<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 16, 1994
REGISTRATION NO. 33-51767
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AMSOUTH BANCORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 6711 63-0591257
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
1400 AMSOUTH-SONAT TOWER
BIRMINGHAM, ALABAMA 35203
(205) 320-7151
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
MARIA B. CAMPBELL, ESQ.
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
AMSOUTH BANCORPORATION
1400 AMSOUTH-SONAT TOWER
BIRMINGHAM, ALABAMA 35203
(205) 326-5319
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
CYNTHIA M. KRUS, ESQ. EDWARD D. HERLIHY, ESQ.
MULDOON, MURPHY & FAUCETTE WACHTELL, LIPTON, ROSEN & KATZ
5101 WISCONSIN AVENUE, N.W. 299 PARK AVENUE
WASHINGTON, D.C. 20016 NEW YORK, NEW YORK 10171
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: At the effective date of the merger of First Federal Savings Bank into
AmSouth Bank of Georgia, as described in the attached Proxy Statement
Prospectus.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION,
ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
AMSOUTH BANCORPORATION
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM LOCATION OR
NUMBER CAPTION CAPTION IN PROXY STATEMENT-PROSPECTUS
------ ------- -------------------------------------
A. Information About the Transaction
<C> <S> <C>
1. Forepart of Registration
Statement and Outside Front
Cover Page of Prospectus... Outside Front Cover of Prospectus; Facing
Page; Cross-Reference Sheet
2. Inside Front and Outside
Back Cover Pages of
Prospectus................. Available Information; Incorporation of
Certain Documents by Reference; Table of
Contents
3. Risk Factors, Ratio of
Earnings to Fixed Charges
and Other Information...... Summary; Stock Price and Dividend
Information; Comparative Per Share
Information; Summary Condensed
Consolidated Financial Information
4. Terms of the Transaction.... Summary; The Merger; Certain Related
Transactions; Description of AmSouth
Capital Stock; Comparison of Rights of
Shareholders
5. Pro Forma Financial
Information................ Summary Condensed Consolidated Financial
Information; Incorporation of Certain
Documents by Reference
6. Material Contacts with the
Company Being Acquired..... The Merger--Background of and Reasons for
the Merger
7. Additional Information
Required for Reoffering by
Persons and Parties Deemed
to Be Underwriters......... *
8. Interest of Named Experts
and Counsel................ *
9. Disclosure of Commission
Position on Indemnification
for Securities Act
Liabilities................ *
<CAPTION>
B. Information About the Registrant
<C> <S> <C>
10. Information with Respect to
S-3 Registrants............ Incorporation of Certain Documents by
Reference; Summary; Parties to the Merger
11. Incorporation of Certain
Information by Reference... Incorporation of Certain Documents by
Reference
12. Information with Respect to
S-2 or S-3 Registrants..... *
13. Incorporation of Certain
Information by Reference... *
14. Information with Respect to
Registrants Other than S-3
or S-2 Registrants......... *
<CAPTION>
C. Information About the Company
Being Acquired
<C> <S> <C>
15. Information with Respect to
S-3 Companies.............. *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ITEM LOCATION OR
NUMBER CAPTION CAPTION IN PROXY STATEMENT-PROSPECTUS
------ ------- -------------------------------------
<C> <S> <C>
16. Information with Respect to
S-2 or S-3 Companies...... *
17. Information with Respect to
Companies Other than S-2
or S-3 Companies.......... Certain Information Regarding FFSB;
Summary; Parties to the Merger; Appendix
C: FFSB Form 10-KSB/A; Appendix C-1: FFSB
Form 10-Q
<CAPTION>
D. Voting and Management
Information
<C> <S> <C>
18. Information if Proxies,
Consents or Authorizations
Are to Be Solicited....... Incorporation of Certain Documents by
Reference; Certain Information Regarding
FFSB; The Meeting; The Merger--Interests
of Certain Persons in the Merger;
Dissenters' Rights; Description of AmSouth
Capital Stock
19. Information if Proxies,
Consents or Authorizations
Are Not to Be Solicited in
an Exchange Offer......... *
</TABLE>
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* Inapplicable, not required or none.
<PAGE>
[FIRST FEDERAL SAVINGS BANK LETTERHEAD]
February 18, 1994
TO THE SHAREHOLDERS OF
FIRST FEDERAL SAVINGS BANK
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Annual Meeting") of First Federal Savings Bank ("FFSB"), which will be held on
Friday, March 18, 1994, at 10:00 a.m., local time, at the main office of FFSB,
located at 208 North Wall Street, Calhoun, Georgia 30701. I look forward, as do
members of the Board and management, to the opportunity of greeting personally
those who are able to attend this meeting.
At this important meeting, you will be asked to consider and vote upon a
proposal to approve an amendment (the "Charter Amendment") of FFSB's Charter to
delete Section 8(A) thereof, which prohibits any person from acquiring more
than 10% of FFSB's stock for a period of five years following FFSB's mutual to
stock conversion, provided the merger is also approved and consummated; and an
Agreement and Plan of Merger (the "Merger Agreement") by and between FFSB and
AmSouth Bancorporation ("AmSouth") and the related Plan of Merger and Merger
Agreement (the "Plan of Merger"), pursuant to which FFSB will merge with and
into AmSouth Bank of Georgia, a wholly-owned subsidiary of AmSouth (the
"Merger"), and each share of your FFSB Common Stock will be converted into the
right to receive 0.9991 of a share of AmSouth Common Stock subject to
adjustment in certain circumstances described in the enclosed Proxy Statement--
Prospectus. AmSouth Common Stock is traded on the New York Stock Exchange.
Consummation of the Merger is subject to certain conditions, including the
approval of the Merger Agreement and the Plan of Merger by FFSB's shareholders
and the approval of the Merger by various regulatory agencies.
In addition, at the Annual Meeting, you will be asked to elect three
directors and ratify the appointment of Read, Martin, Slickman and Sheats as
independent auditors for FFSB for the fiscal year ending September 30, 1994.
You will also be asked to vote to permit the proxy holders to vote in favor
of the adjournment of the Annual Meeting, if necessary, in order to give the
Board of Directors more time to solicit additional proxies in favor of the
Merger Agreement and Plan of Merger.
The proposed Merger has been unanimously approved by the Board of Directors
of FFSB and AmSouth. The FFSB Board of Directors has received an opinion of
Hovde Financial, Inc., a financial advisor, that the consideration to be paid
to FFSB shareholders is fair from a financial point of view. Therefore, your
Board of Directors has determined that the Merger is fair to, and in the best
interests of, FFSB and its shareholders and unanimously recommends that you
vote FOR approval of the Charter Amendment, the Merger Agreement and the Plan
of Merger, as well as the other matters to be considered at the meeting.
The enclosed Notice of Annual Meeting of Shareholders and Proxy Statement--
Prospectus describe the Merger, as well as other matters to be considered at
the Annual Meeting, and provide specific information concerning the Annual
Meeting. Please read these materials carefully and consider the information
contained in them.
It is very important that your shares be represented at the Annual Meeting,
regardless of whether you plan to attend in person. The affirmative vote of a
majority of all of the outstanding shares of FFSB Common Stock is required to
approve the Charter Amendment and two-thirds of all of the outstanding shares
of FFSB Common Stock is required to approve the Merger Agreement and the Plan
of Merger. Even if the Merger Agreement and the Plan of Merger are approved,
the Merger cannot be consummated unless the stockholders have also approved the
Charter Amendment. Consequently, a failure to vote will have the same effect as
a vote against those proposals. Therefore, I urge you to execute, date and
return the enclosed proxy card in the enclosed postage-paid envelope as soon as
possible to ensure that your shares will be voted at the Annual Meeting. You
should not forward any of your stock certificates at this time.
On behalf of the Board of Directors, I urge you to vote FOR approval of the
Charter Amendment, the Merger Agreement and the Plan of Merger, as well as the
other matters to be considered at the meeting.
Sincerely,
Henry E. Holland, Jr.
President, Chief Executive Officer
and
Chairman of the Board
<PAGE>
FIRST FEDERAL SAVINGS BANK
208 NORTH WALL STREET
CALHOUN, GEORGIA 30701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 18, 1994
NOTICE IS HEREBY GIVEN that, pursuant to a call of its Board of Directors,
the annual meeting of shareholders (the "Annual Meeting") of FIRST FEDERAL
SAVINGS BANK ("FFSB") will be held at the office of FFSB located at 208 North
Wall Street, Calhoun, Georgia 30701, on Friday, March 18, 1994, at 10:00 a.m.
local time, for the purpose of considering and voting upon the following
matters:
1. AMENDMENT OF FFSB CHARTER. Considering and voting upon a proposal to
amend FFSB's Charter to delete Section 8(A) thereof, which prohibits any
person from acquiring more than 10% of FFSB's stock for a period of five
years following FFSB's mutual to stock conversion, provided that the merger
between FFSB and AmSouth is approved and consummated.
2. ACQUISITION BY AMSOUTH BANCORPORATION. Considering and voting upon a
proposal to approve an Agreement and Plan of Merger, dated as of the 3rd
day of August, 1993 (the "Merger Agreement"), attached as Appendix A to the
accompanying Proxy Statement-Prospectus, between FFSB and AmSouth
Bancorporation ("AmSouth") and the related Plan of Merger and Merger
Agreement dated as of the 21st day of December, 1993 (attached as Appendix
A-1 to the accompanying Proxy Statement-Prospectus), pursuant to which FFSB
would merge with and into AmSouth Bank of Georgia, a wholly-owned
subsidiary of AmSouth.
3. ELECTION OF THREE DIRECTORS.
4. RATIFICATION OF APPOINTMENT OF READ, MARTIN, SLICKMAN AND SHEATS AS
INDEPENDENT AUDITORS.
5. ADJOURNMENT. Considering and voting upon a proposal to approve the
adjournment of the Annual Meeting for up to 29 days, if necessary, in order
to solicit additional proxies if stockholders holding two-thirds of the
votes eligible to be cast at the Annual Meeting do not submit proxies
voting in favor of Proposal 2.
6. OTHER BUSINESS. Such other business, if necessary, as may properly be
brought before the meeting or any adjournments or postponements thereof.
Only those shareholders of record at the close of business on Tuesday,
February 8, 1994 are entitled to notice of and to vote at the Annual Meeting of
Shareholders or any adjournments or postponements thereof.
A Proxy Statement-Prospectus is set forth on the following pages and a proxy
card is enclosed herewith. To ensure your vote is counted, please complete,
sign, date and return the proxy card in the enclosed, postage-paid envelope,
whether or not you plan to attend the meeting in person.
By Order of the Board of Directors
Henry E. Holland, Jr.
President, Chief Executive Officer
andChairman of the Board
Calhoun, Georgia
February 18, 1994
THE BOARD OF DIRECTORS OF FFSB UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF
FFSB COMMON STOCK VOTE TO APPROVE THE PROPOSALS.
SINCE THE AFFIRMATIVE VOTE OF AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES
OF FFSB COMMON STOCK IS REQUIRED TO APPROVE THE MERGER AGREEMENT AND THE
RELATED PLAN OF MERGER AND MERGER AGREEMENT, WE URGE YOU TO SIGN AND RETURN THE
ENCLOSED PROXY AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE
ANNUAL MEETING IN PERSON. THE PROXY MAY BE REVOKED AT ANY TIME PRIOR TO ITS
EXERCISE IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT-PROSPECTUS.
ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING OF SHAREHOLDERS, INCLUDING ANY
ADJOURNMENTS OR POSTPONEMENTS THEREOF, MAY REVOKE HIS OR HER PROXY AND VOTE
PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING OF SHAREHOLDERS. IF
YOUR SHARES ARE NOT REGISTERED IN YOUR OWN NAME, YOU WILL NEED ADDITIONAL
DOCUMENTATION FROM YOUR RECORDHOLDER TO VOTE PERSONALLY AT THE ANNUAL MEETING.
<PAGE>
PROXY STATEMENT
FIRST FEDERAL SAVINGS BANK
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 18, 1994
---------------
PROSPECTUS
AMSOUTH BANCORPORATION
COMMON STOCK
(PAR VALUE $1.00 PER SHARE)
---------------
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, par value $.01 per share ("FFSB Common Stock"), of First Federal Savings
Bank ("FFSB") in connection with the solicitation of proxies by the FFSB Board
of Directors for use at the annual meeting of FFSB shareholders to be held at
10:00 a.m., local time, on Friday, March 18, 1994, at the office of FFSB
located at 208 North Wall Street, Calhoun, Georgia 30701, and at any
adjournments or postponements thereof (the "Meeting").
At the Meeting, the shareholders of record of FFSB Common Stock as of the
close of business on Tuesday, February 8, 1994, will consider and vote upon a
proposal to approve (i) the amendment of FFSB's Charter to delete Section 8(A)
thereof which prohibits any person from acquiring more than 10% of the FFSB's
Common Stock for a period of five years following FFSB's mutual to stock
conversion (the "Conversion"), provided that the merger is approved and
consummated (the "Charter Amendment"), (ii) the Agreement and Plan of Merger,
dated as of the 3rd day of August, 1993 (the "Merger Agreement"), between
AmSouth Bancorporation, a Delaware corporation ("AmSouth"), and FFSB, and the
related Plan of Merger and Merger Agreement dated as of the 21st day of
December, 1993 (the "Plan of Merger"), pursuant to which FFSB will merge with
and into AmSouth Bank of Georgia, a wholly-owned bank subsidiary of AmSouth
(the "Merger"), (iii) the adjournment of such voting for up to 29 days, if
necessary, in order to solicit additional proxies if shareholders holding two-
thirds of the votes eligible to be cast at the Meeting do not submit proxies
voting in favor of Proposal 2 (the "Adjournment Proposal"); and (iv) such other
business as may come before the Meeting or adjournment thereof.
Upon consummation of the Merger, each outstanding share of FFSB Common Stock
(except for shares held by FFSB or its subsidiaries, other than in a fiduciary
capacity or in satisfaction of a debt previously contracted, and shares held as
treasury stock by FFSB) will be converted into the right to receive 0.9991 of a
share of common stock of AmSouth, par value $1.00 per share ("AmSouth Common
Stock"), with cash being paid in lieu of fractional shares. For a description
of the Merger Agreement and the Plan of Merger (collectively, the
"Agreements"), which are included in their entirety as Appendices A and A-1,
respectively, to this Proxy Statement-Prospectus, see "Proposal 2--THE MERGER."
This Proxy Statement-Prospectus also constitutes a prospectus of AmSouth in
respect of up to 550,000 shares of AmSouth Common Stock (including associated
stock purchase rights), subject to adjustment in the circumstances described
under "THE MERGER--Priced-Based Termination" (the "Merger Shares"), expected to
be issued pursuant to the Merger Agreement. The number of Merger Shares is
based upon (i) the conversion of each outstanding share of FFSB Common Stock
into 0.9991 of a share of AmSouth Common Stock subject to adjustment in certain
circumstances and (ii) the assumed exercise of outstanding stock options. The
actual number of Merger Shares may be higher or lower. See "Proposal 2--THE
MERGER--Effect of the Merger."
FFSB shareholders will also be asked to elect three directors and ratify the
appointment of Read, Martin, Slickman and Sheats as independent auditors for
the fiscal year ending September 30, 1994. See "Proposal 3--ELECTION OF
DIRECTORS" and "Proposal 4--RATIFICATION OF APPOINTMENT OF INDEPENDENT
AUDITORS".
The outstanding shares of AmSouth Common Stock are listed on the New York
Stock Exchange, Inc. (the "NYSE"). The reported last sale price of AmSouth
Common Stock on the NYSE Composite Transactions Reporting System on February
15, 1994 was $30.50 per share.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF AMSOUTH COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY.
This Proxy Statement-Prospectus and the accompanying proxy card are first
being mailed to shareholders of FFSB on or about February 18, 1994.
<PAGE>
AVAILABLE INFORMATION
AmSouth is subject to the information requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files
reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). Copies of such reports, proxy statements and
other information can be obtained, upon payment of prescribed fees, from the
SEC at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C.
20549. In addition, such reports, proxy statements and other information can be
inspected at the SEC's facilities referred to above and at the SEC's Regional
Offices at Seven World Trade Center (13th Floor), New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison, Suite 1400, Chicago, Illinois
60661. The AmSouth Common Stock is listed on the NYSE, and such reports, proxy
statements and other information concerning AmSouth are available for
inspection and copying at the offices of the NYSE, 20 Broad Street, New York,
New York 10005. AmSouth has filed with the SEC a Registration Statement on Form
S-4 (together with any amendments thereto, the "Registration Statement") under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Merger Shares. This Proxy Statement-Prospectus does not contain all the
information set forth in the Registration Statement. Such additional
information may be obtained from the SEC's principal office in Washington, D.C.
FFSB also is subject to the information requirements of the Exchange Act and
in accordance therewith files reports, proxy statements and other information
with the Office of Thrift Supervision (the "OTS"). Such reports, proxy
statements and other information filed by FFSB can be inspected and copied at
the public reference facilities maintained by the OTS at the Office of Public
Information, OTS, 1700 G Street, N.W., Washington, D.C. 20552, and also can be
obtained by written request from such office, at prescribed rates.
Statements contained in this Proxy Statement-Prospectus or in any document
incorporated by reference in this Proxy Statement-Prospectus as to the contents
of any contract or other document referred to herein or therein are not
necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement or such other document, each such statement being qualified in all
respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated in this Proxy
Statement-Prospectus by reference:
(a) AmSouth's Annual Report on Form 10-K for the fiscal year ended
December 31, 1992 filed on March 31, 1993 (provided that the information
referred to in Item 402(a)(8) of Regulation S-K shall not be deemed to be
specifically incorporated herein);
(b) AmSouth's Quarterly Reports on Form 10-Q for the quarterly periods
ended March 31, 1993, June 30, 1993 and September 30, 1993, filed on May
17, 1993, August 12, 1993 and November 15, 1993, respectively;
(c) AmSouth's Current Reports on Form 8-K filed on (i) February 16, 1993,
as amended by a Form 8 filed on April 13, 1993, (ii) April 26, 1993, (iii)
April 28, 1993, (iv) May 13, 1993, (v) July 28, 1993, (vi) August 19, 1993,
(vii) September 16, 1993, as amended by a Form 8-K/A filed September 23,
1993, (viii) September 21, 1993, (ix) October 18, 1993, (x) November 24,
1993, (xi) December 21, 1993, as amended by a Form 8-K/A filed on February
16, 1994, and (xii) January 26, 1994;
(d) AmSouth's Registration Statement on Form 10, filed on March 12, 1973,
with respect to the description of AmSouth Common Stock contained therein
(and any amendment or report filed for the purpose of updating such
description);
2
<PAGE>
(e) AmSouth's Registration Statement on Form 8-A, filed on July 10, 1989,
with respect to AmSouth's Stockholder Protection Rights Agreement (and any
amendment or report filed for the purpose of updating such description);
and
(f) All documents filed by AmSouth pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Proxy Statement-
Prospectus and prior to the Meeting.
Any statement contained in a document incorporated or deemed incorporated
herein by reference will be deemed to be modified or superseded for the purpose
of this Proxy Statement-Prospectus to the extent that a statement contained
herein or in the other subsequently filed document which also is, or is deemed
to be, incorporated herein by reference modifies or supersedes such statement.
Any such statement so modified or superseded will not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement-
Prospectus.
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS RELATING TO AMSOUTH,
OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS, ARE AVAILABLE WITHOUT CHARGE
UPON REQUEST MADE TO AMSOUTH BANCORPORATION, POST OFFICE BOX 11007, BIRMINGHAM,
ALABAMA 35288 (TELEPHONE (205) 583-4439), ATTENTION: INVESTOR RELATIONS
DEPARTMENT. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY MARCH 11, 1994.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN AS CONTAINED HEREIN AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS
NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF AMSOUTH
OR FFSB SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO THE DATE HEREOF.
CERTAIN INFORMATION REGARDING FFSB
FFSB's Annual Report on Form 10-KSB/A for the fiscal year ended September 30,
1993 (the "FFSB Form 10-KSB/A") (without the exhibits thereto) and FFSB's
Quarterly Report on Form 10-Q for the quarterly period ended December 31, 1993
(the "FFSB Form 10-Q"), including the unaudited interim consolidated financial
statements of FFSB and notes thereto, filed with the OTS appear as Appendices C
and C-1, respectively. Such Appendices (excluding any documents incorporated by
reference therein or exhibits thereto) are a part of this Proxy Statement-
Prospectus and should be carefully reviewed for the information regarding FFSB
contained therein. The documents incorporated by reference by, or included as
exhibits to, such report are NOT a part of this Proxy Statement-Prospectus.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROXY STATEMENT............................................................ 1
AVAILABLE INFORMATION...................................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................ 2
CERTAIN INFORMATION REGARDING FFSB......................................... 3
SUMMARY.................................................................... 7
Parties to the Merger.................................................... 7
Recent Developments...................................................... 10
Charter Amendment........................................................ 10
Effect of the Merger..................................................... 11
Consideration for FFSB Common Stock...................................... 11
Price-Based Termination.................................................. 11
Treatment of Stock Options............................................... 12
Meeting of FFSB Shareholders............................................. 12
Record Date; Vote Required............................................... 12
Reasons for the Merger; Recommendation of the FFSB Board................. 12
Opinion of Financial Advisor............................................. 13
Effective Date........................................................... 13
Conditions; Regulatory Approvals......................................... 13
Termination of the Merger Agreement...................................... 13
Management After the Merger.............................................. 14
Interests of Certain Persons in the Merger............................... 14
Certain Federal Income Tax Considerations................................ 14
Accounting Treatment..................................................... 14
Certain Differences in Shareholders' Rights.............................. 14
Dissenters' Rights....................................................... 15
STOCK PRICE AND DIVIDEND INFORMATION....................................... 16
COMPARATIVE PER SHARE INFORMATION.......................................... 18
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION....................... 20
INTRODUCTION............................................................... 27
General.................................................................. 27
Parties to the Merger.................................................... 27
THE MEETING................................................................ 31
General.................................................................. 31
Record Date; Vote Required............................................... 31
PROPOSAL 1. CHARTER AMENDMENT.............................................. 32
PROPOSAL 2. THE MERGER..................................................... 33
Effect of Merger......................................................... 33
Price-Based Termination.................................................. 33
Treatment of Stock Options............................................... 34
Background of and Reasons for the Merger................................. 34
Opinion of Financial Advisor............................................. 36
Effective Date........................................................... 39
Surrender of Certificates................................................ 39
Conditions to Consummation of the Merger................................. 40
Regulatory Approvals..................................................... 42
Conduct of Business Pending the Merger................................... 43
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Waiver and Amendment; Termination....................................... 43
No Solicitation......................................................... 44
Management After the Merger............................................. 44
Interests of Certain Persons in the Merger.............................. 44
Certain Federal Income Tax Considerations............................... 45
Accounting Treatment.................................................... 46
Expenses................................................................ 47
NYSE Listing............................................................ 47
CERTAIN RELATED TRANSACTIONS.............................................. 47
Resales of AmSouth Common Stock......................................... 47
Voting Agreements....................................................... 48
CERTAIN REGULATORY CONSIDERATIONS......................................... 48
General................................................................. 48
Payment of Dividends.................................................... 49
Transactions with Affiliates............................................ 49
Conversion of AmSouth Alabama........................................... 49
Capital Adequacy........................................................ 50
Support of Subsidiary Banks............................................. 51
FDICIA.................................................................. 51
Brokered Deposits....................................................... 52
FDIC Insurance Assessments.............................................. 52
Depositor Preference.................................................... 52
DESCRIPTION OF AMSOUTH CAPITAL STOCK...................................... 52
General................................................................. 53
Common Stock............................................................ 53
Preferred Stock......................................................... 53
AmSouth Rights Agreement................................................ 54
Changes in Control...................................................... 54
COMPARISON OF RIGHTS OF SHAREHOLDERS...................................... 56
Removal of Directors.................................................... 56
Authorized Capital Stock................................................ 56
Cumulative Voting....................................................... 57
Preemptive Rights....................................................... 57
Director's Liability.................................................... 57
Indemnification......................................................... 57
Special Meetings of Shareholders; Action Without a Meeting.............. 58
Mergers, Consolidations and Sales of Assets............................. 58
Amendment of Charter and Bylaws......................................... 59
Rights of Dissenting Shareholders....................................... 59
Antitakeover Statutes................................................... 60
Shareholder Rights Plan................................................. 60
Dividends............................................................... 61
Shareholders' Right to Examine Books and Records........................ 61
DISSENTERS' RIGHTS........................................................ 61
PROPOSAL 3. ELECTION OF DIRECTORS......................................... 62
Information with Respect to the Nominees, Continuing Directors and
Executive Officers..................................................... 63
Compliance with Section 16(a) of the Securities Exchange Act of 1934.... 64
Security Ownership of Certain Beneficial Owners......................... 64
Meetings of the FFSB Board and Committees of the FFSB Board............. 64
Directors' Compensation................................................. 65
Executive Compensation.................................................. 65
Indebtedness of Management and Transactions with Certain Related
Persons................................................................ 67
</TABLE>
5
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS........... 68
PROPOSAL 5. AUTHORITY TO ADJOURN THE MEETING.............................. 68
SHAREHOLDER PROPOSALS..................................................... 68
VALIDITY OF AMSOUTH COMMON STOCK.......................................... 68
EXPERTS................................................................... 68
APPENDICES
APPENDIX A: Agreement and Plan of Merger.................................. A-1
APPENDIX A-1: Plan of Merger and Merger Agreement......................... A-1-1
APPENDIX B: Opinion of Hovde Financial, Inc............................... B-1
APPENDIX C: FFSB Form 10-KSB/A............................................ C-1
APPENDIX C-1: FFSB Form 10-Q.............................................. C-1-1
APPENDIX D: 12 C.F.R. (S) 552.14.......................................... D-1
</TABLE>
6
<PAGE>
SUMMARY
The following summary is not intended to be a complete description of all
material facts regarding AmSouth, FFSB or the matters to be considered at the
Meeting and is qualified in all respects by the more detailed information
appearing elsewhere or incorporated by reference in this Proxy Statement-
Prospectus, the Appendices hereto and the documents referred to herein.
Shareholders are urged to read all such information carefully.
All historical financial and share-price related information of AmSouth
contained herein has been adjusted to give effect to the three-for-two split on
AmSouth Common Stock paid on January 15, 1992 to AmSouth shareholders of record
on December 13, 1991 (the "AmSouth Stock Split"). As used in this Proxy
Statement-Prospectus, the terms "AmSouth" and "FFSB" refer to those entities
respectively and, where the context requires, to such entities and their
subsidiaries.
PARTIES TO THE MERGER
AmSouth. AmSouth is a regional bank holding company headquartered in
Birmingham, Alabama, with 211 banking offices located in Alabama, Florida,
Tennessee and Georgia at September 30, 1993. At September 30, 1993, AmSouth had
total consolidated assets of approximately $11.5 billion, total consolidated
deposits of approximately $8.3 billion and total consolidated shareholders'
equity of approximately $954.8 million. AmSouth is the second largest bank
holding company headquartered in Alabama in terms of equity capital and assets,
based on September 30, 1993 information. Through its subsidiaries, AmSouth
offers a broad range of banking and bank-related services.
AmSouth's largest subsidiary is AmSouth Bank N.A. ("AmSouth Alabama"). At
September 30, 1993, AmSouth Alabama had total consolidated assets of
approximately $9.1 billion, total consolidated deposits of approximately $6.4
billion and total consolidated shareholders' equity of approximately $714.4
million. AmSouth Alabama is a full-service bank and had 147 banking offices
located throughout Alabama at September 30, 1993. AmSouth Alabama was the
largest bank in Alabama, based upon total assets at September 30, 1993.
AmSouth's other major banking subsidiaries are AmSouth Bank of Florida,
headquartered in Pensacola, Florida ("AmSouth Florida"), and AmSouth Bank of
Tennessee, headquartered in Chattanooga, Tennessee ("AmSouth Tennessee").
AmSouth also owns AmSouth Bank of Georgia ("AmSouth Georgia"), currently
headquartered in Summerville, Georgia, AmSouth Bank of Walker County,
headquartered in Jasper, Alabama, The Georgia State Bank of Rome, headquartered
in Rome, Georgia and Orange Bank, headquartered in Orlando, Florida.
At September 30, 1993, AmSouth Florida had total consolidated assets of
approximately $1.3 billion, total consolidated deposits of approximately $1.0
billion and total consolidated shareholders' equity of approximately $85.2
million. AmSouth Florida operated 25 offices in Florida at September 30, 1993.
At September 30, 1993, AmSouth Georgia had total assets of approximately
$31.1 million, total deposits of approximately $27.7 million and total
shareholders' equity of approximately $3.1 million. AmSouth Georgia operated
one office as of September 30, 1993.
Effective February 1, 1993, First Chattanooga Financial Corporation,
headquartered in Chattanooga, Tennessee ("FCFC"), merged with AmSouth, and
First Federal Bank, FSB, a subsidiary of FCFC merged with AmSouth Tennessee.
The mergers were accounted for under the purchase method of accounting under
generally accepted accounting principles ("GAAP"). At September 30, 1993,
AmSouth Tennessee had total consolidated assets of approximately $967 million,
total consolidated deposits of approximately $777.7 million and total
consolidated shareholders' equity of approximately $110.9 million. AmSouth
Tennessee operated 20 offices in Tennessee at September 30, 1993.
7
<PAGE>
Effective October 14, 1993, Mickler Corporation, headquartered in Clearwater,
Florida ("Mickler"), merged with AmSouth, and The First National Bank of
Clearwater ("Clearwater"), a subsidiary of Mickler, merged with AmSouth
Florida. AmSouth issued approximately 2,987,000 shares of AmSouth Common Stock
in exchange for the outstanding shares of Mickler and Clearwater. These
acquisitions were accounted for as a pooling of interests under GAAP. At
September 30, 1993, Mickler had total consolidated assets of approximately $436
million and total consolidated deposits of approximately $335 million.
Also effective October 14, 1993, Charter Banking Corp., headquartered in St.
Petersburg, Florida ("Charter"), merged with AmSouth, and First Gulf Bank, a
subsidiary of Charter, merged with AmSouth Florida. AmSouth paid approximately
$12.8 million in cash for all of the outstanding shares of both institutions.
These acquisitions were accounted for as a purchase under GAAP. At September
30, 1993, Charter had total consolidated assets of approximately $105 million
and total consolidated deposits of approximately $96 million.
Effective December 9, 1993, Mid-State Federal Savings Bank, located in Ocala,
Florida ("Mid-State Federal"), merged with AmSouth Florida. AmSouth issued
approximately 2,041,000 shares of AmSouth Common Stock and paid approximately
$31.7 million for all of the outstanding shares of Mid-State Federal common
stock; AmSouth also paid $542,000 upon cancellation of the outstanding options
to purchase Mid-State Federal common stock. This acquisition was accounted for
as a purchase under GAAP. At September 30, 1993, Mid-State Federal had total
consolidated assets of approximately $734 million and total consolidated
deposits of approximately $645 million.
Effective December 17, 1993, First Sunbelt Bankshares, Inc., headquartered in
Rome, Georgia ("First Sunbelt"), the parent company of The Georgia State Bank
of Rome, merged with AmSouth. AmSouth issued approximately 537,000 shares of
AmSouth Common Stock in exchange for all of the outstanding shares of First
Sunbelt common stock. This acquisition was accounted for as a pooling of
interests under GAAP. At September 30, 1993, First Sunbelt had total
consolidated assets of approximately $102 million and total consolidated
deposits of approximately $92 million.
Effective January 3, 1994, Orange Banking Corporation, headquartered in
Orlando, Florida ("OBC"), the parent company of Orange Bank, merged with
AmSouth. AmSouth issued approximately 1,332,000 shares of AmSouth Common Stock
in exchange for all of the outstanding shares of OBC common stock. This
acquisition was accounted for as a pooling of interests under GAAP. At
September 30, 1993, OBC had total consolidated assets of approximately $346
million and total consolidated deposits of approximately $316 million.
Effective February 10, 1993, FloridaBank, a Federal Savings Bank,
headquartered in Jacksonville, Florida ("FloridaBank"), merged with AmSouth
Florida. AmSouth issued approximately 758,000 shares of AmSouth Common Stock
for all of the outstanding shares of FloridaBank. This acquisition was
accounted for as a pooling of interests under GAAP. At September 30, 1993,
FloridaBank had total consolidated assets of approximately $276 million and
total consolidated deposits of approximately $210 million.
In addition, AmSouth is a party to other pending transactions described
below. Except as noted, consummation of each of these transactions remains
subject to fulfillment of a number of conditions, including shareholder and
regulatory approvals. No assurances can be given that such conditions will be
fulfilled or that such transactions will be consummated.
8
<PAGE>
On July 29, 1993, AmSouth signed an agreement to acquire Parkway Bancorp,
Inc. ("Parkway"), which is headquartered in Fort Myers, Florida, parent
company of Parkway Bank. At September 30, 1993, Parkway had total
consolidated assets of approximately $123 million and total consolidated
deposits of approximately $111 million. Under the terms of the agreement,
AmSouth will issue 0.4886 of a share of AmSouth Common Stock for each of
the outstanding shares of Parkway common stock, with AmSouth issuing a
total of 626,000 shares, subject to adjustment. Shareholder approval has
been received. This acquisition will be accounted for as a pooling of
interests under GAAP.
On August 9, 1993, AmSouth signed an agreement to acquire Citizens
National Bank of Naples, which is headquartered in Naples, Florida, and its
parent company, Citizens National Corporation ("Citizens"). At September
30, 1993, Citizens had total consolidated assets of approximately $285
million and total consolidated deposits of approximately $254 million.
Under the terms of the agreement, AmSouth will issue 0.3609 of a share of
AmSouth Common Stock for each of the outstanding shares of Citizens common
stock. At September 30, 1993, Citizens had 4,045,688 shares of common stock
outstanding. Shareholder and regulatory approvals have been received. This
acquisition will be accounted for as a pooling of interests under GAAP.
On September 12, 1993, AmSouth signed an agreement to acquire Fortune
Bank, which is headquartered in Clearwater, Florida, and its parent
company, Fortune Bancorp, Inc. ("Fortune"). Under the terms of the
agreement, Fortune shareholders may make an election to receive either cash
or AmSouth Common Stock based on a formula which takes into consideration
AmSouth's stock price during a future pricing period. Approximately one-
half of Fortune's shares will be exchanged for cash and one-half for
AmSouth Common Stock (subject to adjustment based upon the average price
per share of AmSouth Common Stock), with AmSouth issuing a total of
approximately 4,482,000 shares and approximately $142.5 million in cash. At
September 30, 1993, Fortune had total consolidated assets of approximately
$2.6 billion and total consolidated deposits of approximately $1.8 billion.
This acquisition will be accounted for as a purchase under GAAP.
These pending and completed transactions listed above (other than the merger
of FCFC with AmSouth) are sometimes referred to herein as the "Other Business
Combinations."
AmSouth continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and, in
some cases, negotiations frequently take place, and future business
combinations involving cash, debt or equity securities can be expected. Any
future business combination or series of business combinations that AmSouth
might undertake may be material, in terms of assets acquired or liabilities
assumed, to AmSouth's financial condition. Recent business combinations in the
banking industry have typically involved the payment of a premium over book and
market values. This practice may result in dilution of book value and net
income per share for the acquirors.
AmSouth's other subsidiaries include AmSouth Mortgage Company, Inc., which
offers first mortgage loans through 44 originating offices in nine states,
AmSouth Leasing Corporation, a specialized lender providing equipment leasing,
and AmSouth Investment Services, Inc., a registered broker-dealer that provides
securities brokerage services.
AmSouth was incorporated under the laws of the State of Delaware in 1970. Its
principal executive office is located at 1400 AmSouth-Sonat Tower, 1900 Fifth
Avenue North, Birmingham, Alabama 35203. Its telephone number is (205) 320-
7151.
FFSB. FFSB is a federally-chartered stock savings bank that converted from a
federally chartered mutual savings bank to a federally chartered stock savings
bank on June 27, 1991 (the "Conversion"). FFSB's business is conducted through
its office in Calhoun, Georgia. FFSB is primarily engaged in the business of
attracting deposits from the general public and using such deposits to
originate mortgage loans, consumer
9
<PAGE>
loans and commercial real estate and residential construction loans. FFSB is a
member of the Federal Home Loan Bank of Atlanta, and its deposit accounts are
insured by the Savings Association Insurance Fund ("SAIF") of the Federal
Deposit Insurance Corporation ("FDIC"). FFSB received its Federal charter in
1949. At September 30, 1993, FFSB had total consolidated assets of
approximately $72 million, total consolidated deposits of approximately $60
million and total consolidated shareholders' equity of approximately $11
million.
FFSB's office is located at 208 North Wall Street, Calhoun, Georgia 30701 and
its telephone number is (706) 629-2848. FFSB has no subsidiaries.
RECENT DEVELOPMENTS
The following tables present certain preliminary unaudited data (i) as of and
for the year ended December 31, 1993 and 1992 for AmSouth on a historical
basis, (ii) as of and for the twelve months ended December 31, 1993 for AmSouth
and FFSB on a pro forma combined basis giving effect to the Merger and (iii) as
of and for the twelve months ended December 31, 1993 for AmSouth and FFSB on a
pro forma combined basis, giving effect to the Merger, as adjusted to give
effect to the Other Business Combinations, as described below. Unaudited
historical data reflect, in the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such data. The unaudited financial information is presented on
a preliminary basis, for informational purposes only, and is not necessarily
indicative of the combined financial position or results of operations which
would have actually occurred if the transactions had been consummated in the
past or which may be obtained in the future.
<TABLE>
<CAPTION>
AMSOUTH AND FFSB
AMSOUTH AND FFSB PRO FORMA COMBINED,
AMSOUTH PRO FORMA COMBINED AS ADJUSTED
----------------------- ------------------ -------------------
1993 (A) 1992 (B) 1993 1993
----------- ----------- ------------------ -------------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Selected data
(In thousands, except per share
amounts)
Net Income............ $ 146,227 $ 108,049 $ 147,450 $ 148,166(C)
Net Income per Share.. 3.10 2.51 3.10 2.54(C)
Total Assets.......... 12,547,871 10,208,606 12,620,098 16,518,652(D)
Shareholders' Equity.. 1,090,009 824,755 1,101,555 1,291,344(D)
Deposits.............. 9,567,882 7,799,816 9,627,051 12,346,252(D)
</TABLE>
- --------
(A) Amounts give effect to the acquisitions of Clearwater, Mickler and First
Sunbelt on a pooling of interests accounting basis, and the acquisitions of
FCFC, Charter and Mid-State Federal on a purchase accounting basis.
(B) Amounts have been restated for the pooling of interests of Clearwater and
Mickler but have not been restated for the pooling of interests of First
Sunbelt, the effect of which is not material.
(C) Amounts are adjusted to give effect to (i) the January 3, 1994 acquisition
of OBC, the February 10, 1994 acquisition of FloridaBank and the pending
acquisitions of Parkway and Citizens on a pooling of interests accounting
basis and (ii) the December 9, 1993 acquisition of Mid-State Federal, as if
such acquisition had occurred on January 1, 1993, and the pending
acquisition of Fortune on a purchase accounting basis.
(D) Amounts are adjusted to give effect to (i) the January 3, 1994 acquisition
of OBC, the February 10, 1994 acquisition of FloridaBank and the pending
acquisitions of Parkway and Citizens on a pooling of interests accounting
basis and (ii) the pending acquisition of Fortune on a purchase accounting
basis.
CHARTER AMENDMENT
In connection with the Merger, the stockholders of FFSB are being asked to
approve an amendment to the Charter of FFSB which will delete Section 8(A)
thereof (the "Charter Amendment"). That section
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<PAGE>
provides that for a period of five years following the Conversion, no person
may acquire more than 10% of the capital stock of FFSB. In order for the Merger
to be effected, this provision must be repealed. The approval of the Charter
Amendment is conditioned on the approval and consummation of the Merger. See
"Proposal 1--CHARTER AMENDMENT."
EFFECT OF THE MERGER
Pursuant to an Agreement and Plan of Merger dated as of August 3, 1993 by and
between AmSouth and FFSB (the "Merger Agreement") and the related Plan of
Merger and Merger Agreement dated as of the 21st day of December, 1993 (the
"Plan of Merger") (collectively, the "Agreements"), at the Effective Date (as
defined below), FFSB will merge with and into AmSouth Georgia, a wholly-owned
subsidiary of AmSouth (the "Surviving Bank") (the "Merger"). See "Proposal 2--
THE MERGER--Effect of the Merger." For information on how FFSB shareholders
will be able to exchange certificates representing shares of FFSB Common Stock
for new certificates representing the shares of AmSouth Common Stock to be
issued to them, see "Proposal 2--THE MERGER--Surrender of Certificates."
CONSIDERATION FOR FFSB COMMON STOCK
The Agreements provide for the merger of FFSB with and into the Surviving
Bank (the "Merger"). At the time the Merger is consummated (the "Effective
Date"), each share of FFSB Common Stock, including shares held by FFSB's
employee stock ownership plan (excluding any shares held by FFSB, AmSouth or
their respective subsidiaries, other than shares held in a fiduciary capacity
or in satisfaction of a debt previously contracted), issued and outstanding at
the Effective Date will be converted into the right to receive (i) 0.9991 of a
share, subject to adjustment in certain circumstances (the "Conversion
Number"), of AmSouth Common Stock, except that cash will be paid in lieu of
issuing fractional shares of AmSouth Common Stock and to holders who perfect
dissenter's rights in accordance with applicable law. The shares of AmSouth
Common Stock to be received in exchange for each share of FFSB Common Stock are
sometimes collectively referred to herein as the "Consideration." Each
outstanding share of AmSouth Common Stock will remain outstanding and unchanged
as a result of the Merger. See "Proposal 2--THE MERGER--General" and "Price-
Based Termination and "DISSENTERS' RIGHTS."
The amount and form of the Consideration was arrived at through arm's-length
negotiations between AmSouth and FFSB. See "Proposal 2--THE MERGER--Background
of and Reasons for the Merger" and "--Opinion of Financial Advisor."
PRICE-BASED TERMINATION
The Merger Agreement may be terminated by FFSB, if the FFSB Board so
determines by a majority vote, at any time during the ten-day period commencing
with the Approval Date (as hereinafter defined), if the Average Closing Price
(as hereinafter defined) of shares of AmSouth Common Stock is less than $28.80;
provided, however, if FFSB elects to exercise its termination right pursuant to
the foregoing, it must give prompt written notice to AmSouth and, during the
seven-day period commencing with the receipt of such notice, AmSouth shall have
the option to increase the Consideration (as hereinafter defined) to be
received by the holders of FFSB Common Stock in the Merger by adjusting the
Conversion Number (as hereinafter defined) up to the number (calculated to the
nearest one one-hundredth) obtained by dividing the product of $28.80 and
0.9991 (i.e. $28.77) by the Average Closing Price. If AmSouth so elects within
such seven-day period, it shall give prompt written notice to FFSB of such
election and the revised Conversion Number, whereupon no termination shall have
occurred and the Merger Agreement shall remain in effect in accordance with its
terms (except as the Conversion Number shall have been so modified). An
increase in the Conversion Number could result in the number of Merger Shares
to be issued exceeding the number indicated on the cover page of this Proxy
Statement-Prospectus. See "Proposal 2--THE MERGER--Price-Based Termination."
11
<PAGE>
TREATMENT OF STOCK OPTIONS
In accordance with the terms of the FFSB stock option and incentive plans,
all options not previously vested become immediately exercisable upon a change
in control of FFSB. At the Effective Date, each outstanding stock option
granted under FFSB's stock option and incentive plans, will be cancelled in
exchange for (a) a number of shares of AmSouth Common Stock equal to (i) the
difference between (A) the product of the closing price of AmSouth Common Stock
on the Effective Date (the "AmSouth Closing Price") multiplied by the
Conversion Number and (B) the exercise price of such option, divided by (ii)
the AmSouth Closing Price, and (b) an amount of cash in lieu of any fractional
shares determined by multiplying such holder's fractional interest by the
AmSouth Closing Price.
MEETING OF FFSB SHAREHOLDERS
The Meeting will be held at 10:00 a.m., local time, on March 18, 1994 for the
purpose of considering and voting upon several proposals. FFSB shareholders
will be asked to approve the Charter Amendment and Agreements as well as the
adjournment of the Meeting for up to 29 days, if necessary, in order to solicit
additional proxies if shareholders holding two-thirds of the votes eligible to
be cast at the Meeting do not submit proxies in favor of the Merger (the
"Adjournment Proposal"). In addition, FFSB shareholders will also be asked to
elect three directors and ratify the appointment of Read, Martin, Slickman and
Sheats as independent auditors for the fiscal year ending September 30, 1994.
See "THE MEETING."
RECORD DATE; VOTE REQUIRED
Only FFSB shareholders of record at the close of business on February 8, 1994
(the "Record Date"), will be entitled to vote at the Meeting. The affirmative
vote of the holders of at least a majority of the shares entitled to vote shall
be required to approve the Charter Amendment. See "Proposal 1--CHARTER
AMENDMENT." The affirmative vote of the holders of at least two-thirds of the
shares outstanding on such date will be required to approve the Agreements. See
"Proposal 2--THE MERGER." The affirmative vote of holders of a majority of the
outstanding shares of FFSB Common Stock represented in person or by proxy at
the Meeting will be required to approve the Adjournment Proposal. Directors
will be elected by a plurality of votes cast. All other matters properly
brought before the meeting shall be determined by a majority of the votes cast.
As of the Record Date, there were 414,330 shares of FFSB Common Stock
outstanding and entitled to be voted.
The directors and executive officers of FFSB and their affiliates had the
ability to vote, as of the Record Date, 143,692 shares or approximately 33.6%
of the outstanding shares of FFSB Common Stock. The directors and executive
officers of AmSouth and their affiliates beneficially owned, as of the Record
Date, no shares of FFSB Common Stock. As of that date, no subsidiary of AmSouth
held of record or in the name of nominees any shares of FFSB Common Stock in a
fiduciary capacity. See "THE MEETING--Record Date; Vote Required."
Pursuant to the Merger Agreement, each member of the FFSB Board (who, in the
aggregate, had the ability to vote 25% of the outstanding shares of FFSB Common
Stock as of the Record Date) has entered into an agreement with AmSouth
providing that, through August 3, 1994, such member will vote his shares of
FFSB Common Stock in favor of the Merger. FFSB has been advised that its
executive officers intend to vote their shares in favor of the Charter
Amendment and the Agreements. It is also anticipated that directors and
executive officers of FFSB will vote for the Adjournment Proposal, if
necessary, as well as the other proposals. See "CERTAIN RELATED TRANSACTIONS--
Voting Agreements."
REASONS FOR THE MERGER; RECOMMENDATION OF THE FFSB BOARD
The FFSB Board of Directors has unanimously approved the Charter Amendment
and the Agreements and has determined that the Merger is fair to, and in the
best interests of, FFSB and its shareholders.
12
<PAGE>
Accordingly, the FFSB Board unanimously recommends that FFSB's shareholders
vote FOR approval of the Charter Amendment and the Agreements, as well as the
other matters to be considered at the Meeting. See "Proposal 2--THE MERGER-
Background of and Reasons for the Merger" and "FFSB's Reasons for the Merger."
For information on the interests of certain officers and directors of FFSB in
the Merger, see "Proposal 2--THE MERGER-Interests of Certain Persons in the
Merger."
OPINION OF FINANCIAL ADVISOR
Hovde Financial, Inc. ("Hovde") has rendered an opinion to FFSB that the
Consideration to be paid to FFSB shareholders is fair, from a financial point
of view. For additional information, see "Proposal 2--THE MERGER-Opinion of
Financial Advisor." The opinion of Hovde is attached as Appendix B to this
Proxy Statement-Prospectus. FFSB shareholders are urged to read the opinion in
its entirety for a description of the procedures followed, matters considered
and limitations on the reviews undertaken in connection therewith.
EFFECTIVE DATE
The Merger will become effective at the time when appropriate documents (the
"Closing Documents") to consummate the Merger are executed in accordance with
all legal requirements and are delivered or filed as required by law, or on
such later date as the Closing Documents may specify (the "Effective Date").
The Closing Documents will be delivered or filed within sixty days after the
later of (i) the expiration date of all applicable waiting periods in
connection with approvals of governmental authorities and (ii) the receipt of
any other required approvals, or on such later date as may be agreed by the
parties; provided that the closing will not take place until the expiration of
the periods contemplated under the provision concerning price-based
termination, if applicable, described under "Proposal 2--THE MERGER--Price-
Based Termination." The FFSB Board and the AmSouth Board may agree to close at
a later date than that specified in the Merger Agreement. See "Proposal 2 --THE
MERGER-Conditions to Consummation of the Merger" and "-Waiver and Amendments;
Termination."
CONDITIONS; REGULATORY APPROVALS
Consummation of the Merger, and issuance of the Merger Shares, is subject to
various conditions, including receipt of the FFSB shareholder approval
solicited hereby both to amend the Charter and for the Merger, receipt of the
necessary regulatory approvals, including the approval of the OTS pursuant to
12 C.F.R. Section 563b.3(i)(3), receipt of opinions regarding certain tax
aspects of the Merger and satisfaction of other customary closing conditions.
The regulatory approvals and consents necessary to consummate the Merger
include the approval of the Board of Governors of the Federal Reserve System
(the "Federal Reserve Board"), the OTS, the FDIC and the Georgia Commissioner
of Banking and Finance. The approvals of the Federal Reserve Board, the OTS and
the FDIC have been received and contain no material conditions. There can be no
assurance that the approval of the Georgia Commissioner of Banking and Finance
will be obtained or as to the timing or conditions of such approval. See
"Proposal 2--THE MERGER--Conditions to Consummation of the Merger," "-
Regulatory Approvals" and "-Conduct of Business Pending the Merger" and
"CERTAIN REGULATORY CONSIDERATIONS."
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated, and the Merger abandoned, prior to
the Effective Date, either before or after its approval by the shareholders of
FFSB, (i) by the mutual consent of AmSouth and FFSB or (ii) by either of them
individually under certain specified circumstances, including if the Merger has
not become effective by June 30, 1994, except that this deadline will be
automatically extended to September 30, 1994, if the regulatory approvals have
not been obtained in time for the Merger to occur by June 30, 1994. See
"Proposal 2--THE MERGER--Waiver and Amendments; Termination."
13
<PAGE>
In addition, the Merger Agreement contains a price-based termination
provision. Under this provision, the Merger Agreement may be terminated by FFSB
at any time during the ten-day period commencing with the Approval Date (as
hereinafter defined), but only if (i) the average closing price of AmSouth
Common Stock over a designated time period is less than $28.80 per share and
(ii) AmSouth elects not to increase the Consideration as specified in the
Merger Agreement. Prior to making any decision to terminate the Merger
Agreement, pursuant to this provision, the FFSB Board intends to consult with
its financial and other advisors and would consider such financial and other
information as it deems relevant to its decision. THE MATTER WOULD NOT,
HOWEVER, BE RESUBMITTED TO SHAREHOLDERS. See "Proposal 2--THE MERGER--Price-
Based Termination."
MANAGEMENT AFTER THE MERGER
The directors and officers of AmSouth and the Surviving Bank immediately
prior to the Effective Date will continue as directors and officers of those
respective entities thereafter. See "Proposal 2--THE MERGER--Management After
the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of FFSB's management and the FFSB Board have interests in the
Merger in addition to their interests as shareholders of FFSB generally. These
include, among other things, provisions in the Merger Agreement relating to
eligibility for certain AmSouth employee benefits and provisions in other
agreements between FFSB and certain of its officers or employees relating to
severance payments. See "Proposal 2--THE MERGER--Interests of Certain Persons
in the Merger."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
It is intended that the Merger will be treated as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, for federal income tax purposes, except with respect to
cash payments in lieu of a fractional share interest and for a dissenter's
shares, (i) no gain or loss will be recognized by an FFSB shareholder upon the
exchange of FFSB Common Stock for AmSouth Common Stock; (ii) the basis of such
AmSouth Common Stock will be the same as the holder's basis in the FFSB Common
Stock exchanged therefor; and (iii) the holding period of such AmSouth Common
Stock will include the period during which such holder held the FFSB Common
Stock exchanged therefor, provided that the FFSB Common Stock was held as a
capital asset immediately prior to the consummation of the Merger. Consummation
of the Merger is conditioned upon receipt by FFSB and AmSouth of an opinion of
Ernst & Young, or another tax advisor acceptable to FFSB, dated as of the
Effective Date, substantially to this effect. See "Proposal 2--THE MERGER--
Certain Federal Income Tax Considerations."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH SHAREHOLDER AND OTHER FACTORS, EACH HOLDER OF
FFSB COMMON STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO
DETERMINE THE PARTICULAR TAX CONSEQUENCES TO SUCH HOLDER OF THE MERGER
(INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX
LAWS).
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a "pooling of
interests" by AmSouth under GAAP. Consummation of the Merger is conditioned
upon the receipt by AmSouth of a letter from AmSouth's independent auditors
stating that the Merger will qualify to be accounted for in such a manner. See
"Proposal 2--THE MERGER--Accounting Treatment."
CERTAIN DIFFERENCES IN SHAREHOLDERS' RIGHTS
On the Effective Date, shareholders of FFSB, whose rights are governed by
FFSB's Charter and Bylaws and by federal law, will automatically become
shareholders of AmSouth, and their rights as shareholders of
14
<PAGE>
AmSouth will be determined by the Delaware General Corporation Law and by
AmSouth's Restated Certificate of Incorporation and Bylaws. The rights of
shareholders of AmSouth differ from rights of the shareholders of FFSB with
respect to certain important matters, including their rights to remove
directors, call special meetings and amend the bylaws and certificate of
incorporation or charter; the required shareholder votes as to certain matters;
statutory and other restrictions on certain business combinations; and the
existence of the AmSouth Stockholder Protection Rights Agreement (the "AmSouth
Rights Agreement"). For a summary of these differences, See "COMPARISON OF
RIGHTS OF SHAREHOLDERS."
Each outstanding share of AmSouth Common Stock has, and when issued each of
the Merger Shares will have, attached to it one right (an "AmSouth Right")
issued pursuant to the AmSouth Rights Agreement. Each AmSouth Right entitles
its registered holder to purchase (under certain circumstances) one one-
hundredth of a share of AmSouth Series A Preferred Stock, without par value,
for $115.00, subject to adjustment. The AmSouth Rights Agreement will not
prevent a takeover of AmSouth but may, however, have certain anti-takeover
effects. The AmSouth Rights may cause substantial dilution to a person or group
that acquires 15% or more of the outstanding AmSouth Common Stock unless the
AmSouth Rights are first redeemed by the Board of AmSouth. See "DESCRIPTION OF
AMSOUTH CAPITAL STOCK--AmSouth Rights Agreement."
DISSENTERS' RIGHTS
Under 12 C.F.R. Section 552.14, any holder of FFSB Common Stock who (i) has
given notice in writing to FFSB prior to the vote on the Merger at the Meeting
of his or her intent to demand payment for his or her shares if the Merger is
effectuated, (ii) does not vote his or her shares in favor of the Merger and
(iii) files with FFSB, (or AmSouth if the Merger has been consummated), within
60 days after the giving of notice to him or her by FFSB of the FFSB
shareholders' authorization of the Merger (which notice shall be given to such
dissenting FFSB Shareholder by FFSB within 10 days of such authorization), an
election stating his or her name, address, the number of shares as to which he
or she dissents and a demand for payment of the fair value of his or her shares
and simultaneously with the notice of election surrenders the certificates for
the FFSB Shares as to which such dissenter dissents, shall be entitled to the
fair value of his or her FFSB Common Stock. Failure to follow the statutory
provisions precisely may result in loss of dissenters' rights. These statutory
provisions are set forth in full in Appendix D to this Proxy Statement-
Prospectus and are summarized under "DISSENTERS' RIGHTS."
15
<PAGE>
STOCK PRICE AND DIVIDEND INFORMATION
AMSOUTH
AmSouth Common Stock is listed and principally traded on the NYSE under the
symbol "ASO."
The following table sets forth for the periods indicated the high and low
sales prices and trading volumes (in thousands of shares) of AmSouth Common
Stock as reported on the NYSE Composite Transactions reporting system (as
published in The Wall Street Journal) with respect to each calendar quarter
since January 1, 1991. The following table also shows the cash dividends
declared per share of AmSouth Common Stock. (AmSouth per share amounts and
shares traded have been restated to give effect to a three-for-two stock split
effective December 13, 1991.)
AMSOUTH COMMON STOCK
<TABLE>
<CAPTION>
HIGH LOW CASH SHARES TRADED
SALE SALE DIVIDEND (IN THOUSANDS)
------ ------ -------- -------------
<S> <C> <C> <C> <C>
1991
1st Quarter...................... $17.25 $12.38 $.24 1,124
2nd Quarter...................... 19.13 16.63 .24 1,325
3rd Quarter...................... 22.13 18.75 .24 3,784
4th Quarter...................... 22.13 19.13 .26 2,201
1992
1st Quarter...................... 27.38 21.38 .26 3,347
2nd Quarter...................... 31.13 26.13 .26 3,722
3rd Quarter...................... 29.00 26.00 .26 3,332
4th Quarter...................... 32.63 26.88 .29 1,962
1993
1st Quarter...................... 34.13 29.63 .29 4,621
2nd Quarter...................... 35.88 30.38 .29 4,267
3rd Quarter...................... 33.63 29.25 .29 6,034
4th Quarter...................... 31.50 27.38 .35 6,137
1994
*1st Quarter...................... 32.00 30.38 -- --
</TABLE>
- --------
* Through February 15, 1994
Shareholders are advised to obtain current market quotations for AmSouth
Common Stock. The market price of AmSouth Common Stock at the Effective Date,
or on the date on which certificates representing Merger Shares are received,
may be higher or lower than the market price at the time the Merger Agreement
was executed, at the date of mailing of this Proxy Statement-Prospectus or at
the time of the Meeting.
FFSB
As of the Record Date, FFSB had approximately 146 shareholders of record.
There is no established trading market for FFSB Common Stock and it has been
subject to only limited trading. The shares are not listed on any exchange or
quoted on any automated quotation system. The following table sets forth sales
prices for the shares, of which FFSB is aware. The prices are based upon trades
of FFSB Common Stock as reported by market makers in FFSB Common Stock, and may
reflect interdealer prices, without retail
16
<PAGE>
markup, markdown or commission and may not necessarily represent actual
transactions. These prices are not necessarily indicative of the fair market
value of the stock at the time of the trade and may not reflect all trades or
the price of those trades. FFSB converted from a mutual to a stock institution
on June 27, 1991.
<TABLE>
<CAPTION>
PRICE
------
<S> <C>
1991.............................................................. $11.75
1992.............................................................. $13.25
1993.............................................................. $19.75
</TABLE>
The Merger Agreement was publicly announced on August 3, 1993. The most
recent sale of FFSB Common Stock prior to the public announcement of the Merger
Agreement occurred in July, 1993, at $19.75 per share for 12,000 shares.
Management is not aware of any sales that have occurred since July, 1993.
The dividend history for FFSB on a quarterly basis (adjusted to conform to a
calendar year) since January 1, 1991 is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------------------------- ------------------------------- -------------------------------
FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash Dividends De-
clared............. $ .25 $ .25 $ .25 $ .25 $ .25 $1.22 $ .20 $ .17 $ .15 $ .13 n/a(1) n/a
</TABLE>
- --------
(1) FFSB was a mutual savings association prior to the third quarter of 1991.
17
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The following table sets forth for the AmSouth Common Stock and the FFSB
Common Stock certain historical, pro forma combined and pro forma equivalent
per share financial information. The proposed Merger with FFSB is accounted for
under the pooling of interests method, and pro forma data is derived
accordingly. The pro forma data does not purport to be indicative of the
results of future operations or the results that would have occurred had the
Merger been consummated on January 1, 1992. As discussed under "Proposal 2--THE
MERGER-Price-Based Termination," the Conversion Number is subject to possible
increase as a result of a decline in the price of AmSouth Common Stock. The pro
forma information presented would be different if the Conversion Number were so
adjusted.
The information shown below should be read in conjunction with the historical
and pro forma financial statements of AmSouth, including the respective notes
thereto, incorporated by reference herein, and with the historical financial
statements of FFSB appearing in Appendix C to this Proxy Statement-Prospectus,
including the notes thereto. See "AVAILABLE INFORMATION", "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE" and "SUMMARY CONDENSED CONSOLIDATED FINANCIAL
INFORMATION".
<TABLE>
<CAPTION>
AMSOUTH,
FFSB
AND OTHER
BUSINESS
AMSOUTH AND COMBINATIONS FFSB
HISTORICAL FFSB FFSB PRO FORMA PRO FORMA
-------------- PRO FORMA PRO FORMA COMBINED, EQUIVALENT,
PER COMMON SHARE AMSOUTH FFSB COMBINED EQUIVALENT(1) AS ADJUSTED(2) AS ADJUSTED(1),(2)
---------------- ------- ------ ----------- ------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
NET INCOME(3)
For the nine months
ended September 30,
1993.................. $ 2.39 $ 2.31 $ 2.39 $ 2.39 $ 2.10 $ 2.10
1993-Adjusted(4)...... 2.39 2.31 2.39 2.39 2.05 2.05
1992.................. 1.88 2.13 1.88 1.88 1.69 1.69
1992-Adjusted(5)...... 1.74 2.13 1.75 1.75 1.60 1.60
For the year ended
December 31,
1992.................. $ 2.55 $ 2.94(6) $ 2.55 $ 2.55 $ 2.33 $ 2.33
1992-Adjusted(5)...... 2.50 2.94(6) 2.50 2.50 2.30 2.30
1991.................. 2.17 1.98(6),(7) 2.17 2.17 1.49 1.49
1991-Adjusted(5)...... -- -- -- -- 1.38 1.38
1990.................. 2.17 2.04(6),(7) 2.17 2.17 1.30 1.30
1990-Adjusted(5)...... -- -- -- -- 1.19 1.19
CASH DIVIDENDS
For the nine months
ended September 30,
1993.................. $ .87 $ .75 $ .87(8) $ .87 $ .87(8) $ .87
1992.................. .78 1.59 .78(8) .78 .78(8) .78
For the year ended
December 31,
1992.................. $ 1.07 $ 1.84(6) $ 1.07(8) 1.07 1.07(8) 1.07
1991.................. .98 .28(6) .98(8) .98 .98(8) .98
1990.................. .94 -- .94(8) .94 .94(8) .94
BOOK VALUE(9)
As of September 30,
1993................... $21.75 $27.49 $21.80 $21.78 $21.87 $21.85
As of December 31, 1992. 19.48 26.21 19.54 19.52 19.94 19.92
As of December 31, 1992-
Adjusted(5)............ 20.26 26.21 20.32 20.30 20.51 20.49
</TABLE>
18
<PAGE>
- --------
(1) FFSB pro forma equivalent amounts are computed by multiplying the pro forma
combined amounts by the assumed Conversion Number of 0.9991.
(2) Amounts are adjusted to reflect the Other Business Combinations.
(3) Net income per common share is based on weighted average common shares
outstanding.
(4) Amounts are adjusted to exclude $4,900,000 pre-tax ($3,100,000 after-tax)
received by Mid-State Federal from the litigation settlement during the
nine months ended September 30, 1993.
(5) Amounts represent historical AmSouth per share data for the period as
adjusted to include the pro forma effect of the February 1, 1993
acquisition of FCFC.
(6) Amounts for FFSB have been adjusted to conform to a calendar year.
(7) On June 27, 1991, FFSB completed its Conversion from a depositor-owned
institution to a stockholder-owned institution by selling 402,500 shares.
Amounts are computed assuming the issuance occurred at the beginning of the
year without considering the investment benefit of the proceeds prior to
their actual receipt.
(8) Pro forma cash dividends represent historical cash dividends of AmSouth.
(9) Book value per common share is based on total period-end shareholders'
equity.
19
<PAGE>
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables present summary consolidated financial data for (i)
AmSouth on an historical basis, (ii) FFSB on an historical basis, (iii) AmSouth
and FFSB on a pro forma combined basis giving effect to the Merger, and (iv)
AmSouth and FFSB on a pro forma combined basis giving effect to the Merger, as
adjusted to give effect to the Other Business Combinations by AmSouth. For
information on the accounting treatment of these Other Business Combinations,
see "INTRODUCTION--Parties to the Merger." The pro forma data in the tables
assume that each outstanding share of FFSB Common Stock at September 30, 1993
is converted in the Merger into 0.9991 of a share of AmSouth Common Stock (with
cash being paid for fractional share interests) resulting in the issuance of
approximately 414,000 shares of AmSouth Common Stock and that the Merger is
accounted for as a "pooling of interests". See "Proposal 2--THE MERGER-
Accounting Treatment." These tables should be read in conjunction with the
historical and pro forma financial statements of AmSouth, including the
respective notes thereto, incorporated by reference herein and with the
historical financial statements of FFSB, including the respective notes
thereto, appearing in Appendices C and C-1 to this Proxy Statement-Prospectus.
See "AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE"
and "CERTAIN INFORMATION REGARDING FFSB." Interim historical data reflect, in
the respective opinions of management, all adjustments (consisting only of
normal recurring adjustments and such other adjustments as are described in the
notes) necessary for a fair presentation of such data. The pro forma combined
condensed financial information is presented for informational purposes only
and is not necessarily indicative of the combined financial position or results
of operations which would have actually occurred if the transactions had been
consummated in the past or which may be obtained in the future.
20
<PAGE>
AMSOUTH--HISTORICAL
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30 YEAR ENDED DECEMBER 31
-------------------- ------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
--------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
(In Thousands)
Gross Interest Margin... $ 325,780 $ 276,128 $375,998 $318,863 $281,393 $261,895 $250,551
Provision for Loan Loss-
es..................... 14,000 26,698 36,555 41,544 31,072 43,294 18,796
Noninterest Revenues.... 132,748 112,700 155,926 154,338 122,325 118,371 118,165
Noninterest Expenses.... 290,549 257,386 353,428 324,458 272,343 260,567 247,602
Applicable Income Taxes. 50,366 29,717 39,928 26,829 23,604 13,237 22,514
Net Income.............. 103,613 75,027 102,013 80,370 76,699 63,168 79,804
PER COMMON SHARE DATA
Net Income.............. $ 2.39 $ 1.88 $ 2.55 $ 2.17 $ 2.17 $ 1.73 $ 2.20
Cash Dividends Declared. .87 .78 1.07 .98 .94 .89 .84
Book Value.............. 21.75 19.10 19.48 18.02 16.75 15.50 14.67
AVERAGE STATEMENT OF
CONDITION
(In Millions)
Investment Securities... $ 2,246 $ 2,355 $ 2,323 $ 2,288 $ 2,033 $ 1,941 $ 1,861
Loans, Net of Unearned
Income................. 6,698 5,528 5,607 5,454 5,529 5,402 5,133
Allowance for Loan Loss-
es..................... 102 84 85 83 83 74 72
Total Earning Assets.... 9,919 8,299 8,353 8,004 7,690 7,459 7,082
Total Assets............ 10,783 9,101 9,156 8,823 8,498 8,275 7,979
Deposits................ 8,192 7,235 7,239 7,060 6,712 6,443 6,161
Long-Term Debt.......... 158 138 138 135 131 131 132
Shareholders' Equity.... 908 742 751 645 569 550 508
END-OF-PERIOD STATEMENT
OF CONDITION
(In Millions)
Investment Securities... $ 2,044 $ 2,468 $ 2,189 $ 2,475 $ 1,974 $ 1,951 $ 1,976
Loans, Net of Unearned
Income................. 6,995 5,745 5,992 5,562 5,642 5,628 5,313
Allowance for Loan Loss-
es..................... 104 87 89 83 80 91 72
Total Earning Assets.... 10,645 8,701 8,875 8,578 7,741 7,740 7,396
Total Assets............ 11,542 9,423 9,751 9,459 8,706 8,565 8,313
Deposits................ 8,346 7,240 7,429 7,373 7,067 6,672 6,511
Long-Term Debt.......... 157 137 136 139 129 131 131
Shareholders' Equity.... 955 766 783 716 589 561 533
SELECTED FINANCIAL RA-
TIOS
Return on Average Total
Assets................. 1.28% 1.10% 1.11% .91% .90% .76% 1.00%
Return on Average Common
Equity................. 15.25 13.50 13.58 12.47 13.49 11.49 15.70
Taxable Equivalent Gross
Interest Margin to
Average Earning Assets. 4.57 4.68 4.73 4.26 3.96 3.83 3.88
Overhead Ratio(1)....... 61.61 63.75 64.11 65.54 63.78 64.47 62.97
Dividend Payout......... 36.40 41.49 41.96 45.16 43.32 51.45 38.18
Average Equity to Aver-
age Assets............. 8.42 8.16 8.20 7.31 6.69 6.65 6.37
Allowance at End of Pe-
riod to Loans, Net of
Unearned Income........ 1.49 1.51 1.49 1.50 1.42 1.62 1.35
Allowance at End of Pe-
riod to Nonperforming
Loans (2).............. 262.97 211.28 181.63 153.50 111.51 121.46 99.60
Nonperforming Assets to
Loans, Net of Unearned
Income, Foreclosed
Properties and
Repossessions(3)....... .93 1.66 1.43 2.51 2.68 2.16 1.85
</TABLE>
- --------
(1) The Overhead Ratio is defined as noninterest expenses divided by the sum of
the taxable equivalent gross interest margin and noninterest revenues.
(2) Nonperforming loans include nonaccrual loans and restructured loans.
(3) Nonperforming assets include nonaccrual loans, restructured loans,
foreclosed properties and repossessions.
21
<PAGE>
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION--CONTINUED
FFSB--HISTORICAL(1)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
DECEMBER 31 YEAR ENDED SEPTEMBER 30
-------------- -------------------------------------------
1993 1992 1993 1992 1991 1990 1989
------ ------ ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF EARNINGS
(In Thousands)
Gross Interest Margin... $ 786 $ 808 $ 3,199 $ 2,939 $ 2,177 $ 1,928 $ 1,835
Provision for Loan Loss-
es..................... 25 31 125 127 132 102 31
Noninterest Revenues.... 138 123 520 483 462 596 743
Noninterest Expenses.... 481 390 1,587 1,497 1,402 1,323 1,291
Applicable Income Taxes. 144 174 722 673 356 352 365
Net Income.............. 274 336 1,283 1,125 749 747 891
PER COMMON SHARE(2)
Net Income.............. $ .66 $ .81 $ 3.10 $ 2.78 $ 1.86 $ 1.86 $ 2.21
Cash Dividends Declared. .25 .25 1.00 1.75 .13 -- --
Book Value.............. 27.89 26.37 27.49 26.37 24.88 13.87 13.45
AVERAGE STATEMENT OF
CONDITION
(In Millions)
Investment Securities... $ 14 $ 13 $ 11 $ 12 $ 5 $ 2 $ 1
Loans, Net of Unearned
Income................. 52 51 51 50 51 51 54
Allowance for Loan Loss-
es..................... -- -- -- -- -- -- --
Total Earning Assets.... 68 66 67 63 63 60 56
Total Assets............ 72 68 70 68 65 63 61
Deposits................ 59 56 58 57 58 57 56
Shareholders' Equity.... 11 11 11 11 7 5 5
END-OF-PERIOD STATEMENT
OF CONDITION
(In Millions)
Investment Securities... $ 16 $ 12 $ 12 $ 8 $ 6 $ 2 $ 1
Loans, Net of Unearned
Income................. 51 51 50 51 51 50 52
Allowance for Loan Loss-
es..................... -- -- -- -- -- -- --
Total Earning Assets.... 69 66 68 65 63 55 54
Total Assets............ 72 68 72 68 66 63 61
Deposits................ 60 56 60 56 56 57 56
Shareholders' Equity.... 12 11 11 11 10 6 5
SELECTED FINANCIAL RA-
TIOS
Return on Average Total
Assets................. 1.52% 1.99% 1.84% 1.66% 1.15% 1.19% 1.45%
Return on Average Common
Equity................. 9.67 12.22 11.53 10.71 10.49 14.22 17.91
Taxable Equivalent Gross
Interest Margin to Av-
erage
Earning Assets......... 4.77 5.60 4.52 5.36 4.42 4.25 4.13
Overhead Ratio(3)....... 49.83 37.04 42.67 38.58 45.29 44.36 42.48
Dividend Payout Ratio... 37.88 30.86 32.26 62.95 6.99 -- --
Average Equity to Aver-
age Assets............. 15.74 16.26 15.75 15.55 10.93 8.39 8.11
Allowance at End of Pe-
riod to Loans, Net of
Unearned Income........ 0.82 0.72 0.84 0.68 0.46 0.07 0.08
Allowance at End of Pe-
riod to Nonperforming
Loans(4)............... 296.05 194.76 195.38 191.16 95.51 22.02 --
Net Charge-Offs to Aver-
age Loans Net of Un-
earned Income.......... 0.04 0.02 0.06 0.04 0.04 0.10 0.03
Nonperforming Assets to
Loans Net of Unearned
Income,
Foreclosed Properties
and Repossessions(5)... 0.16 0.24 0.43 0.35 0.48 0.34 --
</TABLE>
- --------
(1) Certain terminology used in the presentation of FFSB's historical data has
been changed to conform with terminology used in AmSouth's presentation.
(2) On June 27, 1991, FFSB completed its Conversion from a depositor-owned
institution to a stockholder-owned institution by selling 402,500 shares.
Amounts for the years ended September 30, 1989 through 1991 are computed
assuming the issuance occurred on October 1, 1988 without considering the
investment benefit of the proceeds prior to their actual receipt.
(3) The Overhead Ratio is defined as noninterest expenses divided by the sum of
the taxable equivalent gross interest margin and noninterest revenues.
(4) Nonperforming loans include nonaccrual loans and restructured loans.
(5) Nonperforming assets include nonaccrual loans, restructured loans,
foreclosed properties and repossessions.
For more detailed information, see Appendices C: FFSB Form 10-KSB/A and C-1:
Form 10-Q.
22
<PAGE>
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION--CONTINUED
AMSOUTH AND FFSB PRO FORMA COMBINED
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1993
------------------
(IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
<S> <C>
STATEMENT OF CONDITION
Cash and Due from Bank...................................... $ 463,870
Time Deposits in Other Banks................................ 4,037
Federal Funds Sold and Securities Purchased Under Agreements
to Resell.................................................. 518,668
Trading Account Securities.................................. 73,367
Securities Held for Sale.................................... 765,088
Investment Securities....................................... 2,055,801
Mortgage Loans Held for Sale................................ 251,593
Loans, Net of Unearned Income............................... 7,045,575
Less Allowance for Loan Losses.............................. 104,346
-----------
Net Loans................................................... $ 6,941,229
Premises and Equipment, Net................................. 195,456
Other Real Estate Owned..................................... 24,824
Intangible Assets........................................... 94,964
Mortgage Servicing Rights................................... 30,715
Other Assets................................................ 194,269
-----------
$11,613,881
===========
DEPOSITS AND INTEREST-BEARING LIABILITIES
Deposits.................................................... $ 8,405,688
Federal Funds Purchased and Securities Sold Under Agreements
to Repurchase.............................................. 860,880
Other Borrowed Funds........................................ 885,686
Long-Term Debt.............................................. 159,556
-----------
Total Deposits and Interest-Bearing Liabilities............. 10,311,810
Other Liabilities........................................... 335,864
-----------
Total Liabilities........................................... 10,647,674
SHAREHOLDERS' EQUITY
Common Stock................................................ 45,820
Capital Surplus............................................. 373,373
Retained Earnings........................................... 574,345
-----------
993,538
Less: Cost of Common Stock in Treasury...................... 24,173
Deferred Compensation on Restricted Stock................... 3,158
-----------
Total Shareholder's Equity.................................. 966,207
-----------
$11,613,881
===========
Book Value per Common Share................................. $ 21.80
===========
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
ENDED ENDED
SEPTEMBER 30, 1993 DECEMBER 31,1992(1)
------------------ -------------------
<S> <C> <C>
STATEMENT OF EARNINGS
(In Thousands, Except Per Share Amounts)
Gross Interest Margin................... $ 328,124 $ 412,630
Provision for Loan Losses............... 14,094 41,486
Noninterest Revenues.................... 133,183 162,878
Noninterest Expenses.................... 291,730 377,982
Applicable Income Taxes................. 50,914 46,335
Net Income.............................. 104,569 109,705
Net Income per Share.................... $ 2.39 $ 2.50
Average Common Shares Outstanding....... 43,778 43,891
</TABLE>
- --------
(1) Adjusted to include the pro forma effect of the February 1, 1993
acquisition of FCFC.
For more detailed pro forma financial information, see "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE."
For information on regulatory capital ratios of AmSouth on both an historical
and a pro forma combined basis, see "CERTAIN REGULATORY CONSIDERATIONS--Capital
Adequacy."
For information on regulatory capital ratios of FFSB, see Appendix C: FFSB
Form 10-KSB/A and Appendix C-1: FFSB Form 10-Q.
24
<PAGE>
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION--CONTINUED
AMSOUTH, FFSB AND OTHER BUSINESS COMBINATIONS
PRO FORMA COMBINED (1)
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1993
------------------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
<S> <C>
STATEMENT OF CONDITION
Cash and Due from Bank...................................... $ 592,597
Federal Funds Sold and Securities Purchased Under Agreements
to Resell.................................................. 725,840
Trading Account Securities.................................. 73,367
Securities Held for Sale.................................... 1,175,834
Investment Securities....................................... 3,169,980
Mortgage Loans Held for Sale................................ 359,636
Loans, Net of Unearned Income............................... 9,794,033
Less Allowance for Loan Losses.............................. 146,459
-----------
Net Loans................................................... 9,647,574
Premises and Equipment, Net................................. 266,588
Other Real Estate Owned..................................... 52,732
Intangible Assets........................................... 266,875
Mortgage Servicing Rights................................... 59,564
Other Assets................................................ 264,082
-----------
$16,654,669
===========
DEPOSITS AND INTEREST-BEARING LIABILITIES
Deposits.................................................... $12,312,514
Federal Funds Purchased and Securities Sold Under Agreements
to Repurchase.............................................. 1,050,309
Other Borrowed Funds........................................ 1,166,821
Long-Term Debt.............................................. 310,278
-----------
Total Deposits and Interest-Bearing Liabilities........... 14,839,922
Other Liabilities........................................... 545,335
-----------
Total Liabilities......................................... 15,385,257
SHAREHOLDERS' EQUITY
Common Stock................................................ 59,555
Capital Surplus............................................. 593,441
Retained Earnings........................................... 643,747
-----------
1,296,743
Less: Cost of Common Stock in Treasury...................... 24,173
Deferred Compensation on Restricted Stock................... 3,158
-----------
Total Shareholders' Equity................................ 1,269,412
-----------
$16,654,669
===========
Book Value per Common Share................................. $ 21.87
===========
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS TWELVE MONTHS
ENDED ENDED
SEPTEMBER 30, 1993 DECEMBER 31, 1992(1)
------------------ --------------------
<S> <C> <C>
STATEMENT OF EARNINGS
(In Thousands, Except Per Share
Amounts)
Gross Interest Margin................. $453,380 $572,612
Provision for Loan Losses............. 27,036 67,196
Noninterest Revenues.................. 159,497 208,222
Noninterest Expenses.................. 399,271 513,596
Applicable Income Taxes............... 65,706 67,562
Net Income............................ $120,864 $132,480
Net Income per Share.................. $ 2.10 $ 2.30
Average Common Shares Outstanding..... 57,513 57,626
</TABLE>
- --------
(1) Adjusted to reflect the Other Business Combinations.
(2) Adjusted to include the pro forma effect of the February 1, 1993
acquisition of FCFC.
For more detailed pro forma financial information, see "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." For information on regulatory capital ratios
of AmSouth on both an historical and a pro forma combined basis after giving
effect to the Merger and to AmSouth's Other Business Combinations, see "CERTAIN
REGULATORY CONSIDERATIONS--Capital Adequacy."
26
<PAGE>
INTRODUCTION
GENERAL
This Proxy Statement-Prospectus is being furnished to the holders of common
stock, par value $.01 per share of FFSB (the "FFSB Common Stock") in connection
with the solicitation of proxies by the Board of Directors of FFSB (the "FFSB
Board") for use at the annual meeting of FFSB shareholders to be held at 10:00
a.m. local time on Friday, March 18, 1994, at the main office of FFSB located
at 208 North Wall Street, Calhoun, Georgia 30701, and at any adjournments or
postponements thereof (the "Meeting").
At the Meeting, the shareholders of record of FFSB Common Stock as of the
close of business on Tuesday, February 8, 1994 (the "Record Date"), will
consider and vote upon a proposal to approve an amendment of FFSB's Charter to
delete Section 8(A) thereof, which prohibits any person from acquiring more
than 10% of FFSB's stock for a period of five years following FFSB's mutual to
stock Conversion, provided that the Merger is approved and consummated; and the
Agreement and Plan of Merger, dated as of the 3rd day of August, 1993 (the
"Merger Agreement"), between FFSB and AmSouth Bancorporation, a Delaware
corporation ("AmSouth") and the related Plan of Merger and Merger Agreement
dated as of the 21st day of December 1993 (the "Plan of Merger"), pursuant to
which FFSB will merge with and into AmSouth Bank of Georgia (the "Surviving
Bank"), a wholly-owned subsidiary of AmSouth (the "Merger"). Upon consummation
of the Merger, and subject to certain adjustments, each outstanding share of
FFSB Common Stock, including shares held by FFSB's employee stock ownership
plan (except for shares held directly or indirectly by FFSB, other than in a
fiduciary capacity or in satisfaction of a debt previously contracted), will be
converted into the right to receive 0.9991 of a share of common stock, par
value $1.00 per share, of AmSouth ("AmSouth Common Stock"), except that cash
will be paid in lieu of fractional shares of AmSouth Common Stock. See "THE
MEETING" and "Proposal 1--CHARTER AMENDMENT" and "Proposal 2--THE MERGER."
In addition, shareholders of FFSB will also be asked to elect three directors
and ratify the appointment of Read, Martin, Slickman and Sheats as independent
auditors for FFSB for the fiscal year ending September 30, 1994. See "Proposal
3--ELECTION OF DIRECTORS" and "Proposal 4--RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS". The FFSB shareholders will also be asked to consider and
vote upon a proposal to approve the adjournment of the Meeting, if necessary,
to give the Board of Directors more time to solicit additional proxies in favor
of Proposal 2. See "Proposal 5--ADJOURNMENT PROPOSAL".
This Proxy Statement-Prospectus is also being furnished by AmSouth to FFSB
shareholders as a prospectus in connection with the issuance of shares of
AmSouth Common Stock as consideration in the Merger (the "Merger Shares").
All historical financial and share price-related information of AmSouth
contained herein has been adjusted to give effect to the three-for-two split on
AmSouth Common Stock paid on January 15, 1992 to AmSouth shareholders of record
on December 13, 1991.
PARTIES TO THE MERGER
AmSouth. AmSouth is a regional bank holding company headquartered in
Birmingham, Alabama, with 211 banking offices located in Alabama, Florida,
Tennessee and Georgia at September 30, 1993. At September 30, 1993, AmSouth had
total consolidated assets of approximately $11.5 billion, total consolidated
deposits of approximately $8.3 billion and total consolidated shareholders'
equity of approximately $954.8 million. AmSouth was the second largest bank
holding company headquartered in Alabama in terms of equity capital and assets,
based on September 30, 1993 information. Through its subsidiaries, AmSouth
offers a broad range of banking and bank-related services.
27
<PAGE>
AmSouth's largest subsidiary is AmSouth Alabama. At September 30, 1993,
AmSouth Alabama had total consolidated assets of approximately $9.1 billion,
total consolidated deposits of approximately $6.4 billion and total
consolidated shareholders' equity of approximately $714.4 million. AmSouth
Alabama is a full-service bank and had 147 banking offices located throughout
Alabama at September 30, 1993. AmSouth Alabama was the largest bank in Alabama,
based upon total assets at September 30, 1993. AmSouth's other major banking
subsidiaries are AmSouth Florida and AmSouth Tennessee. AmSouth also owns
AmSouth Bank of Georgia ("AmSouth Georgia"), currently headquartered in
Summerville, Georgia, AmSouth Bank of Walker County, headquartered in Jasper,
Alabama, The Georgia State Bank of Rome, headquartered in Rome, Georgia, and
Orange Bank, headquartered in Orlando, Florida.
At September 30, 1993, AmSouth Florida had total consolidated assets of
approximately $1.3 billion, total consolidated deposits of approximately $1.0
billion and total consolidated shareholders' equity of approximately $85.2
million. AmSouth Florida operated 25 offices in Florida at September 30, 1993.
At September 30, 1993, AmSouth Georgia had total assets of approximately
$31.1 million, total deposits of approximately $27.7 million and total
shareholders' equity of approximately $3.1 million. AmSouth Georgia operated
one office as of September 30, 1993.
Effective February 1, 1993, First Chattanooga Financial Corporation,
headquartered in Chattanooga, Tennessee ("FCFC"), merged with AmSouth, and
First Federal Bank, FSB, a subsidiary of FCFC, merged with AmSouth Tennessee.
The mergers were accounted for under the purchase method of accounting under
generally accepted accounting principles ("GAAP"). At September 30, 1993,
AmSouth Tennessee had total consolidated assets of approximately $967 million,
total consolidated deposits of approximately $777.7 million and total
consolidated shareholders' equity of approximately $110.9 million. AmSouth
Tennessee operated 20 offices in Tennessee as of September 30, 1993.
Effective October 14, 1993, Mickler Corporation, headquartered in Clearwater,
Florida ("Mickler"), merged with AmSouth, and The First National Bank of
Clearwater ("Clearwater"), a subsidiary of Mickler, merged with AmSouth
Florida. AmSouth issued approximately 2,987,000 shares of AmSouth Common Stock
in exchange for the outstanding shares of Mickler and Clearwater. These
acquisitions were accounted for as a pooling of interests under GAAP. At
September 30, 1993, Mickler had total consolidated assets of approximately $436
million and total consolidated deposits of approximately $335 million.
Also effective October 14, 1993, Charter Banking Corp., headquartered in St.
Petersburg, Florida ("Charter"), merged with AmSouth and First Gulf Bank, a
subsidiary of Charter, merged with AmSouth Florida. AmSouth paid approximately
$12.8 million in cash for all of the outstanding shares of both institutions.
These acquisitions were accounted for as a purchase under GAAP. At September
30, 1993, Charter had total consolidated assets of approximately $106 million
and total consolidated deposits of approximately $96 million.
Effective December 9, 1993, Mid-State Federal Savings Bank, located in Ocala,
Florida ("Mid-State Federal"), merged with AmSouth Florida. AmSouth issued
approximately 2,041,000 shares of AmSouth Common Stock and paid approximately
$31.7 million for all of the outstanding shares of Mid-State Federal common
stock; AmSouth also paid $542,000 upon cancellation of the outstanding options
to purchase Mid-State Federal common stock. This acquisition was accounted for
as a purchase under GAAP. At September 30, 1993, Mid-State Federal had total
consolidated assets of approximately $734 million and total consolidated
deposits of approximately $645 million.
Effective December 17, 1993, First Sunbelt Bankshares, Inc., headquartered in
Rome, Georgia ("First Sunbelt"), the parent company of The Georgia State Bank
of Rome, merged with AmSouth. AmSouth issued approximately 537,000 shares of
AmSouth Common Stock in exchange for all of the outstanding shares of First
Sunbelt common stock. This acquisition was accounted for as a pooling of
interests under GAAP. At September 30, 1993, First Sunbelt had total
consolidated assets of approximately $102 million and total consolidated
deposits of approximately $92 million.
28
<PAGE>
Effective January 3, 1994, Orange Banking Corporation, headquartered in
Orlando, Florida ("OBC"), the parent company of Orange Bank, merged with
AmSouth. AmSouth issued approximately 1,332,000 shares of AmSouth Common Stock
in exchange for all of the outstanding shares of OBC common stock. This
acquisition was accounted for as a pooling of interests under GAAP. At
September 30, 1993, OBC had total consolidated assets of approximately $346
million and total consolidated deposits of approximately $316 million.
Effective February 10, 1993, FloridaBank, a Federal Savings Bank,
headquartered in Jacksonville, Florida ("FloridaBank"), merged with AmSouth
Florida. AmSouth issued approximately 758,000 shares of AmSouth Common Stock
for all of the outstanding shares of FloridaBank. This acquisition was
accounted for as a pooling of interests under GAAP. At September 30, 1993,
FloridaBank had total consolidated assets of approximately $276 million and
total consolidated deposits of approximately $210 million.
In addition, AmSouth is a party to the other pending business combinations
described below. Except as noted, consummation of each of these transactions
remains subject to fulfillment of a number of conditions, including shareholder
and regulatory approvals. No assurances can be given that such conditions will
be fulfilled or that such transactions will be consummated.
On July 29, 1993, AmSouth signed an agreement to acquire Parkway Bancorp,
Inc. ("Parkway"), which is headquartered in Fort Myers, Florida, parent
company of Parkway Bank. At September 30, 1993, Parkway had total
consolidated assets of approximately $123 million and total consolidated
deposits of approximately $111 million. Under the terms of the agreement,
AmSouth will issue 0.4886 of a share of AmSouth Common Stock for each of
the outstanding shares of Parkway common stock, with AmSouth issuing a
total of 626,000 shares, subject to adjustment. Shareholder approval has
been received. This acquisition will be accounted for as a pooling of
interests under GAAP.
On August 9, 1993, AmSouth signed an agreement to acquire Citizens
National Bank of Naples, which is headquartered in Naples, Florida, and its
parent company, Citizens National Corporation ("Citizens"). At September
30, 1993, Citizens had total consolidated assets of approximately $285
million and total consolidated deposits of approximately $254 million.
Under the terms of the agreement, AmSouth will issue 0.3609 of a share of
AmSouth Common Stock for each of the outstanding shares of Citizens common
stock. At September 30, 1993, Citizens had 4,045,688 shares of common stock
outstanding. Shareholder and regulatory approvals have been received. This
acquisition will be accounted for as a pooling of interests under GAAP.
On September 12, 1993, AmSouth signed an agreement to acquire Fortune
Bank, which is headquartered in Clearwater, Florida, and its parent
company, Fortune Bancorp, Inc. ("Fortune"). Under the terms of the
agreement, Fortune shareholders may make an election to receive either cash
or AmSouth Common Stock based on a formula which takes into consideration
AmSouth's stock price during a future pricing period. Approximately one-
half of Fortune's shares will be exchanged for cash and one-half for
AmSouth Common Stock (subject to adjustment based upon the average price
per share of AmSouth Common Stock), with AmSouth issuing a total of
approximately 4,482,000 shares and approximately $142.5 million in cash. At
September 30, 1993, Fortune had total consolidated assets of approximately
$2.6 billion and total consolidated deposits of approximately $1.8 billion.
This acquisition will be accounted for as a purchase under GAAP.
These pending and completed transactions listed above (other than the merger
of FCFC with AmSouth) are sometimes referred to herein as the "Other Business
Combinations."
AmSouth continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and, in
some cases, negotiations frequently take place, and future business
combinations involving cash, debt or equity securities can be expected. Any
future business combination or series of business
29
<PAGE>
combinations that AmSouth might undertake may be material, in terms of assets
acquired or liabilities assumed, to AmSouth's financial condition. Recent
business combinations in the banking industry have typically involved the
payment of a premium over book and market values. This practice may result in
dilution of book value and net income per share for the acquirors.
AmSouth's other subsidiaries include AmSouth Mortgage Company, Inc., which
offers first mortgage loans through 44 originating offices in nine states,
AmSouth Leasing Corporation, a specialized lender providing equipment leasing,
and AmSouth Investment Services, Inc., a registered broker-dealer that provides
securities brokerage services.
AmSouth was incorporated under the laws of the State of Delaware in 1970. Its
principal executive office is located at 1400 AmSouth-Sonat Tower, 1900 Fifth
Avenue North, Birmingham, Alabama 35203. Its telephone number is (205) 320-
7151.
Additional information about AmSouth and its subsidiaries is included in
documents incorporated by reference in this Proxy Statement-Prospectus. See
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
FFSB. FFSB is a federally-chartered stock savings bank that converted from a
federally chartered mutual savings bank to a federally chartered stock savings
bank on June 27, 1991 (the "Conversion"). FFSB's business is conducted through
its office in Calhoun, Georgia. FFSB is primarily engaged in the business of
attracting deposits from the general public and using such deposits to
originate mortgage loans, consumer loans and commercial real estate and
residential construction loans. FFSB is a member of the Federal Home Loan Bank
of Atlanta, and its deposit accounts are insured by the Savings Association
Insurance Fund (the "SAIF") of the Federal Deposit Insurance Corporation (the
"FDIC"). FFSB received its Federal charter in 1949. At September 30, 1993, FFSB
had total assets of approximately $72 million, total deposits of approximately
$60 million and total shareholders' equity of approximately $11 million.
FFSB's office is located at 208 North Wall Street, Calhoun, Georgia 30701 and
its telephone number is (706) 629-2848. FFSB has no subsidiaries.
For additional information regarding FFSB, refer to the FFSB Forms 10-KSB/A
and 10-Q, which are Appendices C and C-1, respectively, hereto. See "AVAILABLE
INFORMATION" and "CERTAIN INFORMATION REGARDING FFSB."
30
<PAGE>
THE MEETING
GENERAL
This Proxy Statement-Prospectus is being furnished to FFSB shareholders in
connection with the solicitation of proxies by FFSB's Board of Directors (the
"FFSB Board") for use at the Meeting, and any adjournments or postponements
thereof, at which FFSB shareholders will be asked to consider and vote upon a
proposal to approve the Charter Amendment, the Merger Agreement and the Plan of
Merger and several other matters. The Meeting is scheduled to be held on March
18, 1994, at 10:00 a.m. local time, at the office of FFSB located at 208 North
Wall Street, Calhoun, Georgia 30701. Only holders of record of FFSB Common
Stock at the close of business on the Record Date are entitled to receive
notice of and to vote at the Meeting. At the Meeting, FFSB shareholders will
consider and vote upon the following: (i) a proposal to approve the Charter
Amendment; (ii) a proposal to approve the Merger Agreement and the Plan of
Merger (collectively, the "Agreements"); (iii) the election of directors; (iv)
the ratification of independent auditors; (v) a proposal to approve the
adjournment of the meeting, if necessary and (vi) such other matters as may
properly be brought before the Meeting. On each matter to be considered at the
Meeting, shareholders will have one vote for each share of FFSB Common Stock
held of record on the Record Date.
HOLDERS OF FFSB COMMON STOCK ARE REQUESTED PROMPTLY TO SIGN, DATE AND RETURN
THE ACCOMPANYING PROXY CARD TO FFSB IN THE ENCLOSED POSTAGE-PAID, ADDRESSED
ENVELOPE. FAILURE TO RETURN YOUR PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE
MEETING WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE CHARTER AMENDMENT AND
THE AGREEMENTS.
Any holder of FFSB Common Stock who has delivered a proxy may revoke it any
time before it is voted by either (i) giving written notice of revocation to
the Secretary of FFSB, (ii) properly submitting to FFSB a duly executed proxy
bearing a later date or (iii) voting in person at the Meeting. Any notice of
revocation should be sent to FFSB at 208 North Wall Street, Calhoun, Georgia
30701, Attention: Helen H. Jones, Secretary. The shares of FFSB Common Stock
represented by properly executed proxies received at or prior to the Meeting
and not subsequently revoked will be voted as directed in such proxies. IF
INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES
WILL BE VOTED FOR APPROVAL OF THE CHARTER AMENDMENT, THE AGREEMENTS, THE
ELECTION OF DIRECTORS, THE RATIFICATION OF INDEPENDENT AUDITORS AND THE
ADJOURNMENT OF THE MEETING FOR UP TO 29 DAYS, IF NECESSARY, IN ORDER TO SOLICIT
ADDITIONAL PROXIES IF SHAREHOLDERS HOLDING TWO-THIRDS OF THE VOTES ELIGIBLE TO
BE CAST AT THE MEETING DO NOT SUBMIT PROXIES IN FAVOR OF THE MERGER (THE
"ADJOURNMENT PROPOSAL"). IF ANY OTHER MATTERS ARE PROPERLY PRESENTED AT THE
MEETING FOR CONSIDERATION, THE PERSONS NAMED IN THE PROXY CARD ENCLOSED
HEREWITH WILL HAVE DISCRETIONARY AUTHORITY TO VOTE ON SUCH MATTERS IN
ACCORDANCE WITH THEIR BEST JUDGMENT; PROVIDED, HOWEVER, THAT SUCH DISCRETIONARY
AUTHORITY WILL ONLY BE EXERCISED TO THE EXTENT PERMISSIBLE UNDER APPLICABLE
STATE AND FEDERAL SECURITIES AND CORPORATION LAWS. As of the date of this Proxy
Statement-Prospectus, FFSB is unaware of any other matter to be presented at
the Meeting.
In addition to solicitation by mail, proxies may be solicited by the
officers, directors and employees of FFSB by telephone or telegram or in
person. Such directors, officers and employees will not be compensated
additionally for such solicitation, but may be reimbursed for out-of-pocket
expenses. Brokerage houses, nominees, fiduciaries and other custodians will be
requested to forward solicitation materials to beneficial owners and will be
reimbursed for their reasonable out-of-pocket expenses.
FFSB SHAREHOLDERS SHOULD NOT FORWARD ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
RECORD DATE; VOTE REQUIRED
Only holders of record of shares of FFSB Common Stock as of the Record Date
will be entitled to vote at the Meeting. The affirmative vote of the holders of
at least a majority of shares entitled to vote is required in order to approve
the Charter Amendment. The affirmative vote of the holders of at least two-
thirds of the
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shares of FFSB Common Stock outstanding on such date is required in order to
approve the Agreements. Therefore, a failure to return a properly executed
proxy card or to vote in person at the Meeting will have the same effect as a
vote against the Charter Amendment and the Agreements. Similarly, as described
below, abstentions and "broker non-votes" will have the effect of votes against
the Charter Amendment and the Agreements. Directors are elected by a plurality
of votes cast without regard to either proxies as to which authority to vote
for one or more nominees is withheld or broker non-votes, if applicable. The
ratification of independent auditors and the Adjournment Proposal require the
affirmative vote of holders of a majority of the outstanding shares of FFSB
Common Stock represented in person or by proxy at the Meeting. Abstentions are
considered in determining the number of shares represented in person or by
proxy at the meeting and, accordingly, will have the same effect as a vote
against the ratification of the independent auditors and the Adjournment
Proposal. Broker non-votes will have no effect on the outcome of the
ratification of the independent auditors and the Adjournment Proposal.
As of the Record Date, there were 414,330 shares of FFSB Common Stock
outstanding and entitled to vote at the Meeting, with each share being entitled
to one vote. The presence, in person or by proxy, of a majority of the
outstanding shares of FFSB Common Stock is necessary to constitute a quorum of
the shareholders in order to take action at a meeting of shareholders. For
these purposes, shares of FFSB Common Stock which are present, or represented
by proxy, at the Meeting will be counted for quorum purposes regardless of
whether the holder of the shares or proxy fails to vote on the Charter
Amendment, the Agreements or the other proposals or whether a broker with
discretionary authority fails to exercise its discretionary voting authority
with respect to the Charter Amendment or the Agreements or the other proposals.
Once a quorum is established, approval of the Charter Amendment requires the
affirmative vote of the holders of a majority of the outstanding shares of FFSB
Common Stock and approval of the Agreements requires the affirmative vote of
the holders of two-thirds of the outstanding shares of FFSB Common Stock. For
voting purposes therefore, abstentions and "broker non-votes" will have the
same effect as votes against the Charter Amendment and the Agreements.
Pursuant to the Merger Agreement, each member of the FFSB Board (who, in the
aggregate, had the ability to vote as of the Record Date 101,690 shares or 25%
of the outstanding shares of FFSB Common Stock) has entered into an agreement
with AmSouth providing that until August 3, 1994, such member will vote his
shares of FFSB Common Stock in favor of the Merger and against any business
combination or reorganization involving FFSB or its subsidiaries with any
entity other than AmSouth. See "CERTAIN RELATED TRANSACTIONS--Voting
Agreements."
The directors and executive officers of AmSouth and their affiliates
beneficially owned, as of the Record Date, no outstanding shares of FFSB Common
Stock. As of the Record Date, no subsidiary of either FFSB or AmSouth held of
record or in the name of nominees any shares of FFSB Common Stock in a
fiduciary capacity. No vote of holders of AmSouth Common Stock is required to
approve the Merger.
PROPOSAL 1. CHARTER AMENDMENT
The stockholders of FFSB are being asked to amend the Federal Stock Charter
of FFSB for the purpose of effecting the Merger with AmSouth. Section 8(A) of
the Charter currently restricts the acquisition of or offer to acquire shares
of FFSB's Common Stock. This provision expires automatically by the terms of
Section 8(A) on June 27, 1996, the fifth anniversary of the consummation of
FFSB's mutual to stock Conversion.
Section 8(A) provides that no person may acquire the beneficial ownership of
more than 10% of any class of an equity security of FFSB, for a period of five
years following FFSB's Conversion from mutual to stock form. This provision
does not apply to (a) a transaction in which FFSB forms a holding company
without change in the respective beneficial ownership interests of its
stockholders, (b) transactions in which underwriters purchase shares in
connection with a public offering or (c) the purchase of shares by a tax-
qualified employee stock benefit plan which is exempt from the approval
requirements under (S)574.3(c)(1)(vi)
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<PAGE>
of the OTS's regulations. Section 8(A) also provides that shares of FFSB Common
Stock acquired in violation of the foregoing 10% limitation will not be
accorded voting rights and will not be voted by any person or counted as voting
stock in connection with matters submitted to the stockholders of FFSB for a
vote. Such provisions would prohibit any person (including corporations) who
acquired more than 10% of the outstanding FFSB Common Stock from voting the
"excess shares" in any matter submitted to the stockholders of FFSB.
Since AmSouth proposes to acquire 100% of the issued and outstanding FFSB
Common Stock and since none of these exceptions of Section 8(A) would apply to
the Merger, without an amendment to the Charter, Section 8(A) would operate to
prevent the consummation of the Merger. Therefore, the FFSB Board unanimously
recommends the Charter Amendment; provided, however, that the approval of the
Charter Amendment is conditional on the approval and consummation of the
Merger. If the Merger is not approved or if the Merger is not consummated for
any reason, the Charter Amendment will not be effected.
PROPOSAL 2. THE MERGER
The following information, insofar as it relates to matters contained in the
Agreements, is qualified in its entirety by reference to the Agreements, which
are incorporated herein by reference and attached hereto as Appendices A and A-
1, respectively. FFSB shareholders are urged to read the Agreements carefully.
EFFECT OF MERGER
At the Effective Date, FFSB will merge with and into a wholly-owned
subsidiary of AmSouth. Subject to certain adjustments, each share of FFSB
Common Stock, including shares held by FFSB's employee stock ownership plan,
(excluding any shares held by FFSB, AmSouth or their respective subsidiaries,
other than shares held in a fiduciary capacity or in satisfaction of a debt
previously contracted) issued and outstanding at the Effective Date will be
converted into the right to receive 0.9991 of a share (the "Conversion Number")
of AmSouth Common Stock. The shares of AmSouth Common Stock to be received in
exchange for each share of FFSB Common Stock are referred to as the
"Consideration." Each share of AmSouth Common Stock outstanding immediately
prior to the Effective Date will remain outstanding and unchanged as a result
of the Merger.
No fractional shares of AmSouth Common Stock will be issued in connection
with the Merger. In lieu of issuing fractional shares, AmSouth will make a cash
payment equal to the fractional interest which an FFSB shareholder would
otherwise receive multiplied by the closing price of AmSouth Common Stock as
reported on the NYSE Composite Transactions reporting system (as reported by
The Wall Street Journal or, if not reported thereby, another authoritative
source) on the Effective Date.
The amount and form of the Consideration were arrived at through arm's-length
negotiations between AmSouth and FFSB. See "Background of and Reasons for the
Merger." For information regarding certain rights attached to each share of
AmSouth Common Stock, including, when issued, each of the Merger Shares, see
"DESCRIPTION OF AMSOUTH CAPITAL STOCK--AmSouth Rights Agreement."
PRICE-BASED TERMINATION
The Merger Agreement may be terminated by FFSB, if the FFSB Board so
determines by a majority vote, at any time during the ten-day period commencing
with the Approval Date (as hereinafter defined), if the Average Closing Price
(as hereinafter defined) of shares of AmSouth Common Stock is less than $28.80;
provided, however, if FFSB elects to exercise its termination right pursuant to
the foregoing, it must give prompt written notice to AmSouth and, during the
seven-day period commencing with the receipt of such notice, AmSouth shall have
the option to increase the Consideration to be received by the holders of FFSB
Common Stock in the Merger by adjusting the Conversion Number up to the number
(calculated to the
33
<PAGE>
nearest one one-hundredth) obtained by dividing the product of $28.80 and
0.9991 (i.e. $28.77) by the Average Closing Price. If AmSouth so elects within
such seven-day period, it shall give prompt written notice to FFSB of such
election and the revised Conversion Number, whereupon no termination shall have
occurred and the Merger Agreement shall remain in effect in accordance with its
terms (except as the Conversion Number shall have been so modified). An
increase in the Conversion Number could result in the number of Merger Shares
to be issued exceeding the number indicated on the cover page of this Proxy
Statement-Prospectus. The "Average Closing Price" shall mean the average
closing price per share of AmSouth Common Stock as reported on the NYSE
Composite Transaction reporting system (as reported by The Wall Street Journal
or, if not reported thereby, another authoritative source) for the twenty NYSE
trading days ending on the fifth business day prior to the date (the "Approval
Date") of receipt of the last regulatory approval required for consummation of
the Merger. However, there can be no assurance that AmSouth would elect to
increase the Consideration as described above if the Average Closing Price were
less than $28.80. Moreover, there can be no assurance that the FFSB Board would
exercise its right not to consummate the Merger if the Average Closing Price
were less than $28.80 and AmSouth elected not to increase the Consideration in
the manner described above.
Prior to making any decision not to consummate the Merger pursuant to the
provisions described above, the FFSB Board intends to consult with its
financial and other advisors and would consider financial and other information
as it deems relevant to its decision. THE MATTER WOULD NOT, HOWEVER, BE
RESUBMITTED TO THE SHAREHOLDERS OF FFSB.
TREATMENT OF STOCK OPTIONS
At the Effective Date, the holders of stock options (the "FFSB Options")
granted under FFSB's 1991 Incentive Stock Option Plan and 1991 Stock Option
Plan for Outside Directors shall automatically receive, by virtue of the
Merger, for each FFSB Option which has not been exercised prior to the
Effective Date, (a) a number of shares of AmSouth Common Stock equal to (i) the
difference between (A) the product of the closing price of AmSouth Common Stock
on the Effective Date (the "AmSouth Closing Price") multiplied by the
Conversion Number and (B) the exercise price of such FFSB Option, divided by
(ii) the AmSouth Closing Price, and (b) an amount of cash in lieu of any
fractional share determined by multiplying such holder's fractional interest by
the AmSouth Closing Price.
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. Originally chartered in 1949, FFSB converted to the
stock form of organization in 1991. The years since the Conversion have been a
period of substantial and rapid change in the banking industry, characterized
by intensifying competition and consolidation. During this period, the
management of FFSB and the FFSB Board have considered these changes over time
and have sought to best position FFSB to benefit from the consolidation that
has been occurring.
On June 8, 1993, Henry E. Holland, Chairman of the Board, President and Chief
Executive Officer of FFSB, met with a representative of AmSouth, who expressed
an interest on behalf of AmSouth in exploring a possible acquisition of FFSB.
At the FFSB Board meeting on the same date, the FFSB Board authorized Mr.
Holland to continue discussions with AmSouth and to allow AmSouth to conduct a
due diligence investigation of FFSB for purposes of enabling AmSouth to
determine whether to pursue a possible business combination. AmSouth was viewed
by the FFSB Board as an attractive potential acquiror for a transaction based
upon the prospect of receiving a fair price for the FFSB shareholders, the
potential value of AmSouth's Common Stock, and the nature of its business.
A special committee of the FFSB Board was established to engage a financial
advisor to furnish advisory services pertaining to the possible sale of FFSB.
The committee contacted several firms with expertise in this area and after
review and consideration of each firm, the committee selected Hovde. At a
regular meeting of the FFSB Board held on July 16, 1993, a representative of
Hovde made a presentation to the FFSB Board
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concerning the results of its analysis concerning the range of values which
would be fair from a financial point of view to shareholders for the
acquisition of FFSB.
After a preliminary sharing of information, the FFSB management and the FFSB
Board had discussions with representatives of AmSouth concerning AmSouth's
operations, banking philosophy, expansion strategy, employee benefits and how
FFSB would fit into AmSouth's plans.
On July 26, 1993, a special meeting of the FFSB Board was held, with
representatives of Hovde in attendance, to consider AmSouth's proposed offer.
Mr. Holland presented the FFSB Board with an outline of the proposed Merger and
explained the rationale behind the Merger and an assessment of the benefits of
such a combination to both companies summarized under "FFSB's Reasons for the
Merger". Also, at this meeting, Hovde advised that the offer was in a range
such that Hovde would be in a position to render a fairness opinion at the
proposed price level. After extensive discussion, the FFSB Board accepted the
offer in terms of price and authorized Mr. Holland, with the assistance of
counsel and Hovde, to negotiate a definitive agreement with AmSouth.
On August 3, 1993, the FFSB Board, after review of the proposed definitive
agreement, unanimously approved the Merger Agreement, and authorized Mr.
Holland to execute the Merger Agreement.
Reasons for the Merger. The FFSB Board has unanimously approved the Merger
Agreement and has determined that the Merger is fair to, and in the best
interests of, FFSB and its shareholders. The FFSB Board therefore unanimously
recommends that holders of FFSB Common Stock vote for the ratification and
approval of the Merger Agreement. The FFSB Board believes that the Merger will
enable FFSB shareholders receiving consideration to participate in
opportunities for growth that the FFSB Board believes the Merger makes
possible.
The FFSB Board, with the assistance of outside financial and legal advisors,
has evaluated the financial, legal and market considerations bearing on the
decision to recommend the Merger. The terms of the Merger, including the
purchase price, are a result of arm's-length negotiations between
representatives of FFSB and AmSouth. In reaching its determination that the
Merger Agreement is fair to, and in the best interests of, FFSB and holders of
FFSB Common Stock, the FFSB Board considered a number of factors, both from a
short-term and a long-term perspective, including, without limitation, the
following:
(i) The FFSB Board's familiarity with and review of FFSB's business,
financial condition, results of operations and prospects, including, but
not limited to, its potential growth, development, productivity and
profitability;
(ii) The current and prospective environment in which FFSB operates,
including national and local economic conditions, the competitive
environment for savings and other financial institutions generally, the
increased regulatory burden on financial institutions generally and the
trend toward consolidation in the financial services industry;
(iii) Information concerning the business, financial condition, results
of operations and prospects of AmSouth, including the pending acquisitions
and the recent performance of AmSouth Common Stock;
(iv) The value to be received by holders of FFSB Common Stock pursuant to
the Merger, in relation to the historical trading prices and book value of
FFSB Common Stock and the illiquidity of the market for the FFSB Common
Stock;
(v) The oral presentation of Hovde and the opinion of Hovde that the
Consideration is fair to the holders of FFSB Common Stock from a financial
point of view (See "Opinion of Financial Advisor");
(vi) The financial and other significant aspects of the AmSouth offer;
(vii) The review by the FFSB Board, along with its legal and financial
advisors, of the provisions of the proposed Merger Agreement;
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(viii) The belief of the FFSB Board that the terms of the Merger
Agreement are attractive in that it would allow FFSB's shareholders to
become shareholders in AmSouth, an institution with strong operations,
management and earnings performance;
(ix) The expectation that AmSouth will continue to provide quality
service to the community and customers served by FFSB; and
(x) The compatibility of the respective business and management
philosophies of AmSouth and FFSB.
AmSouth's Reasons for the Merger. The AmSouth Board of Directors (the
"AmSouth Board") has approved the Merger Agreement and determined that the
Merger and the issuance of the Merger Shares pursuant thereto are in the best
interests of AmSouth and its shareholders. In approving the Merger Agreement,
the AmSouth Board considered a number of factors. The material factors
considered by the AmSouth Board were the following:
(i) A review, based in part on a presentation by AmSouth management, of
(a) the business, operations, earnings and financial condition of FFSB on
an historical, prospective and pro forma basis, (b) the demographic,
economic and financial characteristics of Calhoun, Georgia and (c) the
results of AmSouth's due diligence review of FFSB; and
(ii) A variety of factors affecting and relating to the overall strategic
focus of AmSouth, including AmSouth's desire to expand in areas near
Alabama and to improve its presence in the northwest Georgia market.
OPINION OF FINANCIAL ADVISOR
Hovde was chosen as FFSB's financial advisor in connection with the Merger on
the basis of its expertise in the valuation of securities in connection with
investments, mergers and acquisitions. Hovde is a financial consulting and
investment banking firm that is engaged, among other things, in the evaluation
of thrift and banking institutions and their securities, the negotiation and
structuring of merger and acquisition transactions, and other financial
advisory matters for financial institutions. Except as described herein, Hovde
is not affiliated in any way with FFSB, AmSouth or their respective affiliates.
On July 16, 1993, in connection with their consideration of the proposed
Merger, Hovde advised the FFSB Board of Hovde's opinion that the Consideration
to be issued to FFSB shareholders in the proposed Merger was fair from a
financial point of view. Hovde has delivered a fairness opinion to the FFSB
Board, dated February 15, 1994 (the "Opinion"), stating that as of such date,
and on the basis set forth therein, the Consideration to be paid to the FFSB
shareholders is fair from a financial point of view. A copy of the Opinion,
which sets forth the assumptions made, matters considered and limitations on
the review undertaken by Hovde, is attached as Appendix B to this Proxy
Statement/Prospectus and should be read in its entirety by FFSB shareholders.
Hovde's Opinion is directed to the FFSB Board only and does not constitute a
recommendation to any FFSB shareholder as to how such shareholder should vote
at the Meeting. As set forth therein, Hovde has relied, without independent
verification, upon the accuracy and completeness of certain publicly available
business and financial information relating to FFSB and AmSouth and certain
other financial information, including financial forecasts, provided to it by
FFSB for purposes of the Opinion. No limitations were imposed on the scope of
Hovde's investigation or the procedures followed by Hovde in rendering its
Opinion.
For purposes of the Opinion, Hovde reviewed the Merger Agreement and analyzed
various financial information relating to FFSB and AmSouth, including FFSB's
and AmSouth's most recently audited financial statements and regulatory reports
filed with the OTS and the Securities and Exchange Commission (the "SEC"). In
addition, Hovde had discussions with the management of FFSB concerning its
business, operations, assets, financial condition and prospects; performed a
discounted cash flow analysis of FFSB, projecting the net present value per
common share of FFSB for certain cash flows attributable to such shares
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over future periods utilizing varying assumptions; reviewed the historical
market prices and limited trading activity of FFSB Common Stock and historical
market prices and trading activity of AmSouth Common Stock; compared the
results of operations of FFSB and AmSouth with those of certain other companies
with operations deemed by Hovde to be reasonably similar; reviewed the markets
for the common stock of thrift and banking institutions, placing particular
emphasis on those institutions located in the southeastern United States;
compared the consideration to be paid in the Merger with the nature and terms
of certain other transactions deemed by Hovde to be reasonably similar; and
considered such other matters and made such other financial analyses and
investigations as Hovde deemed appropriate. On the basis of the foregoing,
Hovde determined that the consideration to be paid to shareholders of FFSB in
the Merger is fair from a financial point of view.
The following paragraphs summarize the material portions of the financial and
comparative analyses performed by Hovde in arriving at its Opinion as to the
fairness, from a financial point of view, of the Consideration to be paid by
AmSouth in the Merger. The following summary does not purport to be a complete
description of the analyses performed, or the matters considered, by Hovde in
arriving at its Opinion.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances, and, therefore,
such an opinion is not readily susceptible to summary description. Furthermore,
in arriving at its Opinion, Hovde did not attribute any particular weight to
any analysis or factor considered by it, but rather made qualitative judgments
as to the significance and relevance of each analysis and factor. Accordingly,
Hovde believes that its analyses must be considered as a whole and that
considering any portions of such analyses 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 analyses, Hovde
made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond
FFSB'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, Hovde's Opinion, along with its presentation to the FFSB
Board, is just one of many factors taken into consideration by the FFSB Board.
Analysis of AmSouth Offer. Hovde reviewed the value of the consideration
offered assuming a trading price for AmSouth Common Stock of $32 per share and
an exchange ratio of one share of AmSouth Common Stock for one share of FFSB
Common Stock. Utilizing these assumptions, Hovde calculated that AmSouth's
offer equated to a multiple of approximately 1.28 of FFSB's March 31, 1993
stated book value and approximately 11.35 of FFSB's earnings for the twelve
month period ended March 31, 1993. Given the lack of trading activity in FFSB's
Common Stock, it was not feasible to calculate a premium relating to the
AmSouth offer versus the current trading price of the FFSB Common Stock. Hovde
updated its analysis and performed the above stated calculations as of February
15, 1994, utilizing FFSB's stated book value as of December 31, 1993, earnings
for the twelve month period ended December 31, 1993, a closing price of $30.625
for the AmSouth Common Stock and the Conversion Number of 0.9991, as specified
in the Merger Agreement.
Selected Group Analysis. Hovde also compared the financial performance of
AmSouth and pricing ratios of AmSouth's Common Stock to a selected group of
bank holding companies, using publicly-available information, including
information prepared by RP Financial, Inc. ("RP Financial"). Such companies
included SouthTrust Corporation, First Alabama Bancshares, Inc., SunTrust
Banks, Inc., Synovus Financial Corp., Bank South Corporation, Barnett Banks,
Inc., First American Corporation, First Tennessee National Corporation, Union
Planters Corporation, Crestar Financial Corporation and Signet Banking
Corporation. This analysis showed, among other things, that AmSouth's return on
assets, based upon trailing twelve month earnings and average assets, as
reported in the July 9, 1993 RP Financial Commercial Bank Market Line,
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amounted to 1.23% versus the group average for the eleven above noted bank
holding companies of 1.01% and the RP Financial composite average for sixty
Southeast commercial banks and bank holding companies of 0.97%. AmSouth's
return on equity, based upon trailing twelve month earnings and average equity,
again as reported in the July 9, 1993 RP Financial Commercial Bank Market Line,
amounted to 14.21% versus the group average for the eleven bank holding
companies of 14.07% and the RP Financial composite average for the sixty
Southeast commercial banks and bank holding companies of 12.35%. AmSouth's
reported ratio of non-performing assets to total assets amounted to 0.86%
versus the eleven company average of 1.23%. The RP Financial Commercial Bank
Market Line also reported a price to earnings multiple for AmSouth Common Stock
of 12.18 and a price to tangible book ratio of 187.26%, again as reported in
the July 9, 1993 RP Financial Commercial Bank Market Line, versus an average
price to earnings multiple of 14.64 for the eleven company group and an average
price to tangible book ratio of 207.32% for that same group. The above noted RP
Financial publication also reported an average price to earnings multiple of
12.49 for the sixty company Southeast group and an average price to tangible
book ratio of 172.18% for that same group.
Given the lack of trading activity in the FFSB Common Stock, it was not
possible to perform a comparable analysis of the financial performance of FFSB
and the pricing ratios of the FFSB Common Stock relative to that of other
actively traded financial institutions. However, as noted above, Hovde
performed a financial analysis of FFSB and compared its financial strength and
earnings performance to industrywide and regional aggregates of comparable
financial institutions.
Analysis of Selected Merger Transactions. Hovde reviewed certain financial
data, including information prepared by SNL Data Service, relating to selected
recent thrift merger transactions involving institutions throughout the United
States, including many located in the southeastern United States. The selection
included a total of thirty-seven pending thrift mergers and twenty recently
completed thrift mergers. In each transaction, Hovde reviewed the price as a
multiple to recent earnings and book value. In regard to the thirty-seven
selected pending transactions, the median price to book multiple was 1.45 and
the median price to earnings multiple was 13.0. Sixteen of the thirty-seven
pending transactions indicated total consideration of less then $25 million.
The median price to book multiple of these sixteen transactions was 1.48 and
the median price to earnings multiple was 9.7. The mean price to book value
multiple for the thirty-seven transactions was 1.47 and the mean price to
earnings multiple was 13.3. The mean price to book value multiple for the
sixteen transactions involving consideration of less than $25 million was 1.34
and the mean price to earnings multiple was 11.2. In regard to the group of
twenty recently completed transactions, the median price to book multiple was
1.06 and the median price to earnings multiple was 13.4. Eight of the twenty
recently completed mergers involved consideration of less than $25 million. The
median price to book value multiple for these eight transactions was 1.01 and
the median price to earnings multiple was 13.6. The mean price to book value
multiple for the twenty completed transactions was 1.17 and the mean price to
earnings multiple was 13.6. The mean price to book value multiple for the eight
transactions involving consideration of less than $25 million was 1.09 and the
mean price to earnings multiple was 11.6.
No company or transaction used in the above analysis as a comparison is
identical to FFSB, AmSouth or the contemplated transaction. Accordingly, an
analysis of the results of the foregoing is not mathematical: rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the companies and other factors that
could affect the public trading value of the companies to which they are being
compared.
Discounted Cash Flow Analysis. In connection with the rendering of its
Opinion, Hovde performed a discounted cash flow analysis of FFSB, projecting
the net present value per common share of FFSB for certain cash flows
attributable to such shares over future periods utilizing varying assumptions.
Hovde performed this analysis utilizing annual discounts of 12% and 15% and
assuming dividend payout equal to 100% of net income and 40% of net income.
Hovde assumed annual asset growth of 3.8%, equivalent to FFSB's annual asset
growth over the fiscal year 1989 through March 31, 1993 period. Hovde projected
net income at a constant level of $1,248,000, equivalent to FFSB's earnings for
the twelve month period ended March 31, 1993. Based upon this analysis, the
aggregate range of offers that FFSB would need to receive in three years
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to equate to the AmSouth offer extends from a multiple of the book value of
FFSB of approximately 1.40 to over 1.50 and a multiple of the earnings of FFSB
of approximately 12.5 to over 15.0.
FFSB has agreed to pay Hovde total fees of $22,000 for delivery of its
fairness opinion and related financial advisory services. FFSB has also agreed
to reimburse Hovde for its reasonable out-of-pocket costs and expenses incurred
in connection with the activities contemplated by its engagement. FFSB has
further agreed to indemnify and hold harmless Hovde from and against certain
liabilities which may arise in connection with the engagement of Hovde.
EFFECTIVE DATE
Unless otherwise agreed upon by AmSouth and FFSB, and subject to the
conditions to the obligations of the parties to effect the Merger, the
effective date of the Merger will be the date that the appropriate documents to
consummate the Merger (the "Closing Documents") are executed in accordance with
all legal requirements and delivered or filed as required by law or on such
later date as the Closing Documents may specify (the "Effective Date"). On a
date to be chosen by AmSouth, the Closing Documents will be delivered or filed
within sixty (60) days after the later of (i) the expiration date of any
applicable waiting period in connection with any regulatory approvals by
governmental authorities and (ii) the receipt of all other required approvals,
or on such later date as may be agreed upon by the parties; provided, however,
that the closing will not take place until the expiration of the periods
contemplated by the price-based termination provisions described under "Price-
Based Termination," if applicable. The FFSB Board and the AmSouth Board may
agree to close at a later date than that specified in the Merger Agreement.
SURRENDER OF CERTIFICATES
As promptly as practicable after the Effective Date, AmSouth will cause
AmSouth Alabama or such other bank or trust company selected by AmSouth, acting
in the capacity of exchange agent for AmSouth (the "Exchange Agent"), to mail
to each former holder of record of FFSB Common Stock a form of letter of
transmittal, which will contain detailed instructions for the exchange of such
holder's certificates representing shares of FFSB Common Stock for the
certificates representing shares of AmSouth Common Stock. Shareholders who have
questions about the exchange procedures may call AmSouth's Investor Relations
Department at 205-583-4439.
HOLDERS OF FFSB COMMON STOCK SHOULD NOT SEND IN ANY STOCK CERTIFICATES UNTIL
THEY RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FROM THE EXCHANGE
AGENT.
Upon surrender to the Exchange Agent of certificates for FFSB Common Stock,
together with a properly completed letter of transmittal, there will be issued
and mailed to the holder of FFSB Common Stock surrendering such items a
certificate or certificates representing the number of shares of AmSouth Common
Stock to which such holder is entitled, if any, and a check for the amount,
where applicable, to be paid in lieu of any fractional share interest, without
interest.
After the Effective Date, to the extent permitted by law, former holders of
record of FFSB Common Stock will be entitled to vote at a meeting of holders of
AmSouth Common Stock the number of shares of AmSouth Common Stock into which
their FFSB shares have been converted, regardless of whether such holders have
surrendered their FFSB Common Stock certificates. No dividend or other
distribution payable after the Effective Date with respect to AmSouth Common
Stock, however, will be paid to the holder of any unsurrendered FFSB
certificate until the holder duly surrenders such certificate. Upon such
surrender all undelivered dividends and other distributions and, if applicable,
a check for the amount representing any fractional share interest will be
delivered to such holder, without interest.
After the Effective Date, there will be no transfers on FFSB's stock transfer
books of shares of FFSB Common Stock. If certificates representing shares of
FFSB Common Stock are presented for transfer after the Effective Date, they
will be canceled and exchanged for the shares of AmSouth Common Stock, if any,
and a check for the amount due in lieu of fractional shares, if any,
deliverable in respect thereof.
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None of AmSouth, the Exchange Agent or any other person will be liable to any
former holder of FFSB Common Stock for any amount or property properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
If a certificate for FFSB Common Stock has been lost, stolen or destroyed,
the Exchange Agent will issue the Consideration properly payable in accordance
with the Merger Agreement upon receipt of appropriate evidence as to such loss,
theft or destruction, appropriate evidence as to the ownership of such
certificate by the claimant and appropriate and customary indemnification.
CONDITIONS TO CONSUMMATION OF THE MERGER
Conditions to Each Party's Obligations. The respective obligations of AmSouth
and FFSB to effect the Merger are subject to the satisfaction of certain
conditions, including the following:
(i) receipt of the requisite approval of the holders of FFSB Common Stock
solicited hereby;
(ii) receipt of the required approval of (a) the Board of Governors of
the Federal Reserve System (the "Federal Reserve Board"), (b) the Federal
Deposit Insurance Corporation (the "FDIC"), (c) the Office of Thrift
Supervision (the "OTS") and (d) the Georgia Commissioner of Banking &
Finance (the "Georgia Commissioner") with respect to the Merger and the
conclusion of any statutory waiting periods in connections therewith;
receipt of all other regulatory consents and approvals and satisfaction of
all other requirements prescribed by applicable laws, rules or regulations;
provided, however, that no approval or consent shall have imposed any
conditions or requirements which would (x) result in any material
limitation on the ability of AmSouth to effectively exercise full rights of
ownership of all the shares of FFSB Common Stock, (y) require a divestiture
which would constitute, if made solely by FFSB, a material portion of
FFSB's business or properties or, (z) in the good faith reasonable judgment
of the AmSouth Board, otherwise materially and adversely effect the
economic assumptions of the transactions contemplated hereby so as to
render inadvisable the consummation of the Merger (all of the required
regulatory approvals, other than that of the Georgia Commissioner, have
been received and all statutory waiting periods have expired; of the
approvals that have been received, none contained any conditions described
in (x), (y) or (z) above);
(iii) the absence of any unstayed or final injunction prohibiting the
consummation of the Merger and of any pending or threatened litigation or
proceeding by any governmental authority before any court or agency seeking
to restrain, prohibit or invalidate the Merger or any other transaction
provided for in the Merger Agreement;
(iv) receipt by AmSouth of all state securities laws and "blue sky"
permits and other authorizations necessary to consummate the transactions
contemplated by the Merger Agreement;
(v) the Registration Statement (as hereinafter defined) shall have become
effective and no stop orders suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC; and
(vi) receipt by FFSB and its directors and AmSouth and its officers and
directors who signed the Registration Statement of an opinion from Ernst &
Young, or another tax advisor acceptable to FFSB, dated the Effective Date,
in form and substance satisfactory to FFSB, to the effect described under
"Certain Federal Income Tax Considerations."
For a discussion of the regulatory approvals required for consummation of the
Merger, See "Proposal 2--THE MERGER--Regulatory Approvals".
AmSouth Conditions: The obligation of AmSouth to effect the Merger is subject
to the satisfaction of certain additional conditions, including the following:
(i) receipt by AmSouth and its directors and officers who sign the
Registration Statement of which this Proxy Statement-Prospectus is a part
(the "Registration Statement"), of an opinion from Ernst & Young that the
transactions contemplated by the Merger Agreement will qualify for pooling
of interests accounting treatment under GAAP;
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(ii) receipt by AmSouth and its directors and officers who sign the
Registration Statement of an opinion dated the Effective Date of counsel to
FFSB acceptable to AmSouth, containing such opinions as are customary in a
transaction of this kind;
(iii) on the Effective Date, the truth in all material respects or
compliance in all material respects with each of the representations,
warranties and covenants of FFSB contained in the Merger Agreement, as if
made on such date (or on the date when made in the case of any
representation or warranty which specifically relates to an earlier date)
except, in the case of such representations or warranties, where the
failure to be true will not have a material adverse effect on the business,
financial condition or results of operations of FFSB and its subsidiaries
taken as a whole; and AmSouth shall have received certificates signed by
the Chief Executive Officer and the Treasurer of FFSB, dated the Effective
Date, to such effect;
(iv) receipt of an executed agreement between AmSouth and each affiliated
shareholder of FFSB relating to the disposition of any Merger Shares
received by such shareholder. See "CERTAIN RELATED TRANSACTIONS--Resales of
AmSouth Common Stock;" and
(v) the absence of a "material adverse condition" with respect to FFSB
(an "FFSB Material Condition"). As defined in the Merger Agreement, an FFSB
Material Condition is a condition which either alone or when aggregated
with other conditions has resulted or, in the reasonable opinion of
AmSouth, would result, in (a) a substantial loss or damage to the
properties or assets of FFSB whether or not insured, that would materially
affect or impair the ability of FFSB to conduct its business as presently
conducted, or (b) a reduction of $565,000 or more on a pre-tax basis in the
consolidated total shareholders' equity of FFSB from the amounts reflected
on the June 30, 1993 financial reports of FFSB; provided, however, that for
purposes of the calculations contemplated herein, consolidated total
shareholders' equity of FFSB shall not be reduced by (x) the continued
payment of the $.25 per share regular quarterly dividend by FFSB, (y) the
addition by FFSB to its allowance for possible loan losses prior to the
Effective Date necessitated by FFSB's agreement under the Merger Agreement
to use its best efforts to modify and change its loan and real estate
valuation policy and practices so as to be consistent with those of AmSouth
or (z) by the recapture of tax or bad debt reserves in the event FFSB
converts to a commercial bank at AmSouth's request prior to the Effective
Date, and that such expenditures, additions or recapture shall not
represent an FFSB Material Condition.
FFSB Conditions: The obligation of FFSB to effect the Merger is subject to
the satisfaction of certain additional conditions, including the following:
(i) receipt by FFSB and its directors of an opinion, dated the Effective
Date, of Maria B. Campbell, counsel for AmSouth, or other counsel
acceptable to FFSB, containing such opinions as are customary in a
transaction of this kind;
(ii) on the Effective Date, the truth in all material respects or the
compliance in all material respects with each of the representations,
warranties and covenants of AmSouth contained in the Merger Agreement, as
if made on such date (or the date when made in the case of any
representation or warranty which specifically relates to an earlier date)
except, in the case of such representations or warranties where the failure
to be true would not have a material adverse effect on the business,
financial condition or results of operations of AmSouth and its
subsidiaries taken as a whole; and FFSB shall receive certificates signed
by the Chief Executive Officer and the Chief Financial Officer of AmSouth,
dated the Effective Date, to such effect; and
(iii) the absence of a "material adverse condition" with respect to
AmSouth (an "AmSouth Material Condition"). As defined in the Merger
Agreement, an "AmSouth Material Condition" is a condition which either
alone or when aggregated with other conditions has resulted or, in the
reasonable opinion of FFSB, would result, in (x) a substantial loss or
damage to the properties or assets of AmSouth whether or not insured, that
would materially effect or impair the ability of AmSouth to conduct its
business as presently conducted, or (y) a reduction of $46,000,000 or more
on a pre-tax basis in the consolidated
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total shareholders' equity of AmSouth from the amounts reflected on the
financial statements of AmSouth as of June 30, 1993; provided, however,
that for purposes of the calculations contemplated herein, consolidated
shareholders' equity of AmSouth shall not be reduced by the payment of its
per share regular quarterly dividend consistent with AmSouth's historical
practice, and that such payment shall not represent an AmSouth Material
Condition.
In addition, as described above under "Price-Based Termination," FFSB will
not be obligated to effect the Merger under certain circumstances related to
the Average Closing Price of AmSouth Common Stock.
REGULATORY APPROVALS
The Merger cannot proceed in the absence of the requisite regulatory
approvals. See "Conditions to Consummation of the Merger" and "Waiver and
Amendment; Termination."
AmSouth and FFSB are not aware of any material governmental approvals or
actions that are required for consummation of the Merger (as currently
structured), except as described below. A restructuring of the Merger could
result in different approvals being required. Should any other approval or
action be required, it is presently contemplated that such approval or action
would be sought.
The Merger will require the prior approvals of (i) the Federal Reserve Board
pursuant to Section 5(d)(3) of the Federal Deposit Insurance Act (the "FDIA"),
(ii) the FDIC pursuant to Section 5(d)(3) of the FDIA and the Bank Merger Act
(Section 18(c) of the FDIA), (iii) the OTS pursuant to its transfer of assets
regulations codified at 12 C.F.R. Sections 563.22(b) and 571.5 (the "OTS
Regulations") and (iv) the Georgia Commissioner. In granting their approvals
under Section 5(d)(3) of the FDIA and the Bank Merger Act, the Federal Reserve
Board and the FDIC must take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
the convenience and needs of the communities to be served. The relevant
statutes prohibit the Federal Reserve Board and the FDIC from approving the
Merger (i) if it would result in a monopoly or 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 (ii) if its effect in
any section of the country may be substantially to lessen competition or to
tend to create a monopoly, or if it would in any other manner be a restraint of
trade, unless those agencies find that any anticompetitive effects are clearly
outweighed by the public interest and the probable effect of the transaction in
meeting the convenience and needs of the communities to be served. The Federal
Reserve Board has the authority to deny an application if it concludes that the
combined organization would have an inadequate capital position or if the
acquiring organization does not meet the requirements of the Community
Reinvestment Act of 1977 (the "CRA"). Under the relevant statutes, the Merger
may not be consummated until the 30th day following the date of the last to be
received of FDIC and Federal Reserve Board approval, during which time the
United States Department of Justice may challenge the transaction on antitrust
grounds. The commencement of any antitrust action would stay the effectiveness
of the FDIC's and the Federal Reserve Board's approval unless a court
specifically orders otherwise.
The Merger also is subject to the approval of the OTS under the OTS
Regulations. In acting upon a transfer of assets application filed with it, the
OTS will take into consideration a number of factors, including the structuring
of the transaction, whether any supervisory problems exist with respect to the
disappearing thrift, whether the acquiring bank has agreed to assume the
thrift's liquidation account obligations, if any, and whether the terms of the
transaction and the benefits to be received by management of the disappearing
thrift have been disclosed fully to the institution's shareholders. Under 12
C.F.R. (S) 563b.3(i)(3), for a period of three years following the date of the
Conversion, no person, directly or indirectly, may offer to acquire or acquire
the beneficial ownership of more than ten percent of the securities of FFSB
without the prior written approval of the OTS.
Georgia law provides that the Georgia Commissioner may not approve the Merger
if (i) it would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any part of Georgia; (ii) the effect may be to substantially
lessen competition or tend to create a monopoly or would in any manner be in
restraint of trade and the
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anticompetitive effects of the acquisition are not clearly outweighed in the
public interest by the probable effect of the transaction in meeting the
convenience and needs of the community to be served; (iii) the Merger might
jeopardize the financial stability of the surviving bank or prejudice the
interests of its depositors; or (iv) the competence, experience or integrity of
any acquiring person or proposed management indicates that the Merger would not
be in the interest of the depositors of the surviving bank or interest of the
public.
All of the required regulatory approvals have been received, other than that
of the Georgia Commissioner, and all statutory waiting periods have expired. Of
the approvals received, none of the approvals have contained any material
conditions to consummation.
There can be no assurance that such regulatory approval of the Georgia
Commissioner will be obtained or as to the timing of any such approval. There
can also be no assurance that such approval will not contain a condition or
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Merger Agreement and described above under "Conditions to
Consummation of the Merger."
CONDUCT OF BUSINESS PENDING THE MERGER
FFSB. The Merger Agreement contains certain restrictions on the conduct of
FFSB's business pending consummation of the Merger. In particular, prior to the
Effective Date, the Merger Agreement prohibits FFSB from taking any of the
following actions without the prior written approval of AmSouth: (i) declaring
or paying any dividend other than its regular quarterly common cash dividend of
$.25 per share (and provided that for the quarter in which the Effective Date
occurs, FFSB may declare and pay a final dividend in an amount per share equal
to $.25 multiplied by the fraction that is equal to the portion of the quarter
that has elapsed prior to the Effective Date); (ii) declaring or making any
distribution of, or directly or indirectly combining, reclassifying, redeeming,
purchasing or otherwise acquiring any of its capital stock; (iii) authorizing
the creation or issuance of or issuing any additional shares of, or any
options, calls or commitments relating to, or any securities or obligations
convertible into or exchangeable for, its capital stock, or giving any person
any right to acquire from FFSB or subscribe for any shares of its capital
stock, other than pursuant to existing plans or agreements with the prior
written consent of AmSouth; (iv) incurring any long-term debt (other than in
the ordinary course of business); (v) entering into any employment contracts
with, increasing the rate of compensation of, or paying any bonus to, any of
its directors, officers or employees, except in accordance with existing
practices; (vi) employing any new officer or employee at an annual salary that
is in excess of $25,000; (vii) except as may be required by applicable law,
entering into, terminating or modifying any pension, retirement, stock option,
stock purchase, saving, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement or any trust agreement related thereto, with
respect to any of its directors, officers or other employees; (viii)
substantially modifying the manner in which it has heretofore conducted its
business or entering into any new line of business or engaging or employing any
consultant or advisor not under contract as of the date of the Merger
Agreement; (ix) amending its charter or bylaws (except for an amendment
deleting Section 8A of its charter); (x) disposing of or discontinuing any
major portion of its business or property or merging or consolidating with, or
acquiring all or any substantial portion of, the business or property of any
other entity; (xi) disposing of any material assets except in the ordinary
course of business; (xii) knowingly taking any action causing deterioration of
its customer deposit or loan relationships; or (xiii) agreeing to take any of
the foregoing actions.
Prior to the Effective Date, the Merger Agreement prohibits AmSouth from
taking any of the following actions without the prior written permission of
FFSB: (i) substantially modifying the manner in which it has conducted its
business; (ii) disposing of to a non-affiliate of AmSouth, or discontinuing any
major portion of, its business or (iii) agreeing to take any of the foregoing
actions.
WAIVER AND AMENDMENT; TERMINATION
Waiver and Amendment. Prior to the Effective Date, any provision of the
Merger Agreement may be (i) waived by the party benefited by the provision or
(ii) amended or modified (including the structure of the
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transaction) by an agreement in writing between AmSouth and FFSB approved by
their respective Boards of Directors; provided, however, that after the vote by
the shareholders of FFSB, no amendment decreasing the Consideration to be
received by FFSB shareholders may be made, except as provided under the heading
"Price-Based Termination."
Termination. The Merger Agreement may be terminated prior to the Effective
Date, either before or after approval by FFSB shareholders, under the
circumstances specified therein, including (i) by mutual consent of the Boards
of Directors of AmSouth and FFSB; (ii) by AmSouth or FFSB, if its Board of
Directors so determines by vote of a majority of the members of its entire
Board, in the event of a material breach by the other party of any
representation, warranty or agreement contained in the Merger Agreement, which
is not cured within 45 days after the giving of written notice to the party
committing such breach; (iii) by AmSouth or FFSB, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the Merger is not consummated on or before June 30, 1994, unless the
failure to consummate is due to a breach of the Merger Agreement by the party
seeking to terminate; provided that if the required regulatory approvals have
not been obtained in time to allow consummation by June 30, 1994, such deadline
shall automatically be extended to September 30, 1994; (iv) by AmSouth or FFSB
if the Merger is not approved by the requisite vote of FFSB shareholders; (v)
by AmSouth or FFSB after the final denial of any required regulatory approval
or by AmSouth if any required regulatory approval is conditioned or restricted
as described in "Conditions to Consummation of the Merger;" (vi) by AmSouth or
FFSB if any condition to the consummation of the Merger is not met or waived by
the party to benefit from the unmet condition within 30 days after the earliest
date the parties could otherwise consummate the Merger; (vii) by FFSB if the
Average Closing Price falls below $28.80 and AmSouth fails to increase the
Conversion Number as described in "Proposal 2--THE MERGER--Price-Based
Termination"; and (viii) by AmSouth if it discovers an FFSB Material Condition
or by FFSB if it discovers an AmSouth Material Condition.
See "Proposal 2--THE MERGER--Expenses" for information concerning certain
fees payable by AmSouth and FFSB in the event of the termination of the Merger
Agreement under certain circumstances.
NO SOLICITATION
FFSB has agreed in the Merger Agreement that neither it nor any of its
subsidiaries will, and FFSB will instruct its employees, officers, directors,
agents, advisers and affiliates not to, solicit or encourage any inquiries or
proposals with respect to, furnish any information relating to or participate
in any negotiations or discussions concerning (i) any acquisition or purchase
of a substantial portion of the assets of, or a substantial equity interest in,
or (ii) any business combination with, FFSB or its subsidiaries other than as
contemplated in the Merger Agreement.
MANAGEMENT AFTER THE MERGER
After the Merger, the directors and officers of AmSouth and the Surviving
Bank immediately prior to the Effective Date shall continue to serve as the
directors and officers of those respective entities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of FFSB's management and the FFSB Board may be deemed to have
interests in the Merger in addition to their interests as shareholders of FFSB
generally. In each case, the FFSB Board either was aware of these factors or,
with respect to interests that arose subsequent to the Merger Agreement, was
aware of their potential, and considered them, among other matters, in
approving the Merger Agreement and the transactions contemplated thereby.
Post-Merger Compensation and Benefits. The Merger Agreement provides that,
after the Effective Date, employees and officers of FFSB who become employees
of AmSouth or one of its subsidiaries shall be entitled to participate in
AmSouth pension, benefit and similar plans on the same terms and conditions as
employees and officers of AmSouth, giving effect to years of service with FFSB
or any predecessors thereof as if such
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service were with AmSouth; provided, however, that in the case of AmSouth's
retirement plan, giving effect to years of service shall be for vesting
purposes only and not for benefit accrual purposes. The Merger Agreement also
provides that employees and officers of FFSB who become employees of AmSouth or
one of its subsidiaries will, on or after the Effective Date, receive
compensation arrangements and fringe benefits as are provided to AmSouth's and
its subsidiaries' employees and officers of equal status and position,
including credit for years of service for determining vacation and sick leave.
Employment and Special Termination Agreements. AmSouth has agreed to continue
the employment agreement entered into between Mr. Holland and FFSB and the
special termination agreements with five other executive officers. All of the
agreements expire on June 27, 1995. See "Proposal 3--ELECTION OF DIRECTORS--
Executive Compensation" for a discussion of Mr. Holland's agreement.
Each current base salary for the executives who entered into the special
termination agreements do not equal or exceed $60,000. Each agreement provides
that at anytime following a change in control of FFSB, if the executive's
employment is terminated for any reason other than cause, or if the executive
voluntarily terminates his employment following his demotion, loss of title,
office or significant authority, a reduction in his compensation, or relocation
of his principal place of employment, the executive or, in the event of death,
his beneficiary, would be entitled to receive a severance payment equal to two
times his average annual compensation over the past three years of his
employment with FFSB. The aggregate amount of severance payments due upon a
change in control, if the executives terminated their employment, would be
$526,258 for the five executives with special termination agreements, based
upon their current salaries.
Stock Options. In accordance with the terms of the FFSB stock option and
incentive plans, all options not previously vested become immediately
exercisable upon a change in control of FFSB. As described more fully under
"Treatment of Stock Options," at the Effective Date, each outstanding FFSB
Option granted under FFSB's stock option and incentive plans will be canceled
in exchange for a number of shares of AmSouth Common Stock equal to (i) the
difference between (A) the AmSouth Closing Price, multiplied by the Conversion
Number and (B) the exercise price of such FFSB Option, divided by (ii) the
AmSouth Closing Price. See "Proposal 2--THE MERGER--Treatment of Stock
Options."
FFSB currently has outstanding options covering 28,416 shares of FFSB Common
Stock. The following list indicates, with respect to Henry E. Holland, Jr. (the
chief executive officer), all executive officers as a group and all directors
who are not executive officers as a group, (i) the number of shares of FFSB
Common Stock that could be purchased pursuant to options that already are
exercisable or that are expected to become exercisable prior to the Effective
Date and, (ii) the estimated number of shares of AmSouth Common Stock that will
be received if the options are not exercised prior to the Effective Date,
assuming an AmSouth Closing Price of $29.00 per share:
<TABLE>
<CAPTION>
FFSB AMSOUTH
OFFICER AND/OR DIRECTOR COMMON STOCK COMMON STOCK
----------------------- ------------ ------------
<S> <C> <C>
Henry E. Holland, Jr............................... 6,709 4,390
All executive officers as a group (6 persons)...... 24,392 15,960
All directors who are not executive officers....... 4,024 2,633
------ ------
Total Shares Subject to Options.................. 28,416 18,593
====== ======
</TABLE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the opinion of Ernst & Young,
Certified Public Accountants, which opinion is a condition to consummation of
the Merger. The opinion sets forth certain federal income tax consequences of
the Merger to AmSouth, FFSB and to the holders of FFSB Common Stock (referred
to in this section as FFSB Shareholders) and has been filed as an exhibit to
the Registration Statement of which this Proxy Statement-Prospectus forms a
part. This discussion is not a complete description of all the tax consequences
of the Merger and, in particular, may not address federal income tax
considerations that may
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be relevant to certain shareholders entitled to a special treatment under the
Internal Revenue Code of 1986, as amended (the "Code") (including, without
limitation, insurance companies, dealers in securities, certain retirement
plans, financial institutions, tax exempt organizations, and foreign persons).
Based upon certain customary representations made by the managements of AmSouth
and FFSB, Ernst & Young has provided (among others) the following opinions
concerning certain federal income tax consequences:
(i) The Merger will qualify as a reorganization within the meaning of
Section 368(a) of the Code, FFSB and AmSouth will each be a party to the
reorganization and no gain or loss will be recognized by FFSB or AmSouth as
a result of the Merger;
(ii) No gain or loss will be recognized by an FFSB Shareholder upon the
receipt of AmSouth Common Stock in the Merger solely in exchange for such
shareholder's FFSB Common Stock (except with respect to cash received in
lieu of a fractional share interest in AmSouth Common Stock);
(iii) An FFSB Shareholder who dissents and receives only cash pursuant to
appraisal rights will recognize gain or loss. Such gain or loss will, in
general, be treated as capital gain or loss measured by the difference
between the amount of cash received and the tax basis of the FFSB Common
Stock converted.
(iv) The basis of the FFSB Common Stock (including any fractional share)
received by an FFSB Shareholder in the Merger will be the same as the basis
of FFSB Common Stock surrendered in exchange therefor; and
(v) The holding period of the AmSouth Common Stock (including any
fractional share) received by an FFSB Shareholder in the Merger will
include the holding period of the FFSB Common Stock surrendered in exchange
therefor, provided such FFSB Common Stock was a capital asset in the hands
of an FFSB Shareholder on the Effective Date.
No ruling has been or will be requested from the Internal Revenue Service
("IRS") as to any of the federal income tax effects to the FFSB shareholders of
the Merger or the federal income tax effects to FFSB or AmSouth. The opinion of
Ernst & Young is based entirely upon the Code, regulations in effect
thereunder, current administrative rulings and practice and judicial authority
as of the date of the Ernst & Young opinion, all of which are subject to change
and any such change could affect the validity of the opinion. Unlike a ruling
from the IRS, the Ernst & Young opinion is not binding on the IRS and there can
be no assurance, and none is thereby given, that the IRS will not take a
position adverse to one or more positions reflected herein or that the opinion
will be upheld by the courts if challenged by the IRS.
THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS THE FEDERAL INCOME TAX
CONSEQUENCES TO ALL SHAREHOLDERS OF FFSB. IN ADDITION, THE DISCUSSION DOES NOT
ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. IN VIEW OF THIS
AND THE INDIVIDUAL NATURE OF CERTAIN OF THE TAX CONSEQUENCES, EACH FFSB
SHAREHOLDER SHOULD CONSULT SUCH SHAREHOLDER'S OWN TAX ADVISOR WITH RESPECT TO
THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH SHAREHOLDER, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
Consummation of the Merger is conditioned upon the receipt by AmSouth and its
directors and officers who signed the Registration Statement, of which this
Proxy Statement-Prospectus is a part, of a letter from Ernst & Young to the
effect that the Merger qualifies for "pooling of interests" accounting
treatment if consummated in accordance with the terms of the Merger Agreement.
All unaudited pro forma financial information contained in this Proxy
Statement-Prospectus has been prepared using the "pooling of interests" method
to account for the Merger. See "SUMMARY
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CONDENSED CONSOLIDATED FINANCIAL INFORMATION" and "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
EXPENSES
The Merger Agreement provides that AmSouth and FFSB will each pay its own
expenses in connection with the Merger Agreement and the transactions
contemplated thereby, including fees and expenses of its own financial or other
consultants, investment bankers, accountants and counsel. AmSouth and FFSB have
agreed to divide equally the cost of printing the Proxy Statement-Prospectus
and the Registration Statement of which this Proxy Statement-Prospectus is a
part, the SEC registration fee and state "blue sky" fees as applicable, and
fees and expenses of experts providing market competition analysis and
supporting materials. All of the preceding expenses listed above are hereafter
referred to as "Transaction Expenses."
Notwithstanding the preceding allocation of expenses, if the Merger Agreement
is terminated by AmSouth or FFSB because of a breach of a material
representation, warranty or covenant by the other party or discovery of a
material adverse condition with respect to the other party, then the breaching
party or the party with respect to which a material adverse condition was
discovered shall promptly pay its own Transaction Expenses and fifty percent of
the other party's Transaction Expenses.
NYSE LISTING
The AmSouth Common Stock is listed on the NYSE. Accordingly, AmSouth has
agreed to use its best efforts to cause the Merger Shares to be listed on the
NYSE. Such listing is not, however, an express condition of consummation of the
Merger.
CERTAIN RELATED TRANSACTIONS
RESALES OF AMSOUTH COMMON STOCK
The shares of AmSouth Common Stock issued pursuant to the Merger Agreement
will be freely transferable under the Securities Act except for shares issued
to any shareholder who may be deemed to be an "affiliate" of FFSB for purposes
of Rule 145 under the Securities Act as of the date of the Meeting. Affiliates
may not sell their shares of AmSouth Common Stock acquired in connection with
the Merger except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 under the
Securities Act, or another applicable exemption from the registration
requirements of the Securities Act. "Affiliates" of FFSB generally are defined
as individuals or entities that control, are controlled by or are under common
control with those entities and generally include executive officers and
directors.
FFSB has agreed to identify to AmSouth all persons whom it reasonably
believes to be affiliates of FFSB for purposes of Rule 145 (the "Affiliated
Shareholders"). Prior to the effective date, FFSB has agreed to obtain an
agreement (the "Affiliate Agreement"), satisfactory to AmSouth and its counsel,
from each of the Affiliated Shareholders, which provides that (i) the Merger
Shares will not be acquired with a view to the distribution thereof except as
permitted by Rule 145; (ii) the Merger Shares will not be disposed of in such a
manner as to violate Rule 145 or the Affiliate Agreement and without AmSouth
having received an opinion of counsel satisfactory to it to such effect, or
other evidence of compliance with Rule 145 and the Affiliate Agreement; (iii)
AmSouth may issue appropriate stop transfer instructions to its transfer agent
with respect to the Merger Shares; (iv) no Affiliate Shareholder will sell or
otherwise reduce such Affiliated Shareholder's risk relative to any of the
Merger Shares from the date that is 30 days prior to the Effective Date until
the financial results covering at least 30 days of post-merger combined
operations have been published; (v) each Affiliated Shareholder will obtain an
agreement similar to the Affiliate Agreement from each transferee of Merger
Shares, unless such transferee may, as evidenced by an opinion of counsel or
other evidence, in each case satisfactory to AmSouth, dispose of the Merger
Shares transferred to the transferee without registration
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under the Securities Act; and (vi) the certificates representing the Merger
Shares may bear a restrictive legend as provided in the Merger Agreement.
VOTING AGREEMENTS
As a condition to AmSouth's obligations under the Merger Agreement, each
member of the FFSB Board entered into a voting agreement with AmSouth (the
"Voting Agreements"). Pursuant to the Voting Agreements, each member of the
FFSB Board (who in the aggregate had the ability to vote, as of the Record
Date, 101,690 of the outstanding shares of FFSB Common Stock) has agreed to
vote all shares of FFSB Common Stock owned by him, or otherwise in his control,
in favor of the Merger and the other transactions contemplated by the Merger
Agreement. Furthermore, the Voting Agreements also require that each member of
the FFSB Board vote such shares of FFSB Common Stock against any business
combination or other reorganization of any kind involving FFSB or its
subsidiaries with any entity other than AmSouth. Each Voting Agreement expires
on August 3, 1994.
CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth certain of the material elements of the
regulatory framework applicable to banks and bank holding companies and
provides certain specific information relevant to AmSouth. Because FFSB is a
federal savings bank, its deposit accounts are insured by the SAIF of the FDIC,
and FFSB is subject to regulation and examination by the OTS and the FDIC and
to the reporting requirements of the OTS and the FDIC. Certain information
regarding the regulation of FFSB is provided in FFSB's 1993 Annual Report on
Form 10-KSB/A and most recent Form 10-Q, which are attached hereto as
Appendices C and C-1. Federal regulation of financial institutions such as
AmSouth and FFSB is intended primarily for the protection of depositors rather
than shareholders of those entities. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
GENERAL
As a bank holding company, AmSouth is subject to the regulation and
supervision of the Federal Reserve Board under the Bank Holding Company Act of
1956, as amended ("the BHCA"). Under the BHCA, bank holding companies may not
generally directly or indirectly acquire the ownership or control of more than
5% of the voting shares or substantially all of the assets of any company,
including a bank, without the prior approval of the Federal Reserve Board. In
addition, bank holding companies are generally prohibited under the BHCA from
engaging in nonbanking activities, subject to certain exceptions.
AmSouth's subsidiary banks (the "Subsidiary Banks") are subject to
supervision and examination by applicable federal and state banking agencies.
AmSouth Alabama is a national banking association subject to regulation and
supervision by the Comptroller. All the other Subsidiary Banks are state-
chartered banks that are not members of the Federal Reserve System, and
therefore are generally subject to regulation and supervision by the FDIC. The
Subsidiary Banks are also subject to various requirements and restrictions
under federal and state law, including requirements to maintain reserves
against deposits, restrictions on the types and amounts of loans that may be
granted and the interest that may be charged thereon and limitations on the
types of investments that may be made and the types of services that may be
offered. Various consumer laws and regulations also affect the operations of
the Subsidiary Banks. In addition to the impact of regulation, commercial banks
are affected significantly by the actions of the Federal Reserve Board as it
attempts to control the money supply and credit availability in order to
influence the economy.
Consummation of the Merger will not result in AmSouth's becoming a savings
and loan holding company subject to regulation as such.
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PAYMENT OF DIVIDENDS
AmSouth is a legal entity separate and distinct from its banking and other
subsidiaries. The principal source of cash flow of AmSouth, including cash flow
to pay dividends on AmSouth Common Stock, is dividends from the Subsidiary
Banks. There are statutory and regulatory limitations on the payment of
dividends by the Subsidiary Banks to AmSouth as well as by AmSouth to its
shareholders.
AmSouth Alabama is required by federal law to obtain the prior approval of
the Comptroller for the payment of dividends if the total of all dividends
declared by the Board of Directors of such bank in any year will exceed the
total of (i) the bank's net profits (as defined and interpreted by regulation)
for that year plus (ii) the retained net profits (as defined and interpreted by
regulation) for the preceding two years, less any required transfers to
surplus. A national bank also can pay dividends only to the extent that
retained net profits (including the portion transferred to surplus) exceed bad
debts (as defined by regulation).
All the Subsidiary Banks other than AmSouth Alabama are subject to varying
restrictions on the payment of dividends under applicable state laws. With
respect to AmSouth Florida and AmSouth Tennessee, state law imposes dividend
restrictions substantially similar to those imposed under federal law on
AmSouth Alabama. Furthermore, if, in the opinion of the applicable federal bank
regulatory authority, a bank under its jurisdiction is engaged in or is about
to engage in an unsafe or unsound practice (which, depending on the financial
condition of the bank, could include the payment of dividends), such authority
may require, after notice and hearing, that such bank cease and desist from
such practice. The Comptroller and the FDIC have indicated that paying
dividends that deplete a bank's capital base to an inadequate level would be an
unsafe and unsound banking practice. Under the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"), an insured bank may not pay any
dividend if payment would cause it to become undercapitalized or once it is
undercapitalized. See "FDICIA." Moreover, the Federal Reserve Board, the
Comptroller and the FDIC have issued policy statements which provide that bank
holding companies and insured banks should generally only pay dividends out of
current operating earnings.
At September 30, 1993, under dividend restrictions imposed under federal and
state laws, the Subsidiary Banks, without obtaining governmental approvals,
could declare aggregate dividends of approximately $159.0 million. The payment
of dividends by AmSouth and the Subsidiary Banks may also be affected or
limited by other factors, such as the requirement to maintain adequate capital
above regulatory guidelines.
CONVERSION OF AMSOUTH ALABAMA
On January 21, 1994, AmSouth announced that it had filed applications with
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") and the State of Alabama to convert AmSouth Alabama, its largest
subsidiary bank, from a national banking association to a state-chartered bank
that is a member of the Federal Reserve System. AmSouth expects to realize
certain cost savings as a result of the conversion.
AmSouth Alabama's operations, including its capital adequacy and capacity for
the payment of dividends, are not expected to change in any material respect as
a result of the conversion. Following the conversion, AmSouth Alabama's primary
federal regulator would be the Federal Reserve Board. It would no longer be
subject to regulation and supervision by the Comptroller.
As an Alabama-chartered bank, in particular AmSouth Alabama would no longer
be subject to the regulations of the Comptroller with respect to payment of
dividends, but would be subject to similar restrictions under federal law and
Alabama state law.
TRANSACTIONS WITH AFFILIATES
There are various legal restrictions on the extent to which AmSouth and its
nonbank subsidiaries can borrow or otherwise obtain credit from its Subsidiary
Banks. Each Subsidiary Bank (and its subsidiaries) is limited in engaging in
borrowing and other "covered transactions" with nonbank or non-savings bank
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affiliates to the following amounts: (i) in the case of any such affiliate, the
aggregate amount of covered transactions of the Subsidiary Bank and its
subsidiaries may not exceed 10% of the capital stock and surplus of such
Subsidiary Bank; and (ii) in the case of all affiliates, the aggregate amount
of covered transactions of the Subsidiary Bank and its subsidiaries may not
exceed 20% of the capital stock and surplus of such Subsidiary Bank. "Covered
transactions" are defined by statute to include a loan or extension of credit,
as well as a purchase of securities issued by an affiliate, a purchase of
assets (unless otherwise exempted by the Federal Reserve Board), the acceptance
of securities issued by the affiliate as collateral for a loan and the issuance
of a guarantee, acceptance or letter of credit on behalf of an affiliate.
Covered transactions are also subject to certain collateralization
requirements. Further, a bank holding company and its subsidiaries 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.
CAPITAL ADEQUACY
The Federal Reserve Board has adopted risk-based capital guidelines for bank
holding companies. The minimum guideline for the ratio of total capital ("Total
Capital") to risk-weighted assets (including certain off-balance-sheet items,
such as standby letters of credit) is 8%. At least half of the Total Capital
must be composed of common stock, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock and a
limited amount of cumulative perpetual preferred stock, less goodwill and
certain other intangible assets ("Tier 1 Capital"). The remainder may consist
of subordinated debt, other preferred stock and a limited amount of loan loss
reserves. At September 30, 1993, AmSouth's consolidated Tier 1 Capital and
Total Capital ratios were 9.58% and 11.88%, respectively. At September 30,
1993, on a pro forma combined basis after giving effect to the Merger on a
pooling of interests accounting basis AmSouth's consolidated Tier 1 Capital and
Total Capital ratios would have been approximately 9.66% and 11.96%,
respectively. Also as of that date, on a pro forma combined basis after giving
effect to the Merger and to the Other Business Combinations referred to under
"Proposal 2--THE MERGER--AmSouth," AmSouth's consolidated Tier 1 Capital and
Total Capital ratios would have been approximately 8.68% and 10.77%,
respectively.
In addition, the Federal Reserve Board has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio of Tier 1 Capital to average assets, less goodwill and certain other
intangible assets (the "Leverage Ratio"), of 3% for bank holding companies that
meet certain specified criteria, including having the highest regulatory
rating. All other bank holding companies generally are required to maintain a
Leverage Ratio of at least 3% plus an additional cushion of 100 to 200 basis
points. AmSouth's Leverage Ratio at September 30, 1993 was 7.78%. At September
30, 1993, on a pro forma combined basis after giving effect to the Merger on a
pooling of interests accounting basis, AmSouth's Leverage Ratio would have been
approximately 7.73%. Also as of that date, on a pro forma combined basis after
giving effect to the Merger and the Other Business Combinations, AmSouth's
Leverage Ratio would have been approximately 6.21%. The guidelines also provide
that bank holding companies experiencing internal growth or making acquisitions
will be expected to maintain strong capital positions substantially above the
minimum supervisory levels without significant reliance on intangible assets.
Furthermore, the Federal Reserve Board has indicated that it will consider a
"tangible Tier 1 Capital leverage ratio" (deducting all intangibles) and other
indicia of capital strength in evaluating proposals for expansion or new
activities.
Each of the Subsidiary Banks is subject to risk-based and leverage capital
requirements adopted by the Comptroller or the FDIC, as the case may be. Each
of AmSouth's Subsidiary Banks was in compliance with applicable minimum capital
requirements as of September 30, 1993. Neither AmSouth nor any of the
Subsidiary Banks has been advised by any federal banking agency of any specific
minimum Leverage Ratio requirement applicable to it.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including the termination of deposit insurance by the
FDIC, and to certain restrictions on its business. See "FDICIA."
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All of the Federal banking agencies have proposed regulations that would add
an additional risk-based capital requirement based upon the amount of an
institution's exposure to interest rate risk. In addition, bank regulators
continue to indicate their desire to raise capital requirements applicable to
banking organizations beyond their current levels. However, the management of
AmSouth is unable to predict whether and when higher capital requirements would
be imposed and, if so, at what levels and on what schedule.
SUPPORT OF SUBSIDIARY BANKS
Under Federal Reserve Board policy, AmSouth is expected to act as a source of
financial strength to, and to commit resources to support, each of the
Subsidiary Banks. This support may be required at times when, absent such
Federal Reserve Board policy, AmSouth may not be inclined to provide it. In
addition, any capital loans by a bank holding company to any of its subsidiary
banks are subordinate in right of payment to deposits and to certain other
indebtedness of such subsidiary bank. In the event of a bank holding company's
bankruptcy, any commitment by the bank holding company to a federal bank
regulatory agency to maintain the capital of a subsidiary bank will be assumed
by the bankruptcy trustee and entitled to a priority of payment.
Under the FDIA, a depository institution insured by the FDIC can be held
liable for any loss incurred by, or reasonably expected to be incurred by, the
FDIC after August 9, 1989 in connection with (i) the default of a commonly
controlled FDIC-insured depository institution or (ii) any assistance provided
by the FDIC to any commonly controlled FDIC-insured depository institution "in
danger of default." "Default" is defined generally as the appointment of a
conservator or receiver and "in danger of default" is defined generally as the
existence of certain conditions indicating that a default is likely to occur in
the absence of regulatory assistance.
FDICIA
On December 19, 1991, FDICIA was enacted. FDICIA substantially revised the
depository institution regulatory and funding provisions of the FDIA and makes
revisions to several other federal banking statutes. Among other things, FDICIA
requires the federal banking regulators to take prompt corrective action in
respect of depository institutions that do not meet minimum capital
requirements. FDICIA establishes five capital tiers: "well capitalized,"
"adequately capitalized," "undercapitalized," "significantly undercapitalized"
and "critically undercapitalized." Under applicable regulations, an FDIC-
insured bank is defined to be well capitalized if it maintains a Leverage Ratio
of at least 5%, a risk-adjusted Tier 1 Capital Ratio of at least 6% and a Total
Capital Ratio of at least 10% and is not otherwise in a "troubled condition" as
specified by its appropriate federal regulatory agency. An FDIC-insured bank is
defined to be adequately capitalized if it maintains a Leverage Ratio of at
least 4%, a risk-adjusted Tier I Capital Ratio of at least 4% and a Total
Capital Ratio of at least 8%. In addition, an FDIC-insured bank will be
considered undercapitalized if it fails to meet any minimum required measure,
significantly undercapitalized if it is significantly below such measure and
critically undercapitalized if it fails to maintain a level of tangible equity
equal to not less than 2% of total assets. An FDIC-insured bank may be deemed
to be in a capitalization category that is lower than is indicated by its
actual capital position if it receives an unsatisfactory examination rating.
FDICIA generally prohibits a depository institution from making any capital
distribution (including payment of dividends) or paying any management fee to
its holding company if the depository institution would thereafter be
undercapitalized. Undercapitalized depository institutions will be subject to
restrictions on borrowing from the Federal Reserve System, effective December
19, 1993. In addition, undercapitalized depository institutions are subject to
growth limitations and are required to submit capital restoration plans. A
depository institution's holding company must guarantee the capital plan, up to
an amount equal to the lesser of 5% of the depository institution's assets at
the time it becomes undercapitalized or the amount of the capital deficiency
when the institution fails to comply with the plan. The federal banking
agencies may not accept a capital plan without determining, among other things,
that the plan is based on realistic assumptions and is likely to succeed in
restoring the depository institution's capital. If a depository institution
fails to submit an acceptable plan, it is treated as if it is significantly
undercapitalized.
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Significantly undercapitalized depository institutions may be subject to a
number of requirements and restrictions, including orders to sell sufficient
voting stock to become adequately capitalized, requirements to reduce total
assets and cessation of receipt of deposits from correspondent banks.
Critically undercapitalized depository institutions are subject to appointment
of a receiver or conservator.
At September 30, 1993, AmSouth believes that all of the Subsidiary Banks were
"well capitalized" under FDICIA and related regulations.
Various other legislation, including proposals to revise the banking
regulatory system and to limit the investments that a depository institution
may make with insured funds, is from time to time introduced in Congress.
BROKERED DEPOSITS
The FDIC has adopted regulations under FDICIA governing the receipt of
brokered deposits. Under the regulations, a bank cannot accept, rollover or
renew brokered deposits unless (i) it is well capitalized or (ii) it is
adequately capitalized and receives a waiver from the FDIC. A bank that cannot
receive brokered deposits also cannot offer "pass-through" insurance on certain
employee benefit accounts. Whether or not it has obtained such a waiver, an
adequately capitalized bank may not pay an interest rate on any deposits in
excess of 75 basis points over certain prevailing market rates specified by
regulation. There are no such restrictions on a bank that is well capitalized.
Because all the Subsidiary Banks were well capitalized as of September 30,
1993, AmSouth believes the brokered deposits regulation will have no material
effect on the funding or liquidity of any of the Subsidiary Banks.
FDIC INSURANCE ASSESSMENTS
The Subsidiary Banks are subject to FDIC deposit insurance assessments. The
FDIC has adopted a risk-based premium schedule which has increased the
assessment rates for most FDIC-insured depository institutions. Under the new
schedule, the premiums initially range from $.23 to $.31 for every $100 of
deposits. 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
insurance fund. The actual assessment rate applicable to a particular
institution will, therefore, depend in part upon the risk assessment
classification so assigned to the institution by the FDIC.
The FDIC is authorized to raise insurance premiums in certain circumstances.
Any increase in premiums would have an adverse effect on AmSouth's earnings.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is in
an unsafe or unsound condition to continue operations or has violated any
applicable law, regulation, rule, order or condition imposed by the FDIC or the
OTS.
DEPOSITOR PREFERENCE
The recently adopted 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.
DESCRIPTION OF AMSOUTH CAPITAL STOCK
The following summaries of certain provisions of the Restated Certificate of
Incorporation (the "AmSouth Certificate"), and Bylaws of AmSouth (the "AmSouth
Bylaws") and the AmSouth Rights Agreement do not purport to be complete and are
qualified in their entirety by reference to such instruments, each of which is
incorporated by reference as an exhibit to the Registration Statement. See
"AVAILABLE INFORMATION."
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GENERAL
As provided in the AmSouth Certificate, AmSouth's authorized capital stock
consists of 200,000,000 shares of AmSouth Common Stock and 2,000,000 shares of
preferred stock, without par value (the "AmSouth Preferred Stock"). As of the
Record Date, there were 50,868,118 shares of AmSouth Common Stock outstanding
and 1,500,000 shares of AmSouth Common Stock were held as treasury stock. As of
the date of this Proxy Statement-Prospectus, no shares of AmSouth Preferred
Stock were issued and outstanding.
The rights of AmSouth to participate in any distribution of assets of any
subsidiary upon its liquidation or reorganization or otherwise (and thus the
ability of AmSouth's shareholders to benefit indirectly from such distribution)
would be subject to the prior claims of creditors of that subsidiary, except to
the extent that AmSouth itself may be a creditor of that subsidiary with
recognized claims. Claims on AmSouth's subsidiaries by creditors other than
AmSouth will include substantial obligations with respect to deposit
liabilities and purchased funds. See also "CERTAIN REGULATORY CONSIDERATIONS--
Payment of Dividends" and "--Support of Subsidiary Banks."
COMMON STOCK
Dividends. Subject to the rights of holders of AmSouth Preferred Stock, if
any, to receive certain dividends prior to the declaration of dividends on
shares of AmSouth Common Stock, when and as dividends, payable in cash, stock
or other property, are declared by the AmSouth Board, the holders of AmSouth
Common Stock are entitled to share ratably in such dividends.
Voting Rights. Each holder of AmSouth Common Stock has one vote for each
share held on matters presented for consideration by the shareholders.
Preemptive Rights. The holders of AmSouth Common Stock have no preemptive
rights to acquire any additional shares of AmSouth.
Issuance of Stock. The AmSouth Certificate authorizes the AmSouth Board to
issue authorized shares of AmSouth Common Stock without shareholder approval.
However, AmSouth Common Stock is listed on the NYSE, which requires shareholder
approval of the issuance of additional shares of AmSouth Common Stock under
certain circumstances.
Liquidation Rights. In the event of liquidation, dissolution or winding-up of
AmSouth, whether voluntary or involuntary, the holders of AmSouth Common Stock
will be entitled to share ratably in any of its assets or funds that are
available for distribution to its shareholders after the satisfaction of its
liabilities (or after adequate provision is made therefor) and after
preferences of any outstanding AmSouth Preferred Stock.
PREFERRED STOCK
AmSouth Preferred Stock may be issued from time to time as a class without
series, or if so determined by the AmSouth Board, either in whole or in part in
one or more series. The voting rights, and such designations, preferences and
relative, participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any, including, but not
limited to, the dividend rights, conversion rights, redemption rights and
liquidation preferences, if any, of any wholly unissued series of AmSouth
Preferred Stock (or of the entire class of AmSouth Preferred Stock if none of
such shares has been issued), the number of shares constituting any such series
and the terms and conditions of the issue thereof may be fixed by resolution of
the AmSouth Board. AmSouth Preferred Stock will have a preference over AmSouth
Common Stock with respect to the payment of dividends and the distribution of
assets in the event of the liquidation or winding-up of AmSouth and such other
preferences as may be fixed by the AmSouth Board.
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AMSOUTH RIGHTS AGREEMENT
Each share of AmSouth Common Stock has, and when issued each of the Merger
Shares will have, attached to it one right (an "AmSouth Right") issued pursuant
to a Stockholder Protection Rights Agreement (the "AmSouth Rights Agreement").
Each AmSouth Right entitles its registered holder to purchase one one-hundredth
of a share of AmSouth Series A Preferred Stock, without par value, designed to
have economic and voting terms similar to one share of Common Stock, for
$115.00 (the "Exercise Price"), subject to adjustment, after the close of
business on the earlier of (i) the tenth day after commencement of a tender or
exchange offer which, if consummated, would result in a person's becoming the
beneficial owner of 15% or more of the outstanding shares of AmSouth Common
Stock (an "Acquiring Person") and (ii) the tenth day after the first date (the
"Flip-in Date") of public announcement that a person has become an Acquiring
Person. In any case, the time described in the foregoing sentence is referred
to as the "Separation Time."
The AmSouth Rights will not be exercisable until the business day following
the Separation Time. The AmSouth Rights will expire on the earlier of (i) the
close of business on June 15, 1999 and (ii) the date on which the AmSouth
Rights are redeemed as described below (the "Expiration Time"). The AmSouth
Board may, at its option, at any time prior to the Flip-in Date, redeem all the
AmSouth Rights at a price of $0.01 per right (the "Redemption Price").
If a Flip-in Date occurs, AmSouth will ensure and provide that each AmSouth
Right (other than AmSouth Rights beneficially owned by the Acquiring Person or
any affiliate or associate thereof or by any transferees, direct or indirect,
of any of the foregoing, which AmSouth Rights shall become void) will
constitute the right to purchase from AmSouth shares of AmSouth Common Stock
having an aggregate market price equal to twice the Exercise Price for an
amount in cash equal to the then-current Exercise Price. In addition, the
AmSouth Board may, at its option, at any time after a Flip-in Date and prior to
the time that an Acquiring Person becomes the beneficial owner of more than 50%
of the outstanding shares of AmSouth Common Stock, elect to exchange the
AmSouth Rights for shares of AmSouth Common Stock at an exchange ratio of one
share of AmSouth Common Stock per AmSouth Right.
AmSouth may not consolidate or merge, or engage in certain other
transactions, with an Acquiring Person without entering into a supplemental
agreement with the Acquiring Person providing that upon consummation or
occurrence of the transaction each AmSouth Right shall thereafter constitute
the right to purchase stock of the Acquiring Person having an aggregate market
price equal to twice the Exercise Price for an amount in cash equal to the
then-current Exercise Price.
The AmSouth Rights will not prevent a takeover of AmSouth. The AmSouth
Rights, however, may have certain anti-takeover effects. The AmSouth Rights may
cause substantial dilution to a person or group that acquires 15% or more of
the outstanding AmSouth Common Stock unless the AmSouth Rights are first
redeemed by the AmSouth Board.
CHANGES IN CONTROL
Certain provisions of the AmSouth Certificate and AmSouth Bylaws may have the
effect of preventing, discouraging or delaying any change in control of
AmSouth. For a discussion of the AmSouth Rights Agreement and its effect on
potential takeovers, see "AmSouth Rights Agreement." The authority of the
AmSouth Board to issue AmSouth Preferred Stock with such rights and privileges,
including voting rights, as it may deem appropriate may enable the AmSouth
Board to prevent a change in control despite a shift in ownership of the
AmSouth Common Stock. See "General" and "Preferred Stock." In addition, the
AmSouth Board's power to issue additional shares of AmSouth Common Stock may
help delay or deter a change in control by increasing the number of shares
needed to gain control. See "Common Stock." The following provisions also may
deter any change in control of AmSouth.
Classification of Board of Directors. The AmSouth Board is divided into three
classes, each serving three-year terms, so that approximately one-third of the
directors of AmSouth are elected at each annual
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meeting of the shareholders of AmSouth. Classification of the AmSouth Board has
the effect of decreasing the number of directors that could be elected in a
single year by any person who seeks to elect its designees to a majority of the
seats on the AmSouth Board and thereby could impede a change in control of
AmSouth.
Removal of Directors. The AmSouth Certificate provides that a director of
AmSouth may be removed only for cause by the affirmative vote of the holders of
80% of the shares of AmSouth Common Stock then entitled to vote at an election
of directors.
Written Consent. As permitted by Delaware law, the AmSouth Certificate
prohibits AmSouth shareholders from taking any action that either is required
to be taken or may be taken at an annual or special meeting without such a
meeting, whether by written consent or otherwise.
Business Combinations. The AmSouth Certificate provides that any "Business
Combination" involving AmSouth and (i) any person that beneficially owns more
than 10% of the AmSouth Common Stock, (ii) any affiliate of AmSouth which
beneficially owned more than 10% of the AmSouth Common Stock during the prior
two years or (iii) any transferee of any shares of AmSouth Common Stock that
were beneficially owned by an "Interested Stockholder" during the prior two
years (any of the foregoing being defined for the purpose of this paragraph as
an "Interested Stockholder") must be approved by (i) the holders of not less
than 80% of the outstanding shares of AmSouth's voting stock and (ii) the
holders of not less than 67% of such voting stock held by stockholders other
than the Interested Stockholder. These special voting requirements do not
apply, however, if either (i) a majority of the Continuing Directors (as
defined) of AmSouth has approved the Business Combination or the Interested
Stockholder's becoming such or (ii) the terms of the proposed Business
Combination satisfy certain minimum price and other standards. For purposes of
these provisions, a "Business Combination" is defined to include (i) any merger
or other corporate reorganization of AmSouth with or into an Interested
Stockholder, (ii) the disposition by AmSouth of a Substantial Part (as defined)
of its assets to an Interested Stockholder, (iii) any merger or other corporate
reorganization of an Interested Stockholder with or into AmSouth, (iv) the
acquisition by AmSouth of a Substantial Part (as defined) of the assets of an
Interested Stockholder, (v) the issuance by AmSouth of any of its securities to
an Interested Stockholder, (vi) any recapitalization that would increase the
voting power of an Interested Stockholder, (vii) the adoption of any plan for
the liquidation or dissolution of AmSouth proposed by or on behalf of an
Interested Stockholder and (viii) any agreement providing for any of the
transactions described above. This provision is intended to deter an acquiring
party from utilizing two-tier pricing and similar coercive tactics in an
attempt to acquire control of AmSouth. However, it is not intended to, and will
not, prevent or deter all tender offers for shares of AmSouth.
Amendment of AmSouth Certificate. The provisions of the AmSouth Certificate
relating to the structure of the AmSouth Board may not be amended, altered or
repealed without the affirmative vote of 80% of the outstanding voting stock of
AmSouth. The Business Combination provision of the AmSouth Certificate may not
be amended, altered or repealed except by the supermajority vote required to
approve a Business Combination. The provision of the AmSouth Certificate
dealing with written consent in lieu of shareholders' meetings may not be
amended, altered or repealed without the affirmative vote of the holders of 67%
of the outstanding voting stock.
Delaware Business Combination Statute. Subject to certain exceptions, the
Delaware General Corporation Law (the "Delaware GCL") prohibits AmSouth from
entering into certain "business combinations" (as defined) involving persons
beneficially owning 15% or more of the outstanding AmSouth Common Stock (or any
person who is an affiliate of AmSouth and has over the past three years
beneficially owned 15% or more of such stock) (either, for the purpose of this
paragraph, an "Interested Stockholder"), unless the AmSouth Board has approved
either (i) the business combination or (ii) prior to the stock acquisition by
which such person's beneficial ownership interest reached 15% (the "Stock
Acquisition"), the Stock Acquisition. The prohibition lasts for three years
from the date of the Stock Acquisition. Notwithstanding the preceding, the
Delaware GCL allows AmSouth to enter into a business combination with an
Interested Stockholder if (i) the business combination is approved by the
AmSouth Board and is authorized by an affirmative vote of at least 66 2/3% of
the outstanding voting stock of AmSouth which is not
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owned by the Interested Stockholder or (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
Stockholder, such stockholder owned at least 85% of the outstanding voting
stock of AmSouth (excluding AmSouth stock held by officers and directors of
AmSouth or by certain AmSouth stock plans).
Control Acquisitions. The Change in Bank Control Act of 1978 prohibits a
person or group of persons from acquiring "control" of a bank holding company
unless the Federal Reserve Board has been given 60 days' prior written notice
of such proposed acquisition and within that time period the Federal Reserve
Board has not issued a notice disapproving the proposed acquisition or
extending for up to another 30 days the period during which such a disapproval
may be issued. An acquisition may be made prior to the expiration of the
disapproval period if the Federal Reserve Board issues written notice of its
intent not to disapprove the action. Under a rebuttable presumption established
by the Federal Reserve Board, the acquisition of more than 10% of a class of
voting stock of a bank holding company with a class of securities registered
under Section 12 of the Exchange Act, such as AmSouth, would, under the
circumstances set forth in the presumption, constitute the acquisition of
control.
In addition, any "company" would be required to obtain the approval of the
Federal Reserve Board under the BHCA before acquiring 25% (5% in the case of an
acquiror that is a bank holding company) or more of the outstanding shares of
AmSouth Common Stock, or otherwise obtaining control over AmSouth.
Changes in control of AmSouth are also subject to certain statutory notice
and approval requirements under the laws of the states in which certain of the
Subsidiary Banks are located.
COMPARISON OF RIGHTS OF SHAREHOLDERS
At the Effective Date, as a consequence of the Merger, shareholders of FFSB,
whose rights are governed by FFSB's Charter and Bylaws and by federal law, will
become shareholders of AmSouth, and their rights as shareholders of AmSouth
will be determined by the Delaware GCL, the AmSouth Certificate and the AmSouth
Bylaws. The following is a summary of certain material differences in the
rights of shareholders of AmSouth and FFSB. The summary does not purport to be
a complete discussion of, and is qualified in its entirety by reference to, the
governing laws, the AmSouth Certificate and AmSouth Bylaws and FFSB's Charter
and Bylaws.
REMOVAL OF DIRECTORS
FFSB. At a meeting of shareholders called expressly for that purpose, any
director may be removed for cause by a vote of the holders of a majority of the
shares then entitled to vote at an election of directors. If less than the
entire Board of Directors is to be removed, no one of the directors may be
removed if the votes cast against the removal would be sufficient to elect a
director if then cumulatively voted at an election of the class of directors of
which such director is a part. Whenever the holders of the shares of any class
are entitled to elect one or more directors by the provisions of FFSB's Charter
or supplemental sections thereto, the above-described provisions of FFSB's
Bylaws will apply, with respect to the removal of a director or directors so
elected, to the vote of the holders of the outstanding shares of that class and
not to the vote of the outstanding shares as a whole.
AmSouth. The AmSouth Certificate provides that a director may be removed from
office, but only for cause and by the affirmative vote of the holders of 80% of
the voting shares then entitled to vote at an election of directors.
AUTHORIZED CAPITAL STOCK
FFSB. The FFSB Charter authorizes the issuance of up to 8,000,000 shares of
FFSB Common Stock, of which 414,330 shares were issued and outstanding as of
the Record Date, and up to 2,000,000 shares of preferred stock, par value $.01
per share, of which no shares were issued and outstanding as of the Record
Date.
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AmSouth. The AmSouth Certificate authorizes the issuance of up to 200,000,000
shares of AmSouth Common Stock, of which 50,868,118 shares were outstanding and
1,500,000 shares were held as treasury shares as of the Record Date, and up to
2,000,000 shares of preferred stock, $.01 par value per share ("AmSouth
Preferred Stock"), of which no shares were issued and outstanding as of the
Record Date. The AmSouth Preferred Stock is issuable in series, each series
having such rights and preferences as the AmSouth Board may fix and determine
by resolution.
CUMULATIVE VOTING
FFSB. Pursuant to the FFSB Charter, each shareholder generally is entitled to
one vote for each share of FFSB Common Stock held, and such holders are not
entitled to cumulative voting rights in the election of directors, for a period
of five years from the date of FFSB's Conversion to a stock form of
organization.
AmSouth. Pursuant to the AmSouth Bylaws each shareholder generally is
entitled to one vote for each share of AmSouth Common Stock held, and such
holders are not entitled to cumulative voting rights in the election of
directors.
PREEMPTIVE RIGHTS
FFSB. The holders of FFSB Common Stock have no preemptive rights to acquire
any additional shares of FFSB Common Stock.
AmSouth. The holders of AmSouth Common Stock have no preemptive rights to
acquire any additional shares of AmSouth Common Stock.
DIRECTOR'S LIABILITY
FFSB. FFSB's Charter and Bylaws contain no provisions concerning director's
liability.
AmSouth. The AmSouth Certificate provides that a director of AmSouth will
have no personal liability to AmSouth or its shareholders for monetary damages
for breach of fiduciary duty as a director except (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 that involve intentional misconduct or a
knowing violation of law, (iii) for the payment of certain unlawful dividends
and the making of certain stock purchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision would absolve directors of personal liability for negligence in the
performance of duties, including gross negligence. It would not permit a
director to be exculpated, however, for liability for actions involving
conflicts of interest or breaches of the traditional "duty of loyalty" to
AmSouth and its shareholders, and it would not affect the availability of
injunctive or other equitable relief as a remedy.
INDEMNIFICATION
FFSB. OTS Regulations provide for indemnification of directors, officers and
employees of federal savings associations against expenses (including
reasonable attorneys' fees), judgments, fines and settlements in connection
with litigation. Such indemnification is available if final judgment on the
merits is rendered in favor of the indemnitee; or, in the case of settlement,
final judgment against the indemnitee or final judgment in favor of the
indemnitee other than on the merits, indemnification is available if a majority
of the disinterested directors of the savings association determine that the
indemnitee was acting in good faith within the scope of his or her employment
or authority as he or she could reasonably have perceived it under the
circumstances and for a purpose he or she could reasonably have believed under
the circumstances was in the best interests of the savings association and its
members. However, no indemnification is available unless the federal savings
association provides the OTS with sixty (60) days notice of its intention to
provide such indemnification. Such notice must state the facts on which the
action arose and the terms of any settlement or disposition. No such
indemnification may be made if the OTS advises the federal savings association
of its objection thereto. The federal savings association may obtain insurance
to protect it and its directors, officers
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and employees from potential losses arising from claims against any of them for
alleged wrongful acts committed in their capacity as directors, officers or
employees; provided, however, that no such insurance may be obtained that
provides for payment of losses of any person incurred as a consequence of his
or her willful or criminal misconduct.
AmSouth. Section 145 of the Delaware GCL contains detailed and comprehensive
provisions providing for indemnification of directors and officers of Delaware
corporations against expenses, judgments, fines and settlements in connection
with litigation. Under the Delaware GCL, other than an action brought by or in
the right of AmSouth, such indemnification is available if it is determined
that the proposed indemnitee acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of AmSouth
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful. In actions brought by or in the
right of AmSouth, such indemnification is limited to expenses (including
attorneys' fees) actually and reasonably incurred if the indemnitee acted in
good faith and in a manner he or she reasonably believed to be in or not
opposed to the best interests of AmSouth, except that no indemnification shall
be made in respect of any claim, issue or matter as to which such person has
been adjudged to be liable to AmSouth unless and only to the extent that the
Court of Chancery or the court in which the action was brought determines upon
application that in view of all the circumstances of the case, he or she is
fairly and reasonably entitled to indemnity for such expenses as the court
deems proper. To the extent that the proposed indemnitee has been successful on
the merits or otherwise in defense of any action, suit or proceeding (or any
claim, issue or matter therein), he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith. AmSouth's Certificate provides for indemnification of the
directors and officers of AmSouth against liabilities to the extent provided by
Delaware Law.
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION WITHOUT A MEETING
FFSB. Under FFSB's Bylaws, unless otherwise prescribed by OTS regulations,
special meetings of the shareholders may be called at any time by the Chairman
of the Board, the President or a majority of the FFSB Board and shall be called
by the Chairman of the Board, the President or the Secretary upon the written
request of the holders of not less than one-tenth of all of the outstanding
capital stock of FFSB entitled to vote at the meetings; provided, however,
under FFSB's Charter for a period of five years from the date of FFSB's
Conversion to the stock form of organization, special meetings of the
shareholders relating to changes in control of FFSB or amendments to its
Charter can be called only by the FFSB Board. Under FFSB's Bylaws, any action
required or permitted to be taken at a meeting of shareholders may be taken
without a meeting if written consents setting forth the action so taken are
signed by all shareholders entitled to vote with respect to such action.
AmSouth. Under the AmSouth Certificate and Bylaws, a special meeting of
AmSouth's shareholders may only be called by the AmSouth Board, the Chief
Executive Officer of AmSouth or the holders of a majority of the outstanding
AmSouth Common Stock entitled to be voted for directors. Under the AmSouth
Certificate and Bylaws, no action required to be taken or which may be taken at
any annual or special meeting of AmSouth shareholders may be taken without such
a meeting.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
FFSB. Federal statutes and regulations applicable to FFSB generally require
the affirmative vote of the holders of at least two-thirds of the outstanding
FFSB voting stock for approval of mergers or consolidations or the sale or
exchange of all or substantially all of FFSB's assets. The FFSB Charter also
contains a beneficial ownership limitation provision (the "Beneficial Ownership
Limitation Provision") that is intended to insure that any person or entity
seeking to acquire control of FFSB will treat all shareholders fairly and
equally. Specifically, the Beneficial Ownership Limitation Provision provides
that, for a period of five years from the date of FFSB's Conversion to the
stock form of organization, in the event, absent certain specific conditions,
any party acquires beneficial ownership of ten percent or more of any class of
FFSB equity securities, all
58
<PAGE>
shares beneficially owned by that party in excess of ten percent shall be
considered "excess shares" and shall not be counted as shares entitled to vote
and shall not be voted by any person or counted as voting shares in connection
with any matter submitted to the FFSB shareholders for a vote. See "Proposal
1--CHARTER AMENDMENT".
AmSouth. The Delaware GCL provides that mergers and sales of substantially
all of the property of corporations must be approved by a majority of the
outstanding stock of the corporation entitled to vote thereon. Delaware law
also provides, however, that the shareholders of the corporation surviving a
merger generally need not approve the transaction if: (i) the agreement of
merger does not amend in any respect the certificate of incorporation of such
corporation; (ii) each share of stock of such corporation outstanding
immediately prior to the effective date of the merger is to be an identical
outstanding or treasury share of the surviving corporation after the effective
date of the merger; and (iii) either no shares of common stock of the surviving
corporation and no shares, securities or obligations convertible into such
stock are to be issued or delivered under the plan of merger, or the authorized
unissued shares or the treasury shares of common stock of the surviving
corporation to be issued or delivered under the plan of merger plus those
initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of common stock of such corporation outstanding immediately prior to the
effective date of the merger. See also "DESCRIPTION OF AMSOUTH COMMON STOCK-
Changes in Control" for a description of statutory provisions and provisions of
the AmSouth Certificate relating to changes in control of AmSouth.
See "Antitakeover Statutes" for additional restrictions on business
combination transactions.
AMENDMENT OF CHARTER AND BYLAWS
FFSB. FFSB's Charter provides that, subject to certain exceptions, no
amendment, addition, alteration, change or repeal thereof may be made, unless
first proposed by the Board of Directors, then preliminarily approved by the
OTS, which preliminary approval may be granted by the OTS pursuant to specified
regulations with respect to preapproved charter amendments, and thereafter
approved by the holders of a majority of the total votes eligible to be cast at
a legal meeting. FFSB's Bylaws provide that they may be amended in a manner
consistent with OTS regulations at any time by a majority of the full FFSB
Board or by a majority vote of the outstanding shares of FFSB at any legal
meeting.
AmSouth. Under the Delaware GCL, a corporation's certificate of incorporation
can be amended by the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote thereon, and a majority of the outstanding
stock of each class entitled to vote as a class, unless the certificate
requires the vote of a larger portion of the stock. The AmSouth Certificate
requires supermajority shareholder approval to amend or repeal any provision
of, or adopt any provision inconsistent with, certain provisions in the AmSouth
Certificate governing (i) business combinations between AmSouth and an
interested shareholder, (ii) shareholder meetings and (iii) the structure of
the AmSouth Board. See "DESCRIPTION OF AMSOUTH CAPITAL STOCK--Changes in
Control." As is permitted by the Delaware GCL, the AmSouth Certificate gives
its Board of Directors the power to adopt, amend or repeal the AmSouth Bylaws.
The AmSouth shareholders entitled to vote have concurrent power to adopt, amend
or repeal the AmSouth Bylaws.
RIGHTS OF DISSENTING SHAREHOLDERS
FFSB. Any holder of FFSB Common Stock who (i) has given notice in writing to
FFSB prior to the vote on the Merger at the Meeting of his or her intent to
demand payment for his or her shares if the Merger is effectuated, (ii) does
not vote his or her shares in favor of the Merger and (iii) files with FFSB,
within 60 days after the giving of notice to him or her by FFSB of the FFSB
shareholders' authorization of the Merger (which notice shall be given to such
dissenting FFSB Shareholder by FFSB within 10 days of such authorization), an
election stating his or her name, address, the number of shares as to which he
or she
59
<PAGE>
dissents and a demand for payment of the fair value of his or her shares and
simultaneously with the notice of election surrenders the certificates for the
FFSB Shares as to which such dissenter dissents, shall be entitled to the fair
value of his or her FFSB Common Stock. Failure to follow the statutory
provisions precisely may result in loss of dissenters' rights. These statutory
provisions are set forth in full in Appendix D to this Proxy Statement-
Prospectus and are summarized under "DISSENTERS' RIGHTS."
AmSouth. Under the Delaware GCL, a shareholder has the right, in certain
circumstances, to dissent from certain corporate transactions and receive the
fair market value (excluding any appreciation or depreciation as a consequence
or in expectation of the transaction) of his shares in cash in lieu of the
consideration he otherwise would have received in the transaction. Such fair
value is determined by the Delaware Court of Chancery if a petition for
appraisal is timely filed. Appraisal rights are not available, however, to
shareholders of a corporation (i) unless otherwise provided in such
corporation's certificate of incorporation (which the AmSouth Certificate does
not so provide), if the shares are listed on a national securities exchange (as
is AmSouth Common Stock) or quoted on the Nasdaq/NMS, or held of record by more
than 2,000 shareholders (as is AmSouth Common Stock), and shareholders are
permitted by the terms of the merger or consolidation to accept in exchange for
their shares (a) shares of stock of the surviving or resulting corporation, (b)
shares of stock of another corporation listed on a national securities exchange
or held of record by more than 2,000 shareholders, (c) cash in lieu of
fractional shares of such stock or (d) any combination thereof or (ii) in a
merger if such corporation is the surviving corporation and no vote of its
shareholders is required.
ANTITAKEOVER STATUTES
FFSB. The Change in Bank Control Act of 1978 prohibits a person or group of
persons from acquiring "control" of a thrift unless the OTS has been given
sixty days' prior written notice of the proposed acquisition and within that
time the OTS has not issued a disapproval or extended for up to another thirty
days the period during which such disapproval may be issued. Generally
speaking, the acquisition of twenty-five percent or more of the outstanding
FFSB Common Stock, among other things, would constitute control of FFSB;
provided that control may be presumed under OTS regulations once such person or
group of persons owns more than 10% of the outstanding shares of FFSB Common
Stock. Furthermore, any company generally would be required to obtain the
approval of the OTS under the Home Owners' Loan Act before acquiring control
over FFSB. Under 12 C.F.R. Section 563b.3(i)(3), for a period of three years
following the date of the completion of the Conversion, no person shall,
directly or indirectly, offer to acquire or acquire the beneficial ownership of
more than ten percent of the securities of FFSB without the prior written
approval of the OTS and where any person acquires such ownership without
approval, the shares beneficially owned in excess of ten percent should not be
counted as entitled to vote in connection with any matter submitted to the
stockholders for a vote.
AmSouth. As a Delaware corporation, AmSouth is subject to the business
combination statute described under the heading "DESCRIPTION OF AMSOUTH CAPITAL
STOCK--Changes in Control--Delaware Business Combination Statute." As a bank
holding company, acquisitions of control of AmSouth are also subject to the
Change in Bank Control Act of 1978 and the BHCA as described under the heading
"DESCRIPTION OF AMSOUTH CAPITAL STOCK--Changes in Control--Control
Acquisitions."
SHAREHOLDER RIGHTS PLAN
FFSB. The FFSB Board has not adopted a shareholder rights plan.
AmSouth. As described above (under "DESCRIPTION OF AMSOUTH CAPITAL STOCK-
AmSouth Rights Agreement"), AmSouth adopted the AmSouth Rights Agreement in
1989. When issued upon consummation of the Merger, the Merger Shares will have
attached AmSouth Rights.
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<PAGE>
DIVIDENDS
FFSB. FFSB's ability to pay dividends is restricted by OTS regulations and by
tax considerations relating to savings associations.
AmSouth. The Delaware GCL provides that, subject to any restrictions in the
corporation's certificate of incorporation, dividends may be declared from the
corporation's surplus or, if there is no surplus, from its net profits for the
fiscal year in which the dividend is declared and the preceding fiscal year.
Dividends may not be declared, however, if the corporation's capital has been
diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. Substantially all of the funds
available for the payment of dividends by AmSouth are derived from its
Subsidiary Banks. There are various statutory limitations on the ability of
AmSouth's Subsidiary Banks to pay dividends to AmSouth. See "CERTAIN REGULATORY
MATTERS."
SHAREHOLDERS' RIGHT TO EXAMINE BOOKS AND RECORDS
FFSB. OTS regulations applicable to FFSB provide that any shareholder or
group of shareholders holding of record (i) voting shares having a cost of at
least $100,000 or constituting at least 1% of the total outstanding voting
shares, provided in either case that such shareholder or group has held those
shares of record for at least six months, or (ii) at least 5% of the total
outstanding voting shares, has the right to examine, with certain exceptions,
books and records of account, minutes, and records of shareholders, upon
written demand stating a proper purpose.
AmSouth. The Delaware GCL provides that a shareholder may inspect books and
records upon written demand under oath stating the purpose of the inspection,
if such purpose is reasonably related to such person's interest as a
stockholder.
DISSENTERS' RIGHTS
The following summary does not purport to be a complete statement of the
procedure to be followed by FFSB shareholders desiring to exercise dissenters'
rights and is qualified in its entirety by reference to 12 C.F.R. (S) 552.14,
the full text of which is attached hereto as Appendix D. Since the preservation
and exercise of dissenters' rights require strict adherence to the provisions
of these regulations, FFSB shareholders who might desire to exercise such
rights should review such laws carefully, timely consult their own legal
advisor and strictly follow provisions.
Each outstanding share of FFSB Common Stock, the holder of which has demanded
and perfected his or her demand for payment of the fair value of such share in
accordance with 12 C.F.R. (S) 552.14 (the "FFSB Dissenter Provisions") and who
has not effectively withdrawn or lost his or her right to such payment, shall
not be converted into a share of AmSouth Common Stock, but shall represent only
rights granted with respect to such dissenting FFSB Common Stock pursuant to
the FFSB Dissenter Provisions as described below. By perfecting demand for
payment in accordance with the FFSB Dissenter Provisions, such shareholder
shall not be entitled to receive AmSouth Common Stock (and cash for fractional
share interests) as a result of the Merger.
Under the FFSB Dissenter Provisions, any holder of FFSB Common Stock who has
(i) given notice in writing to FFSB prior to the Meeting of his or her intent
to demand payment for his or her shares if the Merger is effectuated, (ii) does
not vote his or her shares in favor of the Merger and (iii) who files with FFSB
(or AmSouth if the Merger has already been consummated), within 60 days after
the giving of notice to him or her by FFSB of the FFSB shareholders'
authorization of the Merger (which notice shall be given to such dissenting
FFSB shareholder by FFSB within 10 days of such authorization), an election
stating his or her name, address, the number of shares as to which he or she
dissents and a demand for fair payment of the value of his or her shares and
simultaneously with the notice of election surrenders the certificates for the
FFSB Shares as to which such dissenter dissents, shall be entitled to the fair
value in cash of his or her shares of FFSB Common Stock.
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<PAGE>
Within 10 days after the Merger, AmSouth shall make a written offer to each
dissenting shareholder to pay an amount AmSouth estimates to be the fair value
for such shares, which offer shall be accompanied by (a) a balance sheet and
income statement of FFSB for a fiscal year ending not more than 16 months prior
to the making of such offer together with the latest available interim
financial statements for FFSB, (b) a statement of AmSouth's estimate of the
fair value of the shares, and (c) a statement of the dissenters' right to
demand payment.
If, within 60 days after the making of such offer any holder of FFSB Common
Stock accepts the same, payment for his or her dissenting shares shall be made
within 90 days after the making of such offer or the consummation of the
Merger, whichever is later. If AmSouth fails to make such an offer within the
period specified in the preceding paragraph, or if AmSouth makes the offer and
any dissenting shareholder fails to accept the same within the period of 60
days thereafter, then any such holder of FFSB Common Stock may, within 60 days
of the Effective Date, file a petition with the OTS demanding a determination
of the fair market value of the FFSB Common Stock in any court of competent
jurisdiction. The OTS will then appraise the fair value of such shares which
AmSouth shall pay as directed by the OTS.
The costs and expenses of any such proceeding shall be determined by the OTS
and may be assessed against AmSouth, but all or part of such costs may be
apportioned and assessed as the OTS deems against any or all of the dissenting
holders of shares of FFSB Common Stock who are parties to the proceeding, to
whom AmSouth has made an offer to pay for such shares, if the OTS finds that
the action of such shareholders in failing to accept such offer was arbitrary,
vexatious or not in good faith.
PURSUANT TO THE ABOVE, ANY DISSENTING SHAREHOLDER
OF FFSB SHOULD SEND A WRITTEN
NOTICE TO FFSB AT THE FOLLOWING ADDRESS:
FIRST FEDERAL SAVINGS BANK
208 NORTH WALL STREET
CALHOUN, GEORGIA 30701
ATTENTION: HELEN H. JONES
PROPOSAL 3. ELECTION OF DIRECTORS
Pursuant to its amended Bylaws, the number of directors of FFSB is set at
eight (8). Directors are elected for staggered terms of three years each, with
a term of office of only one of three classes of directors expiring each year.
Directors serve until their successors are elected and qualified.
The three nominees proposed for election at the Meeting are Messrs. John W.
Early, II, Thomas E. Shanahan and William R. Thompson, M.D. Messrs. Early,
Shanahan and Thompson are presently directors of FFSB. No person being
nominated as a director is being proposed for election pursuant to any
agreement or understanding between any person and FFSB.
In the event that any such nominee is unable to serve or declines to serve
for any reason, it is intended that proxies will be voted for the election of
the remaining nominees named and for such other persons as may be designated by
the present Board of Directors. The Board of Directors has no reason to believe
that any of the persons named will be unable or unwilling to serve. Unless
authority to vote for the directors is withheld, it is intended that the shares
represented by the enclosed proxy card will be voted FOR the election of all
nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF ALL NOMINEES
NAMED IN THIS PROXY STATEMENT--PROSPECTUS.
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INFORMATION WITH RESPECT TO THE NOMINEES, CONTINUING DIRECTORS AND EXECUTIVE
OFFICERS.
The following table sets forth, as of the Record Date, the names of the
nominees and continuing directors, their ages, a brief description of their
recent business experience, including present occupations and employment, and
the year in which each became a director of FFSB. This table also sets forth
the amount of Common Stock and the percent thereof beneficially owned by each
director and the directors and executive officers as a group on the Record
Date.
<TABLE>
<CAPTION>
SHARES OF
EXPIRATION COMMON STOCK
NAME AND PRINCIPAL OCCUPATION AT DIRECTOR OF TERM AS BENEFICIALLY PERCENT
PRESENT AND FOR THE PAST FIVE YEARS AGE SINCE DIRECTOR OWNED OF CLASS
- ----------------------------------- --- -------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C>
NOMINEES
John W. Early II................. 47 1982 1994 17,012 4.1%
Pharmacist, Gordon Hospital
Thomas E. Shanahan............... 45 1990 1994 7,463(1) 1.8
Attorney at Law
William R. Thompson, M.D......... 70 1979 1994 6,712(2) 1.6
Doctor, General Practice
CONTINUING DIRECTORS
John Wayne Hall.................. 56 1985 1995 15,012 3.6
President, Calhoun Wholesale Sup-
ply,
Inc. President, Hall Realty, Inc.
Henry E. Holland, Jr............. 50 1974 1995 20,391(3) 4.9
Chairman of the Board, President
and
Chief Executive Officer, FFSB
J. Philip Beamer, Jr............. 52 1981 1996 17,012(4) 4.1
President, Philip Beamer Distrib-
utor,
Inc.; President, Dobe Enter-
prises, Inc.
W. C. Burdette................... 63 1972 1996 7,012(5) 1.7
President, W. C. Burdette Agency,
a
real estate brokerage firm; Inac-
tive
Vice-President of FFSB since 1979
Helen H. Jones................... 49 1978 1996 18,669(6) 4.5
Senior Vice President and Secre-
tary,
FFSB
All directors and executive offi- 143,692(7) 33.6
cers as a group (12 persons)
</TABLE>
- --------
(1) Includes 2,012 shares which may be acquired through the exercise of stock
options granted under the First Federal Savings Bank 1991 Stock Option Plan
for Outside Directors ("Directors' Option Plan") and 106 shares owned by
Mr. Shanahan's wife, Carol, to which he disclaims beneficial ownership.
(2) Includes 700 shares owned by Dr. Thompson's wife, Ouida, to which he
disclaims beneficial ownership.
(3) Includes 2,684 shares which may be acquired through the exercise of stock
options granted under the First Federal Savings Bank 1991 Incentive Stock
Option Plan (the "Incentive Option Plan") which are currently exercisable
and excludes 4,025 shares which may be acquired through the exercise of
stock options which are not currently exercisable. All options become
immediately exercisable upon a change in control. Also includes 2,554
shares allocated under the Employee Stock Ownership Plan of FFSB.
(4) Includes 553 shares owned by Mr. Beamer's wife, June in her IRA to which
Mr. Beamer disclaims beneficial ownership.
(5) Includes 2,012 shares which may be acquired through the exercise of stock
options granted under the Directors' Option Plan.
(6) Includes 885 shares which may be acquired through the exercise of stock
options granted under the Incentive Stock Option Plan which are currently
exercisable and excludes 2,658 shares which may be acquired through the
exercise of stock options which are not currently exercisable. All options
become immediately exercisable upon a change in control. Also includes
1,899 shares allocated under the Employee Stock Ownership Plan, 1,500
shares and 1,000 shares owned by Ms. Jones' husband, Luther, and her two
daughters, respectively. Ms. Jones disclaims beneficial ownership of the
shares owned by her husband and children.
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(7) Includes 11,365 shares with respect to all directors and executive officers
which may be acquired through the exercise of stock options granted under
the Incentive Option Plan and the Director's Option Plan. Also, includes
10,647 shares allocated under FFSB's Employee Stock Ownership Plan.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires FFSB's
executive officers and directors, and persons who own more than ten percent of
a registered class of FFSB's equity securities, to file reports of ownership
and changes in ownership with the OTS. Executive officers, directors and
greater than ten percent shareholders are required by SEC regulation to furnish
FFSB with copies of all Section 16(a) forms they file.
Based solely on a review of copies of such reports of ownership furnished to
FFSB, or written representations that no forms were necessary, FFSB believes
that during the past fiscal year all filing requirements applicable to its
executive officers, directors and greater than ten percent beneficial owners
were complied were except those for which Henry E. Holland, Helen H. Jones,
Barbara J. Balliew, Jim L. Black, Gloria R. Brown and Richard E. Huie failed to
timely report on Forms 4 stock allocations made pursuant to the FFSB's ESOP,
which transactions have subsequently been disclosed on Forms 4.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to FFSB Common Stock
beneficially owned, as of the Record Date, by persons or entities known to FFSB
to be the beneficial owners of more than 5% of the shares of FFSB Common Stock.
Other than those persons listed below, FFSB is not aware of any person or group
that owns more than 5% of FFSB Common Stock as of the Record Date.
<TABLE>
<CAPTION>
AMOUNT OF SHARES
NAME AND ADDRESS BENEFICIALLY OWNED AS PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OF THE RECORD DATE OF CLASS
-------------- ------------------- --------------------- --------
<S> <C> <C> <C>
Common Stock Wellington Management 36,600(1) 8.8%
Company
75 State Street
Boston, Massachusetts 02109
Common Stock First Federal Savings Bank 35,000(2) 8.4
Employee Stock Ownership
Plan and Trust ("ESOP")
Common Stock First Financial Fund, Inc. 29,800(3) 7.2
One Seaport Plaza
25th Floor
New York, New York 10292
</TABLE>
- --------
(1) Wellington Management Company, in its capacity as investment advisor, may
be deemed the beneficial owner of 36,600 shares of FFSB Common Stock which
are owned by numerous investment counselling clients.
(2) The ESOP is administered by the ESOP committee. An unrelated corporate
trustee for the ESOP ("ESOP Trustee") has been appointed by the FFSB Board.
The ESOP Trustee must vote all allocated shares held in the ESOP in
accordance with the instructions of the participating employees. Under the
ESOP, unallocated shares held in the suspense account will be voted by the
ESOP Trustee in a manner calculated to most accurately reflect the
instructions it has received from participants regarding the allocated
stock. As of the Record Date, 12,522 shares of FFSB Common Stock in the
ESOP were unallocated.
(3) First Financial Fund, in its capacity as an investment company, may be
deemed the beneficial owner of 29,800 shares of FFSB Common Stock.
MEETINGS OF THE FFSB BOARD AND COMMITTEES OF THE FFSB BOARD
During fiscal year 1993, the FFSB Board held 16 meetings. No director of FFSB
attended fewer than 75% of the total number of FFSB's board meetings held and
the total number of committee meetings on
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<PAGE>
which such director served. The FFSB Board maintains committees, the nature and
composition of which are described below:
The Loan Review Committee consists of the entire FFSB Board. It reviews all
loans approved by the Loan Committee, which consists of three executive
officers of FFSB. All loans of $300,000 or more must be approved by the full
FFSB Board. The committee met 12 times in fiscal 1993.
The Compensation Committee consists of Messrs. Hall and Early. It reviews the
benefit plans of FFSB, the levels of compensation for officers and employees,
and makes recommendations to the FFSB Board. It met one time in fiscal 1993.
The Audit Committee consists of Messrs. Shanahan (Chairman), Beamer,
Burdette, and Thompson. The committee reports to the FFSB Board concerning the
results of the independent audit reports and recommends an independent auditor
for appointment. This committee met one time in fiscal 1993.
The Nominating Committee consists of the entire FFSB Board. The Committee
considers and recommends to the FFSB Board the nominees for director to stand
for election at FFSB's annual meeting of stockholders. The FFSB Bylaws provide
procedures for stockholder nominations of directors. These provisions require
such nominations to be made pursuant to timely notice in writing to the
Secretary of FFSB. The stockholder's notice of nomination must contain all
information relating to the nominee which is required to be disclosed by FFSB's
Bylaws. The Nominating Committee met one time in fiscal 1993.
DIRECTORS' COMPENSATION
Directors' Fees. Directors of FFSB receive a fee of $600 per meeting attended
with one paid absence. As members of the Loan Review Committee, board members
also receive a $1,000 annual fee. Members of the Audit and Compensation
Committees receive a fee of $200 for each meeting attended. Board members who
are also FFSB employees do not receive compensation for attending committee
meetings.
Director's Option Plan. Under the Directors' Option Plan, each of the non-
employee directors at the time of the initial public offering was granted 2,012
non-statutory stock options to purchase shares of the FFSB Common Stock at a
price of $10 per share. Each option granted under the Directors' Option Plan
expires upon the earlier of ten years following the date of the grant or thirty
days following the date the optionee ceases to be a director, except in the
event of death, where the period is extended to six months following his or her
death, provided that the option is exercised within ten years after the date of
the grant. No options were granted in fiscal year 1993. Messrs. Thompson,
Early, Hall and Beamer exercised 2,012 options each that were granted under the
Directors' Option Plan.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table shows, for the fiscal year
ended September 30, 1993, the cash compensation paid by FFSB, as well as
certain other compensation paid or accrued for fiscal 1993, to the Chief
Executive Officer ("Named Executive Officer") of FFSB. No other executive
officer of FFSB received salary and bonus in excess of $100,000 in fiscal 1993.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
--------------------------------- ----------------------------
AWARDS PAYOUTS
-------------------- -------
OTHER ANNUAL RESTRICTED OPTIONS LTIP ALL OTHER
NAME AND SALARY BONUS COMPENSATION STOCK AWARDS /SARS PAYOUTS COMPENSATION
PRINCIPAL OFFICE(2) YEAR ($)(1) ($)(2) ($)(3) ($) (#) (4) ($)(5)
- ------------------- ---- ------- ------- ------------ ------------ ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry E. Holland, Jr. .. 1993 $75,600 $10,772 None None None None $32,351
Chairman of the Board,
Chief Executive Officer
and President
</TABLE>
65
<PAGE>
- --------
(1) Includes directors' fees paid to Mr. Holland by FFSB.
(2) Includes bonus awards under FFSB's Incentive Plan which provides for
bonuses based upon the profitability of FFSB.
(3) For fiscal year 1993, there were no (a) perquisites over the lesser of
$50,000 or 10% of the individual's total salary and bonus for the year; (b)
payments of above-market preferential earnings on deferred compensation;
(c) payments of earnings with respect to long-term incentive plans prior to
settlement or maturation; (d) tax payment reimbursements; or (e)
preferential discounts on stock.
(4) FFSB has no long-term incentive plans in existence and therefore made no
payouts or awards under such plans.
(5) Mr. Holland was allocated 1,638 shares of Common Stock which had a market
value of $32,351 as of September 30, 1993 under the Employee Stock
Ownership Plan.
Employment Agreement. FFSB entered into an employment agreement with Mr.
Holland that initially provided for a three-year term. Commencing on the first
anniversary date and continuing each anniversary date thereafter, the agreement
could have been extended by the Board of Directors after conducting a review of
the agreement for an additional year so that the remaining term would have been
three years. However, the employment agreement has been amended to provide for
an expiration date of June 27, 1995. The agreement provides that the base
salary of the executive will be reviewed by the Board annually. The current
base salary for Mr. Holland is $66,000.
In addition to the base salary, the agreement provides for, among other
things, disability pay, participation in stock benefit plans and other fringe
benefits. The agreement provides for termination by FFSB for cause at any time.
In the event FFSB elects to terminate the executive's employment for reasons
other than for cause, or in the event of the executive's resignation from FFSB
upon a (i) failure to re-elect the executive to his current office or nominate
the executive for board membership, (ii) a material change in the executive's
functions, duties, or responsibilities, or relocation of his principal place of
employment, (iii) liquidation, consolidation, merger or dissolution of FFSB, or
(iv) a material breach of the agreement by FFSB or if termination, voluntary
(as defined in the agreement) or involuntary, results from a change in control
of FFSB, the executive or, in the event of death, his beneficiary, would be
entitled to receive a severance payment equal to three times his average annual
base salary and directors fees over the past three years of employment with
FFSB. At FFSB's discretion, such payments would be made in a lump sum within
thirty days of the date of termination or paid in equal monthly installments
during the thirty-six months following such date. FFSB would also continue the
executive's life, health, accidental, and disability coverage for a period of
thirty-six months after termination of employment.
A change in control is generally defined to mean the acquisition by a person
or group having beneficial ownership of 20% or more of the FFSB Common Stock
during the term of the agreement, or merger or other form of business
combination, sale of assets or contested election which results in a change of
control of a majority of the FFSB Board.
In the event of a change in control or the occurrence of any other
circumstances that would require a severance payment to be made, based upon an
average of the past three fiscal years' salary and director's fees, Mr. Holland
would receive approximately $221,400 in severance payments in addition to other
cash and noncash benefits provided under the agreement. "See Proposal 2--
MERGER--Interest of Certain Persons in the Merger."
Payments under the employment agreement in the event of a change in control
may constitute an excess parachute payment under Section 280G of the Code,
resulting in the imposition of an excise tax on the recipient and denial of a
deduction to FFSB generally for all amounts in excess of three times the
executive's average annual compensation for the five tax years preceding the
change in control. The agreement provides that benefits payable to the
executive in the event of a change in control will be reduced to an amount that
would not constitute an excess parachute payment (as that term is defined in
Section 280G of the Code) if the reduced amount is greater than the non-reduced
amount less payments of any excise tax.
66
<PAGE>
Incentive Stock Option Plan. FFSB maintains the Incentive Option Plan which
provides discretionary awards to officers and key employees as determined by a
committee of disinterested directors who administer the plan.
The following table provides certain information with respect to the number
of shares of Common Stock represented by outstanding stock options held by the
Named Executive Officer as of September 30, 1993. Also reported are the values
for "in-the-money" options which represent the positive spread between the
exercise price of any such existing stock options and the year-end price of
FFSB Common Stock. No options were exercised by the Named Executive Officer in
fiscal year 1993.
FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY
OPTIONS AT SEPTEMBER 30, 1993 OPTIONS AT SEPTEMBER 30, 1993
NAME EXERCISABLE/UNEXERCISABLE (1)(2)(3) EXERCISABLE/UNEXERCISABLE (4)
---- ----------------------------------- -----------------------------
<S> <C> <C>
Henry E. Holland, Jr.... 2,684/4,025 $26,169/$39,244
</TABLE>
- --------
(1) Options granted to Mr. Holland pursuant to the Incentive Option Plan become
exercisable in equal installments at a rate of 20% per year commencing on
June 27, 1992. To the extent not already exercisable, the options become
exercisable upon a change in control. See "Proposal 2--MERGER--Treatment of
Stock Options" for the effect of the Merger.
(2) Options are subject to limited rights pursuant to which options, to the
extent outstanding for at least six months, may be exercised in the event
of a hostile change in control of FFSB. Upon the exercise of a limited
right, the optionee would receive a cash payment equal to the difference
between the exercise price of the option of the date of grant and the fair
market value of the underlying shares of Common Stock on the date the
limited right is exercised. A hostile change in control has the same
definition as a change in control except that a hostile change in control
is a transaction that has not been approved by the FFSB Board.
(3) The option term is for ten years.
(4) Market Value for underlying securities at year-end ($19.75) minus the
exercise or base price ($10.00), of $9.75 per share.
INDEBTEDNESS OF MANAGEMENT AND TRANSACTIONS WITH CERTAIN RELATED PERSONS
The Financial Institutions Reform, Recovery, and Enforcement Act of 1989
("FIRREA") requires that all loans or extensions of credit to executive
officers and directors must be made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with the general public and must not involve more than the normal
risk of repayment or present other unfavorable features to FFSB. In addition,
loans made to a director or executive officer in excess of the greater of
$25,000 or 5% of FFSB's capital and surplus (up to a maximum of $500,000) must
be approved in advance by a majority of the disinterested members of the FFSB
Board.
Set forth below is certain information as of September 30, 1993 as to loans
made by FFSB to those directors and executive officers and associates of
directors and executive officers whose aggregate indebtedness on preferential
terms to FFSB exceeded $60,000 at any time since October 1, 1992.
<TABLE>
<CAPTION>
LARGEST AMOUNT BALANCE AS OF
NAME AND ORIGINAL LOAN MATURITY OUTSTANDING SINCE SEPTEMBER 30, INTEREST
POSITION AMOUNT LOAN DATE DATE OF LOAN OCTOBER 1, 1992 1993 RATE TYPE
- -------- ------------- --------- ------------ ----------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard E. Huie,
Senior Vice-President,
FFSB.................... $80,000 10-15-86 11-01-06 $69,342 $66,462 7.4% Mortgage
</TABLE>
- --------
Thomas E. Shanahan, a director of FFSB, acts as counsel to FFSB on various
legal matters. During the year ended September 30, 1993, FFSB paid $10,743 in
legal fees to Mr. Shanahan's firm.
67
<PAGE>
PROPOSAL 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
FFSB's independent auditors for the fiscal year ended September 30, 1993,
were Read, Martin, Slickman and Sheats. The Board of Directors has reappointed
Read, Martin, Slickman and Sheats to continue as independent auditors for
FFSB, for the fiscal year ending September 30, 1994, subject to ratification
of such appointment by the stockholders. Representatives of Read, Martin,
Slickman and Sheats are expected to attend the meeting. They will be given an
opportunity to make a statement if they desire to do so and will be available
to respond to appropriate questions from stockholders present at the Meeting.
Unless marked to the contrary, the shares represented by the enclosed Proxy
will be voted FOR ratification of the appointment of Read, Martin, Slickman
and Sheats as the independent auditors of FFSB.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE APPOINTMENT
OF READ, MARTIN, SLICKMAN AND SHEATS AS THE INDEPENDENT AUDITORS OF FFSB.
PROPOSAL 5. AUTHORITY TO ADJOURN THE MEETING
Proposal 2, as described above, must be approved by the holders of two-
thirds of the outstanding shares of FFSB's Common Stock. The form of Revocable
Proxy sent to stockholders with this Proxy Statement-Prospectus sets forth a
proposal to permit the official proxy committee of FFSB to vote the proxy in
favor of an adjournment of the Meeting for up to 29 days in order to solicit
further proxies if stockholders holding two-thirds of the votes eligible to be
cast at the Meeting do not submit proxies voting in favor of the Merger. The
proposal to authorize such adjournment must be approved by a majority of the
votes present in person or by proxy at the Meeting. The FFSB Board recommends
a vote "FOR" the approval of the proposal and requests stockholders check the
box permitting adjournment of the Meeting in the event sufficient votes are
not cast in favor of the Merger.
SHAREHOLDER PROPOSALS
To be considered for inclusion in the proxy statement and proxy relating to
the Annual Meeting of Stockholders for the fiscal year ending September 30,
1994, a stockholder proposal must be received by the Secretary of FFSB at the
address set forth on the first page of this Proxy Statement, not later than
October 21, 1994. Any such proposal will be subject to 17 C.F.R. Section
240.14a.-8 of the Rules and Regulations under the Securities Exchange Act of
1934, as amended. Any new business to be taken up at the annual meeting must
be stated in writing and filed with the Secretary of FFSB at the address set
forth on the first page of this proxy statement at least five days prior to
the date of the annual meeting.
VALIDITY OF AMSOUTH COMMON STOCK
The validity of the Merger Shares (and the related AmSouth Rights) will be
passed upon by Carl L. Gorday, Counsel of AmSouth.
EXPERTS
The consolidated financial statements of FFSB as of September 30, 1993 and
1992 and for each of the three years ended September 30, 1993 included in
Appendix C to this Proxy Statement-Prospectus, have been audited by Read,
Martin, Slickman and Sheats, C.P.A.'s, independent auditors, as stated in
their reports, appearing in such Appendix, and are included in reliance upon
the reports of such firm given upon their authority as experts in accounting
and auditing.
68
<PAGE>
The consolidated financial statements of AmSouth Bancorporation included and
incorporated by reference in AmSouth's Annual Report (Form 10-K) for the year
ended December 31, 1992, have been audited by Ernst & Young, independent
auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
With respect to the unaudited consolidated interim financial information for
the three month periods ended March 31, 1993 and March 31, 1992, the six month
periods ended June 30, 1993 and June 30, 1992, and the nine month periods ended
September 30, 1993 and September 30, 1992, incorporated by reference in this
prospectus, Ernst & Young have reported that they have applied limited
procedures in accordance with professional standards for a review of such
information. However, their separate report, included in AmSouth's Quarterly
Report on Form 10-Q for the quarters ended March 31, 1993, June 30, 1993 and
September 30, 1993, and incorporated herein by reference, state that they did
not audit and they do not express an opinion on that interim financial
information. Accordingly, the degree of reliance on their reports on such
information should be restricted in light of the limited nature of the review
procedures applied. The independent auditors are not subject to the liability
provisions of Section 11 of the Securities Act of 1933 (the "Act") for their
reports on the unaudited interim financial information because the reports are
not a "report" or a "part" of the Registration Statement prepared or certified
by the auditors within the meaning of Sections 7 and 11 of the Act.
69
<PAGE>
APPENDICES
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
A-1
<PAGE>
AGREEMENT AND PLAN OF MERGER
DATED AS OF THE 3RD DAY OF AUGUST, 1993
BETWEEN
FIRST FEDERAL SAVINGS BANK, CALHOUN, GEORGIA
AND
AMSOUTH BANCORPORATION
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of the 3rd day of August, 1993 (the
"Plan"), between FIRST FEDERAL SAVINGS BANK, CALHOUN, GEORGIA (the "Company"),
and AMSOUTH BANCORPORATION ("AmSouth").
RECITALS:
A. The Company. The Company is a savings bank duly organized and existing
in good standing under the laws of the United States, with its principal
executive offices located in Calhoun, Georgia. As of June 30, 1993, the Company
had 8,000,000 authorized shares of common stock, each of $.01 par value,
2,000,000 shares of preferred stock $.01 par value (no other class of capital
stock being authorized) of which 414,330 shares of common stock were issued and
outstanding and no shares were held as treasury stock.
B. AmSouth. AmSouth is a corporation duly organized and existing in good
standing under the laws of the State of Delaware with its principal executive
offices located in Birmingham, Alabama. As of June 30, 1993, AmSouth had
200,000,000 authorized shares of common stock, each of $1.00 par value, and
2,000,000 authorized shares of preferred stock, no par value (no other class of
capital stock being authorized), of which 43,777,992 shares of common stock were
outstanding and 1,500,000 shares were held as treasury stock. No shares of
preferred stock were issued and outstanding and none were held as treasury
stock.
C. Rights, Etc. With respect to the Company, there are no shares of common
stock or preferred stock reserved for issuance, and the Company has no
commitment to issue or sell any such shares or any securities or obligations
convertible into or exchangeable for, or giving any person any right to
subscribe for or acquire from the Company any such shares, and no securities or
obligations representing such rights are outstanding, except as will be set
forth on Schedule 1 hereto.
D. Board Approvals. As of the date of execution hereof, the Board of
Directors of the Company has approved this Plan and has authorized the execution
hereof. The Board of Directors of AmSouth will consider this Plan within 20
days after the date hereof.
<PAGE>
E. Voting Agreements. The directors of the Company will enter into Voting
Agreements (as defined in Paragraph (J) of Article V) in substantially the form
annexed hereto as Annex 1.
In consideration of their mutual promises and obligations, including the
promises and obligations under the Voting Agreements, the parties hereto adopt
and make this Plan and prescribe the terms and conditions thereof and the manner
and basis of carrying it into effect, which shall be as follows:
I. THE MERGER
I(A) The Continuing Corporation. The Company shall be merged into a
subsidiary (the "Merging Subsidiary") of AmSouth (the "Merger"), the separate
existence of the Company shall cease, and the Merging Subsidiary (sometimes
hereinafter referred to as the "Surviving Bank") shall survive, all with the
effect provided by the laws of the State of Georgia.
I(B) Rights, Etc. The Surviving Bank shall thereupon and thereafter
possess all the rights, privileges, immunities and franchises, of a public as
well as of a private nature, of each of the merging corporations; and all
property, real, personal and mixed, and all debts due on whatever account, and
all other choses in action, and all and every other interest, of or belonging to
or due to each of the corporations so merged, shall be taken and deemed to be
transferred to and vested in the Surviving Bank without further act or deed; and
the title to any real estate or any interest therein, vested in any of such
corporations, shall not revert or be in any way impaired by reason of the
Merger.
I(C) Liabilities, Etc. The Surviving Bank shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties of
each of the corporations so merged.
I(D) Articles of Incorporation; By-Laws; Directors and Officers. The
Articles of Incorporation and By-Laws of the Surviving Bank shall be those of
the Merging Subsidiary, as in effect immediately prior to the Effective Date (as
defined in Article IX) of the Merger. The directors and officers of the Merging
Subsidiary immediately prior to the Effective Date shall be the directors and
officers of the Surviving Bank until their successors are elected and qualify.
Page 2
<PAGE>
II. TERMS OF THE MERGER.
Subject to the provisions of this Plan:
II(A) Subject to clause (3) of this Paragraph (A) and Paragraph (E) of
Article II:
(1)(i) Each share of Company common stock, par value $.01 per share (the
"Company Common Stock"), other than (x) shares as to which dissenters'
rights are properly perfected, (y) shares held directly or indirectly
by the Company other than shares held in a fiduciary capacity or in
satisfaction of a debt previously contracted (it being specifically
agreed and acknowledged that shares held by the Company's employee
stock ownership plan will be converted in the Merger as provided
below), and (z) shares held as treasury stock by the Company shall
become and be converted into the right to receive .9991 shares (the
"Conversion Number") of common stock, par value $1.00 per share
("AmSouth Common Stock"), of AmSouth; and (ii) each share of Company
Common Stock, if any, held in the treasury of the Company shall be
cancelled; and (iii) the Conversion Number shall be proportionately
adjusted based on any stock dividend or stock split declared on
AmSouth Common Stock between the date of this Plan and the Effective
Date.
(2) certificates which represent shares of Company Common Stock issued and
outstanding immediately prior to the Effective Date, shall be deemed
to represent rights to receive shares of AmSouth Common Stock and
shall be exchangeable by the holders thereof in the manner provided in
the transmittal materials described below for new certificates
representing the number of full shares of AmSouth Common Stock which
such holders shall be entitled to receive in accordance with the
method of computation set forth in clause (1) of this Paragraph (A);
and
(3) notwithstanding any other provisions hereof, no fractional shares of
AmSouth Common Stock and no certificates or scrip
Page 3
<PAGE>
therefor, or other evidence of ownership thereof, will be issued;
instead, AmSouth shall pay to each holder of Company Common Stock who
would otherwise be entitled to fractional shares pursuant to clause
(1) of this Paragraph (A) an amount in cash determined by multiplying
such holder's fractional interest by the closing price for AmSouth
Common Stock on the Effective Date on the New York Stock Exchange.
II(B) As promptly as practicable after the Effective Date, AmSouth shall
send or cause to be sent to each former shareholder of record of the Company on
the Effective Date, transmittal materials for use in exchanging certificates of
Company Common Stock for certificates of AmSouth Common Stock. Pending delivery
of such certificates of Company Common Stock, dividends on the AmSouth Common
Stock to be exchanged therefor which are payable prior to the delivery date of
such certificates will be held by AmSouth and delivered to the persons entitled
thereto upon delivery of such certificates for exchange, together with any
fractional share checks referred to above.
II(C) On and after the Effective Date, there shall be no transfers on the
stock transfer books of the Company or the Surviving Bank of the shares of
Company Common Stock which were issued and outstanding immediately prior to the
Effective Date.
II(D) On and after the Effective Date, holders of Company Common Stock
shall have no rights as shareholders of the Company other than to receive
AmSouth Common Stock and cash in lieu of fractional shares as provided above or
any amounts due as a result of the perfection of dissenters' rights.
II(E)(1) The Company will have a right to elect to abandon the Merger and
terminate the Plan, (and no provision of this Article II except Paragraph (E)
shall apply) if its Board of Directors so determines by a majority vote of the
members of its entire board, at any time during the ten-day period commencing
with the Approval Date if the Average Closing Price of shares of AmSouth Common
Stock shall be less than $28.80; subject, however, to the following three
sentences. If the Company makes an election to abandon the Merger, it shall
give prompt written notice to AmSouth (provided that such notice of election may
be withdrawn at any time within the aforementioned ten-day period). During the
seven-day period commencing with its receipt of such notice, AmSouth shall have
the option to increase the
Page 4
<PAGE>
consideration to be received by the holders of Company Common Stock in the
Merger, by adjusting the Conversion Number up to the number (calculated to the
nearest one one-hundredth) obtained by dividing (A) the product of $28.80 and
.9991 (i.e. $28.77) by (B) the Average Closing Price. If AmSouth so elects
within such seven-day period, it shall give prompt written notice to the Company
of such election and the revised Conversion Number, whereupon no termination
shall have occurred and this Plan shall remain in effect in accordance with its
terms (except as the Conversion Number shall have been so modified).
(2) The term "Average Closing Price" means the average closing price per
share of AmSouth Common Stock as reported on the New York Stock Exchange
("NYSE") Composite Transactions reporting system (as reported by The Wall Street
Journal or, if not reported thereby, another authoritative source), for the 20
NYSE trading days ending on the fifth business day prior to the date (the
"Approval Date") on which the last regulatory approval required for consummation
of the Merger shall be received.
II(F) The holders of stock options granted under the Company's 1991
Incentive Stock Option Plan and the 1991 Stock Option Plan for Outside Directors
shall on the Effective Date automatically receive, by virtue of the Merger, for
each option which has not been exercised prior to the Effective Date (1) a
number of shares of AmSouth Common Stock equal to (A) the difference between (i)
the exercise price of such option and (ii) the product of the closing price of
AmSouth Common Stock on the Effective Date (the "AmSouth Closing Price")
multiplied by the Conversion Number (as adjusted by Section II (E), if
applicable) divided by (B) the AmSouth Closing Price, and (2) an amount of cash
in lieu of any fractional share determined by multiplying such holder's
fractional interest by the AmSouth Closing Price.
III. ACTIONS PENDING MERGER.
III(A) Without the prior written consent or approval of AmSouth, the
Company will not, and will not permit any subsidiary to:
(1) in the case of the Company only, make, declare or pay any dividend other
than its regular quarterly common cash dividend of $.25 per share (and
provided that for the quarter in which the Effective Date occurs, the
Company may declare and pay a final dividend in an
Page 5
<PAGE>
amount per share equal to $.25 multiplied by the fraction that is equal to
the portion of the quarter that has elapsed prior to the Effective Date);
or declare or make any distribution of, or directly or indirectly combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock or authorize creation or issuance of or issue any additional
shares of its capital stock, or grant any options, calls or commitments
relating to its capital stock or any securities or obligations convertible
into or exchangeable for or giving any person any right to subscribe for or
acquire from the Company or any subsidiary shares of capital stock, except
pursuant to plans or agreements as existing on the date hereof and to be
disclosed in Schedule 1, provided that no stock options, restricted stock
or similar benefits may be granted pursuant to any existing Company plans
without the prior written approval of AmSouth; or, except as to be
disclosed to AmSouth in Schedule 1, incur any long term debt (except as
incurred by the Company in the ordinary course of business);
(2) (i) enter into any employment contracts with, increase the rate of
compensation of, or pay or agree to pay any bonus to, any of its directors,
officers or employees, except in accordance with existing practices as
disclosed to AmSouth in Schedule 1 or (ii) employ any new officer or
employee at an annual salary that is in excess of $25,000;
(3) except as will be disclosed to AmSouth on Schedule 1, enter into, terminate
or modify (except as may be required by applicable law) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers, employees or
any other person;
(4) substantially modify the manner in which it has heretofore conducted its
business, enter into any new line of business, engage or employ any
consultant or advisor not under contract on the date hereof as disclosed in
Schedule 1 or amend its Charter except for an amendment deleting Section 8A
of its Charter,
Page 6
<PAGE>
or, except as will be disclosed to AmSouth on Schedule 1, its By-laws;
(5) dispose of or discontinue any major portion of its business or property, or
merge or consolidate with, or acquire all or (relative to the Company) any
substantial portion of, the business or property of any other entity;
(6) dispose of any material assets except in the ordinary course of business;
(7) knowingly take any action for the purpose of, or that would have the effect
of, causing deterioration of its customer deposit or loan relationships; or
(8) agree to take any of the foregoing actions.
III(B) Without the prior written consent of the Company, AmSouth will not,
and will not permit any bank subsidiary, to:
(1) substantially modify the manner in which it has heretofore conducted its
business;
(2) dispose of to a non-affiliate of AmSouth, or discontinue, any major portion
of its business; or
(3) agree to take any of the foregoing actions.
IV. REPRESENTATIONS AND WARRANTIES.
The Company hereby represents and warrants to AmSouth, and AmSouth
represents and warrants to the Company, as follows:
IV(A) the facts set forth in the recitals of this Plan with respect to it
are true and correct; in the case of the Company and its subsidiaries, the
copies of the Company's Charter and By-Laws to be delivered to AmSouth in
Schedule 1 are correct and complete and the minute books of the Company and its
subsidiaries contain complete and accurate records of all meetings and other
corporate actions held or taken since January 1, 1990, by their respective
shareholders and Boards of Directors (including committees thereof);
IV(B) the outstanding shares of it and its subsidiaries are validly issued
and outstanding, fully paid and (subject to 12 U.S.C. (S) 55 in the case of a
Page 7
<PAGE>
national bank subsidiary) non-assessable, and subject to no preemptive rights;
IV(C) each of it and its subsidiaries has the corporate power and
authority to carry on its business as it is now being conducted and to own or
lease all its material properties and assets;
IV(D) as of the date hereof, the outstanding shares of capital stock of
each of its subsidiaries are owned by it, free and clear of all liens, claims,
encumbrances and restrictions on transfer, except as set forth in Schedule 1
hereto;
IV(E) subject to any necessary receipt of approval by its shareholders and
the regulatory and other approvals referred to in Paragraphs (B) and (C) of
Article VII, this Plan has been authorized by all necessary corporate action of
it (once approval of the Board of Directors of AmSouth has been obtained) and is
a valid and binding agreement of it enforceable against it in accordance with
its terms, subject as to enforcement to bankruptcy, reorganization, insolvency
and other laws of general applicability relating to or affecting creditors
rights and to general equity principles and except that the availability of the
equitable remedies of specific performance or injunctive relief are subject to
the discretion of the court before which any proceedings may be brought;
IV(F) except as disclosed to the other party hereto on Schedule 1, the
execution, delivery and performance of this Plan by it does not, and the
consummation of the transactions contemplated hereby by it will not, constitute
(i) a breach or violation of, or a default under, any law, rule or regulation or
any judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of it, or any of its subsidiaries, or to which it, or
any of its subsidiaries, is subject (other than approval by the office of Thrift
Supervision ("OTS") of an application under 12 CFR Section 563b.3(i)(3)), which
breach, violation or default would have a material adverse effect on the
financial condition, results of operations, business or business plans of it and
its subsidiaries taken as a whole or enable any party to enjoin the transactions
contemplated hereby, or (ii) a breach or violation of, or a default under, the
Charter (except for Section 8A of the Company's Charter), Articles of
Incorporation, or Certificate of Incorporation, as the case may be, or By-laws
of it or its subsidiaries; and the consummation of the transactions contemplated
hereby will not require any
Page 8
<PAGE>
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license or the consent or approval of any other
party to any such agreement, indenture or instrument, other than the required
approvals of applicable regulatory authorities and others referred to in
Paragraph (B) and (C) of Article VII;
IV(G) as of their respective dates, none of its Annual Reports on Form
10-K for its two most recent fiscal years, its most recent Quarterly Report on
Form 10-Q, any Current Report on Form 8-K of it since December 31,1992 and any
proxy statement or registration statement of it since December 31, 1992, each
in the form (including exhibits) filed with the Securities and Exchange
Commission (the "SEC") or the OTS, or any such report to be filed subsequent to
the date hereof (collectively, its "Financial Reports") contained or will
contain any untrue statement of a material fact or omitted or will omit to state
a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. Each of the balance sheets in or incorporated by
reference into the Financial Reports fairly presents or will fairly present the
financial position of the entity or entities to which it relates as of its date
and each of the statements of operations and retained earnings and cash flows or
equivalent statements in the Financial Reports (including any related notes and
schedules) fairly presents or will fairly present the results of operations,
retained earnings and changes in financial position, as the case may be, of the
entity or entities to which it relates for the periods set forth therein
(subject in the case of unaudited interim statements, to normal year-end audit
adjustments which will not be material in amount or effect to such entities
taken as a whole), in each case in accordance with generally accepted accounting
principles applicable to the particular entity consistently applied during the
periods involved, except as may be noted therein; and independent public
accountants for it have rendered or will render an unqualified opinion with
respect to each audited financial statement included in the Financial Reports
or, if qualified, such qualification is reasonably satisfactory to the other
party hereto;
IV(H) in the case of the Company only, except as set forth in Schedule 1:
(i) to the best knowledge of the Company, all evidences of indebtedness in
original principal amount in excess of $50,000 reflected as assets in the
Company's Financial Reports are in all respects binding obligations of the
respective obligors named therein and no material amount of such assets is
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subject to any defenses which may be asserted against it or any of its
subsidiaries, (ii) the allowances for possible loan losses shown on the
Financial Reports as of June 30, 1993, are, as of the date of such Financial
Reports, in the opinion of management adequate in all material respects, under
the principles described in Paragraph (G) of Article IV, to provide for possible
losses, net of recoveries relating to loans previously charged off, on loans
outstanding (including accrued interest receivable), as of the respective dates
of such Financial Reports; (iii) each such allowance has been established in
accordance with the principles described in Paragraph (G) of this Article IV;
and (iv) the Company has duly filed in correct form its Thrift Financial Report
with the OTS for the period ended March 31, 1993 (which Call Report is accurate
and complete in all material respects), and the Company will deliver to AmSouth
in Schedule 1 an accurate and complete copy of such report;
IV(I) in the case of the Company only, (1) the Company will deliver to
AmSouth in Schedule 1 copies of the federal income tax returns of the Company
for each of the last three fiscal years and all schedules and exhibits thereto.
Except as disclosed to AmSouth in Schedule 1, each of the Company and its
subsidiaries has duly filed in correct form all Federal, state and local
information returns and tax returns required to be filed by it and its
subsidiaries on or prior to the date hereof (all such returns to the best
knowledge of the Company being accurate and complete in all material respects)
and, to the best knowledge of the Company, has duly paid or made provisions for
the payment of all taxes and other governmental charges which have been incurred
or are due or claimed to be due from them by Federal, state or local taxing
authorities (including, without limitation, those due in respect of their
properties, income, business, capital stock, deposits, franchises, licenses,
sales and payrolls) other than taxes or other charges (i) which are not yet
delinquent or are being contested in good faith and set forth in Schedule 1 and
(ii) have not been finally determined. Except as disclosed to AmSouth in
Schedule 1, in the reasonable opinion of the respective managements of the
Company and its subsidiaries, the amounts set up as liabilities for taxes on the
latest Financial Reports are sufficient in the aggregate for the payment of all
unpaid Federal, state and local taxes (including any interest or penalties
thereon), whether or not disputed or accrued, for the period ended June 30, 1993
or for any year or period prior thereto, and for which the Company or any of its
subsidiaries may be liable in its own right or as transferee of the assets of,
or successor to, any corporation, person, association,
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partnership, joint venture or other entity. Except as disclosed to AmSouth in
Schedule 1, the Federal income tax returns of the Company and its subsidiaries
have been examined by the appropriate taxing authorities and any liability with
respect thereto has been satisfied, or the statute of limitations has expired,
for all years as set forth on Schedule 1 hereto, and all deficiencies asserted
as a result of such examinations have been satisfied. Except as disclosed to
AmSouth in Schedule 1, to the best knowledge of the Company and its
subsidiaries, there are no material disputes pending, or claims asserted for,
taxes or assessments upon the Company or any of its subsidiaries, nor has the
Company or any of its subsidiaries been requested to give any currently
effective waivers extending the statutory period of limitation applicable to any
Federal, state or local income tax return for any period.
(2) to the best knowledge of the Company and its subsidiaries, (i) proper
and accurate amounts have been withheld by the Company and its subsidiaries from
their employees and others for all prior periods in compliance in all material
respects with the tax withholding provisions of applicable Federal, state and
local laws and regulations, and proper due diligence steps have been taken in
connection with back-up withholding, (ii) Federal, state and local returns which
are accurate and complete in all material respects have been filed by the
Company and each of its subsidiaries for all periods for which returns were due
with respect to income tax withholding, Social Security and unemployment taxes
and (iii) the amounts shown on such returns to be due and payable have been paid
in full or, in the reasonable opinion of the respective managements of the
Company and each of its subsidiaries, adequate provision therefore has been
included by either the Company or its subsidiaries in its or their most recent
Financial Reports;
IV(J) except as disclosed to the other party hereto in writing (dated on or
prior to the date hereof), there has been no material adverse change in its
consolidated financial condition, results of operations, business or business
plans since June 30, 1993; provided, that for purposes of this Paragraph IV(J)
(i) additions to the Company's loan loss reserve made in compliance with
Paragraph (K) of Article V and (ii) the Company's recapture of its tax bad debt
reserve if at AmSouth's request the Company converts to a bank prior to the
Effective Date shall not be considered a material adverse change in the Company.
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IV(K) except as disclosed in the Financial Reports or on Schedule 1, no
material litigation, proceeding or controversy before any court, governmental
agency or arbitrator is pending which in the opinion of management and its legal
counsel is likely to have a material and adverse effect on its consolidated
financial condition, results of operations, business or business plans or
prevent consummation of the transactions contemplated hereby, and, to the best
of its knowledge, no such litigation, proceeding or controversy has been
threatened or is contemplated, nor is there, to the best of its knowledge, a
reasonable basis for any such litigation, proceeding or controversy; no
judgment, decree, injunction, ruling or order of any court, governmental agency
or arbitrator is outstanding against it or any of its subsidiaries having or
which, insofar as reasonably can be foreseen, in the future would have a
material adverse effect on the financial condition, results of operations,
business, or business plans of it and its subsidiaries taken as a whole; there
is no default under any material contract or agreement to which it or any of its
subsidiaries is a party which has had or would have a material adverse effect on
its consolidated financial condition, results of operations, business or
business plans; and neither it nor any of its subsidiaries is subject to any
agreement, memorandum of understanding or similar arrangement with any
regulatory authority materially restricting its operations or requiring that
certain actions be taken;
IV(L) in the case of the Company only, except as disclosed in the
Financial Reports or on Schedule 1 or as permitted herein, and except for this
Plan, neither it nor its subsidiaries are bound by any material contract to be
performed after the date hereof other than contracts which are cancelable on
less than 90 days notice without material penalty or cost to, or material
disruption of the business of, it and its subsidiaries taken as a whole;
IV(M) all negotiations relative to this Plan and the transactions
contemplated hereby have been carried on by it directly with the other parties
hereto and no action has been taken by it that would give rise to any valid
claim against any party hereto for a brokerage commission, finder's fee or other
like payment except as disclosed on Schedule 1;
IV(N) in the case of the Company only, except as disclosed on Schedule 1,
it, each of its subsidiaries and all "Employee Benefit Plans" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that cover any of its or
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their employees, comply with all laws, requirements and orders under ERISA and
the Internal Revenue Code of 1986 as amended (the "Code") the breach or
violation of which could have a material adverse effect on its business; the
present value of all of the assets of each of its Employee Benefit Plans that is
subject to Title IV of ERISA equals or exceeds the present value of all of the
benefits accrued under each such Employee Benefit Plan as of the end of the most
recent plan year with respect to such plan ending prior to the date hereof,
calculated on the basis of the actuarial assumptions used in the last actuarial
evaluation for each such plan; none of the employees of the Company or any of
its subsidiaries is covered by a collective bargaining agreement; neither the
Company nor any of its subsidiaries has ever contributed to a "multiemployer
plan" as defined in Section 3(37) of ERISA; neither the Employee Benefit Plans
nor any fiduciary or administrator has engaged in a "prohibited transaction" as
defined in Section 406 of ERISA or, where applicable, Section 4975 of the Code
for which no exemption is applicable, that may have any material adverse
economic consequence to the Company, nor have there been any "reportable events"
within Section 4043 of ERISA for which the thirty-day notice has not been
waived;
IV(O) in the case of the Company only,
(a) except as disclosed on Schedule 1 each of it and its subsidiaries has
good and marketable title, insurable at regular rates with respect to properties
and assets which currently are of a type for which insurance is generally
available, free and clear (except as indicated in the Financial Reports) of
liens and encumbrances of a material nature, to its property and assets that are
material to its business on a consolidated basis;
(b) Except as disclosed in Schedule 1, neither the Company nor any
properties owned or operated by the Company has been or is in violation of or
liable under any Environmental Law (as defined in (e) below). There are no
actions, suits or proceedings, or demands, claims, notices or, to the best
knowledge of the Company, investigations (including, without limitations,
notices, demand letters or requests for information from any Environmental
Agency (as defined in (g) below), instituted or pending, or to the best
knowledge of the Company, threatened relating to the liability of any properties
owned or operated by the Company under any Environmental Law.
(c) Except disclosed in Schedule 1 (i) no Hazardous Materials (as defined
in (f) below) have been generated, treated, stored or disposed of at, or
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transported to or from any properties owned or operated by the Company at any
time, (ii) no triable asbestos containing material is in use, stored or disposed
of on or upon any properties owned or operated by the Company, (iii) no
polychlorinated biphenyis ("PCBs") are located on or in any properties owned or
operated by the Company in any form or device, including, without limitations,
in the form of electrical transformers, fluorescent light fixtures with
ballasts, or cooling oils, and (iv) no underground storage tanks are located on
any properties owned or operated by the Company or were located on any
properties owned or operated by the Company and subsequently removed or filled.
(d) The representations in (b) and (c) above (i) shall also apply to any
properties in which the Company has a security interest, but (ii) shall not
apply to the extent that in the reasonable opinion of the Company's management,
the results of such actions, suits, proceedings, demands, claims, notices or
investigations, or the presence of such Hazardous Materials, substances or items
on such properties, is not likely to have material adverse effect on the
business or financial condition of the Company.
(e) "Environmental Law" means any federal, state, local, or foreign law,
statute, ordnance, rule, regulation, code, license, permit, authorization,
approval, consent, order, judgment, decree, injunction or agreement with any
Environmental Agency relating to (i) the protection preservation or restoration
of the environment (including, without limitation, air, water vapor, surface
water, groundwater, drinking water supply, surface soil, subsurface soil, plant
and animal life or any other natural resource), and/or (ii) the usage, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of any substance presently listed,
defined, designated or classified as hazardous, toxic, radioactive or dangerous,
or otherwise regulated, whether by type or by quantity, including any material
containing any such substance as a component.
(f) "Hazardous Materials" means solid waste (as that term is defined under
the Resources Conservation and Recovery Act, 42 U.S.C.A. 6901 et seq., and the
regulations adopted pursuant to that Act), hazardous waste (as that term is
defined under the Resource Conservation and Recovery Act, 42 U.S.C.A. 6901 et
seq., and the regulations adopted pursuant to the Act), hazardous substances (as
that term is defined in the Comprehensive Environmental Response, Compensation
and Liability Act, 42 U.S.C.A. 9601 et seq., and the regulations adopted
pursuant to that Act), and other
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pollutants, including, without limitation, any solid, liquid, gaseous or thermal
irritants or contaminant, such as smoke, vapor, soot, fumes, acids, alkalis or
chemicals.
(g) "Environmental Agency" means the United States Environmental
Protection Agency, the Georgia Department of Natural Resources or any other
federal, state or local agency responsible for regulating or enforcing laws,
rules, regulations and ordinances relating to (i) the protection, preservation
or restoration of the environmental (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource), and/or
(ii) the use, storage, recycling, treatment, generation, transportation,
processing, banding, labeling, production, release or disposal of any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, whether by type or by
quantity, including any material containing any such substance as a component.
IV(P) it knows of no reason why the regulatory and other approvals
referred to in Paragraphs (B) and (C) of Article VII should not be obtained
without the imposition of any condition of the type referred to in the proviso
following such Paragraph (C) once Section 8A of the Company's Charter has been
deleted;
IV(Q) in the case of AmSouth only, the AmSouth Common Stock to be issued
in the Merger will have been duly authorized and, when issued in accordance with
the terms of the Plan, will be validly authorized and issued and fully paid and
nonassessable, and no shareholder of AmSouth will have any preemptive rights
thereto;
IV(R) in the case of AmSouth only, it will have available sufficient
AmSouth Common Stock at or prior to the Effective Date to exchange for shares of
Company Common Stock to be converted into the right to acquire AmSouth Common
Stock pursuant to this Plan;
IV(S) in the case of the Company only, all of its and its subsidiaries'
material contracts are in full force and effect, and neither it nor any of its
subsidiaries (nor, to the best of its knowledge, any other party to any such
contract) has breached any provision of, or is in default in any respect under
the terms of, any such contract and no party to any such contract will have the
right to terminate any or all of
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the provisions of any such contract as a result of the transactions contemplated
by this Plan if the effect of such breach, default or right to terminate, alone
or in the aggregate, may be material to the business, financial condition or
results of operations of it and its subsidiaries taken as a whole;
IV(T) in the case of the Company only, it and each of its subsidiaries
are, in the conduct of their businesses, in compliance with all federal, state
and local laws, statutes, ordinances and regulations, the failure to comply with
which would materially adversely affect its consolidated financial condition,
results of operations, business or business plans. Neither it nor any of its
subsidiaries has received any notification (not disclosed in Schedule 1) from
any agency or department of any federal, state or local government or any staff
thereof asserting, other than in a regular report of examination, that it or any
of its subsidiaries are not in compliance with any of the statutes, regulations
or ordinances which such governmental authority or regulatory agency enforces
which noncompliance would have a material adverse effect on its consolidated
financial condition, results of operations, business or business plans, or
threatening to revoke any license, franchise, permit or governmental
authorization, and none of them is subject to any formal agreement with any such
regulatory agency with respect to any of their assets or businesses;
IV(U) (1) in the case of the Company only, (except for the contracts,
plans and documents copies of which will be provided to AmSouth in Schedule 1),
neither the Company nor any subsidiary of the Company is a party to or subject
to:
(i) any employment, consulting or severance contract or arrangement with any
employee, officer or director of the Company or of any one or more of its
subsidiaries or with any former employee, officer or director of any of
them; or
(ii) any plan, arrangement or contract providing for bonuses, pensions,
options, deferred compensation, retirement payments, incentive plans,
contingent pay, profit sharing or similar arrangements for or with its
officers, directors or employees or former directors, officers or
employees; and
(2) in the case of the Company and AmSouth, except as disclosed in Schedule 1,
neither it nor any of its subsidiaries is a party to or subject to:
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(i) any contract materially limiting the freedom of the Company or any of its
subsidiaries to engage in any type of banking or bank-related business; or
(ii) any contract which contains a financial covenant or other restriction that
would have a material adverse effect upon the business, financial
condition, results of operations or business plans of the Surviving Bank
and its subsidiaries taken as a whole;
IV(V) in the case of the Company only, it will disclose to AmSouth in
Schedule 1, as to the Company and each of its subsidiaries, (i) each contractual
restriction or limitation on the payment of dividends, and (ii) the amount
available for dividends as of June 30, 1993; except as disclosed in Schedule 1,
there are no restrictions or limitations with respect to dividends which may be
declared and paid by the Company or any of its subsidiaries, except limitations
under federal or state banking laws, as applicable, and state corporate
statutes;
IV(W) in the case of the Company only, to the best of its knowledge, no
material facts relating to the business, operations, properties, assets,
liabilities (contingent or otherwise) and financial condition of the Company and
each of its subsidiaries have been withheld from the disclosures made to
AmSouth; no representation or warranty contained in this Plan, and no provisions
hereof, to the best knowledge of the Company, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make
statements herein not misleading; no information material to the Merger which is
necessary to make the representations and warranties herein contained not
misleading, to the best knowledge of the Company, has been withheld from, or
will not be delivered in Schedule 1 to, AmSouth; and whenever reference is made
herein to the delivery of copies of documents and instruments to AmSouth, such
copies are true and accurate reproductions of original documents and instruments
in the possession of the party delivering same; and
IV(X) Schedule 1 contains complete and accurate copies of all insurance
policies in force naming the Company, any of its subsidiaries or any employees
of any of them as an insured or beneficiary or as a loss payable payee
(excluding homeowner's, automobile and consumer loan policies in which the
Company is identified as the loss payee lender) or for
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which the Company or any of its subsidiaries has paid or is obligated to pay all
or part of the premiums. Neither the Company nor its subsidiaries have received
notice of any pending or threatened termination or retroactive premium increase
with respect thereto, and the Company and its subsidiaries are in compliance
with all conditions contained therein, the noncompliance with which could result
in termination of insurance coverage or increased premiums for prior or future
periods. There are no pending material claims against such insurance by the
Company or any of its subsidiaries as to which insurers have denied liability,
and there exists no material claim under such insurance that has not been
properly filed by the Company or its subsidiaries; and
V. COVENANTS.
The Company hereby covenants to AmSouth, and AmSouth hereby covenants to
the Company, that:
V(A) it shall use its best efforts in good faith to take or cause to be
taken all action necessary or desirable under this Plan on its part as promptly
as practicable so as to permit the consummation of the transactions contemplated
by this Plan as promptly as practicable and to cooperate fully with the other
parties hereto to that end (it being understood that a resolicitation of proxies
or other action arising as a consequence of an acquisition by AmSouth shall not
violate this covenant even if such resolicitation or other action may delay
consummation of the Merger);
V(B) the Company and AmSouth jointly shall prepare a registration
statement (the "Registration Statement") with respect to the AmSouth Common
Stock to be issued in the Merger; the Registration Statement shall include the
proxy statement ("the Company Proxy Statement") to be submitted to the Company's
shareholders in connection with the transactions contemplated hereby; the
Company Proxy Statement and the Registration Statement shall conform to all
applicable legal requirements;
V(C) in the case of AmSouth only, it shall, as promptly as practicable
following the preparation of the Registration Statement, file the Registration
Statement with the SEC and, in the case of the Company only, it shall file the
Company Proxy Statement with the OTS;
V(D) when the Registration Statement or any post-effective amendment
thereto shall become effective, and at all times subsequent to such
effectiveness, such
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Registration Statement and all amendments or supplements thereto, with respect
to all information set forth therein furnished or to be furnished by the Company
relating to the Company and its subsidiaries and by AmSouth relating to AmSouth
and its subsidiaries, (i) will comply in all material respects with the
provisions of the Securities Act of 1933 (the "Securities Act"), the rules and
regulations of the SEC thereunder and any other applicable statutory or
regulatory requirements and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein, in light of the
circumstances under which they are made, not misleading. In no event, however,
shall any party hereto be liable for any untrue statement of a material fact or
omission to state a material fact in the Registration Statement made in reliance
upon, and in conformity with, written information concerning another party
furnished by such other party specifically for use in the Registration
Statement. AmSouth will advise the Company, promptly after AmSouth receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order
or the suspension of the qualification of the AmSouth Common Stock for offering
or sale in any jurisdiction, of the initiation or threat of any proceeding for
any such purpose, or of any request by the SEC for the amendment or supplement
of the Registration Statement or for additional information;
V(E) in the case of AmSouth only, it shall use its best efforts to obtain,
prior to the Effective Date, all necessary state securities laws or "blue sky"
permits and approvals required to carry out the transactions contemplated by
this Plan, provided that AmSouth shall not be required by virtue thereof to
submit to general jurisdiction in any state, and will prepare and submit to the
New York Stock Exchange a listing application covering the AmSouth Common Stock
issuable in connection with the Merger and will use its best efforts to obtain,
prior to the Effective Date, approval for the listing of such stock upon
official notice of issuance;
V(F) it agrees that, unless approved by the other parties hereto in
advance, it will not issue any press release or written statement for general
circulation relating to the transactions contemplated hereby, except as
otherwise required by law;
V(G)(1) upon reasonable notice, it shall (and shall cause each of its
subsidiaries to) afford to the other party and its officers, employees, counsel,
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accountants and other authorized representatives access, during normal business
hours throughout the period prior to the Effective Date, to all of its and its
subsidiaries' properties, books, contracts, commitments and records and, during
such period it shall (and it shall cause each of its subsidiaries to) furnish
promptly to the other party (a) a copy of each report, schedule and other
document filed by it pursuant to the requirements of federal or state securities
or banking laws, (b) notice of (i) any material change in the business of it or
any of its significant subsidiaries, (ii) any significant governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), and (iii) the institution or threat of material
litigation involving it or any of its subsidiaries and (c) all other information
concerning its business, properties and personnel as the other party may
reasonably request, provided that no investigation pursuant to this Paragraph
(G) shall affect or be deemed to modify any representation or warranty made by,
or the conditions to the obligations to consummate the Merger of, any of the
parties to this Plan; and (2) each party hereto will not use any nonpublic
information or documents obtained pursuant to this Plan for any purpose
unrelated to the consummation of the transactions contemplated by this Plan and,
if the Merger is not consummated, will hold all such information and documents,
including those obtained pursuant to this paragraph, in confidence unless and
until such time as such information or documents become publicly available
(other than by reason of any action or failure to act by such party) or if it is
advised by counsel that any such information or document is required by law to
be disclosed, and in the event of the termination of this Plan, each party will
deliver to the others all documents so obtained by it;
V(H) in the case of the Company only, neither it nor any of its
subsidiaries shall solicit or encourage inquiries or proposals with respect to,
furnish any information relating to or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a substantial
portion of the assets of, or of a substantial equity interest in, the Company or
any of its subsidiaries or any business combination with the Company or any of
its subsidiaries other than as contemplated by this Plan; shall notify AmSouth
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated with, such party; and shall instruct its employees,
officers, directors, agents, advisors and affiliates to refrain from doing any
of the above;
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V(I) in the case of the Company only, it will obtain an agreement as
described below (the "Agreement of Affiliates") from each affiliated shareholder
of the Company (the "Affiliated Shareholders") prior to the Effective Date. The
Affiliated Shareholders shall be those shareholders of the Company who may, in
the opinion of counsel for the Company, be deemed to be "affiliates" of the
Company within the meaning of Rule 145 under the Securities Act, and who may, in
the opinion of such counsel, be deemed, pursuant to the provisions of Rule 145,
to be "underwriters", as such term is defined in the Securities Act,on resale of
the AmSouth Common Stock acquired hereunder (herein referred to as the "Acquired
Securities"). The Agreement of Affiliates shall be an agreement, satisfactory
to AmSouth and its counsel, which provides that: (i) the Acquired Securities
will not be acquired with a view to the distribution thereof except as permitted
by Rule 145, (ii) the Acquired Securities will not be disposed of in such a
manner as to violate Rule 145 under the Securities Act or the Agreement of
Affiliates and without AmSouth having received an opinion of counsel
satisfactory to it, to the foregoing effect, or other evidence of compliance
with Rule 145 and the Agreement of Affiliates satisfactory to AmSouth, (iii)
AmSouth may issue appropriate stop transfer instructions to its transfer agent
with respect to the Acquired Securities, (iv) no Affiliate will sell or
otherwise reduce such Affiliate's risk relative to any shares of the Acquired
Securities from the date that is 30 days prior to the Effective Date until
financial results covering at least 30 days of post-Merger combined operations
have been published, (v) each Affiliated Shareholder will obtain an agreement (a
copy of which will be delivered to AmSouth) similar to that entered into by him
or her from each transferee of Acquired Securities, unless such transferee may,
as evidenced by an opinion of counsel or other evidence, in each case
satisfactory to AmSouth, dispose of the Acquired Securities transferred to him
or her without registration under the Securities Act, and (vi) the certificates
representing Acquired Securities may bear the following or a substantially
similar legend:
"The securities represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of 1933,
as amended (the "Act"), applies, are held subject to the terms of an
agreement between the holder hereof and AmSouth Bancorporation, and may be
sold or otherwise transferred only upon receipt by AmSouth Bancorporation
of an opinion of counsel (or other evidence) satisfactory to such
corporation and its
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counsel as to satisfactory compliance with the limitations of such Rule 145
and such agreement, or of an opinion of counsel (or other evidence)
satisfactory to AmSouth Bancorporation and its counsel that some other
exemption from registration under the Act is available, or pursuant to a
registration statement under the Act.";
V(J) in the case of the Company only, the Members of the Board of
Directors commit to support publicly this transaction and the Company commits
that it will within ten (10) days after the date of this Plan obtain an
agreement (the "Voting Agreements") from each of its directors substantially in
the form set forth in Annex 1;
V(K) in the case of the Company only, it shall at the request of AmSouth
use its best efforts to modify and change its loan and real estate valuation
policies and practices (including loan classifications and levels of reserves)
prior to the Effective Date so as to be consistent on a mutually satisfactory
basis and consistent with generally accepted accounting principles with those of
AmSouth. The Company shall not be required to modify or change any such
policies or practices, however, until the earlier of (i) such time as AmSouth
acknowledges that all conditions to its obligation to consummate the Merger set
forth in Article VII have been waived or satisfied and (ii) immediately prior to
the Effective Date. The Company's representations, warranties and covenants
contained in this Plan shall not be deemed to be untrue or breached in any
respect for any purpose as a consequence of any modifications or changes
undertaken solely on account of this Paragraph (K) of Article V;
V(L) in the case of AmSouth only, it agrees (i) that employees and
officers of the Company and its subsidiaries who become employees of AmSouth or
one of its subsidiaries shall, at and after the Effective Date, be entitled to
participate in AmSouth pension, benefit and similar plans on the same terms and
conditions as employees and officers of AmSouth, giving effect to years of
service with the Company and its subsidiaries or any predecessors thereof as if
such service were with AmSouth; provided, however, that in the case of AmSouth's
Retirement Plan, giving effect to years of service shall be for vesting purposes
only and not for benefit accrual purposes and (ii) that employees and officers
of the Company and its subsidiaries who become employees of AmSouth or one of
its subsidiaries will, at and after the Effective Date, receive compensation
arrangements and fringe benefits (including the right to participate in
AmSouth's incentive compensation
Page 22
<PAGE>
programs) as are provided to AmSouth's and its subsidiaries' employees and
officers of equal status and position and will be given credit for years of
service with the Company for purposes of determining the amount of vacation and
sick leave to which such employees and officers are entitled; and
V(M) AmSouth shall continue to satisfy the current public information
requirements of Rules 144 and 145 of the Securities and Exchange Commission with
respect to the AmSouth Common Stock, and to provide the Affiliates with such
other information as they may reasonably require and to otherwise cooperate with
them to facilitate any sales of AmSouth Common Stock in compliance with Rules
144 and 145.
VI. REGULATORY APPROVALS.
As promptly as practicable after the date hereof:
VI(A) AmSouth and the Company shall cooperate in the preparation and
submission of applications to the appropriate regulatory agencies for approval
of the Merger, including but not limited to the Federal Reserve Board, the
Federal Deposit Insurance Corporation, the Georgia Department of Banking and
Finance and the OTS (including approval by the OTS under 12 CFR Section
563b.3(i)(3)) and such other agencies, approval of which may be required for the
Merger (the "Regulatory Approvals"); and
VI(B) all other appropriate action shall be duly taken to secure the
Regulatory Approvals and all other approvals, consents and rulings to satisfy
all other requirements prescribed by law which are necessary for the
consummation of the transactions contemplated hereby.
VII. CONDITIONS TO CONSUMMATION
The consummation of the Merger is conditioned upon the following:
VII(A) approval of the relevant aspects of this Plan by the holders of
Company Common Stock as and to the extent required by applicable law or the
provisions of any governing instruments;
VII(B) procurement of the Regulatory Approvals, and the conclusion of any
statutory waiting periods in connection therewith;
Page 23
<PAGE>
VII(C) procurement of all other regulatory consents and approvals and
satisfaction of all other requirements prescribed by applicable laws, rules or
regulations which are necessary to the consummation of the transactions
contemplated by this Plan; provided, however, that no approval or consent in
Paragraph (B) or (C) of this Article VII shall have imposed any conditions or
requirements which would (i) result in any material limitation on the ability of
AmSouth effectively to exercise full rights of ownership of all the shares of
Company Common Stock, (ii) require a divestiture which would constitute, if made
solely by the Company or the Bank, a material portion of the Company's business
or properties or (iii) in the good faith reasonable judgment of the Board of
Directors of AmSouth, otherwise materially and adversely affect the economic
assumptions of the transactions contemplated hereby so as to render inadvisable
the consummation of the Merger;
VII(D) there being no unstayed or final injunction prohibiting the
consummation of the Merger and no litigation or proceeding by any governmental
authority shall be pending or threatened before any court or agency seeking to
restrain, prohibit or invalidate the transactions provided for in this Plan;
VII(E) AmSouth and its directors and officers who sign the Registration
Statement shall have received, prior to the time the Company Proxy Statement is
printed and mailed to the shareholders of the Company, from Ernst & Young an
opinion that the transactions contemplated by this Plan will qualify for pooling
accounting treatment under generally accepted accounting principles which
opinion may be updated prior to the Effective Date;
VII(F) the Company and its directors shall have received an opinion, dated
the Effective Date, of Maria B. Campbell, counsel for AmSouth, or other counsel
acceptable to the Company, containing such opinions as are customary in a
transaction of this kind;
VII(G) AmSouth and its directors and officers who sign the Registration
Statement shall have received an opinion, dated the Effective Date, of counsel
to the Company acceptable to AmSouth, containing such opinions as are customary
in a transaction of this kind;
VII(H) each of the representations, warranties and covenants contained
herein of the Company shall be true in all material respects on, or complied
with in all material respects by, the Effective Date as if made on
Page 24
<PAGE>
such date (or on the date when made in the case of any representation or
warranty which specifically relates to any earlier date) except, in the case of
such representations or warranties, where the failure to be true would not have
a material adverse effect on the business, financial condition or results of
operations of the Company and its subsidiaries taken as a whole; and AmSouth
shall have received certificates signed by the Chief Executive Officer and the
Treasurer of the Company, dated the Effective Date, to such effect;
VII(I) each of the representations, warranties and covenants contained
herein of AmSouth shall be true in all material respects on, or complied with in
all material respects by, the Effective Date as if made on such date (or the
date when made in the case of any representation or warranty which specifically
relates to an earlier date) except, in the case of such representations and
warranties, where the failure to be true would not have a material adverse
effect on the business, financial condition or results of operations of AmSouth
and its subsidiaries taken as a whole; and the Company shall have received
certificates signed by the Chief Executive Officer and Chief Financial Officer
of AmSouth, dated the Effective Date, to such effect;
VII(J) the Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been initiated or
threatened by the SEC;
VII(K) AmSouth shall have received all state securities laws and "blue
sky" permits and other authorizations necessary to consummate the transactions
contemplated hereby;
VII(L) AmSouth shall have received from each person who may be deemed to
be an Affiliated Shareholder of the Company pursuant to Paragraph I of Article V
an executed Agreement of Affiliates as provided therein;
VII(M) the Company and its directors and AmSouth and its directors and
officers who sign the Registration Statement shall have received from Ernst &
Young, or other tax advisor acceptable to the Company, an opinion, dated the
Effective Date, in form and substance satisfactory to the Company, to the effect
that, on the basis of facts, representations and assumptions set forth in such
opinion, the Merger will for federal income tax purposes constitute a
reorganization within the meaning of Section 368, or any successor thereto, of
the Code and that (except with respect to holders of Company Common Stock who
exercise dissenters' rights and
Page 25
<PAGE>
except for cash payments in lieu of a fractional share interest), (i) no gain or
loss will be recognized by a holder of Company Common Stock upon conversion in
the Merger of Company Common Stock into AmSouth Common Stock, (ii) the basis of
AmSouth Common Stock to be received in the Merger by a holder of Company Common
Stock will be the same as such holder's basis in the Company Common Stock
exchanged therefor, and (iii) the holding period of AmSouth Common Stock to be
received in the Merger by a holder of Company Common Stock will include the
period during which such holder held the Company Common Stock exchanged
therefor, provided that such Company Common Stock was held as a capital asset
immediately prior to the consummation of the Merger; in rendering such opinion,
such tax advisor may rely upon certificates of officers of AmSouth and the
Company as to factual matters;
VII(N) there shall have been no discovery by AmSouth of a material adverse
condition with respect to the Company. For purposes of this Paragraph (N) of
Article VII a "material adverse condition" is a condition which either alone or
when aggregated with other conditions has resulted or, in the reasonable opinion
of AmSouth, would result, in (i) a substantial loss or damage to the properties
or assets of the Company or AmSouth whether or not insured, that would
materially affect or impair the ability of the Company or AmSouth to conduct its
business as presently conducted, or (ii) a reduction of Five Hundred and
Sixty-Five Thousand Dollars ($565,000) or more on a pre-tax basis in the
consolidated total shareholders' equity of the Company from the amounts
reflected on the June 30, 1993 Financial Reports of the Company; provided,
however, that for purposes of the calculations contemplated herein, consolidated
total shareholders' equity of the Company shall not be reduced by the continued
payment of the $0.25 per share regular quarterly dividend by the Company, by
addition by the Company to the allowance for possible loan losses prior to the
Effective Date in accordance with Paragraph (K) of Article V, or by the
recapture of tax bad debt reserve in the event the Company converts to a
commercial bank at AmSouth's request prior to the Effective Date and that such
expenditures, additions or recapture shall not represent a material adverse
condition with respect to the Company;
VII(O) there shall have been no discovery by the Company of a material
adverse condition with respect to AmSouth. For purposes of this Paragraph (O)
of Article VII a "material adverse condition" is a condition which either alone
or when aggregated with other conditions has resulted or, in the reasonable
opinion of the
Page 26
<PAGE>
Company, would result, in (i) a substantial loss or damage to the properties or
assets of AmSouth whether or not insured, that would materially affect or impair
the ability of AmSouth to conduct its business as presently conducted, or (ii) a
reduction of Forty-Six Million Dollars ($46,000,000) or more on a pre-tax basis
in the consolidated total shareholders' equity of AmSouth from the amounts
reflected on the June 30, 1993 Financial Reports of AmSouth; provided however,
that for purposes of the calculations contemplated herein, consolidated total
shareholders' equity of AmSouth shall not be reduced by the payment of its per
share regular quarterly dividend consistent with historical practice, and that
such payment shall not represent a material adverse condition with respect to
AmSouth;
provided, however, that a failure to satisfy any of the conditions set
forth in Paragraphs (E), (G), (H), (L), (M) or (N) of this Article VII shall
only consti-tute conditions if asserted by AmSouth; and a failure to satisfy any
of the conditions set forth in Paragraphs (F), (I), (M) or (O) of this Article
VII shall only constitute conditions if asserted by the Company.
VIII. TERMINATION.
This Plan may be terminated prior to the Effective Date, either
before or after its approval by shareholders:
VIII(A) by the mutual consent of AmSouth and the Company, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board;
VIII(B) by AmSouth or the Company, if its Board of Directors so determines
by vote of a majority of the members of its entire Board, in the event of a
material breach by the other of any representation, warranty or agreement
contained herein which is not cured within 45 days after the date of written
notice from the other party hereto;
VIII(C) by AmSouth or the Company, if its Board of Directors so determines
by vote of a majority of the members of its entire Board, in the event that the
Merger is not consummated by June 30, 1994 unless the failure to so consummate
by such time is due to a breach of the Plan by the party seeking to terminate;
provided that if the Regulatory Approvals have not been obtained in time to
allow consummation by June 30, 1994, such deadline shall automatically be
extended to September 30, 1994;
Page 27
<PAGE>
VIII(D) by AmSouth or the Company if this Plan is not approved by the
requisite vote of the shareholders of the Company;
VIII(E) by AmSouth or the Company if the Regulatory Approvals are not
obtained or if the Regulatory Approvals contain any condition of the type
referred to in the proviso following Paragraph (C) of Article VII;
VIII(F) by AmSouth or the Company if any condition to closing is not met
or waived by the party to benefit from the unmet condition by thirty (30) days
after the earliest date the parties could otherwise consummate the Merger;
VIII(G) by the Company as provided in Paragraph (E) of Article II;
VIII(H) by AmSouth or the Company as provided in Paragraph (I) of
Article X;
VIII(I) by AmSouth in the event it discovers a material adverse condition
(as defined in Paragraph (N) of Article VII) with respect to the Company;
VIII(J) by the Company in the event it discovers a material adverse
condition (as defined in Paragraph (O) of Article VII) with respect to AmSouth;
and
VIII(K) by AmSouth or the Company if the Board of Directors of AmSouth has
not approved this Plan within twenty (20) days of the date hereof.
IX. CLOSING.
On a date chosen by AmSouth which shall be no later than sixty days after
the later of (i) the expiration date of any applicable waiting period in
connection with any Regulatory Approval and (ii) the receipt of all other
required approvals or by such later date as may be agreed by the parties (the
"Closing Date"), appropriate documents to consummate the Merger shall be
executed in accordance with all appropriate legal requirements and shall be
delivered and/or filed as required by law, and the Merger provided for herein
shall become effective upon such filings or on such later date as may be
specified in the documents (the date of such filing or such later date being
herein called the "Effective Date"); provided, however, that if the conditions
of Paragraph (E)(1) of Article II are met, the Closing shall not take place
until the expiration of all time
Page 28
<PAGE>
periods allowed by said Paragraph (E) for notice and other actions have expired.
The closing shall take place in Birmingham, Alabama.
X. OTHER MATTERS.
X(A) The agreements of the parties which by their terms are applicable in
whole or in part after the Effective Date shall survive the Effective Date. All
other representations, warranties, agreements and covenants shall be deemed to
be conditions of the Merger and shall not survive the Effective Date. If this
Plan shall be terminated, the agreements of the parties in Paragraph (M) of
Article IV, Paragraph (G)(2) of Article V and Paragraphs (E), (F) and (H) of
this Article X shall survive such termination.
X(B) Prior to the Effective Date, any provision of this Plan may be (i)
waived by the party benefited by the provision or (ii) amended or modified at
any time (including the structure of the transaction), by an agreement in
writing among the parties hereto approved by their respective Boards of
Directors and executed in the same manner as this Plan, except that, after the
vote by the shareholders of the Company, the method for determining the number
of shares of AmSouth Common Stock per share of Company Common Stock to be
received by the shareholders of the Company in the Merger shall not be changed
except as provided in Paragraph (E)(1) of Article II.
X(C) This Plan may be executed in one or more counterparts, each of which
shall be deemed to constitute an original. This Plan shall become effective
when one counterpart has been signed by each party hereto.
X(D) This Plan shall be governed by, and interpreted in accordance with,
the laws of the state of Alabama, except as federal law and Georgia law may be
applicable.
X(E) (i) Except as otherwise provided herein, each of the parties shall
bear and pay all costs and expenses incurred by it or on its behalf in
connection with the transactions contemplated hereunder, including fees and
expenses of its own financial or other consultants, investment bankers,
accountants and counsel. The parties agree to divide equally the costs of
printing the Registration Statement and Company Proxy Statement, the SEC
registration fee and state "blue sky" fees as applicable, and fees and expenses
of experts and consultants providing market competition analysis and supporting
materials; provided, however, that in the
Page 29
<PAGE>
event AmSouth decides it must submit the Plan and Merger to its shareholders, it
shall bear the entire expense of printing and mailing the related proxy
statement. For purposes of this Paragraph (E) of Article X, all such properly
documented expenses described in this Paragraph (E) of Article X shall be
defined as "Transaction Expenses." Notwithstanding anything to the contrary in
this Plan, however, if AmSouth's Board of Directors fails to approve this Plan
within 20 days of the date hereof, AmSouth will pay all of the Company's
Transaction Expenses not to exceed $250,000.
(ii) Notwithstanding the provisions of (i) above, if this Plan is
terminated by a party hereto because of a breach of a material representation,
warranty or covenant by the other party or discovery of a material adverse
condition with respect to the other party, then the breaching party or the party
with respect to which a material adverse condition was discovered shall promptly
pay its own Transaction Expenses and fifty percent (50%) of the other party's
Transaction Expenses.
(iii) Final settlement with respect to payment of such fees and expenses by
the parties shall be made within thirty (30) days of the termination of this
Plan.
(iv) Notwithstanding the foregoing provisions of Section X(E)(i)-(iii), if
the Company wrongfully terminates or breaches this Plan and, within the one-year
period after such termination or breach, shall enter into any merger,
acquisition, asset purchase or sale or similar agreement, or a statement or
letter of intent respecting any such transaction, with a third party pursuant to
which the Company would not be the surviving entity, the Company shall pay
AmSouth a fee of $420,000 as compensation for management's time and other costs
incurred by AmSouth.
X(F) Each of the parties and their respective agents, investment bankers,
attorneys and accountants will maintain the confidentiality of all information
provided in connection herewith which has not been publicly disclosed except to
the extent that disclosure of such information may be required by law.
X(G) All notices, requests and other communications hereunder to a party
shall be in writing and shall be deemed to have been duly given when delivered
by hand, telegram, facsimile or telex (confirmed in writing) to such party at
its address set forth or such other address as such party may specify by notice
to the parties hereto.
Page 30
<PAGE>
If to AmSouth to: AmSouth Bancorporation
1400 AmSouth/Sonat Tower
Birmingham, Alabama 35203
Attn: Chairman of the Board and
Chief Executive Officer
Copy to: Maria B. Campbell
AmSouth Bancorporation
Suite 920 AmSouth/Harbert Plaza
1901 6th Avenue North
Birmingham, Alabama 35203
If to Company, to: First Federal Savings Bank,
Calhoun, Georgia
P.O. Box 68
Calhoun, Georgia 30703
Attn: Chairman of the Board,
President and Chief
Executive Officer
Copy to: Charles E. Sloane
Muldoon, Murphy & Faucette
5101 Wisconsin Avenue N.W.
Washington, D.C. 20016
X(H) This Plan represents the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and supersedes any and
all other oral or written agreements heretofore made.
X(I) Notwithstanding anything to the contrary herein, it is understood and
agreed that at the date of execution of this Plan the parties have not had the
opportunity to compile Schedule 1 hereto. No later than 30 days after the date
of execution of this Plan each party shall have provided the other party with
all documents and disclosures constituting Schedule 1. If in the reasonable and
good faith judgment of the Company or AmSouth Schedule 1 discloses matters which
indicate material adverse changes, occurrences or circumstances with respect to
the other party, then within ten (10) days after delivery of the last Schedule 1
information, either of the parties by written notice to the other may terminate
this Plan. Failure to terminate this Plan in accordance with the preceding
sentence shall not affect the ability of AmSouth or the Company to terminate
this Plan as provided in Article VIII. Prior to the Effective Date, each party
will promptly amend Schedule 1 with respect to any matter which if existing,
occurring or known at the date hereof would have been required to be set forth
in such Schedule 1 or which is
Page 31
<PAGE>
necessary to correct any information therein which has been rendered incorrect
or incomplete.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers and their corporate
seals to be hereunto affixed, all as of the day and year first above written.
AMSOUTH BANCORPORATION
ATTEST:
By: /s/ John W. Woods
--------------------------------
Chairman of the Board and
Chief Executive Officer
/s/ Maria B. Campbell
----------------------
Secretary
(Corporate Seal)
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
ATTEST:
By: /s/ Henry E. Holland, Jr.
--------------------------------
Chairman of the Board, President and
Chief Executive Officer
/s/ Richard E. Huie
- ----------------------
Sr. Vice President
(Corporate Seal)
Page 32
<PAGE>
ANNEX 1
August 3, 1993
Mr. John W. Woods
Chairman of the Board and
Chief Executive Officer
AmSouth Bancorporation
1900 Fifth Avenue North
Birmingham, AL 35288
RE: First Federal Savings Bank, Calhoun, Georgia
Dear Mr. Woods:
I am writing to confirm the following agreement between AmSouth and me
regarding the pending merger between First Federal Savings Bank, Calhoun,
Georgia and AmSouth Bancorporation. In consideration of AmSouth Bancorporation
entering into the Agreement and Plan of Merger (the "Agreement") dated August
3rd, 1993 with First Federal, for a period of twelve months from the date of
this letter I agree to vote all of the shares of First Federal that I own or
have the power to vote, otherwise than in a fiduciary capacity for others, in
favor of the merger of First Federal and AmSouth and in favor of the other
transactions contemplated by the Agreement. Furthermore, for the same period of
time with respect to shares I own or have the power to vote, otherwise than in a
fiduciary capacity for others, I will vote against any business combination or
other reorganization of any kind involving First Federal or its subsidiaries
with any entity other than AmSouth. If the Agreement is terminated I will have
no further obligations under this letter after the date of such termination. I
further agree that if I sell any of the shares subject to this agreement, I will
obtain from the purchaser thereof an agreement in favor of AmSouth in the same
form as this agreement.
Sincerely yours,
<PAGE>
APPENDIX A-1
PLAN OF MERGER AND MERGER AGREEMENT
A-1-1
<PAGE>
PLAN OF MERGER AND MERGER AGREEMENT
-----------------------------------
FIRST FEDERAL SAVINGS BANK, CALHOUN, GEORGIA
WITH AND INTO
AMSOUTH BANK OF GEORGIA
UNDER THE CHARTER OF
AMSOUTH BANK OF GEORGIA
UNDER THE TITLE OF
AMSOUTH BANK OF GEORGIA
(RESULTING BANK)
--------------
This AGREEMENT made between AMSOUTH BANK OF GEORGIA (hereinafter referred
to as "AmSouth-Georgia"), a banking corporation organized under the laws of the
State of Georgia, with its main office at Summerville, County of Chattooga, in
the State of Georgia, and First Federal Savings Bank (hereinafter referred to
as "FFSB"), a federal savings bank organized under the laws of the United States
of America with its main office located at 208 North Wall Street, Calhoun,
Georgia 30701, County of Gordon, in the State of Georgia, each acting pursuant
to a resolution of its Board of Directors, adopted by the vote of a majority of
its directors, pursuant to the authority given by and in accordance with the
provisions of Sections 7-1-530 through 7-1-537, Georgia Code Ann. (1989),
witnesseth as follows:
SECTION 1.
---------
FFSB shall be merged into AmSouth-Georgia under the charter of AmSouth Bank
of Georgia.
SECTION 2.
---------
The name of the Resulting Bank shall be "AmSouth Bank of Georgia."
SECTION 3.
---------
The business of the Resulting Bank shall be that of a state banking
corporation. This business shall be conducted by the Resulting Bank at its main
office which shall be located at 101 East Washington Street, Summerville,
Georgia 30747, and at each existing and proposed branch office of
AmSouth-Georgia and FFSB.
Page 1 of 7 Pages
<PAGE>
SECTION 4.
---------
All assets of FFSB, as they exist at the effective time of the merger
shall pass to and vest in the Resulting Bank without any conveyance or other
transfer; and the Resulting Bank shall be considered the same business and
corporate entity as each constituent bank with all the rights, powers and duties
of each constituent bank and the Resulting Bank shall be responsible for all the
liabilities of every kind and description, of each of the banks existing as of
the effective date of the merger.
SECTION 5.
---------
Of the capital stock of the Resulting Bank, the presently outstanding
2,000,000 shares of common stock of AmSouth-Georgia each of $1.00 par value,
shall remain outstanding as 2,000,000 shares of common stock of the Resulting
Bank, each of $1.00 par value, and the holders thereof shall retain their
present rights therein. Each holder of common stock of FFSB issued at and
outstanding prior to the effective date of the merger shall, by virtue of the
merger, automatically and without any action on the part of the holder thereof
become and be converted into the right to receive shares of AmSouth
Bancorporation Common Stock, as provided in, and subject to all of the
qualifications and conditions contained in Article 2 of the Agreement and Plan
of Merger dated as of August 3, 1993 between FFSB and AmSouth Bancorporation,
which Plan of Merger and Merger Agreement is incorporated herein by reference.
SECTION 6.
---------
The shares of AmSouth Bancorporation which are not accepted by
dissenting shareholders of FFSB shall be retained as authorized but unissued
shares of AmSouth Bancorporation.
SECTION 7.
---------
Each owner of shares of FFSB common stock who does not vote in favor of
the approval of the merger and who complies with all other applicable
requirements for perfecting dissenters rights shall be entitled to receive the
value of such FFSB shares in cash, if and when the merger becomes effective.
The value of such FFSB shares shall be determined in accordance with the
provisions of the Code of Federal Regulations at 12 C.F.R. (S) 552.14.
SECTION 8.
---------
The following named persons shall serve as the Board of Directors and
executive officers of the Resulting Bank until the next annual meeting of
shareholders or until such time as their successors have been elected and have
qualified.
Page 2 of 7 Pages
<PAGE>
DIRECTORS:
---------
<TABLE>
<CAPTION>
Name Address
------------------------ ---------------------------
<S> <C>
C. Stanley Bailey P. O. Box 11007
Birmingham, AL 35288
Jerry Johnson P. O. Box 535
Summerville, GA 30747
William R. McCamy 202 Robin Hood Trail
Lookout Mountain, GA 30750
Z. Carter Patten, III Route 1, Box 1636
Chattanooga Valley Road
Flintstone, GA 30725
C. Dowd Ritter P. O. Box 11007
Birmingham, AL 35288
</TABLE>
EXECUTIVE OFFICERS
------------------
<TABLE>
<CAPTION>
Name/Office Address
------------------------- ---------------------------
<S> <C>
William R. McCamy 202 Robin Hood Trail
President Lookout Mountain, GA 30750
Jerry Johnson P. O. Box 535
Vice Pres. & Secretary Summerville, GA 30747
</TABLE>
SECTION 9.
---------
This agreement shall automatically terminate upon the termination of the
Agreement and Plan of Merger. Each constituent bank may authorize one or more
officers to consent to any modification of this agreement prior to its execution
without any further action by such bank's Board of Directors.
Page 3 of 7 Pages
<PAGE>
SECTION 10.
----------
This agreement shall be ratified and confirmed by the affirmative vote
of the shareholders of each of the banks owning not less than two-thirds (2/3)
of its capital stock outstanding, at a meeting to be held on the call of the
Directors or as otherwise provided by the bylaws, and the merger shall become
effective at the time specified in a Certificate to be issued by the Secretary
of State of the State of Georgia, pursuant to Section 7-1-536, Georgia Code Ann.
(1989) under the seal of his office, approving the merger.
SECTION 11.
----------
This agreement is also subject to the following terms and conditions:
(a) The Georgia Department of Banking and Finance shall have approved
this Agreement to Merge and shall have issued all other necessary authorizations
and approvals for the merger, including its notice of approval to the Secretary
of State in accordance with Section 7-1-534, Georgia Code Ann. (1989).
(b) The appropriate federal regulatory agency 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.
Page 4 of 7 Pages
<PAGE>
WITNESS the signatures and seals of said constituent banks this 21st day
of December, 1993, each hereunto set by its President or a Vice President and
attested by its Cashier or Secretary pursuant to a resolution of its Board of
Directors, acting by unanimous consent, and witness the signatures hereto of
each of said Boards of Directors.
Attest: AMSOUTH BANK OF GEORGIA
/s/ JERRY JOHNSON By /s/ WILLIAM R. McCAMY
- -------------------------------- -----------------------------------
Secretary William R. McCamy, President
DIRECTORS OF AMSOUTH BANK OF GEORGIA
-------------------------------------
C. Stanley Bailey
/s/ JERRY JOHNSON
-------------------------------------
Jerry Johnson
/s/ WILLIAM R. McCAMY
-------------------------------------
William R. McCamy
(Seal of Bank)
-------------------------------------
Z. Carter Patten, III
/s/ C. DOWD RITTER
-------------------------------------
C. Dowd Ritter
Page 5 of 7 Pages
<PAGE>
Attest: FIRST FEDERAL SAVINGS BANK,
CALHOUN, GEORGIA
/s/ HELEN H. JONES By /s/ HENRY E. HOLLAND
- ------------------------------ -----------------------------------
Secretary Henry E. Holland, Chairman
of the Board and President
DIRECTORS OF FIRST FEDERAL SAVINGS BANK,
CALHOUN, GEORGIA
/s/ J. PHILIP BEAMER, JR.
(Seal of Bank) -------------------------------------
J. Philip Beamer, Jr.
/s/ W. C. BURDETTE
-------------------------------------
W. C. Burdette
/s/ JOHN W. EARLY, II
-------------------------------------
John W. Early, II
/s/ JOHN WAYNE HALL
-------------------------------------
John Wayne Hall
/s/ HELEN H. JONES
-------------------------------------
Helen H. Jones
/s/ THOMAS E. SHANAHAN
-------------------------------------
Thomas E. Shanahan
/s/ WILLIAM R. THOMPSON
-------------------------------------
William R. Thompson
/s/ HENRY E. HOLLAND
-------------------------------------
Henry E. Holland
Page 6 of 7 Pages
<PAGE>
STATE OF GEORGIA)
COUNTY OF CHATTOOGA)
I, the undersigned authority, a Notary Public in and for said County in
said State, hereby certify that William R. McCamy, whose name as President of
AMSOUTH BANK OF GEORGIA, a banking corporation, is signed to the foregoing Plan
of Merger and Merger Agreement, and who is known to me, acknowledged before me
on this day that, being informed of the contents of said Plan of Merger and
Merger Agreement, he, as such officer and with full authority, executed the same
voluntarily for, and as the act of, said corporation.
Given under my hand and official seal, this the 21st day of December,
1993.
/s/ JERRY JOHNSON
-------------------------
Notary Public
My Commission Expires: [Seal]
- ---------------------
Notary Public Chattooga Co. Georgia
STATE OF GEORGIA) My Commission Expires Nov. 12, 1994
COUNTY OF GORDON)
I, the undersigned authority, a Notary Public in and for said County in
said State, hereby certify that Henry E. Holland, whose name as Chairman of the
Board and President of FIRST FEDERAL SAVINGS BANK, CALHOUN, GEORGIA, a federal
savings bank, is signed to the foregoing Plan of Merger and Merger Agreement,
and who is known to me, acknowledged before me on this day that, being informed
of the contents of said Plan of Merger and Merger Agreement, he, as such officer
and with full authority, executed the same voluntarily for, and as the act of,
said corporation.
Given under my hand and official seal, this the 23rd day of December,
1993.
/s/ RICHARD E. HUIE
-------------------------
Notary Public
My Commission Expires: [Seal]
7-26-96
- ---------------------
Page 7 of 7 Pages
<PAGE>
APPENDIX B
OPINION OF HOVDE FINANCIAL, INC.
B-1
<PAGE>
February 15, 1994
Board of Directors
First Federal Savings Bank
208 North Wall Street
Calhoun, Georgia 30701-2222
Gentlemen:
You have requested our opinion with respect to the fairness to the
stockholders of First Federal Savings Bank ("FFSB"), from a financial point of
view, of the consideration to be received by such shareholders as set forth in
the Agreement and Plan of Merger, dated as of August 3, 1993, between AmSouth
Bancorporation ("AmSouth") and FFSB, pursuant to which, among other things,
FFSB will be merged with and into AmSouth Bank of Georgia, a wholly-owned
subsidiary of AmSouth (the "Merger") and each outstanding share of common
stock of FFSB ("FFSB Common Stock") will be converted, subject to certain
adjustments, into the right to receive 0.9991 shares of common stock of
AmSouth ("AmSouth Common Stock") such fraction, adjusted as provided in the
Agreement, being hereinafter referred to as the "Conversion Number".
In rendering the opinion herein, among other things: (a) reviewed the
Agreement; (b) reviewed certain publicly available information concerning
FFSB, including FFSB's audited financial statements and annual report to
stockholders for the three years ended September 30, 1993 as well as various
regulatory reports filed with the Office of Thrift Supervision and Securities
Exchange Commission ("SEC") during recent periods, including FFSB's 10-Q
report for the three month periods ended December 31, 1992, March 31, 1993 and
June 30, 1993 and December 31,1993; (c) reviewed certain publicly available
and other information concerning AmSouth, including AmSouth's audited
financial statements for the two years ended December 31, 1992 as well as
various regulatory reports filed with the SEC during recent periods, including
AmSouth's 10-Q report for the three month periods ended March 31, 1993, June
30, 1993 and September 30, 1993; (d) discussed with FFSB's management the recent
operating performance and future prospects of FFSB; (e) reviewed the
historical market prices and trading activity of FFSB Common Stock and AmSouth
Common Stock; (f) compared the results of operation of FFSB and AmSouth with
those of certain other companies with operations we deemed to be reasonably
similar; (g) reviewed the markets for the common stocks of thrift and banking
institutions, placing particular emphasis on those institutions located in the
southeastern United States; (h) compared the consideration to be paid in the
Merger with the nature and terms of certain other transactions that we deemed
to be reasonably similar; and (i) considered such other matters and made such
other financial analyses and investigations as we deemed appropriate.
<PAGE>
In connection with rendering this opinion we have not independently
verified any of the foregoing information and have relied on its being complete
and accurate in all material respects. In addition, for purposes of rendering
this opinion, we have not made an independent evaluation or appraisal of the
assets of FFSB or AmSouth.
Based upon and subject to the foregoing, it is our opinion that as of
the date hereof, the consideration to be received by the stockholders of FFSB in
the Merger, and specifically, the Conversion Number, is fair to such
stockholders from a financial point of view.
Very truly yours,
/s/ Hovde Financial, Inc.
HOVDE FINANCIAL, INC.
<PAGE>
APPENDIX C
FFSB FORM 10-KSB/A
C-1
<PAGE>
- --------------------------------------------------------------------------------
OFFICE OF THRIFT SUPERVISION
WASHINGTON, D.C.
-------------------------------
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Act of 1934
[Fee Required}
For the fiscal year ended September 30, 1993 OTS Docket Number: 5300
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
(Exact name of registrant as specified in its Charter)
United States 58-0595476
(jurisdiction of organization) (I.R.S. Employer Identification Number)
208 North Wall Street, Calhoun, Georgia 30701
(Address of Principal Executive Offices) (Zip Code)
(706) 629-2848
(Registrant's Telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year $5,902,151
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the bid price of $19.75 (obtained from
over-the-counter market quotations from the transfer agent) of the registrant's
stock as of December 1, 1993 is approximately $5,345,101.
As of December 1, 1993 there were issued and outstanding 414,330 shares of the
registrant's Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statements for Prospectus for the Annual Meeting of Shareholders
(Part III)
Transitional Small Business Disclosure Format (check one): Yes ;
--------
No X
-------
- --------------------------------------------------------------------------------
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I
<C> <S> <C>
Item 1. Description of Business......................................... 1
Additional Item. Executive Officers of the Registrant........... 33
Item 2. Description of Properties....................................... 33
Item 3. Legal Proceedings............................................... 34
Item 4. Submission of Matters to a Vote of Security Holders............. 34
PART II
Item 5. Market for Common Equity and Related Stockholder Matters........ 34
Item 6. Management's Discussion and Analysis or Plan of Operation....... 35
Item 7. Financial Statements............................................ 46
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure............................. 79
PART III
Item 9. Directors and Executive Officers, Promoters and Control Persons:
Compliance with Section 16(a) of the Exchange Act............... 79
Item 10. Executive Compensation.......................................... 79
Item 11. Security Ownership of Certain Beneficial Owners and
Management...................................................... 79
Item 12. Certain Relationships and Related Transactions.................. 79
PART IV
Item 13. Exhibits and Reports on Form 8-K.................................. 80
</TABLE>
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
--------------------------------
GENERAL
First Federal Savings Bank, Calhoun, Georgia ("First Federal" or "Bank")
was chartered in 1949 as a federally chartered mutual savings and loan
association operating as First Federal Savings and Loan Association of
Calhoun. The name was changed to First Federal Savings Bank on May 16, 1990.
First Federal converted from a mutual to stock form of organization on June
27, 1991. First Federal's business is conducted through its office in
Calhoun, Georgia which is approximately 48 miles southeast of Chattanooga,
Tennessee and 70 miles northwest of Atlanta, GA. First Federal's deposits
are insured up to applicable limits by the Savings Association Insurance Fund
("SAIF") of the Federal Deposit Insurance Corporation ("FDIC"). At September
30, 1993, First Federal had total assets of approximately $72 million,
deposits of $60 million and stockholder's equity of $11 million.
The business of First Federal has been that of a financial intermediary
consisting primarily of attracting deposits from the general public and using
such deposits to originate mortgage loans secured by one- to four-family
residences and, to a lesser extent, consumer, commercial real estate and
residential construction loans. First Federal's profitability depends
primarily on its net interest income, which is the difference between the
income it receives on its loans and investment portfolio and its cost of
funds, which consists of interest paid on deposits. Net interest income is
also affected by the relative amounts of interest-earning assets and
interest-bearing liabilities. When interest-earning assets approximate or
exceed interest-bearing liabilities, any positive interest rate spread will
generate net interest income. To a lesser extent, First Federal's
profitability is also affected by the level of other income and expenses.
Other income consists principally of loan and servicing fees, service charges
on deposit accounts and has in the past included gains on sales of loans and
investments. Other expenses consist of compensation and benefits, occupancy
related expenses, deposit insurance premiums and other operating expenses.
The operations of First Federal are influenced significantly by general
economic conditions and by policies of financial institution regulatory
agencies, including the OTS and the FDIC. The adoption of Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA")
imposed substantial new requirements and restrictions on the operations of
First Federal. See "Regulation and Supervision."
First Federal has entered into an Agreement and Plan of Merger dated as of
the 3rd day of August, 1993 with AmSouth Bancorporation (the "Agreement").
Pursuant to the Agreement, First Federal would merge with and into a
wholly-owned subsidiary of AmSouth (the "Merger"), and each share of common
stock will be converted into the right to receive 0.9991 of a share of
AmSouth common stock subject to adjustment in certain circumstances with cash
being paid in lieu of fractional shares. All outstanding options will be
exchanged for shares of AmSouth pursuant to a formula set forth in the
Agreement. The transaction is
1
<PAGE>
subject to shareholder and regulatory approval and satisfaction of the terms
and conditions of the Agreement.
COMPETITION
First Federal faces significant competition both in making mortgage and
consumer loans and in attracting deposits. First Federal's competition for
loans comes principally from commercial banks, savings institutions, mortgage
banking companies (many of which are subsidiaries of major commercial banks),
federal credit unions, insurance companies and other institutional lenders.
Its most direct competition for deposits has historically come from
commercial banks, savings institutions, credit unions and other financial
institutions. First Federal faces additional competition for deposits from
short-term money market funds and other corporate and government securities
funds. In light of the elimination of federal interest rate controls on
deposits, First Federal may face increasing competition among financial
institutions for deposits. Competition may increase as a result of the
continuing reduction in the effective restrictions on the interstate
operations of financial institutions. Some of First Federal's competitors,
whether traditional financial institutions or otherwise, have greater
financial and marketing resources than those of First Federal.
First Federal competes for loans principally through the interest rates and
loan fees it charges and the efficiency and quality of services it provides
to borrowers. First Federal competes for deposits through pricing and the
offering of a variety of deposit accounts. First Federal primarily competes
for loans and deposits with three (3) commercial banks, two (2) federal
credit unions and one (1) mortgage banking company. First Federal ranks
third in deposits and is considered a leader in residential mortgage finance
although the mortgage company is very competitive.
EMPLOYEES
As of September 30, 1993, First Federal had 21 full-time employees. The
employees are not represented by a collective bargaining unit, and First
Federal considers its relationship with its employees to be good.
MARKET AREA
First Federal's primary market area extends throughout Gordon County, the
county in which its office in Calhoun is located.
According to the 1990 U.S. Census, Calhoun's population is approximately
7,000, while Gordon County's population is approximately 35,000. Major
employers in Gordon County include fourteen companies listed in the Fortune
500, the school system, and the local government. The economy of Gordon
County is somewhat dependent on the carpet and textile industries. Any
significant downturn in these industries could have an adverse impact on the
Bank's earnings and financial condition.
2
<PAGE>
LENDING ACTIVITIES
First Federal principally originates and underwrites Adjustable Rate
Mortgage ("ARM") loans secured by one- to four-family residences. First
Federal also originates and underwrites consumer, commercial real estate, and
residential construction loans, all primarily for retention in its portfolio.
To a lesser extent, First Federal originates long-term, fixed-rate one- to
four-family residential mortgages. Although federal regulations allow First
Federal to originate or purchase loans or loan participations nationwide,
First Federal originates loans primarily in Gordon County, Georgia and
purchases loan participations primarily in the State of Georgia.
Set forth below is selected data relating to the composition of First
Federal's loan portfolio by type of loan on the dates indicated.
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------------------------------
1993 1992 1991
---------------------- ---------------------- ---------------------
Percentage Percentage Percentage
Amount of Total Amount of Total Amount of Total
------ ---------- ------ ---------- ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Mortgage Loans:
One- to four-family........ $33,277 65.91% $33,079 65.07% $34,389 67.66%
Multi-family............... 2,302 4.56 2,562 5.04 1,917 3.77
Residential construction... 787 1.56 530 1.04 340 .67
Commercial real estate..... 3,805 7.54 3,509 6.90 4,164 8.19
Total mortgage loans... 40,171 79.57 39,680 78.05 40,810 80.29
Commercial loans........... 105 .21 690 1.36 -- --
Consumer loans:
Passbook or Certificate.... 283 .56 359 .71 449 .88
Home improvement........... 153 .30 129 .25 135 .27
Education.................. 257 .51 234 .46 191 .37
Automobile................. 2,695 5.34 2,225 4.38 2,211 4.35
Other...................... 8,787 17.40 8,606 16.93 7,927 15.60
Total consumer loans... 12,175 24.11 11,553 22.73 10,913 21.47
Total loans, gross..... 52,451 103.89 51,923 102.14 51,723 101.76
Less:
Allowance for loan losses.. 440 .87 346 .68 234 .46
Loans in process........... 1,209 2.39 357 .70 153 .30
Deferred loan fees......... 264 .52 213 .42 164 .32
Unearned interest.......... 52 .10 173 .34 343 .68
1,965 3.89 1,089 2.14 894 1.76
Total loans, net....... $50,486 100.00% $50,834 100.00% $50,829 100.00%
</TABLE>
3
<PAGE>
Residential Mortgage Lending. First Federal primarily offers first
mortgage loans secured by one- to four-family residences. At September 30,
1993, First Federal had $32.4 million of one- to four-family mortgage loans
which comprised 63.8% of the total loan portfolio. Since 1982, First Federal
has emphasized the origination of ARM loans for its portfolio. At September
30, 1993, ARM loans outstanding were $30 million, or 77.4% of the mortgage
loan portfolio and fixed rate loans outstanding were $8.8 million or 22.6% of
the mortgage loan portfolio. First Federal also originates fixed-rate
residential mortgage loans for its loan portfolio but only pursuant to
limitations set by the Board of Directors. Other fixed-rate residential
mortgage loans are originated and sold in the secondary market and are
underwritten by the purchaser.
Loan originations are obtained from existing customers, walk-in customers,
builders, real estate agents and as a result of marketing efforts. The
lending process begins with the receipt of a completed loan application from
a prospective borrower. For a loan secured by one- to four-family
residential real estate, lending officers are responsible for obtaining a
credit report, verifying income and certain other information and such
additional financial information as is necessary. An appraisal of the real
estate intended to secure the loan is required to be prepared by a qualified
appraiser acceptable to First Federal and drawn from First Federal's approved
list of appraisers. Borrowers must also obtain hazard insurance prior to
closing.
First Federal generally makes one- to four-family residential mortgage
loans in amounts up to 80% of the appraised value of the secured property for
conforming loans. First Federal will originate loans with loan-to-value
ratios in excess of 80% provided that private mortgage insurance on the
amount in excess of 80% is obtained. Mortgage loans in First Federal's
portfolio generally include due-on-sale clauses, which provide First Federal
with the contractual right to declare the loan immediately due and payable in
the event that the borrower transfers ownership of the property that is
subject to the mortgage. On ARMs, First Federal generally does not enforce
due-on-sale provisions, but these loans are transferred and assumed only upon
First Federal's approval. On fixed-rate loans, First Federal generally does
enforce due-on-sale clauses. Residential mortgage loans originated by First
Federal vary in terms to maturity of five to 30 years.
Under current policy, first mortgage loans up to $100,000 are approved by a
loan committee consisting of three officers. Loans over $100,000 and up to
and including $300,000 are approved by a loan committee consisting of three
members of the Board of Directors. Loans in excess of $300,000 require the
approval of the entire Board of Directors.
Since 1982, First Federal has originated one-year and three-year ARM loans
for its portfolio based upon a spread of 2.50% and 2.50%, respectively, above
the one-year and three-year U.S. Treasury obligations, adjusted to a constant
maturity, respectively. First Federal's ARM loans are subject to limitations
on interest rate increases of 2% and 3% (based on the one-year and three-year
ARMs, respectively) per adjustment period and up to an aggregate of 6% over
the life of the loan. These limits, based on the initial rate, may reduce
the interest rate sensitivity of such loans during periods of changing
interest rates. First Federal offers a one-year discount ARM that requires a
higher margin over the index.
4
<PAGE>
The volume and types of ARMs originated by First Federal have been affected
by such market factors as interest rates on various types of loans,
competition, consumer preferences and the availability of funds. Although
First Federal will continue to offer ARMs, there can be no assurance that, in
the future, First Federal can originate a sufficient volume of adjustable
rate loans to increase or maintain the proportion that these loans bear to
total loans.
The retention of ARMs, as opposed to fixed-rate residential loans, in First
Federal's loan portfolio helps reduce First Federal's exposure to increases
in prevailing market interest rates. However, there are unquantifiable
credit risks resulting from potential increased costs to the borrower as a
result of ARM repricing. It is possible, therefore, that during periods of
rising interest rates, the risk of default on ARMs may increase due to the
upward adjustment of interest cost to the borrower. In an effort to minimize
this risk of default, First Federal qualifies borrowers on a fully indexed
rate plus two percent.
The types of loans that First Federal may originate are regulated by
federal law and regulations. Interest rates charged by First Federal on
loans are affected principally by the demand for such loans and the supply of
money available for lending purposes. These factors are, in turn, affected
by general and economic conditions, monetary policies of the federal
government, including the Federal Reserve Board (the "FRB"), legislative tax
policies and governmental budgetary matters.
Residential Construction Lending. First Federal makes a limited amount of
construction loans consisting primarily of loans to individuals for
construction of residential properties. At September 30, 1993, First Federal
had $437,000 of residential construction loans which comprised 1% of the
total loan portfolio. These loans typically are for a six month term and
generally convert to permanent financing, although borrowers are not required
to obtain such financing. Funds are not disbursed prior to inspection of the
collateral. First Federal does not market its construction lending, but will
make residential construction loans to accommodate its customers when it is
prudent to do so.
Commercial Real Estate Loans. At September 30, 1993, First Federal had
$3.8 million of commercial real estate loans which comprised 7.5% of the
total loan portfolio. Additionally, the Bank had $2.3 million of
multi-family mortgage loans with five (5) or more dwelling units which
comprised 4.5% of the total loan portfolio. Commercial and multi-family real
estate loans originated and purchased by First Federal are typically made in
amounts up to $600,000. First Federal's commercial real estate loans are
generally originated in amounts between 70% and 80% of the appraised value of
the property, with the principal amortized over a period of up to 30 years.
When an application for a commercial real estate loan is received, its
processing is governed by the size of the loan request. All loans require
approval of a Loan Committee. All loans which exceed $300,000 must be
approved by the entire Board of Directors. Evaluations of commercial loans
include an analysis of the borrower's equity investment in the property and
long-range plans for the mortgaged premises. First Federal also generally
requires a personal guarantee and evaluates whether the cash flow from the
project is adequate to service the debt. First Federal requires an
independent appraisal from a certified appraiser acceptable to First Federal
on all commercial real estate loans in excess of $300,000. The appraiser and
the appraisal must be approved by First Federal.
5
<PAGE>
First Federal prices its commercial real estate loans based on the
prevailing prime interest rate as published in The Wall Street Journal or
-----------------------
U.S. Treasury Securities index, plus a margin. Most of First Federal's
commercial real estate loans are amortized over periods up to 20 years.
First Federal has, in the past purchased and may, in the future, purchase
loan participations secured by commercial properties from Empire Financial
Services, Inc. ("Empire Financial"), a commercial loan origination company
headquartered in Milledgeville, Georgia, in which First Federal previously
had an equity interest. These loan participations are secured by retail
stores, nursing homes, multi-family housing, motels and a golf course. First
Federal sold its equity interest in Empire Financial, Inc. in 1990. Most of
First Federal's commercial real estate loan participations are amortized over
periods up to 20 years and have 10-year call provisions. For a discussion of
the loans in which First Federal has participations, see "Purchase of Loans."
Loans secured by commercial real estate are generally larger with shorter
maturity schedules and higher interest rates than residential mortgage loans
and involve a greater degree of risk than residential mortgage loans.
Because payments on loans secured by commercial property depend to a large
degree on results of operations and management of the properties, repayment
of such loans may be subject to a greater extent to adverse conditions in the
local real estate market or the local economy.
Home Equity and Consumer Loans. First Federal offers open-end home equity
loans with interest rates tied to the prime rate. These loans are
underwritten with strict credit guidelines to assure that the recipient of
the loan is capable of managing this open-end source of funds. Inspections
or appraisals are made on each property offered as security for the requested
loan. At September 30, 1993, First Federal had $11.9 million of consumer
loans which comprised 23.5% of the total loan portfolio.
First Federal makes secured and unsecured consumer loans for a wide variety
of purposes, including automobile loans, boat loans and personal loans.
These types of loans have been emphasized by management as part of First
Federal's strategy. At September 30, 1993 approximately 2.4% of the
outstanding dollar amount of First Federal's consumer loans were secured by
deposits of First Federal's customers. The majority of the consumer loans
are made to existing customers of First Federal. Generally, consumer loans
have two- to five-year terms and are made at fixed rates. First Federal
generally limits the loan-to-value ratio on its secured consumer loans to
80%. First Federal does not carry any dealer paper nor does First Federal
have any discounting relationship with any retailer of automobiles, furniture
or recreational vehicles. All consumer loan applications are generated
directly by First Federal. Consumer loans pose additional risks of
collectibility as compared with residential mortgage loans.
When application for a consumer loan is received, its processing is
governed by the size of the loan request. Loans under $25,000 can be
approved by certain First Federal officers. All loans in excess of $25,000
must be approved by a committee of three persons, typically two officers and
a director.
6
<PAGE>
Purchase of Loans. At September 30, 1993, First Federal's participations
in real estate loans totalled approximately $4.7 million, which represents
9.2% of First Federal's total loan portfolio. Most of the participations
were acquired through Empire Financial. First Federal has in the past
purchased and may in the future purchase loan participations from Empire
Financial, which is a service corporation subsidiary of two other Georgia
savings institutions. Until August 1990, First Federal had a 33.3% equity
interest in Empire Financial. All loans originated by Empire Financial
provide that there is no recourse to Empire Financial. These loan
participations are secured by retail stores, nursing homes, multi-family
housing, motels and a golf course. Most of First Federal commercial real
estate loan participations are amortized over periods up to 20 years and have
10-year call provisions.
Loan Servicing. First Federal receives fees for servicing activities,
which include collecting and remitting loan payments, inspecting properties
and making certain insurance and tax payments on behalf of the borrowers.
First Federal currently does not retain the servicing on loans it sells.
At September 30, 1993, First Federal was servicing approximately $2.1
million of loans for others. Income from loans serviced by First Federal for
others has not been material.
7
<PAGE>
Maturity of Loans. The following table sets forth the maturity of First
Federal's loan portfolio at September 30, 1993, based upon contractual
maturity dates. The table does not reflect the effects of possible
prepayments.
<TABLE>
<CAPTION>
Due During Due After Due After Due After Due After Due After
Year Ended One Thru Three Thru Five Thru Ten Thru Twenty
Sept. 30, 1994 Three Years Five Years Ten Years Twenty Years Years Total
-------------- ----------- ---------- --------- ------------ ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Single and multi-family
mortgage loans,
commercial real estate
loans and real estate
construction loans........... $12,135 $13,663 $1,179 $3,113 $6,763 $1,458 $38,311
Consumer loans and
commercial loans............. 5,281 2,641 2,403 1,579 268 3 12,175
Total gross loans receivable... 17,416 16,304 3,582 4,692 7,031 1,461 50,486
</TABLE>
The following table sets forth the dollar amount of all loans due after one
year from September 30, 1993 with fixed interest rates and those with
floating or adjustable interest rates.
<TABLE>
<CAPTION>
Year Ended September 30, 1993
-----------------------------------------
Floating or
Adjustable
Fixed Rates Rates Total
----------- ---------- -----
(Dollars in Thousands)
<S> <C> <C> <C>
Single and multi-family mortgage loans,
commercial real estate loans and real
estate construction loans............. $ 7,712 $18,464 $26,176
Consumer loans and commercial loans..... 3,862 3,032 6,894
Total gross loans receivable............ 11,574 21,496 33,070
</TABLE>
8
<PAGE>
Origination, Purchase and Sale of Loans. The following table sets forth
First Federal's loan originations, purchases and sales for the periods
indicated:
<TABLE>
<CAPTION>
Years Ended September 30,
-----------------------------
1993 1992 1991
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
LOANS ORIGINATED:
Mortgage loans:
One- to four-family...... $ 9,085 $10,051 $ 5,024
Multi-family............. -- -- --
Commercial real estate... 1,046 150 382
Other loans originated....... 7,700 9,844 8,413
Total loans originated....... 17,831 $20,045 $13,819
Loans purchased.............. -- $ 1,509 $ 290
Loans sold................... 2,467 $ 2,300 $ 640
</TABLE>
FEE INCOME
In addition to interest earned on loans, First Federal receives loan fees
for originating loans. Loan origination fees are a percentage of the
principal amount of the mortgage loan and are charged to the borrower by
First Federal for origination of the loan. Such fees are normally deducted
form the proceeds of the loan.
First Federal accounts for loan origination fee income and costs by
Statement of Financial Accounting Standards No. 91, "Accounting for
Non-refundable Fees and Costs Associated with Originating or Acquiring Loans
and Initial Direct Costs of Leases." This standard requires First Federal to
defer and amortize loan origination fees and certain direct origination
costs, over the lives of the underlying loans.
Loan origination income is a fluctuating source of income, depending upon
the volume and type of loans made and purchased and competitive conditions in
mortgage markets. In periods of high interest rates, the volume of loan
originations, and thus origination income, declines.
LOAN DELINQUENCIES AND NON-PERFORMING ASSETS
Delinquent Loans. Fifteen days after a borrower fails to make a required
payment, First Federal will send a late notice and a loan officer will
contact the borrower in order to determine the reason for the delinquency and
to effect a cure. In most cases, delinquencies are remedied promptly;
however, if a loan has been delinquent for more than 60 days, First
9
<PAGE>
Federal sends the borrower notice of default. First Federal then reviews the
status of such loan more closely and, if appropriate, appraises the condition
of the property and reviews the financial circumstances of the borrower.
Based upon the results of any such investigation, First Federal may: (1)
counsel the borrower to develop a repayment program for the collection of
past due amounts; (2) seek evidence, in the form of existing contract, of
efforts by the borrower to sell the property if the borrower has stated that
he is attempting to sell; or (3) request a deed in lieu of foreclosure. If
the loan payment has not been received after 90 days, foreclosure proceedings
are initiated. This process may be accelerated for consumer borrowers or
other borrowers if First Federal feels that acceleration may be warranted
based on underlying circumstances. All property acquired as the result of
foreclosure or by deed in lieu of foreclosure is classified as "real estate
owned" until such time as it is acquired or otherwise disposed of by First
Federal. At September 30, 1993, First Federal did not own any real estate as
a result of foreclosures.
Non-Performing Assets. The following table presents information pertaining
to First Federal's non-performing assets and real estate owned at the dates
indicated:
<TABLE>
<CAPTION>
At September 30,
----------------------------------
1993 1992 1991
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
NON-PERFORMING ASSETS:
Non-accruing loans................................. $140 $181 $ 87
Accruing loans (90 days or more delinquent)........ 17 -- --
Troubled debt restructuring........................ 68 69 --
------ ------ ------
Total non-performing loans....................... $225 $250 $87
Real estate owned.................................. -- -- --
------ ------ ------
Total non-performing assets...................... $225 $250 $87
Non-performing assets to total assets................ .31% .37% .14%
Allowance for loan losses to non-performing assets... 195.11% 138.40% 268.97%
</TABLE>
At September 30, 1993, the nonperforming assets were composed primarily
of single family residential mortgage loans. First Federal does not have
any nonperforming commercial loans.
The amount of interest income that was not recognized and that would have
been recognized on nonaccrual loans if they had been accruing interest at the
original contractual rate total $4,227, $4,067 and $12,294 for the years
ended September 30, 1993, 1992, and 1991, respectively.
10
<PAGE>
Asset Quality and Allowance for Loan Losses. In originating loans, First
Federal 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 the quality of
the security for the loan.
First Federal's primary lending emphasis has been, and continues to be
permanent, residential real estate loans. First Federal has experienced
negligible losses in this type of lending. See "-- Lending Activities --
Residential Mortgage Lending."
At least quarterly, the adequacy of the general and specific valuation
allowances are reviewed by management. A general valuation allowance is
provided to properly reflect the collectibility of the loan portfolio as a
whole. The general allowance is based on such factors as First Federal's
historical loan loss experience, trends in loan portfolio volume and
composition, an evaluation of economic conditions and regular weekly reviews
of loan delinquencies. The specific valuation allowance includes 100% of the
amount of First Federal's assets, including loans, classified as loss or for
the assets to be charged off First Federal's books. All delinquent assets
are reviewed by the board of Directors at their regular monthly meeting.
Future adjustments to the allowance for loan losses will be necessary if
economic conditions differ substantially from the assumptions as to economic
conditions used in making the initial determinations.
The following table sets forth an analysis of First Federal's allowance for
loan losses at the periods indicated:
<TABLE>
<CAPTION>
At and for the years ended September 30,
----------------------------------------
1993 1992 1991
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Balance at beginning of year.................... $346 $234 $116
Provision charged to income..................... 125 127 132
Loan charge-offs................................ (34) (21) (19)
Loan recoveries................................. 3 6 5
Net charge-offs................................. (31) (15) (14)
Balance at end of year.......................... $440 $346 $234
Ratio of net charge-offs during the period to
average loans outstanding during the period ... .87 .68 .47
</TABLE>
During fiscal 1993, First Federal's loan charge-offs were composed
primarily of consumer loans and the loan recoveries also were composed
primarily of consumer loans.
11
<PAGE>
The allowance for loan loss is allocated as follows:
<TABLE>
<CAPTION>
At September 30,
-------------------------------------------------------
1993 1992 1991
----------------- ----------------- -----------------
% Loans % Loans % Loans
to Gross to Gross to Gross
Amount Loans Amount Loans Amount Loans
------ ----- ------ ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
One- to four-family loans........ $275 65.91% $203 64.75% $118 67.16%
Multi-family loans............... -- 4.56 -- 4.93 -- 3.70
Commercial real estate loans..... -- 7.54 -- 6.75 -- 8.05
Consumer and commercial loans.... 165 24.32 143 23.57 116 21.09
---- ----- ---- ----- ---- -----
Total.......................... $440 100.00% $346 100.00% $234 100.00%
</TABLE>
INVESTMENT ACTIVITIES
Federal savings institutions such as First Federal have the authority to
invest in various types of liquid assets, including United States Treasury
obligations, securities of various federal agencies, certain certificates of
deposit of insured banks and savings institutions, certain banker's
acceptances, obligations of state and political subdivisions and federal
funds. Subject to various restrictions, such savings institutions may also
invest their assets in commercial paper, corporate debt securities and mutual
funds whose assets conform to the investments that a federal savings
institution is otherwise authorized to make directly. First Federal has not
engaged in any hedging or futures activities. First Federal does not have
nor does it intend to invest in below investment grade instruments.
The Board of Directors sets the investment policy of First Federal. This
policy dictates that investments will be made based on the safety of the
principal, the liquidity requirements of First Federal and the return on the
investment and capital appreciation. No investment or mortgage-backed
securities were reported as held for sale as of September 30, 1993, 1992 or
1991 because management had the intent and ability to hold the securities
until their maturity. All investments are reviewed monthly by First
Federal's Board of Directors.
12
<PAGE>
The cost and market values of investment securities at September 30 are
summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------------- ------------------- --------------------
Estimated Estimated Estimated
Carrying Market Carrying Market Carrying Market
Value Value Value Value Value Value
----- ----- ----- ----- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
BONDS, NOTES, AND DEBENTURES
AT AMORTIZED COST:
Domestic, Corporate.............. $ 255 $ 265 $ 255 $ 256 $ 401 $ 401
U.S. Government and
Federal Agencies......... 6,532 6,806 6,841 7,214 4,755 4,833
State and political
subdivisions............. 470 470 -- -- -- --
Total............................ $7,257 $7,541 $7,096 $7,470 $5,156 $5,234
EQUITY SECURITIES:
Stock in Federal Home Loan
Bank, at cost.............. 434 434 409 409 370 370
Total.................. $7,691 $7,975 $7,505 $7,879 $5,526 $5,604
</TABLE>
The amortized cost and estimated market values of investments in debt
securities and mortgage backed securities are as follows at September 30,
1993:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---- ----- ------ -----
(Dollars in Thousands)
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. government
corporations and agencies.......... $ 6,532 274 -- $ 6,806
State and political subdivisions.... 470 -- -- 470
Corporate securities................ 255 10 -- 265
------- --- -- -------
Total............................. $ 7,257 284 -- $ 7,541
======= === == =======
Mortgage-backed securities.......... $ 4,055 147 -- $ 4,202
======= === == =======
</TABLE>
13
<PAGE>
The amortized cost and estimated market value of debt securities at
September 30, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
---- -----
(Dollars in Thousands)
<S> <C> <C>
Due in one year or less..................... $ 1,365 $ 1,394
Due after one year through five years....... 5,393 5,591
Due after five years through ten years...... 499 556
Due after ten years......................... -- --
------ ------
Total..................................... $ 7,257 $ 7,541
====== ======
Mortgage-backed securities.................. $ 4,055 $ 4,202
====== ======
</TABLE>
Proceeds from sales of investments in debt securities during fiscal year
1993 were $4,077,560. There were gains realized on those sales of $1,250.
14
<PAGE>
The carrying values of mortgage-backed and related securities are
summarized as follows:
<TABLE>
<CAPTION>
At September 30, 1993
---------------------------------------------------------------
Principal Unamortized Unamortized Carrying Estimated Market
Balance Premiums Discounts Value Value
------- -------- --------- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
FNMA Certificates..... $1,728 $-- $ 9 $1,719 $1,772
GNMA Certificates..... 752 4 -- 756 791
FHLMC Certificates.... 1,572 10 2 1,580 1,639
------ --- --- ------ ------
Total............... $4,052 $14 $11 $4,055 $4,202
====== === === ====== ======
<CAPTION>
At September 30, 1992
----------------------------------------------------------------
Principal Unamortized Unamortized Carrying Estimated Market
Balance Premiums Discounts Value Value
------- -------- --------- ----- -----
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
FNMA Certificates...... $2,543 $-- $(12) $2,531 $2,780
---
GNMA Certificates...... 890 6 -- 896 951
FHLMC Certificates..... 2,145 18 (2) 2,161 2,309
------ --- ---- ------ ------
Total................ $5,578 $24 $(14) $5,588 $6,040
====== === ==== ====== ======
</TABLE>
Estimated market values were indeterminable for the mortgage-backed
securities held by the Savings Bank at September 30, 1991.
SOURCE OF FUNDS
First Federal's lending and investment activities are predominantly funded
by savings deposits, interest and principal payments on loans and other
investments, loan origination fees and loan prepayments.
Deposits. First Federal offers a variety of deposit accounts having a wide
range of interest rates and terms. First Federal's deposit accounts consist
of passbook accounts, NOW (checking) accounts (both interest-bearing and
non-interest bearing), money market deposit accounts and certificates of
deposit. First Federal only solicits deposits from its market area and does
not use brokers to obtain deposits. First Federal relies primarily on
competitive pricing policies, advertising and customer service to attract and
retain these deposits.
15
<PAGE>
As a result of the removal of interest rate ceilings on savings
instruments, deposit customers have been offered interest rate sensitive and
short-term demand and certificate accounts in addition to the traditionally
stable and low-cost passbook accounts. Although this has permitted First
Federal to offer competitive rates and terms, the deregulation of deposit
accounts has resulted in deposits being a potentially more volatile source of
funds.
The flow of deposits is influenced significantly by general economic
conditions, changes in money market and prevailing interest rates and
competition. In recent years, First Federal has managed its pricing of
deposits in keeping with its asset/liability objectives.
Management believes that deposit accounts provide the greatest opportunity
for attracting new customers and cross-selling new products and services to
existing customers. NOW, money market deposit, and passbook accounts are
also a source of fee income for the First Federal.
The following table sets forth the deposit accounts by dollar amount and as
percentages of total deposits offered by First Federal at the dates
indicated:
<TABLE>
<CAPTION>
At September 30,
---------------------------------------------------------------
1993 1992 1991
------------------- ------------------- -------------------
Amount Percentage Amount Percentage Amount Percentage
------ ---------- ------ ---------- ------ ----------
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Non-interest bearing... $ 2,394 4.00% $ 2,011 3.56% $ 1,387 2.48%
Passbook accounts...... 15,159 25.37 12,912 22.87 7,168 12.86
NOW accounts........... 4,255 7.12 3,093 5.47 2,750 4.93
Money market........... 4,348 7.28 4,295 7.60 4,111 7.37
Certificates........... 26,741 44.75 27,418 48.59 34,052 61.13
IRAs................... 6,858 11.48 6,726 11.91 6,261 11.23
Total................ $59,755 100.00% $56,455 100.00% $55,729 100.00%
</TABLE>
16
<PAGE>
The following table sets forth the deposit flows of First Federal during
the periods indicated:
<TABLE>
<CAPTION>
Years Ended September 30,
------------------------------
1993 1992 1991
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Beginning balance..................... $56,455 $55,729 $57,070
Net Deposits (Withdrawals)............ 2,008 (1,256) (3,734)
Interest Credited..................... 1,292 1,982 2,393
Net Increase (Decrease) in Deposits... 3,300 726 (1,341)
------ ------ ------
Ending Balance........................ $59,755 $56,455 $55,729
</TABLE>
The following table sets forth the time deposits in First Federal
classified by rates as of the dates indicated:
<TABLE>
<CAPTION>
At September 30,
--------------------------------------
1993 1992 1991
---- ---- ----
Rate (Dollars in Thousands)
----
<S> <C> <C> <C>
1.00 - 3.50%..... $ 7,598 $ 346 $ --
3.51 - 5.00%..... 16,001 18,893 --
5.01 - 6.50%..... 9,882 1,354 10,081
6.51 - 8.00%..... 25 13,487 28,979
8.01 - 9.50%..... 13 12 1,153
------ ------ ------
$33,519 $34,092 $40,213
</TABLE>
The following schedule sets forth the amount of maturities of time deposits
at September 30, 1993 (Dollars in Thousands):
<TABLE>
<CAPTION>
<S> <C>
1 Year or Less $22,244
1 - 3 Years 7,608
3 - 5 Years 3,667
After 5 Years --
Total $33,519
</TABLE>
The aggregate amount of short-term (maturities of one year or less) jumbo
certificates of deposit with a minimum denomination of $100,000 was
approximately $3,253 at September 30, 1993.
Borrowings. Savings deposits are the primary source of funds for First
Federal's lending and investment activities and for its general business
purposes. If the need arises, First Federal may supplement its funds with
advances from the FHLB-Atlanta to meet deposit
17
<PAGE>
withdrawal requirements. During the past three fiscal years, First Federal
had no outstanding advances from the FHLB-Atlanta. In June, 1991, First
Federal's Employee Stock Ownership Plan ("ESOP") borrowed $350,000 to fund
the purchase of 35,000 shares of First Federal common stock issued at the
time of conversion. First Federal's annual contribution to the ESOP is
anticipated to be in an amount at least equal to the principal and interest
requirements of the debt, based upon five equal annual installments of
principal with interest at prime plus 1/2%. As of September 30, 1993, the
balance due on the loan was $149,223.
The FHLB functions as a central reserve bank, providing credit for savings
institutions and certain other member financial institutions. As a member,
First Federal is required to own capital stock in the FHLB and is authorized
to apply for advances on the security of such stock and certain of its home
mortgages and other assets (principally, securities which are obligations of,
or guaranteed by, the United States Government), provided certain standards
related to creditworthiness have been met. Advances are made pursuant to
several different programs. Each credit program has its own interest rate
and range of maturities. The FHLB of Atlanta prescribes the acceptable uses
for the advances made pursuant to each program. Depending on the program,
limitations on the amount of advances are based either on a fixed percentage
of an institution's net worth or on the FHLB's assessment of the
institution's creditworthiness. The FHLB of Atlanta is required to review it
credit limitations and standards at least once every six months.
18
<PAGE>
REGULATION AND SUPERVISION
GENERAL
The Bank is subject to extensive regulation, examination and supervision by
the OTS, as its chartering agency, and the FDIC, as the deposit insurer. The
Bank is a member of the FHLB System and its deposit accounts are insured up
to applicable limits by the Savings Bank Insurance Fund ("SAIF") managed by
the FDIC. The Bank must file reports with the OTS and the FDIC concerning
its activities and financial condition in addition to obtaining regulatory
approvals prior to entering into certain transactions such as mergers with,
or acquisitions of, other financial institutions. There are periodic
examinations by the OTS and the FDIC to test the Bank's compliance with
various regulatory requirements. This regulation and supervision establishes
a comprehensive framework of activities in which an institution can engage
and is intended primarily for the protection of the insurance fund and
depositors. The regulatory structure also gives the regulatory authorities
extensive discretion in connection with their supervisory and enforcement
activities and examination policies, including policies with respect to the
classification of assets and the establishment of adequate loan loss reserves
for regulatory purposes. Any change in such policies, whether by the OTS,
the FDIC or the Congress, could have a material adverse impact on the Bank
and its operations. Certain of the regulatory requirements applicable to the
Bank are referred to below and elsewhere herein.
FEDERAL SAVINGS INSTITUTION REGULATION
Business Activities. The activities of savings institutions are governed
by the Home Owner's Loan Act, as amended (the "HOLA") and, in certain
respects, the Federal Deposit Insurance Act ("FDI Act"). The HOLA and the
FDI Act were amended by the Financial Institution Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") and the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"). FIRREA was enacted for the
purpose of resolving problem savings institutions, establishing a new thrift
insurance fund, reorganizing the regulatory structure applicable to savings
institutions, and imposing bank-like standards on savings institutions.
FDICIA, among other things, requires that federal banking regulators
intervene promptly when a depository institution experiences financial
difficulties, mandates the establishment of a risk-based deposit insurance
assessment system and requires imposition of numerous additional safety and
soundness operational standards and restrictions. Each of FIRREA and FDICIA
contains provisions affecting numerous aspects of the operations and
regulations of federally-insured savings and loan institutions and empowers
the OTS and the FDIC, among other agencies, to promulgate regulations
implementing its provisions. The description of statutory provisions and
regulations applicable to savings and loan institutions set forth in this
document do not purport to be complete descriptions of such statutes and
regulations and their effects on the Bank. Moreover, because some of the
provisions of FDICIA are still in the process of being implemented through
the adoption of regulations by the various federal banking agencies, the Bank
cannot yet fully assess the impact of these provisions on its operations.
The federal banking statutes as amended by the FIRREA and FDICIA, among
other things, (1) restrict the use of brokered deposits by savings
institutions that are troubled or not well-capitalized, (2) prohibit the
acquisition of any corporate debt security that is not rated in
19
<PAGE>
one of the four highest rating categories, (3) restrict the aggregate amount
of loans secured by non-residential real estate property to 400% of capital,
(4) permit savings and loan holding companies to acquire up to 5% of the
voting shares of non-subsidiary savings institutions or savings and loan
holding companies without prior regulatory approval, (5) permit bank holding
companies to acquire healthy savings institutions and (6) require the federal
banking agencies to establish by regulation standards for extension of credit
secured by real estate. Under the HOLA, the Bank has the authority to make
certain loans or investments, not exceeding 5.0% of its total assets, on each
of (i) non-conforming loans (loans in excess of the specific limitations of
the HOLA) secured by real property used for residential or agricultural
purposes, and (ii) construction loans without security for the purpose of
financing what is or is expected to be residential property. To assure
repayment of such loans, the Bank must rely substantially on the borrower's
general credit standing, personal guarantees and projected future income from
the properties.
Capital Requirements. The OTS capital regulations require savings
institutions to meet three capital standards: a 1.5% tangible capital
standard, a 3% leverage (core capital) ratio and an 8% risk based capital
standard. Core capital is defined as common stockholder's equity (including
retained earnings), certain noncumulative perpetual preferred stock and
related surplus, and minority interests in equity accounts of consolidated
subsidiaries less intangibles other than certain qualifying supervisory
goodwill and certain purchased mortgage servicing rights ("PMSRs"). The OTS
regulations also require that, in meeting the leverage ratio, tangible and
risk-based capital standards, institutions must deduct investments in and
loans to subsidiaries engaged in activities not permissible for a national
bank.
In April, 1991, the OTS issued a proposal to amend the regulatory capital
regulations to establish a 3% leverage ratio (defined as the ratio of core
capital to adjusted total assets) for institutions in the strongest financial
and managerial condition, with a 1 MACRO Rating (the highest examination
rating of the OTS for savings institutions). For all other institutions, the
minimum core capital leverage ratio would be 3% plus at least an additional
100 to 200 basis points. In determining the amount of additional capital to
be required under the proposal, the OTS would assess both the quality of risk
management systems and the level of overall risk in each individual
institution through the supervisory process on a case-by-case basis. If the
leverage capital rule is enacted in final form as proposed, management does
not believe that the proposed regulations would have a material impact on the
Bank as the Bank presently exceeds the proposed OTS capital requirements.
Although the OTS has not adopted this regulation in final form, the prompt
corrective action regulation adopted by the OTS provides that a savings
institution that has a leverage capital ratio of less than 4% (3% in the
event that the savings institution was to be assigned a 1 MACRO Rating), will
be deemed to be "undercapitalized" and may be subject to certain
restrictions. See "Prompt Corrective Action Regulations."
The risk-based capital standard for savings institutions requires the
maintenance of total capital (which is defined as core capital and
supplementary capital) to risk weighted assets of 8%. In determining the
amount of risk-weighted assets, all assets, including certain off-balance
sheet assets, are multiplied by a risk-weight of 0% to 100%, as assigned by
the OTS capital regulation based on the risks the OTS believes are inherent
in the type of asset. The components of core capital are equivalent to those
discussed earlier under the 3%
20
<PAGE>
leverage standard. The components of supplementary capital currently include
cumulative preferred stock, long-term perpetual preferred stock, mandatory
convertible securities, subordinated debt and intermediate preferred stock
and allowance for loan and lease losses. Allowance for loan and lease losses
includable in supplementary capital is limited to a maximum of 1.25%.
Overall, the amount of supplementary capital included as part of total
capital cannot exceed 100% of core capital.
FDICIA requires that the OTS (and other federal banking agencies) revise,
in 1993, risk-based capital standards, with appropriate transition rules, to
ensure that they take into account interest rate risk, concentration of risk
and the risks of nontraditional activities.
On August 23, 1993, the OTS issued a final rule which sets forth the
methodology for calculating an interest rate risk component that would be
incorporated into the OTS regulatory capital rule effective January 1, 1994.
Under the final rule, savings institutions with "above normal" interest rate
risk exposure would be subject to a deduction from total capital for purposes
of calculating their risk-based capital requirements. A savings
institution's interest rate risk is measured by the decline in the net
portfolio value of its assets that would result from a hypothetical 200 basis
point increase or decrease in market interest rates divided by the estimated
economic value of the institution's assets, as calculated in accordance with
guidelines set forth by the OTS. A savings institution whose measured
interest rate risk exposure exceeds 2% must deduct an interest rate component
in calculating its total capital under the risk-based capital rule. Savings
institutions with less than $300 million and risk based capital ratios in
excess of 12% are not subject to the interest rate risk component. In the
preamble to the final rule, the OTS also noted its intent to issue a proposal
to lower the leverage ratio requirement applicable to savings associations
from 4% to 3% on July 1, 1994, the date on which the interest rate risk
component will be incorporated into the risk based capital rule.
At September 30, 1993, the Bank met each of its capital requirements, in
each case on a fully phased-in basis. The following table summarizes the
Bank's current capital requirements at September 30, 1993:
<TABLE>
<CAPTION>
Capital Requirement % Actual Capital % Excess Capital %
------------------- - -------------- - -------------- -
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Risk Based...... $3,107 8.0% $11,816 30.4% $ 8,709 22.4%
Tangible........ 1,075 1.5 11,379 15.9 10,303 14.4
Core............ 2,151 3.0 11,379 15.9 9,228 12.9
</TABLE>
Prompt Corrective Regulatory Action. FDICIA establishes a system of prompt
corrective action to resolve the problems of undercapitalized institutions.
Under this system, which became effective on December 19, 1992, the banking
regulators are required to take certain supervisory actions against
undercapitalized institutions, the severity of which depends upon the
institution's degree of capitalization. Generally, subject to a narrow
exception, FDICIA requires the banking regulator to appoint a receiver or
conservator for an institution that is critically undercapitalized. FDICIA
authorizes the banking regulators to specify the
21
<PAGE>
ratio of tangible capital to assets at which an institution becomes
critically undercapitalized and requires that ratio be no less than 2% of
assets.
Under the OTS final rule, generally, a savings institution that has a total
risk-based capital of less than 8.0% or a leverage ratio or a Tier 1
risk-based ratio that is less than 4.0% is considered to be undercapitalized.
A savings institution that has a total risk-based capital ratio less than
6.0%, a Tier 1 risk-based capital ratio of less than 3% or a leverage ratio
that is less than 3.0% is considered to be "significantly undercapitalized"
and a savings institution that has a tangible capital to assets ratio equal
to or less than 2% is deemed to be "critically undercapitalized." Generally,
a capital restoration plan must be filed with the OTS within 45 days of the
date an association receives notice that it is "undercapitalized,"
"significantly undercapitalized" or "critically undercapitalized." In
addition, numerous mandatory supervisory actions become immediately
applicable to the institution, including, but not limited to, restrictions on
growth, investment activities, capital distributions, and affiliate
transactions. The OTS could also take any one of a number of discretionary
supervisory actions, including the issuance of a capital directive and the
replacement of senior executive officers and directors.
Insurance of Deposit Accounts. FDICIA required the FDIC to establish,
beginning January 1, 1994, a risk-based assessment system for insured
depository institutions that takes into account the risks attributable to
different categories and concentrations of assets and liabilities. For the
semi-annual assessment period beginning January 1, 1993, a transitional
risk-based insurance system was implemented by regulation by the FDIC
pursuant to FDICIA and the average assessment rate paid by SAIF and BIF
insured institutions was increased. Under the rule implementing the
transitional system, the FDIC assigns an institution to one of three capital
categories based on the institution's financial information, as of the
reporting period ending seven months before the assessment period, consisting
of 1) well capitalized, 2) adequately capitalized or 3) undercapitalized, and
one of three supervisory subcategories within each capital group. The
supervisory subgroup to which an institution is assigned is based on a
supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by
the institution's state supervisor). An institution's assessment rate
depends on the capital category and supervisory category to which it is
assigned. Under the transitional system there are nine assessment risk
classifications (i.e., combinations of capital groups and supervisory
----
subgroups) to which different assessment rates are applied. Assessment rates
range from 23 basis points of deposits for an institution in the highest
category (i.e., well-capitalized and financially sound with only a few minor
----
weaknesses) to 31 basis points of deposits for an institution in the lowest
category (i.e., undercapitalized and posing a substantial probability of loss
----
to the SAIF unless effective corrective action is taken). The Bank's
assessment rate for fiscal 1993 was .23%.
On June 17, 1993, the FDIC adopted a final rule establishing a new
risk-based system that will be implemented beginning with the semi-annual
assessment period commencing on January 1, 1994, as required under FDICIA.
Except for limited changes, the structure of the new risk-based system is
substantially the same as the structure of the transitional system it will
replace. Thus, under the FDIC rule implementing the new risk-based system,
an
22
<PAGE>
institution's deposit insurance assessment rate will be determined by
assigning the institution to a capital category and a supervisory subgroup to
determine which one of the nine risk classification categories is applicable,
in substantially the same manner as for the transitional system discussed
above. The FDIC is authorized to raise the assessment rates in certain
circumstances. If the FDIC determined to increase the assessment rates for
all institutions, institutions in all risk categories could be affected. The
FDIC has exercised this authority several times in the past and may raise
SAIF insurance premiums again in the future. If such action is taken by the
FDIC, it could have an adverse effect on the earnings of the Bank.
Under the FDIC Act, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe or unsound
practices, is in an unsafe or unsound condition to continue operations or has
violated any applicable law, regulation, rule, order or condition imposed by
the FDIC or the OTS. The management of the Bank does not know of any
practice, condition or violation that might lead to termination of deposit
insurance. At September 30, 1993, the Bank's regulatory capital exceeded all
of the fully phased-in capital requirements.
Loans to One Borrower. Under the HOLA savings institutions are generally
subject to the national bank limits on loans to one borrower. Generally,
savings institutions may not make a loan or extend credit to a single or
related group of borrowers in excess of 15% of the Bank's unimpaired capital
and surplus. An additional amount may be lent, equal to 10% of unimpaired
capital and surplus, if such loan is secured by readily-marketable
collateral, which is defined to include certain securities and bullion, but
generally does not include real estate. At September 30, 1993, the Bank's
largest aggregate outstanding balance of loans to one borrower totalled
$702,000 which did not exceed the Bank's $1.7 million loan to one borrower
limit.
QTL Test. The HOLA requires savings institutions to meet a qualified
thrift lender ("QTL") test. Under the QTL test, as modified by FDICIA, a
savings institution is required to maintain at least 65% of its "portfolio
assets" (total assets less (i) specified liquid assets up to 20% of total
assets, (ii) intangibles, including goodwill, and (iii) the value of property
used to conduct business) in certain "qualified thrift investments"
(primarily residential mortgages and related investments, including certain
mortgage-backed and mortgage-related securities) on a monthly basis in 9 out
of every 12 months.
A savings institution that fails the QTL test must either convert to a bank
charter or operate under certain restrictions. If the savings institution
does not convert to a bank charter, it generally will be prohibited from:
(i) making an investment or engaging in any new activity not permissible for
a national bank, (ii) paying dividends not permissible under national bank
regulations, (iii) obtaining advances from any FHLB, and (iv) establishing
any new branch office in a location not permissible for a national bank in
the institution's home state. In addition, beginning three years after the
bank failed the QTL test, the bank would be prohibited from refinancing any
investment or engaging in any activity not permissible for a national bank
and would have to repay any outstanding advances from an FHLB as promptly as
possible. As of September 30, 1993, the Bank maintained 91.2% of its
portfolio assets in qualified thrift investments and met the QTL test.
23
<PAGE>
Limitation on Capital Distributions. OTS regulations impose limitations
upon all capital distributions by savings institutions, such as cash
dividends, payments to repurchase or otherwise acquire its shares, payments
to shareholders of another institution in a cash-out merger and other
distributions charged against capital. The rule establishes three tiers of
institutions, which are based primarily on an institution's capital level.
An institution that exceeds all fully phased-in capital requirements before
and after a proposed capital distribution ("Tier 1 Institution") and has not
been advised by the OTS that it is in need of more than normal supervision,
could, after prior notice but without the approval of the OTS, make capital
distributions during a calendar year equal to the greater of: (i) 100% of
its net income to date during the calendar year plus the amount that would
reduce by one-half its "surplus capital ratio" (the excess capital over its
fully phased-in capital requirements) at the beginning of the calendar year
or (ii) 75% of its net income for the previous four quarters. Any additional
capital distributions would require prior regulatory approval. In the event
the Bank's capital fell below its fully-phased in requirement or the OTS
notified it that it was in need of more than normal supervision, the Bank's
ability to make capital distributions would be restricted. In addition, the
OTS could prohibit a proposed capital distribution by any institution, which
would otherwise be permitted by the regulation, if the OTS determines that
such distribution would constitute an unsafe or unsound practice.
Furthermore, under the OTS prompt corrective action regulations which took
effect on December 19, 1992, the Bank would be prohibited from making any
capital distributions if, after the distribution, the Bank would have: (i) a
total risk-based capital ratio of less than 8.0%, (ii) a Tier 1 risk-based
capital ratio of less than 4.0% or (iii) a leverage ratio of less than 4.0%
(3.0% in the event that the Bank was to be assigned a 1 MACRO Rating, the
highest examination rating of the OTS for savings institutions).
Liquidity. The Bank is required to maintain an average daily balance of
liquid assets (cash, certain time deposits, bankers' acceptances, specified
United States Government, state or federal agency obligations, shares of
certain mutual funds and certain corporate debt securities and commercial
paper) equal to a monthly average of not less than a specified percentage of
its net withdrawable deposit accounts plus short-term borrowings. This
liquidity requirement may be changed from time to time by the OTS to any
amount within the range of 4% to 10% depending upon economic conditions and
the savings flows of member institutions, and is currently 5%. OTS
regulations also require each savings institution to maintain an average
daily balance of short-term liquid assets at a specified percentage
(currently 1%) of the total of its net withdrawable deposit accounts and
borrowings payable in one year or less. Monetary penalties may be imposed
for failure to meet these liquidity requirements. The Bank's liquidity and
short-term liquidity ratios for September 30, 1993 were 22.93% and 11.60%
respectively, which exceeded the then applicable requirements. The Bank has
never been subject to monetary penalties for failure to meet its liquidity
requirements.
Assessments. Savings institutions are required by OTS regulation to pay
assessments to the OTS to fund the operations of the OTS. The general
assessment, paid on a semi-annual basis, is computed upon the savings
institution's total assets, including consolidated subsidiaries, as reported
in the Bank's latest quarterly thrift financial report. The assessments paid
by the Bank in 1993 totalled $23,000.
24
<PAGE>
Branching. In April, 1992, the OTS amended its rule on branching by
federally chartered savings institutions to permit nationwide branching to
the extent allowed by federal statute. This permits federal savings
institutions with interstate networks to geographically diversify their loan
portfolios and lines of business. The OTS authority preempts any state law
purporting to regulate branching by federal savings institutions.
Community Reinvestment. Under the Community Reinvestment Act ("CRA"), as
implemented by OTS regulations, a savings institution 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 not 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 OTS, in connection with its examination of a
savings institution, to assess the institution'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 institution. The CRA also requires all
institutions to make public disclosure of their CRA ratings. The Bank
received a satisfactory CRA Rating in its most recent CRA examination.
Brokered Deposits. In 1992, the FDIC promulgated final regulations
implementing the FDICIA limitations on brokered deposits. Under the
regulations, well-capitalized institutions, that are not troubled
institutions, are subject to no brokered deposit limitations, while
adequately capitalized institutions are able to accept, renew or roll over
brokered deposits only (i) with a waiver from the FDIC and (ii) subject to
the limitation that they do not pay an effective yield on any such deposit
which exceeds by more than (a) 75 basis points the effective yield paid on
deposits of comparable size and maturity in such institution's normal market
area for deposits accepted in its normal market area or (b) 120 basis points
for retail deposits and 130 basis points for wholesale deposits,
respectively, of the current yield on comparable maturity U.S. Treasury
obligations for deposits accepted outside the institution's normal market
area. Undercapitalized institutions are not permitted to accept brokered
deposits and may not solicit deposits by offering an effective yield that
exceeds by more than 75 basis points the prevailing effective yields on
insured deposits of comparable maturity in the institution's normal market
area or in the market area in which such deposits are being solicited.
Pursuant to the regulations, the Bank, as a well-capitalized institution,
could accept brokered deposits. The Bank, however, does not accept brokered
deposits.
Financial Management Requirements. FDICIA also imposes new financial
reporting requirements on all depository institutions with assets of more
than $500 million, their management and independent auditors, and establishes
new rules for the composition, duties, and authority of such institutions'
audit committees and boards of directors, effective in years beginning after
December 31, 1992. Among other things, all such depository institutions will
be required to prepare and make available to the public annual reports on
their financial condition, including statements of managements'
responsibility for the financial statements, internal controls and compliance
with certain federal banking laws and regulations relating to safety and
soundness, and an assessment of the institution's compliance with such
internal controls, laws and regulations. The institution's independent
public accountants are required
25
<PAGE>
to attest to certain of these management assessments. Each such institution
also is required to have an audit committee composed of independent
directors.
Transactions with Related Parties. The Bank's authority to engage in
transactions with related parties or "affiliates" (i.e., any company that
controls or is under common control with an institution, including the
Company and its non-savings institution subsidiaries) or to make loans, is
limited by Sections 23A and 23B of the Federal Reserve Act ("FRA"). Section
23A limits the aggregate amount of transactions with any individual affiliate
to 10% of the capital and surplus of the savings institution and also limits
the aggregate amount of transactions with all affiliates to 20% of the
savings institution's capital and surplus. Loans and certain other
extensions of credit to affiliates are required to be secured by collateral
in an amount and of a type described in Section 23A and the purchase of low
quality assets from affiliates is generally prohibited. Section 23B provides
that transactions with affiliates, including loans and asset purchases, must
be on terms and under circumstances, including credit standards, that are
substantially the same or at least as favorable to the institution as those
prevailing at the time for comparable transactions with nonaffiliated
companies. In the absence of comparable transactions, such transactions may
only occur under terms and circumstances, including credit standards, that in
good faith would be offered to or would apply to nonaffiliated companies.
Notwithstanding Sections 23A and 23B, savings institutions are prohibited
from lending to any affiliate that is engaged in activities that are not
permissible for bank holding companies under Section 4(c) of the Bank Holding
Company Act ("BHC Act"). Further, no savings institution may purchase the
securities of any affiliate other than a subsidiary.
The Bank's authority to extend credit to executive officers, directors and
10% shareholders, as well as entities controlled by such persons, are
currently governed by Sections 22(g) and 22(h) of the FRA, and Regulation O
thereunder. Among other things, these regulations require such loans to be
made on terms substantially the same as to those offered to unaffiliated
individuals which involve no more than the normal risk of collectibility and
place limits on the amount of loans the Bank may make to such persons based,
in part, on the Bank's capital position, and require certain approval
procedures to be followed. The OTS regulations, with certain minor
variances, apply Regulation O to savings institutions.
Enforcement. Under the FDI Act, the OTS has primary enforcement
responsibility over savings institutions and has the authority to bring
enforcement action against all "institution-related parties," including
certain stockholders, and any attorneys, appraisers and accountants who
knowingly or recklessly participate in wrongful action likely to have an
adverse effect on an insured institution. Civil penalties cover a wide range
of violations and actions and range up to $25,000 per day unless a finding of
reckless disregard is made, in which case penalties may be as high as $1
million per day. Criminal penalties for most financial institution crimes
include fines of up to $1 million and imprisonment for up to 30 years. In
addition, regulators have substantial discretion to impose enforcement action
on an institution that fails to comply with its regulatory requirements,
particularly with respect to the requirements. Possible enforcement action
ranges from the requirement of an approved capital plan and the imposition of
a directive to receivership, conservatorship or the termination of deposit
insurance. Under the FDI Act, the FDIC has the authority to recommend to the
Director of OTS that enforcement action be taken with respect to a
26
<PAGE>
particular savings institution. If action is not taken by the Director, the
FDIC has authority to take such action under certain circumstances.
New Standards for Safety and Soundness. FDICIA requires each federal
banking agency to prescribe for all insured depository institutions and their
holding companies standards relating to internal controls, information
systems and audit systems, loan documentation, credit underwriting, interest
rate risk exposure, asset growth, and compensation, fees and benefits and
such other operational and managerial standards as the agency deems
appropriate. In addition, the federal banking regulatory agencies are
required to prescribe by regulation standards specifying: (i) maximum
classified assets to capital ratios; (ii) minimum earnings sufficient to
absorb losses without impairing capital; (iii) to the extent feasible, a
minimum ratio of market value to book value for publicly traded shares of
depository institutions or the depository institution holding companies; and
(iv) such other standards relating to asset quality, earnings and valuation
as the agency deems appropriate. Finally, each federal banking agency is
required to prescribe standards for employment contracts and other
compensation arrangements of executive officers, employees, directors and
principal stockholders of insured depository institutions that would prohibit
compensation and benefits and arrangements that are excessive or that could
lead to a material financial loss for the institution. If an insured
depository institution or its holding company fails to meet any of its
standards described above, it will be required to submit to the appropriate
federal banking agency a plan specifying the steps that will be taken to cure
the deficiency. If an institution fails to submit an acceptable plan or
fails to implement the plan, the appropriate federal banking agency will
require the institution or holding company, to correct the deficiency and
until corrected, may impose restrictions on the institution or the holding
company including any of the restrictions applicable under the prompt
corrective action provisions of FDICIA. Final regulations to implement
safety and soundness standards must become effective no later than December
1, 1993. The federal banking agencies, including the OTS, recently adopted a
notice of proposed rulemaking regarding implementation of these standards.
Since final regulations have not yet been prescribed, the Bank cannot assess
the significance of the impact, if any, such standards may have on the Bank.
FDICIA also requires each appropriate federal banking agency to adopt
uniform regulations prescribing standards for extensions of credit (i)
secured by real estate or (ii) made for the purpose of financing the
construction of improvements on real estate. In prescribing these standards,
the banking agencies must consider the risk posed to the deposit insurance
funds by real estate loans, the need for safe and sound operation of insured
depository institutions and the availability of credit. The OTS and the
other federal banking agencies announced uniform regulations, effective March
19, 1993. The OTS regulation requires each savings institution to establish
and maintain written internal real estate lending standards consistent with
safe and sound banking practices and appropriate to the size of the
institution and the nature and scope of its real estate lending activities.
The policy also must be consistent with accompanying OTS guidelines, which
include loan-to-value ratio limits for the following types of real estate
loans: raw land (65%); land development (75%); commercial, multi-family and
other nonresidential construction (80%); improved property (85%); and one- to
four-family residential construction (85%). One-to-four family mortgages and
home equity loans do not have maximum loan-to-value ratio limits, but those
with a loan-to-value ratio at origination of 90% or greater are expected to
be backed by private mortgage insurance or
27
<PAGE>
readily marketable collateral. Institutions also are permitted to make a
limited amount of loans that do not conform to the proposed loan-to-value
limitations so long as such exceptions are reviewed and justified
appropriately. The guidelines also list a number of lending situations in
which exceptions to the loan-to-value standards are justified.
FEDERAL HOME LOAN BANK SYSTEM
The Bank is a member of the FHLB System, which consists of 12 regional
FHLBs. The FHLB provides a central credit facility primarily for member
institutions. The Bank, as a member of the FHLB-Atlanta, is required to
acquire and hold shares of capital stock in that FHLB in an amount at least
equal to 1% of the aggregate principal amount of its unpaid residential
mortgage loans and similar obligations at the beginning of each year, or 1/20
of its advances (borrowings) from the FHLB-Atlanta, whichever is greater.
The Bank was in compliance with this requirement with an investment in
FHLB-Atlanta stock at September 30, 1993, of $.4 million. FHLB advances must
be secured by specified types of collateral and long-term advances may be
obtained primarily for the purpose of providing funds for residential housing
finance.
The FHLBs are required to provide funds out of their earnings for the
resolution of insolvent thrifts and to allocate funds for affordable housing
programs. These requirements could reduce the amount of dividends that the
FHLBs pay to their members and could also result in the FHLBs imposing a
higher rate of interest on advances to their members. For the years ended
September 30, 1991, 1992 and 1993, dividends from the FHLB-Atlanta to the
Bank amounted to $18,000, $19,800 and $28,300, respectively. If dividends
were reduced, or interest on future FHLB advances increased, the Bank's net
interest income would likely also be reduced. Further, there can be no
assurance that the impact of FDICIA and the FIRREA on the FHLBs will not also
cause a decrease in the value of the FHLB-Atlanta stock held by the Bank.
FEDERAL RESERVE SYSTEM
The Federal Reserve Board regulations require savings institutions to
maintain noninterest-earning reserves against their transaction accounts
(primarily NOW and regular checking accounts). The Federal Reserve Board
regulations generally require that reserves be maintained against aggregate
transaction accounts as follows: for accounts aggregating $51.9 million or
less (subject to adjustment by the Federal Reserve Board) the reserve
requirement is 3%; and for accounts greater than $51.9 million, the reserve
requirement is $1.6 million plus 10% (subject to adjustment by the Federal
Reserve Board between 8% and 14%) against that portion of total transaction
accounts in excess of $51.9 million. The first $4.0 million of otherwise
reservable balances (subject to adjustments by the Federal Reserve Board) are
exempted from the reserve requirements. The Bank is in compliance with the
foregoing requirements. The balances maintained to meet the reserve
requirements imposed by the Federal Reserve Board may be used to satisfy
liquidity requirements imposed by the OTS. Because required reserves must be
maintained in the form of either vault cash, a non-interest-bearing account
at a Federal Reserve Bank or a pass-through account as defined by the Federal
Reserve Board, the effect of this reserve requirement is to reduce the Bank's
interest-earning assets. FHLB System members are also authorized to borrow
from the
28
<PAGE>
Federal Reserve "discount window," but Federal Reserve Board regulations
require institutions to exhaust all FHLB sources before borrowing from a
Federal Reserve Bank.
FEDERAL AND STATE TAXATION
FEDERAL TAXATION
General. The following discussion of tax matters is intended only as a
summary and does not purport to be a comprehensive description of the federal
tax rules applicable to First Federal. For federal income tax purposes,
First Federal reports its income and expenses using the accrual method of
accounting and, since 1991, files its federal income tax returns on a
September 30 fiscal year basis. For its taxable year ended September 30,
1993, First Federal was subject to a maximum federal income tax rate of 34%.
First Federal's federal income tax returns have not been audited by the IRS
since 1982.
Bad Debt Reserves. Savings institutions, such as First Federal, which meet
certain definitional tests primarily relating to their assets and the nature
of their business ("qualifying thrifts") are permitted to establish a reserve
for bad debts and to make annual additions thereto, which additions may,
within specified formula limits, be deducted in arriving at their taxable
income. For purposes of the bad debt reserve deduction, loans are separated
into "qualifying real property loans," which are, in general, loans secured
by interests in improved real property or real property which is to be
improved out of the proceeds of the loan, and "non-qualifying loans," which
are all other loans.
A qualifying thrift is allowed to calculate the deduction for the addition
to its bad debt reserve for qualifying real property loans based upon the
more favorable of two methods: (i) a method based on the thrift's actual loss
experience (the "experience" method); or (ii) a method based on a specified
percentage of the thrifts taxable income (the "percentage of taxable income"
method). The addition to the bad debt reserve under the percentage of
taxable income method is limited to 8% of the thrift's taxable income, as
adjusted for this purpose. The percentage of taxable income method may not
be used in any year in which less than 60% of the thrift's total assets are
"qualifying assets." "Qualifying assets" generally include cash, obligations
of the United States Government or an agency or instrumentality thereof,
certain obligations of a state or political subdivision thereof, residential
real estate related loans, loans secured by savings accounts, student loans
and property used by First Federal in the conduct of its business. First
Federal presently satisfies the 60% requirement, and management expects First
Federal to be able to satisfy this test in the future.
The amount of the addition to the reserve for losses on qualifying real
property loans under the percentage of taxable income method cannot exceed
the amount necessary to increase the balance of the reserve for losses on
qualifying real property loans at the close of the taxable year to 6% of the
balance of the qualifying real property loans outstanding at the end of the
taxable year. Also, if the qualifying thrift uses the percentage of taxable
income method, then the qualifying thrift's aggregate addition to its reserve
for losses on qualifying real property loans cannot, when added to the
addition to the reserve for losses on non-qualifying loans, exceed the amount
by which (i) 12% of the amount that the total deposits or
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<PAGE>
withdrawable accounts of depositors of the qualifying thrift at the close of
the taxable year exceeded (ii) the sum of the qualifying thrift's surplus,
undivided profits and reserves at the beginning of such year. In the past,
neither of these limitations has materially affected the deduction otherwise
available to First Federal. Finally, the deduction under the percentage of
taxable income method is reduced by the addition of the reserve for losses on
non-qualifying loans. First Federal intends to review the bad debt deduction
calculation each year and use the method which provides the maximum tax
benefits. For the year ended September 30, 1993, First Federal computed its
bad debt deduction for tax purposes using the percentage of taxable income
method.
Corporate Alternative Minimum Tax. The Code imposes a tax on alternative
minimum taxable income ("AMTI") at a rate of 20% to the extent the
alternative tax exceeds the regular tax. The excess of the tax bad debt
reserve deduction using the percentage of taxable income method over the
deduction that would have been allowable under the experience method is
treated as a preference item for purposes of computing the AMTI. Only 90% of
AMTI can be offset by net operating losses. For taxable years beginning
after December 31, 1989, AMTI is increased by an amount equal to 75% of the
amount by which First Federal's adjusted current earnings exceeds its AMTI
(determined without regard to this preference and prior to reduction for net
operating losses). In addition, an environmental tax of .12% of the excess
of AMTI (with certain modifications) over $2.0 million is imposed on
corporations, including First Federal, whether or not an Alternative Minimum
Tax ("AMT") is paid. First Federal does not expect to be subject to the AMT,
but was subject to the environmental tax for the tax year ended September 30,
1993, in an amount which was immaterial.
Distributions. To the extent that (i) First Federal's reserve for losses
on qualifying real property loans exceeds the amount that would have been
allowed under the experience method and (ii) First Federal makes
"non-dividend distributions" to stockholders that are considered to result in
distributions from the excess bad debt reserve or the supplemental reserve
for losses on loans ("Excess Distributions"), then an amount based on the
amount distributed will be included in First Federal's taxable income.
Non-dividend distributions include distributions in excess of First Federal's
current and accumulated earnings and profits, distributions in redemption of
stock, and distributions in partial or complete liquidation. However,
dividends paid out of First Federal's current or accumulated earnings and
profits, as calculated for federal income tax purposes, will not be
considered to result in a distribution from First Federal's bad debt
reserves.
The amount of additional taxable income created as a result of making a
nondividend distribution is an amount that when reduced by the tax
attributable to the income is equal to the amount of the distribution. Thus,
if certain portions of First Federal's accumulated tax bad debt reserve are
used for any purpose other than to absorb qualified bad debt loans,
approximately one and one-half times the amount so used would be includable
in gross income for federal income tax purposes, assuming a 34% corporate
income tax rate (exclusive of state taxes). See "Regulation and Supervision"
and "Limitation on Capital for Distributions" for limits on the payment of
dividends of First Federal.
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<PAGE>
STATE TAXATION
For Georgia income tax purposes, savings banks, including First Federal are
presently taxed at a rate equal to 6% of Georgia taxable income, less certain
credits. For these purposes, "Georgia taxable income" generally means
federal taxable income, subject to certain adjustments.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1992, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards (SFAS) No. 109 relating to the
method of accounting for deferred income taxes. Implementation of SFAS No.
109 is required for fiscal years beginning after December 15, 1992. SFAS No.
109 requires companies to take into account changes in tax rates when valuing
the deferred income tax amounts recorded on the balance sheet. The statement
also requires that deferred taxes be provided for all temporary differences
between financial statement and tax income in addition to the timing
differences in the recognition of income for financial statement and tax
purposes which were covered by prior accounting rules. The Bank has
determined that implementation will have a (unfavorable)/favorable effect of
approximately $(17,300), (9,100), and 5,924 on the financial statements for
the years ended September 30, 1993, 1992, and 1991, respectively.
In December 1990, FASB issued SFAS No. 106, "Employers' Accounting for
Post-Retirement Benefits Other Than Pensions." SFAS No. 106 focuses
principally on post-retirement health care benefits, and will significantly
change the prevalent current practice of accounting for post-retirement
benefits on a cash basis to requiring accrual, during the years that the
employee renders the necessary service, of the expected cost of providing
those benefits to an employee and the employee's beneficiaries and covered
dependents. SFAS No. 106 is effective for fiscal years beginning after
December 15, 1992, and adoption is required on a prospective basis. The
cumulative effect of this change in accounting of $2,061, net of tax effect,
is recorded in the September 30, 1993 income statement as a cumulative effect
of change in accounting principle.
In December 1991, the FASB issued SFAS No. 107, "Disclosures About Fair
Value of Financial Investments." SFAS No. 107 requires all entities to
disclose, in annual financial statements or the notes thereto, the fair value
of financial instruments, both assets and liabilities recognized and not
recognized in the statement of financial condition, for which it is
practicable to estimate fair value. SFAS No. 107 is effective for financial
statements issued for years ending after December 15, 1992. Substantially
all of the Bank's assets and liabilities are financial instruments and, as a
result, SFAS No. 107 requires the fair value of such assets and liabilities
to be disclosed. Because such assets and liabilities are monetary in nature,
their fair values may fluctuate significantly over time.
In April 1992, the Accounting Standards Division of the American Institute
of Certified Public accountants issued Statement of Position 92-3 ("SOP
92-3") "Accounting for Foreclosed Assets." SOP 92-3 requires all entities to
value foreclosed assets held for sale at the lower of (i) fair value minus
estimated costs to sell or (ii) cost. This SOP is effective for
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<PAGE>
fiscal years ending after December 15, 1992. The OTS has adopted a rule
which accords with SOP 92-3 for all valuations of such assets and any
troubled collateral dependent loans.
In November 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Post-employment Benefits."SFAS No. 112 establishes accounting standards
for employers who provide post-employment benefits to its employees
attributable to the employees' services already rendered. This standard
requires the accrual of a reasonably estimated amount when payment is
probable over the service period of the employee. The statement is effective
for years beginning after December 31, 1993. Because the Bank does not
provide any significant post-employment benefits other than pensions, SFAS
No. 112 will not have a material effect on the Bank's financial statements.
In May 1993, the FASB issued SFAS No. 114 "Accounting by Creditors for
Impairment of a Loan." The Statement generally would require all creditors
to account for impaired loans except those loans that are accounted for at
fair value or at the lower of cost or fair value, at the present value of the
expected future cash flows discounted at the loan's effective interest rate.
SFAS No. 114 is effective for fiscal years beginning after December 15, 1994.
Earlier adoption is encouraged. SFAS No. 114, when adopted, is not expected
to have a material effect on the financial statements.
In May 1993, the FASB issued SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." The Statement generally would
require that debt and equity securities that have readily determinable fair
values be carried at fair value unless they are classified as held to
maturity. Securities would be classified as held to maturity and carried at
amortized cost only if the reporting entity has a positive intent and ability
to hold those securities to maturity. If not classified as held to maturity,
such securities would be classified as trading securities or securities
available for sale. Unrealized holding gains or losses for securities
available for sale would be excluded from earnings and reported as a net
amount in a separate component of stockholders' equity. The effective date
for the statement is for fiscal years beginning after December 15, 1993.
Based on the securities held by the Bank as of September 30, 1993, management
does not believe that this statement will have a material effect on the
classification and valuation of the Bank's securities. The impact on the
Bank's future financial position or results of operations will be based on
the future fair values of its securities.
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<PAGE>
ADDITIONAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------------------------
The following table sets forth certain information regarding the executive
officers of FFSB who are not also directors and are not included in the proxy
statement for the Annual Meeting of Stockholders.
<TABLE>
<CAPTION>
Age
Name At 9/30/93 Work Experience Over Past Five Years
- ------------------ ---------- ------------------------------------
<S> <C> <C>
Barbara J. Balliew 42 Treasurer of FFSB
Jim L. Black 41 Senior Vice President of
FFSB since 1993; former
Vice President/Loan
Officer of FFSB from
1990-1993; former Vice
President/City Manager of
a regional area savings
bank
Gloria R. Brown 43 Senior Vice President of
FFSB
Richard E. Huie 42 Senior Vice President of
FFSB
</TABLE>
ITEM 2. DESCRIPTION OF PROPERTIES
- -------------------------------------
Office Properties. First Federal conducts its business through its
full-service office located in Calhoun, Georgia. The following table sets
forth information relating to First Federal's office as of September 30,
1993. The total net book value of First Federal's premises and equipment at
September 30, 1993 was approximately $1.2 million. the following table sets
forth the net book value of the real estate and building owned by First
Federal.
<TABLE>
<CAPTION>
Net
Owned/ Date Book Value at
Location Lease Opened September 30, 1993
-------- ----- ------ ------------------
<S> <C> <C> <C>
Main Office,
208 North Wall Street
Calhoun, Georgia 30701 Owned March 1980 $1,112,129
</TABLE>
33
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
--------------------------
First Federal is periodically involved as plaintiff or defendant in various
legal actions incident to its business, none of which are believed by
management to be material to the financial condition of First Federal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
------------------------------------------------------------
No matter was submitted by First Federal to a vote of its stockholders in
the fourth quarter ended September 30, 1993.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
-----------------------------------------------------------------
First Federal's common stock has been traded in the over-the-counter market
since First Federal's conversion from mutual to stock form of ownership as of
June 27, 1991.
Information relating to the market for the Registrants Common equity since
conversion as shown in the "Common Stock Market Information" section of the
1993 Annual Report to Shareholders is incorporated herein by reference.
As of December 1, 1993, there were approximately 140 stockholders of record
of First Federal's common stock.
First Federal has paid a dividend on its common stock for every quarter
ended since September 30, 1991. Total dividends of $1.72 per share, or
$710,000 in the aggregate, were paid during the fiscal year ended September
30, 1993. First Federal also paid a dividend of $.25 cents per share, or
$104,000 in the aggregate, to shareholders of record on September 14, 1993 in
October, 1993. Payments of dividends on First Federal's common stock are
subject to certain restrictions and limitations which may affect First
Federal's ability to pay cash dividends in the future. See "Item 1.
Business - Regulation - Limitation on Capital Distributions" for a further
discussion of such limitations.
34
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
-------------------------------------------------------------------
SELECTED FINANCIAL DATA
The following selected financial data for First Federal should be read in
conjunction with the Management's Discussion and Analysis or Plan of
Operations and the Financial Statements included elsewhere herein.
<TABLE>
<CAPTION>
Years Ended September 30
------------------------------------------------------------------
1993 1992(1) 1991(1)(2) 1990(1) 1989(1)
---- ------- ---------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Interest Income....................................... $5,382 $5,924 $6,169 $6,146 $5,895
Interest Expense...................................... (2,183) (2,985) (3,992) (4,218) (4,060)
Net Interest Income................................... 3,199 2,939 2,177 1,928 1,835
Provision for Loan Losses............................. (125) (127) (132) (102) (32)
Net Interest Income after Provision in Losses......... 3,074 2,812 2,045 1,826 1,803
Net Income............................................ 1,283 1,116 755 721 856
Earnings per Common Share............................. 3.10 2.75 N/A N/A N/A
Book Value per Common Share........................... 27.46 26.40 N/A N/A N/A
Return on Average Assets.............................. 1.84% 1.65% 1.17% 1.17% 1.40%
Return on Average Equity.............................. 11.53% 10.63% 9.75% 14.15% 20.02%
Equity to Assets...................................... 15.75% 15.66% 12.00% 8.25% 7.01%
<CAPTION>
As of September, 30
----------------------------------------------------------------
1993 1992(1) 1991(1)(2) 1990(1) 1989(1)
---- ------- ---------- ------- -------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Total Assets......................................... $71,686 $67,892 $66,123 $63,021 $60,254
Loan Receivable, net................................. 50,486 50,832 50,829 49,730 52,037
Interest Earning Deposits, Federal Funds sold
and Investments..................................... 15,782 14,003 12,446 8,711 5,520
Deposits............................................. 59,755 56,455 55,729 57,070 55,032
FHLB Advances........................................ -- --- --- --- ---
Stockholders Equity (retained earnings prior to
1991)............................................... 11,379 10,886 9,934 5,379 4,658
Full Service customer Facilities..................... 1 1 1 1 1
</TABLE>
- ----------------------------
(1) As adjusted.
(2) Reflects effect of conversion to stock form in June 1991.
See Item 1. Business - "Regulation and Supervision" for a discussion of the
Association's regulatory capital.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
GENERAL
The business of First Federal has been that of a financial intermediary
consisting primarily of attracting deposits from the general public and using
such deposits to originate mortgage loans secured by one to four family
residences. The relatively low interest rate environment prevalent in fiscal
1993 and the opportunities available from secondary market entities such as
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC") have made residential lending for portfolio a
less profitable activity. Likewise, the origination of fixed rate mortgages
for portfolio does not generate sufficient interest rate spreads to justify
the interest rate risk associated with such activity. The relatively low
interest rate environment has accelerated prepayments and made the
origination of adjustable rate mortgage ("ARMS") loans more difficult.
Since First Federal's profitability depends primarily on its net interest
income, which is the difference between the income it receives on its loan
and investment portfolios and its cost of funds (deposits), the Bank has
determined that a strategy that results in increased consumer lending and
other mortgage related products such as second mortgages is prudent to
enhance its net interest income. The Bank also earns net interest income due
to the fact that it has more interest earning assets than interest bearing
liabilities. To a lesser extent, First Federal's profitability is affected
by the level of other income and expenses. Other income consists principally
of loan fees and service charges on deposit accounts. The Bank has a
relationship with a mortgage banking company that enables the Bank to
originate and sell loans for a fee. Additionally, the Bank is currently
placing additional emphasis on attracting transaction accounts to enhance fee
income.
The operations of First Federal are influenced significantly by general
economic conditions and by policies of financial institution regulatory
agencies, including the OTS and FDIC. First Federal's cost of funds, which
is currently cost of deposits, is influenced by interest rates on competing
investments and general market interest rates. Lending activities are
affected by economic circumstances which also affect the general level of
consumer confidence.
ASSET/LIABILITY MANAGEMENT
First Federal has employed various strategies intended to minimize the
adverse effect of interest rate risk on future operations by providing a
closer match between the interest rate sensitivity of its assets and
liabilities and by expanding its activities which are not directly dependent
on interest rate spreads. However, the Board of Directors of the Bank has
instructed the Asset/Liability Management Committee that the substitution of
credit risk for rate risk is not an acceptable alternative. The Bank, as a
result, has determined to accept a minimal level of rate risk where credit
risk appears to be readily identifiable.
The balance sheet structure of the Bank poses a challenge to the management
of interest rate risk. The one year gap at December 31, 1992 was a negative
1% as determined with the assumptions provided pursuant to the OTS model as
of December 31, 1992 which is
36
<PAGE>
the latest determination available as of September 30, 1993. The negative
one year gap is defined to be the excess of interest bearing liabilities over
interest-earning assets that mature or reprice in one year. During periods of
moderately rising or falling interest rates, it is expected that the cost of
interest bearing liabilities would not significantly affect net interest
income. In periods of substantial interest rate declines, the Bank would
generally experience increased prepayments of its fixed-rate mortgage loans
which may result in the reinvestment of such proceeds at market rates which
are lower than current rates. In periods of substantial interest rate
increases, the Bank generally would experience a greater increase in the cost
of its liabilities than the increase in its yield on assets.
COMPARISON OF YEARS ENDED SEPTEMBER 30, 1993 AND 1992
GENERAL
Total assets were $71,685,699 at September 30, 1993 as compared to
$67,891,927 at September 30, 1992, an increase of $3,793,772. The increase
was due primarily to an increase in deposits in the amount of $3,299,753. A
smaller portion of the increase was due to investment of the net income
earned for the fiscal year ended September 30, 1993 less dividend payments.
Net loans receivable decreased by $347,635 to $50,486,143 at September
30, 1993 as compared to 50,833,778 at September 30, 1992. Although first
mortgage loans increased by $233,149 and other loans increased by $294,562,
the undisbursed portion of loans increased by $852,007 resulting in the
decrease in net loans. Undisbursed loan proceeds increased by $852,007 to
$1,209,142 at September 30, 1993 as compared to $357,135 at September 30,
1992. This increase is the result of an increase in construction loans
outstanding in the amount of $257,000 and loan proceeds retained pending
completion of improvements on "other" mortgage loans originated as
construction-permanent loans. Interest-bearing deposits increased by
$3,424,183 to $4,037,128 at September 30, 1993 from $612,945 at September
30, 1992. This increase is solely the result of an increase in the
overnight account balance at the Federal Home Loan Bank of Atlanta due to
management's decision to maintain a highly liquid position in the current
interest rate environment. Securities purchased under agreement to resell
increased by $2,000,000 for the year ended September 30, 1993 due to an
effort by management to enhance yield while maintaining a high level of
liquidity. These results reflect the Bank's strategy to enhance net
interest income. A substantial portion of First Federal's loans are secured
by real estate in northern Georgia communities, primarily Gordon County.
Although the Bank has a relatively diversified loan portfolio, the
performance of a substantial portion of its loan portfolio is dependent
upon the Gordon County economy. At the present time Gordon County is
experiencing a lower rate of unemployment than the national average and its
economic future looks stable for the foreseeable future.
Total deposits increased $3,299,753 to $59,754,949 at September 30, 1993
from $56,455,196 at September 30, 1992. The increase is due primarily to
increased balances in transaction accounts and regular savings. Although
the increase was limited due to the Bank's depositors' pursuit of higher
yields through other investment alternatives as a result of the low
interest rate environment, the increase of $3,838,313 in demand deposits
and regular savings
37
<PAGE>
reflects the Bank's efforts to enhance its competitive position as a
provider of consumer services.
Stockholders equity totaled $11,378,663 at September 30, 1993, as compared
to $10,885,721 at September 30, 1992, an increase of $492,942. The increase
was due to net income of $l,283,479 reduced by dividends paid of $813,272.
Additionally, stock options for 2,012 shares were exercised at $10 per share
resulting in an increase in equity of $20,120. These options had been
granted under the option plans for officers and directors established in
connection with the conversion and ratified by stockholders at the 1991
annual meeting.
NET INCOME
Net earnings increased $167,540 to $1,283,479 for the fiscal year ended
September 30, 1993 from $1,115,939 for the fiscal year ended September 30,
1992. The average interest rate spread increased to 4.26% for 1993 from
3.87% in 1992. This increase resulted primarily from a decline in the
average cost of funds to 3.84% in 1993 from 5.31% in 1992. This increase was
mitigated by a decline in the average yield on interest earning assets to
8.10% ln 1993 from 9.18% in 1992.
INTEREST INCOME
Total interest income decreased $541,752 to $5,382,146 in 1993 from
$5,923,898 in 1992. Interest income on mortgage loans decreased $517,544
caused by a reduction in the yield on the mortgage loan portfolio. This
decrease was partially offset by an increase in interest on other loans of
$16,666 caused by increased volume. Also, interest on investments decreased
by $40,874 as a result of declining yields. Although the balance of mortgage
loans outstanding increased slightly in 1993, management believes the trend
of reduced first mortgage lending activity for the Bank's loan portfolio will
continue. Currently, management's strategy is to emphasize higher yielding
lending activities, including consumer loan originations. The Bank's
strategy to increase consumer loan production will involve an effort to
maintain and improve relationships with the Bank's existing customer base and
to stress home equity lending.
INTEREST EXPENSE
Interest expense decreased by $801,779 to $2,183,113 in 1993 from 2,984,892
in 1992. This represents a decrease of 26.86% and is attributable to a low
interest rate environment. Interest expense does not reflect any interest on
borrowed funds for 1993 or 1992.
PROVISION FOR LOAN LOSS
The Bank's provision for loan losses was $125,000 for 1993 as compared to
$127,100 for 1992. Net loan charge-offs were $30,909 for 1993 and $15,740 or
1992. The Bank's non-performing loans were $157,000 at September 30, 1993,
or .31% of net loans receivable, compared to $181,000, at September 30, 1992,
or .36 of net loans receivable. The Bank provision is determined by
management' assessment of the adequacy of the allowance for possible loan
losses, based on various factors which, in management's judgment, deserve
recognition in estimating possible losses. Such factors include the inherent
risk in the Bank's loan portfolio, market value of the underlying collateral,
historical loan loss experience, delinquency trends and economic factors.
Management believes that the allowances for losses on loans and real estate
owned are adequate. While management uses available information to recognize
losses on loans and real estate owned, future additions to the loan loss
reserve may be necessary based on changes in economic conditions,
particularly in the northern Georgia market. In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the Bank's allowances for losses on loans and real estate owned. Such
agencies may require the Bank to make additions to the loan loss allowance.
38
<PAGE>
NET INTEREST INCOME
Net interest income after the provision for loan losses increased $262,127
to $3,074,033 in 1993 from $2,811,906 in 1992. This increase is primarily
attributable to the decrease in interest expense due to a lower cost of
funds.
NON-INTEREST INCOME
Total non-interest income increased $37,106 in 1993 as compared to 1992.
Loan origination fees increased $35,175 due to strong lending activity and
recognition of deferred loan fees due to refinancing activity. Other income
increased $3,735 due to an increase in service fees from checking accounts.
This increase was partially offset by decreases in loan late charges and
dividends on stock in the Federal Home Loan Bank.
NON-INTEREST EXPENSE
Total non-interest expense increased $89,668 in 1993 as compared to 1992.
Compensation and benefits increased by $58,647, or 7.09%, due to increased
salaries for employees and fees for board members. Other expenses increased
$61,559 primarily due to expenses incurred as a result of the merger
agreement, increased business license taxes and the general effects of
inflation.
INCOME TAX EXPENSE
The income tax expense was $721,725, or 35.96% of income before tax expense
for 1993, and $681,761, or 37.92% of income before tax expense for 1992, as
restated. In February, 1992 the Financial Accounting Standards Board issued
Statement 109, "Accounting for Income Taxes". The Bank adopted Statement
109 during the period ending September 30, 1993 and has restated the 1992 and
1991 financial statements to retroactively reflect the adoption. Statement
109 requires deferred tax assets and liabilities to be established based upon
temporary differences between the financial reporting basis and the tax base
of assets and liabilities. The deferred tax amounts included in the balance
sheet under Statement 109 represent the expected result when such amounts are
realized or settled. The effect of this change is not considered by
management to be material. A detailed explanation is found at Note 10 to
the Bank's audited financial statements as prepared by Read, Martin, Slickman
and Sheats, CPA's, the Bank's independent auditor.
39
<PAGE>
The following table sets forth for the periods and the date indicated, the
yields on First Federal's assets, costs of First Federal's liabilities and
First Federal's interest rate spread. The yields and costs are based on the
weighted-average monthly balances of the interest-earning assets and
interest-bearing liabilities determined on an annual basis.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30, AT SEPTEMBER 30,
---------------------------- ----------------
1993 1992 1991 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Yield on mortgage loans 8.24 9.66% 10.32% 7.90
Yield on other loans 9.92 10.20 12.00 9.64
Yield on loans 8.44 9.78 10.66 8.31
Yield on mortgage backed
securities 7.81 8.25 8.39 7.55
Yield on investments 6.46 7.31 8.14 5.80
Yield on other interest-earning assets 3.37 4.62 6.53 3.24
Yield on total interest-earning assets 8.10 9.31 10.03 7.60
Cost of deposits 3.84 5.32 6.97 3.51
Cost of borrowings -- -- -- --
Cost of FHLB advances -- -- -- --
Cost of other interest-bearing liabilities -- -- -- --
Cost of funds 3.84 5.32 6.97 3.51
Interest rate spread 4.26 3.99 3.06 4.09
Net yield on average interest-earning assets 4.52 4.59 3.50 4.67
</TABLE>
40
<PAGE>
The table below sets forth certain information regarding changes in interest
income and interest expense of First Federal for the periods indicated. For
each category of interest-earning asset and interest-bearing liability,
information is provided on changes attributable to (1) changes in volume
(changes in volume multiplied by prior rate); (2) changes in rates (change in
rate multiplied by prior volume); (3) changes in rate-volume (changes in rate
multiplied by changes in volume).
<TABLE>
<CAPTION>
Year Ended September 30,
-----------------------
1993 vs. 1992 1992 vs. 1991 1991 vs. 1990
------------- ------------- -------------
Increase (Decrease) due to Increase (Decrease) due to Increase (Decrease) due to
-------------------------- -------------------------- --------------------------
Rate/ Rate/ Rate/
Volume Rate Volume Total Volume Rate Volume Total Volume Rate Volume Total
------ ---- ------ ----- ------ ---- ------ ----- ------ ---- ------ -----
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income
Loans................. $ (34) $(470) $ 3 $(501) $ 36 $(380) $ (3) $ (347) $(183) $ (26) $ 1 $(208)
Investment Securities
and Bank Deposits... 169 (135) (40) (6) 38 184 52 274 -- -- 133 133
Mortgage Backed
Securities.......... (112) 106 (29) (35) 270 (326) (117) (173) (185) 397 (113) 99
----- ----- ---- ----- ---- ----- ----- ------ ----- ----- ----- -----
Total................. $ 23 $(499) $(66) $(542) $344 $(522) $(68) $ (246) $(368) $ 371 $ 21 $ 24
===== ===== ==== ===== ==== ===== ==== ======= ===== ===== ==== =====
Interest Expense:
Deposits.............. $ 174 $(922) $(54) $(802) $(85) $(943) $(20) $(1,008) $ 64 $(286) $ (4) $(226)
===== ===== ==== ===== ==== ===== ==== ======= ===== ===== ==== =====
Net Change in Interest
Income................ $ 260 $ 762 $ 250
--- --- ---
</TABLE>
COMPARISON OF YEARS ENDED SEPTEMBER 30, 1992 AND 1991
General
Total assets were $67,891,927 at September 30, 1992 as compared to
$66,122,884 at September 30, 1991, an increase of $1,769,043.
Net loans receivable remained relatively constant at $50,833,778 at
September 30, 1992 as compared to September 30, 1991. Although first
mortgage loans decreased by $1,082,308 due to prepayments and refinancing
activity induced by the relatively low interest rate environment, other loans
increased $l,282,425. These results reflect the Bank's strategy to enhance
net interest income. A substantial portion of First Federal's loans are
secured by real estate in northern Georgia communities, primarily Gordon
County. Although the Bank has a relatively diversified loan portfolio, the
performance of a substantial portion of its loan portfolio is dependent upon
the Gordon County economy. At the present time Gordon County is experiencing
a lower rate of unemployment than the national average and its economic
future looks stable for the foreseeable future.
Total deposits increased $726,505 to $56,455,196 at September 30, 1992 from
$55,728,691 at September 30, 1991. The increase is due primarily to interest
credits on existing deposits and the increase was limited due to the Bank's
depositors' pursuit of higher yields through other investment alternatives as
a result of the low interest rate environment.
41
<PAGE>
Stockholders equity totaled $10,975,238 at September 30, 1992, as compared
to $10,014,785 at September 30, 1991, an increase of $906,453. The increase
was due to net income of $1,125,045 reduced by dividends paid of $262,772.
Additionally, stock options for 9,818 shares were exercised at $10 per share
resulting in an increase in equity of $98,180. These options had been
granted under the option plans for officers and directors established in
connection with the conversion and ratified by stockholders at the 1991
annual meeting.
NET INCOME
Net earnings increased $376,006 to $1,125,045 for the fiscal year ended
September 30, 1992 from $749,039 for the fiscal year ended September 30,
1991. The average interest rate spread increased to 3.87% for 1992 from
3.06% in 1991. This increase resulted primarily from a decline in the
average cost of funds to 5.31% in 1992 from 6.97% in 1991. This increase was
mitigated by a decline in the average yield on interest earning assets to
9.18% in 1992 from 10.03% in 1991.
INTEREST INCOME
Total interest income decreased $245,956 to $5,923,898 in 1992 from
$6,169,854 in 1991. Interest income on mortgage loans decreased $421,764
caused by a reduction in mortgage loans outstanding and lower yields. This
decrease was partially offset by an increase in interest on other loans of
$74,401 caused by increased volume and an increase in interest on investments
of $101,407 due to an increase in investments outstanding. The lower balance
of mortgage loans outstanding during 1992 reflects decreased originations of
mortgage loans during 1992, prepayments and refinancing of the Bank's
existing mortgage loan portfolio. Management believes this trend of reduced
first mortgage lending activity for the Bank's loan portfolio will continue.
Currently, management's strategy is to emphasize higher yielding lending
activities, including consumer loan originations. The Bank's strategy to
increase consumer loan production will involve an effort to maintain and
improve relationships with the Bank's existing customer base and to stress
home equity lending.
INTEREST EXPENSE
Interest expense decreased by $1,007,569 to $2,984,892 in 1992 from
$3,992,461 in 1991. This represents a decrease of 25.24% and is attributable
to a relatively low interest rate environment with only a limited increase in
deposits. Interest expense does not reflect any interest on borrowed funds
for 1992 or 1991.
PROVISION FOR LOAN LOSS
The Bank's provision for loan losses was $127,100 for 1992 as compared to
$132,302 for 1991. Net loan charge-offs were $15,740 for 1992 and $14,045
for 1991. The Bank's non-performing loans were $181,000 at September 30,
1992, or .36% of net loans receivable, compared to $87,000, at September 30,
1991, or .17% of net loans receivable. The Bank's provision is determined by
management's assessment of the adequacy of the allowance for possible loan
losses, based on various factors which, in management's judgment, deserve
recognition in estimating possible losses. Such factors include the inherent
risk in the Bank's
42
<PAGE>
loan portfolio, market value of the underlying collateral, historical loan
loss experience, delinquency trends and economic factors. Management
believes that the allowances for losses on loans and real estate owned are
adequate. While management uses available information to recognize losses on
loans and real estate owned, future additions to the loan loss reserve may be
necessary based on changes in economic conditions, particularly in the
northern Georgia market. In addition, various regulatory agencies, as an
integral part of their examination process, periodically review the Bank's
allowances for losses on loans and real estate owned. Such agencies may
require the Bank to make additions to the loan loss allowances.
NET INTEREST INCOME
Net interest income after the provision for loan losses increased $766,815
to $2,811,906 in 1992 from $2,045,091 in 1991. This increase is primarily
attributable to the decrease in interest expense due to a lower cost of
funds.
NON-INTEREST INCOME
Total non-interest income increased $20,515 in 1992 as compared to 1991.
Loan origination fees increase $74,455 due to increased lending activity.
This increase was offset by a decrease in gain on the sale of loan servicing
of $78,000 as a result of the sale, in 1991, of loan servicing rights on
loans previously sold to the Federal Home Loan Mortgage Corporation. Also, a
gain on sale of foreclosed real estate of $9,063 was recognized in 1992 and
other income increased $14,997 due to an increase in service fees from
checking accounts.
NON-INTEREST EXPENSE
Total non-interest expense increased $94,570 in 1992 as compared to 1991.
Compensation and benefits increased by $68,033, or 8.97%, due to increased
salaries for employees and fees for board members. Other expenses increased
$31,509 due to expenses incurred due to being a public company, a $5,000
contribution to the public school systems of Calhoun and Gordon County for
purchase of computer equipment and the general effects of inflation.
INCOME TAX EXPENSE
The income tax expense was $672,655, or 37.42% of income before tax expense
for 1992, and $355,901, or 32.21% of income before tax expense for 1991. The
increase in the percentage of income tax expense to income before tax expense
is primarily due to the difference in income recognition for book and tax
purposes regarding loan origination fees pursuant to Statement of Financial
Accounting Standard No.91 and the method prescribed by the Internal Revenue
Service.
43
<PAGE>
CAPITAL RESOURCES
The regulations require financial institutions to have a minimum regulatory
tangible capital equal to 1.5 percent of adjusted total assets, a minimum
regulatory core capital equal to 3 percent of adjusted total assets and for
September 30, 1993, a risk-based capital ratio of 8.0 percent of
risk-weighted assets.
The Bank, at September 30, 1993, meets the fully phased-in regulatory
tangible capital, core capital, and risk-based capital requirements, as
defined by FIRREA. The following table presents the Bank's capital position
relative to its minimum capital requirements as of September 30, 1993:
<TABLE>
<CAPTION>
Percentage of
Amount Applicable Assets
---------------------------
(Dollars in thousands)
<S> <C> <C>
Core Capital............................. 11,468 16.00%
Minimum core capital requirement......... 2,150 3.00
------ -----
Excess................................... 9,318 13.00%
=====
Tangible capital......................... 11,468 16.00%
Minimum tangible capital requirement..... 1,075 1.50
------ -----
Excess................................... 10,393 14.50%
=====
Risk-based capital....................... 11,907 31.46%
Minimum risk-based capital requirement... 3,027 8.00
------ -----
Excess................................... 8,880 23.46%
=====
</TABLE>
The Bank expects to continue meeting the minimum capital requirements in
the foreseeable future. However, events beyond the control of the Bank, such
as increased interest rates, a downturn in the economy in areas in which the
Bank has a substantial portion of its loans or new regulatory laws and
regulations could adversely affect future earnings and, consequently, the
ability of the Bank to meets its future minimum capital requirements.
LIQUIDITY
First Federal is required to maintain specific levels of cash and liquid
assets based upon the levels of its savings deposits and short term
borrowings in order to meet demands for withdrawals and debt repayment.
First Federal has consistently maintained liquid assets substantially in
excess of the required levels. Management believes its sources of liquidity
are adequate to meet future cash needs and commitments. First Federal's
sources of liquidity have included principal and interest payments on loans
and securities and deposit inflows. At September 30, 1993, the Bank had
commitments for approved loan applications totaling
44
<PAGE>
$279,000. Commitments on behalf of borrowers for unused lines of credit on
home equity loans were $3,494,000 at September 30, 1993.
EFFECT OF INFLATION AND CHANGING PRICES
First Federal's financial statement and related data presented herein have
been prepared in accordance with generally accepted accounting principles,
which require the measurement of financial position and operating results in
terms of historical dollars, without considering changes in the relative
purchasing power of money over time due to inflation. Unlike industrial
companies, virtually all of the assets and liabilities of a financial
institution are monetary in nature. As a result, interest rates have a more
significant impact on a financial institution's performance than the effects
of general levels of inflation.
The Bank does not anticipate any material adverse impact from new accounting
pronouncements to include SFAS 109, income taxes, SFAS 106, post-retirement
benefits, SFAS 107, fair value of investments and SOP 92-3, accounting for
foreclosed assets.
45
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
FINANCIAL STATEMENTS
SEPTEMBER 30, 1993, 1992 AND 1991
46
<PAGE>
C O N T E N T S
<TABLE>
<CAPTION>
Page
<S> <C>
INDEPENDENT AUDITOR'S REPORT
FINANCIAL STATEMENTS
Statements of financial condition 50 & 51
Statements of income 52 & 53
Statements of changes in stockholders' equity 54
Statements of cash flows 55 & 56
Notes to financial statements 57 - 78
</TABLE>
47
<PAGE>
(LOGO OF READ, MARTIN, SLICKMAN AND
SHEATS APPEARS HERE)
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
First Federal Savings Bank
Calhoun, Georgia
We have audited the accompanying statements of financial condition of
First Federal Savings Bank, Calhoun, Georgia, as of September 30, 1993, 1992 and
1991, and the related statements of income, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Savings 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 First Federal
Savings Bank Calhoun, Georgia, as of September 30, 1993, 1992 and 1991, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
48
<PAGE>
As discussed in Note 1 to the consolidated financial statements, the
Savings Bank adopted SFAS 109, "Accounting for Income Taxes" as of September 30,
1993 and, accordingly, restated prior year's income where applicable.
Additionally, as explained in Note 10, the Savings Bank adopted SFAS 106,
"Accounting for Post Retirement Benefits".
/s/ Read, Martin, Slickman & Sheats, CPA's
Rome, Georgia
October 29, 1993
49
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
STATEMENTS OF FINANCIAL CONDITION
September 30, 1993 and 1992
<TABLE>
<CAPTION>
ASSETS 1993 1992
as adjusted
(Note 10)
<S> <C> <C>
Cash and cash equivalents $ 1,500,529 $ 1,111,686
Interest-bearing deposits 4,037,128 612,945
----------- -----------
Total cash and equivalents 5,537,657 1,724,631
Certificates of deposits - - 297,000
Securities purchased under agreement
to resell (market value of
$2,010,000) (Note 2) 2,000,000 - -
Investment securities (market value of
$7,973,799 in 1993 and $7,878,788 in
1992) (Note 3) 7,690,743 7,505,208
Mortgage-backed and related securities
(market value of $4,202,537 in 1993
and $6,040,328 in 1992) (Note 4) 4,054,238 5,587,859
Loans receivable, net (Note 5) 50,486,143 50,833,778
Accrued interest receivable (Note 7) 491,043 517,512
Premises and equipment (Note 8) 1,231,737 1,263,912
Other assets 194,138 162,027
----------- -----------
$71,685,699 $67,891,927
=========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
50
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND RETAINED EARNINGS 1993 1992
as adjusted
(Note 10)
<S> <C> <C>
Deposits (Note 9) $59,754,949 $56,455,196
Advances from borrowers for taxes and
insurance 131,841 133,429
Federal and state income taxes
(Note 10):
Current 56,022 148,801
Accrued expenses and other liabilities 364,224 268,780
----------- -----------
60,307,036 57,006,206
----------- -----------
Common stock - $.01 par value,
8,000,000 shares authorized, 414,330
and 412,318 shares issued and
outstanding, respectively 4,143 4,123
Additional paid-in capital 3,917,024 3,894,309
Retained earnings, substantially
restricted (Notes 10, 15, and 17) 7,457,496 6,987,289
----------- -----------
11,378,663 10,885,721
----------- -----------
$71,685,699 $67,891,927
=========== ===========
</TABLE>
51
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
STATEMENTS OF INCOME
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
as adjusted as adjusted
(Note 10) (Note 10)
<S> <C> <C> <C>
Interest income:
Loans receivable:
First mortgage loans $ 3,554,322 $ 4,071,866 $ 4,493,630
Consumer and other loans 880,214 863,548 789,147
Mortgage backed and
related securities 373,421 408,581 133,817
Investments and bank deposits 574,189 579,903 753,260
----------- ----------- -----------
Total interest income 5,382,146 5,923,898 6,169,854
Interest expense:
Deposits (Note 9) 2,183,113 2,984,892 3,992,461
----------- ----------- -----------
Net interest income 3,199,033 2,939,006 2,177,393
Provision for loan losses (Note 5) 125,000 127,100 132,302
----------- ----------- -----------
Net interest income after provision for
loan losses 3,074,033 2,811,906 2,045,091
----------- ----------- -----------
Non-interest income:
Loan origination fees (Note 1) 205,275 170,100 95,645
Gain on sale of loan servicing - - - - 78,000
Gain on sale of foreclosed real estate 6,009 9,063 - -
Gain on sale of investments 1,250 - - - -
Other (Note 16) 307,471 303,736 288,739
----------- ----------- -----------
Total non-interest income 520,005 482,899 462,384
----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
52
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
STATEMENTS OF INCOME
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
as adjusted as adjusted
(Note 10) (Note 10)
<S> <C> <C> <C>
Non-interest expense:
General and administrative:
Compensation and benefits (Note 11) $ 885,372 $ 826,725 $ 758,692
Occupancy and equipment 125,744 130,160 138,146
Federal insurance premium 93,913 120,035 117,021
Other (Note 16) 481,744 420,185 388,676
----------- ----------- -----------
Total non-interest expense 1,586,773 1,497,105 1,402,535
----------- ----------- -----------
Income before tax expense 2,007,265 1,797,700 1,104,940
Income tax expense (Note 10) 721,725 681,761 349,977
----------- ----------- -----------
Net income before cumulative effect of
change in accounting principle 1,285,540 1,115,939 754,963
Cumulative effect of change in accounting
principle, net of taxes (Note 12) (2,061) - - - -
----------- ----------- -----------
Net income $ 1,283,479 $ 1,115,939 $ 754,963
=========== =========== ===========
Earnings per share before cumulative
effect of change in accounting principle
(Note 12) $ 3.11 $ 2.75 $ N/A
Cumulative effect of change in accounting
principle (.01) - - N/A
----------- ----------- -----------
Earnings per share $ 3.10 $ 2.75 N/A
=========== =========== ===========
Weighted average shares outstanding 413,440 405,332 N/A
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
53
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
NUMBER ADDITIONAL
OF PAID-IN RETAINED
SHARES COMMON STOCK CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1991 402,500 $ 4,025 $ 3,796,227 $ 6,214,533 $10,014,785
Cumulative effect of change in
accounting principle (Note 10) - - - - - - (80,411) (80,411)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1991,
as restated 402,500 4,025 3,796,227 6,134,122
9,934,374
Net income - - - - - - 1,115,939
1,115,939
Issuance of 9,818 shares of
common stock 9,818 98 98,082 - - 98,180
Dividends paid - - - - - - (262,772) (262,772)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1992 412,318 4,123 3,894,309 6,987,289 10,885,721
Net income - - - - - - 1,283,479 1,283,479
Issuance of 2,012 shares of
common stock 2,012 20 22,715 - - 22,735
Dividends paid - - - - - - (813,272) (813,272)
----------- ----------- ----------- ----------- -----------
Balance at September 30, 1993 414,330 $ 4,143 $ 3,917,024 $ 7,457,496 $11,378,663
=========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
54
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
STATEMENTS OF CASH FLOWS
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
as adjusted as adjusted
(Note 10) (Note 10)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,283,479 $ 1,115,939 $ 754,963
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 45,562 47,809 51,736
Amortization of investments 21,286 9,461 5,117
Deferred income taxes (13,300) 18,239 (40,824)
Provision for loan losses 125,000 127,100 132,302
Stock dividend on FHLB stock (18,400) (25,900) (28,300)
Gain on sale of investments (1,250) - - - -
Proceeds from sale of loans 2,661,400 2,223,450 1,065,000
Origination of loans sold (2,661,400) (2,223,450) (1,065,000)
(Increase) decrease in:
Certificates of deposit 297,000 991,000 199,000
Accrued interest receivable 26,469 43,003 4,070
Other assets (32,111) (19,732) 69,354
Increase (decrease) in:
Accrued expenses and other liabilities 108,744 14,986 (58,541)
Income taxes payable (92,779) 89,010 (11,318)
----------- ----------- -----------
Net cash provided by operating activities 1,749,700 2,410,915 1,077,559
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investment securities (4,731,110) (5,478,385) (7,262,500)
(Increase) decrease in loans, net 222,635 (132,362) (1,230,516)
Proceeds from sales of investment securities 4,077,560 2,281,171 50,600
Acquisition of premises and equipment (13,387) (27,392) (6,373)
----------- ----------- -----------
Net cash used in investing activities (444,302) (3,356,968) (8,448,789)
----------- ----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
55
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
STATEMENTS OF CASH FLOWS
Years Ended September 30, 1993, 1992 and 1991
<TABLE>
<CAPTION>
1993 1992 1991
as adjusted as adjusted
(Note 10) (Note 10)
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand deposits, savings
accounts, and certificates of deposit $ 3,299,753 $ 726,505 $(1,341,446)
Increase (decrease) in advances from borrowers for
taxes and insurance (1,588) (21,911) (1,308)
Dividends paid (813,272) (262,772) - -
Proceeds from issuance of stock 22,735 98,180 3,800,252
----------- ----------- -----------
Net cash provided by financing activities 2,507,628 540,002 2,457,498
----------- ----------- -----------
CASH AND CASH EQUIVALENTS:
Increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
3,813,026 (406,051) (4,913,732)
Cash and cash equivalents at end of year 1,724,631 2,130,682 7,044,414
----------- ----------- -----------
$ 5,537,657 $ 1,724,631 $ 2,130,682
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest on deposits $2,171,866 $ 3,014,727 $ 4,006,573
Income taxes $ 814,504 $ 574,511 $ 334,243
</TABLE>
<TABLE>
<CAPTION>
NON-CASH TRANSACTIONS: September 30,
Acquisition of Vehicle: 1991
-------------
<S> <C>
Cost of vehicle $ 12,059
Less trade in allowance (3,850)
----------
Cash paid $ 8,209
==========
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
56
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Cash flows:
For purposes of the statements of cash flows, the Savings Bank
considers all highly liquid instruments with an original maturity when
purchased of three months or less to be cash equivalents.
In December, 1990, the FASB issued Statement No. 104, "Statement of
Cash Flows - Net Reporting of Certain Cash Receipts and Cash Payments
and Classification of Cash Flows from Hedging Transactions," which
permits savings institutions to report in a statement of cash flows net
cash receipts and payments for deposits placed and withdrawn, time
deposits accepted and repaid, and net loans to customers and principal
collections on loans. In accordance with this statement, the Savings
Bank has reported cash flows with regard to these items on a net change
basis for the years ended September 30, 1993, 1992 and 1991.
Investment securities:
Bonds, notes, and debentures are carried at cost, adjusted for premiums
and discounts that are recognized in interest income using the interest
method over the period to maturity. Management has the intent and
ability to hold such investments to maturity.
All other equity securities are carried at the lower of cost or
estimated market value in the aggregate. Net unrealized losses are
recognized through a valuation allowance that is shown as a reduction
in the carrying value of the related securities and as a corresponding
reduction in stockholders' equity.
Gains and losses on the sale of investment securities are determined
using the specific-identification method.
57
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment securities: (Continued)
In May 1993 the Financial Accounting Standards Board issued SFAS 115,
"Accounting for Certain Investments in Debt and Equity Securities"
which the Savings Bank is required to adopt no later than 1996, or
earlier if total assets reach $150 million. The effect of Statement
115 is the recognition of changing market values of certain investments
in debt and equity securities held for trading, resale, or until
maturity purposes, within the financial statements. The Savings Bank
currently only discloses the market values within the accompanying
footnotes to the financial statements. The impact of the adoption of
SFAS 115 has not been determined, however the Savings Bank expects the
statement will have a material effect on its financial position.
Mortgage-backed securities:
Mortgage-backed securities are stated at cost, adjusted for
amortization of premiums and accretion of fees and discounts by a level
yield method. The Savings Bank has adequate liquidity and capital, and
management has the intention and ability to hold such assets to
maturity. Should any be sold, gains and losses are recognized based
on the specific identification method.
Loans receivable:
Loans receivable are stated at unpaid principal balances, less the
allowance for loan losses, and net deferred loan origination fees and
discounts.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Savings
Bank's past loan loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to
repay, estimated value of any underlying collateral, and current
economic conditions.
58
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans receivable: (Continued)
Uncollectible interest on loans that are contractually past due is
charged off or an allowance is established based on management's
periodic evaluation. The allowance is established by a charge to
interest income equal to all interest previously accrued, and income is
subsequently recognized only to the extent cash payments are received
until, in management's judgment, the borrower's ability to make
periodic interest and principal payments is back to normal, in which
case the loan is returned to accrual status.
Loan origination fees and discounts:
The Savings Bank accounts for loan origination fees in accordance with
Statement of Financial Accounting Standards No. 91, "Accounting for
Non-refundable Fees and Costs Associated with Originating or Acquiring
Loans and Initial Direct Cost of Leases." This standard requires the
Savings Bank to defer and amortize loan origination fees net of certain
direct origination costs. These net deferred fees (or costs) are
amortized using the interest method over the lives of the underlying
assets adjusted for anticipated prepayment rates.
Real estate held for investment and foreclosed real estate:
Real estate properties acquired through loan foreclosure are initially
recorded at the lower of cost or fair market value at the date of
foreclosure.
Valuations are periodically performed by management, and an allowance
for losses is established by a charge to operations if the carrying
value of a property exceeds its estimated current fair value.
59
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Premises and equipment:
Land is carried at cost. Buildings and furniture, fixtures, and
equipment are carried at cost, less accumulated depreciation.
Buildings and furniture, fixtures, and equipment are depreciated using
the straight-line and accelerated methods over the estimated useful
lives of the assets.
Income taxes:
Deferred income taxes result from timing differences between tax and
financial recognition of income and expense. The principal items
causing timing differences are recognition of deferred loan fees,
accelerated depreciation and bad debt provisions.
The Savings Bank adopted the provisions of the Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" for the
period ending September 30, 1993 and has restated the 1992 and 1991
financial statements to retroactively reflect the adoption. Statement
109 requires deferred tax assets and liabilities to be established
based on temporary differences between financial reporting basis and
the tax basis of assets and liabilities.
Earnings per share:
Earnings per share have been computed on the basis of the
weighted-average number of shares of common stock outstanding during
the fiscal year.
Concentration of credit risk:
The Savings Bank primarily grants residential and consumer loans to
customers in Gordon County. Although the Savings Bank has a
diversified loan portfolio, a substantial portion of its debtors'
ability to honor their contracts is dependent upon the Gordon County
economy.
60
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments with off-balance-sheet risk:
The Savings 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 and to reduce its own exposure to
fluctuations in interest rates. These financial instruments can
include commitments to extend credit, options written, standby letters
of credit and financial guarantees, interest-rate caps and floors
written, interest-rate swaps, and forward and futures contracts. Those
instruments involve, to varying degrees, elements of credit and
interest-rate risk in excess of the amount recognized in the statement
of financial position. The contract or notional amounts of those
instruments reflect the extent of the Savings Bank's involvement in
particular classes of financial instruments and the Savings Bank's
exposure to credit loss in the event of nonperformance by the other
party to the financial instrument. At September 30, 1993, the Savings
Bank was a party to certain commitments to lend (see Note 3).
Reclassification:
Certain reclassification of 1991 and 1992 amounts have been made to
conform to those classifications adopted in 1993.
NOTE 2. SECURITIES PURCHASED UNDER AGREEMENT TO RESELL
Securities purchased under agreement to resell at September 30, 1993
are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Mortgage backed securities
with an estimated market
value of $2,010,000 $2,000,000 $ - -
========== ==========
</TABLE>
61
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 2. SECURITIES PURCHASED UNDER AGREEMENT TO RESELL
(Continued)
The Savings Bank enters into purchases of securities under agreements
to resell. The amounts advanced under these agreements represent
short-term loans and are reflected as a receivable on the balance
sheet. The securities underlying the agreements are book-entry
securities. During the period, the securities were delivered by
appropriate entry into the savings account maintained at the Federal
Reserve Bank of New York or into third-party custodian's account
designated by the Savings Bank under written custodial agreement that
explicitly recognizes the Savings Bank's interest in the securities.
At September 30, these agreements matured within ninety days.
Securities purchased under agreements to resell averaged $333,333
during 1993, and the maximum amounts outstanding at any one time during
1993 was $2,000,000.
NOTE 3. INVESTMENT SECURITIES
The cost and market values of investment securities at September 30 are
summarized as follows:
<TABLE>
<CAPTION>
1993 1992
Estimated Estimated
Carrying Market Carrying Market
Value Value Value Value
<S> <C> <C> <C> <C>
Bond, notes and
debentures at
amortized cost:
Domestic corporate $ 254,858 $ 264,600 $ 255,259 $ 255,845
U.S. government
and federal
agencies 6,532,385 6,805,699 6,840,749 7,213,743
States and
political
subdivisions 470,000 470,000 - - - -
---------- ---------- ---------- ----------
7,257,243 7,540,299 7,096,008 7,469,588
Equity securities: ---------- ---------- ---------- ----------
Stock in Federal
Home Loan Bank,
at cost 433,500 433,500 409,200 409,200
---------- ---------- ---------- ----------
$7,690,743 $7,973,799 $7,505,208 $7,878,788
========== ========== ========== ==========
</TABLE>
The amortized cost and estimated market values of investments
securities are as follows as of September 30, 1993:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
U.S. Treasury
Securities and
obligations of
U.S. Government
corporations and
agencies $6,532,385 $ 273,314 $ - - $6,805,699
Obligations of
state and
political
subdivisions 470,000 - - - - 470,000
Corporate
securities 254,858 9,742 - - 264,600
---------- ---------- ---------- ----------
Total $7,257,243 $ 283,056 $ - - $7,540,299
========== ========== ========== ==========
</TABLE>
62
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 4. MORTGAGE-BACKED AND RELATED SECURITIES
The carrying values of mortgage-backed and related securities are
summarized as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1993
Estimated
Principal Unamortized Unamortized Carrying Market
Balance Premiums Discounts Value Value
------- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Certificates:
FNMA $1,728,144 $ - - $ 9,302 $1,718,842 $1,771,727
GNMA 751,670 3,825 - - 755,495 791,360
FHLMC 1,571,607 9,639 1,345 1,579,901 1,639,450
---------- ---------- ---------- ---------- ----------
$4,051,421 $ 13,464 $ 10,647 $4,054,238 $4,202,537
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1992
Estimated
Principal Unamortized Unamortized Carrying Market
Balance Premiums Discounts Value Value
--------- ----------- ----------- -------- ---------
<S> <C> <C> <C> <C> <C>
Certificates:
FNMA $2,543,106 $ - - $ (11,837) $2,531,269 $2,780,527
GNMA 890,243 5,894 - - 896,137 951,277
FHLMC 2,144,554 17,835 (1,936) 2,160,453 2,308,524
---------- ---------- ---------- ---------- ----------
$5,577,903 $ 23,729 $ (13,773) $5,587,859 $6,040,328
========== ========== ========== ========== ==========
</TABLE>
The amortized cost and estimated market values of mortgage-backed
securities are as follows as of September 30, 1993:
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
FNMA $1,728,144 $ 43,583 $ - - $1,771,727
GNMA 751,670 39,690 - - 791,360
FHLMC 1,571,607 67,843 - - 1,639,450
---------- ---------- ---------- ----------
Total $4,051,421 $ 151,116 $ - - $4,202,537
========== ========== ========== ==========
</TABLE>
The amortized cost and estimated market value of debt securities at
September 30, 1993, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call
or prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATED
AMORTIZED MARKET
COST VALUE
<S> <C> <C>
Due in one year or less $ 1,364,653 $ 1,393,982
Due after one year through five years 5,392,762 5,591,474
Due after five years through ten years 499,828 554,844
Due after ten years - - - -
----------- -----------
7,257,243 7,540,300
Mortgage-backed securities 4,054,238 4,202,537
----------- -----------
$11,311,481 $11,742,837
=========== ===========
</TABLE>
63
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 4. MORTGAGE-BACKED AND RELATED SECURITIES (Continued)
Proceeds from sale of investments in debt securities for the year ended
September 30, 1993 were $4,077,560. Gross gains of $1,250 and no
losses were realized on those sales.
NOTE 5. LOANS RECEIVABLE
Loans receivable at September 30 are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
First mortgage loans:
Single family 1-4 units $33,276,540 $33,079,566
5 or more units 2,301,629 2,561,632
Other 3,805,426 3,509,248
----------- -----------
39,383,595 39,150,446
Installment loans 4,123,810 3,830,228
Equi-line mortgage loans 3,032,171 3,271,041
Construction loans 787,000 530,000
Single payment loans 1,448,023 1,208,224
Second mortgage loans 2,877,757 2,521,334
Savings account loans 282,922 358,698
Student loans 257,091 233,583
Home improvement loans 153,063 129,191
Commercial loans 105,420 690,396
----------- -----------
52,450,852 51,923,141
Less:
Undisbursed portion of loans 1,209,142 357,135
Unearned interest 51,783 173,092
Deferred loan fees 264,176 213,619
Allowance for loans losses 439,608 345,517
----------- -----------
$50,486,143 $50,833,778
=========== ===========
</TABLE>
64
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 5. LOANS RECEIVABLE (Continued)
Activity in the allowance for loan losses is summarized as follows for
the years ended September 30:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Balance at beginning of year $ 345,517 $ 234,157
Provision charged to income 125,000 127,100
Loan charge-offs (34,197) (21,412)
Loan recoveries 3,288 5,672
---------- ---------
Balance at end of year $ 439,608 $ 345,517
========== =========
</TABLE>
The Savings Bank had loans outstanding to executive officers,
directors, and their associates in an aggregate amount greater than
$60,000 of $66,462 at September 30, 1993 and $69,342 at September 30,
1992. These loans are made in the ordinary course of business and are
made on the same terms and collateral as those of comparable
transactions prevailing at the time. The Savings Bank believes these
loans do not involve more than the normal risk of collectibility or
contain other unfavorable features. The following summarizes the
activity for loans to executive officers, directors, and their
associates in the aggregate amount greater than $60,000 for the years
ended September 30:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Balance, beginning $69,342 $71,392
New loans - - - -
Repayments 2,880 (2,050)
Balance, ending ------- -------
$66,462 $69,342
======= =======
</TABLE>
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.
65
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 5. LOANS RECEIVABLE (Continued)
The Savings Bank evaluates each customer's credit-worthiness on a
case-by-case basis. The amount of collateral obtained if deemed
necessary by the Savings Bank upon extension of credit is based on
management's credit evaluation of the party. Collateral held varies
but may include accounts receivable, inventory, property, plant, and
equipment, and income-producing commercial properties.
At September 30, 1993, the Savings Bank had commitments for approved
loan applications totaling $569,800. Of this total, $60,000 were
adjustable rate loans and $509,800 were fixed rate loans.
Fixed rate commitments are summarized as follows:
<TABLE>
<S> <C>
5.84% $ 69,600
6.25% 126,000
7.25% 139,200
8.00% 175,000
-----------
$509,800
===========
</TABLE>
Commitments on behalf of borrowers for unused lines of credit on home
equity loans were $3,032,171 at September 30, 1993.
NOTE 6. LOAN SERVICING
Mortgage loans serviced for others are not included in the accompanying
statements of financial condition. The unpaid principal balances of
these loans at September 30, 1993 and 1992 were $2,056,757 and
$2,561,734, respectively.
NOTE 7. ACCRUED INTEREST RECEIVABLE
Accrued interest receivable at September 30 is summarized as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Mortgage-backed and
related securities $ 25,528 $ 37,881
Investment securities 134,864 130,882
Loans receivable 330,651 348,749
----------- -----------
$ 491,043 $ 517,512
=========== ===========
</TABLE>
66
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 8. PREMISES AND EQUIPMENT
Premises and equipment at September 30, stated at cost, are summarized
by major classification as follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Land and improvements $ 172,900 $ 172,900
Buildings 1,281,448 1,281,448
Furniture and equipment 645,550 632,163
Automobiles 19,472 19,472
---------- ----------
2,119,370 2,105,983
Less accumulated depreciation 887,633 842,071
---------- ----------
$1,231,737 $1,263,912
========== ==========
</TABLE>
NOTE 9. DEPOSITS
Deposits at September 30, are as follows:
<TABLE>
<CAPTION>
Weighted
average 1993 1992
rate at
September 30,
1993 Amount Percent Amount Percent
----------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Checking accounts
including non-interest
bearing deposits of
$2,403,222 in 1993 and
$2,011,245 in 1992. 1.89% $11,034,268 18.47% $ 9,398,665 16.65%
Christmas Club (4.00%) 4.00 73,326 .12 52,471 .09
Passbook (3.00% and
3.50%, respectively) 3.00 15,094,273 25.26 12,912,418 22.87
----------- ------ ----------- ------
26,201,867 43.85 22,363,554 39.61
Certificates of ----------- ------ ----------- ------
deposit:
Under 5.50% 3.77 23,633,789 39.55 19,578,929 34.68
5.50% to 6.00% 5.75 9,882,058 16.54 113,767 .20
6.00% to 6.75% 6.50 4,711 .01 1,013,207 1.80
6.75% to 7.75% 7.50 20,000 .03 13,374,036 23.69
7.75% to 9.75% 8.00 12,524 .02 11,703 .02
----------- ------ ----------- ------
33,553,082 56.15 34,091,642 60.39
----------- ------ ----------- ------
$59,754,949 100.00% $56,455,196 100.00%
=========== ======= =========== =======
</TABLE>
67
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 9. DEPOSITS (Continued)
The aggregate amount of short-term (maturities of one year or less)
jumbo certificates of deposit with a minimum denomination of $100,000
was approximately $3,252,809 at September 30, 1993.
At September 30, 1993, scheduled maturities of certificates of deposit
are approximately as follows:
<TABLE>
<S> <C>
1 year or less $25,945,969
1 - 3 years 7,607,113
-----------
$33,553,082
===========
</TABLE>
Interest expense on deposits for the years ended September 30, is
summarized as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Checking accounts $ 204,453 $ 265,913 $ 412,947
Passbook savings 439,313 466,251 391,917
Christmas club 1,683 31,428 33,735
Certificates of deposit 1,537,664 2,221,300 3,153,862
---------- ---------- ----------
$2,183,113 $2,984,892 $3,992,461
</TABLE> ========== ========== ==========
NOTE 10. INCOME TAXES
In February 1992 the Financial Accounting Standards Board issued
Statement 109, "Accounting for Income Taxes". The Savings Bank adopted
Statement 109 during the period ending September 30, 1993 and has
restated the 1992 and 1991 financial statements to retroactively
reflect the adoption.
68
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 10. INCOME TAXES (Continued)
The following summarizes the effects of these adjustments on the
results of operations for the periods ending September 30, 1992 and
1991 and retained earnings for 1992, 1991 and 1990.
<TABLE>
<CAPTION>
AS PREVIOUSLY
REPORTED CHANGE AS RESTATED
<S> <C> <C> <C>
Retained earnings,
September 30, 1990 $5,465,494 $ (86,335) $5,379,159
---------- ---------- ----------
Earnings before income
taxes, 1991 1,104,940 - - 1,104,940
Income taxes (355,901) 5,924 (349,977)
---------- ---------- ----------
Net earnings, 1991 749,039 5,924 754,963
---------- ---------- ----------
Retained earnings,
September 30, 1991 6,214,533 (80,411) 6,134,122
---------- ---------- ----------
Earnings before income
taxes, 1992 1,797,700 - - 1,797,700
Income taxes (672,655) (9,106) (681,761)
---------- ---------- ----------
Net earnings, 1992 1,125,045 (9,106) 1,115,939
---------- ---------- ----------
Dividends (262,772) - - (262,772)
---------- ---------- ----------
Retained earnings,
September 30, 1992 $7,076,806 $ (89,517) $6,987,289
========== ========== ==========
</TABLE>
Prior to the adoption of Statement 109, the Savings Bank had provided
for income taxes under APB Opinion 11 and SFAS 96. Statement 109
requires deferred tax assets and liabilities to be established based
upon temporary differences between the financial reporting basis and
the tax base of assets and liabilities. The deferred tax amounts
included in the balance sheet under Statement 109 represent the
expected result when such amounts are realized or settled. The primary
effect of the change from APB Opinion 11 and SFAS 96 to Statement
69
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 10. INCOME TAXES (Continued)
109 relates to the recognition of tax liabilities for bad debt
deductions associated with the allowance for loan losses. Under APB
Opinion 11 and SFAS 96, these future tax benefits were not recognized,
while Statement 109 provides for their recognition under certain
conditions.
Through September 30, 1993, the Savings Bank has incurred approximately
$1,765,607 in tax deductions for loan losses that have not been
utilized for provisions on the books. These excess tax deductions are
the result of certain conditions that were met in determining taxable
income. These conditions when met, provide for a special bad debt
deduction based on a percentage of taxable income (presently 8%) or on
specified experience formulas. The Savings Bank used the percentage of
taxable income method in 1993, 1992, and 1991. If the amounts that
qualify as deductions for federal income tax purposes are later used
for purposes other than bad debt losses, they will be subject to
federal income tax at the current corporate rate. Retained earnings at
September 30, 1993 and 1992 included approximately $1,535,438 for which
no federal income tax has been provided.
The components of income tax expense for the years ended September 30,
1993, 1992, and 1991 are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Federal:
Current $ 644,541 $ 584,408 $ 372,461
Deferred (11,305) 15,503 (34,700)
---------- ---------- ----------
633,236 599,911 337,761
---------- ---------- ----------
State:
Current 90,484 79,114 18,340
Deferred (1,995) 2,736 (6,124)
---------- ---------- ----------
88,489 81,850 12,216
---------- ---------- ----------
Total income tax
expense $ 721,725 $ 681,761 $ 349,977
========== ========== ==========
</TABLE>
70
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 10. INCOME TAXES (Continued)
The difference between the provision for income taxes and the amount
computed by applying the statutory federal income tax rate to earnings
before income taxes are as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Expected income tax at
federal tax rate $ 682,470 $ 611,218 $ 375,680
Increase (decrease) in
expense resulting from:
Statutory bad debt
deduction (56,912) (50,954) (32,943)
Provision for loan losses
not deductible for tax
purposes 42,500 43,214 44,882
Stock dividends (7,956) (6,596) (9,160)
Deferred loan fees 17,189 16,780 5,659
Deferred taxes (11,305) 15,503 (34,700)
State tax benefit (30,748) (26,899) (6,236)
Other, net (2,002) (2,355) (5,421)
---------- ---------- ----------
$ 633,236 $ 599,911 $ 337,761
========== ========== ==========
</TABLE>
The following summarizes the source and expected tax consequences of
future taxable deductions (income) which comprise the deferred tax
asset and liability. The deferred tax asset and liability are included
as components of other assets and accrued liabilities and other
liabilities, respectively, at September 30, 1993 and 1992.
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Deferred tax asset:
Net loan fees deferred for financial
reporting purposes $ 104,899 $ 72,630
Accrued compensation deferred for tax
purposes 5,452 2,837
---------- ----------
$ 110,351 $ 75,467
Deferred tax liability: ========== ==========
FHLB stock dividends not currently
recognized for tax purposes $ 7,360 $ 6,732
Difference between financial statement
and tax basis depreciation 15,013 11,329
Difference between financial statement
and tax bad debt provisions 106,789 89,517
---------- ----------
$ 129,162 $ 107,578
========== ==========
</TABLE>
71
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 11. RETIREMENT PLAN
The Savings Bank maintains a qualified stock ownership retirement
benefit plan (ESOP). The Plan is administered by the Compensation
Committee who has engaged Columbus Bank and Trust Company, Columbus,
Georgia, to function as Trustee for the Plan. The Plan borrowed
$350,000 on June 27, 1991 to purchase 35,000 shares of the common stock
of the Bank. The loan was obtained from First Federal Bank of
Northwest Georgia, FSB to be repaid in five (5) annual payments at a
rate of interest obtained by adding one-half per cent to the prime rate
of interest as quoted in the Wall Street Journal. The balance due on
-------------------
the loan was $149,223 at September 30, 1993. Prime was 6% at September
30, 1993. Every employee who has been with the Bank for at least one
(1) year and is twenty-one (21) years of age or older is eligible to
participate.
The ESOP became effective upon the Savings Bank's conversion to stock
ownership on June 27, 1991. The Bank will make annual contributions to
cover this obligation. Contributions for principal payments of $70,000
were made by the Savings Bank in the year ended September 30, 1993.
The loan balance was also reduced $52,027 by dividends paid on stock.
Scheduled contributions of principal are as follows:
<TABLE>
<CAPTION>
Year Ended September 30,
<S> <C>
1994 $ 70,000
1995 70,000
1996 9,223
--------
$149,223
========
</TABLE>
NOTE 12. OTHER POST RETIREMENT BENEFITS
The Financial Accounting Standards Board issued SFAS No. 106 in
December 1990, "Employers' Accounting for Post Retirement Benefits
Other Than Pensions". Prior to SFAS No. 106 the Savings Bank
recognized the cost of these benefits as incurred, and in accordance
with the standard, now recognizes the cost of benefits over the service
period of the employee. The cumulative effect of this change of
$2,061, net of tax effect, is recorded in the September 30, 1993 income
statement as a cumulative effect of change in accounting principle.
72
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 12. OTHER POST RETIREMENT BENEFITS (Continued)
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Net Periodic Cost:
Service cost - benefits
earned during period $3,435 $ - - $ - -
====== ========== ==========
Accumulated post retirement
benefit obligation -
September 30, 1993 1992
Active plan participants $6,869 $ - -
====== ==========
</TABLE>
An 8% increase in the cost of covered health care benefits was assumed
for fiscal 1994. A 1% increase in the health care trend rate would
increase the post retirement benefit obligation by $2,060 at year end
1993 and the net periodic cost by $103 for the year. The discount rate
used in determining the accumulated benefit obligation was 3.6%.
There was no expense for post retirement health care benefits for 1992
and 1991.
NOTE 13. STOCK OPTION PLANS
In connection with the Conversion, the Savings Bank's Board of
Directors adopted a stock option plan (Incentive Stock Option Plan) to
attract and retain management to effectively manage the complexities of
a publicly-owned institution. 6.5% of common stock was allocated for
the Plan, or 26,162 shares. The Compensation Committee shall
administer the Plan and has awarded Mr. Holland 6,709 shares which vest
over a five (5) year period in equal installments. All other officers
as a group (5 persons) received options for 19,453 shares which vest
equally over five (5) years. The options allow the officers to purchase
shares at $10.00 per share. As of September 30, 1993, 1,770 options
had been exercised at $10.00 per share.
73
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 13. STOCK OPTION PLANS (Continued)
In connection with the Conversion, the Savings Bank's Board of
Directors also adopted a Stock Option Plan for Outside Directors. The
Plan awarded each outside director, seven directors, an option to
purchase 2,012 shares at $10.00 per share. This option is available
only while the director serves in an active capacity and has a term of
ten (10) years. Upon death, the option passes for a period of six (6)
months to the director's survivors. A total of 14,084 shares, or 3.5%
of the original issue were allocated for this Plan. As of September
30, 1993, 4,024 options had not been exercised, all of which expire on
June 27, 2001.
During the year 2,012 options, which were non-qualifying, were
exercised resulting in a tax benefit to the Savings Bank which was
recorded as additional paid in capital.
NOTE 14. FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT
("FIRREA") OF 1989
FIRREA was signed into law on August 9, 1989; regulations for savings
institutions' minimum capital requirements went into effect on December
7, 1989. In addition to its capital requirements, FIRREA includes
provisions for changes in the Federal regulatory structure for
institutions including a new deposit insurance system, increased
deposit insurance premiums, and restricted investment activities with
respect to noninvestment-grade corporate debt and certain other
investments. FIRREA also increases the required ratio of
housing-related assets in order to qualify as a savings institution.
The regulations require institutions to have a minimum regulatory
tangible capital equal to 1.5 percent of adjusted total assets, a
minimum regulatory core capital equal to 3 percent of adjusted total
assets and for September 30, 1993, a risk-based capital ratio of 8.0
percent of risk-weighted assets. The ability to include qualifying
supervisory goodwill for purposes of the leverage capital ratio
requirement will be phased out by January 1, 1995.
74
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 14. FINANCIAL INSTITUTIONS REFORM, RECOVERY, AND ENFORCEMENT ACT
("FIRREA") OF 1989 (Continued)
The Savings Bank, at September 30, 1993, meets the regulatory tangible
capital, core capital, and risk-based capital requirements, as defined
by FIRREA. At September 30, 1993 the Institution regulatory tangible
capital was $1,075,285 or 1.5% of total assets; core capital was
$2,150,571 or 3% of total assets; and risk-based capital was $3,107,266
or 8% of total risk adjusted assets, as defined by FIRREA.
The Savings Bank expects to continue meeting the minimum capital
requirements in the foreseeable future. However, events beyond the
control of the Savings Bank, such as increased interest rates or a
downturn in the economy in areas where the Savings Bank has most of its
loans, could adversely affect future earnings and, consequently, the
ability of the Savings Bank to meet its future minimum capital
requirements.
The following is a reconciliation of GAAP capital to regulatory
capital:
<TABLE>
<CAPTION>
TANGIBLE TOTAL
GAAP CAPITAL CAPITAL CORE CAPITAL CAPITAL
<S> <C> <C> <C> <C>
GAAP capital $11,378,663 $11,378,663 $11,378,663 $11,378,663
----------- ----------- ----------- -----------
Regulatory capital,
computed 11,378,663 15.9% 11,378,663 15.9% 11,378,663 15.9%
Minimum capital
requirements (1,075,285) 1.5% (2,150,571) 3.0% (3,225,856) 4.5%
----------- ----------- -----------
Regulatory capital -
excess (deficiency) $10,303,378 14.4% $ 9,228,092 12.9% $ 8,152,807 11.4%
=========== =========== ===========
</TABLE>
75
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 15. OTHER NON-INTEREST INCOME AND EXPENSE
Other noninterest income and expense amounts are summarized as follows
for the years ended September 30:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Other noninterest income:
Service fees from
checking accounts $ 148,896 $ 133,911 $ 97,509
Loan late charges 47,641 51,972 60,461
Dividend on FHLB stock 23,869 26,075 28,532
Other 87,065 91,778 102,237
---------- ---------- ----------
$ 307,471 $ 303,736 $ 288,739
========== ========== ==========
Other noninterest expense:
Computer processing expense $ 125,116 $ 121,470 $ 111,483
Advertising 22,054 20,891 24,178
Stationery, printing and office
supplies 32,321 28,944 38,027
Telephone and postage 43,096 41,148 37,958
Insurance and surety bond
premiums 29,539 29,701 30,011
Audits, accounting services and
supervisory examinations 47,150 45,981 44,584
Taxes, including payroll taxes 61,389 49,594 43,618
Merger expenses 44,673 - - - -
Miscellaneous 76,406 82,456 58,817
---------- ---------- ----------
$ 481,744 $ 420,185 $ 388,676
========== ========== ==========
</TABLE>
NOTE 16. STOCKHOLDERS' EQUITY
On June 27, 1991, the Savings Bank completed its conversion from a
depositor-owned institution to a stockholder-owned institution by
selling 402,500 shares of common stock at $10 a share. The cost of
conversion approximated $225,000.
76
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 16. STOCKHOLDERS' EQUITY (Continued)
Federal regulations permit the Savings Bank to pay dividends only from
net earnings and retained earnings and do not permit the Savings Bank
to pay cash dividends on common stock if its net worth would be reduced
below the level required by the regulations or the amount required for
the liquidation account established by the Plan of Conversion. In
order to grant a priority to eligible account holders (as defined in
the Plan of Conversion) in the event of future liquidation, the Savings
Bank, at the time of conversion, established a liquidation account in
an amount equal to its net worth as of December 31, 1990, of
$5,793,702 adjusted as described below. In the event of future
liquidation of the Savings Bank, eligible account holders who
continue to maintain their deposit accounts shall be entitled to
receive a distribution from the liquidation account based on their
proportionate share of the then total remaining qualifying deposits.
The total amount of the liquidation account will be decreased as the
balances of eligible account holders are reduced on annual
determination dates subsequent to the conversion. No dividends may be
paid to stockholders if such dividends reduce the stockholders'
equity of the Savings Bank below the amount required for the
liquidation account.
The Savings Bank may not, for a period of three years from the date of
conversion, repurchase any of its stock from any person, except in the
event of an offer to repurchase by the Savings Bank on a pro rata basis
to all shareholders of the Savings Bank that is approved by the OTS,
and except for the repurchase of qualifying shares of a Director.
Furthermore, the Savings Bank may not declare or pay a cash dividend
on, or repurchase any of, its common stock if the effect thereof would
cause the stockholders' equity of the Savings Bank to be reduced below
either the amount required for the liquidation account or the
regulatory capital requirement imposed by the OTS. In addition, for a
period of three years after the date of conversion, the Savings Bank
may not declare or pay a cash dividend or repurchase any of its stock
in an amount in excess of 50% of the greater of its net earnings for
the current year or the average of the Savings Bank's net earnings for
the current year and not more than two of the immediately preceding
years.
77
<PAGE>
FIRST FEDERAL SAVINGS BANK
CALHOUN, GEORGIA
NOTES TO FINANCIAL STATEMENTS
September 30, 1993, 1992 and 1991
NOTE 16. STOCKHOLDERS' EQUITY (Continued)
Earnings per share have not been presented for the year ended September
30, 1991, because the Savings Bank converted from mutual to stock form
on June 27, 1991. On a pro forma basis, had the 402,500 shares
outstanding at September 30, 1991 been issued and proceeds received on
October 1, 1990, earnings per share would have been $1.86, without
considering the investment benefit to the Savings Bank of the proceeds
for the period prior to their actual receipt.
On September 14, 1993, the Board of Directors declared a $.25 per share
dividend or a total of $103,583 to shareholders of record on September
30, 1993.
78
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
------------------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
-------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT OF THE REGISTRANT
-------------------------------------------------------------------
Information concerning the Directors and Executive Officers of First
Federal is set forth in the Proxy Statement - Prospectus for the Annual
Meeting which will be filed within 120 days after the end of the fiscal year.
Information concerning Executive Officers who are not directors and who are
not listed in the Registrant's Proxy Statement for the Annual Meeting of
Stockholders is contained in Part I of the report pursuant to paragraph (b)
of Item 401 of Regulation S-K in reliance on Instruction G.
ITEM 10. EXECUTIVE COMPENSATION
--------------------------------
Information concerning executive compensation by First Federal is set forth
in the Proxy Statement - Prospectus for the Annual Meeting which will be
filed within 120 days after the end of the fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
Information concerning the security ownership by officers and directors of
First Federal's common stock is set forth in the Proxy Statement - Prospectus
for the Annual Meeting which will be filed within 120 days after the end of
the fiscal year.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------------------------------------------------------
Information concerning certain relationships and related transactions is
set forth in the Proxy Statement - Prospectus for the Annual Meeting which
will be filed within 120 days after the end of the fiscal year.
79
<PAGE>
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
------------------------------------------
The following documents are filed as part of this report:
(a) None
(b) The following exhibits are filed as part of this report:
2.0 Agreement and Plan of Merger dated August 3, 1993 between First
Federal Savings Bank, Calhoun, Georgia and AmSouth Bancorporation.*
3.1 Charter**
3.2 Amended Bylaws**
4.0 Stock Certificate***
10.1 Employment Agreement with Henry E. Holland, Jr.
10.2 Form of Special Termination Agreement
10.3 Employee Stock Ownership Plan
10.4 First Federal Savings Bank 1991 Incentive Option Plan***
10.5 First Federal Saving Bank 1991 Stock Option Plan for Outside
Directors.***
11.1 Computation of earnings per share, incorporated herein by reference
to Note 16 to the Consolidated Financial Statements
(c) Form 8-K was filed on August 5, 1993 concerning the merger of First
Federal Savings Bank, Calhoun, Georgia with Amsouth Bancorporation.
(d) Exhibits
___________________________
* Incorporated herein by reference into this document from Form 8-K filed
on August 5, 1993.
** Incorporated herein by reference into this document from Form AC
initially filed on March 29, 1991.
*** Incorporated herein by reference into this document from the Proxy
Statement for the 1991 Annual Meeting of Stockholders to be held on
January 22, 1992.
80
<PAGE>
CONFORMED SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
FIRST FEDERAL SAVINGS BANK
February 10, 1994 By: /s/ Henry E. Holland
---------------------------------
Henry E. Holland, President
(Duly Authorized Representative)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
February 10, 1994 By: /s/ Henry E. Holland
---------------------------------
Henry E. Holland
President, Managing Officer, and Chairman of the
Board
February 10, 1994 By: /s/ Helen H. Jones
---------------------------------
Helen H. Jones
Senior Vice President, Secretary and Director
February 10, 1994 By: /s/ W.C. Burdette
---------------------------------
W.C. Burdette
Director
February 10, 1994 By: /s/ William R. Thompson, M.D.
---------------------------------
William R. Thompson, M.D.
Director
February 10, 1994 By: /s/ J. Philip Beamer, Jr.
---------------------------------
J. Philip Beamer, Jr.
Director
February 10, 1994 By: /s/ John W. Early II
---------------------------------
John W. Early II
Director
By:
---------------------------------
John Wayne Hall
Director
By:
---------------------------------
Thomas E. Shanahan
Director
<PAGE>
APPENDIX C-1
FFSB FORM 10-Q
C-1-1
<PAGE>
OFFICE OF THRIFT SUPERVISION
WASHINGTON, D. C. 20552
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended December 31, 1993
Docket Number - 5300
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
-------------------------------------------
(Exact name of registrant as specified in its charter)
UNITED STATES 58-0595476
------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
208 North Wall Street
Calhoun, Georgia 30701
-------------------------------------------
(Address of principal executive offices)
(706) 629-2848
-------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such short period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the close of the period covered by this report.
Class Outstanding at December 31, 1993
- ------------------------------ --------------------------------
Common Stock, $.01 Par Value 414,330 Shares
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
--------------------
The following statements are provided for First Federal Savings Bank
Calhoun, Georgia as required by Item 1.
A. Statements of Financial Condition - December 31, 1993 and
September 30, 1993.
B. Statements of Income - for the three months ended December 31,
1993 and December 31, 1992.
C. Statements of Cash Flows - for the three months ended December 31,
1993 and December 31, 1992.
The financial statements furnished have not been examined by
independent certified public accountants, but reflect, in the opinion
of management, all adjustments necessary for a fair presentation of
the results of operations for the periods presented.
2
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
STATEMENTS OF FINANCIAL CONDITION
December 31, 1993 and September 30, 1993
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1993 1993
------------- -------------
<S> <C> <C>
ASSETS
------
Cash and Cash Equivalents $ 1,297 $ 1,501
Other Interest - bearing Deposits $ 2,742 $ 4,037
Obligations of Government Agencies and
Other Securities, at Amortized Cost 15,691 13,745
Loans Receivable, Net 50,597 50,486
Accrued Interest Receivable 438 491
Foreclosed Real Estate -- --
Office Property and Equipment, Net 1,209 1,232
Prepaid Expenses and Other Assets 253 194
------- -------
Total Assets $72,227 $71,686
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Savings and Demand Deposit Accounts $60,115 $59,755
Advances from Borrowers for Taxes and
Insurance 59 132
Accrued Income Taxes 168 56
Accounts Payable and Other Liabilities 340 364
------- -------
Total Liabilities 60,682 60,307
------- -------
Preferred Stock - $.01 Par; 2,000,000
Shares Authorized; None Issued -- --
Common Stock - $.01 Par; 8,000,000
Shares Authorized; 402,500
Shares Issued and Outstanding 4 4
Additional Paid-In Capital 3,917 3,917
Retained Earnings - Substantially
Restricted 7,624 7,458
------- -------
Total Stockholders' Equity 11,545 11,379
------- -------
Total Liabilities & Stockholders' Equity $72,227 $71,686
======= =======
</TABLE>
See Accompanying Notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
3
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
STATEMENTS OF INCOME
Three Months Ended December 31, 1993 and 1992
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1993 1992
------ ------
<S> <C> <C>
Interest Income:
Interest on Mortgage Loans $ 745 $ 826
Interest on Loans on Savings
Accounts & Single Payment Loans 35 38
Interest on Home Improvement &
Second Mortgage Loans 78 75
Interest on Consumer & Student
Loans 111 108
Interest on Investments & Bank
Deposits 234 242
Interest on Participation Loans 91 103
------ ------
Total Interest Income 1,294 1,392
Interest Expense on Deposits 508 584
------ ------
Net Interest Income 786 808
Provision for Loan Losses 25 31
------ ------
Net Interest Income after
Provision for Loan Losses 761 777
------ ------
Other Income:
Fees and Discounts on Loans 66 65
Dividends on Stock in Federal
Home Loan Bank 6 6
Service Income on Loans and
Participations 2 2
Service Fees from Checking Accounts 45 35
Miscellaneous Fees and Other
Operating Income 19 15
------ ------
Total Other Income 138 123
------ ------
</TABLE>
See Accompanying Note and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
4
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
STATEMENTS OF INCOME
Three Months Ended December 31, 1993 and 1992
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1993 1992
---- ----
<S> <C> <C>
Other Expenses:
Compensation of Directors,
Officers and Employees $178 $ 174
Expenses of Directors, Officers
and Employees 63 41
Office Building Expenses,
including Depreciation 22 20
Furniture, Fixtures and Equipment
Expenses, including
Depreciation 19 9
Advertising 3 6
Stationary, Printing and Office
Supplies 5 6
Telephone, Postage and Express 11 11
Insurance and Surety Bond
Premiums 7 7
Federal Insurance Premiums 33 30
Audit and Supervisory Exams 17 12
Data Processing and Now
Account Expense 43 30
Licenses and Taxes, including
Payroll Taxes 18 20
Other Expenses 62 24
---- -----
Total Other Expenses 481 390
---- -----
Income Before Provision for
Income Taxes 418 510
Provision for Income Taxes 144 174
---- -----
Net Income $274 $ 336
---- -----
Earnings per share $.66 $ .81
---- -----
</TABLE>
See Accompanying Notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
5
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
STATEMENTS OF CASH FLOWS
Three Months Ended December 31, 1993 and 1992
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1993 1992
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 274 $ 336
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation 13 12
Amortization (Accretion) 6 5
Provision for Loan Losses, Net of charge-offs 10 26
Increase in deferred loan fees, net 5 16
Stock Dividend on Federal Home Loan Bank Stock ( 6) ( 6)
(Increase) Decrease in:
Other interest bearing deposits 1,295 (1,373)
Accrued Interest Receivable 53 58
Prepaid Expenses and Other Assets (63) (67)
Increase (Decrease) in:
Accrued Income Taxes 112 61
Accounts Payable and Other Liabilities (24) (34)
------- -------
Net Cash Provided by (Used in)
Operating Activities 1,675 ( 966)
------- -------
Cash Flows from Investing Activities:
Purchases of Investment Securities (7,034) ( 922)
Proceeds from Sales of Investment Securities 5,088 1,577
(Increase) Decrease in Loans, Net (126) 254
Acquisition of Premises and Equipment 10 (2)
Sale of Federal Home Loan Bank Stock -0- -0-
------- -------
Net Cash Used in Investing Activities (2,062) 907
------- -------
</TABLE>
See Accompanying Notes and Management's Discussion and Analysis of Financial
Condition and Results of Operation.
6
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
STATEMENTS OF CASH FLOWS
Three Months Ended December 31, 1993 and 1992
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
------------------
1993 1992
------ ------
<S> <C> <C>
Cash Flows from Financing Activities:
Net Increase (Decrease) in Deposits $ 360 $ 720
Decrease in Advances from Borrowers for
Taxes and Insurance (73) (87)
Payment of Dividends (104) (503)
Sale of Stock Through Option Exercise -0- -0-
------ ------
Net Cash Provided by Financing Activities 183 130
Increase (Decrease) in Cash and Cash Equivalents (204) 71
Cash and Cash Equivalents at Beginning of Period 1,501 1,112
------ ------
Cash and Cash Equivalents at End of Period $1,297 $1,183
====== ======
Supplemental Disclosures of Cash Flow Information:
Cash Paid During the Period for:
Interest $ 471 $ 260
Income Taxes 32 100
Noncash Transactions:
Loans transferred to foreclosed real estate -0- -0-
------ ------
</TABLE>
See Accompanying Notes and Management's Discussion and Analysis of Financial
Condition and Results of Operations.
7
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
NOTES TO THE FINANCIAL STATEMENTS
Note 1. Presentation
The statement of financial position for December 31, 1993, the
related statements of income for the three and six month periods
ended December 31, 1993 and 1992, and the statements of cash flows
for the six months ended December 31, 1993 and 1992 are unaudited. In
the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consist only of normal recurring items. Interim results
are not necessarily indicative of results for a full year.
The financial statements and notes are presented as permitted by Form
10-Q and do not contain certain information included in the Bank's
annual financial statements and notes.
Note 2. Investment Securities
The cost and estimated market values of investment securities are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1993 September 30,1993
----------------- -----------------
Cost Market Cost Market
---- ------ ---- ------
<S> <C> <C> <C> <C>
U.S. Treasury Securities
and Obligations of
U.S. Government,
Corporations and Agencies $11,897 $11,897 $ 9,002 $9,286
Mortgage Backed Securities 3,100 3,100 4,054 4,203
Federal Home Loan Bank Stock 439 439 434 434
Corporate Securities 255 255 255 265
------- ------- ------- -------
$15,691 $15,691 $13,745 $14,188
======= ======= ======= =======
</TABLE>
8
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
NOTES TO THE FINANCIAL STATEMENTS
Note 3. Loans Receivable
Loans receivable are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1993 September 30,1993
----------------- -----------------
<S> <C> <C>
First Mortgage Loans $33,799 $34,727
Loan Participations 4,607 4,657
Installment Loans 4,220 4,123
Equi-line Mortgage Loans 3,044 3,032
Construction Loans 1,301 787
Single Payment Loans 1,325 1,448
Second Mortgage Loans 2,767 2,878
Savings Account Loans 336 283
Student Loans 275 257
Commercial Non-Mtg.
Loans 124 106
Home Improvement Loans 171 153
------- -------
$51,969 $52,451
Less:
Undisbursed Portion of
Loans in Process 613 1,209
Unearned Interest 39 52
Unamortized Loan Fees 270 264
Allowance for Losses 450 440
------- -------
$50,597 $50,486
======= =======
</TABLE>
Note 4. Deposits
Deposits are summarized as follows (in thousands):
<TABLE>
<CAPTION>
December 31, 1993 September 30,1993
----------------- -----------------
<S> <C> <C>
Checking Accounts & Non-Interest
Bearing Accounts $11,725 $11,034
Regular Savings Accounts 15,053 15,095
Christmas Club -0- 73
Certificates of Deposit 33,337 33,553
------- -------
$60,115 $59,755
======= =======
</TABLE>
9
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
NOTES TO THE FINANCIAL STATEMENTS
Note 5. Financial Institutions Reform, Recovery and Enforcement Act
("FIRREA") of 1989
The institution at December 31, 1993, meets the regulatory tangible
capital, core capital, and risk-based capital requirements, as
defined by FIRREA. The following table presents the Bank's capital
position relative to its minimum capital requirements under FIRREA as
of December 31, 1993 (in thousands):
<TABLE>
<CAPTION>
Percentage of
Amount Applicable Assets
------ -----------------
<S> <C> <C>
Core Capital $11,545 15.98%
Minimum Requirement (2,167) (3.00)
------- -----
Excess $ 9,378 12.98%
======= =====
Tangible Capital $11,545 15.98%
Minimum Requirement (1,083) (1.50)
------- -----
Excess $10,462 14.48%
======= =====
Risk-Based Capital $11,995 32.00%
Minimum Requirement (2,999) (8.00)
------- -----
Excess $ 8,996 24.00%
======= =====
</TABLE>
The Bank expects to continue meeting the minimum capital requirements
in the foreseeable future. However, events beyond the control of the
Bank, such as increased interest rates or a downturn in the economy
in areas where the Bank has most of its loans, could adversely affect
future earnings and, consequently, the ability of the Bank to meet
its future minimum capital requirements.
Note 6. Earnings Per Share
Earnings per share for the three months ended December 31, 1993 are
based on 414,330 shares outstanding. Earnings per share for the three
months ended December 31, 1992 are based on shares outstanding of
412,318.
On December 14, 1993, the Board of Directors declared a $.25 per
share dividend or a total of $103,582.50 to shareholders of record on
December 31, 1993.
10
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
FINANCIAL CONDITION AND RESULT OF OPERATIONS
Financial Condition
- -------------------
At December 31, 1993 the net worth of First Federal Savings Bank totaled
$11,545,000. This amount represents an increase of $166,000 as compared to net
worth of $11,379,000 at September 30, 1993. This increase is a net increase and
reflects adjustments to net worth of $90,000 to adopt Financial Accounting
Standard 109. First Federal Savings Bank continues to be in compliance with its
regulatory capital requirements by exceeding the minimum requirements as
disclosed in Note 5.
Total assets increased by $541,000 from $71,686,000 at September 30, 1993 to
$72,227,000 at December 31,1993. Net loans increased $111,000 for the same
period from $50,486,000 to $50,597,000. Obligations of Government Agencies and
Other Securities increased $1,946,000 which is offset by decreases in Other
Interest Bearing Deposits and Cash as well as the small increase in net Loans
Receivable.
Liquidity and Capital Resources
- -------------------------------
First Federal's principal sources of funds are cash receipts from savings
deposits, loan repayments by borrowers and net income.
For regulatory purposes, liquidity is measured as a ratio of cash and certain
investments to withdrawable savings. The minimum level of liquidity required by
regulation is presently 5%. First Federal's liquidity ratio at December 31,
1993 was approximately 26.67%.
First Federal's goals with respect to liquidity are to insure that sufficient
funds are available to meet current operating requirements and to provide
reserves against unforeseen liquidity requirements. Management of First Federal
continuously reviews its liquidity position.
11
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Comparison of the three months ended December 31, 1993
to the three months ended December 31, 1992
------------------------------------------------------
Net Income:
Net income decreased by $62,000 from $336,000 for the three month period ended
December 31, 1992 to $274,000 for the three month period ended December 31,
1993. Although net interest income after provision for loan loss decreased by
$16,000 from $777,000 for the three months ended December 31, 1992 to $761,000
for the three months ended December 31, 1993, other income increased by $15,000
and other expenses increased $91,000 for the same period.
Net Interest Income after Provision for Loan Loss:
Net interest income after provision decreased $16,000 from $777,000 for the
three months ended December 31, 1992 to $761,000 for the three month period
ended December 31, 1993. This decrease was due primarily to a reduction in
interest income of $98,000 from $1,392,000 for the three month period ended
December 31, 1992 to $1,294,000 for the three month period ended December 31,
1993. This decrease in interest income was due to lower interest rates and was
partially offset by a decrease in interest expense of $76,000 for the three
months ended December 31, 1993.
Provision for Loan Loss:
In establishing its provision for loan losses, management reviews loans for
which full collectibility may not be reasonably assured and considers, among
other matters, the estimated net realizable value of the underlying collateral.
The Bank provided $31,000 for loan losses during the three month period ended
December 31, 1992. Based on management's ongoing detailed quarterly review and
classification of assets policy, a provision of $25,000 was necessary for the
three month period ended December 31, 1993.
12
<PAGE>
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Other Income:
Other income increased by $15,000 from $123,000 for the three month period ended
December 31, 1992 to $138,000 for the three month period ended December 31,
1993. This was due primarily to an increase in fees on checking accounts and a
slight increase in miscellaneous fees and other income.
Other Expenses:
Other expenses increased by $91,000 from $390,000 for the three months ended
December 31, 1992 to $481,000 for the three months ended December 31, 1993. This
increase was primarily due to expenses associated with the proposed merger with
AmSouth Bancorporation in the amount of $72,000 and legal, accounting and other
expenses associated with the proposed merger incurred in the quarter of
$34,000. If these merger related expenses had not occurred, other expenses
would have declined by $15,000 primarily due to a decline of approximately
$10,000 in expenses of directors and officers.
13
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
ITEM 2. CHANGES IN SECURITIES
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 5. OTHER INFORMATION
ITEMS 1, 2, 3, 4 AND 5 ARE INAPPLICABLE AND ARE OMITTED
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
NONE
(B) REPORTS ON FORM 8-K
NO REPORTS ON FORM 8-K WERE FILED DURING THE PERIOD COVERED
BY THIS REPORT
14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THE REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
FIRST FEDERAL SAVINGS BANK CALHOUN, GEORGIA
Date: 1/27/94 By: /s/ Henry E. Holland, Jr.
--------------------- ----------------------------------------
Henry E. Holland, Jr.
President
Date: 1/27/94 By: /s/ Barbara J. Balliew
--------------------- -----------------------------------------
Barbara J. Balliew
Treasurer
15
<PAGE>
APPENDIX D
12 C.F.R. (S) 552.14
D-1
<PAGE>
12 C.F.R. (S) 552.14
(a) Right to demand payment of fair or appraised value. Except as provided in
paragraph (b) of this section, any stockholder of a Federal stock association
combining in accordance with (S) 552.13 of this part shall have the right to
demand payment of the fair or appraised value of his stock: Provided; That,
such stockholder has not voted in favor of the combination and complies with
the provisions of paragraph (c) of this section.
(b) Exceptions. No stockholder required to accept only qualified
consideration for his or her stock shall have the right under this section to
demand payment of the stock's fair or appraised value, if such stock was listed
on a national securities exchange or quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ") on the date of the
meeting at which the combination was acted upon or stockholder action is not
required for a combination made pursuant to (S) 552.13(h)(2) of this part.
"Qualified consideration" means cash, shares of stock of any association or
corporation which at the effective date of the combination will be listed on a
national securities exchange or quoted on NASDAQ, or any combination of such
shares of stock and cash.
(c) Procedure--(1) Notice. Each constituent Federal stock association shall
notify all stockholders entitled to rights under this section, not less than
twenty days prior to the meeting at which the combination agreement is to be
submitted for stockholder approval, of the right to demand payment of appraised
value of shares, and shall include in such notice a copy of this section. Such
written notice shall be mailed to stockholders of record and may be part of
management's proxy solicitation for such meeting.
(2) Demand for appraisal and payment. Each stockholder electing to make a
demand under this section shall deliver to the Federal stock association,
before voting on the combination, a writing identifying himself or herself and
stating his or her intention thereby to demand appraisal of and payment for his
or her shares. Such demand must be in addition to and separate from any proxy
or vote against the combination by the stockholder.
(3) Notification of effective date and written offer. Within ten days after
the effective date of the combination, the resulting association shall:
(i) Give written notice by mail to stockholders of constituent Federal
stock associations who have complied with the provisions of paragraph
(c)(2) of this section and have not voted in favor of the combination, of
the effective date of the combination.
(ii) Make a written offer to each stockholder to pay for dissenting
shares at a specified price deemed by the resulting association to be the
fair value thereof; and
(iii) Inform them that, within sixty days of such date, the respective
requirements of paragraphs (c)(5) and (c)(6) of this section (set out in
the notice) must be satisfied. The notice and offer shall be accompanied by
a balance sheet and statement of income of the association the shares of
which the dissenting stockholder holds, for a fiscal year ending not more
than sixteen months before the date of notice and offer, together with the
latest available interim financial statements.
(4) Acceptance of offer. If within sixty days of the effective date of the
combination the fair value is agreed upon between the resulting association and
any stockholder who has complied with the provisions of paragraph (c)(2) of
this section, payment therefor shall be made within ninety days of the
effective date of the combination.
(5) Petition to be filed if offer not accepted. If within sixty days of the
effective date of the combination the resulting association and any stockholder
who has complied with the provisions of paragraph (c)(2) of this section do not
agree as to the fair value, then any such stockholder may file a petition with
the Office, with a copy by registered or certified mail to the resulting
association, demanding a determination of the fair market value of the stock of
all such stockholders. A stockholder entitled to file a petition under this
section
D-1
<PAGE>
who fails to file such petition within sixty days of the effective date of the
combination shall be deemed to have accepted the terms offered under the
combination.
(6) Stock certificates to be noted. Within sixty days of the effective date
of the combination, each stockholder demanding appraisal and payment under this
section shall submit to the transfer agent his certificates of stock for
notation thereon that an appraisal and payment have been demanded with respect
to such stock and that appraisal proceedings are pending. Any stockholder who
fails to submit his or her stock certificates for such notation shall no longer
be entitled to appraisal rights under this section and shall be deemed to have
accepted the terms offered under the combination.
(7) Withdrawal of demand. Notwithstanding the foregoing, at any time within
sixty days after the effective date of the combination, any stockholder shall
have the right to withdraw his or her demand for appraisal and to accept the
terms offered upon the combination.
(8) Valuation and payment. The Director shall, as he or she may elect, either
appoint one or more independent persons or direct appropriate staff of the
Office to appraise the shares to determine their fair market value, as of the
effective date of the combination, exclusive of any element of value arising
from the accomplishment or expectation of the combination. Appropriate staff of
the Office shall review and provide an opinion on appraisals prepared by
independent persons as to the suitability of the appraisal methodology and the
adequacy of the analysis and supportive data. The Director after consideration
of the appraisal report and the advice of the appropriate staff shall, if he or
she concurs in the valuation of the shares, direct payment by the resulting
association of the appraised fair market value of the shares, upon surrender of
the certificates representing such stock. Payment shall be made, together with
interest from the effective date of the combination, at a rate deemed equitable
by the Director.
(9) Costs and expenses. The costs and expenses of any proceeding under this
section may be apportioned and assessed by the Director as he or she may deem
equitable against all or some of the parties. In making this determination the
Director shall consider whether any party has acted arbitrarily, vexatiously,
or not in good faith in respect to the rights provided by this section.
(10) Voting and distribution. Any stockholder who has demanded appraisal
rights as provided in paragraph (c)(2) of this section shall thereafter neither
be entitled to vote such stock for any purpose nor be entitled to the payment
of dividends or other distributions on the stock (except dividends or other
distribution payable to, or a vote to be taken by stockholders of record at a
date which is on or prior to, the effective date of the combination): Provided,
That if any stockholder becomes unentitled to appraisal and payment of
appraised value with respect to such stock and accepts or is deemed to have
accepted the terms offered upon the combination, such stockholder shall
thereupon be entitled to vote and receive the distributions described above.
(11) Status. Shares of the resulting association into which shares of the
stockholders demanding appraisal rights would have been converted or exchanged,
had they assented to the combination, shall have the status of authorized and
unissued shares of the resulting association.
D-2
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law contains detailed
provisions for indemnification of directors and officers of Delaware
corporations against expenses, judgments, fines and settlements in connection
with litigation.
The Registrant's Restated Certificate of Incorporation, and its Directors'
and Officers' Liability Insurance Policy provide for indemnification of the
directors and officers of the Registrant against certain liabilities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT
------- -------
<C> <S>
2(a) Agreement and Plan of Merger, dated as of the 3rd day of August, 1993,
between First Federal Savings Bank ("FFSB") and AmSouth Bancorporation
("AmSouth"), included as Appendix A to Proxy Statement-Prospectus.
2(b) Plan of Merger and Merger Agreement, dated as of the 21st day of
December, 1993, between First Federal Savings Bank ("FFSB") and
AmSouth Bank of Georgia ("AmSouth Georgia"), included as Appendix A-1
to Proxy Statement-Prospectus.
3(a) Restated Certificate of Incorporation of AmSouth, incorporated by
reference to Exhibit 3(b) to AmSouth's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993.
3(b) Bylaws of AmSouth, as amended, incorporated by reference to Exhibit
3(b) to Amendment No. 1 to AmSouth's Registration Statement on Form S-
4 filed on October 8, 1993 (Registration No. 33-50041).
4(a) Stockholder Protection Rights Agreement, dated as of June 15, 1989,
between AmSouth and AmSouth Bank, National Association, as Rights
Agent, incorporated by reference to Exhibit 4-a to AmSouth's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1989.
4(b) Instruments defining the rights of holders of long-term debt of
AmSouth are not filed herewith pursuant to Item 601(b)(4)(iii) of
Regulation S-K, and AmSouth hereby agrees to furnish a copy of said
instruments to the SEC upon request.
5* Opinion of Carl L. Gorday, Esq. as to the validity of the shares of
AmSouth Common Stock.
8* Opinion of Ernst & Young as to certain federal income tax matters.
15* Letter of Ernst & Young re: Unaudited Financial Information.
23(a)* Consent of Carl L. Gorday, Esq. (included in the opinion in Exhibit
5).
23(b)* Consent of Ernst & Young (included in the opinion in Exhibit 8).
23(c)* Consent of Ernst & Young.
23(d) Consent of Read, Martin, Slickman & Sheats, C.P.A.s.
23(e) Consent of Hovde Financial, Inc.
24* Powers of Attorney.
99 Form of Proxy for FFSB.
</TABLE>
- --------
* Filed previously.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
II-1
<PAGE>
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(d) The registrant undertakes that every prospectus (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
items 4, 10(b), 11, or 13 of this Form, within one
II-2
<PAGE>
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF BIRMINGHAM, STATE OF
ALABAMA, AS OF THE 16TH DAY OF FEBRUARY, 1994.
Amsouth Bancorporation
/s/ John W. Woods
By __________________________________
(John W. Woods)
(Chairman of the Board, Chief
Executive Officer, President and a
Director)
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED
AS OF FEBRUARY 16, 1994.
SIGNATURE TITLE DATE
* Chairman of the February 16,
- ------------------------------------- Board, Chief 1994
(JOHN W. WOODS) Executive Officer,
President and a
Director (Principal
Executive Officer)
* Executive Vice February 16,
- ------------------------------------- President and Chief 1994
(M. LIST UNDERWOOD, JR.) Financial Officer
(Principal
Financial Officer)
* Senior Vice February 16,
- ------------------------------------- President, 1994
(RICKY W. THOMAS) Controller and
Chief Accounting
Officer (Principal
Accounting Officer)
* A Director and an February 16,
- ------------------------------------- Officer 1994
(C. STANLEY BAILEY)
* A Director February 16,
- ------------------------------------- 1994
(GEORGE W. BARBER, JR.)
* A Director February 16,
- ------------------------------------- 1994
(WILLIAM D. BIGGS)
* A Director February 16,
- ------------------------------------- 1994
(BARNEY B. BURKS, JR.)
* A Director February 16,
- ------------------------------------- 1994
(WILLIAM J. CABANISS, JR.)
II-4
<PAGE>
SIGNATURE TITLE DATE
A Director
- -------------------------------------
(JOSEPH M. FARLEY)
* A Director February 16,
- ------------------------------------- 1994
(M. MILLER GORRIE)
* A Director February 16,
- ------------------------------------- 1994
(ROBERT A. GUTHANS)
* A Director February 16,
- ------------------------------------- 1994
(ELMER B. HARRIS)
* A Director February 16,
- ------------------------------------- 1994
(JAMES I. HARRISON, JR.)
* A Director February 16,
- ------------------------------------- 1994
(DONALD E. HESS)
* A Director February 16,
- ------------------------------------- 1994
(HUGH B. JACKS)
* A Director February 16,
- ------------------------------------- 1994
(RONALD L. KUEHN, JR.)
* A Director February 16,
- ------------------------------------- 1994
(E. ROBERTS LEATHERBURY)
* A Director February 16,
- ------------------------------------- 1994
(MRS. H. TAYLOR MORRISSETTE)
* A Director February 16,
- ------------------------------------- 1994
(CLAUDE B. NIELSEN)
* A Director February 16,
- ------------------------------------- 1994
(ARTHUR R. OUTLAW)
II-5
<PAGE>
SIGNATURE TITLE DATE
* A Director February 16,
- ------------------------------------- 1994
(Z. CARTTER PATTEN, III)
* A Director February 16,
- ------------------------------------- 1994
(BENJAMIN F. PAYTON)
* A Director February 16,
- ------------------------------------- 1994
(B. PHIL RICHARDSON)
* A Director and an February 16,
- ------------------------------------- Officer 1994
(C. DOWD RITTER)
* A Director February 16,
- ------------------------------------- 1994
(WILLIAM J. RUSHTON, III)
* A Director February 16,
- ------------------------------------- 1994
(HERBERT A. SKLENAR)
* A Director February 16,
- ------------------------------------- 1994
(W. A. WILLIAMSON, JR.)
* A Director February 16,
- ------------------------------------- 1994
(SPENCER H. WRIGHT)
/s/ Carl L. Gorday
By: _________________________________
(CARL L. GORDAY)
Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT PAGE
------- ------- ----
<C> <S> <C>
2(a) Agreement and Plan of Merger, dated as of the 3rd day of
August, 1993, between First Federal Savings Bank ("FFSB") and
AmSouth Bancorporation ("AmSouth"), included as Appendix A to
Proxy Statement-Prospectus
2(b) Plan of Merger and Merger Agreement, dated as of the 21st day
of December, 1993, between First Federal Savings Bank ("FFSB")
and AmSouth Bancorporation ("AmSouth"), included as Appendix A-
1 to Proxy Statement-Prospectus
3(a) Restated Certificates of Incorporation of AmSouth, incorporated
by reference to Exhibit 3(b) to AmSouth's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993.
3(b) Bylaws of AmSouth, as amended, incorporated by reference to
Exhibit 3(b) to Amendment No. 1 to AmSouth's Registration
Statement on Form S-4 filed on October 8, 1993 (Registration
No. 50041).
4(a) Stockholder Protection Rights Agreement, dated as of June 15,
1989, between AmSouth and AmSouth Bank, National Association,
as Rights Agent, incorporated by reference to Exhibit 4-a to
AmSouth's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1989.
4(b) Instruments defining the rights of holders of long-term debt of
AmSouth are not filed herewith pursuant to Item 601(b)(4)(iii)
of Regulation S-K, and AmSouth hereby agrees to furnish a copy
of said instruments to the SEC upon request.
5* Opinion of Carl L. Gorday, Esq. as to the validity of the
shares of AmSouth Common Stock.
8* Opinion of Ernst & Young as to certain federal income tax
matters.
15* Letter of Ernst & Young re: Unaudited Financial Information.
23(a)* Consent of Carl L. Gorday, Esq. (included in the opinion in
Exhibit 5).
23(b)* Consent of Ernst & Young (included in the opinion in Exhibit
8).
23(c)* Consent of Ernst & Young.
23(d) Consent of Read, Martin, Slickman & Sheats, C.P.A.'s.
23(e) Consent of Hovde Financial, Inc.
24* Powers of Attorney.
99 Form of Proxy for FFSB.
</TABLE>
- --------
* Filed previously.
<PAGE>
[LETTERHEAD OF READ, MARTIN, SLICKMAN
& SHEATS APPEARS HERE]
[LOGO OF RMS APPEARS HERE]
First Federal Savings Bank
Calhoun, Georgia
Dear Sirs:
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of our report dated October 29, 1993,
relating to the financial statements of First Federal Savings Bank, Calhoun,
Georgia, which appears in such Prospectus. We also consent to the reference to
us under the heading "Experts" in such Prospectus.
/s/ READ, MARTIN, SLICKMAN & SHEATS, CPA'S
Rome, Georgia
February 15, 1994
Exhibit 23(d)
1 of 1
<PAGE>
[LOGO OF HOVDE FINANCIAL, INC. APPEARS HERE]
February 15, 1994
Consent of Hovde Financial, Inc.
We hereby consent to reference to us in the Proxy Statement/Prospectus
constituting part of this Registration Statement on Form S-4, and to the
inclusion in such Proxy Statement/Prospectus of our fairness opinion, (in
whole but not in part) to the Board of Directors of First Federal Savings Bank
dated February 15, 1994. In giving this consent, we do not concede that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1993, as amended, or rules and regulations of the Securities
and Exchange Commission thereunder.
Sincerely,
/s/ HOVDE FINANCIAL, INC.
Hovde Financial, Inc.
<PAGE>
REVOCABLE PROXY
FIRST FEDERAL SAVING BANK
208 NORTH WALL STREET
CALHOUN, GEORGIA 30701
FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON MARCH 18, 1994, OR
ANY ADJOURNMENT THEREOF
The undersigned hereby appoints the Board of Directors of First Federal
Savings Bank ("First Federal" or "FFSB"), with full power of substitution, to
act as attorneys and proxies for the undersigned, and to vote all shares of
Common Stock of First Federal which the undersigned is entitled to vote only at
the Annual Meeting of Shareholders, to be held on March 18, 1994, at 10:00
a.m., local time, at 208 North Wall Street, Calhoun, Georgia, and at any and
all adjournments thereof, as follows:
1. The approval of an amendment to the FFSB Charter to delete Section 8(A)
thereof, which prohibits any person from acquiring more than 10% of FFSB's
stock for a period of five years following FFSB's mutual to stock conversion;
provided that the merger between FFSB and AmSouth Bancorporation ("AmSouth") is
approved and consummated.
[_] FOR [_] AGAINST [_] ABSTAIN
2. The approval of the Agreement and Plan of Merger, dated as of the 3rd day
of August, 1993 between FFSB and AmSouth and the related Plan of Merger and
Merger Agreement dated as of the 21st day of December, 1993, pursuant to which
FFSB would merge with and into AmSouth Bank of Georgia, a wholly-owned
subsidiary of AmSouth.
[_] FOR [_] AGAINST [_] ABSTAIN
3. The election as directors for a three year term of all nominees listed
below (except as marked to the contrary below).
John W. Early, II, Thomas E. Shanahan, William R. Thompson, M.D.
[_] FOR [_] VOTE WITHHELD
Instruction: To withhold your vote for any individual nominee, write the
nominee's name on the space provided:
- ------------------------------------------------------
<PAGE>
4. The ratification of the appointment of Read, Martin, Slickman and Sheats
as independent auditors of FFSB for the fiscal year ending September 30, 1994.
[_] FOR [_] AGAINST [_] ABSTAIN
5. The adjournment of the Annual Meeting for up to 29 days, if necessary, in
order to solicit additional proxies if stockholders holding two-thirds of the
votes eligible to be cast at the Annual Meeting do not submit proxies voting in
favor of Proposal 2.
[_] FOR [_] AGAINST [_] ABSTAIN
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
This proxy is revocable and will be voted as directed, but if no instructions
are specified, this proxy will be voted FOR each of the proposals listed. If
any other business is presented at the Annual Meeting, this proxy will be voted
by those named in this proxy in their best judgement. At the present time, the
Board of Directors knows of no other business to be presented at the Annual
Meeting.
The undersigned acknowledges receipt prior to the execution of this proxy of
a Notice of Annual Meeting of Shareholders and of a Proxy Statement-Prospectus
dated February 18, 1994.
Dated:
------------------------
-------------------------------
SIGNATURE OF SHAREHOLDER
-------------------------------
SIGNATURE OF SHAREHOLDER
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS CARD. WHEN SIGNING AS
ATTORNEY, EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, PLEASE GIVE YOUR FULL
TITLE. IF SHARES ARE HELD JOINTLY, EACH HOLDER MAY SIGN BUT ONLY ONE SIGNATURE
IS REQUIRED.
