.17% 0.15% 0.14% 0.17% 0.19%
========= ========= ========= ======== ======== ======== ========
Allowance as a percentage of total loans .. 0.82% 0.74% 0.74% 0.97% 0.84% 0.97% 0.75%
========= ========= ========= ======== ======== ======== ========
</TABLE>
- ----------
(1) Annualized
68
<PAGE> 75
The following table sets forth a breakdown of the allowance for credit
losses by loan category for the periods indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. The
allocation of an allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any other category.
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT SEPTEMBER 30, ---------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------------- ------------- ------------ ------------ ------------ ------------
% OF % OF % OF % OF % OF % OF
LOANS LOANS LOANS LOANS LOANS LOANS
TO TO TO TO TO TO
TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL
AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS AMOUNT LOANS
------ ----- ------ ----- ------ ----- ------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential mortgage (1) . $ 208 15.8% $ 185 14.0% $ 44 15.0% $ 14 15.0% $ 11 18.0% $ 10 15.0%
Commercial and commercial
real estate .......... 845 64.2 494 55.0 458 54.0 306 53.0 280 56.0 160 54.0
Consumer loans ........... 263 20.0 290 31.0 166 31.0 157 32.0 149 26.0 85 31.0
Unallocated .............. 0 0.0 31 0.0 278 0.0 148 0.0 65 0.0 30 0.0
------ ----- ------ ----- ---- ----- ---- ----- ---- ----- ---- -----
Total allowance for
loan losses ...... $1,316 100.0% $1,000 100.0% $946 100.0% $625 100.0% $505 100.0% $285 100.0%
====== ===== ====== ===== ==== ===== ==== ===== ==== ===== ==== =====
</TABLE>
- ----------
(1) No allowance has been allocated to real estate construction since the amount
such loans held in the Bank's loan portfolio at the periods indicated was
not material.
The measurement of impaired loans is based on the fair value of the
loan's collateral. The measurement of non-collateral dependent loans is based on
the present value of expected future cash flows discounted at the historical
effective interest rate. The components for the allowance for credit losses are
as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
---------------------- --------------------
1997 1996 1996 1995
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Impaired loans $ 361,600 $ 414,400 $ 331,400 $233,000
Other ........ 954,400 585,600 668,600 713,000
---------- ---------- ---------- --------
$1,316,000 $1,000,000 $1,000,000 $946,000
========== ========== ========== ========
</TABLE>
INVESTMENT ACTIVITIES
At September 30, 1997, the Bank's investment portfolio totalled
$40,473,000, compared to $26,111,000 and $24,073,000 at the years ended December
31, 1996 and 1995, respectively. The investment portfolio consists of U.S.
Treasury and federal agency securities, municipal bonds, and FHLB stock.
Maturities range from three months to thirty years with a portfolio average
maturity of approximately 5 years.
69
<PAGE> 76
The following table summarizes the Bank's investment portfolio as of
the dates indicated.
INVESTMENT SECURITIES PORTFOLIO
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
SEPTEMBER 30, ---------------------------------
1997 1996 1995 1994
------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
HELD TO MATURITY (1):
U.S. Treasury securities . $ 0 $ 0 $ 0 $ 8,521
------- ------- ------- -------
AVAILABLE FOR SALE (2):
U.S. Treasury securities . $ 4,918 $ 6,924 $12,110 $ 9,712
U.S. Government Agencies . 29,238 13,105 4,986 0
State and municipal ...... 500 498 498 453
------- ------- ------- -------
Total debt securities .. 34,656 20,527 17,594 10,165
FHLB stock ............... 1,133 499 490 352
Mortgage-backed securities 4,684 5,085 5,989 934
Other investments ........ 0 0 0 37
------- ------- ------- -------
Total available for sale $40,473 $26,111 $24,073 $11,488
======= ======= ======= =======
</TABLE>
- ----------
(1) Carried at amortized cost.
(2) Carried at estimated market value.
The following table summarizes the Bank's securities by maturity and
weighted average yields at December 31, 1996. Yields on tax exempt securities
are stated at their nominal rates and have not been adjusted for tax rate
differences.
<TABLE>
<CAPTION>
AFTER ONE YEAR AFTER FIVE YEARS
BUT WITHIN BUT WITHIN
WITHIN ONE YEAR 5 YEARS 10 YEARS AFTER 10 YEARS TOTAL
---------------- ---------------- ---------------- -------------- ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
------ ----- ------- 0---- ------- ----- ------ ---- ------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AT SEPTEMBER 30, 1997:
U.S. Treasury securities $1,898 5.62% $ 3,020 5.39% $ 0 0.00% $0 0.00% $ 4,918 5.48%
U.S. Government agencies 1,994 5.62 13,305 6.33 13,939 7.08 0 0.00 29,238 6.64
State and municipals ... 500 5.75 0 0.00 0 0.00 0 0.00 500 5.75
------ ---- ------- ---- ------- ---- -- ---- ------- ----
$4,392 5.63% $16,325 6.16% $13,939 7.08% $0 0.00% $34,656 6.46%
====== ==== ======= ==== ======= ==== == ==== ======= ====
AT DECEMBER 31, 1996:
U.S. Treasury securities $3,408 5.65% $ 3,516 5.32% $ 0 0.00% $0 0.00% $ 6,924 5.48%
U.S. Government agencies 0 0.00 3,253 5.99 9,852 6.97 0 0.00 13,105 6.73
State and municipals ... 0 0.00 498 5.76 0 0.00 0 0.00 498 5.77
------ ---- ------- ---- ------- ---- -- ---- ------- ----
$3,408 5.65% $ 7,267 5.65% $ 9,852 6.97% $0 0.00% $20,527 6.28%
====== ==== ======= ==== ======= ==== == ==== ======= ====
</TABLE>
DEPOSIT ACTIVITIES AND OTHER SOURCE OF FUNDS
GENERAL. Deposit accounts are the primary source of funds of the Bank
for use in lending and other investment purposes. In addition to deposits, the
Bank draws funds from interest payments, loan principal payments, loan and
security sales, and funds from operations (including various types of loan
fees). Scheduled loan payments of principal and interest are a relatively stable
source of funds, while deposit inflows and outflows are significantly influenced
by general interest rates and money market conditions. The Bank and ABI may use
borrowings on a short-term basis if necessary to compensate for reductions in
the availability of other sources of funds, or borrowings may be used on a
longer term basis for general business purposes.
70
<PAGE> 77
DEPOSIT ACTIVITIES. Deposits are attracted principally from within the
Bank's primary market area through the offering of a broad variety of deposit
instruments, including checking accounts, money market accounts, savings
accounts, certificates of deposit (including jumbo certificates in denominations
of $100,000 or more), and retirement savings plans. Total deposits were
$226,097,000 at September 30, 1997, compared to $177,200,000 and $129,861,000 at
December 31, 1996 and 1995, respectively. The introduction of new products and
the continued focus on quality customer service have contributed to strong
deposit growth. The Bank continues to develop consumer and commercial deposit
relationships through referrals and additional contacts within its market area.
As of September 30, 1997 and December 31, 1996, jumbo certificates accounted for
$30,006,000 and $21,482,000, respectively, of the Bank's deposits. The Bank has
not aggressively attempted to obtain large denomination, high interest-bearing
certificates except to address a particular funding need. In an effort to fund
the rapid growth of the loan volume originated by the Mortgage Banking Division
during the fourth quarter of 1994, the Bank offered a five year certificate of
deposit and money market product at above market rates at that time. In
addition, in an effort to fund strong loan demand during 1996, the Bank offered
a five year certificate and money market product at above market rates at that
time. Although all of such deposits were originated within the Bank's market
area and substantially all were not jumbo products, the regulators required the
Bank to classify these deposits as brokered deposits because the rate exceeded
75 basis points over the then existing market rate.
Maturity terms, service fees, and withdrawal penalties are established
by the Bank on a periodic basis. The determination of rates and terms is
predicated on funds acquisition and liquidity requirements, rates paid by
competitors, growth goals and federal regulations.
DEPOSIT FLOWS AND AVERAGE BALANCE AND RATES. The following table sets
forth the average balance and weighted average rates for the Bank's categories
of deposits for the period indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
-------------------------- ------------------------------------------------------------------------------
1997 1996 1995 1994
-------------------------- ------------------------- ------------------------- -------------------------
AVERAGE AVERAGE % OF AVERAGE AVERAGE % OF AVERAGE AVERAGE % OF AVERAGE AVERAGE % OF
BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS BALANCE RATE DEPOSITS
------- ------- -------- ------- ------- -------- ------- ------- -------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest checking.... $30,728 0.10% 15 $21,540 0.00% 14 $16,010 0.00% 13 $11,228 0.00% 13
Interest checking and
Money Market.......... 68,682 4.11% 34 45,027 3.85% 29 39,222 3.90% 31 29,440 3.78% 33
Savings.................. 7,457 2.20% 4 6,963 2.21% 5 6,252 2.22% 5 5,225 2.22% 6
Certificates of deposit.. 96,146 6.30% 47 80,344 6.27% 52 63,868 6.24% 51 43,004 5.25% 48
-------- --- -------- --- -------- --- ------- ---
Total...............$203,013 100 $153,874 100 $125,352 100 $88,897 100
======== === ======== === ======== === ======= ===
</TABLE>
CERTIFICATES OF DEPOSIT. At September 30, 1997, certificates of deposit
represented approximately 46.7% of the Bank's total deposits, as compared to
50.5% and 53.1% of total deposits at December 31, 1996 and 1995, respectively.
The Bank does not have a concentration of deposits from any one source, the loss
of which would have a material adverse effect on the business of ABI. Management
believes that substantially all of the Bank's depositors are residents, either
full or part time, in its primary market area.
71
<PAGE> 78
The following table summarizes the amount of the Bank's certificates of
deposit of $100,000 or more by time remaining until maturity at September 30,
1997 and December 31, 1996.
<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
MATURITY PERIOD (DOLLARS IN THOUSANDS)
- ---------------
<S> <C> <C>
Less than three months .............. $ 3,740 $ 3,515
Over three months through six months 4,547 2,012
Over six months through twelve months 8,063 4,930
Over twelve months .................. 13,656 11,025
------- -------
Totals ......................... $30,006 $21,482
======== ========
</TABLE>
The following table indicates the scheduled maturities of time deposits
of the Bank as of September 30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
AT AT
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
MATURITY PERIOD (DOLLARS IN THOUSANDS)
- ---------------
<S> <C> <C>
Due within one year..........................$ 49,874 $ 32,807
Due after one through two years.............. 26,535 12,456
Due after two through three years............ 13,929 18,905
Due after three through four years........... 17,992 7,681
Due after four years......................... 2,635 17,611
------ -------
$110,965 $ 89,460
======== ========
</TABLE>
DEPOSIT ACTIVITY. The following table sets forth the deposit flows of
the Bank during the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------- -------------------------------
1997 1996 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net increase before interest credited............. $42,166 $34,243 $40,445 $ 9,010 $45,511
Net credited...................................... 6,728 4,980 6,897 5,509 3,362
------- ------- ------- ------- -------
Net deposit increase .......................... $48,894 $39,223 $47,342 $14,519 $48,873
======= ======= ======= ======= =======
</TABLE>
BORROWINGS. The Bank has borrowed funds during the past to fund
short-term cash requirements. None of such funds were used to fund loan
activity. In the future, if there are periods when the supply of funds from
deposits cannot meet the demand for loans, the Bank has the ability to seek a
portion of the needed funds through loans (advances) from the FHLB of Atlanta
where the Bank currently has a $25 million line of credit. As of September 30,
1997, $5 million has been borrowed on the line and $20 million remained
available for future use.
COMPETITION
The Bank encounters strong competition both in making loans and
attracting deposits. The deregulation of the banking industry and the widespread
enactment of state laws which permit multi-bank holding companies as well as the
availability of nationwide interstate banking has created a highly competitive
72
<PAGE> 79
environment for financial services providers in the Bank's primary service area.
In one or more aspects of its business, the Bank competes with other commercial
banks, savings and loan associations, credit unions, finance companies, mutual
funds, insurance companies, brokerage and investment banking companies, and
other financial intermediaries operating in the Bradenton area and elsewhere.
Most of the Bank's primary competitors, some of which are affiliated with large
bank holding companies, have substantially greater resources and lending limits,
and may offer certain services, such as trust services, that the Bank does not
currently provide. In addition, many of ABI's non-bank competitors are not
subject to the same extensive federal regulations that govern bank holding
companies and state chartered and federally insured banks.
EMPLOYEES
At September 30, 1997, ABI and the Bank together employed 136 full-time
and 16 part-time employees. None of these employees are covered by a collective
bargaining agreement and the Company believes that its employee relations are
good.
PROPERTY
The executive and administrative offices of both ABI and the Bank are
located at 4702 Cortez Road West, Bradenton, Florida 34210 and consist of
approximately 7,700 square feet on two floors, containing a lobby, executive and
customer service offices, teller stations, safe deposit booths and related non
vault area and vault operations. A drive through facility and adequate paved
parking also is on the premises. Both the land and all improvements are owned by
the Bank.
The Bank has seven banking office locations. Five of these offices, the
main office, two full service branches, a drive-thru branch, and a separate
Mortgage Banking Division office are in Bradenton. The remaining offices include
a drive-thru branch in Palmetto and a full service branch in Ellenton. The land
and improvements dedicated to the main banking office, the five branch offices
and the Mortgage Banking Division offices are owned in fee simple by the Bank.
The offices housing the accounting and operations departments are on a six month
lease which commenced in October 1995, with one month renewals, at a rate of
$3,200 per month. These leased offices are expected to be a temporary location
until such time as ABI obtains facilities for the administrative offices of ABI
and the Bank. ABI has purchased a site on which administrative offices are
expected to be built and is currently seeking the necessary licenses and permits
to commence the construction of the facilities.
Management believes that each of its banking locations provide
sufficient parking for its customers as well as visibility from highly travelled
thoroughfares.
LEGAL PROCEEDINGS
ABI and the Bank are periodically parties to or otherwise involved in
legal proceedings arising in the normal course of business, such as claims to
enforce liens, foreclose on loan defaults, claims involving the making and
servicing of real property loans, and other issues incident to the Bank's
business. Except as described below, Management does not believe that there is
any proceeding threatened or pending against ABI or the Bank which, if
determined adversely, would have a material effect on the business or financial
position of ABI or the Bank.
On January 15, 1997, Theresa Moss, an employee of the Bank, filed a
claim with the Equal Employment Opportunity Commission ("EEOC") alleging that
such employee was demoted by the Bank in retaliation for complaining against a
co-employee for offensive comments which caused a hostile work
73
<PAGE> 80
environment leading to her resignation from the Bank. It is alleged that this
conduct violated her rights under Title VII of the Civil Rights Act of 1964. The
EEOC claim does not request any specific relief or remedies sought in connection
therewith. ABI believes that the Bank acted appropriately and that this action
is without merit and it intends to defend this action vigorously.
On March 27, 1997, James J. Bazata, a former employee of the Bank,
filed a suit in the United States District Court, Tampa Division, alleging that
he was illegally discriminated against in connection with the termination of his
employment with the Bank. The suit alleges that Mr. Bazata was terminated from
his employment in violation of his rights under the Americans with Disabilities
Act of 1990. The suit makes a claim for unspecified monetary damages and seeks
the reinstatement of Mr. Bazata's employment with the Bank. ABI believes that
the Bank acted appropriately in connection with its termination of Mr. Bazata
and that this action is without merit. ABI intends to defend this action
vigorously.
ABI MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS. The directors and executive officers of
ABI and the Bank, their ages, and their positions with ABI and the Bank are set
forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH ABI AND/OR THE BANK
- ---- --- ---------------------------------
<S> <C> <C>
J. Gary Russ......................... 47 Chairman of the Board of ABI and the Bank
Gerald L. Anthony.................... 53 President, Chief Executive Officer and Director of ABI and the Bank
Samuel S. Aidlin..................... 83 Director of ABI and the Bank
Philip W. Coon....................... 43 Senior Vice President, Mortgage Banking Division of the Bank
Andrea M. Franco..................... 48 Vice President, Credit Cards and Marketing of the Bank
Stuart M. Gregory.................... 40 Senior Vice President, Retail Residential Lending for the Bank
Ronald L. Larson..................... 53 Director of ABI and the Bank
Michael R. Lewis..................... 49 Senior Vice President, Consumer Lending for the Bank
David R. Mady........................ 35 Vice President, Secondary Market Manager for the Bank
Timothy I. Miller.................... 57 Director of ABI and the Bank
Dan E. Molter........................ 45 Director of ABI and the Bank
Kirk D. Moudy........................ 45 Director of ABI and the Bank
John S. Nash......................... 37 Senior Vice President, Senior Commercial Lending Officer for
the Bank
Lindell W. Orr....................... 53 Director of ABI and the Bank
Lynn B. Powell, III.................. 60 Director of ABI and the Bank
Walter L. Presha..................... 51 Director of ABI and the Bank
R. Jay Taylor........................ 41 Director of ABI and the Bank
Brian M. Watterson................... 40 Chief Financial Officer, Secretary, and Chief Operations Officer of
ABI and the Bank
Edward D. Wyke....................... 76 Director of ABI and the Bank
</TABLE>
All directors of ABI hold office until the earlier of the next annual
meeting of ABI Shareholders and until their successors have been duly elected
and qualified, or their death, resignation, or removal. Officers are elected
annually by the ABI Board to hold office until the earlier of their resignation,
removal, or death.
Set forth below is a description of the business experience during the
past five years or more, and other biographical information, for the directors
and executive officers of ABI and the Bank:
74
<PAGE> 81
J. GARY RUSS has been Chairman of the Board of Directors of the Company
and the Bank since 1995, and has been a director of the Bank since 1989. Mr.
Russ is the principal owner of Russ Citrus Groves, Ltd. and a 50% partner of
Edwards-Russ Groves.
GERALD L. ANTHONY has been President, Chief Executive Officer, and a
director of the Company since its inception in 1995, and has also served in
these three capacities for the Bank since 1989.
SAMUEL S. AIDLIN has served as a director of the Company since 1995,
and as a director of the Bank since 1989. Mr. Aidlin was the Chairman of the
Board and Chief Executive Officer of Aidlin Automation Corporation and Automated
Recycling, Inc. from 1945 until its sale in 1997.
PHILIP W. COON has been the Senior Vice President, Mortgage Banking
Division of the Bank since the start-up of the Bank's mortgage banking
operations in 1994. Mr. Coon has engaged in mortgage banking activities for the
past 17 years. He was employed as Director of Residential Lending with Key
Florida Bank, Bradenton from 1991 to 1994, as Regional Manager with Southeast
Mortgage Company, Tampa from 1985 to 1991, as a Branch Manager with Collateral
Mortgage Company from 1984 to 1985, and as a Loan Officer with Cameron-Brown
Company in Charlotte, North Carolina and Tampa, Florida from 1979 to 1984.
ANDREA M. FRANCO has been the Vice President, Credit Cards and
Marketing of the Bank since 1994. Previously, Ms. Franco was the District
Manager of Financial Alliance, an independent sales organization for credit card
sales, from 1992 to 1994; Vice President of Credit Card operations for First
Florida Banks from 1982 to 1992; credit card sales for Telecredit, a credit card
processing company, from 1978 to 1982; and credit card processing for First
National Bank of Ft. Myers, Florida from 1972 to 1978.
STUART M. GREGORY has been the Senior Vice President, Residential Real
Estate since January 1997. Previously, Mr. Gregory was the founder and President
of DesChamps & Gregory Mortgage Company, Inc. ("DesChamps"), a Bradenton based
mortgage brokerage company originating residential mortgage loans, from 1991
until its acquisition by the Bank in 1997. Prior to forming DesChamps, Mr.
Gregory served for eleven years as a Senior Account Executive for Republic
Mortgage Insurance Company and General Electric Capital Corporation in the State
of Florida. Both companies specialize in high loan to value risk insurance for
residential mortgage loans. Mr. Gregory is a graduate of Florida Southern
College with a bachelor of science degree in Sports Administration.
RONALD L. LARSON has been a director of the Company since 1995, and a
director of the Bank since 1989. He currently serves as the President and owner
of Ron Larson & Associates, Inc., a consulting engineer company which was
organized in early 1997. From 1994 to 1997, Mr. Larson was the Senior Project
Manager at Larson Engineering, a division of Kimley Horn & Associates, Inc.
Prior to 1994, Mr. Larson was the President and owner of Larson Engineering.
MICHAEL R. LEWIS has been the Vice President, Consumer Lending of the
Bank since 1993. Previously, Mr. Lewis has worked as Vice President, Consumer
Lending, at Barnett Bank, Tallahassee (1969- 75), as Vice President, Consumer
Lending at Southeast Bank, Bradenton (1975-80), as Business Manager for Sands
Toyota, Bradenton (1980-83), as a Consumer Lending Officer as Island Bank,
Bradenton (1983-84), and a Director of Indirect Consumer Lending at Barnett
Bank, Bradenton (1985-93). Mr. Lewis attended Florida State University and is a
graduate of the University of Oklahoma Banking School.
DAVID R. MADY has been the Vice President, Secondary Market Manager of
the Bank since the start-up of the Bank's mortgage banking operations in 1994.
Previously, Mr. Mady served as the Secondary Market Manager for Key Florida
Bank, F.S.B., from 1991 to 1994. From 1990 to 1991, he was employed
75
<PAGE> 82
by First Union Bank of Florida in charge of their residential lending operations
for Hillsborough County, Florida, and from 1984 to 1989, Mr. Mady served as a
loan officer for Southeast Mortgage. Mr. Mady is a graduate of the University of
Connecticut with a bachelor of science degree in finance.
TIMOTHY I. MILLER has been a director of the Company since 1995, and a
director of the Bank since 1989. Mr. Miller is the President of Miller
Insulation & Acoustics, Inc.
DAN E. MOLTER has been a director of the Company since 1995, and a
director of the Bank since 1992. Mr. Molter has been the President and Chief
Executive Officer of Molter Termite & Pest Control since 1976 and since 1994 he
also has served as President and Chief Executive Officer of Extend-O Drain Inc.,
as product manufacturer.
KIRK D. MOUDY has been a director of the Company since 1995, and a
director of the Bank since 1994. Mr. Moudy has been the President and Chief
Executive Officer of General Mortgage Corporation of America, a mortgage banker,
since 1985.
JOHN S. NASH has been the Senior Vice President, Senior Commercial
Lending Officer of the Bank since 1989. Prior to joining the Bank, from 1982 to
1989, Mr. Nash worked with Barnett Bank in Bradenton as a consumer lending
officer, corporate lending officer and finally as Branch Manager/Commercial
Officer in the downtown office of Barnett Bank in Bradenton. He holds a bachelor
of science degree in business administration, conferred by the University of
Florida in 1981.
LINDELL W. ORR has been a director of the Company and the Bank since
1995. Mr. Orr has been the President and Chief Executive Officer of Columbia
Blake Medical Center since 1995. From 1993 to 1995 he was the Chief Executive
Officer of the Columbia Ed White Hospital and from 1988 to 1993 Mr. Orr was the
District Vice President for Hospital Corporation of America responsible for the
management of 14 hospitals located in Florida, Georgia, and South Carolina.
LYNN B. POWELL, III has been a director of the Company since 1995, and
a director of the Bank since 1989. Mr. Powell has been the owner of Powell Motor
Company since 1992. Prior to 1992, Mr. Powell was the owner of Cortez Motors.
WALTER L. PRESHA has been a director of the Company since 1995, and a
director of the Bank since 1989. Mr. Presha is the Executive Director for
Manatee County Rural Health Services.
R. JAY TAYLOR has been a director of the Company and the Bank since
1995. Mr. Taylor is the President of Taylor & Fulton Packing Company.
BRIAN M. WATTERSON has been a Vice President and the Chief Operations
Officer of the Company and the Bank since January 15, 1996, and in February 1997
Mr. Watterson took over the responsibilities of the Chief Financial Officer of
the Company and the Bank. Previously, Mr. Watterson served as a Senior Vice
President and Chief Financial Officer at SouthTrust Bank, Sarasota, Florida from
August 1995 to December 1995. Senior Vice President and Chief Financial Officer
at Key Florida Bank, F.S.B., Bradenton, Florida from September 1992 to July
1995; insurance agent for Nationwide Insurance and Metropolitan Insurance
Company, Bradenton from September 1990 to February 1992; Vice President, Chief
Financial Officer, and Cashier at Southtrust Bank, Sarasota, Florida from
February 1992 to August 1992; and as Assistant Controller at Barnett Bank of
Manatee County, N.A. from July 1979 to May 1990. Mr. Watterson graduated in 1981
from the University of South Florida with a degree in Business Administration.
He also graduated from the
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<PAGE> 83
Florida School of Banking at the University of Florida, Gainesville, Florida in
1985 and from the B.A.I. School for Banking Administration at the University of
Wisconsin, Madison, Wisconsin in 1989.
EDWARD D. WYKE has been a director of the Company since 1995 and a
director of the Bank since 1989. Mr. Wyke is a retired architect.
There is no family relationship between any of ABI's or the Bank's
directors or executive officers.
DIRECTOR MEETINGS AND COMMITTEES. During 1997, the ABI Board held a
total of 15 regular meetings. Each of the directors attended at least 75% of the
total number of meetings of the ABI Board and the committees on which the
director served. The committees of the ABI Board consists of a standing Audit
Committee, and an Executive Committee which acts as a nominating committee and
compensation committee.
The Audit Committee of the ABI Board met five times during 1997. The
Audit Committee is responsible for recommending to the ABI Board the engagement
or discharge of the independent public accountants, meeting with the independent
public accountants to review the plans and results of the audit engagement,
reviews the activities of the subsidiary Bank's examining committees,
maintaining direct reporting responsibility and regular communication with ABI's
internal audit staff, reviewing the scope and results of the internal audit
procedures of ABI and its subsidiary, approving the services to be performed by
the independent public accountants, considering the range of the audit and
non-audit fees, reviewing the adequacy of ABI's system of internal accounting.
The Audit Committee is comprised of Timothy I. Miller, Samuel S. Aidlin, Lindell
W. Orr, Lynn B. Powell, and R. Jay Taylor.
The Executive Committee of the ABI Board met 9 times in 1997. The
Executive Committee, which also serves as the nominating committee and
compensation committee, makes recommendations to the ABI Board with respect to
ABI's compensation policies and the compensation of executive officers. The
Executive Committee is comprised of J. Gary Russ, Gerald L. Anthony, Ronald L.
Larson, Timothy I. Miller, Dan E. Molter and Walter L. Presha.
COMPENSATION OF DIRECTORS
ABI Directors also are directors of the Bank, and receive $600 per
month for their services to ABI and the Bank regardless of the number of regular
or special board meetings they attend and an additional $100 for each committee
meeting that they attend. The Chairman of the Board of ABI also is the Chairman
of the Board for the Bank and receives $1500 per month for services rendered to
ABI and the Bank.
In April, 1997, the ABI Board adopted the "American Bancshares, Inc.
Directors' Non-qualified Stock Option Plan of 1997" (the "1997 Directors'
Plan"). No options have been granted under the 1997 Directors' Plan.
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table. The following summary compensation table
sets forth the cash and non-cash compensation paid to or accrued for the past
three fiscal years for ABI's Chief Executive Officer, and all other executive
officers whose total compensation exceeded $100,000 for fiscal year 1997 ("Named
Executive Officers").
77
<PAGE> 84
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND -------------------- ALL OTHER
PRINCIPAL OCCUPATION YEAR SALARY($) BONUS($) COMPENSATION($)(1)
-------------------- ---- -------- ------- ------------------
<S> <C> <C> <C> <C>
Gerald L. Anthony .......... 1997 $136,267 $10,000 $ 7,500
President and Chief 1996 135,000 0 6,600
Executive Officer 1995 98,333 8,000 600
Philip W. Coon ............. 1997 $ 84,133 $53,156(1) 0
Senior Vice President 1996 85,228 40,226(1) 0
Mortgage Banking Division 1995 72,950 17,378(1) 66,500(2)
Stuart M. Gregory .......... 1997(3) $ 67,968 $53,467(4) 0
Senior Vice President
Retail Residential Lending
David R. Mady .............. 1997 $ 66,506 $53,156 0
Vice President Secondary . 1996 66,770 40,266(1) 0
Market Manager 1995 54,662 17,378(1) 66,500(2)
John S. Nash ............... 1997 $ 86,204 $17,407 0
Senior Vice President 1996 78,140 0 0
Senior Commercial Lending 1995 68,916 0 0
Officer
</TABLE>
- -----------
(1) Commission paid based on aggregate principal balance of wholesale
residential mortgage loans originated by Mortgage Banking Division and
sold in the Secondary Mortgage Market.
(2) Amounts represent settlements made to Mr. Coon and Mr. Mady in 1995 for
the release of their employment contracts entered into during May of
1994.
(3) Commenced employment with ABI in 1997.
(4) Includes commission of $12,536 and $40,931 bonus.
Share Options Grants. As of December 31, 1997, ABI did not have any
long term incentive plans nor had it awarded any restricted shares. The table
set forth below contains information with respect to the award of stock options
during the fiscal year ended December 31, 1997 to the Named Executive Officers
covered by the Summary Compensation Table.
<TABLE>
<CAPTION>
PERCENT OF TOTAL
NUMBER OF SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE OR MARKET PRICE EXPIRATION
NAME OPTIONS GRANTED(#) EMPLOYEES IN 1997(1) BASE PRICE ON DATE OF GRANT DATE
---- ------------------ -------------------- ---------- ---------------- -----
<S> <C> <C> <C> <C> <C>
Gerald L. Anthony 6,000 (2) 20.0% $8.375 $8.375 04/15/2007
John S. Nash 5,000 (2) 16.7% $8.375 $8.375 04/15/2007
</TABLE>
- ---------
(1) Employees of the Company were granted an aggregate of 30,000 options during
1997 under the Company's 1996 Incentive Stock Option Plan. Options were not
granted under any other plans.
(2) These options were granted to Messrs. Anthony and Nash on April 15, 1997
under the Company's 1996 Incentive Stock Option Plan. These options vest on
a cumulative basis for one-third of the shares covered thereby on the
anniversary of grant.
Aggregated Options Exercises in Last Fiscal Year and Fiscal Year-End
Option Values. No stock options or SARs were exercised in 1997 by the Named
Executive Officers covered by the Summary
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<PAGE> 85
Compensation Table. The following table sets forth, for each of the Named
Executive Officers in the Summary Compensation Table above who holds stock
options, the number of the stock options held at December 31, 1997, and the
realizable gain of the stock options that are "in-the-money". The in-the-money
stock options and SARs are those with exercise prices that are below the
year-end stock price because the stock value grew since the date of the grant.
FISCAL YEAR-END OPTIONS VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR END(1)
ACQUIRED ON VALUE ------------------------------ ---------------------------
NAME EXERCISED(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ---------- (#) (#) ($) ($)
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gerald L. Anthony 0 0 0 6,000 $0 $26,250
John S. Nash 0 0 0 5,000 $0 $21,875
</TABLE>
- -----------
(1) Based upon the closing price of the ABI Common Shares as quoted by
NASDAQ-NMS on December 30, 1997 of $12.75 per share.
Employment Agreements. ABI, believing that the continued services and
contributions of certain key executives is critical to ABI's prospects and in
the best interest of ABI Shareholders, has caused the Bank to enter into
employment agreements with such executives under the terms and conditions set
forth below.
The Bank has entered into an employment agreement with Mr. Gerald L.
Anthony, President and Chief Executive Officer of ABI and the Bank, which
commenced on December 1, 1995. The agreement is for a period of three years, at
the end of which, the agreement is automatically renewed on an annual basis. The
agreement provides, among other things, for an initial annual base salary of
$135,000, which salary is subject to annual increases and the payment of
performance bonuses if the Bank achieves certain target goals with respect to
projected yearly returns on assets. Under the agreement, Mr. Anthony is provided
an automobile, and also is eligible to receive any other benefits provided to
the Bank's executive employees.
The agreement further provides that if Mr. Anthony's employment is
terminated within 120 days after a "change of control" (as that term is defined
therein) for other than "just cause" (as that term is defined therein), Mr.
Anthony shall be entitled to an amount equal to his then existing annual
compensation, as well as his salary through the last day of the month of
termination. In the event that Mr. Anthony is not terminated within 120 days
after the "change of control", but Mr. Anthony or the ABI Board however, opposes
the "change of control" within 120 days after its occurrence, and Mr. Anthony
ends his employment within that time period, Mr. Anthony is entitled to receive
an amount equal to his then existing annual salary.
The Bank also entered into employment agreements with Mr. John S. Nash
and Mr. Michael Lewis, which commenced January 1, 1996. Each agreement is for a
three year term, with automatic annual renewals thereafter. The initial annual
base salaries for Messrs. Nash and Lewis, as provided under their respective
agreements, are $78,000 and $67,000, respectively. These base salaries are
subject to merit-based increases, which are determined by the President and
Chief Executive Officer, as well as increases based on the amount of any annual
increase in the Consumer Price Index. These officers may also earn a performance
bonus based upon achievement of quantified goals related to the Bank's
profitability. Messrs. Nash and Lewis also are eligible to receive any other
benefits provided to the Bank's executive employees.
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<PAGE> 86
In connection with its acquisition of DesChamps, the Bank entered into
an employment agreement with Mr. Stuart M. Gregory which commenced on January
22, 1997. Mr. Gregory's employment agreement has a three year term, with
automatic renewals thereafter. The base salary under the agreement is $75,000
per year and provides for an initial bonus of $25,000. In addition to base
salary, Mr. Gregory's employment agreement provides for the payment of a
quarterly bonus based on the aggregate principal balance of all residential
loans for which Mr. Gregory and the loan officers under his supervision generate
and close during the quarter. The employment agreement also provides for the
payment of a commission as incentive compensation based on the achievement of
quantifiable goals related to residential loan productivity.
Each agreement provides that the employee will be entitled to twelve
months salary as severance pay should the employee be involuntarily terminated
within 90 days prior to or after a "change of control", (as that term is defined
therein).
The Board of Directors of the Bank entered into an employment
agreements with Mr. Philip W. Coon and Mr. David Mady, of the Mortgage Banking
Division, effective June 30, 1995. Each contract is for a four year term, with
automatic annual renewal thereafter. These agreements provide for a base salary
which is subject to annual increases based upon annual increases, if any, in the
Consumer Price Index. The base salaries are $79,233 and $59,850 for Messrs. Coon
and Mady, respectively. In addition to the base salary, the contracts provide
for a commission based on the aggregate principal balance of wholesale
residential mortgage loans originated by the Mortgage Banking Division and sold
in the secondary market. The agreements further entitle the officers to earn
incentive compensation based upon achievement of quantified goals related to the
Bank's profitability.
401(k) Plan. The Board of Directors of the Bank approved a tax-deferred
investment plan (the "401(k) Plan") effective January 1, 1994. All employees who
work at least 250 hours per quarter and are at least 21 years of age may elect
to participate in the 401(k) Plan once he or she has completed one year of
service. Under the 401(k) Plan, a participating employee is given an opportunity
to make an elective contribution under a salary deferral savings arrangement of
up to a maximum of 15% of the participant's pre-tax compensation up to a maximum
of $9,500 per year. Each such contribution is fully vested in the participant.
In addition, the Bank may make a separate matching contribution in an amount
based upon its annual profitability, which will be allocated proportionally
among the participants and vested on a five year schedule. In 1997, Messrs.
Anthony, Coon, Gregory, Mady, and Nash participated in the 401(k) Plan at 6.9%,
6.9%, 2.7%, 7.5%, and 6.0% of their salaries respectively.
Employee Incentive Share Option Plan. The American Bancshares, Inc. and
American Bank of Bradenton Incentive Stock Option Plan of 1996 ("ISO Plan")
approved by ABI Shareholders in 1996 provides options which may be granted by
the ABI Board to key employees to purchase up to an aggregate of 150,000 ABI
Common Shares. Key employees eligible to participate in the ISO Plan include any
person in the regular full-time employment of ABI or any subsidiary as an
executive or non-executive officer thereof, who in the opinion of the ABI Board,
is or is expected to be primarily responsible for the management, growth, or
protection of some part or all of the business of ABI.
The ISO Plan is designed to qualify as an "incentive stock option plan"
under Section 422 of the Code and it is administered by the ABI Board. The ABI
Board has the power and authority to administer, construe, and interpret the ISO
Plan and to make rules for carrying it out and to make changes in such rules.
Except for options granted to 10% shareholders, the exercise price of
the options must not be less than the fair market value of the ABI's Common
Shares on the date of grant, as determined by the ABI Board in conformity with
Treasury regulations. In order for options granted to shareholders possessing
more than 10%
80
<PAGE> 87
of the combined voting power of all classes of ABI's stock (or persons to whom
such ownership is attributed on the date of the grant) to constitute incentive
stock options, the exercise price of such options must not be less than 110% of
such fair market value and must be exercised within five years from the date of
grant. Options must be granted within ten years from the date of adoption of the
ISO Plan. Except for ISO options granted to 10% shareholders, each option
granted under the ISO Plan must be exercised, if at all, within ten years from
the date of grant, unless by their terms the options expire sooner. Options are
cancelled three months following termination of employment, unless termination
is due to death or permanent disability. Options must be exercised. The ABI
Board may impose additional or more restricted terms and conditions on the
option.
No options were granted under the ISO Plan in 1996. During 1997, 30,000
options have been granted under the ISO Plan at an option price of $8.375 per
share. Of this amount, 11,000 options were granted to the Named Executive
Officers covered by the Summary Compensation Table and 18,500 options were
issued to all the executive officers as a group (including the Named Executive
Officers' options). None of these options have been exercised.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the outstanding ABI Common Shares as of December 31,
1997, by: (i) each person known to ABI to own beneficially more than 5% of the
outstanding ABI Common Shares, (ii) each executive officer of ABI named in the
Summary Compensation Table, and (iii) all directors and executive officers of
ABI as a group. Except as otherwise indicated, the persons named in the table
have sole voting and investment power with respect to all of the ABI Common
Shares owned by them.
<TABLE>
<CAPTION>
CURRENT BENEFICIAL OWNERSHIP
---------------------------
NUMBER PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES(1) OF CLASS(2)
- ------------------------------------- ------------ -----------
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
<S> <C> <C>
J. Gary Russ......................................................................... 193,371 (3) 4.75%
Samuel S. Aidlin..................................................................... 67,408 (4) 1.66%
Gerald L. Anthony.................................................................... 16,479 (5) *
Philip W. Coon....................................................................... -- *
Ronald L. Larson..................................................................... 51,879 (6) 1.27%
David R. Mady........................................................................ 80 *
Timothy I. Miller.................................................................... 41,229 (7) 1.01%
Dan E. Molter........................................................................ 16,335 *
Kirk D. Moudy........................................................................ 23,600 (8) *
John S. Nash......................................................................... 6,369 (9) *
Lindell W. Orr....................................................................... 1,000 *
Lynn B. Powell, III.................................................................. 16,000 *
Walter L. Presha..................................................................... 18,947 *
R. Jay Taylor........................................................................ -- *
Edward D. Wyke....................................................................... 35,632 *
All directors and executive officers as a group (19 persons)......................... 484,769 11.91%
</TABLE>
- --------------
* Less than 1%
(1) In accordance with Rule 13d-3 promulgated pursuant to the Securities
Exchange Act of 1934, a person is deemed to be the beneficial owner of a
security for purposes of the rule if he or she has or shares voting power
or dispositive power with respect to such security or has the right to
acquire such ownership within sixty days. As used herein, "voting power"
is the power to vote
81
<PAGE> 88
or direct the voting of shares, and "dispositive power" is the power to
dispose or direct the disposition of shares, irrespective of any economic
interest therein.
(2) In calculating the percentage ownership for a given individual or group,
the number of ABI Common Shares outstanding includes unissued shares
subject to options, warrants, rights or conversion privileges exercisable
within sixty days held by such individual or group, but are not deemed
outstanding by any other person or group.
(3) Includes 57,479 shares owned by Russ Citrus Groves, Ltd., a Florida
limited partnership in which Mr. Russ is the general partner; and, by
reason of his position, Mr. Russ may be deemed the beneficial owner of
these shares.
(4) Includes 441 shares held by Mr. Aidlin's spouse.
(5) Includes 4,500 shares held by Mr. Anthony's spouse, and 920 shares held by
his stepson.
(6) Includes 26,624 shares held by Mr. Larson's spouse as to which Mr. Larson
disclaims beneficial ownership and 1,000 shares held with his father in
joint ownership.
(7) Includes 2,205 shares held by Mr. Miller's spouse as to which Mr. Miller
disclaims beneficial ownership.
(8) Includes 23,600 shares held by General Mortgage Corporation, of which Mr.
Moudy is President and majority owner; and, by reason of his position and
ownership, Mr. Moudy may be deemed the beneficial owner of these Shares.
(9) Includes 150 shares held in trust for Mr. Nash's daughter.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Bank has had, and expects to have in the future, various loans and
other banking transactions in the ordinary course of business with the
directors, executive officers, and principal ABI Shareholders (or associate of
such person). All such transactions: (i) have been and will be made in the
ordinary course of business; (ii) have been and will be made on substantially
the same terms, including interest rates and collateral on loans, as those
prevailing at the time for comparable transactions with unrelated persons; and
(iii) in the opinion of management do not and will not involve more than the
normal risk of collectability or present other unfavorable features. At December
31, 1997 and 1996, the total dollar amount of extensions of credit to directors
and executive officers identified above and principal ABI Shareholders
identified below, and their associates (excluding extensions of credit which
were less than $60,000 to any one such person and their associates) were
$6,164,157 and $5,963,312, respectively, which represented approximately 28.5%
and 32%, respectively, of total shareholders' equity.
Outside of normal customer relationships, none of the directors or
officers of ABI, and no ABI Shareholders holding over 5% of ABI's Common Shares
and no corporations or firms with which such persons or entities are associated,
currently maintains or has maintained since the beginning of the last fiscal
year, any significant business or personal relationship with ABI or the Bank,
other than such as arises by virtue of such position or ownership interest in
ABI or the Bank.
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<PAGE> 89
SELECTED FINANCIAL AND OTHER DATA OF ABI
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- -------------------------------------------------------
1997 1996 1995 1994 1993 1992
-------- -------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA:
Total assets...................................... $270,192 $211,965 $154,948 $127,962 $ 77,483 $ 54,997
Cash (including interest-bearing accounts)........ 17,086 21,045 6,768 7,223 5,187 3,209
Loans receivable, net............................. 159,598 135,109 97,480 74,256 51,329 38,051
Mortgage loans held for sale, net................. 42,064 20,351 21,011 21,640 0 0
Investment securities and other
interest-earning assets.......................... 40,473 26,111 24,073 20,009 17,819 11,871
Deposits.......................................... 226,097 177,200 129,861 115,342 66,784 48,128
Borrowed funds.................................... 22,684 15,113 14,567 5,377 5,264 2,540
Retained earnings (deficits)...................... 3,548 2,456 1,572 554 260 (303)
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------- ------ ------ ------ ------ -----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED OPERATIONS DATA:
Interest income......................... $ 14,173 $ 10,334 $ 14,548 $ 11,409 $ 7,274 $ 4,864 $ 3,446
Interest expense........................ 7,469 5,263 7,411 6,011 3,627 2,247 1,777
Net interest income..................... 6,704 5,071 7,137 5,398 3,647 2,617 1,669
Provision for loan losses............... 615 207 287 483 221 296 160
Net interest income after
provision for loan losses.............. 6,089 4,864 6,850 4,915 3,426 2,321 1,509
Other income............................ 2,514 1,416 1,834 1,473 631 431 275
Other expense........................... 6,899 5,248 7,279 4,797 3,276 2,035 1,342
Provision for income taxes.............. 659 382 522 573 279 155 0
Net income.............................. 1,045 650 883 1,018 502 562 442
Net income per share.................... 0.26 0.18 0.24 0.46 0.26 0.33 0.31
Weighted-average number of
shares outstanding.....................
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED AT OR FOR THE
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------- ------ ------ ------ ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SELECTED RATIOS:
Return on average assets (1)............ 0.58% 0.44% 0.48% 0.71% 0.50% 0.82% 1.01%
Return on average equity (2)............ 7.10 7.12 5.24 12.54 8.80 12.47 15.24
Average interest-earnings assets to
average interest-bearing liabilities... 1.17 1.27 1.18 1.13 1.11 1.10 1.10
Net yield on average earning assets..... 3.98 4.18 4.22 4.07 3.97 4.19 4.15
Asset quality ratio (3)................. 0.26 0.44 0.59 0.01 0.01 0.13 0.00
Average equity to average total assets.. 8.06 6.22 9.23 5.69 5.70 7.15 7.90
Dividend payout ratio (4)............... N/A N/A N/A N/A N/A N/A N/A
Other expenses to average total assets.. 3.79 3.58 3.98 3.36 3.27 2.98 3.07
Net interest income to other expenses... 97.17 96.60 98.05 112.53 111.32 128.63 124.40
</TABLE>
- -------------
(1) Net income to average total assets.
(2) Net income to average total equity.
(3) Non-performing loan and other real estate owned to average total assets.
(4) Non applicable.
83
<PAGE> 90
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS OF ABI
GENERAL
ABI's principal asset is its ownership of the Bank. Accordingly, ABI's
results of operations is primarily dependent on the results of the operations of
the Bank. The Bank conducts a commercial banking business which consists of
attracting deposits from the general public and applying those funds to the
origination of loans for commercial, consumer, and real estate loans (including
commercial loans collateralized by real estate). The Bank's profitability
depends primarily on net interest income, which is the difference between
interest income generated from interest-earning assets (i.e., loans and
investments) less the interest expense incurred on interest-bearing liabilities
(i.e., customer deposits and borrowed funds). Net interest income is affected by
the relative amounts of interest-earning assets and interest-bearing
liabilities, and the interest rate paid on these balances.
Net interest income is dependent upon the Bank's interest rate spread,
which is the difference between the average yield earned on its interest-earning
assets and the average rate paid on its interest-bearing liabilities. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest income. The interest
rate spread is impacted by interest rates, deposit flows, and loan demands.
Additionally, and to a lesser extent, the Bank's profitability is affected by
such factors as the level of non-interest income and expenses, the provision for
loan losses, and the effective tax rate. Non-interest income consists primarily
of loan and other fees and income from the sale of loans, servicing rights, and
investment securities. Non-interest expenses consist of compensation and
benefits, occupancy related expenses, deposit insurance premiums paid to the
FDIC, expenses of opening branch offices, and other operating expenses.
This Management's Discussion and Analysis of Financial Condition and
Results of Operations of ABI discusses (i) material changes in the financial
condition of ABI from September 30, 1996 to September 30, 1997, and from
December 31, 1995 to December 31, 1996, and (ii) material changes in the results
of operations with respect to the nine month period ending September 30, 1997
compared to September 30, 1996, and the year ended December 31, 1996 compared to
the year ended December 31, 1995. This discussion and analysis is intended to
assist in understanding the financial condition and results of operation of the
Bank. This section should be read in conjunction with the financial statements
and the related notes and the other statistical information contained herein.
ASSET QUALITY
Management seeks to maintain a level of high quality assets through
conservative underwriting and sound lending practices. Management intends to
follow this policy even thought it may result in foregoing the funding of higher
yielding loans. Approximately 30% of the Bank's loan portfolio is collateralized
by first liens on primarily owner-occupied residential homes which have
historically carried a relatively low credit risk. The Bank also maintains a
commercial real estate portfolio comprised primarily of owner-occupied
commercial businesses. The Bank has experienced low delinquency and default
rates since opening in 1989.
In an effort to maintain the quality of the loan portfolio, management
seeks to minimize higher risk types of lending and additional precautions have
been taken when such loans are made in order to reduce the Bank's risk of loss.
Generally, construction loans present a higher degree of risk to a lender
depending upon, among other things, whether the borrower has permanent financing
at the end of the loan period, whether the project is an income producing
transaction in the interim, and the nature of changing economic conditions
84
<PAGE> 91
including changing interest rates. While there is no assurance that the Bank
will not suffer losses on its construction loans or its commercial real estate
loans, management believes that it has reduced the risks associated therewith
because, among other things, primarily all such loans relate to owner-occupied
projects where the borrower has demonstrated to the Bank's management that its
business will generate sufficient income to repay the loan. The Bank primarily
enters into agreements with individuals who are familiar to Bank personnel, are
residents of the Bank's primary market area and are believed by management to be
good credit risks.
Commercial and financial loans also entail certain risks since they
usually involve large loan balances to single borrowers or a related group of
borrowers, resulting in a more concentrated loan portfolio. Further, since their
repayment is usually dependent upon the successful operation of the commercial
enterprise, they also are subject to adverse conditions in the economy.
Commercial loans are generally riskier than residential mortgages because they
are typically made on the basis of the ability to repay from the cash flow of a
business rather than on the ability of the borrower or guarantor to repay.
Further, the collateral underlying commercial loans may depreciate over time,
and occasionally cannot be appraised with as much precision as residential real
estate, and may fluctuate in value based on the success of the business.
While there is no assurance that the Bank will not suffer any losses on
its construction loans or its commercial real estate loans, management believes
that it has reduced the risks associated therewith because, among other things,
substantially all of such loans relate to owner-occupied projects, projects
where the borrower has received permanent financing commitments from which the
Bank will be repaid, and projects where the borrower has demonstrated to
management that its business will generate sufficient income to repay the loan.
In addition to maintaining high quality assets, management attempts to
limit the Banks' risk exposure to any one borrower or borrowers with similar or
related entities. As of September 30, 1997, the Bank has extended credit in
excess of $1.3 million to 20 borrowers.
Loan concentrations are defined as amounts loaned to a number of
borrowers engaged in similar activities which would cause them to be similarly
impacted by economic or other conditions. ABI, on a routine basis, evaluates
these concentrations for purposes of policing its concentrations and to make
necessary adjustments in its lending practices that most clearly reflect the
economic times, loan to deposit ratios, and industry trends. As of September 30,
1997, total loans to any particular group of customers engaged in similar
activities or having similar economic characteristics did not exceed 10% of
total loans.
The Board of Directors of the Bank concentrates its efforts and
resources, and that of its senior management and lending officials, on loan
review and underwriting procedures. The Bank utilizes the services of an
independent consultant to perform periodic loan documentation and compliance
reviews as well as deposit and operations compliance reviews. Internal controls
include a loan review specialist employed by the Bank, who performs on-going
reviews of new and existing loans to monitor documentation and ensure the
existence and valuations of collateral. Senior loan officers of the Bank have
established a review process with the objective of quickly identifying,
evaluating, and initiating necessary corrective action for substandard loans.
The goal of the loan review process is to address the watch list, and
substandard and non-performing loans as early as possible. Combined, these
components are integral elements of the Bank's loan program which has resulted
in its loan portfolio performance to date. Nonetheless, management maintains a
cautious outlook in anticipating the potential effects of uncertain economic
conditions (both locally and nationally) and the possibility of more stringent
regulatory standards.
85
<PAGE> 92
Asset quality continues to remain strong due to adherence to
underwriting and credit standards. Management remains focused on this area and,
as a result, non-performing loans as of September 30, 1997, remain low at
$509,000 and there were $246,000 in repossessions as of the same date.
Management actively monitors collection activities, which include ten day
delinquency letters, customer contact by telephone, and referral to the
collection supervisor for review. The collection supervisor determines the
collectability of the debt, the potential for an extension or workout, and a
review of the Bank's collateral position. If the loan becomes ninety days past
due, actions are taken to take possession of the collateral, charge off any
deficiency balance, and pursue legal action as necessary. Real property loan
defaults are referred to legal counsel for foreclosure action.
ASSET/LIABILITY MANAGEMENT
One of the Bank's primary objectives is to control fluctuations in net
interest income caused by changes in interest rates. To manage interest rate
risk, the Bank's Board of Directors has established interest rate risk policies
and procedures which delegate to the Asset/Liability Management Committee
("ALCO") the responsibility to monitor and report on interest rate risk, devise
strategies to manage interest rate risk, monitor loan origination and deposit
activity, and approve all pricing strategies.
The management of interest rate risk is one of the most significant
factors affecting the Bank's ability to achieve future earnings. The principal
measure of the Bank's exposure to interest rate risk is the difference between
interest rate sensitive assets and liabilities for the periods being measured,
commonly referred to as the "gap" for such period. An asset or liability is
considered interest rate sensitive if it will reprice or mature within the time
period being analyzed. Controlling the maturity or repricing of an institution's
liabilities and assets in order to minimize interest rate risk is commonly
referred to as gap management. A gap is considered positive when the amount of
interest rate assets exceed the amount of interest rate sensitive liabilities.
When the opposite occurs, the gap is considered to be negative. During periods
of increasing interest rates, negative gap would tend to adversely affect income
while a positive gap would tend to result in net interest income. During periods
of decreasing interest rates, the inverse would tend to occur. If the maturities
of interest rate sensitive assets and liabilities were equally flexible and
moved concurrently, the impact of any material or prolonged increase or decrease
in interest rates or net interest income on existing assets or liabilities would
be minimal. It is common to focus on the one year gap, which is the difference
between the dollar amount of assets and the dollar amount of liabilities
maturing or repricing within the next twelve months.
ALCO uses an external asset/liability modeling service to analyze the
Bank's current financial position and develop strategies prior to
implementation. The systems attempt to simulate the Bank's asset and liability
base and project future operating results under several interest rate and spread
assumptions.
Under asset/liability management guideline, the Bank's policy is to
maintain a cumulative one-year gap of no more than 15% of total assets,
primarily by managing the maturity distribution of its investment portfolio and
emphasizing loan originations tied to interest sensitive indices. Additionally,
the Bank has joined the FHLB to enhance its liquidity position and provide the
ability to utilize fixed rate advances to improve the match between
interest-earning assets and interest-bearing liabilities in certain periods.
The Bank's cumulative one year gap at December 31, 1996 was a positive
$17,235,000 (or 8.13%, expressed as a percentage of total assets).
86
<PAGE> 93
COMPARATIVE AVERAGE BALANCES, INTEREST, AND AVERAGE YIELDS
The following tables show for each category of interest-earning assets
and interest-bearing liabilities, the average amount outstanding, the interest
earned or paid on such amount, and the average rate earned or paid for the nine
months ended September 30, 1997 and 1996, and for the years ended December 31,
1996, 1995, and 1994. These tables also show the average rate earned on all
interest-earning assets, the average rate paid on all interest-bearing
liabilities, and the net yield on average interest-earning assets for the same
periods.
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------------------------------------------------
1997 1996
------------------------------ ------------------------------
INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE(1) EXPENSE RATE(2) BALANCE(1) EXPENSE RATE(2)
---------- ------- ------- ---------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Cash and due from banks......................... $ 7,367 $ 5,683
Bank premises and equipment, net................ 7,538 5,274
Other assets.................................... 3,226 2,138
------ --------
Total non-interest earning assets........ $ 18,131 $ 13,095
-------- --------
INTEREST-EARNING ASSETS:
Federal funds sold.............................. $ 5,841 $ 240 5.49% $ 4,416 $ 178 5.39%
Investment securities (3)....................... 38,906 1,973 6.78 26,548 1,197 6.03
Loans, net (4)(5)............................... 179,804 11,960 8.89 130,836 8,960 9.16
-------- ------- ---- -------- ------- ----
Total interest-earning assets/interest/income
average rates paid......................... $224,551 $14,173 8.44% $161,800 $10,335 8.54%
========= ======= ==== ======== ======= ====
Total assets.................................... $242,682 $174,895
========= ========
Other liabilities............................... $ 31,823 $ 22,265
-------- --------
Total non-interest bearing liabilities.......... $ 31,823 $ 22,265
-------- --------
INTEREST-BEARING LIABILITIES:
NOW . ......................................... $ 14,295 $ 160 1.50% $ 12,055 $ 136 1.51%
Money market.................................... 54,387 1,947 4.79 30,634 1,080 4.71
Savings......................................... 7,457 122 2.19 6,906 114 2.21
Time. . ........................................ 96,146 4,533 6.30 77,618 3,634 6.26
------- ------- ---- -------- ------- ----
Total interest-bearing deposits............ 172,285 6,762 5.25 127,213 4,964 5.22
Securities sold under agreement to repurchase... 13,126 438 4.46 8,408 255 4.05
Federal funds purchased......................... 102 4 5.24 25 1 5.35
FHLB advances................................... 5,676 265 6.24 727 43 7.91
-------- ------- ---- -------- ------- ----
Total interest-bearing liabilities/interest
expense/average rate paid.................... $191,189 $ 7,469 5.22% $136,373 $ 5,263 5.16%
======== ======= ==== ======== ======= ====
Total liabilities............................... $223,012 $158,638
Shareholders' equity............................ 19,670 16,257
-------- --------
Total liabilities and shareholders' equity...... $242,682 $174,895
======== ========
Net interest income............................. $ 6,704 $ 5,072
======= =======
Net yield on average earning assets (6)......... 3.99% 4.19%
==== ====
</TABLE>
- -----------------------------
(1) Average balances represent the average daily balance year to date.
(2) Annualized for comparability with full year data.
(3) Principally taxable
(4) Non-accruing loans included in computation of average balance.
(5) Interest income on loans includes fees of $266,170 in 1997 and $293,972 in
1996.
(6) The net yield on average earning assets is the net interest income divided
by average interest earning assets.
87
<PAGE> 94
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------
1996 1995 1994
--------------------------- ------------------------------ -----------------------------
INTEREST INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE(1) EXPENSE RATE BALANCE(1) EXPENSE RATE BALANCE(1) EXPENSE RATE
---------- ------- ---- ---------- ------- ---- ---------- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and due from banks............... $ 5,699 $ 5,258 $ 4,554
Bank premises and equipment, net...... 5,670 3,619 2,866
Other assets.......................... 2,155 1,332 790
-------- -------- --------
-------- -------- --------
Total non-interest earning assets.. 13,524 10,209 8,210
-------- -------- --------
INTEREST-EARNING ASSETS:
Federal funds sold.................... $ 4,382 $ 237 5.41% $ 3,236 $ 196 6.06% 2,651 115 4.33%
Investment securities (2)............. 27,689 1,720 6.21 21,372 1,298 6.07 17,516 992 5.66
Loans, net (3)(4)..................... 137,188 12,591 9.18 107,860 9,915 9.19 71,833 6,168 8.59
-------- ------- ---- -------- ------- ---- -------- ------ ----
Total interest-earning assets/interest/
income average rates paid........ $169,259 $14,548 8.60% $132,468 $11,409 8.61% $ 92,000 $7,275 7.91%
======== ======= ==== ======== ======= ==== ======== ====== ====
Total assets.......................... $182,783 $142,677 $100,210
======== ======== ========
Other liabilities..................... $ 22,914 $ 16,906 $ 11,586
-------- -------- --------
Total non-interest bearing liabilities $ 22,914 $ 16,906 $ 11,586
-------- -------- --------
INTEREST-BEARING LIABILITIES:
NOW . . .............................. $ 12,271 $ 185 1.51% $ 9,311 $ 152 1.63% $ 8,201 $ 146 1.78%
Money market.......................... 32,756 1,550 4.73 29,911 1,377 4.60 21,239 967 4.55
Savings............................... 6,963 154 2.21 6,252 139 2.22 5,225 116 2.22
Time. ................................ 80,344 5,038 6.27 63,868 3,988 6.24 43,004 2,257 5.25
------- ------ ---- -------- ------- ---- -------- ------ ----
Total interest-bearing deposits.... 132,334 6,927 5.23 109,342 5,656 5.17 77,669 3,486 4.49
Securities sold under agreement
to repurchase.................... 8,628 352 4.08 7,123 293 4.11 5,242 141 2.69
Federal funds purchased............... 47 3 6.38 630 37 5.87 0 0 0.00
FHLB advances......................... 1,992 130 6.53 562 25 4.45 0 0 0.00
------- ------ ---- -------- ------- ---- -------- ------ ----
Total interest-bearing liabilities/
interest/expense/average
rate paid....................... $143,001 $ 7,412 5.18% $117,657 $ 6,011 5.11% $ 82,911 $3,627 4.37%
======== ======= ==== ======== ======= ==== ======== ====== ====
Total liabilities..................... $165,915 $134,563 $ 94,497
Shareholders' equity.................. 16,868 8,114 5,713
-------- -------- --------
Total liabilities and
shareholders' equity........... $182,783 $142,677 $100,210
======== ======== ========
Net interest income................... $ 7,136 $ 5,398 $3,648
======= ======= ======
Net yield on average earning
assets (5)....................... 4.22% 4.07% 3.97%
==== ==== ====
</TABLE>
- ------------------------------
(1) Average balances represent the average daily balance year to date.
(2) Principally taxable
(3) Non-accruing loans included in computation of average balance.
(4) Interest income on loans includes fees of $525,000 in 1996, $131,000 for
1995 and $39,000 in 1994.
(5) The net yield on average earning assets is the net interest income
divided by average interest earning assets.
88
<PAGE> 95
'
The effect on interest income, interest expense, and net interest
income for the periods indicated, of changes in average balance and rate, is
shown below for the Bank. The effect of a change in average balance has been
determined by applying the average rate at the year-end for the earlier period
to the change in average balance at the year-end for the later period. Changes
resulting from average balance/rate variances are included in changes resulting
from volume.
<TABLE>
<CAPTION>
YEAR ENDED
-------------------------------------------------------------------------------
1996 COMPARED TO 1995 1995 COMPARED TO 1994
INCREASE (DECREASE) DUE TO CHANGE IN: INCREASE (DECREASE DUE TO CHANGE IN:
------------------------------------- -------------------------------------
AVERAGE AVERAGE TOTAL AVERAGE AVERAGE TOTAL
VOLUME (1) RATE CHANGE VOLUME (1) RATE CHANGE
---------- ------ ------ ---------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNING ASSETS:
Federal funds sold.................... $ 69 $(28) $ 41 $ 35 $ 46 $ 81
Investment securities................. 384 38 422 234 72 306
Loans, net (2)........................ 2,697 (20) 2,677 3,312 435 3,747
------- ---- ------- ------- ----- -------
Total interest income............... $ 3,150 $(10) $ 3,140 $ 3,581 $ 553 $ 4,134
======= ==== ======= ======= ===== =======
INTEREST BEARING LIABILITIES:
NOW................................... $ 48 (15) 33 $ 18 (12) 6
Money market.......................... 131 42 173 399 11 410
Savings............................... 16 (1) 15 23 0 23
Time.................................. 1,029 22 1,051 1,303 428 1,731
------- ---- ------- ------- ----- -------
Total interest on deposits.......... 1,224 48 1,272 1,743 427 2,170
Securities sold under agreement to
repurchase and borrow funds........... 108 22 130 139 75 214
------- ---- ------- ------- ----- -------
Total interest expense.............. $ 1,332 $ 70 $ 1,402 $ 1,882 $ 502 $ 2,384
======= ==== ======= ======= ===== =======
Change in net interest income....... $ 1,818 $(80) $ 1,738 $ 1,699 $ 51 $ 1,750
======= ==== ======= ======= ===== =======
</TABLE>
(1) Non-accruing loans are excluded form the average volumes used in calculating
this table.
(2) Includes loan fees of $524,677 in 1996 and $131,479 in 1995.
The following table presents the interest rate-sensitive assets and
liabilities of the Bank at December 31, 1996, which are expected to mature or
are subject to repricing in each of the time periods indicated. The tables may
not be indicative of the Bank's rate sensitive position at other points in time.
The balances have been derived based on the financial characteristics of the
various assets and liabilities. Adjustable and floating rate assets are included
in the period in which interest rates are next scheduled to adjust rather than
their scheduled maturity dates. Fixed rate loans are shown in the periods in
which they are scheduled to be repaid. Repricing of time deposits is based on
their scheduled maturities. Deposits without a stated maturity are repriced
based on known characteristics of the deposit product.
89
<PAGE> 96
INTEREST RATE SENSITIVITY ANALYSIS AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
TERM TO REPRICING
----------------------------------------------------------------------
90-180 181 DAYS 1-2 2-3 3-4 4-5+
90 DAYS DAYS TO 365 DAYS YEARS YEARS YEARS YEARS TOTAL
------- ------ ----------- ----- ----- ----- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Federal funds sold...................................... 6,000 0 0 0 0 0 0 6,000
Interest-bearing due from banks......................... 7,528 0 0 0 0 0 0 7,528
Fixed rate loans........................................ 16,254 6,932 10,956 15,516 15,517 7,337 11,896 84,408
Variable rate loans..................................... 49,606 7,491 11,481 705 706 575 576 71,140
Treasuries.............................................. 499 500 2,401 1,274 1,274 508 508 6,964
Governmental agencies................................... 0 0 0 500 500 1,147 11,080 13,227
State and municipal..................................... 0 0 0 500 0 0 0 500
Federal Home Loan Bank Stock............................ 499 0 0 0 0 0 0 499
Mortgage-backed securities.............................. 1,122 122 234 403 403 317 2,449 5,050
------ ------ ------ ------ ------ ------ ------ -------
Total interest-earning assets....................... 81,508 15,045 25,072 18,898 18,400 9,884 26,509 195,316
NOW..................................................... 13,081 0 0 0 0 0 0 13,081
Money market............................................ 42,040 0 0 0 0 0 0 42,040
Savings................................................. 6,339 0 0 0 0 0 0 6,339
Certificates/IRS's (less than) $100,000................. 7,814 4,836 8,323 12,545 12,546 10,215 10,215 66,494
Certificates/IRS's (more than) $100,000................. 3,515 2,112 6,217 2,492 3,770 940 3,921 22,967
Securities sold under agreements to repurchase.......... 10,113 0 0 0 0 0 0 10,113
Federal Home Loan Bank advances......................... 0 0 0 5,000 0 0 0 5,000
------ ------ ------ ------ ------ ------ ------ -------
Total interest-bearing liabilities...................... 82,902 6,948 14,540 20,037 16,316 11,155 14,136 166,034
------ ------ ------ ------ ------ ------ ------ -------
Interest sensitivity gap................................ (1,394) 8,097 10,532 (1,139) 2,084 (1,271) 12,373 29,282
====== ====== ===== ====== ======= ====== ======= =======
Cumulative gap.......................................... (1,394) 6,703 17,235 16,096 18,180 16,909 29,282
====== ====== ===== ====== ======= ====== =======
Cumulative gap ratio.................................... 0.98 1.07 1.17 1.13 1.13 1.11 1.18
====== ====== ===== ====== ======= ====== =======
Cumulative gap as a percentage of total assets.......... 0.66% 3.16% 8.13% 7.59% 8.58% 7.98% 13.81%
====== ====== ===== ====== ======= ====== =======
</TABLE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
GENERAL. ABI's total assets at September 30, 1997 were $270 million as
compared to $212 million at December 31, 1996, a $58 million, or 27% increase.
This increase was due primarily to an increase in loans receivable of $25
million, mortgage loans held for sale of $22 million, and investment securities
of $14 million. These increases were funded primarily by increases in ABI's
deposits of $49 million and an increase in the number of banking locations from
four to six in 1996 as well as the relocation of one limited service banking
location to a full service office location in 1997. In addition, strong loan
demand, particularly in the commercial and residential real estate
classification, has accounted for the increase in loans receivable held in
portfolio and mortgage loans held for sale.
For the nine months ended September 30, 1997, net income was $1,045,000
or $.26 per share, compared to net income of $650,000 or $.18 per share for the
same period for 1996. Earnings per share were affected by the additional shares
outstanding as a result of the public offering which was completed in the first
quarter of 1996. Net interest income increased $1,633,000 to $6,704,000 compared
to $5,071,000 for the same period in 1996 as a result of the 35% asset growth.
The provision for loan loss expense increased from $207,000 for the nine month
period ended September 30, 1996 to $615,000 for the same period in 1997.
Management uses a procedure on a monthly basis for evaluating the adequacy of
the allowance for loan loss. Based on that review management considers the
allowance sufficient to cover expected loan losses.
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<PAGE> 97
NON-INTEREST INCOME. Noninterest income increased to $2.5 million for
the nine months ended September 30, 1997 from $1.4 million for the same period
for 1996. Significant items include increases in service charges and fees from
$517,000 to $925,000 ($331,000 of the increase is attributable to NSF fees),
gain on sale of servicing from $38,000 to $346,000 primarily as a result of the
sale of the FNMA servicing portfolio outstanding at May 30, 1997 and broker loan
fees from $31,000 to $242,000 due to the acquisition of DesChamps and Gregory, a
local mortgage brokerage firm, in January 1997.
NON-INTEREST EXPENSES. Noninterest expenses increased to $6.9 million
for the nine months ended September 1997 from $5.2 million for the same period
for 1996. Salaries and employee benefits increased $625,000 to $3.2 million from
$2.5 million due to increased staff size. Other significant expense increases
were incidental to the growth of the Bank.
PROVISION FOR LOAN LOSSES. For the nine month period ended September
30, 1997, $615,000 was recorded to the loan loss provision, compared to $207,000
for the same period in 1996. During the nine month period ended September 30,
1997, the Bank experienced $357,000 in charge-offs and $58,000 in recoveries of
previously charged-off loans. At September 30, 1997, the Bank had $508,000 of
loans in non-accrual status.
INCOME TAX EXPENSE. For the nine month period ended September 30, 1997,
an income tax provision totalling $659,000 was recorded, compared to $382,000
for the same period last year, and was a result of increased earnings during
1997.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
GENERAL. For the year ended December 31, 1996 ABI reported net income
of $883,000 or $.24 per share, as compared to net income of $1,018,000 or $.46
per share for 1995. Per share results reflect the effect of the 67% increase in
the weighted average number of shares outstanding resulting from the public
offering completed in February 1996. From 1995 to 1996, net interest income
increased by $1,740,000 and non-interest income and non-interest income
increased by $361,000. The increase in non-interest income from 1995 to 1996 is
primarily attributable to increases in collection of service charges on deposits
of $177,000 credit card merchant fee income of $165,000, and gains on sale of
securities of $70,000. In addition, loan loss provision expense decreased by
$196,000 from 1995 to 1996. These changes contributing to income were offset by
increases in start-up costs in the form of general and administrative expenses
associated with two new full service branches which were opened by the Bank in
March and September of 1996. Management believes the long term benefits
associated with these two branches will provide additional income which will
contribute to the growth and profitability of the Bank.
ABI's total assets at December 31, 1996 were $211,965,000, an increase
of $57,017,000 or approximately 37% from December 31, 1995. This increase was
due primarily to the increase in loans originated by the Bank.
The Bank's loans at December 31, 1996 totalled $155,460,000, net, or
approximately 73% of total assets. Of this total, portfolio loans consisted of
$41,382,000 in commercial loans, $33,156,000 in commercial real estate,
$18,695,000 in residential real estate, and $42,271,000 in consumer loans, net
of deferred costs and allowance for loan losses of $395,000. Loans held for sale
were $4,335,000 in residential real estate loans and $16,016,000 in real estate
construction loans, net of deferred costs and allowance for loan losses of
$112,000. The allowance for loan losses increased from $946,000 at December 31,
1995 to $1,000,000 at December 31, 1996. The allowance for loan losses
represented approximately .64% of total loans, down from .79% at December 31,
1995.
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<PAGE> 98
NET INTEREST INCOME. The growth in loans resulted in a steady increase
in net interest income during 1996. Net interest income for the period ended
December 31, 1996 amounted to $7,137,000 on a $169,259,000 average outstanding
balance of interest-earning assets, an increase of $1,739,000 over the
$5,398,000 recorded in 1995 on average interest-earning assets of $132,468,000.
Interest income from loans during the same period comprised 86.5% and 86.9%,
respectively, of the total interest income and earned an average yield of 9.18%
and 9.19%, respectively, while interest income from investments and federal
funds sold earned an average yields of 6.10% and 6.07%, respectively. Total
interest expense for 1996 was $7,411,000 on average outstanding balances of
interest-bearing liabilities of $117,657,000 for the same period in 1995. The
average cost of interest-bearing liabilities for 1996 and 1995 was 5.18% and
5.11%, respectively. The Bank experienced an increase in the net yield on
average earning assets to 4.22% in 1996, from 4.07% in 1995, due in part to an
increase in non-interest-bearing liabilities used to fund interest-earning
assets.
PROVISION FOR LOAN LOSSES. For the year ended December 31, 1996,
$287,000 was recorded to the loan loss provision, compared to the $483,000
recorded to the provision during the year ended 1995.
The targeted level of loan loss allowance is based on management's
continual review of the loan portfolio. Management reviews the loan by type and
nature of collateral and establishes an appropriate provision for loan losses
based upon industry standards, management's experience, historical charge-off
experience, the present and prospective financial condition of specific
borrowers, industry concentrations within the loan portfolio, size of the
credit, existence and quality of any collateral, profitability, and general
economic conditions. The Bank has experienced relative low delinquency and
default rates in its portfolio due in part to adherence to established
underwriting guidelines. Management believes the allowance for loan losses is
adequate based on its assessment of the risks of loan defaults. However, the
Bank intends to review its allowance for loan losses on a monthly basis and to
provide increases in the allowance, if necessary, based on the results of this
review.
The total allowance for loan losses increased from $946,000 in 1995 to
$1,000,000 in 1996. During 1996, the Bank experienced $279,000 in charge-offs
and $46,000 in recoveries on previously charged-off loans. As of December 31,
1996, the Bank had $905,000 of loans in non-accrual status. The year end 1996
and 1995 loan loss provisions reflect the growth in the Bank's loan portfolio
and management's philosophy of maintaining adequate loan loss reserves.
Although management uses the best information available to make
determinations with respect to the allowance for loan losses, future adjustments
may be necessary if economic conditions differ substantially from the
assumptions used or adverse developments arise with respect to the Bank's
nonperforming or performing loans.
NON-INTEREST INCOME. For the year ended December 31, 1996 and 1995,
non-interest income totalled $1,834,000 and $1,473,000, respectively, an
increase of approximately 25%. During 1996, service fees on customer deposits
contributed $733,000, mortgage banking operations contributed $598,000, fees on
credit card merchant services contributed $262,000 gains from sales of
securities contributed $106,000, and other income increased to $136,000. For the
year ended 1995, mortgage banking operations contributed $587,000, service fees
on customer deposits $556,000, fees on credit card merchant services $97,000,
and miscellaneous other income $233,000.
NON-INTEREST EXPENSE. Non-interest expense for the years ended December
31, 1996 and 1995, totaled $7,279,000 and $4,797,000, respectively,
substantially all of which was general and administrative expenses. The increase
in non-interest expense is due primarily to the opening of the Palma Sola and
92
<PAGE> 99
Whitfield branches, additional lending staff, and additional support staff for
backroom operations and the related costs associated with these areas. For the
years ended December 31, 1996 and 1995, general and administrative expenses were
3.98% and 3.36%, respectively, of average assets. The largest component,
salaries and employee benefit, amounted to $3,469,000 or 48% and $2,276,000 or
47%, respectively, of total expense for the years ended 1996 and 1995.
Management continuously monitors general and administrative expenses and the
efficiency ratio to maintain non-interest expenses at a level within industry
standards.
INCOME TAX EXPENSE. For the year ended December 31, 1996, an income tax
provision totaling $522,000 was recorded, compared to a $573,000 provision for
the year ended 1995 as a result of decreased earnings during the 1996 period.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
GENERAL. For the year ended December 31, 1995 ABI reported net income
of $1,018,000 or $.26 per share, as compared to net income of $502,000 or $.46
per share for 1994. From 1994 to 1995, net interest income increased by
$1,750,000 and non-interest income increased by $842,000. The increase in
non-interest income from 1995 to 1996 is primarily attributable to increases in
collection of service charges on deposit accounts. These changes contributing to
income were partially offset by an increase in the provision of loan loss of
$294,000 and additional start-up costs in the form of general and administrative
expenses associated with the Mortgage Banking Division and the Credit Card
Merchant Services Divisions. Management believes the long term benefits
associated with these new divisions will contribute to the growth and
profitability of the Bank.
ABI's total assets at December 31, 1995 were $154,948,000, an increase
of $26,986,000 or approximately 21% from December 31, 1994. This increase was
due almost entirely to the increase in loans originated by the Bank.
The Bank's loans at December 31, 1995 totalled $118,491,000, net, or
approximately 76% of total assets. Of this total, portfolio loans consisted of
$52,600,000 in commercial and commercial real estate loans, $14,723,000 in
residential real estate, and $30,650,000 in consumer loans, net of deferred
costs and allowance for loan losses of $494,000. Loans held for sale were
$203,000 in residential real estate loans and $20,651,000 in real estate
construction loans, net of deferred costs and allowance for loan losses of
$157,000. The allowance for loan losses increased from $625,000 at December 31,
1994 to $946,000 at December 31, 1995. The allowance for loan losses represented
approximately 0.80% of total loans, up from 0.65% at December 31, 1994.
NET INTEREST INCOME. The growth in loans resulted in a steady increase
in net interest income during 1995. Net interest income for the period ended
December 31, 1995 amounted to $5,398,000 on a $132,468,000 average outstanding
balance of interest-earning assets, an increase of $1,751,000 over the
$3,647,000 recorded in 1994 on average interest-earning assets of $92,000,000.
Interest income from loans during the same period comprised 86.9% and 84.8%,
respectively, of the total interest income and earned an average yield of 9.19%
and 8.59%, respectively, while interest income from investments and federal
funds sold earned an average yields of 6.07% and 5.49%, respectively. Total
interest expense for 1995 was $6,011,000 on average outstanding balances of
interest-bearing liabilities of $117,685,000 for the same period in 1994. The
average cost of interest-bearing liabilities for 1995 and 1994 was 5.11% and
4.37%, respectively. The Bank experienced a decrease in the net yield on average
earning assets in 1995, due to offering deposit products at above market rates
in 1994 to attract deposits to fund rapid growth of loan volume originated by
the Mortgage Banking Division.
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PROVISION FOR LOAN LOSSES. For the year ended December 31, 1995,
$483,000 was recorded to the loan loss provision, compared to the $221,000
recorded to the provision during the year ended 1994.
The total allowance for loan losses increased from $625,000 in 1994 to
$964,000 in 1995. During 1995, the Bank experienced $185,000 in charge-offs and
$23,000 in recoveries on previously charged-off loans. As of December 31, 1995,
the Bank had $18,000 of loans in non-accrual status. The year end 1995 and 1994
loan loss provisions reflect the growth in the Bank's loan portfolio and
management's philosophy of maintaining adequate loan loss reserves.
NON-INTEREST INCOME. For the years ended December 31, 1995 and 1994,
non-interest income totalled $1,473,000 and $631,000, respectively, an increase
of approximately 233%. During 1995, $587,000 of non-interest income was
generated by the Mortgage Banking Division operations, including $321,000 from a
gain on sale of loans, $210,000 from a gain on sale of servicing, and $56,000
from fees on mortgage servicing. Additional non-interest income was contributed
by service fees from customer deposits of $556,000, from fees on credit card
merchant servicing of $97,000, and miscellaneous other income of $233,000. For
the year ended 1994, service fees from customer deposits were $435,000, and
miscellaneous other income totaled $196,000.
NON-INTEREST EXPENSE. Non-interest expense for the years ended December
31, 1995 and 1994, totalled $4,797,000 and $3,276,000, respectively,
substantially all of which was general and administrative expenses due primarily
to the costs associated with opening the Palmetto branch in early 1994, adding
the Mortgage Banking Division and the Credit Card Merchant Services Division in
1994, and the staffing and occupancy costs associated with operating these
areas. For years ended December 31, 1995 and 1994, general and administrative
expenses were 3.36% and 3.27%, respectively, of average assets. The largest
component, salaries and employee benefits, amounted to $2,276,000 or 47% and
$1,479,000 or 45%, respectively, of total expense for the years ended 1995 and
1994. Management continuously monitors general and administrative expenses and
the efficiency ratio to maintain non-interest expenses at a level within
industry standards.
Due to recent changes in deposit insurance premiums assessed by the
FDIC, the Bank's annual FDIC premiums were reduced to 70% or approximately
$216,000 (based on current deposit balances) effective in 1995. The Bank
received a refund of approximately $76,000 in September 1995 as payment of part
of the refund due for the applicable portion of 1995.
INCOME TAX EXPENSE. For the year ended December 31, 1995, an income tax
provision totaling $573,000 was recorded, compared to a $279,000 provision for
the year ended 1994 as a result of increased earnings during the 1995 period.
LIQUIDITY AND CAPITAL RESOURCES
ABI's principal sources of funds are deposits, principal, and interest
payments on loans, sale of loans, interest on investments, and the sale of
investments. ABI received $48.9 million from deposit growth during the nine
month period ended September 30, 1997 and $47.3 million for the year ended
December 31, 1996.
At September 30, 1997, shareholders' equity was approximately
$20,402,000, or 7.55% of total assets, as compared to $18,814,000 at December
31, 1996, or 8.88% of total assets, and $9,698,000, or 6.26% of total assets, at
December 31, 1995. At September 30, 1997 and December 31, 1996, respectively,
ABI's Tier I leverage ratio was 7.74% and 9.00%, the Tier I risk-based capital
ratio was 10.92% and 12.29% and the total risk-based capital ratio was 11.60%
and 12.95%, all in excess of FDIC guidelines for a "well capitalized" bank.
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The ALCO reviews the Bank's liquidity, which is the ability to generate
sufficient cash to meet the funding needs of current loan demand, deposit
withdrawals, and other cash demands. The primary source of funds consists of
deposits, amortization and prepayments of loan and sales of investments. The
Bank also has the ability to borrow from the FHLB and correspondent banks to
supplement its liquidity needs.
At September 30, 1997, December 31, 1996 and 1995, the liquidity ratio
of ABI was 37.49%, 32.44% and 32.14%, respectively, well in excess of regulatory
requirements.
Management believes that there are adequate funding sources to meet
future liquidity needs for the foreseeable future. Primary among these funding
sources are the repayment of principal and interest on loans, the renewal of
time deposits and the growth in the deposit base. Management does not believe
that the terms and conditions that will be present at the renewal of these
funding sources will significantly impact ABI's operations, due to its
management of the maturities of its assets and liabilities.
RECENT DEVELOPMENTS
On March 25, 1997 ABI purchased approximately 2 acres of land located
adjacent to the Bank's main office for the purpose of constructing
administrative offices. To the extent not utilized by ABI, management expects to
lease space to the Bank and possible other subsidiaries and other unrelated
businesses. This new facility will total approximately 30,000 square feet with a
construction cost of approximately $2.4 million. On October 30, 1997, ABI
obtained a $5,000,000 Commercial Revolving Line of Credit from Barnett Banks,
N.A. South Florida. The proceeds from this facility will be applied, in part, to
fund the construction ABI's new administrative offices, as well as other general
corporate purposes as shall be determined from time to time by the ABI Board or
its management. This line of credit is collateralized with the all of the
capital stock of the Bank. Interest is calculated quarterly on either a one or
three month LIBOR plus 175 basis points. After two years the loan converts into
a ten year term note with a five-year balloon payment.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related financial data presented herein
concerning ABI have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation. The primary
impact of inflation on the operations of ABI is reflected in increased operating
costs. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
changes in interest rates have a more significant impact on the performance of
ABI than do the effects of changes in the general rate of inflation and changes
in prices. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services.
FEDERAL AND STATE TAXATION
FEDERAL INCOME TAXATION. Although a bank's income tax liability is
determined under provisions of the Code, which is applicable to all taxpayers or
corporations, Sections 581 through 597 of the Code apply specifically to
financial institutions.
The two primary areas in which the treatment of financial institutions
differ from the treatment of other corporations under the Code are in the areas
of bond gains and losses and bad debt deductions. Bond gains and losses
generated from the sale or exchange of portfolio instruments are generally
treated for financial institutions as ordinary gains and losses as opposed to
capital gains and losses for other corporations, as the
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Code considers bond portfolios held by banks to be inventory in a trade or
business rather than capital assets. Banks are allowed a statutory method for
calculating a reserve for bad debt deductions.
STATE TAXATION. ABI files state income tax returns in Florida. Florida
taxes banks under primarily the same provisions as other corporations.
Generally, state taxable income is calculated under applicable Code sections
with some modifications required by state law.
FUTURE ACCOUNTING REQUIREMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128").
This statement specifies the computation, presentation and disclosure
requirements for net earnings per share for entities with publicly-held common
stock. SFAS 128 is effective for both interim and annual periods ending after
December 15, 1997 and upon adoption, all prior period net earnings per share
data presented will be restated to conform with SFAS 128.
INFORMATION ABOUT MURDOCK
GENERAL
Murdock, a Florida state chartered bank, is a commercial bank located
in Charlotte County, Florida. Murdock was chartered as a savings and loan
association in Florida on January 10, 1986 under the name "Murdock Savings
Bank". In December 1992, Murdock converted its thrift charter to a commercial
state bank charter and its name was changed to "Murdock Florida Bank". Murdock
engages in a general commercial banking business from its sole banking facility
located at 1777 Tamiami Trail, Murdock Florida. At September 30, 1997, Murdock
had total assets of approximately $62.9 million, net portfolio loans of
approximately $39.8 million, total deposits of approximately $57.0 million, and
shareholders' equity of approximately $5.2 million.
Murdock provides a wide range of banking services in the Charlotte
County area, including the offering of real estate secured loans, other asset
based loans, commercial and consumer loans, and deposit services. The business
of Murdock consists primarily of attracting deposits from the general public in
its market area and applying those funds, together with funds derived from other
sources, to the origination of loans. Because of its original organization as a
savings and loan association, a substantial portion of Murdock's loan portfolio
is comprised of single-family residential real estate loans. Murdock's principal
sources of income are from interest income on loans and investments, loan fees
and services charges. Murdock's principal expenses are the interest paid on
deposits, general, and administrative expenses and expenses associated with
nonperforming assets.
Murdock's deposits are insured by the FDIC up to applicable limits.
Murdock is not a member of the Federal Reserve System and it is subject to
examination and regulation by the Department and the FDIC. As is the case with
banking institutions generally, Murdock's operations are materially and
significantly influenced by general economic conditions and by related monetary
and fiscal policies of financial institution regulatory agencies. Deposit flows
and cost of funds are influenced by interest rates on competing investments and
general market rates of interest. Lending activities are affected by the demand
for financing of real estate and other types of loans, which in turn are
affected by the interest rates at which such financing may be offered and other
factors affecting local demand and availability of funds. Murdock faces strong
competition in the attraction of deposits (its primary source of lendable funds)
and in the origination of loans.
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MARKET AREA
Murdock's operations are based in Murdock, Florida and its primary
market area covers Charlotte County, Florida. According to published reports,
Charlotte County had an estimated population of 132,000 as of April 1997 and
experienced an aggregate growth in population from 1990-96 of approximately 17%.
The United States Census Bureau reported that Charlotte County was the fastest
growing county on a percentage basis in the U.S. during the 1980-90 decade. This
population growth has earned Charlotte County Metropolitan Statistical Area
(MSA) status from the Census Bureau. With a population of slightly more than
12,000, Punta Gorda is the only incorporated city in Charlotte County. For the
years 1993-2005, the U.S. Department of Commerce rated Punta Gorda MSA as the
fastest growing metropolitan employment area in the United States, based on
employment, earnings, total personal income and population on the basis of
historical trend. Port Charlotte/Murdock and Englewood are unincorporated areas
also located within Charlotte County. Within Charlotte County, the average
household size is 2.23 persons. This population growth has resulted in continued
construction of residential housing and related commercial support facilities.
As of 1990, the County had 64,641 multi-family and single family housing units,
a 54% increase for the decade 1980 to 1990.
Management believes that Murdock's principal markets have been
residential customers and small businesses. Specifically, Murdock has targeted
businesses with annual gross revenues up to $10 million, and all households
within the primary market areas. Businesses have been solicited through the
personal efforts of Murdock's directors and officers.
HISTORY
During the first three years of Murdock's operations, economic
conditions were favorable and the institution grew rapidly with its loan
portfolio peaking at approximately $67 million in 1989. The loan volume was
funded from deposits and borrowings from the Federal Home Loan Bank Board.
However, in 1989 the economy in Murdock's primary market area slowed
dramatically as a result of the national recession and the resulting decline in
the number of people moving or retiring to Florida. Furthermore, the Tax Reform
Act of 1986 significantly altered or removed from the Code various provisions
which had been conducive to real estate development. These and other factors
resulted in a decline in real property value at the same time as certain
borrowers became delinquent in their loans. By mid-1989, Murdock's
loan-to-deposit ratio was 110% and it had approximately $15 million in borrowed
funds. For the year ended December 31, 1989, Murdock experienced a net loss of
approximately $230,000.
As a result of the above developments, Murdock and its regulators
determined that Murdock had to halt its growth and completely restructure its
operations. Under the restructuring plan commenced in mid-1989, Murdock reduced
the size of its loan portfolio and used the funds generated thereby to repay the
borrowed funds. In addition, low cost deposit accounts, such as savings and
checking, were to be rapidly increased in an effort to replace higher cost
certificates of deposit as they matured.
Further, as part of the restructuring, in 1992 Murdock converted from a
savings and loan association into a state chartered commercial bank. The primary
reasons for the conversion were to: (i) to effect a change in the general
public's perception of Murdock so that it could more easily attract commercial
customers, thereby increasing its opportunities to acquire noninterest-bearing
checking accounts which produce fee income, and to enhance the potential for
local commercial loans, (ii) to eliminate the oversight of one regulatory
authority and the corresponding expenses attendant thereto, and (iii) to no
longer be subject to
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federal regulations which require thrift institutions to maintain the bulk of
its loan portfolio in residential mortgage loans, so that Murdock could enter
the commercial loan market.
In July 1993, following an examination of Murdock by its regulatory
authorities, the Murdock Board entered into a written agreement (the "Memorandum
of Understanding") with the FDIC and the Department which required Murdock,
among other things, to (i) increase its Tier 1 capital by $500,000 within 180
days, and thereafter maintain Murdock's Tier 1 capital ratio at not less than
6%, (ii) refrain from the payment of any cash dividends without the prior
written consent of the banking regulators, (iii) take certain actions to
strengthen Murdock's credit functions, (iv) to hire one or more credit function
officers approved by the regulators, (v) adopt plans and procedures to monitor
and reduce the dollar amount of assets classified adversely by the regulators,
(vi) maintain adequate reserves for credit losses, (vii) strengthen Murdock's
procedures for loan documentation, and (viii) provide the regulators with
periodic progress reports.
In January 1994, to satisfy the first requirement of the Memorandum of
Understanding, Murdock completed a limited private offering to its directors in
which the directors purchased 50,000 shares of Murdock Common Stock at a
purchase price of $10.00 per share for an aggregate purchase price of $500,000.
Each director participated in the limited private offering. In mid-1994, in an
effort to raise additional capital, Murdock effected an offering of
transferrable rights to purchase Murdock Common Stock at a purchase price of
$10.00 per share (the "Rights Offering"). Net of expenses, the Rights Offering
added approximately $285,000 to Murdock's equity capital.
On October 18, 1994, the Memorandum of Understanding was replaced by a
board resolution ("Board Resolution") passed by unanimous vote of the directors
at a meeting held on that date. The Board Resolution committed Murdock and its
Board of Directors to (a) maintain Tier 1 Capital at a minimum of 6%, (b)
refrain from payment of cash dividends unless approved by the regulators, (c)
review all problem assets on a monthly basis, (d) maintain an adequate loan loss
reserve, (e) continue monitoring and reporting to regulators quarterly on action
plans for adversely classified assets of $250,000 or more and to develop new
plans for any newly identified problem assets of this size, (f) maintain an
adequate system of loan documentation, and (g) prepare and submit to the
regulators a comprehensive budget and earnings forecast annually and provide
quarterly variance reports.
All of those commitments have been adhered to and at the last
examination by the Department, there was no criticism of any provision of the
Board Resolution. As a result, as of October 9, 1997, Murdock has been relieved
by the Regulators of Murdock's obligations under the Board Resolution.
The additional capital raised in 1994 was more than completely
eliminated as a result of credit losses and additions to the allowance for
credit losses in 1995 and 1996. Most of the credit losses resulted from
commercial loans which were made prior to the initiation of the restructuring
plan. During the last three quarters of 1996, Murdock worked aggressively to
liquidate its portfolio of foreclosed real estate held for sale. Additional
losses resulted when the net proceeds after expenses were less than carrying
values. At the same time, Murdock continued to make additions to is allowance
for credit losses. At September 30, 1997, Murdock had reduced its foreclosed
real estate and other assets held for sale to $51,000. See "Selected Financial
and Other Data of Murdock".
As of September 30, 1997, the loan-to-deposit ratio has been reduced to
70% and Murdock has attracted $15 million in new checking and savings deposits
while reducing other higher cost deposits. Lower cost checking and savings
deposits were 37% of total deposits as of September 30, 1997.
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LENDING ACTIVITIES
GENERAL
The primary source of income generated by Murdock is from the interest
earned from both the loan and investment portfolios. Accordingly, the quality of
Murdock's loan portfolio directly impacts its profitability. Emphasis is placed
on the borrower's ability to generate cash flow sufficient to support its debt
obligations and other cash related expenses. Because Murdock previously had been
a savings and loan association, its lending activities have primarily consisted
of residential loans. Residential loans include the origination of conventional
mortgages, residential lot loans, and residential acquisition, development, and
construction loans for the purchase or construction of single family housing on
lots. Although single-family residential loans constitute the largest component
of Murdock's lending activities, Murdock also originates commercial real estate
loans, other commercial loans, and consumer loans.
LOAN PORTFOLIO COMPOSITION
At September 30, 1997, Murdock's net loan portfolio, which is equal to
total loans less loan origination fees and allowances for credit losses, totaled
approximately $39.8 million, representing approximately 63.2% of Murdock's total
assets. As of such date, the loan portfolio consisted of 72.6% residential real
estate loans, 13% commercial real estate loans, 7.0% other commercial loans, and
7.4% installment loans. The large percentage of residential real estate loans
(those secured by units housing one-to-four families) is primarily due to
Murdock having been a savings and loan association. Commercial real estate loans
(those secured by small office buildings, apartment buildings, developed land or
vacant land) constitutes the other major category of loans originated by
Murdock.
The following table summarizes the composition of Murdock's loan
portfolio by type of loan at the dates indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- --------------------------------------
1997 1996 1995
---------------- --------------- ----------------
AMOUNT % AMOUNT % AMOUNT %
------ ------ ------ ------ ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
TYPE OF LOAN:
Residential real estate loans (1)............. $27,773 66.0% $27,513 66.6% $24,178 58.5%
Real estate construction loans................ 2,740 6.6 1,338 3.2 3,919 9.5
Commercial real estate loans (2).............. 5,474 13.0 6,659 16.0 6,703 16.2
Commercial loans (3).......................... 2,924 7.0 2,718 6.6 3,119 7.6
Consumer and other loans (4).................. 3,119 7.4 3,151 7.6 3,373 8.2
------- ------ ------- ----- ------- -----
Total loans................................. $42,030 100.0% $41,379 100.0% $41,292 100.0%
====== ===== =====
LESS:
Loans in process.............................. (1,495) (445) --
Deferred loan (fees) costs, net............... 45 (17) (23)
Allowance for loan losses..................... (815) (761) (663)
------- ------- -------
Total loans, net............................ $39,765 $40,156 $40,606
======== ======= =======
</TABLE>
- ------------
(1) Residential real estate loans include residential real estate mortgages on,
and construction loans on, one-to-four family residences.
(2) Commercial real estate loans include multi-family and land loans as well as
loans secured by other commercial real estate.
(3) Commercial loans include non-real estate commercial loans. Includes lease
financings of $165,000, $179,000, and $346,000 as of September 30, 1997,
and of December 31, 1996, and 1995, respectively.
(4) Consumer loans include installment loans to individuals.
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The following table sets forth the maturities of loans outstanding as
of December 31, 1996.
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
---------------------------------------------------------
DUE AFTER 1
DUE IN 1 YEAR BUT DUE AFTER
YEAR OR LESS BEFORE 5 YEARS 5 YEARS TOTAL
------------ -------------- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Residential mortgage loans........................... $ 967 $3,171 $23,375 $27,513
Real estate construction loans....................... 1,338 -- -- 1,338
Commercial loans (1)................................. 2,025 2,706 4,646 9,377
Consumer loans....................................... 576 1,535 1,040 3,151
------- ------ ------- -------
$ 4,906 $7,412 $29,061 $41,379
======= ====== ======= =======
</TABLE>
- ---------------
(1) Includes commercial real estate loans and non-real estate commercial loans?
Of the $36.5 million of loans due after 1997, approximately 51% of such
loans have fixed rates of interest and approximately 49% have adjustable rates.
LOAN ORIGINATIONS
Consistent with its emphasis on being a community-oriented bank,
Murdock's policy has been to concentrate its loan originations within Charlotte
County. Murdock's loan originations are principally attributable to a number of
sources, including existing customers, referrals from real estate brokers and
walk-in customers. It has been Murdock's policy to originate all loans for its
portfolio, and it is currently not engaged in the sale or purchase of whole
loans or participations.
The following table sets forth total loans originated and repaid during
the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- -----------------
1997 1996 1996 1995
---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Originations:
Residential real estate (1)....................................... $ 6,212 $ 6,037 $ 8,266 $ 9,252
Commercial real estate loans (2).................................. 49 875 1,018 1,591
Commercial loans (3).............................................. 1,625 581 948 1,240
Consumer loans (4)................................................ 1,609 1,139 1,545 2,259
------ ------- ------- -------
Total loans originated.......................................... 9,495 8,632 11,777 14,342
Principal reductions.............................................. (8,844) (9,587) (11,690) ( 6,890)
------ ------- ------- -------
Increased (decrease) in loans..................................... $ 651 $ (955) $ 87 $ 7,452
====== ======= ======= =======
</TABLE>
- ----------
(1) Residential real estate loans include residential real estate mortgages on,
and construction loans on, one-to-four family residences.
(2) Commercial real estate loans include multi-family and land loans as well as
loans secured by other commercial real estate.
(3) Commercial loans include non-real estate commercial loans.
(4) Consumer loans include installment loans to individuals.
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REAL ESTATE LOANS
A large portion of Murdock's lending activity consists of the
origination of single-family residential mortgage loans collateralized by
owner-occupied property situated in Charlotte County, Florida.
It has been Murdock's general policy to lend up to 80% of the appraised
value of the real property securing a residential mortgage loan. Loans in excess
of 80% of appraised value require a waiver of Murdock's credit policy. These
exceptions are closely monitored and private mortgage insurance is required with
respect to the amount of the loan in excess of 80% of appraised value. Even with
such insurance, the maximum loan to value ratio is 90%. In the case of real
estate secured loans, Murdock requires a valid mortgage lien on the real
property and a title insurance policy insuring the property that is to serve as
collateral. Borrowers are required to obtain fire and hazard insurance and, if
the property is designated by the Department of Housing and Urban Development to
be in a flood plain, flood insurance.
The original contractual term of residential real estate loans made by
Murdock varies, with a maximum term of 30 years. Industry experience (which
Murdock believes has been reflected in its own experience) is that, because of
refinancings and sales of property, the average life of residential loans in
Florida is between six and eight years. Murdock charges no penalty for
prepayment of mortgage loans. Mortgage loans originated by Murdock customarily
include a "due-on-sale" clause giving Murdock the right to declare a loan
immediately due and payable in the event, among other things, that the borrower
sells or otherwise disposes of the real property subject to the mortgage.
The maximum loan to appraised value ratio for commercial real estate
loans is generally 75%, subject to the same limited exception process described
above with respect to residential loans. Commercial real estate lending entails
significant additional risks in comparison to residential property lending. The
payment experience on commercial real estate loans is typically dependent on the
successful operation of the real estate project. These risks can be
significantly impacted by supply and demand conditions in the market for office
and retail space and, as a result, commercial real estate loans may be subject
to a greater extent to adverse conditions in the economy generally. To minimize
these risks, a comprehensive review of the borrower's financial capacity is made
prior to approving a loan, with a significant factor being the borrower's
independent ability to repay the proposed loan. In underwriting these loans,
Murdock considers the operating history, future operating projections, current
and projected occupancy, position in the local and regional markets and location
and physical condition of the property. If the property is owner-occupied, the
capacity of the borrower to service the debt is the primary consideration and
underwriting of the business activity is paramount. Cash flow coverage of debt
service should be greater than 1.0. Narrative reports by state certified
appraisers are currently obtained on all real estate loans. Murdock requires
appraisals on loans of more than $100,000 even though FDIC regulations only
require appraisals on real estate loans of more than $250,000. Appraisal reports
are reviewed by management for compliance with regulatory standards.
Murdock is allowed to extend loans to one borrower and certain closely
related parties in an amount equal to or up to 15% of Murdock's unimpaired
capital and surplus. Loans in an amount equal to an additional 10% of unimpaired
capital and surplus may also be made to a borrower if the additional amount is
fully secured by collateral and approved by the Murdock Board as a waiver of
Murdock's policy. At September 30, 1997, Murdock's maximum loans to borrowers
using the 15% test was $777,600.
Murdock offers both fixed and a variety of adjustable interest rate
loans. Interest rates charged by Murdock are affected principally by competitive
factors, the demand for such loans, and the costs of the supply of funds
available for lending purposes. These factors are, in turn, affected by general
economic
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conditions, monetary policies of the federal government, including the FRB,
legislative policies, and government budgetary matters.
OTHER COMMERCIAL LOANS
In its efforts to build up its commercial lending activities, Murdock
has been making loans and extending lease financing for various types of
commercial equipment, such as office, medical, farming, and industrial
equipment. Such loans and financing arrangements have generally carried
maturities ranging from one to five years.
CONSUMER LOANS
Murdock offers consumer loans to provide a broader range of financial
services to its customers and because shorter terms and higher interest rates on
such loans assist Murdock in maintaining a profitable spread between the average
loan yield and the cost of funds.
Consumer loans consist of home equity loans, loans secured by deposit
accounts, and automobile loans. Underwriting standards include a determination
of the applicant's payment history on other debts and an assessment of the
applicant's ability to meet existing obligations on the proposed loan.
Murdock offers automobile loans on new and used vehicles. New
automobile loans are made for terms of up to five years. Rates vary with the
term of the loan. The term and rates on loans for used automobiles vary with the
age of the vehicle. Murdock does not have a lending relationship with any
automobile dealerships and does not engage in floor plan financing.
Loans on deposit accounts may be made up to 95% of the account balance
with a hold placed on the account restricting the amount of withdrawal for at
least the amount borrowed. Interest rates on such loans are typically at least
2% above the deposit account rate.
Consumer loans generally represent a higher risk of loss associated
with collection than residential real estate loans because they are more
dependent on the borrower's financial stability. However, historically higher
yields earned on consumer loans compensate for the increased credit risk
associated with such loans.
LOAN UNDERWRITING POLICIES
The lending activities of Murdock are subject to written
nondiscriminatory underwriting standards and loan origination procedures
prescribed by the Murdock Board and management. The underwriting process
generally includes obtaining personal or business applications, credit reports,
financial statements, federal income tax returns, and confirmations thereof,
cash flow analysis, credit analysis, analysis of repayment ability and sources
and property valuations by independent third party appraisers. Loans must be
approved at various management levels, including the Murdock Board, depending on
the loan amount.
LOAN FEE INCOME
In addition to interest earned on loans, Murdock receives income
through fees in connection with loan originations, loan modifications, late
payments, and miscellaneous services related to its loans. Income varies from
period to period with the volume and type of loans originated, which in turn is
dependent upon prevailing interest rates and their effect on the demand for
loans in Murdock's market area.
102
<PAGE> 109
Loan origination fees are calculated as a percentage of the amount
loaned and are charged primarily on real estate loans. These fees, net of direct
loan origination costs, are deferred and taken into income over the contractual
life of the loan. Should a loan prepay or refinance, all remaining deferred fees
with respect to such loan are taken into income at that time. Commitment fees
are charged and amortized using the same method of recognition.
NONPERFORMING ASSETS AND ASSET CLASSIFICATION
When a borrower fails to make a required loan payment, a late notice is
sent by mail. A contact is made by Murdock personnel if a payment has not been
received after the tenth day. Additional notices or telephone calls are made if
the loan is 30 days past due. A summary analysis of all delinquencies is
reviewed monthly by the Murdock Board. Most loan delinquencies are cured and no
legal action is required.
Once a delinquency extends beyond 90 days, the loan is placed in
nonaccrual status (i.e., no interest is accrued by Murdock) even though formal
measures may be well underway to resolve the collection problem, including
litigation or restructuring. Consumer loans more than ninety (90) days
delinquent are written off unless they are abundantly collateralized or are to
be paid by insurance coverage. Nonaccrual loans of Murdock totaled $273,000, or
approximately 0.65% of total loans at September 30, 1997.
Real estate acquired through foreclosure or under a deed-in-lieu of
foreclosure is placed in the "Other Real Estate Owned" ("OREO") account until
sold. When acquired, the property is recorded at the lower of its cost or "fair
value" at the date of acquisition and any write-down resulting therefrom is
charged to operations. For these purposes, the Bank considers "fair value" to be
the appraised value less estimated holding, maintenance, and selling costs,
which may result in a carrying value on the books of Murdock lower than "fair
market value" (the amount that a willing buyer would pay a willing seller, when
both parties are equally informed and neither is under any pressure to effect a
transaction). All costs associated with acquiring the property and improving it,
which when added to the loan balance would not exceed the fair value, are
capitalized. After the date of acquisition, all costs of maintaining the
property are expensed. At September 30, 1997, Murdock had one property
classified as foreclosed real estate with an aggregate carrying value of
approximately $51,000.
The following table sets forth certain information, as of the date
indicated, regarding nonaccrual loans and real estate owned the ratio of such
loans and real estate owned to total assets, and certain other related
information:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996 1995
-------------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
NONACCRUAL LOANS:
Residential real estate................................................... $ 203 $ 214 $ 130
Commercial real estate.................................................... -- 15 1,017
Commercial loans.......................................................... 70 -- --
Consumer loans and other loans............................................ -- -- 77
----- ----- ------
Total nonaccrual loans................................................. 273 229 1,224
----- ----- ------
Total nonperforming loans (1).......................................... 273 229 1,224
----- ----- ------
Total nonperforming loans to total assets.............................. 0.43% 0.37% 1.91%
===== ===== ======
Foreclosed real estate and other foreclosed assets........................ 51 94 1,262
----- ----- ------
Total nonperforming loans and foreclosed real estate...................... 324 323 2,486
===== ===== ======
Total nonperforming loans and foreclosed real estate to total loans....... 0.52% 0.52% 3.88%
===== ===== ======
</TABLE>
- -------------
(1) Accruing loans which are contractually past due 90 days or more as to
principal or interest.
103
<PAGE> 110
DELINQUENT LOANS
Murdock had $566,000 of delinquent loans at September 30, 1997 with
payments that were between 30 and 90 days past due. There is one significant
loan in this group with an outstanding balance of approximately $479,000.
Management believes that this loan will be collected without significant adverse
impact on earnings; however, any discount negotiated to avoid foreclosure
litigation may impact allowances for credit losses.
ALLOWANCE FOR CREDIT LOSSES
In originating loans, Murdock recognizes that credit losses will be
experienced and that the risk of loss will vary with, among other things, the
type of loan being made, the credit worthiness of the borrower over the term of
the loan, economic conditions and, in the case of a secured loan, the value of
the security.
Accordingly, credit loss allowances are established on Murdock's loan
portfolio for anticipated losses on loans. Loan payment history, the current
economic conditions, and the loan portfolio composition are all relevant to the
determination of the adequacy of the credit loss reserve. Management's perceived
adequacy of the allowance is determined and reported monthly to the Murdock
Board and to regulators. The allowance is increased by provisions for loan
losses, which are charged against earnings.
The balance in Murdock's allowance for loan losses at September 30,
1997 was $815,000. Murdock's provision for loan losses was $71,000 during the
nine month period ended September 30, 1997. The provision for loan losses for
the year ended December 31, 1996 was $228,000 and the balance in Murdock's
allowance for loan losses at December 31, 1996 was $761,000. Although management
and the Murdock Board believe Murdock's present allowance for loan losses is
adequate, there can be no assurance that it will in fact be adequate. Recovery
and collection of the carrying value of such loans are dependent, to a great
extent, upon the economy, operating and other conditions that may be beyond
Murdock's control. Therefore, although loan losses are anticipated through the
allowance for loan losses analysis process, actual losses may differ
sufficiently enough to cause a material adjustment to future earnings.
Murdock has classified certain loans pursuant to examination by the
FDIC and the Department, outside loan review, outside auditor's review, and
internal loan review. These classified assets (including substandard and
doubtful loans) represent performing loans that have displayed a weakness in the
borrower's repayment ability or the fair value of the underlying collateral and
require higher levels of reserves. At September 30, 1997, Murdock had classified
loans totalling approximately $3.0 million, or approximately 4.8% of total
assets. This total includes loans for a commercial resort ($479,481), a
commercial property ($854,612), and an office building ($395,137). The remaining
classified loans are smaller and are secured by residential real estate or
equipment.
Murdock utilizes a loan quality review process whereby credit quality
and collateral value are determined in order for management to decide on an
asset resolution strategy. These strategies are developed into action plans that
include potential repayment restructures, additional collateral, payouts, or
litigation. These action plans also require specific time frames for completion.
104
<PAGE> 111
The following table sets forth an analysis of Murdock's allowance for
loan losses for the periods indicated.
SUMMARY OF LOAN LOSS EXPERIENCE
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------------ ------------------------
1997 1996 1996 1995
-------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Average net loans outstanding during the year................. $ 40,823 $ 41,416 $ 41,175 $ 37,814
======== ======== ======== ========
Allowance for loan losses, beginning of period................ 761 663 663 749
-------- -------- -------- --------
Loans charged-off during the period:
Residential loans.......................................... - - 10 128
Commercial loans........................................... 13 - - 195
Consumer loans............................................. 13 123 123 26
-------- -------- -------- --------
Total loans charged-off................................ 26 123 133 349
Recoveries of loans previously charged-off.................... 9 3 3 44
-------- -------- -------- --------
Net loans charged-off during the period.................... 17 120 130 305
-------- -------- -------- --------
Provisions for loan losses charged to operating expenses...... 71 148 228 219
-------- -------- -------- --------
Allowance for loan losses, end of period...................... $ 815 $ 691 $ 761 $ 663
Ratio of net charge-offs to average loans outstanding......... 0.04 0.29 0.32 0.81
======== ======== ======== ========
Allowance as a percentage of total loans...................... 1.94% 1.71% 1.84% 1.61%
======== ======== ======== ========
Total loans at end of period.................................. $ 42,030 $ 40,500 $ 41,379 $ 41,292
======== ======== ======== ========
</TABLE>
The following table sets forth a breakdown of the allowance for credit
losses by loan category for the periods indicated. Management believes that the
allowance can be allocated by category only on an approximate basis. The
allocation of an allowance to each category is not necessarily indicative of
future losses and does not restrict the use of the allowance to absorb losses in
any other category.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
------------------------ ----------------------------------------------
1997 1996 1995
------------------------ ----------------------- -----------------------
% OF LOANS % OF LOANS % OF LOANS
IN CATEGORY IN CATEGORY IN CATEGORY
AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS AMOUNT TO TOTAL LOANS
------ -------------- ------ -------------- ------ --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Residential real estate loans................. $ 438 72.6% $ 430 69.7% $ 424 68.0%
Commercial real estate loans.................. 309 13.0 276 16.1 167 16.2
Commercial loans.............................. 15 7.0 3 6.6 5 7.6
Consumer loans................................ 53 7.4 52 7.6 67 8.2
----- ------- ------ ------- ----- ------
Total allowance for credit loss............. $ 815 100.0% $ 761 100.0% $ 663 100.0%
===== ======= ====== ======= ===== =======
</TABLE>
INVESTMENT ACTIVITIES
State chartered banks are authorized to invest in various types of
securities, including U.S. Treasury obligations, other securities of various
federal agencies, certificates of deposit at insured banks and savings
institutions, bankers acceptances, and federal funds.
Securities that management has the intent and Murdock has the ability
at the time of purchase to hold until maturity are classified securities held to
maturity. Securities in this category are carried at amortized cost adjusted for
accretion of discounts and amortization of premiums using the effective interest
method over the estimated life of the securities. If a security declines in fair
value below its amortized cost that is other
105
<PAGE> 112
than temporary, then the security will be written down to its new cost basis by
recording a loss in statement of operations. Securities to be held for
indefinite periods of time and not intended to be held to maturity are
classified as available for sale. Assets included in this category are those
assets that management intends to use as part of its asset/liability management
strategy and that may be sold in response to changes in interest rates,
resultant prepayment risk, and other factors related to interest rate and
resultant prepayment risk changes. Securities available for sale are recorded at
fair value. Both unrealized holding gains and losses on securities available for
sale, net of taxes, are included as a separate component of stockholders' equity
in the balance sheet until these gains or losses are realized. The cost of
investment securities sold is determined by the specific identification method.
If a security declines in fair value that is other than temporary, then the
securities will be written down to its fair value by recording a loss in the
statement of operations. These securities are recorded at fair value. Both
unrealized gains and losses are included in the balance sheets. Murdock
currently has no securities classified as trading securities.
At September 30, 1997, an unrealized gain of $88,000 was shown as an
increase of stockholders' equity compared to a loss of $11,000, net of taxes, as
of December 31, 1996. Murdock presently has not designated any of its investment
securities as "held to maturity".
INVESTMENT SECURITIES PORTFOLIO
The following table summarizes the carrying value of Murdock's
securities portfolio as of the dates indicated.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- --------------------
1997 1996 1995
------ ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Securities, available for sale:
U.S. treasury securities........................... $ 553 $ 501 $ 1,004
U.S. government agencies........................... 10,111 8,975 8,134
Municipal obligations.............................. 634 536 662
Mortgage-backed securities......................... 6,275 6,810 5,974
------ ------ ------
Total securities, available for sale............. $17,573 $16,822 $15,774
======= ======= =======
</TABLE>
The following table sets forth, by maturity distribution, certain
information pertaining to Murdock's investment security portfolio as of the
dates indicated:
<TABLE>
<CAPTION>
AFTER 1 YEAR AFTER 5 YEARS
ONE YEAR OR LESS TO 5 YEARS TO 10 YEARS AFTER 10 YEARS TOTAL
---------------- ---------------- ---------------- ---------------- ----------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD VALUE YIELD
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AT SEPTEMBER 30, 1997:
U.S. government agencies......... $ 502 7.68% $4,173 6.20% $5,436 7.05% $ -- .--% $10,111 6.35%
Municipal obligations............ -- -.-- -- -.-- 523 8.66 111 5.50 634 8.11
U.S. treasury securities......... -- -.-- -- -.-- 553 6.39 -- -.-- 553 6.39
----- ------ ----- -------
$ 502 7.68% $4,173 6.20% $6,512 7.16% $ 111 5.50% $11,298 6.45%
===== ===== ====== ===== ====== ===== ===== =====
Mortgage-backed securities....... 6,275 7.96
------ -----
Total.......................... $17,573 6.98%
======= ======
AT DECEMBER 31, 1996:
U.S. government agencies......... $ 509 7.68% $3,535 6.00% $4,433 6.87% $ 498 8.00% $ 8,975 6.63%
Municipal obligations............ -- -.-- -- -.-- 536 8.69 -- -.-- 536 8.69
U.S. treasury securities......... 501 6.25 -- -.-- -- -.-- -- -.-- 501 6.25
------ ------ ------ ----- -------
$1,010 6.91% $3,535 6.00% $4,969 7.05% $ 498 8.00% 10,012 6.71
====== ===== ====== ===== ====== ===== ===== =====
Mortgage-backed securities....... 6,810 7.85
------
Total.......................... $16,822 7.17%
======= =====
</TABLE>
106
<PAGE> 113
SOURCE OF FUNDS
GENERAL
Deposit accounts are Murdock's primary source of funds for use in
lending and other general business purposes. In addition, Murdock obtains funds
from normal loan amortization and prepayments and from operations (including
various types of loan fees). Scheduled loan payments of principal and interest
are a relatively stable source of funds, while deposit inflows and outflows and
loan prepayments are significantly influenced by general market rates and
economic conditions. If necessary, Murdock may borrow funds on a short-term
basis to meet liquidity needs. At September 30, 1997, Murdock had a $5.8 million
line of credit with the Federal Home Loan Bank of Atlanta. As of that date,
Murdock had no borrowings outstanding other than capital lease obligations.
DEPOSIT ACTIVITIES
Deposit accounts, including personal and business checking accounts,
savings accounts, NOW accounts and certificates of deposit, are attracted
primarily from customers residing within Murdock's primary market area. Murdock
has had a policy against utilizing brokered deposits. Murdock may negotiate
rates and other terms for certificates of deposit in the amount of $100,000 or
greater.
The principal methods used to attract deposit accounts include offering
a wide variety of services and accounts, competitive interest rates, a
convenient office location, periodic direct mailing advertisements in the
community and the ability to access transaction accounts through the use of
automated teller machines ("ATMs") at various ATM network locations throughout
the United States.
Management periodically reviews rates offered by other institutions in
its market area and adjusts Murdock's rates for deposit accounts from time to
time in an attempt to remain competitive.
Murdock's deposit accounts are insured by the FDIC up to applicable
limits. In the event of a liquidation of Murdock, depositors would be entitled
to full payment of their insured accounts prior to payment to stockholders. The
FDIC, however, has the authority to take various actions with different results
for depositors in conducting receiverships of insured institutions in default,
including, without limitation, merging the defaulting institution with another
insured institution, taking over the assets of and operating the insured
institution, and organizing a new institution to take over the insured
institution's assets.
Regulations promulgated by the FDIC place limitations on the ability of
insured depository institutions to accept, renew, or roll-over deposits by
offering rates of interest which are significantly higher than the prevailing
rates of interest on deposits offered by other insured depository institutions
having the same type of charter in such depository institution's normal market
area. Under these regulations, "well capitalized" depository institutions may
accept, renew, or roll such deposits over without restriction, "adequately
capitalized" depository institutions may accept, renew or roll such deposits
over with a waiver from the FDIC (subject to certain restrictions on payments of
rates), and "undercapitalized" depository institutions may not accept, renew or
roll such deposits over. The regulations contemplate that the definitions of
"well capitalized," "adequately capitalized", and "undercapitalized" will be the
same as the definitions adopted by the agencies to implement the corrective
action provisions of the FDICIA. As of September 30, 1997, Murdock met the
definition of a "well capitalized" depository institution.
107
<PAGE> 114
The following table shows the distribution of, and certain other
information relating to, deposit accounts by type.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
------------------- ----------------------------------------
1997 1996 1995
------------------- ------------------ -------------------
% OF % OF % OF
AMOUNT DEPOSITS AMOUNT DEPOSITS AMOUNT DEPOSITS
------ -------- ------ -------- ------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits........................... $ 3,867 6.79% $ 3,458 6.26% $ 3,310 5.82%
Savings and NOW accounts.................. 13,332 23.40 12,673 22.95 12,217 21.49
Money-market deposits..................... 3,983 6.99 3,424 6.20 2,668 4.69
Time deposits............................. 35,794 62.82 35,675 64.59 38,671 68.00
------- ------ ------- ------ ------- ------
Total deposits.......................... $56,976 100.00% $55,230 100.00% $56,866 100.00%
======= ======= ======= ======= ======= =======
</TABLE>
At December 31, 1996, certificates of deposit represented approximately
64.6% of Murdock's total deposits, down from 68% at December 31, 1995. Murdock
does not have a concentration of deposits from any one source, the loss of which
would have a material adverse effect on the business of Murdock. Management
believes that substantially all of Murdock's depositors are residents, either
full or part time, in its primary market area.
The following table indicates the amount of Murdock's certificates of
deposit of $100,000 or more by time remaining until maturity at September 30,
1997 and December 31, 1996.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1997 1996
---------------- ------------
MATURITY PERIOD (DOLLARS IN THOUSANDS)
- ---------------
<S> <C> <C>
Under three months............................................................... $ 506 $ 746
Over three months through twelve months.......................................... 1,637 1,014
Over twelve months............................................................... 1,348 1,460
------ ------
Totals...................................................................... $3,491 $3,220
====== ======
</TABLE>
The following table indicates the scheduled maturities of time deposits
of Murdock as of September 30, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
1997 1996
---------------- ------------
MATURITY PERIOD (DOLLARS IN THOUSANDS)
<S> <C> <C>
Due in 1 year or less............................................................ $ 7,159 $ 21,571
Due in more than 1 but less than 3 years......................................... 20,744 7,848
Due in more than 3 but less than 5 years......................................... 6,657 4,407
Due in over 5 years.............................................................. 1,234 1,849
------ ------
$ 35,794 $ 35,675
======== ========
</TABLE>
108
<PAGE> 115
The following table sets forth the deposit flows of Murdock during the
periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, YEARS ENDED DECEMBER 31,
1997 1996 1996 1995
------- -------- --------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Net increase (decrease) before interest credited............ $ 1,749 $ (178) $(1,645) $ 6,635
Net credited................................................ (3) 6 9 (35)
------- ------ ------- -------
Net deposit increase (decrease).......................... $ 1,746 $ (172) $(1,636) $ 6,600
======= ====== ======= =======
</TABLE>
The following table sets forth the average balances and average
weighted rates paid for Murdock's categories of interest-bearing deposits for
the periods indicated.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30, FISCAL YEARS ENDED DECEMBER 31,
1997 1996 1996 1995
--------------- --------------- --------------- ----------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE RATE BALANCE RATE BALANCE RATE BALANCE RATE
------- ---- ------- ---- ------- ---- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Savings.......................................$ 5,122 2.73% $ 5,790 2.76% $ 5,719 2.76% $ 6,941 2.76%
Money-market and NOW deposits................. 11,629 3.11 10,604 3.28 10,826 3.26 8,785 3.03
Time deposits................................. 35,934 5.47 37,299 5.49 37,063 5.50 36,019 5.48
------- ------- ------- -------
Total....................................$52,685 $53,693 $53,608 $51,745
======= ======= ======= =======
Weighted-Average Rate (all
deposits).................................. 4.68% 4.76% 4.75% 4.70%
===== ===== ==== ====
</TABLE>
BORROWINGS
Murdock has borrowed funds during the past two years to fund short-term
cash requirements. None of such funds were used to fund loan activity. In the
future, if there are periods when the supply of funds from deposits cannot meet
the demand for loans, Murdock has the ability to seek a portion of the needed
funds through loans (advances) from the Federal Home Loan Bank of Atlanta where
the Bank currently has a $5.8 million line of credit. As of September 30, 1997,
all of the line remained available for future use.
COMPETITION
Murdock encounters significant competition both in making loans and
attracting deposits. The deregulation of the banking industry and the widespread
enactment of state laws which permit multi-bank holding companies as well as
interstate banking has created a highly competitive environment for commercial
banking in Murdock's primary market area. In one or more aspects of its
business, Murdock has competed with other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, brokerage and investment banking companies, and other financial
intermediaries operating in its market area and elsewhere. Most of these
competitors, some of which are affiliated with large bank holding companies,
have substantially greater resources and lending limits, and may offer certain
services, such as trust services, that Murdock does not provide. Murdock
competes for loans primarily through competitive interest rates, loan fees
charged by Murdock, and quality of services provided to borrowers.
Murdock's primary market area, Charlotte County, Florida is served by
10 commercial banks with 21 offices, 2 savings and loan associations with 2
offices, for a total of 23 offices.
109
<PAGE> 116
Competition among financial institutions is based upon interest rates
offered on deposit accounts, interest rates charged on loans and other credit
and service charges, the quality of the services rendered, the convenience of
banking facilities, and, in the case of loans to commercial borrowers, relative
lending limits. Murdock competes for deposit accounts principally by offering a
variety of deposit programs, convenient hours, loan products, and other
services.
EMPLOYEES
At September 30, 1997, Murdock employed 24 full-time and 7 part-time
employees. None of these employees are covered by a collective bargaining
agreement and management believes that its employee relations are good.
DESCRIPTION OF PROPERTY
Murdock conducts its operations from a single leased location in a
modern five-story office building located on U.S. Highway 41 at 1777 Tamiami
Trail, Murdock, Florida. This facility, consisting of approximately 10,300
square feet on 2 floors of this building, also serves as Murdock's principal
executive and administrative offices. The bank lobby and executive offices are
located on the first floor of the building and various back-office operations
are located in other areas of the building. Parking for approximately 150
automobiles is available at this location. This facility also includes five
outside drive-in teller operations. Management believes that the facilities are
adequate for Murdock's current operations.
Murdock leases its facilities from an independent third party under a
lease requiring annual rental payments of $145,000. The initial term of the
lease expires on July 31, 2000 and Murdock has the option to renew the lease for
two additional five-year terms.
LEGAL PROCEEDINGS
Murdock has periodically been a party to or otherwise involved in legal
proceedings arising in the normal course of business, such as claims to enforce
liens, foreclose on loan defaults, claims involving the making and servicing of
real property loans, and other issues incident to Murdock's business. Management
is not aware of any proceeding threatened or pending against Murdock which, if
determined adversely, would have a material effect on the business or financial
position of Murdock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Murdock has had various loan and other banking transactions in the
ordinary course of business with the directors, executive officers, and
principal stockholders of Murdock (or an associate of such person). All such
transactions: (i) have been made in the ordinary course of business; (ii) have
been made on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the time for comparable transactions
with unrelated persons; and (iii) in the opinion of management do not involve
more than the normal risk of collectability or present other unfavorable
features. At September 30, 1997, the total dollar amount of extensions of credit
to directors and executive officers and principal stockholders of Murdock
identified below, and any of their associates (excluding extensions of credit
which were less than $60,000 to any one such person and their associates) were
$339,146, which represented approximately 6.5% of total stockholders' equity.
During the fiscal year ended December 31, 1996 and 1995, each
non-employee director of Murdock was paid a $150 fee for each meeting of the
Murdock Board attended and a $35 fee for each committee
110
<PAGE> 117
meeting attended. Charles E. Taylor, Jr., Chairman of the Board, is paid $250
for each meeting attended and is reimbursed for travel expenses for each day or
portion thereof when he is present at Murdock and providing services to Murdock
in his capacity as Chairman of the Board (including meetings of the Murdock
Board and its committees). Mr. Taylor receives no other payments for attendance
at such meetings. During 1996, Mr. Taylor was so present at Murdock for 35 days
and received $8,750 (plus travel expense reimbursement). The directors as a
group (other than Mr. Taylor) received a total of $14,445 as payment for
attendance at such meetings during 1996.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the outstanding shares of Murdock Common Stock as of
December 31, 1997, by (i) each person known to Murdock to own beneficially more
than 5% of its outstanding Murdock Common Stock, (ii) each director and certain
executive officers of Murdock, and (iii) all directors and executive officers of
Murdock as a group. Except as otherwise indicated, the persons named in the
table have sole voting and investment power with respect to all shares of
Murdock Common Stock owned by them.
<TABLE>
<CAPTION>
CURRENT BENEFICIAL OWNERSHIP
------------------------------
NUMBER PERCENT
NAME OF BENEFICIAL OWNER OF SHARES (1) OF CLASS (2)
- ------------------------ ------------- ------------
DIRECTORS AND CERTAIN EXECUTIVE OFFICERS
<S> <C> <C> <C>
J. Robert Anderson......................................................... 13,941 (3) 3.6%
Robert L. Andreasen........................................................ 38,497 (4) 9.6%
Randall F. Dunn............................................................ 600 (5) *
John David McQueen......................................................... 20,741 (6) 5.4%
Vernon E. Peeples.......................................................... 2,666 (7) *
Richard R. Rebol........................................................... 4,900 (8) 1.3%
Charles E. Taylor, Jr...................................................... 11,445 (9) 3.0%
Leo Wotitzky............................................................... 16,941 (10) 4.4%
Herbert L. Zimmerman....................................................... 19,341 (11) 5.0%
H. Martin Light, Jr........................................................ 225 (12) *
Dale E. Bowe............................................................... 750 *
Deborah Fitzgerald......................................................... -- *
All Directors and Executive Officers as a group (12 persons)............... 130,047 (13) 32.6%
OTHER BENEFICIAL HOLDERS
Richard J. Enders (14)..................................................... 19,466 5.1%
</TABLE>
- -----------------
* Less than 1%
(1) In accordance with Rule 13d-3 promulgated under the Exchange Act, a person
is deemed to be the beneficial owner of a security for purposes of the
rule if he or she has sole or shared voting power or dispositive power
with respect to such security or has the right to acquire such ownership
within 60 days. As used herein, "voting power" is the power to vote or
direct the voting of shares, and "dispositive power" is the power to
dispose or direct the disposition of shares, irrespective of any economic
interest therein.
(2) In calculating the percentage ownership for a given individual or group,
the number of shares of Murdock Common Stock outstanding includes shares
subject to options, warrants, rights, or conversion privileges exercisable
within 60 days held by such individual or group, but are not deemed
outstanding by any other person or group.
(3) Includes 13,941 shares held jointly, with his spouse.
111
<PAGE> 118
(4) Includes currently exercisable stock options to purchase 14,000 shares of
Murdock Common Stock, and 24,497 shares held as trustee under a revocable
trust established by Mr. Andreasen.
(5) Includes 500 shares held jointly with his spouse.
(6) Includes 9,000 shares held as custodian for two minor children. Mr.
McQueen disclaims any beneficial interest in such shares.
(7) Includes 2,000 shares held in an IRA trust in which Mr. Peeples has a
beneficial interest.
(8) Includes 4,500 shares held jointly with his spouse.
(9) Includes 3,200 shares held jointly with his spouse.
(10) Includes 16,941 shares held as co-trustee with spouse as the other trustee
under a revocable trust established by Mr. Wotitzky.
(11) Includes 11,100 shares held jointly with his spouse.
(12) Includes 225 shares held jointly with his spouse.
(13) Includes 14,000 shares of Murdock Common Stock which may be acquired by
such directors and officers within 60 days upon exercise of options held
by them and shares held as custodian for minor children.
(14) Mr. Enders' address is 5501 W. Veenstra Road, Prentice, WI 54556-9201.
112
<PAGE> 119
SELECTED FINANCIAL AND OTHER DATA OF MURDOCK
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
---------------- -------------------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
FINANCIAL CONDITION DATA:
Cash and due from banks........................... $ 1,147 $ 1,185 $ 3,240 $ 1,261 $ 1,306 $ 1,429
Interest-bearing deposits with banks.............. 1,378 746 633 539 724 1,436
Securities........................................ 17,573 16,822 15,774 15,737 13,498 11,866
Loans, receivable net............................. 39,765 40,156 40,606 34,139 39,219 43,881
All other assets.................................. 3,011 2,756 3,792 4,263 3,525 3,734
-------- -------- -------- -------- -------- --------
Total assets..................................... $ 62,874 $ 61,665 $ 64,045 $ 55,939 $ 58,272 $ 62,346
======== ======== ======== ======== ======== ========
Deposits.......................................... $ 56,976 $ 55,230 $ 56,866 $ 50,266 $ 53,644 $ 57,616
Other borrowings.................................. - 1,300 1,500 600 - -
All other liabilities............................. 714 445 745 396 574 891
Stockholders' equity.............................. 5,184 4,690 4,934 4,677 4,054 3,839
-------- -------- -------- -------- -------- --------
Total liabilities and
stockholders' equity........................... $ 62,874 $ 61,665 $ 64,045 $ 55,939 $ 58,272 $ 62,346
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------ -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Total interest income................... $ 3,676 $ 3,653 $ 4,883 $ 4,417 $ 3,913 $ 4,389 $ 5,278
Total interest expense.................. 1,860 1,922 2,554 2,441 1,931 2,227 3,037
------- ------- ------- ------- ------- ------- --------
Net interest income..................... 1,816 1,731 2,329 1,976 1,982 2,162 2,241
Provision for loan losses............... 71 148 228 219 70 414 307
------- ------- ------- ------- ------- ------- --------
Net interest income after
provision for loan losses.............. 1,745 1,583 2,101 1,757 1,912 1,748 1,934
Noninterest income...................... 376 482 314 613 493 569 393
Noninterest expense..................... 1,483 2,111 2,577 2,640 2,078 2,069 1,927
------- ------- ------- ------- ------- ------- --------
Earnings (loss) before
income taxes (benefit)................. 638 (46) (162) (270) 327 248 400
Income taxes (benefit).................. 243 (17) (61) (102) 117 93 124
------- ------- ------- ------- ------- ------- --------
Net earnings (loss)..................... $ 395 $ (29) $ (101) $ (168) $ 210 $ 155 $ 276
======= ======= ======= ======= ======= ======= ========
Earnings (loss) per share............... $ 1.03 $ (0.08) $ (0.26) $ (0.44) $ 0.59 $ 0.52 $ 0.92
======== ======== ======== ======== ======= ======= ========
Weighted-average number of
shares outstanding..................... 385,015 385,015 385,015 385,015 358,754 300,000 300,000
</TABLE>
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED AT OR FOR THE
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ -------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------ ------- ------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
FOR THE PERIOD:
Return on average assets................ .84% (.06)% (.16)% (.28)% .36% .25% .43%
Return on average equity................ 10.64 (.83)% (2.16) (3.49) 4.58 4.04 7.45
Average equity to average assets........ 7.93 7.43 7.46 8.02 7.94 6.27 5.83
Interest-rate spread during the period.. 3.42 3.37 3.40 3.10 3.29 3.56 3.54
Net yield on average
interest-earning assets................ 4.01 3.85 3.89 3.49 3.59 3.74 3.72
Other expense to average assets......... 3.17 4.49 4.12 4.40 3.60 3.38 3.03
Ratio of average interest-earning
assets to average interest-bearing
liabilities............................ 1.14 1.11 1.11 1.09 1.09 1.05 1.04
AT THE END OF THE PERIOD:
Nonperforming loans, and foreclosed
real estate as a percentage
of total assets........................ .52% 1.49% .52% 3.88% 4.93% 2.49% 2.25%
Allowance for loan losses as a
percentage of total loans.............. 1.94 1.71 1.84 1.61 2.21 1.72 1.65
Allowance for loan losses as a
percentage of nonperforming loans...... 299 255 332 54 68 46 83
Total number of offices................. 1 1 1 1 1 1 1
Total shares outstanding at end of period 385,015 385,015 385,015 385,015 385,015 300,000 300,000
Book value per share.................... $13.46 $11.97 $12.18 $12.82 $12.15 $13.51 $12.80
</TABLE>
113
<PAGE> 120
MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATIONS OF MURDOCK
GENERAL
Murdock is a Florida state-chartered bank which conducts a general
commercial banking business which consists of attracting deposits from the
general public and applying those funds to the origination of loans for
residential, commercial, and consumer purposes. Murdock's profitability depends
primarily on net interest income, which is the difference between interest
income generated from interest-earning assets (i.e., loans and investments) less
the interest expense incurred on interest-bearing liabilities (i.e., customer
deposits and borrowed funds). Net interest income is affected by the relative
amounts of interest-earning assets and interest-bearing liabilities, and the
interest rate paid on these balances.
Net interest income is dependent upon Murdock's interest-rate spread,
which is the difference between the average yield earned on its interest-earning
assets and the average rate paid on its interest-bearing liabilities. When
interest-earning assets approximate or exceed interest-bearing liabilities, any
positive interest rate spread will generate net interest. Accordingly, net
interest income also is strongly impacted by levels of deposits which do not
bear interest costs. During 1996, Murdock maintained a net yield on average
earning assets of 3.89%. The interest rate spread is impacted by interest rates,
deposit flows, and loan demands.
Additionally, and to a lesser extent, Murdock's profitability is
affected by such factors as the level of noninterest income and expenses, the
provision for loan losses, and the effective tax rate. Noninterest income
consists primarily of fees on deposit accounts and other fees, as well as and
income from the sale of loans and investment securities. Noninterest expenses
consist of compensation and benefits, occupancy related expenses, deposit
insurance premiums paid to the FDIC, and other operating expenses.
At September 30, 1997, Murdock had total assets of $62.9 million, an
increase of 1.9% over total assets of $61.7 million at December 31, 1996. During
the nine months ended September 30, 1997, loans receivable decreased slightly
from $40.2 million to $39.8 million. Murdock's portfolio of securities available
for sale increased to $17.6 million at September 30, 1997 from $16.8 million at
December 31, 1996. Murdock's deposits increased to $57.0 million at September
30, 1997 from $55.2 million at December 31, 1996, a 3.2% increase. The Bank had
net earnings of $395,000 or $1.03 per share for the nine months ended September
30, 1997 compared to a net loss of $(29,000) or $(0.08) per share for the same
1996 period. The net loss for the nine months ended September 30, 1997 included
the effect of the SAIF special assessment of $348,000 (before taxes).
At December 31, 1996, Murdock had total assets of $61.7 million, a
decrease of 3.6% over total assets of $64.0 million at December 31, 1995. During
the year ended December 31, 1996, loans receivable decreased $0.4 million to
$40.2 million. Murdock's portfolio of securities available for sale increased to
$16.8 million as of December 31, 1996 from $15.8 million at December 31, 1995.
Murdock's deposits decreased to $55.2 million as of December 31, 1996 from $56.9
million at December 31, 1995. Murdock had a net loss of $(101,000) or $(0.26)
per share for the year ended December 31, 1996 compared to a net loss of
$(168,000) or $(0.44) per share for 1995. The net loss for the year ended
December 31, 1996 included the effect of the SAIF special assessment of $348,000
(before taxes).
114
<PAGE> 121
LIQUIDITY AND CAPITAL RESOURCES
The liquidity of a financial institution measures the availability of
funds to meet its deposit withdrawals and other borrowing needs, maintain
reserve requirements, and otherwise sustain its operations. A Florida chartered
commercial bank is required to maintain a liquidity reserve of at least 15% of
its total transaction accounts and 8% of its total nontransaction accounts less
deposits of certain public funds. The liquidity reserve may consist of cash on
hand, cash on demand with other correspondent banks and other investments and
short-term marketable securities as determined by the rules of the Department,
such as federal funds sold and United States securities or securities guaranteed
by the United States or agencies thereof. As of September 30, 1997 and December
31, 1996, Murdock has liquidity of approximately $20.4 million and $19.6
million, respectively, or approximately 36.01% and 35.80% of total deposits
combined with borrowings, respectively. These percentages are substantially
higher than the regulatory minimum amounts.
During the nine months ended September 30, 1997, Murdock's primary
sources of funds consisted of principal payments on loans, sales, principal
payments, and maturities of securities available for sale and net increases in
deposits. Murdock used its capital resources principally to purchase investment
securities, fund existing and continuing loan commitments and to repay Federal
Home Loan Bank advances. At September 30, 1997, Murdock had commitments to
originate loans totaling $2.3 million. Scheduled maturities of certificates of
deposit during the 12 months following September 30, 1997 totaled $7.2 million.
Management believes that Murdock has adequate resources to fund all its
commitments, that substantially all of its existing commitments will be funded
within the next 12 months and, if so desired, that it can adjust the rates on
certificates of deposit to retain deposits in a changing interest-rate
environment.
During the year ended December 31, 1996, Murdock's primary sources of
funds consisted of principal and interest payments on loans and investment
securities and proceeds from sales and maturities of securities available for
sale. Murdock used its capital resources principally to purchase investment
securities and fund existing and continuing loan commitments. At December 31,
1996, Murdock had commitments to originate loans totaling $1.8 million.
Scheduled maturities of certificates of deposit during the 12 months following
December 31, 1996 totaled $21.6 million.
REGULATORY CAPITAL REQUIREMENTS
Under FDIC regulations, Murdock is required to meet certain minimum
regulatory capital requirements. This is not a valuation allowance and has not
been created by charges against earnings. These requirements represent a
restriction on stockholders' equity.
Quantitative measures established by regulation to ensure capital
adequacy require Murdock to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of September 30, 1997, that Murdock
meets all capital adequacy requirements to which it is subject.
As of September 30, 1997, the most recent notification from the state
and federal regulators categorized Murdock as well capitalized under the
regulatory framework for prompt corrective action. To be categorized as well
capitalized, Murdock must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage ratios as set forth in the table below. There are no
conditions or events since that notification that management believes have
changed Murdock's category.
115
<PAGE> 122
The following table summarizes the capital requirements for Murdock at the dates
indicated:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES: ACTION PROVISIONS:
---------------- ------------------ ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
AT SEPTEMBER 30, 1997:
Total Capital (to risk-weighted assets).............. $ 5,505 17.04% $ 2,583 8.0% $ 3,229 10.0%
Tier I Capital (to risk-weighted assets)............. 5,096 15.78 1,292 4.0 1,937 6.0
Tier I Capital (to average assets)................... 5,096 8.16 2,497 4.0 3,121 5.0
AT DECEMBER 31, 1996:
Total Capital (to risk-weighted assets).............. $ 5,104 16.02% $ 2,549 8.0% $ 3,186 10.0%
Tier I Capital (to risk-weighted assets)............. 4,701 14.76 1,274 4.0 1,911 6.0
Tier I Capital (to average assets)................... 4,701 7.63 2,463 4.0 3,080 5.0
</TABLE>
RESULTS OF OPERATIONS
The operating results of Murdock depend primarily on its net interest
income, which is the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities, consisting
primarily of deposits. Net interest income is determined by the difference
between yields earned on interest-earning assets and rates paid on
interest-bearing liabilities ("interest-rate spread") and the relative amounts
of interest-earning assets and interest-bearing liabilities. Murdock's
interest-rate spread is affected by regulatory, economic and competitive factors
that influence interest rates, loan demand and deposit flows. In addition,
Murdock's net earnings are also affected by the level of nonperforming loans and
foreclosed real estate, as well as the level of its noninterest income, and its
noninterest expenses, such as salaries and employee benefits, occupancy and
equipment costs and provisions for losses on foreclosed real estate and income
taxes.
The following table sets forth, for the periods indicated, information
regarding (i) the total dollar amount of interest and dividend income of Murdock
from interest-earning assets and the resultant average yields; (ii) the total
dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest-rate
spread; (v) interest margin; and (vi) ratio of average interest-earning assets
to average interest-bearing liabilities.
The following table shows for each category of interest-earning assets
and interest-bearing liabilities, the average amount outstanding, the interest
earned or paid on such amount, and the average rate earned or paid for the nine
months ended September 30, 1997 and 1996, and for the years ended December 31,
1996
116
<PAGE> 123
and 1995. The table also shows the average rate earned on all interest-earning
assets, the average rate paid on all interest-bearing liabilities, and the net
yield on average interest-earning assets for the same periods.
COMPARATIVE AVERAGE BALANCES, INTEREST, AND AVERAGE YIELDS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------------------------------------- -------------------------------------------------
1997 1996 1996 1995
------------------------ ---------------------- ----------------------- -----------------------
INTEREST INTEREST INTEREST INTEREST
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE(1) BALANCE EXPENSE RATE(1) BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ------- ------- ------- ------- ------- ------- ---- ------- ------- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans receivable (2).......... $40,823 $2,607 8.51% $41,416 $2,675 8.61% $41,175 $3,559 8.64% $37,814 $3,177 8.40%
Investment securities......... 17,905 982 7.31 16,388 868 7.06 16,633 1,184 7.12 16,323 1,109 6.79
Other interest-earning
assets (3).................. 1,681 87 6.90 2,139 110 6.86 2,036 140 6.88 2,453 131 5.34
------- ------ ------- ------ ------- ------ ------- ------
Total interest-earning assets 60,409 $3,676 8.11% 59,943 $3,653 8.13% 59,844 $4,883 8.16% 56,590 $4,417 7.81%
------ ------ ------ ------
Non-interest earning assets... 2,008 2,766 2,702 3,422
------ ------- ------- ------
Total assets................. $62,417 $62,709 $62,546 $60,012
======= ======= ======= =======
INTEREST-BEARING LIABILITIES:
Savings deposits.............. $ 5,122 105 2.73% 5,790 120 2.76% $ 5,719 $ 158 2.76% $ 6,941 $ 192 2.76%
Money market and NOW deposits. 11,629 271 3.11 10,604 261 3.28 10,826 353 3.26 8,785 266 3.03
Time deposits................. 35,934 1,475 5.47 37,299 1,536 5.49 37,063 2,037 5.50 36,019 1,974 5.48
Other borrowings.............. 241 9 4.97 109 5 6.13 103 6 5.81 129 9 6.98
------- ------ ------- ------ ------- ------ ------- ------
Total interest-bearing
liabilities............... 52,926 $ 1,860 4.69% 53,802 $1,922 4.76% 53,711 $2,554 4.76% 51,874 $2,441 4.71%
------- ------ ------ -------
Non-interest bearing
liabilities................. 4,540 4,247 4,168 3,328
Stockholders' equity.......... 4,951 4,660 4,667 4,810
------- ------- ------- -------
Total liabilities and
stockholders' equity..... $62,417 $62,709 $62,546 $60,012
======= ======= ======= =======
Net interest income............. $ 1,816 $1,731 $2,329 $1,976
======= ====== ====== ======
Interest rate spread (4)........ 3.42% 3.37% 3.40% 3.10%
Net interest margin (5)......... 4.01% 3.85% 3.89% 3.49%
Rate of average
interest-earning assets
to interest-bearing
liabilities.................... 1.14 1.11 1.11 1.09
</TABLE>
- ------------------------------
(1) Annualized for comparability with full year data.
(2) Non-accrual loans included in comparative of average balances.
(3) Includes interest-bearing deposits and Federal Home Loan Bank Board of
Atlanta stock.
(4) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average costs of interest-bearing
liabilities.
(5) Net interest margin is net interest income divided by average
interest-earning assets.
The following table sets forth certain information regarding changes in
interest income and interest expense of Murdock for the periods indicated. For
each category of interest-bearing assets and
117
<PAGE> 124
interest-bearing liabilities, information is provided on changes attributable to
(i) changes in rate (change in rate multiplied by prior volume), (ii) changes in
volume (change in volume multiplied by prior rate) and (iii) changes in
rate-volume (change in rate multiplied by change in volume).
RATE/VOLUME ANALYSIS OF NET INTEREST INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
1996 COMPARED TO 1995 1995 COMPARED TO 1994
------------------------------------- -----------------------------------
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
------------------------------------- -----------------------------------
AVERAGE AVERAGE RATE/ TOTAL AVERAGE AVERAGE RATE/ TOTAL
RATE VOLUME VOLUME CHANGE RATE VOLUME VOLUME CHANGE
------- ------- ------ ------ ------- ------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Loans (1)........................... $ 91 $ 283 $ 8 $ 382 $ 236 $ 26 $ 4 $ 266
Investment securities............... 53 21 1 75 112 81 10 203
Other interest-earning assets....... 38 (23) (6) 9 47 (8) (4) 35
----- ----- ---- ----- ----- ---- ---- -----
Total interest income............. $ 182 $ 281 $ 3 $ 466 $ 395 $ 99 $ 10 $ 504
----- ----- ---- ----- ----- ---- ---- -----
INTEREST-BEARING LIABILITIES:
Savings deposits.................... $ - $ (34) $ - $ (34) $ 18 (69) (5) (56)
Money market and NOW deposits....... 20 62 5 87 65 31 12 108
Time deposits....................... 7 56 - 63 310 122 27 459
Other borrowings.................... (1) (2) - (3) - - (1) (1)
----- ----- ---- ----- ----- ---- ---- -----
Total interest expense............ $ 26 $ 82 $ 5 $ 113 $ 393 $ 84 $ 33 $ 510
----- ----- ---- ----- ----- ---- ---- -----
Net change in net interest income...... $ 156 $ 199 $ (2) $ 353 $ 2 $ 15 $ (23) $ (6)
===== ===== ==== ===== ===== ==== ===== ====
</TABLE>
- -----------
(1) Does not include loan fees.
ASSET AND LIABILITY MANAGEMENT
The asset and liability management process at Murdock is designed to
provide a framework for planning and controlling Murdock's financial resources
as well as establishing internal asset-liability procedures and guideline
targets to aid in managing Murdock's earnings. Management believes that this
formal process provides boundaries for decision making, describes various
balance sheet components, establishes means of achieving Murdock's financial
goals, and ensures compliance with the guidelines and rules of various
regulatory agencies while minimizing Murdock's exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest-rate sensitive" and by
monitoring Murdock's interest-rate sensitivity "gap." An asset or liability is
said to be interest-rate sensitive within a specific time period if it will
mature or reprice within that time period. The interest-rate sensitivity gap is
defined as the difference between interest-earning assets and interest-bearing
liabilities maturing or repricing within a given time period. The gap ratio is
computed by dividing rate-sensitive assets by rate-sensitive liabilities. A gap
ratio of 1.0% represents perfect matching. A gap is considered positive when the
amount of interest-rate sensitive assets exceeds interest-rate sensitive
liabilities. A gap is considered negative when the amount of interest-rate
sensitive liabilities exceeds interest-rate sensitive assets. During a period of
rising interest rates, a negative gap would adversely affect net interest
income, while a positive gap would result in an increase in net interest income.
During a period of falling interest rates, a negative gap would result in an
increase in net interest income, while a positive gap would adversely affect net
interest income.
118
<PAGE> 125
Since gap analysis does not take into account the probability that
potential maturities or repricings of interest rate sensitive assets and
liabilities will occur, or the relative magnitude of the repricings, Murdock
also uses an industry standard asset-liability simulation model to reflect the
repricing potential, calculate the net effect of such repricings or maturities,
and permit management to assess the probable effect on Murdock's financial
condition.
On a quarterly basis, the simulation model measures the effect on
Murdock's net interest income and market value of portfolio equity (MVPE) of
immediate interest rate changes, either up or down, of 100, 200, 300 and 400
basis points, measured against a flat base rate scenario. Murdock has adopted
guidelines for maximum acceptable volatility in each rate scenario and
management will institute appropriate strategies, when necessary, to keep the
volatility levels within those guidelines.
In order to minimize the potential for adverse effects of material and
prolonged increases in interest rates on the results of operations, Murdock's
management continues to utilize asset and liability management policies to
better match the maturities and repricing terms of its interest-earning assets
and interest-bearing liabilities. Such policies have consisted primarily of: (i)
emphasizing the origination and/or purchase of adjustable-rate loans; (ii)
maintaining a stable core deposit base; and (iii) maintaining an adequate
portfolio of liquid assets (cash and short-term investments).
Murdock maintains a portfolio of liquid assets (cash and assets
maturing or repricing in one year or less) in order to reduce its vulnerability
to shifts in market rates of interest. At December 31, 1996, 4.73% of Murdock's
total assets consisted of cash and short-term U.S. Government securities
maturing in one year or less. Furthermore, as of such date, Murdock's entire
investment portfolio was classified Available For Sale and its liquidity ratio
was 35.8%.
Murdock also seeks to maintain a large stable core deposit base by
providing quality service to its customers without significantly increasing its
cost of funds or operating expenses. The success of Murdock's core deposit
strategy is demonstrated by the stability and growth of its demand accounts,
money-market deposit accounts, savings accounts and NOW accounts, which totaled
$19.6 million, representing 35.4% of total deposits at December 31, 1996.
Management anticipates that these accounts will increase and in the future
comprise an even more significant portion of Murdock's deposit base.
As of December 31, 1996, Murdock's one-year negative interest-rate
sensitivity gap in dollars was $9.5 million. Although management believes that
the implementation of the foregoing strategies has reduced the potential adverse
effects of changes in interest rates on Murdock's results of operations, any
substantial and prolonged increase in market rates of interest could have an
adverse impact on Murdock's results of operations. As discussed above, on a
quarterly basis an asset/liability simulation analysis is performed to measure
the volatility of Murdock's projected net interest income when subjected to
interest rate shocks of 100, 200, 300 and 400 basis points. As a result of this
simulation analysis, management believes that the present gap position is
appropriate for the current interest rate environment and that a negative gap
will continue in the one year time period.
The following tables set forth the interest rate-sensitive assets and
liabilities of Murdock at December 31, 1996, which are expected to mature or are
subject to repricing in each of the time periods indicated. The tables may not
be indicative of Murdock 's rate sensitive position at other points in time. The
balances have been derived based on the financial characteristics of the various
assets and liabilities. Adjustable and floating rate assets are included in the
period in which interest rates are next scheduled to adjust rather than their
scheduled maturity dates. Fixed-rate loans are shown in the periods in which
they are
119
<PAGE> 126
scheduled to be repaid. Repricing of time deposits is based on their scheduled
maturities. Deposits without a stated maturity are repriced based on known
characteristics of the deposit product.
INTEREST RATE SENSITIVITY ANALYSIS AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
TERM TO REPRICING
------------------------------------------------------
MORE THAN MORE THAN
1 YEAR 1 YEAR TO 5 YEARS 5 YEARS TOTAL
------ ----------------- ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
LOANS (1)(2):
Adjustable rate......................................... $ 14,739 $ 5,154 $ 268 $ 20,161
Fixed rate.............................................. 1,358 1,184 15,525 18,067
Consumer and other loans................................ 576 1,535 1,040 3,151
-------- -------- ------- --------
Total loans.......................................... 16,673 7,873 16,833 41,379
Investments (3)(4)...................................... 2,931 10,014 5,786 18,731
-------- -------- ------- --------
Total rate-sensitive assets.......................... 19,604 17,887 22,619 60,110
-------- -------- ------- --------
DEPOSIT ACCOUNTS (5):
Savings................................................. $ 870 $ 2,200 $ 2,046 $ 5,116
Money market, NOW, and other transactional accounts..... 5,341 6,207 2,891 14,439
Time deposits........................................... 21,578 14,097 -- 35,675
-------- -------- ------- --------
Total deposit accounts.................................. 27,789 22,504 4,937 55,230
Other borrowings........................................ 1,300 -- -- 1,300
-------- -------- ------- --------
Total rate-sensitive liabilities..................... $ 29,089 $ 22,504 $ 4.937 $ 56,530
-------- -------- ------- --------
Interest sensitivity gap per period........................ $ (9,485) $ (4,617) $17,682 $ 3,580
======== ======== ======= ========
Cumulative gap............................................. $ (9,485) $(14,102) $ 3,580
======== ======== =======
Cumulative gap to assets................................... (15.38%) (22.87%) (5.81%)
======== ======== =======
</TABLE>
- -----------------------------
(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather than
in the period in which the loans mature. Fixed-rate loans are scheduled,
including repayment, according to their contractual maturities.
(2) Include nonaccrual loans.
(3) Investments are scheduled according to their respective repricing and
maturity dates.
(4) Includes Federal Home Loan Bank stock, interest-bearing deposits with banks,
mortgage-backed securities, and interest-bearing time deposits.
(5) Demand deposits, NOW accounts, and savings accounts are regarded as readily
accessible withdrawal accounts. However management has estimated the periods
in which these deposits will reprice or withdraw.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
GENERAL. Net earnings for the nine months ended September 30, 1997 were
$395,000 or $1.03 per share compared to a net loss of $29,000 or $0.08 per share
for the nine months ended September 30, 1996. This increase in Murdock's net
earnings was primarily due to an increase in net interest income after provision
for loan losses and a significant decrease in noninterest expenses (particularly
the SAIF assessment and foreclosed real estate expenses), partially offset by a
decrease in noninterest income and an increase in income taxes.
INTEREST INCOME AND EXPENSE. Interest income increased from $3.65
million for the nine months ended September 30, 1996 to $3.68 million for the
nine months ended September 30, 1997. Interest income on loans decreased $68,000
due to a decrease in the average loan portfolio balance from $41.4 million for
the nine month period ended September 30, 1996 to $40.8 million for the nine
month period ended September 30, 1997. Interest on investment securities
increased $114,000 due to an increase in the average investment
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securities portfolio from $16.4 million in 1996 to $17.9 million in 1997, as
well as, an increase in the average yield earned from 7.06% in 1996 to 7.31% in
1997. Interest on other interest-earning assets decreased $23,000 primarily due
to a decrease in average other interest-earning assets from $2.1 million in 1996
to $1.7 million in 1997.
Interest expense decreased to $1.86 million for the nine months ended
September 30, 1997 from $1.92 million for the nine months ended September 30,
1996. Interest expense on deposit accounts decreased primarily due to a decrease
in average interest-bearing deposit balances from $53.7 million during the nine
months ended September 30, 1996 to $52.7 million for the comparable period in
1997. Also, the average cost of all interest-bearing liabilities decreased from
4.76% for the nine months ended September 30, 1996 to 4.69% for the nine months
ended September 30, 1997.
PROVISION FOR LOAN LOSSES. The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by Murdock, industry standards, the amounts of nonperforming
loans, general economic conditions, particularly as they relate to Murdock's
market areas, and other factors related to the collectability of Murdock's loan
portfolio. The provision decreased from $148,000 for the nine months ended
September 30, 1996 to $71,000 for the nine months ended September 30, 1997. This
provision decreased because of the improved asset quality. Management believes
that the allowance for loan losses of $815,000 is adequate at September 30,
1997.
NONINTEREST INCOME. Total noninterest income decreased $106,000 for the
nine months ended September 30, 1997 compared to the 1996 period, principally
due to a decrease in other noninterest income partially offset by a decrease in
loss on sale of foreclosed real estate and an increase in other fees and service
charges.
NONINTEREST EXPENSE. Total noninterest expense decreased to $1.5
million for the nine months ended September 30, 1997 from $2.1 million for the
nine months ended September 30, 1996, primarily due to Murdock's payment of the
SAIF assessment in 1996 with no corresponding amount in 1997, a decrease in
foreclosed real estate expenses, and a decrease in the Federal Insurance
premiums.
INCOME TAXES. Income taxes were $243,000 or 36.6% of earnings before
income taxes for the nine months ended September 30, 1997 compared to an income
tax benefit of $17,000 or 37.0% of losses before tax benefit for the nine months
ended September 30, 1996.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
GENERAL. The net loss for the year ended December 31, 1996 was $101,000
or $(0.26) per share compared to a net loss of $168,000 or $(0.44) per share for
the year ended December 31, 1995. This decrease in Murdock's net loss was
primarily due to an increase in net interest income, as well as, a decrease in
foreclosed real estate expenses, partially offset by an increase in losses on
sales of foreclosed real estate and the 1996 SAIF assessment.
INTEREST INCOME AND EXPENSE. Interest income increased from $4.4
million for the year ended December 31, 1995 to $4.9 million for the year ended
December 31, 1996. Interest income on loans increased $382,000 due to an
increase in the average loan portfolio balance from $37.8 million for the year
ended December 31, 1995 to $41.2 million for 1996, as well as, an increase in
the average yield from 8.40% in 1995 to 8.64% in 1996. Interest on securities
increased $75,000 due to an increase in the average securities balance from
$16.3 million in 1995 to $16.6 million in 1996, as well as an increase in
average yield from
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6.79% in 1995 to 7.12% in 1996. Interest on other interest earning assets
increased $9,000 due to an increase in the average yield from 5.34% in 1995 to
6.88% in 1996, partially offset by a decrease in the average other interest
earning assets balance.
Interest expense increased to $2.6 million for the year ended December
31, 1996 from $2.4 million for the year ended December 31, 1995. Interest
expense on deposit accounts increased primarily due to an increase in average
interest-bearing deposit balances from $51.7 million for the year ended December
31, 1995, to $53.6 million in 1996 as well as a slight increase in the average
rate paid on deposits.
PROVISION FOR LOAN LOSSES. The provision for loan losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by Murdock, industry standards, the amounts of nonperforming
loans, general economic conditions, particularly as they relate to Murdock's
market areas, and other factors related to the collectability of Murdock's loan
portfolio. The provision increased from $219,000 for the year ended December 31,
1995 to $228,000 for the year ended December 31, 1996. Management believes that
the allowance for loan loss of $761,000 was adequate at December 31, 1996.
NONINTEREST INCOME. Total noninterest income decreased $299,000 for the
year ended December 31, 1996 compared to 1995 primarily due to a loss on the
sale of other foreclosed real estate of $336,000 in 1996 compared to a gain of
$64,000 in 1995, partially offset by an increase in deferred profit on the sale
of foreclosed real estate assets.
NONINTEREST EXPENSE. Total noninterest expense decreased $63,000 for
the year ended December 31, 1996 compared to 1995, primarily due to a decrease
in foreclosed real estate expenses offset by the SAIF assessment in 1996.
INCOME TAXES. The income tax benefit was $61,000, or 37.6% of the loss
before income tax benefit in 1996 compared to $102,000, or 37.8%, of the tax
loss before income tax benefit in 1996.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related financial data presented herein
concerning Murdock have been prepared in accordance with generally accepted
accounting principles, which require the measurement of financial position and
operating results in terms of historical dollars, without considering changes in
the relative purchasing power of money over time due to inflation. The primary
impact of inflation on the operations of Murdock is reflected in increased
operating costs. Unlike most industrial companies, virtually all of the assets
and liabilities of a financial institution are monetary in nature. As a result,
changes in interest rates have a more significant impact on the performance of
Murdock than do the effects of changes in the general rate of inflation and
changes in prices. Interest rates do not necessarily move in the same direction
or in the same magnitude as the prices of goods and services.
DESCRIPTION OF ABI CAPITAL STOCK
GENERAL
The ABI Articles currently provide for one class of capital stock
consisting of 10,000,000 ABI Common Shares. As of the ABI Record Date, there
were issued and outstanding 4,070,458 ABI Common Shares.
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Assuming the Amendments are approved by ABI Shareholders, the revised ABI
Articles will provide for authorized capital stock consisting of 20,000,000 ABI
Common Shares and 5,000,000 Preferred Shares. No series of Preferred Shares will
be issued in connection with the Merger. Following the consummation of the
proposed Merger, at an Exchange Ratio of 2.4 ABI Common Shares for each issued
and outstanding share of Murdock Common Stock, there will be approximately
4,994,494 ABI Common Shares issued and outstanding (based on 4,070,458 ABI
Common Shares outstanding immediately prior to the Effective Time), assuming no
Murdock Stockholders elects to exercise their dissenters' rights. ABI's revised
Articles will authorize the ABI Board, without shareholder approval, to fix the
preferences, limitations, and relative rights of the Preferred Shares, to
establish one or more series or classes of Preferred Shares, and to determine
the variations between each such series or class. To the extent that Preferred
Shares are issued, the rights of the holders of ABI Common Shares will be
subject to the rights and preferences conferred to holders of Preferred Shares.
ABI COMMON SHARES
Holders of ABI Common Shares are entitled to receive dividends and
other distributions when, as, and if declared by the ABI Board out of funds
legally available therefor. The payment of distributions by ABI is subject to
restrictions of Florida law applicable to the declaration of, and distributions
by, a business corporation. Generally, a corporation may not authorize and make
distributions if, after giving effect thereto, it would be unable to meet its
debts as they become due in the usual course of business or if the corporation's
total assets would be less than the sum of its total liabilities plus the amount
that would be needed, if it were to be dissolved at the time of distribution, to
satisfy claims upon dissolution of shareholders who have preferential rights
superior to the rights of the holders of its common shares. In addition, to the
extent that the Amendments are adopted authorizing Preferred Shares, the payment
of distributions to shareholders will be subject to any prior rights of
outstanding ABI Preferred Shares. The principal source of funds for payment for
cash dividends by ABI is dividends paid by the Bank. Both Florida law and
federal law place certain restrictions on the declaration and payment of cash
dividends by banking institutions. See "Regulation - Dividend Restrictions and
Transfers of Funds". Share dividends, if any are declared, may be paid from
authorized but unissued shares.
The holders of ABI Common Shares are entitled to one vote for each
share held of record on all matters submitted to a vote of shareholders. In the
case of elections for directors, shareholders do not have the right to cumulate
their votes. In the event of a dissolution, liquidation, or winding up of ABI,
whether voluntary or involuntary, holders of ABI Common Shares will be entitled
to share ratably in all net assets or funds that are available for distribution
to shareholders after satisfaction of its liabilities or after adequate
provision has been made therefor, subject to the rights of any holders of the
Preferred Shares, if any, outstanding at that time. The holders of ABI Common
Shares do not have any preferential, subscriptive, or preemptive rights with
respect to any securities of ABI, or any conversion rights. The ABI Common
Shares are not subject to redemption. The outstanding ABI Common Shares, are and
those shares issuable by ABI upon consummation of the Merger will be, when
issued in accordance with the terms of the Merger Agreement, fully paid and
nonassessable.
Sun Trust Bank-Atlanta is the Transfer Agent and Registrar for the ABI
Common Shares.
ABI PREFERRED SHARES
The ABI Articles do not presently authorize or provide for the issuance
of any class or series of Preferred Shares. If, however, the proposed Amendments
are approved by ABI Shareholders, the ABI Articles will be amended to authorize
the ABI Board, without further shareholder approval, to issue Preferred
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Shares in one or more series with powers, preferences, rights, restrictions,
limitations, and other qualifications that could adversely affect the voting and
other rights of the holders of ABI Common Shares. Among such powers preferences,
rights, restrictions, limitations, and qualifications are voting rights,
dividend rates, redemption provisions, rights upon liquidation, and conversion
privileges. See "The ABI Proposed Amendments - Authorization of a Class of
Preferred Shares (Proposal 3)".
COMPARISON OF RIGHTS OF HOLDERS
OF ABI COMMON SHARES AND MURDOCK COMMON STOCK
At the Effective Time, Murdock Stockholders will become the
shareholders of ABI, a Florida corporation, and the FBCA will govern
shareholders rights after the Merger. Florida state banking institutions are
primarily governed by the Florida Banking Code which, in turn, provides that the
FBCA shall govern except to the extent that the provisions of the Florida
Banking Code is in direct conflict with the FBCA. In such instances, the Florida
Banking Code supersedes the FBCA with respect to Florida state chartered banks.
Accordingly, even though Murdock is subject to similar Florida laws as is ABI,
differences between the Florida Banking Code and the FBCA, and between the
Murdock Articles and Murdock Bylaws and the ABI Articles and ABI Bylaws will
result in various changes in the rights of Murdock Stockholders.
The following is a summary of the material differences between the
rights of ABI Shareholders under the FBCA, the ABI Articles, and the ABI Bylaws,
as compared with those of Murdock Stockholders under the Florida Banking Code,
the Murdock Articles and the Murdock Bylaws. This summary does not purport to be
a complete description of the provisions discussed and is qualified in its
entirety by the FBCA, the Florida Banking Code, the ABI Articles, the ABI
Bylaws, the Murdock Articles, and the Murdock Bylaws, to which Murdock
Stockholders are referred.
DIRECTORS QUALIFICATIONS AND NUMBER
Under the FBCA, the number of directors may be specified in or fixed in
accordance with the articles of incorporation or bylaws of a corporation,
provided that the board must be comprised of at least one individual. The ABI
Articles, however, require that the ABI Board consist of no less than five
directors. The Proposal 5, if approved and adopted, would eliminate this
requirement and provide for the size of the ABI Board to be determined in
accordance with the ABI Bylaws. Neither the FBCA nor the ABI Bylaws require that
the directors be state residents or shareholders of the corporation in order to
qualify to serve as a director.
The ABI Bylaws provide that the ABI Board shall consist of such number
of directors as may be determined by the ABI Board, which number shall not be
less than 5 nor more than 25. By resolution, the ABI Board has set the present
size of the ABI Board at 12 directors.
The Florida Banking Code requires that a bank's board must consist of
at least 5 elected directors. The Florida Banking Code further requires that at
all times not less than a majority of directors must be citizens of the United
States and at least three-fifths of the directors must have resided in Florida
for at least one year preceding their election and must be residents of Florida
during their term in office. In addition, the Florida Banking Code requires that
at least one outside director of Murdock must have at least one year's
experience as an executive officer, regulator, or director of a financial
institution within the last 3 years. Under the FBCA, directors must be at least
18 years of age but need not be shareholders of the corporation. The Murdock
Bylaws provide that the Murdock Board shall consist of not less than 5 or more
than 25 persons. By resolution, the Murdock Board has set the present size at 9
directors. The Murdock Stockholders are
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entitled to elect all of the members of the Murdock Board. The Murdock Bylaws
further provide that the directors of the Murdock Board must be the beneficial
holders of at least 100 shares of Murdock Common Stock.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under the FBCA a director may be removed by a corporation's
shareholders with or without cause, unless the articles provide that a director
can be removed only for cause, at a duly convened special meeting of
shareholders called for that purpose when a quorum is present if the votes cast
in favor of removal exceed the vote cast opposing removal; PROVIDED that, if a
director is elected by a voting group, only the shareholders of that voting
group may participate in the vote to remove him or her. Such action also may be
taken in action by written consent where a majority of the outstanding shares
consent to the removal of the director. Both ABI and Murdock are governed by
this FBCA provision and neither the ABI Articles nor the Murdock Articles
currently contain a provision which requires removal only for cause. If,
however, Proposal 5 is approved by ABI Shareholders, the ABI Articles will be
amended to provide that ABI directors may be removed by shareholders only for
cause.
The FBCA provides that vacancies on the Board of Directors of a Florida
corporation, including vacancies resulting from an increase in the number of
directors or resulting from the removal of a director from office, may be filled
by a majority vote of the remaining directors, though less than a quorum (or by
a sole remaining director), or by the shareholders at any meeting held during
the existence of such vacancy, and each person so selected shall serve until the
next election of directors, and until a successor has been selected and
qualified. The ABI Articles, however, limits the numbers of vacancies that can
be filled by the ABI Board to two directors per year for vacancies due to an
increase in the size of the ABI Board. The proposed Amendments, if adopted,
would remove this limitation.
The Murdock Bylaws provide that upon occurrence of any vacancy on the
Murdock Board, the Murdock Board may fill such vacant position for the remainder
of the relevant term. Although the provisions of the FBCA generally control, if
vacancies are due to an increase in the size of the Board of Directors, the
Florida Banking Code limits the number of vacancies that can be filled by the
Board of Directors to two per year. A director elected to fill a vacancy shall
have the same remaining term as that of his or her predecessor in office. If the
number of directors is increased, the additional director(s) will hold office
until the next succeeding annual meeting of shareholders.
MEETINGS OF SHAREHOLDERS
ANNUAL MEETINGS.
Under the FBCA, corporations are required to hold an annual meeting for
the election of directors and for the transaction of any other proper business.
No specific time frame is established under the FBCA for when the annual meeting
must be held. Rather, the annual meeting is to take place at a time stated in or
fixed in accordance with the corporation's bylaws. ABI Articles, however,
currently require the annual meeting to be held within the first four months of
each year. Proposal 5, if approved and adopted, would eliminate this
requirement.
Under the Florida Banking Code and Murdock's Bylaws, Murdock is
required to hold an annual meeting of its shareholders within 120 days following
the end of its fiscal year. Further, under the Murdock Bylaws, shareholders'
meetings, whether annual or special, must be held within the State of Florida.
The ABI
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Bylaws specifically permit shareholders' meetings to be held within or outside
the State of Florida as determined by the ABI Board.
SPECIAL MEETINGS.
Under the FBCA, a special meeting of shareholders of a Florida
corporation may be called by the Board of Directors, persons authorized by
articles of incorporation or bylaws, and the holders of shares entitled to cast
not less than 10% of all shares entitled to vote at the meeting, unless a
different percentage, not to exceed 50%, is provided in the articles of
incorporation. The ABI Bylaws provide that special meetings of shareholders may
be called by the ABI Board, the President, Secretary, or at least 10% of the ABI
Shareholders. If Proposal 7 is approved, at least 50% of the ABI Shareholders
will be required to call a special meeting. The Murdock Bylaws permit the
Murdock Board or at least 10% of the Murdock Stockholders to call a special
meeting.
NOTICE OF SHAREHOLDER MEETINGS.
Under the FBCA and the ABI Bylaws, notice of shareholder meetings must
be provided to each shareholder of record entitled to vote at such meeting not
less than 10, nor more than 60 days prior to the meeting. The ABI Bylaws provide
that before a matter can be properly brought before the annual meeting of
shareholders, such business must be either (i) specified in the notice of the
meeting given at the direction of the ABI Board, (ii) otherwise properly brought
before the meeting by the ABI Board, or (iii) otherwise properly brought before
the meeting by an ABI Shareholder. In order for a shareholder to properly bring
any business before the annual meeting, such shareholder generally must provide
a notice to the Secretary of ABI containing certain required information not
less than 50, nor more than 78 days prior to such annual meeting. If such
meeting is not properly noticed, it can not be presented at the annual meeting
unless the ABI Board should decide otherwise.
SHAREHOLDER NOMINATIONS.
The Bylaws of both ABI and Murdock establish procedures that must be
followed in order for shareholders to nominate individuals for election to their
respective Board of Directors. Nominations, other than those made by or on
behalf of the existing management of ABI, must be made in writing and must be
delivered or mailed to and received by the Secretary of ABI not less than 30
days nor more than 75 days prior to any meeting of shareholders called for the
election of directors; provided, however, that if less than 58 days' notice of
the meeting is given to shareholders of ABI, such nomination must be received by
the Secretary of ABI not later than the close of business on the eighth day
following the day on which the notice of meeting was mailed. The nomination
notice must set forth certain information to the extent known to the notifying
shareholder including the name and address of the proposed nominee and the
notifying shareholder, the principal occupation and employment of the proposed
nominee, the number of shares owned by the notifying shareholder and information
typically required to be disclosed about nominees under the SEC rules and
regulations. Nominations not made in accordance with the above may be
disregarded by the Chairman of ABI.
The Murdock Bylaws merely require the nomination to be delivered in
writing to the Secretary of Murdock at least 20 days prior to the meeting. If,
however, the nominating committee of Murdock fails to submit nominations to the
Secretary of Murdock at least 20 days prior to the annual meeting, the Murdock
Bylaws provide that nominations for directors may be made at the annual meeting
by any stockholder entitled to vote, and such nominations will be voted upon.
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DISSENTERS' RIGHTS
Under the FBCA a shareholder is entitled to dissent and obtain payment
of the fair value of his or her shares in the event of, among other things, (a)
consummation of a plan of merger to which the corporation is a party, if either
(i) shareholder approval is required and the shareholder is entitled to vote on
the merger or (ii) the corporation is a subsidiary that is owned 80% by and is
merged into its parent; (b) consummation of a plan of share exchange to which
the corporation is a party as the corporation whose shares will be acquired, if
the shareholder is entitled to vote on the plan; (c) consummation of a sale or
exchange or substantially all of the property of the corporation other than in
the usual and regular course of the business if shareholder approval is
required; (d) an amendment to the articles of incorporation that adversely
affects the rights in respect of the dissenter's shares in specified ways; (e)
in the event of a control share acquisition as discussed in Section 607.0902 of
the FBCA; or (f) any corporate action pursuant to a stockholder vote to the
extent that the articles of incorporation provide that dissenters' rights shall
apply. Dissenters' rights are not available, however, if the class of securities
entitled to vote on those matters identified above are either registered on a
national securities exchange, designated for listing on Nasdaq National Market,
or are held by 2,000 or more shareholders. Since the ABI Common Shares are
listed on the Nasdaq National Market, dissenter's rights will not be generally
available to ABI Shareholders.
Under Florida law, in the event of a merger transaction in which the
surviving entity will be a Florida state bank, shareholders of the acquired
institution shall be afforded dissenters' rights under the Florida Banking Code.
If the shareholders of the acquired institution properly perfect their rights of
dissent, they shall have the following rights with respect to those shares.
Under the Florida Banking Code, on or promptly after the effective date of the
merger, the surviving state bank may fix an amount which it will pay in cash to
dissenting shareholders of the acquired institution. If the surviving state bank
fixes such an amount (which it is not legally required to do), it shall offer to
pay such amount to the holders of all dissenting shares of the acquired
institution. The owners of dissenting shares who have accepted the offer shall
be entitled to receive the amount so offered upon surrender of their stock
certificates at any time within 30 days after the effective date of the merger.
Those owners who have not accepted such an offer for their shares shall have the
value of their dissenting shares determined as of the effective date of the
merger by three appraisers; one to be selected by the owners of at least
two-thirds of such dissenting shares, one to be selected by the board of
directors for the surviving bank, and the third to be selected by the other two
appraisers so chosen. The value agreed upon by any two of the three appraisers
shall control and be final and binding on all parties. If, within 90 days from
the effective date of the merger, for any reason one or more of the appraisers
is not selected as required under the Florida Banking Code, or the appraisers
fail to determine the value of the dissenting shares, the Department shall cause
an appraisal of the dissenting shares to be made, which appraisal shall be paid
by the surviving state bank. Upon conclusion of the appraisal process, the value
determined pursuant to the appraisal shall be paid to all dissenting
shareholders in cash upon surrender of the stock certificates representing such
shares within 30 days after the appraisal has been made. The Florida Banking
Code does not contain a provision similar to the FBCA exempting the application
of such dissenter's rights for certain widely held securities or those listed on
an exchange or with the Nasdaq National Market.
DIVIDENDS AND DISTRIBUTIONS
The payment of dividends or other distributions is governed by the
FBCA. The FBCA generally provides that a corporation may make distributions to
its shareholders unless, after giving effect thereto, if would be unable to
satisfy its debts as they become due in the ordinary course of business or if
the corporation's total assets would be less than its total liabilities plus the
amount that would be needed, if it were to be dissolved at the time of the
distribution, to satisfy preferential rights of shareholders whose preferential
rights are superior to those of the class of shareholders receiving the dividend
or other distribution.
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The payment of dividends and distributions by Murdock are subject to
the restriction of both the FBCA and the Florida Banking Code. The Florida
Banking Code provides that dividends may only be made if, after charging-off bad
debts, depreciation, worthless assets and making provision for anticipated
future losses there remains any net profit for that period. If net profit for
the period remains, the Florida Banking Code permits a distribution of such
profits along with such amount as has been accrued to retained net profits for
the preceding 2 years. No Florida bank is permitted to declare a dividend when
the bank's net income for the current year combined with its net income for the
preceding 2 years is a loss.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS
The FBCA generally requires the affirmative vote of the holders of at
least a majority of the votes actually cast on an amendment to the articles of
incorporation (i.e., the votes cast in favor of such amendment at a meeting
where a quorum is present must exceed the votes cast against the amendment);
PROVIDED, HOWEVER, a majority of the votes entitled to be cast on the amendment
is required with respect to an amendment that would create dissenters' rights.
Under Florida corporate law, shareholder approval is not required for certain
non-material amendments. Amendment of the Murdock Articles are subject to such
requirements, except that no such amendment may be made unless it has prior
written approval of the Department.
Under the FBCA and the ABI Bylaws, the ABI Bylaws may be amended or
repealed by the ABI Board shareholders; PROVIDED, HOWEVER, that the ABI Board
may not amend or repeal the corporation's bylaws if the articles of
incorporation reserve such power to the shareholders, or the shareholders, in
amending or appealing the bylaws, expressly provide that the ABI Board may not
amend or repeal the bylaws or a particular bylaw provision. If, however,
Proposal 6 is approved and adopted, ABI Shareholders will only be able to amend
the ABI Bylaws upon the affirmative vote of 66 2/3% of the outstanding voting
stock.
The Murdock Bylaws provide that they may be amended by an affirmative
vote of at least two-thirds of the directors or by a majority of the
stockholders. Further, to the extent FDIC or the Department's approval of such
Bylaw amendment is required, such amendment will not be effective until such
approval is received.
REGULATORY MATTERS
The following discussion sets forth certain of the material elements of
the regulatory framework applicable to bank holding companies and their
subsidiaries and provides certain specific information relevant to ABI. This
regulatory framework is intended primarily for the protection of depositors and
the federal deposit insurance funds and not for the protection of security
holders. To the extent that the following information describes statutory and
regulatory provisions, it is qualified in its entirety by reference to those
provisions. A change in the statutes, regulations, or regulatory policies
applicable to ABI or its subsidiaries may have a material affect on the business
of ABI.
BANK HOLDING COMPANY REGULATION
GENERAL. As a bank holding company registered under the BHCA, ABI is
subject to the regulation and supervision of, and inspection by, the FRB. ABI is
required to file with the FRB annual reports and other information regarding its
business operations and those of its subsidiaries. Under the BHCA, ABI's
activities and those of its subsidiaries are limited to banking, managing or
controlling banks, furnishing services to or
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performing services for its subsidiaries or engaging in any other activity which
the FRB determines to be so closely related to banking or managing or
controlling banks as to be properly incident thereto. In this regard, the BHCA
prohibits a bank holding company, with certain limited exceptions, from (i)
acquiring or retaining direct or indirect ownership or control of more than 5%
of the outstanding voting stock of any company which is not a bank or bank
holding company, or (ii) engaging directly or indirectly in activities other
than those of banking, managing or controlling banks, or performing services for
its subsidiaries; unless such nonbanking business is determined by the FRB to be
so closely related to banking or managing or controlling banks as to be properly
incident thereto. In making such determinations, the FRB is required to weigh
the expected benefit to the public, such as greater convenience, increased
competition or gains in efficiency, against the possible adverse effects, such
as undue concentration of resources, decreased or unfair competition, conflicts
of interest, or unsound banking practices. Generally, bank holding companies,
such as ABI, are required to obtain prior approval of the FRB to engage in any
new activity not previously approved by the FRB.
The enactment of the Economic Growth and Regulatory Paperwork Reduction
Act of 1996 ("EGRPRA") streamlines the nonbanking activities application process
for well capitalized and well managed bank holding companies. Under EGRPRA,
qualified bank holding companies may commence a regulatory approved nonbanking
activity without prior notice to the FRB; written notice is merely required
within ten business days after commencing the activity. Also under EGRPRA, the
prior notice period is reduced to twelve business days in the event of any
nonbanking acquisition or share purchase, assuming the size of the acquisition
does not exceed 10% of risk-weighted assets of the acquiring bank holding
company and the consideration does not exceed 15% in Tier I capital. This prior
notice requirement also applies to commencing a nonbanking activity DE NOVO
which has been previously approved by order of the FRB, but not yet implemented
by regulations.
The BHCA also requires, among other things, the prior approval of the
FRB in any case where a bank holding company proposes to (i) acquire all or
substantially all of the assets of any bank, (ii) acquire direct or indirect
ownership or control of more than 5% of the outstanding voting stock of any bank
(unless it owns a majority of such bank's voting shares) or (iii) merge or
consolidate with any other bank holding company. The FRB will not approve any
acquisition, merger, or consolidation that would result in a monopoly, or which
would be in the furtherance of any attempt to monopolize the business of banking
in any part of the United States, or which would have a substantially
anti-competitive effect, unless the anti-competitive impact of the proposed
transaction are clearly outweighed by a greater public interest in meeting the
convenience and needs of the community to be served. The FRB also considers
capital adequacy and other financial and managerial factors when reviewing
acquisitions or mergers. As described in greater detail below, pursuant to the
Riegle- Neal Interstate Banking and Branch Efficiency Act of 1994 (the
"Interstate Banking and Branching Act") passed by Congress in 1994, a bank
holding company is permitted to acquire banks in states other than its home
state. See "-Bank Holding Company Regulation--Interstate Banking" below for
additional information.
There are a number of obligations and restrictions imposed on bank
holding companies and their depository institution subsidiaries by law and
regulatory policy that are designed to minimize potential loss to the depositors
of such depository institutions and the FDIC insurance funds in the event the
depository institution becomes in danger of default or in default. For example,
under the Federal Deposit Insurance Company Improvement Act of 1991 ("FDICIA"),
to avoid receivership of an insured depository institution subsidiary, a bank
holding company is required to guarantee the compliance of any insured
depository institution subsidiary that may become "undercapitalized" with the
terms of any capital restoration plan filed by such subsidiary with its
appropriate federal banking agency up to the lesser of (i) an amount equal to 5%
of the institution's total assets at the time the institution became
undercapitalized or (ii) the amount that is necessary (or would have been
necessary) to bring the institution into compliance with all applicable capital
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standards as of the time the institution fails to comply with such capital
restoration plan. See "-- Capital Adequacy Guidelines."
Under a policy of the FRB with respect to bank holding company
operations, a bank holding company is required to serve as a source of financial
strength to its subsidiary depository institutions and to commit all available
resources to support such institutions in circumstances where it might not do so
absent such policy. Although this "source of strength" policy has been
challenged in litigation, the FRB continues to take the position that it has
authority to enforce it. The FRB under the BHCA also has cease and desist
authority pursuant to which it may require a bank holding company to terminate
any activity or to relinquish control of a nonbank subsidiary (other than a
nonbank subsidiary of a bank) upon the FRB's determination that such activity or
control constitutes a serious risk to the financial soundness and stability of
any bank subsidiary of the bank holding company.
In addition, the "cross-guarantee" provisions of the FDIA require
insured depository institutions which are under common control to reimburse the
FDIC for any loss suffered by the Bank Insurance Fund ("BIF") of the FDIC as a
result of the default of a commonly controlled insured depository institution or
for any assistance provided by the FDIC to a commonly controlled insured
depository institution in danger of default. Accordingly, the cross-guarantee
provisions enable the FDIC to access a bank holding company's healthy BIF
members. The FDIC may decline to enforce the cross-guarantee provisions if it
determines that a waiver is in the best interest of the BIF. The FDIC's claims
are superior to claims of stockholders of the insured depository institution or
its holding company but are subordinate to claims of depositors, secured
creditors and holders of subordinated debt (other than affiliates) of the
commonly controlled insured depository institutions.
The FRB and the FDIC collectively have extensive enforcement authority
over commercial banks. This authority has been enhanced substantially by the
Financial Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA")
and the FDICIA. This enforcement authority includes, among other things, the
ability to assess civil money penalties, to issue cease and desist or removal
orders, to initiate injunctive actions, and, in extreme cases, to terminate
deposit insurance. In general, these enforcement actions may be initiated for
violations of laws and regulations and unsafe or unsound practices. Other
actions or inactions may provide the basis for enforcement action, including
misleading or untimely reports filed with the federal banking agencies. FIRREA
significantly increased the amount of and the grounds for civil money penalties
and generally requires public disclosure of final enforcement actions.
COMMUNITY REINVESTMENT ACT. Bank holding companies and their subsidiary
banks are subject to the provisions of the Community Reinvestment Act of 1977
("CRA") and the regulations promulgated thereunder by the appropriate bank
regulatory agency. Under the terms of the CRA, a national bank has a continuing
and affirmative obligation consistent with its safe and sound operation to help
meet the credit needs of its entire community, including low and moderate income
neighborhoods. The CRA does no establish specific lending requirements or
programs for financial institutions nor does it limit an institution's
discretion to develop the types of products and services that it believes are
best suited to its particular community, consistent with the CRA. The CRA
requires the OCC, in connection with its examination of a national bank, to
assess the association's record of meeting the credit needs of its community and
to take such record into account in its evaluation of certain applications by
such association. The CRA also requires all institutions to make public
disclosure of their CRA ratings. Further, such assessment also is required of
any national bank that, among other things, has applied to merge or consolidate
with, or acquire the assets or assume the liabilities of, a federally regulated
financial institution, or to open or relocate a branch office. In the case of a
bank holding company applying for approval to acquire a bank or a bank holding
company, the FRB will
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assess the record of each subsidiary bank of the applicant bank holding company
in considering the application.
Pursuant to current CRA regulations, an institution's CRA rating is
based on its actual performance in meeting community needs. In particular, the
rating system focuses on three tests: (i) a lending test, which evaluates the
institution's record of making loans in its service areas; (ii) an investment
test, which evaluates the institution's record of investing in community
development projects, affordable housing, and programs benefitting low or
moderate income individuals and business; and (iii) a service test, which
evaluates the institution's delivery of services through its branches, ATMs, and
other offices. The current CRA regulations also clarify how an institution's CRA
performance will be considered in the application process.
INTERSTATE BANKING. Prior to the Interstate Banking and Branching Act,
the BHCA prohibited the FRB from approving a bank holding company's application
to acquire a bank or a bank holding company located outside the state in which
the operations of its banking subsidiaries are principally conducted, unless
such acquisition is specifically authorized by statute of the state in which the
bank or bank holding company to be acquired is located. The Interstate Banking
and Branching Act significantly altered interstate banking rules. Under the
Interstate Banking and Branching Act, regardless of any previously applicable
state law, bank holding companies which meet specified capital and management
adequacy standards are eligible to acquire banks in states other than their home
states, but will need to retain a separate bank charter in each state where
subsidiaries conduct banking business. Various restrictions on interstate
acquisitions will continue to apply, including: (1) federal and state antitrust
laws, as currently in effect; (2) prohibitions on a single holding company
system accounting for more than 10% of all deposits nationwide or, subject to
various opt-in and opt-out provisions for various states on a nondiscriminatory
basis, accounting for more than 30% or more of deposits in any state; (3)
state-imposed prohibitions on acquiring banks within up to five years after they
commence operations; and (4) compliance by the acquiror with the CRA and fair
lending laws.
Furthermore, beginning June 1, 1997, the Interstate Banking and
Branching Act authorized adequately capitalized and managed banks to cross state
lines to merge with other banks, thereby creating interstate branches, subject
to individual state's adoption of various nondiscriminatory opt-in and opt-out
provisions. Under such legislation, each state has the opportunity to "opt-in"
at an earlier time thereby allowing interstate banking in that state prior to
1997, or to "opt-out". Furthermore a state may opt-in with respect to DE NOVO
branching thereby permitting a bank to open new branches in a state in which the
bank does not already have a branch. Without DE NOVO branching, an out-of-state
bank can enter the state only by acquiring an existing bank. Antitrust and
anti-concentration restrictions will apply as described above. It will not be
necessary to keep multiple state charters in effect or to have a holding company
system. Generally, all banks that are parties to a proposed post-1997 merger
must satisfy applicable CRA, management quality, and capital adequacy standards.
FLORIDA INTERSTATE BANKING LAWS. In this context, the Florida
legislature enacted legislation in 1996, the Florida Interstate Banking Act
("FIBA"), which specifically authorizes out-of-state bank holding companies
located in any state or the District of Columbia that meet certain prescribed
criteria to acquire Florida bank holding companies or banks which have been in
existence and continuously operated as a bank for more than three years, subject
to the prior approval of the Florida Department of Banking and Finance. To the
extent pre-empted by federal law, prior Department approval is not required when
such Florida bank or all bank subsidiaries of such Florida bank holding company
are national banks. Entry into the State of Florida by interstate branching or
by means other than such an acquisition is expressly prohibited by the FIBA.
Furthermore, except for initial entry into the State of Florida by an
out-of-state bank or bank holding company, no acquisition of a Florida bank or
Florida bank holding company is permitted if the resulting bank holding company
and its affiliates would control 30% or more of total deposits in the state.
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In addition, the Florida legislature also enacted the Florida
Interstate Branching Act ("Florida Branching Act") which permits interstate
branching in Florida by a merger transaction and grants Florida state-chartered
banks the same interstate branching opportunities as will be afforded to
national banks under the newly enacted federal law.
An out-of-state bank that does not operate a branch in the State of
Florida is prohibited from establishing a DE NOVO branch in Florida. Accordingly
an out-of-state bank or bank holding company can only enter Florida by acquiring
an existing Florida bank which has been operating continuously for at least
three years. The same deposit concentration limits referred to above apply. Any
out-of-state bank or bank holding company that has acquired a Florida bank under
either the FIBA or the Florida Branching Act, may establish additional branches
in Florida to the same extent as any Florida bank may do so.
Proposals to change the laws and regulations governing the banking
industry are frequently introduced in Congress, in state legislatures, and
before the various bank regulatory agencies. The likelihood and timing of any
such changes and the potential impact of such changes on ABI or the Bank cannot
be determined at this time.
BANK REGULATION
GENERAL. The Bank is a Florida state-chartered bank and, as such, is
subject to the primary supervision, examination, and regulation by the
Department and the FDIC. It is not a member of the Federal Reserve System.
As a state-chartered commercial bank, the Bank is subject to the
applicable provisions of Florida law and the regulations adopted by the
Department. The Bank must file various reports with, and is subject to periodic
examinations by the Department. Florida law and the Department regulate (in
conjunction with applicable federal laws and regulations), among other things,
the Bank's capital, permissible activities, reserves, investments, lending
authority, branching, the issuance of securities, payment of dividends,
transactions with affiliated parties, and borrowing.
The FDIC insures the deposits of the Bank to the current maximum
allowed by law. Applicable statutes and regulations administered by the FDIC
also relate to required reserves against deposits, investments, loans, mergers
and consolidations, issuance of securities, payment of dividends, establishment
of branches, and other aspects of the Bank's operations. Various consumer laws
and regulations also affect the operations of the Bank, including state usury
laws, laws relating to fiduciaries, consumer credit and equal credit, and fair
credit reporting.
TRANSACTIONS WITH AFFILIATES. There are various legal restrictions on
the event to which ABI and any future nonbank subsidiaries can borrow or
otherwise obtain credit from the Bank. There also are legal restrictions on the
Bank's purchase of or investments in the securities of and purchases of assets
from ABI and any of its future nonbank subsidiaries, a bank's loans or
extensions of credit to third parties collateralized by the securities or
obligations of ABI and any of its future nonbank subsidiaries, the issuance of
guaranties, acceptances and letters of credit on behalf of ABI and any of its
future nonbank subsidiaries, or with respect to which ABI and nonbank
subsidiaries, act as agent, participate or have a financial interest. Subject to
certain limited exception, the Bank may not extend credit to ABI or to any other
affiliate in an amount which exceeds 10% of the Bank's capital stock and surplus
and may not extend credit in the aggregate to such affiliates in an amount which
exceeds 20% of its capital stock and surplus. Further, there are legal
requirement as to the type, amount and quality of collateral which must secure
such extensions of credit transactions between the Bank and ABI or such
affiliates, and such transactions must be on terms and under circumstances,
including
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credit standards, that are substantially the same or at least as favorable to
the Bank as those prevailing at the time for comparable transactions with
non-affiliated companies. These regulations and restrictions may limit ABI's
ability to obtain funds from the Bank for its cash needs, including funds for
acquisitions, and the payment of dividends, interest and operating expenses.
Further, the Bank and ABI are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit, lease or sale of
property, or furnishing of services. For example, the Bank may not generally
require a customer to obtain other services from the Bank or ABI, and may not
require the customer to promise not to obtain other services from a competitor,
as a condition to an extension of credit.
The Bank also is subject to certain restrictions imposed by the Federal
Reserve Act on extensions of credit to executive officers, directors, principal
shareholders or any related interest of such persons. Extensions of credit (i)
must be made on substantially the same terms, including interest rates and
collateral as, and following credit underwriting procedures that are not less
stringent than those prevailing at the time for comparable transactions with
persons not covered above and who are not employees and (ii) must not involve
more than the normal risk of repayment or present other unfavorable features.
The Bank also is subject to certain lending limits and restrictions on
overdrafts to such persons. A violation of these restrictions may result in the
assessment of substantial civil monetary penalties on the Bank or any officer,
director, employee, agent or other person participating in the conduct of the
affairs of the Bank or the imposition of a cease and desist order.
DIVIDEND RESTRICTIONS AND TRANSFERS OF FUNDS
Under various banking laws, the declaration and payment of dividends by
a national banking institution is subject to certain restrictions, including
those relating to the amount and frequency of such dividends. Under the FDICIA,
an insured depository institution is prohibited from making any capital
distribution to its owner, including any dividend, if, after making such
distribution, the depository institution fails to meet the required minimum
level for any relevant capital measure, including the risk-based capital
adequacy and leverage standards described below.
If, in the opinion of the applicable federal bank regulatory authority,
a depository institution or holding company is engaged in or is about to engage
in an unsafe or unsound practice (which, depending on the financial condition of
the depository institution or holding company, could include the payment of
dividends), such authority may require, after notice and hearing (except in the
case of an emergency proceeding where there is no notice or hearing), that such
institution or holding company cease and desist from such practice. The federal
banking agencies have indicated that paying dividends that deplete a depository
institution's or holding company's capital base to an inadequate level would be
such an unsafe and unsound banking practice. Moreover, the FRB and the FDIC have
issued policy statements which provide that bank holding companies and insured
depository institutions generally should only pay dividends out of current
operating earnings.
In addition, Florida law places certain restrictions on the declaration
of dividends from state chartered banks to their holding companies. Pursuant to
the Florida Banking Code, the Board of Directors of state-chartered banks, after
charging off bad debts, depreciation, and other worthless assets, if any, and
making provisions for reasonably anticipated future losses on loans and other
assets, may quarterly, semiannually or annually declare a dividend of up to the
aggregate net profits of that period combined with bank's retained net profits
for the preceding two years and, with the approval of the Department, declare a
dividend from retained net profits which accrued prior to the preceding two
years. Before declaring such dividends, 20% of the net profits for the preceding
period as is covered by the dividend must be transferred
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to the surplus fund of the bank until the fund becomes equal to the amount of
the bank's common stock then issued and outstanding. A state-chartered bank may
not declare any dividend if (i) its net income from the current year combined
with the retained net income from the preceding two years is a loss, or (ii) the
payment of such dividend would cause the capital account of the bank to fall
below the minimum amount required by law, regulation, order, or any written
agreement with the Department or a federal regulatory agency.
CAPITAL ADEQUACY GUIDELINES
MINIMUM CAPITAL REQUIREMENTS. The federal banking agencies, including
the FDIC, have adopted substantially similar risk-based capital guidelines for
bank holding companies and banks under their supervision. The risk-based capital
guidelines are designed to make regulatory capital requirements more sensitive
to differences in risk profile among banks and bank holding companies, to
account for off-balance sheet exposure, and to minimize disincentives for
holding liquid assets. Under these guidelines, assets and off-balance sheet
items are assigned to broad risk categories each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance sheet items. In addition, these regulatory
agencies may from time to time require that a banking organization maintain
capital above the minimum limits, whether because of its financial condition or
actual or anticipated growth.
The FRB risk-based capital guidelines define a two-tier capital
framework. Under these regulations, the minimum ratio of total capital to
risk-weighted assets (including certain off-balance sheet activities, such as
stand-by letters of credit) is 8%. At least half of the total capital must be
"Tier I Capital," consisting of common shareholders' equity, noncumulative
perpetual preferred stock, and a limited amount of cumulative perpetual
preferred stock, less certain goodwill items and other intangible assets (i.e.,
at least 4% of the risk weighted assets). The remainder ("Tier II Capital") may
consist of (a) the allowance for loan losses of up to 1.25% of risk-weighted
risk assets, (b) excess of qualifying perpetual preferred stock, (c) hybrid
capital instruments, (d) perpetual debt, (e) mandatory convertible securities,
and (f) subordinated debt and intermediate term-preferred stock up to 50% of
Tier I capital. Total capital is the sum of Tier I and Tier II capital less
reciprocal holdings of other banking organizations' capital instruments and
investments in unconsolidated subsidiaries and any other deductions as
determined by the FDIC (determined on a case by case basis or as a matter of
policy after formal rule making).
In computing total risk-weighted assets, bank holding company assets
are given risk-weights of 0%, 20%, 50% and 100%. In addition, certain
off-balance sheet items are given similar credit conversion factors to convert
them to asset equivalent amounts to which an appropriate risk-weight will apply.
These computations result in the total risk-weighted assets. Most loans will be
assigned to the 100% risk category, except for first mortgage loans fully
collateralized by residential property which carry a 50% risk rating. Most
investment securities (including, primarily, general obligation claims on states
or other political subdivisions of the United States) will be assigned to the
20% category, except for municipal or state revenue bonds, which have a 50%
risk-weight, and direct obligations of the U.S. treasury or obligations backed
by the full faith and credit of the U.S. Government, which have a 0%
risk-weight. In converting off-balance sheet items, direct credit substitutes
including general guarantees and standby letters of credit backing financial
obligations, are given a 100% conversion factor. Transaction related
contingencies such as bid bonds, standby letters of credit backing non-financial
obligations, and undrawn commitments (including commercial credit lines with an
initial maturity or more than one year) have a 50% conversion factor. Short term
or trade letters of credit are converted at 20% and certain short-term
unconditionally cancelable commitments have a 0% factor.
As of December 31, 1996, the total risk-based capital ratio of ABI and
the Bank were 10.60% and 10.65%, respectively. In addition to the risk-based
capital guidelines, the FDIC also has adopted a leverage
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standard to supplement the risk-based ratios. This leverage standard focuses on
the banking institution's ratio of Tier I capital to average total assets,
adjusted for goodwill and certain other items. Under these guidelines, banking
institutions which have received the highest regulatory rating and exhibit
certain other high standards, must maintain a minimum level of Tier I capital to
average consolidated assets of at least 3%. All other banking institutions are
expected to maintain a ratio of at least 1% or 2% above the stated minimum. As
of December 31, 1996, the leverage capital ratio of ABI and the Bank were 9.93%
and 9.97%, respectively.
Federal banking agencies also have adopted regulations which require
regulators to take into consideration concentrations of audit risk and risks
from non-traditional activities, as well as an institution's ability to manage
those risks. This evaluation will be made as part of the institution's regular
safety and soundness examination. In addition, pursuant to the requirements of
the FDICIA, federal banking agencies all have adopted regulations requiring
regulators to consider interest rate risk (when interest rate sensitivity of an
institution's assets does not match its liabilities or its off-balance sheet
position) in the evaluation of a bank's capital adequacy. Concurrently, the
federal banking agencies have prepared a new methodology for evaluating interest
rate risk.
CLASSIFICATION OF BANKING INSTITUTIONS. FDICIA substantially revised
the bank regulatory and funding provisions of the FDIA and made revisions to
several other federal banking statutes. Among other things, the FDICIA provided
federal banking agencies broad powers to take "prompt corrective action" in
respect of depository institutions that do not meet minimum capital
requirements. The extent of those powers depend upon whether the institutions in
question are "well capitalized," "adequately capitalized," "undercapitalized,"
"significantly undercapitalized," or "critically undercapitalized." A depository
institution's capital tier will depend upon where its capital levels are in
relation to various relevant capital measures, which include a risk- based
capital measure and a leverage ratio capital measure, and certain other factors.
Under implementing regulations adopted by the federal banking agencies,
a bank would be considered "well capitalized" if it has (i) a total risk-based
capital ratio of 10% or greater, (ii) a Tier I risk-based capital ratio of 6% or
greater, (iii) a leverage ratio of 5% or greater and (iv) is not subject to any
order or written directive to meet and maintain a specific capital level for any
capital measure. An "adequately capitalized" bank would be defined as one that
has (i) a total risk-based capital ratio of 8% or greater, (ii) a Tier I risk-
based capital ratio of 4% of greater, and (iii) a leverage ratio of 4% or
greater (or 3% or greater in the case of a bank with a composite CAMEL rating of
1). A bank would be considered (A) "undercapitalized" if it has (i) a total
risk-based capital ratio of less than 8%, (ii) a Tier I risk-based capital ratio
of less than 4%, or (iii) a leverage ratio of less than 4% (or 3% in the case of
a bank with a composite CAMEL rating of 1); (B) "significantly undercapitalized"
if the bank has (i) a total risk-based capital ratio of less than 6%, or (ii) a
Tier I risk-based capital ratio of less than 3%, or (iii) a leverage ratio of
less than 3%; and (C) "critically undercapitalized" if the bank has a ratio of
tangible equity to total assets equal to or less than 2%. The FRB may reclassify
a "well classified" bank as "adequately capitalized" or subject an "adequately
capitalized" or "undercapitalized" institution to supervisory actions applicable
to the next lower capital category if it determines that the bank is in an
unsafe or unsound condition or deems the bank to be engaged in an unsafe or
unsound practice and not have corrected the deficiency. The Bank currently meets
the definition of a "well capitalized" institution.
FDICIA
FDICIA was enacted on December 19, 1991. Some of the more significant
provisions of FDICIA are outlined below:
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REAL ESTATE LENDING POLICIES. Pursuant to FDICIA, the FDIC and the
other federal banking agencies adopted real estate lending guidelines pursuant
to which each insured depository institution is required to adopt and maintain
written real estate lending policies in conformity with the prescribed
guidelines. Under these guidelines, each institution is expected to set loan to
value ratios not exceeding the supervisory limits set forth in the guidelines. A
loan to value ratio is generally defined as the total loan amount divided by the
appraised value of the property at the time the loan is originated. The
guidelines also require that the institution's real estate policy require proper
loan documentation and that it establishes prudent under-writing standards.
These guidelines became effective on March 19, 1993.
BROKERED DEPOSITS. The FDICIA also amended the prior law with respect
to the acceptance of brokered deposits by insured depository institutions to
permit only a "well capitalized" depository institution to accept brokered
deposits without prior regulatory approval. Under implementing regulations,
"well capitalized" banks may accept brokered deposits without restriction,
"adequately capitalized" banks may accept brokered deposits with a waiver from
the FDIC (subject to certain restrictions on payments of rates), while
"undercapitalized" banks may not accept brokered deposits. The regulations
contemplate that the definitions of "well capitalized," "adequately capitalized"
and "undercapitalized" will be the same as the definitions adopted by the
agencies to implement the prompt corrective action provisions of the FDICIA (as
described above).
OTHER FDICIA PROVISIONS. FDICIA contains numerous other provisions,
including new accounting, audit, and reporting requirements, termination of the
"too big to fail" doctrine except in special cases, limitations on the FDIC's
payment of deposits at foreign branches, new regulatory standards in such areas
as asset quality, earnings and compensation and revised regulatory standards
for, among other things, powers of state banks, real estate lending and capital
adequacy. FDICIA also requires that a depository institution provide 90 days
prior notice of the closing of any branches. Complete regulations have yet been
issued under FDICIA.
FDIC INSURANCE PREMIUMS
The Bank is required to pay semiannual FDIC deposit insurance
assessments. However, the FDIC has recently lowered assessment rates in
recognition of the fact that the BIF has achieved its legally mandated reserve
ratio. Under the FDIC's risk-based insurance system, BIF-insured institutions
are currently assessed premiums of between zero and $0.27 per $100 of insured
deposits, depending on the institution's capital position and other supervisory
factors. Each financial institution is assigned to one of three capital groups -
well capitalized, adequately capitalized or undercapitalized - and further
assigned to one of three subgroups - within a capital group, on the basis of
supervisory evaluations by the institution's primary federal and, if applicable,
state supervisors and other information relevant to the institution's financial
condition and the risk posed to the applicable FDIC deposit insurance fund. The
actual assessment rate applicable to a particular institution (and any
applicable refund) will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC.
Under the recently enacted EGRPRA, BIF-insured institutions will be
assessed for certain payments to be used to pay certain Financing Corporation
("FICO") obligations. In addition to any BIF Insurance assessments, BIF-insured
banks are expected to make payments from the FICO obligations equal to an
estimated $0.0129 per $100 of eligible deposits each year during 1997 through
1999, and an estimated $0.024 per $100 of eligible deposits thereafter.
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DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits
and certain claims for administrative expenses and employee compensation against
an insured depository institution would be afforded a priority over other
general unsecured claims against such an institution, including federal funds
and letters of credit, in the "liquidation or other resolution" of such an
institution by any receiver.
MONETARY POLICY AND ECONOMIC CONTROL
The commercial banking business in which the Bank engages is affected
not only by general economic conditions, but also by the monetary policies of
the FRB. Changes in the discount rate on member bank borrowing, availability of
borrowing at the "discount window," open market operations, the imposition of
changes in reserve requirements against members banks' deposits and assets of
foreign branches and the imposition of and changes in reserve requirements
against certain borrowings by banks and their affiliates are some of the
instruments of monetary policy available to the FRB. These monetary policies are
used in varying combinations to influence overall growth and distributions of
bank loans, investments and deposits, and this use may affect interest rates
charged on loans or paid on deposits. The monetary policies of the FRB have had
a significant effect on the operating results of commercial banks and are
expected to do so in the future. The monetary policies of these agencies are
influenced by various factors, including inflation, unemployment, short-term and
long-term changes in the international trade balance and in the fiscal policies
of the United States Government. Future monetary policies and the effect of such
policies on the future business and earnings of ABI cannot be predicted.
LEGAL OPINIONS
The legality of the ABI Common Shares to be issued to Murdock
Stockholders upon consummation of the Merger will be passed upon by Carlton,
Fields, Ward, Emmanuel, Smith & Cutler, P.A., Tampa, Florida.
The Merger Agreement provides as a condition to each party's obligation
to consummate the Merger that ABI and Murdock receive the opinion of Carlton,
Fields, Ward, Emmanuel, Smith & Cutler, P.A. substantially to the effect that
the Merger will constitute a "reorganization" under Section 368(a) of the Code.
EXPERTS
The consolidated balance sheets of ABI and its subsidiaries as of
December 31, 1996 and 1995, and the statements of income, shareholders' equity,
and cash flows for each of the two years in the period ended December 31, 1996,
included in this Joint Proxy Statement-Prospectus, have been included herein in
reliance on the report of Coopers & Lybrand, L.L.P., independent accountants,
given on the authority of that firm as experts in auditing and accounting.
The financial statements of Murdock at December 31, 1996 and for each
of the years in the two-year period then ended in this Joint Proxy
Statement-Prospectus have been audited by Hacker, Johnson, Cohen & Grieb P.A.,
independent certified public accountants, as indicated in their reports with
respect thereto, and are included in reliance upon such report given upon the
authority of said firm as experts in auditing and accounting.
137
<PAGE> 144
SHAREHOLDER PROPOSALS
Eligible ABI Shareholders may submit proposals to be considered for
shareholder action at the 1998 Annual Meeting of ABI Shareholders if such
proposals are submitted in accordance with the applicable regulations of the
SEC. Any such proposals were to be submitted in writing to the President of ABI
at the address of ABI set forth on the ABI Notice of Special Meeting and such
proposals were required to be received by the President no later than November
26, 1997 in order to be considered for inclusion in ABI's 1998 proxy materials.
An ABI Shareholder is eligible to present proposals if, at the time he or she
submits the proposals, the ABI Shareholder owns at least 1% or $1,000 in market
volume of ABI Common Shares and has held such shares for at least one year, and
such ABI Shareholder continues to own such shares through the date of the 1998
Annual Meeting.
OTHER MATTERS
As of the date of this Joint Proxy Statement-Prospectus, the ABI Board
is not aware of any other matters that will be presented for consideration at
the ABI Shareholders Meeting other than as described in this Joint Proxy
Statement-Prospectus. If any other matters shall properly come before the ABI
Shareholders Meeting or any adjournments or postponements thereof and be voted
upon, the enclosed proxies will be deemed to confer discretionary authority on
the individuals named as proxies therein to vote the shares represented by such
proxies as to any such matters. The persons named as proxies intend to vote or
not vote in accordance with the recommendation of the management of ABI.
138
<PAGE> 145
INDEX TO FINANCIAL STATEMENTS
AMERICAN BANCSHARES, INC. AND SUBSIDIARY
<TABLE>
<CAPTION>
AUDITED FINANCIAL STATEMENTS PAGE
- ---------------------------- ----
<S> <C>
Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2
Consolidated Balance Sheets, December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Income for the Years
Ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Shareholders' Equity for the Years
Ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7 to F-25
UNAUDITED CONDENSED FINANCIAL STATEMENTS
- ----------------------------------------
Consolidated Condensed Balance Sheet, September 30, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . F-26
Consolidated Condensed Statements of Income for the Nine Months
Ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-27
Consolidated Condensed Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-28
Notes to Consolidated Condensed Financial Statements for the Nine Months
Ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-29 to F-30
MURDOCK FLORIDA BANK
AUDITED FINANCIAL STATEMENTS
- ----------------------------
Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-31
Balance Sheet, December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-32
Statements of Operations for the Years
Ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-33
Statements of Stockholders' Equity for the Years
Ended December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-34
Statements of Cash Flows for the Years Ended
December 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-36 to F-45
UNAUDITED CONDENSED FINANCIAL STATEMENTS
- ----------------------------------------
Condensed Balance Sheet, September 30, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-46
Condensed Statements of Operations for the Nine Months
Ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-47
Condensed Statement of Stockholders' Equity for the Nine Months
Ended September 30, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-48
Condensed Statements of Cash Flows for the Nine Months
Ended September 30, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-49
Notes to Condensed Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-50 to F-51
</TABLE>
F-1
<PAGE> 146
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
American Bancshares, Inc. and Subsidiary
Bradenton, Florida
We have audited the accompanying consolidated balance sheets of American
Bancshares, Inc. and Subsidiary as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
American Bancshares, Inc. and Subsidiary as of December 31, 1996 and 1995, and
the consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Fort Myers, Florida
February 14, 1997
F-2
<PAGE> 147
AMERICAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<TABLE>
<CAPTION>
ASSETS 1996 1995
<S> <C> <C>
Cash and due from banks $ 15,044,908 $ 5,767,649
Federal funds sold 6,000,000 1,000,000
Loans held for sale 20,351,204 21,011,114
Investment securities available for sale (at aggregate fair value) 26,110,712 24,073,233
Loans receivable (net of allowance for loan losses and deferred loan fees/costs
of $395,463 in 1996 and $493,566 in 1995) 135,108,438 97,479,638
Premises and equipment, net 6,878,589 4,071,595
Other assets 2,471,477 1,545,191
------------- ------------
Total assets $ 211,965,328 $154,948,420
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposit accounts $ 177,202,633 $129,860,904
Securities sold under agreements to repurchase 10,112,986 9,566,668
Federal Home Loan Bank advances 5,000,000 5,000,000
Other liabilities 835,802 822,379
------------- ------------
Total liabilities 193,151,421 145,249,951
------------- ------------
COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY
Common stock - $1.175 par value; authorized 10,000,000 shares at December
31, 1996 and 10,000,000 at December 31, 1995; issued 4,001,744 and 2,401,070
shares at December 31, 1996 and 1995, respectively 4,702,049 2,821,257
Additional paid-in capital 11,736,471 5,257,877
Unrealized gain (loss) on investment securities available for sale,
net of tax of $(49,145) and $25,000 at December 31, 1996
and 1995, respectively (79,951) 47,486
Retained earnings 2,455,338 1,571,849
------------- ------------
Total shareholders' equity 18,813,907 9,698,469
------------- ------------
Total liabilities and shareholders' equity $ 211,965,328 $154,948,420
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 148
AMERICAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Interest income:
Interest and fees on loans $12,590,883 $ 9,914,496
Interest on federal funds sold 237,408 195,857
Interest on investment securities 1,720,060 1,298,366
----------- -----------
Total interest income 14,548,351 11,408,719
----------- -----------
Interest expense:
Deposits 6,926,587 5,655,161
Borrowings 484,591 355,887
----------- -----------
Total interest expense 7,411,178 6,011,048
----------- -----------
Net interest income before provision for loan losses 7,137,173 5,397,671
Provision for loan losses 286,654 482,604
----------- -----------
Net interest income after provision for loan losses 6,850,519 4,915,067
----------- -----------
Other income 1,834,059 1,472,774
----------- -----------
Other expenses 7,279,136 4,796,957
----------- -----------
Income before income tax provision 1,405,442 1,590,884
Income tax provision 521,953 572,975
----------- -----------
Net income $ 883,489 $ 1,017,909
=========== ===========
Net income per common share:
Primary earnings $ 0.24 $ 0.46
=========== ===========
Weighted average shares outstanding 3,718,502 2,234,070
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 149
AMERICAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock Additional
Authorized Outstanding Paid-In Retained
Shares Shares Par Value Capital Earnings
------ ------ --------- ------- --------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 4,000,000 2,100,920 $2,468,581 $ 4,270,251 $ 553,940
Exercise of warrants 212,932 250,195 610,333
Sale of stock 0 87,218 102,481 377,293 0
Change in net unrealized
gain on investment
securities available
for sale
Net unrealized loss on
securities designated as
available for sale
Unrealized loss on investments 0 0 0 0 0
Net income 0 0 0 0 1,017,909
Increase in authorized
shares resulting from
formation of holding
company (see Note 19) 6,000,000 0 0 0 0
---------- --------- ---------- ----------- ----------
Balance, December 31,
1995 10,000,000 2,401,070 2,821,257 5,257,877 1,571,849
Exercise of warrants 163,695 192,342 789,828
Sale of stock 0 1,436,979 1,688,450 5,688,766 0
Change in net unrealized
gain on investment
securities available
for sale 0 0 0 0 0
Net income 0 0 0 0 883,489
---------- --------- ---------- ----------- ----------
Balance, December 31,
1996 10,000,000 4,001,744 $4,702,049 $11,736,471 $2,455,338
========== ========= ========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Gains/
(Losses) on
Investment
Securities
Available
for Sale, Net Total
------------- -----
<S> <C> <C>
Balance, January 1, 1995 $(485,923) $ 6,806,849
Exercise of warrants 860,528
Sale of stock 0 479,774
Change in net unrealized
gain on investment
securities available
for sale
Net unrealized loss on
securities designated as
available for sale
Unrealized loss on investments 533,409 533,409
Net income 0 1,017,909
Increase in authorized
shares resulting from
formation of holding
company (see Note 19) 0 0
--------- -----------
Balance, December 31,
1995 47,486 9,698,469
Exercise of warrants 982,170
Sale of stock 0 7,377,216
Change in net unrealized
gain on investment
securities available
for sale (127,437) (127,437)
Net income 0 883,489
--------- -----------
Balance, December 31,
1996 $ (79,951) $18,813,907
========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 150
AMERICAN BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 883,489 $ 1,017,909
------------ ------------
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred tax credit (359,411) (261,300)
Depreciation 402,976 276,051
Amortization of investment securities 120,064 29,118
Provision for loan losses 286,654 482,604
Gain on sale of investment securities available for sale (105,826) (36,310)
Gain on sale of loans (190,624) (321,499)
Gain on sale of mortgage servicing rights (323,378) (210,327)
Gain on sale of assets 0 (42,976)
Origination of loans held for sale (38,628,254) (42,845,175)
Proceeds from sales of loans held for sale 38,158,995 42,480,846
Increase in deferred loan costs 150,103 25,079
Increase in other liabilities 371,011 361,635
Increase in other assets (699,012) (263,737)
------------ ------------
Total adjustments (816,702) (325,991)
------------ ------------
Net cash provided by operating activities 66,787 691,918
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net loans to customers (36,522,219) (22,229,401)
Purchases of bank premises and equipment (3,202,104) (1,348,094)
Proceeds on sales of assets 0 96,000
Proceeds from maturities of held to maturity investment securities 0 500,000
Proceeds from sales and maturities of available for sale investment securities 39,096,758 6,070,642
Purchases of held to maturity investment securities 0 (4,000,000)
Purchases of available for sale investment securities (41,455,883) (5,808,348)
Recoveries on loans charged off 46,487 23,255
------------ ------------
Net cash used in investing activities (42,036,961) (26,695,946)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in demand deposits, NOW, money market
and savings accounts 26,871,180 (1,127,910)
Net increase in time deposits 20,470,549 15,646,788
Net increase in securities sold under agreements to repurchase 546,318 4,189,176
Proceeds from advances from Federal Home Loan Bank 0 5,000,000
Proceeds from stock sale 8,359,386 1,340,302
------------ ------------
Net cash provided by financing activities 56,247,433 25,048,356
------------ ------------
Net increase (decrease) in cash and cash equivalents 14,277,259 (955,672)
Cash and cash equivalents at beginning of year 6,767,649 7,723,321
------------ ------------
Cash and cash equivalents at end of year $ 21,044,908 $ 6,767,649
============ ============
SUPPLEMENTAL DISCLOSURES
Interest paid $ 7,224,428 $ 5,863,000
============ ============
Income taxes paid $ 536,500 $ 434,000
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 151
AMERICAN BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
American Bancshares, Inc. (Holding Company) is a one-bank holding
company, operated under the laws of the State of Florida. Its
wholly-owned banking subsidiary is American Bank of Bradenton (Bank), a
state-chartered bank. The Holding Company, a Florida corporation
organized June 30, 1995, is a registered bank holding company under the
Bank Holding Company Act of 1956, as amended and on December 1, 1995
became the bank holding company for the Bank. The Bank was incorporated
on December 6, 1988 and opened for business on May 8, 1989. The Bank is
a general commercial bank with all the rights, powers, and privileges
granted and conferred by the Florida Banking Code. Although the Holding
Company was not formed until June 30, 1995 and did not acquire the Bank
until December 1, 1995, the financial statements have been presented as
if the Holding Company had been in existence since the Bank was formed
in 1988 and as if the Bank was its wholly owned subsidiary since that
time.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting and reporting policies of the Holding Company and Bank
conform to generally accepted accounting principles and general
practice within the banking industry. Following is a description of the
more significant of those policies:
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements
include the accounts of the Holding Company and its wholly-owned
subsidiary, American Bank of Bradenton, collectively referred to herein
as the Company. All significant intercompany accounts and transactions
have been eliminated.
INVESTMENT SECURITIES: Investment securities are classified in the
following categories:
HELD TO MATURITY - Securities that management has the intent
and the Company has the ability at the time of purchase to
hold until maturity are classified as securities held to
maturity. Securities in this category are carried at amortized
cost. Sales of securities classified as held to maturity are
prohibited except under rare circumstances. If a security has
a decline in fair value below its amortized cost that is other
than temporary, then the security will be written down to its
new cost basis by recording a loss in the statement of
operations. The Company currently has no securities classified
as held to maturity securities.
AVAILABLE FOR SALE - Securities to be held for indefinite
periods of time and not intended to be held to maturity are
classified as available for sale. Assets included in this
category are those assets that management intends to use as
part of its asset/liability management strategy and that may
be sold in response to changes in interest rates, resultant
prepayment risk and other factors related to interest rate and
resultant prepayment risk changes. Securities available for
sale are recorded at fair value. Both unrealized gains and
losses on securities available for sale, net of taxes, are
included as a separate component of shareholders' equity in
the consolidated balance sheets until these gains or losses
are realized. If a security has a decline in fair value that
is other than temporary, then the security will be written
down to its fair value by recording a loss in the consolidated
statements of operations.
F-7
<PAGE> 152
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
INVESTMENT SECURITIES, CONTINUED
TRADING SECURITIES - Securities that are held principally for
the purpose of selling in the near future are classified as
trading securities. These securities are recorded at fair
value. Both unrealized gains and losses are included in the
statement of operations. The Company currently has no
securities classified as trading securities.
Gains or losses on the disposition of investment securities are
recognized using the specific identification method.
LOANS: Loans are carried at the principal amount outstanding, net of
deferred loan fees and/or origination costs. Interest is accrued on a
simple-interest basis. Loans are charged to the allowance for loan
losses at such time as management considers them uncollectible in the
normal course of business. Accrual of interest is discontinued on a
loan, including impaired loans, when management believes, after
considering economic and business conditions and collection efforts,
the borrower's financial condition is such that collection of interest
is doubtful. Classification of a loan as nonaccrual is not necessarily
indicative of a potential loss of principal. Collections of interest
and principal on nonaccrual loans are generally applied as a reduction
to principal outstanding.
ALLOWANCE FOR LOAN LOSSES: The Company adheres to an internal asset
review system and allowance for loan losses methodology designated to
provide for the detection of problem assets and to provide an adequate
general valuation allowance to cover loan losses. A provision for loan
losses is charged to operations based on management's evaluation of
potential losses in the loan portfolio. The provision is based on an
analysis of the loan portfolio, economic conditions, historical loan
loss experience, changes in the nature and volume of the loan
portfolios and management's assessment of the inherent risk in the
portfolio in relation to the level of the allowance for loan losses.
While management uses the best information available to make these
evaluations, future adjustments to the allowance may be necessary if
economic conditions differ from the assumptions used in preparing the
evaluation. The Company also establishes provisions on a specific loan
basis when an identified problem becomes known. Ultimate losses may
vary from the current estimates and any adjustments, as they become
necessary, are reported in earnings in the periods in which they become
known.
When a loan or portion of a loan, including an impaired loan, is
determined to be uncollectible, the portion deemed uncollectible is
charged against the allowance, and subsequent recoveries, if any, are
credited to the allowance.
INCOME RECOGNITION ON IMPAIRED AND NONACCRUAL LOANS: Loans, including
impaired loans, are generally classified as nonaccrual if they are past
due as to maturity or payment of principal or interest for a period of
more than 90 days, unless such loans are well-collateralized and in the
process of collection. If a loan or a portion of a loan is classified
as doubtful or is partially charged off, the loan is classified as
nonaccrual. Loans that are on a current payment status or past due less
than 90 days may also be classified as nonaccrual if repayment in full
of principal and/or interest is in doubt.
Loans may be returned to accrual status when all principal and interest
amounts contractually due (including arrearages) are reasonably assured
of repayment within an acceptable period of time, and there is a
sustained period of repayment performance (generally a minimum of six
months) by the borrower, in accordance with the contractual terms of
interest and principal.
While a loan is classified as nonaccrual and the future collectibility
of the recorded loan balance is doubtful, collections of interest and
principal are generally applied as a reduction to principal
outstanding. When the future collectibility of the recorded loan
balance is expected, interest income may be recognized on a cash basis.
In the case where a nonaccrual loan had been partially charged off,
recognition of interest on a cash basis is limited to that which would
have been recognized on the recorded loan balance at the contractual
interest rate. Cash interest receipts in excess of that amount are
recorded as recoveries to the allowance for loan losses until prior
charge-offs have been fully recovered.
F-8
<PAGE> 153
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
LOANS HELD FOR SALE: Mortgage loans originated or purchased and intended for
sale in the secondary market are carried at the lower of cost or market as
determined by outstanding commitments from investors or current investor yield
requirements, calculated on the aggregate loan basis. Net unrealized losses, if
any, are recognized in a valuation allowance by charges to earnings. All loans
sold are subject to recourse. The recourse provisions relate to documentation
deficiencies only, which the Company may correct. Gains and losses resulting
from the sales of these loans are recognized in the period the sale occurs, as
the recourse provisions are not considered to significantly affect the earnings
process. Mortgage loan servicing fees are earned concurrently with the receipt
of the related mortgage payments.
The Company adopted Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights," (SFAS No. 122) effective January 1,
1996, which requires the Company to recognize an asset for rights to service
mortgage loans for others regardless of the manner in which those servicing
rights are acquired. It also requires the Company to assess its capitalized
mortgage servicing rights for impairment based on the fair value of those
rights. The value of mortgage servicing rights related to loans sold during 1996
was $226,000. The Company had no valuation allowance for capitalized mortgage
servicing rights as of December 31, 1996.
LOAN FEES: Loan origination fees and certain direct loan origination costs are
deferred and amortized as a yield adjustment, using a method which approximates
the interest method, over the contractual lives of the loans. The net of
deferred origination fees and deferred origination costs is presented as an
adjustment of loans receivable in the accompanying balance sheets.
During 1994, the Company implemented a program of purchasing consumer loans
collateralized by automobiles from local auto dealers. In conjunction with this
program, the Company pays a premium represented by the present value
differential of the yield required by the Company and the underlying loan
interest rate. The premium paid is amortized as a yield adjustment, using the
interest method, over the contractual lives of the loans. If the loan prepays,
the Company has recourse against the auto dealer for any unamortized premiums.
At December 31, 1996 and 1995, the unamortized premiums totaled $459,541 and
$410,450.
OTHER REAL ESTATE OWNED: Other real estate owned includes properties acquired
through foreclosure or acceptance of deeds in lieu of foreclosure. These
properties are recorded on the date acquired at the lower of fair value minus
estimated costs to sell or the recorded investment in the related loan. If the
fair value minus estimated costs to sell the property acquired is less than the
recorded investment in the related loan, the resulting loss is charged to the
allowance for loan losses. The resulting carrying value established at the date
of foreclosure becomes the new cost basis for subsequent accounting. After
foreclosure, if the fair value minus estimated costs to sell the property
becomes less than its cost, the deficiency is charged to the provision for
losses on other real estate owned or charged directly to the asset. Costs
relating to the development and improvement of the property are capitalized,
whereas those relating to holding the property for sale are charged to expense.
Gains and losses on the disposition of other real estate owned are charged to
operations as incurred. The Company had no other real estate owned at December
31, 1996 and 1995.
PREMISES AND EQUIPMENT: Premises and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed on the straight-line method over the estimated useful lives of the
related assets. Maintenance, repairs and minor improvements are charged to
operating expenses as incurred. Major improvements and betterments are
capitalized. Upon retirement or other disposition of the assets, the applicable
cost and accumulated depreciation are removed from the accounts and any gains or
losses are included in operations.
INCOME TAXES: The Holding Company and its banking subsidiary file consolidated
income tax returns. Deferred tax assets or liabilities are computed based on the
difference between the financial statement and income tax bases of assets and
liabilities using the enacted marginal tax rate. Deferred income tax expenses or
credits are based on the changes in the asset or liability from period to
period. The effect on deferred income taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
F-9
<PAGE> 154
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
STATEMENT OF CASH FLOWS: For purposes of reporting cash flows, cash and cash
equivalents include cash and due from banks and federal funds sold.
EARNINGS PER SHARE: Earnings per share are based on the weighted average number
of common shares outstanding plus common equivalent shares from the dilutive
stock warrants using the treasury stock method. The weighted average number of
common shares outstanding was 3,718,502 and 2,227,872 for 1996 and 1995,
respectively. All references in the consolidated financial statements to
weighted average shares have been restated to reflect stock dividends declared.
RECLASSIFICATIONS: Certain amounts in the 1995 financial statements have been
reclassified to conform with the current year presentation. Such
reclassification had no impact on total assets, equity, net income or total cash
flow balances previously reported.
3. INVESTMENT SECURITIES AVAILABLE FOR SALE:
The amortized costs and approximate fair value of investment securities
available for sale at December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. Treasury Securities $ 6,963,521 $ 8,193 $ (48,264) $ 6,923,450
U.S. Government agencies 13,227,152 0 (122,400) 13,104,752
State and municipals 499,639 0 (1,258) 498,381
----------- ------- --------- -----------
Total debt securities 20,690,312 8,193 (171,922) 20,526,583
----------- ------- --------- -----------
FHLB stock 499,100 0 0 499,100
Mortgage-backed securities 5,050,396 47,951 (13,318) 5,085,029
----------- ------- --------- -----------
Total available for sale $26,239,808 $56,144 $(185,240) $26,110,712
=========== ======= ========= ===========
</TABLE>
<TABLE>
<CAPTION>
1995
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED APPROXIMATE
COST GAINS LOSSES FAIR VALUE
---- ----- ------ ----------
<S> <C> <C> <C> <C>
AVAILABLE FOR SALE:
U.S. Treasury Securities $12,010,641 $128,483 $(29,584) $12,109,540
U.S. Government agencies 4,997,615 7,005 (18,787) 4,985,833
State and municipals 499,409 0 (934) 498,475
----------- -------- -------- -----------
Total debt securities 17,507,665 135,488 (49,305) 17,593,848
----------- -------- -------- -----------
FHLB stock 490,200 0 0 490,200
Mortgage-backed securities 6,002,882 9,390 (23,087) 5,989,185
----------- -------- -------- -----------
Total available for sale $24,000,747 $144,878 $(72,392) $24,073,233
=========== ======== ======== ===========
</TABLE>
F-10
<PAGE> 155
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. INVESTMENT SECURITIES AVAILABLE FOR SALE, CONTINUED
The amortized cost and approximate fair value of investments at
December 31, 1996, by scheduled maturity, are shown below. Scheduled
maturities may differ from actual maturities because borrowers may have
the right to call or prepay obligations with or without call or
prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED APPROXIMATE
COST FAIR VALUE
---- ----------
<S> <C> <C>
Due in one year or less $ 3,400,399 $ 3,408,139
Due after one year through five years 7,357,471 7,266,236
Due after five years through ten years 9,932,442 9,852,207
----------- -----------
Total debt securities 20,690,312 20,526,582
FHLB stock 499,100 499,100
Mortgage-backed securities 5,050,396 5,085,030
----------- -----------
$26,239,808 $26,110,712
=========== ===========
</TABLE>
Proceeds from the sale of investment securities available for sale
during the years ended December 31, 1996 and 1995 were $27,563,000 and
$5,764,632, respectively. Gross gains of $157,500 and $37,000 were
realized on these sales for the years ended December 31, 1996 and 1995,
respectively. Gross losses of $51,700 and $1,000 were realized on these
sales for the years ended December 31, 1996 and 1995, respectively.
At December 31, 1996, the Company had pledged securities with a
carrying value of approximately $505,000 and market value of
approximately $493,000 to the State of Florida for public fund
deposits. The current value of pledged securities is adequate to meet
the pledging requirements.
4. LOANS RECEIVABLE, NET:
The Company's loan portfolio consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Residential mortgage loans, substantially all single-family $ 18,695,342 $ 14,723,358
Commercial and commercial real estate loans 74,538,560 52,600,026
Consumer loans 42,269,999 30,649,820
------------- ------------
135,503,901 97,973,204
Less allowance for loan losses (1,000,000) (946,000)
Net deferred costs (unearned fees) 604,537 452,434
------------- ------------
Loans, net $ 135,108,438 $ 97,479,638
============= ============
</TABLE>
F-11
<PAGE> 156
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
4. LOANS RECEIVABLE, NET, CONTINUED
The Company grants and purchases real estate, commercial and consumer
loans throughout Florida, with a majority in the Sarasota and Manatee
County area. Although the Company has a diversified loan portfolio, a
significant portion of its debtors' ability to honor their contracts is
dependent primarily upon the economy of Sarasota and Manatee counties,
Florida and general economic conditions.
A summary of activity in the allowance for loan losses follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Balance at beginning of year $ 946,000 $ 625,000
Provision charged to income 286,653 482,604
Recoveries on loans previously charged off 46,487 23,255
Loans charged off (279,140) (184,859)
----------- ---------
Balance at end of year $ 1,000,000 $ 946,000
=========== =========
</TABLE>
In management's opinion, the allowance is adequate to reflect the risk
in the loan portfolio.
LOANS TO OFFICERS AND DIRECTORS - In the course of its business, the
Company has granted loans to executive officers, directors and
principal stockholders of the Company and to entities to which they are
related. As of December 31, 1996 and 1995, loans to such parties were
as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Balance at beginning of year $ 6,138,000 $ 3,963,000
New loans 2,071,838 3,214,521
Repayments on loans (1,688,432) (1,039,521)
----------- -----------
Balance at end of year $ 6,521,406 $ 6,138,000
=========== ===========
</TABLE>
At December 31, 1996 and 1995, the recorded investment in loans for
which impairment has been recognized totaled approximately $1,478,000
and $799,000, respectively. The total allowance for loan losses related
to these loans was approximately $331,400 and $233,000 at December 31,
1996 and 1995, respectively. Interest income on impaired loans of
approximately $87,000 and 80,000 was recognized for cash payments
received in 1996 and 1995, respectively. For the years ended December
31, 1996 and 1995, the average recorded investment in impaired loans
was $1,139,000 and $477,000, respectively.
At December 31, 1996 and 1995, the Company had approximately $905,000
and $18,000 in nonaccrual loans, respectively. For the year ended
December 31, 1996, the amount of interest income not recorded related
to nonaccrual loans was approximately $60,720. Interest income that
would have been earned on the nonaccrual loans for the year ended
December 31, 1995 was immaterial. At December 31, 1996 and 1995, there
were no accruing loans that were 90 days or more past due.
F-12
<PAGE> 157
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. PREMISES AND EQUIPMENT:
A summary of premises and equipment at December 31, 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Land $ 2,792,263 $ 1,795,151
Building and improvements 2,844,277 1,593,141
Furniture, fixtures, and equipment 2,446,909 1,485,757
----------- -----------
8,083,449 4,874,049
Less accumulated depreciation (1,204,860) (802,454)
----------- -----------
$ 6,878,589 $ 4,071,595
=========== ===========
</TABLE>
Depreciation expense totaled $402,976 and $276,051 for the years ended
December 31, 1996 and 1995, respectively.
6. LOAN SERVICING:
Mortgage loans serviced for others are not included in the accompanying
consolidated balance sheets. The unpaid principal balances of mortgage
loans serviced for others was $19,781,866 and $9,462,179 at December
31, 1996 and 1995, respectively.
Custodial escrow balances maintained in connection with the foregoing
loan servicing, and included in demand deposits, were approximately
$34,675 and $25,955 at December 31, 1996 and 1995, respectively.
Mortgage servicing rights of $254,783 were capitalized in 1996.
Amortization of mortgage servicing rights during 1996 was $28,901.
7. DEPOSIT ACCOUNTS:
Deposits consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Demand $ 26,281,696 $ 19,617,269
NOW 13,081,210 10,138,011
Money market 42,040,356 24,864,048
Savings 6,338,853 6,251,607
------------ ------------
87,742,115 60,870,935
------------ ------------
Certificate accounts:
Under $100,000 58,037,837 46,550,442
Over $100,000 20,161,471 13,833,085
IRAs 11,261,210 8,606,442
------------ ------------
89,460,518 68,989,969
------------ ------------
$177,202,633 $129,860,904
============ ============
</TABLE>
F-13
<PAGE> 158
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
7. DEPOSIT ACCOUNTS, CONTINUED
The aggregate amount of certificates of deposit of $100,000 or more at
December 31, 1996 and 1995 was approximately $21,482,000 and
$14,638,000, respectively.
A summary of certificate accounts at December 31, 1996 and 1995 by year
of scheduled maturity follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Due within one year $32,807,388 $26,349,243
Due after one year through two years 12,455,878 9,344,845
Due after two years through three years 18,905,335 8,091,144
Due after three years through four years 7,680,533 17,458,306
Due after four years 17,611,384 7,746,431
----------- -----------
$89,460,518 $68,989,969
=========== ===========
</TABLE>
Interest expense on deposit accounts is summarized as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Interest on NOW accounts and money market deposit accounts $1,735,056 $1,529,321
Interest on savings accounts 153,948 139,955
Interest on certificate accounts 5,037,583 3,986,885
---------- ----------
$6,926,587 $5,656,161
========== ==========
</TABLE>
8. SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE:
The Company enters into sales of securities under agreements to
repurchase. Repurchase agreements are treated as financings, and the
obligations to repurchase securities sold are reflected as a liability
in the consolidated balance sheets. The dollar amount of securities
underlying the agreements remains in the asset accounts. The securities
sold under repurchase agreements remain in the custody of a third-party
trustee. The Company may have sold, loaned, or otherwise disposed of
such securities in the normal course of its operations and has agreed
to maintain substantially identical securities during the agreements.
The agreements mature within 30 days.
Information related to the Company's securities sold under repurchase
agreements (including accrued interest) at December 31, 1996 and 1995
is presented below, segregated by the type of securities sold and by
due date of the agreement:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Average balance during the year $ 9,660,214 $ 9,539,165
Average interest rate during the year 4.08% 3.60%
Maximum month-end balance during the year $10,557,098 $12,302,837
U.S. Treasury securities underlying the agreements at year-end:
Carrying value $11,242,138 $12,109,540
Fair value 11,153,493 12,109,540
</TABLE>
F-14
<PAGE> 159
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
9. FEDERAL HOME LOAN BANK ADVANCES:
Each Federal Home Loan Bank (FHLB) is authorized to make advances to
its member associations, subject to such regulations and limitations as
the FHLB may prescribe. The Bank's borrowings from the FHLB of Atlanta
are as follows at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
MATURITY RATE 1996 1995
---- ---- ----
<S> <C> <C> <C> <C>
June 1996 5.73% $ 0 $5,000,000
October 1998 6.31% 5,000,000 0
---------- ----------
$5,000,000 $5,000,000
========== ==========
</TABLE>
The FHLB requires that the Bank maintain qualifying mortgages as
collateral and all of the Company's FHLB stock as collateral for its
advances. In addition, all of the Bank's FHLB stock is pledged as
collateral for such advances. As of December 31, 1996, the Bank has a
credit availability of $11,500,000.
10. INCOME TAXES:
The Company's provision for income taxes consisted of the following for
the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Current:
Federal $ 491,300 $ 763,835
State 29,200 70,440
--------- ---------
520,500 834,275
--------- ---------
Deferred:
Federal (38,500) (251,900)
State (3,700) (9,400)
--------- ---------
(42,200) (261,300)
--------- ---------
$ 478,300 $ 572,975
========= =========
</TABLE>
Deferred income taxes consisted of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Provision for loan losses $ (7,700) $(102,000)
Deferred loan fees (39,700) (26,300)
Depreciation (15,200) 30,200
Cash to accrual adjustment 57,900 (72,200)
Loans held for sale 3,700 (90,300)
Other (41,200) (700)
--------- ---------
$ (42,200) $(261,300)
========= =========
</TABLE>
F-15
<PAGE> 160
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. INCOME TAXES, CONTINUED
Deferred income taxes reflect the impact of temporary differences
between the amounts of assets and liabilities recorded for financial
reporting purposes and such amounts as measured in accordance with tax
laws. In general, these temporary differences are more inclusive than
timing differences recognized under previously applicable accounting
principles. The items which comprise a significant portion of deferred
tax assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Book over tax bad debts $ 283,400 $ 291,200
Market value of loans held for sale 94,000 90,300
Other 0 10,100
--------- ---------
Deferred tax assets 377,400 391,600
Deferred tax liabilities:
Loan origination fees (54,700) (15,000)
Cash to accrual adjustment (116,800) (165,300)
Tax over book depreciation (86,800) (71,500)
Other (30,900) (9,400)
--------- ---------
Deferred tax liabilities (289,200) (261,200)
--------- ---------
Net deferred tax asset $ 88,200 $ 130,400
========= =========
</TABLE>
The Company's effective income tax rates of 37% and 36% for the years
ended December 31, 1996 and 1995, respectively, vary from the statutory
federal income tax rate of 34% due primarily to state income taxes of
5.5% net of federal tax benefits.
11. OTHER INCOME:
Other income consisted of the following for the years ended December
31:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Service charges on deposit accounts $ 733,258 $ 555,697
Broker loan fees 32,807 38,350
Net gains on sales of investment securities 105,825 36,310
Net gains on sales of loans held for sale 190,624 321,499
Merchant fees on credit cards 262,061 97,114
Mortgage servicing fees 50,007 55,503
Net gain on sales of servicing rights 323,377 210,327
Net gain on sales of assets 0 63,515
Other 136,100 94,459
---------- ----------
$1,834,059 $1,472,774
========== ==========
</TABLE>
F-16
<PAGE> 161
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. OTHER EXPENSES:
Other expenses consisted of the following for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Compensation and related benefits $3,470,130 $2,276,104
Occupancy and equipment 849,960 705,853
FDIC insurance 35,181 164,478
Data processing 740,140 405,708
Advertising and promotion 319,507 135,284
Printing supplies and postage 322,445 224,191
Directors fees and expenses 123,952 97,063
Professional fees 243,934 187,367
ATM fees 100,327 86,375
Intangible taxes 126,235 75,873
Other 947,325 438,661
---------- ----------
$7,279,136 $4,796,957
========== ==========
</TABLE>
Loan origination costs of approximately $380,000 and $342,000 in 1996 and
1995, respectively, have been offset against compensation and related
benefits.
13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK:
The Company is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to extend
credit, standby letters of credit, and credit cards. They involve, to
varying degrees, elements of credit and interest rate risk in excess of
the amount recognized on the balance sheet. The contract or notional
amounts of those instruments reflect the extent of involvement the Company
has in particular classes of financial instruments. The Company has no
financial instruments with off-balance-sheet risk that are held for
trading purposes.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual or
notional amount of the instruments. The Company uses the same credit
policies in making commitments and conditional obligations as it does for
on-balance sheet instruments. As of December 31, 1996 and 1995 financial
instruments with off-balance-sheet risk were as follows:
<TABLE>
<CAPTION>
CONTRACTUAL OR NOTIONAL AMOUNTS 1996 1995
------------------------------- ------------ ------------
<S> <C> <C>
Commitments to extend credit $27,601,000 $21,738,000
Standby letters of credit $ 373,000 $ 388,000
Credit cards $ 4,258,000 $ 450,000
</TABLE>
F-17
<PAGE> 162
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
13. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, CONTINUED
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination
clauses and may require payment of a fee. Since many of the commitments
are expected to expire without being drawn upon, the total commitment
amounts do not necessarily represent future cash requirements. The Company
evaluates each customer's credit worthiness on a case-by-case basis. The
amount of collateral obtained if deemed necessary by the Company upon
extension of credit is based on management's credit evaluation of the
counter-party. Collateral held varies but may include accounts receivable,
inventory, property, plant, and equipment, and income-producing commercial
properties.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party. Those
guarantees are primarily issued to support public and private borrowing
arrangements, including commercial paper, bond financing, and similar
transactions. The guarantees are short-term, expiring in 1996.
14. EMPLOYEE BENEFIT AND STOCK OPTION PLANS:
The Company has a qualified plan under Section 401(k) of the Internal
Revenue Code (Plan) for all employees meeting certain eligibility
requirements. The Plan allows participants to make annual contributions
equal to 15% or less of the participant's compensation up to a maximum
allowed by Internal Revenue Service regulation. The Company may match a
percentage of the participant's contributions. Plan contributions by the
Company for the year ended December 31, 1996 and 1995 was approximately
$12,000 and $10,000, respectively.
During 1996, the Company also adopted an Incentive Stock Option Plan
(Incentive Plan) whereby up to 150,000 shares of the Company's common
stock may be granted to employees at not less than 100% of the fair market
value of the stock at the date of grant. No options have been granted
under the Incentive Plan.
F-18
<PAGE> 163
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
15. SHAREHOLDERS' EQUITY:
The Company's current policy is to retain all earnings to fund operations.
Future dividend payments will be at the discretion of the Board of
Directors of the Company and will be dependent upon several factors,
including State and Federal banking regulations that impose limitations on
such payments.
The following table summarizes the activity of the Company's issued and
outstanding warrants and their corresponding exercise prices:
<TABLE>
<CAPTION>
ORIGINAL
DIRECTOR WARRANTS 1992 WARRANTS 1994 WARRANTS
------------------------- ------------------------- ------------------------
WARRANTS EXERCISE WARRANTS EXERCISE WARRANTS EXERCISE
OUTSTANDING PRICE OUTSTANDING PRICE OUTSTANDING PRICE
------------------------- ------------------------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 - $2.71 227,126 $4.00 144,606 $6.00
Warrants exercised - - (208,532) 4.00 (4,400) 6.00
Warrants issued - - - - 87,018 6.00
------------------------- ------------------------- ------------------------
Balance, December 31, 1995 - $2.71 18,594 $4.00 227,224 $6.00
Warrants exercised - - - - (163,695) 6.00
------------------------- ------------------------- ------------------------
Balance, December 31, 1996 - $2.71 18,594 $4.00 63,529 $6.00
========================= ========================= ========================
</TABLE>
16. DIVIDEND RESTRICTIONS:
State banking regulations limit the amount of dividends that may be paid
by the Bank to its Parent without prior approval of regulatory agencies.
The amount of dividends that may be paid is based on the net profits of
the current year combined with retained net profits of the preceding two
years as defined by state banking regulations. At December 31, 1996,
approximately $2,455,000 are available for payment of dividends without
prior regulatory approval.
17. FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, "Disclosures About
Fair Value of Financial Instruments," requires that the Company disclose
estimated fair values for its financial instruments. Fair value is defined
as the price at which a financial instrument could be liquidated in an
orderly manner over a reasonable time period under present market
conditions. Fair values estimates, methods and assumptions are set forth
below for the Company's financial instruments.
F-19
<PAGE> 164
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
17. FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED
CASH AND DUE FROM BANK - For cash and due from banks, the carrying amount
is a reasonable estimate of fair value.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES - The fair value of investments
and mortgage-backed securities is estimated based on bid prices published
in financial newspapers or bid quotations received from securities
dealers.
LOANS RECEIVABLE - The estimated fair value of the Company's fixed rate
loans was calculated by discounting contractual cash flows adjusted for
current prepayment estimates. The discount rates were based on the
interest rate charged to current customers for comparable loans. The
Company's adjustable rate loans reprice frequently at current market
rates. Therefore, the fair value of these loans has been estimated to be
approximately equal to their carrying amount.
The impact of delinquent loans on the estimation of the fair values
described above is not considered to have a material effect and,
accordingly, delinquent loans have been disregarded in the valuation
methodologies used.
DEPOSIT LIABILITIES - The fair value of deposits with no stated maturity,
such as demand, NOW, money market and savings is equal to the amount
payable on demand as of December 31, 1996. The fair value of time deposits
is estimated using the rates currently offered for deposits of similar
remaining maturities.
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS - At December 31, 1996, the
Company had approximately $10,113,000 of securities sold under repurchase
agreements. The repurchase agreements outstanding at December 31, 1996
mature within 30 days. The estimated fair value of these agreements
approximates the carrying value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT - The fair
value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account
the remaining terms of the agreements and the present creditworthiness of
the counterparties. For fixed rate loan commitments, fair value also
considers the difference between current levels of interest rates and the
committed rates. The fair value of standby letters of credit is based on
fees currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the
counterparties.
FHLB ADVANCES - Cash flow from fixed-rate borrowings are discounted at a
spread to the zero Treasury curve which equates to the LIBOR yield.
Maturing borrowings are rolled into 12-month FHLB advances.
F-20
<PAGE> 165
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
17. FAIR VALUES OF FINANCIAL INSTRUMENTS, CONTINUED
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT, CONTINUED
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
------------------------------------------------------------------
1996 1995
----------------------------- ----------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from bank $ 15,045 $ 15,045 $ 5,768 $ 5,768
Federal funds sold 6,000 6,000 0 0
Loans held for sale 20,351 20,414 21,011 21,253
Investment securities available for
sale 26,111 26,111 24,073 24,073
Loans receivable, net of allowance for
loan losses and deferred costs 135,108 135,285 97,480 99,259
Financial liabilities:
Deposits with no stated maturity 87,742 87,742 60,871 60,871
Time deposits 89,461 91,319 68,990 70,881
Securities sold under agreements to
repurchase 10,113 10,113 9,567 9,567
FHLB advances 5,000 5,000 0 0
</TABLE>
<TABLE>
<CAPTION>
CONTRACT CONTRACT
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Unrecognized financial instruments:
Loan commitments (loan fees) $27,601 $41 $21,738 $32
Standby letters of credit 373 0 388 0
Credit cards 4,258 0 450 0
</TABLE>
LIMITATIONS - The fair value estimates are made at a discrete point in
time based on relevant market information and information about the
financial instrument. Quoted market prices, when available, are used as
the measure of fair value. When quoted market prices are not available,
fair value estimates have been based on judgments regarding future
expected loss experience, current economic conditions, risk
characteristics of various financial instruments, and other factors. These
estimates are inherently subjective, involving uncertainties and matters
of significant judgment, and, therefore, may not be indicative of the
value that could be realized in a current market exchange. Changes in
assumptions could significantly affect the estimates.
The value estimates are based on existing on- and off-balance-sheet
financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that
are not considered financial instruments. Other significant assets and
liabilities that are not considered financial assets or liabilities
include deferred tax assets and property, plant and equipment. In
addition, the tax ramifications related to the realization of the
unrealized gains and losses for investments and mortgage-backed securities
can have a significant effect on fair value estimates and have not been
considered in many of the estimates.
F-21
<PAGE> 166
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
18. RISKS AND UNCERTAINTIES:
The earnings of the Company depend on the earnings of the Bank. The Bank
is dependent primarily upon the level of net interest income, which is the
difference between interest earned on its interest earning assets, such as
loans and investments and the interest paid on its interest-bearing
liabilities, such as deposits and borrowings. Accordingly, the operations
of the Bank are subject to risks and uncertainties surrounding its
exposure to changes in the interest rate environment.
Most of the Bank's lending activity is with customers located within
Sarasota and Manatee counties. Generally, the loans are collateralized by
real estate consisting of single family residential and commercial
properties. While this represents a concentration of credit risk, the
credit losses arising from this type of lending compares favorably with
the Bank's credit loss experience on its portfolio as a whole. The
ultimate repayment of these loans is dependent to a certain degree on the
local economy and real estate market.
The financial statements of the Company are prepared in conformity with
generally accepted accounting principles that require management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from
these estimates.
Significant estimates are made by management in determining the allowance
for possible loan losses. Consideration is given to a variety of factors
in establishing these estimates including current economic conditions,
diversification of the loan portfolio, delinquency statistics, results of
internal loan reviews, borrowers' perceived financial and managerial
strengths, the adequacy of underlying collateral, if collateral dependent,
or present value of future cash flows and other relevant factors. Since
the allowance for possible loan losses is dependent, to a great extent, on
general and other conditions that may be beyond the Bank's control, it is
at least reasonably possible that the estimates of the allowance for
possible loan losses and the carrying values of the real estate assets
could differ materially in the near term.
19. PUBLIC OFFERING OF COMMON STOCK:
In February 1996, American Bancshares, Inc. completed a public offering of
1,250,000 shares of common stock at $6.00 per share (the Offering). Prior
to the Offering, there was no public market for the Company's common
stock. The common stock is traded on the NASDAQ National Market System
under the symbol "ABAN." In connection with this Offering, the Board of
Directors approved increasing the number of authorized shares of common
stock for American Bancshares, Inc. to 10,000,000 shares. Subsequent to
the Offering, an additional 187,500 shares of common stock were issued as
part of the over-allotment amount. The net proceeds of the Offering, after
deducting applicable issuance costs and expenses, were approximately
$7,377,000 and are to be used for general corporate purposes, including
the financing of working capital needs, capital expenditures and possible
future acquisitions.
In 1995, the Company sold 87,218 shares of common stock at $6.00 per share
in relation to a stock offering. Net proceeds after stock issuance costs
were $479,774.
F-22
<PAGE> 167
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
20. REGULATORY CAPITAL:
The Bank is subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum
capital requirements can initiate certain mandatory and possibly
additional discretionary actions by regulators that, if undertaken, could
have a direct material effect on the Bank's financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines that
involve quantitative measures of the Bank's assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also subject
to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations)
to risk-weighted assets (as defined), and of Tier I capital (as defined)
to average assets (as defined). Management believes, as of December 31,
1996, that the Bank meets all capital adequacy requirements to which it is
subject.
As of December 31, 1996, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework
for prompt corrective action. To be categorized as well capitalized, the
Bank must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
Bank's category.
The Bank's actual capital amounts and ratios are also presented in the
table. There were no deductions for interest-rate risk in 1996 or 1995.
<TABLE>
<CAPTION>
FOR CAPITAL
ACTUAL ADEQUACY PURPOSES
-------------------- ---------------------------------------------------------------------
AMOUNT RATIO AMOUNT RATIO
------------- ------ ------------------------------------- ------------------------------
<S> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted
Assets) $ 15,790,512 10.65% greater than or equal to $ 11,864,054 greater than or equal to 8.0%
Tier I Capital (to Risk Weighted
Assets) $ 14,790,512 9.97% greater than or equal to $ 5,932,027 greater than or equal to 4.0%
Tier I Capital (to Averaged
Assets) $ 14,790,512 7.22% greater than or equal to $ 6,143,606 greater than or equal to 3.0%
As of December 31, 1995:
Total Capital (to Risk Weighted
Assets) $ 10,642,808 9.50% greater than or equal to $ 8,957,744 greater than or equal to 8.0%
Tier I Capital (to Risk Weighted
Assets) $ 9,696,808 8.66% greater than or equal to $ 4,478,872 greater than or equal to 4.0%
Tier I Capital (to Averaged
Assets) $ 9,696,808 6.33% greater than or equal to $ 4,597,590 greater than or equal to 3.0%
</TABLE>
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
PROMPT CORRECTIVE
ACTION PROVISIONS
---------------------------------------------------------------------
AMOUNT RATIO
----------------------------------- -----------------------------
<S> <C> <C>
As of December 31, 1996:
Total Capital (to Risk Weighted
Assets) greater than or equal to $14,830,067 greater than or equal to 10.0%
Tier I Capital (to Risk Weighted
Assets) greater than or equal to $ 8,898,040 greater than or equal to 6.0%
Tier I Capital (to Averaged
Assets) greater than or equal to $10,239,343 greater than or equal to 5.0%
As of December 31, 1995:
Total Capital (to Risk Weighted
Assets) greater than or equal to $11,197,179 greater than or equal to 10.0%
Tier I Capital (to Risk Weighted
Assets) greater than or equal to $ 6,718,308 greater than or equal to 6.0%
Tier I Capital (to Averaged
Assets) greater than or equal to $ 7,662,650 greater than or equal to 5.0%
</TABLE>
F-23
<PAGE> 168
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
21. FUTURE ACCOUNTING PRONOUNCEMENTS:
In June 1996, Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities," (SFAS No. 125) was issued. SFAS No. 125
provides accounting and reporting standards based on a control-oriented
"financial-components" approach. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets
it controls and liabilities it has incurred, derecognizes financial assets
when control has been surrendered, and derecognizes liabilities when
extinguished. SFAS No. 125 is effective on a prospective basis January 1,
1997.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share,"
(SFAS No. 128). SFAS No. 128 specifies the computation, presentation and
disclosure requirements for earnings per share and is effective for
financial statements issued for periods ending after December 15, 1997.
Management has not determined the impact that the adoption of this
statement will have on the financial statements.
22. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS:
The condensed financial statements of American Bancshares, Inc., as the
parent organization, are presented as follows:
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ----------
<S> <C> <C>
Assets:
Cash $ 3,392,968 $ 0
Premises and equipment 682,118 0
Prepaid expense 5,781 0
Investment in banking subsidiary 14,733,040 9,698,469
------------ ----------
Total assets $ 18,813,907 $9,698,469
============ ==========
Liabilities:
Total liabilities $ 0 $ 0
------------ ----------
Shareholders' equity:
Common stock 4,702,049 2,821,257
Additional paid-in capital 11,736,471 5,257,877
Unrealized gain (loss) on investment securities available
for sale, net (79,951) 47,486
Retained earnings 2,455,338 1,571,849
------------ ----------
Total shareholders' equity 18,813,907 9,698,469
------------ ----------
Total liabilities and shareholders' equity $ 18,813,907 $9,698,469
============ ==========
</TABLE>
F-24
<PAGE> 169
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
22. CONDENSED PARENT COMPANY FINANCIAL STATEMENTS, CONTINUED
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
--------- ----------
<S> <C> <C>
Equity in undistributed earnings of banking subsidiary $ 953,567 $1,017,909
Operating expense (70,078) 0
--------- ----------
Net income $ 883,489 $1,017,909
========= ==========
</TABLE>
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
----------- ----
<S> <C> <C>
Cash flows used in operating activities $ (75,859) $0
----------- --
Cash flows used in investing activities:
Acquisition of premises and equipment (4,890,559) 0
----------- --
Cash flows provided by financing activities:
Proceeds from sale of common stock (net of stock
offering costs) 8,359,386 0
----------- --
Net increase in cash 3,392,968 0
Cash at beginning of year 0 0
----------- --
Cash at end of year $ 3,392,968 $0
=========== ==
</TABLE>
F-25
<PAGE> 170
AMERICAN BANCSHARES, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997
-----------
(UNAUDITED)
<C> <S>
ASSETS
Cash and due from banks .................................................. $ 9,176
Federal funds sold ....................................................... 6,324
Interest-bearing deposits in banks ....................................... 1,586
Mortgage loans held for sale ............................................. 42,064
Investment securities available for sale ................................. 35,789
Mortgage-backed securities, available for sale ........................... 4,684
Loans receivable (net of allowance for loan losses and deferred loan
fees/costs of $733,256 as of September 30, 1997) ....................... 159,598
Other real estate owned .................................................. 60
Goodwill ................................................................. 81
Other assets ............................................................. 2,621
--------
Total assets ........................................................ $270,192
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits ............................................................... $226,097
Securities sold under agreements to repurchase ......................... 17,684
Federal funds purchase and FHLB borrowings ............................. 5,000
Other liabilities ...................................................... 1,009
--------
Total liabilities ................................................... $249,790
--------
Shareholders' equity:
Common shares, $1.175 par value; 10,000,000 authorized,
4,040,927 shares issued and outstanding as of September 30, 1997 ..... 4,783
Additional paid-in capital ............................................. 12,033
Unrealized gain (loss) on investment securities
available for sale, net .............................................. 38
Retained earnings ...................................................... 3,548
--------
Total shareholders' equity .......................................... 20,402
--------
Total liabilities and stockholders' equity .......................... $270,192
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 171
AMERICAN BANCSHARES, INC.
CONDENSED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1997 1996
----------- ---------
(UNAUDITED) (UNAUDITED
<C> <S> <S>
Interest income:
Interest and fees on loans ............................................. $11,960 $ 8,760
Interest on mortgage-backed securities, taxable......................... 233 321
Interest on investment securities, taxable ............................. 1,726 862
Interest on investment securities, non-taxable ......................... 14 14
Other interest income .................................................. 240 177
-------- -------
Total interest income ............................................... 14,173 10,334
-------- -------
Interest expense:
Deposits ............................................................... 6,762 4,964
Securities sold under agreements to repurchase ......................... 438 255
Federal funds purchased and FHLB advances .............................. 269 44
-------- -------
Total interest expense .............................................. 7,469 5,263
-------- -------
Net interest income .................................................... 6,704 5,071
Provision for loan losses .............................................. 615 207
-------- -------
Net interest income after provision for loan losses .................... 6,089 4,864
-------- -------
Noninterest income:
Service charges and fees ............................................... 925 517
Gain on sale of leases ................................................. 90 164
Gain on sale of securities ............................................. 73 60
Gain on sale of servicing .............................................. 346 38
Broker loan fees ....................................................... 242 31
Originated mortgage servicing rights ................................... 92 196
Merchant fees .......................................................... 362 188
Other income ........................................................... 384 222
-------- -------
Total noninterest income ............................................ 2,514 1,416
-------- -------
Noninterest expense:
Salaries and employee benefits ......................................... 3,180 2,538
Net occupancy expense .................................................. 466 279
Furniture and equipment expenses ....................................... 454 322
Data processing fees ................................................... 286 416
Other expenses ......................................................... 2,513 1,693
-------- -------
Total noninterest expense ........................................... 6,899 5,248
-------- -------
Income before income tax provision ..................................... 1,704 1,032
Provision for income tax ............................................... 659 382
Net income ............................................................. $ 1,045 $ 650
======== =======
Earnings per common share:
Primary ................................................................ $ 0.26 $ 0.18
Fully diluted .......................................................... $ 0.26 $ 0.17
Average number of shares outstanding:
Primary ................................................................ 4,038,057 3,631,068
Fully diluted .......................................................... 4,061,938 3,854,981
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 172
AMERICAN BANCSHARES, INC.
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1996
----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operation activities
Net income............................................ $ 1,045 $ 650
Adjustments to reconcile net income to net cash
provided by operation activities:
Provision for loan losses........................... 615 208
Net gain on sale of investment securities........... (73) (60)
Net gain on sale of loans........................... (90) (165)
Net gain on sale of mortgage servicing rights....... (396) (25)
Net gain on original mortgage servicing rights...... (92) (207)
Net gain on sale of assets.......................... 0 0
Deferred income taxes............................... (65) 381
Depreciation........................................ 466 291
Net amortization of premiums and accretion of
discounts on investment securities................. 13 (101)
Increase in other liabilities....................... 171 406
Increase in other assets............................ 146 119
-------- --------
Total adjustments................................. 745 847
-------- --------
Net cash provided by operating activities........... 1,790 1,497
-------- --------
Cash flows from investing activities:
Loan origination, net of repayments................. (70,485) (54,976)
Purchase of loans held for sale..................... 0 0
Proceeds from sales of loans held for sale.......... 28,823 22,576
Purchase of bank premises and equipment............. (1,796) (2,714)
Proceeds on sales of assets......................... 0 0
Proceeds from maturities of held to maturity
investment securities.............................. 0 0
Proceeds from sales and maturities of available
for sale investment securities..................... 13,597 16,460
Purchase of held to maturity investment securities.. 0 0
Purchases of available for sale investment
securities, net of repayments...................... (28,141) (24,214)
-------- --------
Net cash used in investing activities............. (62,642) (42,868)
-------- --------
Cash flows from financing activities;
Net increase (decrease) in demand deposits, NOW and
savings accounts.................................... 27,393 20,384
Net increase in time deposits........................ 21,504 18,286
Net increase (decrease) in securities sold under
agreements to repurchase............................ 7,571 (1,679)
Principal payments under capital lease obligations... 0 0
Proceeds from advances from FHLB and federal reserve
funds purchased..................................... 0 0
Proceeds from stock sale............................. 425 8,220
-------- --------
Net cash provided by financing activities............ 56,893 45,211
-------- --------
Net increase (decrease) in cash and cash equivalents. (3,959) 4,042
Cash and equivalents at beginning of period.......... 21,045 6,768
-------- --------
Cash and cash equivalents at end of period........... $ 17,086 $ 10,810
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 173
AMERICAN BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Holding Company and Subsidiaries Background Information
American Bancshares, Inc. (Company), is a one bank holding company,
operated under the laws of the state of Florida. Its wholly owned
banking subsidiary is American Bank of Bradenton (Bank), a state
chartered bank. The Holding Company, a Florida corporation organized
June 30, 1995, is a registered holding company under the Bank Holding
Company Act of 1956, as amended, and on December 1, 1995 became the
bank holding company for the Bank. The Bank was incorporated on
December 6, 1988 and opened for business on May 8, 1989. The Bank is
a general commercial bank with all the rights, powers, and privileges
granted and conferred by the Florida Banking Code. Although the
Holding Company was not formed until June 30, 1995 and did not
acquire the Bank until December 1, 1995, the financial statements
have been presented as if the Holding Company had been in existence
since the Bank was formed in 1988 and as if the Bank was its wholly
owned subsidiary since that time.
The Company organized "Freedom Finance Company" (Finance Company), a
Florida Corporation, as a non-banking subsidiary on June 11, 1997.
The Finance Company was capitalized by the Company on July 11, 1997.
The Finance Company is licensed under the Florida Consumer Finance
Act by the Florida Department of Banking and Finance. The purpose of
Freedom Finance Company is to make "consumer finance loans." A
"consumer finance loan" means a loan of money, credit or goods in the
amount of $25,000 or less for which the Lender charges, contracts
for, collects or receives interest at a rate greater than 18% per
annum.
On September 23, 1997 the Company entered into a definitive merger
agreement. Pursuant to the merger agreement the Company will acquire
Murdock Florida Bank (Murdock) on a stock-for-stock basis valued at
$29.22 per share in a tax free exchange. Murdock Florida Bank is a
community bank serving Murdock, Florida and the surrounding area of
northern Charlotte county and southern Sarasota county. The
acquisition is expected to close in the fourth quarter of 1997 or the
first quarter of 1998 and to be accounted for as a pooling of
interests. Based upon information provided by Murdock, management
believes the transaction will be accretive to 1998 earnings in excess
of ten percent. The merger agreement has been approved by the boards
of directors of both American Bancshares, Inc. and Murdock Florida
Bank. The merger must also be approved by Murdock shareholders and by
Federal and State bank regulatory authorities and is subject to
various customary closing conditions.
Note 2. Basis of Presentation
The accompanying unaudited condensed consolidated financial
statements, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of the results for the interim periods. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules and
regulations, although the Company believes that the disclosures
included herein are adequate to make the information presented not
misleading. The results of operations for the three month period and
the nine month period ended September 30, 1997 are not necessarily
indicative of the results expected for the full year.
The organization and business of the Company, accounting policies
followed by the Company and other information are contained in the
Company's December 31, 1996 Form 10-KSB. This quarterly report should
be read in conjunction with such annual report.
F-29
<PAGE> 174
Note 3. Investments
The Company's investment and mortgage-backed securities are classified
as available for sale and recorded at fair value as required by the
provisions of Statement of Financial Accounting Standards number 115.
Unrealized gains and losses are reflected as a separate component of
shareholders' equity on the consolidated statement of condition. At
September 30, 1997, an unrealized gain, net of tax, of $38,000 was
reflected as an increase of shareholders' equity.
Note 4. Earnings Per Share
Earnings per share have been computed by dividing net income by the
weighted average number of shares outstanding for the respective
period(s). The increase in the weighted average number of shares is a
result of the Company's public offering in February 1996. Common stock
equivalents in the form of stock warrants and options have been
included to reflect the dilution effect of such warrants and options.
Note 5. Capital
In December 1995, the Company filed a registration statement on Form
SB-2 with the Securities and Exchange Commission to register for sale
1,250,000 shares of the Company's common stock (with an additional
187,500 shares subject to the underwriter's over allotment option) at
$6.00 per share pursuant to a firm commitment underwritten public
offering. The SB-2 became effective February 6, 1996, with the sale of
1,250,000 shares of common stock consummated on February 13, 1996. On
March 6, 1996, the underwriter elected to exercise the over allotment,
consummating the transaction on March 13, 1996. Of the net proceeds of
approximately $7.5 million, $4.9 million has been contributed as
capital to the Bank and approximately $1,420,000 invested to date in
land and building in the construction of an administrative facility.
The balance will be used for general corporate purposes including the
construction of a new administrative facility, possible acquisitions
of other financial institutions, and working capital.
Note 6. Impact of Recently Issued Accounting Standards
Comprehensive Income: In June, 1997 the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards (SFAS) No.
130, Reporting of Comprehensive Income, which establishes standards
for reporting and display of comprehensive income and its components
(revenues, expenses, gains and losses) in a full set of financial
statements. This statement also requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. This
statement is effective for the fiscal years beginning after December
15, 1997. Earlier application is permitted. Reclassification of
financial statements for earlier periods provided for comparative
purposes is required. Management does not believe that adoption of
SFAS No. 130 will have a material impact on the company's financial
statements.
Disclosure About Segments of an Enterprise: In June, 1997 the
Financial Accounting Standards Board also issued (SFAS) No. 131,
Disclosures about segments of an Enterprise and Related Information,
which establishes standards for the way the public business
enterprises report information about operating segments in annual
financial statements and requires that those enterprises report
selected information about operating segments in interim financial
reports issued to shareholders. This statement also establishes
standards for related disclosures about products and services,
geographic areas, and major customers. This statement requires the
reporting of financial and descriptive information about an
enterprise's reportable operating segments. This statement is
effective for financial statements for periods beginning after
December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. The Company has not
yet determined the impact adoption of SFAS No. 131 will have on its
financial statements.
F-30
<PAGE> 175
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Murdock Florida Bank
Murdock, Florida:
We have audited the balance sheet of Murdock Florida Bank (the "Bank")
at December 31, 1996 and the related statements of operations, stockholders'
equity and cash flows for each of the years in the two-year period then ended.
These financial statements are the responsibility of the Bank's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Bank at
December 31, 1996, and the results of its operations and its cash flows for
each of the years in the two-year period then ended in conformity with
generally accepted accounting principles.
/s/ Hacker, Johnson, Cohen & Grieb
HACKER, JOHNSON, COHEN & GRIEB
Tampa, Florida
February 22, 1997
F-31
<PAGE> 176
MURDOCK FLORIDA BANK
BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
ASSETS 1996
----
<S> <C>
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,185
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 746
--------
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 1,931
Interest-bearing time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,822
Loans receivable, net of allowance for loan losses of $761 . . . . . . . . . . . . . . . . . . 40,156
Foreclosed real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256
Restricted securities, Federal Home Loan Bank stock . . . . . . . . . . . . . . . . . . . . . . 576
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 518
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,665
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,458
Savings and NOW deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,097
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,675
--------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,230
Advance from Federal Home Loan Bank of Atlanta . . . . . . . . . . . . . . . . . . . . . . 1,300
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445
--------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,975
--------
Commitments (Notes 4 and 7)
Stockholders' equity:
Common stock, $10 par value; 800,000 shares authorized
385,015 issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,850
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Unrealized depreciation on securities available
for sale, net of tax of $(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11)
--------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,690
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 61,665
========
</TABLE>
See accompanying Notes to Financial Statements.
F-32
<PAGE> 177
MURDOCK FLORIDA BANK
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Interest income:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,559 3,177
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . 1,184 1,109
Other interest-earning assets . . . . . . . . . . . . . . . . . . . . . . . . . 140 131
-------- --------
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,883 4,417
-------- --------
Interest expense:
Interest expense on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 2,548 2,432
Interest expense on other borrowings . . . . . . . . . . . . . . . . . . . . . . 6 9
-------- --------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 2,554 2,441
-------- --------
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,329 1,976
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 219
-------- --------
Net interest income after provision for loan losses . . . . . . . . . . . . 2,101 1,757
-------- --------
Noninterest income:
Other fees and service charges . . . . . . . . . . . . . . . . . . . . . . . . . 459 482
(Loss) gain on sale of foreclosed real estate . . . . . . . . . . . . . . . . . (336) 64
Gain on sale of securities available for sale . . . . . . . . . . . . . . . . . 1 6
Deferred profit on sale of foreclosed real estate . . . . . . . . . . . . . . . 155 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 61
-------- --------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . 314 613
-------- ---------
Noninterest expenses:
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . 891 889
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 334 338
SAIF assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 348 -
Data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 178
Federal insurance premium . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 135
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 24
Foreclosed real estate expense . . . . . . . . . . . . . . . . . . . . . . . . . 223 632
Office expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 120
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 324
-------- ---------
Total noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . 2,577 2,640
-------- ---------
Loss before income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . (162) (270)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61) (102)
-------- ---------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (101) (168)
======== =========
Loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.26) (.44)
======== =========
Weighted-average number of shares outstanding . . . . . . . . . . . . . . . . . . . . 385,015 385,015
======= =========
</TABLE>
See accompanying Notes to Financial Statements.
F-33
<PAGE> 178
MURDOCK FLORIDA BANK
STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
COMMON STOCK ON
------------------------ ADDITIONAL SECURITIES TOTAL
NUMBER OF PAID-IN RETAINED AVAILABLE STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS FOR SALE EQUITY
---------- ----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1994 . . . . . . . . . 385,015 $ 3,850 703 417 (293) 4,677
Net loss . . . . . . . . . - - - (168) - (168)
Unrealized appreciation on
securities available
for sale . . . . . . . - - - - 425 425
--------- ------- ---- ---- --- -----
Balance at December 31,
1995 . . . . . . . . . 385,015 3,850 703 249 132 4,934
Net loss . . . . . . . . . - - - (101) - (101)
Unrealized depreciation on
securities available
for sale . . . . . . . - - - - (143) (143)
--------- ------- ---- ---- --- -----
Balance at December 31,
1996 . . . . . . . . . 385,015 $ 3,850 703 148 (11) 4,690
======= ===== === === === =====
</TABLE>
See accompanying Notes to Financial Statements.
F-34
<PAGE> 179
MURDOCK FLORIDA BANK
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (101) (168)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 113
Decrease (increase) in other assets . . . . . . . . . . . . . . . . . . . . 51 (2)
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . 228 219
Gain from sale of securities available for sale . . . . . . . . . . . . . . (1) (6)
(Decrease) increase in other liabilities . . . . . . . . . . . . . . . . . (300) 364
Increase in accrued interest receivable . . . . . . . . . . . . . . . . . . (56) (19)
Net amortization of fees, premiums and discounts . . . . . . . . . . . . . 29 95
Loss (gain) on sale of foreclosed real estate . . . . . . . . . . . . . . . 336 (64)
Decrease in accrued income taxes payable . . . . . . . . . . . . . . . . . - (4)
Write-down on foreclosed real estate . . . . . . . . . . . . . . . . . . . 79 439
Deferred income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . (61) (131)
------- ------
Net cash flow provided by operating activities . . . . . . . . . . . . 287 836
------- ------
Cash flows from investing activities:
Net decrease in interest-bearing time deposits . . . . . . . . . . . . . . . . . - (95)
Purchase of securities available for sale . . . . . . . . . . . . . . . . . . . (7,993) (6,590)
Proceeds from sale of securities available for sale . . . . . . . . . . . . . . 6,038 4,311
Proceeds from sale of foreclosed real estate . . . . . . . . . . . . . . . . . . 1,405 215
Net purchases of property and equipment . . . . . . . . . . . . . . . . . . . . (130) (52)
Principal repayments and maturities of securities available for sale . . . . . . 704 2,825
Net increase in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (290) (6,841)
Capitalized expenditures on foreclosed real estate . . . . . . . . . . . . . . . (127) (25)
------- ------
Net cash used in investing activities . . . . . . . . . . . . . . . . (393) (6,252)
------- ------
Cash flows from financing activities:
Net increase in demand, savings and NOW deposits . . . . . . . . . . . . . . . . 1,360 1,404
(Decrease) increase in time deposits . . . . . . . . . . . . . . . . . . . . . . (2,996) 5,196
Proceeds from Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . 3,900 4,500
Repayments of Federal Home Loan Bank advances . . . . . . . . . . . . . . . . . (4,100) (3,600)
Repayments of obligations under capital leases . . . . . . . . . . . . . . . . . - (11)
------- ------
Net cash (used in) provided by financing activities . . . . . . . . . (1,836) 7,489
------- ------
Net (decrease) increase in cash and cash equivalents . . . . . . . . . (1,942) 2,073
Cash and cash equivalents at beginning of year . . . . . . . . . . . . . . . . . . . 3,873 1,800
------- ------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . . . . . . . . $ 1,931 3,873
======= ======
</TABLE>
See accompanying Notes to Financial Statements.
F-35
<PAGE> 180
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Murdock Florida Bank (the "Bank") is a state-chartered nonFederal Reserve
member commercial bank. The Bank's deposits are insured by the SAIF
fund of the Federal Deposit Insurance Corporation (FDIC). The Bank
provides retail community banking services in the Charlotte County,
Florida area, including real estate secured loans, other asset based
loans, commercial and consumer loans and deposit services.
The accounting and reporting policies of the Bank conform to
generally accepted accounting principles and to general practices
within the banking industry. The following summarizes the more
significant of these policies and practices:
ESTIMATES. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
SECURITIES. The Bank may classify its securities as either trading, held
to maturity or available for sale. Trading securities are held
principally for resale and recorded at their fair values. Unrealized
gains and losses on trading securities are included immediately in
earnings. Held-to-maturity securities are those which the Bank has
the positive intent and ability to hold to maturity and are reported
at amortized cost. Available-for-sale securities consist of
securities not classified as trading securities nor as
held-to-maturity securities. Unrealized holding gains and losses,
net of tax, on available-for-sale securities are reported as a net
amount in a separate component of stockholders' equity until
realized. Gains and losses on the sale of available-for-sale
securities are determined using the specific-identification method.
Premiums and discounts on securities available for sale and held to
maturity are recognized in interest income using the interest method
over the period to maturity.
LOANS RECEIVABLE. Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or
pay-off are reported at their outstanding principal adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or
costs on originated loans and unamortized premiums or discounts on
purchased loans. Loan origination fees and certain direct
origination costs are capitalized and recognized as an adjustment of
the yield of the related loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
The allowance for loan losses is increased by charges against
earnings and decreased by charge-offs (net of recoveries).
Management's periodic evaluation of the adequacy of the allowance is
based on the Bank's past loan loss experience, known and inherent
risks in the portfolio, adverse situations that may affect the
borrower's ability to repay, the estimated value of any underlying
collateral, and current economic conditions.
FORECLOSED REAL ESTATE. Real estate properties acquired through, or in
lieu of, loan foreclosure are to be sold and are initially recorded
at fair value at the date of foreclosure establishing a new cost
basis. After foreclosure, valuations are periodically performed by
management and the real estate is carried at the lower of carrying
amount or fair value less cost to sell. Revenue and expenses from
operations and changes in the valuation allowance are included in the
statements of operations.
PREMISES AND EQUIPMENT. Bank premises, furniture and equipment and
leasehold improvements are stated at cost less accumulated
depreciation and amortization. Depreciation and amortization are
computed on the straight-line method over the estimated useful lives
of the assets.
(continued)
F-36
<PAGE> 181
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
CONTINUED
INCOME TAXES. Deferred tax assets and liabilities are reflected
at currently enacted income tax rates applicable to the period in
which the deferred tax assets or liabilities are expected to be
realized or settled. As changes in tax laws or rates are enacted,
deferred tax assets and liabilities are adjusted through the income
tax provision.
PER SHARE AMOUNTS. Earnings (loss) per share are computed by dividing net
earnings by the weighted-average number of common shares outstanding.
Per share amounts would not be materially diluted by the exercise of
outstanding stock options. Because of limited trading activity in
the Bank's common stock, the book value was used for the purposes of
determining the materiality of dilution.
OFF-BALANCE-SHEET INSTRUMENTS. In the ordinary course of business the
Bank has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit. Such financial
instruments are recorded in the financial statements when they are
funded.
STOCK-BASED COMPENSATION. In October 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation"
("Statement 123"). Statement 123 establishes a "fair value" based
method of accounting for stock-based compensation plans and
encourages all entities to adopt that method of accounting for all of
their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost for those plans using
the intrinsic value based method of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees" (Opinion
25). The Bank has elected to follow Opinion 25 and related
interpretations in accounting for its employee stock options.
Statement 123 requires the disclosure of proforma net earnings and
earnings per share determined as if the Bank accounted for its
employee stock options under the fair value method of that Statement.
FUTURE ACCOUNTING REQUIREMENTS. The FASB has issued Statement of
Financial Accounting Standards No. 125 ("SFAS 125"). This Statement
provides accounting and reporting standards for transfers and
servicing of financial assets as well as extinguishments of
liabilities. This Statement also provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. SFAS 125 is effective for
transfers and servicing of financial assets as well as
extinguishments of liabilities occurring in 1997. Management does
not anticipate SFAS 125 will have a material impact on the Bank.
(2) SECURITIES AVAILABLE FOR SALE
Securities have been classified according to management's intent. The
carrying amount of securities available for sale and their approximate
fair values are summarized as follows (in thousands):
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1996:
U.S. Treasury and agency securities . . . . $ 9,574 16 114 9,476
Municipal bonds . . . . . . . . . . . . . . 521 15 - 536
Mortgage-backed securities . . . . . . . . 6,753 97 40 6,810
-------- --- --- ------
Total . . . . . . . . . . . . . . . . $ 16,848 128 154 16,822
======== === === ======
</TABLE>
(continued)
F-37
<PAGE> 182
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(2) SECURITIES AVAILABLE FOR SALE, CONTINUED
The scheduled maturities of securities available for sale at December 31,
1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due in one year or less . . . . . . . . . . . . . . . . . . . . . $ 1,001 1,010
Due after one year through five years . . . . . . . . . . . . . . 3,591 3,535
Due after five years through ten years . . . . . . . . . . . . . . 5,003 4,969
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . 500 498
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . 6,753 6,810
-------- ------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,848 16,822
======== ======
</TABLE>
Sales of securities available for sale were as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,038 4,311
======= =====
Gross gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 6
Gross losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 -
------- -----
Net gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 6
======= =====
</TABLE>
In November 1995, the FASB issued a Special Report entitled "A Guide to
Implementation of Statement 115 on Accounting for Certain Investments in
Debt and Equity Securities." This Special Report allowed companies a
one-time opportunity to reassess its classification of certain
securities. As a result of this opportunity, the Bank transferred all
of its held-to-maturity securities to available for sale. The amortized
cost of the securities transferred was approximately $7,496,000 at the
time of transfer.
(3) LOANS RECEIVABLE
The components of loans were as follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
1996
----
<S> <C>
Real estate loans:
Residential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,513
Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,659
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,338
-------
Total real estate loans . . . . . . . . . . . . . . . . . . . . . . . . . 35,510
Consumer loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,332
Commercial loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,718
Loans on deposit accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 819
-------
41,379
Deduct:
Loans in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . 445
Deferred loan fees, net . . . . . . . . . . . . . . . . . . . . . . . . . 17
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . 761
-------
$ 40,156
======
</TABLE>
(continued)
F-38
<PAGE> 183
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(3) LOANS RECEIVABLE, CONTINUED
An analysis of the change in the allowance for loan losses is summarized as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1995
---- ----
<S> <C> <C>
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . $ 663 749
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . 228 219
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 44
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (133) (349)
----- ---
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . $ 761 663
===== ===
</TABLE>
LOAN IMPAIRMENT AND LOSSES. The following summarizes the amounts of
specifically identified impaired loans (in thousands):
<TABLE>
<CAPTION>
ESTIMATED FAIR
VALUE OF COLLATERAL
AT DECEMBER 31,
----------------------
1996 1995
---- ----
<S> <C> <C>
Loans identified as impaired:
Gross loans with no related allowance for losses . . . . . . . . . . . . $ - -
Gross loans with related allowance for losses recorded . . . . . . . . . - 1,224
Less: Allowances on these loans . . . . . . . . . . . . . . . . . . . . - 260
------ -----
Net investment in impaired loans . . . . . . . . . . . . . . . . . . . . .
$ - 964
====== =====
</TABLE>
The average net investment in impaired loans and interest income recognized
and received on impaired loans is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
---- ----
<S> <C> <C>
Average investment in impaired loans . . . . . . . . . . . . . . . . . . . $ - 814
====== ====
Interest income recognized on impaired loans . . . . . . . . . . . . . . . $ - -
====== ====
Interest income received on impaired loans . . . . . . . . . . . . . . . . $ - -
====== ====
</TABLE>
(continued)
F-39
<PAGE> 184
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(4) PREMISES AND EQUIPMENT
A summary of property and equipment follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
1996
----
<S> <C>
Building and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . $ 446
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 1,172
-----
Total, at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,618
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,362
-----
$ 256
=====
</TABLE>
The Bank leases its facilities and certain equipment under operating leases
with noncancellable terms. Rent expense amounted to $145,000 for both
the years ended December 31, 1996 and 1995. A summary of the operating
lease commitments at December 31, 1996 follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 145
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 145
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
---
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 519
===
</TABLE>
(5) DEPOSITS
At December 31, 1996, the scheduled maturities of certificates of deposit
are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ------
<S> <C>
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,571
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,999
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,849
2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,407
2001 and thereafter . . . . . . . . . . . . . . . . . . . . . 1,849
------
$ 35,675
======
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit, each with
a minimum denomination of $100,000 was approximately $3.2 million at
December 31, 1996.
(continued)
F-40
<PAGE> 185
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(6) ADVANCE FROM THE FEDERAL HOME LOAN BANK
The advance from the Federal Home Loan Bank of Atlanta is shown below. The
Bank has pledged all of its stock in the Federal Home Loan Bank of
Atlanta and four securities with a book value of approximately
$1,430,000 at December 31, 1996 as collateral for this advance.
<TABLE>
<CAPTION>
BALANCE AT
INTEREST DECEMBER 31,
MATURITY RATE 1996
-------- -------- ----
(In thousands)
<S> <C> <C>
1997 6.95% $ 1,300
=====
</TABLE>
(7) FINANCIAL INSTRUMENTS
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its
customers. These financial instruments are commitments to extend
credit and may involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the balance
sheet. The contract amounts of these instruments reflect the extent of
involvement the Bank has in these financial instruments.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend
credit is represented by the contractual amount of those instruments.
The Bank uses the same credit policies in making commitments as it does
for on-balance-sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed-expiration dates or other termination
clauses and may require payment of a fee. Since some of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash
requirements. The Bank evaluates each customer's credit worthiness on
a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on
management's credit evaluation of the customer.
A summary of the notional amounts of the Bank's financial instruments, with
off balance sheet risk at December 31, 1996 follows (in thousands):
<TABLE>
<S> <C>
Unfunded loan commitments at variable rates . . . . . . . . . . . . . . $ 1,794
=======
Unused lines of credit . . . . . . . . . . . . . . . . . . . . . . . . $ 125
=======
</TABLE>
(8) CREDIT RISK
The Bank grants loans to borrowers throughout the State of Florida with a
majority of the loans in the Charlotte County area. Although the Bank
has a diversified loan portfolio, a significant portion of its
borrowers' ability to honor their contracts is dependent upon the
economy of the Charlotte County area of Florida.
(continued)
F-41
<PAGE> 186
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(9) INCOME TAXES
The benefit for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------
1996 1995
---- ----
<S> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - 23
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 6
----- ----
Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 29
----- ----
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52) (112)
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) (19)
----- ----
Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61) (131)
----- ----
Total income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . $ (61) (102)
===== ====
</TABLE>
The benefit for income taxes is different than that computed by applying
the federal statutory rate of 34%, as indicated in the following
analysis (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1996 1996
--------------------- --------------
AMOUNT % AMOUNT %
------ ----- ------ -----
<S> <C> <C> <C> <C>
Tax at federal income tax rate . . . . . . . . . . . . $(55) (34)% $ (92) (34)%
State income tax, net of federal tax benefit . . . . . (6) (4) (9) (3)
Other . . . . . . . . . . . . . . . . . . . . . . . . - - (1) (1)
---- ---- ----- ---
Income tax benefit . . . . . . . . . . . . . . . . . . $(61) (38)% $(102) (38)%
==== === ===== ===
</TABLE>
The tax effects of each type of significant item that gave rise to deferred
taxes are as follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
1996
----
<S> <C>
Deferred loan fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5
Premises and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Federal Home Loan Bank stock . . . . . . . . . . . . . . . . . . . . . . . (44)
Net operating loss carryforward . . . . . . . . . . . . . . . . . . . . . 219
Allowance for loan losses and foreclosed real
estate writedowns . . . . . . . . . . . . . . . . . . . . . . . . . . 211
Unearned gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Unrealized depreciation on securities available for sale . . . . . . . . . 7
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16)
------
Net deferred income tax asset . . . . . . . . . . . . . . . . . . . . $ 511
======
</TABLE>
At December 31, 1996, the Bank has a net operating loss carryforward of
approximately $580,000 which is available to offset future taxable
income and which expires in 2011.
(continued)
F-42
<PAGE> 187
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(10) LOANS TO RELATED PARTIES
In the ordinary course of business, the Bank has made loans at terms and
rates prevailing at the time to officers and directors of the Bank and
to entities in which they hold a financial interest. The aggregate
dollar amount of these loans totaled approximately $371,000 at
December 31, 1996.
(11) STOCK OPTIONS
In conjunction with his employment contract, the Bank's president, has been
granted options to purchase 6,000 shares of the Bank's common stock at
$12.50 per share, 2,000 shares at $12.90 per share, 2,000 shares at
$12.58 per share, and 2,000 at $12.41 per share. The employment
contract calls for an additional 2,000 shares to be granted annually.
All options are exercisable at the date of grant at the officer's
option and are exercisable anytime during his employment. The maximum
number of shares under the agreement is 10% of the outstanding shares.
On January 1, 1996, the Bank adopted Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," which
establishes financial accounting and reporting standards for
stock-based employee compensation plans. As permitted by this
Statement, the Bank has elected to continue utilizing the intrinsic
value method of accounting defined in APB Opinion No. 25. Due to the
exercise price of the options approximating the market value of the
common stock at the date of grant, no compensation expense has been
recognized in the consolidated statements of operations.
In order to calculate the fair value of the options, it was assumed that
the risk-free interest rate was 6.0%, there would be no dividends paid
by the Bank over the estimated exercise period, the expected life of
the options would be the entire exercise period and stock volatility
would be zero due to the lack of an active market for the stock. The
following information pertains to the options granted to purchase
common stock in 1996 and 1995 (in thousands):
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Weighted-average grant-date fair value of options
issued during the year . . . . . . . . . . . . . . . . . . . . . . $ 8 10
=== ===
Proforma net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $(109) (178)
=== ===
</TABLE>
(12) PROFIT SHARING PLAN
The Bank has a section 401(k) profit sharing plan covering substantially
all employees. The plan provides for the Bank to provide certain
percentage matching contributions for employee contributions (based on
a percentage of compensation) to the plan. Expenses for the plan for
the years ended December 31, 1996 and 1995 were $6,300 and $6,700,
respectively.
(continued)
F-43
<PAGE> 188
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(13) REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements administered
by regulatory agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and possibly additional discretionary
actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance-sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and classification are also
subject to qualitative judgements by the regulators about components,
risk weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in
the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I
capital (as defined) to average assets (as defined). Management
believes, as of December 31, 1996, that the Bank meets all capital
adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the regulatory
authorities categorized the Bank as well capitalized under the
regulatory framework for prompt corrective action. To be categorized
as adequately capitalized the Bank must maintain minimum total
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth
in the table. There are no conditions or events since that
notification that management believes have changed the Bank's
category.
The Bank's actual capital amounts and ratios are also presented in the
table.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES: ACTION PROVISIONS:
--------------------- -------------------- -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996:
Total capital
(to Risk-Weighted Assets) $ 5,104 16.02% $ 2,549 8.00% $ 3,186 10.00%
Tier I Capital
(to Risk-Weighted Assets) 4,701 14.76 1,274 4.00 1,911 6.00
Tier I Capital
(to Average Assets) 4,701 7.63 2,463 4.00 3,080 5.00
</TABLE>
(continued)
F-44
<PAGE> 189
MURDOCK FLORIDA BANK
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(14) SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Supplemental disclosure of cash flow information is as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-----------------------
1996 1995
---- ----
<S> <C> <C>
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,563 2,406
========= =====
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . $ 5 115
========= =====
Supplemental disclosure of noncash transactions:
Reclassification of loans to foreclosed real estate . . . . . . . $ 518 781
========= =====
Loans originated to facilitate sale of foreclosed
real estate . . . . . . . . . . . . . . . . . . . . . . . . $ 570 613
========= =====
Unrealized (depreciation) appreciation on securities
available for sale . . . . . . . . . . . . . . . . . . . . . $ (143) 425
========= =====
</TABLE>
(15) SAIF ASSESSMENT
On September 30, 1996, a one-time SAIF recapitalization assessment was
enacted. The rate was 65.7 cents per $100 on domestic deposits held
as of March 31, 1995. The effect on the Bank is a pretax charge of
$348,000 on deposits of $52.9 million at March 31, 1995. This amount
was paid in November, 1996.
F-45
<PAGE> 190
MURDOCK FLORIDA BANK
CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
ASSETS 1997
----
(UNAUDITED)
<S> <C>
Cash and due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,147
Interest-bearing deposits with banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,378
--------
Total cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 2,525
Interest-bearing time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,079
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,573
Loans receivable, net of allowance for loan losses of $815 . . . . . . . . . . . . . . . . . . 39,765
Foreclosed real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
Restricted securities, Federal Home Loan Bank stock . . . . . . . . . . . . . . . . . . . . . . 576
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 478
Deferred tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,874
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,867
Savings and NOW deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,315
Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,794
--------
Total deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,976
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690
--------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,690
--------
Stockholders' equity:
Common stock, $10 par value; 800,000 shares authorized
385,015 issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,850
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543
Unrealized appreciation on securities available
for sale, net of tax of $53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
--------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,184
--------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 62,874
========
</TABLE>
See accompanying Notes to Condensed Financial Statements.
F-46
<PAGE> 191
MURDOCK FLORIDA BANK
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Interest income:
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,607 2,675
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . . . . 982 868
Other interest earning assets . . . . . . . . . . . . . . . . . . . . . . . . . 87 110
---------- -------
Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,676 3,653
---------- -------
Interest expense:
Interest expense on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,851 1,917
Interest expense on other borrowings . . . . . . . . . . . . . . . . . . . . . . 9 5
---------- -------
Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . 1,860 1,922
---------- -------
Net interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,816 1,731
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 148
---------- -------
Net interest income after provision for loan losses . . . . . . . . . . . . 1,745 1,583
---------- -------
Noninterest income:
Other fees and service charges . . . . . . . . . . . . . . . . . . . . . . . . . 375 343
Loss on sale of foreclosed real estate . . . . . . . . . . . . . . . . . . . . . (7) (52)
(Loss) gain on sale of securities available for sale . . . . . . . . . . . . . . (3) 1
Deferred profit on sale of foreclosed real estate . . . . . . . . . . . . . . . - 155
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 35
---------- -------
Total noninterest income . . . . . . . . . . . . . . . . . . . . . . . . . 376 482
---------- -------
Noninterest expenses:
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . 605 663
Occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266 247
SAIF assessment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 348
Data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 134
Federal insurance premium . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 116
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 36
Foreclosed real estate expense . . . . . . . . . . . . . . . . . . . . . . . . . 28 211
Office expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 93
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274 263
---------- -------
Total noninterest expenses . . . . . . . . . . . . . . . . . . . . . . . . 1,483 2,111
---------- -------
Earnings (loss) before income taxes (benefit) . . . . . . . . . . . . . . . . . . . . 638 (46)
Income taxes (benefit) . . . . . . . . . . . . . . . . . . . . . . . . . . 243 (17)
---------- -------
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 395 (29)
========== =======
Earnings (loss) per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.03 (.08)
========== =======
Weighted-average number of shares outstanding . . . . . . . . . . . . . . . . . . . . 385,015 385,015
========== =======
</TABLE>
See accompanying Notes to Condensed Financial Statements.
F-47
<PAGE> 192
MURDOCK FLORIDA BANK
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION)
COMMON STOCK ON
------------------------ ADDITIONAL SECURITIES TOTAL
NUMBER OF PAID-IN RETAINED AVAILABLE STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS FOR SALE EQUITY
---------- ----------- ----------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996 . . . . . . . . . 385,015 $ 3,850 703 148 (11) 4,690
Net earnings (unaudited). . - - - 395 - 395
Unrealized appreciation
on securities available
for sale (unaudited) . . - - - - 99 99
------ ------- ----- ---- --- -----
Balance at September 30,
1997 (unaudited) . . . 385,015 $ 3,850 703 543 88 5,184
======= ======= ===== ==== === =====
</TABLE>
See accompanying Notes to Condensed Financial Statements.
F-48
<PAGE> 193
MURDOCK FLORIDA BANK
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
---------------------
1997 1996
---- ----
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 395 (29)
Adjustments to reconcile net earnings (loss) to net cash
from operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 64
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . (45) (95)
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . 71 148
Loss (gain) from sale of securities available for sale . . . . . . . . . . 3 (1)
Increase in other liabilities . . . . . . . . . . . . . . . . . . . . . . . 245 415
Decrease (increase) in accrued interest receivable . . . . . . . . . . . . 40 (11)
Net amortization of fees, premiums and discounts . . . . . . . . . . . . . (37) (6)
Loss on sale of foreclosed real estate . . . . . . . . . . . . . . . . . . 7 52
Increase in accrued income taxes payable . . . . . . . . . . . . . . . . . 24 -
Write-down on foreclosed real estate . . . . . . . . . . . . . . . . . . . 6 60
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 45
-------- ------
Net cash flow provided by operating activities . . . . . . . . . . . . 931 642
-------- ------
Cash flows from investing activities:
Net increase in interest-bearing time deposits . . . . . . . . . . . . . . . . . (492) (197)
Purchase of securities available for sale . . . . . . . . . . . . . . . . . . . (3,912) (7,993)
Proceeds from sale of securities available for sale . . . . . . . . . . . . . . 997 6,038
Proceeds from sale of foreclosed real estate . . . . . . . . . . . . . . . . . . 85 585
Net purchases of property and equipment . . . . . . . . . . . . . . . . . . . . (85) (133)
Principal repayments and maturities of securities available for sale . . . . . . 2,322 527
Net decrease in loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 610
Capitalized expenditures on foreclosed real estate . . . . . . . . . . . . . . . (14) (65)
-------- ------
Net cash used in investing activities . . . . . . . . . . . . . . . . (783) (628)
-------- ------
Cash flows from financing activities:
Net increase in demand, savings and NOW deposits . . . . . . . . . . . . . . . . 1,627 1,908
Increase (decrease) in time deposits . . . . . . . . . . . . . . . . . . . . . . 119 (2,080)
Net decrease in Federal Home Loan Bank advances . . . . . . . . . . . . . . . . (1,300) (1,500)
-------- ------
Net cash provided by (used in) financing activities . . . . . . . . . 446 (1,672)
-------- ------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . 594 (1,658)
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . . . . . 1,931 3,873
-------- ------
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . . . $ 2,525 2,215
======== ======
</TABLE>
See accompanying Notes to Condensed Financial Statements.
F-49
<PAGE> 194
MURDOCK FLORIDA BANK
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION. In the opinion of the management of Murdock
Florida Bank (the "Bank") the accompanying condensed financial
statements contain all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position at
September 30, 1997 and the results of operations and cash flows for
the nine-month periods ended September 30, 1997 and 1996. The
results of operations and cash flows for the nine months ended
September 30, 1997, are not necessarily indicative of results that
may be expected for the year ending December 31, 1997.
2. LOAN IMPAIRMENT AND LOAN LOSSES. The Bank prepares a quarterly review of
the adequacy of the allowance for loan losses to also identify and
value impaired loans in accordance with guidance in the Statements of
Financial Accounting Standards No. 114 and 118. There were no
impaired loans identified by the Bank during the nine-month periods
ended September 30, 1997 or 1996.
An analysis of the change in the allowance for loan losses follows
(in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
1997 1996
---- ----
<S> <C> <C>
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . $ 761 663
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . 71 148
Loans charged-off, net of recoveries . . . . . . . . . . . . . . . . . (17) (120)
--- ---
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 815 691
=== ===
</TABLE>
3. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION. Supplemental disclosure
of cash flow information is as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1996
---- ----
<S> <C> <C>
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,857 1,928
======= =====
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . $ 274 -
======= =====
Supplemental disclosure of noncash transactions:
Reclassification of loans to foreclosed real estate . . . . . . . $ 136 518
======= =====
Loans originated to facilitate sale of foreclosed real estate . . $ 95 488
======= =====
Unrealized appreciation (depreciation) on
securities available for sale . . . . . . . . . . . . . . . . $ 99 (298)
======= =====
</TABLE>
4. IMPACT OF NEW ACCOUNTING ISSUES. In June 1996, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards
No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities" ("SFAS No. 125"). That Statement
provides accounting and reporting standards for transfers and
servicing of financial assets and extinguishments of liabilities.
That Statement also provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are
secured borrowings. SFAS No. 125 is effective for transfers and
servicing of financial assets as well as extinguishments of
liabilities occurring in 1997. The adoption of SFAS No. 125 had no
significant effect on the Bank's financial position at September 30,
1997 or results of operations for the nine months then ended.
(continued)
F-50
<PAGE> 195
MURDOCK FLORIDA BANK
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED), CONTINUED
5. PENDING ACQUISITION. On September 23, 1997, the Bank entered into an
agreement to be acquired by American Bancshares, Inc., Bradenton,
Florida ("American"). American will exchange 2.4 shares of its
common stock for each outstanding share of the Bank's stock. This
exchange ratio may be adjusted for changes in value of American
stock. This transaction is subject to the approval of the Bank's
stockholders and various regulatory authorities.
F-51
<PAGE> 196
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AMERICAN BANCSHARES, INC.,
AMERICAN BANK OF BRADENTON
AND
MURDOCK FLORIDA BANK
DATED AS OF SEPTEMBER 23, 1997
A-1
<PAGE> 197
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PREAMBLE
ARTICLE I
The Merger and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
1.1 The Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
1.2 Time and Place of Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-5
1.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
ARTICLE II
Terms of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
2.1 Articles of Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
2.2 Bylaws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
2.3 Directors and Officers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
ARTICLE III
Manner of Converting Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
3.1 Conversion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-6
3.2 Anti-Dilution Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
3.3 Shares held by Murdock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
3.4 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
3.5 Conversion of Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-7
3.6 Dissenter's Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-8
3.7 Transfers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
ARTICLE IV
Exchange of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
4.1 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-9
4.2 Rights of Former Murdock Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . A-10
4.3 Termination of Exchange Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
ARTICLE V
Representations and Warranties of Murdock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
5.1 Organization, Standing, and Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
5.2 Authority; No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-10
5.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
5.4 No Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-12
5.5 Regulatory Filings; Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . A-12
5.6 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
5.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
5.8 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-13
5.9 Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-14
5.10 Allowance for Loan or Credit Losses. . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
5.11 Notes and Obligations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
5.12 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
5.13 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-15
5.14 Compliance with Laws; No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . A-16
5.15 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
5.16 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-17
5.17 Commitments and Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
</TABLE>
A-2
<PAGE> 198
<TABLE>
<S> <C> <C>
5.18 Material Contract Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-18
5.19 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
5.20 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
5.21 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
5.22 Statements True and Correct. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-19
5.23 Accounting, Tax and Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . . . . . A-20
5.24 Opinion of Financial Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
5.25 State Takeover Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
5.26 Corporate Governance Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
5.27 Derivative Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
5.28 Support of Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
ARTICLE VI
Representations and Warranties of ABI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
6.1 Organization, Standing, and Power. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-20
6.2 Authority; No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-21
6.3 Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
6.4 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
6.5 SEC Filings; Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
6.6 Absence of Certain Changes or Events. . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
6.7 No Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-22
6.8 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
6.9 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-23
6.10 Compliance with Laws; No Violations. . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
6.11 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-24
6.12 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
6.14 Accounting, Tax, and Regulatory Matters. . . . . . . . . . . . . . . . . . . . . . . . . A-25
6.15 Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
ARTICLE VII
Conduct of Business Prior to the Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
7.1 Conduct of Business by Murdock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-25
7.2 Forbearance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-26
7.3 Covenants of ABI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-27
7.4 Notification of Adverse Changes in Condition. . . . . . . . . . . . . . . . . . . . . . . A-28
7.5 Government Filings and Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
ARTICLE VIII
Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-28
8.1 Registration Statement; Proxy Statement; Regulatory Matters. . . . . . . . . . . . . . . A-28
8.2 Access to Information; Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . A-28
8.3 Stockholders' Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
8.4 Filings with State Offices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-29
8.5 Agreements As To Efforts to Consummate. . . . . . . . . . . . . . . . . . . . . . . . . . A-29
8.6 No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
8.7 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
8.8 Current Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
8.9 Other Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
8.10 Press Releases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-30
8.11 Pooling and Tax-Free Reorganization Treatment. . . . . . . . . . . . . . . . . . . . . . A-31
8.12 State Takeover Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
8.13 Corporate Governance Provisions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
8.14 Agreement of Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
</TABLE>
A-3
<PAGE> 199
<TABLE>
<S> <C> <C>
8.15 Officer Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-31
8.16 American Bank/Murdock Local Advisory Board. . . . . . . . . . . . . . . . . . . . . . . . A-32
8.17 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-32
ARTICLE IX
Conditions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-33
9.1 Conditions to Obligations of Each Party. . . . . . . . . . . . . . . . . . . . . . . . . A-33
9.2 Conditions to Obligations of ABI to Effect the Merger. . . . . . . . . . . . . . . . . . A-34
9.3 Conditions to Obligation of Murdock to Effect the Merger. . . . . . . . . . . . . . . . . A-35
ARTICLE X
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
10.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-36
10.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
10.3 Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
ARTICLE XI
Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
11.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-38
11.2 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
11.3 Non-Survival of Representations, Warranties and Covenants Following the Effective
Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
11.4 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
11.5 Obligation of ABI. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-43
11.6 Amendment and Modification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
11.7 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
11.8 No Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
11.9 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-44
11.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
11.11 Fiduciary Duty. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
11.12 Enforcement of Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
11.13 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
11.14 Captions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-45
PREAMBLE
Exhibit A Plan of Merger
Exhibit B Voting Letter Agreement
Exhibit C Affiliate's Letter
Exhibit D Opinion of Counsel for Murdock
Exhibit E Opinion of Counsel for ABI
</TABLE>
A-4
<PAGE> 200
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of September
23, 1997 by and among AMERICAN BANCSHARES, INC. ("ABI"), a Florida corporation
having its principal office located in Bradenton, Florida, AMERICAN BANK OF
BRADENTON ("American Bank"), a Florida state chartered bank, and MURDOCK
FLORIDA BANK ("Murdock"), a Florida state chartered bank having its principal
office located in Murdock, Florida.
PREAMBLE
The Boards of Directors of ABI, American Bank, and Murdock are of the
opinion that the transactions described herein are in best interest of the
parties and their respective shareholders and have approved the transactions
described herein. This Agreement provides for the acquisition of Murdock by
ABI pursuant to the merger of Murdock with and into, American Bank (the
"Merger"), a wholly owned subsidiary of ABI. At the effective time of the
Merger, the outstanding shares of capital stock of Murdock shall be converted
into the right to receive shares of the capital stock of the ABI (except as
provided herein). As a result, stockholders of Murdock shall become
stockholders of ABI. The transactions contemplated by this Agreement are
subject to the approval of the shareholders of Murdock, the Florida Department
of Banking and Finance, the Board of Governors of the Federal Reserve System,
and the Federal Deposit Insurance Corporation ("FDIC"), and the satisfaction of
certain other conditions described in this Agreement. It is the intention of
the parties to this Agreement that for federal income tax purposes the Merger
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code, and for accounting purposes shall qualify for treatment
as a "pooling of interest".
Certain capitalized terms used in this Agreement are defined in
Section 11.1 of this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
representations, warranties, covenants, and agreements herein contained, the
parties hereby agree as follows:
ARTICLE I
THE MERGER AND RELATED TRANSACTIONS
1.1 THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, Murdock shall be merged with and into
American Bank in accordance with the provisions of the FFIC. At the Effective
Time, the separate corporate existence of Murdock shall cease, and American
Bank, which shall remain a wholly-owned subsidiary of ABI, shall be the
surviving corporation resulting from the Merger (the "Surviving Corporation")
and shall continue to be governed by the laws of the State of Florida. The
Merger will be consummated pursuant to the terms of this Agreement, which has
been approved and adopted by the respective Board of Directors of ABI, American
Bank, and Murdock, and the Plan of Merger in substantially the form set forth
in Exhibit A and is incorporated herein by reference, which has been approved
and adopted by the Board of Directors of American Bank and Murdock. From and
after the Effective Time, the Merger shall have the effects set forth in the
FFIC.
1.2 TIME AND PLACE OF CLOSING. The closing of the transactions
contemplated hereby (the "Closing"), including the Merger, will take place at
the offices of Carlton, Fields, Ward, Emmanuel, Smith & Cutler, P.A., One
Harbour Place, 777 South Harbour Island Drive, Tampa, Florida 33601, at 10:00
a.m. local time on a date specified by the parties as they, acting through
their chief executive officers or Chairman of the Board of Directors, may
mutually agree. Subject to the terms and conditions hereof, unless mutually
agreed upon in writing by each party, the parties shall use their reasonable
best efforts to cause the Closing to occur on or before the fifth business day
following the Determination Date.
A-5
<PAGE> 201
1.3 EFFECTIVE TIME. The Merger and other transactions
contemplated by this Agreement shall become effective on the date and at the
time on which the articles of merger ("Articles of Merger") containing the
provisions required by, and executed in accordance with, the Florida Business
Corporation Act ("FBCA"), shall have been accepted for filing by the Secretary
of State of the State of Florida or such later date and time as is agreed upon
in writing by ABI and Murdock and specified in the Articles of Merger (the
"Effective Time"). Unless ABI and Murdock otherwise mutually agree in writing,
the parties to this Agreement shall use their best efforts to cause the
Effective Time to occur on the date of Closing.
ARTICLE II
TERMS OF MERGER
2.1 ARTICLES OF INCORPORATION. Pursuant to the Merger, the
articles of incorporation of American Bank in effect immediately prior to the
Effective Time shall be the articles of incorporation of the Surviving
Corporation until otherwise amended and repealed in accordance with applicable
law.
2.2 BYLAWS. Pursuant to the Merger, the Bylaws of the American
Bank in effect immediately prior to the Effective Time shall be the bylaws of
the Surviving Corporation until otherwise amended or repealed in accordance
with applicable law.
2.3 DIRECTORS AND OFFICERS. From and after the Effective Time,
the directors and officers of American Bank immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation, each to
hold office in accordance with the articles of incorporation and bylaws of the
Surviving Corporation.
ARTICLE III
MANNER OF CONVERTING SHARES
3.1 CONVERSION. Subject to the provisions of this Article III, at
the Effective Time, by virtue of the Merger and without any action on the part
of the shareholders of ABI or Murdock, the shares of the constituent
corporations shall be converted as follows:
(a) Except for shares of Murdock Common Stock issued and
outstanding immediately prior to the Effective Time as to which dissenters'
rights have been perfected and not withdrawn, and subject to Section 3.4
relating to fractional shares, each share of Murdock Common Stock (excluding
shares to be cancelled pursuant to Section 3.3 of this Agreement) issued and
outstanding at the Effective Time shall cease to be outstanding and shall be
converted into and exchanged for 2.40 ABI Common Shares (the "Exchange Ratio").
The Exchange Ratio shall be fixed and no adjustment shall be made except
pursuant to Section 3.2 of this Agreement unless the Designated Price of the
ABI Common Shares is less than $11.00, the Closing Equity is less than
$5,000,000, or both, in which case the Exchange Ratio shall be adjusted in
accordance with Section 3.1(b) of this Agreement.
(b) If the Designated Price of ABI Common Shares is less
than $11.00 and the Closing Equity is at least $5,000,000, then the Exchange
Ratio shall be increased to equal the quotient, rounded to the third decimal
point, of: (x) the product of $11.00 and the Exchange Ratio divided by (y) the
Designated Price. If the Designated Price shall be less than $10.00, then ABI
and Murdock shall in good faith attempt to negotiate a mutually acceptable
Merger Consideration for the Murdock Common Stock; provided, however, that if a
mutually agreed upon Merger Consideration is not negotiated within four days
following the Determination Date, then Murdock may terminate this Agreement
pursuant to Section 10.1(i) of this Agreement. If the Closing Equity shall be
less than $5,000,000, then the Exchange Ratio shall be adjusted as follows:
(i) if the Designated Price is $11.00 or more, then the Exchange Ratio shall be
decreased to equal the quotient, rounded to the third decimal point, of (A) the
quotient of
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[Closing Equity multiplied by 2.25, divided by 385,015] divided by (B) 12.169,
or (ii) if the Designated Price is less than $11.00, then the Exchange Ratio
shall be adjusted to equal the quotient, rounded to the third decimal point, of
(A) the quotient of [Closing Equity multiplied by 2.25, divided by 385,015]
divided by (B) 11.00. If the Closing Equity shall be less than $4,875,000,
then ABI and Murdock shall in good faith attempt to negotiate a mutually
acceptable Merger Consideration for the Murdock Common Stock; provided,
however, that if a mutually agreed upon Merger Consideration is not negotiated
within four days following the determination of Closing Equity, then ABI may
terminate the Agreement pursuant to Section 10.1(j) of this Agreement.
(c) Each of the Surviving Corporation common shares,
$1.175 par value per share, issued and outstanding immediately prior to the
Effective Time shall remain issued and outstanding from and after the Effective
Time.
(d) Each of the ABI Common Shares issued and outstanding
immediately prior to the Effective Time shall remain issued and outstanding
from and after the Effective Time.
3.2 ANTI-DILUTION PROVISIONS. In the event that ABI changes the
number of ABI Common Shares issued and outstanding prior to the Effective Time
as a result of a stock split, stock dividend, recapitalization,
reclassification, or other similar transaction with respect to such ABI Common
Shares and the record date therefor (in the case of a stock dividend) or the
effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Merger Consideration shall be proportionately adjusted
so as to prevent any dilutive effect to the stockholders of Murdock which would
otherwise result from any such transaction on a percentage of ownership basis.
3.3 SHARES HELD BY MURDOCK. Each share of Murdock Common Stock
held by Murdock as treasury stock, other than those shares of Murdock Common
Stock held in a fiduciary capacity or as a result of debts previously
contracted, shall be cancelled and retired at the Effective Time and shall
cease to exist and no consideration shall be exchanged therefor. All ABI
Common Shares that are owned by Murdock shall become treasury stock of ABI.
3.4 FRACTIONAL SHARES. Notwithstanding any other provision of
this Agreement, each holder of shares of Murdock Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of an ABI Common Share (after taking into account all certificates
delivered by such holder) shall receive, in lieu thereof, cash (without any
interest thereon) in an amount equal to such fractional part of an ABI Common
Share multiplied by the "market price" of one ABI Common Share at the Closing.
The "market price" of one ABI Common Share at the Closing shall be the closing
price of such common shares on Nasdaq (as reported by the Wall Street Journal
or, if not reported thereby, any other authoritative source selected by ABI) on
the last trading day preceding the Closing. No such holder will be entitled to
dividends, voting rights, or any other rights as a shareholder in respect of
any fractional share.
3.5 CONVERSION OF STOCK OPTIONS.
(a) At the Effective Time, each award, option, or other
right to purchase or acquire ABI Common Shares pursuant to any stock awards,
stock options, stock appreciation rights or other benefits ("Murdock Rights")
granted and under any employee stock option or compensation plan or arrangement
of Murdock ("Murdock Stock Plans") which are outstanding at the Effective Time,
whether or not vested or exercisable, without any action on the part of the
holder thereof, shall be converted into and become rights with respect to ABI
Common Shares, and ABI shall assume each Murdock Right, in accordance with the
terms of the Murdock Stock Plan and stock option agreement or award by which it
is evidenced, except that from and after the Effective Time (i) ABI and its
Compensation Committee shall be substituted for Murdock and the committee of
Murdock's Board of Directors (including, if applicable, the entire Board of
Directors of Murdock) administering such Murdock Stock Plan, (ii) each Murdock
Right assumed by ABI may be exercised solely for ABI Common Shares (or cash in
the case of
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stock appreciation rights), (iii) the number of ABI Common Shares subject to
such Murdock Right shall be equal to the number of ABI Common Shares subject to
such Murdock Right immediately prior to the Effective Time multiplied by the
Exchange Ratio, and (iv) the per share exercise price (or similar threshold
price, in the case of stock awards) under each such Murdock Right shall be
adjusted by dividing the per share exercise (or threshold) price under each
such Murdock Right by the Exchange Ratio and rounding up to the nearest cent.
Notwithstanding the provisions of clause (iii) of the proceeding sentence, ABI
shall not be obligated to issue any fraction of an ABI Common Share upon
exercise of Murdock Rights and any fraction of an ABI Common Share that
otherwise would be subject to a converted Murdock Right shall represent the
right to receive a cash payment equal to the product of such fraction and the
difference between the market price of one ABI Common Share and the per share
exercise price of such right. In addition, notwithstanding the provisions of
clauses (iii) and (iv) of the first sentence of this Section 3.5(a), each
Murdock Right which is an "incentive stock option" shall be adjusted as
required by Section 424 of the Internal Revenue Code, and the regulations
promulgated thereunder, so as not to constitute a modification, extension, or
renewal of the option, within the meaning of Section 424(h) of the Internal
Revenue Code. ABI agrees to take all necessary steps to effectuate the
foregoing provisions of this Section 3.5.
(b) As soon as practicable after the Effective Time, ABI
shall deliver to the participants in each Murdock Stock Plan an appropriate
notice setting forth such participant's rights pursuant thereto and the grants
pursuant to such Murdock Stock Plan shall continue in effect on the same terms
and conditions (subject to the adjustments required by Section 3.5(a) of this
Agreement after giving effect to the Merger), and ABI shall comply with the
terms of each Murdock Stock Plan to ensure, to the extent required by, and
subject to the provisions of, such Murdock Stock Plan, that the Murdock Rights
which qualified as incentive stock options prior to the Effective Time continue
to qualify as incentive stock options after the Effective Time. At or prior to
the Effective Time, ABI shall take all corporate action necessary to reserve
for issuance sufficient ABI Common Shares for delivery upon exercise of Murdock
Rights assumed by ABI in accordance with this Section 3.5. None of the ABI
Common Shares to be issued upon conversion or exercise of converted Murdock
Rights will be required to be registered under the Securities Act or any blue
sky or state securities Laws.
(c) All restrictions or limitations on transfer with
respect to Murdock Common Stock awarded under the Murdock Stock Plans, to the
extent that such restrictions or limitations shall not have already lapsed, and
except as otherwise expressly provided in such plan, program, or arrangement,
shall remain in full force and effect with respect to ABI Common Shares into
which such restricted stock is converted pursuant to Section 3.1 of this
Agreement.
(d) Prior to the Effective Time, Murdock will make any
amendments to the terms of the Murdock Stock Plans that are necessary to give
effect to the transactions contemplated by this Section 3.5. Murdock
represents that neither the execution of this Agreement nor the consummation of
the transactions contemplated hereby will cause the acceleration of vesting,
the lapse of repurchase rights or obligations, or the triggering of any other
benefits, rights, or protections occurring upon a change of control of Murdock
with respect to any Murdock Rights under any Murdock Stock Plan or otherwise.
Except as contemplated by this Section 3.5(d), Murdock will not, after the date
hereof, without the written consent of ABI, amend any outstanding Murdock
Rights or other options or rights to purchase shares of Murdock Common Stock
(including accelerating the vesting or lapse of repurchase rights or
obligations).
3.6 DISSENTER'S SHARES. Notwithstanding Section 3.1(a) of this
Agreement, shares of Murdock Common Stock issued and outstanding at the
Effective Time which are held by a holder who has not voted in favor of the
Merger and who has demanded payment for such shares in accordance with Section
658.44 of the Florida Statutes ("Dissenting Murdock Shares") shall not be
converted into or represent the right to receive the ABI Common Shares payable
thereon pursuant to Section 3.1 of this Agreement, and shall be entitled only
to such rights of appraisal as are granted by Section 658.44 of the Florida
Statutes ("Dissent Provisions"), unless and until such holder fails to perfect
or effectively withdraws or otherwise loses his or her right to appraisal. If
after the Effective Time any such holder fails to perfect or effectively
withdraws or loses his right to appraisal, such shares of
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Murdock Common Stock shall be treated as if they had been converted at the
Effective Time into the right to receive the ABI Common Shares payable thereon
pursuant to Section 3.1 of this Agreement. Murdock shall give ABI prompt
notice upon receipt by Murdock of any written objection to the Merger and such
written demands for payment for shares of Murdock Common Stock under the
Dissent Provisions, and the withdrawals of such demands, and any other
instruments provided to Murdock pursuant to the Dissent Provisions (any
shareholder duly making such demand being hereinafter called a "Dissenting
Shareholder"). Each Dissenting Shareholder that becomes entitled, pursuant to
the Dissent Provisions, to payment for any shares of Murdock Common Stock held
by such Dissenting Shareholder shall receive payment therefor from ABI (but
only after the amount thereof shall have been agreed upon or at the times and
in the amounts required by the Dissent Provisions) and all of such Dissenting
Shareholders shares of Murdock Common Stock shall be cancelled. Murdock shall
not, except with the prior written consent of ABI, voluntarily make any payment
with respect to, or settle or offer to settle, any demand for payment by a
Dissenting Shareholder.
3.7 TRANSFERS. At the Effective Time, the stock transfer books of
Murdock shall be closed as to holders of Murdock Common Stock immediately prior
to the Effective Time and no transfers of Murdock Common Stock by any such
holder shall thereafter be made or recognized. If, after the Effective Time,
certificates representing Murdock Common Stock are properly presented in
accordance with Section 4.1 of this Agreement to the exchange agent, which
shall be selected by ABI ("Exchange Agent"), such certificates shall be
cancelled and exchanged for certificates representing the number of whole ABI
Common Shares and a check representing the amount of cash for fractional
shares, if any, into which the Murdock Common Stock represented thereby were
converted in the Merger (the "Merger Consideration").
ARTICLE IV
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. As of the Effective Time, ABI shall
deposit or shall cause to be deposited with the Exchange Agent for exchange in
accordance with this Article IV, certificates representing ABI Common Shares
and cash in such amounts necessary to provide all the Merger Consideration
required to be exchanged by ABI pursuant to the terms of this Agreement (such
Merger Consideration, together with any dividends or other distributions with
respect thereto, referred to herein as the "Exchange Fund"). As soon as
reasonably practicable after the Effective Time, ABI shall cause the Exchange
Agent to mail to each holder of record of shares of Murdock Common Stock
immediately prior to the Effective Time whose shares were converted pursuant to
Section 3.1 of this Agreement into the right to receive the Merger
Consideration: (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the certificates theretofore
representing shares of Murdock Common Stock shall pass, only upon proper
delivery of such certificates to the Exchange Agent, and which shall be in such
form and have such other provisions as ABI may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Murdock Common Stock
certificates in exchange for the Merger Consideration. After the Effective
Time, each holder of shares of Murdock Common Stock issued and outstanding at
the Effective Time (other than shares as to which dissenters' rights have been
perfected under the Dissent Provisions and not withdrawn and other than shares
to be cancelled pursuant to Section 3.3 of this Agreement) shall surrender the
certificate or certificates theretofore representing such shares, together with
such transmittal materials properly and duly executed, to the Exchange Agent
and promptly upon surrender shall receive in exchange therefor the Merger
Consideration, together with all declared but unpaid dividends or distributions
in respect of such shares (without any interest thereon), and the Murdock
Common Stock certificates so surrendered shall forthwith be cancelled. The
certificate or certificates for Murdock Common Stock shall be duly endorsed as
the Exchange Agent may require. ABI shall not be obligated to deliver the
consideration to which any former holder of Murdock Common Stock is entitled as
the result of the Merger until such holder surrenders his certificate or
certificates representing shares of Murdock Common Stock for exchange as
provided in this Section 4.1. If any certificate for ABI Common Shares, or
check representing cash in lieu of fractional shares and/or declared by unpaid
dividends or distributions, is to be issued in a name other than that in which
a certificate surrendered for exchange is issued, the certificate so
surrendered
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shall be properly endorsed and otherwise in proper form for transfer and the
person requesting such exchange shall affix any requisite transfer tax stamps
to the certificate surrendered or provide funds for their purchase or establish
to the reasonable satisfaction of the Exchange Agent that no such taxes are
payable.
4.2 RIGHTS OF FORMER MURDOCK SHAREHOLDERS. Until surrendered for
exchange in accordance with the provisions of Section 4.1 of this Agreement,
each certificate theretofore representing shares of Murdock Common Stock (other
than those shares as to which dissenter's rights have been perfected under the
Dissent Provisions and not withdrawn, and other than shares to be cancelled
pursuant to Section 3.3 of this Agreement) shall from and after the Effective
Time represent for all purposes only the right to receive ABI Common Shares and
cash in lieu of fractional shares as set forth in this Agreement (without any
interest thereon). Whenever a dividend or other distribution is declared by
ABI on the ABI Common Shares, the record date for which is at or after the
Effective Time, the declaration shall include dividends or other distributions
on all shares issuable pursuant to this Agreement, but no dividend or other
distribution payable to the holders of record of ABI Common Shares at or
subsequent to the Effective Time shall be delivered to the holder of any
certificate representing shares of Murdock Common Stock issued and outstanding
at the Effective Time until such holder physically surrenders such certificate
for exchange as provided in Section 4.1 of this Agreement, promptly after which
time all such dividends or distributions shall be paid (without any interest
thereon).
4.3 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund (including the proceeds of any investments thereof) which had been made
available to the Exchange Agent pursuant to Section 4.1 of this Agreement that
remain unclaimed by the former shareholders of Murdock for six (6) months after
the Effective Time shall be paid to ABI. Any former shareholders of Murdock
who have not theretofore complied with this Article IV shall thereafter look
only to ABI for payment of the Merger Consideration, and any unpaid dividends
and distributions on the ABI Common Shares deliverable in respect of each share
of Murdock Common Stock such shareholder holds as determined pursuant to this
Agreement, in each case, without any interest thereon. Any other provision of
this Agreement notwithstanding, neither ABI, American Bank, the Surviving
Corporation, nor shall the Exchange Agent be liable to a holder of Murdock
Common Stock for any amount paid or property delivered in good faith to a
public official pursuant to any abandoned property, escheat, or similar law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MURDOCK
Murdock hereby represents and warrants to ABI and American Bank as
follows:
5.1 ORGANIZATION, STANDING, AND POWER. Murdock is a state banking
corporation duly organized, validly existing, and in active status under the
laws of the State of Florida, and has the requisite corporate power and
authority to own, lease, and operate its properties and to carry on its
business as it is now being conducted. Murdock is not required to be
qualified or licensed to do business as a foreign corporation in any other
jurisdiction. Murdock's deposits are insured by the FDIC to the maximum extent
permitted by Law. Murdock has provided to ABI true, complete, and correct
copies of the articles of incorporation and bylaws of Murdock, in each case as
amended and in effect on the date of this Agreement.
5.2 AUTHORITY; NO CONFLICT.
(a) Murdock has all the requisite corporate power and
authority to execute and deliver this Agreement and, subject to the requisite
approval and adoption of this Agreement by the stockholders of Murdock, to
perform its obligations under this Agreement and consummate the transactions
contemplated hereby. The execution, delivery, and performance of this
Agreement by Murdock and the consummation by Murdock of the transactions
contemplated hereby, have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of Murdock, subject in the case
of the consummation of the Merger contemplated hereby to the
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requisite approval and adoption of this Agreement by the stockholders of
Murdock as contemplated by Section 8.3 of this Agreement. The affirmative vote
of the holders of a majority of the outstanding shares of Murdock Common Stock
is the only vote required of Murdock's capital stock necessary in connection
with the consummation of the Merger. No other vote of the holders of Murdock's
capital stock is necessary in conjunction with this Agreement or consummation
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by Murdock and, subject to such requisite stockholder approval of
the Agreement (and assuming due authorization, execution and delivery by ABI
and American Bank), the Agreement constitutes a legal, valid, and binding
obligation of Murdock enforceable against Murdock in accordance with its terms
(except in all cases to the extent as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or similar Laws
affecting the enforcement of creditors' rights and remedies generally and
except that the availability of the equitable remedy of specific performance
and injunctive relief is subject to the discretion of the court before which
any proceedings may be brought).
(b) At a meeting duly called and held, the Board of
Directors of Murdock has determined that this Agreement and the transactions
contemplated hereby, including the Merger, are fair to and in the best
interests of Murdock's stockholders, approved and adopted this Agreement and
the transactions contemplated hereby, and resolved (subject to Section 8.3 of
this Agreement) to recommend approval and adoption of this Agreement by its
stockholders. Murdock has been advised that all of Murdock's directors and its
President and Chief Executive Officer intend to vote in favor of the approval
and adoption of this Agreement at the Stockholders' Meeting and have executed a
letter agreement to this effect with ABI in substantially the form as set forth
in Exhibit B to this Agreement.
(c) Except as disclosed in Section 5.2(c) of the Murdock
Disclosure Memorandum, neither the execution and delivery of this Agreement by
Murdock, nor the consummation by Murdock of the transactions contemplated
hereby, nor compliance by Murdock with any of the terms or provisions herein,
will (i) conflict with or violate any provision of the Articles of
Incorporation or Bylaws of Murdock, (ii) violate, conflict with, constitute or
result in a breach of any term, condition, or provision of, or constitute a
default (with or without notice or the lapse of time, or both) under, or give
rise to any right of termination, cancellation, or acceleration of any
obligation or the loss of a benefit under, or require a Consent pursuant to, or
result in the creation of any claims, lien, pledge, security interest, charge,
or other encumbrance of any kind whatsoever ("Liens") upon any assets or
properties of Murdock pursuant to, any of the terms, provisions, or conditions
of any loan or credit agreement, note, bond, mortgage, indenture, deed of
trust, license, agreement, contract, lease, Permit, concession, franchise,
plan, or other instrument or obligation to which Murdock is a party, or by
which any of its assets or properties may be bound or affected, except for such
violations, conflicts, breaches, defaults, creation of Liens, or failure to
obtain such a Consent that would not, individually or in the aggregate, have a
Material Adverse Effect on Murdock or the Surviving Corporation or materially
threaten, impede, or impair the consummation of the transactions contemplated
by this Agreement, or (iii) subject to receipt of the requisite approvals and
Consents referred to in Sections 9.1(a), 9.1(b), and 9.1(e) of this Agreement,
conflict with or violate any judgment, order, writ, Injunction, decree, or Law
applicable to Murdock or any of its assets or properties, which conflict or
violation, individually or in the aggregate, would have or be reasonably likely
to have a Material Adverse Effect on Murdock.
(d) Other than (i) in connection or compliance with the
provisions of applicable state corporate and securities Laws, the Securities
Laws, and rules of Nasdaq, (ii) Consents required from, or notification, to or
filings with Regulatory Authorities, and (iii) notices to or filings with the
Internal Revenue Service, or the Pension Benefit Guaranty Corporation with
respect to any employee benefit plans, or under the HSR Act, no notice to,
registration, declaration, or filing with, order, authorization, or Permit of,
exemption or waiver by, or Consent of, or any action by any court,
governmental, regulatory, or administrative agency, commission, authority,
instrumentality, or other public body, domestic or foreign (a "Governmental
Entity") is necessary or required as a pre-condition to the execution and
delivery of this Agreement by Murdock or the consummation by Murdock of the
Merger and the other transactions contemplated hereby, other than such notices,
registrations, declarations, or
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filings, which if not made or obtained would not have or be reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Murdock.
5.3 CAPITALIZATION.
(a) The authorized capital stock of Murdock consists of,
and as of the Closing will consist of 800,000 shares of Murdock Common Stock,
of which 385,015 shares are, and as of Closing will be, issued and outstanding.
There are no treasury shares. All of the issued and outstanding shares of
Murdock Common Stock are duly and validly issued and are fully paid and
nonassessable. None of the outstanding shares of Murdock Common Stock has been
issued in violation of any preemptive rights. Except for 14,000 shares of
Murdock Common Stock reserved for issuance and issuable upon the exercise of
outstanding options granted to the President of Murdock, as of the date hereof,
there are no shares of Murdock Common Stock issuable pursuant to any options,
warrants, or other outstanding rights to purchase shares of Murdock Common
Stock.
(b) Except as set forth in Section 5.3(a) of this
Agreement, there are no shares of capital stock or other voting or equity
securities of Murdock outstanding and Murdock has not granted and there are not
outstanding any options, warrants, scrip, rights to subscribe to or acquire,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of
Murdock or any contracts, commitments, undertakings, or other arrangements of
any kind to which Murdock is a party or by which Murdock may be bound to issue,
deliver, or sell additional shares of its capital stock or other voting
securities of Murdock, or any options, warrants, scrip, or rights to purchase
or acquire any additional shares of its capital stock. There are no
outstanding obligations of Murdock to repurchase, redeem, or otherwise acquire
any shares of the capital stock of Murdock.
5.4 NO SUBSIDIARIES. Murdock does not have any Subsidiaries.
5.5 REGULATORY FILINGS; FINANCIAL STATEMENTS.
(a) Murdock (i) has delivered to ABI copies of the
balance sheets (including related notes and schedules, if any) of Murdock as of
June 30, 1997, December 31, 1996, 1995, and 1994, and the related statements of
income, changes in shareholders' equity, and cash flows (including related
notes and schedules, if any) for the six months ended June 30, 1997, and for
each of the three fiscal years ended December 31, 1996, 1995, and 1994, as
filed by Murdock with the FDIC and the Florida Department of Banking and
Finance (the "Department"), and (ii) will deliver to ABI the balance sheets
(including the related notes and schedules, if any) of Murdock and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and available schedules, if any) included in Murdock's
call reports filed and published in accordance with applicable federal and
state regulations with respect to the periods ended subsequent to June 30, 1997
(the financial statements described in this Section 5.5(a)(i) and (ii),
collectively, the "Murdock Financial Statements"). Murdock has furnished ABI
with all management letters of its outside independent certified public
accountants relating to audits performed in connection with the Murdock
Financial Statements. Each of the Murdock Financial Statements, including, in
each case, any related notes: (A) is true or will be true, complete, and
correct in all material respects as of their respective dates, (B) is or, if
dated after the date of this Agreement, will be in accordance with and
supported by and consistent with the books and records of Murdock, including,
without limitation, a general ledger and detailed trial balances, which books
and records have been made available to ABI and which have been or will have
been maintained in accordance with good business practices, (C) is or will be
prepared in accordance with GAAP (except as may be indicated therein or in the
notes thereto), and (D) presents or will present fairly the consolidated
financial position and the consolidated results of operations, changes in
shareholders' equity, and statements of cash flows of Murdock as of the dates
and for the periods indicated subject, in the case of interim financial
statements, to normal year-end adjustments and any other adjustments described
therein which were not or are not expected to be material in amount, and except
for the absence of certain footnote information in the unaudited statements.
All Murdock Financial Statements presented for any fiscal year ended December
31 are and will be audited.
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(b) Since January 1, 1994, Murdock has timely filed all
forms, reports, documents, and statements, including any call reports, required
to be filed by Murdock with any Regulatory Authority, together with any
amendments or supplements required to be made with respect thereto
(collectively referred to as the "Murdock Regulatory Documents"), and all such
Murdock Regulatory Documents have been filed on the appropriate form and
prepared in all material respects in accordance with such form's instruction
and the rules and regulations of the applicable Regulatory Authority and all
other applicable Laws. None of the Murdock Regulatory Documents, including any
financial statements, exhibits, and schedules thereto, filed with a Regulatory
Authority, as of their respective filing dates, contained, and no such Murdock
Regulatory Documents filed after the date of this Agreement will contain, any
untrue statements of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. Murdock is not
required to file any forms, reports, or other documents with the SEC.
5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
Section 5.6 of the Murdock Disclosure Memorandum, since December 31, 1996: (i)
Murdock has conducted its business in all material respects only in the
ordinary course and in a manner consistent with past practices, (ii) there have
been no events, changes, developments, or occurrences which have had, or which
would have, individually or in the aggregate, a Material Adverse Effect on
Murdock, and (iii) Murdock has not taken any action, or failed to take any
action (whether or not in the ordinary course and consistent with past
practices), prior to the date of this Agreement, which action or failure, if
taken after the date of this Agreement, would represent or result in a material
breach or violation of the covenants and agreements of Murdock provided in
Articles VII and VIII of this Agreement.
5.7 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section
5.7 of the Murdock Disclosure Memorandum, Murdock does not have any material
obligations or liabilities (contingent or otherwise whether accrued or
reserved), and there is no existing condition, situation, or set of
circumstances which could reasonably be expected to result in such obligation
or liability, except obligations and liabilities (i) which are fully accrued or
reserved against in the balance sheets of Murdock as of June 30, 1997, included
in the Murdock Financial Statements or reflected in the notes thereto, or (ii)
which were fully incurred or paid after June 30, 1997 in the ordinary course of
business consistent with past practices. Except as set forth in Section 5.7 of
the Murdock Disclosure Memorandum, since June 30, 1997, Murdock has not
incurred or paid any obligation or liability which would have a Material
Adverse Effect on Murdock.
5.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf
of Murdock have been timely filed, or requests for extensions have been timely
filed, granted, and have not expired, for periods ending on or after December
31, 1994, and on or before the date of the most recent fiscal year and
immediately preceding the Effective Time, and all such Tax Returns filed are
true, complete, and accurate in all material respects. To the Knowledge of
Murdock, all Taxes shown to be due on such Tax Returns have been timely paid by
Murdock. There is no audit examination, deficiency, or refund litigation or
matter in controversy in which Murdock has been joined as a party with respect
to any Taxes, except as reserved against in the Murdock Financial Statements or
as disclosed in Section 5.8 of the Murdock Disclosure Memorandum. All Taxes
and other liabilities due with respect to completed and settled examinations or
concluded litigation have been paid, accrued, or provided for as disclosed in
Section 5.8 of the Murdock Disclosure Memorandum.
(b) Except as disclosed in Section 5.8 of the Murdock
Disclosure Memorandum, Murdock has not executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due that is
currently in effect.
(c) Except as disclosed in Section 5.8 of the Murdock
Disclosure Memorandum, adequate provision for any Taxes due or to become due
for Murdock for any period or periods through June 30, 1997, has been made and
is reflected on the June 30, 1997 financial statements included in the Murdock
Financial Statements.
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(d) Deferred Taxes of Murdock have been provided for in
the Murdock Financial Statements in accordance with GAAP.
(e) All Taxes which Murdock is required by Law to
withhold or to collect for payment have been duly withheld and collected, and
have been paid to the proper Governmental Entity or are being withheld by
Murdock, except for such failures which are not, individually or in the
aggregate, material in amount. Murdock is in compliance with, and its records
contain all information and documents (including properly completed Internal
Revenue Service Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state, and local Tax
Laws and such records identify with specificity all accounts subject to backup
withholding under Section 3406 of the Internal Revenue Code, except for such
instances of noncompliance and such omissions which would not have,
individually or in the aggregate, a Material Adverse Effect on Murdock.
(f) Except as disclosed in Section 5.8 of the Murdock
Disclosure Memorandum, Murdock has not made any payments, is not obligated to
make any payments, and is not a party to any contract, agreement, or other
arrangement that could obligate Murdock to make any payments that would be
disallowed as a deduction under Section 280G or 162(m) of the Internal Revenue
Code.
(g) There are no Liens with respect to Taxes upon any of
the material assets or properties of Murdock, except for loans on Murdock's
books generated in the ordinary and normal course of business consistent with
past practices.
(h) There has not been an ownership change, as defined in
Internal Revenue Code Section 383(g), of Murdock that occurred during or after
any taxable period in which Murdock or any Murdock Subsidiary incurred a net
operating loss that carries over to any taxable period ending after December
31, 1995.
(i) Murdock has not filed any consent under Section
341(f) of the Internal Revenue Code concerning collapsible corporations.
(j) All material elections with respect to Taxes
affecting Murdock as of the date of this Agreement have been or will be timely
made as set forth in Section 5.8 of the Murdock Disclosure Memorandum. After
the date hereof, other than as set forth in Section 5.8 of the Murdock
Disclosure Memorandum, no election with respect to Taxes will be made without
the prior written consent of ABI, which consent will not be unreasonably
withheld.
5.9 ASSETS. A true, complete, and correct list of all real
property, owned or leased by Murdock, including without limitation real
property acquired in foreclosure of mortgages in the ordinary course of
business, is set forth in Section 5.9 of the Murdock Disclosure Memorandum.
Except as set forth in Section 5.9 of the Murdock Disclosure Memorandum,
Murdock has good, valid and marketable title to all of its assets and
properties, whether tangible or intangible, real, personal, or mixed, free and
clear of all Liens, mortgages, conditional and installment sale agreements, and
secondary interests, of any kind whatsoever, except for (i) Liens for current
taxes and assessments not-yet-past due, (ii) inchoate mechanic and materialmen
Liens for construction in progress, (iii) workmen's, repairmen's, warehouse
men's, and carriers' Liens arising in the ordinary course of business, (iv)
Liens incurred in the ordinary course of its banking business, and (v) such
imperfections or irregularities of title, or Liens as do not materially affect
the use of such asset or property which are subject thereto or otherwise
materially impair or affect the business operation of Murdock. All real
property which is identified as owned in Section 5.9 of the Murdock Disclosure
Memorandum is held in fee simple by Murdock and none of the Liens thereon which
are disclosed in Section 5.9 of the Murdock Disclosure Memorandum interfere
with the enjoyment or use of such real property. All buildings, and all
fixtures, equipment, and other assets and properties which are material or
necessary to the business of Murdock held under leases or subleases by Murdock
are held under valid instruments enforceable in accordance with their
respective terms (except in all cases to the extent as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
other Laws, laws
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affecting creditors' rights and remedies generally and except that the
availability of equitable remedy of the specific performance or injunctive
relief is subject to the discretion of the court before which any proceedings
may be brought), and each such instrument is in full force and effect.
Substantially all of the equipment and other assets regularly used in the
business of Murdock is in good and serviceable condition, reasonable wear and
tear excepted.
5.10 ALLOWANCE FOR LOAN OR CREDIT LOSSES. The allowance for loan
or credit losses (the "Allowance") shown on the statements of the financial
condition of Murdock as of June 30, 1997 included in the Murdock Financial
Statements was, and the Allowance shown on the statements of financial
condition of Murdock as of the dates subsequent to the execution of this
Agreement included in the Murdock Financial Statements will be, in each case as
of the dates thereof, adequate to provide for losses relating to or inherent in
the loan and lease portfolios (including accrued interest receivable) of
Murdock and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by Murdock and all off balance
sheet expenses of Murdock. Except as set forth in Section 5.10 of the Murdock
Disclosure Memorandum, as of the Effective Time the ratio of Allowance, as
established on such date in good faith by management of Murdock, to total loans
outstanding at such time, shall not exceed the ratio of Allowance to the total
loans outstanding as reflected on the consolidated balance sheet of Murdock as
of June 30, 1997 (without regard to recoveries by Murdock and except as
otherwise agreed to by ABI).
5.11 NOTES AND OBLIGATIONS.
Except as set forth in Section 5.11 of the Murdock Disclosure
Memorandum or as provided in the Allowance as described in Section 5.10 of this
Agreement, Murdock is not aware of any facts which would cause management of
Murdock to believe that any loan or note receivable or any other obligation
owned by Murdock or due to it as shown on the balance sheets as of June 30,
1997 included in the Murdock Financial Statements or any such loan or note
receivable or other obligations on the date hereof and as of the Effective Time
has not been and will not be genuine, legal, valid, and collectible obligations
of the respective makers thereof and is not and will not be subject to any
offset or counterclaim.
5.12 INSURANCE. Set forth in Section 5.12 of the Murdock
Disclosure Memorandum is a true, complete, and correct list of all insurance
policies maintained by Murdock, including, but not limited to life, casualty,
fire, general liability, employers' liability, workers' compensation, title,
directors' and officers' liability, credit, fidelity, business interruption,
errors and omissions, and all other forms of insurance, in each case indicating
the name of the insurer, and the amount, scope, and coverage of such policies
(including the effective dates of the policy, deductibles, and any aggregate
limits). All material policies set forth in Section 5.12 of the Murdock
Disclosure Memorandum are in full force and effect, and with respect to all
policies, all premiums payable with respect to all periods up to and including
the date of Closing have been, or will be fully paid. Murdock has not received
any notice from any insurance carrier or otherwise that: (i) such insurance
will be cancelled or terminated or that coverage thereunder will be reduced or
eliminated, or (ii) premium costs with respect to such policies of insurance
will be substantially increased. Except as disclosed in Section 5.12 of the
Murdock Disclosure Memorandum, there are no claims pending under such policies
of insurance and no notices have been given by Murdock under such polices.
5.13 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in Section 5.13 of the Murdock
Disclosure Memorandum, to the Knowledge of Murdock, Murdock, its Participation
Facilities, and its Loan Properties are, and have been, in compliance in all
material respects with all applicable Environmental Laws, except for violations
which do not and would not have a Material Adverse Effect, individually or in
the aggregate, on Murdock or the Surviving Corporation.
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(b) Except as disclosed in Section 5.13 of the Murdock
Disclosure Memorandum, to the Knowledge of Murdock there is no suit, claim,
action, or proceeding pending or threatened before any Governmental Entity or
other forum in which Murdock or any Participation Facility or Loan Property has
been or, with respect to threatened proceedings, may be named as a defendant or
a potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law, or (ii) relating to the release into
the environment of any Hazardous Material in violation of applicable law,
whether or not occurring at, on, under, or involving a site owned, leased, or
operated by Murdock, or any of its Participation Facilities or Loan Properties
(or Murdock in respect of any Participation Facility or Loan Property). To the
Knowledge of Murdock, except as disclosed in Section 5.13 of the Murdock
Disclosure Memorandum, no notice, notification, demand, request for
information, citation, summons, or order has been received, no complaint has
been filed, no penalty has been assessed, and no investigation or review is
pending or, to the Knowledge of Murdock, is threatened by any Governmental
Entity or other person relating to or arising out of any Environmental Law
which has, or which seeks, or which if adversely determined would have or would
be reasonably likely to have, individually or in the aggregate, a total cost to
Murdock of $75,000 or more.
(c) Except as disclosed in Section 5.13 of the Murdock
Disclosure Memorandum, to the Knowledge of Murdock there is no reasonable basis
for any suit, claim, action, or proceeding, or any notice, notification,
demand, request for information, citation, summons, order, complain, penalty,
investigation, or review of the type as described in Section 5.13(b) of this
Agreement.
(d) Except as disclosed in Section 5.13 of the Murdock
Disclosure Memorandum, to the Knowledge of Murdock, there have been no releases
of Hazardous Material in violation of any Environmental Law, in, on, under, or
affecting any current or previously owned or leased real properties of Murdock,
or any Participation Facility or any Loan Property of Murdock, except where
such release does not and would not have, individually or in the aggregate, a
Material Adverse Effect on Murdock or the Surviving Corporation.
5.14 COMPLIANCE WITH LAWS; NO VIOLATIONS.
(a) Murdock has in effect and holds all permits,
licenses, variances, certificates, authorizations, filings, franchises,
notices, rights, Consents, and approvals of and from all Governmental Entities
(collectively, "Permits") necessary for it to own, lease, and operate its
assets and properties and to carry on its business as now conducted, except for
such Permits the absence of which do not have, individually or in the
aggregate, a Material Adverse Effect on Murdock.
(b) Except as set forth in Section 5.14(b) of the Murdock
Disclosure Memorandum, Murdock is not presently in conflict with or, in default
under, or in violation of, (i) its Articles of Incorporation, Bylaws, or
comparable organizational documents, (ii) any Law, Permit, order, judgment,
writ, Injunction, or decree applicable to its businesses or to its employees
conducting such business or by which its assets or properties are bound or
affected, other than those conflicts, defaults, or violations of Permits that
do not have, individually or in the aggregate, a Material Adverse Effect on
Murdock, or (iii) any Regulatory Agreement (as defined in Section 5.14(c) of
this Agreement).
(c) Except as set forth in Section 5.14(c) of the Murdock
Disclosure Memorandum, since January 1, 1994 Murdock has not received any
notification or communication from any Governmental Entity, or from any of the
Department, the FDIC, the SEC, the United States Department of Justice ("DOJ"),
the Federal Trade Commission ("FTC"), all state regulatory authorities having
jurisdiction over Murdock, or the staffs thereof (the Department, the FDIC, the
SEC, DOJ, FTC, such state regulatory authorities, and the staffs thereof are
sometimes referred to herein collectively as "Regulatory Authorities") (i)
asserting that Murdock is not in compliance with any of the Laws, orders,
judgments, writs, Injunctions, or decrees which such Governmental Entity
enforces, (ii) threatening to revoke any Permits, or (iii) requiring or
threatening to require Murdock, or indicating that Murdock may be required, to
enter into or consent to the issuance of a cease and desist order, formal
agreement,
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directive, commitment, or memorandum of understanding, or to adopt any Board
resolution or similar undertaking, or any other agreement restricting or
limiting or purporting to restrict or limit in any manner the operations or
conduct of business of Murdock, or in any manner relates to its capital
adequacy, its credit or reserve policies, its management, or the payment of
dividends (any such notice, communication, memorandum, agreement, or order
herein referred to as a "Regulatory Agreement"). Except as Disclosed in
Section 5.14(c) of the Murdock Disclosure Memorandum, Murdock has not consented
to, entered into, or agreed to enter into, any Regulatory Agreement. True and
complete copies of all Regulatory Agreements have been delivered to ABI.
Except for routine examinations by the Department and the FDIC, as of the date
of this Agreement, to the Knowledge of Murdock no investigation by any
Governmental Entity with respect to Murdock is pending or threatened.
5.15 LABOR MATTERS. Murdock is not a party to, or bound by, any
collective bargaining agreement, contract, or other agreement or understanding
with any labor union or labor organization, nor has Murdock been joined as a
party in any action, suit, claim or proceeding asserting that Murdock has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act or comparable state law) or seeking to compel Murdock to bargain
with any labor organization as to wages or conditions of employment, nor is
there any strike, work stoppage, or other labor dispute involving Murdock
pending or threatened, other than routine disputes with individual employees or
former employees which routine disputes would not have or be reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on
Murdock. To the Knowledge of Murdock, there is no any activity involving
employees of Murdock seeking to certify a collective bargaining unit or
engaging in any other organizing activity. To the Knowledge of Murdock, no
material employment related dispute, arbitration, action, suit, claim, or
proceeding is pending or threatened.
5.16 EMPLOYEE BENEFIT PLANS.
(a) Murdock has disclosed in Section 5.16(a) of the
Murdock Disclosure Memorandum, and has delivered to ABI prior to the execution
of this Agreement, true, complete, and correct copies or summaries thereof, and
financial data with respect to, all pension, retirement, profit-sharing,
deferred compensation, stock option, employee stock ownership, severance pay,
vacation, bonus, or other incentive plans, all other material written employee
programs, arrangements, or agreements, all medical, vision, dental, or other
health plans, all life insurance plans, and all other material employee benefit
plans or fringe benefit plans, including, without limitation, all "employee
benefit plans" (as that term is defined in Section 3(3) of ERISA), currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
Murdock or any affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
who are eligible to participate (collectively, the "Murdock Benefit Plans").
Any of the Murdock Benefit Plans which is an "employee pension benefit plan"
(as that term is defined in Section 3(2) of ERISA) is referred to herein as a
"Murdock ERISA Plan." No Murdock Benefit Plan is or has been a multi-employer
plan within the meaning of Section 3(37) of ERISA.
(b) Except as disclosed in Section 5.16(b) of the Murdock
Disclosure Memorandum, all Murdock Benefit Plans are in compliance in all
material respects with the applicable terms of ERISA, the Internal Revenue
Code, and any other applicable Laws, the breach or violation of which would be
reasonably likely to have a Material Adverse Effect on Murdock.
(c) Murdock does not have any plans which are a "defined
benefit pension plan" (as defined in Section 4140 of the Internal Revenue
Code).
(d) Except as set forth in Section 5.16(d) of the Murdock
Disclosure Memorandum, no Murdock Benefit Plan provides death or medical
benefits (whether or not insured) with respect to current or former employees
of Murdock or any ERISA affiliate beyond their retirement or other termination
of service, other than (i) coverage mandated under applicable Law, including
but not limited to the continuation of group health plan coverage requirements
of Section 4980B of the Internal Revenue Code and ERISA Section 601 et seq.
(ii) death
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benefits or retirement benefits under any "employee pension plan" (as that term
is defined in Section 3(2) of ERISA), or (iii) benefits the full cost of which
is borne by current or former employee (or his or her beneficiary).
(e) No Murdock Benefit Plan or other arrangement
authorizes grants of either stock appreciation rights or restricted stock of
Murdock and there are no outstanding stock appreciation rights or restricted
stock of Murdock.
(f) Except as disclosed in Section 5.16(f) of the Murdock
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance or golden parachute payments)
becoming due to any director or any employee of Murdock from Murdock under any
Murdock Benefit Plan or otherwise, except as may result from the payment of
unemployment insurance premiums or similar payments required by applicable Law
as a result of the termination of the employment of one or more employees of
Murdock, (ii) increase any benefits otherwise payable under any Murdock Benefit
Plan, or (iii) result in any acceleration of the time of payment or vesting of
any such benefits.
5.17 COMMITMENTS AND CONTRACTS. Except as disclosed in Section
5.17 of the Murdock Disclosure Memorandum, Murdock is not a party or subject to
any of the following (whether written or oral, expressed or implied): (i) any
employment, severance, termination, consulting, or retirement agreement,
contract, arrangement or understanding or other obligation understanding
(including any understandings or obligations with respect to severance or
termination pay liabilities or fringe benefits) with any present or former
officer, director, or employee providing for aggregate payments to any person
in any calendar year in excess of $50,000; (ii) any real property lease or
sublease; (iii) any contract, agreement, arrangement, or other instrument
containing noncompetition covenants which limits the ability of Murdock to
compete in any line of business or which involves any restriction of the
geographical area in which Murdock or any of its affiliates may carry on its
business; (iv) any agreement, contract, or other instrument or commitment
relating to the borrowing of money by Murdock or the guarantee by Murdock of
any such obligation (other than agreements, contracts, or other instruments, or
commitments evidencing deposit liabilities, purchases of federal funds, sales
of certificate of deposits, advances from the Federal Reserve Bank or the
Federal Home Loan Bank, fully-secured repurchase agreements, or agreements,
contracts, or other instruments and understandings relating to borrowings or
guarantees made in the ordinary course of business); (v) any agreement,
contract, personal property or equipment lease, or instrument requiring
payments in excess of $25,000 or having a term of greater than one year (in
each case other than agreement, contract, or instrument relating to loans,
extensions of credit, trusts or other banking or fiduciary service provided to
customers of Murdock in the ordinary course of its banking business); and (vii)
any other agreement, contract, lease, commitment, or other instrument or
understanding or amendment thereto as of the date of this Agreement material to
the assets, business, conditions, or prospects of Murdock or not made in the
ordinary course of business to which Murdock is a party or by which it is bound
(together with all contracts, agreements, leases, commitments, or other
instruments or understandings referred to in Sections 5.9 and 5.16(a) of this
Agreement, the "Murdock Contracts").
5.18 MATERIAL CONTRACT DEFAULTS. Except as set forth in Section
5.18 of the Murdock Disclosure Memorandum, Murdock is not, or has not received
any notice or has any Knowledge that any other party is, in default in any
respect under any Murdock Contract or any other material contract, agreement,
commitment, arrangement, lease, insurance policy, or other instrument to which
Murdock is a party or by which Murdock or any of its assets, business, or
operations thereof may be bound or affected or under which its assets,
business, or operations receives benefits except for those defaults which would
not have, individually or in the aggregate, a Material Adverse Effect on
Murdock; and there has not occurred any event that with the lapse of time or
the giving of notice or both would constitute such a default. With respect to
each Murdock Contract, except as disclosed in Section 5.18 of the Murdock
Disclosure Memorandum: (i) each contract, agreement, commitment, lease,
policy, or other instrument is in full force and effect, (ii) Murdock is not in
material default thereunder, and (iii) Murdock has not repudiated or knowingly
waived any material provision of any such Murdock Contract. All of the
indebtedness of Murdock for money borrowed may be prepaid at any time by
Murdock without penalty or premium.
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5.19 LEGAL PROCEEDINGS. Except as disclosed in Section 5.19 of the
Murdock Disclosure Memorandum, there are no actions, suits, or proceedings
instituted or pending or, to the Knowledge of Murdock, threatened (or
unasserted but considered probable of assertion and which if asserted would
have at least a reasonable probability of an unfavorable outcome) against
Murdock, or against any asset, property, employee benefit plan, interest, or
right of any of them, that would have, individually or in the aggregate, a
Material Adverse Effect on Murdock or that might reasonably be expected to
materially threaten, impede, or impair the consummation of the transactions
contemplated by this Agreement. Except as disclosed in Section 5.19 of the
Murdock Disclosure Memorandum, Murdock is not a party to any agreement,
contract, or other instrument or is subject to any restriction under its
Articles of Incorporation or Bylaws, or other corporate restriction, nor is
there any judgment, order, writ, Injunction, or decree of any Governmental
Entity or arbitrator that would have, individually or in the aggregate, a
Material Adverse Effect on Murdock or that might reasonably be expected to
materially threaten, impede, or impair the consummation of the transactions
contemplated by this Agreement. Section 5.19 of the Murdock Disclosure
Memorandum includes a summary report of all actions, suits, or proceedings as
of the date of this Agreement to which Murdock is a party and which names
Murdock as a defendant or a cross-defendant, and where the estimated maximum
exposure is $15,000 or more.
5.20 INTELLECTUAL PROPERTY. Section 5.20 of the Murdock Disclosure
Memorandum sets forth a true, complete, and correct list of all material
software, computer programs, trade secrets, trademarks, trademark rights,
copyrights, service marks, service names, trade names, proprietary processes,
patents, inventions, or similar rights, or applications for any of the
foregoing (collectively, "Intellectual Property"), which are necessary to
operate or conduct or are used in the business of Murdock. Murdock owns or
possess all material licenses or other rights necessary to use such
Intellectual Property free and clear of any Lien and without infringing upon or
otherwise acting adversely to the Intellectual Property rights of any other
person, except for those Intellectual Property rights as to which the absence
of ownership rights or existence of infringement would not, individually or in
the aggregate, have or be reasonably likely to have a Material Adverse Effect
on Murdock. Murdock has not received notice claiming that it is infringing
upon or otherwise acting adversely to any Intellectual Property of any other
person.
5.21 BROKERS AND FINDERS. No broker or finder has acted directly
or indirectly for Murdock in connection with this Agreement or the transactions
contemplated hereby.
5.22 STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by Murdock for inclusion in the registration statement on
Form S-4, or other appropriate form, to be filed with the SEC by ABI under the
Securities Act or the Exchange Act in connection with the transactions
contemplated by this Agreement (the "Registration Statement"), the proxy
statement to be used by Murdock to solicit any required approval of its
stockholders as contemplated by this Agreement (the "Proxy Statement"), or any
other document to be filed with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby will, at the respective
time such documents are filed, and with respect of the Proxy Statement, when it
is first mailed to the stockholders of Murdock contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which such
statements are made, not misleading, or, in the case of the Registration
Statement, when it is filed with the SEC and at the time it becomes effective,
be false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements therein not misleading,
or, in the case of the Proxy Statement or any amendment thereof or supplement
thereto, at the time of the Stockholders Meeting of Murdock to be held pursuant
to Section 8.3 of this Agreement, including any adjournments thereof, be false
or misleading with respect to any material fact or omit to state any material
fact necessary to correct any statement or remedy any omission in any earlier
communication with respect to the solicitation of any proxy for the
Stockholders' Meeting. All documents that Murdock is responsible for filing
with any Regulatory Authority in connection with the transactions contemplated
hereby will comply as to form in all material respects with the provisions of
applicable law, including applicable provisions of the Securities Laws.
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5.23 ACCOUNTING, TAX AND REGULATORY MATTERS. To the Knowledge of
Murdock, neither Murdock nor any of its affiliates has taken or agreed to take
any action that would, or has Knowledge of any fact or circumstance that is
reasonably likely to (i) prevent the transactions contemplated hereby,
including the Merger, from qualifying for "pooling of interests" treatment or
as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code, or (ii) materially impede or delay receipt of any Consents of any
Regulatory Authority referred to in Section 9.1(b) of this Agreement or result
in the imposition of a condition or restriction of the type referred to in the
last sentence of such Section 9.1(b).
5.24 OPINION OF FINANCIAL ADVISOR. Murdock has received an opinion
of Allen C. Ewing & Co., to the effect that, as of the date of this Agreement,
the Merger Consideration is fair to the Murdock stockholders from a financial
point of view, and a true, complete, and correct copy of such opinion will be
delivered to ABI.
5.25 STATE TAKEOVER LAWS. The Board of Directors of Murdock has
duly and validly taken or will take in a timely manner all necessary actions to
exempt the transactions contemplated by this Agreement, including the Merger,
from the provisions of Sections 607.0901 through 607.0903, inclusive, of the
FBCA, and no other state takeover statute or similar Law applies or purports to
apply to the Agreement, or the transactions contemplated hereby or thereby
(collectively, "Takeover Laws").
5.26 CORPORATE GOVERNANCE PROVISIONS. Murdock has taken or will
take in a timely manner all action so that the entering into this Agreement and
the consummation of the Merger and the other transactions contemplated by this
Agreement do not and will not result in any super-majority voting requirement
or the grant of any rights to any person under the Articles of Incorporation,
Bylaws, or other governing instruments of Murdock or restrict or impair the
ability of ABI or any of its Subsidiaries to vote, or otherwise exercise the
rights of a stockholder with respect to, shares of Murdock Common Stock that
may be directly or indirectly acquired or controlled by it.
5.27 DERIVATIVE CONTRACTS. Except as disclosed in Section 5.27 of
the Murdock Disclosure Memorandum, Murdock is not a party to nor has Murdock
agreed to enter into any swap, forward, future, option, cap, floor, or collar
financial contract, or any other interest rate or foreign currency protection
contract not included on its balance sheet which is a financial derivative
contract (including various combinations thereof) (each a "Derivatives
Contract").
5.28 SUPPORT OF STOCKHOLDERS. As an inducement to ABI to enter
into this Agreement, Murdock has obtained and delivered to ABI letter
agreements with each of the Murdock stockholders who serve as directors and
officers of Murdock in substantially the form as set forth in Exhibit A hereto
committing these stockholders to actively support the Merger by, among other
things, voting all shares beneficially owned by each of them, except with
respect to certain shares beneficially held by their spouses ("Spouse Shares")
in favor of the Merger at the Stockholders' Meeting and not disposing of the
Murdock Common Stock other than pursuant to the Merger.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ABI
ABI represents and warrants to Murdock as follows:
6.1 ORGANIZATION, STANDING, AND POWER.
(a) ABI is a corporation duly organized, validly
existing, and in active status under the laws of the State of Florida, and has
the requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as it is now being conducted. ABI is
duly qualified or licensed to do business as a
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foreign corporation, and is in good standing in each jurisdiction (whether
federal, state, or local) where the nature of its business or the ownership of
leasing of its properties make such qualification or licensing necessary,
except for such jurisdictions where the failure to be so qualified or licensed
is not reasonably likely to have a Material Adverse Effect on ABI.
(b) American Bank is a state banking corporation duly
organized, validly existing, and in active status under the laws of the State
of Florida, and has the requisite corporate power and authority to own, lease,
and operate its properties and to carry on its business as it is now being
conducted. American Bank is duly qualified or licensed to do business as a
foreign corporation, and is in good standing, in each jurisdiction (whether
federal, state, or local) where the nature of its business or the ownership or
leasing of its properties make such qualification or licensing necessary,
except for such jurisdictions where the failure to be so qualified or licensed
is not reasonably likely to have a Material Adverse Effect on American Bank.
6.2 AUTHORITY; NO CONFLICT.
(a) Each of ABI and American Bank has the requisite
corporate power and authority to execute and deliver this Agreement, to perform
its obligations under this Agreement, and to consummate the transactions
contemplated hereby. The execution, delivery, and performance of this
Agreement by ABI and American Bank and the consummation by ABI and American
Bank of the transactions contemplated hereby, including the Merger, have been
duly and validly authorized by all necessary corporate action in respect
thereof on the part of ABI and American Bank. This Agreement has been duly
executed and delivered by ABI and American Bank and (assuming due
authorization, execution, and delivery by Murdock) constitutes a legal, valid,
and binding obligation of ABI and American Bank enforceable against ABI and
American Bank in accordance with its terms (except in all cases to the extent
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or similar Laws affecting the enforcement of
creditors' rights and remedies generally and except that the availability of
the equitable remedy of general specific performance and injunctive relief is
subject to the discretion of the court before which any proceedings may be
brought).
(b) Neither the execution and delivery of this Agreement
by ABI or American Bank, nor the consummation by ABI or American Bank of the
transactions contemplated hereby, nor compliance by ABI or American Bank with
any of the terms or provisions herein, will (i) conflict with or violate any
provision of the Articles of Incorporation or Bylaws of any ABI Company, or
(ii) violate, conflict with, constitute or result in a breach of any term,
condition, or provision of, or constitute a default (with or without notice or
the lapse of time, or both) under, or give rise to any right of termination,
cancellation, or acceleration of any obligation or the loss of any benefit
under, or require a Consent pursuant to, or result in the creation of any Lien
upon any material assets or properties of any ABI Company pursuant to, any of
the terms, provisions, or conditions of any loan or credit agreement, note,
bond, mortgage, indenture, deed of trust, license, agreement, contract, lease,
Permit, concession, franchise, plan, or other instrument or obligation to which
ABI any ABI Company is a party, or by which any of their properties or assets
may be bound or affected, when such violation, conflict, breach, default,
creation of Lien, or failure to obtain a Consent would, in the aggregate have a
Material Adverse Effect on ABI and its Subsidiary on a consolidated basis or
(iii) subject to receipt of the Consents referred to in Section 9.1(c) of this
Agreement, conflict with or violate any judgment, order, writ, Injunction,
decree, or Law applicable to any ABI Company or any of their properties or
assets which in the aggregate would have a Material Adverse Effect on ABI and
American Bank on a consolidated basis.
(c) Other than (i) in connection or compliance with the
provisions of applicable state corporate and securities Laws, the Securities
Laws, and rules of the Nasdaq, (ii) consents or approvals Consents required
from Regulatory Authorities, and (iii) notices to or filings with the Internal
Revenue Service, or the Pension Benefit Guaranty Corporation with respect to
any employee benefit plans, or under the HSR Act, no notice to, registration,
declaration, or filing with, order, authorization, or Permit of, exemption or
waiver by, or Consent of, or any action by any Government Entity is necessary
or required in connection with the execution and delivery of this Agreement
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and the consummation by ABI and American Bank of the Merger and the other
transactions contemplated by this Agreement.
6.3 CAPITALIZATION. The authorized capital stock of ABI consists
of 10,000,000 ABI Common Shares, of which 4,040,927 shares were issued and
outstanding as of September 23, 1997. All of the issued and outstanding ABI
Common Shares are, and all of the ABI Common Shares to be issued in exchange
for shares of Murdock Common Stock upon consummation of the Merger when issued
in accordance with the terms of this Agreement, will be, duly and validly
issued and outstanding and fully paid and nonassessable. All of the ABI Common
Shares to be issued in the Merger will be authorized and reserved for issuance
prior to the Effective Time. None of the outstanding ABI Common Shares has
been, and none of the ABI Common Shares to be issued in exchange for shares of
Murdock Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights.
6.4 SUBSIDIARIES. Except as disclosed in Section 6.4 of the ABI
Disclosure Memorandum, the list of Subsidiaries of ABI filed by ABI with its
most recent SEC Report (as defined in Section 6.5 of this Agreement) on Form
10-KSB for the fiscal year ended December 31, 1996 (or incorporated therein by
reference) is a true and complete list of all of the ABI Subsidiaries. ABI or
one of its Subsidiaries own all of the issued and outstanding shares of capital
stock of each ABI Subsidiary.
6.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) ABI has filed and made available to Murdock copies of
all forms, reports, and documents required to be filed by ABI with the SEC
since February 6, 1996 (collectively referred to as the "SEC Reports"). As of
their respective filing dates, each SEC Report complied as to form in all
material respects with the applicable requirements under the Securities Act and
the Exchange Act. As of their respective filing dates, no SEC Report filed
contained any untrue statement of a material fact or omitted to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading (except any
statement or omission therein which has been corrected or otherwise disclosed
or updated in a subsequent SEC Reports). None of the ABI Subsidiaries,
including American Bank, is required to file any forms, reports, or documents
under the Exchange Act with the SEC or with any other Regulatory Authority.
(b) The audited consolidated financial statements and the
unaudited interim financial statements of ABI (including, in each case, the
notes thereto) contained in the SEC Reports filed on Form 10-KSB or Form
10-QSB, including any SEC Reports filed subsequent to the date of this
Agreement until the Effective Time (the "ABI Financial Statements") (as of the
dates thereof and for the periods covered thereby) (i) are or will be prepared
in accordance with GAAP (except as may be indicated in the notes to such
financial statements or, in the case of unaudited financial statements, as
permitted by Form 10-QSB promulgated by the SEC), and (ii) present or will
present fairly the consolidated financial position of ABI and its Subsidiaries
as of their respective dates and the consolidated results of operations and
cash flows of for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not or are not expected to be material in amount, and
except for the absence of certain footnote information in the unaudited
statements.
6.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since June 30, 1997,
except as disclosed in the ABI Financial Statements or in Section 6.6 of the
ABI Disclosure Memorandum, there have been no events, changes, developments, or
occurrences which have had, or are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on ABI and its Subsidiaries on a
consolidated basis.
6.7 NO UNDISCLOSED LIABILITIES. Except as disclosed in Section
6.7 of the ABI Disclosure Memorandum, no ABI Company has any obligations or
liabilities (contingent or otherwise whether accrued or reserved) that might
reasonably be expected to have a Material Adverse Effect on ABI and its
Subsidiaries on a
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consolidated basis, except obligations and liabilities (i) which are accrued or
reserved against in the ABI Financial Statements or reflected in the notes
thereto, or (ii) which were incurred or paid since June 30, 1997 in the
ordinary course of business consistent with past practices and are not
reasonably likely to have a Material Adverse Effect on ABI and its
Subsidiaries.
6.8 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf
of ABI or any of its Subsidiaries have been filed, or requests for extensions
have been filed, granted, and have not expired for periods ending on or after
February 6, 1996, and on or before the date of the most recent fiscal year and
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on ABI and its Subsidiaries on a consolidated basis, and all
such returns filed are true, complete, and accurate in all material respects.
ABI has paid or caused to be paid all Taxes shown to be due on such Tax
Returns. There is no audit examination, deficiency, or refund litigation or
matter in controversy with respect to any Taxes that is reasonably likely to
result in a determination that would have a Material Adverse Effect on ABI and
its Subsidiaries on consolidated basis, except as reserved against in the ABI
Financial Statements or disclosed in Section 6.8 of the ABI Disclosure
Memorandum. All Taxes and other liabilities due with respect to completed and
settled examinations or concluded litigation have been paid accrued, or
provided for as disclosed in Section 6.8 of the ABI Disclosure Memorandum.
(b) Adequate provision for any Taxes due or to become due
for ABI or any of its Subsidiaries for any period or periods through the date
of the ABI Financial Statements, has been made and is reflected on such ABI
Financial Statements.
(c) Deferred Taxes of ABI and its Subsidiaries have been
provided for in the ABI Financial Statements in accordance with GAAP.
(d) ABI and each of its Subsidiaries are in compliance
with, and their records contain all information and documents (including
properly completed Internal Revenue Service Forms W-9) necessary to comply
with, all applicable information reporting and Tax withholding requirements
under federal, state, and local Tax Laws and such records identify with
specificity all accounts subject to backup withholding under Section 3406 of
the Internal Revenue Code, except for such instances of noncompliance and such
omissions which are not reasonably likely to have a Material Adverse Effect on
ABI and its Subsidiaries on a consolidated basis.
6.9 ENVIRONMENTAL MATTERS.
(a) Except as disclosed in Section 6.9 of the ABI
Disclosure Memorandum, to the Knowledge of ABI each ABI Company, their
Participation Facilities, and their Loan Properties are, and have been, in
compliance in all material respects with all applicable Environmental Laws,
except for violations which are not reasonably likely to have a Material
Adverse Effect on ABI and its Subsidiaries on a consolidated basis.
(b) Except as disclosed in Section 6.9 of the ABI
Disclosure Memorandum, to the Knowledge of ABI there is no suit, claim, action,
or proceeding pending or threatened before any Governmental Entity, or other
forum in which any ABI Company or any of their Loan Properties or Participation
Facilities has been or, with respect to threatened proceedings may be named as
a defendant or a potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law, or (ii) relating to
the release into the environment of any Hazardous Material, whether or not
occurring at, on, under, or involving a site owned, leased, or operated by any
ABI Company, or any of their Loan Properties or Participation Facilities,
except for such proceedings pending or threatened that are not reasonably
likely to have a Material Adverse Effect on ABI and its Subsidiaries on a
consolidated basis. Except as disclosed in Section 6.9 of the ABI Disclosure
Memorandum, to the knowledge of ABI no notice, notification, demand, request
for information, citation, summons, or order has been received, to the Knowledge
of ABI no complaint has been filed, no penalty has been assessed, and to the
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Knowledge of ABI no investigation or review is pending or, to the
Knowledge of ABI, is threatened by any Governmental Entity or other person
relating to or arising out of any Environmental Law.
(c) Except as disclosed in Section 6.9 of the ABI
Disclosure Memorandum, to the Knowledge of ABI there is no reasonable basis for
any suit, claim, action, or proceeding of the type as described in Section
6.9(b) of this Agreement, except as would not have a Material Adverse Effect on
ABI and its Subsidiaries on a consolidated basis.
(d) Except as disclosed in Section 6.9 of the ABI
Disclosure Memorandum, to the Knowledge of ABI there has been no release of
Hazardous Material in, on, under, or affecting any current or previously owned
or leased real property of ABI Company, or any Participation Facility or any
Loan Property, except where such release does not or is not reasonably likely
to have, in the aggregate, a Material Adverse Effect on ABI and its
Subsidiaries on a consolidated basis.
6.10 COMPLIANCE WITH LAWS; NO VIOLATIONS.
(a) ABI is a bank holding company duly registered under
the BHC Act. Each ABI Company has in effect and holds all Permits of and from
all Governmental Entities necessary for it to own, lease, and operate its
material assets and property and to carry on its business as now conducted,
except for such Permits the absence of which are not reasonably likely to have
a Material Adverse Effect on ABI and its Subsidiaries on a consolidated basis.
(b) Except as set forth in Section 6.10 of the ABI
Disclosure Memorandum, none of the ABI Companies is presently in conflict with
or, in default under or in violation of, (i) its Articles of Incorporation,
Bylaws, or comparable organizational documents, or (ii) Law, Permit, order,
judgment, writ, Injunction, or decree or any Regulatory Agreement applicable to
their respective businesses or to their employees conducting such business or
by which their assets or properties are bound or affected except for conflicts,
defaults, or violations that are not reasonably likely to have a Material
Adverse Effect on ABI or any of its Subsidiaries on a consolidated basis.
(c) No ABI Company has received any notification or
communication from any Governmental Entity, or from any Regulatory Authority
(i) asserting that any ABI Company is not in compliance with any of the Laws,
orders, judgments, writs, Injunctions, or decrees which such Governmental
Entity or Regulatory Authority enforces, which as a result of such
noncompliance is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on ABI and its Subsidiaries on a consolidated basis,
(ii) threatening to revoke any Permits, or (iii) requiring or threatening to
require any ABI Company, or indicating that any ABI Company may be required, to
enter into or consent to the issuance of a Regulatory Agreement. Except as
disclosed in Section 6.10 of the ABI Disclosure Memorandum, no ABI Company has
consented to, entered into, or agreed to enter into, any Regulatory Agreement.
Except for routine examination by the Federal Reserve, the FDIC, and the
Department, as of the date of this Agreement, to the Knowledge of ABI, no
investigation by any Governmental Entity with respect to ABI or American Bank
is pending or threatened.
6.11 LEGAL PROCEEDINGS. Except as disclosed in Section 6.11 of the
ABI Disclosure Memorandum, there are no actions, suits, or proceedings
instituted or pending or, to the best of the Knowledge of ABI, threatened (or
unasserted but considered probable of assertion and which if asserted would
have at least a reasonable probability of an unfavorable outcome) against any
ABI Company, or against any property, assets, interest, or right of any of
them, that is reasonably likely to have a Material Adverse Effect on ABI and
its Subsidiaries on a consolidated basis. Except as disclosed in Section 6.11
of the ABI Disclosure Memorandum, no ABI Company is a party to any agreement or
instrument or is subject to any restrictions under their respective Articles of
Incorporation or Bylaws, or other corporate restriction, or any judgment,
order, writ, Injunction, or decree of any Governmental Entity or
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arbitrators that is reasonably likely to have a Material Adverse Effect on ABI
and its Subsidiaries on a consolidated basis.
6.12 BROKERS AND FINDERS. Except for Advest, Inc., no ABI Company,
nor any of their respective directors, officers, or employees has employed any
agent, broker, finder, investment banker, or other intermediary or incurred any
liability for any financial advisory services, brokerage fees, commissions, or
finder's fees, and no broker or finder has acted directly or indirectly for ABI
or any of its Subsidiaries in connection with this Agreement or the
transactions contemplated hereby.
6.13 STATEMENTS TRUE AND CORRECT. None of the information supplied
or to be supplied by any ABI Company or any affiliate thereof for inclusion in
the Registration Statement to be filed by ABI with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect
to any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any ABI Company or any affiliate thereof for inclusion in the Proxy
Statement to be mailed to Murdock's shareholders in connection with the
Stockholders' Meeting, and any other documents to be filed by any ABI Company
or any affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions contemplated hereby, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the shareholders of Murdock, contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment thereof
or supplement thereto, at the time of the Stockholders' Meeting, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of any proxy for the Stockholders' Meeting. All
documents that any ABI Company or any affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
contemplated hereby will comply as to form in all material respects with the
provisions of applicable Law.
6.14 ACCOUNTING, TAX, AND REGULATORY MATTERS. No ABI Company has
taken or agreed to take any action that would, or has Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for "pooling of
interests" treatment or as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, or (ii) materially impede or delay receipt
of any Consents of Regulatory Authorities referred to in Section 9.1(b) of this
Agreement or result in the imposition of a condition or restriction of the type
referred to in the last sentence of such Section 9.1(b).
6.15 MATERIAL CONTRACTS. Except as disclosed in Section 6.15 of
the ABI Disclosure Memorandum, all material contracts, agreements, leases,
commitments, and other instruments to which ABI is a party and which are
required to be filed as an exhibit to SEC Reports have been so filed.
ARTICLE VII
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
7.1 CONDUCT OF BUSINESS BY MURDOCK. During the period from the
date of this Agreement to the Effective Time, unless the prior written consent
of ABI shall have been obtained, and except as otherwise expressly contemplated
by this Agreement, Murdock shall: (a) operate its business only in the usual,
regular, and ordinary course consistent with past practice, (b) use its
reasonable best efforts to maintain and preserve intact its business
organization, assets, and properties and maintain its rights and franchises,
(c) use its reasonable efforts to maintain its current employee and
advantageous business relationships and retain the services of its officers and
key employees, and (d) take no action which would adversely affect or delay the
ability of any party (i) to obtain any necessary Consents of any Regulatory
Authority or other Governmental Entity required for the transactions
contemplated hereby without the imposition of a condition or restriction of the
type referred to in the last sentence of Section 9.1(b) of this Agreement or
(ii) to perform its covenants and agreements under this Agreement.
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7.2 FORBEARANCE. During the period from the date of this
Agreement until the earlier of the Effective Time or the termination of this
Agreement, Murdock covenants and agrees that it will not do or agree to commit
to do any of the following, without the prior written consent of the chief
executive officer of ABI:
(a) amend the Articles of Incorporation, Bylaws, or other
governing instruments of Murdock, except as expressly contemplated by this
Agreement; or
(b) except for single family residential mortgage loans
not in excess of $200,000, make any loan or other extension of credit to any
person in excess of $100,000; or
(c) (i) incur any additional debt obligation or other
obligation for borrowed money in excess of an aggregate of $50,000 except in
the ordinary course of the business of Murdock consistent with past practices
(it being understood and agreed that incurrence of indebtedness in the ordinary
course of business shall include, without limitation, creation of deposit
liabilities, purchases of federal funds, sales of certificates of deposit,
purchases of federal funds, advances from the Federal Reserve Bank or Federal
Home Loan Bank, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or (ii) assume, guarantee, endorse, or
otherwise as an accommodation become responsible for the obligations of an
individual, corporation, or other entity, or (iii) impose, or suffer the
imposition, on any material asset or property of Murdock of any Lien or permit
any such Lien to exist (other than in connection with deposits, repurchase
agreements, bankers acceptances, "treasury tax and loan" accounts established
in the ordinary course of business, and any Liens in effect as of the date
hereof that are disclosed in Section 5.2(c) of the Murdock Disclosure
Memorandum); or (iv) or make any loan or advance which would be reasonably
likely to have a Material Adverse Effect on Murdock; or
(d) repurchase, redeem, or otherwise acquire or exchange,
directly or indirectly, any shares, or any securities convertible into any
shares, of the capital stock of Murdock, or make, declare, or pay any dividend
or make any other distribution in respect of Murdock's capital stock; or
(e) except as contemplated by Section 8.15 of this
Agreement, issue, sell, pledge, encumber, authorize the issuance of, enter into
any contract, agreement, or other contract, agreement, commitment, or other
instrument to issue, sell, pledge, encumber, or authorize the issuance of, or
otherwise permit to become outstanding any additional shares of Murdock Common
Stock or any other capital stock of Murdock (or permit the exercise of any
option, warrant, or other right requiring the issuance of any securities by
Murdock), or any stock appreciation rights, or any option, warrant, conversion,
or other right to acquire any such stock, or any security convertible into any
such stock; or
(f) adjust, split, combine, or reclassify any capital
stock of Murdock or authorize the issuance of any other securities in respect
of or in substitution for shares of Murdock Common Stock, or sell, lease,
mortgage, or otherwise dispose of or otherwise encumber any property or asset
other than in the ordinary course of business for reasonable and adequate
consideration; or
(g) except for purchases of United States Treasury
securities or United States Government agency securities, which in either case
have maturities of five years or less, purchase any securities or make any
material investment, either by purchase of stock or securities, contributions
to capital, assets transfers, or purchase of any assets or property, in any
person, entity, partnership, or corporation, or otherwise acquire direct or
indirect control over any person, entity, partnership, or corporation, other
than in connection with (i) foreclosures in the ordinary course of business or
(ii) acquisitions of control in its fiduciary capacity.
(h) grant any increase in compensation or benefits to the
employees or officers of Murdock, except in accordance with past practice
disclosed in Section 7.2(h) of the Murdock Disclosure Memorandum or as required
by Law; except as disclosed in Section 7.2(h) of the Murdock Disclosure
Memorandum, pay any severance or termination pay or any bonus other than
pursuant to written policies or written contracts, agreements, or other
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instruments in effect on the date of this Agreement; enter into or amend any
severance agreements with officers or employees of Murdock, grant any material
increase in fees or other increases in compensation or other benefits to
directors of Murdock, except in accordance with past practice disclosed in
Section 7.2(h) of the Murdock Disclosure Memorandum; or voluntarily accelerate
the vesting of any stock options or other stock-based compensation or employee
benefits; or
(i) except as contemplated by Section 8.15 of this
Agreement, enter into or amend any employment agreement, contract, or other
instrument between Murdock and any person (unless such amendment is required by
Law) that Murdock does not have the unconditional right to terminate without
liability (other than liability for services already rendered), at any time on
or after the Effective Time; or
(j) adopt any new employee benefit plan of Murdock or
make any material change in or to any existing employee benefit plans of
Murdock other than any such change that is required by Law or that, in the
opinion of counsel, is necessary or advisable to maintain the Tax qualified
status of any such plan; or
(k) make any significant change in any Tax or accounting
methods or systems of internal accounting controls in effect on June 30, 1997,
except as may be appropriate to conform to changes in Tax Laws or regulatory
accounting requirements, or GAAP; or
(l) commence any action, suit, proceeding, or litigation
other than in accordance with past practice or settle any action, suit,
proceeding, or litigation involving any liability of Murdock for material money
damages or restrictions upon the operations of Murdock; or
(m) except in the ordinary course of business consistent
with past practice, modify, amend, or terminate any material contract,
agreement, or other instrument, other than renewals without material adverse
change of terms, or waive, release, compromise, or assign any material rights
or claims; or
(n) except for transactions in the ordinary course of
business consistent with past practice, make any investment in excess of
$50,000 either by purchase of stock or securities, contributions to capital,
property transfers, or purchase of property or assets of any other individual,
corporation, or other entity; or
(o) sell, transfer, mortgage, encumber, or otherwise
dispose of any of its properties or assets to any individual, corporation, or
other entity or cancel, release, or assign any indebtedness to any such person
or any claims held by any such person, except in the ordinary course of
business consistent with past practice or pursuant to contracts, agreements, or
other instruments in force at the date of this Agreement; or
(p) agree to, or make any commitment to, take any of the
actions prohibited by this Section 7.2 of this Agreement.
7.3 COVENANTS OF ABI. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, ABI
covenants and agrees that it shall (a) continue to conduct its business and the
business of its Subsidiaries in a manner designed in its reasonable judgment,
to enhance the long-term value of the ABI Common Shares and the business
prospects of ABI and its Subsidiaries, and (b) take no action which would (i)
materially adversely affect the ability of any party to this Agreement to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentence of Section 9.1(b) of this Agreement, or (ii) materially adversely
affect the ability of any party to perform its covenants and agreements under
this Agreement; provided, that the foregoing shall not prevent any ABI Company
from discontinuing or disposing of any of its properties, assets, or business
if such action is, in the judgment of ABI, desirable in the conduct of the
business of ABI and its Subsidiaries.
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7.4 NOTIFICATION OF ADVERSE CHANGES IN CONDITION. Each party
agrees to promptly advise the other parties to this Agreement, orally and in
writing, upon becoming aware of the occurrence or pending occurrence of any
event or circumstance relating to it or any of its Subsidiaries which is (i)
reasonably likely to have a Material Adverse Effect on such party or its
Subsidiaries, if any, or (ii) which would cause or constitute a material breach
of any of the representations, warranties, or covenants of such party contained
herein, and shall use its reasonable best efforts to prevent or promptly remedy
the same.
7.5 GOVERNMENT FILINGS AND REPORTS. Each party and their
respective Subsidiaries, if any, shall file all reports required to be filed by
each of them with Regulatory Authorities between the date of this Agreement and
the Effective Time and shall deliver to the other parties copies of all such
reports promptly after the same are filed. Murdock and American Bank shall
file all call reports with the appropriate bank regulator and all other
reports, applications, and other documents required to be filed with the
appropriate bank regulators between the date hereof and the Effective Time and
shall make available to the other party copies of all such reports promptly
after the same are filed. If financial statements are contained in any such
reports filed with the SEC, such financial statements shall fairly present the
consolidated financial position of the entity filing such statements as of the
dates indicated thereon and the consolidated results of operations, changes in
shareholders' equity, and cash flows for the periods then ended in accordance
with GAAP (subject in the case of interim financial statements to normal
year-end adjustments or any other adjustments described therein which are not
expected to be material in amount, and except for the absence of certain
footnote information in the unaudited statements). As of their respective
dates, such reports filed with the SEC will comply in all material respects
with the Securities Laws and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein,
in light of the circumstances under which they were made, not misleading
(except to the extent that any such statement or omission therein has been
corrected or otherwise disclosed or updated in a subsequent report filed by
such party with the SEC). Any financial statements contained in any other
reports to another Regulatory Authority shall be prepared in accordance with
the Laws applicable to such reports.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; REGULATORY MATTERS.
(a) ABI shall (i) prepare and file with the SEC as soon
as is reasonably practicable after execution of this Agreement, the
Registration Statement including the Proxy Statement, (ii) use its reasonable
best efforts to cause the Registration Statement to become effective under the
Securities Act and remain effective through the Effective Time, and (iii) take
any action reasonably required to be taken under any applicable state blue sky
or securities Laws in connection therewith. Murdock shall furnish ABI with all
information concerning Murdock and the holders of Murdock Common Stock as ABI
may reasonably request in connection with the foregoing.
(b) ABI shall promptly prepare and file, and Murdock
shall cooperate in the preparation and, where appropriate, filing of, (i) all
applications and documentation with third parties and Regulatory Authorities
having jurisdiction over the transactions contemplated by this Agreement
seeking the requested Consents and Permits to consummate the transactions
contemplated by this Agreement, and (ii) thereafter to use its reasonable best
efforts to cause the Merger to be consummated as expeditiously as reasonably
practicable.
8.2 ACCESS TO INFORMATION; CONFIDENTIALITY. From the date hereof
until the earlier of the Effective Time or the termination of this Agreement,
upon reasonable notice and subject to applicable Laws, ABI and Murdock shall
afford each other, and each other's accountants, counsel, and other
representatives, during normal business hours during the period of time prior
to the Effective Time, reasonable access to all of its properties, books,
contracts, commitments, and records and, during such period, each of Murdock
and ABI shall furnish promptly to the other (a) a copy of each report,
schedule, and other document filed or received by it during such
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period pursuant to the requirements of the Securities Laws or federal or state
banking laws (other than reports or documents which such party is not permitted
to disclose under applicable Law), (b) a copy of all filings made with any
Regulatory Authorities or other Governmental Entities in connection with the
transactions contemplated by this Agreement and all written communications
received from such Regulatory Authorities and Governmental Entities related
thereto, and (c) all other information concerning its business, properties, and
personnel as such other party may reasonably request, including reports of
condition filed with Regulatory Authorities. In this regard, without limiting
the generality of the foregoing, each of the parties hereto shall notify the
other parties hereto promptly upon the receipt by it of any comments from the
SEC, or its staff, and any requests by the SEC for amendments or supplements to
the Registration Statement or the Proxy Statement or for additional information
and will supply the other parties hereto with copies of all correspondence
between it and its representatives, on the one hand, and the SEC or the members
of its staff or any other government official, on the other hand, with respect
to the Registration Statement or the Proxy Statement. Each party hereto shall,
and shall cause its advisors and representatives to (x) conduct its
investigation in such a manner which will not unreasonably interfere with the
normal operations, customers or employee relations of the other and shall be in
accordance with procedures established by the parties having due regard for the
foregoing, and (y) refrain from using for any purposes other than as set forth
in this Agreement and shall treat as confidential all such information obtained
by each hereunder or in connection herewith and not otherwise known to them
prior to the Effective Time. Except as otherwise agreed to in writing by
Murdock, until the Effective Time, ABI and its Subsidiaries and affiliates will
be bound by, and all information received with respect to Murdock pursuant to
this Section 8.2 shall be subject to that certain confidentiality agreement
entered into with ABI on August 11, 1997. Except as otherwise agreed to in
writing by ABI, until the Effective Time, Murdock will be bound by, and all
information received with respect to ABI pursuant to this Section 8.2 shall be
subject to that certain confidentiality agreement entered into with Murdock on
August 15, 1997.
8.3 STOCKHOLDERS' APPROVALS. Murdock shall call a meeting of its
stockholders to be held on a date to be mutually agreed to by the parties as
soon as reasonably practicable after the Registration Statement is declared
effective by the SEC under the Securities Act for the purpose of considering
and voting upon approval of the Merger and such other related matters as it
deems appropriate (the "Stockholders' Meeting"). In connection with the
Stockholders' Meeting, (a) Murdock shall prepare a Proxy Statement relating to
the Merger and mail such Proxy Statement to the stockholders of Murdock, (b)
the parties shall furnish to each other all information concerning them that
they may reasonably request in connection with the preparation of the Proxy
Statement, (c) the Board of Directors of Murdock shall submit for approval of
its stockholders the matters to be voted upon at the Stockholders' Meeting, and
shall recommend (unless the Board of Directors of Murdock shall have concluded
in good faith and based upon advice of counsel, that such recommendation would
be inconsistent with its fiduciary obligations under applicable Law) to its
stockholders the approval of this Agreement, (d) each member of the Board of
Directors of and the Chief Executive Officer of Murdock shall vote all Murdock
Common Stock beneficially owned by each in favor of approval of this Agreement
and consummation of the Merger, and (e) the Board of Directors and executive
officers of Murdock shall use their reasonable efforts to obtain such
stockholder approvals (subject to compliance with their fiduciary duties as
advised by counsel). ABI shall approve and shall cause the Board of Directors
of the Surviving Corporation to approve the Merger.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, Murdock and the Surviving Corporation shall
execute and file the Articles of Merger with the Secretary of State of the
State of Florida in connection with the Closing.
8.5 AGREEMENTS AS TO EFFORTS TO CONSUMMATE. Subject to the terms
and conditions of this Agreement, each of the parties hereto agrees to use, and
cause its Subsidiaries, if any, to use, its reasonable best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper, or advisable under applicable Laws to consummate and make
effective the transactions contemplated by this Agreement as expeditiously as
practicable after the date of this Agreement, including the use of their
respective reasonable best efforts to lift or rescind any judgment, order,
writ, Injunction or other decree adversely affecting the ability of the parties
to consummate the transactions contemplated hereby and to cause to be satisfied
the conditions referred to
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in Article IX of this Agreement; provided, however, that nothing herein shall
preclude either party from exercising its rights under this Agreement. ABI and
Murdock shall use their reasonable best efforts to obtain all Consents and
Permits of all third parties and Regulatory Authorities necessary or desirable
for the consummation of the transactions contemplated by this Agreement. Each
party hereto agrees that to the extent practicable, it will consult with the
other parties to this Agreement with respect to obtaining all such Permits and
Consents of third parties and Governmental Entities and each will keep the
other parties apprised of the status of matters relating to the completion of
the transactions contemplated hereby.
8.6 NO SOLICITATION. Except with respect to this Agreement and
the transactions contemplated hereby, from the date of this Agreement until the
Effective Time or the termination of this Agreement pursuant to Article X,
neither Murdock nor any affiliate or representative of Murdock, shall, directly
or indirectly, solicit an Acquisition Proposal by any person. Neither Murdock
nor any affiliate or representative of any of them shall negotiate with, or
provide any information to with respect to an Acquisition Proposal. Murdock
shall promptly advise ABI orally and in writing of any such inquiries or
proposals relating to any such transaction, including all of the material terms
thereof. Murdock and any of its affiliates or representatives shall
immediately cease and cause to be terminated any existing activities,
discussions, or negotiations with any persons conducted heretofore with respect
to any of the foregoing.
8.7 EMPLOYEE BENEFITS. Following the Effective Time, ABI shall
provide generally to officers and employees of Murdock employee benefits,
including without limitation, pension benefits, health and welfare benefits,
life insurance and vacation, and severance arrangements, on terms and
conditions provided from time to time by ABI and its Subsidiaries to their
similarly situated officers and employees. For purposes of participation and
vesting under any employee benefit plan of ABI and its Subsidiaries, the
service of the employees of Murdock or its Subsidiaries prior to the Effective
Time shall be treated as service with the ABI or its Subsidiaries participating
in such employee benefit plans.
8.8 CURRENT INFORMATION. During the period from the date of this
Agreement until the Effective Time or the termination of this Agreement, each
of ABI and Murdock shall, and shall cause its representatives to, confer on a
regular and frequent basis with representatives of the other. Each of Murdock
and ABI shall promptly notify the other of (i) any material change in its
business or operations, (ii) any material complaints, investigations or
hearings (or communications indicating that the same may be contemplated) of
any Regulatory Authority, (iii) the institution or the threat of material
action, suit, claim, or proceeding involving such party, or (iv) the
occurrence, or nonoccurrence, of any event or condition the occurrence, or
nonoccurrence, of which would be reasonably expected to cause any of such
party's representations or warranties set forth herein that are qualified as to
materiality to become untrue or inaccurate in any respect as of the Closing,
and these representations and warranties not so qualified to become untrue or
inaccurate in any material respect as of the Closing; and in each case shall
keep the other fully informed with respect thereto.
8.9 OTHER ACTIONS. No party shall take any action, except in
every case as may be required by applicable Law, that would or is intended to
result in (i) any of its representations and warranties set forth in this
Agreement that are qualified as to materiality being or becoming untrue, (ii)
any of such representations and warranties that are not so qualified becoming
untrue in any material manner having a Material Adverse Effect, (iii) any of
the conditions set forth in this Agreement not being satisfied or in a
violation of any provision of this Agreement, or (iv) adversely affecting the
ability of any of them to obtain any of the Consents or Permits from the
Regulatory Authorities (unless such action is required by sound banking
practice).
8.10 PRESS RELEASES. From the date of this Agreement until the
Effective Time or the termination of this Agreement, Murdock and ABI shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement, the Merger, or
any other transaction contemplated hereby; provided, that nothing in this
Section 8.10 of this Agreement shall prohibit any party from making any
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disclosure which its counsel deems necessary or advisable in order to satisfy
such party's disclosure obligations imposed by Law.
8.11 POOLING AND TAX-FREE REORGANIZATION TREATMENT. Neither
Murdock nor ABI shall take or cause to be taken any action, whether before or
after the Effective Time, which would disqualify the Merger from being treated
as a "pooling of interests" for accounting purposes or cause the Merger not to
qualify for treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
8.12 STATE TAKEOVER LAWS. Murdock shall take all action necessary
to exempt the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Laws.
8.13 CORPORATE GOVERNANCE PROVISIONS. Murdock shall take all
necessary action to ensure that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated hereby do
not and will not result in any super-majority voting requirements under the
Articles of Incorporation, Bylaws, or other governing instruments of Murdock or
restrict or impair the ability of ABI or any of its Subsidiaries to vote, or
otherwise to exercise the rights of a shareholder with respect to, shares of
Murdock Common Stock.
8.14 AGREEMENT OF AFFILIATES. Murdock has disclosed in Section
8.14 of the Murdock Disclosure Memorandum all persons whom it reasonably
believes are "affiliates" of Murdock for purposes of Rule 145 under the
Securities Act or under applicable SEC accounting releases with respect to
"pooling of interests" accounting treatment. Murdock shall cause each such
person to deliver to ABI not later than thirty (30) days prior to the Effective
Time, a written agreement, substantially in the form of Exhibit B hereto,
providing that such person will not sell, pledge, transfer, or otherwise
dispose of the shares of Murdock Common Stock held by such person except as
contemplated by such agreement or by this Agreement and will not sell, pledge,
transfer, or otherwise dispose of the ABI Common Shares to be received by such
person upon consummation of the Merger except in compliance with applicable
provisions of the Securities Act and the rules and regulations thereunder and
until such time as financial results covering at least thirty (30) days of
combined operations of ABI and Murdock have been published within the meaning
of Section 201.01 of the SEC's Codification of Financial Reporting Policies.
ABI Common Shares issued to such affiliates of Murdock in exchange for shares
of Murdock Common Stock shall not be transferable until such time as financial
results covering at least thirty (30) days of combined operations of ABI and
Murdock have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies, regardless of whether each such
affiliate has provided the written agreement referred to in this Section 8.14,
and ABI shall be entitled to place restrictive legends upon certificates for
ABI Common Shares issued to affiliates of Murdock pursuant to this Agreement to
enforce the provisions of this Section 8.14.
8.15 OFFICER AGREEMENT. On or before the date of Closing, Murdock
shall deliver to ABI an agreement from Robert L. Andreasen in a form
satisfactory to ABI and its counsel (the "Officer Agreement") to the effect
that (a) the option to purchase 14,000 shares of Murdock Common Stock
referenced in Section 5.3(a) of this Agreement constitutes all of the options,
warrants, rights to subscribe to or acquire, or otherwise receive shares of
Murdock Common Stock from, or issued by, Murdock under any agreement, contract,
or other instrument or commitment, written or oral, whether as a result of his
employment or otherwise, and that he has no other right or claim to any
additional shares of Murdock Common Stock or rights to acquire Murdock Common
Stock, and (b) Mr. Andreasen waives his right, if any, to any additional
compensation payable to him under Section Seven of the Amended and Restated
Employment Agreement by and between Murdock and Mr. Andreasen dated August 29,
1995 upon a "change of control" as defined therein, provided that he is
retained by the Surviving Corporation and his base compensation which, as of
the date of this Agreement is $102,500 annually, is not reduced and the
Surviving Corporation specifically assures Murdock's obligations under such
Restated Employment Agreement and performs in accordance with the terms
thereof.
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8.16 AMERICAN BANK/MURDOCK LOCAL ADVISORY BOARD. ABI will
establish or cause to be established an advisory board of directors for the
Murdock branch of American Bank consisting of 7 to 9 members. The advisory
board will meet no less frequently than on a quarterly basis and whose members
will receive a payment of $100 for each meeting attended. At the Effective
Time, ABI shall appoint at least three current members of the Board of
Directors of Murdock (to the extent that at least three such directors are
interested in serving in such position) to such advisory board together with
such other persons as ABI, in its sole discretion, may deem advisable or
desirable to serve on such board. ABI also will cause to be established, a
loan committee of the advisory board consisting of five to seven members which
shall meet weekly, or as needed, and whose members will receive a payment of
$100 per meeting. The current members of the Board of Directors of Murdock
selected to the advisory board shall be given preference to serve as members of
the loan committee.
8.17 INDEMNIFICATION.
(a) ABI shall, and shall cause the Surviving Corporation
(and its successors and assigns) to, indemnify, defend, and hold harmless the
present directors, officers, employees, and agents of Murdock (each, an
"Indemnified Party) after the Effective Time against all costs, fees, or
expenses (including reasonable attorneys' fees) judgements, fines, penalties,
losses, damages, liabilities, and amounts paid in settlement in connection with
any claim, action, suit, proceeding, or investigation, whether civil,
administrative, or investigative, arising out of actions or omissions occurring
at or prior to the Effective Time (including the transactions contemplated by
this Agreement) to the full extent permitted under Florida Law and by Murdock's
Articles of incorporation and Bylaws as in effect as of the date hereof,
including any provisions relating to advances of expenses incurred in the
defense of any action, suit, or proceeding. If indemnification is sought
hereunder, the Indemnified Party shall notify ABI of the commencement of the
litigation, proceeding, or other action, or any overt threat with respect to
any of the foregoing; provided, however, that the failure to provide such
notification shall not relieve ABI from its indemnification obligations
hereunder or otherwise to such Indemnified Party unless and only to the extent
that such failure shall materially and adversely affect the ability of ABI to
defend such litigation, proceeding, or other action. Following such
notification, ABI may elect to assume the defense of such litigation,
proceeding, or other action (and the costs related thereto) and, upon such
election, ABI shall not be liable for any legal costs subsequently incurred by
such Indemnified Party (other than the costs of investigation or the production
of documents or witnesses) unless (i) ABI fails to provide legal counsel
reasonably satisfactory to such Indemnified Party in a timely manner, or (ii)
such Indemnified Party shall have reasonably concluded that (A) the
representation of such Indemnified Party by legal counsel selected by ABI would
be inappropriate due to actual or potential conflicts of interest or (B) there
may be a legal defense available to such Indemnified Party that are different
from or additional to those available to the Company or any other Indemnified
Party represented by such legal counsel. Nothing set forth herein shall
preclude any Indemnified Party from retaining its own counsel at its own
expense. ABI agrees that it will not, without the prior written consent of the
Indemnified Parties, settle, compromise, or consent to the entry of judgment in
any pending or threatened claim, proceeding, or action in respect of which
indemnification could be sought hereunder (whether or not any Indemnified Party
is a party to such claim or proceeding) unless such settlement includes a
provision unconditionally releasing each Indemnified Party from and holding
each of them harmless against all liability in respect of claims by any
releasing party related to or arising out of such matters or any transaction or
conduct in connection therewith. Without limiting the generality of the
foregoing, in any case in which the approval of ABI is required to effectuate
such indemnification, ABI shall direct, or cause such ABI Company to direct, at
the election of the Indemnified Party, that the determination of any such
approval shall be made by independent counsel mutually agreed upon between ABI
and the Indemnified Party. ABI shall, and shall cause the Surviving
Corporation and all other relevant ABI Companies to apply such rights of
indemnification in good faith and to the fullest extent permitted by applicable
Law.
(b) Incident to any information furnished or disclosed by
ABI or any ABI Company in connection with the Registration Statement and the
Proxy Statement, and subject to applicable Law, ABI shall indemnify, defend,
and hold harmless Indemnified Parties against all costs, fees, or expenses
(including reasonable attorneys' fees) judgements, fines, penalties, losses,
damages, liabilities, and amounts paid in settlement in
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connection with any claim, action, suit, proceeding, or investigation, whether
civil, administrative, or investigative, arising out of or under the
Securities Laws or any state blue sky or securities Laws based in whole or in
part on (i) any untrue statement or alleged untrue statement of a material fact
contained in such documents including any amendment or supplement to such
document), (ii) any omission or alleged omission to state in such documents a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or (iii) any violation of ABI or an ABI Company of the
Securities Laws or any state blue sky or securities Laws in connection with
such documents; provided, however, that neither ABI or any ABI Company will be
liable in any such case to the extent that any such claim, action, suit, or
investigation is based on any untrue statement or alleged untrue statement or
omission or alleged omission made in such Registration Statement or Proxy
Statement or any amendment or supplement thereto in reliance upon and in
conformity with information furnished in writing to ABI or any ABI Company by
Murdock or any Indemnified Party specifically for use therein.
(c) Murdock shall indemnify, and each Indemnified Party
shall, severally and not jointly, indemnify, defend, and hold harmless ABI, any
ABI Company, each of their directors, officers, employees, and agents, and each
person who controls ABI or any ABI Company against all costs, fees, or expenses
(including reasonable attorneys' fees) judgements, fines, penalties, losses,
damages, liabilities, and amounts paid in settlement in connection with any
claim, action, suit, proceeding, or investigation, whether civil,
administrative, or investigative, arising out of or under the Securities Laws
or any state blue sky or securities Laws based in whole or in part on (i) any
untrue statement or alleged untrue statement of a material fact contained in
such documents including any amendment or supplement to such document), (ii)
any omission or alleged omission to state in such documents a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (iii) any violation of Murdock or such Indemnified Party of the
Securities Laws or any state blue sky or securities Laws in connection with
such documents; provided, however, that each Indemnified Party will be liable
only for, and Murdock will be liable in any such case only to the extent that,
any such claim, action, suit, or investigation is based on any untrue statement
or alleged untrue statement or omission or alleged omission made in such
Registration Statement or Proxy Statement or any amendment or supplement
thereto in reliance upon and in conformity with information furnished in
writing by Murdock or such Indemnified Party, as the case may be, specifically
for use therein.
(d) If ABI or the Surviving Corporation or any of its
successors or assigns shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any person, corporation or entity, then in
each case, proper provision shall be made so that the successors and assigns of
ABI shall assume the obligations set forth in this Section 8.17
(e) The provisions of this Section 8.17 are intended to
be for the benefit of and shall be enforceable by, each Indemnified Party, his
or her heirs and representatives, and shall survive the consummation of the
Merger and be binding on all successors and assigns of ABI and the Surviving
Corporation.
8.18 SPOUSES SHARES. Murdock shall obtain and deliver to ABI prior
to the Stockholders' Meeting, letter agreements with respect to the Spouses
Shares in substantially the form set forth in Exhibit A hereto committing the
holder of such Spouses Shares in favor of the Merger at the Stockholders'
Meeting and not disposing of the Murdock Common Stock other than pursuant to
the Merger.
ARTICLE IX
CONDITIONS
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby shall be subject to the
satisfaction of the following conditions, unless waived by both parties
pursuant to Section 11.7 of this Agreement:
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(a) Stockholder Approval. The Stockholders of Murdock
shall have approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law.
(b) Regulatory Approval. Other than the filing of the
Articles of Merger contemplated by Section 1.3 hereof, all Consents of, filings
and registrations with, and notifications to, all Regulatory Authorities
required for consummation of the Merger shall have been obtained or made and
shall be in full force and effect and all waiting periods required by Law shall
have expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including requirements relating to the
raising of additional capital or the disposition of assets or properties) which
in the reasonably judgement of the Board of Directors of either party would so
materially adversely impact the economic or business benefits of the
transactions contemplated by this Agreement that, had such condition or
requirement been known, such party would not, in its reasonable judgment, have
entered into this Agreement.
(c) Legal Proceedings. No Governmental Entity of
competent jurisdiction shall have issued any injunction, order, decree, ruling,
or other legal restraint or prohibition, whether temporary, preliminary, or
permanent (an "Injunction") which is in effect and has the effect of preventing
the consummation of the Merger or any of the transactions contemplated thereby,
nor shall any such action or proceeding been commenced or be pending for the
purposes of obtaining an Injunction. No Law, judgment, order, Injunction,
writ, or decree shall have been enacted, entered, promulgated, or enforced by
any Governmental Entity which prohibits, restricts or makes illegal
consummation of the Merger.
(d) Registration Statement. The Registration Statement
shall have been declared effective under the Securities Act, and no stop orders
suspending the effectiveness of the Registration Statement shall have been
issued, and no action, suit, proceeding, or investigation by the SEC to suspend
the effectiveness thereof shall have been initiated and be continuing, and all
necessary approvals and Consents under blue sky or state securities Laws or the
Securities Act or the Exchange Act relating to the issuance or trading of the
ABI Common Shares issuable pursuant to the Merger shall have been received.
(e) Pooling of Interests. Coopers & Lybrand L.L.P.,
ABI's independent public accountants, shall have issued a letter, dated as of
the Effective Time, to ABI to the effect that the Merger will qualify for
"pooling of interests" accounting treatment under GAAP.
(f) Tax Opinion. Each party shall have received a
written tax opinion of Carlton, Fields, Ward, Emmanuel, Smith, & Cutler, P.A.
in form and substance reasonably satisfactory to such parties substantially to
the effect that (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and that (ii) the
exchange in the Merger of the shares of Murdock Common Stock for ABI Common
Shares will not give rise to gain or loss to the shareholders of Murdock with
respect to such exchange (except to the extent of any cash received). In
rendering such Tax Opinion, Carlton, Fields, Ward, Emmanuel, Smith, & Cutler,
P.A. may require and shall be entitled to rely upon representations contained
in certificates of officers of Murdock and ABI and others in form and substance
reasonably satisfactory to such counsel.
9.2 CONDITIONS TO OBLIGATIONS OF ABI TO EFFECT THE MERGER. The
obligations of ABI to perform this Agreement and to consummate the Merger and
the other transactions contemplated hereby are subject to the satisfaction of
the following additional conditions, unless waived by ABI pursuant to Section
11.7 of this Agreement:
(a) Representations and Warranties. The representations
and warranties of Murdock set forth in this Agreement shall be true and correct
as of the date of this Agreement and (except to the extent such representations
and warranties are by their express provisions made as of a specified date
shall speak only as of such date) as of the date of Closing as though made on
and as of the date of Closing, subject to such exceptions as do not have, and
would not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect
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on Murdock or the Surviving Corporation following the Effective Time.
Notwithstanding any of the foregoing, the representations and warranties of
Murdock set forth in Section 5.3 of this Agreement shall be true and correct in
all respects (except for inaccuracies which are de minimis in amount).
(b) Performance of Covenants and Agreements. Each and
all of the agreements and covenants of Murdock to be performed or complied with
pursuant to this Agreement and the other agreements contemplated hereby prior
to the Effective Time shall have been duly performed and complied with in all
material respects.
(c) Consents and Approvals. Murdock shall have obtained
any and all Consents (other than those referred to in Section 9.1(b) of this
Agreement) required for consummation of the Merger and the other transactions
contemplated hereby, or for preventing any default under any agreement,
contract, other instrument or Permit to which Murdock is a party, which, if not
obtained or made, is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect after the Effective Time on the Surviving
Corporation.
(d) Certificates. Murdock shall have delivered to ABI
(i) a certificate, dated as of the date of Closing, signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Sections 9.2(a), 9.2(b), 9.2(c), and
9.2(g) of this Agreement have been satisfied, and (ii) copies of all documents
that ABI may reasonably request relating to the existence of Murdock and
certified copies of resolutions or written consents duly adopted by Murdock's
Board of Directors evidencing the taking of all corporate action necessary to
authorize the execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as ABI and its counsel may request.
(e) Affiliates Agreements. ABI shall have received from
each affiliate of Murdock, the affiliates letter referred to in Section 8.16 of
this Agreement, to the extent necessary to assure in the reasonable judgment of
ABI that the transactions contemplated hereby will qualify for pooling of
interests accounting treatment.
(f) Officer Agreement. Murdock shall have delivered to
ABI the Officer Agreement from Robert L. Andreasen.
(g) Minimum Closing Equity. Murdock shall have Closing
Equity of no less than $4,875,000; provided, however, that in such event ABI
shall be subject to the requirements of Section 10.1(j) of this Agreement.
(h) Opinion of Counsel. ABI shall have received a
written opinion of Trenam, Kemker, Scarf, Barkin, Frye, O'Neill & Mullis,
counsel to Murdock, dated as of the Closing, containing such opinions as set
forth in Exhibit C to this Agreement.
9.3 CONDITIONS TO OBLIGATION OF MURDOCK TO EFFECT THE MERGER. The
obligations of Murdock to perform this Agreement and consummate the Merger and
the other transactions contemplated hereby are subject to the satisfaction of
the following conditions, unless waived by Murdock pursuant to Section 11.7 of
this Agreement:
(a) Representations and Warranties. The representations
and warranties of ABI set forth in this Agreement shall be true and correct as
of the date of this Agreement and (except to the extent such representations
and warranties are by their express provisions made as of a specified date
shall speak only as of such date) as of the date of Closing as though made on
and as of the date of Closing, subject to such exceptions as do not have, and
would not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on Murdock or the Surviving Corporation following the
Effective Time.
(b) Performance of Covenants and Agreements. Each and
all of the agreements and covenants of ABI to be performed or complied with
pursuant to this Agreement and the other agreements contemplated hereby prior
to the Effective Time shall have been duly performed and complied with in all
respects.
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(c) Consents and Approvals. ABI shall have obtained any
and all Consents (other than those referred to in Section 9.1(b) of this
Agreement) required for consummation of the Merger and the other transactions
contemplated hereby, or for preventing any default under any agreement,
contract, other instrument or Permit to which ABI is a party, which, if not
obtained or made, is reasonably likely to have a Material Adverse Effect after
the Effective Time on ABI and its Subsidiaries on a consolidated basis.
(d) Certificates. ABI shall have delivered to Murdock
(i) a certificate, dated as of the Effective Time, signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that the
conditions of its obligations set forth in Section 9.3(a), 9.3(b), and 9.3(c)
of this Agreement have been satisfied, and (ii) copies of all documents that
Murdock may reasonably request relating to the existence of ABI and certified
copies of resolutions or written consents duly adopted by ABI's Board of
Directors evidencing the taking of all corporate action necessary to authorize
the execution, delivery, and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as Murdock and its counsel shall request.
(e) Nasdaq Listing. The ABI Common Shares to be issued
pursuant to the Merger shall have been approved and authorized for quotation on
the Nasdaq Stock Market upon official notice of issuance.
(f) Opinion of Counsel. Murdock shall have received a
written opinion of Carlton, Fields, Ward, Emmanuel, Smith, & Cutler, P.A.,
counsel to ABI, dated as of the Effective Time, containing such opinions set
forth in Exhibit D to this Agreement.
(g) Fairness Opinion. Murdock shall have received from
Allen C. Ewing & Co. a letter, dated not more than five business days prior to
the date of the Proxy Statement, in form and substance reasonably satisfactory
to Murdock, to the effect that in the opinion of such firm, the Merger
Consideration is fair, from a financial point of view, to the holders of the
Murdock Common Stock.
(h) Payment of Consideration. ABI shall have delivered
to the Exchange Agent the aggregate Merger Consideration payable to all holders
of Murdock Common Stock pursuant to the terms of this Agreement.
ARTICLE X
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this
Agreement, this Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time by action taken or authorized by the Board of
Directors of the terminating party or parties, whether before or after approval
of the matters presented in connection with the Merger by the stockholders of
Murdock:
(a) by mutual written consent of ABI and Murdock; or
(b) by either ABI or Murdock: (i) in the event of an
inaccuracy of any representation or warranty of the other party contained in
this Agreement which cannot be or has not been cured within thirty (30) days
after the giving of written notice of such inaccuracy and which inaccuracy
would provide the terminating party with the ability to refuse to consummate
the Merger under applicable standard set forth in Section 9.2(a) of this
Agreement in the case of Murdock and 9.3(a) in the case of ABI (provided that
the terminating party is not then in material breach of any representation or
warranty contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Murdock and Section 9.3(a) in
the case of ABI, or in material breach of any covenant or other agreement
contained in this Agreement), or (ii) in the event of a material breach by the
other party of any covenant, agreement, or obligation contained in this
Agreement which breach
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cannot be or has not been cured within thirty (30) days after giving of written
notice to the breaching party of such breach; or
(c) by either ABI or Murdock, in the event (i) any
Consent of any Regulatory Authority required for consummation of the Merger and
the other transactions contemplated hereby shall have been denied by a final
nonappealable action of such Regulatory Authority or if such action taken by
such Regulatory Authority is not appealed within the time limit for appeal, or
(ii) the stockholders of Murdock fail to vote their approval of this Agreement
and the transactions contemplated hereby as required by the FFIC at the
Stockholders' Meeting where the transactions were presented to the stockholders
for approval and voted upon; or
(d) by either ABI or Murdock, in the event that the
Merger shall not have been consummated by April 30, 1998; provided, however,
that the right to terminate this Agreement pursuant to this Section 10.1(d)
shall not be available to any party whose breach of its obligations under this
Agreement has been the cause of, or resulted in the failure of the Merger to be
consummated on or before such date; or
(e) by ABI in the event dissenters' rights are claimed,
pursuant to the Dissent Provisions, by persons owning in the aggregate more
than 10% of the issued and outstanding shares of Murdock Common Stock; or
(f) by ABI or Murdock (provided that the terminating
party is not then in breach of any representation or warranty contained in this
Agreement under the applicable standard set forth in Section 9.2(a) of this
Agreement in the case of Murdock and Section 9.3(a) in the case of ABI or in
material breach of any covenant or other agreement contained in this Agreement)
in the event that any of the conditions precedent to the obligations of such
party to consummate the Merger cannot be satisfied or fulfilled by the date
specified in Section 10.1(d) of this Agreement; or
(g) by Murdock, if prior to the Effective Time a
corporation, partnership, person, or other entity or group shall have made a
bona fide Acquisition Proposal that the Board of Directors of Murdock
determines in its good faith and in the exercise of its fiduciary duties based
on, with respect to legal matters, the written opinion of counsel, and with
respect to financial matters, in the written opinion of an investment banking
firm of national reputation with respect to the business conducted by Murdock,
ABI, and similar banks and bank holding companies, that the Acquisition
Proposal is more favorable to the stockholders of Murdock and that the failure
to terminate this Agreement and accept such Acquisition Proposal would be
inconsistent with the proper exercise of such fiduciary duties (it being agreed
for purposes of this Agreement that the firm of Allen C. Ewing & Co. is an
investment banking firm of such national reputation); provided, however, that
termination under this Section 10.1(g) shall not have been deemed effective
until the termination fee required by Section 10.3 hereof has been paid to ABI;
or
(h) by ABI, if the Board of Directors of Murdock (i)
shall withdraw, modify, or change its recommendation to its stockholders with
respect to approval of this Agreement or the Merger contemplated thereby or
shall have resolved to engage in any Acquisition Proposal, (ii) shall have
recommended to the stockholders of Murdock any Acquisition Proposal, or (iii)
shall have made any public announcement of a proposal, plan, or intention to do
any of the foregoing or shall have entered into and have any agreement, written
or oral, to enter into, any agreement, contract, understanding, or arrangement
to engage in any of the foregoing.
(i) by Murdock, if the Designated Price is less than
$10.00 and its Board of Directors determines by a vote of a majority of the
members of its entire Board of Directors, at any time commencing on the fourth
day following the Determination Date and ending on the close of business on the
day before Closing, to terminate; provided, however, before exercising its
rights to effect termination under this Section 10.1(i), Murdock shall first
have satisfied the good faith procedures specified in Section 3.2(b)of this
Agreement, it being agreed that it shall not be a failure to negotiate in good
faith if the Murdock Board of Directors declines to agree to a new Merger
Consideration because it has determined in its reasonable business judgment that
there has been a Material Adverse Change in the financial condition, results of
operations, business or prospects of ABI.
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(j) by ABI, if the Closing Equity shall be less than
$4,875,000; provided, however, that before exercising its rights to effect
termination under this Section 10.1(j), ABI shall have first satisfied the good
faith procedures specified in Section 3.2(b) of this Agreement, it being agreed
that it shall not be a failure to negotiate in good faith if the ABI Board of
Directors declines to agree to a new Merger Consideration because it has
determined in its reasonable business judgment that there has been a Material
Adverse Change in the financial condition, results of operations, business or
prospects of Murdock.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect and no party shall have any
obligation to the other parties hereto with respect to this Agreement, except
that (i) the provisions of this Section 10.2 and Sections 10.3, 11.1, and 11.2
of this Agreement shall survive any termination and abandonment, and (ii) that
a termination pursuant to Sections 10.1(b) of this Agreement shall not relieve
or release the breaching party from liability for an uncured willful breach of
a representation, warranty, consent, or agreement giving rise to such
termination, of this Agreement.
10.3 TERMINATION FEE. (a) In the event that this Agreement is
terminated or the transactions contemplated hereby are abandoned pursuant to
Section 10.1(b) of this Agreement due to the failure or breach of Murdock under
this Agreement, Murdock shall reimburse ABI for its reasonable out-of-pocket
expenses relating to the Merger (consisting of costs and expenses of outside
legal counsel, printing expenses, fiscal expense reimbursements for its
financial advisor and accountants) in an amount not to exceed $250,000.
(b) In the event this Agreement is terminated or the
transactions contemplated hereby are abandoned pursuant to Sections 10.1(g) or
10.1(h) of this Agreement, ABI shall be entitled to a cash payment from Murdock
in an amount equal to $750,000. In the event of a termination of this
Agreement pursuant to Section 10.1(g) or 10.1(h) of this Agreement, the
payments provided under this Section 10.3(b) shall be the sole and exclusive
remedy available to ABI.
(c) In the event this Agreement is terminated as a result
of ABI's failure or breach under Section 10.1(b), ABI shall reimburse Murdock
for its reasonable out-of-pocket expenses relating to the Merger (consisting of
costs and expenses of outside legal counsel, printing expenses, fees and
expense reimbursement for its financial advisor and accountants) in an amount
not to exceed $200,000.
ARTICLE XI
DEFINITIONS
11.1 DEFINITIONS.
(a) Except as otherwise provided herein, the capitalized
terms set forth below shall have the following meanings:
"ABI" shall have the meaning set forth in the first paragraph
of this Agreement.
"ABI Capital Stock" shall mean, collectively, the ABI Common
Shares and any other class or series of capital stock of ABI.
"ABI Companies" shall mean, collectively, ABI and all ABI
Subsidiaries.
"ABI Common Shares" shall mean the common shares, $1.175 par
value per share, of ABI.
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"ABI Disclosure Memorandum" shall mean the written information
entitled "ABI Disclosure Memorandum" delivered prior to or on the date of this
Agreement to Murdock describing in reasonable detail the matters contained
therein and, with respect to each disclosure made therein, specifically
referencing the Section of this Agreement under which such disclosure is being
made.
"ABI Financial Statements" shall have the meaning set forth in
Section 6.5(b) of this Agreement.
"ABI Subsidiaries" shall mean the Subsidiaries of ABI which
shall include any corporation, bank, savings association, or other organization
acquired as a Subsidiary of ABI in the future and owned by ABI at the Effective
Time.
"Acquisition Proposal" shall mean any offer or proposal, or
any indication of interest in, a merger, consolidation, or other business
combination involving Murdock, or any tender or exchange offer, or any proposed
offer to acquire, or the acquisition of, any equity interest in, or a
substantial portion of the assets and properties, of Murdock other than
contemplated pursuant to this Agreement.
"affiliate" means, with respect to any person, any other
person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or under common control with, the first mentioned
person.
"Agreement" shall mean this Agreement and Plan of Merger,
including the exhibits and schedules delivered pursuant hereto and incorporated
herein by reference.
"American Bank" shall have the meaning set forth in the first
paragraph of this Agreement.
"Articles of Merger" shall mean the Articles of Merger to be
executed by the Parties and filed with the Secretary of State of Florida
relating to the Merger as contemplated in Section 1.3 of this Agreement.
"BHC Act" shall mean the Federal Bank Holding Company Act of
1956, as amended.
"Closing" shall have the meaning set forth in Section 1.2 of
this Agreement.
"Closing Equity" shall mean the stockholders' equity of
Murdock as of the close of business on the day immediately preceding the date
of Closing as determined in accordance with GAAP and as verified by ABI plus
(i) any cash expenditures up to a maximum of $270,000 made and actually paid in
connection with the cancellation of the Information Processing Agreement, dated
March 24, 1994, by and between Murdock and Florida Informanagement Services,
Inc., and the Software License Addendum to Information Processing Agreement,
dated July 18, 1997, by and between Murdock and FIS, Inc. and (ii) any other
amounts or adjustments agreed to in writing by the parties to this Agreement.
"Consent" shall mean any consent, approval, authorization,
clearance, exemption, waiver, ratification, or similar affirmation by any
person.
"Department" shall have the meaning set forth in
Section 5.5(a) of this Agreement.
"Designated Price" shall mean the average of the last daily
sales price of ABI Common Shares as reported on Nasdaq (as reported by the Wall
Street Journal, or if not reported thereby, another authoritative source
selected by ABI) for the twenty (20) consecutive full trading days in which
such shares are traded ending at the close of trading on the fifth business day
preceding the Determination Date.
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"Determination Date" shall mean the date on which the last of
the following occurs: (i) the effective date (including the expiration of any
applicable waiting period required by Law) of the last required Consent or
order of any Regulatory Authority having authority over and approving or
exempting the Merger, and (ii) the date on which the stockholders of Murdock
approve this Agreement.
"Derivatives Contract" shall have the meaning set forth in
Section 5.27 of this Agreement.
"Dissent Provisions" shall have the meaning set forth in
Section 3.6 of this Agreement.
"Dissenting Murdock Shares" shall have the meaning set forth
in Section 3.6 of this Agreement.
"Dissenting Shareholders" shall have the meaning set forth in
Section 3.6 of this Agreement.
"DOJ" shall have the meaning set forth in Section 5.14(c) of
this Agreement.
"Effective Time" shall have the meaning set forth in Section
1.3 of this Agreement.
"Environmental Laws" shall mean all Laws relating to pollution
or protection of human health or the environment (including ambient air,
surface water, ground water, land surface, or subsurface strata) and which are
administered, interpreted, or enforced by the United States Environmental
Protection Agency and state and local agencies with jurisdiction over, and
including common law in respect of, pollution or protection of the environment,
including the Comprehensive Environmental Response Compensation and Liability
Act, as amended, 42 U.S.C. 9601 et seq., the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. 6901 et seq., and other Laws relating to emissions,
discharges, releases, or threatened releases of any Hazardous Material, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
"Exchange Agent" shall have the meaning set forth in
Section 3.7 of this Agreement.
"Exchange Fund" shall have the meaning set forth in
Section 4.1 of this Agreement.
"Exchange Ratio" shall have the meaning set forth in Section
3.1(a) of this Agreement.
"FBCA" shall have the meaning set forth in Section 1.3 of this
Agreement.
"FDIC" shall have the meaning set forth in the Preamble to
this Agreement.
"FFIC" shall mean the Florida Financial Institutions Code,
which includes those Florida Laws identified in Section 655.005(j) of the
Florida Statutes.
"FTC" shall have the meaning set forth in Section 5.14(c) of
this Agreement.
"GAAP" shall mean the generally accepted accounting principles
in the United States consistently applied during the periods involved
applicable to banks, savings associations, or bank holding companies, as the
case may be.
"Governmental Entity" shall have the meaning set forth in
Section 5.2(d) of this Agreement.
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"Hazardous Material" shall mean (i) any hazardous substance,
hazardous material, hazardous waste, regulated substance, or toxic substance
(as those terms are defined by any applicable Environmental Laws) and (ii) any
chemicals, pollutants, contaminants, petroleum, petroleum products, or oil and
(specifically shall include asbestos requiring abatement, removal, or
encapsulation pursuant to the requirements of governmental authorities and any
polychlorinated biphenyls).
"HSR Act" shall mean Section 7A of the Clayton Act, as added
by Title II of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
"Indemnified Party" shall have the meaning set forth in
Section 8.17 of this Agreement.
"Injunction" shall have the meaning set forth in
Section 9.1(e) of this Agreement.
"Intellectual Property" shall have the meaning set forth in
Section 5.20 of this Agreement.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated thereunder.
"Knowledge" of any person which is not an individual means, as
of the date relating thereto, the knowledge of such person's senior officers
and the knowledge of such person(s) obtained or which would or should have been
obtained after reasonable investigation, and the knowledge of such person's
directors without any special investigation.
"Law" shall mean any code, law, ordinances, regulation,
reporting or licensing requirement, rule, or statute applicable to a person or
its assets, properties, assets, liabilities, or business, including those
promulgated, interpreted, or enforced by any Regulatory Authority.
"Liens" shall have the meaning set forth in Section 5.2(c) of
this Agreement.
"Loan Property" shall mean any property owned, leased, or
operated by the party in question or by any of its Subsidiaries or in which
such party or its Subsidiary holds a security or other interest (including an
interest in a fiduciary capacity) and, where required by the context, includes
the owner or operator of such property, but only with respect to such property.
"market price" shall have the meaning set forth in
Section 3.4 of this Agreement.
"Material Adverse Effect" or "Material Adverse Change" to a
party shall mean an event, change, or occurrence which, individually or
together with any other event, change, or occurrence, has a material adverse
impact on (i) the financial position, business, or results of operations of
such party and its Subsidiaries, if any, taken as a whole, or (ii) the ability
of such party to perform its obligations under this Agreement or to consummate
the Merger or the other transactions contemplated by this Agreement, provided
that "Material Adverse Effect" shall not be deemed to include the impact of (a)
changes in banking and similar Laws of general applicability or interpretations
thereof by courts or governmental authorities, (b) changes in GAAP or
regulatory accounting principles generally applicable to banks and their
holding companies, (c) actions and omissions of a party (or any of its
Subsidiaries) taken with the prior informed consent of the other party in
contemplation of the transactions contemplated hereby, (d) circumstances
affecting Florida based or regional bank holding companies generally, and (e)
the Merger and compliance with the provisions of this Agreement on the
operating performance of ABI or Murdock.
"Merger" shall have the meaning set forth in the Preamble of
this Agreement.
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"Merger Consideration" shall have the meaning set forth in
Section 3.7 of this Agreement.
"Murdock" shall have the meaning set forth in the first
paragraph of this Agreement.
"Murdock Benefits Plans" shall have the meaning set forth in
Section 5.16(a) of this Agreement.
"Murdock Common Stock" shall have the meaning set forth in the
Preamble to this Agreement.
"Murdock Disclosure Memorandum" shall mean the written
information entitled "Murdock Disclosure Memorandum" delivered prior to or on
the date of this Agreement to ABI describing in reasonable detail the matters
contained therein and, with respect to each disclosure made therein,
specifically referencing the Section of this Agreement under which such
disclosure is being made.
"Murdock ERISA Plan" shall have the meaning set forth in
Section 5.16(a) of this Agreement.
"Murdock Financial Documents" shall have the meaning set forth
in 5.5(a) of this Agreement.
"Murdock Regulatory Documents" shall have the meaning set
forth in Section 5.5(b) of this Agreement.
"Murdock Rights" shall have the meaning set forth in Section
3.5(a) of this Agreement.
"Murdock Stock Plans" shall have the meaning set forth in
Section 3.5(a) of this Agreement.
"Nasdaq" shall mean the Nasdaq Stock Market.
"Officer Agreement" shall have the meaning set forth in
Section 8.15 of this Agreement.
"Participation Facility" shall mean any facility in property
in which the party in question or any of its Subsidiaries participates in the
management and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such facility
or property.
"Permit" shall have the meaning set forth in Section 5.14 of
this Agreement.
"Proxy Statement" shall have the meaning set forth in Section
5.22 of this Agreement.
"Registration Statement" shall have the meaning set forth in
Section 5.22 of this Agreement.
"Regulatory Authorities" shall have the meaning set forth in
Section 5.14(c) of this Agreement.
"Regulatory Agreement" shall have the meaning set forth in
Section 5.14(c) of this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall have the meaning set forth in Section 6.5
of this Agreement.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Securities Laws" shall mean the Securities Act, the Exchange
Act, the Investment Company Act of 1940, as amended, the Investment Advisors
Act of 1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
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"Spouses Shares" shall have the meaning set forth in
Section 5.28 of this Agreement.
"Stockholders' Meeting" shall have the meaning set forth in
Section 8.3 of this Agreement.
"Subsidiaries" shall mean all those corporations, banks,
associations, or other entities of which the entity in question owns or
controls 50% or more of the outstanding equity or voting securities either
directly or through an unbroken chain of entities as to each of which 50% or
more of the outstanding equity or voting securities is owned directly or
indirectly by its parent; provided, however, there shall not be included any
such entity acquired through foreclosure or any such entity the equity
securities of which are owned or controlled in a fiduciary capacity.
"Surviving Corporation" shall have the meaning set forth in
Section 1.1 of this Agreement.
"Takeover Laws" shall have the meaning set forth in Section
5.24 of this Agreement.
"Taxes" shall mean all federal, state, local and foreign
income, payroll, franchise, property, sales, excise, and all other taxes,
tariffs, duties, assessments or governmental charges of any nature whatsoever,
including all interest, penalties, and additions imposed with respect to such
amounts.
"Tax Return" shall mean all returns, reports, or similar
statements required to be filed with respect to any Tax (including any attached
schedules), including without limitation, any information return, Claims for
refund, amended return or declaration of estimated Tax.
(b) Any singular term in this Agreement shall be deemed
to include the plural, and any plural term the singular. Whenever the words
"include," "includes," or "including" are used in this Agreement, they shall be
deemed followed by the words "without limitation".
11.2 EXPENSES. Except as otherwise provided in Section 10.3 and
this 11.2, each party hereto shall bear and pay its own costs and expenses
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger. The expenses of preparing, printing, and filing the
Registration Statement and the Proxy Statement, and any proxy solicitation
expenses, including mailing shall be borne equally by Murdock and ABI.
11.3 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
FOLLOWING THE EFFECTIVE TIME. Except for Articles III and IV, and Sections
8.7, 8.16, 8.17, 11.2, 11.3 and 11.4 of this Agreement, none of the respective
representations, warranties, obligations, covenants, and agreements of the
parties shall survive the Effective Time. Such representations, warranties,
covenants and agreements which do survive the Effective Time shall be for the
benefit of the stockholders of Murdock, except for Section 8.17 which is for
the benefit of the Indemnified Parties.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement, which includes the Disclosure Memoranda and exhibits
hereto, and the other documents, agreements, and instruments, executed and
delivered pursuant to or in connection with this Agreement, contains the entire
agreement between the parties hereto with respect to the transactions
contemplated hereunder, and such Agreement supersedes all prior arrangements or
understandings with respect to the subject matter hereof, both written and
oral. Other than Section 8.17, nothing in this Agreement, expressed or
implied, is intended to confer upon any individual, corporation or other
entity, other than ABI or Murdock or their respective successors, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
11.5 OBLIGATION OF ABI. Whenever this Agreement requires ABI to
take any action, such requirement shall be deemed to include an undertaking by
ABI to cause the ABI Subsidiaries to take such action.
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11.6 AMENDMENT AND MODIFICATION. To the extent permitted by Law,
this Agreement may be amended, modified, and supplemented by a subsequent
writing signed by each of Murdock and ABI upon the approval of the Board of
Directors of ABI on the one hand and Murdock on the other hand; provided,
however, that the provisions hereof relating to the manner or basis in which
shares of Murdock Common Stock will be exchanged for ABI Common Shares shall
not be amended, modified, or supplemented after the Stockholders' Meeting
without any requisite approval of the holders of the issued and outstanding
shares of Murdock Common Stock.
11.7 WAIVERS. Prior to or at the Effective Time, each of ABI on
the one hand and Murdock on the other hand, shall have the right to waive any
default in the performance of any term of this Agreement by the other, to waive
or extend the time for the compliance or fulfillment by the other of any and
all of the other's obligations under this Agreement, and to waive any or all of
the conditions precedent to its obligations under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law or
applicable governmental regulation, which violation would have a Material
Adverse Effect on Murdock on the one hand and on the other hand ABI and its
Subsidiaries on a consolidated basis. The failure of any party at any time or
times to require performance of any provision hereof shall in no manner affect
the right of such party at a later time to enforce the same or any other
provision of this Agreement. No waiver of any condition or the breach of any
provision contained in this Agreement in one or more instances shall be deemed
to be or construed as a further or continuing waiver of such condition or
breach or a waiver of any other condition or at the breach of any other term of
this Agreement.
11.8 NO ASSIGNMENT. None of the parties hereto may assign any of
its rights or delegate any of its obligations under this Agreement to any other
person or entity and any such purported assignment or delegation that is made
without the prior written consent of the other parties to this Agreement shall
be void and of no effect.
11.9 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and shall be (a) delivered
by registered or certified mail, return receipt requested, postage prepaid, (b)
by expedited mail or package delivery service guaranteeing next Business Day
delivery, or (c) delivered personally, by hand, or facsimile transmission, to
the persons at the addresses set forth below (or at such other address as may
be provided hereunder):
ABI or American Bank: American Bancshares, Inc.
4702 Cortez Road West
Bradenton, FL 34210
Telecopy Number: 941-798-3712
Attention: Gerald L. Anthony
President and Chief
Executive Officer
Copy to Counsel: Carlton, Fields, Ward, Emmanuel,
Smith & Cutler, P.A.
One Harbour Place
777 South Harbour Island Blvd.
Tampa, FL 33602-5799
Telecopy Number: 813-229-4133
Attention: Richard A. Denmon,
Esquire
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Murdock: Murdock Florida Bank
1777 Tamiami Trail
Murdock, FL 33948-1051
Telecopy Number: 941-629-1729
Attention: Robert L. Andreasen,
President & Chief
Executive Officer
Copy to Counsel: Trenam, Kemker, Scharf,
Barkin, Frye, O'Neill & Mullis
Barnett Plaza, Suite 2700
101 East Kennedy Boulevard
Tampa, Florida 33601-1102
Telecopy Number: 813-229-6553
Attention: Richard M. Leisner,
Esquire
Any notice or other communications to be given or that may be given
pursuant to this Agreement shall be deemed to have been given: (x) three
calendar days of the deposit of such notice or communication in the United
States Mail, registered or certified, return receipt requested, with proper
postage affixed thereto; (y) upon the first Business Day after depositing such
notice of communication with Federal Express, Express Mail, or other expedited
mail or package delivery service guaranteeing delivery no later than the next
Business Day if next day delivery service has been required and paid for; or
(z) upon delivery if hand delivered or telecopied to the appropriate address
and person as provided hereinabove or the person to whose attention the notice
is to be given to the other parties in the manner hereinabove provided.
11.10 GOVERNING LAW. This Agreement shall in all respects be
governed by and construed in accordance with the laws of the State of Florida.
11.11 FIDUCIARY DUTY. Notwithstanding anything to the contrary in
this Agreement, no provision of this Agreement shall be construed to prevent
the exercise by any director of Murdock (or the actions of Murdock thereon) of
his or her fiduciary duty as contemplated to be exercised under Section 8.7 of
this Agreement.
11.12 ENFORCEMENT OF AGREEMENT. Each party hereto agrees that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an Injunction or Injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States of any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
11.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original, but all
of which together shall constitute one and the same instrument.
11.14 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by their respective officers thereunto duly
authorized, all as of the date first written above.
AMERICAN BANCSHARES, INC.
By:________________________________
Gerald L. Anthony
President and
Chief Executive Officer
AMERICAN BANK OF BRADENTON
By:________________________________
Gerald L. Anthony
President and
Chief Executive Officer
MURDOCK FLORIDA BANK
By:________________________________
Robert L. Andreasen
President and
Chief Executive Officer
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EXHIBIT A
PLAN OF MERGER OF
MURDOCK FLORIDA BANK WITH AND INTO
AMERICAN BANK OF BRADENTON
PLAN OF MERGER ("Plan of Merger") dated ____________, 1997,
describing a merger by and between MURDOCK FLORIDA BANK ("Murdock"), a Florida
state chartered bank having its principal office at 1777 Tamiami Trail, Murdock,
Florida 33948 and AMERICAN BANK OF BRADENTON ("American Bank"), a Florida state
chartered bank having its principal office at 4702 Cortez Road West, Bradenton,
Florida 34210.
W I T N E S S E T H
WHEREAS, Murdock is a banking corporation chartered under the laws of
the State of Florida, the authorized capital stock of which consists of
________ shares of common stock, $_____ par value per share ("Murdock Common
Stock") of which, at the date hereof, ______ shares are issued and outstanding
and ________ of which are reserved for issuance pursuant to outstanding options
covering such reserved shares are outstanding;
WHEREAS, American Bank is a Florida banking corporation and a
wholly-owned subsidiary of American Bancshares, Inc., a Florida corporation and
a bank holding company registered under the Bank Holding Company Act of 1956
("ABI");
WHEREAS, the respective Board of Directors of Murdock, American Bank,
and ABI deem the merger of Murdock with and into American Bank, under and
pursuant to the terms and conditions herein set forth or referred to, desirable
and in the best interests of the respective banks, corporations, and the
shareholders, and the respective Board of Directors of Murdock and American
Bank have adopted resolutions approving the Agreement and Plan of Merger dated
as of September ___, 1997, by and among ABI, American Bank, and Murdock
("Merger Agreement"), providing for all the terms of the merger of Murdock with
and into American Bank;
WHEREAS, the Merger Agreement and this Plan of Merger providing for
the merger pursuant to Section 658.42 of the Florida Statutes having been
approved by the Board of Directors of each of the parties thereto, the Board of
Directors of Murdock has directed the Merger Agreement and this Plan of Merger
be submitted to its shareholders; and
NOW THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties do hereby agree that the Plan of Merger shall be
as follows:
ARTICLE I
TERMS OF THE MERGER
1.1. THE MERGER. Subject to the terms and conditions of this Plan
of Merger, on the Effective Date (as hereinafter defined), Murdock shall be
merged with and into American Bank pursuant to the provisions of, and with the
effect provided under, Florida law (said transaction being hereinafter referred
to as the "Merger"). On the Effective Date, the separate existence of Murdock
shall cease and American Bank, as the surviving entity, shall continue
unaffected and unimpaired by the Merger. (American Bank as existing on and
after the Effective Date being hereinafter sometimes referred to as the
"Surviving Bank.") The name of the Surviving Bank shall be "American Bank."
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1.2. EFFECTIVE TIME. The Articles of Merger evidencing the
transactions contemplated herein shall be delivered for filing to the Secretary
of State of the State of Florida (the "Secretary"). The Merger shall become
effective at the time and on the date the Articles of Merger are accepted for
filing by the Secretary, or such later time and date as agreed to by the
parties and specified in the Articles of Merger (such date being referred to
herein as the "Effective Time").
1.3. EFFECT OF THE MERGER. The Merger shall have the effects
specified in Section 658.45 of the Florida Statutes.
ARTICLE II
ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation and the Bylaws of American Bank in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation and the Bylaws of the Surviving Bank, in each case until amended
in accordance with applicable law.
ARTICLE III
BOARD OF DIRECTORS
At the Effective Time, the Board of Directors and Officers of the
Surviving Bank shall consist of those persons serving as directors and
executives of American Bank immediately prior to the Effective Time, each such
person being identified in Exhibit A hereto. Directors of the Surviving Bank
will be elected annually and shall serve until the next election of directors
or until their successors are duly elected and qualified.
ARTICLE IV
BUSINESS OF BANK AND OFFICES
4.1. BUSINESS OF SURVIVING BANK. The business of the Surviving
Bank shall be that of a state banking corporation. The Surviving Bank shall
issue savings accounts on the same basis as American Bank issued savings
accounts prior to the Merger. The Surviving Bank shall not have trust powers
as of the Effective Time.
4.2. PRINCIPAL OFFICE AND BRANCHES. The principle offices of the
Surviving Bank shall be located at 4702 Cortez Road West, Bradenton, Florida
34280. A list of the branches of the Surviving Bank is attached hereto as
Exhibit B.
ARTICLE V
CAPITAL STOCK
5.1. CONVERSION OF SHARES. Subject to the provisions of this
Article V, at the Effective Time, by virtue of the Merger and without any
action on the part of ABI, American Bank, Murdock, or their respective
stockholders, the shares of the constituent corporations shall be converted in
the manner set forth in Article III of the Merger Agreement as attached hereto
as Exhibit C and incorporated herein by reference, and stockholders of Murdock
shall be entitled to the Merger Consideration (as defined in the Merger
Agreement), except to the extent that such stockholders of Murdock have
purportedly exercised the dissenters' rights.
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5.2. CAPITAL OF SURVIVING BANK. At the Effective Time, the
Surviving Bank shall have authorized capital stock of _______________, of which
________ shall be issued and outstanding and ____________ Dollars ($________)
divided into ________ (____) shares of $1.175 par value common stock, of which
________ (____) shares issued to ABI, and the Surviving Bank shall have surplus
and retained earnings equal to the capital accounts of American Bank and
Murdock immediately prior to the Effective Time. All such amounts of surplus
and retained earnings shall be adjusted for normal earnings and expenses, and
any accounting adjustments relating to the Merger provided for herein.
ARTICLE VI
CONDITIONS TO MERGER
This Plan of Merger is subject to the following terms and conditions:
6.1. MERGER AGREEMENT CONDITIONS. The obligations of American Bank
and Murdock to effect the Merger as herein provided shall be subject to the
satisfaction, unless duly waived, of the conditions set forth in the Merger
Agreement, which conditions are incorporated herein by reference to the Merger
Agreement.
6.2. REGULATORY APPROVALS. The Florida Department of Banking and
Finance shall have approved this Plan of Merger and shall have issued all other
necessary authorizations and approvals for the Merger, including the
Certificate of Merger. The appropriate federal regulatory agencies shall have
approved the Merger and shall have issued all other necessary authorizations
and approvals for the Merger, and any statutory waiting period shall have
expired.
ARTICLE VII
SHAREHOLDER APPROVAL
This Plan of Merger has been approved by the affirmative vote of ABI,
the sole shareholder of American Bank, and the affirmative vote of holders of
at least two-thirds of the outstanding Murdock Common Stock at a meeting of
stockholders duly called by the Directors of Murdock or as otherwise provided
by the bylaws, and the Merger Agreement and Plan of Merger have been approved
by the stockholders of Murdock and American Bank in accordance with applicable
law and the Articles of Incorporation and Bylaws of the respective
institutions. American Bank and Murdock shall proceed expeditiously and
cooperate fully in the procurement of any other consents and approvals and in
the taking of actions, and the satisfaction of all other requests prescribed by
law or otherwise necessary or appropriate for consummation of the Merger and
the transactions contemplated thereby, including, without limitation, any
necessary regulatory approvals and consents.
ARTICLE VIII
FURTHER ASSURANCES
If at any time the Surviving Bank shall consider or be advised that
any further assignments, conveyances, or assurances are necessary or desirable
to vest, perfect, or confirm in the Surviving Bank title to any property or
rights of Murdock, or otherwise carry out the provisions hereof, the proper
officers and directors of Murdock, as of the Effective Date, and thereafter the
officers of the Surviving Bank, acting on behalf of Murdock, shall execute and
deliver any and all property or assignments, conveyances, and assurances, and
do all things necessary or desirable to vest, perfect or confirm title to such
property or rights in the Surviving Bank and otherwise carry out the provisions
hereof.
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ARTICLE IX
ABANDONMENT AND TERMINATION
Anything contained in the Plan of Merger to the contrary
notwithstanding, and notwithstanding adoption hereof by the shareholders of
Murdock, this Plan of Merger may be terminated and the Merger abandoned as
provided in the Merger Agreement.
ARTICLE X
MISCELLANEOUS
10.1. This Plan of Merger may be amended or supplemented at any time
by mutual agreement of American Bank and Murdock. Any such amendment or
supplement must be in writing and approved by their respective Board of
Directors and shall be subject to the proviso in Section 11.6 of the Merger
Agreement.
10.2. Any notice or other communication required or permitted under
this Plan of Merger shall be given, and shall be effective, in accordance with
the provisions of the Merger Agreement.
10.3. The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Plan of Merger.
10.4. This Plan of Merger shall be governed by and construed in
accordance with the laws of the State of Florida applicable to agreements made
and entirely to be performed in such jurisdiction, except to the extent federal
law may applicable.
WITNESS WHEREOF the American Bank and Murdock have caused the
signatures and seals of said constituent banks to be affixed hereto on this
_____ day of __________, 1997, each hereunto set by its President or a Vice
President and attested by its Cashier or _________________, pursuant to a
resolution of its Board of Directors, acting by a majority thereof.
AMERICAN BANK OF BRADENTON
By:_______________________________________
Name:______________________________
Title:_____________________________
Attest:
___________________________________
Cashier
(Seal of Bank)
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MURDOCK FLORIDA BANK
By:_______________________________________
Name:______________________________
Title:_____________________________
Attest:
___________________________________
Cashier
(Seal of Bank)
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EXHIBIT B
September__, 1997
American Bancshares, Inc.
4702 Cortez Road West
Bradenton, Florida 34210
Attention: Brian M. Watterson, Secretary
Dear Mr. Watterson:
The undersigned is a director of Murdock and is the beneficial holder
of __________ shares of common stock of Murdock ("Murdock Common Stock").
American Bancshares, Inc. ("ABI") and Murdock are considering the execution and
delivery of an Agreement and Plan of Merger (the "Merger Agreement")
contemplating the merger of a wholly-owned subsidiary of American Bancshares,
Inc. ("ABI") with and into Murdock (the "Merger"), such execution being subject
in the case of American Bancshares, Inc. ("ABI") to the execution and delivery
of this Letter Agreement (this "Agreement"). In consideration of the
substantial expense that ABI will incur in connection with the transactions
contemplated by the Merger Agreement and in order to induce ABI to execute and
deliver the Merger Agreement and to proceed to incur such expenses, the
undersigned represents, agrees and undertakes, as follows:
1. REPRESENTATIONS.
(a) The undersigned is the registered holder of, and has the
exclusive right to vote the shares of Murdock Common Stock referenced in the
first paragraph of this Agreement.
(b) The undersigned has had access to and has carefully reviewed
all information relating to ABI that is relevant to its determination to
approve and recommend to other stockholders of ABI that they approve the Merger
Agreement and the Merger.
(c) The undersigned has participated in the negotiation of the
terms of the Merger Agreement and, in particular, the Merger Consideration (as
defined therein) and believes that such terms, including the Merger
Consideration, are fair and appropriate. The negotiations between ABI and the
undersigned were accomplished on an arms-length basis.
2. AGREEMENTS AND UNDERTAKINGS.
(a) The undersigned agrees that he or she will vote or cause to be
voted for approval of the Merger Agreement and the other agreements and
transactions contemplated thereby, all of the shares of Murdock Common Stock
that are referenced in the first paragraph of this Agreement, and all other
shares of Murdock Common Stock that the undersigned owns of record or
beneficially as of the date of the Stockholder's Meeting (defined in the Merger
Agreement).
(b) The undersigned will not, and will not agree to, without the
consent of ABI (as defined in the Merger Agreement), effect, directly or
indirectly, any sale, pledge, assumption, hypothecation, transfer, or otherwise
dispose any of the undersigned's shares of Murdock Common Stock subject to the
provisions of paragraph 2(a) of this Agreement, or grant any proxy or interests
with respect to such shares, or deposit such shares into a voting trust or
enter into another voting agreement or arrangement with respect to such shares
unless or until
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Murdock's stockholders have voted to approve the Merger Agreement or until the
Merger Agreement has been terminated pursuant to the terms thereof. In the
case of any transfer by operation of law or otherwise, this Agreement shall be
binding upon and inure to the benefit of the transferee. Any transfer or other
disposition in violation of the terms of this paragraph 2(b) shall be null and
void.
(c) The undersigned shall take or cause to be taken all action
necessary or desirable on the undersigned's part so as to permit consummation
of the Merger at the earliest possible date and shall not take, or cause or to
the best of the undersigned's ability permit to be taken, any action which
would substantially impair the prospects of completing the Merger pursuant to
the Merger Agreement.
(d) The undersigned acknowledges and agrees that any remedy at law
for breach of the foregoing provisions shall be inadequate and that, in
addition to any other relief which may be available, Acquiror shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
actual damages.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the date first above written.
Very truly yours,
Name:_____________________________________
Accepted and agreed to as of
the date first above written:
AMERICAN BANCSHARES, INC.
By:___________________________
Name:____________________
Title:___________________
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EXHIBIT C
AFFILIATES' LETTER
American Bancshares, Inc.
4702 Cortez Road West
Bradenton, Florida 34210
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed to be
an "affiliate" of Murdock Florida Bank, a Florida state chartered bank
("Murdock"), as the term "affiliate" is (i) defined for purposes of paragraphs
(c) and (d) of Rule 145 of the Rules and Regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), and (ii) used in and
for purposes of Accounting Series Releases 130 and 135, as amended, of the
Commission. Pursuant to the terms of the Agreement and Plan of Merger dated as
of September 23, 1997 (the "Merger Agreement"), by and among Murdock, American
Bancshares, Inc., a Florida corporation ("ABI"), and American Bank of
Bradenton, a Florida state chartered bank (the "Bank"), Murdock will be merged
with and into the Bank (the "Merger"), and that as a result of the Merger, I
may receive common shares, par value $1.175 per share, of ABI ("ABI Common
Shares") in exchange for shares of common stock, par value $10.00 per share, of
Murdock ("Murdock Common Stock") owned by me at the Effective Time (as defined
in the Merger Agreement) of the Merger as determined by the Merger Agreement.
Whenever reference is made herein to the ABI Common Shares, such reference
shall include any options for ABI Common Shares that may be received by me in
connection with this Merger.
I represent, warrant, and covenant to ABI that in the event I receive
any ABI Common Shares as a result of the Merger:
A. I shall not make any sale, transfer, or other disposition of
ABI Common Shares in violation of the Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and
discussed its requirements and other applicable limitations upon my ability to
sell, transfer, or otherwise dispose of ABI Common Shares to the extent I
believed necessary, with my counsel or counsel for Murdock.
C. I have been advised that the issuance of ABI Common Shares to
me pursuant to the Merger has been registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I also have been advised
that, since at the time the Merger was submitted for a vote of the stockholders
of Murdock, I may be deemed to have been an affiliate of Murdock and the
distribution by me of the ABI Common Shares has not been registered under the
Act, I may not sell, transfer or otherwise dispose of ABI Common Shares issued
to me in the Merger unless (i) such sale, transfer, or other disposition has
been registered under the Act, (ii) such sale, transfer, or other disposition
is made in conformity with the volume and other limitations of Rule 145
promulgated by the Commission under the Act, or (iii) in the opinion of counsel
reasonably acceptable to ABI, such sale, transfer, or other disposition is
otherwise exempt from registration under the Act; provided, however, that in
any such case, such sale, transfer, or other disposition shall only be
permitted if, in the opinion of counsel for ABI, such transaction would not
have, directly or indirectly, and adverse consequences for ABI with respect to
the treatment of the Merger for tax purposes.
D. I understand that ABI is under no obligation to register the
sale, transfer, or other disposition of the ABI Common Shares by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.
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E. I also understand that stop transfer instructions will be
given to ABI's transfer agents with respect to the ABI Common Shares and that
there will be placed on the certificates for the ABI Common Shares issued to
me, or any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were
issued in a transaction to which Rule 145 promulgated under
the Securities Act of 1933 applies. The shares represented by
this certificate may only be transferred in accordance with
the terms of a letter agreement dated September, 1997 between
the registered holder hereof and American Bancshares, Inc., a
copy of which agreement is on file at the principal offices of
American Bancshares, Inc."
F. I also understand that unless the transfer by me of my ABI
Common Shares has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, ABI reserves the right to put the following
legend on the certificates issued to my transferee:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933 and were
acquired from a person who received such shares in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The shares have been acquired by the
holder not with a view to, or for resale in connection with,
any distribution thereof within the meaning of the Securities
Act of 1933 and may not be sold, pledged or otherwise
transferred except in accordance with an exemption from the
registration requirements of the Securities Act of 1933."
It is understood and agreed that the legend set forth in paragraphs E
and F above, as the case may be, shall be removed by delivery of substitute
certificates without such legend if the undersigned shall have delivered to ABI
a copy of a letter from the staff of the Commission, or an opinion of counsel
in form and substance reasonably satisfactory to ABI, to the effect that such
legend is not required for purposes of the Act.
G. I understand and acknowledge that the Merger is intended to be
treated for accounting purposes as a "pooling-of-interests", and that such
treatment for financial accounting purposes is dependent upon the accuracy of
certain of my representations and warranties, and my compliance with certain
covenants and agreements set forth herein. Accordingly, I further represent to
and covenant with ABI that I have not, and during the thirty (30) days prior to
the Effective Time of the Merger, I will not sell, transfer, or otherwise
dispose of, or reduce my risk relative to, any shares of the capital stock of
ABI or Murdock held by me (whether or not issued to me in the Merger) and that
I will not sell, transfer, or otherwise dispose of any ABI Common Shares
received by me in the Merger or other shares of the capital stock of ABI until
after such time as results covering at least thirty (30) days of combined
operations of ABI and Murdock have been published by ABI, in the form of a
quarterly earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10-KSB, 10-QSB, or 8-K, or any
other public filing or announcement which includes the combined results of
operations. ABI agrees that it will use its reasonable best efforts to publish
such results within forty-five (45) days after the end of the first full fiscal
quarter of ABI ending subsequent to the Effective Time, which results shall
contain the required period of post-Merger combined operations.
H. I have no present plan or intention to sell, transfer, or
otherwise dispose of any ABI Common Shares to be received by me in or as a
result of the Merger. I understand that stop transfer instructions will be
given to the transfer agents of ABI in order to prevent any breach of my
covenants and agreements made in this paragraph. I agree that if ABI advises
me in writing that additional restrictions apply to my ability to sell,
transfer, or otherwise dispose of ABI Common Shares or Murdock Company Stock in
order for ABI to be entitled to account for the Merger as a
pooling-of-interest, I will abide by such instructions.
I. I further understand and agree that any warranties, covenants,
and agreements set forth herein are for the benefit of Murdock, ABI, and
American Bank, and will be relied upon by such entities and their respective
counsel and accountants.
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This letter shall constitute an irrevocable agreement of the
undersigned, and may be revoked only upon the mutual agreement of the parties.
Very truly yours,
By:________________________________________
Name:______________________________________
Accepted this _____ day of
___________, 199___, by
AMERICAN BANCSHARES, INC.
By:________________________________________
Name:______________________________________
Title:_____________________________________
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<PAGE> 252
FIRST AMENDMENT
TO
AGREEMENT AND PLAN OF MERGER
FIRST AMENDMENT TO AGREEMENT AND PLAN OF MERGER (this "First
Amendment") dated as of October 8, 1997 by and among AMERICAN BANCSHARES, INC.
("ABI"), a Florida corporation having its principal office located in
Bradenton, Florida, AMERICAN BANK OF BRADENTON ("American Bank"), a Florida
state chartered bank, and MURDOCK FLORIDA BANK ("Murdock"), a Florida state
chartered bank having its principal office located in Murdock, Florida.
PREAMBLE
The parties hereto entered into an Agreement and Plan of Merger, dated
as of September 23, 1997 ("Merger Agreement"), whereby ABI, American Bank, and
Murdock agreed to the merger of Murdock with and into American Bank. The
parties now desire to amend the Merger Agreement on the terms and conditions
set forth herein for the purpose of making certain corrective revisions.
NOW, THEREFORE, in consideration of the above and the mutual
representations, warranties, covenants, and agreements herein contained, the
parties hereby agree as follows:
1. AMENDMENTS TO THE MERGER AGREEMENT.
(A) CONVERSION OF MURDOCK COMMON STOCK - ADJUSTMENT OF
EXCHANGE RATIO. Section 3.1(b) of the Merger Agreement is hereby
amended by deleting Section 3.1(b) in its entirety and by insertion,
in lieu thereof, of the following:
(b) If the Designated Price of ABI Common Shares is
less than $11.00 and the Closing Equity is at least
$5,000,000, then the Exchange Ratio shall be increased to
2.65. If the Designated Price shall be less than $10.00, then
ABI and Murdock shall in good faith attempt to negotiate a
mutually acceptable Merger Consideration for the Murdock
Common Stock; provided, however, that if a mutually agreed
upon Merger Consideration is not negotiated within four days
following the Determination Date, then Murdock may terminate
this Agreement pursuant to Section 10.1(i) of this Agreement.
If the Closing Equity shall be less than $5,000,000, then the
Exchange Ratio shall be adjusted as follows: (i) if the
Designated Price is $11.00 or more, then the Exchange Ratio
shall be decreased to equal the quotient, rounded to the third
decimal point, of (A) the quotient of [Closing Equity
multiplied by 2.25, divided by 385,015] divided by (B) 12.169,
or (ii) if the Designated Price is less than $11.00, then the
Exchange Ratio shall be adjusted to equal the quotient,
rounded to the third decimal point, of (A) the quotient of
[Closing Equity multiplied by 2.25, divided by 385,015]
divided by (B) 11.00. If the Closing Equity shall be less
than $4,875,000, then ABI and Murdock shall in good faith
attempt to negotiate a mutually acceptable Merger
Consideration for the Murdock Common Stock; provided, however,
that if a mutually agreed upon Merger Consideration is not
negotiated within four days following the determination of
Closing Equity, then ABI may terminate the Agreement pursuant
to Section 10.1(j) of this Agreement.
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(B) REVISED DEFINITIONS. The definition of Murdock Common
Stock set forth in Section 11.1(a) of the Merger Agreement is hereby
amended by deleting the definition of Murdock Common Stock set forth
in Section 11.1(a) in its entirety and by insertion, in lieu thereof,
of the following:
"Murdock Common Stock" shall mean the $10.00 par
value common stock of Murdock.
2. DEFINED TERMS. All terms which are capitalized but are not
otherwise defined herein shall have the meanings ascribed to them in the Merger
Agreement.
3. INCONSISTENT PROVISIONS. All provisions of the Merger Agreement
which have not been amended by this First Amendment shall remain in full force
and effect. Notwithstanding the foregoing to the contrary, to the extent that
there is any inconsistency between the provisions of the Merger Agreement and
the provisions of this First Amendment, the provisions of this First Amendment
shall control and be binding.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by their respective officers thereunto duly
authorized, all as of the date first written above.
AMERICAN BANCSHARES, INC.
By:______________________________________
Gerald L. Anthony
President and Chief Executive Officer
AMERICAN BANK OF BRADENTON
By:______________________________________
Gerald L. Anthony
President and Chief Executive Officer
MURDOCK FLORIDA BANK
By:______________________________________
Robert L. Andreasen
President and Chief Executive Officer
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<PAGE> 254
APPENDIX B
ALLEN C. EWING & CO. 50 North Laura Street, Suite 3625
INVESTMENT BANKERS Jacksonville, Florida 32202-3812
JACKSONVILLE.ORLANDO.TAMPA Telephone 904-354-5573
Telecopier 904-354-7033
January 23, 1998
CONFIDENTIAL
Board of Directors
Murdock Florida Bank
1777 Tamiami Trail
Murdock, Florida 33948-1051
Gentlemen:
The purpose of this letter is to update our opinion as to the fairness, from a
financial point of view, to the shareholders of Murdock Florida Bank ("Bank") of
Murdock, Florida, of the consideration to be paid to the shareholders of the
Bank by American Bancshares, Inc. ("American") of Bradenton, Florida, as
provided by the Agreement and Plan of Merger entered into by the parties on
September 23, 1997, and amended on October 7, 1997, ("Merger Agreement").
Pursuant to the Merger Agreement, American will acquire all of the outstanding
shares of the Bank by exchanging American shares for the shares of the Bank.
Existing options of the Bank shall be converted into and become options of
American. The Bank will be merged with and into the American Bank of Bradenton,
which is a wholly-owned banking subsidiary of American.
We have held discussions with the officers of the Bank who have indicated to
us that there has been no material change in the financial condition of the
Bank from that projected for the Bank as of October 17, 1997, the date of our
original fairness opinion. Management confirmed that the Bank will have a net
worth in excess of the $5,000,000 minimum requirement as required by the Merger
Agreement. Management indicated that they have not received any offers from
other institutions subsequent to October 17, 1997.
We have reviewed the operations of American subsequent to October 17, 1997,
and we have determined that there has been no material change in the financial
condition and earnings performance of American. This is reflected in the
price of American's shares as they have traded in a narrow price range as
reflected in Exhibit A subsequent to October 17, 1997, of $11 7/8 to $13 1/8
per share. Accordingly, the termination provision of the Merger Agreement
whereby the Bank may terminate the transaction if American's stock trades below
$10.00 is not applicable. American should issue 924,036 of its shares under the
2.40 exchange ratio which requires that each Bank shareholder will receive
2.4 shares of American for each share of the Bank as per the terms of the
Merger Agreement.
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<PAGE> 255
Board of Directors
Murdock Florida Bank
Page Two
January 23, 1998
Based on the above, it is our opinion that the consideration to be paid by
American Bancshares, Inc. for the common shares and outstanding options of
Murdock Florida Bank continues to be fair, from a financial point of view, to
the shareholders of the Bank, as of this date.
Very truly yours,
ALLEN C. EWING & CO.
By: /s/ Benjamin C. Bishop, Jr.
--------------------------------
Benjamin C. Bishop, Jr.
B-2
<PAGE> 256
APPENDIX C
F.S. 1995 BANKING CODE: BANKS AND TRUST COMPANIES Ch. 658
- --------------------------------------------------------------------------------
658.44 APPROVAL BY STOCKHOLDERS; RIGHTS OF DISSENTERS; PREEMPTIVE
RIGHTS.--
(1) The department shall not issue a certificate of merger to a
resulting state bank or trust company unless the plan of merger and merger
agreement, as adopted by a majority of the entire board of directors of each
constituent bank or trust company, and as approved by each appropriate federal
regulatory agency and by the department, has been approved:
(a) By the stockholders of each constituent national bank as provided
by, and in accordance with the procedures required by, the laws of the
United States applicable thereto, and
(b) After notice as hereinafter provided, by the affirmative vote
written consent of the holders of at least a majority of the shares entitled to
vote thereon of each constituent state bank or state trust company, unless
any class of shares of any constituent state bank or state trust company is
entitled to vote thereon as a class, in which event as to such constituent state
bank or state trust company the plan of merger and merger agreement shall be
approved by the stockholders upon receiving the affirmative vote or written
consent of the holders of a majority of the shares of each class of shares
entitled to vote thereon as a class and of the total shares entitled to vote
thereon. Such vote of stockholders of a constituent state bank or state trust
company shall be at an annual or special meeting of stockholders or by written
consent of the stockholders without a meeting as provided in s. 607.0704.
Approval by the stockholders of a constituent bank or trust company of a plan of
merger and merger agreement shall constitute the adoption by the stockholders of
the articles of incorporation of the resulting state bank or state trust company
as set forth in the plan of merger and merger agreement.
(2) Written notice of the meeting of, or proposed written consent
action by, the stockholders of each constituent state bank or state trust
company shall be given to each stockholder of record, whether or not entitled to
vote, and whether the meeting is an annual or a special meeting or whether the
vote is to be by written consent pursuant to s. 607.0704, and the notice shall
state that the purpose or one of the purposes of the meeting, or of the proposed
action by the stockholders without a meeting, is to consider the proposed plan
of merger and merger agreement. Except to the extent provided otherwise with
respect to stockholders of a resulting bank or trust company pursuant to
subsection (7), the notice shall also state that dissenting stockholders will be
entitled to payment in cash of the value of only those shares held by the
stockholders:
(a) Which at a meeting of the stockholders are voted against the
approved of the plan of merger and merger agreement;
(b) As to which, if the proposed action is to be by written consent of
stockholders pursuant to s. 607.0704, such written consent is not given by the
holder thereof; or
(c) With respect to which the holder thereof has given written notice
to the constituent state bank or trust company, at or prior to the meeting of
the stockholders or on or prior to the date specified for action by the
stockholders without a meeting pursuant to s.607.0704 in the notice of such
proposed action, that the stockholder dissents from the plan of merger and
merger agreement.
Hereinafter in this section, the term "dissenting shares" means and includes
only those shares, which may be all or less than all the shares of any class
owned by a stockholder, described in paragraphs (a), (b), and (c).
(3) On or promptly after the effective date of the merger, the
resulting state bank or trust company, or a bank holding company which, as set
out in the plan of merger or merger agreement, is offering shares rights,
obligations, or other securities or property in exchange for shares of the
constituent banks or trust companies, may fix an amount which it considers to be
not more than the fair market value of the shares of a constituent bank or trust
company and which it will pay to the holders of dissenting shares of that
constituent bank or trust company and, if it fixes such amount, shall offer to
pay such amount to the holders of all dissenting shares of that constituent bank
or trust company. The amount payable pursuant to any such offer which is
accepted by the holders of dissenting shares, and the amount payable to the
holders of dissenting shares pursuant to an appraisal, shall constitute a debt
of the resulting state bank or state trust company.
(4) The owners of dissenting shares who have accepted an offer made
pursuant to subsection (3) shall be entitled to receive the amount so offered
for such shares in cash upon surrendering the stock certificates representing
such shares at any time within 30 days after the effective date of the merger,
and the owners of dissenting shares, the value of which is to be determined by
appraisal, shall be entitled to receive the value of such shares in cash upon
surrender of the stock certificates representing such shares at any time within
30 days after the value of such shares has been determined by appraisal made on
or after the effective date of the merger.
(5) The value of dissenting shares of each constituent state bank
or state trust company, the owners of which have not accepted an offer for such
shares made pursuant to subsection (3), shall be determined as of the effective
date of the merger by three appraisers, one to be selected by the owners of at
least two-thirds of such dissenting shares, one to be selected by the board of
directors of the resulting state bank, and the third to be selected by the two
so chosen. The value agreed upon by any two of the appraisers shall control and
be final and binding on all parties. If, within 90 days from the effective date
of the merger, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such
dissenting shares, the department shall cause an appraisal of such dissenting
shares to be made which will be final and binding on all parties. The expenses
of appraisal shall be paid by the resulting state thank or trust company.
(6) Upon the effective date of the merger, all the shares of stock of
every class of each constituent bank or trust company, whether or not
surrendered by the holders thereof, shall be void and deemed to be canceled,
and no voting or other rights of any kind shall pertain thereto or to the
holders thereof except only such rights as may be expressly provided in the plan
of merger and merger agreement or expressly provided by law.
(7) The provisions of subsection (6) and, unless agreed by all the
constituent banks and trust companies and expressly provided in the plan of
merger and merger agreement, subsections (3), (4), and (5) are not applicable to
a resulting bank or trust company or to the shares or holders of shares of a
resulting bank or trust company the cash, shares, rights, obligations, or other
securities or property of which, in whole or in part, is provided in the plan
of merger or merger agreement to be exchanged for the shares of the other
constituent banks or trust companies.
(8) The stock, rights, obligations, and other securities of a resulting
bank or trust company may be issued as provided by the terms of the plan of
merger and merger agreement, free from any preemptive rights of the holders of
any of the shares of stock or of any of the rights, obligations, or other
securities of such resulting bank or trust company or of any of the constituent
banks or trust companies.
(9) After approval of the plan of merger and merger agreement by the
stockholders as provided in subsection (1), there shall be filed with the
department, within 30 days after the time limit in s. 658.43(5), a fully
executed counterpart of the plan of merger and merger agreement as so approved
if it differs in any respect from any fully executed counterpart thereof
theretofore filed with the department, and copies of the resolutions approving
the same by the stockholders of each constituent bank or trust company,
certified by the president, or chief executive officer if other than the
president, and the cashier or corporate secretary of each constituent bank or
trust company, respectively, with the corporate seal impressed thereon.
HISTORY - s.4, ch. 28016. 1953; ss. 12, 35, ch. 69-106; s. 3, ch. 76-168: s.
1. ch. 77-457; ss. 34, 151, 152. ch. 80-260; ss. 2, 3, ch. 81-318; s. 147, ch.
83-216; ss. 29, 51, ch. 84-216; s. 1, ch. 91-307; ss. 1, 127, ch. 92-303.
NOTE. - Former s. 661.05.
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APPENDIX D
---------------------------
Text of Amendments to the
Articles of Incorporation
follow:
Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
---------------------------
D-1
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EXHIBIT 1
AMENDMENTS TO INCREASE AUTHORIZED COMMON SHARES AND AUTHORIZE
PREFERRED SHARES
ARTICLE III OF THE ARTICLES OF INCORPORATION SHALL BE REVISED TO READ
IN ITS ENTIRETY AS FOLLOWS:
"Article III
The total number of shares of capital stock of all
classes which the Corporation shall have the authority to
issue is Twenty Five Million (25,000,000), consisting of
Twenty Million (20,000,000) common shares having a par value
of $1.175 per share (the "Common Shares") and Five Million
(5,000,000) preferred shares having a par value of $1.175 per
share (the "Preferred Shares").
The Board of Directors of the Corporation (the "Board
of Directors") is authorized, subject to limitations
prescribed by law and this Article III, to provide for the
issuance of Preferred Shares in classes or series, and by
filing an Amendment to the Articles of Incorporation pursuant
to the applicable law of the State of Florida, to establish
from time to time the number of shares to be included in each
such class or series, and to fix the designations, powers,
preferences, and rights of the shares of such class or series
and any qualifications, limitations, or restrictions thereof,
all as shall hereafter be stated and expressed in the
Amendment or Amendments to these Articles of Incorporation
adopted by the Board of Directors providing for the issuance
of Preferred Shares from time to time."
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EXHIBIT 2
AMENDMENT TO THE ARTICLES OF INCORPORATION RELATING TO THE SIZE OF THE
BOARD OF DIRECTORS AND REMOVAL ONLY FOR CAUSE.
ARTICLE VII OF THE ARTICLES OF INCORPORATION SHALL BE REVISED TO READ
IN ITS ENTIRETY AS FOLLOWS:
"Article VII
The number of directors constituting the Board of
Directors of the Corporation shall be such number as from time
to time fixed by, or in the manner prescribed by, the bylaws
of the Corporation.
*[Subject to the rights of the holders of any series of
Preferred Shares then outstanding,] any director, or the
entire Board of Directors, may be removed from office at any
time, but only for cause and only by the affirmative vote of
the holders of at least 66 2/3% of the voting power of all
capital stock of the Corporation entitled to vote generally in
the election of the Corporation's directors, voting together
as a single class.
__________________________
* This bracketed language will be included in Article III if Proposal 3 is
approved by ABI Shareholders.
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EXHIBIT 3
AMENDMENTS RELATING TO SPECIAL MEETINGS OF SHAREHOLDERS AND CERTAIN
SHAREHOLDER ACTIONS.
NEW ARTICLE VIII AND ARTICLE IX SHALL BE ADDED TO THE ARTICLES OF
INCORPORATION TO READ AS FOLLOWS:
"Article VIII
In addition to any requirements of law and any other
provision of these Articles of Incorporation (and
notwithstanding the fact that a lesser percentage may be
specified by law or these Articles of Incorporation), the
affirmative vote of the holders of at least 66 2/3% of the
voting power of all the shares of capital stock of the
Corporation entitled to vote on the matter, voting together as
a single class, shall be required for the shareholders of the
Corporation to adopt, repeal, alter, or amend any bylaws of
the Corporation."
"Article IX
Special Meetings of the shareholders of the
Corporation may be called only by the Chairman of the Board of
Directors, the President, by the Board of Directors pursuant
to a resolution adopted by a majority of the entire Board of
Directors, or by the holders of not less than 50% of all votes
entitled to be cast on any issue proposed to be considered at
such special meeting."
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EXHIBIT 4
AMENDMENTS RELATING TO INDEMNIFICATION AND LIMITATION OF LIABILITY
A NEW ARTICLE X SHALL BE ADDED TO THE ARTICLES OF INCORPORATION TO
READ AS FOLLOWS:
"Article X
The Corporation shall indemnify its directors and
officers, or any former director or officer, to the fullest
extent permitted under law. A director of the Corporation
shall not be personally liable to the Corporation or its
shareholders for monetary damages to the Corporation or any
other person for any statement, vote, decision, or failure to
act, regarding corporate management or policy, as a director,
except for liability (i) for any breach of the director's duty
of loyalty to the Corporation or its shareholders, (ii) for
acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of the law, or
(iii) for any transaction from which the director derived any
improper personal benefit. If the Florida Business
Corporation Act is amended after the filing of the Articles of
Incorporation which this Article is a part to authorize
corporate action increasing the ability of the Corporation to
indemnify its directors or officers, or further eliminating or
limiting the personal liability of directors or officers, then
such indemnification shall be increased, or the liability of a
director or an officer of the Corporation shall be eliminated
or limited, as the case may be, to the fullest extent
permitted by the Florida Business Corporation Act as so
amended.
Any repeal or modification of the foregoing paragraph
by the shareholders of the Corporation shall not adversely
affect any right or protection of a director or an officer of
the Corporation existing at the time of such repeal or
modification."
D-5
